-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J0RLObkiBHKMxdpG7qtVLBJ7uJGsFlRrctnMnGzG7IXcwQfKUK4HI14O0VHxiq5R tuZu24JrR+FvanRGpIcnbg== 0000088204-96-000007.txt : 19960328 0000088204-96-000007.hdr.sgml : 19960328 ACCESSION NUMBER: 0000088204-96-000007 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960327 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEALED AIR CORP CENTRAL INDEX KEY: 0000088204 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PLASTIC PRODUCTS [3080] IRS NUMBER: 221682767 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-07834 FILM NUMBER: 96538905 BUSINESS ADDRESS: STREET 1: PARK 80 EAST CITY: SADDLE BROOK STATE: NJ ZIP: 07662 BUSINESS PHONE: 2017917600 FORMER COMPANY: FORMER CONFORMED NAME: CHAVANNES M A DATE OF NAME CHANGE: 19670406 10-K405 1 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 [FEE REQUIRED] For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 New York Stock Exchange $0.01 per share 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 15, 1996 was approximately $1,164,756,000. The number of outstanding shares of the registrant's Common Stock as of March 15, 1996 was 42,376,205. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 1995 Annual Report to Stockholders are incorporated by reference into Part I and Part II of this Annual Report on Form 10-K. Portions of the registrant's definitive proxy statement for its 1996 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. PART I ITEM 1. BUSINESS Sealed Air Corporation (together with its subsidiaries, the "Company") is engaged primarily in the manufacture and sale of a complementary line of protective and specialty packaging materials and systems and selected food packaging products. The Company's operations are conducted primarily in North America, Europe and the Asia/Pacific region, 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, 1995 appears in Note 3 of the Notes to Consolidated Financial Statements, which are contained in the Company's 1995 Annual Report to Stockholders. Such Note is incorporated herein by reference. As previously reported, on January 10, 1995, the Company acquired Trigon Industries Limited, a privately-owned New Zealand corporation ("Trigon"). Trigon was engaged primarily in the manufacture and sale of food packaging films and systems, durable mailers and bags, and specialty adhesive products. Trigon operated six manufacturing facilities in New Zealand, England and the United States and had subsidiaries in Australia and Germany that marketed certain of its products. During 1995, the Company has integrated Trigon's operations into the Company's other protective and specialty packaging operations. Further information concerning the Trigon acquisition is set forth in Note 2 of the Notes to Consolidated Financial Statements, which Note appears in the Company's 1995 Annual Report to Stockholders and is incorporated herein by reference. PRODUCTS The Company's principal protective and specialty packaging products are engineered products, surface protection and other cushioning products, and food packaging products. Certain of these products are also produced for non-packaging applications. 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, 1995 appears in the table under the caption "Selected Financial Data" in the Company's 1995 Annual Report to Stockholders, 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 certain other engineered 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 a line of Instamate(R) polyolefin films, which are high-performance plastic 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 primarily in North America, Europe and the Asia/Pacific region. 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 200 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 and maintains an ongoing program to develop new equipment models to meet evolving customer needs. The Company's High-Speed Instapacker(TM) automated system and the bench-top version of the Instapacker(TM) system, marketed in the United States as the VersaPacker(TM) system and in Europe as the SpeedyPacker(TM) system, produce ready-to-use foam cushions consisting of Instamate(R) film bags filled with Instapak(R) foam. Hand-held equipment models range from low-volume single station systems to microprocessor- controlled multiple station systems. During 1995, the Company introduced new microprocessor-controlled dispensing equipment for use in certain hand-held and foam-in-bag systems. Generally, customers may either buy or lease equipment from the Company for use with Instapak(R) systems. 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 2 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 Instapak(R) cushions using the Instapacker(TM) system. Specialty Polyethylene Foams The Company manufactures and sells extruded plank and laminated foams for packaging and non-packaging applications. Extruded plank foam is offered in varying densities and thicknesses up to three inches. Laminated foams, which are sold under various trademarks including Polylam(R) in the United States and Stratocell(R) in Europe, are produced in various densities and laminated into thicknesses ranging up to six inches. Certain of the Company's specialty polyethylene foam product lines contain a percentage of post-consumer recycled polyethylene resins. These foams can be produced in various colors and are available in anti-static and fire retardant forms. The Company's specialty polyethylene foams are generally sold to fabricators and converters for packaging and non-packaging applications in which a clean, non-abrasive material is required with such properties as shock absorption, vibration dampening, thermal insulation or buoyancy. In packaging applications, these foams are fabricated into a wide range of protective packaging shapes, forms and die-cuts for designed packages in which a clean, attractive appearance and cushioning or blocking and bracing performance is needed. Non- packaging applications for specialty foams include construction, automotive, sporting and athletic equipment products. The Company's specialty polyethylene foams are sold primarily in North America and Europe. Other Engineered Products The Company is engaged in the development, manufacture and sale of Korrvu(R) suspension packaging, which is covered by certain patents. A Korrvu(R) package suspends the product to be packaged in the air space of its shipping container between two strong, flexible low-slip films. 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 air cellular cushioning materials primarily under the trademarks AirCap(R) and PolyCap(R). These 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 3 during shipment. The Company's PolyCap(R) R line of air cellular cushioning material is similar to AirCap(R) R cushioning in construction except that its plastic film contains a lighter barrier layer. The Company's air cellular cushioning materials are used by a wide variety of end users, including both manufacturers and retailers. AirCap(R) 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) 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 and Europe. 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. The Company's AirCap(R) R and PolyCap(R) R 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 preconstructed 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 protective mailers include lightweight, tear-resistant mailers marketed primarily in North America and Europe under the trademarks Jiffylite(R) and Mail Lite(R) These mailers, which are lined with air cellular cushioning material, are offered in heat-sealable or self-seal forms. The Company's Jiffylite(R) R line of mailers are made from recycled kraft paper and the Company's PolyCap(R) R air cellular cushioning materials. 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, 4 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 and Jiffy(TM) floppy disk mailers, which are lined with thin polyethylene foam. The kraft paper used in many of these mailer lines and the foam lining of certain foam mailer products contain recycled content. These mailers are marketed primarily in North America and Europe. 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 primarily in North America, Europe and the Asia/Pacific region. Such mailers and bags are marketed under a number of brand names, including ShurTuff(R), Cache-Pak(R), Lok-Sure(R), Protec(R), Keepsafe(R) and Crush-Gard(R). Thin Polyethylene Foams In addition to the specialty polyethylene foams described above, the Company manufactures thin polyethylene foams in roll or sheet form in low, medium and special densities, in flat, ribbed or bag form and in a number of colors and thicknesses up to one-half inch. The Company also sells thin polyethylene foam that has anti-static properties and foam laminate products in which the foam is laminated to paper, polyethylene film or other substrates for specialized applications. Certain of the Company's thin polyethylene foam product lines include a percentage of post-consumer recycled resins. Low-density thin polyethylene foam manufactured by the Company is marketed primarily in North America and Europe under the trademark Cell-Aire(R) and is used primarily for surface protection and light-duty cushioning. Medium-density thin polyethylene foam is marketed in North America and Europe 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, introduced in 1995, are used for masking and other surface protection applications. 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 or sale to unaffiliated customers. 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 5 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. The 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 called 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. 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 6 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 primarily in North America, Europe and the Asia/Pacific region. During 1995, the Company began offering its Dri-Loc(R) theft sensor pads, which incorporate a component that can be used with electronic surveillance systems in supermarkets to reduce theft. 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 aesthetically attractive than conventional absorbent pads. The Company also manufactures conventional padding, sold as individual pads and in roll stock form for use by converters and processors to prepad trays. This padding consists of layers of bleached crepe tissue with one or two outer layers of polyethylene film. The Company also sells supermarket display case liners, which are similar in construction to conventional padding, under the trademark Cellu Liner(TM). During 1995, the Company began offering 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 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 systems marketed and sold primarily in Australasia and Europe and used to package a broad range of perishable foods such as meat, poultry, fish, prepared foods, cheese and other dairy products. The Company produces proprietary flexible films, bags and pouches in permeable and barrier varieties. The Company's permeable films, bags and pouches are designed primarily for frozen or dried foods. The oxygen permeability and water vapor barrier properties of the film allow for the retention of fresh product color and appearance to enhance product presentation. The Company's barrier films, bags and pouches provide a high barrier to oxygen and water, allowing extended storage for fresh chilled or processed products by preserving the texture, taste and moisture balance of the chilled or processed product. Both permeable and barrier films and bags are produced in various grades to meet customer requirements. The Company markets permeable and barrier shrinkbags under the Shrinkvac(R) trademark and barrier shrinkbags under the Perflex(TM) trademark. Permeable and barrier vacuum skin packaging is marketed under the Intact(R) and Tri-Fresh(TM) trademarks. The Company also offers Tuf-Flex(TM) barrier pouches with high puncture resistance. 7 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 frozen food and similar loose product packaging 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, 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 under the trademark Mic-Pac(R) to customers in those countries. 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. In certain countries, subsidiaries of the Company sell translucent air cellular material similar to AirCap(R) cushioning that is fabricated into solar pool covers. 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 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 foreign licensees that manufacture certain of its protective packaging products in Australia, Chile, England, Germany, Japan, New Zealand, South Africa and Sweden. Licensing revenues are not material to the Company's consolidated financial statements. 8 During 1995, 1994 and 1993, foreign net sales represented approximately 39%, 29% and 27%, respectively, of the Company's total net sales, while operating profit from foreign operations represented approximately 30%, 21% and 20%, respectively, of the Company's total operating profit. For a discussion of the factors affecting these changes in foreign net sales and operating profit, see Management's Discussion and Analysis of Results of Operations and Financial Condition, which appears in the Company's 1995 Annual Report to Stockholders and is incorporated by reference into Item 7 of this Annual Report on Form 10-K. In maintaining its foreign operations, the Company runs the risks inherent in such operations, including those of currency fluctuations. MARKETING, DISTRIBUTION AND CUSTOMERS The Company employs several hundred sales and account representatives in the countries in which it has operations who market the Company's products through a large number of distributors, fabricators and converters as well as directly to end users. In the United States and certain other countries, the Company has separate sales and marketing groups for its engineered products, its surface protection and other cushioning products, its food packaging products and certain of its other products. These groups often work together to develop market opportunities for the Company's products. To assist its marketing efforts and to provide specialized customer services, the Company maintains packaging laboratories in many of its United States and foreign facilities. These laboratories are staffed by professional packaging engineers and equipped with drop-testing and other equipment used to develop and test cost-effective package designs to meet the particular protective packaging requirements of each customer. Certain of these laboratories also design and construct molds for Instapak(R) packaging customers who prefer to use preformed foam cushions. The Company has no material long-term contracts for the distribution of its packaging products. In 1995, 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 resins and films, polyurethane chemicals, and paper and wood pulp products (including recycled or reprocessed paper products, resins, films and chemicals), and blowing agents used in foam products. 9 PRODUCT DEVELOPMENT The Company incurred expenses of $14,597,000 related to Company-sponsored research and development in 1995 compared with $10,912,000 during 1994 and $9,168,000 during 1993. The Company maintains a continuing effort to develop new products based on its existing product lines as well as new packaging and non- packaging applications for its products. The Company also maintains ongoing efforts to add or increase recycled or reprocessed content in its product lines. PATENTS AND LICENSES The Company is the owner or licensee of a number of United States and foreign patents and patent applications that relate to certain of its products, manufacturing processes and equipment. While some of these patents and licenses, as well as certain trademarks which the Company owns, offer some protection and competitive advantage for the Company's products and their manufacture, the Company believes that its success depends primarily on its marketing, engineering and manufacturing skills and on its research and product technology. COMPETITION The Company's 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. Certain firms producing competing products are well established and may have greater financial resources than the Company. Competition for most of the Company's protective and specialty packaging products is based primarily on packaging performance characteristics, service and price. 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 aesthetic appearance. 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. 10 ENVIRONMENTAL MATTERS The Company, like other manufacturers, is subject to various laws, rules and regulations in the countries, jurisdictions and localities in which it operates regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. The Company believes that compliance with current environmental laws and regulations has not had a material effect on the Company's capital expenditures or financial position. In some jurisdictions in which the Company's packaging products are sold or used, laws and regulations have been adopted or proposed that seek to regulate, among other things, recycled or reprocessed content, sale and disposal of packaging materials. In addition, customer demand for packaging materials that are viewed as being "environmentally responsible" and that minimize the generation of solid waste continues to evolve. While these issues have become a competitive factor in the marketplace for packaging materials, the Company maintains active programs designed to comply with these laws and regulations, to monitor their evolution, and to meet such customer demand. The Company believes that its protective packaging materials offer superior packaging protection, enabling customers to achieve lower package cube and weight using the Company's protective packaging materials than with many alternative packaging methods, thereby reducing the disposal of damaged products as well as the generation of packaging waste. Because the Company offers both plastic-based and paper-based protective packaging materials, customers can select the protective packaging materials that they consider to best meet their performance and cost needs and environmental preferences. A number of the Company's product lines incorporate recycled or reprocessed content, and the Company maintains ongoing efforts to add or increase recycled or reprocessed content in many of its product lines. The Company also supports its customers' interests in eliminating waste by offering or participating in collection programs for certain of the Company's products or product packaging and for materials used in certain of the Company's products, including programs aimed at recovering and recycling polyethylene materials from customers in the United States, an Instapak(R) foam return program with return sites throughout the United States, collection programs for packaging materials in Germany and elsewhere in Europe, and local newspaper collection programs to obtain materials used to produce Jiffy(TM) padded mailers and certain other products. Whenever possible, materials collected through these collection programs are reprocessed and either reused in the Company's operations or offered to other manufacturers for use in other products. Certain of the Company's protective packaging products can be reused and, as an alternative to recycling or disposal in solid waste landfills, are suitable fuel sources for waste-to-energy conversion facilities. 11 EMPLOYEES At December 31, 1995, the Company had approximately 3,940 employees, with approximately 280 employees covered by collective bargaining agreements. The Company believes that its employee relations are satisfactory. ITEM 2. PROPERTIES The Company has manufacturing facilities at twenty-five locations in the United States, two other locations in North America, including facilities in Canada and Mexico, fifteen locations in Europe, including facilities in England, France, Germany, Italy, the Netherlands, Norway, Spain and Sweden, and six locations in the Asia/Pacific region, including two facilities in New Zealand and facilities in Hong Kong, Malaysia, Singapore and Taiwan. The Company occupies other facilities containing sales, technical, warehouse or administrative offices at several locations in the United States and in the other countries in which the Company conducts business. 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 twenty-four 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 considers its manufacturing facilities to be 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 Superfund sites or other alleged clean-up obligations. The Company believes that its liability with respect to such proceedings is not material. 13 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 1995. 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, 1996, 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, 1996 Current Position an Officer T. J. Dermot Dunphy 63 1971 1971 President, Chief Executive Officer and Director William V. Hickey 51 1995 1980 Executive Vice President and Chief Operating Officer Elmer N. Funkhouser III 54 1984 1982 Senior Vice President Warren H. McCandless 55 1994 1990 Senior Vice President- Finance Dale Wormwood 61 1991 1989 Senior Vice President 13 Name and Age as of First Elected to First Elected Current Position March 15, 1996 Current Position an Officer Jonathan B. Baker 43 1994 1994 Vice President James A. Bixby 52 1990 1990 Vice President Mary A. Coventry 42 1994 1994 Vice President Bruce A. Cruikshank 53 1990 1990 Vice President Jean-Luc Debry 50 1992 1992 Vice President Paul B. Hogan 56 1995 1995 Vice President James P. Mix 44 1994 1994 Vice President Robert A. Pesci 50 1990 1990 Vice President Abraham N. Reichental 39 1994 1994 Vice President Horst Tebbe 55 1986 1986 Vice President Robert M. Grace, Jr. 49 1981 1981 General Counsel H. Katherine White 50 1996 1996 Secretary 14 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information appearing under the caption "Common Stock Information" in the Company's 1995 Annual Report to Stockholders is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information appearing under the caption "Selected Financial Data" in the Company's 1995 Annual Report to Stockholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information appearing under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1995 Annual Report to Stockholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INTERIM FINANCIAL INFORMATION (UNAUDITED) The information appearing under the caption "Interim Financial Information (Unaudited)" in the Company's 1995 Annual Report to Stockholders is incorporated herein by reference. FINANCIAL STATEMENTS AND SCHEDULE See Index to Consolidated Financial Statements and Schedule on page F-2 of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 15 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Part of the information required in response to this Item is set forth in Part I of this Annual Report on Form 10-K under the caption "Executive Officers of the Registrant," and the balance will be set forth in the Company's Proxy Statement for its 1996 Annual Meeting of Stockholders under the caption "Information Concerning Nominees." All such information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required in response to this Item will be set forth in the Company's Proxy Statement for its 1996 Annual Meeting of Stockholders under the caption "Directors' Compensation," under the subheadings "Summary Compensation Table" and "Compensation Committee Interlocks and Insider Participation" under the caption "Executive Compensation," and under the caption "Amendment of the Restricted Stock Plan for Non-Employee Directors - The Directors Stock Plan (as currently in effect)." Such information is incorporated herein by reference, except such incorporated information does not include the information under the subheadings "Report of Organization and Compensation Committee on Executive Compensation" and "Common Stock Performance Comparison" under the caption "Executive Compensation" in such Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in response to this Item will be set forth in the Company's Proxy Statement for its 1996 Annual Meeting of Stockholders under the caption "Voting Securities," and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 16 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 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, 1995, File No. 1-7834, is incorporated herein by reference.) 3.2 By-Laws of the Company as currently in effect. (Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 1-7834, is incorporated herein by reference.) 4.1 Credit Agreement dated as of June 8, 1994 among the Company, certain of its subsidiaries, various banks and Bankers Trust Company, as agent (Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994, File No. 1-7834, is incorporated herein by reference.) 4.2 Consent to Credit Agreement among the Company, certain of its subsidiaries, various financial institutions and Bankers Trust Company, as agent, dated as of December 7, 1994 (Exhibit 4.1 to the Company's Current Report on Form 8-K, Date of Report January 10, 1995, File No. 1-7834, is incorporated herein by reference.) 4.3 Amendment No. 1 to Credit Agreement among the Company, certain of its subsidiaries, various financial institutions and Bankers Trust Company, as agent, dated as of January 3, 1995 (Exhibit 4.2 to the Company's Current Report on Form 8-K, Date of Report January 10, 1995, File No. 1-7834, is incorporated herein by reference.) 4.4 Second Amendment to Credit Agreement among the company, certain of its subsidiaries, Bankers Trust Company, as agent, and various financial 17 institutions dated as of July 21, 1995 (Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ending September 30, 1995, File No. 1-7834, is incorporated herein by reference.) 4.5 Consent to Credit Agreement among the Company, certain of its subsidiaries, various financial institutions and Bankers Trust Company, as agent, dated as of November 2, 1995. 4.6 Third Amendment to Credit Agreement among the company, certain of its subsidiaries, Bankers Trust Company, as agent, and various financial institutions dated as of January 11, 1996. 10.1 Contingent Stock Plan of the Company, as amended. (Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File No. 1-7834, is incorporated herein by reference.)* 10.2 Restricted Stock Plan for Non-Employee Directors of the Company, as amended.* 10.3 Share Purchase Agreement dated as of January 10, 1995 among Sealed Air Corporation, Trigon Industries Limited, Sealed Air Holdings (NZ) Limited, a wholly owned New Zealand subsidiary of Sealed Air, James William Ferguson Foreman and Diane Shirley Foreman (Exhibit 2 to the Company's Current Report on Form 8-K, Date of Report January 10, 1995, File No. 1-7834, is incorporated herein by reference.) 13 Portions of the Company's 1995 Annual Report to Stockholders that are incorporated by reference into this Annual Report on Form 10-K. 21 Subsidiaries of the Company. 23 Consent of KPMG Peat Marwick LLP. 27 Financial Data Schedule *Compensatory plan or arrangement of management required to be filed as an exhibit to this report on Form 10-K. (b) REPORTS ON FORM 8-K: The Company did not file any reports on Form 8-K during the fiscal quarter ended December 31, 1995. 18 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 26, 1996 By s/T. J. DERMOT DUNPHY T. J. Dermot Dunphy President 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 26, 1996 T. J. Dermot Dunphy President and Director (Principal Executive Officer) By s/ WARREN H. MCCANDLESS March 26, 1996 Warren H. McCandless Senior Vice President-Finance (Principal Financial Officer and Principal Accounting Officer) By s/ JOHN K. CASTLE March 26, 1996 John K. Castle Director By s/ LAWRENCE R. CODEY March 26, 1996 Lawrence R. Codey Director 19 By s/ CHARLES F. FARRELL, JR. March 26, 1996 Charles F. Farrell, Jr. Director By s/ DAVID FREEMAN March 26, 1996 David Freeman Director By s/ ALAN H. MILLER March 26, 1996 Alan H. Miller Director By s/ R. L. SAN SOUCIE March 26, 1996 R. L. San Soucie Director 20 SEALED AIR CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE Years ended December 31, 1995, 1994 and 1993 F-1 SEALED AIR CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule Page Independent Auditors' Report * Financial Statements: Consolidated Statements of Earnings for the years ended December 31, 1995, 1994 and 1993 * Consolidated Balance Sheets - December 31, 1995 and 1994 * Consolidated Statements of Shareholders' Equity (Deficit) for the years ended December 31, 1995, 1994 and 1993 * Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 * Notes to Consolidated Financial Statements * Independent Auditors' Report on Schedule F-3 Consolidated Schedule: II - Valuation and Qualifying Accounts F-4 *The information required appears on pages 17 through 36 of the Company's 1995 Annual Report to Stockholders and is incorporated by reference into this Annual Report on Form 10-K. All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. F-2 Independent Auditor's Report on Schedule The Board of Directors and Shareholders Sealed Air Corporation: Under date of January 17, 1996, we reported on the consolidated balance sheets of Sealed Air Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings, shareholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in the 1995 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1995. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. s/KPMG Peat Marwick LLP Short Hills, New Jersey January 17, 1996 F-3 SEALED AIR CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS - SCHEDULE II YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (In thousands of dollars)
ADDITIONS BALANCE AT CHARGED TO CHARGED TO BEGINNING COSTS AND OTHER DEDUCTIONS BALANCE AT DESCRIPTION OF YEAR EXPENSES ACCOUNTS (1) (2) END OF YEAR Year ended December 31, 1995 Allowance for doubtful accounts $3,970 $2,421 $ 350 $1,480 $5,261 Year ended December 31, 1994 Allowance for doubtful accounts $2,675 $1,210 $ 764 $ 679 $3,970 Year ended December 31, 1993 Allowance for doubtful accounts $2,665 $ 734 $ 6 $ 730 $2,675 (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.
F-4 EX-4.5 2 EXHIBIT 4.5 CONSENT TO CREDIT AGREEMENT CONSENT TO CREDIT AGREEMENT (this "Consent"), dated as of November 2, 1995, among SEALED AIR CORPORATION, a Delaware corporation (the "Company"), SEALED AIR B. V., a corporation organized and existing under the laws of the Netherlands, SEALED AIR LIMITED, a corporation organized and existing under the laws of England, SEALED AIR (NZ) LIMITED, a corporation organized and existing under the laws of New Zealand (each a "Subsidiary Borrower" and together with the Company, the "Borrowers", and each a "Borrower"), BANKERS TRUST COMPANY, as Agent (the "Agent") and the lenders party to the Credit Agreement referred to below. All capitalized terms used herein and not otherwise defined herein shall have the respective meaning as provided such terms in the Credit Agreement. W I T N E S S E T H : WHEREAS, the Borrowers, various lender (the "Banks") and the Agent are parties to a Credit Agreement, dated as of June 8, 1994 (the "Credit Agreement"); WHEREAS, the company has requested that the Banks agree to the issuance of two Letters of Credit that have an expiry date of longer than 12 months; and WHEREAS, in connection with the foregoing, the parties hereto wish to consent to a modification to the Credit Agreement as herein provided; NOW, THEREFORE, it is agreed: 1. Notwithstanding anything to the contrary contained in Section 2.01(c) (ii) (x) of the Credit Agreement, the Banks hereby agree that BTCo may issue two Letters of Credit for the account of the Company with expiry dates of longer than 12 months so long as such expiry dates are otherwise prior to the Final Maturity Date. 2. This Consent is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 3. This Consent may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Company and the Agent. 4. THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 5. This Consent shall become effective on the date (the "Consent Effective Date") when the Borrowers, the Agent and the Required Banks shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of telecopier) the same to the Agent at its Notice office. 6. From and after the Consent Effective Date, all references in the Credit Agreement and each of the Credit Documents to the Credit Documents to the Credit Agreement, shall be deemed to be references to the Credit Agreement as modified hereby. IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Consent to be duly executed and delivered as of the date first above written. SEALED AIR CORPORATION By s/Warren H. McCandless Title: Senior Vice President-Finance SEALED AIR B. V. By s/William V. Hickey Title: Managing Director SEALED AIR LIMITED By s/William V. Hickey Title: Attorney-in-Fact SEALED AIR (NZ) LIMITED By s/William V. Hickey Title: Director BANKERS TRUST COMPANY, Individually and as Agent By s/______________________________ Title: Vice President ABN AMRO BANK N. V. NEW YORK BRANCH By s/John W. Deegan Title: Vice President By s/David W. Stack Title: Assistant Vice President THE BANK OF NOVA SCOTIA By s/ Title: Vice President CAMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENE By s/______________________________ Title: By s/______________________________ Title: NATIONSBANK, N.A. By s/______________________________ Title: UNITED JERSEY BANK By s/______________________________ Title: THE BANK OF NOVA SCOTIA By s/ Title: Vice President CAMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENE By s/Brian O'Leary Title: Vice President By s/Sean Mounier Title: First Vice President NATIONSBANK, N.A. By s/______________________________ Title: Vice President UNITED JERSEY BANK By s/Lawrence F. Zema Title: Vice President & Regional Manager BANQUE FRANCAISE DU COMMERCE EXTERIEUR By: s/ Title CREDIT LYONNAIS, NEW YORK BRANCH By s/ Title: CORESTATES BANK, N.A. By s/ Title: THE FIRST NATIONAL BANK OF BOSTON By s/ Title: Director FLEET BANK N.A. By s/ Title: Senior Vice President THE NORTHERN TRUST COMPANY By s/ Lawson E. Whiting Title: Commerical Banking Officer TORONTO DOMINION (NEW YORK), INC. By s/ Title: Managing Director MIDLAND BANK PLC NEW YORK BRANCH By s/ Title: Authorized Signatory EX-4.6 3 Exhibit 4.6 THIRD AMENDMENT THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of January 11, 1996, among SEALED AIR CORPORATION, a Delaware corporation (the "Company"), SEALED AIR B.V., a corporation organized and existing under the laws of the Netherlands, SEALED AIR LIMITED, a corporation organized and existing under the laws of England, SEALED AIR (NZ) LIMITED, a corporation organized and existing under the laws of New Zealand (each a "Subsidiary Borrower" and together with the Company, the "Borrowers", and each a "Borrower"), BANKERS TRUST COMPANY, as Agent (the "Agent") and the lenders party to the Credit Agreement referred to below. All capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the Credit Agreement. W I T N E S S E T H : WHEREAS, the Borrowers, various lenders (the "Banks") and the Agent are parties to a Credit Agreement, dated as of June 8, 1994 (as amended, modified or supplemented through the date hereof, the "Credit Agreement"); and WHEREAS, the parties hereto wish to further amend the Credit Agreement as herein provided; NOW, THEREFORE, it is agreed: 1. Section 8.01 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of clause (x) thereof, (ii) deleting the period appearing at the end of clause (xi) thereof and inserting "; and" in lieu thereof and (iii) inserting the following new clause (xii) at the end thereof: "(xii) additional Liens on assets of the Company or any of its Subsidiaries so long as such Liens (i) only attach to those assets that comprise the non-United States operations of the Company or such Subsidiary and (ii) the aggregate principal amount of all Indebtedness and other obligations secured by such Liens does not exceed $10,000,000 (or the Dollar Equivalent thereof in the case of Indebtedness or other obligations incurred in a currency other than Dollars) at any time outstanding." 2. The Banks hereby acknowledge and agree that from and after the Amendment Effective Date (as defined below) the Company shall not be required to deliver the monthly reports pursuant to Section 7.01(a) of the Credit Agreement. 3. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 4. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Company and the Agent. 5. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 6. This Amendment shall become effective on the date (the "Amendment Effective Date") when the Borrowers and the Required Banks shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of telecopier) the same to the Agent at its Notice Office. 7. From and after the Amendment Effective Date, all references in the Credit Agreement and each of the Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby. IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. SEALED AIR CORPORATION By s/ Warren H. McCandless Title: Senior Vice President - Finance SEALED AIR B.V. By s/William V. Hickey Title: Managing Director SEALED AIR LIMITED By s/William V. Hickey Title: Attorney in Fact SEALED AIR (NZ) LIMITED By s/ Title: Director BANKERS TRUST COMPANY, Individually and as Agent By s/ Dana Klein Title: Vice President ABN AMRO BANK N.V. NEW YORK BRANCH By s/__________________________ Title: By s/__________________________ Title: THE BANK OF NOVA SCOTIA By s/__________________________ Title: COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By s/Brian O'Leary Title: Vice President By s/ Sean Mounier Title: First Vice President NATIONSBANK, N.A. By s/ Title: Vice President UNITED JERSEY BANK By s/Lawrence F. Zema Title: Vice President & Regional Manager BANQUE FRANCAISE DU COMMERCE EXTERIEUR By s/ Frederick K. Kammler Title: Vice President By s/ William C. Maier Title: Vice President - Group Manager CREDIT LYONNAIS, NEW YORK BRANCH By s/ Mary E. Collier Title: CORESTATES BANK, N.A. By s/ Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By s/ Title: Director FLEET BANK N.A. By s/___________________________ Title: Senior Vice President THE NORTHERN TRUST COMPANY By s/Lawson E. Whiting Title: Commercial Banking Officer TORONTO DOMINION (NEW YORK), INC. By s/Debbie A. Greene Title: Vice President MIDLAND BANK PLC NEW YORK BRANCH By s/ Title: Authorized Signatory EX-10.2 4 Exhibit 10.2 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS OF SEALED AIR CORPORATION, AS AMENDED Section 1. Purpose. The Restricted Stock Plan for Non-Employee Directors (the "Plan") of Sealed Air Corporation (the "Corporation") is designed to enhance the ability of the Corporation to attract, retain and motivate Non-Employee Directors (as defined in Section 3) of exceptional ability and to promote the common interest of directors and stockholders in enhancing the value of the Corporation's Common Stock. It is the intention of the Plan to provide for payment in shares of the Corporation's common stock, par value $0.01 per share ("Common Stock"), of all or a portion of the annual retainer paid to each Non-Employee Director for serving as a director of the Corporation. Section 2. Stock Available. The stock subject to the Plan shall be such authorized but unissued or treasury shares of Common Stock as shall from time to time be available for issuance pursuant to the Plan. The total amount of Common Stock which may be issued pursuant to the Plan is 75,000 shares, subject to adjustment in accordance with the provisions of Section 7. Section 3. Eligibility. Each Non-Employee Director of the Corporation shall be eligible to participate in the Plan. As used in the Plan, the term "Non-Employee Director" shall include any person who, at the time of his or her election to the Board of Directors of the Corporation, is not an officer or employee of the Corporation or any of its Subsidiaries (as such term is defined in Section 16). Any Non-Employee Director who becomes an officer or employee of the Corporation or any of its Subsidiaries shall cease to be eligible to participate in the Plan for so long as such person remains as such an officer or employee. Section 4. Grants of Shares. Grants of shares of Common Stock available for issuance under the Plan shall be made as follows: (a) Initial Grants. On the date any Non-Employee Director is first elected a director of the Corporation on or after the Effective Date (as defined in Section 20) of the Plan, such Non-Employee Director shall receive a grant of 500 shares of Common Stock pursuant to the Plan; provided that such grant shall not be made to a Non-Employee Director who was, within twelve (12) months immediately preceding his or her election as a director, an officer or employee of the Corporation or any of its Subsidiaries. (b) Annual Grants. On the date on which each Non-Employee Director is elected a director of the Corporation at each annual meeting of the stockholders of the Corporation, held on or after the Effective Date of the Plan, such Non-Employee Director shall receive a grant of shares of Common Stock pursuant to the Plan calculated by dividing $15,000 by the Fair Market Value per Share (as defined in Section 4(d)) of the Corporation's Common Stock at the close of business on such date. In the event that such quotient is other than a round lot of shares of the Corporation's Common Stock, the number of shares to be issued to such Non-Employee Director pursuant to such grant shall be rounded up or down to the next nearest round lot in accordance with Section 4(e). (c) Interim Grants. In the event that, on or after the Effective Date of the Plan, any Non-Employee Director is elected a director at other than an annual meeting of the stockholders of the Corporation, in addition to any shares of Common Stock granted to such director pursuant to Section 4(a), such Non-Employee Director shall also receive on the date of such Non-Employee Director's election a grant of shares of Common Stock pursuant to the Plan calculated by (i) dividing $15,000 by the Fair Market Value Per Share of the Corporation's Common Stock at the close of business on such date and (ii) multiplying such quotient by a fraction the numerator of which shall be the number of days remaining from the date of such Non-Employee Director's election to the date of the next annual meeting of the stockholders of the Corporation provided for in accordance with the By-Laws of the Corporation as then in effect and the denominator of which shall be 365. In the event that such product is other than a round lot of shares of the Corporation's Common Stock, the number of shares to be issued to such Non-Employee Director pursuant to such grant shall be rounded up or down to the next nearest round lot in accordance with Section 4(e). (d) Fair Market Value Per Share. As used in the Plan, the term "Fair Market Value Per Share" shall mean the last sales price of the Common Stock as reported on the composite transaction reporting system for New York Stock Exchange listed issues on the day on which a grant is made pursuant to the Plan or, if no sales occurred on such date, the last sales price on such composite transaction reporting system on the most recent day prior to such day on which a sale occurred. (e) Rounding. In the event that rounding of a grant is required pursuant to Section 4(b) or 4(c), an odd lot of 50 or more shares of Common Stock shall be rounded to the next highest round lot and an odd lot of less than 50 shares of Common Stock shall be rounded to the next lowest round lot. (f) Non-Transferability of Grants. Except as provided below, no grant of shares of Common Stock pursuant to the Plan shall be transferable by the recipient of such grant, and no shares of Common Stock issued pursuant to the Plan, or any interest therein, may be sold, transferred, pledged, encumbered or otherwise disposed of (including without limitation by way of gift o r donation) by the Non-Employee Director to whom such shares are issued as long as such Non-Employee Director shall remain a director of the Corporation. Each Non-Employee Director may provide the Corporation with a written designation in form satisfactory to the Corporation's counsel designating a person or persons ("Beneficiary") entitled to receive shares to be issued pursuant to a grant of shares under the Plan upon the death of such Non-Employee Director after such grant but prior to the issuance of shares pursuant to such grant. The Corporation shall honor each such written designation, provided that the Beneficiary named in such designation shall take all steps necessary to comply with the Plan, including the payment of the Issue Price (as defined below) for such shares if not paid by the Non-Employee Director and the execution of any agreement reasonably required by counsel to the Corporation in order to comply with the Plan or with federal or state securities laws or other legal requirements. (g) Execution of Agreement. Each grant of Common Stock pursuant to this Section 4 shall be contingent upon and subject to (i) payment by such Non-Employee Director pursuant to Section 5 of the Issue Price for the shares covered by such grant and (ii) the execution by the Non-Employee Director (or by his or her Beneficiary) of a document agreeing to hold the shares of Common Stock covered by such grant in accordance with the terms and conditions of the Plan (including without limitation Sections 4(c) and 13) and containing such other terms and conditions as may be required by counsel to the Corporation in order to comply with federal or state securities laws or other legal requirements. Section 5. Issue Price of Common Stock. Prior to the issuance of Common Stock to a Non-Employee Director pursuant to the Plan, the Non-Employee Director shall pay to the Corporation an amount of money per share ("Issue Price") equal to the lesser of (a) $1.00 per share and (b) ten percent (10%) of the Fair Market Value Per Share thereof; provided, however, that such amount shall not be less per share than the par value per share of the Common Stock. The Issue Price for shares of Common Stock granted pursuant to the Plan shall be tendered to the Corporation within thirty (30) days after notice of the amount thereof is given by the Corporation to the recipient of such shares. Section 6. Change in Control. Notwithstanding any other provision of the Plan, in the event that (i) the Corporation is merged into or consolidated with another corporation or other entity and as a result of such merger or consolidation less than 70% of the combined voting power of the outstanding voting securities of the surviving or resulting corporation or other entity shall, after giving effect to such merger or consolidation, be "beneficially owned" (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act")) in the aggregate, directly or indirectly, by the former stockholders of the Corporation (excluding from such computation any such securities beneficially owned, directly or indirectly, by "affiliates" of the Corporation (as defined in Rule 12b-2 under the Securities Exchange Act) and any such securities so beneficially owned, directly or indirectly, by a party to such merger or consolidation), (ii) the Corporation shall sell all or substantially all of its assets, (iii) any "person" is or becomes the "beneficial owner" (as the terms "person" and "beneficial owner" are used in Sections 13(d) and 14(d) of the Securities Exchange Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation's then outstanding securities, (iv) as a result of any solicitation subject to Rule 14a-11 under the Securities Exchange Act (or any successor rule thereto) one or more persons not recommended by or opposed for election to the Board of Directors by one-third or more of the directors of the Corporation then in office is or are elected a director of the Corporation, or (v) the Corporation shall become subject for any reason to a voluntary or involuntary dissolution or liquidation, then, in any such event, as of the close of business at the principal executive office of the Corporation on the business day immediately preceding the date on which such event occurs, for purposes of the Plan and to the extent that the provisions of the Plan remain applicable to shares granted under the Plan, the restriction provided for in Section 4(f) of the Plan shall without further act expire and cease to apply to any securities granted under the Plan, the requirement of a legend on stock certificates provided for in Section 9 of the Plan shall without further act expire and cease to apply to any securities granted under the Plan, and each Non-Employee Director holding shares issued under the Plan shall thereupon have the right to receive an unlegended certificate as set forth in the last sentence of Section 9 of the Plan. Section 7. Adjustments. In the event of changes in the Common Stock of the Corporation after the Effective Date of the Plan by reason of any stock dividend, split-up, combination of shares, reclassification, recapitalization, merger, consolidation, reorganization or liquidation: (a) the restrictions provided in Section 4(f) and the requirement of a legend on stock certificates provided in Sections 9 and 10(d) shall apply to any securities issued in connection with any such change in respect of stock which has been granted under the Plan and (b) appropriate adjustments shall be made by the Board of Directors as to (i) the number of shares to be delivered and the Issue Price where such change occurred after the date of the grant but before the date the stock covered by the grant is delivered and (ii) the number and class of shares available under the Plan in the aggregate, which changes shall be made in the same manner as such items are adjusted for purposes of the Contingent Stock Plan of Sealed Air Corporation as then in effect. Section 8. Action by Corporation. Neither the existence of the Plan nor the issuance of Common Stock pursuant thereto shall impair the right of the Corporation or its stockholders to make or effect any adjustments, recapitalizations or other change in the Common Stock referred to in Section 7, any change in the Corporation's business, any issuance of debt obligations or stock by the Corporation or any grant of options on stock of the Corporation. Section 9. Legend on Stock Certificates. Every certificate of Common Stock issued pursuant to the Plan shall, so long as the restrictions imposed by the Plan (including without limitation Section 4(f)) remain in effect, bear a legend in substantially the following form: This certificate and the shares represented hereby are held subject to the terms of the Restricted Stock Plan for Non-Employee Directors of Sealed Air Corporation, which Plan provides that neither the shares issued pursuant thereto, nor any interest therein, may be sold, transferred, pledged, encumbered or otherwise disposed of (including without limitation by way of gift or donation) except in accordance with such Plan. A copy of such Plan is available for inspection at the executive offices of Sealed Air Corporation. Each Non-Employee Director may surrender to the Corporation the certificate or certificates representing such shares in exchange for a new certificate or certificates, free of the above legend, at any time after either such Non-Employee Director has ceased to be a director of the Corporation or the restriction set forth in Section 4(f) has otherwise ceased to apply to the shares covered by such certificate. Section 10. Government and Other Regulations and Restrictions. (a) In General. The issuance by the Corporation of any shares of Common Stock pursuant to the Plan shall be subject to all applicable laws, rules and regulations and to such approvals by governmental agencies as may be required. (b) Registration of Shares. The Corporation shall use its reasonable commercial efforts to cause the grants of shares of Common Stock to be made pursuant to this Plan to be registered under the Securities Act of 1933, as amended (the "Securities Act"), but shall otherwise be under no obligation to register any shares of Common Stock issued under the Plan under the Securities Act or otherwise. If, at the time any shares of Common Stock are issued pursuant to the Plan, there shall not be on file with the Securities and Exchange Commission an effective Registration Statement under the Securities Act covering such shares of Common Stock, the Non-Employee Director to whom such shares are to be issued will execute and deliver to the Corporation upon receipt by him or her of any such shares an undertaking, in form and substance satisfactory to the Corporation, that (i) such Non-Employee Director has had access or will, by reason of such person's service as a director of the Corporation, or otherwise, have access to sufficient information concerning the Corporation to enable him or her to evaluate the merits and risks of the acquisition of shares of the Corporation's Common Stock pursuant to the Plan, (ii) such Non-Employee Director has such knowledge and experience in financial and business matters that such person is capable of evaluating such acquisition, (iii) it is the intention of such Non-Employer Director to acquire and hold such shares for investment and not for the resale or distribution thereof, (iv) such Non-Employer Director will comply with the Securities Act and the Securities Exchange Act with respect to such shares, and (v) such Non-Employer Director will indemnify the Corporation for any costs, liabilities and expenses which the Corporation may sustain by reason of any violation of the Securities Act or the Securities Exchange Act occasioned by any act or omission on his or her part with respect to such shares. (c) Resale of Shares. Without limiting the generality of Section 4 (f), shares of Common Stock acquired pursuant to the Plan shall not be sold, transferred or otherwise disposed of unless and until either (i) such shares shall have been registered by the Corporation under the Securities Act, (ii) the Corporation shall have received either a "no action" letter from the Securities and Exchange Commission or an opinion of counsel acceptable to the Corporation to the effect that such sale, transfer or other disposition of the shares may be effected without such registration, or (iii) such sale, transfer or disposition of the shares is made pursuant to Rule 144 of the General Rules and Regulations promulgated under the Securities Act, as the same may from time to time be in effect, and the Corporation shall have received an opinion of counsel acceptable to the Corporation to such effect. (d) Legend on Certificates. The Corporation may require that any certificate or certificates evidencing shares issued pursuant to the Plan bear a restrictive legend, and be subject to stop-transfer orders or other actions, intended to effect compliance with the Securities Act or any other applicable regulatory measures. Section 11. Corporation's Right to Terminate Retention; Non-Exclusivity. Nothing contained in the Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements or modifying existing compensation arrangements for Non-Employee Directors, subject to stockholder approval if such approval is required by applicable statute, rule or regulation; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any member of the Board of Directors of the Corporation any right to continued membership on the Board of Directors of the Corporation. Section 12. No Rights in Common Stock. No Non- Employee Director or Beneficiary shall have any interest in or be entitled to any voting rights or dividends or other rights or privileges of stockholders of the Corporation with respect to any shares of Common Stock granted pursuant to the Plan unless, and until, shares of Common Stock are actually issued to such person and then only from the date such person becomes the record owner thereof. Section 13. Tax Withholding. The Corporation shall make appropriate provisions for the payment of any Federal, state or local taxes or any other charges that may be required by law to be withheld by reason of a grant or the issuance of shares of Common Stock pursuant to the Plan. Section 14. No Liability. No member of the Board of Directors of the Corporation, nor any officer or employee of the Corporation acting on behalf of the Board of Directors of the Corporation, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Board of Directors and each and any officer or employee of the Corporation acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Corporation in respect of any such action, determination or interpretation. Section 15. Successors. The provisions of the Plan shall be binding upon and inure to the benefit of all successors of any person receiving Common Stock of the Corporation pursuant to the Plan, including, without limitation, the estate of such person and the executors, administrators or trustees thereof, the heirs and legatees of such person, and any receiver, trustee in bankruptcy or representative of creditors of such person. Section 16. Subsidiaries. For the purposes of the Plan, the term "Subsidiaries" includes those corporations 50 per cent or more of whose outstanding voting stock is owned or controlled, directly or indirectly, by the Corporation and those partnerships and joint ventures in which the Corporation owns directly or indirectly a 50 per cent or more interest in the capital account or earnings. Section 17. Expenses. The expenses of administering the Plan shall be borne by the Corporation. Section 18. Pronouns. Masculine pronouns and other words of masculine gender shall refer to both men and women. Section 19. Termination and Amendment of the Plan. The Board of Directors may from time to time amend this Plan, or discontinue the Plan or any provisions thereof; provided that no amendment or modification of the Plan shall, without the prior approval of the stockholders of the Corporation: (a) increase the number of shares of Common Stock available for grant under the Plan; (b) materially increase the benefits accruing to participants under the Plan; (c) modify the requirements as to eligibility for participation under the Plan; or (d) change any of the provisions of this Section 19. No amendment or discontinuation of the Plan or any provision thereof shall, without the written consent of the participant, adversely affect any shares theretofore granted to such participant under the Plan. Section 20. Effective Date. The Plan became effective (the "Effective Date") on May 17, 1991 and was amended as of February 7, 1996. EX-13 5 EXHIBIT 13 SEALED AIR CORPORATION 1995 ANNUAL REPORT Selected Financial Data (In thousands of dollars except per share data)
1995(1) 1994 1993 1992 1991(2) Consolidated Earnings Statement Data Net sales by class of product: Engineered products $252,535 $208,363 $180,508 $176,541 $165,926 Surface protection and other cushioning products 345,592 242,864 209,909 206,447 199,800 Food packaging products 103,866 56,444 51,023 52,727 49,207 Other products 21,127 11,515 10,254 10,343 20,195 Total 723,120 519,186 451,694 446,058 435,128 Cost of sales 466,952 327,423 282,147 278,427 271,006 Marketing, administrative and development expenses 147,288 107,854 95,434 95,441 94,642 Operating profit 108,880 83,909 74,113 72,190 69,480 Other income (expense), net (21,726) (22,706) (28,652) (33,372) (38,014) Earnings before income taxes 87,154 61,203 45,461 38,818 31,466 Income taxes 34,426 23,987 19,547 18,050 15,291 Earnings before cumulative effect of accounting change and early redemption of subordinated notes 52,728 37,216 25,914 20,768 16,175 Cumulative effect of accounting change(3) - - 1,459 - - Early redemption of subordinated notes, net of income taxes(4) - (5,576) - - - Net earnings $ 52,728 $ 31,640 $ 27,373 $ 20,768 $ 16,175 Earnings per common share(5): Before cumulative effect of accounting change and early redemption of subordinated notes $ 1.25 $ .94 $ .66 $ .54 $ .44 Cumulative effect of accounting change(3) - - .04 - - Early redemption of subordinated notes, net of income taxes(4) - (.14) - - - Net earnings $ 1.25 $ .80 $ .70 $ .54 $ .44 ________________________________________________________________________________________________________ Consolidated Balance Sheet Data Working capital $ 41,945 $ 15,767 $ 33,828 $ 29,417 $ 18,495 Total assets 443,545 331,117 279,818 268,264 274,877 Long-term debt, less current installments 149,808 155,293 190,058 225,278 253,746 Shareholders' equity (deficit) 106,338 11,012 (29,419) (66,311) (94,626) (1)Includes the operations of Trigon Industries Limited from the date of its acquisition in January 1995. (2)Includes the operations of Sentinel Holdings, Inc. from the date of its acquisition in August 1991. (3)Reflects cumulative effect of the implementation as of January 1, 1993 of Financial Accounting Standard No. 109, "Accounting for Income Taxes." (See notes 1 and 7 to the Consolidated Financial Statements.) (4)Reflects charge arising from the early redemption in 1994 of the Company's 12-5/8% Senior Subordinated Notes, net of applicable income taxes. (See note 4 to the Consolidated Financial Statements.) (5)Per common share data has been restated for periods prior to 1995 to reflect the 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. Per common share data for 1991 has been restated to reflect the two-for-one stock split distributed in September 1992.
Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Net Sales Net sales increased 39% in 1995 compared with 1994 and 15% in 1994 compared with 1993. Approximately two-fifths of the increase in net sales in 1995 resulted from the added sales of Trigon Industries Limited ("Trigon"), which the Company acquired in early January 1995. Trigon, originally based in New Zealand, is a multi-national manufacturer of food packaging materials and systems, durable mailers and bags, and specialty adhesive products. During 1995, the Company integrated Trigon's operations into the Company's other operations. The increase in net sales also reflects higher average selling prices for certain products, increased unit volume, and the added net sales of other foreign businesses acquired during 1994. Foreign currency translation did not have a significant effect on the Company's operating results in 1995. The increase in net sales in 1994 resulted primarily from increased unit volume in the Company's major classes of products and, to a lesser extent, the additional net sales of businesses acquired in 1994 and 1993. Higher average selling prices also contributed modestly to the increase in net sales. Foreign currency translation did not have a significant effect on the Company's operating results in 1994. Net sales from domestic operations increased 20% in 1995 compared with 1994 and 12% in 1994 compared with 1993. The increase in 1995 was due primarily to higher average selling prices for certain products, the added net sales of Trigon's U.S. operations, and higher unit volume in certain of the Company's major classes of products. The increase in 1994 resulted primarily from increased unit volume in certain of the Company's major classes of products and the additional sales of Shurtuff(R) durable mailer products, a product line that was acquired in August 1993. Net sales from foreign operations increased 86% in 1995 compared with 1994 primarily due to the added net sales of Trigon's operations outside of the United States, the added net sales of other foreign businesses acquired during 1994 as discussed below, increased unit volume in the Company's major classes of products, higher average selling prices for certain products and the modest contribution of foreign currency translation. Net sales from foreign operations increased 22% in 1994 compared with 1993 primarily due to increased unit volume of the Company's major classes of products and the additional sales of products added as a result of acquisitions that the Company made in Europe during 1994. Net sales of engineered products, which consist primarily of Instapak(R) products and thick polyethylene foams, increased 21% in 1995 compared with 1994 and 15% in 1994 compared with 1993. The increase in 1995 was due primarily to increased unit volume of Instapak(R) products and higher average selling prices for certain products. The increase in 1994 was due primarily to increased unit volume of Instapak(R) products, thick polyethylene foams and Korrvu(R) suspension packaging. Contributing to the increased sales in both 1995 and 1994 were the added net sales of fabricated packaging materials produced by a small French company acquired in May 1994. Net sales of surface protection and other cushioning products, primarily air cellular products, thin polyethylene foam products and protective and durable mailers, increased 42% in 1995 compared with 1994 and 16% in 1994 compared with 1993. The increase in 1995 resulted primarily from the added net sales of Trigon's durable mailer and bag products, higher average selling prices for certain products, the added sales of businesses acquired during 1994, and increased unit volume for certain products. The businesses acquired in 1994 include manufacturers of air cellular and other protective packaging products in Norway and Italy which the Company acquired in September and December, 1994, respectively. The increase in 1994 was primarily due to increased unit volume of certain products and the additional sales of businesses acquired during 1994 and 1993. Net sales of food packaging products, which consist primarily of Dri-Loc(R) pads as well as Trigon's food packaging films and systems, increased 84% in 1995 compared with 1994 and 11% in 1994 compared with 1993. The increase in 1995 was due primarily to the added sales of Trigon's food packaging products and, to a lesser extent, increased unit volume. The increase in 1994 was due primarily to increased unit volume. Contributing to the increase in both 1995 and 1994 were the added sales of a small English manufacturer of absorbent food pads that the Company acquired in July 1994. Net sales of other products increased to $21,127,000 in 1995 from $11,515,000 in 1994 primarily due to the added net sales of Trigon's specialty adhesive products. Costs and Expenses Cost of sales increased 43% in 1995 compared with 1994 and 16% in 1994 compared with 1993 reflecting primarily the higher level of net sales in each period combined with certain higher raw material costs in each period as well as the impact of the Trigon and other acquisitions. In 1994, the effect of certain higher raw material costs was partially offset by certain production efficiencies. Cost of sales as a percentage of net sales was 64.6%, 63.1%, and 62.5% in 1995, 1994 and 1993, respectively. Gross profit increased 34% in 1995 compared with 1994 and 13% in 1994 compared with 1993 reflecting the higher level of net sales in each period, the changes in raw material costs discussed above, and changes in product mix. Marketing, administrative and development expenses increased 37% in 1995 compared with 1994 and 13% in 1994 compared with 1993. The increase in both 1995 and 1994 reflects primarily the Company's higher level of net sales. The increase in 1995 also reflects the added marketing, administrative and development expenses of Trigon and other acquired companies, and costs associated with the integration of Trigon and other recent acquisitions. Also contributing to the increase in 1994 were the added marketing, administrative and development expenses of acquired companies, and costs associated with integrating acquisitions completed in 1994. Marketing, administrative and development expenses declined modestly as a percentage of net sales each year from 1993 to 1995 primarily reflecting higher net sales, certain operating efficiencies and certain cost control measures. Operating Profit Operating profit increased 30% in 1995 compared with 1994 and 13% in 1994 compared with 1993 primarily due in each year to the Company's higher net sales and the relative changes inthe Company's costs and expenses discussed above. Domestic operating profit increased 15% in 1995 compared with 1994 and 12% in 1994 compared with 1993, primarily due to higher net sales and the relative changes in costs and expenses discussed above. Foreign operating profit increased 83% in 1995 compared with 1994 and 20% in 1994 compared with 1993 primarily due to higher net sales partially offset by changes in certain costs and expenses. Other Income (Expense) Other income expense, net decreased to $21,726,000 in 1995 compared with $22,706,000 in 1994 and $28,652,000 in 1993. Interest expense, which is the principal component of this item, decreased to $19,106,000 in 1995 from $19,363,000 in 1994 and $28,828,000 in 1993. Although the Company had higher levels of outstanding indebtedness during the course of 1995 compared with 1994 primarily due to borrowings made in connection with the Trigon acquisition, the effective interest rates on such indebtedness were lower than those which prevailed in 1994 primarily due to the refinancing in July 1994 of the Company's 12-5/8% Senior Subordinated Notes (the "12-5/8% Notes".) The lower amount of interest expense in 1994 compared with 1993 resulted primarily from lower average borrowings as well as, in 1994, the refinancing of the 12- 5/8% Notes. Income Taxes The Company's effective income tax rate was 39.5%, 39.2% and 43.0% in 1995, 1994 and 1993, respectively. 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, foreign withholding taxes on the assumed repatriation of accumulated earnings from the Company's foreign subsidiaries and additional United States income taxes on such accumulated foreign earnings. The Company anticipates that its effective income tax rate in 1996 will remain at a rate comparable to that in 1995. As of January 1, 1993, the Company implemented Financial Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income Taxes" ("FAS 109"). The cumulative effect of this accounting change resulted in a credit to earnings of $1,459,000, or $0.04 per share, in 1993. Early Redemption of Senior Subordinated Notes The early redemption in 1994 of the 12-5/8% Notes resulted in an after-tax charge to earnings of $5,576,000, or $.14 per share, in 1994 reflecting the 4.734% call premium paid on the redemption of the 12-5/8% Notes and the write-off of the related unamortized deferred financing costs. Earnings Excluding the extraordinary charge to earnings in 1994 attributable to the refinancing of the 12-5/8% Notes and the cumulative effect of the accounting change in 1993 related to the implementation of FAS 109, earnings increased 42% in 1995 compared with 1994 and 44% in 1994 compared with 1993. After giving effect to these items, net earnings increased 67% in 1995 compared with 1994 and 16% in 1994 compared with 1993. The foregoing earnings per share figures reflect the effect of a two-for-one stock split in the nature of a stock dividend distributed on September 29, 1995 to holders of record of the Company's common stock at the close of business on September 15, 1995. Liquidity and Capital Resources The Company's principal sources of liquidity are cash flows from operations and amounts available under the Company's existing lines of credit. The Company has met, and currently expects that it will continue to meet, substantially all of its working capital and capital expenditure requirements as well as its debt servicing requirements with funds provided by operations and borrowings made either under its available lines of credit or otherwise. Cash flows from operating activities were $75,218,000 in 1995, $62,941,000 in 1994 and $53,100,000 in 1993. The increase each year was due primarily to increased earnings and increased levels of depreciation and amortization partially offset by changes in operating assets and liabilities. Among the Company's operating assets and liabilities reflected in the Company's cash flows at December 31, 1995, the increases in accounts receivable, inventories and accrued liabilities were due primarily to the Company's higher level of net sales and the timing of cash disbursements and cash receipts. Cash flows used in investing activities were $47,993,000 in 1995, $32,518,000 in 1994 and $23,438,000 in 1993. Such cash was used primarily to fund capital expenditures and acquisitions. The fluctuation between years was primarily due to the timing of acquisitions, particularly the Trigon acquisition in 1995, and capital expenditures. Cash flows used in financing activities were $30,912,000 in 1995, $39,097,000 in 1994 and $36,206,000 in 1993. The lower amount of net cash used in financing activities in 1995 primarily reflects the higher level of net repayments of outstanding debt in the 1995 period partially offset by an increase in notes payable. At December 31, 1995 the Company had working capital of $41,945,000, or 9% of total assets, compared to working capital of $15,767,000, or 5% of total assets, at December 31, 1994. The increase in working capital was due primarily to increases in accounts receivable and inventory and a decrease in current portion of long-term debt partially offset by increases in accrued liabilities and notes payable, which were primarily due to the effect of the Trigon acquisition, the Company's higher level of operations and the timing of payments and debt maturities. The Company's ratio of current assets to current liabilities (current ratio) was 1.3 at December 31, 1995 and 1.1 at December 31, 1994. The Company's ratio of current assets less inventory to current liabilities (quick ratio) was 0.9 at December 31, 1995 and 0.8 at December 31, 1994. The increase in the current ratio in 1995 resulted primarily from the increase in working capital discussed above. The Company's principal credit facility is an unsecured 1994 credit agreement, as amended, with Banker's Trust Company, as agent for a syndicate of banks (the "1994 Credit Facility"), which provides for a $200 million revolving credit facility (the "1994 Revolving Credit Facility") and a term loan (the "1994 Term Loan") in the original aggregate principal amount of $100 million, both of which terminate on June 30, 1999. The 12-5/8% Notes were redeemed on July 8, 1994 with the proceeds of $178 million of borrowings under the 1994 Credit Facility. Long-term debt, less current installments declined to $149,808,000 at December 31, 1995 from $155,293,000 at December 31, 1994 due primarily to a net reduction of outstanding long-term indebtedness during 1995, partially offset by $25,592,000 of additional borrowings that the Company incurred in connection with the Trigon acquisition in January 1995 primarily under the 1994 Credit Facilty and approximately $25 million of Trigon's net long-term indebtedness that the Company assumed as a result of the acquisition. The majority of such Trigon indebtedness has since been replaced by indebtedness under the 1994 Credit Facility. Current installments of long-term debt declined to $17,953,000 at December 31, 1995 from $22,579,000 at December 31, 1994 reflecting the timing of scheduled maturities. The 1994 Term Loan is repayable at the rate of $20,000,000 aggregate principal amount per year in equal quarterly installments through June 30, 1999. The 1994 Revolving Credit Facility has no required annual minimum paydown provision, but the available commitment under such Facility will be reduced by $25,000,000 on each of June 30, 1997 and June 30, 1998. The 1994 Credit Facility terminates on June 30, 1999, and all outstanding loans thereunder must be repaid on or before such date. The Company's obligations under the 1994 Credit Facility and certain other lines of credit bear interest at floating rates. The Company has entered into certain interest rate swap agreements that have the effect of converting a portion of the Company's floating rate debt to fixed rate debt. The 1994 Credit Facility provides for changes in interest rate margins based on certain financial criteria and imposes certain limitations on the operations of the Company that include restrictions on the incurrence of additional indebtedness, the creation of liens, the making of investments and capital expenditures, dispositions of property or assets, certain transactions with affiliates and the payment by the Company of cash dividends to its stockholders, as well as certain financial covenants including requirements as to interest coverage and debt leverage. The Company was in compliance with these requirements as of December 31, 1995. The Company expects that the payment of principal and interest on its indebtedness will remain a significant use of the Company's funds for the foreseeable future. The Company expects to continue to make the principal and interest payments on its outstanding indebtedness as well as to meet its working capital and capital expenditure requirements primarily with funds provided by operations and borrowings under its available lines of credit. As of December 31, 1995, such lines of credit amounted to approximately $242 million of which approximately $140 million were unused. The ability of the Company to make payments of principal and interest on its indebtedness, and to comply with the financial covenants to which it is subject in connection with such indebtedness, is dependent on the Company's future performance and business growth, which are subject to financial, economic, competitive and other factors affecting the Company, many of which may be beyond the Company's control. The Company's shareholders' equity increased to $106,338,000 at December 31, 1995 from $11,012,000 at December 31, 1994 primarily as a result of the Company's net earnings for 1995, the value of shares of common stock issued in connection with the Trigon acquisition, and the value of shares of common stock issued for non-cash compensation. Impact of Inflation Inflation did not have a material impact on the Company's consolidated financial statements in the 1993 to 1995 period. Other Matters The Company's worldwide operations are subject to environmental laws and regulations which, among other things, impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. The Company reviews the effects of environmental laws and regulations on its operations and believes that it is in substantial compliance with all material applicable environmental laws and regulations. At December 31, 1995, the Company was a party to, or otherwise involved in, several federal and state government environmental proceedings or private environmental claims for the cleanup of superfund or other sites. The Company may have potential liability for investigation and clean up 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, 1995 and 1994, such environmental related provisions were not material and the Company believes that its potential liability with respect to such sites is not material. Environmental liabilities are paid over an extended period, and the timing of such payments cannot be predicted with certainty. New Accounting Pronouncements The Financial Accounting Standards Board ("FASB") issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which becomes effective for fiscal years beginning after December 15, 1995. The Company adopted such statement effective January 1, 1996. The Company currently anticipates that the implementation of such statement will not have a material effect on the Company's consolidated financial statements. The FASB issued Statement No. 123, "Accounting For Stock-Based Compensation," which becomes effective for transactions entered into after December 15, 1995. The Company, as permitted by Statement No. 123, has not adopted the recognition provision of this statement when accounting for stock-based compensation and the Company believes any requirements in connection with such statement will not have a material effect on the consolidated financial statements. SEALED AIR CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings Years Ended December 31, 1995, 1994 and 1993 (In thousands of dollars except per share data)
1995 1994 1993 ________________________________________________________________________________________ Net sales $723,120 $519,186 $451,694 Cost of sales 466,952 327,423 282,147 Gross profit 256,168 191,763 169,547 Marketing, administrative and development expenses 147,288 107,854 95,434 Operating profit 108,880 83,909 74,113 Other income (expense): Interest income 1,187 1,140 1,145 Interest expense (19,106) (19,363) (28,828) Other, net (3,807) (4,483) (969) Other income (expense), net (21,726) (22,706) (28,652) Earnings before income taxes 87,154 61,203 45,461 Income taxes 34,426 23,987 19,547 Earnings before cumulative effect of accounting change and early redemption of subordinated notes 52,728 37,216 25,914 Cumulative effect of accounting change - - 1,459 Early redemption of subordinated notes, net of income taxes - (5,576) - Net earnings $ 52,728 $ 31,640 $ 27,373 Earnings per common share: Before cumulative effect of accounting change and early redemption of subordinated notes $ 1.25 $ 0.94 $ 0.66 Cumulative effect of accounting change - - 0.04 Early redemption of subordinated notes, net of income taxes - (.14) - Net earnings per common share $ 1.25 $ 0.80 $ 0.70 See accompanying notes to consolidated financial statements.
SEALED AIR CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1995 and 1994 (In thousands of dollars except share data)
1995 1994 Assets Current assets: Cash and cash equivalents $ 7,661 $ 11,153 Accounts receivable, less allowance for doubtful accounts of $5,261 in 1995 and $3,970 in 1994 116,446 91,321 Other receivables 6,170 3,866 Inventories 54,500 38,259 Prepaid expenses 2,470 1,009 Deferred income taxes 8,912 6,223 Total current assets 196,159 151,831 Property and equipment: Land and buildings 77,603 67,226 Machinery and equipment 177,832 141,981 Leasehold improvements 6,766 5,029 Furniture and fixtures 11,956 12,224 Construction in progress 10,711 5,864 284,868 232,324 Less accumulated depreciation and amortization 115,012 96,154 Property and equipment, net 169,856 136,170 Patents and patent rights, less accumulated amortization of $13,619 in 1995 and $11,819 in 1994 12,107 9,647 Excess of cost over fair value of net assets acquired, less accumulated amortization of $7,607 in 1995 and $4,715 in 1994 41,932 19,710 Other assets 23,491 13,759 $443,545 $331,117 See accompanying notes to consolidated financial statements. 1995 1994 Liabilities and Shareholders' Equity Current liabilities: Notes payable $18,887 $ 7,929 Current installments of long-term debt 17,953 22,579 Accounts payable 44,460 43,009 Accrued wages, salaries and related costs 26,759 20,788 Accrued interest 1,560 1,323 Other accrued liabilities 28,865 23,859 Income taxes payable 15,730 16,577 Total current liabilities 154,214 136,064 Long-term debt, less current installments 149,808 155,293 Deferred income taxes 21,875 17,215 Deferred credits and other liabilities 11,310 11,533 Total liabilities 337,207 320,105 Commitments and contingent liabilities (notes 5 and 8) Shareholders' equity: Preferred stock, no par value. Authorized 1,000,000 shares, none issued in 1995 and 1994 - - Common stock, $.01 par value. Authorized: 60,000,000 shares in 1995 and 35,000,000 shares in 1994; Issued: 42,506,573 shares in 1995 and 20,111,618 shares in 1994 425 201 Additional paid-in capital 158,400 114,686 Retained earnings (deficit) (53,308) (106,036) Accumulated translation adjustment 7,279 6,126 112,796 14,977 Less: Deferred compensation 6,232 3,717 Treasury stock at cost: 224,758 shares held in 1995 and 122,306 shares held in 1994 226 248 Shareholders' equity 106,338 11,012 $443,545 $331,117
SEALED AIR CORPORATION AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity (Deficit) Years Ended December 31, 1995, 1994 and 1993 (In thousands of dollars)
Additional Retained Accumulated Common Paid-in Earnings Translation Deferred Treasury Stock Capital (Deficit) Adjustment Compensation Stock _____________________________________________________________________________________________________ Balance, December 31, 1992 $ 194 $ 95,551 $(165,049) $ 6,723 $ (3,468) $ (262) Net earnings - - 27,373 - - - Proceeds from awards of contingent stock, net 2 199 - - - - Excess of fair value over proceeds from awards of contingent stock, net - 4,591 - - (4,591) - Amortization - - - - 2,929 - Tax benefit in excess of amortization on stock awards - 542 - - - - Contingent stock forfeited - (10) - - 10 (1) Non-cash compensation 1 1,807 - - - - Shares issued in acquisitions 2 5,681 - - - 17 Foreign currency translation _______ (1,660) ______ ______ Balance, December 31, 1993 199 108,361 (137,676) 5,063 (5,120) (246) Net earnings - - 31,640 - - - Proceeds from awards of contingent stock, net 1 52 - - - - Excess of fair value over proceeds from awards of contingent stock, net - 1,615 - - (1,615) - Amortization - - - - 2,957 - Tax benefit in excess of amortization on stock awards - 664 - - - - Contingent stock forfeited - (61) - - 61 (2) Non-cash compensation 1 2,360 - - - - Shares issued in acquisitions - 1,695 - - - - Foreign currency translation 1,063 ______ ____ Balance, December 31, 1994 201 114,686 (106,036) 6,126 (3,717) (248) Net earnings - - 52,728 - - - Proceeds from awards of contingent stock, net - 160 - - - - Excess of fair value over proceeds from awards of contingent stock, net 2 5,931 - - (5,933) - Amortization - - - - 3,370 - Tax benefit in excess of amortization on stock awards - 527 - - - - Contingent stock forfeited - (48) - - 48 (2) Non-cash compensation 1 3,239 - - - - Shares issued in acquisitions 9 34,117 - - - 24 Stock split 212 (212) - - - - Foreign currency translation 1,153 _______ ______ Balance, December 31, 1995 $ 425 $ 158,400 $(53,308) $ 7,279 $ (6,232) $ (226) See accompanying notes to consolidated financial statements.
SEALED AIR CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended December 31, 1995, 1994 and 1993 (In thousands of dollars)
1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 52,728 $ 31,640 $ 27,373 Adjustments to net earnings to reconcile to net cash provided by operating activities: Cumulative adjustment for effect of accounting change - - (1,459) Early redemption of subordinated notes - 5,576 - Depreciation and amortization of property and equipment 20,473 14,921 14,334 Other depreciation and amortization 14,807 8,599 10,210 Deferred tax provision (1,375) 385 2,886 Net losses on disposals of property and equipment 273 397 408 Non-cash compensation 3,491 3,100 2,293 Other, net 876 (505) (2,172) Change in operating assets and liabilities: Receivables (13,016) (17,478) (1,716) Inventories (5,953) (4,018) (2,466) Prepaid expenses (1,441) 666 (664) Accounts payable (9,262) 14,913 1,555 Accrued interest 237 (9,810) (519) Other accrued liabilities 10,813 4,264 1,892 Income taxes payable 2,567 10,291 1,145 Net cash provided by operating activities 75,218 62,941 53,100 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for property and equipment (21,056) (17,470) (22,474) Proceeds from sales of property and equipment 776 226 203 Net cash utilized in purchase of subsidiaries (27,713) (15,274) (1,167) Net cash used in investing activities (47,993) (32,518) (23,438) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 75,271 203,857 5,501 Principal payments on long-term debt (114,281) (234,613) (43,753) Net (payments) proceeds on notes payable 8,098 (293) 2,046 Subordinated debt redemption premium - (8,048) - Net cash used in financing activities (30,912) (39,097) (36,206) Effect of exchange rate changes on cash and cash equivalents 195 435 (106) CASH AND CASH EQUIVALENTS: Decrease during the period (3,492) (8,239) (6,650) Balance, beginning of period 11,153 19,392 26,042 Balance, end of period $ 7,661 $ 11,153 $ 19,392 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 18,582 $ 28,645 $ 26,735 Income taxes $ 33,898 $ 14,349 $ 16,058 See accompanying notes to consolidated financial statements.
SEALED AIR CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of Sealed Air Corporation and its subsidiaries (the "Company"). All significant intercompany transactions and balances have been eliminated in consolidation. Certain of the Company's non-U.S. subsidiaries are included in the consolidated financial statements on a calendar year basis while the remaining non-U.S. subsidiaries are included on the basis of a fiscal year ended November 30. Prior years' financial statement amounts have been reclassified to conform with their 1995 presentation. Foreign Currency All balance sheet accounts are translated at year-end exchange rates, and statement of earnings items are translated at applicable month-end exchange rates. Resulting translation adjustments are made directly to a separate component of shareholders' equity. Earnings before income taxes include aggregate exchange losses of $828,000, $697,000 and $86,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Cash and Cash Equivalents The Company's policy is to invest cash in excess of short-term operating and debt service requirements in temporary cash investments with original maturities of three months or less. Such short-term investments amounted to $6,134,000 and $7,426,000 at December 31, 1995 and 1994, 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. Financial Instruments The Company has a limited involvement with various financial instruments with off-balance-sheet risk. These financial instruments include interest rate and foreign currency swap agreements, interest rate swap agreements, foreign exchange forward contracts and foreign currency option contracts. Such financial instruments are used to limit, fix or offset certain interest rate or foreign currency exposures with respect to the Company's borrowings, and trade activities. The Company does not purchase, hold or sell financial instruments for trading purposes. The Company would be exposed to credit risk in the event of non-performance by the counterparties to such financial instruments. However, the Company seeks to minimize such risk by entering into such transactions with counterparties who are major financial institutions with high credit ratings. Gains and losses on the various financial instruments are included in the carrying amounts of those underlying assets or liabilities for which the financial instruments were entered and are recognized in income as part of those carrying amounts. Gains and losses related to qualifying hedges of firm commitments or anticipated transactions are deferred and are recognized in income or as adjustments of carrying amounts when the hedged transaction occurs. Gains and losses on financial instruments that do not qualify as hedges are recognized as other income or expense on a current basis. Inventories Inventories are stated at the lower of cost or market. The majority of U.S. inventories are valued using the last-in, first-out ("LIFO") method; other U.S. inventories, principally parts used in packaging systems, are valued using the first-in, first-out ("FIFO") method. Inventories of foreign operations are valued using primarily the FIFO method. Had the FIFO method (which approximates current cost) been used for all inventory at December 31, 1995, inventories would have been higher by $4,557,000 ($4,848,000 and $1,158,000 in 1994 and 1993, respectively). The cost elements of work in process and finished goods inventories are raw materials, direct labor and manufacturing overhead. Because the cost of certain inventories is determined on the LIFO method, it is not practicable to present separately the components of inventories (raw materials, work in process and finished goods). Property and Equipment Property and equipment are stated at acquisition cost. Property and equipment no longer in use or surplus to the Company's needs are carried at the lower of cost or fair value. Depreciation of buildings and equipment is provided over the estimated useful lives (generally periods ranging up to 40 years and 10 years, respectively) of the related assets. Amortization of leasehold improvements is provided over the lesser of the term of the lease and the asset's useful life. The Company uses primarily 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 is recorded using the straight-line method over the legal lives of the patents, generally for periods ranging up to 17 years. The excess of cost over fair value of net assets acquired is amortized over periods ranging up to 40 years. Other intangible assets, including non-competition agreements, included in other assets are amortized over the life of such agreements usually ranging from 1 to 5 years. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future non- discounted operating cash flows derived from such intangible assets are less than their carrying value. Deferred financing costs, which were incurred by the Company in connection with various financing instruments, are capitalized and charged to operations as additional interest expense over the life of the underlying indebtedness using the interest method adjusted to give effect to any early repayments. Employee Benefit Plans The Company has a non-contributory profit-sharing plan covering most U.S. employees except those employees covered by collective bargaining agreements that do not provide for their participation. Contributions to this plan, which are made at the discretion of the Board of Directors, may be made in cash, shares of the Company's common stock, or in a combination of cash and shares of the Company's common stock. The Company also has a thrift and section 401(k) plan in which most U.S. employees of the Company are eligible to participate except those employees who are covered by certain collective bargaining agreements that do not provide for participation in the plan. Under this plan, the Company matches 50% of each employee's contributions to a maximum Company contribution of 3% of the employee's compensation. Forfeitures of nonvested interests in each of these plans remain in the respective plans for the benefit of the remaining participants. The Company also has pension or profit-sharing 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 pension plans, net of forfeitures, are charged to operations and amounted to $10,069,000 in 1995 ($8,718,000 and $6,734,000 in 1994 and 1993, 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 $14,597,000 in 1995 ($10,912,000 and $9,168,000 in 1994 and 1993, 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. As of January 1, 1993, the Company implemented FASB Statement No. 109 ("FAS 109"), "Accounting for Income Taxes," which prescribes the liability method of accounting for income taxes. Prior to January 1, 1993, the Company accounted for income taxes as prescribed by Accounting Principles Board Opinion No. 11 ("APB 11") under which deferred taxes were recorded based on the current period's tax rates and laws and were not adjusted for subsequent changes in tax rates or laws. Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets are recorded when it is more likely than not such tax benefits will be realized (note 7). Earnings Per Common Share Earnings per common share are computed on the basis of the weighted average number of shares of common stock outstanding during the year, including contingent stock awards and shares issued as non-cash compensation (note 6). The weighted average number of common shares outstanding in 1995 was 42,057,000 (39,884,000 and 39,168,000 in 1994 and 1993, respectively) after reflecting the effect of the 1995 stock split (note 6). Risks and Uncertainties 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 evalualtions of its customers' financial condition and generally requires no collateral from its customers. No single customer or affiliated group of customers accounts for more than 10% of the Company's net sales. In conformity with generally accepted accounting principles, management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities to prepare the Company's consolidated financial statements. Actual results could differ from these estimates. Note 2 Acquisitions 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 1994 Credit Facility (note 4), representing a purchase price of approximately $57 million. The net assets of Trigon acquired included property and equipment of approximately $28,400,000, intangible assets of approximately $43,000,000 including trademarks, non-compete agreements, and the excess of cost over the fair value of net assets acquired, $25,000,000 of net indebtedness, and working capital of approximately $12,000,000. Such acquisition was accounted for as a purchase. In December 1995, the Company acquired certain assets of LF&P Inc., a United States manufacturer of certain protective packaging materials. In November 1995, the Company acquired the assets of Poly-Cell,Inc., a United States manufacturer of multi-web air cellular products. These transactions, each of which was 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. In December 1994, the Company acquired SPIC Srl, an Italian manufacturer of air cellular and other protective packaging products. In September 1994, the Company acquired Emballasje-Teknikk A/S, a Norwegian manufacturer of air cellular and other protective packaging products. In July 1994, the Company acquired Hereford Paper and Allied Products Limited, an English manufacturer of absorbent food pads. In May 1994, the Company acquired Delsopak S.A., a French fabricator of polyethylene foam and other protective packaging products, and an exclusive license and option to purchase certain patents related to its business. These transactions, each of which was effected in exchange for shares of the Company's common stock, cash or a combination of shares of the Company's common stock and cash, were accounted for as purchases, and were not material to the Company's consolidated financial statements. In August 1993, the Company acquired the assets of the Shurtuff Division of Shuford Mills, Inc., a manufacturer of durable protective mailers. In July 1993, the Company acquired the assets of Polypride, Inc., a manufacturer of multi-web air cellular materials. These transactions, each of which was effected in exchange for shares of the Company's common stock, cash or a combination of shares of the Company's common stock and cash, were accounted for as purchases, and were not material to the Company's consolidated financial statements. Note 3 Geographic Areas The Company's operations are conducted primarily in the United States, Europe, the Asia/Pacific region, Canada and Mexico 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 1995 United States $ 464,820 $ 75,828 $ 224,877 Europe 188,558 24,617 148,787 Asia/Pacific & Other 94,864 8,435 69,719 Eliminations (25,122) - - Consolidated $ 723,120 $ 108,880 $ 443,383 1994 United States $385,484 $ 65,884 $185,510 Europe 107,990 13,882 116,800 Asia/Pacific & Other 44,681 4,143 28,807 Eliminations (18,969) - - Consolidated $519,186 $ 83,909 $331,117 1993 United States $341,321 $ 59,059 $191,014 Europe 87,939 12,433 65,780 Asia/Pacific & Other 34,893 2,621 23,024 Eliminations (12,459) - - Consolidated $451,694 $ 74,113 $279,818
NOTE: Net sales shown for the United States, Europe and Asia/Pacific and other include transfers to other geographic areas as follows: United States, 1995 -$18,412,000; 1994 -$14,850,000; 1993 -$11,130,000; Europe, 1995 -$2,398,000; 1994 -$1,368,000; 1993 -$754,000; Asia/Pacific and other, 1995 -$4,312,000; 1994 -$2,751,000; 1993 -$575,000. Note 4 Long-Term Debt A summary of long-term debt at December 31, 1995 and 1994 follows:
(In thousands of dollars) 1995 1994 1994 Credit Facility $146,611 $155,681 Other foreign loans 16,352 20,729 Other 4,798 1,462 Total 167,761 177,872 Less current installments 17,953 22,579 Long-term debt, less current installments $149,808 $155,293
The Company and certain of its subsidiaries are parties to a credit agreement dated as of June 8, 1994, as amended, with Bankers Trust Company, as agent for a syndicate of banks (the "1994 Credit Facility"), which provides for an unsecured five-year $200 million revolving credit facility (the "1994 Revolving Credit Facility") and an unsecured five- year $100 million term loan (the "1994 Term Loan"). On July 8, 1994, the Company redeemed all of its outstanding 12-5/8% Senior Subordinated Notes (the "12-5/8% Notes") from the proceeds of the 1994 Term Loan and a $78 million borrowing under the 1994 Revolving Credit Facility. The early redemption of the 12-5/8% Notes resulted in a charge to earnings of $5,576,000, or $.14 per share, after giving effect to an income tax benefit of $3,716,000 in 1994 reflecting the 4.734% call premium due on the redemption of the 12-5/8% Notes and the write-off of the related unamortized deferred financing costs. At December 31, 1995, the Company's borrowings under the 1994 Credit Facility consisted of $83,611,000 of indebtedness under the 1994 Revolving Credit Facility and $63,000,000 of indebtedness under the 1994 Term Loan. The weighted average interest rate under the 1994 Credit Facility was approximately 7.1% at December 31, 1995 and December 31, 1994. Under the terms of the 1994 Credit Facility, $20 million aggregate principal amount of the 1994 Term Loan is repayable each year in equal quarterly installments through June 30, 1999. There is no required annual minimum paydown provision under the 1994 Revolving Credit Facility, but the available commitment under this Facility will be reduced by $25 million on each of June 30, 1997 and June 30, 1998. The 1994 Credit Facility terminates on June 30, 1999. The Company's obligations under the 1994 Credit Facility and certain other loans and other lines of credit bear interest at floating rates. The Company has entered into certain interest rate swap agreements in the notional amount of $50 million which effectively fix interest rates on borrowings of that amount. The 1994 Credit Facility provides for changes in interest rates based on certain financial criteria and imposes certain limitations on the operations of the Company that include restrictions on the incurrence of additional indebtedness, the creation of liens, the making of investments and capital expenditures, dispositions of property or assets, certain transactions with affiliates, and the payment by the Company of cash dividends to its stockholders as well as certain financial covenants including requirements as to interest coverage and debt leverage. The Company was in compliance with these requirements as of December 31, 1995. Other foreign loans, certain of which are secured by foreign assets, are due in varying annual installments through 2010 with fixed and variable interest rates with weighted average interest rates of 7.8% and 9.2% at December 31, 1995 and 1994, respectively. Under the 1994 Credit Facility and other credit facilities, the Company had available lines of credit at December 31, 1995 of approximately $242 million of which approximately $140 million were 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, 1995 are as follows: 1996-$17,953,000; 1997- $23,266,000; 1998-$23,107,000; 1999-$82,894,000 and 2000-$15,094,000. Note 5 Financial Instruments The Company is required by generally accepted accounting principles to disclose its estimate of the fair value of material financial instruments, including those recorded as assets or liabilities in its consolidated financial statements and derivative financial instruments. 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 and estimated fair values of the Company's financial instruments at December 31, 1995 and 1994 are as follows: (In thousands of dollars)
1995 1994 Carrying Fair Carrying Fair Amount Value Amount Value Financial assets: Cash and cash equivalents $ 7,661 $ 7,661 $ 11,153 $ 11,153 Accounts receivable, net 116,446 116,446 91,321 91,321 Other assets (derivatives) - - 1,086 1,484 Financial liabilities: Accounts payable 44,460 44,460 43,009 43,009 Notes payable 18,887 18,887 7,929 7,929 Debt: 1994 Credit Facility 146,611 146,611 155,681 155,681 Derivatives - (254) - 156 1994 Credit Facility, net 146,611 146,357 155,681 155,837 Other Foreign Loans 16,352 16,530 20,729 20,733 Other 4,798 5,001 1,462 1,302
The carrying amounts of cash and cash equivalents, accounts receivable, net of the allowance for doubtful accounts, notes payable and, accounts payable approximate fair value due to their short-term maturity. 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. Other assets (derivatives) in the preceding table includes foreign currency options and forwards and interest rate caps. Foreign currency options and forwards are generally used by the Company to limit the risk on anticipated international transactions. At December 31, 1995 the Company was party to foreign currency options with an aggregate notional amount of approximately $14 million as well as several foreign currency fowards with an aggregate notional amount of approximately $1.2 million. At December 31, 1994, the Company was party to foreign currency options with an aggregate notional amount of approximately $59 million, primarily for the purchase of New Zealand dollars in anticipation of the Company's acquisition of Trigon. The Company believes that its risk of accounting loss on such options is limited to unamortized premium paid for such options, which amortization is not material to the Company's financial statements. Interest rate swaps and caps limit exposure to rising interest rates. Interest rate swaps effectively fix the rate of interest the Company pays on debt in the amount of the notional amount of the swaps. At December 31, 1995 the Company was party to interest rate swaps with various expiration dates up to June 1999 with an aggregate notional amount of $50 million. Such instruments were designated as hedges against borrowings under the 1994 Credit Facility. At December 31, 1994 the Company was not party to any interest rate swap agreements. Interest rate caps give the Company the right to receive, at specified intervals, the difference between certain fixed and floating interest rates multiplied by agreed notional principal amounts. At December 31, 1994 the Company was party to several interest rate caps with various expiration dates up to December 1997 with an aggregate notional amount of $90 million. At December 31, 1995 the Company was no longer party to any interest rate cap agreements. Debt derivatives in the preceding table includes interest rate and currency swaps which allow the Company to swap borrowings denominated in U.S. dollars for borrowings denominated in foreign currencies, gaining access to additional sources of international financing while limiting foreign exchange risk. At December 31, 1995 and 1994, the Company was party to several such interest rate and currency swaps with an aggregate notional amount of approximately $43.5 million and $22.8 million, respectively, and various expiration dates up to June 1999. Such instruments were designated as hedges against borrowings under the 1994 Credit Facility. 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, thereby taking into account the current unrealized gains or losses of open contracts. Realized gains and losses on its financial instruments and derivatives were not material to the Company's consolidated financial statements. The Company is exposed to credit losses in the event of non-performance by the counterparties to its interest rate and currency swaps and foreign currency options and forwards but it does not expect any counterparties to fail to meet their obligations given their high credit ratings and financial strength. The Company believes that off-balance sheet risk in conjunction with interest rate and currency swaps would not be material in the case of non-performance on the part of counterparties on such agreements. The Company believes that there is minimal off-balance sheet risk relating to interest rate caps. Note 6 Shareholders' Equity The Company's shareholders' equity increased to $106,338,000 at December 31, 1995 from $11,012,000 at December 31, 1994 primarily as a result of the Company's net earnings in 1995, the value of shares of common stock issued in connection with the Trigon acquisition, and the value of shares of common stock issued for non-cash compensation and other acquisitions. A two-for-one stock split in the nature of a 100% stock dividend (the "1995 stock split") was distributed on September 29, 1995 to the holders of record of the Company's common stock at the close of business on September 15, 1995. As a result, a transfer was made from additional paid-in-capital to common stock in an amount equal to the aggregate par value of the shares of common stock issued pursuant to this stock split. All per share data and share information in the consolidated financial statements and notes there to have been adjusted to give retroactive effect to the 1995 stock split where appropriate. A summary of changes in issued and outstanding shares of common stock and shares of treasury stock of the Company follows:
1995 1994 1993 ______________________________________________________________________________ Changes in common stock: Number of shares issued, 20,111,618 19,924,661 19,343,238 Non-cash compensation 80,400 78,200 70,900 Awards of contingent stock 157,550 52,000 294,200 Shares issued in acquisitions 957,335 56,757 216,323 Two-for-one stock split 21,199,670 - - Number of shares issued, end of year 42,506,573 20,111,618 19,924,661 Changes in treasury stock: Number of shares held, beginning of year 122,306 119,306 126,986 Shares issued in acquisition (11,927) - (8,180) Contingent stock forfeited 2,000 3,000 500 Two-for-one stock split 112,379 - - Number of shares held, end of year 224,758 122,306 119,306
Non-cash compensation in each year includes shares issued for a portion of the Company's contribution to its profit-sharing plan for the respective preceding year and shares issued to non-employee directors in the form of awards under the restricted stock plan for non-employee directors discussed below. The aggregate amount of non-cash compensation charged to operations amounted to $3,491,000, $3,100,000 and $2,293,000 in 1995, 1994 and 1993, respectively. The Company's contingent stock plan provides for the granting to employees of awards to purchase common stock (during the succeeding 60- day period) for less than 100% of fair market value at the date of award. Shares issued under the contingent stock plan ("Contingent Stock") are restricted as to disposition by the holders for a period of 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 three-year period if certain events occur which affect the existence or control of the Company. At December 31, 1995, 725,000 shares of common stock were reserved for issuance under such plan. The excess of fair value over the award price of Contingent Stock is charged to operations as compensation over the three-year vesting periods of such awards. In 1995, such charges amounted to $3,370,000 ($2,957,000 and $2,929,000 in 1994 and 1993, respectively). The aggregate fair value of Contingent Stock issued is credited to common stock and additional paid-in capital accounts, and the unamortized portion of the compensation is deducted from shareholders' equity. The Company's restricted stock plan for non-employee directors provides for initial grants of shares to newly elected non-employee directors and annual grants of shares to non-employee directors for less than 100% of fair value at date of grant in lieu of cash payments for certain directors' fees. Shares issued under this plan are restricted as to disposition by the holders as long as such holders remain directors of the Company. The excess of fair value over the granting price of shares issued under this plan is charged to operations at the date of such grant. In 1995 the Company issued 1,500 shares under such plan (5,600 and 3,600 in 1994 and 1993, respectively). At December 31, 1995, 161,400 shares of common stock were reserved for issuance under such plan. 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, 1995. The FASB issued Statement No. 123, "Accounting For Stock-Based Compensation," which becomes effective for transactions entered into after December 15, 1995. The Company, as permitted by Statement No. 123, has not adopted the recognition provision of this statement when accounting for stock-based compensation and the Company believes any requirements in connection with such statement will not have a material effect on the consolidated financial statements. Note 7 Income Taxes The Company adopted FAS 109 effective January 1, 1993. FAS 109 provides a liability method under which deferred taxes are provided based upon enacted tax rates and laws applicable to the periods in which the taxes become payable. For periods prior to January 1, 1993, the Company accounted for income taxes as prescribed by APB 11 under which deferred taxes were recorded based on the current period's tax rates and laws without adjustment for subsequent changes in such tax rates and laws. The cumulative effect of this change at January 1, 1993 was a reduction of deferred tax liability and a corresponding credit to earnings of $1,459,000, or $0.04 per share. The components of earnings before income taxes and the cumulative effect of this accounting change in 1993 and the early redemption of the 12- 5/8% Notes in 1994 (note 4) follow: (In thousands of dollars)
1995 1994 1993 _____________________________________________________________________________ Domestic $ 61,007 $ 44,150 $ 32,721 Foreign 26,147 17,053 12,740 $ 87,154 $ 61,203 $ 45,461
The components of the provision for income taxes on earnings before the cumulative effect of accounting change in 1993 and the early redemption of the 12-5/8% Notes in 1994 follow:
(In thousands of dollars) 1995 1994 1993 ____________________________________________________________________ Current tax provision: U.S. federal $ 20,624 $ 13,543 $ 9,816 U.S. state and local 5,830 3,981 2,210 Foreign 9,347 6,078 4,635 35,801 23,602 16,661 Deferred tax provision (benefit): Domestic (2,589) 631 3,090 Foreign 1,214 (246) (204) (1,375) 385 2,886 Provision for income taxes $ 34,426 $ 23,987 $ 19,547
The Company's deferred tax liability net of deferred tax assets at December 31, 1995 and 1994 amounted to $12,452,000 and $10,444,000, respectively. The significant components of the Company's deferred tax assets and liabilities at December 31, 1995 and 1994 as established in accordance with FAS 109 are as follows:
(In thousands of dollars) 1995 1994 ______________________________________________________________________________ Deferred tax assets: Facilities consolidation and integration $ 4,485 $ 3,207 Accrued expenses 3,057 1,970 Property and equipment 3,076 3,431 Deferred revenue 694 609 Patents and other intangibles 933 126 Other 4,493 3,711 16,738 13,054 Valuation allowance (522) (725) Deferred tax asset $16,216 $12,329 Deferred tax liabilities: Property and equipment $21,670 $16,394 Deferred revenue 1,230 954 Patents and other intangibles 756 1,927 Other 5,012 3,498 Deferred tax liability $28,668 $22,773
The Company expects that it is more likely than not that the net deferred tax assets of $16,216,000 at December 31, 1995 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 $522,000 is maintained for certain foreign deferred tax assets primarily relating to insignificant net operating losses. The net change in the valuation allowance for deferred tax assets was a decrease of $203,000 in 1995 related to benefits arising from these net operating losses. An explanation of the difference between the effective income tax rate and the statutory U.S. federal income tax rate expressed as a percentage of earnings before income taxes for the years ended December 31, 1995, 1994 and 1993 follows:
1995 1994 1993 _____________________________________________________________________________ Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% Provision for foreign withholding taxes and additional U.S. taxes on repatriated and accumulated earnings of foreign subsidiaries 0.1 1.4 1.8 Tax effect of expenses not subject to tax benefit 1.7 0.5 1.7 State income taxes, net of U.S. federal income tax benefit 4.0 4.1 4.2 Taxes on foreign earnings at other than the statutory U.S. federal income tax rate (0.4) (1.0) (1.1) Other miscellaneous items (0.9) (0.8) 1.4 Effective income tax rate 39.5% 39.2% 43.0%
The Company's tax provisions for 1995, 1994 and 1993 give effect to foreign withholding taxes on the repatriation of accumulated earnings from the Company's foreign subsidiaries and additional U.S. taxes on such accumulated earnings. The Company has provided U.S. and foreign income taxes on the accumulated earnings of the Company's foreign subsidiaries through December 31, 1995. The Company's Dutch subsidiary is entitled to certain tax incentives to manufacture certain product lines under agreements with local tax authorities. The total amount of such incentives is dependent on the profitability of such product lines over a period extending through 1999. Note 8 Commitments and Contingent Liabilities The Company is obligated under the terms of various leases covering many of the facilities occupied by the Company. The Company accounts for substantially all of its leases as operating leases. Net rental expense for 1995 was $10,228,000 ($8,281,000 and $7,803,000 in 1994 and 1993, respectively). Estimated future minimum annual rental commitments under noncancelable real property leases expiring through 2006 are as follows: 1996 - $8,220,000; 1997 - $7,053,000; 1998 - $5,741,000; 1999 - $4,279,000; 2000 - $3,714,000; and subsequent years - $11,922,000. The Company's worldwide operations are subject to environmental laws and regulations which, among other things, impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. The Company reviews the effects of environmental laws and regulations on its operations and believes that it is in substantial compliance with all material applicable environmental laws and regulations. At December 31, 1995, the Company was a party to, or otherwise involved in, several federal and state government environmental proceedings or private environmental claims for the cleanup of superfund or other sites. The Company may have potential liability for investigation and clean-up 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, 1995 and 1994, such environmental related provisions are not material, and the Company believes that its potential liability with respect to such sites is not material. Environmental liabilities may be paid over an extended period, and the timing of such payments cannot be predicted with certainty. The Company is also involved in various legal actions incidental to its business. Company management believes, after consulting with counsel, that the disposition of its litigation and other legal proceedings and matters, including environmental matters, will not have a material effect on the Company's consolidated financial statements. The Board of Directors and Shareholders Sealed Air Corporation: We have audited the accompanying consolidated balance sheets of Sealed Air Corporation and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of earnings, shareholders' equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sealed Air Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in notes 1 and 7 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1993. s/KPMG Peat Marwick LLP Short Hills New Jersey January 17, 1996 Interim Financial Information (Unaudited) (In thousands of dollars except per share data)
Quarter Net Sales Gross Profit Net Earnings 1995 1994 1995 1994 1995 1994 First $173,354 $117,461 $ 60,807 $ 44,458 $ 11,573 $ 7,548 Second(1) 182,087 126,761 63,154 47,754 12,623 3,093 Third 178,536 131,121 62,432 47,932 13,442 10,309 Fourth 189,143 143,843 69,775 51,619 15,090 10,690 Year $723,120 $519,186 $256,168 $191,763 $ 52,728 $ 31,640 Earnings Per Share (2) 1995 1994 First $ .28 $ .19 Second(1) .30 .08 Third .32 .26 Fourth .35 .28 $ 1.25 $ .80 (1)Included in net earnings and earnings per share for the second quarter of 1994 is an after-tax charge of $5,576,000, or $0.14 per share, resulting from the early redemption of the Company's 12-5/8% Senior Subordinated Notes. (2) Earnings per share adjusted to reflect the effect of the September 1995 two-for-one stock split paid in the nature of a 100% stock dividend.
Common Stock Information
The Company's Common Stock is listed the New York Stock 1994 High Low Exchange(trading symbol: SEE). First Quarter $15-13/16 $14-1/16 The adjacent table sets forth the Second Quarter $15-1/16 $13-5/16 high and low sales prices for the Company's Common Stock for each quarterduring the two-year period Third Quarter $18-1/8 $13-13/16 ended December 31, 1995. Fourth Quarter $18-1/8 $15-1/4 The Company is currently subject to certain covenants in loan 1995 documentsthat limit the payment of cash dividends. No dividends were paid in 1995 or 1994. First Quarter $22-3/4 $17-15/16 Second Quarter $22-7/8 $20-1/8 As of March 4, 1996, there were approximately 1,319 holders of Third Quarter $28-1/4 $22-1/8 record of the Company's Common Stock. Fourth Quarter $30-3/4 $24-1/4 Stock prices for periods prior to the fourth quarter of 1995 have been adjusted to reflect the effect of a two-for-one stock split in the nature of a 100% stock dividend distributed on September 29,1995 to stockholders of record at the close of business on September 15,1995.
EX-21 6 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. Such subsidiaries do business under their corporate names. Aire Sellado, S.A. de C.V. Mexico Cascades Sealed Air Inc.* Canada Danco (NZ) Limited New Zealand Delsopak S.A. France Emballasje Teknikk A/S Norway Instapak France S.A. France PolyMask Corporation* Delaware Polypride, Inc. Delaware Sealed Air N.V. Belgium Sealed Air Holdings (Brazil) Limited Brazil Sealed Air of Canada Limited Ontario, Canada Sealed Air Espana, S.A. Spain Sealed Air (FPD) Limited England Sealed Air Limited England Sealed Air S.A.** France Sealed Air (Far East) Limited Hong Kong Sealed Air GmbH Germany Sealed Air (NZ) Limited New Zealand Sealed Air Japan Limited Nevada Sealed Air S.p.A. Italy Sealed Air (Korea) Limited Korea Sealed Air (Malaysia) Sdn. Bhd. Malaysia Sealed Air B.V. Netherlands Sealed Air (Singapore) Pte. Limited Singapore Sealed Air Svenska AB Sweden Sealed Air Taiwan Limited Taiwan Sealed Air Thailand Limited Thailand Sealed Air Trucking, Inc. Delaware Trigon Packaging Systems (NZ) Limited New Zealand Trigon Packaging Systems (Aust.) Pty. Limited Queensland, Australia Trigon Packaging Corporation Washington *The Company owns 50% of the outstanding shares. **The Company indirectly owns a majority of the outstanding shares. 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, 1995. EX-23 7 EXHIBIT 23 Independent Auditors' Consent The Board of Directors Sealed Air Corporation: We consent to incorporation by reference in the Registration Statement No. 33-41734 on Form S-8, Registration Statement No. 333-341 on Form S-3, Registration Statement No. 33-68614 on Form S-3, Registration Statement No. 33-57441 on Form S-3, Registration Statement No. 33-58843 on Form S-3 and Registration Statement No. 33-53751 on Form S-3 of Sealed Air Corporation of our reports dated January 17, 1996, relating to the consolidated balance sheets of Sealed Air Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings, shareholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 1995, and related schedule, which reports appear or are incorporated by reference in the December 31, 1995 annual report on Form 10-K of Sealed Air Corporation. Our report on the aforementioned consolidated financial statements refers to a change in the Company's method of accounting for income taxes in 1993. s/KPMG Peat Marwick LLP Short Hills, New Jersey March 26, 1996 EX-27 8
5 The schedule contains summary information extracted from the consolidated statement of earnings for the twelve months ended December 31, 1995 and the consolidated balance sheet at December 31, 1995 and is qualified in its entirety by reference to such financial statements. 0000088204 SEALED AIR CORPORATION 12-MOS DEC-31-1995 DEC-31-1995 7,661,000 0 121,707,000 5,261,000 54,214,000 196,159,000 284,868,000 115,012,000 443,545,000 154,214,000 0 425,000 0 0 105,913,000 443,545,000 723,120,000 723,120,000 466,952,000 466,952,000 147,288,000 2,421,000 19,106,000 87,154,000 34,426,000 52,728,000 0 0 0 52,728,000 1.25 0
-----END PRIVACY-ENHANCED MESSAGE-----