CROWN HOLDINGS, INC. Introduction
The following discussion presents management's analysis of the results of operations for the three and nine months endedSeptember 30, 2020 compared to 2019 and changes in financial condition and liquidity fromDecember 31, 2019 . This discussion should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 , along with the consolidated financial statements and related notes included in and referred to within this report.
Business Strategy and Trends
The Company's strategy is to grow its businesses in targeted growth markets, while improving operations and results in more mature markets through disciplined pricing, cost control and careful capital allocation.
The Company's global beverage can business continues to be a major strategic focus for organic growth. Beverage cans are the world's most sustainable and recycled beverage packaging and continue to gain market share in new beverage product launches. The Company continues to drive brand differentiation by increasing its ability to offer multiple product sizes. For several years, global industry demand for beverage cans has been growing. InNorth America , beverage can growth has accelerated mainly due to the outsized portion of new beverage products being introduced in cans versus other packaging formats. In addition, markets such asBrazil ,Europe ,Mexico andSoutheast Asia have also experienced higher volumes and market expansion. While the Company expects beverage can demand to continue to grow in the coming years, the impact of the coronavirus pandemic could weaken demand in the near term in certain areas. In addition to its beverage can operations, the Company has generated strong returns on invested capital and significant cash flow from its non-beverage can operations including its global food can and transit packaging businesses. Due to the impact of the coronavirus pandemic, the Company expects lower demand in several of the industries served by its transit packaging businesses. The Company's primary capital allocation focus has been to reduce leverage, as was successfully accomplished following previous acquisitions, and to begin to return capital to its shareholders. InNovember 2019 , the Company announced a Board-led review of the Company's portfolio and capital allocation strategy, which is ongoing. InOctober 2020 , the Company announced that it intends to initiate regular quarterly dividends and a share repurchase program in 2021. The actual amount and timing of these programs will be determined by the Board of Directors. In direct response to the coronavirus pandemic, the Company has taken specific actions to ensure the safety of its employees. Following the implementation of travel and visitor restrictions in February, the Company continues to update its policies as new information becomes available. The Company has increased safety measures in its manufacturing facilities to protect the safety of its employees and the products they produce. In addition, as many employees as possible are working remotely. The Company's products are a vital part of the support system to its customers and consumers. In addition to manufacturing containers that provide protection for food and beverages, the Company also produces closures for baby food, aerosol containers for cleaning and sanitizing products and numerous other products that provide for the safe and secure transportation of goods in transit. The Company is working to keep its manufacturing facilities around the world operational and equipped with the resources required to meet continually evolving customer demand by delivering high quality products in a safe and timely manner. The Company is actively monitoring and managing supply chain challenges, including coordinating with its suppliers to identify and mitigate potential areas of risk and manage inventories. 25 --------------------------------------------------------------------------------
Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
The Company is also working to actively elevate its industry-leading commitment to sustainability. InJuly 2020 , the Company debuted Twentyby30, a robust program that outlines twenty measurable environmental, social and governance goals to be completed by 2030 or sooner. Results of Operations In assessing performance, the key performance measure used by the Company is segment income, a non-GAAP measure generally defined by the Company as income from operations adjusted to exclude intangibles amortization charges, provisions for asbestos and restructuring and other, and the impact of fair value adjustments to inventory acquired in an acquisition. The foreign currency translation impacts referred to in the discussion below were primarily due to changes in the euro and pound sterling in the Company's European andTransit Packaging segments and the Canadian dollar and Mexican peso in the Company's Americas Beverage segment. The Company calculates the impact of foreign currency translation by multiplying or dividing, as appropriate, current yearU.S. dollar results by the current year average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the applicable prior year average exchange rates.
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net sales $ 3,167 $ 3,084 $ 8,613 $ 8,874
Three months ended
Net sales increased primarily due to 8% higher beverage can shipments and 9% higher food can shipments partially offset by the pass-through of lower raw material costs.
Nine months ended
Net sales decreased primarily due to the pass through of lower raw material
costs and
Americas Beverage
The Americas Beverage segment manufactures aluminum beverage cans and ends, steel crowns, glass bottles and aluminum closures and supplies a variety of customers from its operations in theU.S. ,Brazil ,Canada ,Colombia andMexico . TheU.S. and Canadian beverage can markets have experienced recent market growth due to the introduction of new beverage products in cans versus other packaging formats. To meet volume requirements in theU.S. and Canadian beverage can markets, the Company began commercial production on a new beverage can line at itsToronto, Ontario plant inJanuary 2020 and on the third line at itsNichols, NY facility inJune 2020 . The Company also announced a new beverage can facility inBowling Green, Kentucky , which is expected to begin production in the second quarter of 2021. The Company will add a second line to that facility with a late third quarter 2021 planned start-up. Additionally, the Company announced it will construct a third line at itsOlympia, Washington plant which is scheduled to begin production during the third quarter of 2021. InBrazil andMexico , the Company's beverage can shipments have increased in recent years primarily due to market growth driven by increased per capita incomes and consumption, combined with an increased preference for cans over other packaging formats. InNovember 2019 , the Company commenced operations at a new one-line beverage can facility inRio Verde ,Brazil . The Company will construct a second line at this facility which is expected to commence operations during the third quarter of 2021. 26 --------------------------------------------------------------------------------
Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Net sales and segment income in the Americas Beverage segment were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net sales $ 960 $ 835 $ 2,608 $ 2,513
Segment income 193 134 456 386
Three months ended
Net sales increased primarily due to 17% higher beverage can shipments partially
offset by
Segment income increased due to higher beverage can shipments and improved
pricing, partially offset by
Nine months ended
Net sales increased primarily due 9% higher beverage can shipments, partially
offset by
Segment income increased primarily due to higher beverage can shipments,
improved pricing and lower freight costs in the
European Beverage
The Company's European Beverage segment manufactures steel and aluminum beverage cans and ends and supplies a variety of customers from its operations throughoutEurope , theMiddle East andNorth Africa . In recent years, the Western European beverage can markets have been growing. InFebruary 2019 , the second line at the beverage can plant inValencia, Spain began operations. In the second quarter of 2020, both beverage can lines in theSeville, Spain plant began commercial production of aluminum cans. Net sales and segment income in the European Beverage segment were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net sales$ 418 $ 416 $ 1,094 $ 1,165 Segment income 76 64 152 163
Three months ended
Net sales were comparable as$13 from the impact of foreign currency translation and 3% higher beverage can shipments were partially offset by the pass-through of lower aluminum costs.
Segment income increased primarily due to cost reduction initiatives and higher beverage can shipments.
Nine months ended
Net sales decreased primarily due to lower beverage can shipments due to the coronavirus pandemic and the pass-through of lower aluminum costs.
Segment income decreased primarily due to lower beverage can shipments partially offset by cost reduction initiatives.
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Item 2. Management's Discussion and Analysis (Continued)
European Food
The European Food segment manufactures steel and aluminum food cans and ends and metal vacuum closures, and supplies a variety of customers from its operations throughoutEurope andAfrica . The European food can market is a mature market where consumer preference continues to favor the can due to product protection and food preservation.
Net sales and segment income in the European Food segment were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net sales $ 623 $ 581 $ 1,524 $ 1,487
Segment income 90 79 191 189
Three months ended
Net sales increased primarily due to 10% higher food can shipments and$20 from the impact of foreign currency translation, partially offset by the pass-through of lower raw material costs.
Segment income increased due to higher food can shipments and
Nine months ended
Net sales increased primarily due to 8% higher food can shipments, partially offset by the pass-through of lower raw material costs and$5 from the impact of foreign currency translation. Segment income was comparable as higher food can shipments and improved cost performance were partially offset by$18 arising from the carryover of higher tinplate costs from prior year-end inventory.Asia Pacific The Company'sAsia Pacific segment consists of beverage can operations inCambodia ,China ,Indonesia ,Malaysia ,Myanmar ,Singapore ,Thailand andVietnam and non-beverage can operations, primarily food cans and specialty packaging. In recent years, the beverage can market inSoutheast Asia has been growing. The Company commenced operations at a new beverage can plant inNong Khae ,Thailand inJuly 2020 . In response to market conditions inChina , the Company closed itsHuizhou facility in early 2019. Following this closure, the Company has three beverage can plants inChina with approximately$75 in annual sales.
Net sales and segment income in the
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net sales $ 281 $ 319 $ 852 $ 959
Segment income 41 47 125 143
Three and nine months ended
Net sales decreased primarily due to lower beverage can shipments due to the impact of the coronavirus pandemic and the pass-through of lower aluminum costs.
Segment income decreased primarily due to lower beverage can shipments.
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Item 2. Management's Discussion and Analysis (Continued)
The Transit Packaging segment includes the Company's global consumables and equipment and tools businesses. Consumables include steel strap, plastic strap and industrial film and other related products that are used in a wide range of industries, and transit protection products that help prevent movement during transport for a wide range of industrial and consumer products. Equipment and tools includes manual, semi-automatic and automatic equipment and tools used in end-of-line operations to apply industrial solutions consumables. Net sales and segment income in theTransit Packaging segment were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net sales$ 511 $ 564 $ 1,495 $ 1,725 Segment income 72 74 189 227
Three months ended
Net sales decreased primarily due to lower sales unit volumes due to the impact of the coronavirus pandemic and the pass-through of lower raw material prices.
Segment income was comparable as lower sales unit volumes were partially offset by improved product mix and cost performance.
Nine months ended
Net sales decreased primarily due to lower sales unit volumes due to the impact of the coronavirus pandemic, the pass-through of lower raw material prices and$18 from the impact of foreign currency translation.
Segment income decreased primarily due to lower sales unit volumes, partially offset by improved product mix and cost performance.
Non-reportable Segments
The Company's non-reportable segments include its food can and closures
businesses in
Net sales and segment income in non-reportable segments were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net sales $ 374 $ 369 $ 1,040 $ 1,025
Segment income 36 34 86 103
Three months ended
Net sales and segment increased primarily due to higher sales in the Company's beverage can equipment operations and 9% higher shipments in the Company'sNorth America food can business, partially offset by lower shipments in the Company's global aerosol can businesses. Net sales were also unfavorably impacted by the pass-through of lower tinplate costs. 29 --------------------------------------------------------------------------------
Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Nine months ended
Net sales increased as higher sales in the Company's beverage can equipment
operations and 11% higher shipments in the Company's
Segment income decreased primarily due to$16 arising from the carryover of higher tinplate costs from the prior year-end inventory and lower shipments in the Company's global aerosol can businesses, partially offset by higher sales in the Company's beverage can equipment operations and higher shipments in the Company'sNorth America food can business.
Corporate and Unallocated Expense
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Corporate and unallocated expense $ (47) $
(37)
For the three months ended
For the nine months ended
Interest Expense
For the three and nine months ended
Taxes on Income
The Company's effective income tax rate was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Income before income taxes $ 335 $ 257 $ 678 $ 695
Provision for income taxes 91 54 182 190
Effective income tax rate 27 % 21 % 27 % 27 %
The effective tax rate for the three and nine months ended September 30, 2020 ,
included a charge of $8 related to a tax law change in the U.K. The nine months
ended September 30, 2020 , also included a benefit of $4 arising from a tax law
change in India .
The effective tax rate for the nine months ended
Net Income Attributable to Noncontrolling Interests
For the three months ended
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Item 2. Management's Discussion and Analysis (Continued)
For the nine months endedSeptember 30, 2020 compared to 2019, net income attributable to noncontrolling interest decreased from$86 to$72 primarily due to higher income inBrazil in 2019 related to a favorable court ruling for one of the Company's Brazilian subsidiaries related to indirect taxes. Liquidity and Capital Resources
Cash from Operations
Cash provided by operating activities increased from$201 for the nine months endedSeptember 30, 2019 to$309 for the nine months endedSeptember 30, 2020 . The increase was primarily due to higher earnings and changes in working capital.
Days sales outstanding for trade receivables, excluding the impact of unbilled
receivables, was 39 days as of
Inventory turnover was 64 days at
The food can business is seasonal with the first quarter tending to be the slowest period as the autumn packaging period in the Northern Hemisphere has ended and new crops are not yet planted. The industry enters its busiest period in the third quarter when the majority of fruits and vegetables in the Northern Hemisphere are harvested. Due to this seasonality, inventory levels increase in the first half of the year to meet peak demand in the second and third quarters. The beverage can business is also seasonal with inventory levels generally increasing in the first half of the year to meet peak demand in the summer months in the Northern Hemisphere. Days outstanding for trade payables was 88 days atSeptember 30, 2019 compared to 89 days atSeptember 30, 2020 . Investing Activities
Cash used for investing activities increased from
The Company currently expects capital expenditures in 2020 to be approximately
Financing Activities Financing activities used cash of$245 for the nine months endedSeptember 30, 2019 and provided cash of$26 for the nine months endedSeptember 30, 2020 . The Company had higher net borrowings in 2019. Additionally, during the nine months endedSeptember 30, 2020 , the Company repurchased$58 of capital stock and had an inflow related to foreign exchange derivatives related to debt.
Liquidity
As ofSeptember 30, 2020 ,$538 of the Company's$613 of cash and cash equivalents was located outside theU.S. The Company funds its cash needs in theU.S. through cash flows from operations in theU.S. , distributions from certain foreign subsidiaries, borrowings under its revolving credit facility and the acceleration of cash receipts under its receivable securitization facilities. Of the cash and cash equivalents located outside theU.S. ,$49 was held by subsidiaries for which earnings are considered indefinitely reinvested. While based on current operating plans the Company does not foresee a need to repatriate these funds, if such earnings were repatriated the Company would be required to record any incremental taxes on the repatriated funds. As ofSeptember 30, 2020 , the Company had$1,585 of borrowing capacity available under its revolving credit facility, equal to the total facility of$1,650 less outstanding standby letters of credit of$65 . The Company did not have any outstanding borrowings under the facility atSeptember 30, 2020 . The Company could have borrowed this amount atSeptember 30, 2020 and still been in compliance with its leverage ratio covenants. The Company's net total leverage ratio, as defined by the credit agreement, of 4.38 to 1.0 atSeptember 30, 2020 was in compliance with the covenant 31 --------------------------------------------------------------------------------
Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
requiring a ratio of no greater than 5.75 to 1.0. The required net total
leverage ratio under the agreement reduces to 5.0 to 1.0 at
Capital Resources
As of
Contractual Obligations
During the nine months ended
Supplemental Guarantor Financial Information
As disclosed in Note K , the Company has senior notes and debentures outstanding, which have various guarantees.
The Company's outstanding$350 principal amount of 7.375% senior notes due 2026 and$40 principal amount 7.5% senior notes due 2096 were issued byCrown Cork & Seal Company, Inc. (Crown Cork Issuer), a 100% owned subsidiary of the Company and are fully and unconditionally guaranteed byCrown Holdings, Inc. (Parent). No other subsidiary guarantees the debt and the guarantees are made on a joint and several basis. The Company's$1,000 principal amount 4.5% senior notes due 2023,$400 principal amount of 4.25% senior notes due 2026, and$875 principal amount of 4.75% senior notes due 2026 were issued byCrown Americas LLC andCrown Americas Capital Corp. IV, Crown Americas Capital Corp.V and Crown Americas Capital Corp. VI, respectively (collectively, the Crown Americas Issuer), each a 100% owned subsidiary of the Company, and are fully and unconditionally guaranteed by the Parent and substantially all of its subsidiaries inthe United States . Each of the guarantors to these senior notes (collectively, the Crown Americas Guarantors) is a 100% owned subsidiary of the Company and the guarantees are made on a joint and several basis. The other subsidiaries of the Company do not guarantee the debt. The senior notes described above and issued by the Crown Cork Issuer and the Crown Americas Issuer are collectively referred to as the senior notes, the Crown Cork Issuer and the Crown Americas Issuer are collectively referred to as the issuers, the Parent and the Crown Americas Guarantors are collectively referred to as the guarantors and the subsidiaries of the Company that do not guarantee the senior notes are collectively referred to as the non-guarantors. Each of the Parent (in the case of the senior notes issued by the Crown Cork Issuer) and the Crown Americas Guarantors (in the case of the senior notes issued by the Crown Americas Issuer) guarantee the payment of the principal and premium, if any, and interest on the senior notes when due, whether at stated maturity of the senior notes, by acceleration, call for redemption or otherwise, together with interest on the overdue principal, if any, and interest on any overdue interest, to the extent lawful, and all other obligations of the Company to the holders of the senior notes and to the trustee under the applicable indenture governing the senior notes.
The senior notes and guarantees are senior unsecured obligations of the issuers and the guarantors, and are
•effectively subordinated to all existing and future secured indebtedness of the issuers and the guarantors to the extent of the value of the assets securing such indebtedness, including any borrowings under the Company's senior secured credit facilities, to the extent of the value of the assets securing such indebtedness; •structurally subordinated to all indebtedness of the Company's non-guarantor subsidiaries, which include all of the Company's foreign subsidiaries and anyU.S. subsidiaries that are neither obligors nor guarantors of the Company's senior secured credit facilities; •ranked equal in right of payment to any existing or future senior indebtedness of the issuers and the guarantors; and 32 --------------------------------------------------------------------------------
Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
•ranked senior in right of payment to all existing and future subordinated indebtedness of the issuers and the guarantors.
Each guarantee of a guarantor is limited to an amount not to exceed the maximum amount that can be guaranteed that will not (after giving effect to all other contingent and fixed liabilities of such guarantor and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of all other guarantors in respect of the obligations of such other guarantors under their respective guarantees of the guaranteed obligations) render the guarantee, as it relates to such guarantor, voidable under applicable law relating to fraudulent conveyances or fraudulent transfers.
A guarantee of a guarantor other than the Parent will be unconditionally released and discharged upon any of the following:
•any transfer (including, without limitation, by way of consolidation or merger) by the Parent or any subsidiary of the Parent to any person or entity that is not the Parent or a subsidiary of the Parent of all of the equity interests of, or all or substantially all of the properties and assets of, such guarantor; •any transfer (including, without limitation, by way of consolidation or merger) by the Parent or any subsidiary of the Parent to any person or entity that is not the Parent or a subsidiary of the Parent of equity interests of such guarantor or any issuance by such guarantor of its equity interests, such that such guarantor ceases to be a subsidiary of the Parent; provided that such guarantor is also released from all of its obligations in respect of indebtedness under the Company's senior secured credit facilities; •the release of such guarantor from all obligations of such guarantor in respect of indebtedness under the Company's senior secured credit facilities, except to the extent such guarantor is otherwise required to provide a guarantee; or •upon the contemporaneous release or discharge of all guarantees by such guarantor which would have required such guarantor to provide a guarantee under the applicable indenture. The following tables present summarized financial information related to the senior notes issued by each of Crown Cork and Crown Americas on a combined basis for each issuer and its guarantors after elimination of (i) intercompany transactions and balances among the Parent and the guarantors and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor.
Crown Cork Issuer and Guarantor
Nine Months Ended
September 30, 2020
Net sales $ -
Gross Profit -
Income from operations (2)
Net income1 (56)
Net income attributable to Crown Holdings1 (56)
(1) Includes$25 of expense related to intercompany interest with non-guarantor subsidiaries September 30, 2020 December 31, 2019 Current assets $ 12 $ 11 Non-current assets 96 129 Current liabilities 46 57 Non-current liabilities1 4,296 4,237
(1) Includes payables of
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Crown Americas Issuer and Guarantors
Nine Months Ended
September 30, 2020
Net sales1 $ 2,944
Gross profit2 474
Income from operations2 162
Net income3 52
Net income attributable to Crown Holdings3 52
(1) Includes
September 30, 2020 December 31, 2019
Current assets1 $ 763 $ 799
Non-current assets2 3,270 3,171
Current liabilities3 950 956
Non-current liabilities4 4,712 4,709
(1) Includes receivables of $50 and $55 due from non-guarantor subsidiaries as
of September 30, 2020 and December 31, 2019
(2) Includes receivables of $227 and $128 due from non-guarantor subsidiaries as
of September 30, 2020 and December 31, 2019
(3) Includes payables of $30 and $21 due to non-guarantor subsidiaries as of
September 30, 2020 and December 31, 2019
(4) Includes payables of $268 and $245 due to non-guarantor subsidiaries as of
September 30, 2020 and December 31, 2019
The senior notes are structurally subordinated to all indebtedness of the
Company's non-guarantor subsidiaries. The non-guarantors are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due pursuant to the senior notes, or to make any funds available
therefor, whether by dividends, loans, distributions or other payments. Any
right that the Company or the guarantors have to receive any assets of any of
the non-guarantors upon the liquidation or reorganization of any non-guarantor,
and the consequent rights of holders of senior notes to realize proceeds from
the sale of any of a non-guarantor's assets, would be effectively subordinated
to the claims of such non-guarantor's creditors, including trade creditors and
holders of preferred equity interests, if any, of such non-guarantor.
Accordingly, in the event of a bankruptcy, liquidation or reorganization of any
of the non-guarantors, the non-guarantors will pay the holders of their debts,
holders of preferred equity interests, if any, and their trade creditors before
they will be able to distribute any of their assets to the Company or any of the
guarantors.
Under U.S. federal bankruptcy laws or comparable provisions of state fraudulent
transfer laws, the issuance of the senior note guarantees by the guarantors
could be voided, or claims in respect of such obligations could be subordinated
to all of their other debts and other liabilities, if, among other things, at
the time the guarantors issued the related senior note guarantees, the Company
or the applicable guarantor intended to hinder, delay or defraud any present or
future creditor, or received less than reasonably equivalent value or fair
consideration for the incurrence of such indebtedness and either:
•was insolvent or rendered insolvent by reason of such incurrence; •was engaged in a business or transaction for which the Company's or such guarantor's remaining assets constituted unreasonably small capital; or •intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
Each guarantee provided by a guarantor includes a provision intended to limit
the guarantor's liability to the maximum amount that it could incur without
causing the incurrence of obligations under its guarantee to be a fraudulent
transfer or conveyance. This provision may not be effective to protect those
guarantees from being avoided under fraudulent transfer or conveyance law, or it
may reduce that guarantor's obligation to an amount that effectively makes its
guarantee worthless, and we cannot predict whether a court will ultimately find
it to be effective.
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
On the basis of historical financial information, operating history and other factors, we believe that each of the guarantors, after giving effect to the issuance of its guarantee of the senior notes when such guarantee was issued, was not insolvent, did not have unreasonably small capital for the business in which it engaged and did not and has not incurred debts beyond its ability to pay such debts as they mature. The Company cannot assure, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.
Commitments and Contingent Liabilities
Information regarding the Company's commitments and contingent liabilities appears in Part I within Item 1 of this report under Note I , entitled "Commitments and Contingent Liabilities," to the consolidated financial statements, and in Part II within Item 1A of this report which information is incorporated herein by reference.
Critical Accounting Policies
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
Actual results could differ from these estimates and assumptions, impacting the reported results of operations and financial condition of the Company. Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note A to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 describe the significant accounting estimates and policies used in the preparation of the consolidated financial statements. Updates to the Company's accounting policies related to new accounting pronouncements are included in
Note B to the consolidated financial statements included in this Quarterly Report on Form 10-Q.
The discussion below supplements the discussion from the Company's Annual Report
on Form 10-K for the year ended
Goodwill Impairment
As ofOctober 1, 2019 , the estimated fair values of the Equipment & Tools and Consumables reporting units, which are included in theTransit Packaging segment were 9% and 15% higher than their respective carrying values. The reporting units operate in low-growth environments that are expected to experience lower demand in the near term because of the impact of the coronavirus pandemic. If the reporting units' operating results are significantly impacted for an extended period of time, it is possible that the Company may record an impairment charge in the future. As ofSeptember 30, 2020 , the Equipment and Tools reporting unit had$797 of goodwill and the Consumables reporting unit had$731 of goodwill. As previously disclosed in the Company's Annual Report on Form 10-K for the year-endedDecember 31, 2019 , based upon an internal reorganization, theProtective Packaging reporting unit was merged into the Industrial Solutions reporting unit, effectiveJanuary 1, 2020 , to form the new Consumables reporting unit. The amounts and percentages presented represent the combined Consumables reporting unit. As ofSeptember 30, 2020 , the Company considered recent events and circumstances and determined it was more likely than not that fair value was more than carrying amount for all of its reporting units. To the extent future operating results decline it is possible that material impairment charges may be recorded.
Forward Looking Statements
Statements included herein, including, but not limited to, those in "Management's Discussion and Analysis of Financial Condition and Results of Operations" (such as statements regarding the Company's expectation and ability to pay quarterly dividends in the future or statements regarding the Company's initiation of a share repurchase program) and in the discussions of asbestos in Note H and commitments and contingencies in Note I to the consolidated financial statements included in this Quarterly Report on Form 10-Q, and also in Part I, Item 1, "Business" and Item 3, "Legal Proceedings" and in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," within the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 , which are not historical facts (including any statements concerning the direct or indirect impact of 35 --------------------------------------------------------------------------------
Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
COVID-19, plans and objectives of management for capacity additions, share repurchases, dividends, future operations or economic performance, or assumptions related thereto), are "forward-looking statements" within the meaning of the federal securities laws. In addition, the Company and its representatives may, from time to time, make oral or written statements which are also "forward-looking statements."
These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the Company and, therefore, involve a number of risks and uncertainties. Management cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.
While the Company periodically reassesses material trends and uncertainties affecting the Company's results of operations and financial condition in connection with the preparation of "Management's Discussion and Analysis of Financial Condition and Results of Operations" and certain other sections contained in the Company's quarterly, annual or other reports filed with theSecurities and Exchange Commission ("SEC"), the Company does not intend to review or revise any particular forward-looking statement in light of future events. A discussion of important factors that could cause the actual results of operations or financial condition of the Company to differ from expectations has been set forth in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 within Part II, Item 7: "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the caption "Forward Looking Statements" and is incorporated herein by reference. Some of the factors are also discussed elsewhere in this Form 10-Q (including under Item 1A below) and in prior Company filings with theSEC . In addition, other factors have been or may be discussed from time to time in the Company'sSEC filings.
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