<PAGE>
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, 1997
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 42,593,346 shares of the registrant's common stock, par
value $0.01 per share, outstanding as of April 30, 1997.
</PAGE>
<PAGE>
PART I
FINANCIAL INFORMATION
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
For the Three Months Ended March 31, 1997 and 1996
(In thousands of dollars except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net sales $202,859 $185,930
Cost of sales 127,425 117,189
Gross profit 75,434 68,741
Marketing, administrative and
development expenses 41,750 38,855
Operating profit 33,684 29,886
Other income (expense):
Interest income 188 250
Interest expense (2,196) (3,511)
Other, net 414 (361)
Other income (expense), net (1,594) (3,622)
Earnings before income taxes 32,090 26,264
Income taxes 12,649 10,374
Net earnings $ 19,441 $ 15,890
Net earnings per common share $ 0.46 $ 0.37
Weighted average number of
shares outstanding (000) 42,593 42,416
</TABLE>
See accompanying notes to consolidated financial statements.
2
</PAGE>
<PAGE>
SEALED AIR CORPORATION
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
(In thousands of dollars except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 6,596 $ 2,985
Accounts receivable, less allowance for
doubtful accounts of $5,699 in 1997 and
$5,623 in 1996 127,908 124,204
Other receivables 7,863 8,258
Inventories 59,275 57,231
Prepaid expenses 2,246 1,095
Deferred taxes 12,899 13,193
Total current assets 216,787 206,966
Property and equipment:
Land and buildings 80,409 81,629
Machinery and equipment 197,174 199,275
Leasehold improvements 7,944 8,409
Furniture and fixtures 11,563 12,029
Construction in progress 8,520 6,139
305,610 307,481
Less accumulated depreciation
and amortization 135,593 132,919
Property and equipment, net 170,017 174,562
Patents, patent applications and rights, less
accumulated amortization of $15,481 in 1997
and $15,139 in 1996 11,229 11,998
Excess of cost over fair value of net assets
acquired, less accumulated amortization of
$14,362 in 1997 and $12,966 in 1996 44,905 47,840
Other assets 24,487 25,753
$467,425 $467,119
</TABLE>
See accompanying notes to consolidated financial statements.
3
</PAGE>
<PAGE>
SEALED AIR CORPORATION
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 (Continued)
(In thousands of dollars except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Notes payable and current
installments of long-term debt $ 19,182 $ 15,565
Accounts payable 45,093 46,934
Accrued interest 834 323
Other accrued liabilities 61,812 69,526
Income taxes payable 21,809 15,708
Total current liabilities 148,730 148,056
Long-term debt, less current
installments 79,269 99,900
Deferred income taxes 19,392 19,863
Other non-current liabilities 13,937 12,651
Total liabilities 261,328 280,470
Shareholders' equity:
Common stock, $.01 par value. Authorized
60,000,000 shares, issued 42,774,404 shares
in 1997 and 42,747,704 shares in 1996 428 427
Additional paid-in capital 170,724 167,801
Retained earnings 35,462 16,021
Accumulated translation adjustment 4,633 8,615
211,247 192,864
Less deferred compensation and cost ($182
in 1997 and $227 in 1996) of 181,058 shares
in 1997 and 226,758 in 1996 of common
stock held as treasury stock 5,150 6,215
Shareholders' equity 206,097 186,649
$467,425 $467,119
</TABLE>
See accompanying notes to consolidated financial statements.
4
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements (abbreviated) of Cash Flows
For the Three Months Ended March 31, 1997 and 1996
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
Cash Flows From Operating Activities:
<S> <C> <C>
Net earnings $ 19,441 $ 15,890
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 11,160 9,147
Deferred taxes (129) 191
Net loss (gain) on disposals of fixed assets 33 (84)
Other, net (1,748) (1,770)
Cash provided (used) by changes in:
Receivables (3,275) (2,173)
Inventories (2,044) 981
Prepaid expenses (1,151) (930)
Accounts payable (1,863) (278)
Accrued interest 511 (24)
Other accrued liabilities (4,422) (2,718)
Income taxes payable 6,101 5,387
Net cash provided by operating activities 22,614 23,619
Cash Flows From Investing Activities:
Capital expenditures for property and equipment (4,942) (2,858)
Proceeds from sales of property and equipment 19 495
Net cash used in investing activities (4,923) (2,363)
Cash Flows From Financing Activities:
Proceeds from long-term debt 2,550 11,334
Payments of long-term debt (20,214) (27,905)
Net proceeds (payments) on notes payable 3,754 (507)
Net cash used by financing activities (13,910) (17,078)
Effect of exchange rate changes on cash and cash
equivalents (170) (82)
Cash and Cash Equivalents:
Increase during the period 3,611 4,096
Balance, beginning of period 2,985 7,661
Balance, end of period $ 6,596 $ 11,757
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 1,663 $ 3,466
Income taxes $ 6,548 $ 4,987
</TABLE>
See accompanying notes to consolidated financial statements.
5
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1997 and 1996
(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
financial position and results of operations for the quarter ended March
31, 1997 have been made.
Where appropriate, financial statement amounts for prior periods have
been reclassified to conform with their 1997 presentation.
(2) 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 three months ended March 31, 1997
and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
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 0.3 0.6
Tax effect of U.S. expenses not subject to
tax benefit 0.8 0.4
State income taxes, net of U.S. federal
income tax benefit 4.0 4.0
Taxes on foreign earnings at other than the
statutory U.S. federal income tax rate 0.1 (1.4)
Other miscellaneous items (0.8) 0.9
Effective income tax rate 39.4% 39.5%
</TABLE>
(3) Earnings Per Share
Earnings per common share are computed on the basis of the weighted
average number of shares of common stock outstanding during the year,
including shares issued for contingent stock awards and non-cash
compensation.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," ("FASB 128") which is required
to be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per
share and to restate all prior periods. The impact of FASB 128 on the
calculation of earnings per share amounts is not expected to be material.
6
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The Company's net sales increased 9% in the first quarter of 1997
compared with the first quarter of 1996. The increase primarily reflects
increased unit volume and added net sales from businesses acquired during
1996. Foreign currency translation had a modestly negative effect on the
increase in net sales.
Net sales from domestic operations increased 8% compared with the first
quarter of 1996 primarily due to increased unit volume. Net sales from
foreign operations increased 11% compared with the first quarter of 1996
primarily due to added net sales from businesses acquired during 1996 and
increased unit volume.
Net sales of engineered products, primarily Instapak(R) products and
specialty polyethylene foams, increased 9% compared with the first
quarter of 1996 primarily due to increased unit volume of these products.
Net sales of surface protection and other cushioning products, primarily
air cellular products, other polyethylene foam products and protective
and durable mailers and bags, increased 12% compared with the first
quarter of 1996 primarily due to added net sales from businesses acquired
during 1996 and increased unit volume.
Net sales of food packaging products decreased 4% compared with the first
quarter of 1996 primarily due to the absence in the 1997 period of the
net sales of certain food packaging products that were transferred during
1996 to a small unconsolidated joint venture in Australia. Excluding the
effect of such joint venture, net sales of food packaging products
increased modestly as higher unit volume was partially offset by lower
average selling prices.
7
</PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Cost of sales increased 9% and marketing, administrative and development
expenses increased 7% compared with the first quarter of 1996 primarily
reflecting the Company's higher level of net sales.
Operating profit increased 13% in the first quarter of 1997 primarily
reflecting the Company's higher level of net sales and the changes in
costs and expenses mentioned above.
Interest expense, which is the principal component of other income
(expense), net, decreased to $2,196,000 in the first quarter of 1997 from
$3,511,000 in the first quarter of 1996 primarily reflecting the decrease
in the Company's outstanding indebtedness.
The Company's effective income tax rate was 39.4% in the first quarter of
1997 and 39.5% in the first quarter of 1996.
Net earnings increased 22% to $19,441,000, or $0.46 per share, compared
with net earnings of $15,890,000, or $0.37 per share, for the first
quarter of 1996 primarily reflecting the Company's higher level of
operating profit and lower interest expense.
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. The Company has met, and currently expects that it will continue
to meet, substantially all of its working capital and capital
expenditure requirements as well as its debt service requirements with
funds provided by operations and borrowings made under its available lines
of credit or otherwise.
Net cash provided by operating activities amounted to $22,614,000 in the
first quarter of 1997 compared with $23,619,000 for the 1996 period. In
the 1997 period, changes in operating assets and liabilities partially
offset the Company's increased net earnings and higher level of
depreciation and amortization. The changes in operating assets and
8
</PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
liabilities were primarily due to the timing of cash receipts and payments
and the Company's higher level of operations.
Net cash used in investing activities increased to $4,923,000 in the first
quarter of 1997 compared with $2,363,000 for the first quarter of 1996
primarily due to the timing of capital expenditures.
Net cash used in financing activities amounted to $13,910,000 in the first
quarter of 1997 compared with $17,078,000 in the 1996 period, primarily
reflecting the net repayment of long-term debt.
At March 31, 1997, the Company had working capital of $68,057,000, or 15%
of total assets, compared with $58,910,000, or 13% of total assets, at
December 31, 1996. The increase in working capital was due primarily to
an increase in total current assets. Such increase was due primarily to
increases in cash and accounts receivable. Current liabilities increased
modestly from December 31, 1996 to March 31, 1997 due primarily to
increases in notes payable and current installments of long-term debt
and increases in income taxes payable, offset by decreases in accrued
liabilities and accounts payable. These changes in working capital
balances were primarily due to the timing of cash receipts and payments
and the timing of working capital borrowings. The decrease in accrued
liabilities was due primarily to the payment during the first quarter
of 1997 of the Company's annual profit-sharing contribution.
The Company's ratio of current assets to current liabilities (current
ratio) was 1.5 at March 31, 1997 and 1.4 at December 31, 1996. The
Company's ratio of current assets less inventory to current liabilities
(quick ratio) was 1.1 at March 31, 1997 and 1.0 at December 31, 1996. The
increase in these ratios is due primarily to the increase in working
capital discussed above.
9
</PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Long-term debt, less current installments, decreased to $79,269,000 at
March 31, 1997 from $99,900,000 at December 31, 1996 primarily due to
repayments made in the first quarter of 1997. At March 31, 1997, the
Company's available lines of credit amounted to approximately $252,462,000
of which approximately $203,236,000 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 an unsecured $200 million
revolving credit facility with Bankers Trust Company, as agent for a
syndicate of banks (the "BT Credit Agreement"), that expires on June 30,
2001. The Company's obligations under the BT Credit Agreement and certain
other loans and lines of credit bear interest at floating rates. The
Company has entered into certain derivative financial instruments,
including interest rate swap, interest rate collar and interest rate and
currency swap agreements that have the effect of fixing or limiting the
Company's exposure to fluctuations in interest rates on a portion of the
Company's floating rate debt.
The BT Credit Agreement provides for changes in borrowing margins based on
financial criteria and imposes certain limitations on the operations of
the Company and its subsidiaries. These limitations include restrictions
on the incurrence of additional indebtedness, the creation of liens, the
making of investments, dispositions of property or assets, certain
transactions with affiliates, and the payment by the Company of cash
dividends to its stockholders, as well as financial covenants relating to
interest coverage and debt leverage. The Company was in compliance with
these requirements as of March 31, 1997.
The Company's shareholders' equity increased to $206,097,000 at March 31,
1997 from $186,649,000 at December 31, 1996 primarily as a result of the
Company's net earnings for the first quarter of 1997 and the value of
shares of common stock issued during the first quarter of 1997 for non-
cash compensation.
10
</PAGE>
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number Description
27 Financial Data Schedule.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarter
ended March 31,1997.
11
</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: May 2, 1997 By s/Horst Tebbe
Horst Tebbe
Vice President-Finance & Chief
Financial Officer
(Authorized Executive Officer
and Principal Financial Officer)
12
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the consolidated
statements of earnings for the three months ended March 31, 1997 and the
consolidated balance sheet at March 31, 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6596000
<SECURITIES> 0
<RECEIVABLES> 133607000
<ALLOWANCES> 5699000
<INVENTORY> 59275000
<CURRENT-ASSETS> 216787000
<PP&E> 305610000
<DEPRECIATION> 135593000
<TOTAL-ASSETS> 467425000
<CURRENT-LIABILITIES> 148730000
<BONDS> 0
0
0
<COMMON> 428000
<OTHER-SE> 205669000
<TOTAL-LIABILITY-AND-EQUITY> 467425000
<SALES> 202859000
<TOTAL-REVENUES> 202859000
<CGS> 127425000
<TOTAL-COSTS> 127425000
<OTHER-EXPENSES> 41750000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2196000
<INCOME-PRETAX> 32090000
<INCOME-TAX> 12649000
<INCOME-CONTINUING> 19441000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19441000
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0
</TABLE>
