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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 2022
 
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 000-50189
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.)
770 Township Line RoadYardleyPA19067
(Address of principal executive offices) (Zip Code)
215-698-5100
(registrant’s telephone number, including area code)
____________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each classTrading SymbolsName of each exchange on which registered
Common Stock $5.00 Par ValueCCKNew York Stock Exchange
7 3/8% Debentures Due 2026CCK26New York Stock Exchange
7 1/2% Debentures Due 2096CCK96New York Stock Exchange
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      No  
Indicate by check mark whether the registrant has submitted electronically 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      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes      No  

There were 122,942,067 shares of Common Stock outstanding as of April 28, 2022.


Crown Holdings, Inc.


PART I – FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions except per share data)
(Unaudited)
Three Months Ended
March 31,
20222021
Net sales$3,162 $2,564 
Cost of products sold, excluding depreciation and amortization2,547 1,982 
Depreciation and amortization115 112 
Selling and administrative expense157 143 
Restructuring and other(1) 
Income from operations344 327 
Other pension and postretirement(4)(1)
Interest expense54 69 
Interest income(3)(2)
Foreign exchange(10)(2)
Income from continuing operations before taxes and equity in net earnings of affiliates307 263 
Provision for income taxes78 65 
Equity in net earnings of affiliates17 2 
Net income from continuing operations246 200 
Net income from discontinued operations— 45 
Net income 246 245 
Net income from continuing operations attributable to noncontrolling interests30 33 
Net income from discontinued operations attributable to noncontrolling interests 1 
Net income attributable to Crown Holdings$216 $211 
Net income from continuing operations attributable to Crown Holdings$216 $167 
Net income from discontinued operations attributable to Crown Holdings 44 
Net income attributable to Crown Holdings$216 $211 
Earnings per common share attributable to Crown Holdings:
Basic earnings per common share from continuing operations1.75 1.25 
Basic earnings per common share from discontinued operations 0.33 
Basic$1.75 $1.58 
Diluted earnings per common share from continuing operations1.74 1.24 
Diluted earnings per common share from discontinued operations 0.33 
Diluted$1.74 $1.57 
The accompanying notes are an integral part of these consolidated financial statements.

2

Crown Holdings, Inc.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
Three Months Ended
March 31,
20222021
Net income$246 $245 
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments13 (35)
Pension and other postretirement benefits7 15 
Derivatives qualifying as hedges42 15 
Total other comprehensive income / (loss)62 (5)
Total comprehensive income 308 240 
Net income attributable to noncontrolling interests30 34 
Translation adjustments attributable to noncontrolling interests 1 
Derivatives qualifying as hedges attributable to noncontrolling interests3 (1)
Comprehensive income attributable to Crown Holdings$275 $206 

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

3

Crown Holdings, Inc.


CONSOLIDATED BALANCE SHEETS (Condensed)
(In millions)
(Unaudited)
March 31,
2022
December 31,
2021
Assets
Current assets
Cash and cash equivalents$389 $531 
Receivables, net2,170 1,889 
Inventories2,063 1,735 
Prepaid expenses and other current assets341 243 
Current assets held for sale99 97 
Total current assets5,062 4,495 
Goodwill 3,006 3,007 
Intangible assets, net1,477 1,525 
Property, plant and equipment, net4,083 4,036 
Operating lease right-of-use assets, net196 191 
Other non-current assets606 604 
Total assets$14,430 $13,858 
Liabilities and equity
Current liabilities
Short-term debt$96 $75 
Current maturities of long-term debt1,137 135 
Current portion of operating lease liabilities36 42 
Accounts payable2,889 2,901 
Accrued liabilities931 966 
Current liabilities held for sale17 14 
Total current liabilities5,106 4,133 
Long-term debt, excluding current maturities5,654 6,052 
Postretirement and pension liabilities489 497 
Non-current portion of operating lease liabilities164 150 
Other non-current liabilities757 696 
Commitments and contingent liabilities (Note I)
Noncontrolling interests440 418 
Crown Holdings shareholders’ equity 1,820 1,912 
Total equity2,260 2,330 
Total liabilities and equity$14,430 $13,858 

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

4

Crown Holdings, Inc.


CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed)
(In millions)
(Unaudited)
Three Months Ended
March 31,
20222021
Cash flows from operating activities
Net income$246 $245 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization115 127 
Restructuring and other(1)2 
Pension expense8 12 
Pension contributions20 (5)
Stock-based compensation10 11 
Working capital changes and other(699)(777)
Net cash used for operating activities(301)(385)
Cash flows from investing activities
Capital expenditures(117)(135)
Acquisition of business, net of cash acquired(23) 
Net investment hedge13 13 
Proceeds from sale of discontinued operations, net of cash disposed6  
Proceeds from sale of property, plant and equipment12 2 
Other(8) 
Net cash used for investing activities(117)(120)
Cash flows from financing activities
Net change in revolving credit facility and short-term debt158 (13)
Proceeds from long-term debt601 36 
Payments of long-term debt(42)(26)
Bond issuance costs(7) 
Foreign exchange derivatives related to debt (4)
Payments of finance leases(1)(1)
Dividends paid to noncontrolling interests(11)(9)
Dividends paid to shareholders(27)(27)
Common stock issued 1 
Common stock repurchased(350)(12)
Net cash provided by / (used for) financing activities321 (55)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(36)(11)
Net change in cash, cash equivalents and restricted cash(133)(571)
Cash, cash equivalents and restricted cash at January 1593 1,238 
Cash, cash equivalents and restricted cash at March 31$460 $667 

The accompanying notes are an integral part of these consolidated financial statements.
5

Crown Holdings, Inc.


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

 Crown Holdings, Inc. Shareholders’ Equity  
Common StockPaid-in CapitalAccumulated EarningsAccumulated Other Comprehensive LossTreasury StockTotal Crown EquityNoncontrolling InterestsTotal Shareholders' Equity
Balance at January 1, 2022$929 $ $3,180 $(1,898)$(299)$1,912 $418 $2,330 
Net income216 216 30 246 
Other comprehensive income59 59 3 62 
Dividends paid to shareholders(27)(27)(27)
Dividends paid to noncontrolling interests— (11)(11)
Restricted stock awarded(1)1 —  
Stock-based compensation10 10 10 
Common stock repurchased(335)(15)(350)(350)
Balance at March 31, 2022$929 $ $3,043 $(1,839)$(313)$1,820 $440 $2,260 


Balance at January 1, 2021$929 $179 $4,538 $(3,193)$(255)$2,198 $406 $2,604 
Net income211 211 34 245 
Other comprehensive loss(5)(5)(5)
Dividends paid to shareholders(27)(27)(27)
Dividends paid to noncontrolling interests— (9)(9)
Restricted stock awarded(1)1 —  
Stock-based compensation11 11 11 
Common stock issued1 1 1 
Common stock repurchased(11)(1)(12)(12)
Balance at March 31, 2021$929 $179 $4,722 $(3,198)$(255)$2,377 $431 $2,808 

The accompanying notes are an integral part of these consolidated financial statements
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Crown Holdings, Inc.


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


A.Statement of Information Furnished

The consolidated financial statements include the accounts of Crown Holdings, Inc. and its consolidated subsidiaries (the “Company”). The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Form 10-Q instructions. In the opinion of management, these consolidated financial statements contain all adjustments of a normal and recurring nature necessary for a fair statement of the financial position of the Company as of March 31, 2022 and the results of its operations for the three months ended March 31, 2022 and 2021 and of its cash flows for the three months ended March 31, 2022 and 2021. 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”), the application of which requires management’s utilization of estimates, and actual results may differ materially from the estimates utilized.

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, 2021.


B.     Divestitures

On August 31, 2021, the Company completed the sale (the “Transaction”) of its European Tinplate business (the “Business”) to Kouti B.V., an affiliate of KPS Capital Partners LP. The Business comprised the Company’s European Food segment and its European Aerosol and Promotional Packaging reporting unit which was previously reported in Other. The Company received pre-tax proceeds of approximately €1.9 billion ($2.3 billion) from the Transaction and received a 20% minority interest in the Business. For the year ended December 31, 2021, the Company recorded a pre-tax loss of $101 and tax charges of $81 related to taxable gains on the sale of the Business.

Major components of net income from discontinued operations for the three months ended March 31, 2021 were as follows:
Three Months Ended March 31,
2021
Net sales$514 
Cost of products sold, excluding depreciation and amortization418 
Depreciation and amortization16 
Selling and administrative expense21 
Interest expense2 
Transaction costs2 
Income from discontinued operations before tax55 
Provision for income taxes10 
Net income from discontinued operations45 
Net income from discontinued operations attributable to noncontrolling interests1 
Net income from discontinued operations attributable to Crown Holdings$44 

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Crown Holdings, Inc.


The Company accounted for the minority interest received in the Business under the equity method. The Company's share of income of the Business was $15 for the three months ended March 31, 2022 and is reported in Equity in net earnings of affiliates in the Consolidated Statement of Operations.

In October 2021, the Company signed an agreement to sell Transit Packaging's Kiwiplan business for approximately $182. The transaction is subject to customary regulatory approvals and is expected to close in the second quarter of 2022. In 2021, the business had net sales of $39. The Company expects to record an after tax gain of approximately $100 related to the transaction. The assets and liabilities of this business were classified as held for sale as of December 31, 2021. The transaction will not represent a strategic shift that will have a major effect on the Company's operations and financial results, and therefore does not qualify for reporting as a discontinued operation.


C.    Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash included in the Company's Consolidated Balance Sheets and Statement of Cash Flows were as follows:

March 31, 2022December 31, 2021
Cash and cash equivalents$389 $531 
Restricted cash included in prepaid expenses and other current assets71 61 
Restricted cash included in other non-current assets 1 
Total restricted cash71 62 
Total cash, cash equivalents and restricted cash$460 $593 

Amounts included in restricted cash primarily represent amounts required to be segregated by certain of the Company's receivables securitization agreements.


D.    Receivables

March 31, 2022December 31, 2021
Accounts receivable$1,463 $1,289 
Less: allowance for credit losses(20)(20)
Net trade receivables1,443 1,269 
Unbilled receivables404 325 
Miscellaneous receivables323 295 
Receivables, net$2,170 $1,889 


E.    Inventories

March 31, 2022December 31, 2021
Raw materials and supplies$1,241 $1,094 
Work in process147 120 
Finished goods675 521 
$2,063 $1,735 





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Crown Holdings, Inc.


F.    Intangible Assets

Gross carrying amounts and accumulated amortization of finite-lived intangible assets by major class were as follows:
    
 March 31, 2022December 31, 2021
 GrossAccumulated amortizationNetGrossAccumulated amortizationNet
Customer relationships$1,359 $(469)$890 $1,363 $(443)$920 
Trade names537 (90)447 544 (86)458 
Technology156 (93)63 158 (88)70 
Long term supply contracts141 (67)74 137 (63)74 
Patents14 (11)3 15 (12)3 
$2,207 $(730)$1,477 $2,217 $(692)$1,525 

Net income from continuing operations for the three months ended March 31, 2022 and 2021 included amortization expense of $40, and $42, respectively.


G.    Restructuring and Other

The Company recorded restructuring and other items as follows:
Three Months Ended
March 31,
20222021
Other costs / (income)$1 $(8)
Asset impairments and sales$(5)$ 
Restructuring3 8 
$(1)$ 

For the three months ended March 31, 2022, asset impairments and sales related to various land and building sales in the Company's Asia-Pacific segment which were closed as part of prior restructuring actions.


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 U.S. 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 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.

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Crown Holdings, Inc.


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 October 2010, the Texas Supreme Court held that the Texas legislation was unconstitutional under the Texas Constitution when applied to asbestos-related claims pending against Crown Cork when the legislation was enacted in June 2003. The Company believes that the decision of the Texas Supreme Court is limited to retroactive application of the Texas legislation to asbestos-related cases that were pending against Crown Cork in Texas on June 11, 2003 and therefore, in its accrual, continues to assign no value to claims filed after June 11, 2003.

The states of Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Michigan, Mississippi, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, West Virginia, Wisconsin and Wyoming have enacted legislation that limits asbestos-related liabilities under state law of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos. The legislation, which applies to future and, with the exception of Arkansas, Georgia, South Carolina, South Dakota, West Virginia and Wyoming, pending claims, caps asbestos-related liabilities at the fair market value of the predecessor's total gross assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total value of its predecessor's assets adjusted for inflation. Crown Cork has integrated the legislation into its claims defense strategy.

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

During the three months ended March 31, 2022, the Company paid $3 to settle asbestos claims and pay related legal and defense costs and had claims activity as follows:

Beginning claims57,000 
New claims300
Settlements or dismissals(300)
Ending claims57,000 

In the fourth quarter of each year, the Company performs an analysis of outstanding claims and categorizes these claims by year of exposure and state filed. As of December 31, 2021, the Company's outstanding claims were:

Claimants alleging first exposure after 196417,000 
Claimants alleging first exposure before or during 1964 filed in:
Texas13,000 
Pennsylvania1,500 
Other states that have enacted asbestos legislation6,000 
Other states19,500 
Total claims outstanding57,000 

The outstanding claims in each period exclude approximately 19,000 inactive claims. Due to the passage of time, the Company considers it unlikely that the plaintiffs in these cases will pursue further action against the Company. The exclusion of these inactive claims had no effect on the calculation of the Company’s accrual as the claims were filed in states, as described above, where the Company’s liability is limited by statute.

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

With respect to post-1964 claims, regardless of the existence of asbestos legislation, the Company does not include in its accrual any amounts for settlement of these claims because of increased difficulty of establishing identification of
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Crown Holdings, Inc.


relevant insulation products as the cause of injury. Given the Company's settlement experience with post-1964 claims, it does not believe that an adverse ruling in the Texas or Pennsylvania asbestos litigation cases, or in any other state that has enacted asbestos legislation, would have a material impact on the Company with respect to such claims.

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

20212020
Total claims24 %23 %
Pre-1965 claims in states without asbestos legislation42 %41 %

Crown Cork has entered into arrangements with plaintiffs’ counsel in certain jurisdictions with respect to claims which are not yet filed, or asserted, against it. However, Crown Cork expects claims under these arrangements to be filed or asserted against Crown Cork in the future. The projected value of these claims is included in the Company’s estimated liability as of March 31, 2022.

As of March 31, 2022, the Company’s accrual for pending and future asbestos-related claims and related legal costs was $234, including $192 for unasserted claims. The Company determines its accrual without limitation to a specific time period.

It is reasonably possible that the actual loss could be in excess of the Company’s accrual. However, the Company is unable to estimate the reasonably possible loss in excess of its accrual due to uncertainty in the following assumptions that underlie the Company’s accrual and the possibility of losses in excess of such accrual: the amount of damages sought by the claimant (which was not specified for approximately 82% of the claims outstanding at the end of 2021), the Company and claimant’s willingness to negotiate a settlement, the terms of settlements of other defendants with asbestos-related liabilities, the bankruptcy filings of other defendants (which may result in additional claims and higher settlements for non-bankrupt defendants), the nature of pending and future claims (including the seriousness of alleged disease, whether claimants allege first exposure to asbestos before or during 1964 and the claimant’s ability to demonstrate the alleged link to Crown Cork), the volatility of the litigation environment, the defense strategies available to the Company, the level of future claims, the rate of receipt of claims, the jurisdiction in which claims are filed, and the effect of state asbestos legislation (including the validity and applicability of the Pennsylvania legislation to non-Pennsylvania jurisdictions, where the substantial majority of the Company’s asbestos cases are filed).


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 $12 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 $6 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.

In March 2015, the Bundeskartellamt, or German Federal Cartel Office (“FCO”), conducted unannounced inspections of the premises of several metal packaging manufacturers, including a German subsidiary of the Company. The local court order authorizing the inspection cited FCO suspicions of anti-competitive agreements in the German market for the supply of metal packaging products.  The Company conducted an internal investigation into the matter and discovered instances of inappropriate conduct by certain employees of German subsidiaries of the Company. The
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Crown Holdings, Inc.


Company cooperated with the FCO and submitted a leniency application with the FCO which disclosed the findings of its internal investigation to date.  In April 2018, the FCO discontinued its national investigation and referred the matter to the European Commission (the “Commission”). Following the referral, Commission officials conducted unannounced inspections of the premises of several metal packaging manufacturers, including Company subsidiaries in Germany, France and the U.K. 

The Commission's investigation is ongoing and, to date, the Commission has not officially charged the Company or any of its subsidiaries with violations of competition law.  The Company is cooperating with the Commission and submitted a leniency application with the Commission with respect to the findings of the investigation in Germany referenced above.  This application may lead to the reduction of possible future penalties. At this stage of the investigation, the Company believes that a loss is probable and is unable to estimate the range of any potential loss in excess of its accrual.

In March 2017, U.S. Customs and Border Protection (“CBP”) at the Port of Milwaukee issued a penalty notification alleging that certain of the Company’s subsidiaries intentionally misclassified the importation of certain goods into the U.S. during the period 2004 -2009. CBP initially assessed a penalty of $18. The Company has acknowledged to CBP that the goods were misclassified and has paid all related duties, which CBP does not dispute. The Company has asserted that the misclassification was unintentional and disputes the penalty assessment by CBP. CBP has brought suit in the U.S. Court of International Trade seeking enforcement of the initial penalty against the Company. At the present time, based on the information available, the Company does not believe that a loss for the alleged intentional misclassification is probable. However, there can be no assurance that the Company will be successful in contesting the assessed penalty.

On October 7, 2021, the French Autorité de la concurrence (the French Competition Authority or “FCA”) issued a statement of objections to 14 trade associations, one public entity and 101 legal entities from 28 corporate groups, including the Company, certain of its subsidiaries, other leading metal can manufacturers, certain can fillers and certain retailers in France. The FCA alleged violations of Articles 101 of the Treaty on the Functioning of the European Union and L.420-1 of the French Commercial Code. The statement of objections alleges, among other things, anti-competitive behavior in connection with the removal of bisphenol-A from metal packaging in France. The removal of bisphenol-A was mandated by French legislation that went into effect in 2015. If the FCA finds that the Company or its subsidiaries violated competition law, the FCA may levy fines. Proceedings with respect to this matter are ongoing and the Company is unable to predict the ultimate outcome including the amount of fines, if any, that may be levied by the FCA. The Company intends to vigorously defend against the allegations in the statement of objections.

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

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

At March 31, 2022, the Company was party to certain indemnification agreements covering environmental remediation, lease payments and other potential costs associated with properties sold or businesses divested. 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.







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Crown Holdings, Inc.



J.    Derivative and Other Financial Instruments

Fair Value Measurements

Under U.S. 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 those available in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 includes unobservable pricing inputs that are not corroborated by market data or other objective sources. The Company has no recurring items valued using Level 3 inputs other than certain pension plan assets.

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

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

Fair value disclosures for financial assets and liabilities that were accounted for at fair value on a recurring basis are provided later in this note. In addition, see Note K for fair value disclosures related to debt.

Derivative Financial Instruments

In the normal course of business the Company is subject to risk from adverse fluctuations in currency exchange rates, interest rates and commodity prices. The Company manages these risks through a program that includes the use of derivative financial instruments, primarily swaps and forwards. 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 and interest rate 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, using sales agreements that permit the pass-through of commodity price and foreign exchange rate risk to customers and borrowing both fixed and floating debt instruments to manage interest rate risk.

For derivative financial instruments accounted for in hedging relationships, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the manner in which effectiveness will be assessed. The Company formally assesses, both at inception and at least quarterly thereafter, whether the hedging relationships are effective in offsetting changes in fair value or cash flows of the related underlying exposures. When a forecasted transaction is reasonably possible, but not probable of occurring, the hedge no longer qualifies for hedge accounting and the change in fair value from the date of the last effectiveness test is recognized in earnings. Any gain or loss which has accumulated in other comprehensive income at the date of the last effectiveness test is reclassified into earnings at the same time of the underlying exposure or when the forecasted transaction becomes probable of not occurring.

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 are recorded in accumulated other comprehensive income until earnings are impacted by the hedged transaction. Classification of the gain or loss in the Consolidated Statements of Operations upon reclassification from accumulated comprehensive income is the same as that of the underlying exposure. Contracts outstanding at March 31, 2022 mature between one and thirty-one months.
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Crown Holdings, Inc.


The Company uses commodity forward contracts to hedge anticipated purchases of various commodities, primarily aluminum, and these exposures are hedged by a central treasury unit.

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

    The Company may also use interest rate swaps to convert interest on floating rate debt to a fixed-rate. 

The following tables set forth financial information about the impact on other comprehensive income ("OCI"), accumulated other comprehensive income ("AOCI") and earnings from changes in the fair value of derivative instruments.

Amount of gain/(loss) recognized in OCI
Three Months Ended March 31,
Derivatives in cash flow hedges20222021
Foreign exchange$(5)$(1)
Interest Rate 1 
Commodities50 25 
$45 $25 
Amount of gain/(loss) reclassified from AOCI into income
Three Months Ended March 31,
Derivatives in cash flow hedges20222021Affected line items in the Statement of Operations
Foreign exchange$(5)$(1)Net sales
Commodities(11)$(4)Net sales
Foreign exchange(1) Cost of products sold
Commodities26 19 Cost of products sold
9 14 Income from continuing operations before taxes
(3)(4)Provision for income taxes
6 10 Net income from continuing operations
Foreign exchange— 1 Net income from discontinued operations
Total reclassified$6 $11 Net income

For the twelve-month period ending March 31, 2023, a net gain of $71 ($58, net of tax) is expected to be reclassified to earnings for commodity and foreign exchange contracts. No material amounts were reclassified during the three months ended March 31, 2022 and 2021 in connection with anticipated transactions that were considered probable of not occurring.

    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.

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Crown Holdings, Inc.


For the three months ended March 31, 2022 and 2021, the Company recorded a loss of $21 and a gain of $7 from foreign exchange contracts designated as fair value hedges. These adjustments were reported within foreign exchange in the Consolidated Statements of Operations.

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

The following table sets forth the impact on earnings from derivatives not designated as hedges.

Pre-tax amounts of gain/(loss) recognized in income on derivative
Three Months Ended March 31,
Derivatives not designated as hedges20222021Affected line item in the Statement of Operations
Foreign exchange$(4)$(1)Net sales
Foreign exchange1 1 Cost of products sold
Foreign exchange(10)(13)Foreign exchange
$(13)$(13)

Net Investment Hedges

The Company designates certain debt and derivative instruments as net investment hedges to manage foreign currency risk relating to net investments in subsidiaries denominated in foreign currencies and reduce the variability in the functional currency equivalent cash flows.

During the three months ended March 31, 2022, the Company recorded a gain of $17 ($10, net of tax) in other comprehensive income for certain debt instruments that are designated as hedges of its net investment in a euro-based subsidiary. During the three months ended March 31, 2021, the Company recorded a gain of $54 ($54, net of tax) in other comprehensive income for these net investment hedges. As of March 31, 2022 and December 31, 2021, cumulative gains of $86 ($102, net of tax) and gains of $69 ($92, net of tax) were recognized in accumulated other comprehensive income related to these net investment hedges and the carrying amount of the hedged net investment was €551 ($610) at March 31, 2022.

The following tables set forth the impact on AOCI from changes in the fair value of derivative instruments designated as net investment hedges.
Amount of gain / (loss) recognized in AOCI
Three Months Ended March 31,
Derivatives designated as net investment hedges20222021
Foreign exchange$2 $22 

Gains and losses representing components excluded from the assessment of effectiveness on derivatives designated as net investment hedges are recognized in accumulated other comprehensive income.

Gains or losses on net investment hedges remain in accumulated other comprehensive income until disposal of the underlying assets.



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Crown Holdings, Inc.


    Fair Values of Derivative Financial Instruments and Valuation Hierarchy

The following table sets forth the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, respectively. The fair values of these financial instruments were reported under Level 2 of the fair value hierarchy.

Balance Sheet classificationMarch 31,
2022
December 31, 2021Balance Sheet classificationMarch 31,
2022
December 31, 2021
Derivatives designated as hedging instruments
Foreign exchange contracts cash flowPrepaid expenses and other current assets$2 $3 Accrued liabilities$3 $10 
Foreign exchange contracts fair valuePrepaid expenses and other current assets1 1 Accrued liabilities6 2 
Commodities contracts cash flowPrepaid expenses and other current assets107 53 Accrued liabilities35 17 
Other non-current assets20 2 Other non-current liabilities9 1 
Net investment hedgeOther non-current assets51 49 Other non-current liabilities  
$181 $108 $53 $30 
Derivatives not designated as hedging instruments
Foreign exchange contractsPrepaid expenses and other current assets$4 $3 Accrued liabilities$7 $3 
$4 $3 $7 $3 
Total derivatives$185 $111 $60 $33 

Carrying amount of the hedged assets / liabilities
March 31,
2022
December 31,
2021
Line item in the Balance Sheet in which the hedged item is included
Cash and cash equivalents$31 $38 
Receivables, net16 21 
Accounts payable90 116 

As of March 31, 2022 and December 31, 2021, the cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged assets and liabilities were net gains of $5 and $1.

Offsetting of Derivative Assets and Liabilities

Certain derivative financial instruments are subject to agreements with counterparties similar to master netting arrangements and are eligible for offset. The Company has made an accounting policy election not to offset the fair values of these instruments within the statement of financial position. In the table below, the aggregate fair values of the Company's derivative assets and liabilities are presented on both a gross and net basis, where appropriate.
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Crown Holdings, Inc.


Gross amounts recognized in the Balance SheetGross amounts not offset in the Balance SheetNet amount
Balance at March 31, 2022
Derivative assets$185$44$141
Derivative liabilities604416
Balance at December 31, 2021
Derivative assets1111992
Derivative liabilities331914
    
    Notional Values of Outstanding Derivative Instruments

The aggregate U.S. dollar-equivalent notional values of outstanding derivative instruments in the Consolidated Balance Sheets at March 31, 2022 and December 31, 2021 were:

March 31, 2022December 31, 2021
Derivatives designated as cash flow hedges:
Foreign exchange$231 $241 
Commodities249 261 
Derivatives designated as fair value hedges:
Foreign exchange225 229 
Derivatives designated as net investment hedges:
Foreign exchange875 875 
Derivatives not designated as hedges:
Foreign exchange572 617 
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Crown Holdings, Inc.


K.    Debt

    The Company's outstanding debt was as follows:
March 31, 2022December 31, 2021
PrincipalCarryingPrincipalCarrying
outstandingamountoutstandingamount
Short-term debt$96 $96 $75 $75 
Long-term debt
Senior secured borrowings:
Revolving credit facilities179 179 50 50 
Term loan facilities
U.S. dollar due 2024988 985 1,002 997 
Euro due 20241
329 329 344 344 
Senior notes and debentures:
335 at 2.25% due 2023
371 370 381 380 
550 at 0.75% due 2023
609 607 626 624 
600 at 2.625% due 2024
664 661 683 680 
600 at 3.375% due 2025
664 660 683 679