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 March 31, 1995
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 1-7834
SEALED AIR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-1682767
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification Number)
Park 80 East 07663-5291
Saddle Brook, New Jersey (Zip Code)
(Address of Principal
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 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
There were 20,992,773 shares of the registrant's common stock, par
value $0.01 per share, outstanding as of April 28, 1995.
<TABLE>
PART I
FINANCIAL INFORMATION
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
For the Three Months Ended March 31, 1995 and 1994
(In thousands of dollars except per share data)
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Net sales $173,354 $117,461
Cost of sales 112,547 73,003
Gross profit 60,807 44,458
Marketing, administrative and
development expenses 35,885 24,936
Operating profit 24,922 19,522
Other income (expense):
Interest income 218 182
Interest expense (5,037) (6,196)
Other, net (974) (928)
Other income (expense), net (5,793) (6,942)
Earnings before income taxes 19,129 12,580
Income taxes 7,556 5,032
Net earnings $ 11,573 $ 7,548
Net earnings per common share $ 0.55 $ 0.38
Weighted average number of
shares outstanding (000) 20,887 19,899
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
SEALED AIR CORPORATION
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994
(In thousands of dollars except share data)
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,203 $ 11,153
Accounts receivable, less allowance for
doubtful accounts of $4,456 in 1995 and
$3,970 in 1994 115,897 91,321
Other receivables 5,251 3,866
Inventories 53,030 38,259
Prepaid expenses 1,998 1,009
Deferred taxes 6,445 6,223
Total current assets 194,824 151,831
Property and equipment:
Land and buildings 76,457 67,226
Machinery and equipment 183,290 141,981
Leasehold improvements 5,694 5,029
Furniture and fixtures 11,167 12,224
Construction in progress 8,277 5,864
284,885 232,324
Less accumulated depreciation and amortization 119,908 96,154
Property and equipment, net 164,977 136,170
Patents, patent applications and rights, less
accumulated amortization of $12,270 in 1995
$11,819 in 1994 15,386 9,647
Excess of cost over fair value of net assets
acquired, less accumulated amortization of
$5,808 in 1995 and $4,715 in 1994 43,407 19,710
Other assets 25,834 13,759
$444,428 $331,117
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
SEALED AIR CORPORATION
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994 (Continued)
(In thousands of dollars except share data)
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current
installments of long-term debt $ 40,467 $ 30,508
Accounts payable 50,378 43,009
Accrued interest 1,668 1,323
Other accrued liabilities 39,771 44,647
Income taxes payable 20,273 16,577
Total current liabilities 152,557 136,064
Long-term debt, less current
installments 203,679 155,293
Deferred income taxes 17,956 17,215
Other non-current liabilities 10,952 11,533
Total liabilities 385,144 320,105
Shareholders' equity:
Common stock, $.01 par value. Authorized
35,000,000 shares, issued 21,093,420 shares
in 1995 and 20,111,618 shares in 1994 211 201
Additional paid-in capital 150,481 114,686
Retained earnings (deficit) (94,463) (106,036)
Accumulated translation adjustment 7,298 6,126
63,527 14,977
Less deferred compensation and cost ($246
in 1995 and 1994) of 123,806 shares
in 1995 and 119,309 in 1994 of common
stock held as treasury stock 4,243 3,965
Shareholders' equity 59,284 11,012
$444,428 $331,117
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements (abbreviated) of Cash Flows
For the Three Months Ended March 31, 1995 and 1994
(In thousands of dollars)
(Unaudited)
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 11,573 $ 7,548
Adjustments to net earnings to reconcile to
net cash provided by operating activities:
Depreciation and amortization 8,491 6,126
Deferred credits - income taxes and other 168 (44)
Net losses on disposals of fixed assets 72 58
Other, net (710) 817
Cash provided (used) by changes in:
Receivables (12,017) (6,427)
Inventories (4,874) (351)
Prepaid expenses (989) (136)
Accounts payable (3,212) 609
Accrued interest 345 (5,436)
Other accrued liabilities (1,983) (4,097)
Income taxes payable 4,336 4,477
Net cash provided by operating activities 1,200 3,144
Cash Flows From Investing Activities:
Capital expenditures for property and equipment (3,700) (4,834)
Proceeds from sales of property and equipment 9 19
Net cash utilized in purchase of subsidiaries (24,157) -
Net cash used in investing activities (27,848) (4,815)
Cash Flows From Financing Activities:
Proceeds from long-term debt 59,645 1,324
Payments of long-term debt (33,853) (17,730)
Net proceeds on notes payable 1,543 9,834
Net cash provided (used) by financing activities 27,335 (6,572)
Effect of exchange rate changes on cash and cash
equivalents 363 70
Cash and Cash Equivalents:
Increase (decrease) during the period 1,050 (8,173)
Balance, beginning of period 11,153 19,392
Balance, end of period $ 12,203 $ 11,219
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 4,617 $ 11,448
Income taxes $ 3,860 $ 555
See accompanying notes to consolidated financial statements.
</TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995 and 1994
(Unaudited)
(1) Principles of Consolidation
The consolidated financial statements include the accounts of
Sealed Air Corporation and its subsidiaries (the "Company"). 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 results of operations
for the quarter ended March 31, 1995 have been made.
Where appropriate, financial statement amounts for prior periods
have been reclassified to conform with their 1995 presentation.
(2) Acquisition
On January 10, 1995, the Company acquired Trigon Industries
Limited ("Trigon"), a privately owned, New Zealand based
manufacturer of flexible packaging materials, for 882,930 newly
issued shares of common stock valued at $35.70 per share and
$25,496,000 in cash primarily provided by proceeds from borrowings
under the Company's credit facility with Bankers Trust Company, as
agent for a syndicate of banks, representing a purchase price of
approximately $57 million. The net assets of Trigon acquired
included property and equipment of approximately $28,400,000,
intangible assets of approximately $43,000,000 including
trademarks, non-compete agreements, and the excess of cost over
the fair value of net assets acquired, $20,000,000 of net
indebtedness, and working capital of approximately $12,000,000.
Such acquisition is being accounted for as a purchase.
The following table presents selected financial information
(unaudited) for the Company and Trigon on a pro forma basis as if
such acquisition had occurred on January 1, 1994. Such
information combines consolidated earnings statement data for the
Company for the year ended December 31, 1994 with consolidated
income statement data of Trigon for the twelve months ended
September 30, 1994. Such information gives effect to pro forma
adjustments necessary to account for the acquisition as a
purchase, principally for the amortization of the excess of cost
over fair value of net assets acquired and other intangible
assets, specific cost reductions which management expects to
realize from the combined operations, interest expense on
borrowings incurred to finance the acquisition, and additional
shares issued in the acquisition.
(Amount in thousands, except per common share data) 1994
Net sales $591,529
Earnings(1) 39,050
Earnings per common share(1) 1.88
(1) Before reflecting the after-tax charge of $5,576,000, or $0.28
per share, to the Company's earnings in 1994 arising from the
early redemption in July 1994 of the Company's 12-5/8% Senior
Subordinated Notes.
Pro forma results are not necessarily indicative of future results
or of the results that would have occurred had the acquisition
actually taken place on January 1, 1994.
SEALED AIR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1995 and 1994
(Unaudited)
(3) Income Taxes
An explanation of the difference between the effective income tax
rate and statutory U.S. federal income tax rate expressed as a
percentage of earnings before income taxes for the nine months
ended March 31, 1995 and 1994 follows:
1995 1994
Statutory U.S. federal income tax rate 35.0% 35.0%
Provision for foreign withholding taxes and
additional U.S. taxes on the accumulated
earnings of foreign subsidiaries 1.5 1.9
Tax effect of U.S. expenses not subject to
tax benefit 1.1 0.5
State income taxes, net of U.S. federal
income tax benefit 3.9 4.0
Taxes on foreign earnings at other than the
statutory U.S. federal income tax rate (2.4) (1.9)
Other miscellaneous items 0.4 0.5
Effective income tax rate 39.5% 40.0%
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The Company's net sales increased 48% in the first quarter of 1995
compared with the first quarter of 1994. Approximately one third
of the 48% increase in net sales reflects the net sales of
products of Trigon Industries Limited ("Trigon"), which the
Company acquired in early January 1995. Trigon is a New Zealand-
based manufacturer of flexible packaging primarily for the food
industry and durable mailers and bags as well as specialty
adhesive products. The increase in net sales also reflects
increased unit volume in the Company's major classes of products,
higher average selling prices for certain products, and the
additional net sales of other businesses acquired in 1994.
Foreign currency translation contributed modestly to the increase
in net sales in the first quarter of 1995.
Net sales from domestic operations increased 27% in the first
quarter of 1995 compared to the first quarter of 1994 primarily due
to higher average selling prices for certain products, higher unit
volume in the Company's major classes of products and the added net
sales of Trigon's U.S. operations.
Net sales from foreign operations increased 105% in the first
quarter of 1995 compared to the first quarter of 1994. Such
increase was due primarily to the added net sales of Trigon's
operations outside of the United States, increased unit volume in
the Company's major classes of products, the added net sales of
other foreign businesses acquired during 1994 as discussed below,
and the modest effect of foreign currency translation.
Net sales of engineered products, primarily Instapak(R) products
and thick polyethylene foams, increased 26% in the first quarter
of 1995 primarily due to increased unit volume of Instapak(R)
products, thick polyethylene foams and, to a lesser extent,
fabricated packaging materials produced by Delsopak S.A., a small
French company that was acquired in May 1994.
Net sales of surface protection and other cushioning products,
primarily air cellular products, other polyethylene foam products
and protective and durable mailers, increased 53% in the first
quarter of 1995 due primarily to higher average selling prices for
certain products, the added sales of Trigon's durable mailer and
bag products, increased unit volume of certain products and the
added sales of businesses acquired during 1994. Net sales of
businesses acquired in 1994 include air cellular and other
protective packaging products produced by Emballasje-Teknikk A/S
of Norway, which was acquired in September 1994, and SPIC Srl of
Italy, which was acquired late in December 1994.
Net sales of food packaging products increased 94% in the first
quarter of 1995 primarily due to the added net sales of Trigon's
food packaging products, the added net sales of Hereford Paper and
Allied Products Limited, an English manufacturer of absorbent food
pads that was acquired in July 1994, and increased unit volume of
the Company's Dri-Loc(R) products.
Net sales of other products increased to $4,691,000 from
$2,173,000 in the first quarter of 1994 primarily due to the added
sales of Trigon's specialty adhesive products.
Cost of sales increased 54% in the first quarter of 1995 primarily
reflecting the Company's higher level of net sales and certain
higher raw material costs.
Gross profit increased 37% in the first quarter of 1995 reflecting
the Company's higher level of net sales partially offset by the
higher cost of sales discussed above. As a percent of net sales,
gross profit declined from 37.9% to 35.1% primarily due to certain
higher raw material costs and changes in product mix, including
the effect of the added products of Trigon and the businesses that
the Company acquired in 1994.
Marketing, administrative and development expenses increased 44%
in the first quarter of 1995, primarily reflecting the Company's
higher level of net sales, the added marketing, administrative and
development expenses of Trigon and other acquired businesses, and
costs associated with integrating the Trigon acquisition and other
recent acquisitions.
Operating profit increased 28% in the first quarter of 1995
primarily reflecting the Company's higher net sales and the effect
of the changes in costs and expenses discussed above.
Interest expense, which is the principal component of other
expense, net, decreased to $5,037,000 in the first quarter of 1995
compared to $6,196,000 in the first quarter of 1994. Although the
amount of the Company's outstanding indebtedness increased from
December 31, 1994 to March 31, 1995 primarily due to borrowings in
connection with the Trigon acquisition, such borrowings bear lower
effective interest rates than those to which the Company was
subject in the first quarter of 1994.
The Company's effective income tax rate decreased to 39.5% in the
first quarter of 1995 from 40.0% for the first quarter of 1994
primarily reflecting lower tax provisions required.
Net earnings for the quarter increased 53% to $11,573,000, or $.55
per share, compared with net earnings of $7,548,000, or $.38 per
share, for the first quarter of 1994.
Liquidity and Capital Resources
Long-term debt, less current installments, increased to
$203,679,000 at March 31, 1995 from $155,293,000 at December 31,
1994. Notes payable and current installments of long-term debt
increased to $40,467,000 at March 31, 1995 from $30,508,000 at
December 31, 1994 primarily due to the timing of maturities. The
net increase in indebtedness was primarily due to additional net
borrowings of $25,496,000 incurred in connection with the Trigon
acquisition, the assumption of approximately $20,000,000 of
Trigon's indebtedness and borrowings made primarily for working
capital purposes, partially offset by certain repayments made in
the first quarter of 1995. At March 31, 1995, the Company's
available lines of credit amounted to approximately $237,200,000 of
which approximately $109,300,000 were unused. Such lines of credit
permit the Company and certain of its subsidiaries to make
borrowings for working capital and other corporate purposes.
The Company's principal credit facility is a 1994 credit agreement,
as amended, with Bankers Trust Company, as agent for a syndicate of
banks (the "1994 Credit Facility"), which provides for a $200
million unsecured revolving credit facility (the "1994 Revolving
Credit Facility") and an unsecured $100 million term loan (the
"1994 Term Loan") both of which terminate on June 30, 1999.
Under the 1994 Credit Facility, $20,000,000 aggregate principal
amount of the 1994 Term Loan is repayable each year in equal
quarterly installments through June 30, 1999. There is no required
annual minimum paydown provision under the 1994 Revolving Credit
Facility, but the available commitment under this Facility will be
reduced by $25 million on each of June 30, 1997 and June 30, 1998.
The Company currently intends to make principal payments due under
the 1994 Credit Facility primarily out of funds provided by
operations.
The Company's obligations under the 1994 Credit Facility and
certain other loans and other lines of credit bear interest at
floating rates. The 1994 Credit Facility provides for changes in
interest rate margins based on certain financial criteria and
imposes certain limitations on the operations of the Company that
include restrictions on the incurrence of additional indebtedness,
the creation of liens, the making of investments and capital
expenditures, dispositions of property or assets, certain
transactions with affiliates, and the payment by the Company of
cash dividends to its stockholders as well as certain financial
covenants including requirements as to interest coverage and debt
leverage. The Company was in compliance with these requirements as
of March 31, 1995.
The Company expects that the payment of principal and interest on
its indebtedness will remain a significant use of the Company's
funds for the foreseeable future. The Company also expects to
continue to make the principal and interest payments on its
outstanding indebtedness as well as to meet its working capital and
capital expenditure requirements with funds provided by operations
and borrowings under its available lines of credit.
The ability of the Company to make payments of principal and
interest on its indebtedness, and to comply with the financial
covenants (discussed above) to which it is subject is dependent on
the Company's future performance and business growth, which are
subject to financial, economic, competitive and other factors
affecting the Company, many of which may be beyond the Company's
control.
The Company's shareholders' equity increased to $59,284,000 at
March 31, 1995 from $11,012,000 at December 31, 1994 primarily as a
result of the Company's net earnings for the first quarter of 1995,
the value of shares of common stock issued in connection with the
Trigon acquisition, and the value of shares of common stock issued
during the first quarter of 1995 for non-cash compensation.
Cash flows from operating activities amounted to $1,200,000 in the
first quarter of 1995 compared with $3,144,000 for the 1994 period
primarily due to changes in operating assets and liabilities, which
are discussed below, partially offset by increased net earnings
during the 1995 period.
Net cash used in investing activities amounted to $27,848,000 in
the first quarter of 1995 compared with $4,815,000 for the first
quarter of 1994. The increase in net cash used in investing
activities primarily reflects net cash used in connection with the
Trigon acquisition. Cash used for capital expenditures amounted to
$3,700,000 in the first quarter of 1995 compared with $4,834,000 in
the 1994 period primarily due to the timing of capital
expenditures.
Net cash provided by financing activities amounted to $27,335,000
in the first quarter of 1995 compared with net cash used in
financing activities of $6,572,000 in the 1994 period primarily due
to borrowings incurred in connection with the Trigon acquisition.
At March 31, 1995, the Company had working capital of $42,267,000,
or 10% of total assets, compared with $15,767,000, or 5% of total
assets, at December 31, 1994. The increase in working capital was
due primarily to increases in accounts receivable and inventories
and a decrease in accrued liabilities which were partially offset
by increases in accounts payable attributable to the Company's
level of operations. Accounts receivable, inventories and accounts
payable increased during the first quarter of 1995 due primarily to
the higher level of operations, the additional amounts attributable
to Trigon's operations and timing of payments.
The Company's ratio of current assets to current liabilities
(current ratio) was 1.3 at March 31, 1995 and 1.1 at December 31,
1994. The Company's ratio of current assets less inventory to
current liabilities (quick ratio) was 0.9 at March 31, 1995 and 0.8
at December 31, 1994.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 10-K
(a) Exhibits
Exhibit Number Description
27 Financial Data Schedule.
(b) Reports on Form 8-K:
On January 24, 1995, the Company filed a Current Report
on Form 8-K (Date of Report: January 10, 1995) reporting, pursuant
to Item 2 thereof, that the Company had acquired Trigon Industries
Limited, a privately owned New Zealand corporation, which
acquisition is described in Item 1 of this Annual Report on Form
10-K, and submitting pursuant to Item 5 thereof certain unaudited
consolidated condensed financial information for the Company. The
following financial statements and pro forma financial information
were filed pursuant to Item 7 of such Report:
A. Consolidated Financial Statements of Trigon Industries
Limited
Consolidated Income Statement for the year to June 30,
1994
Consolidated Balance Sheet as at June 30, 1994
Notes to the accounts
Consolidated Statement of Cash Flows for the year ended
June 30, 1994
Report of Independent Chartered Accountants dated August
26, 1994 (December 21, 1994 as to certain information in
notes 16, 23 and 24)
B. Unaudited Interim Financial Information of Trigon
Industries Limited
Consolidated Income Statements for the quarters ended
September 30, 1994 and 1993
Consolidated Balance Sheet as of September 30, 1994
Notes to unaudited interim consolidated financial
information
C. Unaudited Financial Information of the Company (certain
information previously presented in the Company's press
release made public on January 19, 1995)
Unaudited Consolidated Condensed Statement of Earnings
for the years ended December 31, 1994 and 1993
Unaudited Consolidated Condensed Balance Sheet,
December 31, 1994 and 1993
Notes to unaudited consolidated condensed financial
information
D. Unaudited Pro Forma Condensed Consolidating Financial
Information
Unaudited Pro Forma Condensed Consolidating Statement of
Earnings for the year ended December 31, 1994
Unaudited Pro Forma Condensed Consolidating Balance
Sheet, December 31, 1994
Notes to Unaudited Pro Forma Condensed Consolidating
Financial Information
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: May 11, 1995 By s/Warren H. McCandless
Warren H. McCandless
Senior Vice President-Finance
(Authorized Executive Officer
and Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND THE
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000088204
<NAME> SEALED AIR CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 12,203,000
<SECURITIES> 0
<RECEIVABLES> 120,353,000
<ALLOWANCES> 4,456,000
<INVENTORY> 53,030,000
<CURRENT-ASSETS> 194,824,000
<PP&E> 284,885,000
<DEPRECIATION> 119,908,000
<TOTAL-ASSETS> 444,428,000
<CURRENT-LIABILITIES> 152,557,000
<BONDS> 0
<COMMON> 211,000
0
0
<OTHER-SE> 59,073,000
<TOTAL-LIABILITY-AND-EQUITY> 444,428,000
<SALES> 173,354,000
<TOTAL-REVENUES> 173,354,000
<CGS> 112,547,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 35,885,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,037,000
<INCOME-PRETAX> 19,129,000
<INCOME-TAX> 7,556,000
<INCOME-CONTINUING> 11,573,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,573,000
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0
</TABLE>
