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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period from
to
Commission File Number 1-7834
SEALED AIR CORPORATION
(Exact name of registrant as specified in its charter)
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. [X ]
The aggregate market value of the registrant's Common Stock held by non-
affiliates of the registrant on March 17, 1998 was approximately
$2,725,000,000.
The number of outstanding shares of the registrant's Common Stock as of
March 17, 1998 was 42,624,246.
DOCUMENTS INCORPORATED BY REFERENCE: None
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 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, 1997 appears in Note 4 of the Notes to Consolidated Financial
Statements in Item 8 of this Annual Report on Form 10-K, which Note is
incorporated herein by reference.
Significant Developments
On August 14, 1997, the Company entered into an Agreement and
Plan of Merger among the Company, W. R. Grace & Co., a Delaware corporation
("Grace") and a wholly owned subsidiary of Grace pursuant to which the
worldwide packaging business of Grace will be combined with the Company. As
part of the transaction, the Company will be renamed "Sealed Air Corporation
(US)" and will become a wholly owned subsidiary of Grace, which will be
renamed "Sealed Air Corporation." The stockholders of the Company and Grace
approved the transaction on March 23 and March 20, 1998, respectively.
Subject to certain customary conditions, the closing of the transaction is
expected to occur on or about March 31, 1998.
The transaction is described in a Joint Proxy Statement/Prospectus
dated February 13, 1998 for the Special Meeting of Stockholders of the Company
held on March 23, 1998. The Joint Proxy Statement/Prospectus was mailed to
the stockholders of the Company on February 17, 1998. Except as specifically
noted, the information in this Annual Report on Form 10-K does not give effect
to any changes in the Company's business that may occur as a result of the
transaction with Grace.
Products
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, 1997 appear in the table
under the caption "Selected Financial Data" in Item 6 of this Annual Report on
Form 10-K, which data 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 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, sold
under various trademarks including CelluPlank(TM), is offered in varying
densities and thicknesses up to three inches. Laminated foams, which are sold
under various trademarks including Stratocell(TM) and Stratocell(TM) Plus in
the United States and Europe, are produced in various densities and laminated
into thicknesses ranging up to six inches. 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 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. Such products are marketed primarily in North
America, Europe and 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. The Company's Dolphin Pad(TM) film and foam laminate
wrap is used in 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 creped tissue with
one or two outer layers of polyethylene film. During 1997, the Company began
manufacturing padding containing super-absorbents for sale primarily in
Australia and New Zealand. 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 shrink bags 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 shrink bags and barrier films, bags and pouches are
produced in various grades to meet customer requirements.
The Company markets permeable shrink bags under the Shrinkvac(R)
and other trademarks. Barrier vacuum skin packaging films are marketed under
the Intact(R) trademark. 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 1997, 1996 and 1995, foreign net sales represented
approximately 39%, 39% and 38%, respectively, of the Company's total net
sales, while operating profit from foreign operations represented
approximately 24%, 27% and 30%, 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 in 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 1997, 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 $15,781,000 related to Company-
sponsored research and development in 1997 compared with $15,449,000 during
1996 and $14,597,000 during 1995. 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 certain of 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 does not consider that the expiration or
unenforceability of any of such patents, applications or licenses would be
material to the Company's business or financial position, since 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 can be 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 worldwide, collection programs for packaging
materials 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, 1997, the Company had approximately 4,400
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-six locations
in the United States, five other locations in North America, including three
facilities in Canada and two in Mexico, twenty locations in Europe, including
facilities in England, France, Germany, Italy, the Netherlands, Norway, Spain
and Sweden, and nine locations in the Asia/Pacific region, including two
facilities in Australia, two facilities in New Zealand and facilities in 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, Korea and Poland 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-three 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 1997.
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, 1998, 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, 1998 Current Position an Officer
T. J. Dermot Dunphy 65 1971 1971
Chairman of the Board,
Chief Executive Officer
and Director
William V. Hickey 53 1996 1980
President and Chief
Operating Officer
Bruce A. Cruikshank 55 1996 1990
Senior Vice President
Robert A. Pesci 52 1997 1990
Senior Vice President
Jonathan B. Baker 45 1994 1994
Vice President
James A. Bixby 54 1990 1990
Vice President
Mary A. Coventry 44 1994 1994
Vice President
Jean-Luc Debry 52 1992 1992
Vice President
Paul B. Hogan 58 1995 1995
Vice President
James P. Mix 46 1994 1994
Vice President
Abraham N. Reichental 41 1994 1994
Vice President
Horst Tebbe 57 1997 1986
Vice President-Finance
and Chief Financial
Officer
Jeffrey S. Warren 44 1996 1996
Controller
H. Katherine White 52 1996 1996
Secretary
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters
The Company's Common Stock is listed on the New York Stock
Exchange (trading symbol: SEE). The table below sets forth the high and low
sales prices for the Company's Common Stock for each quarter during the two-
year period ended December 31, 1997.
1996 High Low 1997 High Low
First Quarter $35-1/4 $26 First Quarter $48 $39-3/4
Second Quarter $38-1/4 $32-3/8 Second Quarter $49-5/8 $41-1/4
Third Quarter $39 $30-1/8 Third Quarter $55-3/8 $45-15/16
Fourth Quarter $44-1/8 $37 Fourth Quarter $63 $49-3/4
The Company is currently subject to certain covenants in loan
documents that limit the payment of cash dividends. No dividends were paid in
1997 or 1996. As of March 13, 1998, there were approximately 1,329 holders of
record of the Company's Common Stock.
Item 6. Selected Financial Data
See Index to Financial Supplement on page F-1.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
See Index to Financial Supplement on page F-1.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Supplement on page F-1.
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
The information set forth in Part I of this Annual Report on Form
10-K under the caption "Executive Officers of the Registrant" is incorporated
herein by reference. The following table sets forth the business experience
for the last five years and other information about the directors of the
Company.
Director
Name Business Experience Since Age
John K. Castle Chairman and Chief Executive Officer 1971 57
of Castle Harlan, Inc., a merchant banking
firm, and of Branford Castle, Inc., a
holding company. Director of Commemorative
Brands, Inc., Morton's Restaurant Group,
Inc., Statia Terminals International, N.V.
and Universal Compression, Inc.
Lawrence R. Codey President and Chief Operating Officer 1993 53
of Public Service Electric and Gas
Company, a public utility. Director of
Public Service Enterprise Group Incorporated,
The Trust Company of New Jersey and United
Water Resources Inc.
T. J. Dermot Dunphy Chairman of the Board and Chief Executive 1969 65
Officer of the Company. Director of Public
Service Enterprise Group Incorporated,
Summit Bancorp and Summit Bank.
Charles F. Farrell, President of Crystal Creek Partners, 1971 67
Jr. an investment management and business
consulting firm.
David Freeman Chairman and Chief Executive Officer of 1993 53
Loctite Corporation, a manufacturer of
adhesives and sealants. He has held senior
management positions with Loctite Corporation
for more than five years.
Alan H. Miller Private investor. Until his retirement in 1984 64
December 1994, President and Chief Executive
Officer of Laird, Inc., a manufacturer of
specialty folding cartons and special
commercial printing and a distributor of
rigid plastics. Director of The Laird
Group PLC.
Robert L. San Soucie President and Chief Executive Officer 1971 70
of The Math Learning Center, a non-profit
educational organization, since September
1997. Previously Managing Director and
President of MRV Financial Associates,
a financial and management consulting firm.
Item 11. Executive Compensation
Directors' Compensation
Each member of the Board of Directors who is neither an officer
nor an employee of the Company (each a "Non-Employee Director") receives an
annual retainer fee for serving as a director. The Restricted Stock Plan for
Non-Employee Directors (the "Directors Stock Plan") provides for the payment
of such retainer in the form of an annual grant of 1,200 shares of the
Company's Common Stock to each eligible director who is elected at each annual
meeting of stockholders. During 1997, each director other than Mr. Dunphy
received a retainer grant of 1,200 shares of Common Stock at a price of $1.00
per share following his election at the 1997 Annual Meeting of Stockholders.
Shares of Common Stock issued under the Directors Stock Plan may
not be sold, transferred or encumbered while the director serves on the Board
of Directors, except that Non-Employee Directors may transfer shares issued
under the Directors Stock Plan to certain family members or to trusts or other
forms of indirect ownership so long as the Non-Employee Director would be
deemed a beneficial owner of the shares with a direct or indirect pecuniary
interest in the shares and would retain voting and investment control over the
shares while the Non-Employee Director remains a director of the Company.
During this period, the director is entitled to receive any dividends or other
distributions in respect of shares of Common Stock and has voting rights in
respect of such shares. The restrictions on the disposition of shares issued
pursuant to the Directors Stock Plan terminate upon the occurrence of any of
certain events related to change of control of the Company that are specified
in the Directors Stock Plan. In August 1997, the provision of the Directors
Stock Plan related to change in control was amended so that the restrictions
on disposition of shares previously issued under the Plan will remain in place
following the upcoming combination of the Grace packaging business with the
Company so long as the director continues to serve as a director of the new
Sealed Air Corporation.
In addition, each member of the Audit Committee and of the
Organization and Compensation Committee receives a retainer fee of $2,000 per
year for serving as a member of such committee. The chairman of each such
committee receives an additional retainer fee of $2,000 per year for serving
as such. Each Non-Employee Director also receives a fee of $1,000 for each
Board or committee meeting attended. These fees are paid in cash in quarterly
installments. All directors are reimbursed for expenses incurred in attending
Board or committee meetings.
Executive Compensation
Summary Compensation Table
Annual Long-Term
Compensation(1) Compensation
Contingent
Name and Principal Stock All Other
Position Year Salary Bonus Awards(2) Compensation(3)
T. J. Dermot Dunphy 1997 $363,600 $390,000 $2,733,750 $29,000
Chairman of the Board 1996 363,600 390,000 -0- 29,000
and Chief Executive 1995 363,600 340,000 1,590,000 29,000
Officer
William V. Hickey 1997 $253,600 $225,000 $1,366,875 $22,600
President and Chief 1996 226,100 200,000 -0- 22,600
Operating Officer 1995 217,767 150,000 795,000 22,600
Elmer N. Funkhouser III 1997 $218,600 $120,000 $ -0- $26,000
Senior Vice 1996 217,433 120,000 -0- 26,000
President (4) 1995 211,600 95,000 -0- 26,000
Bruce A. Cruikshank 1997 $175,000 $ 80,000 $ -0- $22,400
Senior Vice President 1996 167,100 65,000 396,000 22,400
1995 153,267 52,000 -0- 22,400
Robert A. Pesci 1997 $175,000 $ 75,000 $ -0- $22,000
Senior Vice President 1996 161,933 70,000 -0 - 22,000
1995 145,183 60,000 270,000 22,000
___________________
(1) Annual compensation is reported in this table before deducting amounts
deferred pursuant to Section 401(k) of the Internal Revenue Code, as amended
(the "Code"), under the Company's Thrift and Tax-Deferred Savings Plan (the
"Thrift Plan") or other amounts excludible from income for tax purposes.
Perquisites, other personal benefits, securities and property paid or accrued
during each year not otherwise reported did not exceed for any named executive
officer the lesser of $50,000 or 10% of the annual compensation reported in
the Summary Compensation Table for that individual.
(2) Represents the fair market value on the date of an award made under the
Company's Contingent Stock Plan after deducting the purchase price of the
shares covered by such award. The total number of unvested shares held by
each of the named executive officers as of December 31, 1997 is set forth in
the following table, and the fair market values of such unvested shares as of
such date are as follows: Mr. Dunphy - $8,645,000, Mr. Hickey - $4,847,375,
Mr. Cruikshank - $741,000 and Mr. Pesci - $617,500. As of such date, such
awards, all of which were granted with an original vesting period of three
years, which has been extended in certain cases, vested as follows:
1998 1999 2000
T. J. Dermot Dunphy 80,000 -0- 60,000
William V. Hickey 48,500 -0- 30,000
Elmer N. Funkhouser II -0- -0- -0-
Bruce A. Cruikshank -0- 12,000 -0-
Robert A. Pesci -0- 10,000 -0-
During the vesting period, pursuant to the terms of such Plan, recipients of
awards are entitled to receive any dividends or other distributions with
respect to the unvested shares they hold.
(3) Includes Company contributions to the Company's Profit-Sharing Plan,
matching contributions under the Company's Thrift Plan, and premiums paid by
the Company for supplemental universal life insurance policies owned by the
named executive officers. For 1997, such amounts were as follows:
Profit- Insurance
Sharing Plan Thrift Plan Premiums
T. J. Dermot Dunphy $ 15,000 $ 4,500 $ 9,500
William V. Hickey 15,000 4,500 3,100
Elmer N. Funkhouser III 15,000 4,500 6,500
Bruce A. Cruikshank 15,000 4,500 2,900
Robert A. Pesci 15,000 4,500 2,500
The Company's Profit-Sharing Plan and its Thrift Plan are broad-based defined
contribution plans. Contributions to the Profit-Sharing Plan are made only by
the Company. Further information about the Profit-Sharing Plan is discussed
in note 5 to the table in Item 12.
(4) Mr. Funkhouser retired at the end of 1997.
Compensation Committee Interlocks and Insider Participation
The members of the Organization and Compensation Committee of the
Company's Board of Directors are Mr. Miller (chairman), Mr. Castle and Mr.
Freeman. None of the members of the Organization and Compensation Committee
has been an officer or employee of the Company or any of its subsidiaries.
Until the end of 1983, Mr. Miller was the President of Cellu-Products Company,
a corporation that the Company acquired in October 1983.
Mr. Codey is the President and Chief Operating Officer of Public
Service Electric and Gas Company. Mr. Dunphy is a member of the Organization
and Compensation Committee of the Board of Directors of Public Service
Enterprise Group Incorporated, the parent company of Public Service Electric
and Gas Company. Such committee administers the compensation program for
executive officers of Public Service Electric and Gas Company.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth the number and percentage of
outstanding shares of the Company's common stock beneficially owned, directly
or indirectly, as of March 17, 1998 by: (i) each person known to the Company
to be the beneficial owner of more than five percent of the then outstanding
shares of the Company's common stock, (ii) each director of the Company and
each executive officer of the Company named in the Summary Compensation Table
in Item 11 of this Annual Report on Form 10-K who continues to serve as an
executive officer, and (iii) all directors and executive officers of the
Company as a group. Except as indicated below, none of the directors or
executive officers listed below beneficially owns more than 1% of the
outstanding shares of the Company's common stock.
Shares of % of
Common Outstand-
Stock ing
Beneficially Common
Beneficial Owner Owned Stock
The Equitable Companies Incorporated (1) 4,465,278 10.5
1290 Avenue of the Americas
New York, New York 10104
Janus Capital Corporation (2) 3,852,848 9.0
100 Fillmore Street, Suite 300
Denver, Colorado 80206-4923
FMR Corp. (3) 4,690,000 11.0
82 Devonshire Street
Boston, Massachusetts 02109
Travelers Group Inc. (4) 2,325,086 5.5
388 Greenwich Street
New York, New York 10013
John K. Castle 12,936 *
Lawrence R. Codey 5,800 *
Bruce A. Cruikshank 183,120 (5) *
T. J. Dermot Dunphy 1,091,719 (5) 2.6
(6)
Charles F. Farrell, Jr. 24,600 (6) *
David Freeman 5,600 *
William V. Hickey 286,905 (5) *
Alan H. Miller 502,710 (6) 1.2
Robert A. Pesci 67,618 (5) *
Robert L. San Soucie 11,400 (6) *
All directors and executive officers as a group
(20 persons) 2,679,494 (7) 6.3
* Less than 1%.
(1) The ownership information set forth in the table is based in its
entirety on material contained in Amendment No. 1 to Schedule 13G, dated
February 10, 1998, filed with the Securities and Exchange Commission
("SEC") by The Equitable Companies Incorporated ("Equitable Companies"),
AXA-UAP, which beneficially owns a majority interest in Equitable
Companies, and Mutuelles AXA, which as a group beneficially own a
majority interest in AXA-UAP. The Schedule 13G stated that the shares
were acquired solely for investment purposes. The shares are owned by
the following subsidiaries of Equitable Companies in the amounts
indicated: The Equitable Life Assurance Society of the United States,
30,700; Alliance Capital Management L.P., 4,434,478; and Donaldson,
Lufkin & Jenrette Securities Corporation, 100.
(2) The ownership information set forth in the table is based in its
entirety on material contained in Amendment No. 2 to Schedule 13G,
dated February 13, 1998, filed with the SEC by Janus Capital Corporation
("Janus"), which indicated that Janus beneficially owned such shares,
with shared voting and dispositive power as to such shares. Such
Schedule 13G states that Thomas H. Bailey may be deemed to control Janus
Capital Corporation and to be a beneficial owner of such shares, which
beneficial ownership Mr. Bailey disclaims.
(3) The ownership information set forth in the table is based in its
entirety on material contained in Amendment No. 3 to Schedule 13G,
dated February 14, 1998, filed with the SEC by FMR Corp. ("FMR"), which
indicated that FMR had sole voting power as to 141,700 shares and sole
dispositive power as to 4,690,000 shares. Such Schedule 13G indicates
that Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR, beneficially owns 4,480,600 of such shares (as to
which shares Edward C. Johnson 3d, chairman of FMR, and Fidelity Funds
each have sole power of disposition). The power to vote these shares
resides with the Board of Trustees of Fidelity Funds. Of the shares
beneficially owned by FMR, Fidelity Management Trust Company, a wholly
owned subsidiary of FMR, is the beneficial owner of 209,400 shares, of
which Mr. Johnson and FMR have sole dispositive power over 209,400
shares and sole voting power over 141,700 shares. Such Schedule 13G
states that members of the family of Mr. Johnson may be deemed to
control FMR.
(4) The ownership information set forth in the table is based in its
entirety on material contained in a Schedule 13G, dated February 6,
1998, filed with the SEC by Travelers Group Inc. ("Travelers"), and its
wholly owned subsidiary Salomon Smith Barney Holdings Inc. ("SSB
Holdings"). The Schedule 13G stated that Travelers has shared voting
power and shared dispositive power as to 2,325,086 shares, of which
2,308,286 are held by SSB Holdings, and that Travelers and SSB Holdings
each disclaimed beneficial ownership of such shares.
(5) This figure includes approximately 20,620, 67,369, 13,305, 24,218 and
221,118 shares of common stock held in the Company s Profit-Sharing Plan
trust fund with respect to which Messrs. Cruikshank, Dunphy, Hickey,
Pesci and the executive officers of the Company who participate in such
Plan as a group, respectively, may, by virtue of their participation in
such Plan, be deemed to be beneficial owners. The participants in such
Plan include, in general, all full-time employees of the Company except
employees who are covered by collective bargaining agreements that do
not provide for their participation. As of March 17, 1998,
approximately 2,162,344 shares of the Company common stock were held in
the trust fund under such Plan, constituting approximately 5.1% of the
outstanding shares of the Company's common stock. The Company has been
advised that Bankers Trust Company, the trustee of such Plan, does not
deem itself the beneficial owner of the shares of the Company common
stock held as trustee of such Plan.
(6) The number of shares held by Mr. Dunphy includes 81,600 shares held by
him as custodian for certain of his children and 29,250 shares held by a
charitable foundation for which he shares voting and investment power.
The number of shares held by Mr. Farrell includes 11,200 shares held in
a revocable retirement trust of which he is the trustee and sole
beneficiary. All but 1,200 of the shares held by Mr. Miller are held
indirectly through a limited partnership for which he shares voting and
investment power. Mr. San Soucie shares investment and voting power as
to 3,120 of the shares beneficially owned by him with his wife.
(7) This figure includes, without duplication, all of the outstanding shares
referred to in notes 5 and 6 above as well as 12,400 shares for which
voting and investment power is shared by an executive officer of the
Company and 3,580 shares held by or for family members of executive
officers of the Company who are not named in the above table.
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 Number Description
2.1 Agreement and Plan of Merger dated as of August 14, 1997 (the "Merger
Agreement") by and among W. R. Grace & Co., Packco Acquisition Corp.
and the Corporation. [Exhibit 2.1 to the Corporation's Current Report
on Form 8-K, Date of Report August 14, 1997, File No. 1-7834, is
incorporated by reference.]
2.2 Form of Distribution Agreement (the "Distribution Agreement") by and
among Grace, W. R. Grace & Co.-Conn. ("Grace-Conn."), and Grace
Specialty Chemicals, Inc. ("Grace Chemicals"). [Exhibit 2.2 to the
Corporation's Current Report on Form 8-K, Date of Report August 14,
1997, File No. 1-7834, is incorporated by reference.]
3.1 Unofficial Composite Certificate of Incorporation 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 June 30, 1997, File No.
1-7834, is incorporated herein by reference.]
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.]
4.2 Term Sheet for Senior Convertible Preferred Stock of New Sealed Air
(referred to therein as "Newco") (Exhibit E to the Merger Agreement).
[Exhibit 4.1 to the Corporation's Current Report on Form 8-K/A, Date
of Report August 14, 1997, File No. 1-7834, is incorporated by
reference.]
4.3 Amendment No. 1 dated August 14, 1997 to the Amended and Restated
Credit Agreement among the Corporation, 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 4.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, File No. 1-7834, is
incorporated herein by reference.]
10.1 Form of Employee Benefits Allocation Agreement by and among Grace,
Grace-Conn. and Grace Chemicals. [Exhibit 10.1 to the Corporation's
Current Report on Form 8-K, Date of Report August 14, 1997, File No.
1-7834, is incorporated by reference.]
10.2 Form of Tax Sharing Agreement by and among Grace, Grace-Conn. and the
Corporation (Exhibit B to the Distribution Agreement). [Exhibit 10.2
to the Corporation's Current Report on Form 8-K, Date of Report August
14, 1997, File No. 1-7834, is incorporated by reference.]
10.3 Contingent Stock Plan of the Company, as amended. [Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, File No. 1-7834, is incorporated herein by
reference.]*
10.4 Restricted Stock Plan for Non-Employee Directors of the Company, as
amended. [Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, File No. 1-7834, is
incorporated herein by reference.]*
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, 1997.
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 27, 1998 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 27, 1998
T. J. Dermot Dunphy
Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
By s/ HORST TEBBE March 27, 1998
Horst Tebbe
Vice President-Finance and Chief
Financial Officer
(Principal Financial Officer)
By s/ JEFFREY S. WARREN March 27, 1998
Jeffrey S. Warren
Controller
(Principal Accounting Officer)
By s/ JOHN K. CASTLE March 27, 1998
John K. Castle
Director
By s/ LAWRENCE R. CODEY March 27, 1998
Lawrence R. Codey
Director
By s/ CHARLES F. FARRELL, JR. March 27, 1998
Charles F. Farrell, Jr.
Director
By s/ DAVID FREEMAN March 27, 1998
David Freeman
Director
By s/ ALAN H. MILLER March 27, 1998
Alan H. Miller
Director
By s/ R. L. SAN SOUCIE March 27, 1998
R. L. San Soucie
Director
<PAGE>
FINANCIAL SUPPLEMENT
SEALED AIR CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
<\PAGE>
<PAGE>
FINANCIAL SUPPLEMENT
to
Annual Report on Form 10-K for the Year Ended December 31, 1997
SEALED AIR CORPORATION AND SUBSIDIARIES
Index to Financial Supplement
Page
Selected Financial Data............................................F-2
Management's Discussion and Analysis of Results of Operations
and Financial Condition...................................... F-3
Report of Independent Certified Public Accountants.................F-9
Consolidated Statements of Earnings for the three years
ended December 31, 1997...................................... F-10
Consolidated Balance Sheets at December 31, 1997 and 1996..........F-11
Consolidated Statements of Shareholders' Equity for the three
years ended December 31, 1997................................ F-13
Consolidated Statements of Cash Flows for the three years
ended December 31, 1997...................................... F-14
Notes to the Consolidated Financial Statements.....................F-15
Interim Financial Information (Unaudited)..........................F-28
Consolidated Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts........... . F-29
F-1
<\PAGE>
<PAGE>
<TABLE>
Selected Financial Data
(In thousands of dollars except per share data)
<CAPTION>
1997 1996 1995(1) 1994 1993
<S> <C> <C> <C> <C> <C>
Consolidated Earnings Statement Data
Net sales by class of product:
Engineered products $307,759 $284,974 $252,535 $208,363 $180,508
Surface protection and other
cushioning products 399,221 368,692 333,519 234,587 204,645
Food packaging products 104,663 106,473 103,866 56,444 51,023
Other products 31,190 29,473 33,200 19,792 15,518
Total 842,833 789,612 723,120 519,186 451,694
Cost of sales 523,517 495,185 466,952 327,423 282,147
Marketing, administrative and
development expenses 172,795 164,355 147,288 107,854 95,434
Transaction expenses 8,405 - - - -
Operating profit 138,116 130,072 108,880 83,909 74,113
Other income (expense), net (4,628) (15,477) (21,726) (22,706) (28,652)
Earnings before income taxes 133,488 114,595 87,154 61,203 45,461
Income taxes 53,567 45,266 34,426 23,987 19,547
Earnings before cumulative effect of
accounting change and early
redemption of subordinated notes 79,921 69,329 52,728 37,216 25,914
Cumulative effect of accounting change (2) - - - - 1,459
Early redemption of subordinated
notes, net of income taxes (3) - - - (5,576) -
Net earnings $ 79,921 $ 69,329 $ 52,728 $ 31,640 $ 27,373
Basic earnings per common share (4):
Before cumulative effect of accounting
change and early redemption of
subordinated notes $ 1.88 $ 1.63 $ 1.25 $ .94 $ .66
Cumulative effect of accounting change (2) - - - - .04
Early redemption of subordinated notes,
net of income taxes (3) - - - (.14) -
Basic earnings per common share $ 1.88 $ 1.63 $ 1.25 $ .80 $ .70
Consolidated Balance Sheet Data
Working capital $ 87,155 $ 58,910 $ 41,945 $ 15,767 $ 33,828
Total assets 498,360 467,119 443,545 331,117 279,818
Long-term debt, less
current installments 48,506 99,900 149,808 155,293 190,058
Shareholders' equity (deficit) 257,283 186,649 106,338 11,012 (29,419)
<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>
F-2
</PAGE>
<PAGE>
Management's Discussion and Analysis of Results of Operations and
Financial Condition
On August 14, 1997, the Company and W. R. Grace & Co. ("Grace") entered
into a definitive merger agreement to combine Grace's packaging business
("Grace Packaging") with the Company. This transaction is described in
the Company's Joint Proxy Statement/Prospectus dated February 13, 1998
(the "Joint Proxy Statement/Prospectus"), which was filed with the
Securities and Exchange Commission and distributed to the stockholders
of the Company in connection with a special meeting of the stockholders
held on March 23, 1998 at which the stockholders approved such merger
agreement. The transactions contemplated by the merger agreement are
currently expected to be completed on or about March 31, 1998.
For accounting purposes, such merger will be treated as a purchase of
the Company by Grace (after the spin-off of Grace's specialty chemicals
business). Except for the discussion of certain transaction
expenses that the Company incurred in 1997 in connection with this
merger, and certain other matters, the following discussion does not give
effect to any of the changes that are expected to occur as a result of
the merger.
Results of Operations
Net Sales
Net sales increased 7% in 1997 compared with 1996 and 9% in 1996
compared with 1995.
The 1997 increase in net sales was due primarily to higher unit volume
in the Company's major classes of products partially offset by the
negative effect of foreign currency translation as the U.S. dollar
strengthened against most foreign currencies. Net sales also benefited
modestly from the additional net sales of recently acquired businesses.
Excluding the negative effect of foreign currency translation, the
increase in net sales would have been 10% for 1997 compared with 1996.
The recent economic difficulties in Asia did not have a significant
effect on the Company's consolidated operating results or financial
condition for 1997.
During 1997, the Company made small acquisitions in Australia and Italy.
These acquisitions, which were made for cash in the aggregate amount of
approximately $10 million and accounted for as purchases, were not
material to the Company's consolidated financial statements.
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.
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 Australia. They also included small acquisitions in Canada,
Finland, Germany and the United States. These transactions, which were
made 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.
Net sales from domestic operations, which represented 61%, 61% and 62%
of consolidated net sales in 1997, 1996 and 1995, respectively,
increased 7% in 1997 compared with 1996 and 8% in 1996 compared with
1995. The 1997 increase was due primarily to higher unit volume in the
Company's major classes of products. 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.
Net sales from foreign operations, which represented 39%, 39% and 38% of
consolidated net sales in 1997, 1996 and 1995, respectively, increased
7% in 1997 compared with 1996 and 11% in 1996 compared with 1995. The
1997 increase was due primarily to higher unit volume and the added net
sales of recently acquired businesses partially offset by the negative
effect of foreign currency translation. Excluding the negative effect
of foreign currency translation, net sales from foreign operations would
F-3
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<PAGE>
have increased 15% compared to 1996. 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.
Net sales of engineered products, which consist primarily of Instapak (R)
products and specialty polyethylene foams, increased 8% in 1997 compared
with 1996 and 13% in 1996 compared with 1995. The increase in net sales
in both 1997 and 1996 was due primarily to higher unit volume and in
1996, 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 8% in 1997 compared with 1996
and 11% in 1996 compared with 1995. The increase in net sales in both
1997 and 1996 was due primarily to higher unit volume and the added net
sales of recently acquired businesses and in 1996, to a lesser extent,
to higher average selling prices for certain products.
Net sales of food packaging products, which consist primarily of Dri-Loc
(R) pads and food packaging films and systems, decreased 2% in 1997
compared with 1996 but increased 3% in 1996 compared with 1995. In
1997, added net sales from a business acquired in 1997 and higher unit
volume were more than offset by the negative effect of foreign currency
translation. The decrease in 1997 also reflects the transfer in 1996 of
certain food packaging products to an unconsolidated joint venture in
Australia. The 1996 increase was due primarily to higher unit volume of
the Company's Dri-Loc (R) products, which was partially offset by the
effects of the transfer to the joint venture and lower unit volume in
certain other food packaging products.
Net sales of other products increased 6% in 1997 compared with 1996
primarily due to added net sales of recently acquired businesses and
higher unit volume in certain products. Net sales of other products
decreased 11% in 1996 compared with 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.
Costs and Expenses
Cost of sales increased 6% in 1997 and 1996 compared with the respective
prior years. The increase in both 1997 and 1996 reflects primarily the
higher level of net sales partially offset by the effect of certain
lower raw material costs. Cost of sales as a percentage of net sales was
62.1%, 62.7% and 64.6% in 1997, 1996 and 1995, respectively.
Marketing, administrative and development expenses increased 10% in 1997
compared with 1996 and 12% in 1996 compared with 1995. The 1997 increase
reflects the Company's higher level of operations and transaction
expenses of $8,405,000 (the "Transaction Expenses") partially offset by
the absence of certain expenses (discussed below) in 1997. The
Transaction Expenses consisted of certain professional fees incurred in
1997 primarily related to the pending merger with Grace Packaging. The
Company will incur additional expenses in 1998 in connection with this
transaction. Excluding such expenses, marketing, administrative and
development expenses increased 5% compared to 1996. The 1996 increase
reflects the Company's higher level of operations, including the added
marketing, administrative and development expenses of acquired companies
and costs associated with the integration of these companies.
Marketing, administrative and development expenses (excluding the
Transaction Expenses) amounted to 20.5%, 20.8% and 20.4% as a percentage
of net sales in 1997, 1996 and 1995, respectively.
F-4
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<PAGE>
Operating Profit
Operating profit increased 6% in 1997 compared with 1996 and 19% in 1996
compared with 1995 primarily reflecting the Company's higher level of
net sales and the changes in costs and expenses discussed above.
Excluding the Transaction Expenses, operating profit increased 13% in
1997 compared with 1996.
Domestic operating profit, which represented 76%, 73% and 70% of
consolidated operating profit in 1997, 1996 and 1995, respectively,
increased 10% in 1997 compared with 1996 (18% excluding the Transaction
Expenses) and 26% in 1996 compared with 1995. Domestic operating profit
was 19%, 19% and 16% of total domestic net sales in 1997, 1996 and 1995,
respectively. Excluding the Transaction Expenses, domestic operating
profit amounted to 21% of total domestic net sales in 1997.
Foreign operating profit, which represented 24%, 27% and 30% of
consolidated operating profit in 1997, 1996 and 1995, respectively,
decreased 3% in 1997 compared with 1996 but increased 5% in 1996
compared with 1995. The 1997 decrease was primarily due to certain
integration costs in the Asia Pacific region, costs of new operations in
various foreign markets and the negative effect of foreign currency
translation, which more than offset the effect of the Company's higher
level of foreign net sales on foreign operating profit in 1997. The
1996 increase was primarily due to the Company's higher level of foreign
net sales partially offset by the added expenses of acquired companies,
including additional amortization of acquired intangible assets, and
integration costs. Foreign operating profit amounted to 10%, 11% and
12% of total foreign net sales in 1997, 1996 and 1995, respectively.
Other Income (Expense)
Other expense decreased to $4,628,000 in 1997 compared with $15,477,000
in 1996 and $21,726,000 in 1995. Interest expense, which is the
principal component of this item, decreased to $6,950,000 in 1997 from
$13,350,000 in 1996 and $19,106,000 in 1995. The decrease in interest
expense in both years resulted primarily from lower levels of
outstanding indebtedness compared with the previous year and in 1996, to
a lesser extent, lower effective interest rates.
Income Taxes
The Company's effective income tax rate was 40.1% in 1997 and 39.5% in
1996 and 1995. 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 and, in 1997, the non-deductibility of a portion of
the Transaction Expenses. The Company anticipates that its effective
income tax rate for the first quarter of 1998 will be higher than that
in 1997 primarily due to the non-deductibility of certain additional
expenses to be incurred in 1998 related to the merger.
Earnings
Net earnings increased 15% in 1997 compared with 1996 and 31% in 1996
compared with 1995. Excluding the Transaction Expenses, net earnings
for 1997 increased 24% compared with 1996 primarily reflecting the
Company's higher level of operating profit and lower interest expense.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash flows from
operations and amounts available under the Company's existing lines of
credit. The Company has met 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.
F-5
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<PAGE>
Cash flows from operating activities were $108,321,000 in 1997,
$116,065,000 in 1996 and $75,218,000 in 1995. The decrease in 1997
compared with 1996 was due primarily to the Transaction Expenses and
changes in certain operating assets which partially offset the Company's
higher levels of earnings and depreciation and amortization. The
changes in operating assets, primarily receivables and inventory, were
due primarily to the Company's higher level of operations and the timing
of cash receipts and changes in inventory. The increase in 1996
compared to 1995 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 $33,983,000 in 1997,
$45,544,000 in 1996 and $47,993,000 in 1995. 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 $41,228,000 in 1997,
$75,121,000 in 1996 and $30,912,000 in 1995. The lower amount of net
cash used for financing activities in 1997 was due to the Company's
lower level of outstanding debt in 1997. Such cash used in 1997 includes
primarily the net repayment of $43,180,000 of long-term debt in 1997
partially offset by net proceeds from notes payable discussed below.
At December 31, 1997, there were no outstanding borrowings under the BT
Credit Agreement (discussed below). Cash used for financing activities in
1997 also reflects the Company's purchase of 159,200 of its common shares
for use in the Company's employee benefit plans as discussed below.
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 compared with 1995.
At December 31, 1997, the Company had working capital of $87,155,000, or
17% of total assets, compared to working capital of $58,910,000, or 13%
of total assets, at December 31, 1996. The increase in 1997 was due
primarily to an increase in cash and cash equivalents. Net cash
provided by operations exceeded the net cash used in the Company's
investing and financing activities during 1997. This increase in cash
was partially offset by an increase in notes payable primarily due to
the timing of borrowings for working capital purposes by certain foreign
operations.
The Company's ratio of current assets to current liabilities (current
ratio) was 1.5 at December 31, 1997 and 1.4 at December 31, 1996. The
Company's ratio of current assets less inventory to current liabilities
(quick ratio) was 1.2 at December 31, 1997 and 1.0 at December 31, 1996.
The increases in these ratios in 1997 resulted primarily from the
increase in working capital discussed above.
Long-term debt, less current installments, declined to $48,506,000 at
December 31, 1997 from $99,900,000 at December 31, 1996 due primarily to
the repayment of all amounts outstanding under the BT Credit Agreement
and the effects of foreign currency fluctuations during 1997. Other
long-term debt at December 31, 1997 included primarily $47,257,000 of
foreign loans that have been incurred for acquisitions, working capital
and other corporate purposes. Current installments of long-term debt
were $2,641,000 at December 31, 1997 and $2,891,000 at December 31,
1996.
The BT Credit Agreement is an unsecured $200 million revolving credit
facility with Bankers Trust Company, as agent for a syndicate of banks,
that expires on June 30, 2001. As of December 31, 1997, the Company's
available lines of credit, including the BT Credit Agreement, amounted
to approximately $264 million, of which approximately $230 million was
unused. Such lines of credit permit the Company and certain of its
subsidiaries to borrow for working capital and other corporate purposes.
Upon the consummation of the Grace Packaging merger, it is expected that
the BT Credit Agreement will be terminated and replaced by other credit
facilities that are discussed in the Joint Proxy Statement/Prospectus.
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 swaps, collars and cross currency swaps, that
F-6
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<PAGE>
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, 1997.
The Company's shareholders' equity increased to $257,283,000 at December
31, 1997 from $186,649,000 at December 31, 1996 primarily as a result of
the Company's net earnings for 1997 partially offset by a net reduction
in the Company's accumulated translation adjustment due to the effect of
foreign currency fluctuations. During 1997, the Company purchased
159,200 of its common shares for $8,772,000 for use in the Company's
employee benefit plans. See Note 8 of the Notes to the Consolidated
Financial Statements.
Impact of Inflation
Inflation did not have a material impact on the Company's consolidated
financial statements in the 1995 to 1997 period.
Environmental Issues
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, 1997, 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, 1997 and
1996, 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 to the Company's consolidated financial
position. Environmental liabilities are paid over an extended period,
and the timing of such payments cannot be predicted with certainty.
Year 2000 Issues
Like many other companies, the Company will have to ensure that its
information systems are able to recognize and process date-sensitive
information properly as the year 2000 approaches. Systems that do not
properly recognize and process this information could generate erroneous
data or even fail. The Company has conducted a worldwide comprehensive
review of its key computer systems and has identified a number of
F-7
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<PAGE>
systems that could be affected by the "Year 2000" issue. The Company
has undertaken steps to ensure that these systems will function
properly, including installing vendor-supplied upgrades or new software
or modifying existing software. The Company believes that these steps
will be substantially completed by the end of 1998, that the costs to
the Company to complete these steps will not be material to the
Company's consolidated financial position and that the Year 2000 issue
will not pose significant problems. Nevertheless, if these steps are
not completed successfully in a timely manner, the Company's operations
and financial performance could be adversely affected. Also, the
Company is in the process of contacting key suppliers, banks, customers
and other unaffiliated companies to assess their Year 2000 compliance
programs, since the Company could be adversely affected by the failure
of these unaffiliated companies to adequately address this issue.
Forward-Looking Statements
Certain statements made by the Company in this report and in future oral
and written statements by management of the Company may be forward-
looking in nature, or "forward-looking statements." These forward-
looking statements are based upon management's current expectations
concerning future events and discuss, among other things, anticipated
future performance and future business plans. Forward-looking
statements are identified by such words and phrases as "expects,"
"believes," "will continue," "plans to," "could be" and similar
expressions. Forward-looking statements are necessarily subject to
uncertainties, many of which are outside the control of the Company,
that could cause actual results to differ materially from such
statements.
While the Company is not aware that any of the factors listed below will
adversely affect the future performance of the Company, the Company
recognizes that it is subject to a number of uncertainties, such as
general economic, business and market conditions, conditions in the
industries and markets that use the Company's packaging materials, the
development and success of new products, the Company's success in
entering new markets, competitive factors, raw material availability and
pricing, changes in the Company's relationship with customers and
suppliers, future litigation and claims (including environmental
matters) against the Company, changes in domestic or foreign laws or
regulations, difficulties related to the Year 2000 issue, and costs or
difficulties that may arise relating to the transaction with Grace.
New Financial Pronouncements
In 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130"), and Statement No.
131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 130 establishes standards for reporting
and display of comprehensive income and its components in the financial
statements. SFAS 131 establishes reporting standards for information
about operating segments in annual financial statements, for selected
information about operating segments in interim financial reports issued
to shareholders and for related disclosures about products and services,
geographic areas and major customers. Both SFAS 130 and SFAS 131 are
effective for fiscal years beginning after December 15, 1997. As these
are disclosure-related standards, neither the adoption of SFAS 130 nor
the adoption of SFAS 131 will have any effect on the Company's
consolidated results of operations, financial position or cash flows.
F-8
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<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of Sealed Air Corporation:
We have audited the accompanying consolidated balance sheets of Sealed
Air Corporation and subsidiaries as of December 31, 1997 and 1996 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, 1997. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related
consolidated financial statement schedule as listed in the accompanying
index. These consolidated financial statements and consolidated
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and consolidated financial statement
schedule 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, 1997 and
1996, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1997 in
conformity with generally accepted accounting principles. Also in our
opinion, the related consolidated 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, 1998, except
for note 2, which is as
of March 23, 1998
F-9
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<PAGE>
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Years Ended December 31, 1997, 1996 and 1995
(In thousands of dollars except per share data)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net sales $842,833 $789,612 $723,120
Cost of sales 523,517 495,185 466,952
Gross profit 319,316 294,427 256,168
Marketing, administrative and
development expenses 172,795 164,355 147,288
Transaction expenses 8,405 - -
Operating profit 138,116 130,072 108,880
Other income (expense):
Interest income 1,696 1,482 1,187
Interest expense (6,950) (13,350) (19,106)
Other, net 626 (3,609) (3,807)
Other income (expense), net (4,628) (15,477) (21,726)
Earnings before income taxes 133,488 114,595 87,154
Income taxes 53,567 45,266 34,426
Net earnings $79,921 $69,329 $52,728
Basic earnings per common share $ 1.88 $ 1.63 $ 1.25
See accompanying notes to consolidated financial statements.
</TABLE>
F-10
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<PAGE>
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
(In thousands of dollars except share data)
<CAPTION>
1997 1996
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 35,481 $ 2,985
Accounts receivable, less allowance for doubtful
accounts of $5,799 in 1997 and $5,623 in 1996 132,325 124,204
Other receivables 8,037 8,258
Inventories 58,895 57,231
Prepaid expenses 2,742 1,095
Deferred income taxes 13,285 13,193
Total current assets 250,765 206,966
Property and equipment:
Land and buildings 84,780 81,629
Machinery and equipment 204,241 199,275
Leasehold improvements 8,274 8,409
Furniture and fixtures 10,639 12,029
Construction in progress 7,307 6,139
315,241 307,481
Less accumulated depreciation and amortization 144,114 132,919
Property and equipment, net 171,127 174,562
Patents and patent rights, less accumulated
amortization of $16,636 in 1997 and $15,139 in 1996 10,430 11,998
Excess of cost over fair value of net assets acquired, less
accumulated amortization of $20,249 in 1997 and
$12,966 in 1996 42,149 47,840
Other assets 23,889 25,753
$498,360 $467,119
See accompanying notes to consolidated financial statements.
</TABLE>
F-11
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<PAGE>
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
(In thousands of dollars except share data)
<CAPTION>
1997 1996
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $23,929 $12,674
Current installments of long-term debt 2,641 2,891
Accounts payable 48,843 46,934
Accrued wages, salaries and related costs 36,235 33,448
Other accrued liabilities 39,220 36,401
Income taxes payable 12,742 15,708
Total current liabilities 163,610 148,056
Long-term debt, less current installments 48,506 99,900
Deferred income taxes 16,571 19,863
Other liabilities 12,390 12,651
Total liabilities 241,077 280,470
Commitments and contingent liabilities (notes 6, 7 and 10)
Shareholders' equity:
Preferred stock, no par value. Authorized: 1,000,000
shares; none issued in 1997 and 1996 - -
Common stock, $.01 par value. Authorized: 125,000,000
shares in 1997 and 60,000,000 shares in 1996; Issued:
42,856,704 shares in 1997 and 42,747,704 shares in 1996 429 427
Additional paid-in capital 180,512 167,801
Retained earnings 95,942 16,021
Accumulated translation adjustment (933) 8,615
275,950 192,864
Less:
Deferred compensation 9,821 5,988
Treasury stock at cost: 232,458 shares held
in 1997 and 226,758 shares held in 1996 8,846 227
Total shareholders' equity 257,283 186,649
$498,360 $467,119
F-12
</TABLE>
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<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1997, 1996 and 1995
(In thousands of dollars)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year $427 $425 $201
Shares issued for awards of
contingent stock 1 1 2
Shares issued for non-cash compensation 1 1 1
Shares issued in acquisitions - - 9
Two-for-one stock split - - 212
Balance, end of year 429 427 425
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year 167,801 158,400 114,686
Shares issued for awards of
contingent stock 8,336 3,396 6,091
Tax benefit in excess of amortization on
stock awards 1,065 1,700 527
Contingent stock forfeited (7) (51) (48)
Shares issued for non-cash compensation 3,317 3,743 3,239
Shares issued in acquisitions - - 34,117
Shares issued related to prior year acquisition - 613 -
Two-for-one stock split - - (212)
Balance, end of year 180,512 167,801 158,400
RETAINED EARNINGS (DEFICIT)
Balance, beginning of year 16,021 (53,308) (106,036)
Net earnings 79,921 69,329 52,728
Balance, end of year 95,942 16,021 (53,308)
ACCUMULATED TRANSLATION ADJUSTMENT
Balance, beginning of year 8,615 7,279 6,126
Foreign currency translation (9,548) 1,336 1,153
Balance, end of year (933) 8,615 7,279
DEFERRED COMPENSATION
Balance, beginning of year (5,988) (6,232) (3,717)
Excess of fair value over proceeds from
awards of contingent stock (8,308) (3,305) (5,933)
Amortization 4,467 3,498 3,370
Contingent stock forfeited 8 51 48
Balance, end of year (9,821) (5,988) (6,232)
TREASURY STOCK
Balance, beginning of year (227) (226) (248)
Shares reissued for awards of
contingent stock 154 - -
Contingent stock forfeited (1) (1) (2)
Shares issued in acquisitions - - 24
Purchase of treasury shares (8,772) - -
Balance, end of year (8,846) (227) (226)
TOTAL SHAREHOLDERS' EQUITY $257,283 $186,649 $106,338
See accompanying notes to consolidated financial statements.
</TABLE>
F-13
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<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995
(In thousands of dollars)
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 79,921 $ 69,329 $ 52,728
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization of property
and equipment 23,196 22,862 20,473
Other depreciation and amortization 22,582 17,035 14,807
Deferred tax provision (2,940) (5,297) (1,375)
Net losses on disposals of property
and equipment 105 149 273
Non-cash compensation 322 3,242 3,556
Other, net (2,860) 2,217 811
Change in operating assets and liabilities,
net of acquisitions:
Receivables (15,284) (7,798) (13,016)
Inventories (5,031) 1,164 (5,953)
Prepaid expenses (1,884) 1,644 (1,441)
Accounts payable 2,558 1,113 (9,262)
Other accrued liabilities 10,854 12,119 11,050
Income taxes payable (3,218) (1,714) 2,567
Net cash provided by operating activities 108,321 116,065 75,218
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment (24,349) (17,015) (21,056)
Proceeds from sales of property and equipment 463 1,497 776
Net cash utilized in purchase of subsidiaries (10,097) (30,026) (27,713)
Net cash used in investing activities (33,983) (45,544) (47,993)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 13,162 108,131 75,271
Principal payments on long-term debt (56,342) (177,039) (114,281)
Net proceeds from (payments on) notes payable 10,724 (6,213) 8,098
Purchase of treasury shares (8,772) - -
Net cash used in financing activities (41,228) (75,121) (30,912)
Effect of exchange rate changes on cash
and cash equivalents (614) (76) 195
CASH AND CASH EQUIVALENTS:
Increase (decrease) during the period 32,496 (4,676) (3,492)
Balance, beginning of period 2,985 7,661 11,153
Balance, end of period $ 35,481 $ 2,985 $ 7,661
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 7,093 $ 14,173 $ 18,582
Income taxes $ 53,704 $ 39,991 $ 33,898
See accompanying notes to consolidated financial statements.
</TABLE>
F-14
</PAGE>
<PAGE>
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. Substantially all of the Company's non-U.S. subsidiaries
are included in the consolidated financial statements on a calendar year
basis while certain non-U.S. subsidiaries are included on the basis of a
fiscal year ended November 30.
Certain prior years' financial statement amounts have been reclassified
to conform with their 1997 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 loss of
$1,951,000 for the year ended December 31, 1997 (an aggregate exchange
gain of $271,000 and an aggregate loss of $828,000 for the years ended
December 31, 1996 and 1995, 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 $41,667,000 and $3,489,000 at
December 31, 1997 and 1996, 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 cross currency swaps, interest rate swaps,
caps and collars and foreign exchange forwards and options relating to
the Company's borrowing and trade activities. Such financial
instruments are used to manage the Company's exposure to fluctuations
in interest rates and foreign exchange rates. The Company
does not purchase, hold or sell derivative financial instruments for
trading or speculative purposes. The Company is exposed to credit risk
in the event of the inability of the counterparties to perform under
their obligations. However, the Company seeks to minimize such risk by
entering into transactions with counterparties that are major financial
institutions with high credit ratings.
The Company records realized and unrealized gains and losses from
foreign exchange hedging instruments (including cross currency swaps,
forwards and options) differently depending on whether the instrument
qualifies for hedge accounting. Gains and losses on those foreign
exchange instruments that qualify as hedges are deferred as part of the
cost basis of the asset or liability being hedged and are recognized in
the statement of earnings in the same period as the underlying
transaction. Realized and unrealized gains and losses on instruments
that do not qualify for hedge accounting are recognized currently in the
statement of earnings.
The Company records the net payments or receipts from interest rate
swaps, caps, collars and the interest rate component of cross currency
swaps as adjustments to interest expense on a current basis. If an
interest rate hedging instrument were terminated prior to the maturity
F-15
</PAGE>
<PAGE>
date, any gain or loss would be amortized into earnings over the shorter
of the original term of the derivative instrument and the underlying
transaction.
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, 1997, inventories would have been
higher by $4,032,000 ($4,729,000 and $4,557,000 in 1996 and 1995,
respectively). The cost elements of work in process and finished goods
inventories are raw materials, direct labor and manufacturing overhead.
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 remaining 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. 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.
Other intangible assets, including non-competition agreements, included
in other assets are amortized over the life of such agreements using the
straight-line method, usually ranging from 1 to 5 years.
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
F-16
</PAGE>
<PAGE>
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 $12,009,000 in 1997
($10,903,000 and $10,069,000 in 1996 and 1995, 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 $15,781,000 in 1997 ($15,449,000 and $14,597,000 in 1996 and
1995, 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
At December 31, 1997, the Company retroactively adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," for all
periods for which earnings per share information is presented. Under
the provisions of this statement, basic earnings per common share are
computed on the basis of the weighted average number of shares of common
stock outstanding during the year, including stock awards and
shares issued as non-cash compensation. The weighted average number of
common shares outstanding in 1997 was 42,613,000 (42,459,000 and
42,057,000 in 1996 and 1995, respectively). The Company has no
potentially dilutive securities and therefore is not subject to diluted
earnings per share presentation or disclosure requirements.
F-17
</PAGE>
<PAGE>
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 Pending Merger with Packaging Business of W. R. Grace & Co.
On August 14, 1997, the Company and W. R. Grace & Co. ("Grace") entered
into a definitive merger agreement to combine Grace's packaging business
("Grace Packaging") with the Company. This transaction is described in
the Company's Joint Proxy Statement/Prospectus dated February 13, 1998
(the "Joint Proxy Statement/Prospectus"), which was filed with the
Securities and Exchange Commission and distributed to the stockholders
of the Company in connection with a special meeting of the stockholders
held on March 23, 1998 at which the stockholders approved such merger
agreement. The transactions contemplated by the merger agreement are
currently expected to be completed on or about March 31, 1998. For
accounting purposes, such merger will be treated as a purchase of the
Company by Grace (after the spin-off of Grace's specialty chemicals
business). During 1997, the Company incurred transaction
expenses of $8,405,000 related to certain professional fees primarily in
connection with this merger.
Note 3 Acquisitions
During 1997, the Company made small acquisitions in Australia and Italy.
These acquisitions, which were made for cash in the aggregate amount of
approximately $10 million and were accounted for as purchases, were not
material to the Company's consolidated financial statements.
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 made 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 6),
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.
F-18
</PAGE>
<PAGE>
Note 4 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.
Information by Major Geographic Area:
(In thousands of dollars)
Net Operating Identifiable
Sales Profit Assets
1997
United States $ 540,213 $ 104,496 $ 223,650
Europe 214,311 25,840 171,347
Asia/Pacific & Other 127,027 7,780 103,363
Eliminations (38,718) - -
Consolidated $ 842,833 $ 138,116 $ 498,360
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
NOTE: Net sales shown for the United States, Europe and Asia/Pacific
and Other include transfers to other geographic areas as follows:
United States, 1997--$27,134,000; 1996 --$22,888,000; 1995 --
$18,412,000; Europe, 1997 --$7,042,000; 1996 --$4,781,000; 1995 --
$2,398,000; Asia/Pacific and Other, 1997--$4,542,000; 1996 --$5,329,000;
1995 --$4,312,000.
F-19
</PAGE>
<PAGE>
Note 5 Inventories
At December 31, 1997, the components of inventories, by major
classification (raw materials, work in process and finished goods) are
as follows:
(In thousands of dollars)
1997 1996
Raw materials $ 22,279 $ 23,497
Work in process 2,204 2,622
Finished goods 38,444 35,841
Subtotal 62,927 61,960
Less LIFO reserve 4,032 4,729
Total inventory $ 58,895 $ 57,231
Note 6 Debt
A summary of long-term debt at December 31, 1997 and 1996 follows:
(In thousands of dollars)
1997 1996
BT Credit Agreement $ - $ 38,228
Foreign loans 47,257 59,719
Other 3,890 4,844
Total 51,147 102,791
Less current installments 2,641 2,891
Long-term debt, less current installments $ 48,506 $ 99,900
The BT Credit Agreement is an unsecured $200 million revolving credit
facility that expires on June 30, 2001. The BT Credit Agreement has no
minimum annual paydown provision. As of December 31, 1997, there were
no outstanding borrowings under the BT Credit Agreement. At December
31, 1996, the Company's outstanding borrowings under the BT Credit
Agreement were $38,228,000. The weighted average interest rate under
the BT Credit Agreement was approximately 6.8% at December 31, 1996.
Had the Company not been a party to derivative financial instruments,
discussed below, the weighted average interest rates related to the BT
Credit Agreement would have been approximately 6.7% at December 31,
1996.
Foreign loans have been incurred for acquisitions, working capital and
other corporate purposes. Certain of such loans are secured by foreign
assets of approximately $7 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 6.8% and 7.4% at
December 31, 1997 and 1996, 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 cross 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, 1997.
F-20
</PAGE>
<PAGE>
The Company had available lines of credit at December 31, 1997, under
the BT Credit Agreement and other credit facilities of approximately
$264 million, of which approximately $230 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, 1997 are as follows: 1998 - $2,641,000; 1999
- - $29,439,000; 2000 -$1,504,000; 2001 -$13,974,000; and 2002 -
$1,120,000.
Note 7 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, 1997 and 1996 are as follows:
(In thousands of dollars)
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
On-Balance-Sheet Liabilities:
BT Credit Agreement $ - $ - $38,228 $38,228
Foreign loans 47,257 47,489 59,719 60,163
Other loans 3,890 3,681 4,844 4,565
Other liabilities 12,390 12,390 12,651 12,651
Off-Balance-Sheet Instruments (Derivatives)
Interest Rate Swaps - 167 - 324
Interest Rate Collars - 681 - 505
Cross Currency Swaps - (173) - 1,760
Foreign Exchange Forward Contracts - 23 - -
The Company utilizes derivative financial instruments to manage its
exposure to flucuations in interest rates and foreign exchange rates.
The Company does not purchase, hold or sell derivative financial
instruments for trading or speculative purposes.
Interest rate swaps are used to reduce the Company's exposure to
fluctuations in interest rates by fixing the rate of interest the
Company pays on the notional amount of debt. At December 31, 1997 and
1996, the Company was party to interest rate swaps with an aggregate
notional amount of approximately $14 million. These swaps fix the rate
of interest paid on the notional amount of certain non-U.S. dollar
denominated long-term debt at rates which ranged from 8.55% to 8.60% in
1997 and 1996. Such swaps expire through September 1999.
Interest rate collars are used to reduce the Company's exposure to
fluctuations in interest rates by limiting fluctuations in the rate of
interest the Company pays on a notional amount of debt. At December 31,
1997 and 1996, the Company was party to interest rate collars with an
aggregate notional amount of approximately $8 million. These collars
limit the rate of interest paid on the notional amount of certain non-
U.S. dollar denominated long-term debt to between 7.28% and 11.0%
F-21
</PAGE>
<PAGE>
through June 1999 and between 8.27% and 11.0% from June 1999 through
June 2001.
Cross currency swaps allow the Company to gain access to additional
sources of international financing while limiting foreign exchange
exposure and adjusting or limiting interest rate exposure by swapping
borrowings in U.S. dollars for borrowings denominated in the functional
currencies of the borrowers. At December 31, 1997, the Company was
party to cross currency swaps with an aggregate notional amount of
approximately $25 million with various expiration dates through
May 2002. At December 31, 1996, the Company was party to cross
currency swaps with an aggregate notional amount of $30 million
with various expiration dates through May 2002.
Foreign exchange forwards and options are generally used to reduce the
Company's exposure to the risk that the eventual cash outflows resulting
from firm commitments or anticipated transactions will be adversely
affected by changes in exchange rates. At December 31, 1997, the
Company was not party to any foreign currency options but was party to
two foreign currency forward contracts with an aggregate notional amount
of $4 million. Such forward contracts expire through December 1998. At
December 31, 1996, the Company was not party to any material foreign
currency options or forwards.
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. The notional amounts referred to above represent
agreed-upon amounts on which calculations of cash to be exchanged are
based. The notional amounts are not a measure of the Company's exposure
to credit or market risk.
Realized and unrealized gains and losses on the Company's financial
instruments and derivatives were not material to the consolidated
financial statements in 1997, 1996, and 1995.
The Company is exposed to credit losses in the event of the inability of
the counterparties to perform under 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 8 Shareholders' Equity
The Company's shareholders' equity increased to $257,283,000 at December
31, 1997 from $186,649,000 at December 31, 1996 primarily as a result of
the Company's net earnings in 1997 partially offset by a net reduction
in the Company's accumulated translation adjustment due to the effect of
foreign currency fluctuations. During 1997, the Company
purchased 159,200 of its common shares in the approximate aggregate
amount of $8,772,000 for use in the Company's employee benefit
plans.
On September 29, 1995, the Company distributed a two-for-one stock split
in the nature of a 100% stock dividend to the holders of record of the
Company's common stock at the close of business on September 15, 1995
(the "1995 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.
F-22
</PAGE>
<PAGE>
<TABLE>
A summary of changes in issued and outstanding shares of common stock and shares of treasury stock of the
Company follows:
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Changes in common stock:
Number of shares issued, beginning of year 42,747,704 42,506,573 20,111,618
Non-cash compensation 80,100 127,590 80,400
Awards of contingent stock 28,900 92,850 157,550
Shares issued related to acquisitions - 20,691 957,335
1995 stock split - - 21,199,670
Number of shares issued, end of year 42,856,704 42,747,704 42,506,573
Changes in treasury stock:
Number of shares held, beginning of year 226,758 224,758 122,306
Shares issued in acquisition - - (11,927)
Awards of contingent stock (153,800) - -
Purchase of treasury shares 159,200 - -
Contingent stock forfeited 300 2,000 2,000
1995 stock split - - 112,379
Number of shares held, end of year 232,458 226,758 224,758
</TABLE>
Non-cash compensation in each year includes the shares, if any, issued
as all or a portion of the Company's contribution to its profit-sharing
plan as determined by the Board of Directors of the Company, for the
respective preceding year and shares issued each year to non-employee
directors under the restricted stock plan for non-employee directors
(the "Directors Stock Plan"), discussed below. The amount charged to
operations related to these shares issued was $322,000 in 1997
($3,242,000 in 1996 and $3,556,000 in 1995). Non-cash compensation in
1997 included only the amount charged to operations for shares issued
under the Directors Stock Plan, as the Company's 1997 profit-sharing
plan contribution was made entirely in cash.
The Directors Stock Plan, as mentioned above, 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.
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. On August 14, 1997, the Board of Directors
amended the contingent stock plan to provide that the Grace Packaging
merger would not constitute such an event.
The excess of fair value over the award price of Contingent Stock is
charged to operations as compensation over a three-year period. In
1997, such charges amounted to $4,467,000 ($3,498,000 and $3,370,000 in
1996 and 1995, 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.
F-23
</PAGE>
<PAGE>
<TABLE>
A summary of the changes in shares available for the Directors Stock Plan and the Contingent Stock Plan
follows:
<CAPTION>
Changes in the Directors Stock Plan shares: 1997 1996 1995
<S> <C> <C> <C>
Number of shares available, beginning of year 29,200 161,400 82,200
Shares issued for new awards (1) (7,200) (7,200) (1,500)
1995 stock split - - 80,700
Reduction in shares authorized during year - (125,000) -
Number of shares available, end of year 22,000 29,200 161,400
Weighted average per share market value
of stock on grant date (2) $45.75 $35.13 $21.50
</TABLE>
<TABLE>
<CAPTION>
Changes in the Contingent Stock Plan shares: 1997 1996 1995
<S> <C> <C> <C>
Number of shares available, beginning of year 646,150 737,000 505,900
Shares issued for new awards (1) (182,700) (92,850) (157,550)
Contingent stock forfeited 300 2,000 2,000
1995 stock split - - 386,650
Number of shares available, end of year 463,750 646,150 737,000
Weighted average per share market value
of stock on grant date (2) $46.47 $36.59 $21.97
<FN>
(1) For the Directors Stock Plan during 1995, all 1,500 shares were issued before the 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 such stock split.
(2) Per share data adjusted to reflect the effect of the 1995 stock split.
</FN>
</TABLE>
The Company has adopted only the disclosure provisions of 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.
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, 1997.
Note 9 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.
F-24
</PAGE>
<PAGE>
The components of earnings before income taxes follow:
(In thousands of dollars)
1997 1996 1995
__________________________________________________________________
Domestic $107,261 $ 91,055 $ 61,007
Foreign 26,227 23,540 26,147
$133,488 $114,595 $ 87,154
The components of the provision for income taxes on earnings follow:
(In thousands of dollars)
1997 1996 1995
__________________________________________________________________
Current tax provision:
U.S. federal $36,409 $31,888 $20,624
U.S. state and local 9,345 8,085 5,830
Foreign 10,753 10,590 9,347
56,507 50,563 35,801
Deferred tax provision (benefit):
Domestic (2,396) (4,067) (2,589)
Foreign (544) (1,230) 1,214
(2,940) (5,297) (1,375)
Provision for income taxes $53,567 $45,266 $34,426
The Company's deferred tax liability, net of deferred tax assets, at
December 31, 1997 and 1996 amounted to $2,973,000 and $6,014,000,
respectively. The principal components of the Company's deferred tax
assets and liabilities at December 31, 1997 and 1996 are as follows:
(In thousands of dollars)
1997 1996
_____________________________________________________________________
Deferred tax assets:
Accrued liabilities $ 5,924 $ 7,970
Patents and other intangibles 5,396 2,830
Facilities consolidation and integration 3,364 3,801
Inventory 2,736 824
Deferred compensation 1,561 1,121
Bad debts 1,423 732
Property and equipment 1,217 1,169
Deferred revenue 729 1,128
Other 6,735 5,159
29,085 24,734
Valuation allowance (810) (277)
Deferred tax asset $28,275 $24,457
Deferred tax liabilities:
Property and equipment $24,706 $24,944
Deferred revenue 1,011 855
Patents and other intangibles 434 598
Other 5,097 4,074
Deferred tax liability $31,248 $30,471
F-25
</PAGE>
<PAGE>
The Company expects that it is more likely than not that the net
deferred tax assets of $28,275,000 at December 31, 1997 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 $810,000 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 an increase of $533,000 in 1997
related to additional foreign net operating losses in 1997.
<TABLE>
An explanation of the difference between the effective income tax rate and the statutory U.S. federal income
income tax rate expressed as a percentage of earnings before income taxes for the years ended December 31,
1997, 1996 and 1995 follows:
<CAPTION>
1997 1996 1995
<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 0.6 0.1 0.1
Tax effect of expenses not subject
to tax benefit 2.4 1.4 1.7
State income taxes, net of U.S. federal income tax benefit 4.4 4.5 4.0
Taxes on foreign earnings at other than the
statutory U.S. federal income tax rate (0.6) (0.6) (0.4)
Other miscellaneous items (1.7) (0.9) (0.9)
Effective income tax rate 40.1% 39.5% 39.5%
</TABLE>
The Company's tax provisions for 1997, 1996 and 1995 give effect to
foreign withholding taxes on the repatriation of accumulated earnings
from the Company's foreign subsidiaries and additional U.S. taxes, if
any, 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, 1997.
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 10 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 1997 was $11,209,000 ($10,939,000 and $10,228,000 in 1996 and 1995,
respectively). Estimated future minimum annual rental commitments under
noncancelable real property leases expiring through 2023 are as follows:
1998 - $9,374,000; 1999 - $6,424,000; 2000 - $5,204,000; 2001 -
$3,925,000; 2002 - $3,050,000; and subsequent years - $7,560,000.
F-26
</PAGE>
<PAGE>
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, 1997, 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, 1997 and
1996, 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 to the Company's consolidated financial
position. 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 position.
F-27
</PAGE>
<PAGE>
<TABLE>
Interim Financial Information (Unaudited)
(In thousands of dollars except per share data)
<CAPTION>
Quarter Net Sales Gross Profit Net Earnings Earnings Per Share
1997 1996 1997 1996 1997(a) 1996 1997(a) 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $202,859 $185,930 $ 75,434 $ 68,741 $ 19,441 $ 15,890 $ .46 $ .37
Second 211,607 193,116 79,776 72,661 21,671 17,573 .51 .42
Third 206,303 196,532 78,195 73,126 21,397 17,141 .50 .40
Fourth 222,064 214,034 85,911 79,899 17,412 18,725 .41 .44
Year $842,833 $789,612 $319,316 $294,427 $ 79,921 $ 69,329 $ 1.88 $ 1.63
<FN>
a) Reported net of the transaction expenses incurred primarily related to the
Grace Packaging merger in the amount of $850,000 in the third quarter and
$7,555,000 in the fourth quarter of 1997. Excluding these expenses,
net earnings and earnings per share for the third and fourth quarter of 1997
were $21,912,000, or $0.51 per share, and $22,963,000, or $0.54 per share,
respectively. For 1997, the transaction expenses amounted to $8,405,000.
Excluding such expenses, net earnings and earnings per share for 1997 were
$85,987,000,or $2.02 per share.
</FN>
</TABLE>
F-28
</PAGE>
<PAGE>
<TABLE>
SEALED AIR CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(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, 1997
Allowance for doubtful
accounts $5,623 $ 1,073 $ 656 $1,553 $5,799
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
<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-29
</PAGE>
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 and does business under its corporate name.
Aire Sellado, S.A. de C.V. Mexico
Creative Packaging Corporation* Japan
Danco (NZ) Limited*** New Zealand
E. T. Bygg AS Norway
L'Imballaggio S.r.l. Italy
Noja Immobiliaria, S.A. de C.V. Mexico
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 (Philippines) Inc. Philippines
Sealed Air Polska Sp. z.o.o. Poland
Sealed Air S.A.** France
Sealed Air (Singapore) Pte. Limited Singapore
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
Tepak S.p.A. Italy
Trigon Packaging Systems (NZ) New Zealand
Limited****
Trigon Viskase Pty. Limited* Queensland, Australia
*The Company directly or indirectly owns 50% of the outstanding shares.
**The Company directly or 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, 1997.
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 report dated January 20,
1998, except for note 2 which is as of March 23, 1998, relating to the
consolidated balance sheets of Sealed Air Corporation and subsidiaries as of
December 31, 1997 and 1996, 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, 1997, and related consolidated financial
statement schedule, which report appears in the December 31, 1997 annual
report on Form 10-K of Sealed Air Corporation.
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 27, 1998
<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, 1997 and the
consolidated balance sheet at December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000088204
<NAME> SEALED AIR CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 35481000
<SECURITIES> 0
<RECEIVABLES> 138124000
<ALLOWANCES> 5799000
<INVENTORY> 58895000
<CURRENT-ASSETS> 250765000
<PP&E> 315241000
<DEPRECIATION> 144114000
<TOTAL-ASSETS> 498360000
<CURRENT-LIABILITIES> 163610000
<BONDS> 0
0
0
<COMMON> 429000
<OTHER-SE> 256854000
<TOTAL-LIABILITY-AND-EQUITY> 498360000
<SALES> 842833000
<TOTAL-REVENUES> 842833000
<CGS> 523517000
<TOTAL-COSTS> 523517000
<OTHER-EXPENSES> 181200000
<LOSS-PROVISION> 1073000
<INTEREST-EXPENSE> 6950000
<INCOME-PRETAX> 133488000
<INCOME-TAX> 53567000
<INCOME-CONTINUING> 79921000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79921000
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.88
</TABLE>
