Edgar Filing: CROWN HOLDINGS INC

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

[ X ]

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011

[ ]

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-50189

CROWN HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Pennsylvania		75-3099507
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Crown Way, Philadelphia, PA		19154-4599
(Address of principal executive offices)		(Zip Code)

215-698-5100

(registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)


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

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes No X

There were 155,940,729 shares of Common Stock outstanding as of April 29, 2011.

Crown Holdings, Inc.

PART I – FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions except share and per share data)

(Unaudited)


Three months ended March 31	2011			2010

Net sales		$1,882			$1,777


Cost of products sold, excluding depreciation and amortization		1,550			1,483
Depreciation and amortization		40			44


Gross profit		292			250


Selling and administrative expense		102			79
Provision for restructuring		25			22
Asset impairments and sales		0			(1	)
Loss from early extinguishments of debt		30			0
Interest expense		56			47
Interest income		(4	)		(1	)
Translation and foreign exchange		0			(2	)


Income before income taxes and equity earnings		83			106
Provision for income taxes		41			39

Net income		42			67
Net income attributable to noncontrolling interests		(26	)		(26	)

Net income attributable to Crown Holdings		$16			$41

Earnings per common share attributable to Crown Holdings:
Basic		$0.10			$0.26

Diluted		$0.10			$0.25


Weighted average common shares outstanding:
Basic		154,610,056			160,714,929
Diluted		157,928,690			163,100,074

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

Crown Holdings, Inc.

CONSOLIDATED BALANCE SHEETS (Condensed)

(In millions)

(Unaudited)


	March 31, 2011			December 31, 2010

Assets
Current assets
Cash and cash equivalents		$409			$463
Receivables, net		1,104			936
Inventories		1,353			1,060
Prepaid expenses and other current assets		204			190

Total current assets		3,070			2,649


Goodwill		2,047			1,984
Property, plant and equipment, net		1,702			1,610
Other non-current assets		657			656

Total		$7,476			$6,899


Liabilities and equity
Current liabilities
Short-term debt		$413			$241
Current maturities of long-term debt		176			158
Accounts payable and accrued liabilities		1,994			1,978

Total current liabilities		2,583			2,377


Long-term debt, excluding current maturities		2,884			2,649
Postretirement and pension liabilities		1,171			1,159
Other non-current liabilities		499			485
Commitments and contingent liabilities (Note I)

Noncontrolling interests		346			325
Crown Holdings shareholders’ deficit		(7	)		(96	)

Total equity		339			229


Total		$7,476			$6,899

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

Crown Holdings, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed)

(In millions)

(Unaudited)


Three months ended March 31	2011			2010

Cash flows from operating activities
Net income		$42			$67
Adjustments to reconcile net income to net cash used for operating activities:
Depreciation and amortization		40			44
Provision for restructuring		25			22
Asset impairments and sales		0			(1	)
Pension expense		24			29
Pension contributions		(18	)		(15	)
Stock-based compensation		10			7
Changes in assets and liabilities:
Receivables		(163	)		(366	)
Inventories		(260	)		(140	)
Accounts payable and accrued liabilities		(22	)		(132	)
Other, net		5			69

Net cash used for operating activities		(317	)		(416	)


Cash flows from investing activities
Capital expenditures		(103	)		(32	)
Other		2			11

Net cash used for investing activities		(101	)		(21	)


Cash flows from financing activities
Proceeds from long-term debt		754			4
Payments of long-term debt		(605	)		(17	)
Net change in revolving credit facility and short-term debt		218			409
Debt issue costs		(11	)		0
Common stock issued		4			2
Common stock repurchased		(6	)		(5	)
Dividends paid to noncontrolling interests		(6	)		(15	)
Other		5			8

Net cash provided by financing activities		353			386


Effect of exchange rate changes on cash and cash equivalents		11			(9	)


Net change in cash and cash equivalents		(54	)		(60	)

Cash and cash equivalents at January 1		463			459


Cash and cash equivalents at March 31		$409			$399

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

Crown Holdings, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(In millions) (Unaudited)


	Crown Holdings, Inc. Shareholders’ Equity
	Common Stock		Paid-in Capital			Accumulated Earnings/ (Deficit)			Accumulated Other Comprehensive Loss			Treasury Stock			Total Crown Equity			Noncontrolling Interests			Total
Balance at January 1, 2010		$929		$1,536			($94	)		($2,255	)		($122	)		($6	)		$389			$383

Comprehensive income:
Net income							41									41			26			67
Translation adjustments										(31	)					(31	)		(5	)		(36	)
Amortization of net loss and prior service cost included in pension and postretirement cost										18						18						18
Derivatives qualifying as hedges										9						9						9

Total comprehensive income																37			21			58


Dividends paid to noncontrolling interests																			(15	)		(15	)
Restricted stock awarded				(2	)								3			1						1
Stock-based compensation				7												7						7
Common stock issued				1									1			2						2
Common stock repurchased				(4	)								(1	)		(5	)					(5	)

Balance at March 31, 2010		$929		$1,538			($53	)		($2,259	)		($119	)		$36			$395			$431

Balance at January 1, 2011		$929		$1,231			$230			($2,333	)		($153	)		($96	)		$325			$229

Comprehensive income:
Net income							16									16			26			42
Translation adjustments										45						45			4			49
Amortization of net loss and prior service cost included in pension and postretirement cost										16						16						16
Derivatives qualifying as hedges										5						5			1			6

Total comprehensive income																82			31			113


Dividends paid to noncontrolling interests																			(6	)		(6	)
Restricted stock awarded				(2	)								2
Stock-based compensation				10												10						10
Common stock issued				3									1			4						4
Common stock repurchased				(5	)								(1	)		(6	)					(6	)
Purchase of noncontrolling interests				(1	)											(1	)		(4	)		(5	)

Balance at March 31, 2011		$929		$1,236			$246			($2,267	)		($151	)		($7	)		$346			$339

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

Crown Holdings, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share and statistical data)

(Unaudited)

A.	Statement of Information Furnished

The consolidated financial statements include the accounts of Crown Holdings, Inc. and its consolidated subsidiaries (the “Company”). The accompanying unaudited interim consolidated financial statements have been prepared by the Company in accordance with Form 10-Q instructions. In the opinion of management, these consolidated financial statements contain all adjustments of a normal and recurring nature necessary for a fair statement of the financial position of Crown Holdings, Inc. as of March 31, 2011 and the results of its operations for the three month periods ended March 31, 2011 and 2010 and of its cash flows for the three months ended March 31, 2011 and 2010. The results reported in these consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. These results have been determined on the basis of accounting principles generally accepted in the United States of America (“GAAP”).

Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been condensed or omitted. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Certain reclassifications of prior years’ data have been made to conform to the current year presentation.

B.	Stock-Based Compensation

During the first three months of 2011, the Company awarded 318,607 shares of restricted stock to certain senior executives, including 121,940 shares of restricted stock with time-vesting requirements and 196,667 shares of performance-based stock with a market feature. The time-vesting awards vest ratably over three years and had a grant-date fair value of $33.70 per share. The performance-based shares cliff vest at the end of three years based on the results of the market criterion. The number of performance-based shares that will ultimately vest is based on the level of market performance achieved, ranging between 0% and 200% of the shares awarded, and will be settled in stock. The estimated grant-date fair value of each performance share was calculated as $41.69 using a Monte Carlo valuation model. During the first three months of 2011, 235,313 shares of previously issued time-vested awards and 145,278 shares of previously issued performance-based shares vested. Also during the first three months of 2011, 145,278 performance-based shares were issued because the Company exceeded the target level of performance shares established on the original date of the related awards by 100%. These shares were issued without restriction. The aggregate market value of the shares released and issued on the vesting dates was approximately $18. At March 31, 2011, unrecognized compensation cost related to unvested restricted stock was approximately $10. The weighted average period over which the expense is expected to be recognized is 1.8 years.

C.	Inventories

Inventories are stated at the lower of cost or market, with cost for U.S. inventories principally determined under the first-in, first-out (“FIFO”) method. Non-U.S. inventories are principally determined under the average cost method.


	March 31, 2011		December 31, 2010
Finished goods		$577		$365
Work in process		169		128
Raw materials and supplies		607		567

		$1,353		$1,060

Crown Holdings, Inc.

D.	Fair Value Measurements

Under GAAP a framework exists for measuring fair value, providing a three-tier hierarchy of pricing inputs used to report assets and liabilities that are adjusted to fair value. Level 1 includes inputs such as quoted prices which are available in active markets for identical assets or liabilities as of the report date. Level 2 includes inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the 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 other than certain pension plan assets.

The following table sets forth the fair value hierarchy of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2011 and December 31, 2010, respectively.


					Fair value at reporting date using
					Level 1				Level 2
	Mar. 31, 2011		Dec. 31, 2010		Mar. 31, 2011		Dec. 31, 2010		Mar. 31, 2011		Dec. 31, 2010
Assets
Derivative instruments:
Foreign exchange		$25		$26						$25		$26
Commodities		63		53		$63		$53

Total		$88		$79		$63		$53		$25		$26

Liabilities
Derivative instruments:
Foreign exchange		$15		$15						$15		$15
Commodities		1		1		$1		$1

Total		$16		$16		$1		$1		$15		$15

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

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

Refer to Note E for further discussion of the Company’s use of derivative instruments and their fair values.

E.	Derivative Financial Instruments

In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange, interest rates and commodity prices. The Company manages these risks through a program that includes the use of derivative financial instruments, primarily swaps and forwards. Counterparties to these contracts are major financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company does not use derivative instruments for trading or speculative purposes.

The Company’s objective in managing exposure to market risk is to limit the impact on earnings and cash flow. The extent to which the Company uses such instruments is dependent upon its access to these contracts in the financial markets and its success using other methods, such as netting exposures in the same currencies to mitigate foreign exchange risk and using sales agreements that permit the pass-through of commodity price and foreign exchange rate risk to customers.

Crown Holdings, Inc.

For derivative financial instruments accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the manner in which effectiveness will be assessed. The Company formally assesses, both at inception and at least quarterly thereafter, whether the derivative financial instruments used in hedging transactions are effective in offsetting changes in fair value or cash flows of the related underlying exposures. Any ineffective portion of the change in fair value of the instruments is recognized immediately in earnings.

Cash Flow Hedges

The Company designates certain derivative financial instruments as cash flow hedges. No components of the hedging instruments are excluded from the assessment of hedge effectiveness. Changes in fair value of outstanding derivatives accounted for as cash flow hedges, except any ineffective portion, are recorded in other comprehensive income until earnings are impacted by the hedged transaction. Classification of the gain or loss in the Consolidated Statements of Operations upon release from comprehensive income is the same as that of the underlying exposure. Contracts outstanding at March 31, 2011 mature between one and twenty-three months.

When the Company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur in the originally specified period, changes to fair value accumulated in other comprehensive income are recognized immediately in earnings.

The Company uses commodity forwards to hedge anticipated purchases of various commodities, including aluminum, fuel oil and natural gas and these exposures are hedged by a central treasury unit. The aggregate U.S. dollar-equivalent notional value of commodity contracts designated as cash flow hedges at March 31, 2011 and December 31, 2010 was $304 and $326.

The Company also designates certain foreign exchange contracts as cash flow hedges of anticipated foreign-currency-denominated sales or purchases. The Company manages these risks at the operating unit level. Often the hedging of foreign currency risk is performed in concert with related commodity price hedges. The aggregate U.S. dollar-equivalent notional value of foreign exchange contracts designated as cash flow hedges at March 31, 2011 and December 31, 2010 was $636 and $751.

The following table sets forth financial information about the impact on Accumulated Other Comprehensive Income (“AOCI”) and earnings from changes in fair value related to derivative instruments accounted for as cash flow hedges.


	Amount of gain/(loss) recognized in AOCI (effective portion)					Amount of gain/(loss) reclassified from AOCI into earnings
Derivatives in cash flow hedges	Quarter ended Mar. 31, 2011			Quarter ended Mar. 31, 2010		Quarter ended Mar. 31, 2011			Quarter ended Mar. 31, 2010

Cross-currency swap		$0			$17		$0			$17	⁽¹⁾
Foreign exchange contracts		(3	)		2		(1	)		1	⁽²⁾
Commodity contracts		13			10		6			2	⁽³⁾

Total		$10			$29		$5			$20

(1)

Within the Statement of Operations for the three months ended March 31, 2010, $17 was credited to translation and foreign exchange.

(2)

Within the Statement of Operations for the three months ended March 31, 2011, $1 was charged to cost of products sold. During the three months ended March 31, 2010, $2 was credited to net sales and $1 was charged to cost of products sold.

(3)

Within the Statement of Operations for the three months ended March 31, 2011, $8 was credited to cost of products sold and $2 was charged to income tax expense. For the three months ended March 31, 2010, $2 was credited to cost of products sold.

Crown Holdings, Inc.

During the twelve months ending March 31, 2012, a net gain of $51 ($39, net of tax) is expected to be reclassified to earnings. No amounts were reclassified during the three months ended March 31, 2011 and 2010 in connection with anticipated transactions that were no longer considered probable and the ineffective portion recorded in earnings was less than $1.

Fair Value Hedges and Contracts Not Designated as Hedges

The Company designates certain derivative financial instruments as fair value hedges of recognized foreign-denominated assets and liabilities, generally trade accounts receivable and payable and unrecognized firm commitments. The notional values and maturity dates of the derivative instruments coincide with those of the hedged items. Changes in fair value of the derivative financial instruments, excluding time value, are offset by changes in fair value of the related hedged items. Other than for firm commitments, amounts related to time value are excluded from the assessment and measurement of hedge effectiveness and are reported in earnings. Less than $1 was reported in earnings for the three months ended March 31, 2011. The U.S. dollar-equivalent notional value of foreign exchange contracts designated as fair value hedges at March 31, 2011 and December 31, 2010 was $273 and $256.

Certain derivative financial instruments, including foreign exchange contracts related to intercompany debt, were not designated or did not qualify for hedge accounting; however, they are effective economic hedges as the changes in their fair value, except for time value, are offset by changes in remeasurement of the related hedged items. The Company’s primary use of these derivative instruments is to offset the earnings impact that fluctuations in foreign exchange rates have on certain monetary assets and liabilities denominated in nonfunctional currencies. Changes in fair value of these derivative instruments are immediately recognized in earnings as foreign exchange adjustments. The aggregate U.S dollar-equivalent notional value of these contracts at March 31, 2011 and December 31, 2010 was $659 and $827.

The impact on earnings of foreign exchange contracts designated as fair value hedges was less than $1 for the three months ended March 31, 2011 and 2010, respectively. The impact on earnings of foreign exchange contracts not designated as hedges were gains of $12 and $17 for the three months ended March 31, 2011 and 2010, respectively. These items were reported as translation and foreign exchange and were offset by changes in the fair value of the related hedged items.

The fair values of outstanding derivative instruments in the Consolidated Balance Sheet at March 31, 2011 and December 31, 2010 were:


Assets		March 31, 2011			December 31, 2010
	Derivatives designated as hedges:
	Foreign exchange		$14	⁽⁴⁾		$12	⁽⁴⁾
	Commodities		63	⁽⁵⁾		53	⁽⁵⁾

	Derivatives not designated as hedges:
	Foreign exchange		11	⁽⁴⁾		14	⁽⁴⁾

	Total		$88			$79

Liabilities
	Derivatives designated as hedges:
	Foreign exchange		$13	⁽⁶⁾		$12	⁽⁶⁾
	Commodities		1	⁽⁶⁾		1	⁽⁶⁾

	Derivatives not designated as hedges:
	Foreign exchange		2	⁽⁶⁾		3	⁽⁶⁾

	Total		$16			$16

⁽⁴⁾

Reported in other current assets.

⁽⁵⁾

$52 and $40 reported in other current assets at March 31, 2011 and December 31, 2010 and $11 and $13 reported in other non-current assets at March 31, 2011 and December 31, 2010.

⁽⁶⁾

Reported in accounts payable and accrued liabilities.

Crown Holdings, Inc.

F.	Restructuring

The components of the outstanding restructuring reserve and movements within these components during the three months ended March 31, 2011 and 2010, respectively, were as follows:


	Termination benefits			Other exit costs			Asset writedowns			Total

Balance at January 1, 2010		$25			$0			$0			$25
Provision		10			2			10			22
Payments		(8	)		(2	)					(10	)
Reclassified to other accounts		(5	)					(10	)		(15	)

Balance at March 31, 2010		$22			$0			$0			$22


Balance at January 1, 2011		$21			$2			$0			$23
Provision		4			21						25
Payments		(3	)		(4	)					(7	)

Balance at March 31, 2011		$22			$19			$0			$41

In the first three months of 2011, the Company recorded a pre-tax charge of $25 for restructuring costs, including $19 related to the relocation of the Company’s European Division headquarters and management to Switzerland, $4 related to severance costs in the Company’s European Specialty Packaging segment and $2 related to prior restructuring actions in the Company’s North America Food segment. The charge of $19 represents the estimated employee compensation costs resulting from an intercompany payment related to the action. The Company expects to pay these costs over the next one to three years.

In the first three months of 2010, the Company recorded a pre-tax charge of $22 for restructuring costs, including $20 related to the closure of a Canadian plant in the Company’s Americas Food segment and $2 for plant maintenance and strip and clean costs from a prior restructuring action. The charge of $20 included $5 for pension and postretirement plan curtailment charges, $5 for severance costs and $10 for asset writedowns.

In connection with the prior restructuring actions in Canada, the Company expects to incur future additional charges of approximately $5 for strip and clean costs and may incur future additional charges for pension settlements of approximately $40 when the Company receives regulatory approval and settles the obligations. The Company expects the total cash cost of these prior restructuring actions to be $27 including $15 for the pension settlement.

Debt

In January, 2011, the Company sold $700 principal amount of 6.25% senior unsecured notes due 2021. The notes were issued at par by Crown Americas LLC and Crown Americas Capital Corp. III, each a subsidiary of the Company, and are unconditionally guaranteed by the Company and substantially all of its U.S. subsidiaries. The Company paid $11 in bond issue costs that will be amortized over the term of the debt.

In addition, concurrently with the offering of the notes, the Company commenced a tender offer for any and all of the $600 outstanding 7.75% senior secured notes due 2015 (the “2015 notes”). At the expiration of the tender offer approximately 90% of the 2015 notes had been repurchased. All 2015 notes that remained outstanding after the expiration of the tender offer were redeemed by the Company in February, 2011. The Company recorded a loss from early extinguishment of debt of $30 including $25 for premiums paid and $5 for the write off of deferred financing fees.

Crown Holdings, Inc.

The Company’s outstanding debt at March 31, 2011 and December 31, 2010 was as follows.


	Mar. 31 2011			Dec. 31 2010

Short-term debt		$413			$241


Long-term debt
Senior secured revolving credit facilities borrowings		$235			$184
Senior secured notes:
Euro (€84 at March 31, 2011) 6.25% first priority due 2011		118			112
First priority term loans:
U.S. dollar at LIBOR plus 1.75% due 2012		147			147
Euro (€108 at March 31, 2011) at EURIBOR plus 1.75% due 2012		153			145
Senior notes and debentures:
U.S. dollar 7.75% due 2015		0			600
U.S. dollar 7.625% due 2017		400			400
Euro (€500 at March 31, 2011) 7.125% due 2018		708			669
U.S. dollar 6.25% due 2021		700			0
U.S. dollar 7.375% due 2026		350			350
U.S. dollar 7.50% due 2096		64			64
Other indebtedness in various currencies		197			148
Unamortized discounts		(12	)		(12	)

Total long-term debt		3,060			2,807
Less: current maturities		(176	)		(158	)

Total long-term debt, less current maturities		$2,884			$2,649

H.	Asbestos-Related Liabilities

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

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

During 2010 and 2011, the states of Nebraska, South Dakota and Wyoming enacted legislation that limits asbestos-related liabilities under state law of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos.

Similar legislation was enacted in Florida, Georgia, Indiana, Mississippi, North Dakota, Ohio, Oklahoma, South Carolina and Wisconsin in recent years. The legislation, which applies to future and, with the exception of Georgia, South Carolina and South Dakota, 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.

Crown Holdings, Inc.

On October 22, 2010, the Texas Supreme Court, in a 6-2 decision, reversed a lower court decision, Barbara Robinson v. Crown Cork & Seal Company, Inc., No. 14-04-00658-CV, Fourteenth Court of Appeals, Texas, which had upheld the dismissal of an asbestos-related case against Crown Cork. The Texas Supreme Court held that the Texas legislation was unconstitutional under the Texas Constitution when applied to asbestos-related claims pending against Crown Cork when the legislation was enacted in June of 2003. In 2010, the Company recorded a pre-tax charge of $15 including estimated legal fees to increase its accrual for asbestos related costs for claims pending in Texas on June 11, 2003. The Company believes that the decision of the Texas Supreme Court is limited to retroactive application of the Texas legislation to asbestos-related cases that were pending against Crown Cork in Texas on June 11, 2003 and therefore continues to assign no value to claims filed after June 11, 2003.

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

At December 31, 2010, the Company had 50,000 claims outstanding. Of these claims, approximately 15,000 relate to claimants alleging first exposure to asbestos after 1964 and 35,000 relate to claimants alleging first exposure to asbestos before or during 1964, of which approximately 12,000 were filed in Texas, 2,000 were filed in Pennsylvania, 6,000 were filed in other states that have enacted asbestos legislation and 15,000 were filed in other states. Historically (1977-2010), 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.

With respect to claimants alleging first exposure to asbestos before or during 1964, the Company does not include in its accrual any amounts for settlements in states where the Company’s liability is limited by statute except for certain pending claims in Texas as described earlier.

With respect to post-1964 claims, regardless of the existence of asbestos legislation, the Company does not include in its accrual any amounts for settlement of these claims because of increased difficulty of establishing identification of relevant insulation products as the cause of injury. Given our settlement experience with post-1964 claims, we do not believe that an adverse ruling in the Texas or Pennsylvania asbestos litigation cases, or in any other state that has enacted asbestos legislation, would have a material adverse impact on the Company with respect to such claims.

Of the approximately 50,000 claims outstanding at the end of 2010, 2009 and 2008 approximately 18%, 16% and 15%, respectively, relate to claims alleging serious diseases (primarily mesothelioma and other malignancies). Of the approximately 15,000 claims related to claimants alleging first exposure to asbestos before or during 1964 that were filed in states that have not enacted asbestos legislation and were outstanding at the end of 2010, 2009 and 2008 approximately 31%, 29% and 25%, respectively, relate to claims alleging serious disease.

During the three months ended March 31, 2011, Crown Cork received approximately 600 new claims, settled or dismissed approximately 500 claims for a total of $4, and had approximately 50,000 claims outstanding at the end of the period. Settlement amounts include amounts committed to be paid in future periods. The outstanding claims at March 31, 2011 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 March 31, 2011 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.

Crown Holdings, Inc.

As of March 31, 2011, the Company’s accrual for pending and future asbestos-related claims and related legal costs was $243, including $192 for unasserted claims. The Company’s accrual includes estimates for probable costs for claims through the year 2020. Potential estimated additional claims costs of $30 beyond 2020 have not been included in the Company’s accrual, 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.

Crown Cork has entered into arrangements with plaintiffs’ counsel in certain jurisdictions with respect to claims which are not yet filed, or asserted, against us. However, Crown Cork expects claims under these arrangements to be filed or asserted against Crown Cork in the future. The projected value of these claims is included in the Company’s estimated liability as of March 31, 2011.

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 adverse effect on the Company’s results of operations, financial position or cash flow.

I.	Commitments and Contingent Liabilities

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

The Company has also recorded aggregate accruals of $8 for remediation activities at various worldwide locations that are owned by the Company and for which the Company is not a member of a PRP group. Although the Company believes its accruals are adequate to cover its portion of future remediation costs, there can be no assurance that the ultimate payments will not exceed the amount of the Company’s accruals and will not have a material effect on its results of operations, financial position and cash flow. Any possible loss or range of potential loss that may be incurred in excess of the recorded accruals cannot be estimated.

The Company is subject to antitrust investigations in Europe. In August 2010, the Spanish National Antitrust Commission issued a Proposal for Resolution (Propuesta de Resolución) alleging that Crown European Holdings SA, a wholly-owned subsidiary of the Company, and one of its subsidiaries violated Spanish and European competition law by coordinating certain commercial terms and exchanging information with competitors in Spain. The Proposal for Resolution does not constitute a decision on the merits and was replied to by the Company. The investigation phase of the proceeding has now ended and the proceeding has entered the resolution phase before the Board of the Spanish National Antitrust Commission. If the Antitrust Commission finds that the Company’s subsidiaries violated competition law, the Antitrust Commission has the authority to levy fines. The Company believes that the allegations in Spain are without merit and intends to defend its position vigorously. The Company estimates the possible range of loss to be €8 to €12. However, the Company is unable to predict the ultimate outcome of the investigation or its impact on the Company. The Company expects that a final decision from the Board of Spanish National Antitrust Commission will be issued in 2011. This decision would be subject to appeal to the Spanish courts.

In July 2010, a subsidiary of the Company became aware of an investigation by the Netherlands Competition Authority in relation to competition law matters. In April 2011, the Netherlands Competition Authority terminated its investigation having found no evidence to support any charges against the Company’s subsidiary. There can be no assurance that the Netherlands Competition Authority will not re-open its investigation against the Company’s subsidiary in the event new facts or other circumstances justify a new investigation.

Crown Holdings, Inc.

The Company’s Italian subsidiaries have received or expect to receive assessments for value added taxes and related income taxes from the Italian tax authorities resulting from certain third party suppliers’ failures to remit required value added tax payments due by those suppliers under Italian law with respect to purchases for resale to the Company. The assessments cover tax periods 2004 and 2005 and additional assessments are expected to cover periods 2006 through 2009. The expected total assessments resulting from these third party suppliers failing to remit the tax payments are approximately €40 plus any applicable interest and penalties. The Company intends to dispute these assessments and believes that, if necessary, it should be able to successfully demonstrate in the Italian courts that it has no additional liability for the asserted taxes. While the Company intends to dispute the assessments, there can be no assurance that it will be successful in such disputes or regarding the final amount of additional taxes, if any, payable to the Italian tax authorities.

The Company and its subsidiaries are also subject to various other lawsuits and claims with respect to labor, environmental, securities, vendor and other matters arising out of the Company’s normal course of business. While the impact on future financial results is not subject to reasonable estimation because considerable uncertainty exists, management believes that the ultimate liabilities resulting from such lawsuits and claims will not materially affect the Company’s consolidated results of operations, financial position or cash flow.

The Company has various commitments to purchase materials, supplies and utilities as part of the ordinary conduct of business. The Company’s basic raw materials for its products are steel and aluminum, both of which are purchased from multiple sources. The Company is subject to fluctuations in the cost of these raw materials and has periodically adjusted its selling prices to reflect these movements. There can be no assurance, however, that the Company will be able to fully recover any increases or fluctuations in raw material costs from its customers. The Company also has commitments for standby letters of credit and for purchases of capital assets.

In January 2010, the Company received a net one time payment of $20 as part of an overall resolution of a long-time dispute unrelated to the Company’s ongoing operations and recorded a gain of $20 in the first quarter of 2010 within selling and administrative expense.

At March 31, 2011, the Company was party to certain indemnification agreements covering environmental remediation, lease payments and other potential costs associated with properties sold or businesses divested. For agreements with defined liability limits the maximum potential amount of future liability was $14. The Company accrues for costs related to these items when it is probable that a liability has been incurred and the amount can be reasonably estimated. At March 31, 2011, the Company also had guarantees of $16 related to the residual values of leased assets.

J.	Earnings Per Share

The following table summarizes the computations of basic and diluted earnings per share attributable to Crown Holdings for the periods ended March 31, 2011 and 2010, respectively:


	2011		2010
Net income attributable to Crown Holdings		$16		$41

Weighted average shares outstanding:
Basic		154.6		160.7
Add: dilutive stock options and restricted stock		3.3		2.4

Diluted		157.9		163.1


Basic earnings per share		$0.10		$0.26

Diluted earnings per share		$0.10		$0.25

Excluded from the computation of diluted earnings per share were common shares contingently issuable, amounting to 0.1 million shares for the three months ended March 31, 2011 and 3.3 million shares for the same period in 2010 because the effect would have been antidilutive.

Crown Holdings, Inc.

K.	Pension and Other Postretirement Benefits

The components of net periodic pension and other postretirement benefits costs for the three months ended March 31 were as follows:


Pension Benefits	U.S. Plans						Non-U.S. Plans
	2011			2010			2011			2010

Service cost	$	3		$	2		$	6		$	7
Interest cost		18			18			39			39
Expected return on plan assets		(20	)		(20	)		(48	)		(45	)
Recognized prior service cost		1			1			1			(1	)
Recognized net loss		11			17			13			11

Net periodic cost	$	13		$	18		$	11		$	11


Other Postretirement Benefits
	2011			2010
Service cost	$	2		$	2
Interest cost		6			7
Recognized prior service credit		(8	)		(5	)
Recognized net loss		3			2

Net periodic cost	$	3		$	6

L.	Accelerated Share Repurchase

In December 2010, the Company entered into an agreement with Citigroup to purchase shares of its common stock under an accelerated share repurchase program. Pursuant to the agreement, the Company initially purchased 4,354,838 shares for $150. The purchase price of these shares was subject to an adjustment based on the Company’s volume-weighted average stock price during the term of the transaction. The purchase price adjustment was settled in April, 2011 and resulted in an additional cash payment of $6.

In May 2011, the Company entered into an agreement with Goldman, Sachs & Co. to purchase shares of its common stock under an accelerated share repurchase program. Pursuant to the agreement, the Company may purchase up to an aggregate of $200 of its common stock, subject to a maximum per share purchase price. Repurchases pursuant to the agreement are expected to conclude during the third quarter of 2011. Repurchases under the agreement are subject to provisions that will establish a minimum number of shares to be repurchased based on the volume-weighted average share price of the Company’s common stock over an initial hedge period and a maximum share purchase price. The actual number of shares repurchased will be determined at the completion of the term of the agreement.

M.	Income Taxes

During the three months ended March 31, 2011, the Company recorded net tax charges of $41 on pre-tax income of $83 for an effective rate of 49.4%. The difference between pre-tax income at the U.S. statutory rate of 35%, or $29, and the tax charge of $41 is primarily explained as follows: $17 of increase due to tax charges in connection with the relocation of the Company’s European headquarters and management to Switzerland, $10 of increase to valuation allowances, $14 of decrease from lower tax rates in non-U.S. jurisdictions and $1 of decrease from other net differences.

During the three months ended March 31, 2010, the Company recorded net tax charges of $39 on pre-tax income of $106 for an effective rate of 36.8%. The difference of $2 between pre-tax income at the U.S. statutory rate of 35% or $37, and the tax charge of $39, is primarily explained as follows: $7 of increase to recognize the tax impact of the new U.S. health care legislation, $9 of increase to the valuation allowance in Canada for the tax benefit of current year losses that are not expected to be realized and $1 of increase from other net differences, partially offset by $7 of decrease for the nontaxable settlement benefit of a legal dispute unrelated to the Company’s ongoing operations and $8 of decrease from lower tax rates in non-U.S. jurisdictions.

Crown Holdings, Inc.

N.	Segment Information

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

The tables below present information about operating segments for the three months ended March 31, 2011 and 2010:


2011	External sales		Segment Income
Americas Beverage	$	512	$	63
North America Food		188		28
European Beverage		340		45
European Food		422		52
European Specialty Packaging		100		7

Total reportable segments		1,562		195

Non-reportable segments		320		57
Corporate and unallocated items				(62	)

Total	$	1,882	$	190


2010	External sales		Segment Income
Americas Beverage	$	480	$	57
North America Food		197		16
European Beverage		314		52
European Food		404		40
European Specialty Packaging		91		3

Total reportable segments		1,486		168

Non-reportable segments		291		45
Corporate and unallocated items				(42	)

Total	$	1,777	$	171

A reconciliation of segment income of reportable segments to income before income taxes and equity earnings for the three months ended March 31, 2011 and 2010 follows:


	2011			2010
Segment income of reportable segments	$	195		$	168
Segment income of non-reportable segments		57			45
Corporate and unallocated items		(62	)		(42	)
Provision for restructuring		(25	)		(22	)
Asset impairments and sales					1
Loss from early extinguishment of debt		(30	)
Interest expense		(56	)		(47	)
Interest income		4			1
Translation and foreign exchange		0			2

Income before income taxes and equity earnings	$	83		$	106

“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.

Crown Holdings, Inc.

O.	Condensed Combining Financial Information

Crown European Holdings SA (Issuer), a 100% owned subsidiary of the Company, has outstanding first priority senior secured notes and senior unsecured notes that are fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent) 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 for the three months ended March 31, 2011 and 2010,

•

balance sheets as of March 31, 2011 and December 31, 2010, and

•

statements of cash flows for the three months ended March 31, 2011 and 2010

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 three months ended March 31, 2011

(in millions)


	Parent		Issuer			Guarantors			Non- Guarantors			Eliminations			Total Company

Net sales							$1,266			$616						$1,882
Cost of products sold, excluding depreciation and amortization				$(1)			1,090			461						1,550
Depreciation and amortization							19			21						40


Gross profit				1			157			134						292


Selling and administrative expense				(1	)		79			24						102
Provision for restructuring							25									25
Asset impairments and sales							(182	)					$182
Loss from early extinguishment of debt							30									30
Net interest expense				19			30			3						52
Technology royalty							(6	)		6


Income/(loss) before income taxes				(17	)		181			101			(182	)		83
Provision for income taxes				1			1			39						41
Equity earnings/(loss) in affiliates		$16		48			(164	)					100


Net income		16		30			16			62			(82	)		42
Net income attributable to noncontrolling interests										(26	)					(26	)

Net income attributable to Crown Holdings		$16		$30			$16			$36			$(82	)		$16

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended March 31, 2010

(in millions)


	Parent		Issuer			Guarantors			Non- Guarantors			Eliminations			Total Company

Net sales							$1,047			$730						$1,777
Cost of products sold, excluding depreciation and amortization				$(2	)		895			590						1,483
Depreciation and amortization							22			22						44


Gross profit				2			130			118						250


Selling and administrative expense							52			27						79
Provision for restructuring							22									22
Asset impairments and sales							(1	)								(1	)
Net interest expense				(2	)		43			5						46
Technology royalty							(7	)		7
Translation and foreign exchange							(2	)								(2	)


Income before income taxes				4			23			79						106
Provision for income taxes							24			15						39
Equity earnings in affiliates		$41		32			42						$(115	)


Net income		41		36			41			64			(115	)		67
Net income attributable to noncontrolling interests										(26	)					(26	)

Net income attributable to Crown Holdings		$41		$36			$41			$38			$(115	)		$41

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of March 31, 2011

(in millions)


	Parent			Issuer		Guarantors			Non- Guarantors		Eliminations			Total Company
Assets
Current assets
Cash and cash equivalents							$49			$360					$409
Receivables, net					$56		213			835					1,104
Intercompany receivables					2		104			70		$(176	)
Inventories							710			643					1,353
Prepaid expenses and other current assets		$1			6		163			34					204

Total current assets		1			64		1,239			1,942		(176	)		3,070


Intercompany debt receivables					1,232		3,168			615		(5,015	)
Investments		388			3,249		(559	)				(3,078	)
Goodwill							1,446			601					2,047
Property, plant and equipment, net							633			1,069					1,702
Other non-current assets					16		590			51					657

Total		$389			$4,561		$6,517			$4,278		$(8,269	)		$7,476


Liabilities and equity
Current liabilities
Short-term debt					$58		$158			$197					$413
Current maturities of long-term debt					122		5			49					176
Accounts payable and accrued liabilities		$10			11		1,115			858					1,994
Intercompany payables							70			106		$(176	)

Total current liabilities		10			191		1,348			1,210		(176	)		2,583


Long-term debt, excluding current maturities					857		1,882			145					2,884
Long-term intercompany debt		386			2,281		1,401			947		(5,015	)
Postretirement and pension liabilities							1,152			19					1,171
Other non-current liabilities							344			155					499
Commitments and contingent liabilities

Noncontrolling interests							2			344					346
Crown Holdings shareholders’ equity/(deficit)		(7	)		1,232		388			1,458		(3,078	)		(7	)

Total equity/(deficit)		(7	)		1,232		390			1,802		(3,078	)		339


Total		$389			$4,561		$6,517			$4,278		$(8,269	)		$7,476

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of December 31, 2010

(in millions)


	Parent			Issuer		Guarantors			Non- Guarantors		Eliminations			Total Company
Assets
Current assets
Cash and cash equivalents							$65			$398					$463
Receivables, net					$66		111			759					936
Intercompany receivables					1		101			64		$(166	)
Inventories							575			485					1,060
Prepaid expenses and other current assets		$1			12		148			29					190

Total current assets		1			79		1,000			1,735		(166	)		2,649


Intercompany debt receivables					1,374		2,956			373		(4,703	)
Investments		308			3,039		(350	)				(2,997	)
Goodwill							1,411			573					1,984
Property, plant and equipment, net							626			984					1,610
Other non-current assets					16		590			50					656

Total		$309			$4,508		$6,233			$3,715		$(7,866	)		$6,899


Liabilities and equity
Current liabilities
Short-term debt					$48		$5			$188					$241
Current maturities of long-term debt					116		5			37					158
Accounts payable and accrued liabilities		$28			26		1,085			839					1,978
Intercompany payables					2		62			102		$(166	)

Total current liabilities		28			192		1,157			1,166		(166	)		2,377


Long-term debt, excluding current maturities					810		1,731			108					2,649
Long-term intercompany debt		377			2,362		1,556			408		(4,703	)
Postretirement and pension liabilities							1,149			10					1,159
Other non-current liabilities							331			154					485
Commitments and contingent liabilities

Noncontrolling interests							1			324					325
Crown Holdings shareholders’ equity/(deficit)		(96	)		1,144		308			1,545		(2,997	)		(96	)

Total equity/(deficit)		(96	)		1,144		309			1,869		(2,997	)		229


Total		$309			$4,508		$6,233			$3,715		$(7,866	)		$6,899

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the three months ended March 31, 2011

(in millions)


	Parent			Issuer			Guarantors			Non- Guarantors			Eliminations			Total Company

Net used for operating activities		$(7	)		$(23	)		$(205	)		$(82	)					$(317	)


Cash flows from investing activities
Capital expenditures								(21	)		(82	)					(103	)
Intercompany investing activities					6			188			(180	)		$(14	)
Other								2									2


Net cash provided by/(used for) investing activities					6			169			(262	)		(14	)		(101	)


Cash flows from financing activities
Proceeds from long-term debt								700			54						754
Payments of long-term debt								(600	)		(5	)					(605	)
Net change in revolving credit facility and short-term debt					12			204			2						218
Debt issue costs								(11	)								(11	)
Net change in long-term intercompany balances		9			(5	)		(273	)		269
Common stock issued		4															4
Common stock repurchased		(6	)														(6	)
Dividends paid											(14	)		14
Dividends paid to noncontrolling interests											(6	)					(6	)
Other					10						(5	)					5


Net cash provided by financing activities		7			17			20			295			14			353


Effect of exchange rate changes on cash and cash equivalents											11						11


Net change in cash and cash equivalents								(16	)		(38	)					(54	)

Cash and cash equivalents at January 1					0			65			398						463


Cash and cash equivalents at March 31		$0			$0			$49			$360			$0			$409

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the three months ended March 31, 2010

(in millions)


	Parent			Issuer			Guarantors			Non- Guarantors			Eliminations			Total Company

Net cash provided by/(used for) operating activities		$(7	)		$20			$(141	)		$(288	)					$(416	)


Cash flows from investing activities
Capital expenditures								(11	)		(21	)					(32	)
Intercompany investing activities								7			3			$(10	)
Other											11						11


Net cash used for investing activities								(4	)		(7	)		(10	)		(21	)


Cash flows from financing activities
Proceeds from long-term debt											4						4
Payments of long-term debt					(14	)					(3	)					(17	)
Net change in revolving credit facility and short-term debt					164			126			119						409
Net change in long-term intercompany balances		10			(170	)		(12	)		172
Common stock issued		2															2
Common stock repurchased		(5	)														(5	)
Dividends paid											(10	)		10
Dividends paid to noncontrolling interests											(15	)					(15	)
Other					(5	)		13									8


Net cash provided by/(used for) financing activities		7			(25	)		127			267			10			386


Effect of exchange rate changes on cash and cash equivalents											(9	)					(9	)


Net change in cash and cash equivalents					(5	)		(18	)		(37	)					(60	)

Cash and cash equivalents at January 1					5			49			405						459


Cash and cash equivalents at March 31		$0			$0			$31			$368			$0			$399

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 for the three months ended March 31, 2011 and 2010,

•

balance sheets as of March 31, 2011 and December 31, 2010, and

•

statements of cash flows for the three months ended March 31, 2011 and 2010

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 three months ended March 31, 2011

(in millions)


	Parent		Issuer			Non- Guarantors			Eliminations			Total Company

Net sales							$1,882						$1,882
Cost of products sold, excluding depreciation and amortization							1,550						1,550
Depreciation and amortization							40						40


Gross profit							292						292

Selling and administrative expense				$2			100						102
Provision for restructuring							25						25
Loss from early extinguishment of debt							30						30
Net interest expense				21			31						52


Income/(loss) before income taxes				(23	)		106						83
Provision for/(benefit from) income taxes				(7	)		48						41
Equity earnings in affiliates		$16		32						$(48	)


Net income		16		16			58			(48	)		42
Net income attributable to noncontrolling interests							(26	)					(26	)

Net income attributable to Crown Holdings		$16		$16			$32			$(48	)		$16

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended March 31, 2010

(in millions)


	Parent		Issuer			Non- Guarantors			Eliminations			Total Company

Net sales							$1,777						$1,777
Cost of products sold, excluding depreciation and amortization							1,483						1,483
Depreciation and amortization							44						44


Gross profit							250						250


Selling and administrative expense				$(18	)		97						79
Provision for restructuring							22						22
Asset impairments and sales							(1	)					(1	)
Net interest expense				22			24						46
Translation and foreign exchange							(2	)					(2	)


Income/(loss) before income taxes				(4	)		110						106
Provision for income taxes				2			37						39
Equity earnings in affiliates		$41		47						$(88	)


Net income		41		41			73			(88	)		67
Net income attributable to noncontrolling interests							(26	)					(26	)

Net income attributable to Crown Holdings		$41		$41			$47			$(88	)		$41

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of March 31, 2011

(in millions)


	Parent			Issuer		Non- Guarantors		Eliminations			Total Company
Assets
Current assets
Cash and cash equivalents							$409					$409
Receivables, net							1,104					1,104
Inventories							1,353					1,353
Prepaid expenses and other current assets		$1					203					204

Total current assets		1					3,069					3,070


Intercompany debt receivables							1,037		$(1,037	)
Investments		388			$1,226				(1,614	)
Goodwill							2,047					2,047
Property, plant and equipment, net							1,702					1,702
Other non-current assets					527		130					657

Total		$389			$1,753		$7,985		$(2,651	)		$7,476


Liabilities and equity
Current liabilities
Short-term debt							$413					$413
Current maturities of long-term debt							176					176
Accounts payable and accrued liabilities		$10			$44		1,940					1,994

Total current liabilities		10			44		2,529					2,583


Long-term debt, excluding current maturities					411		2,473					2,884
Long-term intercompany debt		386			651				$(1,037	)
Postretirement and pension liabilities							1,171					1,171
Other non-current liabilities					259		240					499
Commitments and contingent liabilities

Noncontrolling interests							346					346
Crown Holdings shareholders’ equity/(deficit)		(7	)		388		1,226		(1,614	)		(7	)

Total equity/(deficit)		(7	)		388		1,572		(1,614	)		339


Total		$389			$1,753		$7,985		$(2,651	)		$7,476

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of December 31, 2010

(in millions)


	Parent			Issuer		Non- Guarantors		Eliminations			Total Company
Assets
Current assets
Cash and cash equivalents							$463					$463
Receivables, net							936					936
Inventories							1,060					1,060
Prepaid expenses and other current assets		$1					189					190

Total current assets		1					2,648					2,649


Intercompany debt receivables							1,014		$(1,014	)
Investments		308			$1,133				(1,441	)
Goodwill							1,984					1,984
Property, plant and equipment, net							1,610					1,610
Other non-current assets					528		128					656

Total		$309			$1,661		$7,384		$(2,455	)		$6,899


Liabilities and equity
Current liabilities
Short-term debt							$241					$241
Current maturities of long-term debt							158					158
Accounts payable and accrued liabilities		$28			$42		1,908					1,978

Total current liabilities		28			42		2,307					2,377


Long-term debt, excluding current maturities					411		2,238					2,649
Long-term intercompany debt		377			637				$(1,014	)
Postretirement and pension liabilities							1,159					1,159
Other non-current liabilities					263		222					485
Commitments and contingent liabilities

Noncontrolling interests							325					325
Crown Holdings shareholders’ equity/(deficit)		(96	)		308		1,133		(1,441	)		(96	)

Total equity/(deficit)		(96	)		308		1,458		(1,441	)		229


Total		$309			$1,661		$7,384		$(2,455	)		$6,899

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the three months ended March 31, 2011

(in millions)


	Parent			Issuer			Non- Guarantors			Eliminations			Total Company
Net cash used for operating activities		$(7	)		$(17	)		$(293	)					$(317	)


Cash flows from investing activities
Capital expenditures								(103	)					(103	)
Investment dividends					3						$(3	)
Other								2						2

Net cash provided by/(used for) investing activities					3			(101	)		(3	)		(101	)


Cash flows from financing activities
Proceeds from long-term debt								754						754
Payments of long-term debt								(605	)					(605	)
Net change in revolving credit facility and short-term debt								218						218
Debt issue costs								(11	)					(11	)
Net change in long-term intercompany balances		9			14			(23	)
Common stock issued		4												4
Common stock repurchased		(6	)											(6	)
Dividends paid								(3	)		3
Dividend paid to noncontrolling interests								(6	)					(6	)
Other								5						5

Net cash provided by financing activities		7			14			329			3			353


Effect of exchange rate changes on cash and cash equivalents								11						11


Net change in cash and cash equivalents								(54	)					(54	)

Cash and cash equivalents at January 1								463						463


Cash and cash equivalents at March 31		$0			$0			$409			$0			$409

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the three months ended March 31, 2010

(in millions)


	Parent			Issuer			Non- Guarantors			Eliminations			Total Company

Net cash provided by/(used for) operating activities		$(7	)		$10			$(419	)					$(416	)


Cash flows from investing activities
Capital expenditures								(32	)					(32	)
Investment dividends					9						$(9	)
Other								11						11


Net cash provided by/(used for) investing activities					9			(21	)		(9	)		(21	)


Cash flows from financing activities
Proceeds from long-term debt								4						4
Payments of long-term debt								(17	)					(17	)
Net change in revolving credit facility and short-term debt								409						409
Net change in long-term intercompany balances		10			(19	)		9
Common stock issued		2												2
Common stock repurchased		(5	)											(5	)
Dividends paid								(9	)		9
Dividend paid to noncontrolling interests								(15	)					(15	)
Other								8						8


Net cash provided by/(used for) financing activities		7			(19	)		389			9			386


Effect of exchange rate changes on cash and cash equivalents								(9	)					(9	)


Net change in cash and cash equivalents								(60	)					(60	)

Cash and cash equivalents at January 1								459						459


Cash and cash equivalents at March 31		$0			$0			$399			$0			$399

Crown Holdings, Inc.

Crown Americas, LLC, Crown Americas Capital Corp. and Crown Americas Capital Corp. II (collectively, the Issuers), 100% owned subsidiaries of the Company, have outstanding senior unsecured notes that are fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent) and 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 for the three months ended March 31, 2011 and 2010,

•

balance sheets as of March 31, 2011 and December 31, 2010, and

•

statements of cash flows for the three months ended March 31, 2011 and 2010

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 three months ended March 31, 2011

(in millions)


	Parent		Issuer			Guarantors			Non- Guarantors			Eliminations			Total Company

Net sales							$623			$1,259						$1,882
Cost of products sold, excluding depreciation and amortization							528			1,022						1,550
Depreciation and amortization							10			30						40


Gross profit							85			207						292

Selling and administrative expense				$2			36			64						102
Provision for restructuring							20			5						25
Loss from early extinguishment of debt				30												30
Net interest expense				12			22			18						52
Technology royalty							(10	)		10


Income/(loss) before income taxes				(44	)		17			110						83
Provision/(benefit) for income taxes				(17	)		17			41						41
Equity earnings in affiliates		$16		26			16						$(58	)


Net income/(loss)		16		(1	)		16			69			(58	)		42
Net income attributable to noncontrolling interests										(26	)					(26	)

Net income/(loss) attributable to Crown Holdings		$16		$(1	)		$16			$43			$(58	)		$16

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended March 31, 2010

(in millions)


	Parent		Issuer			Guarantors			Non- Guarantors			Eliminations			Total Company

Net sales							$522			$1,255						$1,777
Cost of products sold, excluding depreciation and amortization							454			1,029						1,483
Depreciation and amortization							10			34						44


Gross profit							58			192						250

Selling and administrative expense				$2			15			62						79
Provision for restructuring										22						22
Asset impairments and sales										(1	)					(1	)
Net interest expense				21			13			12						46
Technology royalty							(7	)		7
Translation and foreign exchange										(2	)					(2	)


Income/(loss) before income taxes				(23	)		37			92						106
Provision/(benefit) for income taxes				(9	)		24			24						39
Equity earnings in affiliates		$41		28			28						$(97	)


Net income		41		14			41			68			(97	)		67
Net income attributable to noncontrolling interests										(26	)					(26	)

Net income attributable to Crown Holdings		$41		$14			$41			$42			$(97	)		$41

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of March 31, 2011

(in millions)


	Parent		Issuer		Guarantors			Non- Guarantors		Eliminations			Total Company

Assets
Current assets
Cash and cash equivalents				$33					$376					$409
Receivables, net						$(16	)		1,120					1,104
Intercompany receivables						46			13		$(59	)
Inventories						331			1,022					1,353
Prepaid expenses and other current assets		$1		2		87			114					204

Total current assets		1		35		448			2,645		(59	)		3,070
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