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 JUNE 30, 2008

                                  [      ]                      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 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 160,956,974 shares of Common Stock outstanding as of July 25, 2008.

Crown Holdings, Inc.

FORM 10-Q

FOR QUARTER ENDED JUNE 30, 2008

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

	Page Number
Item 1   Financial Statments
Consolidated Statements of Operations - Three Months	1
Consolidated Statements of Operations - Six Months	2
Consolidated Balance Sheets	3
Consolidated Statements of Cash Flows	4
Consolidated Statements of Changes in Shareholders' Equity/(Deficit) and Comprehensive Income	5
Notes to Consolidated Financial Statements	6
A.  Statement of Information Furnished	6
B.  Recent Accounting and Reporting Pronouncements	6
C.  Stock-Based Compensation	7
D.  Goodwill	7
E.  Inventories	7
F.  Fair Value Measurements	7
G.  Derivative Financial Instruments	8
H.  Restructuring	9
I.  Asbestos-Related Liabilities	9
J.   Commitments and Contingent Liabilities	11
K.  Earnings Per Share	12
L.  Pension and Postretirement Benefits	12
M.  Income Taxes	13
N.  Segment Information	13
O.  Condensed Combining Financial Information	15
Item 2   Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction	39
Executive Overview	39
Results of Operations	39
Liquidity and Capital Resources	42
Forward Looking Statements	44
Item 3    Quantitative and Qualitative Disclosures About Market Risk	48
Item 4    Controls and Procedures	48
PART II - OTHER INFORMATION
Item 1    Legal Proceedings	49
Item 1A Risk Factors	49
Item 2    Unregistered Sales of Equity Securities and use of Proceeds	49
Item 6    Exhibits	49
Signature	50

Crown Holdings, Inc.

PART I – FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions except share and per share data)

(Unaudited)

Three months ended June 30			2008			2007
Net sales		$	2,196		$	1,990
Cost of products sold, excluding depreciation and amortization			1,788			1,647
Depreciation and amortization			56			57
Gross profit			352			286
Selling and administrative expense			105			93
Gain on sale of assets			(2)			(10)
Provision for restructuring			1			5
Interest expense			79			77
Interest income			(2)			(4)
Translation and exchange adjustments			2			(7)
Income before income taxes, minority interests and equity earnings			169			132
Provision for income taxes			42			22
Minority interests and equity earnings			(28)			(19)
Net income		$	99		$	91
Earnings per average common share:
Basic		$	0.62		$	0.56
Diluted		$	0.61		$	0.54
Weighted average common shares outstanding:
Basic	159,631,670			162,900,139
Diluted	163,298,467			167,182,198

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

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Crown Holdings, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions except share and per share data)

(Unaudited)

Six months ended June 30			2008			2007
Net sales		$	4,059		$	3,703
Cost of products sold, excluding depreciation and amortization			3,342			3,090
Depreciation and amortization			109			112
Gross profit			608			501
Selling and administrative expense			207			188
Gain on sale of assets			(2)			(10)
Provision for restructuring			1			5
Loss from early extinguishment of debt			2
Interest expense			156			153
Interest income			(5)			(7)
Translation and exchange adjustments			6			(8)
Income before income taxes, minority interests and equity earnings			243			180
Provision for income taxes			68			40
Minority interests and equity earnings			(49)			(31)
Net income		$	126		$	109
Earnings per average common share:
Basic		$	0.79		$	0.67
Diluted		$	0.77		$	0.65
Weighted average common shares outstanding:
Basic	159,409,493			162,588,529
Diluted	163,037,370			166,933,467

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

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Crown Holdings, Inc.

CONSOLIDATED BALANCE SHEETS (Condensed)

(In millions)

(Unaudited)

	June 30, 2008			December 31, 2007
Assets
Current assets
Cash and cash equivalents		$	311		$	457
Receivables, net			1,085			673
Inventories			1,325			1,030
Other current assets			116			74
Total current assets			2,837			2,234
Goodwill			2,266			2,199
Property, plant and equipment, net			1,612			1,604
Other non-current assets			983			942
Total		$	7,698		$	6,979
Liabilities and shareholders’ equity
Current liabilities
Short-term debt		$	78		$	45
Current maturities of long-term debt			29			38
Accounts payable and accrued liabilities			2,090			2,000
Total current liabilities			2,197			2,083
Long-term debt, excluding current maturities			3,692			3,354
Postretirement and pension liabilities			625			625
Other non-current liabilities			633			579
Minority interests			348			323
Commitments and contingent liabilities (Note J)
Shareholders’ equity			203			15
Total		$	7,698		$	6,979

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

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Crown Holdings, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed)

(In millions)

(Unaudited)

Six months ended June 30		2008		2007
Net cash used for operating activities	$	(354)	$	(210)
Cash flows from investing activities
Capital expenditures		(71)		(76)
Proceeds from sale of property, plant and equipment		6		58
Other		(21)		(4)
Net cash used for investing activities		(86)		(22)
Cash flows from financing activities
Proceeds from long-term debt				6
Payments of long-term debt		(59)		(16)
Net change in revolving credit facility and short-term debt		328		134
Common stock repurchased		(3)
Common stock issued		7		9
Dividends paid to minority interests		(27)		(14)
Other		29
Net cash provided by financing activities		275		119
Effect of exchange rate changes on cash and cash equivalents		19		10
Net change in cash and cash equivalents		(146)		(103)
Cash and cash equivalents at January 1		457		407
Cash and cash equivalents at June 30	$	311	$	304

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

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Crown Holdings, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIT) AND COMPREHENSIVE INCOME

(In millions)

(Unaudited)

													Accumulated
													Other
	Comprehensive Income				Common		Paid-In		Accumulated		Treasury		Comprehensive
	Quarter		Year-To-Date		Stock		Capital		Deficit		Stock		Loss		Total
Balance at January 1, 2007					$	929	$	1,589	$	(1,217)	$	(115)	$	(1,731)	$	(545)
Net income	$	91	$	109						109						109
Translation adjustments		16		19										19		19
Amortization of net loss and prior service cost  included in net periodic pension and postretirement cost, net of tax		17		33										33		33
Derivatives qualifying as hedges		(2)		1										1		1
Available-for-sale securities		(3)		(1)										(1)		(1)
Comprehensive income	$	119	$	161
Adoption of FIN 48										(16)						(16)
Restricted stock awarded								(2)				2
Stock-based compensation								9								9
Common stock issued –  benefit plans								3				5				8
Balance at June 30, 2007					$	929	$	1,599	$	(1,124)	$	(108)	$	(1,679)	$	(383)
Balance at January 1, 2008					$	929	$	1,516	$	(654)	$	(130)	$	(1,646)	$	15
Net income	$	99	$	126						126						126
Translation adjustments		17		(8)										(8)		(8)
Amortization of net loss and prior service cost included in net periodic pension and postretirement cost, net of tax		7		18										18		18
Derivatives qualifying as hedges		2		41										41		41
Available-for-sale securities				(2)										(2)		(2)
Comprehensive income	$	125	$	175
Restricted stock awarded								(2)				2
Stock-based compensation								9								9
Common stock issued – benefit plans								3				4				7
Common stock repurchased								(2)				(1)				(3)
Balance at June 30, 2008					$	929	$	1,524	$	(528)	$	(125)	$	(1,597)	$	203

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

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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 June 30, 2008, the results of its operations for the three and six month periods ended June 30, 2008 and 2007, and its cash flows for the six month periods ended June 30, 2008 and 2007.  These results have been determined on the basis of U.S. generally accepted accounting principles and practices consistently applied.

Certain information and footnote disclosures, normally included in financial statements presented in accordance with U.S. generally accepted accounting principles, have been condensed or omitted.  The December 31, 2007 balance sheet data was derived from the audited consolidated financial statements as of December 31, 2007.  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, 2007.

B. Recent Accounting and Reporting Pronouncements

Effective January 1, 2008, the Company adopted SFAS No. 157 (“FAS 157”), “Fair Value Measurements.”  FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. Expanded disclosures include a tabular presentation of the fair value of a company’s outstanding financial instruments according to a fair value hierarchy (i.e., levels 1, 2, 3, as defined) as well as enhanced disclosures regarding instruments in the level 3 category including a reconciliation of the beginning and ending balances for each major category of assets and liabilities.  FAS  157  emphasizes  that  fair  value  is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on assumptions that market participants would use in pricing the asset or liability.  The adoption of FAS 157 did not have a material impact on the Company.  The provisions of FAS 157 relating to nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value on a nonrecurring basis are effective for the Company as of January 1, 2009.  See Note F for additional information regarding FAS 157.

Effective January 1, 2008, the Company adopted SFAS No. 159 (“FAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.”  FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities.  The adoption of FAS 159 had no impact on the Company’s financial statements as the Company did not elect the fair value option.

In December 2007, the FASB issued SFAS No. 160 (“FAS 160”), “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.”  FAS 160 requires the recognition of noncontrolling (minority) interests as equity in the consolidated financial statements, but separate from the parent’s equity.  The statement also requires that the amount of net income attributable to minority interests be included in consolidated net income on the face of the income statement.  Assuming FAS 160 was adopted as of December 31, 2007, and using the amounts included in the Company’s financial statements as of that date, the adoption of FAS 160 would increase the Company’s shareholders’ equity from $15 to $338 due to the inclusion of minority interests of $323 in shareholders’ equity.  The effect on the income statement for the year ended December 31, 2007 would be to increase the Company’s consolidated net income from $528 to $601 with the inclusion of $73 of net income attributable to minority interests, and the Company would separately disclose $73 of consolidated net income attributable to minority interests. FAS 160 also includes expanded disclosure requirements regarding interests of the parent and noncontrolling interests, and amends certain consolidation procedures of ARB No. 51 for consistency with the requirements of FAS 141(R).  FAS 160 is effective for the Company as of January 1, 2009.

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Crown Holdings, Inc.

C.         Stock-Based Compensation

During the first quarter of 2008, the Company awarded 482,337 shares of restricted and performance-based stock to certain senior executives, including 337,059 shares with time-vesting requirements and 145,278 shares containing a market performance feature.  The time-vested awards vest ratably over three years on the anniversary date of the grant and had a grant-date fair value of $22.68 per share.  The performance shares vest at the end of the three years based on the results of a market performance criterion.  The number of performance shares that will ultimately vest in 2011 is based on the level of performance achieved, ranging between 0% and 200% of the shares awarded, and will be settled in stock.  The estimated fair value of each performance share was calculated as $25.59 using a Monte Carlo valuation model.  Also during the first quarter, 361,388 shares of service-based awards were released from restriction.  The weighted average fair value of these shares on the date of release was $23.87 per share.

Unrecognized compensation cost related to unvested stock options and restricted stock was $25 and $13, respectively, at June 30, 2008.  The weighted average period over which the expense is expected to be recognized is 4.6 years for stock options and 1.8 years for restricted stock.

As of June 30, 2008, outstanding stock options included 8,589,494 shares that were fully vested or expected to vest of which 5,279,759 were exercisable.  The weighted average exercise price of the options that were fully vested or expected to vest was $16.36 per share, the aggregate intrinsic value was $85, and the weighted average remaining contractual life was 5.7 years.  The weighted average exercise price of options that were currently exercisable was $11.94 per share, the aggregate intrinsic value was $77, and the weighted average remaining contractual life was 3.9 years.

The Company received cash proceeds of $7 and $8 from the exercise of stock options in the first six months of 2008 and 2007, respectively.

D.         Goodwill

Changes in the carrying amount of goodwill by reportable segment for the six-month period ended June 30, 2008 were as follows:

	Americas		North America		European		European		Non-reportable
	Beverage		Food		Beverage		Food		segments		Total
Balance as of January 1, 2008	$	428	$	164	$	780	$	649	$	178	$	2,199
Foreign currency translation		(2)		(2)		26		40		5		67
Balance as of June 30, 2008	$	426	$	162	$	806	$	689	$	183	$	2,266

E.          Inventories

	June 30,		December 31,
	2008		2007
Finished goods	$	578	$	380
Work in process		172		125
Raw material and supplies		575		525
	$	1,325	$	1,030

F. Fair Value Measurements

As discussed in Note B, FAS 157 provides a framework for measuring fair value under GAAP and provides a three-tier fair value hierarchy of pricing inputs used to report assets and liabilities that are adjusted to fair value. Level 1 includes inputs such as quoted prices which are available in active markets for identical assets or liabilities as of the report date.  Level 2 includes inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the report date.  Level 3 inputs include unobservable pricing inputs that are not corroborated by market data or other objective sources.

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Crown Holdings, Inc.

The following table sets forth within the FAS 157 fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2008:

		June 30, 2008
				Fair Value Measurements Using
		Assets/liabilities
		at fair value		Level 1		Level 2		Level 3
Assets
	Derivative instruments	$	38	$	25	$	13
	Available-for-sale securities		7		7
	Total assets	$	45	$	32	$	13
Liabilities
	Derivative instruments	$	154	$	1	$	153

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

The Company uses an income approach to value the assets and liabilities for outstanding derivative contracts including cross-currency swaps and foreign exchange forward contracts.  These contracts are valued using a discounted cash flow model that calculates the present value of future cash flows under the terms of the contracts using market information as of the reporting date, such as prevailing interest rates and foreign exchange spot and forward rates, and are reported under Level 2 of the fair value hierarchy.  The Company applies a market approach to value its exchange-traded available-for-sale securities and commodity price hedge contracts.  Prices from observable markets are used to develop the fair value of these financial instruments and they are reported under Level 1.

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

G. Derivative Financial Instruments

At June 30, 2008 and December 31, 2007, the Company had two outstanding cross-currency swaps with a combined notional value of $460.  These swaps were designated as cash flow hedges and effectively convert fixed rate U.S. dollar intercompany debt into fixed rate euro intercompany debt.  The aggregate fair values of these swaps at June 30, 2008 and December 31, 2007 were losses of $136 and $100, respectively, and were reported within other non-current liabilities.  The Company also designated certain foreign exchange and commodity contracts as cash flow hedges of anticipated purchases or sales.  At June 30, 2008 and December 31, 2007, the aggregate fair values of the foreign exchange contracts were net losses of $8 and $6, respectively, and were reported within other current assets and liabilities.  The aggregate fair values of outstanding commodity price contracts at June 30, 2008 and December 31, 2007 were a gain of $24 and a loss of $19, respectively.  At June 30, 2008 the fair values of the outstanding commodity contracts were reported within other current assets and liabilities, and at December 31, 2007, the fair values were reported in other current liabilities.

The Company designates certain foreign currency forward contracts as fair value hedges of recognized foreign denominated assets and liabilities and unrecognized foreign-denominated firm commitments.  At June 30, 2008 and December 31, 2007, the aggregate fair values of the outstanding contracts were net losses of $4 and $3, respectively, and were reported in other current assets and liabilities.

At June 30, 2008 and December 31, 2007, the Company had outstanding foreign exchange contracts that had not been designated as hedges.  Changes in their fair values are reported currently in earnings as translation and exchange adjustments and offset foreign exchange adjustments which result from the remeasurement of related intercompany balances.  The aggregate fair values of these contracts were net gains of $8 at June 30, 2008 and $13 at December 31, 2007, and were reported in other current assets and liabilities.

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Crown Holdings, Inc.

H.         Restructuring

The components of the outstanding restructuring reserve and movements within these components during the six months ended June 30, 2008 and 2007, respectively, were as follows:

	Termination		Other Exit
	Benefits		Costs		Total
Balance as of January 1, 2007	$	7	$	4	$	11
Provision		4		1		5
Payments		(8)				(8)
Balance as of June 30, 2007	$	3	$	5	$	8
Balance as of January 1, 2008	$	8	$	7	$	15
Provision				1		1
Payments		(2)		(7)		(9)
Balance as of June 30, 2008	$	6	$	1	$	7

The charge of $1 in 2008 was primarily for equipment transfer costs in the European food segment.

The charge of $5 in 2007 included $2 of corporate costs for the settlement of a labor dispute related to prior restructurings, $1 for severance costs in the European food segment to reduce headcount, and $2 of other severance costs in South America and Europe.

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

In April 2007, May 2006, May 2005, January 2005 and April 2004, the States of Georgia, South Carolina, Florida, Ohio and Mississippi, respectively, enacted legislation that limits the asbestos-related liabilities under state law of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos.   The legislation, which applies to future and, with the exception of Georgia and South Carolina, pending claims, caps asbestos-related liabilities at the fair market value of the predecessor’s total gross assets adjusted for inflation.  Crown Cork has paid significantly more for asbestos-related claims than the total value of its predecessor’s assets adjusted for inflation.  Crown Cork has integrated the legislation into its claims defense strategy.  The Company cautions, however, that the legislation may be challenged and there can be no assurance regarding the ultimate effect of the legislation on Crown Cork.

In June 2003, the State of Texas enacted legislation that limits the asbestos-related liabilities in Texas courts of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos. The Texas legislation, which applies to future claims and pending claims, caps asbestos-related liabilities at the total gross value of the predecessor’s assets adjusted for inflation.  Crown Cork has paid significantly more for asbestos-related claims than the total adjusted value of its predecessor’s assets.  On October 31, 2003, Crown  Cork received a favorable  ruling on its motion for summary judgment in two asbestos-related cases pending against it in the district court of Harris County, Texas  (in Re  Asbestos Litigation  No. 90-23333,  District  Court, Harris County, Texas),  which  were appealed.   On May 4, 2006, the  Texas  Fourteenth Court of Appeals upheld the favorable ruling in one of the two cases (Barbara Robinson v. Crown Cork & Seal Company, Inc.,  No. 14-04-00658-CV,  Fourteenth  Courtof Appeals, Texas). The Appeals Court decision has been appealed by the plaintiff to the Texas Supreme Court where oral argument was held on February 7, 2008.  The Texas Supreme Court has not ruled on the appeal. In addition, a favorable ruling for summary judgment in an asbestos case pending against Crown Cork in the district court of Travis County, Texas (in Re Rosemarie Satterfield as Representative of the Estate of Jerrold Braley Deceased v. Crown Cork & Seal Company, Inc. District Court Travis County 98th Judicial District Cause No. GN-203572) has been appealed.  Although the Company believes that the rulings of the District Court and Appeals Court are correct, there can be no assurance that the legislation will be upheld by the Texas courts or in other cases that may challenge the legislation.  Adverse rulings in either or both of these cases could have a material impact on the Company.

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Crown Holdings, Inc.

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 already paid significantly more for asbestos-related claims than the acquired company’s adjusted asset value. On February 20, 2004, the Supreme Court of Pennsylvania reversed the June 11, 2002 order of the  Philadelphia  Court of  Common Pleas, in  which the  Court of  Common  Pleas  ruled  favorably on a  motion by  Crown Cork for summary judgment regarding 376 pending asbestos-related cases against Crown Cork in Philadelphia and remanded the cases to the Philadelphia Court of Common Pleas (Ieropoli v. AC&S Corporation, et. al., No. 117 EM 2002). The Court ruled that the new statute, as applied, violated the Pennsylvania Constitution because it retroactively extinguished the plaintiffs’ pre-existing and accrued causes of action.  The Company believes that the ruling by the court was limited only to cases which were pending at the time the legislation was enacted.  In November 2004, the Commonwealth of Pennsylvania enacted legislation amending the 2001 successor liability statute providing that the 2001 statute applies only to asbestos-related claims with respect to which the two-year statute of limitations for asbestos-related claims had not yet commenced at the time the statute was enacted on December 17, 2001. On July 28, 2005, the  Philadelphia Court of Common Pleas granted Crown Cork’s global  motion  for summary judgment  to  dismiss  all pending asbestos-related cases filed in the court after December 17, 2003 (In re: Asbestos-Litigation October term 1986, No. 001).  Additional cases have been dismissed subsequent to July 28, 2005 by the Philadelphia Court of Common Pleas.  These decisions remain subject to potential appeal by the plaintiffs and, in some cases, appeals to the Superior Court of Pennsylvania have been filed by the plaintiffs in connection with these decisions and oral argument was held before the Superior Court.  The Superior Court has not ruled on these appeals.  The Company cautions that the limitation of the statute may not be upheld.

During the six months ended June 30, 2008, Crown Cork received approximately 1,000 new claims, settled or dismissed approximately 2,000 claims for a total of $3, and had approximately 69,000 claims outstanding at the end of the period. Settlement amounts include amounts committed to be paid in future periods.  During the second quarter of 2008, the Company updated its claims database to remove approximately 9,000 duplicate claims.  The removal of the duplicate claims had no effect on the Company’s accrual as these claims were not valued in calculating the accrual.

As of June 30, 2008, the Company’s accrual for pending and future asbestos-related claims and related legal costs was $193, including $68 for unasserted claims and $3 for committed settlements that will be paid over time.

Historically (1977-2007), Crown Cork estimates that approximately one-quarter of all asbestos-related claims made against it have been asserted by claimants who claim first exposure to asbestos after 1964.  However, because of Crown Cork’s settlement experience to date and the increased difficulty of establishing identification of the subsidiary’s insulation products as the cause of injury by persons alleging first exposure to asbestos after 1964, the Company has not included in its accrual any amounts for settlements by persons alleging first exposure to asbestos after 1964.

Underlying the accrual are assumptions that claims for exposure to asbestos that occurred after the sale of the U.S. company’s insulation business in 1964 would not be entitled to   settlement   payouts  and  that  the Georgia,   South  Carolina,   Florida,   Ohio,  Mississippi,   Texas  and Pennsylvania asbestos legislation described above are expected to have a highly favorable impact on  Crown Cork’s  ability to  settle or  defend against asbestos-related claims in those states, and other states where Pennsylvania law may apply.  Estimated additional costs of $42 beyond 2017 have not been included in the Company’s liability, as the Company believes cost projections beyond ten years are inherently unreliable due to potential changes in the litigation environment and other factors whose impact cannot be known or reasonably estimated.

10

Crown Holdings, Inc.

At the end of each quarter, the Company considers whether there have been any material developments that would cause it to update its asbestos liability accrual calculations.  Absent any significant developments in the asbestos litigation environment in general or with respect to the Company specifically, the Company updates its accrual calculations in the fourth quarter of each year.  The Company’s asbestos liability accrual is calculated in the fourth quarter of each year as the sum of its outstanding and expected future claims, multiplied by the expected average settlement cost of those claims, plus estimated legal fees.  The expected number of claims, and the expected average settlement cost per claim,  are  calculated  using  projections  based  on  actual  data for the most recent five years.  Because claims are not submitted or settled evenly throughout  the  year, it  is  difficult  to  predict  at any time  during the year  whether the  number of   claims or average settlement  cost over the  five year period ending  December 31 of such year will increase  compared to the prior five year period.  The five year average settlement cost at the end of 2007 was higher than at the end of 2006. The effect of this increase in the expected average settlement cost per claim was partially mitigated by a decrease in the expected number of future claims.  The combination of these two factors resulted in a charge of $29 in 2007 compared to charges of $10 in each of the preceding two years.

While it is not possible to predict the ultimate outcome of the asbestos-related claims and settlements, the Company believes that resolution of these matters is not expected to have a material adverse effect on the Company’s financial position.  The Company cautions, however, that estimates for asbestos cases and settlements are difficult to predict and may be influenced by many factors.  In addition, there can be no assurance regarding the validity or correctness of the Company’s assumptions or beliefs underlying its accrual.  Unfavorable court decisions or other adverse developments may require the Company to substantially increase its accrual or change its estimate.  Accordingly, these matters, if resolved in a manner different from the estimate, could have a material effect on the Company’s results of operations, financial position or cash flow.

J.          Commitments and Contingent Liabilities

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

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 include tinplate 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 certain customers to reflect these movements. There can be no assurances, 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 June 30, 2008, the Company had certain indemnification agreements covering environmental remediation and other potential costs associated with properties sold or businesses divested.   The Company accrues for costs associated with such indemnifications and potential costs when it is probable that a liability has been incurred and the amount can be reasonably estimated.  At June 30, 2008, the Company also had guarantees of $29 related to the residual values of leased assets.

 

11

Crown Holdings, Inc.

K.       Earnings Per Share

The following table summarizes the basic and diluted earnings per share computations for the periods ended June 30, 2008 and 2007, respectively:

	Three Months Ended				Six Months Ended
	June 30				June 30
		2008		2007		2008		2007
Earnings:
Income from continuing operations	$	99	$	91	$	126	$	109
Weighted average common shares outstanding:
Basic		159.6		162.9		159.4		162.6
Add: dilutive stock options and restricted stock		3.7		4.3		3.6		4.3
Diluted		163.3		167.2		163.0		166.9
Basic earnings per share	$	0.62	$	0.56	$	0.79	$	0.67
Diluted earnings per share	$	0.61	$	0.54	$	0.77	$	0.65

Excluded from the computation of diluted earnings per share were common shares contingently issuable upon the exercise of outstanding stock options, amounting to 4.1 million and 4.2 million shares for the three and six month periods ended June 30, 2008, and 4.6 million shares  and 3.6 million shares for the three and six month periods ended June 30, 2007.  These shares were excluded because the assumed proceeds of the then outstanding options were above the average market prices for the related periods.

L.          Pension and Other Postretirement Benefits

Components of Net Periodic Benefit Cost

	Three Months Ended				Six Months Ended
	June 30				June 30
Pension Benefits – U.S. Plans	2008		2007		2008		2007
Service cost	$	2	$	2	$	4	$	4
Interest cost		21		20		40		39
Expected return on plan assets		(30)		(28)		(59)		(56)
Recognized prior service cost						1		1
Recognized net loss		7		12		15		24
Settlement		3				3
Net periodic cost	$	3	$	6	$	4	$	12

The settlement cost of $3 occurred in the U.S. supplemental executive retirement plan due to lump sum payments made to certain retired executives.

	Three Months Ended				Six Months Ended
	June 30				June 30
Pension Benefits – Non-U.S. Plans	2008		2007		2008		2007
Service cost	$	10	$	10	$	20	$	19
Interest cost		46		42		92		83
Expected return on plan assets		(62)		(61)		(123)		(120)
Recognized prior service credit		(1)		(1)		(3)		(3)
Recognized net loss		9		7		18		14
Net periodic cost/(credit)	$	2	$	(3)	$	4	$	(7)

12

Crown Holdings, Inc.

	Three Months Ended				Six Months Ended
	June 30				June 30
Other Postretirement Benefits	2008		2007		2008		2007
Service cost	$	2	$	1	$	4	$	2
Interest cost		7		8		15		17
Recognized prior service credit		(5)		(4)		(11)		(8)
Recognized net loss		2		4		4		7
Net periodic cost	$	6	$	9	$	12	$	18

M.       Income Taxes

As of December 31, 2007, the Company had $77 of unrecognized tax benefits, including $36 related to a claim filed by the Company in the United States Court of Federal Claims to recover U.S. federal taxes paid in prior years.  Due to a recent unfavorable ruling on a similar claim filed by another company, the Company has  withdrawn its claim in this matter

As of December 31, 2007, the Company had a full valuation allowance of $185 against its net U.S. deferred tax assets in France.  Due to improved profits in the Company’s French operations, including a reduction in interest expense due to a corporate restructuring in 2008, it is possible that some or all of the French deferred tax valuation allowance could be reversed in a future period.  The Company believes there is not sufficient positive evidence as of the filing of this Form 10-Q to reverse any portion of the French valuation allowance but will review the status each quarter, including at the end of the year when the 2008 results are complete and the 2009 budget is available.

N.       Segment Information

The Company’s business is organized geographically within three divisions, Americas, Europe and Asia-Pacific.  Within the Americas and Europe, the Company has determined that it has the following reportable segments organized along a combination of product lines and geographic areas: Americas Beverage and North America Food within the Americas, and European Beverage, European Food and European Specialty Packaging within Europe.

The Company evaluates performance and allocates resources based on segment income. Segment income, which is not a defined term under U.S. generally accepted accounting principles, is defined by the Company as net sales less cost of products sold, depreciation and amortization, and selling and administrative expenses. Segment income should not be considered in isolation or as a substitute for net income data prepared in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies.

The tables below present information about operating segments for the three and six months ended June 30, 2008 and 2007:

	External Sales				External Sales
	Three Months Ended				Six Months Ended
	June 30				June 30
		2008		2007		2008		2007
Americas Beverage	$	501	$	488	$	918	$	881
North America Food		220		210		405		401
European Beverage		476		401		824		682
European Food		557		469		1,045		915
European Specialty Packaging		125		112		230		209
Total reportable segments		1,879		1,680		3,422		3,088
Non-reportable segments		317		310		637		615
Total	$	2,196	$	1,990	$	4,059	$	3,703

13

Crown Holdings, Inc.

	Segment Income				Segment Income
	Three Months Ended				Six Months Ended
	June 30				June 30
		2008		2007		2008		2007
Americas Beverage	$	58	$	57	$	100	$	94
North America Food		20		20		31		30
European Beverage		88		58		139		88
European Food		61		45		102		83
European Specialty Packaging		11		9		12		10
Total reportable segments	$	238	$	189	$	384	$	305

The following table reconciles the Company’s segment income of reportable segments to consolidated income from continuing operations before income taxes, minority interests and equity earnings:

Three Months Ended					Six Months Ended
	June 30				June 30
	2008		2007		2008		2007
Segment income of reportable segments	$	238	$	189	$	384	$	305
Segment income of non-reportable segments		46		31		87		65
Corporate and unallocated items		(37)		(27)		(70)		(57)
Provision for restructuring		(1)		(5)		(1)		(5)
Gain on sale of assets		2		10		2		10
Loss from early extinguishment of debt						(2)
Interest expense		(79)		(77)		(156)		(153)
Interest income		2		4		5		7
Translation and exchange adjustments		(2)		7		(6)		8
Income from continuing operations before income taxes, minority interests and equity earnings	$	169	$	132	$	243	$	180

“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 or income.

14

Crown Holdings, Inc.

O.         Condensed Combining Financial Information

Crown European Holdings (Issuer), a 100% owned subsidiary of the Company, has outstanding senior notes that are fully and unconditionally guaranteed by Crown Holdings, Inc. and certain subsidiaries.  The guarantors are 100% owned by the Company and the guarantees are made on a joint and several basis.  The guarantor column includes financial information for all subsidiaries in the United States (except for an insurance subsidiary and a receivable securitization subsidiary), and substantially all subsidiaries in the United Kingdom, France, Germany, Belgium, Canada, Mexico and Switzerland.  The following condensed combining financial statements:

· statements of operations for  the three and six months ended June 30, 2008 and 2007,

· balance sheets as of June 30, 2008 and December 31, 2007, and

· statements of cash flows for the six months ended June 30, 2008 and 2007

are presented on the following pages to comply with the Company’s requirements under Rule 3-10 of Regulation S-X.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended June 30, 2008

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net sales					$	1,268	$	928			$	2,196
Cost of products sold, excluding depreciation and amortization			$	(5)		1,042		751				1,788
Depreciation and amortization						31		25				56
Gross profit				5		195		152				352
Selling and administrative expense				(1)		76		30				105
(Gain)/loss on sale of assets				(6)		7		(3)				(2)
Provision for restructuring								1				1
Net interest expense				26		47		4				77
Technology royalty						(10)		10
Translation and exchange adjustments						2						2
Income/(loss) before income taxes, minority interests and equity earnings				(14)		73		110				169
Provision for income taxes						23		19				42
Equity earnings	$	99		77		49			$	(225)
Income before minority interests and equity earnings		99		63		99		91		(225)		127
Minority interests and equity earnings								(28)				(28)
Net income	$	99	$	63	$	99	$	63	$	(225)	$	99

15

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended June 30, 2007

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net sales					$	1,197	$	793			$	1,990
Cost of products sold, excluding depreciation and amortization			$	(3)		990		660				1,647
Depreciation and amortization						34		23				57
Gross profit				3		173		110				286
Selling and administrative expense				(1)		71		23				93
Gain on sale of assets						(2)		(8)				(10)
Provision for restructuring						1		4				5
Net interest expense				25		48						73
Technology royalty						(8)		8
Translation and exchange adjustments						(5)		(2)				(7)
Income/(loss) before income taxes, minority interests and equity earnings				(21)		68		85				132
Provision for income taxes						2		20				22
Equity earnings	$	91		78		25			$	(194)
Income before minority interests and equity earnings		91		57		91		65		(194)		110
Minority interests and equity earnings								(19)				(19)
Net income	$	91	$	57	$	91	$	46	$	(194)	$	91

16

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the six months ended June 30, 2008

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net sales					$	2,366	$	1,693			$	4,059
Cost of products sold, excluding depreciation and amortization			$	(10)		1,962		1,390				3,342
Depreciation and amortization						62		47				109
Gross profit				10		342		256				608
Selling and administrative expense				(1)		153		55				207
(Gain)/loss on sale of assets				(6)		7		(3)				(2)
Provision for restructuring								1				1
Loss from early extinguishment of debt				2								2
Net interest expense				51		92		8				151
Technology royalty						(18)		18
Translation and exchange adjustments						9		(3)				6
Income/(loss) before income taxes, minority interests and equity earnings				(36)		99		180				243
Provision for income taxes						29		39				68
Equity earnings	$	126		110		56			$	(292)
Income before minority interests and equity earnings		126		74		126		141		(292)		175
Minority interests and equity earnings								(49)				(49)
Net income	$	126	$	74	$	126	$	92	$	(292)	$	126

17

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the six months ended June 30, 2007

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net sales					$	2,255	$	1,448			$	3,703
Cost of products sold, excluding depreciation and amortization			$	(6)		1,887		1,209				3,090
Depreciation and amortization						68		44				112
Gross profit				6		300		195				501
Selling and administrative expense				(1)		141		48				188
Gain on sale of assets						(2)		(8)				(10)
Provision for restructuring						1		4				5
Net interest expense				48		95		3				146
Technology royalty						(15)		15
Translation and exchange adjustments						(6)		(2)				(8)
Income/(loss) before income taxes, minority interests and equity earnings				(41)		86		135				180
Provision for income taxes						8		32				40
Equity earnings	$	109		113		31			$	(253)
Income before minority interests and equity earnings		109		72		109		103		(253)		140
Minority interests and equity earnings								(31)				(31)
Net income	$	109	$	72	$	109	$	72	$	(253)	$	109

18

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of June 30, 2008

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Assets
Current assets
Cash and cash equivalents					$	33	$	278			$	311
Receivables, net			$	74		211		800				1,085
Intercompany receivables				2		81		41	$	(124)
Inventories						715		610				1,325
Other current assets	$	2		12		91		11				116
Total current assets		2		88		1,131		1,740		(124)		2,837
Intercompany debt receivables				2,155		2,068		421		(4,644)
Investments		400		3,123		(107)				(3,416)
Goodwill						1,607		659				2,266
Property, plant and equipment, net						807		805				1,612
Other non-current assets				7		917		59				983
Total	$	402	$	5,373	$	6,423	$	3,684	$	(8,184)	$	7,698
Liabilities and shareholders’ equity
Current liabilities
Short-term debt			$	22	$	8	$	48			$	78
Current maturities of long-term debt				5		5		19				29
Accounts payable and accrued liabilities	$	14		21		1,157		898				2,090
Intercompany payables						41		83	$	(124)
Total current liabilities		14		48		1,211		1,048		(124)		2,197
Long-term debt, excluding current maturities				1,212		2,405		75				3,692
Long-term intercompany debt		185		2,607		1,477		375		(4,644)
Postretirement and pension liabilities						605		20				625
Other non-current liabilities				136		325		172				633
Minority interests								348				348
Commitments and contingent liabilities
Shareholders’ equity		203		1,370		400		1,646		(3,416)		203
Total	$	402	$	5,373	$	6,423	$	3,684	$	(8,184)	$	7,698

19

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of December 31, 2007

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Assets
Current assets
Cash and cash equivalents			$	13	$	81	$	363			$	457
Receivables, net				75		78		520				673
Intercompany receivables				2		70		47	$	(119)
Inventories						590		440				1,030
Prepaid expenses and other current assets	$	2		15		52		5				74
Total current assets		2		105		871		1,375		(119)		2,234
Intercompany debt receivables				1,624		1,924		381		(3,929)
Investments		225		2,724		(554)				(2,395)
Goodwill						1,582		617				2,199
Property, plant and equipment, net						842		762				1,604
Other non-current assets				9		886		47				942
Total	$	227	$	4,462	$	5,551	$	3,182	$	(6,443)	$	6,979
Liabilities and shareholders’ equity
Current liabilities
Short-term debt			$	14	$	2	$	29			$	45
Current maturities of long-term debt				4		5		29				38
Accounts payable and accrued liabilities	$	23		22		1,161		794				2,000
Intercompany payables				1		46		72	$	(119)
Total current liabilities		23		41		1,214		924		(119)		2,083
Long-term debt, excluding current maturities				1,116		2,157		81				3,354
Long-term intercompany debt		189		2,480		1,026		234		(3,929)
Postretirement and pension liabilities						606		19				625
Other non-current liabilities				100		323		156				579
Minority interests								323				323
Commitments and contingent liabilities
Shareholders’ equity		15		725		225		1,445		(2,395)		15
Total	$	227	$	4,462	$	5,551	$	3,182	$	(6,443)	$	6,979

20

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the six months ended June 30, 2008

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net cash used for operating activities			$	(40)	$	(202)	$	(112)			$	(354)
Cash flows from investing activities
Capital expenditures						(20)		(51)				(71)
Proceeds from sale of property, plant and equipment						1		5				6
Intercompany investing activities				429		(410)			$	(19)
Other						(19)		(2)				(21)
Net cash provided by/(used for) investing activities				429		(448)		(48)		(19)		(86)
Cash flows from financing activities
Payments of long-term debt				(41)		(1)		(17)				(59)
Net change in revolving credit facility and short-term debt				113		193		22				328
Net change in long-term intercompany balances	$	(4)		(499)		405		98
Common stock repurchased		(3)										(3)
Common stock issued		7										7
Dividends paid								(19)		19
Dividends paid to minority interests								(27)				(27)
Other				25		4						29
Net cash provided by/(used for) financing activities				(402)		601		57		19		275
Effect of exchange rate on cash and cash equivalents						1		18				19
Net change in cash and cash  equivalents				(13)		(48)		(85)				(146)
Cash and cash equivalents at January 1				13		81		363				457
Cash and cash equivalents at June 30	$	0	$	0	$	33	$	278	$	0	$	311

21

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the six months ended June 30, 2007

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net cash provided by/(used for) operating activities	$	20	$	(19)	$	(107)	$	(104)			$	(210)
Cash flows from investing activities
Capital expenditures						(40)		(36)				(76)
Proceeds from sale of property, plant and equipment						2		56				58
Intercompany investing activities				2		12			$	(14)
Other								(4)				(4)
Net cash provided by/(used for) investing activities				2		(26)		16		(14)		(22)
Cash flows from financing activities
Proceeds from long-term debt								6				6
Payments of long-term debt						(1)		(15)				(16)
Net change in revolving credit facility and short-term debt				69		66		(1)				134
Net change in long-term intercompany balances		(29)		(52)		21		60
Common stock issued		9										9
Dividends paid								(14)		14
Dividends paid to minority interests								(14)				(14)
Net cash provided by/(used by) financing activities		(20)		17		86		22		14		119
Effect of exchange rate on cash and cash equivalents						2		8				10
Net change in cash and cash equivalents						(45)		(58)				(103)
Cash and cash equivalents at January 1						97		310				407
Cash and cash equivalents at June 30	$	0	$	0	$	52	$	252	$	0	$	304

22

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 and six months ended June 30, 2008 and 2007,

· balance sheets as of June 30, 2008 and December 31, 2007, and

· statements of cash flows for the six months ended June 30, 2008 and 2007

 are presented on the following pages to comply with the Company’s requirements under Rule 3-10 of Regulation S-X.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended June 30, 2008

(in millions)

	Parent		Issuer		Non Guarantors		Eliminations		Total Company
Net sales					$	2,196			$	2,196
Cost of products sold, excluding depreciation and amortization						1,788				1,788
Depreciation and amortization						56				56
Gross profit						352				352
Selling and administrative expense			$	5		100				105
Gain on sale of assets						(2)				(2)
Provision for restructuring						1				1
Net interest expense				17		60				77
Translation and exchange adjustments						2				2
Income/(loss) before income taxes, minority interests and equity earnings				(22)		191				169
Provision/(benefit) for income taxes				(8)		50				42
Equity earnings	$	99		113			$	(212)
Income before minority and equity earnings		99		99		141		(212)		127
Minority interests and equity earnings						(28)				(28)
Net income	$	99	$	99	$	113	$	(212)	$	99

23

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended June 30, 2007

(in millions)

	Parent		Issuer		Non Guarantors		Eliminations		Total Company
Net sales					$	1,990			$	1,990
Cost of products sold, excluding depreciation and  amortization						1,647				1,647
Depreciation and amortization						57				57
Gross profit						286				286
Selling and administrative expense			$	2		91				93
Gain on sale of assets						(10)				(10)
Provision for restructuring						5				5
Net interest expense				17		56				73
Translation and exchange adjustments						(7)				(7)
Income/(loss) before income taxes, minority interests and equity earnings				(19)		151				132
Provision/(benefit) for income taxes				(2)		24				22
Equity earnings	$	91		108			$	(199)
Income before minority and equity earnings		91		91		127		(199)		110
Minority interests and equity earnings						(19)				(19)
Net income	$	91	$	91	$	108	$	(199)	$	91

24

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the six months ended June 30, 2008

(in millions)

	Parent		Issuer		Non Guarantors		Eliminations		Total Company
Net sales					$	4,059			$	4,059
Cost of products sold, excluding depreciation and amortization						3,342				3,342
Depreciation and amortization						109				109
Gross profit						608				608
Selling and administrative expense			$	8		199				207
Gain on sale of assets						(2)				(2)
Provision for restructuring						1				1
Loss from early entinguishment of debt						2				2
Net interest expense				34		117				151
Translation and exchange adjustments						6				6
Income/(loss) before income taxes, minority interests and equity earnings				(42)		285				243
Provision/(benefit) for income taxes				(16)		84				68
Equity earnings	$	126		152			$	(278)
Income before minority interests and equity earnings		126		126		201		(278)		175
Minority interests and equity earnings						(49)				(49)
Net income	$	126	$	126	$	152	$	(278)	$	126

25

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the six months ended June 30, 2007

(in millions)

	Parent		Issuer		Non Guarantors		Eliminations		Total Company
Net sales					$	3,703			$	3,703
Cost of products sold, excluding depreciation      and amortization						3,090				3,090
Depreciation and amortization						112				112
Gross profit						501				501
Selling and administrative expense			$	5		183				188
Gain on sale of assets						(10)				(10)
Provision for restructuring						5				5
Net interest expense				33		113				146
Translation and exchange adjustments						(8)				(8)
Income/(loss) before income taxes, minority interests and equity earnings				(38)		218				180
Provision/(benefit) for income taxes				(7)		47				40
Equity earnings	$	109		140			$	(249)
Income before minority interests and equity earnings		109		109		171		(249)		140
Minority interests and equity earnings						(31)				(31)
Net income	$	109	$	109	$	140	$	(249)	$	109

26

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of June 30, 2008

(in millions)

	Parent		Issuer		Non Guarantors		Eliminations		Total Company
Assets
Current assets
Cash and cash equivalents					$	311			$	311
Receivables, net						1,085				1,085
Inventories						1,325				1,325
Other current assets	$	2				114				116
Total current assets		2				2,835				2,837
Intercompany debt receivables						382	$	(382)
Investments		400	$	1,162				(1,562)
Goodwill						2,266				2,266
Property, plant and equipment, net						1,612				1,612
Other non-current assets				381		602				983
Total	$	402	$	1,543	$	7,697	$	(1,944)	$	7,698
Liabilities and shareholders’ equity
Current liabilities
Short-term debt					$	78			$	78
Current maturities of long-term debt			$	1		28				29
Accounts payable and accrued liabilities	$	14		48		2,028				2,090
Total current liabilities		14		49		2,134				2,197
Long-term debt, excluding current maturities				697		2,995				3,692
Long-term intercompany debt		185		197			$	(382)
Postretirement and pension liabilities						625				625
Other non-current liabilities				200		433				633
Minority interests						348				348
Commitments and contingent liabilities
Shareholders’ equity		203		400		1,162		(1,562)		203
Total	$	402	$	1,543	$	7,697	$	(1,944)	$	7,698

27

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of December 31, 2007

(in millions)

	Parent		Issuer		Non Guarantors		Eliminations		Total Company
Assets
Current assets
Cash and cash equivalents					$	457			$	457
Receivables, net						673				673
Inventories						1,030				1,030
Prepaid expenses and other current assets	$	2				72				74
Total current assets		2				2,232				2,234
Intercompany debt receivables						375	$	(375)
Investments		225	$	968				(1,193)
Goodwill						2,199				2,199
Property, plant and equipment, net						1,604				1,604
Other non-current assets				416		526				942
Total	$	227	$	1,384	$	6,936	$	(1,568)	$	6,979
Liabilities and shareholders’ equity
Current liabilities
Short-term debt					$	45			$	45
Current maturities of long-term debt						38				38
Accounts payable and accrued liabilities	$	23	$	69		1,908				2,000
Total current liabilities		23		69		1,991				2,083
Long-term debt, excluding current maturities				698		2,656				3,354
Long-term intercompany debt		189		186			$	(375)
Postretirement and pension liabilities						625				625
Other non-current liabilities				206		373				579
Minority interests						323				323
Commitments and contingent liabilities
Shareholders’ equity		15		225		968		(1,193)		15
Total	$	227	$	1,384	$	6,936	$	(1,568)	$	6,979

28

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the six months ended June 30, 2008

(in millions)

	Parent		Issuer		Non Guarantors		Eliminations		Total Company
Net cash used for operating activities			$	(23)	$	(331)			$	(354)
Cash flows from investing activities
Capital expenditures						(71)				(71)
Proceeds from sale of property, plant and equipment						6				6
Intercompany investing activities				12			$	(12)
Other						(21)				(21)
Net cash provided by/(used for)investing activities				12		(86)		(12)		(86)
Cash flows from financing activities
Payments of long-term debt						(59)				(59)
Net change in revolving credit facility and short-term debt						328				328
Net change in long-term intercompany balances	$	(4)		11		(7)
Common stock repurchased		(3)								(3)
Common stock issued		7								7
Dividends paid						(12)		12
Dividends paid to minority interests						(27)				(27)
Other						29				29
Net cash provided by financing activities				11		252		12		275
Effect of  exchange rate on cash and cash equivalents						19				19
Net change in cash and cash equivalents						(146)				(146)
Cash and cash equivalents at January 1						457				457
Cash and cash equivalents at June 30	$	0	$	0	$	311	$	0	$	311

29

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the six months ended June 30, 2007

(in millions)

	Parent		Issuer		Non Guarantors		Eliminations		Total Company
Net cash provided by/(used for) operating activities	$	20	$	(43)	$	(187)			$	(210)
Cash flows from investing activities
Capital expenditures						(76)				(76)
Proceeds from sale of property, plant and equipment						58				58
Intercompany investing activities				3			$	(3)
Other						(4)				(4)
Net cash provided by/(used for)investing activities				3		(22)		(3)		(22)
Cash flows from financing activities
Proceeds from long-term debt						6				6
Payments of long-term debt						(16)				(16)
Net change in revolving credit facility and short-term debt						134				134
Net change in long-term intercompany balances		(29)		40		(11)
Common stock issued		9								9
Dividends paid						(3)		3
Dividends paid to minority interests						(14)				(14)
Net cash provided by/(used for) financing activities		(20)		40		96		3		119
Effect of  exchange rate on cash and cash equivalents						10				10
Net change in cash and cash equivalents						(103)				(103)
Cash and cash equivalents at January 1						407				407
Cash and cash equivalents at June 30	$	0	$	0	$	304	$	0	$	304

30

Crown Holdings, Inc.

Crown Americas, LLC and Crown Americas Capital Corp., 100% owned subsidiaries of the Company, have outstanding senior unsecured notes that are fully and unconditionally guaranteed by Crown Holdings, Inc. 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 and six months ended June 30, 2008 and 2007,

·       balance sheets as of June 30, 2008  and December 31, 2007, and

·       statements of cash flows for the six months ended June 30, 2008 and 2007

are presented on the following pages to comply with the Company’s requirements under Rule 3-10 of Regulation S-X.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended June 30, 2008

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net sales					$	578	$	1,618			$	2,196
Cost of products sold, excluding depreciation and amortization						479		1,309				1,788
Depreciation and amortization						13		43				56
Gross profit						86		266				352
Selling and administrative expense			$	2		33		70				105
Gain on sale of assets								(2)				(2)
Provision for restructuring								1				1
Net interest expense				10		24		43				77
Technology royalty						(13)		13
Translation and exchange adjustments				1				1				2
Income/(loss) before income taxes, minority interests and equity earnings				(13)		42		140				169
Provision/(benefit) for income taxes				(5)		20		27				42
Equity earnings	$	99		42		77			$	(218)
Income before minority interests and equity earnings		99		34		99		113		(218)		127
Minority interests and equity earnings								(28)				(28)
Net income	$	99	$	34	$	99	$	85	$	(218)	$	99

31

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the three months ended June 30, 2007

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net sales					$	564	$	1,426			$	1,990
Cost of products sold, excluding depreciation and amortization						466		1,181				1,647
Depreciation and amortization						15		42				57
Gross profit						83		203				286
Selling and administrative expense			$	2		31		60				93
Gain on sale of assets								(10)				(10)
Provision for restructuring						1		4				5
Net interest expense				15		19		39				73
Technology royalty						(8)		8
Translation and exchange adjustments								(7)				(7)
Income/(loss) before income taxes, minority interests and equity earnings				(17)		40		109				132
Provision/(benefit) for income taxes				(6)		8		20				22
Equity earnings	$	91		46		59			$	(196)
Income before minority interests and equity earnings		91		35		91		89		(196)		110
Minority interests and equity earnings								(19)				(19)
Net income	$	91	$	35	$	91	$	70	$	(196)	$	91

32

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the six months ended June 30, 2008

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net sales	$				$	1,062	$	2,997			$	4,059
Cost of products sold, excluding depreciation and amortization						882		2,460				3,342
Depreciation and amortization						27		82				109
Gross profit						153		455				608
Selling and administrative expense			$	4		67		136				207
Gain on sale of assets								(2)				(2)
Provision for restructuring								1				1
Loss from early extinguishment of debt								2				2
Net interest expense				22		45		84				151
Technology royalty						(24)		24
Translation and exchange adjustments				1				5				6
Income/(loss) before income taxes, minority interests and equity earnings				(27)		65		205				243
Provision/(benefit) for income taxes				(10)		32		46				68
Equity earnings	$	126		70		93			$	(289)
Income before minority interests and equity earnings		126		53		126		159		(289)		175
Minority interests and equity earnings								(49)				(49)
Net income	$	126	$	53	$	126	$	110	$	(289)	$	126

33

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF OPERATIONS

For the six months ended June 30, 2007

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net sales					$	1,043	$	2,660			$	3,703
Cost of products sold, excluding depreciation and amortization						875		2,215				3,090
Depreciation and amortization						30		82				112
Gross profit						138		363				501
Selling and administrative expense			$	4		63		121				188
Gain on sale of assets								(10)				(10)
Provision for restructuring						1		4				5
Net interest expense				30		37		79				146
Technology royalty						(16)		16
Translation and exchange adjustments								(8)				(8)
Income/(loss) before income taxes, minority interests and equity earnings				(34)		53		161				180
Provision/(benefit) for income taxes				(12)		16		36				40
Equity earnings	$	109		65		72			$	(246)
Income before minority interests and equity earnings		109		43		109		125		(246)		140
Minority interests and equity earnings								(31)				(31)
Net income	$	109	$	43	$	109	$	94	$	(246)	$	109

34

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of June 30, 2008

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Assets
Current assets
Cash and cash equivalents			$	15	$	1	$	295			$	311
Receivables, net						9		1,076				1,085
Intercompany receivables						57		11	$	(68)
Inventories						270		1,055				1,325
Other current assets	$	2		1		8		105				116
Total current assets		2		16		345		2,542		(68)		2,837
Intercompany debt receivables				1,239		716		510		(2,465)
Investments		400		845		687				(1,932)
Goodwill						453		1,813				2,266
Property, plant and equipment, net				2		314		1,296				1,612
Other non-current assets				39		590		354				983
Total	$	402	$	2,141	$	3,105	$	6,515	$	(4,465)	$	7,698
Liabilities and shareholders’ equity
Current liabilities
Short-term debt							$	78			$	78
Current maturities of long-term debt			$	4	$	1		24				29
Accounts payable and accrued liabilities	$	14		14		365		1,697				2,090
Intercompany payables						11		57	$	(68)
Total current liabilities		14		18		377		1,856		(68)		2,197
Long-term debt, excluding current maturities				1,599		700		1,393				3,692
Long-term intercompany debt		185		424		957		899		(2,465)
Postretirement and pension liabilities						428		197				625
Other non-current liabilities						243		390				633
Minority interests								348				348
Commitments and contingent liabilities
Shareholders’ equity		203		100		400		1,432		(1,932)		203
Total	$	402	$	2,141	$	3,105	$	6,515	$	(4,465)	$	7,698

35

Crown Holdings, Inc.

CONDENSED COMBINING BALANCE SHEET

As of December 31, 2007

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Assets
Current assets
Cash and cash equivalents			$	42	$	5	$	410			$	457
Receivables, net						10		663				673
Intercompany receivables						70		12	$	(82)
Inventories						239		791				1,030
Prepaid expenses and other current assets	$	2		1		4		67				74
Total current assets		2		43		328		1,943		(82)		2,234
Intercompany debt receivables				1,073		623		53		(1,749)
Investments		225		780		48				(1,053)
Goodwill						453		1,746				2,199
Property, plant and equipment, net				2		331		1,271				1,604
Other non-current assets				43		580		319				942
Total	$	227	$	1,941	$	2,363	$	5,332	$	(2,884)	$	6,979
Liabilities and shareholders’ equity
Current liabilities
Short-term debt							$	45			$	45
Current maturities of long-term debt			$	4	$	1		33				38
Accounts payable and accrued liabilities	$	23		21		337		1,619				2,000
Intercompany payables						12		70	$	(82)
Total current liabilities		23		25		350		1,767		(82)		2,083
Long-term debt, excluding current maturities				1,454		701		1,199				3,354
Long-term intercompany debt		189		416		396		748		(1,749)
Postretirement and pension liabilities						429		196				625
Other non-current liabilities						262		317				579
Minority interests								323				323
Commitments and contingent liabilities
Shareholders’ equity		15		46		225		782		(1,053)		15
Total	$	227	$	1,941	$	2,363	$	5,332	$	(2,884)	$	6,979

36

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the six months ended June 30, 2008

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net cash provided by/(used for) operating activities			$	(13)	$	58	$	(399)			$	(354)
Cash flows from investing activities
Capital expenditures						(12)		(59)				(71)
Proceeds from sale of property, plant and equipment						1		5				6
Intercompany investing activities				5		(517)		528	$	(16)
Other				(6)				(15)				(21)
Net cash provided by/(used for) investing activities				(1)		(528)		459		(16)		(86)
Cash flows from financing activities
Payments of long-term debt						(1)		(58)				(59)
Net change in revolving credit facility and short-term debt				145				183				328
Net change in long-term intercompany balances	$	(4)		(158)		467		(305)
Common stock repurchased		(3)										(3)
Common stock issued		7										7
Dividends paid								(16)		16
Dividends paid to minority interests								(27)				(27)
Other								29				29
Net cash provided by/(used for) financing activities				(13)		466		(194)		16		275
Effect of exchange rate on cash and cash equivalents								19				19
Net change in cash and cash  equivalents				(27)		(4)		(115)				(146)
Cash and cash equivalents at January 1				42		5		410				457
Cash and cash equivalents at June 30	$	0	$	15	$	1	$	295	$	0	$	311

37

Crown Holdings, Inc.

CONDENSED COMBINING STATEMENT OF CASH FLOWS

For the six months ended June 30, 2007

(in millions)

	Parent		Issuer		Guarantors		Non Guarantors		Eliminations		Total Company
Net cash provided by/(used for) operating activities	$	20	$	(31)	$	37	$	(236)			$	(210)
Cash flows from investing activities
Capital expenditures						(20)		(56)				(76)
Proceeds from sale of property, plant and equipment						1		57				58
Intercompany investing activities				10		3			$	(13)
Other								(4)				(4)
Net cash provided by/(used for) investing activities				10		(16)		(3)		(13)		(22)
Cash flows from financing activities
Proceeds from long-term debt								6				6
Payments of long-term debt						(1)		(15)				(16)
Net change in revolving credit facility and short-term debt				50				84				134
Net change in long-term intercompany balances		(29)		(73)		(22)		124
Common stock issued		9										9
Dividends paid								(13)		13
Dividends paid to minority interests								(14)				(14)
Net cash provided by/(used for) financing activities		(20)		(23)		(23)		172		13		119
Effect of exchange rate on cash and cash equivalents								10				10
Net change in cash and cash equivalents				(44)		(2)		(57)				(103)
Cash and cash equivalents at January 1				60		4		343				407
Cash and cash equivalents at June 30	$	0	$	16	$	2	$	286	$	0	$	304

38

Crown Holdings, Inc.

PART I – FINANCIAL INFORMATION

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

(in millions)

Introduction

The following discussion presents management’s analysis of the results of operations for the three and six months ended June 30, 2008 compared to the corresponding periods in 2007 and the changes in financial condition and liquidity from December 31, 2007.  This discussion should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, along with the consolidated financial statements and related notes included in and referred to within this report.

Executive Overview

The Company’s principal areas of focus include improving segment income and cash flow from operations and reducing debt. See Note N to the consolidated financial statements for information regarding segment income.

Improving segment income is primarily dependent on the Company’s ability to increase revenues and manage costs. Key strategies for expanding revenue include targeting geographic markets with strong growth potential, such as southern, central and eastern Europe, the Middle East, Asia and Latin America, improving selling prices in certain product lines and developing innovative packaging products using proprietary technology.  The Company’s cost control efforts focus on improving operating efficiencies and managing material and labor costs, including pension and benefit costs.

The reduction of debt remains a principal strategic goal of the Company and is primarily dependent upon the Company’s ability to generate cash flow from operations.  In addition, the Company may consider divestitures from time to time, the proceeds of which may be used to reduce debt.  The Company’s total debt of $3,799 at June 30, 2008 increased $98 from $3,701 at June 30, 2007, including $177 of increase due to foreign currency translation.

Results of Operations

Net Sales

Net sales in the second quarter of 2008 were $2,196, an increase of $206 or 10.4% compared to net sales of $1,990 for the same period in 2007.  Net sales in the first six months of 2008 were $4,059, an increase of $356 or 9.6% compared to net sales of $3,703 for the same period in 2007. The increase in net sales for the second quarter and first six months included $139 and $258, respectively, of foreign currency translation. Sales from U.S. operations accounted for 26.2% of consolidated net sales in the first six months of 2008 compared to 28.5% for the same period in 2007.  Sales of beverage cans and ends accounted for 48.2% and sales of food cans and ends accounted for 32.3% of consolidated net sales in the first six months of 2008 compared to 47.2% and 32.1%, respectively, in 2007.

Net sales in the Americas Beverage segment in the second quarter increased 2.7% from $488 in 2007 to $501 in 2008. Net sales in the first six months increased 4.2% from $881 in 2007 to $918 in 2008. The increases in net sales in 2008 were primarily due to the pass-through of increased aluminum costs to customers in the form of higher selling prices.

Net sales in the North America Food segment in the second quarter increased 4.8% from $210 in 2007 to $220 in 2008, and in the first six months increased 1.0% from $401 in 2007 to $405 in 2008.  The increase in net sales in the quarter was primarily due to $12 from the pass-through of increased steel and other costs to customers in the form of higher selling prices and $4 due to foreign currency translation, partially offset by a decrease of $6 due to lower sales unit volumes.  The increase in net sales in the first six months was primarily due to $26 from the pass-through of increased costs to customers and $9 due to foreign currency translation, partially offset by a decrease of $32 due to lower sales unit volumes.

Net sales in the European Beverage segment increased 18.7% from $401 in the second quarter of 2007 to $476 in the same period in 2008.  Net sales in the first six months of 2008 increased 20.8% from $682 in 2007 to $824 in 2008.  The increases in the quarter and first six months of 2008 were primarily due to increased sales unit volumes and also included $26 of foreign currency translation for the quarter and $45 for the six months.

39

Crown Holdings, Inc.

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

Net sales in the European Food segment increased 18.8% from $469 in the second quarter of 2007 to $557 in the same period in 2008, and net sales in the first six months of 2008 increased 14.2% from $915 in 2007 to $1,045 in 2008, primarily due to the impact of foreign currency translation of $67 for the quarter and $122 for the six months.

Net sales in the European Specialty Packaging segment increased 11.6% from $112 in the second quarter of 2007 to $125 in the same period in 2008, and net sales in the first six months of 2008 increased 10.0% from $209 in 2007 to $230 in 2008.  The increases were primarily due to the impact of foreign currency translation.

Cost of Products Sold (Excluding Depreciation and Amortization)

Cost of products sold, excluding depreciation and amortization, was $1,788 and $3,342 for the second quarter and first six months of 2008, increases of $141 and $252 compared to $1,647 and $3,090 for the same periods in 2007.  The increases were primarily due to the impact of higher material costs for aluminum and steel and included $114 and $216 due to the impact of foreign currency translation for the quarter and six months. 

As a percentage of net sales, cost of products sold, excluding depreciation and amortization, was 81.4% and 82.3% for the second quarter and first six months of 2008 compared to 82.8% and 83.4% for the same periods in 2007.

As a result of steel and aluminum price increases in recent years, the Company has implemented significant price increases with many of its customers.  The Company’s major metal suppliers have indicated that they expect prices to significantly increase in 2009.  Due to continuing worldwide supply/demand pressures, the Company expects other commodity related costs affecting its business to increase as well, including natural gas, electricity and freight related costs.  The Company intends to pass these raw material price increases on to its customers.  However, there can be no assurance that the Company will be able to fully recover from its customers the impact of price increases affecting the Company, or the timing of such recovery.  In addition, if the Company is unable to purchase steel, aluminum or other critical raw materials for a significant period of time, the Company’s operations would be disrupted.  The Company continues to monitor its core commodity and other cost inputs in relation to its pricing strategy.

Depreciation and Amortization

Depreciation and amortization was $56 and $109 in the second quarter and first six months of 2008, compared to $57 and $112 for the prior year periods.  Decreases due to lower capital spending in recent years were partially offset by increases due to the impact of foreign currency translation.

Gross Profit

Gross profit increased $66 from $286 in the second quarter of 2007 to $352 in the second quarter of 2008.  Gross profit as a percentage of net sales was 16.0% and 15.0% for the second quarter and fist six months of 2008, compared to 14.4% and 13.5% for the same prior year periods.  The improvements in gross profit in 2008 included foreign currency translation of $22 and $37 in the second quarter and first six months, respectively. The remaining improvement includes sales unit volume growth, primarily in beverage cans and food cans in the Company’s European division and beverage cans in the Asia-Pacific division.

Selling and Administrative Expense

Selling and administrative expense was $105 in the second quarter of 2008 compared to $93 for the same period in 2007.  The increase was primarily due to $7 of foreign currency translation and increased incentive compensation costs .  As a percentage of net sales, selling and administrative expense was 4.8% in the second quarter of 2008 compared to 4.7% for the same period in 2007.

Selling and administrative expense was $207 in the first six months of 2008 compared to $188 for the same period in 2007.  The increase was primarily due to $13 of foreign currency translation and increased incentive compensation costs.  As a percentage of net sales, selling and administrative expense was 5.1% for the first six months of 2008 and 2007.

40

Crown Holdings, Inc.

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

The expense for the second quarter and first six months also included a credit of $4 for litigation settlements, and a charge of $3 for pension settlement costs in the Company’s supplemental executive retirement plan. The credit for litigation settlements primarily arose from a malpractice claim the Company filed several years ago related to the sale of property.

Segment Income by Reportable Segment

As discussed in Note N to the consolidated financial statements, the Company defines segment income as net sales less cost of products sold, depreciation and amortization, and selling and administrative expenses.

Segment income in the Americas Beverage segment increased $1 from $57 in the second quarter of 2007 to $58 in the second quarter of 2008.  Segment income in the first six months increased $6 from $94 in 2007 to $100 in 2008.  The increases in 2008 were primarily due to cost reduction efforts, including improved plant operating efficiencies.

Segment income in the North America Food segment was $20 in the second quarters of 2007 and 2008.  Segment income in the first six months increased $1 from $30 in 2007 to $31 in 2008.  Lower sales unit volumes in the quarter and first six months of 2008 did not have a significant impact on segment income due to cost reduction efforts and plant operating efficiencies.

Segment income in the European Beverage segment increased $30 from $58 in the second quarter of 2007 to $88 in the second quarter of 2008.  Segment income in the first six months increased $51 from $88 in 2007 to $139 in 2008.  The increases in 2008 were primarily due to increased sales unit volumes, and also included $3 and $5 of foreign currency translation for the quarter and six months, respectively.

Segment income in the European Food segment increased $16 from $45 in the second quarter of 2007 to $61 in the second quarter of 2008.  Segment income in the first six months increased $19 from $83 in 2007 to $102 in 2008.  The increase in the quarter was primarily due to $9 of foreign currency translation and $6 from increased sales unit volumes.  The increase for six months was primarily due to $15 of foreign currency translation.

Segment income in the European Specialty Packaging segment increased $2 from $9 in the second quarter of 2007 to $11 in the second quarter of 2008.  Segment income in the first six months also increased $2, from $10 in 2007 to $12 in 2008.  The increases in the quarter and first six months were primarily due to foreign currency translation.

Restructuring

The results for the six month periods ended June 30, 2008 and 2007 included restructuring charges of $1 and $5, respectively.  See Note H to the consolidated financial statements for additional information on these charges.

Interest Expense

Interest expense increased $2 and $3, respectively, for the three and six months ended June 30, 2008 versus the same periods in 2007.  The increases were due to $5 of foreign currency translation for the second quarter and $9 for the first six months, partially offset by lower average debt outstanding.

Translation and Exchange Adjustments

The results for the three and six month periods ended June 30, 2008 included net foreign exchange losses of $2 and $6, respectively, for certain subsidiaries that have unhedged currency exposures arising primarily from intercompany debt obligations.  These currency exposures may continue to result in future foreign exchange gains or losses.  The Company may hedge or mitigate a portion of these exposures in the future through derivative instruments or intercompany loans.

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Crown Holdings, Inc.

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

Taxes on Income

The second quarter of 2008 included net tax charges of $42 on pre-tax income of $169 for an effective rate of 24.9%.  The difference of $17 between the pre-tax income at the U.S. statutory rate of 35% or $59, and the tax charge of $42, was primarily due to benefits of $16 from lower tax rates in certain non-U.S. jurisdictions and $4 for valuation allowance adjustments, partially offset by charges of $2 for withholding taxes and $1 for other items.

The first six months of 2008 included net tax charges of $68 on pre-tax income of $243 for an effective rate of 28.0%.  The difference of $17 between the pre-tax income at the U.S. statutory rate of 35% or $85, and the tax charge of $68, was primarily due to $29 of benefits from lower tax rates in certain non-U.S. jurisdictions, partially offset by charges of $4 for withholding taxes, $5 for valuation allowance adjustments, and $3 for other items.

The second quarter of 2007 included net tax charges of $22 on pre-tax income of $132 for an effective rate of 16.7%.  The difference of $24 between the pre-tax income at the U.S. statutory rate of 35% or $46, and the tax charge of $22, was primarily due to benefits from lower tax rates in certain non-U.S. jurisdictions and valuation allowance adjustments.

The first six months of 2007 included net tax charges of $40 on pre-tax income of $180 for an effective rate of 22.2%.  The difference of $23 between the pre-tax income at the U.S. statutory rate of 35% or $63, and the tax charge of $40, was primarily due to benefits from lower tax rates in certain non-U.S. jurisdictions.

Minority Interests, Net of Equity Earnings

The charge for minority interests, net of equity earnings, increased $9 and $18 in the second quarter and first six months of 2008, respectively, compared to the same periods in 2007.  These increases were primarily due to increased profits in the Company’s beverage can operations in the Middle East, South America and China due to increased profits in these emerging markets.

Liquidity and Capital Resources

Cash from Operations

Cash of $354 was used for operating activities in the first six months of 2008 compared to $210 during the same period in 2007.  The increase of $144 in cash used for operating activities in 2008 was primarily due to an increase in working capital due to higher material costs, $37 of increased incentive compensation payments in 2008 due to higher accruals at the end of 2007 compared to 2006 and $44 from the translation of foreign currency cash flows at higher rates in 2008 due to the weakening of the U.S. dollar.

Investing Activities

Investing activities used cash of $86 during the first six months of 2008 compared to cash used of $22 in the prior year period.  Primary investing activities were capital expenditures of $71 in the first six months of 2008 and $76 in the same period of 2007. The Company expects its full year capital expenditures to be approximately $185 in 2008 compared to $156 in 2007.  Included in other investing activities in 2008 were payments of $13 to repurchase a portion of the outstanding shares from minority shareholders in the Company’s operations in Greece, which increased the Company’s ownership to 80.5%.  In 2007, the Company received $58 of proceeds from asset sales, primarily land and buildings, including $39 from the sale of a note related to property sold in 2006.

Financing Activities

Financing activities provided cash of $275 during the first six months of 2008 compared to cash provided of $119 during the same period in 2007.  The cash provided by financing activities in 2008 and 2007 was primarily related to increased short-term borrowings.  Dividends paid to minority interests increased from $14 in 2007 to $27 in 2008 due to increased payments from the Company’s joint venture beverage can operations in the Middle East.  Other financing activities of $29 in 2008 represent cash received upon the settlement of foreign currency contracts used to hedge intercompany debt obligations.

42

Crown Holdings, Inc.

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

As of June 30, 2008, the Company had $431 of borrowing capacity available under its revolving credit facility, equal to the total facility of $800 less $297 of borrowings and $72 of outstanding standby letters of credit.

Contractual Obligations

During the first six months of 2008, purchase obligations covering new agreements for raw materials and other consumables increased by $362 for 2008, $708 for 2009 and $445 for 2010 above amounts provided within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including, but not limited to, in the “Liquidity and Capital Resources” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. 

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 J, entitled “Commitments and Contingent Liabilities,” to the consolidated financial statements.

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require that management make numerous estimates and assumptions.  Actual results could differ from these estimates and assumptions, impacting the reported results of operations and financial condition of the Company.  Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note A to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended  December 31, 2007  describe the  significant  accounting  estimates and  policies  used in the preparation of the consolidated financial statements.  There have been no significant changes in the Company’s critical accounting policies during the first six months of 2008. 

The discussion below repeats and expands the discussion from the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 with respect to goodwill impairment and deferred tax valuation allowances.  The discussion also includes additional disclosure with respect to the calculation of the Company’s asbestos-related liability accrual and the accounting for unrecognized gains and losses for the Company’s pension and postretirement benefit plans.  The discussion below should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note A to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Goodwill Impairment

The Company performs a goodwill impairment review in the fourth quarter of each year or when facts and circumstances indicate goodwill may be impaired. The impairment review involves a number of assumptions and judgments, including the calculation of fair value for the Company’s identified reporting units. The Company determines the estimated  fair value for each reporting unit based on  the  average of the estimated fair values calculated using market values for comparable businesses and discounted cash flow projections.  The Company’s estimates of future cash flows include assumptions concerning future operating performance, economic conditions, and technological changes and may differ from actual future cash flows.  Under the first method of calculating estimated fair value, the Company obtains publicly available trading multiples based on the enterprise value of companies in the packaging industry whose shares are publicly traded. The Company also reviews available information regarding the multiples used in recent transactions,

if any, involving transfers of controlling interests in the packaging industry.  The appropriate multiple is applied to the forecasted EBITDA (defined by the Company as net customer sales, less cost of products sold excluding depreciation and amortization, less selling and administrative expenses) of the reporting unit to obtain an estimated fair value.  Under the second method, fair value is calculated as the sum of the projected discounted cash flows of the reporting unit over the next five years and the terminal value at the end of those five years.  The projected cash flows generally include no growth assumption unless there has recently been a material change in the business or a material change is forecasted.  The discount rate used is based on the average weighted-average cost of capital of companies in the packaging industry, which information is available through various sources.

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Crown Holdings, Inc.

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

The terminal value at the end of the five years is the product of the projected EBITDA at the end of the five year period and the trading multiple.

The North America Food segment includes the North America Food and North America Closures reporting units. As of December 31, 2007, the estimated fair value of the North America Closures reporting unit was $24 higher than its carrying value, and the reporting unit had $68 of goodwill. The fair value of the North America Closures reporting unit was estimated based on the average of the fair values calculated using market values for comparable businesses and discounted cash flow projections, as described above. The Company used an average of the two methods in estimating fair value because it believes they provide an equal probability of yielding an appropriate fair value for the reporting unit.  The maximum potential effect of weighting  the two  methods other than  equally would have been to  increase or  decrease the  estimated  fair value at December 31, 2007 by $2 as the two methods provided values that were within $4 of the other.  The Company assumed an EBITDA multiple of 8.0 times for the market value method.  For its discounted cash flow projections the Company assumed a five-year projection of revenue and operating margins consistent with current results, a discount rate of 8.75%, and a terminal value of 8.0 times EBITDA at the end of the five years. Assuming all other factors remain the same, a $1 change in projected annual EBITDA changes the excess of estimated fair value over carrying value by $8; a change of 0.5 in the assumed EBITDA multiple changes the excess of estimated fair value over carrying varying value by $8; and a change in the discount rate to 7.75% or 9.75% changes the excess of estimated fair value over carrying value by $3.

It is possible that an impairment charge of up to $68 could be recorded for the North America Closures reporting unit if its estimated fair value were to fall below its carrying value.

During the fourth quarter of 2007, the Company recorded a goodwill impairment charge of $103 in its European metal vacuum food closures business due to a decrease in projected operating results.  The European metal vacuum food closures business is included within the Company’s European Food segment.  The segment income of the business was $6, $14 and $17 for the years ended December 31, 2007, 2006 and 2005, respectively, and as of the end of 2006, the Company was projecting 2007 segment income of $16.

The decrease in 2007 segment income, compared to 2006 results and the Company’s 2007 projections, was primarily due to lower sales unit volumes, an inability to recover cost increases through increased selling prices, and, to a lesser extent, increased costs due to a temporary disruption from the relocation of certain operations during the first half of 2007.  The relocation of operations is complete and the related excess costs incurred in 2007 are not expected to recur in future years.

In its projections for the European metal vacuum food closures business for 2007, the Company expected to see some pressure on selling prices based on preliminary discussions with its customers, but believed it could compensate for these losses through increased sales unit volumes that could be obtained from existing or new customers throughout the year.  However, due to aggressive pricing by certain of the Company’s competitors (an effort to maintain or increase their sales unit volumes), the Company was unable to increase volumes for 2007 as allocations were finalized during the first two quarters.  In addition to its effect on the Company's sales unit volumes, the competitive situation also depressed selling prices throughout the year beyond the Company’s expectations.  The aggressive pricing policies evident in 2007 were unexpected in a business that had consistent segment income and relatively stable selling prices in recent years.  As of  October 31, 2007,  it  was  management’s judgment that the adverse competitive situation was temporary based on its understanding of the competitive market at that time.  However, at the conclusion of the 2008 budget process, which occurred at the end of 2007 only after initial discussions with existing and potential customers related to 2008 pricing and volumes, management concluded that the depressed selling prices and  competition for sales volume would likely continue, and that 2008 segment income was unlikely to improve.  Due to this second consecutive year of reduced segment income, and absent any evidence to the contrary, the Company determined that it was appropriate to  assume  similar  results for its  projections  used to  calculate the  estimated  fair  value  of  the reporting unit at the end of 2007.  As of December 31, 2007, the European metal vacuum food closures business had $68 of remaining carrying value including $19 of goodwill.

The Company believes segment income in the European metal vacuum food closures business will improve only when, and if, selling prices in the market increase or the Company  is  able  to  significantly  increase  its current sales unit volumes. The Company is attempting to reduce costs in the business through manufacturing efficiencies and manpower reductions, while also seeking to improve sales price and volume by supplying a quality product and technical support in a competitive market environment.  The Company is unable to predict at this time whether these initiatives will be successful or whether and to what extent such initiatives will reduce costs and improve sales volumes and pricing.

44 

Crown Holdings, Inc. 

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

Estimated fair value for the European metal vacuum food closures business was calculated in the fourth quarters of 2007 and 2006 using the methodology outlined above.  The results achieved using the market value and discounted cash flow projections were weighted evenly as the Company believes they have an equal probability of providing an appropriate fair value. Weighting the two methods in any other proportion would not have had any effect on the 2006 impairment  review as any  combination would have  resulted in an estimated fair value in excess of carrying value.  For the 2007 impairment review, the maximum potential effect of weighting the two methods other than equally would have been to increase or decrease the impairment charge by $5. The primary assumptions  used  included  EBITDA  multiples of  8.0  times and  7.5 times, and discount rates of 8.75% and 7.0%, as of December 31, 2007 and 2006, respectively.  The increases in the EBITDA multiple and discount rate used in 2007 compared to 2006 were due to increases in the market values and weighted average cost of capital of companies in the packaging industry from 2006 to 2007.  The primary cause of the impairment charge in 2007 was a decrease in projected operating results as described above, as the net effect of the assumed multiple and discount rate changes was not significant.

Tax Valuation Allowances

The Company records a valuation valuation allowance to reduce its deferred tax assets when it is more likely than not that a portion of the tax assets will not be realized.  The estimate of the amount that will not be realized requires the use of assumptions concerning the Company’s future taxable income. The Company considers all sources of taxable income in estimating its valuation allowances, including taxable income in any available carry back period; the reversal of taxable temporary differences; tax-planning strategies; and taxable income expected to be generated in the future other than reversing temporary differences.  Should the Company change its estimate of the amount of its deferred tax assets that it would be able to realize, an adjustment to the valuation allowance will result in an increase or decrease in tax expense in the period such a change in estimate is made.

At December 31, 2007, the Company reversed a portion of its U.S. valuation allowances and had approximately $360 of U.S. net deferred tax assets.  The reversal of the valuation allowance was made based on management’s determination that it was more likely than not that a portion of its deferred tax benefits would be realized through future income. In forming this conclusion, the Company considered the fact that it no longer had cumulative losses in the U.S. over the past three years. The Company’s U.S. pre-tax book income/(loss) from continuing operations, as reported in Note X of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, was $4, $39 and ($60) for the years ended December 31, 2007, 2006 and 2005, respectively.  However, these amounts represent the U.S. book income only and exclude additional U.S. taxable income from dividends and other foreign source income. Foreign source income in 2007 was $40 and the Company has included similar amounts in its projections of future taxable income. In addition, the loss of $60 in 2005 included charges of $53 related to early extinguishments of debt, and the Company has not included similar charges in its projections of future income.

Asbestos-Related Liabilities

At the end of each quarter, the Company considers whether there have been any material developments that would cause it to update its asbestos liability accrual calculations. Absent any significant developments in the asbestos litigation environment in general or with respect to the Company specifically, the Company updates its accrual calculations in the fourth quarter of each year. The Company’s asbestos liability accrual is calculated in the fourth quarter of each year as the sum of its outstanding and expected future claims, multiplied by the expected average settlement cost of those claims, plus estimated legal fees. The expected number of claims, and the expected average settlement cost per claim, are calculated using projections based on the actual data for the most recent five years. Because claims are not submitted or settled evenly throughout the year, it is difficult to predict at any time during the year whether the number of claims or average settlement cost over the five year period ending December 31 of such year will increase compared to the prior five year period. The five year average settlement cost at the end of 2007 was higher than at the end of 2006. The effect of this increase in the expected average settlement cost per claim was partially mitigated by a decrease in the expected number of future claims. The combination of these two factors in 2007 resulted in a charge of $29 in 2007 compared to charges of $10 in each of the preceding two years.  A 10% change in either the number of projected claims or the average cost per claim would increase or decrease the estimated liability at December 31, 2007 by $20.  A 10% increase or decrease in these two factors at the same time would increase or decrease the estimated liability at December 31, 2007 by $42 and $38, respectively.

45

Crown Holdings, Inc.

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

Pension and Postretirement Benefit Plans – Unrecognized Losses

As of December 31, 2007, the Company had unrecognized net losses in other comprehensive income of $1,480 related to its pension plans and $131 related to its other postretirement benefit plans. Unrecognized gains and losses arise each year primarily due to changes in discount rates, differences in actual plan asset returns compared to assumed returns, and changes in actuarial assumptions such as mortality. Unrecognized gains and losses are accumulated in other comprehensive income and the portion in each plan that exceeds 10% of the greater of that plan’s assets or projected benefit obligation is amortized to income over future periods. The Company’s pension expense for the year ended December 31, 2007 included charges of $78 for the amortization of unrecognized net losses, and the Company estimates charges of $74 in 2008. Unrecognized net losses of $1,480 in the pension plans as of December 31, 2007 include $861 in the U.K. defined benefit plan, $446 in the U.S defined benefit plan, $157 in the Canadian defined benefit plans, and $16 in other plans.  The amortizable losses in the U.K. plan are being recognized over 21 years, representing the average expected life of inactive employees as over 90% of the plan participants are inactive and the fund is closed to new participants.  The amortizable losses in the U.S. plan are being recognized over the average remaining service life of active participants of 11 years.  The amortizable losses in the Canadian plans are being recognized over the average remaining service life of active participants of 11 years. An increase of 10% in the number of years used to amortize the unrecognized losses in each plan would decrease the estimated charges for 2008 by 9.1% or $7. A decrease of 10% in the number of years would increase the estimated charge for 2008 by 11.1% or $8.

Unrecognized net losses in the Company’s other postretirement benefit plans as of December 31, 2007, primarily included $117 in the U.S. plans, with the amortizable portion being recognized over the average remaining service life of active participants of 9 years.  The Company’s other postretirement benefits expense for the year ended December 31, 2007 included charges of $10 for the amortization of unrecognized net losses, and the Company estimates charges of $9 in 2008. An increase of 10% in the number of years used to amortize the unrecognized losses in each plan would decrease the estimated charge for 2008 by 9.1% or $1. A decrease of 10% in the number of years would increase the estimated charge for 2008 by 11.1% or $1.

Recent Accounting Pronouncements

In April 2008, the FASB issued FASB Staff Position FAS 142-3 (“FSP FAS 142-3”), “Determination of the Useful Life of Intangible Assets.”  FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142 (“FAS 142”), “Goodwill and Other Intangible Assets.” The FSP attempts to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (revised 2007) (“FAS 141(R )”), “Business Combinations” and other generally accepted accounting principles. The FSP requires disclosure of information that enables users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the company’s intent and/or ability to renew or extend the arrangement. The FSP is effective for the Company as of January 1, 2009.  The guidance for determining the useful life of the recognized intangible asset in the FSP is to be applied prospectively to intangible assets acquired after the effective date. The Company is currently evaluating the FSP and does not expect its adoption to have a material impact on the Company’s consolidated financial statements.

46

Crown Holdings, Inc.

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

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.”  FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”) under the two-class method described in FAS 128, “Earnings per Share.” The guidance in the FSP applies to the calculation of EPS for share-based payment awards with rights to dividends or dividend equivalents.  Further, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. The FSP is effective  for  the  Company  as  of  January 1, 2009.   All  prior-period  EPS  data presented will be adjusted retrospectively to conform to the provisions of the FSP. The Company is currently evaluating the FSP and does not expect its adoption to have a material impact on the Company’s calculation of earnings per share.

In March 2008, the FASB issued SFAS No. 161 (“FAS 161”), “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.”  FAS 161 amends and expands the disclosure requirements of SFAS No. 133 (“FAS 133”), “Accounting for Derivative Instruments and Hedging Activities” with the intent to provide users of financial statements with an enhanced understanding of how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under FAS 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.  The statement requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.  FAS 161 is effective for the Company as of January 1, 2009 and the Company is currently evaluating the disclosure implications of this statement.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“FAS 141(R)”), “Business Combinations,” which replaces FAS 141. FAS 141(R) retains the requirement of FAS 141 that business combinations be accounted for at fair value using the acquisition method, but changes the accounting for acquisitions in certain areas.   Under   FAS  141(R)  acquisition  costs  will  be   expensed   as  incurred; noncontrolling (minority) interests will be valued at fair value at the  acquisition date;  in-process  research and development will be recorded at  fair  value as an  indefinite-lived  intangible  asset at  the  acquisition date; restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. FAS 141(R) is effective for the Company for all business combinations for which the acquisition date is on or after January 1, 2009, and the Company does not expect its adoption to have a material impact on the Company’s financial statements at the date of adoption.

In December 2007, the FASB issued SFAS No. 160 (“FAS 160”), “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.”  FAS 160 requires the recognition of noncontrolling (minority) interests as equity in the consolidated financial statements, but separate from the parent’s equity.  The statement also requires that the amount of net income attributable to minority interests be included in consolidated net income on the face of the income statement.  Assuming FAS 160 was adopted as of December 31, 2007, and using the amounts included in the Company’s financial statements as of that date, the adoption of FAS 160 would increase the Company’s shareholders’ equity from $15 to $338 due to the inclusion of minority interests of $323 in shareholders’ equity.  The effect on the income statement for the year ended December 31, 2007 would be to increase the Company’s consolidated net income from $528 to $601 with the inclusion of $73 of net income attributable to minority interests, and the Company would separately disclose $73 of consolidated net income attributable to minority interests. FAS 160 also includes expanded disclosure requirements regarding interests of the parent and noncontrolling  interests,  and  amends certain consolidation procedures of ARB No. 51 for consistency with the requirements of FAS 141(R).   FAS 160 is effective for the Company as of January 1, 2009.

Forward Looking Statements

Statements included herein in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including, but not limited to, in the discussions of asbestos in Note I and commitments and contingencies in  Note J to the consolidated financial statements included in this Quarterly Report on Form 10-Q and also in Part I, Item 1: “Business” and Item 3:  “Legal Proceedings”  and  in  Part II,  Item  7:  “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” within the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, which are not historical facts (including any statements concerning plans and objectives of management for 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.”

47

Crown Holdings, Inc. 

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

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

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

A discussion of important factors that could cause the actual results of operations or financial condition of the Company to differ from expectations has been set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 within Part II, Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Forward Looking Statements” and is incorporated herein by reference.  Some of the factors are also discussed elsewhere in this Form 10-Q and in prior Company filings with the SEC.  In addition, other factors have been or may be discussed from time to time in the Company’s SEC filings.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company has foreign currency exposure related to certain intercompany debt obligations, primarily between the U.S. and Canada, which may result in future foreign exchange adjustments to earnings.  The Company may hedge or mitigate a portion of these exposures in the future through derivative instruments or intercompany loans.

As of June 30, 2008, the Company had approximately $1.2 billion principal floating interest rate debt.  A change of 0.25% in these floating interest rates would change annual interest expense by approximately $3 before tax.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Based upon that evaluation and as of the end of the quarter for which this report is made, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective.  Disclosure controls and procedures ensure that information to be disclosed in reports that the Company files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and terms of the Securities and Exchange Commission, and ensures that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There has been no change in internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

48

Crown Holdings, Inc. 

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

In addition to the other information set forth in this report, carefully consider the factors discussed in Item 1A to Part I in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect the Company’s business, financial condition or future results.  The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing the Company.  Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

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

The Company made no purchases of its equity securities during the quarter ended June 30, 2008.

On February 28, 2008, the Company’s Board of Directors authorized the repurchase of up to $500 million of the Company’s outstanding common stock from time to time through December 31, 2010, in the open market or through privately negotiated transactions, subject to the terms of the Company’s debt agreements, market conditions, the Company’s ability to generate operating cash flow, alternative uses of operating cash flow (including the reduction of indebtedness) and other factors.  This authorization replaces and supersedes all previous outstanding authorizations to repurchase shares.  The Company is not obligated to acquire any shares of common stock and the share repurchase plan may be suspended or terminated at any time at the Company’s discretion.

Item 6. Exhibits

a)           31.1. Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2. Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32. Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by John W. Conway, Chairman of the Board, President and Chief Executive Officer of Crown Holdings, Inc. and Alan W. Rutherford, Vice Chairman of the Board, Executive Vice President and  Chief Financial Officer of Crown Holdings, Inc.

49

Crown Holdings, Inc. 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Crown Holdings, Inc.

Registrant

    By:    /s/ Thomas A. Kelly

Thomas A. Kelly

Vice President and Corporate Controller

Date:  July 28, 2008

50

EX-31

EXHIBIT 31.1

CERTIFICATION

I, John W. Conway, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Crown Holdings, Inc. (“the registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
		a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
		a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   July 25, 2008	/s/ John W. Conway
	John W. Conway
	Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATION

I, Alan W. Rutherford, certify that:
1.	I have reviewed this quarterly report on Form 10-Q of Crown Holdings, Inc. (“the registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
		a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
		a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   July 25, 2008	/s/ Alan W. Rutherford
	Alan W. Rutherford
	Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

          In connection with the Quarterly Report of Crown Holdings, Inc. (the “Company”) on Form 10–Q for the period ending June 30, 2008 (the “Report”), each of the undersigned officers certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes–Oxley Act of 2002, that:

(1)      the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)      the information contained in the Report fairly presents, in all material respects, the financial position and results of operations of the Company.

Date:  July 25, 2008	/s/ John W. Conway
	John W. Conway
	Chairman of the Board,
	President and Chief Executive Officer
Date:  July 25, 2008	/s/ Alan W. Rutherford
	Alan W. Rutherford
	Vice Chairman of the Board,
	Executive Vice President and
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to this Quarterly Report on Form 10-Q and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.