ITEM 1 .      BUSINESS

GENERAL

Crown Holdings, Inc. (the “Company” or the “Registrant”) is a worldwide leader in the design, manufacture and sale of packaging products for consumer goods. The Company’s primary products include steel and aluminum cans for food, beverage, household and other consumer products and a wide variety of metal and plastic caps, closures and dispensing systems. At December 31, 2004, the Company operated 185 plants along with sales and service facilities throughout 43 countries and had approximately 27,600 employees. Consolidated net sales for the Company in 2004 were $7.2 billion with over 70% of 2004 net sales derived from operations outside the United States, of which 78% of these non-U.S. revenues were derived from operations in the European operating segment. In connection with debt refinancing and a corporate reorganization in 2003, Crown Cork & Seal Company, Inc. a Pennsylvania corporation founded in 1892 (“Crown Cork”), formed the Company as a new public holding company. Crown Cork is now a wholly-owned subsidiary of the Company. The Company is a Pennsylvania corporation.

OPERATING SEGMENTS

The Company’s business is organized on the basis of geographic regions with three reportable segments: Americas, Europe and Asia-Pacific. The Americas includes the United States, Canada, Mexico and Central and South America. Europe includes Europe, Africa and the Middle East. Asia-Pacific includes China and Southeast Asia.

Financial information concerning the Company’s operations in its three operating segments, Americas, Europe and Asia-Pacific, and within selected geographic areas is set forth in Part II herein under Net Sales and under Segment Income within Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report and within Item 8 herein under Note W to the consolidated financial statements, which information is incorporated herein by reference.

AMERICAS

The Americas operating segment manufactures beverage, food and aerosol cans, specialty packaging, metal closures and caps, plastic closures and health and beauty care packaging. At December 31, 2004, the Americas operated 68 plants and had approximately 8,400 employees. During 2002, the Company divested its U.S. fragrance pumps business and sold 89.5% of its interest in Constar International Inc. in an initial public offering. These divested operations accounted for $499 million of segment net sales in 2002. There were additional divestitures in 2002, but sales from these operations were not material.

For 2004, the Americas had net sales of $2.9 billion (40% of consolidated net sales) and segment income (as defined in Note W to the consolidated financial statements, which information is incorporated herein by reference) of $188 million. Approximately 75% of segment net sales were derived from within the United States. Approximately 76% of segment net sales were for beverage and food cans and ends.

EUROPE

The European operating segment, which includes the Middle East and Africa, manufactures beverage, food and aerosol cans, specialty packaging, metal closures and caps, high density polyethylene (“HDPE”) containers, plastic closures, health and beauty care packaging and canmaking equipment. At December 31, 2004, the segment operated 100 plants and had approximately 16,600 employees. During 2002, the Company divested its European pharmaceutical packaging business, its operations in Central and East Africa and its Constar beverage plastics business. These divested operations accounted for $175 million of segment net sales in 2002.

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Crown Holdings, Inc.

For 2004, Europe had net sales of $4.0 billion (55% of consolidated net sales) and segment income of $386 million. Net sales in the United Kingdom of $916 million and France of $792 million represented 23% and 20%, respectively, of segment net sales. Sales in 2004 for food and beverage cans and ends accounted for 62% of segment net sales.

ASIA-PACIFIC

The Asia-Pacific operating segment manufactures beverage, food and aerosol cans, plastic closures and metal caps. At December 31, 2004, the segment operated 17 plants and had approximately 2,300 employees. Asia-Pacific had net sales in 2004 of $379 million (5% of consolidated net sales) and segment income of $62 million.

PRODUCTS

Beverage Cans

The Company supplies beverage cans and other packaging products to a variety of beverage and beer companies, including Anheuser-Busch, Cadbury Schweppes, Coca-Cola, Cott Beverages, Heineken, InBev, Kroger, Pepsi-Cola and Scottish Courage. The Company’s beverage business is built around local, regional and global markets which has served to develop its understanding of global consumer expectations.

The beverage market is dynamic and highly competitive, with each packaging manufacturer striving to satisfy consumers’ ever-changing needs. The Company competes by offering its customers broad market knowledge, resources at all levels of its worldwide organization and extensive research and development capabilities that have enabled the Company to provide its customers with innovative products. The Company meets its customers’ beverage packaging needs with an array of two-piece beverage cans and ends, plastic closures and metal bottle caps. Recent innovations include the SuperEnd™ beverage can end and shaped beverage cans.

Beverage can manufacturing is capital intensive, requiring significant investment in tools and machinery. The Company seeks to effectively manage its invested capital and is continuing its efforts to reduce can and end diameter, lighten its cans, reduce non-metal costs and restructure production processes.

Food Cans

The Company manufactures a variety of food cans, including two-and three-piece cans in numerous shapes and sizes, and sells food cans to food marketers such as Bonduelle, Campbell Soup, Continentale, H. J. Heinz, Mars, Menu Foods, Nestlé and Premier Foods.

Technologies used to produce these cans include three-piece welded, two-piece drawn and wall-ironed, and two-piece drawn and redrawn. The Company has also introduced its Lift Off™ series of food ends, including its EOLE™ (easy-open low energy) full pull-out steel food can ends and Peel Seam,™ a flexible aluminum foil laminated end. The Company’s commitment to innovation has led to developments in packaging materials, surface finishes, can shaping, lithography, sealing and opening techniques and environmental performance.

The Company manufactures conventional and easy-open ends for a variety of heat-processed and dry food products including fruits and vegetables, meat and seafood, soups, ready-made meals, infant formula, coffee and pet food. In addition, the Company supplies a range of coil shearing, specialty coating, advanced printing and decoration services.

Aerosol Cans

The Company’s customers for aerosol cans include manufacturers of personal care, food, household and industrial products, including CCL Industries, Gillette, S.C. Johnson and Unilever. The aerosol can business, while highly competitive, is marked by its high value-added service to customers. Such value-added services include, among others, the ability to manufacture multiple sizes and design customer labels and multiple color schemes.

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Crown Holdings, Inc.

Plastic Closures

The Company offers a variety of choices in plastic closures for the beverage (including soft drinks, mineral water and wines and spirits), food (wet and dry), health and beauty care, household and industrial markets. The Company manufactures plastic closures for consumer products marketers such as Coca-Cola, Colgate Palmolive, Danone, Diageo UDV, Nestlé, Pepsi-Cola, Procter & Gamble and Unilever.

Specialty Packaging

The Company’s specialty packaging business is located primarily in Europe and serves many major European and multinational companies. The Company produces a wide variety of specialty containers, with numerous lid and closure variations. The Company’s specialty packaging customers include Altria Group (Kraft Foods), Akzo Nobel, Bristol-Meyers Squibb, Nestlé, Teisseire and United Biscuits.

In the consumer market, the Company manufactures a wide variety of tinplate containers for cookies and cakes, tea and coffee, confectionery, giftware, personal care, tobacco, wines and spirits, as well as non-processed food products. In the industrial market, the Company manufactures tinplate containers for paints and inks, do-it-yourself products, and chemical, automotive and household products.

Metal Closures

The Company offers a wide variety of metal closures and sealing equipment solutions to leading marketers such as Abbott Laboratories, Anheuser Busch, H. J. Heinz, Nestlé, Novartis and Unilever from a network of metal closure plants around the world. The Company supplies total packaging solutions, including closures, capping systems and services while working closely with customers, retailers and glass manufacturers to develop innovative closure solutions and meet customer requirements.

The Company strives to continuously improve its metal closure design and printing technology to better support customers’ marketing programs and promotional activities. The Company offers expertise in closure design and decoration, ranging from high quality printing of the closure in up to nine colors, to inside-the-cap printing, which offers customers new promotional possibilities.

Health and Beauty Care

The Company produces fragrance closures and packaging for lipsticks and eyecare products for leading cosmetics and beauty care companies. As a global, single-source packaging partner, the Company strives to use innovative design and engineering coupled with advanced manufacturing and decorating capabilities to meet the high quality standards and the demanding deadlines of its global customers. The Company’s health and beauty customers include Avon, Estée Lauder, L’Oreal and Procter & Gamble.

SALES AND DISTRIBUTION

Global marketers continue to demand the consolidation of their supplier base under long-term arrangements and qualify those suppliers on the basis of their ability to provide global service to create innovative designs and technologies in a cost-effective manner.

With its global reach, the Company markets and sells products to customers through its own sales and marketing staff located within each operating segment. Regional sales personnel support the segments’ sales staffs. Contracts with global suppliers are centrally negotiated, although products are ordered through and distributed directly by each plant. Facilities are generally located in proximity to their respective major customers. The Company maintains contact with customers in order to develop new business and to extend the terms of its existing contracts.

Many customers provide the Company with quarterly or annual estimates of product requirements along with related quantities pursuant to which periodic commitments are given. Such estimates assist the Company in managing production and controlling working capital levels. The Company schedules its production to meet customer requirements. Because the production time for the Company’s products is short, any backlog of customer orders in relation to overall sales is immaterial.

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Crown Holdings, Inc.

COMPETITION

Most of the Company’s products are sold in highly competitive markets, primarily based on price, quality, service, and performance. The Company competes with other packaging manufacturers as well as with fillers, food processors and packers who manufacture containers for their own use and for sale to others. The Company’s multinational competitors include, but are not limited to, Alcoa Inc., Amcor Limited, AptarGroup Inc., Ball Corporation, BWAY Corporation, Impress Holdings B.V., Metal Container Corporation, Owens-Illinois Inc., Rexam Plc, Silgan Holdings Inc., and U.S. Can Corporation.

CUSTOMERS

The Company’s largest customers consist of many of the leading manufacturers and marketers of packaged products in the world. Consolidation trends among beverage and food marketers has led to a concentrated customer base. The Company’s top ten global customers represented approximately 23% of its 2004 net sales.

In each of the years in the period 2002 through 2004, no one customer of the Company accounted for more than ten percent of the Company’s net sales. Each operating segment of the Company has major customers and the loss of one or more of these major customers could have a material adverse effect on an individual segment or the Company as a whole. Major customers include those listed above under the Products discussion. In addition to sales to Coke and Pepsi, the Company also supplies independent licensees of Coke and Pepsi.

RESEARCH AND DEVELOPMENT

The Company’s principal Research, Development & Engineering (RD&E) centers are located in Alsip, Illinois and Wantage, England. The Company uses its RD&E capabilities to (i) promote development of value-added packaging systems, (ii) design cost-efficient manufacturing systems and materials that also provide continuous quality improvement, (iii) support technical needs in customer and vendor relationships, and (iv) provide engineering services for the Company’s worldwide packaging activities. These capabilities allow the Company to identify market opportunities by working directly with customers to develop new products, such as the creation of new packaging shapes.

Recent innovations include:

The Company intends to selectively license its proprietary technologies and has licensed SuperEnd,™ can shaping and BiCan™ technology to Amcor Limited in Australia and New Zealand and SuperEnd™ to Nampak Ltd. in South Africa.

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Crown Holdings, Inc.

The Company spent $47 million in 2004, $44 million in 2003 and $43 million in 2002 on RD&E activities. Certain of these activities are expected to improve and expand the Company’s product lines in the future. Expenditures were also made to improve manufacturing efficiencies and reduce unit costs, principally raw material costs, by reducing the material content of containers while improving or maintaining other physical properties, such as material strength. The costs incurred were associated with a number of products in varying stages of development.

MATERIALS AND SUPPLIERS

The Company in its manufacturing operations uses various raw materials, including aluminum and steel for metals packaging, and various types of resins, which are petrochemical derivatives, for plastics packaging. In general, these raw materials are purchased in highly competitive, price-sensitive markets which have historically exhibited price and demand cyclicality. These materials and others used in the manufacturing process have historically been available in adequate supply from multiple sources. Generally, the Company’s principal raw materials are obtained from the major suppliers in the countries in which it operates plants. Some plants in developing countries, which do not have local mills, obtain raw materials from nearby, more-developed countries. The Company has agreements for what it considers adequate supplies of raw materials. However, sufficient quantities may not be available in the future due to, among other things, temporary shortages due to weather or other factors, including disruptions in supply caused by raw material transportation or production delays. From time to time, some of the raw materials have been in short supply, but to date, these shortages have not had a significant impact on the Company’s operations.

In 2004, consumption of steel, aluminum and resin represented approximately 27% , 24% and 4%, respectively, of consolidated cost of products sold, excluding depreciation and amortization. Due to the significance of these raw materials to overall cost of products sold, raw material efficiency is a critical cost component of the products manufactured. Supplier consolidations, recent government regulations, political unrest and global or local demand for raw materials in the packaging and other industries, among other risk factors, provide uncertainty as to the level of prices at which the Company might be able to source such raw materials in the future. Moreover, the prices of certain of these raw materials, such as aluminum, steel and resin, have at times been subject to volatility. Generally, the Company has sales contracts in place which allow it to pass-through higher raw material costs. However, there can be no assurance that the Company will be able to fully recover higher raw material costs from its customers.

The Company’s average steel price increased 5% in 2004. Price increases in the United States were significantly higher as the suppliers commenced assessing a price surcharge on the Company’s purchases of steel. Suppliers have indicated that a shortage of raw materials to produce steel and increased global demand, primarily in China, have combined to create the need for steel price increases for their customers. Several suppliers have also indicated that they intend to further increase steel prices, and that the current market environment has resulted in a tighter supply of steel which could require allocation among their steel purchasing customers. As a result of the steel price increases, the Company in 2004 has implemented significant price increases in all of its steel product categories. To date, the impact on the Company’s earnings has not been material as a result of the pass-through of increased cost to customers. However, there can be no assurance that the Company will be able to fully recover from its customers the impact of steel surcharges or price increases. In addition, if the Company is unable to purchase steel for a significant period of time, its steel-consuming operations would be disrupted and if the Company is unable to fully recover the higher cost of steel, its financial results may be adversely affected. The Company continues to monitor this situation and the effect on its operations.

The average price of aluminum ingot on the London Metal Exchange (“LME”) increased approximately 15% in 2004 compared to 5% in 2003. In an effort to reduce the impact of volatile aluminum prices on North American operations, the Company in North America has entered into contracts with its suppliers of aluminum can and end sheet that, by formula, guarantee prices for a period of six months. The pricing structure is directly tied to a rolling average of the prior six months market price of aluminum ingot on the LME. Further, ceiling prices have been established under these contracts that set maximum prices that the Company would pay for aluminum. The Company’s beverage can and end sales contracts in North America contain similar provisions that adjust selling prices to the customers based on changes in the market price of aluminum.

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Crown Holdings, Inc.

Based on petrochemical and resin industry data, average high density polyethylene (“HDPE”) resin prices increased approximately 21% in 2004 compared to 29% in 2003 and average polyethylene resin prices increased approximately 58% in 2004 compared to 21% in 2003. The increases have been driven primarily by the significant increase in oil prices.

In response to the volatility of raw material prices, ongoing productivity and cost reduction efforts in recent years have focused on improving raw material cost management.

The Company’s manufacturing facilities are dependent, in varying degrees, upon the availability of processed energy, such as natural gas and electricity. Certain of these energy sources may become difficult or impossible to obtain on acceptable terms due to external factors, and the Company cannot predict the effects, if any, of such occurrences on its future operations.

SEASONALITY

Food packaging products accounted for 32% of 2004 consolidated net sales. The food can business is somewhat seasonal with the first quarter tending to be the slowest period as the autumn packing period in the Northern Hemisphere ends and new crops are not yet planted. The industry enters its busiest period in the third quarter when the majority of fruits and vegetables are harvested. Weather represents a substantial uncertainty in the yield of food products and is a major factor in determining the demand for food cans in any given year.

The Company’s metal beverage container and plastic beverage closures businesses are predominantly located in the Northern Hemisphere. Generally, beverage products are consumed in greater amounts during warmer months of the year and sales and earnings have generally been higher in the second and third quarters of the calendar year.

The Company’s other businesses include aerosol, specialty and health and beauty care packaging, canmaking equipment and various other products which tend not to be significantly affected by seasonal variations.

ENVIRONMENTAL MATTERS

The Company’s operations are subject to numerous laws and regulations governing the protection of the environment, disposal of waste, discharges into water, emissions into the atmosphere and the protection of employee health and safety. Future regulations may impose stricter environmental requirements on the packaging industry and may require additional capital investment. Anticipated future restrictions in some jurisdictions on the use of certain coatings may require the Company to employ additional control equipment or process modifications. The Company has a Corporate Environmental Protection Policy, and environmental considerations are among the criteria by which the Company evaluates projects, products, processes and purchases. While the Company does not believe that any of the foregoing matters are likely to have a material effect on the financial statements, there can be no assurance that current or future environmental laws or remediation liabilities will not have a material effect on the Company’s financial condition, liquidity or results of operations. Discussion of the Company’s environmental matters is contained within Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report under the caption Environmental Matters , and within Item 8 herein under Note L to the consolidated financial statements, which information is incorporated herein by reference.

WORKING CAPITAL

The Company generally uses cash during the first nine months of the year to finance seasonal working capital needs. The Company’s working capital requirements are funded by its receivables securitization and factoring programs, its revolving credit facility and from operations.

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Crown Holdings, Inc.

In 2003, the Company completed a refinancing that improved its liquidity through the repayment of debt due in 2003 from the proceeds and the extension of maturities to 2006 and beyond. In September and October 2004, the Company completed an additional refinancing. The funds received in the 2004 refinancing were used to refinance the credit and term loan facilities entered into in 2003 and to pay fees and expenses associated with the refinancing. The 2004 refinancing extended maturities on the Company’s credit facilities to 2010.

Further information relating to the Company’s liquidity and capital resources and the refinancing is set forth within Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Report under the caption Debt Refinancing and within Item 8 herein under Note Q and Note R to the consolidated financial statements, which information is incorporated herein by reference.

Collection and payment periods tend to be longer for the Company’s operations located outside the U.S. due to local business practices.

EMPLOYEES

At December 31, 2004, the Company employed approximately 27,600 people. Collective bargaining agreements with varying terms and expiration dates cover approximately 18,800 employees. The Company does not expect that renegotiations of the agreements expiring in 2004 will have a material adverse effect on its results of operations, financial position or cash flow.

AVAILABLE INFORMATION

The Company’s Internet web site address is www.crowncork.com . The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed by the Company with the Securities and Exchange Commission pursuant to sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are accessible free of charge through the Company’s web site as soon as reasonably practicable after the documents are filed with, or otherwise furnished to, the Securities and Exchange Commission.

The Company’s Code of Business Conduct and Ethics, its Corporate Governance Guidelines, and the charters of its Audit, Compensation and Nominating and Corporate Governance committees are available on the Company’s web site. These documents are also available in print to any shareholder who requests them. The Company intends to disclose amendments to and waivers of the Code of Business Conduct and Ethics on the Company’s web site.