UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year
ended December 31, 1996
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)
State or other jurisdiction of incorporation or organization: Delaware
I.R.S. Employer Identification Number: 22-1682767
Address of principal executive offices: Park 80 East, Saddle Brook,
New Jersey 07663-5291
Registrant's telephone number, including area code: (201) 791-7600
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange
Title of each class on which registered
Common Stock, par value $0.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant on March 14, 1997 was approximately
$1,674,883,000.
The number of outstanding shares of the registrant's Common Stock as of
March 14, 1997 was 42,593,346.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1996 Annual Report to Stockholders are
incorporated by reference into Part I and Part II of this Annual Report on
Form 10-K.
Portions of the registrant's definitive proxy statement for its 1997
Annual Meeting of Stockholders are incorporated by reference into Part III
of this Annual Report on Form 10-K.
<PAGE>
PART I
Item 1. Business
Sealed Air Corporation (together with its subsidiaries,
the "Company") is engaged primarily in a single line of business:
the manufacture and sale of protective and specialty packaging
products to a diverse group of customers throughout the world.
The Company's principal protective packaging products are its
engineered products and its surface protection and other
cushioning products. Certain of these products are also produced
for non-packaging applications. The Company's principal
specialty packaging products are its food packaging products.
The Company also manufactures and sells certain other products
discussed below. The net sales contributed by each class of
product for each of the five years in the period ended December
31, 1996 appear in the table under the caption "Selected
Financial Data" in the Company's 1996 Annual Report to
Stockholders, which data is incorporated herein by reference.
The Company's operations are conducted primarily in the
United States, Europe, the Asia/Pacific region, Canada and Latin
America, and its products are distributed in these areas as well
as in other parts of the world. Information by geographic area,
including net sales, operating profit and identifiable assets,
for each of the three years in the period ended December 31, 1996
appears in Note 3 of the Notes to Consolidated Financial
Statements contained in the Company's 1996 Annual Report to
Stockholders. Such Note is incorporated herein by reference.
Engineered Products
The Company's engineered products include its
Instapak(R) polyurethane foam packaging systems, specialty
polyethylene foams for packaging and non-packaging uses, and
Korrvu(R) packaging products.
Instapak(R) Systems
Instapak(R) polyurethane foam packaging systems consist
of proprietary blends of polyurethane chemicals and specially
designed dispensing equipment, certain features of which are
patented. The Company also manufactures high-performance
polyolefin films designed for use with Instapak(R) packaging
systems. Most of the Company's net sales from Instapak(R) systems
are attributable to the sale of the polyurethane chemicals and
polyolefin films used in the systems installed at customer
locations.
Instapak(R) chemicals, films and equipment are marketed
as integrated packaging systems to provide protective packaging
for a wide variety of products, including computer, electronic,
office, medical and communications equipment, compressors and
motors, furniture and spare parts, and void-fill packaging of
office supplies, books, cosmetics and other small products for
distribution. Instapak(R) systems are also used to produce
polyurethane foams used in certain non-packaging applications,
including Instapak(R) Floral, a foam used as a design base for
artificial flower arrangements. The Company's Instapak(R)
products are sold in all geographic areas in which the Company's
operations are conducted. The Company maintains ongoing programs
to develop new chemical formulations and new equipment models to
meet evolving customer needs.
An Instapak(R) packaging system allows a customer to
create protective cushions for products of any shape and thus to
tailor its protective packaging to its individual products and
needs. When Instapak(R) chemicals are mixed together and
dispensed, they expand up to 280 times their liquid volume within
seconds after they are dispensed to form a foam cushion. Because
Instapak(R) chemicals expand significantly in volume only when
mixed together, the storage space required for the chemicals
before use is very small.
The Company purchases chemicals from various suppliers,
including major chemical companies, and blends these chemicals
according to its own proprietary formulations. The Company offers
its Instapak(R) customers a family of protective packaging foams,
ranging from low-density foams used for light cushioning and
void-fill applications to heavy-duty foams used for blocking and
bracing heavy items.
The Company produces a number of dispensing equipment
models for low, medium and high volume use. The Company's
SpeedyPacker(TM) foam-in-bag system, introduced in 1996, and its
High-Speed Instapacker(TM) foam-in-bag system produce ready-to-use
foam cushions consisting of polyolefin film bags filled with
Instapak(R) foam. Hand-held equipment models range from low-
volume single station systems to microprocessor-controlled
multiple station systems. Generally, customers may either buy or
lease equipment from the Company.
Customers are also able to produce pre-formed
Instapak(R) foam cushions for use in packaging a wide range of
products. The Company offers assistance to its customers in
producing, or in preparing the molds used to produce, such pre-
formed cushions. The Company offers Instamolder(TM) semi-
automated cushion molding equipment that produces molded
Instapak(R) cushions using its foam-in-bag systems.
Specialty Polyethylene Foams
The Company manufactures and sells extruded plank and
laminated foams for packaging and non-packaging applications.
Extruded plank foam is offered in varying densities and
thicknesses up to three inches. Laminated foams, which are sold
under various trademarks including Polylam(R) in the United States
and Stratocell(TM) in Europe, are produced in various densities
and laminated into thicknesses ranging up to six inches. Certain
of the Company's specialty polyethylene foam product lines
contain a percentage of post-consumer recycled polyethylene
resins. These foams can be produced in various colors and are
available in anti-static and fire retardant forms.
The Company's specialty polyethylene foams are
generally sold to fabricators and converters for packaging and
non-packaging applications in which a clean, non-abrasive
material is required with such properties as shock absorption,
vibration dampening, thermal insulation or buoyancy. In
packaging applications, these foams are fabricated into a wide
range of protective packaging shapes, forms and die-cuts for
designed packages in which a clean, attractive appearance and
cushioning or blocking and bracing performance is needed. Non-
packaging applications for specialty foams include construction,
automotive, sporting and athletic equipment products. The
Company's specialty polyethylene foams are sold in all geographic
areas in which the Company's operations are conducted.
Korrvu(R) Packaging Products
The Company is engaged in the manufacture and sale of
Korrvu(R) suspension and retention packaging. Korrvu(R) suspension
packaging suspends the product to be packaged in the air space of
its shipping container between two strong, flexible, low-slip
films. Korrvu(R) retention packaging holds the product to be
packaged against a corrugated base using a single sheet of
flexible retention film. Korrvu(R) packaging is sold primarily in
North America and Europe.
Surface Protection and Other Cushioning Products
The Company's surface protection and other cushioning
products include air cellular cushioning materials, protective
and durable mailers and bags, thin polyethylene foams, paper
packaging products, automated packaging systems and certain other
packaging products.
Air Cellular Cushioning Materials
The Company manufactures and markets Bubble Wrap(R) air
cellular cushioning materials, which are also marketed under
various other trademarks, including AirCap(R) and PolyCap(R). The
Company's air cellular cushioning materials consist of air
bubbles encapsulated between two layers of plastic film, each
containing a barrier layer to retard air loss, that form a
pneumatic cushion to protect products from damage through shock
or vibration during shipment. The Company's PolyCap(R) line of
air cellular cushioning material contains a lighter barrier layer
than the Company's AirCap(R) line.
The Company's air cellular cushioning materials are
used by a wide variety of end users, including both manufacturers
and retailers. AirCap(R) cushioning is used primarily to protect
a wide variety of lightweight and medium-weight delicate items,
such as instruments, electronic components and glassware, that
have no limitation on their shipping and shelf-life cycles.
PolyCap(R) cushioning is used primarily for a wide variety of
lightweight products that have a relatively short shipping and
shelf-life cycle. The Company also markets anti-static forms of
its air cellular cushioning materials. The Company's air
cellular materials are manufactured and sold primarily in North
America, Europe and, since mid-1996, Australasia.
The Company's air cellular cushioning materials are
produced in various forms, including continuous rolls, perforated
rolls and sheets, depending on customer preference. These
materials can be used alone or laminated to other materials such
as paper. They are also available in bag form (marketed under
the trademark Bubblebags(R)), primarily used to provide product
protection to small parts. The Company's air cellular cushioning
materials can be varied in the size, shape and spacing of their
encapsulated air bubbles and the thickness of the plastic to
provide specific types of performance in cushioning, surface
protection and void fill. Many of the Company's air cellular
cushioning product lines contain post-industrial and post-
consumer recycled polyethylene resins.
The Company also manufactures and sells adhesive-coated
air cellular cushioning material under the trademark Bubble
Mask(R) and cohesive air cellular cushioning material under the
trademark Cold Seal(R) AirCap(R). Polypride(TM) air cellular
materials are multi-web materials with high tensile strength used
primarily as furniture wrapping.
Protective and Durable Mailers and Bags
The Company manufactures and markets a variety of
protective and durable mailers and bags that are made in several
standard sizes and are used for mailing or shipping a wide
variety of items for which clean, lightweight pre-constructed
protective packages are desirable. They can provide the user
with significant postage savings, ease of use and enhanced
product protection relative to other types of mailers and
shipping containers. The Company's mailers are marketed
primarily in North America, Europe and the Asia/Pacific region.
The Company's protective mailers include lightweight,
tear-resistant mailers marketed under various trademarks,
including Jiffylite(R) and Mail Lite(TM). These mailers, which are
lined with air cellular cushioning material, are offered in heat-
sealable or self-seal forms.
These products also include the widely used Jiffy(TM)
padded mailers made from recycled kraft paper padded with
macerated recycled newspaper, Jiffy(TM) reinforced mailers, which
are highly tear resistant and moisture retardant, Jiffy(TM)
utility mailers, which are low-cost, lightweight mailers without
padding, and Jiffy Rigi Bag(R) mailers, which are rigid mailers
without padding that are well suited for products such as books
and photographs. The Company also manufactures and markets
Jiffy(TM) foam-lined mailers. The kraft paper used in many of
these mailer lines and the foam lining of certain foam mailer
products contain recycled content.
The Company's durable plastic mailers and bags, which
are produced from multi-layered polyolefin film, are lightweight,
water-resistant and puncture-resistant and are available in
tamper-evident varieties. Such mailers and bags are used by a
wide range of customers including air courier, mail order,
banking, postal, security and office supply services. Such
mailers and bags are marketed under a number of brand names,
including ShurTuff(R), MailTuff(TM), Trigon(R), Lab Pak(R),
Keepsafe(TM) and Crush-Gard(TM).
Thin Polyethylene Foams
In addition to the specialty polyethylene foams
described above, the Company manufactures thin polyethylene foams
in roll and sheet form, in low, medium and special densities, in
flat, ribbed or bag form and in a number of colors and
thicknesses up to one-half inch. The Company also sells thin
polyethylene foam that has anti-static properties and foam
laminate products in which the foam is laminated to paper,
polyethylene film or other substrates for specialized
applications. Certain of the Company's thin polyethylene foam
product lines include a percentage of post-consumer recycled
resins. Such products are marketed primarily in North America
and Europe and, since mid-1996, in Australasia.
Low-density thin polyethylene foam manufactured by the
Company is marketed under the trademark Cell-Aire(R) and is used
primarily for surface protection and light-duty cushioning.
Medium-density thin polyethylene foam is marketed under the
trademark Cellu Cushion(R) as a cushioning material to protect
products from damage through shock or vibration during shipment.
The Company's Quicksilver(TM) cohesive polyethylene film and foam
laminates and its Cellu-Mask(TM) adhesive foam laminates are used
for masking and other surface protection applications. In 1996,
the Company introduced its Dolphin Pad(TM) film and foam laminate
wrap for the moving and storage industry. The Company also
manufactures special density polyethylene foams for a variety of
packaging and non-packaging applications.
Paper Packaging Products
The Company manufactures recycled kraft, tissue and
creped paper for use as a raw material in the manufacture of the
Company's protective mailer and food packaging products. The
Company also manufactures and sells paper packaging products
under the trademarks Kushion Kraft(R), Custom Wrap(TM), Jiffy(TM)
Padwrap(R) and Void Kraft(TM) for industrial surface protection,
furniture surface protection, moving and storage blankets, and
for use as cushioning or void fill in various packaging
applications. The Company's paper packaging products are sold
primarily in North America and Europe.
Packaging Systems
The Company produces and markets the Instasheeter(TM)
high-speed converting system, designed for on-line packaging
applications, which automatically converts the Company's flexible
packaging materials, including air cellular cushioning materials,
thin polyethylene foam and paper packaging materials, described
above, into sheets of a pre-selected size and quantity. The
Company also produces and markets the Accu-Cut(TM) converting
system, an economical system for converting the Company's
flexible packaging materials in off-line packaging applications.
Such systems are sold primarily in North America and Europe.
The Company's Jiffy Packer(TM) high-speed paper dunnage
system, which is marketed in Europe under the name Paperboy(TM)
and in Japan under the name Eco Packer(TM), produces paper dunnage
material on site from the Company's multi-ply Void Kraft(TM)
recycled kraft paper. The Jiffy Packer(TM) system is also offered
in a bench-top version. The Company's Rapid Fill(R) inflatable
packaging system, marketed primarily in North America, consists
of a compact, portable inflator and self-sealing inflatable
plastic bags, available in several sizes. When inflated, the
bags can be used in a wide range of void fill applications, and
they can be deflated and re-inflated for reuse.
The Company sells on-site packaging systems for void
fill and light-duty cushioning applications. These systems,
marketed primarily in Europe under the trademark Fill Air(TM),
convert rolls of polyethylene film into packaging materials on
demand.
Other Surface Protection and Cushioning Products
The Company participates in a joint venture named
PolyMask Corporation with Minnesota Mining and Manufacturing
Company ("3M") that manufactures and sells protective tapes
consisting of adhesive-coated polyethylene films marketed by 3M.
These products are used primarily for protecting the surfaces of
polished metal, glass, plastic and other materials from abrasion
during fabrication, handling and shipping. This joint venture is
accounted for using the equity method.
The Company manufactures and sells specialty plastic
films in Europe for a variety of packaging and non-packaging
applications.
Food Packaging Products
The Company's food packaging products include absorbent
pads, produce bags, and flexible films, bags, pouches and related
equipment.
Absorbent Pads and Produce Bags
The Company manufactures and sells absorbent pads used
for food packaging, including its Dri-Loc(R) absorbent pads,
certain features of which are covered by patents. The Company
also produces other absorbent pads that utilize the features of
its Dri-Loc(R) pads, including the Company's Pad-Loc(TM) pad for
the poultry processor industry. These products are used in meat,
fish and poultry trays to absorb excess fluids and are sold in
the geographic areas in which the Company's operations are
conducted.
The Company's Dri-Loc(R) pads consist of two layers of
polyethylene film sealed on all four sides which enclose a layer
of fluffed virgin wood-pulp fibers. On one side, the layer of
film has tiny openings that permit fluids to be absorbed and
retained by the enclosed fibers. The Company believes that Dri-
Loc(R) pads are more effective and more attractive in use than
conventional absorbent pads.
The Company also manufactures conventional padding,
sold as individual pads and in roll stock form for use by
converters and processors to prepad trays. This padding consists
of layers of bleached crepe tissue with one or two outer layers
of polyethylene film. The Company also sells supermarket display
case liners, which are similar in construction to conventional
padding, under the trademark Cellu Liner(TM).
The Company also offers its All Star(TM) produce bagging
systems, which consist of easy-open plastic bags with star seal
bottoms that are dispensed one at a time through patented
dispensers supplied by the Company, for use in supermarket
produce departments.
Flexible Films and Related Equipment
The Company produces a variety of flexible films, bags
and pouches and associated packaging equipment marketed and sold
primarily in the Asia/Pacific region and Europe and used to
package a broad range of perishable foods such as meat, poultry,
fish, prepared foods, cheese and other dairy products.
The Company produces proprietary flexible films, bags
and pouches in permeable and barrier varieties. The Company's
permeable films, bags and pouches are designed primarily for
frozen or dried foods. The oxygen permeability and water vapor
barrier properties of the film allow for the retention of fresh
product color and appearance to enhance product presentation.
The Company's barrier films, bags and pouches provide a high
barrier to oxygen and water, allowing extended storage for fresh
chilled or processed products by preserving the texture, taste
and moisture balance of the chilled or processed product. Both
permeable and barrier films and bags are produced in various
grades to meet customer requirements.
The Company markets permeable and barrier shrinkbags
under the Shrinkvac(R) and other trademarks. Permeable and
barrier vacuum skin packaging is marketed under the Intact(R) and
Tri-fresh(TM) trademarks. The Company also offers Tuf-flex(TM)
barrier pouches with high puncture resistance.
The Company's food packaging equipment offerings
include automatic film and bag making, dispensing and loading
units to package foods in vacuum or vacuum skin packages using
the Company's films. Systems are marketed to the food processing
industry under the Intact(R), Flexibag(TM) and other trademarks.
The Company also manufactures printed co-extruded films
for packaging frozen foods and other loose food products as well
as a wide range of mono- and multi-layer films for other food and
general applications.
Other Products
The Company's other products consist primarily of
specialty adhesive products, loose-fill polystyrene packaging,
paper products, products that control static electricity, and
recreation and energy conservation products.
Through a subsidiary in New Zealand, the Company
manufactures and sells a wide range of specialty adhesive tapes
on a variety of substrates. These specialty adhesive tapes
provide custom formulations for a wide range of applications that
include the tape strip or closure tape for disposable diapers,
foil tapes used in heating, air conditioning and refrigeration,
and cloth based tapes used in construction and underground
applications on pipe work for corrosion protection.
Subsidiaries of the Company in the Asia/Pacific region
and Mexico produce loose-fill polystyrene packaging for sale to
customers in those countries.
As noted above, the Company manufactures recycled
kraft, tissue and creped paper and sells such paper to
unaffiliated customers in the United States.
In addition to air cellular cushioning materials and
polyethylene foam with anti-static properties, the Company sells
other products related to the elimination and neutralization of
static electricity, including conductive shielding bags and floor
and benchtop mats. Static control products, which are sold
primarily in the Asia/Pacific region, are used principally by
manufacturers of static-sensitive microelectronic devices.
Translucent air cellular material similar to AirCap(R)
cushioning that is fabricated into solar pool covers is sold in
certain countries outside the United States. In the United
States, the Company manufactures and sells solar heating systems
for swimming pools that use thermostatically controlled pumps to
circulate pool water through plastic solar collector panels.
Foreign Operations
The Company manufactures and sells most of its product
lines in a number of foreign countries as well as in the United
States, as described more fully above. In addition, the Company
has unaffiliated foreign licensees that manufacture certain of
its protective packaging products in Chile, England, Japan, the
Netherlands, South Africa and Sweden. Licensing revenues are not
material to the Company's consolidated financial statements.
During 1996, 1995 and 1994, foreign net sales
represented approximately 39%, 38% and 29%, respectively, of the
Company's total net sales, while operating profit from foreign
operations represented approximately 27%, 30% and 21%,
respectively, of the Company's total operating profit. For a
discussion of the factors affecting these changes in foreign net
sales and operating profit, see Management's Discussion and
Analysis of Results of Operations and Financial Condition, which
appears in the Company's 1996 Annual Report to Stockholders and
is incorporated by reference into Item 7 of this Annual Report on
Form 10-K. In maintaining its foreign operations, the Company
runs the risks inherent in such operations, including those of
currency fluctuations.
Marketing, Distribution and Customers
The Company employs several hundred sales and account
representatives in the countries in which it has operations who
market the Company's products through a large number of
distributors, fabricators and converters as well as directly to
end users. In the United States and certain other countries, the
Company has separate sales and marketing groups for its
engineered products, its surface protection and other cushioning
products, its food packaging products and certain of its other
products. These groups often work together to develop market
opportunities for the Company's products.
To assist its marketing efforts and to provide
specialized customer services, the Company maintains packaging
laboratories in many of its United States and foreign facilities.
These laboratories are staffed by professional packaging
engineers and equipped with drop-testing and other equipment used
to develop and test cost-effective package designs to meet the
particular protective packaging requirements of each customer.
Certain of these laboratories also design and construct molds for
Instapak(R) packaging customers who prefer to use preformed foam
cushions.
The Company has no material long-term contracts for the
distribution of its packaging products. In 1996, no customer or
affiliated group of customers accounted for as much as 10% of the
Company's consolidated net sales.
Raw Materials
The raw materials utilized in the Company's operations
generally have been readily available on the open market and are
purchased from several suppliers, reprocessed from scrap
generated in the Company's manufacturing operations or obtained
through participation in recycling programs. The principal raw
materials used in the Company's operations include polyethylene
and other resins and films, polyurethane chemicals, paper and
wood pulp products (including recycled or reprocessed paper
products, resins, films and chemicals), and blowing agents used
in foam products.
Product Development
The Company incurred expenses of $15,449,000 related to
Company-sponsored research and development in 1996 compared with
$14,597,000 during 1995 and $10,912,000 during 1994. The Company
maintains a continuing effort to develop new products based on
its existing product lines as well as new packaging and non-
packaging applications for its products. The Company also
maintains ongoing efforts to add or increase recycled or
reprocessed content in its product lines.
Patents and Licenses
The Company is the owner or licensee of a number of
United States and foreign patents and patent applications that
relate to certain of its products, manufacturing processes and
equipment. While some of these patents and licenses, as well as
certain trademarks which the Company owns, offer some protection
and competitive advantage for the Company's products and their
manufacture, the Company believes that its success depends
primarily on its marketing, engineering and manufacturing skills
and on its research and product technology.
Competition
Competition for most of the Company's protective and
specialty packaging products is based primarily on packaging
performance characteristics, service and price. Certain firms
producing competing products are well established and may have
greater financial resources than the Company.
The Company's protective packaging products compete
with similar products made by others and with a number of other
packaging materials, including various forms of paper packaging
products, expanded plastics, corrugated die cuts, loosefill
packaging materials, and with envelopes, reinforced bags, boxes
and other containers and various corrugated materials. Heavy-
duty applications of the Company's engineered products also
compete with various types of molded foam plastics, fabricated
foam plastics and mechanical shock mounts and with wood blocking
and bracing systems. As discussed below under "Environmental
Matters," the Company is also subject to competitive factors
affecting packaging materials that are based upon customers'
environmental preferences. The Company believes that it is a
leading manufacturer of air cellular cushioning materials
containing a barrier layer and polyurethane foam packaging
systems in the geographic areas in which it sells these products.
There are a number of competing manufacturers of food
packaging products. The Company believes that its Dri-Loc(R)
products have a competitive advantage over conventional pads
because of their efficiency and appearance in use. Conventional
pads and display case liners compete primarily on the basis of
price, absorbency and service. The Company believes it is one of
the leading suppliers of meat, fish and poultry absorbent pads to
supermarkets and poultry processors in the United States and
Europe. The Company's food packaging films and systems compete
with similar flexible films and systems produced by other
companies around the world as well as with other food packaging
materials.
Environmental Matters
The Company, like other manufacturers, is subject to
various laws, rules and regulations in the countries,
jurisdictions and localities in which it operates regulating the
discharge of materials into the environment or otherwise relating
to the protection of the environment. The Company believes that
compliance with current environmental laws and regulations has
not had a material effect on the Company's capital expenditures
or financial position.
In some jurisdictions in which the Company's packaging
products are sold or used, laws and regulations have been adopted
or proposed that seek to regulate, among other things, recycled
or reprocessed content, sale and disposal of packaging materials.
In addition, customer demand for packaging materials that are
viewed as being "environmentally responsible" and that minimize
the generation of solid waste continues to evolve. While these
issues have become a competitive factor in the marketplace for
packaging materials, the Company maintains active programs
designed to comply with these laws and regulations, to monitor
their evolution, and to meet such customer demand. The Company
believes that its protective packaging materials offer superior
packaging protection, enabling customers to achieve lower package
cube and weight using the Company's protective packaging
materials than with many alternative packaging methods, thereby
reducing the disposal of damaged products as well as the
generation of packaging waste. Because the Company offers both
plastic-based and paper-based protective packaging materials,
customers can select the protective packaging materials that they
consider to best meet their performance and cost needs and
environmental preferences. A number of the Company's product
lines incorporate recycled or reprocessed content, and the
Company maintains ongoing efforts to add or increase recycled or
reprocessed content in many of its product lines.
The Company also supports its customers' interests in
eliminating waste by offering or participating in collection
programs for certain of the Company's products or product
packaging and for materials used in certain of the Company's
products, including programs aimed at recovering and recycling
polyethylene materials from customers in the United States, an
Instapak(R) foam return program with return sites throughout the
United States, collection programs for packaging materials in
Germany and elsewhere in Europe, and local newspaper collection
programs to obtain materials used to produce Jiffy(TM) padded
mailers and certain other products. Whenever possible, materials
collected through these collection programs are reprocessed and
either reused in the Company's operations or offered to other
manufacturers for use in other products. Certain of the
Company's protective packaging products can be reused and, as an
alternative to recycling or disposal in solid waste landfills,
are suitable fuel sources for waste-to-energy conversion
facilities.
Employees
At December 31, 1996, the Company had approximately
4,200 employees worldwide, with approximately 600 employees
covered by collective bargaining agreements. The Company
believes that its employee relations are satisfactory.
Item 2. Properties
The Company has manufacturing facilities at twenty-five
locations in the United States, five other locations in North
America, including three facilities in Canada and two in Mexico,
nineteen locations in Europe, including facilities in England,
France, Germany, Italy, the Netherlands, Norway, Spain and
Sweden, and eight locations in the Asia/Pacific region, including
two facilities in New Zealand and facilities in Australia, Hong
Kong, Malaysia, Singapore, Taiwan and Thailand. The Company
occupies other facilities containing fabricating or converting
operations or sales, distribution, technical, warehouse or
administrative offices at several locations in the United States,
in Brazil, Belgium, Finland, China, India, Japan and Korea and in
a number of the other countries in which the Company manufactures
its products.
In the United States, the Company's Instapak(R) products
are manufactured at facilities in Connecticut and North Carolina,
its surface protection and other cushioning products and certain
of its other products are manufactured at facilities in
California, Georgia, Illinois, Massachusetts, Mississippi, New
Jersey, New York, North Carolina, Pennsylvania, Texas and
Washington, and its food packaging products are manufactured at
facilities in California, Mississippi, North Carolina and
Pennsylvania. Because of the light but bulky nature of the
Company's air cellular, polyethylene foam and protective mailer
products, significant freight savings may be realized by locating
manufacturing facilities for these products near markets. To
realize the benefit of such savings, the Company has facilities
for manufacturing these products in various locations in
proximity to major markets.
The Company owns thirty of its manufacturing
facilities, certain of which are owned subject to mortgages or
similar financing arrangements. The balance of the Company's
manufacturing facilities are located in leased premises. The
Company's manufacturing facilities are usually located in general
purpose buildings in which the Company's specialized machinery
for the manufacture of one or more products is contained. The
Company believes that its manufacturing facilities are well
maintained, suitable for their purposes, and adequate for the
Company's needs.
Item 3. Legal Proceedings
The Company is a party to various lawsuits and
administrative and other proceedings incidental to its business,
including certain federal or state governmental environmental
proceedings or private environmental claims relating to the
cleanup of Superfund sites or other sites. While it is often
difficult to estimate potential environmental liabilities and the
future impact of environmental matters, based upon the
information currently available to the Company and its experience
in dealing with such matters, the Company believes that its
potential liability with respect to such sites is not material.
The Company believes, after consulting with counsel, that the
disposition of its lawsuits and other legal proceedings,
including environmental matters, will not have a material effect
on the Company's consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's
stockholders during the fourth quarter of 1996.
Executive Officers of the Registrant
The information appearing in the table below sets forth
the current position or positions held by each executive officer
of the Company, his or her age as of March 15, 1997, the year in
which he or she first was elected to the position currently held,
and the year in which he or she first was elected an officer of
the Company.
All of the Company's officers serve at the pleasure of
the Board of Directors. All officers have been employed by the
Company or its subsidiaries for more than five years. There are
no family relationships among any of the Company's officers or
directors.
Name and Age as of First Elected to First Elected
Current Position March 15, 1997 Current Position an Officer
T. J. Dermot Dunphy 64 1996 1971
Chairman of the Board,
Chief Executive Officer
and Director
William V. Hickey 52 1996 1980
President and Chief
Operating Officer
Bruce A. Cruikshank 54 1996 1990
Senior Vice President
Elmer N. Funkhouser III 55 1984 1982
Senior Vice President
Robert A. Pesci 51 1997 1990
Senior Vice President
Jonathan B. Baker 44 1994 1994
Vice President
James A. Bixby 53 1990 1990
Vice President
Mary A. Coventry 43 1994 1994
Vice President
Jean-Luc Debry 51 1992 1992
Vice President
Paul B. Hogan 57 1995 1995
Vice President
James P. Mix 45 1994 1994
Vice President
Abraham N. Reichental 40 1994 1994
Vice President
Name and Age as of First Elected to First Elected
Current Position March 15, 1997 Current Position an Officer
Horst Tebbe 56 1997 1986
Vice President-Finance
and Chief Financial Officer
Jeffrey S. Warren 43 1996 1996
Controller
H. Katherine White 51 1996 1996
Secretary
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters
The information appearing under the caption "Common
Stock Information" in the Company's 1996 Annual Report to
Stockholders is incorporated herein by reference.
Item 6. Selected Financial Data
The information appearing under the caption "Selected
Financial Data" in the Company's 1996 Annual Report to
Stockholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information appearing under the caption
"Management's Discussion and Analysis of Results of Operations
and Financial Condition" in the Company's 1996 Annual Report to
Stockholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Interim Financial Information (Unaudited)
The information appearing under the caption "Interim
Financial Information (Unaudited)" in the Company's 1996 Annual
Report to Stockholders is incorporated herein by reference.
Financial Statements and Schedule
See Index to Consolidated Financial Statements and
Schedule on page F-2 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Part of the information required in response to this
Item is set forth in Part I of this Annual Report on Form 10-K
under the caption "Executive Officers of the Registrant," and the
balance will be set forth in the Company's Proxy Statement for
its 1997 Annual Meeting of Stockholders under the captions
"Information Concerning Nominees" and "Section 16(a) Beneficial
Ownership Reporting Compliance." All such information is
incorporated herein by reference.
Item 11. Executive Compensation
The information required in response to this Item will
be set forth in the Company's Proxy Statement for its 1997 Annual
Meeting of Stockholders under the caption "Directors'
Compensation" and under the subheadings "Summary Compensation
Table" and "Compensation Committee Interlocks and Insider
Participation" under the caption "Executive Compensation." Such
information is incorporated herein by reference. Such
incorporated information does not include the information under
the subheadings "Report of Organization and Compensation
Committee on Executive Compensation" and "Common Stock
Performance Comparison" under the caption "Executive
Compensation" in such Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
The information required in response to this Item will
be set forth in the Company's Proxy Statement for its 1997 Annual
Meeting of Stockholders under the caption "Voting Securities,"
and such information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K
(a) Documents filed as a part of this Annual Report on Form
10-K:
(i) Financial Statements and Financial Statement
Schedule
See Index to Consolidated Financial Statements and
Schedule on page F-2 herein.
(ii) Exhibits
Exhibit Description
Number
3.1 Unofficial Composite Certificate of Incorporation
of the Company as currently in effect.
3.2 By-Laws of the Company as currently in effect.
(Exhibit 3.2 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September
30, 1996, File No. 1-7834, is incorporated herein
by reference.)
4.1 Amended and Restated Credit Agreement among the
Company, certain of its subsidiaries, Bankers
Trust Company, as agent, and various financial
institutions, dated as of June 8, 1994 and amended
and restated as of August 22, 1996. (Exhibit 4 to
the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1996,
File No. 1-7834, is incorporated herein by
reference.)
10.1 Contingent Stock Plan of the Company, as amended.
(Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1995, File No. 1-7834, is incorporated herein by
reference.)*
10.2 Restricted Stock Plan for Non-Employee Directors
of the Company, as amended. (Exhibit A to the
Company's Proxy Statement for the Annual Meeting
of Stockholders held on May 17, 1996, File Number
1-7834, is incorporated herein by reference.)*
13 Portions of the Company's 1996 Annual Report to
Stockholders that are incorporated by reference
into this Annual Report on Form 10-K.
21 Subsidiaries of the Company.
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule
*Compensatory plan or arrangement of management required to be
filed as an exhibit to this report on Form 10-K.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the
fiscal quarter ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
Date: March 24, 1997 By s/T. J. DERMOT DUNPHY
T. J. Dermot Dunphy
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date
By s/ T. J. DERMOT DUNPHY March 24, 1997
T. J. Dermot Dunphy
Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
By s/ HORST TEBBE March 24, 1997
Horst Tebbe
Vice President-Finance and Chief
Financial Officer
(Principal Financial Officer)
By s/ JEFFREY S. WARREN March 24, 1997
Jeffrey S. Warren
Controller
(Principal Accounting Officer)
By s/ JOHN K. CASTLE March 24, 1997
John K. Castle
Director
By s/ LAWRENCE R. CODEY March 24, 1997
Lawrence R. Codey
Director
By s/ CHARLES F. FARRELL, JR. March 24, 1997
Charles F. Farrell, Jr.
Director
By s/ DAVID FREEMAN March 24, 1997
David Freeman
Director
By s/ ALAN H. MILLER March 24, 1997
Alan H. Miller
Director
By s/ R. L. SAN SOUCIE March 24, 1997
R. L. San Soucie
Director
<PAGE>
SEALED AIR CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Years ended December 31, 1996, 1995 and 1994
F-1
</PAGE>
<PAGE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Page
Independent Auditors' Report *
Financial Statements:
Consolidated Statements of Earnings for the years
ended December 31, 1996, 1995 and 1994 *
Consolidated Balance Sheets - December 31, 1996 and 1995 *
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994 *
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 *
Notes to Consolidated Financial Statements *
Independent Auditors' Report on Schedule F-3
Consolidated Schedule:
II - Valuation and Qualifying Accounts F-4
*The information required appears on pages 21 through 36 of the Company's
1996 Annual Report to Stockholders and is incorporated by reference into this
Annual Report on Form 10-K.
All other schedules are omitted, as the required information is inapplicable
or the information is presented in the consolidated financial statements
or related notes.
F-2
</PAGE>
<PAGE>
Independent Auditors' Report on Schedule
The Board of Directors and Shareholders
Sealed Air Corporation:
Under date of January 20, 1997, we reported on the consolidated balance
sheets of Sealed Air Corporation and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of earnings, shareholders'
equity, and cash flows for each of the years in the three-year period
ended December 31, 1996, as contained in the 1996 annual report to
shareholders. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for
the year 1996. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
s/KPMG Peat Marwick LLP
Short Hills, New Jersey
January 20, 1997
F-3
</PAGE>
<PAGE>
SCHEDULE II
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands of dollars)
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER DEDUCTIONS BALANCE AT
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (1) (2) END OF YEAR
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful
accounts $5,261 $1,151 $ 301 $1,090 $5,623
Year ended December 31, 1995
Allowance for doubtful
accounts $3,970 $2,421 $ 350 $ 1,480 $5,261
Year ended December 31, 1994
Allowance for doubtful
accounts $2,675 $ 1,210 $ 764 $ 679 $3,970
<FN>
(1) Primarily recoveries of bad debts and allowance for doubtful accounts of companies acquired at dates of
acquisition.
(2) Primarily accounts receivable balances written off.
</FN>
</TABLE>
F-4
</PAGE>
EXHIBIT 3.1
UNOFFICIAL COMPOSITE
CERTIFICATE OF INCORPORATION
OF
SEALED AIR CORPORATION
(as amended through May 19, 1995)
FIRST: The name of the corporation is Sealed Air
Corporation.
SECOND: The registered office of the corporation in
the State of Delaware is to be located at Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. Its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in
any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is sixty-one million
(61,000,000), sixty million (60,000,000) of which shall be common
stock with a par value of One Cent ($.01) per share, amounting in
the aggregate to Six Hundred Thousand Dollars ($600,000), and one
million (1,000,000) of which shall be preferred stock without par
value.
The preferred stock may be issued from time to time in
one or more series. The powers, designations, preferences and
other rights and qualifications, limitations or restrictions of
the preferred stock of each series shall be such as are stated
and expressed in this Article Fourth and, to the extent not
stated and expressed herein, shall be such as may be fixed by the
board of directors (authority so to do being hereby expressly
granted) and stated and expressed in a resolution or resolutions
adopted by the board of directors providing for the initial issue
of preferred stock of such series. Such resolution or
resolutions shall (a) fix the dividend rights of holders of
shares of such series, (b) fix the terms on which stock of such
series may be redeemed if the shares of such series are to be
redeemable, (c) fix the rights of the holders of stock of such
series upon dissolution or any distribution of assets, (d) fix
the terms or amount of the sinking fund, if any, to be provided
for the purchase or redemption of stock of such series, (e) fix
the terms upon which the stock of such series may be converted
into or exchanged for stock of any other class or classes or of
any one or more series of preferred stock if the shares of such
series are to be convertible or exchangeable, (f) fix the voting
rights, if any, of the shares of such series and (g) fix such
other powers, designations, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof desired to be
so fixed.
Except to the extent otherwise provided in the
resolution or resolutions of the board of directors providing for
the initial issue of shares of a particular series or expressly
required by law, holders of shares of preferred stock of any
series shall be entitled to one vote for each share thereof so
held, shall vote share for share with the holders of the common
stock without distinction as to class and shall not be entitled
to vote separately as a class or series of a class. The number
of shares of preferred stock authorized to be issued may be
increased or decreased from time to time by the affirmative vote
of the holders of a majority of the stock of the corporation
entitled to vote, and the holders of the preferred stock shall
not be entitled to vote separately as a class or series of a
class on any such increase or decrease.
All shares of any one series of preferred stock shall
be identical with each other in all respects except that shares
of any one series issued at different times may differ as to the
dates from which dividends thereon shall accumulate, and all
series of preferred stock shall rank equally and be identical in
all respects except as specified in the respective resolutions of
the board of directors providing for the initial issue thereof.
Subject to the prior and superior rights of the
preferred stock as set forth in any resolution or resolutions of
the board of directors providing for the initial issuance of any
particular series of preferred stock, such dividends (payable in
cash, stock or otherwise) as may be determined by the board of
directors may be declared and paid on the common stock from time
to time out of any funds legally available therefor and the
preferred stock shall not be entitled to participate in any such
dividend.
FIFTH: The name of the incorporator is Edward Beuchert
and his mailing address is Room 1410, 25 Broad Street, New York,
New York 10004.
SIXTH: The corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders
shall not be subject to the payment of the corporate debts to any
extent whatever except as otherwise provided by law.
EIGHTH: In furtherance, and not in limitation of the
powers conferred by statute, the board of directors is expressly
authorized:
A. To make, alter or repeal the by-laws of the
corporation;
B. To authorize and cause to be executed
mortgages and liens, with or without limit as to
amount, upon the real and personal property of the
corporation;
C. To authorize the guaranty by the corporation
of securities, evidences of indebtedness and obligation
of other persons, corporations and business entities;
D. By resolution adopted by a majority of the
whole board, to designate one or more committees, each
committee to consist of two or more of the directors of
the corporation, which, to the extent provided in the
resolution, shall have and may exercise the powers of
the board of directors in the management of the
business and affairs of the corporation and may
authorize the seal of the corporation to be affixed to
all papers which may require it. Such committee or
committees shall have such name or names as may be
determined from time to time by resolution adopted by
the board of directors. The board may designate one or
more directors as alternate members of any committee,
who may replace any absent or disqualified member at
any meeting of the committee. The members of any such
committee present at any meeting and not disqualified
from voting may, whether or not they constitute a
quorum, unanimously appoint another member of the board
of directors to act at the meeting in the place of any
absent or disqualified member.
All corporate powers of the corporation shall be exercised by the
board of directors except as otherwise provided herein or by law.
NINTH: Any property of the corporation less than all
of its assets including goodwill and its corporate franchise,
deemed by the board of directors to be not essential to the
conduct of the business of the corporation, may be sold, leased,
exchanged or otherwise disposed of by authority of the board of
directors. All of the property and assets of the corporation
including its goodwill and its corporate franchises, may be sold,
leased or exchanged upon such terms and conditions and for such
consideration (which may be in whole or in part shares of stock
and/or other securities of any other corporation or corporations)
as the board of directors shall deem expedient and for the best
interests of the corporation, when and as authorized by the
affirmative vote of the holders of a majority of the stock issued
and outstanding having voting power given at a stockholders'
meeting duly called for that purpose upon at least 20 days'
notice containing notice of the proposed sale, lease or exchange,
or when authorized by the written consent of the holders of a
majority of the voting stock issued and outstanding.
TENTH: A director or officer of the corporation shall
not be disqualified by his office from dealing or contracting
with the corporation either as a vendor, purchaser or otherwise,
nor shall any transaction or contract of the corporation be void
or voidable by reason of the fact that any director or officer or
any firm of which any director or officer is a member or any
corporation of which any director or officer is a stockholder,
officer or director, is in any way interested in such transaction
or contract, provided that such transaction or contract is or
shall be authorized, ratified or approved either (1) by a vote of
a majority of a quorum of the board of directors or of a
committee thereof, without counting in such majority any director
so interested (although any director so interested may be
included in such quorum), or (2) by a majority of a quorum of the
stockholders entitled to vote at any meeting. No director or
officer shall be liable to account to the corporation for any
profits realized from any such transaction or contract
authorized, ratified or approved as aforesaid by reason of the
fact that he, or any firm of which he is a member or any
corporation of which he is a stockholder, officer or director,
was interested in such transaction or contract. Nothing herein
contained shall create liability in the events above described or
prevent the authorization, ratification or approval of such
contracts in any other manner permitted by law.
ELEVENTH: No person shall be liable to the corporation
for any loss or damage suffered by it on account of any action
taken or omitted to be taken by him as a director or officer of
the corporation in good faith, if such person (i) exercised or
used the same degree of diligence, care and skill as an
ordinarily prudent man would have exercised or used under the
circumstances in the conduct of his own affairs, or (ii) took, or
omitted to take, such action in reliance upon advice of counsel
for the corporation, or upon statements made or information
furnished by officers or employees of the corporation which he
had reasonable grounds to believe to be true, or upon a financial
statement of the corporation prepared by an officer or employee
of the corporation in charge of its accounts or certified by a
public accountant or firm of public accountants.
TWELFTH: Any contract, transaction or act of the
corporation or of the board of directors which shall be approved
or ratified by a majority of a quorum of the stockholders
entitled to vote at any meeting shall be as valid and binding as
though approved or ratified by every stockholder of the
corporation; but any failure of the stockholders to approve or
ratify such contract, transaction or act, when and if submitted,
shall not be deemed in any way to invalidate the same or to
deprive the corporation, its directors or officers of their right
to proceed with such contract, transaction or act.
THIRTEENTH: Every person who was or is a party or is
threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by
reason of the fact that he or a person of whom he is the legal
representative is or was a director or officer of the corporation
or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other
enterprise, shall be indemnified and held harmless by the
corporation to the fullest extent legally permissible under the
General Corporation Law of the State of Delaware against all
expenses, liability and loss (including attorney's fees,
judgments, fines and amounts paid or to be paid in settlement)
reasonably incurred or suffered by him in connection therewith.
Such right of indemnification shall be a contract right which may
be enforced in any manner desired by such person. Such right of
indemnification shall not be exclusive of any other right which
such directors, officers or representatives may have or hereafter
acquire and, without limiting the generality of such statement,
they shall be entitled to their respective rights of
indemnification under any by-law, agreement, vote of
stockholders, provision of law or otherwise, as well as their
rights under this Article.
The Board of Directors may adopt by-laws from time to
time with respect to indemnification to provide at all times the
fullest indemnification permitted by the General Corporation Law
of the State of Delaware and may cause the corporation to
purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation, as a
director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other
enterprise against any liability asserted against such person and
incurred in any such capacity or arising out of such status,
whether or not the corporation would have the power to indemnify
such person against such liability.
FOURTEENTH: Whenever a compromise or arrangement is
proposed between this corporation and its creditors or any class
of them and/or between this corporation and its stockholders or
any class of them, any court of equitable jurisdiction within the
State of Delaware may, on the application in a summary way of
this corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this
corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as
the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders
or class of stockholders, of this corporation, as the case may
be, and also on this corporation.
FIFTEENTH: Meetings of stockholders and directors may
be held within or without the State of Delaware, as the by-laws
may provide. The books of account of the corporation may be kept
(subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated
from time to time by the board of directors or in the by-laws of
the corporation. Elections of directors need not be by written
ballot unless the by-laws of the corporation shall so provide.
SIXTEENTH: Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in
connection with any corporate action, the meeting and vote of
stockholders may be dispensed with if a written consent to such
corporate action is signed by the holders of 51% of the stock who
would have been entitled to vote upon such corporate action if a
meeting were held; provided that in no case shall a written
consent be by the holders of stock having less than the minimum
percentage of the vote required herein or by statute for the
proposed corporate action, and provided that prompt notice must
be given to all stockholders of the taking of corporate action
without a meeting and by less than unanimous written consent.
SEVENTEENTH: The corporation reserves the right to
amend, alter, change or repeal any provision contained in this
certificate of incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
EIGHTEENTH: A director of the corporation shall not be
liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability or the limitation thereof is
not permitted under the Delaware General Corporation Law as the
same exists or may hereafter be amended.
Any repeal or modification of the foregoing paragraph
of this Article EIGHTEENTH shall not adversely affect any right
or protection of a director of the corporation existing hereunder
with respect to any act or omission occurring prior to or at the
time of such repeal or modification.
IN WITNESS WHEREOF the undersigned, being the
incorporator hereinbefore named, for the purpose of forming a
corporation pursuant to the General Corporation Law of the State
of Delaware, does make this certificate February 13, 1969.
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
The following table sets forth the name and state or other
jurisdiction of incorporation of the Company's subsidiaries.
Except as otherwise indicated, each subsidiary is wholly-owned,
directly or indirectly, by the Company. Except as noted, such
subsidiaries do business under their corporate names.
Aire Sellado, S.A. de C.V. Mexico
Danco (NZ) Limited*** New Zealand
E.T. Bygg AS Norway
Noja Inmobiliaria, S.A. de C.V. Mexico
Norlepak Oy Finland
Omni Supply Inc.** North Carolina
PolyMask Corporation* Delaware
Polypride, Inc. Delaware
Sealed Air Australia Pty. Limited Queensland, Australia
Sealed Air Brasil Ltda. Brazil
Sealed Air B.V. Netherlands
Sealed Air (Canada) Inc. Ontario, Canada
Sealed Air Espana, S.A. Spain
Sealed Air (Far East) Limited Hong Kong
Sealed Air (FPD) Limited England
Sealed Air GmbH Germany
Sealed Air Japan Limited Nevada
Sealed Air (Korea) Limited Korea
Sealed Air Limited England
Sealed Air (Malaysia) Sdn. Bhd. Malaysia
Sealed Air N.V. Belgium
Sealed Air (NZ) Limited New Zealand
Sealed Air Norge AS Norway
Sealed Air Oy Finland
Sealed Air Packaging (Shanghai) China
Co. Ltd.
Sealed Air S.A.** France
Sealed Air (Singapore) Pte. Singapore
Limited
Sealed Air S.p.A. Italy
Sealed Air Svenska AB Sweden
Sealed Air Systems S.A. France
Sealed Air Taiwan Limited Taiwan
Sealed Air Thailand Limited Thailand
Sealed Air Trucking, Inc. Delaware
Trigon Packaging Systems (NZ) New Zealand
Limited****
Trigon/Viskase Pty. Limited* Queensland, Australia
*The Company owns 50% of the outstanding shares.
**The Company indirectly owns a majority of the outstanding
shares.
***Does business as Sealed Air (New Zealand) Packaging Products Division.
****Does business as Sealed Air (New Zealand) Food Packaging Division.
Certain subsidiaries are omitted from the above table. Such
subsidiaries, if considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary as of
December 31, 1996.
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
Sealed Air Corporation:
We consent to incorporation by reference in Registration
Statement No. 33-41734 on Form S-8, Registration Statement No.
333-341 on Form S-3, Registration Statement No. 333-03985 on Form
S-8, Registration Statement No. 33-57441 on Form S-3,
Registration Statement No. 33-58843 on Form S-3, Registration
Statement No. 333-7297 on Form S-3 and Registration Statement No.
333-7311 on Form S-3 of Sealed Air Corporation of our reports
dated January 20, 1997, relating to the consolidated balance
sheets of Sealed Air Corporation and subsidiaries as of December
31, 1996 and 1995, and the related consolidated statements of
earnings, shareholders' equity and cash flows for each of the
years in the three-year period ending December 31, 1996, and
related schedule, which reports appear in or are incorporated by
reference in the December 31, 1996 annual report on Form 10-K of
Sealed Air Corporation.
s/KPMG Peat Marwick LLP
Short Hills, New Jersey
March 24, 1997
<TABLE>
EXHIBIT 13
PORTION'S OF SEALED AIR CORPORATION'S 1996 ANNUAL REPORT
THAT ARE INCORPORATED BY REFERENCE
SELECTED FINANCIAL DATA
(In thousands of dollars except per share data)
<CAPTION>
1996 1995(1) 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Consolidated Earnings Statement Data
Net sales by class of product:
Engineered products $284,974 $252,535 $208,363 $180,508 $176,541
Surface protection and other
cushioning products 368,692 333,519 234,587 204,645 200,396
Food packaging products 106,473 103,866 56,444 51,023 52,727
Other products 29,473 33,200 19,792 15,518 16,394
Total 789,612 723,120 519,186 451,694 446,058
Cost of sales 495,185 466,952 327,423 282,147 278,427
Marketing, administrative and
development expenses 164,355 147,288 107,854 95,434 95,441
Operating profit 130,072 108,880 83,909 74,113 72,190
Other income (expense), net (15,477) (21,726) (22,706) (28,652) (33,372)
Earnings before income taxes 114,595 87,154 61,203 45,461 38,818
Income taxes 45,266 34,426 23,987 19,547 18,050
Earnings before cumulative effect of
accounting change and early
redemption of subordinated notes 69,329 52,728 37,216 25,914 20,768
Cumulative effect of accounting change(2) - - - 1,459 -
Early redemption of subordinated
notes, net of income taxes(3) - - (5,576) - -
Net earnings $ 69,329 $ 52,728 $ 31,640 $ 27,373 $ 20,768
Earnings per common share(4):
Before cumulative effect of accounting
change and early redemption of
subordinated notes $ 1.63 $ 1.25 $ .94 $ .66 $ .54
Cumulative effect of accounting change(2) - - - .04 -
Early redemption of subordinated notes,
net of income taxes(3) - - (.14) - -
Net earnings per common share $ 1.63 $ 1.25 $ .80 $ .70 $ .54
Consolidated Balance Sheet Data
Working capital $ 58,910 $ 41,945 $ 15,767 $ 33,828 $ 29,417
Total assets 467,119 443,545 331,117 279,818 268,264
Long-term debt, less
current installments 99,900 149,808 155,293 190,058 225,278
Shareholders' equity (deficit) 186,649 106,338 11,012 (29,419) (66,311)
<FN>
(1)Includes the operations of Trigon Industries Limited from the date of its acquisition in January 1995.
(2)Reflects cumulative effect of the implementation as of January 1, 1993 of Financial Accounting Standard No. 109,
"Accounting for Income Taxes."
(3)Reflects after-tax charge to earnings arising from the early redemption in 1994 of the Company's 12-5/8% Senior
Subordinated Notes.
(4)Per common share data has been restated for periods prior to 1995 to reflect the effect of a two-for-one stock
split in the nature of a 100% stock dividend distributed on September 29, 1995 to shareholders of record at the
close of business on September 15, 1995.
</FN>
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
Net Sales
Net sales increased 9% in 1996 compared with 1995 and 39% in 1995
compared with 1994.
The 1996 increase in net sales was due primarily to higher unit volume in
the Company's major classes of products, the added net sales of businesses
acquired during 1996, discussed below, and higher average selling prices for
certain products. Foreign currency translation did not have a material effect
on the Company's operating results in 1996 or 1995.
During 1996, the Company made several acquisitions. These included the
acquisition in June 1996 of the protective packaging business of Southcorp
Holdings Limited, which had previously been the Company's licensee in
Australasia. They also included small acquisitions in Canada, Finland, Germany
and the United States. These transactions, which were effected for cash in
the aggregate amount of approximately $30 million and accounted for as
purchases, were not material to the Company's consolidated financial
statements.
Approximately two-fifths of the 1995 increase in net sales resulted from
the added sales of Trigon Industries Limited ("Trigon"), which the Company
acquired in early January 1995. Trigon's operations have subsequently been
integrated into the Company's other operations. Trigon, originally based in
New Zealand, was a multinational manufacturer of food packaging materials and
systems, durable mailers and bags and specialty adhesive products. The 1995
increase also reflected higher average selling prices for certain products,
higher unit volume in the Company's major classes of products and the added
net sales of other foreign businesses acquired during 1994.
Net sales from domestic operations increased 8% in 1996 compared with
1995 and 20% in 1995 compared with 1994. The 1996 increase was due primarily
to higher unit volume in certain of the Company's major classes of products as
well as higher average selling prices for certain products. The 1995 increase
was due primarily to higher average selling prices for certain products, the
added net sales of Trigon's U.S. operations and higher unit volume in certain
of the Company's major classes of products.
Net sales from foreign operations increased 11% in 1996 compared with
1995 and 86% in 1995 compared with 1994. The 1996 increase was primarily due
to the added net sales of businesses acquired in 1996, higher unit volume in
certain of the Company's major classes of products and, to a lesser extent,
higher average selling prices for certain products. The 1995 increase
resulted primarily from the added net sales of Trigon's operations outside of
the United States, the added net sales of other foreign businesses acquired
during 1994, increased unit volume in the Company's major classes of products,
higher average selling prices for certain products and the modest contribution
of foreign currency translation.
Net sales of engineered products, which consist primarily of Instapak(R)
products and thick polyethylene foams, increased 13% in 1996 compared with
1995 and 21% in 1995 compared with 1994. The increase in net sales in both
1996 and 1995 was due primarily to higher unit volume and, to a lesser extent,
higher average selling prices for certain 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 11% in 1996 compared with 1995 and 42% in
1995 compared with 1994. In 1996, the increase was due primarily to higher
unit volume, the added net sales of businesses acquired in 1996 and, to a
lesser extent, higher average selling prices for certain products. The 1995
increase resulted primarily from the added net sales of Trigon's durable
mailer and bag products, higher average selling prices for certain products,
the added sales of businesses acquired during 1994, and higher unit volume for
certain products.
Net sales of food packaging products, which consist primarily of Dri-Loc
(R) pads and food packaging films and systems, increased 3% in 1996 compared
with 1995 and 84% in 1995 compared with 1994. The 1996 increase was due
primarily to higher unit volume of the Company's Dri-Loc (R) products, which
was partially offset by the effect of the transfer during 1996 of the sales of
certain food packaging products in Australia to a small unconsolidated joint
venture in that country and the effect of lower unit volume in certain other
food packaging products. The increase in 1995 was due primarily to the added
sales of Trigon's food packaging products and, to a lesser extent, higher unit
volume.
Net sales of other products decreased to $29,473,000 in 1996 from
$33,200,000 in 1995 primarily due to decreased unit volume of the Company's
mill tonnage paper products partially offset by an increase in unit volume of
the Company's specialty adhesive products. Net sales of other products
increased to $33,200,000 in 1995 from $19,792,000 in 1994 primarily due to the
added net sales of specialty adhesive products resulting from the Trigon
acquisition.
Costs and Expenses
Cost of sales increased 6% in 1996 compared with 1995 and 43% in 1995
compared with 1994. The increase in both the 1996 and 1995 periods reflects
primarily the higher level of net sales in each period. Cost of sales as a
percentage of sales was 62.7%, 64.6% and 63.1% in 1996, 1995 and 1994,
respectively. In 1996, cost of sales as a percentage of net sales benefited
from certain lower raw material costs, but in 1995 it increased due to certain
higher raw material costs and the impact of the Trigon and other acquisitions.
Marketing, administrative and development expenses increased 12% in 1996
compared with 1995 and 37% in 1995 compared with 1994. The increase in both
1996 and 1995 reflects primarily the Company's higher level of operations,
including the added marketing, administrative and development expenses of
acquired companies. The increase also reflects costs associated with the
integration of these companies. Marketing, administrative and development
expenses changed modestly as a percentage of net sales each year from 1994
through 1996.
Operating Profit
Operating profit increased 19% in 1996 compared with 1995 and 30% in 1995
compared with 1994. Domestic operating profit increased 26% in 1996 compared
with 1995 and 15% in 1995 compared with 1994, and foreign operating profit
increased 5% in 1996 compared with 1995 and 83% in 1995 compared with 1994.
In each case, these increases were due primarily to the Company's higher level
of net sales and the relative changes in costs and expenses discussed above.
While consolidated and domestic operating profit increased in 1996 as a
percentage of net sales, foreign operating profit decreased as a percentage of
net sales primarily due to the added expenses of acquired companies, including
additional amortization of acquired intangible assets, and integration costs.
Other Income (Expense)
Other expense decreased to $15,477,000 in 1996 compared with $21,726,000
in 1995 and $22,706,000 in 1994. Interest expense, which is the principal
component of this item, decreased to $13,350,000 in 1996 from $19,106,000 in
1995 and $19,363,000 in 1994. The decrease in interest expense in 1996
resulted primarily from lower levels of outstanding indebtedness compared with
1995 and, to a lesser extent, lower effective interest rates. During 1995,
although the Company had higher levels of outstanding indebtedness compared
with 1994, the effective interest rates on such indebtedness were lower than
those which prevailed in 1994 primarily due to the refinancing in July 1994 of
the Company's 12-5/8% Senior Subordinated Notes (the "12-5/8% Notes").
Income Taxes
The Company's effective income tax rate was 39.5% in 1996 and 1995 and
39.2% in 1994. The Company's effective tax rate was higher than the statutory
U.S. federal income tax rate in each year primarily due to state income taxes.
The Company anticipates that its effective income tax rate in 1997 will remain
at a rate comparable to that in 1996.
Earnings
Net earnings increased 31% in 1996 compared with 1995. Earnings
increased 42% in 1995 compared with 1994, excluding the effect of an
extraordinary charge to earnings in 1994 of $5,576,000, or $0.14 per share,
attributable to the refinancing of the 12-5/8% Notes. After giving effect to
this charge, net earnings increased 67% in 1995 compared with 1994.
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 servicing requirements with funds provided by operations
and by borrowings under its available lines of credit or otherwise.
Cash flows from operating activities were $116,065,000 in 1996,
$75,218,000 in 1995 and $62,941,000 in 1994. The increase each year was due
primarily to higher levels of earnings, higher levels of depreciation and
amortization, and changes in operating assets and liabilities resulting
primarily from the Company's higher level of operations.
Cash flows used in investing activities were $45,544,000 in 1996,
$47,993,000 in 1995 and $32,518,000 in 1994. Such cash was used primarily to
fund acquisitions and capital expenditures. The fluctuation between years was
primarily due to the timing of acquisitions and capital expenditures.
Cash flows used in financing activities were $75,121,000 in 1996,
$30,912,000 in 1995 and $39,097,000 in 1994. The higher amount of net cash
used in financing activities in 1996 primarily reflects the higher level of
net repayments of outstanding debt in 1996.
At December 31, 1996, the Company had working capital of $58,910,000, or
13% of total assets, compared to working capital of $41,945,000, or 9% of
total assets, at December 31, 1995. The increase in working capital was due
primarily to an increase in accounts receivable resulting from the Company's
higher level of net sales and a decrease in current portion of long-term debt
and notes payable resulting from the timing of scheduled maturities on the
remaining outstanding debt. These changes were partially offset by an
increase in accrued liabilities, which was primarily due to the higher level
of operations.
The Company's ratio of current assets to current liabilities (current
ratio) was 1.4 at December 31, 1996 and 1.3 at December 31, 1995. The
Company's ratio of current assets less inventory to current liabilities (quick
ratio) was 1.0 at December 31, 1996 and 0.9 at December 31, 1995. The
increases in these ratios in 1996 resulted primarily from the increase in
working capital discussed above.
Long-term debt, less current installments, declined to $99,900,000 at
December 31, 1996 from $149,808,000 at December 31, 1995 due primarily to net
repayments of outstanding long-term debt during 1996, including the repayment
of the term loan portion of the BT Credit Agreement, mentioned below. Current
installments of long-term debt declined to $2,891,000 at December 31, 1996
from $17,953,000 at December 31, 1995 reflecting the timing of scheduled
maturities on the remaining outstanding debt.
The Company's principal credit agreement 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. As of
December 31, 1996, the Company's available lines of credit, including the BT
Credit Agreement, amounted to approximately $256 million of which
approximately $194 million was unused. Such lines of credit permit the
Company and certain of its subsidiaries to borrow for working capital and
other corporate purposes.
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
December 31, 1996.
The Company's shareholders' equity increased to $186,649,000 at December
31, 1996 from $106,338,000 at December 31, 1995 primarily as a result of the
Company's net earnings for 1996.
Impact of Inflation
Inflation did not have a material impact on the Company's consolidated
financial statements in the 1994 to 1996 period.
Other Matters
The Company's worldwide operations are subject to environmental laws and
regulations which, among other things, impose limitations on the discharge of
pollutants into the air and water and establish standards for the treatment,
storage and disposal of solid and hazardous wastes. The Company reviews the
effects of environmental laws and regulations on its operations and believes
that it is in substantial compliance with all material applicable
environmental laws and regulations.
At December 31, 1996, the Company was a party to, or otherwise involved
in, several federal and state government environmental proceedings and private
environmental claims for the cleanup of Superfund or other sites. The Company
may have potential liability for investigation and cleanup of certain of such
sites. At most of such sites, numerous companies, including either the
Company or one of its predecessor companies, have been identified as
potentially responsible parties ("PRPs") under Superfund or related laws. It
is the Company's policy to provide for environmental cleanup costs if it is
probable that a liability has been incurred and if an amount which is within
the estimated range of the costs associated with various alternative
remediation strategies is reasonably estimable without giving effect to any
possible future insurance proceeds. As assessments and cleanups proceed,
these liabilities are reviewed periodically and adjusted as additional
information becomes available. At December 31, 1996 and 1995, such
environmental related provisions were not material. While it is often
difficult to estimate potential liabilities and the future impact of
environmental matters, based upon the information currently available to the
Company and its experience in dealing with such matters, the Company believes
that its potential liability with respect to such sites is not material.
Environmental liabilities are paid over an extended period, and the timing of
such payments cannot be predicted with certainty.
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended December 31, 1996, 1995 and 1994
(In thousands of dollars except per share data)
<CAPTION>
1996 1995 1994
________________________________________________________________________________________
<S> <C> <C> <C>
Net sales $789,612 $723,120 $519,186
Cost of sales 495,185 466,952 327,423
Gross profit 294,427 256,168 191,763
Marketing, administrative and
development expenses 164,355 147,288 107,854
Operating profit 130,072 108,880 83,909
Other income (expense):
Interest income 1,482 1,187 1,140
Interest expense (13,350) (19,106) (19,363)
Other, net (3,609) (3,807) (4,483)
Other income (expense), net (15,477) (21,726) (22,706)
Earnings before income taxes 114,595 87,154 61,203
Income taxes 45,266 34,426 23,987
Earnings before early redemption of
subordinated notes 69,329 52,728 37,216
Early redemption of subordinated notes,
net of income taxes - - (5,576)
Net earnings $ 69,329 $ 52,728 $ 31,640
Earnings per common share:
Before early redemption of subordinated notes $ 1.63 $ 1.25 $ 0.94
Early redemption of subordinated notes,
net of income taxes - - (.14)
Net earnings per common share $ 1.63 $ 1.25 $ 0.80
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
(In thousands of dollars except share data)
<CAPTION>
1996 1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,985 $ 7,661
Accounts receivable, less allowance for doubtful
accounts of $5,623 in 1996 and $5,261 in 1995 124,204 116,446
Other receivables 8,258 6,170
Inventories 57,231 54,500
Prepaid expenses 1,095 2,470
Deferred income taxes 13,193 8,912
Total current assets 206,966 196,159
Property and equipment:
Land and buildings 81,629 77,603
Machinery and equipment 199,275 177,832
Leasehold improvements 8,409 6,766
Furniture and fixtures 12,029 11,956
Construction in progress 6,139 10,711
307,481 284,868
Less accumulated depreciation and amortization 132,919 115,012
Property and equipment, net 174,562 169,856
Patents and patent rights, less accumulated
amortization of $15,139 in 1996 and $13,619 in 1995 11,998 12,107
Excess of cost over fair value of net assets acquired, less
accumulated amortization of $12,966 in 1996 and
$7,607 in 1995 47,840 41,932
Other assets 25,753 23,491
$467,119 $443,545
<FN>
See accompanying notes to consolidated financial statements.
</FN>
1996 1995
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $12,674 $18,887
Current installments of long-term debt 2,891 17,953
Accounts payable 46,934 44,460
Accrued wages, salaries and related costs 33,448 26,759
Accrued interest 323 1,560
Other accrued liabilities 36,078 28,865
Income taxes payable 15,708 15,730
Total current liabilities 148,056 154,214
Long-term debt, less current installments 99,900 149,808
Deferred income taxes 19,863 21,875
Other liabilities 12,651 11,310
Total liabilities 280,470 337,207
Commitments and contingent liabilities (notes 4, 5 and 8)
Shareholders' equity:
Preferred stock, no par value. Authorized: 1,000,000
shares; none issued in 1996 and 1995 - -
Common stock, $.01 par value. Authorized: 60,000,000
shares in 1996 and 1995; Issued: 42,747,704 shares
in 1996 and 42,506,573 shares in 1995 427 425
Additional paid-in capital 167,801 158,400
Retained earnings (deficit) 16,021 (53,308)
Accumulated translation adjustment 8,615 7,279
192,864 112,796
Less:
Deferred compensation 5,988 6,232
Treasury stock at cost: 226,758 shares held
in 1996 and 224,758 shares held in 1995 227 226
Total shareholders' equity 186,649 106,338
$467,119 $443,545
</TABLE>
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<CAPTION>
Additional Retained Accumulated
Common Paid-in Earnings Translation Deferred Treasury
Stock Capital (Deficit) Adjustment Compensation Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 199 $108,361 $(137,676) $ 5,063 $ (5,120) $ (246) $ (29,419)
Net earnings - - 31,640 - - - 31,640
Proceeds from awards of
contingent stock, net 1 52 - - - - 53
Excess of fair value over
proceeds from awards of
contingent stock, net - 1,615 - - (1,615) - -
Amortization - - - - 2,957 - 2,957
Tax benefit in excess of
amortization on stock
awards - 664 - - - - 664
Contingent stock forfeited - (61) - - 61 (2) (2)
Shares issued for non-cash
compensation 1 2,360 - - - - 2.361
Shares issued in acquisitions - 1,695 - - - - 1,695
Foreign currency translation - - - 1,063 - - 1,063
Balance, December 31, 1994 $ 201 $114,686 $(106,036) $ 6,126 $ (3,717) $ (248) $ 11,012
Net earnings - - 52,728 - - - 52,728
Proceeds from awards of
contingent stock, net - 160 - - - - 160
Excess of fair value over
proceeds from awards of
contingent stock, net 2 5,931 - - (5,933) - -
Amortization - - - - 3,370 - 3,370
Tax benefit in excess of
amortization on stock
awards - 527 - - - - 527
Contingent stock forfeited - (48) - - 48 (2) (2)
Shares issued for non-cash
compensation 1 3,239 - - - - 3,240
Shares issued in acquisitions 9 34,117 - - - 24 34,150
Stock split 212 (212) - - - - -
Foreign currency translation - - - 1,153 - - 1,153
Balance, December 31, 1995 $ 425 $ 158,400 $(53,308) $ 7,279 $ (6,232) $ (226) $ 106,338
Net earnings - - 69,329 - - - 69,329
Proceeds from awards of
contingent stock, net - 92 - - - - 92
Excess of fair value over
proceeds from awards of
contingent stock, net 1 3,304 - - (3,305) - -
Amortization - - - - 3,498 - 3,498
Tax benefit in excess of
amortization on stock
awards - 1,700 - - - - 1,700
Contingent stock forfeited - (51) - - 51 (1) (1)
Shares issued for non-cash
compensation 1 3,743 - - - - 3,744
Shares issued related to
prior year acquisition - 613 - - - - 613
Foreign currency translation - - - 1,336 - - 1,336
Balance, December 31, 1996 $ 427 $ 167,801 $ 16,021 $ 8,615 $ (5,988) $ (227) $186,649
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 69,329 $ 52,728 $ 31,640
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Early redemption of subordinated notes - - 5,576
Depreciation and amortization of property and equipment 22,862 20,473 14,921
Other depreciation and amortization 17,035 14,807 8,599
Deferred tax provision (5,297) (1,375) 385
Net losses on disposals of property and equipment 149 273 397
Non-cash compensation 3,242 3,556 3,256
Other, net 2,217 811 (661)
Change in operating assets and liabilities:
Receivables (7,798) (13,016) (17,478)
Inventories 1,164 (5,953) (4,018)
Prepaid expenses 1,644 (1,441) 666
Accounts payable 1,113 (9,262) 14,913
Accrued interest (1,237) 237 (9,810)
Other accrued liabilities 13,356 10,813 4,264
Income taxes payable (1,714) 2,567 10,291
Net cash provided by operating activities 116,065 75,218 62,941
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment (17,015) (21,056) (17,470)
Proceeds from sales of property and equipment 1,497 776 226
Net cash utilized in purchase of subsidiaries (30,026) (27,713) (15,274)
Net cash used in investing activities (45,544) (47,993) (32,518)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 108,131 75,271 203,85
Principal payments on long-term debt (177,039) (114,281) (234,613)
Net (payments on) proceeds from notes payable (6,213) 8,098 (293)
Subordinated debt redemption premium - - (8,048)
Net cash used in financing activities (75,121) (30,912) (39,097)
Effect of exchange rate changes on cash and cash equivalents (76) 195 435
CASH AND CASH EQUIVALENTS:
Decrease during the period (4,676) (3,492) (8,239)
Balance, beginning of period 7,661 11,153 19,392
Balance, end of period $ 2,985 $ 7,661 $ 11,153
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 14,173 $ 18,582 $ 28,645
Income taxes $ 39,991 $ 33,898 $ 14,349
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
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.
Certain of the Company's non-U.S. subsidiaries are included in the
consolidated financial statements on a calendar year basis while the remaining
non-U.S. subsidiaries are included on the basis of a fiscal year ended
November 30.
Prior years' financial statement amounts have been reclassified to conform
with their 1996 presentation.
Foreign Currency
All balance sheet accounts are translated at year-end exchange rates, and
statement of earnings items are translated at weighted average month-end
exchange rates. Resulting translation adjustments are made directly to a
separate component of shareholders' equity.
Earnings before income taxes includes an aggregate exchange gain of $271,000
for the year ended December 31, 1996 and aggregate exchange losses of $828,000
and $697,000 for the years ended December 31, 1995 and 1994, respectively.
Cash and Cash Equivalents
Investments with original maturities of three months or less are considered to
be cash equivalents. The Company's policy is to invest cash in excess of
short-term operating and debt service requirements in such cash equivalents,
which amounted to $3,489,000 and $6,134,000 at December 31, 1996 and 1995,
respectively. These instruments consisted of money market and commercial
paper amounts stated at cost, which approximates market because of the short
maturity of these instruments.
Derivative Financial Instruments
The Company has limited involvement with derivative financial instruments that
have off-balance-sheet risk. These financial instruments generally include
interest rate and currency swap agreements, interest rate swap agreements,
interest rate collar agreements, foreign exchange forward contracts and
foreign currency option contracts. Such financial instruments are used to
limit, fix or offset certain interest rate or foreign currency exposures with
respect to the Company's borrowings and trade activities. The Company does
not purchase, hold or sell derivative financial instruments for trading
purposes. The Company is exposed to credit risk in the event of the inability
of the counterparties to its outstanding derivative contracts to perform their
obligations. However, the Company seeks to minimize such risk by entering
into such transactions with counterparties that are major financial
institutions with high credit ratings.
Gains and losses related to qualifying hedges of firm commitments or
anticipated transactions are deferred and are recognized in income or as
adjustments of carrying amounts when the underlying hedged transaction is
settled. Gains and losses on financial instruments that do not qualify as
hedges are recognized as other income or expense on a current basis.
Inventories
Inventories are stated at the lower of cost or market. The majority of U.S.
inventories are valued using the last-in, first-out ("LIFO") method; other
U.S. inventories, principally parts used in packaging systems, are valued
using the first-in, first-out ("FIFO") method. Inventories of foreign
operations are valued using primarily the FIFO method. Had the FIFO
method (which approximates current cost) been used for all inventory at
December 31, 1996, inventories would have been higher by $4,729,000
($4,557,000 and $4,848,000 in 1995 and 1994, respectively). The cost elements
of work in process and finished goods inventories are raw materials, direct
labor and manufacturing overhead. Because the cost of certain inventories is
determined on the LIFO method, it is not practicable to present separately the
components of inventories (raw materials, work in process and finished goods).
Property and Equipment
Property and equipment are stated at acquisition cost. Property and equipment
no longer in use or surplus to the Company's needs are carried at the lower of
cost or fair value. Depreciation of buildings and equipment is provided over
the estimated useful lives (generally periods ranging up to 40 years and 10
years, respectively) of the related assets. Amortization of leasehold
improvements is provided over the lesser of the term of the lease or the
asset's useful life. The Company generally uses the straight-line method of
depreciation for financial reporting purposes and accelerated methods of
depreciation for income tax purposes.
Intangibles and Other Assets
Patents and patent rights are stated at acquisition cost. Amortization of
patents and patent rights is recorded using the straight-line method over the
legal lives of the patents, generally for periods ranging up to 20 years. The
excess of cost over fair value of net assets acquired is amortized over
periods ranging up to 40 years. Other intangible assets, including
non-competition agreements, included in other assets are amortized over the
life of such agreements, usually ranging from 1 to 5 years.
The carrying value of the excess of cost over fair value of net assets
acquired is periodically reviewed by the Company. Impairments are recognized
when the expected future undiscounted operating cash flows derived from such
intangible assets are less than their carrying value.
Impairment of Long-Lived Assets
Long-lived assets, including property and equipment, certain intangibles, and
the excess of cost over fair value of net assets acquired related to those
assets, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If
the sum of the expected future undiscounted cash flows is less than the
carrying amount of the asset, a loss is recognized for the difference between
the fair value and the carrying amount.
Employee Benefit Plans
The Company has a non-contributory profit-sharing plan covering most U.S.
employees, except those employees covered by collective bargaining agreements
that do not provide for their participation. Contributions to this plan,
which are made at the discretion of the Board of Directors, may be made in
cash, shares of the Company's common stock, or in a combination of cash and
shares of the Company's common stock. The Company also has a thrift and
Section 401(k) plan in which most U.S. employees of the Company are eligible
to participate, except those employees who are covered by certain collective
bargaining agreements that do not provide for participation in the plan.
Under this plan, the Company matches 50% of each employee's contributions to a
maximum company contribution of 3% of the employee's compensation.
Forfeitures of non-vested interests in each of these plans remain in the
respective plans for the benefit of the remaining participants. The Company
also has pension or other retirement plans for employees of certain foreign
subsidiaries and certain U.S. employees who are covered by collective
bargaining agreements. Company contributions to or provisions for its profit-
sharing, thrift and other retirement plans, net of forfeitures, are charged to
operations and amounted to $10,903,000 in 1996 ($10,069,000 and $8,718,000 in
1995 and 1994, respectively).
The Company provides various other benefit programs to active employees
including group medical, insurance and other welfare benefits. The costs of
these benefit programs are charged to operations as incurred. Eligibility to
participate in these programs generally ceases upon retirement or other
separation from service except as required by applicable law.
Research and Development Costs
Research and development costs are charged to operations as incurred and
amounted to $15,449,000 in 1996 ($14,597,000 and $10,912,000 in 1995 and 1994,
respectively).
Environmental Expenditures
Environmental expenditures that relate to ongoing business activities are
expensed or capitalized, as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenues, are expensed. Liabilities are recorded when the
Company determines that environmental assessments or remediations are probable
and that the costs or a range of costs to the Company associated therewith can
be reasonably estimated.
Income Taxes
The Company and its domestic subsidiaries file a consolidated U.S. federal
income tax return. The Company's non-U.S. subsidiaries file income tax
returns in their respective local jurisdictions. The Company provides for
taxes on the assumed repatriation of accumulated earnings of its foreign
subsidiaries.
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. A valuation allowance is
provided when it is more likely than not that all or some portion of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to the taxable income
in the years in which those temporary differences are expected to be recovered
or settled.
Earnings Per Common 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
contingent stock awards and shares issued as non-cash compensation. The
weighted average number of common shares outstanding in 1996 was 42,459,000
(42,057,000 and 39,884,000 in 1995 and 1994, respectively).
Other Matters
The Company is primarily engaged in a single line of business: the manufacture
and sale of protective and specialty packaging materials and systems to a
diverse group of customers throughout the world. The Company performs ongoing
credit evaluations of its customers' financial condition and generally
requires no collateral from its customers. No single customer or affiliated
group of customers accounts for more than 10% of the Company's net sales.
In conformity with generally accepted accounting principles, management of the
Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent
liabilities to prepare the Company's consolidated financial statements.
Actual results could differ from these estimates.
Note 2 Acquisitions
In June 1996, the Company acquired the Australian and New Zealand protective
packaging business of Southcorp Holdings Limited. During 1996, the Company
also made several other small acquisitions, including acquisitions in Canada,
Finland, Germany and the United States. These transactions, which were
effected for cash in the aggregate amount of approximately $30 million and
accounted for as purchases, were not material to the Company's consolidated
financial statements.
On January 10, 1995, the Company acquired Trigon Industries Limited
("Trigon"), a privately owned, New Zealand-based manufacturer of food
packaging films and systems, durable mailers and bags and specialty adhesive
products, for 882,930 newly issued shares of common stock valued at $35.70 per
share and $25,592,000 in cash primarily provided by proceeds from borrowings
under the BT Credit Agreement (note 4), representing a purchase price of
approximately $57 million. The acquired net assets of Trigon included
property and equipment of approximately $28,400,000, intangible assets of
approximately $43,000,000 including trademarks, non-competition agreements,
and the excess of cost over the fair value of net assets acquired, $25,000,000
of net indebtedness, and working capital of approximately $12,000,000. Such
acquisition was accounted for as a purchase.
During 1995, the Company made certain other small acquisitions in the United
States. These transactions, which were effected in exchange for shares of the
Company's common stock, cash or a combination of the Company's common stock
and cash, were accounted for as purchases and were not material to the
Company's consolidated financial statements.
During 1994, the Company made several small acquisitions in England, France,
Italy and Norway. These transactions, which were effected in exchange for
shares of the Company's common stock, cash or a combination of shares of the
Company's common stock and cash, were accounted for as purchases and were
not material to the Company's consolidated financial statements.
Note 3 Geographic Areas
The Company's operations are conducted primarily in the United States, Europe,
the Asia/Pacific region, Canada and Latin America, and its products are
distributed in these areas as well as other parts of the world. Net sales for
each major geographic area include transfers to other geographic areas. Such
transfers are made at prices intended to provide reasonable and appropriate
returns to the selling unit, and applicable eliminations have been applied to
the intergeographic transactions.
Operating profit consists of net sales less operating expenses. Other income
(expense), net and income taxes have not been added or deducted in the
computation of operating profit for each geographic area. Corporate expenses
have been allocated to the geographic areas for whose benefit the expenses
were incurred.
Identifiable assets are those assets that are used in the Company's operations
in each geographic area.
<TABLE>
Information by Major Geographic Area:
(In thousands of dollars)
<CAPTION>
Net Operating Identifiable
Sales Profit Assets
<S> <C> <C> <C>
1996
United States $ 504,449 $ 95,375 $ 213,223
Europe 204,474 25,696 156,242
Asia/Pacific & Other 113,687 9,001 97,654
Eliminations (32,998) - -
Consolidated $ 789,612 $ 130,072 $ 467,119
1995
United States $ 464,820 $ 75,828 $ 213,099
Europe 188,558 24,617 153,563
Asia/Pacific & Other 94,864 8,435 76,883
Eliminations (25,122) - -
Consolidated $ 723,120 $ 108,880 $ 443,545
1994
United States $385,484 $ 65,884 $185,510
Europe 107,990 13,882 116,800
Asia/Pacific & Other 44,681 4,143 28,807
Eliminations (18,969) - -
Consolidated $519,186 $ 83,909 $331,117
NOTE: Net sales shown for the United States, Europe and Asia/Pacific and Other include transfers to other
geographic areas as follows: United States, 1996--$22,888,000; 1995 --$18,412,000; 1994 --$14,850,000; Europe, 1996
- - --$4,781,000; 1995 --$2,398,000; 1994 --$1,368,000; Asia/Pacific and Other, 1996--$5,329,000; 1995 --$4,312,000;
1994 --$2,751,000.
</TABLE>
Note 4 Long-Term Debt
<TABLE>
A summary of long-term debt at December 31, 1996 and 1995 follows:
(In thousands of dollars)
<CAPTION>
1996 1995
<S> <C> <C>
BT Credit Agreement $38,228 $146,611
Foreign loans 59,719 16,352
Other 4,844 4,798
Total 102,791 167,761
Less current installments 2,891 17,953
Long-term debt, less current installments $ 99,900 $149,808
</TABLE>
The Company's principal credit agreement (the "BT Credit Agreement"), as
amended and restated in August 1996, is an unsecured $200 million revolving
credit facility ("Revolving Facility") that expires on June 30, 2001. Before
its restatement, the BT Credit Agreement also provided for a $100 million term
loan ("Term Loan"), the remaining portion of which was repaid during 1996.
The Revolving Facility has no minimum annual paydown provision. The Company's
borrowings under the Revolving Facility amounted to $38,228,000 at December
31, 1996. At December 31, 1995, the Company's outstanding borrowings under
the Revolving Facility and the Term Loan were $83,611,000 and $63,000,000,
respectively. The weighted average interest rates under the BT Credit
Agreement were approximately 6.8% and 7.1% at December 31, 1996 and 1995,
respectively. Had the Company not been a party to derivative financial
instruments, discussed below, at December 31, 1996 and 1995, the weighted
average interest rates related to the BT Credit Agreement would have been
approximately 6.7% and 7.1%, respectively.
Foreign loans have been incurred for acquisitions, working capital and other
corporate purposes. Certain of such loans are secured by foreign assets of
approximately $14 million and are due in varying annual installments through
2010 with fixed and variable interest rates. The weighted average interest
rates on such loans were 7.4% and 7.8% at December 31, 1996 and 1995,
respectively.
The Company's obligations under the BT Credit Agreement and certain foreign
and other loans and lines of credit bear interest at floating rates. The
Company utilizes certain derivative financial instruments to manage its
exposure to fluctuations in interest rates, including interest rate swaps and
collars and interest rate and currency swaps.
The BT Credit Agreement provides for changes in borrowing margins based on
certain financial criteria and imposes certain limitations on the operations
of the Company and its subsidiaries that 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 certain financial covenants relating to interest
coverage and debt leverage. The Company was in compliance with these
requirements as of December 31, 1996.
Under the BT Credit Agreement and other credit facilities, the Company had
available lines of credit at December 31, 1996 of approximately $256 million
of which approximately $194 million was unused. The Company is not subject to
any material compensating balance requirements in connection with its lines of
credit.
Scheduled annual maturities of long-term debt for the five years subsequent to
December 31,1996 are as follows: 1997 -- $2,891,000; 1998 -- $9,183,000; 1999
- - --$27,968,000; 2000 -$1,526,000 and 2001 -- $57,549,000.
In 1994, the Company redeemed all of its then outstanding 12-5/8% Senior
Subordinated Notes (the "12-5/8% Notes"), incurring an after-tax charge to
earnings of $5,576,000, or $0.14 per share.
Note 5 Financial Instruments
The Company is required by generally accepted accounting principles to
disclose its estimate of the fair value of material financial instruments,
including those recorded as assets or liabilities in its consolidated
financial statements and derivative financial instruments. The fair value
estimates of the Company's various debt instruments were derived by evaluating
the nature and terms of each instrument, considering prevailing economic and
market conditions, and examining the cost of similar debt offered at the
balance sheet date. Such estimates are subjective and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the Company's
estimates.
The carrying amounts of current assets and liabilities approximate fair value
due to their short-term maturity. The carrying amounts and estimated fair
values of the Company's material, non-current financial instruments at
December 31, 1996 and 1995 are as follows:
<TABLE>
(In thousands of dollars)
<CAPTION>
1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial liabilities:
Debt:
BT Credit Agreement $38,228 $38,228 $146,611 $146,611
Derivatives - 2,265 - 668
BT Credit Agreement, net 38,228 40,493 146,611 147,279
Foreign loans 59,719 60,163 16,352 16,530
Derivatives - 324 - -
Foreign loans, net 59,719 60,487 16,352 16,530
Other loans 4,844 4,565 4,798 5,001
Other liabilities 12,651 12,651 11,310 11,310
</TABLE>
The Company utilizes derivative financial instruments to manage its exposure
to fluctuations in interest rates and foreign exchange rates. The Company
does not purchase, hold or sell derivative financial instruments for trading
purposes.
Interest rate swaps and interest rate collars are used to reduce the Company's
exposure to fluctuations in interest rates by fixing or limiting the rate of
interest the Company pays on the notional amount of debt. At December 31,
1996, the Company was party to interest rate swaps and collars with an
aggregate notional amount of $22 million with various expiration dates through
June 2001. At December 31, 1995, the Company was party to interest rate swaps
with an aggregate notional amount of $50 million with various expiration dates
through June 1999.
Interest rate and currency swaps allow the Company to gain access to
additional sources of international financing while limiting foreign exchange
and interest rate exposure by swapping borrowings in U.S. dollars for
borrowings denominated in foreign currencies. At December 31, 1996, the
Company was party to interest rate and currency swaps with an aggregate
notional amount of $30 million and various expiration dates through December
2001. At December 31, 1995, the Company was party to interest rate and
currency swaps with an aggregate notional amount of $44 million with various
expiration dates through June 1999.
Foreign currency options and forwards are generally used by the Company to
limit the risk on anticipated international transactions. At December 31,
1996, the Company was not party to any material foreign currency options or
forwards. At December 31, 1995, the Company was party to foreign currency
options with an aggregate notional amount of approximately $14 million but
was not party to any material foreign currency forwards. The carrying value
and fair value of the foreign currency options were not material at December
31, 1995.
The fair values of the Company's various derivative instruments, as advised by
the Company's bankers, generally reflect the estimated amounts that the
Company would receive or pay to terminate the contracts at the reporting date.
Unrealized losses and realized gains and losses on the Company's financial
instruments and derivatives were not material to the consolidated financial
statements in 1996, 1995, and 1994.
The Company is exposed to credit losses in the event of the inability of the
counterparties to its outstanding derivative contracts to perform their
obligations, but it does not expect any counterparties to fail to do so given
their high credit ratings and financial strength. The Company believes that
off-balance sheet risk in conjunction with its derivative contracts would not
be material in the case of non-performance on the part of the counterparties
to such agreements.
Note 6 Shareholders' Equity
The Company's shareholders' equity increased to $186,649,000 at December 31,
1996 from $106,338,000 at December 31, 1995 primarily as a result of the
Company's net earnings in 1996.
On September 29, 1995, the Company distributed a two-for-one stock split in
the nature of a 100% stock dividend (the "1995 stock split") to the holders of
record of the Company's common stock at the close of business on September 15,
1995. As a result, a transfer was made from additional paid-in capital to
common stock in an amount equal to the aggregate par value of the shares of
common stock issued pursuant to this stock split. All per share data and
share information in the consolidated financial statements and notes thereto
have been adjusted to give retroactive effect to the 1995 stock split where
appropriate.
<TABLE>
A summary of changes in issued and outstanding shares of common stock and shares of treasury
stock of the Company follows:
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Changes in common stock:
Number of shares issued, beginning of year 42,506,573 20,111,618 19,924,661
Non-cash compensation 127,590 80,400 78,200
Awards of contingent stock 92,850 157,550 52,000
Shares issued related to acquisitions 20,691 957,335 56,757
Two-for-one stock split - 21,199,670 -
Number of shares issued, end of year 42,747,704 42,506,573 20,111,618
Changes in treasury stock:
Number of shares held, beginning of year 224,758 122,306 119,306
Shares issued in acquisition - (11,927) -
Contingent stock forfeited 2,000 2,000 3,000
Two-for-one stock split - 112,379 -
Number of shares held, end of year 226,758 224,758 122,306
</TABLE>
Non-cash compensation in each year includes shares issued for a portion of the
Company's contribution to its profit-sharing plan for the respective preceding
year and shares issued to non-employee directors in the form of awards under
the restricted stock plan for non-employee directors (the "Directors Stock
Plan"), discussed below. The aggregate amount of non-cash compensation
charged to operations amounted to $3,242,000, $3,556,000 and $3,256,000 in
1996, 1995 and 1994, respectively.
The Company's contingent stock plan provides for the granting to employees of
awards to purchase common stock (during the succeeding 60-day period) for less
than 100% of fair market value at the date of award. Shares issued under the
contingent stock plan ("Contingent Stock") are restricted as to disposition by
the holders for a period of at least three years after issue. In the event of
termination of employment prior to lapse of the restriction, the shares are
subject to an option to repurchase by the Company at the price at which the
shares were issued. Such restriction will lapse prior to the expiration of
the vesting period if certain events occur which affect the existence or
control of the Company.
The excess of fair value over the award price of Contingent Stock is charged
to operations as compensation over a three-year period. In 1996, such charges
amounted to $3,498,000 ($3,370,000 and $2,957,000 in 1995 and 1994,
respectively).
The aggregate fair value of Contingent Stock issued is credited to common
stock and additional paid-in capital accounts, and the unamortized portion of
the compensation is deducted from shareholders' equity.
The Company's restricted stock plan for non-employee directors provides annual
grants of shares to non-employee directors, and interim grants of shares to
eligible directors elected at other than an annual meeting, for less than 100%
of fair value at date of grant in lieu of cash payments for certain directors'
fees. Shares issued under this plan are restricted as to disposition by the
holders as long as such holders remain directors of the Company. The excess
of fair value over the granting price of shares issued under this plan is
charged to operations at the date of such grant. In 1996, such charges
amounted to $246,000 ($63,000 and $150,000 in 1995 and 1994, respectively).
The Company currently has the authority to issue 1,000,000 shares of preferred
stock, without par value, none of which were issued at December 31, 1996.
The Company has adopted only the disclosure provisions of Financial Accounting
Standards Board ("FASB") Statement No. 123, "Accounting for Stock-Based
Compensation," but applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its stock-based compensation plans.
The compensation cost that has been charged against income for the Company's
stock-based compensation was noted above. Since such compensation cost is
consistent with the compensation cost that would have been recognized for the
Company's stock plans under the provisions of FASB Statement No. 123, the pro
forma disclosure requirements under such statement are not applicable.
A summary of the changes in shares available for the Directors Stock Plan and
the Contingent Stock Plan follows:
<TABLE>
<CAPTION>
Changes in the Directors Stock Plan shares: 1996 1995 1994
<S> <C> <C> <C>
Number of shares available, beginning of year 161,400 82,200 87,800
Shares issued for new awards (1) (7,200) (1,500) (5,600)
Two-for-one stock split - 80,700 -
Reduction in shares authorized during year (125,000) - -
Number of shares available, end of year 29,200 161,400 82,200
Weighted average per share market value
of stock on grant date (2) $35.13 $21.50 $13.89
Changes in the Contingent Stock Plan shares: 1996 1995 1994
Number of shares available, beginning of year 737,000 505,900 554,900
Shares issued for new awards (1) (92,850) (157,550) (52,000)
Contingent stock forfeited 2,000 2,000 3,000
Two-for-one stock split - 386,650 -
Number of shares available, end of year 646,150 737,000 505,900
Weighted average per share market value
of stock on grant date (2) $36.59 $21.97 $16.04
<FN>
(1) For the Directors Stock Plan during 1995, all 1,500 shares were issued before the September 1995 stock split. For
the Contingent Stock Plan during 1995, 119,050 shares were issued before such stock split and the remaining 38,500
shares were issued after the stock split.
(2) Per share data adjusted to reflect the effect of the September 1995 two-for-one stock split paid in the nature of
a 100% stock dividend.
</FN>
</TABLE>
Note 7 Income Taxes
The Company's method of accounting for income taxes is the asset and liability
method, under which deferred tax assets and liabilities are recognized for
temporary differences and are measured using enacted tax rates and laws
applicable to the periods in which the taxes become payable.
The components of earnings before income taxes and, in 1994, before the early
redemption of the 12-5/8% Notes (note 4) follow:
<TABLE>
(In thousands of dollars)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Domestic $ 91,055 $ 61,007 $ 44,150
Foreign 23,540 26,147 17,053
$114,595 $ 87,154 $ 61,203
The components of the provision for income taxes on earnings and, in 1994, before the effect of the early redemption
of the 12-5/8% Notes follow:
</TABLE>
<TABLE>
(In thousands of dollars)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current tax provision:
U.S. federal $ 31,888 $ 20,624 $ 13,543
U.S. state and local 8,085 5,830 3,981
Foreign 10,590 9,347 6,078
50,563 35,801 23,602
Deferred tax provision (benefit):
Domestic (4,067) (2,589) 631
Foreign (1,230) 1,214 (246)
(5,297) (1,375) 385
Provision for income taxes $ 45,266 $ 34,426 $ 23,987
The Company's deferred tax liability, net of deferred tax assets, at December 31, 1996 and 1995 amounted to
$6,014,000 and $12,452,000, respectively. The principal components of the Company's deferred tax assets and
liabilities at December 31, 1996 and 1995 are as follows:
</TABLE>
<TABLE>
(In thousands of dollars)
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Accrued expenses $ 7,970 $ 3,057
Facilities consolidation and integration 3,801 4,485
Patents and other intangibles 2,830 933
Property and equipment 1,169 3,076
Deferred revenue 1,128 694
Deferred compensation 1,121 683
Inventory 824 745
Bad debts 732 626
Other 5,159 2,439
24,734 16,738
Valuation allowance (277) (522)
Deferred tax asset $24,457 $16,216
Deferred tax liabilities:
Property and equipment $24,944 $21,670
Deferred revenue 855 1,230
Patents and other intangibles 598 756
Other 4,074 5,012
Deferred tax liability $30,471 $28,668
</TABLE>
The Company expects that it is more likely than not that the net deferred tax
assets of $24,457,000 at December 31, 1996 will be realized based on the
future reversals of existing deferred tax liabilities and the continuation of
earnings, which may be affected by factors outside the Company's control. The
valuation allowance of $277,000 is maintained for certain foreign deferred tax
assets primarily relating to insignificant net operating losses. The net
change in the valuation allowance for deferred tax assets was a decrease of
$245,000 in 1996 related to benefits arising from these net operating losses.
An explanation of the difference between the effective income tax rate and the
statutory U.S. federal income tax rate expressed as a percentage of earnings
before income taxes for the years ended December 31, 1996, 1995 and 1994
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
Provision for foreign withholding taxes
and additional U.S. taxes on
repatriated and accumulated earnings of
foreign subsidiaries 0.1 0.1 1.4
Tax effect of expenses not subject
to tax benefit 1.4 1.7 0.5
State income taxes, net of U.S. federal income tax benefit 4.5 4.0 4.1
Taxes on foreign earnings at other than the
statutory U.S. federal income tax rate (0.6) (0.4) (1.0)
Other miscellaneous items (0.9) (0.9) (0.8)
Effective income tax rate 39.5% 39.5% 39.2%
</TABLE>
The Company's tax provisions for 1996, 1995 and 1994 give effect to foreign
withholding taxes on the repatriation of accumulated earnings from the
Company's foreign subsidiaries and additional, if any, U.S. taxes on such
accumulated earnings. The Company has provided U.S. and foreign income taxes
on the accumulated earnings of the Company's foreign subsidiaries through
December 31, 1996.
The Company's Dutch subsidiary is entitled to certain tax incentives to
manufacture certain product lines under agreements with local tax authorities.
The total amount of such incentives is dependent on the profitability of such
product lines over a period extending through 1999.
Note 8 Commitments and Contingent Liabilities
The Company is obligated under the terms of various leases covering many of
the facilities occupied by the Company. The Company accounts for
substantially all of its leases as operating leases. Net rental expense for
1996 was $10,939,000 ($10,228,000 and $8,281,000 in 1995 and 1994,
respectively). Estimated future minimum annual rental commitments under
noncancelable real property leases expiring through 2023 are as follows: 1997
- - - $9,355,000; 1998 - $7,285,000; 1999 - $4,992,000; 2000 - $3,863,000; 2001 -
$3,196,000; and subsequent years - $9,125,000.
The Company's worldwide operations are subject to environmental laws and
regulations which, among other things, impose limitations on the discharge of
pollutants into the air and water and establish standards for the treatment,
storage and disposal of solid and hazardous wastes. The Company reviews the
effects of environmental laws and regulations on its operations and believes
that it is in substantial compliance with all material applicable
environmental laws and regulations.
At December 31, 1996, the Company was a party to, or otherwise involved in,
several federal and state government environmental proceedings and private
environmental claims for the cleanup of Superfund or other sites. The Company
may have potential liability for investigation and cleanup of certain of such
sites. At most of such sites, numerous companies, including either the
Company or one of its predecessor companies, have been identified as
potentially responsible parties ("PRPs") under Superfund or related laws. It
is the Company's policy to provide for environmental cleanup costs if it is
probable that a liability has been incurred and if an amount which is within
the estimated range of the costs associated with various alternative
remediation strategies is reasonably estimable, without giving effect to any
possible future insurance proceeds. As assessments and cleanups proceed,
these liabilities are reviewed periodically and adjusted as additional
information becomes available. At December 31, 1996 and 1995, such
environmental related provisions are not material. While it is often
difficult to estimate potential liabilities and the future impact of
environmental matters, based upon the information currently available to the
Company and its experience in dealing with such matters, the Company believes
that its potential liability with respect to such sites is not material.
Environmental liabilities may be paid over an extended period, and the timing
of such payments cannot be predicted with certainty.
The Company is also involved in various legal actions incidental to its
business. Company management believes, after consulting with counsel, that
the disposition of its litigation and other legal proceedings and matters,
including environmental matters, will not have a material effect on the
Company's consolidated financial statements.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Sealed Air Corporation:
We have audited the accompanying consolidated balance sheets of Sealed Air
Corporation and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sealed
Air Corporation and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996 in conformity with generally
accepted accounting principles.
s/KPMG Peat Marwick LLP
Short Hills, New Jersey
January 20, 1997
<TABLE>
INTERIM FINANCIAL INFORMATION (Unaudited)
(In thousands of dollars except per share data)
<CAPTION>
Quarter Net Sales Gross Profit Net Earnings
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
First $185,930 $173,354 $ 68,741 $ 60,807 $ 15,890 $ 11,573
Second 193,116 182,087 72,661 63,154 17,573 12,623
Third 196,532 178,536 73,126 62,432 17,141 13,442
Fourth 214,034 189,143 79,899 69,775 18,725 15,090
Year $789,612 $723,120 $294,427 $256,168 $ 69,329 $ 52,728
</TABLE>
<TABLE>
<CAPTION>
Earnings Per Share (1)
1996 1995
<S> <C> <C>
First $ .37 $ .28
Second .42 .30
Third .40 .32
Fourth .44 .35
Year $ 1.63 $ 1.25
<FN>
(1) Earnings per share adjusted to reflect the effect
of the September 1995 two-for-one stock split paid
in the nature of a 100% stock dividend.
</FN>
</TABLE>
<TABLE>
COMMON STOCK INFORMATION
The Company's Common Stock
is listed on the New York Stock
<CAPTION>
1995 High Low
<S> <C> <C>
Exchange(trading symbol: SEE). First Quarter $22-3/4 $17-15/16
The adjacent table sets forth the Second Quarter $22-7/8 $20-1/8
high and low sales prices for the
Company's Common Stock for each
quarter during the two-year period Third Quarter $28-1/4 $22-1/8
ended December 31, 1996.
Fourth Quarter $30-3/4 $24-1/4
</TABLE>
<TABLE>
The Company is currently subject
to certain covenants in loan
documents that limit the payment
of cash dividends. No dividends
were paid in 1996 or 1995.
<CAPTION>
1996 High Low
<S> <C> <C>
First Quarter $35-1/4 $26
Second Quarter $38-1/4 $32-3/8
As of March 4, 1997, there were
approximately 1,334 holders of Third Quarter $39 $30-1/8
record of the Company's Common
Stock. Fourth Quarter $44-1/8 $37
Stock prices for periods prior to the fourth quarter of 1995 have
been adjusted to reflect the effect of a two-for-one stock split in
the nature of a 100% stock dividend distributed on September 29, 1995
to stockholders of record at the close of business on September 15, 1995.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the consolidated
statement of earnings for the twelve months ended December 31, 1996 and the
consolidated balance sheet at December 31, 1996 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000088204
<NAME> SEALED AIR CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,985,000
<SECURITIES> 0
<RECEIVABLES> 129,827,000
<ALLOWANCES> 5,623,000
<INVENTORY> 57,231,000
<CURRENT-ASSETS> 206,966,000
<PP&E> 307,481,000
<DEPRECIATION> 132,919,000
<TOTAL-ASSETS> 467,119,000
<CURRENT-LIABILITIES> 148,056,000
<BONDS> 0
<COMMON> 427,000
0
0
<OTHER-SE> 186,222,000
<TOTAL-LIABILITY-AND-EQUITY> 467,119,000
<SALES> 789,612,000
<TOTAL-REVENUES> 789,612,000
<CGS> 495,185,000
<TOTAL-COSTS> 495,185,000
<OTHER-EXPENSES> 164,355,000
<LOSS-PROVISION> 1,151,000
<INTEREST-EXPENSE> 13,350,000
<INCOME-PRETAX> 114,595,000
<INCOME-TAX> 45,266,000
<INCOME-CONTINUING> 69,329,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,329,000
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 0
</TABLE>
