SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
( ) 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 1-12139
SEALED AIR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 65-0654331
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
Park 80 East
Saddle Brook, New Jersey 07663-5291
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (201) 791-7600
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
Actof 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
There were 83,272,061 shares of the registrant's common stock, par value
$0.10 per share, and 36,021,851 shares of the registrant's convertible
preferred stock, par value $.10 per share, outstanding as of July 31,
1998.
</PAGE>
<PAGE>
PART I
FINANCIAL INFORMATION
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
For the Three and Six Months Ended June 30, 1998 and 1997
(In thousands of dollars except share data)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $670,005 $463,211 $1,101,040 $885,904
Cost of sales 442,945 299,528 733,858 574,157
Gross profit 227,060 163,683 367,182 311,747
Marketing, administrative and
development expenses 124,084 85,978 218,537 170,647
Goodwill amortization 12,018 90 12,108 180
Restructuring and asset
impairments - 9,538 - 9,538
Operating profit 90,958 68,077 136,537 131,382
Other income (expense):
Interest expense (20,642) (115) (20,724) (148)
Other, net (1,537) (2,869) (1,948) (2,767)
Other income (expense), net (22,179) (2,984) (22,672) (2,915)
Earnings before income taxes 68,779 65,093 113,865 128,467
Income taxes 33,214 26,834 51,248 52,948
Net earnings $ 35,565 $ 38,259 $ 62,617 $ 75,519
Preferred dividend 18,011 - 18,011 -
Net earnings available to common
shareholders $ 17,554 $ - $ 44,606 $ -
Earnings per common share
(see Note 4):
Basic $ 0.21 $ 0.51 $ 0.43 $ 0.98
Diluted $ 0.21 $ 0.51 $ 0.43 $ 0.98
Weighted average number of
common shares outstanding (000's):
Basic 83,612 39,403 62,249 40,052
Diluted 83,746 39,503 62,426 40,131
</TABLE>
See accompanying notes to consolidated financial statements.
2
</PAGE>
<PAGE>
SEALED AIR CORPORATION
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
(In thousands of dollars except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 34,064 $ -
Notes and accounts receivable, less allowance
for doubtful accounts of $11,832 in 1998 and
$7,256 in 1997 423,544 272,194
Inventories 301,492 225,976
Other current assets 41,891 29,188
Total current assets 800,991 527,358
Property and equipment:
Land and buildings 398,908 320,099
Machinery and equipment 1,311,813 1,125,567
Other property and equipment 123,588 119,533
Construction in progress 108,149 187,797
1,942,458 1,752,996
Less accumulated depreciation and amortization 761,860 712,844
Property and equipment, net 1,180,598 1,040,152
Goodwill, less accumulated amortization of
$12,541 in 1998 and $379 in 1997 1,894,398 13,433
Other assets 179,607 65,888
$4,055,594 $1,646,831
</TABLE>
3
</PAGE>
<PAGE>
SEALED AIR CORPORATION
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997 (Continued)
(In thousands of dollars except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
LIABILITIES, CONVERTIBLE PREFERRED STOCK & EQUITY
<S> <C> <C>
Current Liabilities:
Notes payable and current
installments of long-term debt $164,062 $ -
Accounts payable 163,166 114,907
Other accrued liabilities 178,027 68,710
Income taxes payable 27,851 -
Total current liabilities 533,106 183,617
Long-term debt, less current
installments 1,039,488 -
Deferred income taxes 127,057 13,939
Other non-current liabilities 86,954 96,647
Total liabilities 1,786,605 294,203
Convertible preferred stock, $50.00 per share
redemption value. Authorized 50,000,000
shares, issued 36,021,851 shares in 1998 1,801,093 -
Equity:
Net assets - 1,482,682
Accumulated translation adjustment - (130,054)
Shareholders' equity:
Common stock, $.10 par value. Authorized
400,000,000 shares, issued 83,272,061
shares in 1998 8,327 -
Additional paid-in capital 618,578 -
Retained earnings 17,554 -
Accumulated translation adjustment (142,732) -
501,727 -
Less deferred compensation 33,831 -
Total equity 467,896 1,352,628
$4,055,594 $1,646,831
</TABLE>
See accompanying notes to consolidated financial statements.
4
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
Cash Flows From Operating Activities:
<S> <C> <C>
Net earnings $ 62,617 $ 75,519
Adjustments to reconcile net earnings to
net cash provided by operating activities, net of
effect of businesses acquired:
Depreciation and amortization 86,006 50,326
Deferred taxes 5,673 10,625
Restructuring costs - 9,538
Loss on disposals of fixed assets 608 347
Cash provided (used) by changes in:
Receivables (8,743) (10,557)
Inventories 5,320 (2,840)
Other current assets 1,417 (2,672)
Other assets (9,357) (25,577)
Accounts payable (2,243) (18,342)
Income taxes payable 5,641 -
Other accrued liabilities 3,660 (25,552)
Other non-current liabilities 5,271 3,319
Net cash provided by operating activities 155,870 64,134
Cash Flows From Investing Activities:
Capital expenditures for property and equipment (32,462) (50,636)
Businesses acquired, net of cash acquired and
debt assumed 48,994 (13,709)
Proceeds from sales of property and equipment 4,191 2,015
Net cash provided by (used in) investing
activities 20,723 (62,330)
Cash Flows From Financing Activities:
Net advances to W. R. Grace & Co.-Conn. (24,106) (1,804)
Proceeds from Credit Agreements 1,258,807 -
Payment of debt, principally Credit
Agreements (125,768) -
Payment of contribution to New Grace (1,256,614) -
Net proceeds on notes payable 4,230 -
Net cash used in financing activities (143,451) (1,804)
Effect of exchange rate changes on cash and cash
equivalents 922 -
Cash and Cash Equivalents:
Increase during the period 34,064 -
Balance, beginning of period - -
Balance, end of period $ 34,064 $ -
</TABLE>
5
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997 (Continued)
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
Supplemental Non-Cash Items:
<S> <C> <C>
Issuance of 36,021,851 shares of convertible
preferred stock and 40,647,815 shares of common
stock in connection with the Recapitalization $1,805,000 $ -
Net assets acquired in exchange for the
issuance of 42,624,246 shares of common stock in
connection with the Merger, net of cash balance
of $51,300 acquired $2,089,000 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
6
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Three and Six Months Ended June 30, 1998 and 1997
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net earnings $35,565 $38,259 $62,617 $75,519
Other comprehensive income:
Foreign currency
translation adjustments (2,561) (2,345) (12,678) (23,382)
Comprehensive income $33,004 $35,914 $49,939 $52,137
</TABLE>
See accompanying notes to consolidated financial statements.
7
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
(Amounts in thousands, except share data)
(Unaudited)
(1) Reorganization and Merger
On March 31, 1998, the Company (formerly known as W. R. Grace & Co.)
and Sealed Air Corporation ("old Sealed Air"), completed a series of
transactions as a result of which:
(a) The specialty chemicals business of the Company was separated
from its packaging business, the packaging business was contributed to one
wholly owned subsidiary ("Cryovac"), and the specialty chemicals business
was contributed to another wholly owned subsidiary ("New Grace"); the
Company and Cryovac borrowed approximately $1,258,807 under two new credit
agreements (the "Credit Agreements") (see Note 7) and transferred
substantially all of those funds to New Grace; and the Company distributed
all of the outstanding shares of common stock of New Grace to its
shareholders. These transactions are referred to below as the
"Reorganization."
(b) The Company recapitalized its outstanding shares of common
stock, par value $0.01 per share ("Old Grace Common Stock"), into a new
common stock and Series A convertible preferred stock (the
"Recapitalization").
(c) A subsidiary of the Company merged into old Sealed Air (the
"Merger"), with old Sealed Air being the surviving corporation. As a
result of the Merger, old Sealed Air became a subsidiary of the Company,
and the Company was renamed Sealed Air Corporation.
(2) Basis of Presentation
The Merger has been accounted for as a purchase of old Sealed Air by the
Company as of March 31, 1998. As a result, the consolidated statements of
earnings and cash flows reflect, for the second quarter of 1998, after giving
effect to the Merger, the consolidated operating results from April 1, 1998
of the Company and its subsidiaries, including Cryovac and old Sealed Air,
while the operating results for the first three months of 1998 include
only the operating results of Cryovac. The results for 1997 reflect only
the operating results of Cryovac. The consolidated balance sheet at
December 31, 1997 reflects the financial position of Cryovac only while the
consolidated balance sheet at June 30, 1998 reflects the consolidated
financial position of the Company and its subsidiaries, including Cryovac
and old Sealed Air, after giving effect to the Merger.
In connection with the Merger, the Company issued 42,624,246 shares of
common stock at a value of $49.52 per share and incurred costs related to
the Merger of approximately $30,000 for a purchase price of approximately
$2,141,000 in exchange for the net assets of old Sealed Air. The fair
value of such net assets acquired by the Company include approximately
$181,000 of property and equipment, approximately $95,800 of working
capital (including a cash balance of approximately $51,300), and other
long-term assets and liabilities resulting in approximately $1,900,000 of
goodwill, which is being amortized over 40 years. See Note 8 for unaudited
pro forma financial information for the quarter and six months ended June
30, 1998 and 1997.
8
</PAGE>
<PAGE>
All significant intercompany transactions and balances have been eliminated
in consolidation. In management's opinion, all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of the
consolidated financial position and results of operations for the quarter
and six months ended June 30, 1998 have been made.
(3) Equity
Prior to the Reorganization and the Merger, Cryovac's operations were
conducted by divisions or subsidiaries of the Company, and Cryovac did not
have a separately identifiable capital structure. Therefore, the balance
sheet as of December 31, 1997 reflects the net assets rather than
shareholders' equity of Cryovac at such date. In connection with the
Recapitalization, the Company recapitalized the outstanding shares of Old
Grace Common Stock into 40,647,815 shares of common stock and 36,021,851
shares of Series A convertible preferred stock (convertible into
approximately 31,900,000 shares of common stock), each with a par value of
$0.10 per share. In connection with the Merger, the Company issued
42,624,246 shares of common stock to the shareholders of old Sealed Air.
The convertible preferred stock votes with the common stock on an as-
converted basis, pays a cash dividend, as declared by the Board, at an
annual rate of $2.00 per share, payable quarterly in arrears, will become
redeemable at the option of the Company beginning March 31, 2001, subject
to certain conditions, and will be subject to mandatory redemption on
March 31, 2018 at $50.00 per share, plus any accrued and unpaid dividends.
Because it is subject to mandatory redemption, the convertible preferred
stock is classified outside of the shareholders' equity section of the
balance sheet at its mandatory redemption value of $50.00 per share.
On June 26, 1998 the Board of Directors declared the third quarter cash
dividend of $0.50 per share on the convertible preferred stock, which is
due and payable on October 1, 1998. The Company will accrue this
dividend in the third quarter. The dividend paid on July 1, 1998 was
accrued during the second quarter of 1998.
The funds that the Company and Cryovac transferred to New Grace in
connection with the Reorganization included estimates of amounts that had
not been finalized as of the date of the Reorganization. The Company and
New Grace have agreed to periodically adjust such amounts as additional
facts become available and until the Company has paid or received final
agreed upon amounts. Certain of such amounts may be recorded as
adjustments to shareholders' equity.
(4) Earnings Per Common Share
Prior to the Reorganization and the Recapitalization, Cryovac's operations
were conducted by divisions or subsidiaries of the Company and therefore
Cryovac did not have a separately identifiable capital structure upon
which a calculation of earnings per common share could be based. In
February 1998, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 98, "Computation of Earnings per Share"
("SAB 98"). SAB 98 revised prior SEC guidance concerning
presentations of earnings per common share information for companies
whose historical financial statements are not indicative of the ongoing
entity. SAB 98 requires the presentation of earnings per common share
information for all periods for which earnings statement information is
presented in accordance with Statement of Financial Accounting Standards
No. 128, "Earnings per Share."
In calculating basic and diluted earnings per common share for the 1997
periods and the first six months of 1998, retroactive recognition has
been given to the Recapitalization as if it had occurred on January 1,
1997. Accordingly, net earnings have been reduced for each period by the
dividends that would have been payable on the convertible preferred stock
(as if such shares had been outstanding during each period) to arrive at
earnings available to common shareholders. The weighted average number
of outstanding common shares used to calculate basic earnings per common
9
</PAGE>
<PAGE>
share has been calculated on an equivalent share basis using the weighted
average number of shares of the common stock outstanding for the first
quarter of 1998 and the 1997 periods, adjusted to reflect the terms of
the Recapitalization. The weighted average number of common shares used
to calculate diluted earnings per common share also includes the assumed
exercise of outstanding dilutive stock options. The convertible preferred
stock is not considered in the calculation of diluted earnings per common
share because the treatment of the convertible preferred stock as the
common stock into which it is convertible would be anti-dilutive (i.e.,
would increase earnings per common share).
The following represents the reconciliation of the basic and diluted
earnings per common share computations for the three and six months ended
June 30, 1998 and 1997 (shares in thousands).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Basic EPS:
Numerator
Net earnings $35,565 $38,259 $62,617 $75,519
Less: Preferred dividends 18,011 18,011 36,022 36,022
Earnings available to
common shareholders $17,554 $20,248 $26,595 $39,497
Denominator
Weighted average common
shares outstanding-basic 83,612 39,403 62,249 40,052
Basic earnings per
common share $0.21 $0.51 (a) $0.43 (a) $0.98 (a)
Diluted EPS:
Numerator
Earnings available to
common shareholders $17,554 $20,248 $26,595 $39,497
Denominator
Weighted average common
shares outstanding-basic 83,612 39,403 62,249 40,052
Effect of assumed
exercise of options 134 100 177 79
Weighted average common
shares outstanding-
diluted 83,746 39,503 62,426 40,131
Diluted earnings per
common share $0.21 $0.51(a) $0.43(a) $0.98(a)
</TABLE>
(a) Such earnings per common share amounts are not necessarily indicative of
the results that would have occurred had Cryovac been a stand-alone company
for the periods prior to March 31, 1998.
10
</PAGE>
<PAGE>
(5) Inventories
At June 30, 1998, the components of inventories by major classification
(raw materials, work in process and finished goods) are as follows:
June 30, December 31,
1998 1997
Raw materials $ 69,953 $ 44,043
Work in process 58,620 54,532
Finished goods 187,926 142,282
Subtotal 316,499 240,857
Less LIFO reserve 15,007 14,881
Total inventory $301,492 $225,976
(6) Income Taxes
The Company's effective income tax rates were 48.3% and 41.2% for the
second quarters of 1998 and 1997, respectively. Such rates were higher
than the statutory U.S. federal income tax rate primarily due to the non-
deductibility of the goodwill amortization resulting from the Merger and
state income taxes. During the third quarter, the Company expects to
incur a special income tax charge of approximately $23 million for the
assumed repatriation to the U.S. of that portion of accumulated earnings
of its foreign subsidiaries that are not considered permanently invested
in their businesses.
All tax liabilities related to earnings of Cryovac prior to the Merger
were or will be paid by W. R. Grace & Co.-Conn. The balance reflected on
the consolidated balance sheet for June 30, 1998 relates to old
Sealed Air for the first six months of 1998 and to Cryovac for the
second quarter only.
(7) Debt
At June 30, 1998, debt consisted primarily of borrowings that were made
in connection with the Reorganization under the Credit Agreements
described below and also includes certain other loans incurred by the
Company's subsidiaries. The balance sheet at December 31, 1997 does not
reflect any long-term debt or notes payable because, prior to the Merger,
the Company borrowed for its subsidiarues and divisions and generally did
not allocate such debt to those subsidiaries or divisions.
In connection with the Reorganization, the Company entered into the Credit
Agreements, which include a $1 billion 5-year revolving credit facility
that expires on March 30, 2003 and a $600 million 364-day revolving credit
facility that expires on March 29, 1999. The Credit Agreements provide
that the Company and certain of its subsidiaries, including Cryovac and
old Sealed Air, may borrow for various purposes, including the refinancing
of existing debt, the provision of working capital and other general
corporate needs.
The Company's obligations under the Credit Agreements bear interest at
floating rates. The weighted average interest rate under the Credit
Agreements was approximately 6.2% at June 30, 1998. The Company has
entered into certain interest rate swap agreements that have the effect of
fixing the interest rates on a portion of such debt. The weighted
average interest rate at June 30, 1998 did not change as a result of the
derivative financial instruments.
The Credit Agreements provide for changes in borrowing margins based on
financial criteria and impose certain limitations on the operations of
the Company and certain of its subsidiaries. These limitations include
financial covenants relating to interest coverage and debt leverage as
well as certain restrictions on the incurrence of additional
indebtedness, the creation of liens, mergers and acquisitions, and
certain dispositions of property or assets. The Company was in
compliance with these requirements as of June 30, 1998.
11
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<PAGE>
(8) Pro Forma Information
The following table presents selected unaudited pro forma financial
information for the three and six-month periods ended June 30, 1998 and
1997 that has been prepared as if the Reorganization, the
Recapitalization and the Merger had occurred on January 1, 1997. This
information is not intended to represent what the Company's actual
results of operations would have been for such periods.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three and Six Months Ended June 30, 1998 and 1997
(In thousands of dollars except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30 (1) June 30 (1)
1998 (2) 1997 1998 (2) 1997
<S> <C> <C> <C> <C>
Net sales $670,005 $674,498 $1,313,792 $1,299,730
Cost of sales 434,945 433,514 858,795 837,723
Gross profit 235,060 240,984 454,997 462,007
Marketing, administrative and
development expenses 124,084 122,754 248,646 242,976
Goodwill amortization 12,018 11,921 23,939 23,842
Restructuring and asset
impairments - 9,538 - 9,538
Operating profit 98,958 96,771 182,412 185,651
Interest expense (20,642) (20,173) (43,095) (40,346)
Other income (expense), net (1,537) (3,848) (1,333) (5,373)
Earnings before income taxes 76,779 72,750 137,984 139,932
Income taxes 35,787 33,689 64,187 65,152
Net earnings $ 40,992 $ 39,061 $ 73,797 $ 74,780
Preferred dividend 18,011 18,011 36,022 36,022
Net earnings available to common
shareholders $ 22,981 $ 21,050 $ 37,775 $ 38,758
Earnings per common share (3):
Basic $ 0.27 $ 0.26 $ 0.45 $ 0.47
Diluted $ 0.27 $ 0.26 $ 0.45 $ 0.47
Weighted average number of
common shares outstanding (000):
Basic 83,612 83,272 83,443 83,272
Diluted 83,746 83,372 83,620 83,351
</TABLE>
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<PAGE>
(1) Reflects pro forma adjustments made in combining the historical
results of old Sealed Air and Cryovac as a result of the Merger and its
related transactions for all periods presented. Such amounts include,
among others, incremental goodwill amortization of approximately $10.3
million and incremental interest expense of approximately $20.4 million
in the first quarter of 1998 and in each of the first and second
quarters of 1997.
(2) The data for the second quarter of 1998 sets forth the Company's
actual operating results during that period but excludes a non-cash
inventory charge of approximately $8 million recorded in the second
quarter resulting from the turnover of certain of the Company's
inventories previously stepped-up to fair value in connection with the
Merger.
(3) For purposes of calculating basic and diluted earnings per common
share, net earnings for the first quarter of 1998 and the 1997 periods
have been reduced by the dividend ($18,011 per quarter) that would have
been payable on the Company's convertible preferred stock (as if such
shares had been outstanding during the periods) to arrive at earnings
available to common shareholders. The weighted average number of
outstanding common shares used to calculate basic earnings per common
share is calculated on an equivalent share basis using the shares of
common stock outstanding for the first quarter of 1998 and the 1997
periods, adjusted to reflect the terms of the Recapitalization. The
assumed conversion of the convertible preferred stock is not considered
in the calculation of diluted earnings per common share as the effect
would be anti-dilutive (i.e., would increase earnings per share).
(9) Subsequent Event - Restructuring and Asset Impairment
On July 27, 1998, the Company announced a restructuring program that is
expected to result in restructuring and other charges of between
$135 million and $145 million (including the special income tax charge
of $23 million described in Note 6) to its third quarter earnings. This
restructuring is part of the implementation of a combined operating plan
for the post-Merger integration of old Sealed Air and Cryovac and is
expected to reduce annual operating costs by approximately $45 million by
the end of 1999. The restructuring program, including asset impairments,
will require a charge to third quarter earnings of $112 million
to $122 million. Approximately 30% of this charge is expected to
represent actual cash costs, primarily severance and personnel-related
costs, costs of terminating leases and facilities disposition costs.
The remainder is expected to represent non-cash write-offs or
write-downs of impaired property and equipment, intangibles and
other assets identified in developing the operating plan for the
combined businesses.
13
</PAGE>
<PAGE>
Management's Discussion and Analysis of Results of Operations and
Financial Condition
On March 31, 1998, the Company (formerly known as W. R. Grace & Co.)
and Sealed Air Corporation ("old Sealed Air") completed a series of
transactions as a result of which:
(a) the specialty chemicals business of the Company was separated
from its packaging business, the packaging business was contributed to
one wholly owned subsidiary ("Cryovac"), and the specialty chemicals
business was contributed to another wholly owned subsidiary
("New Grace"); the Company and Cryovac borrowed approximately
$1,258,807,000 under two new credit agreements (the "Credit Agreements")
that are discussed below and transferred substantially all of those
funds to New Grace; and the Company distributed all of the outstanding
shares of common stock of New Grace to its stockholders. These
transactions are referred to below as the "Reorganization."
(b) The Company recapitalized its outstanding shares of common
stock, par value $0.01 per share ("Old Grace Common Stock"), into a
new common stock and Series A convertible preferred stock (the
"Recapitalization").
(c) A subsidiary of the Company merged into old Sealed Air (the
"Merger"), with old Sealed Air being the surviving corporation. As a
result of the Merger, old Sealed Air became a subsidiary of the Company,
and the Company was renamed Sealed Air Corporation.
The Merger has been accounted for as a purchase of old Sealed Air by
the Company as of March 31, 1998. As a result, the operating results
for the second quarter reflect the consolidated operating results of the
Company and its subsidiaries, including Cryovac and old Sealed Air,
while the operating results for the first three months of 1998 include
only the operating results of Cryovac. The 1997 periods reflect only
the operating results of Cryovac.
In order to facilitate review of the factors that affected the
Company's operating results for the second quarter and first six months
of 1998, the Company has included selected unaudited pro forma financial
information in note 8 to the financial statements included in this Form
10-Q. This information has been prepared as if the Reorganization, the
Recapitalization and the Merger had occurred on January 1, 1997. A
discussion and analysis of that information is set forth below. Such pro
forma information is not intended to represent what the Company's actual
results of operations would have been for such periods had the
transactions actually occurred on January 1, 1997.
14
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<PAGE>
Recent Events
On July 27, 1998, the Company announced a restructuring program that
is expected to result in restructuring and other charges of between $135
million and $145 million (including a special income tax charge of $23
million discussed below) to its third quarter earnings. This
restructuring is part of the implementation of a combined operating plan
related to the integration of old Sealed Air and Cryovac, which the
Company believes should reduce annual operating costs by approximately
$45 million by the end of 1999. The Company's financial statements for
the period ended June 30, 1998 do not include the effect of this
restructuring program.
Results of Operations
Discussion and Analysis of Actual Operating Results
The Company's net sales increased 45% to $670,005,000 in the second
quarter of 1998 from $463,211,000 in the second quarter of 1997. For the
six-month period, the Company's net sales increased 24% to $1,101,040,000
in 1998 from $885,904,000 in 1997. These increases in net sales as well
as most of the increases in cost of sales, marketing, administrative and
development expenses and other costs and expenses, including the substantial
increases in interest expense and amortization of goodwill, that the
Company experienced in both the second quarter and first six months of
1998 were due to the inclusion of old Sealed Air's operations in these
periods and adjustments arising from the Merger, the Reorganization and
the Recapitalization.
Gross profit declined as a percentage of net sales to 33.9% from
35.3% for the second quarter of 1997. During the second quarter of 1998,
the Company incurred a non-cash inventory charge of approximately
$8,000,000, or $0.06 per share (the "Inventory Charge"), resulting from
the turnover of certain of the Company's inventories previously stepped-up
to fair value in connection with the Merger. Excluding the effect of the
Inventory Charge, gross profit as a percentage of net sales would have
been 35.1%. For the first six months of 1998, gross profit as a
percentage of net sales was 33.3% (34.1% excluding the effect of the
Inventory Charge) compared to 35.2% in the 1997 period.
Included in marketing, administrative and development expenses are
certain corporate expenses that were allocated to Cryovac by W. R.
Grace & Co. prior to the Merger which amounted to $18,044,000 in 1998
prior to the Merger and $10,003,000 and $19,819,000 in the second
quarter and first six months of 1997, respectively. Such allocated
expenses ceased as a result of the Merger. However, following the Merger,
the Company has and will continue to incur marketing, administrative and
development expenses that will partially offset the savings derived from
the elimination of these allocated expenses. Additionally, as a result
of the Merger, the Company recorded goodwill amortization of $12,018,000
in the second quarter of 1998.
15
</PAGE>
<PAGE>
For the second quarter and first six months of 1998, operating
profit increased to $90,958,000 and $136,537,000, respectively, compared
to $68,077,000 and $131,382,000 for the comparable 1997 periods,
primarily due to the gross profit on the added net sales of old Sealed
Air from April 1, 1998 partially offset by the higher level of goodwill
amortization arising from the Merger and the changes in costs and
expenses discussed above.
The increase in other expense, net for both the second quarter and
the first six months of 1998 was due primarily to interest expense on the
debt incurred in connection with the Reorganization.
The Company's effective income tax rates for the second quarter and
first six months of 1998 were 48.3% and 45.0%, respectively, compared to
41.2% for the 1997 periods. The higher effective income tax rates in the
1998 periods resulted primarily from the non-deductibility of goodwill
amortization.
Net earnings declined to $35,565,000 compared with $38,259,000 for
the second quarter of 1997 and to $62,617,000 compared with $75,519,000
for the first six months of 1997 primarily due to the higher effective
tax rate and the higher level of interest expense, which more than
offset the increase in operating profit.
Basic and diluted earnings per common share for the second quarter
and first six months of 1998 declined by a greater rate than net earnings
primarily as a result of the higher average number of shares of common
stock outstanding during the 1998 periods.
Discussion and Analysis of Pro Forma Operating Results
The following discussion relates to the unaudited selected pro forma
financial information that appears in note 8 to the financial statements
included in this Form 10-Q.
Net sales for the second quarter of 1998 decreased marginally to
$670,005,000 compared with pro forma net sales of $674,498,000 for the
second quarter of 1997. Pro forma net sales for the first six months of
1998 increased marginally to $1,313,792,000 compared to $1,299,730,000 for
the first six months of 1997.
The Company's net sales were affected in the second quarter and first
six months of 1998 by the continued weakness of foreign currencies
compared with the U.S. dollar, particularly in the Asia-Pacific region,
continued sluggish sales in Asia and the spill-over of the Asian economic
crisis into other markets, particularly Australia, New Zealand and Latin
America. Excluding the negative effect of foreign currency translation,
net sales would have increased on a pro forma basis 3% and 5% compared to
the second quarter and first six months of 1997, respectively, primarily
due to higher unit volume. In the second quarter of 1998, the rate of
increase in the Company's unit volume was lower than the rate of increase
in unit volume in the first quarter of 1998 for the reasons discussed
above. The negative effect of foreign currency translation more than
offset the increase in unit volume in the second quarter and partially
offset the increase in unit volume in the six-month period. Price and
product mix changes had a minor negative effect on sales in the 1998
periods compared with the 1997 periods.
16
</PAGE>
<PAGE>
Net sales from domestic operations increased approximately 3% and 5%
on a pro forma basis compared with the second quarter and first six months
of 1997, respectively, primarily due to increased unit volume. Net sales
from foreign operations, which represented 46% of the Company's total net
sales in both periods, decreased 5% and 3% compared with the second
quarter and first six months of 1997, respectively, primarily due to the
negative effect of foreign currency translation which more than offset
increased unit volume.
Net sales of the Company's food and specialty packaging products,
which consist primarily of the Company's Cryovac(R) food packaging
products and Dri-Loc (R) absorbent pads, decreased marginally on a pro
forma basis compared with the second quarter of 1997 and increased
marginally on a pro forma basis compared with net sales for the first six
months of 1997. These changes were due primarily to increased unit volume
offset by the negative effect of foreign currency translation. Excluding
the effect of foreign currency translation, net sales of these products
would have increased on a pro forma basis by 3% and 5% for the second
quarter and first six months of 1998, respectively.
Net sales of the Company's protective packaging and other packaging
products, which consist primarily of Cryovac (R) industrial and consumer
packaging, Instapak (R) chemicals and equipment, air cellular and
polyethylene foam surface protection and cushioning materials and
protective and durable mailers and bags, increased 1% on a pro forma basis
for the second quarter and 3% for the first six months of 1998 primarily
due to higher unit volume, which was partially offset in both periods by
the negative effect of foreign currency translation and, in the second
quarter, by changes in product mix. Excluding the effect of foreign
currency translation, net sales in this class of products would have
increased on a pro forma basis by 3% and 5% for the second quarter and
first six months of 1998, respectively.
Gross profit for the second quarter of 1998 on a pro forma basis
(which excludes the effect of the Inventory Charge) decreased $5,924,000
and, as a percentage of net sales, decreased to 35.1% from 35.7% in 1997.
These declines were primarily due to the higher levels of depreciation
arising from capital expenditures made in prior years partially offset by
certain lower raw material costs. The 35.1% rate was higher than the
Company's gross profit as a percentage of net sales in the first quarter
of 1998 reflecting the higher level of net sales compared to the first
quarter and certain manufacturing and product introduction costs and
changes in product mix that affected the first quarter.
On a pro forma basis, marketing, administrative and development
expenses as a percentage of net sales increased modestly in the second
quarter and first six months of 1998 compared with the respective 1997
periods.
Operating profit for the second quarter and first six months of 1998
increased 2% on a pro forma basis due to the absence in 1998 of certain
restructuring charges that were included in the 1997 period partially
offset by the changes in costs and expenses discussed above. Excluding
the 1997 restructuring charges, pro forma operating income for the second
quarter and first six months of 1998 decreased 7% due primarily to the
lower gross profit described above.
17
</PAGE>
<PAGE>
Interest expense primarily reflects the interest expense on the
borrowings under the Credit Agreements made in connection with
the Reorganization.
On a pro forma basis, the Company's effective income tax rates were
46.6% and 46.3% in the second quarters of 1998 and 1997, respectively, and
46.5% and 46.6% for the first six months of 1998 and 1997, respectively.
These rates are higher than the Company's historical 1997 effective income
tax rate primarily due to the non-deductibility for tax purposes of the
amortization of goodwill resulting from the Merger. The Company expects
that this higher effective tax rate will continue in future periods. The
Company expects to record a special income tax charge of approximately $23
million in the third quarter of 1998 for the assumed repatriation to the
U.S. of that portion of the accumulated earnings of its foreign
subsidiaries that are not considered permanently invested in their
businesses. The subsidiaries of old Sealed Air have previously reported
their earnings on this basis.
Net earnings increased 5% on a pro forma basis to $40,992,000 from
$39,061,000 for the second quarter of 1998 and decreased 1% on a pro forma
basis to $73,797,000 from $74,780,000 for the first six months of 1997
primarily due to the changes in operating profit discussed above.
On a pro forma basis, which excludes the $8 million, or $0.06 per
share, Inventory Charge, basic and diluted earnings per common share were
$0.27 and $0.26, for the second quarter of 1998 and 1997, respectively,
and basic and diluted earnings per common share were $0.45 and $0.47 for
the first six months of 1998 and 1997, respectively. The effect of the
conversion of the Company's outstanding convertible preferred stock is not
considered in the calculation of diluted earnings per common share because
it would be anti-dilutive (i.e., would increase earnings per share on a
pro forma basis to $0.36 for the second quarter of 1998 compared with
$0.34 for the second quarter of 1997 and to $0.64 for the first six months
of 1998 compared with $0.65 for the 1997 period).
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash flows from
operations and amounts available under the Company's existing lines of
credit, including the Credit Agreements mentioned above. Prior to the
consummation of the Merger, Cryovac participated in a centralized cash
management system, whereby cash received from operations was transferred
to, and disbursements were funded from, centralized corporate accounts.
As a result, any cash needs of Cryovac in excess of cash flows from
operations were transferred to these corporate accounts and used for other
corporate purposes. In the first six months of 1997, $1,804,000 of net
cash was advanced by Cryovac to W. R. Grace & Co.-Conn. (which is now part
of New Grace) pursuant to these procedures. In connection with the
Reorganization, most of the Company's net cash at March 31, 1998 (other
than $51,259,000 cash recorded on the balance sheet of old Sealed Air
immediately before the Merger) was transferred to New Grace.
Net cash provided by operating activities amounted to $155,870,000
and $64,134,000 in the first six months of 1998 and 1997, respectively.
The increase in operating cash flows in the first six months of 1998 was
primarily due to higher levels of depreciation and
amortization and changes in operating assets and liabilities.
18
</PAGE>
<PAGE>
Net cash provided by investing activities amounted to
$20,723,000 in the first six months of 1998 which includes the
cash acquired from old Sealed Air of $51,259,000
at the time of the Merger, which more than offset cash used for
capital expenditures and acquisitions. Cash used in investing
activities amounted to $62,330,000 in the first six months of 1997,
which includes cash used for capital expenditures and acquisitions.
Capital expenditures for the first six months were $32,462,000 in
1998 and $50,636,000 in 1997. The decrease in 1998 reflects the
completion in 1997 of several major Cryovac manufacturing expansion
programs. As the assets of old Sealed Air were acquired in the
Merger through the issuance of common stock, the consolidated statement
of cash flows for the first six months of 1998 does not reflect the
changes in the related balance sheet items caused by the addition of
old Sealed Air's assets and liabilities, except for old Sealed Air's
cash balance. The non-cash acquisition of such net assets is reflected
as supplementary information to the consolidated statement of cash
flows, net of cash.
Net cash used in financing activities amounted to $143,451,000 in the
first six months of 1998 primarily reflecting the payment of $125,768,000
of debt, principally relating to the Credit Agreements. Cash flows from
financing activities in 1998 also reflected the proceeds from borrowings
under the Credit Agreements, offset by the payment of the contribution of
funds to New Grace in connection with the Reorganization. In the first
six months of 1997, $1,804,000 of net cash was advanced by the Company to
W. R. Grace & Co. - Conn. pursuant to the cash management procedures
discussed above.
At June 30, 1998, the Company had working capital of $267,885,000, or
7% of total assets, compared to working capital of $343,741,000, or 21% of
total assets, at December 31, 1997. The decrease in working capital
primarily reflects the increase in notes payable and current installments
of long-term debt of $164,062,000 due primarily from the borrowings made
under the Credit Agreements, partially offset by the acquired working
capital of old Sealed Air.
The Company's ratio of current assets to current liabilities (current
ratio) was 1.5 at June 30, 1998 and 2.9 at December 31, 1997. The
Company's ratio of current assets less inventory to current liabilities
(quick ratio) was 0.9 at June 30, 1998 and 1.6 at December 31, 1997. The
decreases in these ratios in 1998 resulted primarily from the decreases in
working capital discussed above.
Prior to the Merger, Cryovac had no capital structure since it was
operated by divisions or subsidiaries of the Company. In addition, there
was no allocation of the Company's borrowings and related interest
expense, except for interest capitalized as a component of Cryovac's
properties and equipment. Therefore, the financial position of the
Company at December 31, 1997 was not indicative of the financial position
that would have existed if Cryovac had been an independent stand-alone
entity at that time. At June 30, 1998, the consolidated balance sheet
reflects the consolidated financial position of the Company, as adjusted
for the Reorganization, Recapitalization and Merger.
19
</PAGE>
<PAGE>
In connection with the Reorganization, the Company entered into the
Credit Agreements, one of which is a $1 billion 5-year revolving credit
facility that expires on March 30, 2003 and the second of which is a $600
million 364-day revolving credit facility that expires on March 29, 1999.
The Credit Agreements provide that the Company and certain of its
subsidiaries, including Cryovac and old Sealed Air, may borrow for
various purposes, including the refinancing of existing debt, the
provision of working capital and for other general corporate needs.
Initial borrowings of approximately $1,258,807,000 were made in
connection with the Reorganization.
The Company's obligations under the Credit Agreements bear interest
at floating rates. The weighted average interest rate under the Credit
Agreements was approximately 6.2% at June 30, 1998. The Company has
entered into certain interest rate swap agreements that have the effect of
fixing the interest rates on a portion of such debt. The weighted
average interest rate at June 30, 1998 did not change as a result of the
derivative financial instruments.
The Credit Agreements provide for changes in borrowing margins based
on financial criteria and impose certain limitations on the operations of
the Company and certain of its subsidiaries. These limitations include
financial covenants relating to interest coverage and debt leverage as
well as certain restrictions on the incurrence of additional indebtedness,
the creation of liens, mergers and acquisitions, and certain dispositions
of property or assets. The Company was in compliance with these
requirements as of June 30, 1998.
At June 30, 1998, the Company had available lines of credit, including
those available under the Credit Agreements, of approximately
$1,735,000,000 of which approximately $565,000,000 were unused. Such
lines of credit permit the Company and certain of its subsidiaries to make
borrowings for working capital and other corporate purposes.
Since Cryovac did not have a separately identifiable capital
structure before the Merger, the balance sheet as of December 31, 1997
reflects the net assets of Cryovac at such date rather than shareholders'
equity. In connection with the Recapitalization, the Company
recapitalized the outstanding shares of Old Grace Common Stock into
outstanding shares of a new common stock and Series A convertible
preferred stock. In connection with the Merger, the Company issued
42,624,246 shares of common stock to the shareholders of old Sealed Air.
The convertible preferred stock votes with the common stock on an
as-converted basis, pays a cash dividend, as declared by the Board, at an
annual rate of $2.00 per share, payable quarterly in arrears, will be
redeemable at the option of the Company beginning March 31, 2001, subject
to certain conditions, and will be subject to mandatory redemption on
March 31, 2018 at $50.00 per share, plus accrued and unpaid dividends.
Because it is subject to mandatory redemption, the convertible preferred
stock is classified outside of the shareholders' equity section of the
balance sheet at the mandatory redemption value of $50.00 per share.
20
</PAGE>
<PAGE>
The Company's shareholders' equity was $467,896,000 at June 30, 1998.
The decrease in total equity (shareholders' equity of $467,896,000 at
June 30, 1998 and net assets of $1,352,628,000 at December 31, 1997) was
primarily due to the cash transferred to New Grace in connection with the
Reorganization and the issuance and classification of the convertible
preferred stock outside of shareholders' equity, partially offset by the
common stock issued in connection with the Merger.
Other Matters
Environmental Matters
The Company is subject to loss contingencies resulting from
environmental laws and regulations, and it accrues for anticipated costs
associated with investigatory and remediation efforts when an assessment
has indicated that a loss is probable and can be reasonably estimated.
These accruals do not take into account any discounting for the time value
of money and are not reduced by potential insurance recoveries, if any.
Environmental liabilities are reassessed whenever circumstances become
better defined and/or remediation efforts and their costs can be better
estimated. These liabilities are evaluated periodically based on
available information, including the progress of remedial investigation at
each site, the current status of discussions with regulatory authorities
regarding the methods and extent of remediation and the apportionment of
costs among potentially responsible parties. As some of these issues are
decided (the outcomes of which are subject to uncertainties) and/or new
sites are assessed and costs can be reasonably estimated, the Company
adjusts the recorded accruals, as necessary. However, the Company
believes that it has adequately reserved for all probable and estimable
environmental exposures.
Year 2000 Computer System Compliance
The Company has conducted a comprehensive review of its computer
systems to identify systems that could be affected by the "Year 2000"
issue and is implementing a plan to resolve the issue. The Company
currently believes that, with modifications to existing software and by
converting to new software, the Year 2000 issue will not pose significant
operational problems. However, if such modifications and conversions are
not completed in a timely manner, the Year 2000 issue may have a material
impact on the operations of the Company. It is anticipated that costs
associated with modifying the existing systems will not be material to the
Company's consolidated financial position.
21
</PAGE>
<PAGE>
Recently Issued Statements of Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133").
This statement, which becomes effective for the Company beginning
January 1, 2000, establishes accounting and operating standards for
hedging activities and derivative instruments, including certain
derivative instruments embedded in other contracts. The Company
is reviewing the potential impact, if any, of SFAS 133 on its
financial statements.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards, "Employers' Disclosure about
Pensions and Other Post-retirement Benefits," ("SFAS 132")
which became effective for the Company for the annual period beginning
January 1, 1998. SFAS 132 requires additional information about
the changes in the benefit obligation and fair value of plan assets
during the period, while standardizing the disclosure requirements for
pensions and other postretirement benefits. The Company will include
such disclosures in its Form 10-K filing for the year ended
December 31, 1998.
In June 1997, the Financial Accounting Standards Board released
Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130") and
Statement No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"). Both statements became effective for
the Company beginning January 1, 1998. These statements require
disclosure of certain components of changes in equity and certain
information about operating segments and geographic areas of operation,
respectively. The Company adopted SFAS 130 in the first quarter of 1998
(see "Consolidated Statements of Comprehensive Income"). The Company is
completing its evaluation of the disclosure requirements of SFAS 131 and
will begin such disclosures in its Form 10-K filing for the year ended
December 31, 1998. These statements do not have any effect on the results
of operations or financial position of the Company.
Forward-Looking Statements
Certain statements made by the Company in this report and in future
oral and written statements by management of the Company may be forward-
looking in nature, or "forward-looking statements." These forward-
looking statements are based upon management's current expectations
concerning future events and discuss, among other things, anticipated
future performance and future business plans. Forward-looking statements
are identified by such words and phrases as "expects," "believes,"
"will continue," "plans to," "could be," and similar expressions.
Forward-looking statements are necessarily subject to uncertainties, many
of which are outside the control of the Company, that could cause actual
results to differ materially from such statements.
While the Company is not aware that any of the factors listed below
will adversely affect the future performance of the Company, the Company
recognizes that it is subject to a number of uncertainties, such as the
continuing effect of the Asian economic crisis on business and market
22
</PAGE>
<PAGE>
conditions in Asia and in other markets, continued weakness of foreign
currencies against the U.S. dollar, the ability of the Company to
implement integration and restructuring activities and the success of
those efforts, general economic, business and market conditions,
conditions in the industries and markets that use the Company's packaging
materials and other products, the development and success of new products,
the Company's success in entering new markets, competitive factors, raw
material availability and pricing, changes in the Company's relationship
with customers and suppliers, future litigation and claims (including
environmental matters) against the Company, changes in domestic or foreign
laws or regulations, or difficulties related to the Year 2000 issue.
23
</PAGE>
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On June 26, 1998, the Corporation held its 1998 annual meeting
of stockholders, at which the stockholders elected three Class III
directors for a three-year term, approved an amendment to the
Corporation's Contingent Stock Plan and the adoption of the Corporation's
Restricted Stock Plan for Non-Employee Directors and ratified the
appointment of KPMG Peat Marwick LLP as the Corporation's independent
public accountants for 1998. However, the stockholders did not approve
three proposed amendments to the Corporation's Amended and Restated
Certificate of Incorporation that would repeal certain provisions, which
amendments required the affirmative vote of 80% in voting power of the
Corporation's capital stock. Such provisions were as follows:
(a) provisions requiring a classified board and removal of
directors only for cause;
(b) a provision prohibiting stockholder action by written
consent; and
(c) a provision requiring 80% stockholder vote to amend the
Corporation's bylaws.
The following Class I and Class II directors, whose terms expire
at the annual meetings in 1999 and 2000, respectively, continued in office
following the 1998 annual meeting:
Class I: Hank Brown, John K. Castle, Charles F. Farrell,
Jr., and Alan H. Miller
Class II: Christopher Cheng, T. J. Dermot Dunphy, Virginia
A. Kamsky, and John E. Phipps
A total of 73,200,909 shares of common stock and 26,378,576
shares of Series A Convertible Preferred Stock (preferred stock) were
voted in person or by proxy at the annual meeting, representing
approximately 96,545,948 votes, or approximately 84% of the voting power
of the Corporation entitled to vote at such meeting. Each share of common
stock was entitled to one vote on each matter before the meeting, and each
share of preferred stock was entitled to 0.885 votes on each matter before
the meeting. The votes cast on the matters before the meeting, including
the broker non-votes where applicable, were as follows:
Nominees for Election Number of Votes
to Board of Directors: In Favor Withheld
Lawrence R. Codey 96,024,844 521,104
David Freeman 96,029,591 525,356
Robert L. San Soucie 95,880,754 665,194
Approval of proposed For 66,024,089
amendments to Contingent Against 30,120,628
Stock Plan Abstentions 401,231
Approval of Restricted For 93,115,018
Stock Plan for Non- Against 2,990,373
Employee Directors Abstentions 440,558
24
</PAGE>
<PAGE>
Approval of proposed amendments to Certificate of Incorporation:
(a) Classified board and For 80,780,262
removal for cause Against 1,051,613
Abstentions 436,350
Broker Non-Votes 14,277,723
(b) Stockholder action For 80,757,431
by written consent Against 1,054,416
Abstentions 455,917
Broker Non-Votes 14,278,184
(c) 80% stockholder vote For 80,786,933
to amend by-laws Against 1,049,496
Abstentions 431,335
Broker Non-Votes 14,278,184
Ratification of KPMG For 96,110,291
Peat Marwick LLP as Against 149,404
independent accountants Abstentions 286,253
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number Description
10.1 Contingent Stock Plan of the Corporation, as amended
[incorporated by reference to Exhibit 4.3 to the Corporation's
Registration Statement on Form S-8, Registration No. 333-59197].
10.2 Restricted Stock Plan for Non-Employee Directors.
[incorporated by reference to Annex E of the Corporation's Proxy Statement
for the annual meeting held on June 26, 1998, File No. 1-12139].
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Corporation filed the following Reports on Form 8-K during
the second quarter of 1998:
Date of Filing Disclosures
April 6, 1998 as Changes in the Corporation's certifying accountants
Amended April 29, from Price Waterhouse LLP to KPMG Peat Marwick LLP.
1998
April 15, 1998 Closing of the transactions under the Merger
Agreement. The Report also disclosed changes in
the Board of Directors and officers of the
Corporation, the approval of an Amended and
Restated Certificate of Incorporation for the
Corporation and the adoption of new by-laws for
the Corporation.
25
</PAGE>
<PAGE>
The Report included the following financial statements:
1. Consolidated Financial Statements for the years
ended December 31, 1997, 1996 and 1995 for Sealed Air
Corporation (US).
2. Grace Packaging Special-Purpose Combined Financial
Statements as of December 31, 1997 and 1996 and
for each of the three years ended December 31, 1997.
3. Unaudited pro forma condensed consolidated financial
information for the year ended December 31, 1997
giving effect to the transactions under the Merger
Agreement.
26
</PAGE>
<PAGE>
Signatures
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.
SEALED AIR CORPORATION
Date: August 14, 1998 By s/Jeffrey S. Warren
Jeffrey S. Warren
Controller
(Authorized Executive
Officer
and Chief Accounting
Officer)
27
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the consolidated
statement of earnings for the six months ended June 30, 1998 and the
consolidated balance sheet at June 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001012100
<NAME> SEALED AIR CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 34064000
<SECURITIES> 0
<RECEIVABLES> 435376000
<ALLOWANCES> 11832000
<INVENTORY> 301492000
<CURRENT-ASSETS> 800991000
<PP&E> 1942458000
<DEPRECIATION> 761860000
<TOTAL-ASSETS> 4055594000
<CURRENT-LIABILITIES> 533106000
<BONDS> 0
1801093000
0
<COMMON> 8327000
<OTHER-SE> 459569000
<TOTAL-LIABILITY-AND-EQUITY> 4055594000
<SALES> 1101040000
<TOTAL-REVENUES> 1101040000
<CGS> 733858000
<TOTAL-COSTS> 733858000
<OTHER-EXPENSES> 230645000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20724000
<INCOME-PRETAX> 113865000
<INCOME-TAX> 51248000
<INCOME-CONTINUING> 62617000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62617000
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
