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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____ to _____
Commission File Number 1-12139
SEALED AIR CORPORATION
(Exact name of registrant as specified in its charter)
State or other jurisdiction of incorporation or organization: Delaware
Address of principal executive offices: Park 80 East, Saddle Brook,
New Jersey 07663-5291
I.R.S. Employer Identification Number: 65-0654331
Registrant's telephone number, including area code: (201) 791-7600
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, par value $0.10 per share New York Stock Exchange, Inc.
Series A Convertible Preferred Stock, New York Stock Exchange, Inc.
par value $0.10 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. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant on March 24, 1999 was approximately
$3,921,000,000.
The number of outstanding shares of the registrant's Common Stock as of
March 24, 1999 was 83,486,552.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's 1998
Annual Report to Stockholders are incorporated by reference into Parts I and II
of this Form 10-K. Portions of the registrant's definitive proxy statement for
its 1999 Annual Meeting of Stockholders are incorporated by reference into Part
III of this Form 10-K.
PART I
ITEM 1. BUSINESS
Sealed Air Corporation (together with its subsidiaries, the
"Company") is engaged in the manufacture and sale of a wide range of protective,
food and specialty packaging materials and systems throughout the world.
On March 31, 1998, the Company (formerly known as W. R. Grace
& Co.) and Sealed Air Corporation (US), a Delaware corporation formerly known as
Sealed Air Corporation ("old Sealed Air"), completed a series of transactions as
a result of which:
(a) The specialty chemicals business of the Company was
separated from its packaging business, the packaging business
("Cryovac") was contributed to one group of wholly owned subsidiaries,
and the specialty chemicals business was contributed to another group
of wholly owned subsidiaries ("New Grace"); the Company and Cryovac
borrowed approximately $1.26 billion under two new revolving credit
agreements and transferred substantially all of those funds to New
Grace; and the Company distributed all of the outstanding shares of
common stock of New Grace to its stockholders. As a result, New Grace
became a separate publicly owned company that is unrelated to the
Company. These transactions are referred to below as the
"Reorganization."
(b) The Company recapitalized its outstanding shares of common
stock, par value $0.01 per share, into a new common stock and Series A
convertible preferred stock, each with a par value of $0.10 per share
(the "Recapitalization").
(c) A subsidiary of the Company merged into old Sealed Air
(the "Merger"), with old Sealed Air being the surviving corporation. As
a result of the Merger, old Sealed Air became a subsidiary of the
Company, and the Company was renamed Sealed Air Corporation.
References to "Grace" in this Annual Report on Form 10-K refer to the Company
before the Reorganization, the Recapitalization and the Merger.
SEGMENTS
The Company operates in two reportable business segments: (i)
food and specialty packaging products and (ii) protective packaging products,
described more fully below. Information concerning the Company's reportable
segments appears in Note 3 of the Notes to Consolidated Financial Statements in
Item 8 of this Annual Report on Form 10-K, which Note is incorporated herein by
reference.
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FOOD AND SPECIALTY PACKAGING PRODUCTS
The Company's principal food and specialty packaging products
are its flexible materials and related products, comprising principally shrink
bag and film products, non-shrink laminates and specialty packaging systems
marketed primarily under the Cryovac (R) trademark for a broad range of
perishable food applications. This segment also includes the Company's rigid
packaging and absorbent pads, principally absorbent pads used for the retail
packaging of meat, fish and poultry, foam trays used by supermarkets and food
processors, and rigid plastic containers for dairy and other food products.
FLEXIBLE MATERIALS AND RELATED SYSTEMS
The Company produces a variety of high-performance proprietary
flexible films, bags and associated packaging equipment marketed and sold
primarily under the Cryovac (R) trademark in North America, Europe, Latin
America, South Africa and the Asia Pacific region that are used to package a
broad range of perishable foods such as fresh, smoked and processed meat
products, cheese, poultry, prepared foods (including soups and sauces for
restaurants and institutions) and produce. The Company also offers sterilized
medical bags and films for use with medical products and produce bags with
dispensing systems used by customers in supermarket produce departments.
Cryovac (R) food packaging products include shrink bags,
shrink films sold for food packaging applications and laminated films. Shrink
bags and films are multi-layered shrinkable plastic bags and films that mold
themselves to the shape of the product. Laminates are multi-layered,
non-shrinkable plastic materials used to package perishable foods and
shelf-stable products such as syrups and toppings. Films and bags are sold in
barrier and permeable forms, depending on whether oxygen or other gases can pass
through the material. Offerings include modified atmosphere packaging (MAP) that
is designed to provide a controlled gas environment within a package to extend
shelf life.
The Company's food packaging films and bags incorporate the
Company's core technologies, including proprietary film processing technology,
resin technology, and packaging and food science expertise. The Company seeks to
maintain technological leadership through a continuous program of research and
development in its core technologies.
For processed meats and poultry, Cryovac (R) cook-in bags and
laminates withstand high cooking temperatures while retaining product shape,
clarity and weight. For fresh-cut produce, the Company produces films that
permit oxygen to pass through at various rates, thereby matching the varying
respiration rates of different vegetables and permitting longer shelf life.
During 1998, the Company introduced a new low-oxygen packaging film for use with
MAP packaging. The Company's Cryovac (R) films offer a wide variety of other
characteristics, such as anti-fog, clarity, gloss, oxygen barrier or strength,
that meet customer demands in specific food packaging applications.
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The Company's food packaging equipment offerings include:
dispensing and loading units to package foods in shrink, vacuum or vacuum skin
packages using the Company's films and bags; form, fill and seal units to
package foods in pouches made using the Company's films; and bagging systems.
Systems are marketed to the food processing industry under the Cryovac (R)
trademark and other trademarks.
RIGID PACKAGING AND ABSORBENT PADS
The Company manufactures and sells Cryovac (R) polystyrene
foam trays that are used by supermarkets and by food processors to protect and
display fresh meat, poultry and produce. The Company also manufactures and sells
absorbent pads used for food packaging, including its Dri-Loc (R) absorbent
pads. The Company's foam trays and absorbent pads are often used together. The
Company's case-ready packaging customers, principally meat and poultry
processors, purchase trays, pads and specially-designed films and packaging
equipment to package centrally meat and poultry products prior to shipment to
the supermarket. The Company also manufactures rigid plastic containers,
primarily plastic tubs for dairy products such as margarine and yogurt, in
Australia that are marketed under the Omicron (TM) trademark.
PROTECTIVE PACKAGING PRODUCTS
The Company's protective packaging products include its
cushioning and surface protection products and certain other products. The
Company's principal cushioning and surface protection products are air cellular
cushioning materials, Cryovac (R) films for non-food applications, Instapak (R)
polyurethane foam packaging systems, polyethylene foam sheets and planks,
protective and durable mailers and bags, paper-based packaging products,
suspension and retention packaging and packaging systems.
CUSHIONING AND SURFACE PROTECTION PRODUCTS
AIR CELLULAR CUSHIONING MATERIALS: The Company manufactures
and markets Bubble Wrap (R) air cellular cushioning materials, which are also
marketed under various other trademarks, including AirCap (R) and PolyCap (R).
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
during shipment. The Company's air cellular cushioning materials are used by a
wide variety of end users, including both manufacturers and retailers.
CRYOVAC (R) FILMS FOR NON-FOOD APPLICATIONS: The Company
manufactures and sells Cryovac (R) films used to shrink-wrap a wide assortment
of industrial and consumer products. The Company's proprietary multi-layer films
provide features such as strength and clarity. In certain regions the Company
also offers shrink-wrap equipment for use with the Company's shrink films.
4
INSTAPAK (R) SYSTEMS: Instapak (R) polyurethane foam packaging
systems consist of proprietary blends of polyurethane chemicals and specially
designed dispensing equipment. The Company also manufactures high-performance
polyolefin films designed for use with Instapak (R) packaging systems.
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.
POLYETHYLENE FOAMS: The Company manufactures thin polyethylene
foams in roll and sheet form, in low, medium and special densities, in flat,
ribbed or bag form and in a number of colors and thicknesses up to one-half
inch. The Company's low-density thin polyethylene foam is marketed under the
trademark Cell-Aire (R) and is used primarily for surface protection and
light-duty cushioning. The Company's medium-density thin polyethylene foam is
marketed under the trademark Cellu Cushion (R) as a cushioning material to
protect products from damage through shock or vibration during shipment.
The Company's CelluPlank (TM) plank foams and Stratocell (TM)
laminated 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.
PROTECTIVE AND DURABLE MAILERS AND BAGS: The Company
manufactures and markets a variety of protective and durable mailers and bags
that are made in several standard sizes and are used for mailing or shipping a
wide variety of items for which clean, lightweight pre-constructed protective
packages are desirable. They can provide the user with significant postage
savings, ease of use and enhanced product protection relative to other types of
mailers and shipping containers.
The Company's protective mailers include lightweight,
tear-resistant paper mailers marketed under various trademarks, including
Jiffylite (R) and Mail Lite (R) mailers, lined with air cellular cushioning
material. These products also include the widely used Jiffy (TM) padded mailers
made from recycled kraft paper padded with macerated recycled newspaper and
other Jiffy (TM) mailers designed for particular applications.
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The Company's durable plastic mailers and bags, which are
produced from multi-layered polyolefin film, are lightweight, water-resistant
and puncture-resistant and are available in tamper-evident varieties. Such
mailers and bags are used by a wide range of customers including air courier,
mail order, banking, postal, security and office supply services. Such mailers
and bags are marketed under a number of brand names, including ShurTuff (R),
MailTuff (TM), Trigon (R), Lab Pak (R), Keepsafe (TM) and Crush-Gard (TM).
KORRVU (R) PACKAGING PRODUCTS: The Company manufactures and
sells Korrvu (R) suspension and retention packaging. Korrvu (R) suspension
packaging suspends the product to be packaged in the air space of its shipping
container between two strong, flexible, low-slip films. Korrvu (R) retention
packaging holds the product to be packaged against a corrugated base using a
single sheet of flexible retention film.
PACKAGING SYSTEMS: The Company produces and markets converting
systems that convert certain of the Company's packaging materials, including air
cellular cushioning materials, thin polyethylene foam and paper packaging
materials, into sheets of a pre-selected size and quantity or, for the Company's
recycled kraft paper, into paper dunnage material.
The Company offers two inflatable packaging systems, its Rapid
Fill (R) system, which consists of a compact, portable inflator and self-sealing
inflatable plastic bags, and its Fill-Air (TM) system, which converts rolls of
polyethylene film into continuous perforated chains of air-filled cushions on
demand.
OTHER PROTECTIVE PACKAGING PRODUCTS: The Company manufactures
recycled kraft, tissue and crepe paper for use as a raw material in the
manufacture of the Company's protective mailer and food packaging products. The
Company also manufactures and sells paper packaging products under the
trademarks Kushion Kraft (R), Custom Wrap (TM), Jiffy (TM) Padwrap (R) and Void
Kraft (TM) for industrial surface protection, furniture surface protection,
moving and storage blankets, and for use as cushioning or void fill in various
packaging applications.
Subsidiaries of the Company in certain foreign countries
produce loose-fill polystyrene packaging for sale to customers in those
countries.
OTHER PRODUCTS
The Company manufactures and sells a number of non-packaging
products, including specialty adhesive tapes, solar pool covers and solar
heating systems for swimming pools, recycled kraft, tissue and crepe paper sold
to unaffiliated customers, and certain products related to the elimination and
neutralization of static electricity.
6
FOREIGN OPERATIONS
The Company operates in the United States and in 43 other
countries, and its products are distributed in those countries as well as in
other parts of the world. Since the Merger, the Company has begun extending its
protective packaging product offerings into countries where Cryovac had
established operations prior to the Merger and where old Sealed Air had not,
such as eastern Europe and parts of Latin America. In maintaining its foreign
operations, the Company runs the risks inherent in such operations, including
those of currency fluctuations. Information on currency exchange risks appears
in Item 7A of this Annual Report on Form 10-K. Financial information about
geographic areas, including net sales and total assets, for each of the three
years in the period ended December 31, 1998 appears in Note 3 of the Notes to
Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K,
which Note is incorporated herein by reference.
MARKETING, DISTRIBUTION AND CUSTOMERS
The Company employs over 1,200 field sales and technical
support representatives in the countries in which it operates 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 many of
its product lines. These groups often work together to develop market
opportunities for the Company's products.
To support the Company's food packaging customers, the Company
has food science laboratories in a number of locations that assist customers in
identifying the appropriate food packaging materials and systems to meet their
needs. The Company also offers customized graphic design services to its food
packaging and mailer customers.
To assist its marketing efforts for its protective packaging
products 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 products. In 1998, no customer or affiliated group of
customers accounted for as much as 10% of the Company's consolidated net sales.
Although net sales of both food and specialty packaging
products and protective packaging tend to be slightly higher in the fourth
quarter, the Company does not consider seasonality to be a material factor.
7
COMPETITION
Competition for most of the Company's packaging products is
based primarily on packaging performance characteristics, service and price.
Since competition is also based upon innovations in packaging technology, the
Company's ongoing research and development programs are intended to enable the
Company to maintain technological leadership. Certain firms producing competing
products are well established and may have greater financial resources than the
Company.
There are a number of competing manufacturers of food
packaging products, including companies offering similar products that operate
on a global basis as well as those that operate in a region or single country.
Competing manufacturers produce a wide variety of plastic, paper and other
materials that are used for the packaging of food. The Company believes that it
is one of the leading suppliers of flexible materials and related systems in the
principal geographic areas in which it offers those products and one of the
leading suppliers of absorbent pads for food products to supermarkets and
poultry processors in the United States.
The Company's protective packaging products compete with
similar products made by others and with a number of other packaging materials,
all of which are used to provide protection against damage to the packaged
product during its shipment and storage. Competitive materials include various
forms of paper packaging products, expanded plastics, corrugated die cuts,
loosefill packaging materials, strapping, envelopes, reinforced bags,
boxes and other containers and various corrugated materials. Heavy-duty
applications of the Company's Instapak(R) packaging and its plank and laminated
foam products also compete with various types of molded foam plastics,
fabricated foam plastics and mechanical shock mounts and with wood blocking and
bracing systems. The Company believes that it is one of the leading suppliers of
air cellular cushioning materials containing a barrier layer and polyurethane
foam packaging systems in the geographic areas in which it sells these products.
As discussed below under "Environmental Matters," the Company
is also subject to competitive factors affecting packaging materials that are
based upon customers' environmental preferences.
RAW MATERIALS
The raw materials utilized in the Company's operations
generally have been readily available on the open market and in most cases are
available from several suppliers. Some materials used in the Company's
protective packaging products are 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 food and
specialty products include polyolefin and other resins and films, paper and wood
pulp products and blowing agents used in foam products. The principal raw
materials used in the Company's protective packaging products include similar
raw materials as those used in its food and specialty products, as well as
polyurethane chemicals. The Company also offers a wide variety of specialized
packaging equipment, some of which it assembles and some of which it purchases
from other suppliers.
8
PRODUCT DEVELOPMENT
The Company maintains a continuing effort to develop new
products and improvements to its existing products and processes as well as new
packaging and non-packaging applications for its products. From time to time the
Company also acquires promising new packaging designs or techniques developed by
others and commercializes them. Since the Merger, the Company has begun an
ongoing program of joint research and development projects combining the
technical capabilities of Cryovac and old Sealed Air. The Company incurred
expenses of $57,524,000 related to Company-sponsored research and development in
1998 compared with $40,675,000 during 1997 and $42,255,000 during 1996.
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 ongoing research and
development efforts. Therefore, the Company believes that the expiration or
unenforceability of any of such patents, applications or licenses would not be
material to the Company's business or financial position.
ENVIRONMENTAL MATTERS
The Company, like other manufacturers, is subject to various
laws, rules and regulations in the countries, jurisdictions and localities in
which it operates regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment. The Company believes
that compliance with current environmental laws and regulations has not had a
material effect on the Company's capital expenditures or financial position.
In some jurisdictions in which the Company's packaging
products are sold or used, laws and regulations have been adopted or proposed
that seek to regulate, among other things, recycled or reprocessed content, sale
and disposal of packaging materials. In addition, customer demand for packaging
materials that are viewed as being "environmentally responsible" and that
minimize the generation of solid waste continues to evolve. While these issues
can be a competitive factor in the marketplace for packaging materials, the
Company maintains active programs designed to comply with these laws and
regulations, to monitor their evolution, and to meet such customer demand.
The Company believes that its packaging materials offer
superior packaging protection, enabling customers to achieve lower package cube
and weight using the Company's 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
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environmental preferences. A number of the Company's protective packaging
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 protective packaging 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, and, when possible, materials collected
through these collection programs are reprocessed and either reused in the
Company's protective packaging operations or offered to other manufacturers for
use in other products.
EMPLOYEES
At December 31, 1998, the Company had approximately 14,700
employees worldwide.
ITEM 2. PROPERTIES
The Company's food and specialty packaging products are
produced in 40 manufacturing facilities (15 in North America, 10 in Europe, 5 in
Latin America, 9 in the Asia Pacific region, and 1 in South Africa). Protective
packaging products are produced in 62 manufacturing facilities (29 in North
America, 18 in Europe, 4 in Latin America, and 11 in the Asia Pacific region,
including certain small converting facilities). Several of the Company's
manufacturing facilities serve both segments. The Company occupies other
facilities containing fabricating or converting operations or sales,
distribution, technical, warehouse or administrative offices at a number of
locations in the United States and in various foreign countries.
In the United States, the Company's food and specialty
products are manufactured at facilities in California, Indiana, Iowa,
Mississippi, Missouri, New York, North Carolina, Pennsylvania, South Carolina,
and Texas. Its protective packaging products are manufactured at facilities in
California, Connecticut, Georgia, Illinois, Massachusetts, Mississippi, New
Jersey, New York, North Carolina, Pennsylvania, South Carolina, Texas and
Washington. Because of the light but voluminous 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 the large majority of its manufacturing
facilities, certain of which are owned subject to mortgages or similar financing
arrangements. The balance of the Company's manufacturing facilities are located
in leased premises. The Company's manufacturing facilities are usually located
in general purpose buildings in which the Company's specialized machinery for
the manufacture of one or more products is contained. The Company believes that
its manufacturing facilities are well maintained, suitable for their purposes,
and adequate for the Company's needs.
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ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various lawsuits and administrative
and other proceedings incidental to its business, including certain federal or
state governmental environmental proceedings or private environmental claims
relating to the cleanup of Superfund sites or other sites. While it is often
difficult to estimate potential environmental liabilities and the future impact
of environmental matters, based upon the information currently available to the
Company and its experience in dealing with such matters, the Company believes
that its potential liability with respect to such sites is not material. The
Company believes, after consulting with counsel, that the disposition of its
lawsuits and other legal proceedings, including environmental matters, will not
have a material effect on the Company's consolidated financial position.
In connection with the Reorganization, the Recapitalization
and the Merger, New Grace agreed to indemnify the Company against all
liabilities of Grace, whether accruing or occurring before or after the merger,
other than liabilities arising from or relating to Cryovac's operations. New
Grace also agreed to retain certain liabilities of Cryovac and to indemnify the
Company against such liabilities. The Company may remain liable with respect to
certain of such liabilities if New Grace fails to fulfill its indemnity
obligations to the Company. Based upon currently available information, the
Company believes that future costs related to such indemnified liabilities will
not have a material adverse effect on the Company's consolidated financial
position.
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 1998.
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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, 1999, the year in which he or she first was elected
to the position currently held with the Company or with old Sealed Air (as
indicated in the footnote to the table), and the year in which he or she first
was elected an officer of the Company or of old Sealed Air (as indicated in the
footnote to the table).
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 except for Mr. Van Riper, who was elected
Senior Vice President and Chief Financial Officer of the Company effective July
1, 1998. Previously Mr. Van Riper was a partner in the accounting firm of KPMG
LLP, which were the independent accountants for old Sealed Air for many years
prior to the Merger and have acted as the independent accountants for the
Company since the Merger. 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, 1999 CURRENT POSITION AN OFFICER
- ---------------- -------------- ---------------- -------------
T. J. Dermot Dunphy 66 1971 1971
Chairman of the Board,
Chief Executive Officer
and Director
William V. Hickey 54 1996 1980
President and Chief
Operating Officer
J. Gary Kaenzig, Jr.* 53 1998 1995
Executive Vice President
Bruce A. Cruikshank 55 1996 1990
Senior Vice President
Robert A. Pesci 53 1997 1990
Senior Vice President
Daniel S. Van Riper 58 1998 1998
Senior Vice President
and Chief Financial Officer
Jonathan B. Baker 46 1994 1994
Vice President
James A. Bixby 55 1990 1990
Vice President
Leonard R. Byrne* 57 1998 1998
Vice President
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Mary A. Coventry 45 1994 1994
Vice President
Jean-Luc Debry 53 1992 1992
Vice President
Paul B. Hogan 59 1995 1995
Vice President
James P. Mix 47 1994 1994
Vice President
Manuel Mondragon* 49 1999 1999
Vice President
J. Stuart K. Prosser* 53 1999 1999
Vice President
Abraham N. Reichental 42 1994 1994
Vice President
Horst Tebbe 58 1998 1986
Vice President
Alan S. Weinberg* 57 1998 1998
Vice President
Jeffrey S. Warren 45 1996 1996
Controller
H. Katherine White 53 1998 1996
General Counsel and
Secretary
*Prior to the Merger, Mr. Kaenzig served as Senior Vice President of Grace and
as President of Cryovac, and Messrs. Byrne, Mondragon, Prosser and Weinberg were
executives of Cryovac. Prior to the Merger, all other persons listed in the
table except Mr. Van Riper were executive officers of old Sealed Air.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The information appearing under the caption "Capital Stock
Information" in the Company's 1998 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 1998 Annual Report to Stockholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The information appearing under the caption "Management's
Discussion and Analysis of Results of Operations and Financial Condition" in the
Company's 1998 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest
rates and foreign currency exchange rates, which may adversely affect its
results of operations and financial condition. The Company seeks to minimize
these risks through its regular operating and financing activities and, when
deemed appropriate, through the use of derivative financial instruments. The
Company does not purchase, hold or sell derivative financial instruments for
trading purposes.
INTEREST RATES
The Company uses interest rate swaps to reduce exposure to
fluctuations in interest rates by fixing the rate of interest the Company pays
on the notional amount of debt. Interest rate collars are used to reduce the
Company's exposure to fluctuations in the rate of interest by limiting
fluctuations in the rate of interest. At December 31, 1998, the Company had
interest rate swap and collar agreements, maturing at various dates through
March 2003, with a combined aggregate notional amount of $265,000,000. The fair
value of these agreements, which represents the estimated net payment that would
be made by the Company to terminate the agreements as advised by the Company's
banks, was $4,652,000 at December 31, 1998. A hypothetical 10% decrease in
interest rates would increase the amount to be paid by the Company to terminate
these agreements by approximately $3,933,000.
14
The fair value of the Company's fixed rate debt also varies
with changes in interest rates. Generally, the fair value of fixed rate debt
will increase as interest rates fall and decrease as interest rates rise. At
December 31, 1998, the carrying value of the Company's total debt was
$1,081,657,000, of which only $3,477,000 was fixed rate debt. The estimated fair
value of the Company's total debt, which includes the cost of replacing the
Company's fixed rate debt with borrowings at current market rates, was
$1,082,392,000 at December 31, 1998. A hypothetical 10% decrease in interest
rates would result in an increase in the fair value of the total debt balance of
approximately $381,000.
FOREIGN EXCHANGE CONTRACTS
The Company uses interest rate and currency swaps to gain
access to additional sources of international financing while limiting foreign
exchange exposure and limiting or adjusting interest rate exposure by swapping
borrowings in U.S. dollars for borrowings denominated in foreign currencies. At
December 31, 1998, the Company had interest rate and currency swap agreements,
maturing at various dates through May 2002, with an aggregate notional amount of
$23,000,000. The estimated fair value of these contracts, which represents the
estimated net payment that would be made by the Company to terminate these
agreements based on the then current interest rates and foreign exchange rates,
was $379,000 at December 31, 1998. A hypothetical 10% decrease in interest rates
would increase the amount to be paid by the Company to terminate these
agreements by approximately $55,000. A hypothetical 10% adverse change in
foreign exchange rates at December 31, 1998 would increase the amount to be paid
by the Company by approximately $2,426,000. However, since these contracts hedge
foreign currency denominated transactions, any change in the fair value of the
contracts would be offset by changes in the underlying value of the transaction
being hedged.
The Company generally uses foreign currency forwards to fix
the amount payable on transactions denominated in foreign currencies. At
December 31, 1998, the Company had foreign currency forward contracts, maturing
at various dates through March 1999, with an aggregate notional amount of
$12,800,000. The estimated fair value of these contracts, which represents the
estimated net payment/(receipt) that would be made by (paid to) the Company to
terminate the agreements, was ($415,000) at December 31, 1998. A hypothetical
10% adverse change in foreign exchange rates at December 31, 1998 would decrease
the net amount received to terminate these contracts by approximately $307,000.
However, since these contracts hedge foreign currency denominated transactions,
any change in the fair value of the contracts would be offset by changes in the
underlying value of the transaction being hedged.
15
FORWARD LOOKING INFORMATION
The above discussion of the Company's procedures to reduce
market risk and the estimated changes in fair value resulting from the Company's
sensitivity analyses are forward-looking statements of market risk assuming
certain adverse market conditions occur. Actual results in the future may differ
materially from these estimated results due to actual developments in the global
financial markets. The analysis methods used by the Company to assess and
mitigate risk discussed above should not be considered projections of future
events or losses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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.
16
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 1999 Annual Meeting of Stockholders under the
captions "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance." All such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this Item will be set
forth in the Company's Proxy Statement for its 1999 Annual Meeting of
Stockholders under the captions "Directors' Compensation," "Summary Compensation
Table" and "Compensation Committee Interlocks and Insider Participation." Such
information is incorporated herein by reference.
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 1999 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.
17
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 of this Annual Report on Form 10-K.
(ii) EXHIBITS
EXHIBIT NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger dated as of August 14, 1997 by
and among Grace, Packco Acquisition Corp. and Sealed Air
Corporation. [Exhibit 2.1 to Grace's Current Report on Form
8-K, Date of Report August 14, 1997, File No. 1-12139, is
incorporated herein by reference.]
2.2 Distribution Agreement dated as of March 30, 1998 among the
Company, W. R. Grace & Co.-Conn. ("Grace-Conn."), and New
Grace. [Exhibit 2.2 to the Company's Current Report on Form
8-K, Date of Report March 31, 1998, File No. 1-12139, is
incorporated herein by reference.]
3.1 Amended and Restated Certificate of Incorporation of the
Company as currently in effect. [Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998, File No. 1-12139, is incorporated herein by
reference.]
3.2 Amended and Restated By-Laws of the Company as currently in
effect. [Exhibit 3.2 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1998, File No.
1-12139, is incorporated herein by reference.]
10.1 Employee Benefits Allocation Agreement dated as of March 30,
1998 among the Company, Grace-Conn. and New Grace. [Exhibit
10.1 to the Company's Current Report on Form 8-K, Date of
Report March 31, 1998, File No. 1-12139, is incorporated
herein by reference.]
10.2 Tax Sharing Agreement dated as of March 30, 1998 by and among
the Company, Grace-Conn. and New Grace. [Exhibit 10.2 to the
Company's Current Report on Form 8-K, Date of Report March 31,
1998, File No. 1-12139, is incorporated herein by reference.]
18
10.3 Contingent Stock Plan of the Company, as amended. [Exhibit 4.3
to the Company's Registration Statement on Form S-8,
Registration No. 333-59197, is incorporated herein by
reference.]*
10.4 Restricted Stock Plan for Non-Employee Directors of the
Company. [Annex E to the Company's Proxy Statement for the
1998 Annual Meeting of Stockholders is incorporated herein by
reference.]*
10.5 Grace 1996 Stock Incentive Plan, as amended. [Exhibit 10.1 to
the Quarterly Report on Form 10-Q of Grace for the quarter
ended March 31, 1997, File No. 1-12139, is incorporated herein
by reference.]*
10.6 Grace 1994 Stock Incentive Plan, as amended. [Exhibit 10.6 to
the Current Report on Form 8-K filed October 10, 1996 of
Grace, File No. 1-12139, is incorporated herein by
reference.]*
10.7 Grace 1989 Stock Incentive Plan, as amended. [Exhibit 10.5 to
the Current Report on Form 8-K filed October 10, 1996 of
Grace, File No. 1-12139, is incorporated herein by
reference.]*
10.8 Grace 1986 Stock Incentive Plan, as amended. [Exhibit 10.4 to
the Current Report on Form 8-K filed October 10, 1996 of
Grace, File No. 1-12139, is incorporated herein by
reference.]*
10.9 Information concerning Grace's stock options and deferred
payment arrangements for Grace's LTIP awards that were assumed
by the Company. [Information under the headings "Stock
Options" and "LTIP" on pages 15-16 of the Proxy Statement for
the Company's 1999 Annual Meeting of Stockholders is
incorporated herein by reference.]*
10.10 Sealed Air Corporation Deferred Compensation Program for
Cryovac Employees.*
10.11 Form of Contingent Stock Agreement - Officer. [Exhibit 4.5 to
the Company's Registration Statement on Form S-8, Registration
No. 333-59197, is incorporated herein by reference.]*
10.12 Form of Contingent Stock Agreement - Section 162(m) Officer.
[Exhibit 4.6 to the Company's Registration Statement on Form
S-8, Registration No. 333-59197, is incorporated herein by
reference.]*
19
10.13 Form of Restricted Stock Purchase Agreement. [Exhibit 4.4 to
the Company's Registration Statement on Form S-8, Registration
No. 333-59195, is incorporated herein by reference.]*
10.14 Global Revolving Credit Agreement (5-year) dated as of March
30, 1998 among the Company, certain of its subsidiaries
including Cryovac, Inc., ABN AMRO Bank N.V., Bankers Trust
Company, Bank of America National Trust and Savings
Association, NationsBank, N. A., and the other banks party
thereto. [Exhibit 10.3 to the Company's Current Report on Form
8-K, Date of Report March 31, 1998, File No. 1-12139, is
incorporated herein by reference.]
10.15 Global Revolving Credit Agreement (364-day) dated as of March
30, 1998 among the Company, certain of its subsidiaries
including Cryovac, Inc., ABN AMRO Bank N.V., Bankers Trust
Company, Bank of America National Trust and Savings
Association, NationsBank, N. A., and the other banks party
thereto. [Exhibit 10.4 to the Company's Current Report on Form
8-K, Date of Report March 31, 1998, File No. 1-12139, is
incorporated herein by reference.]
13 Portions of the Company's 1998 Annual Report to Stockholders
that are incorporated by reference into this Annual Report on
Form 10-K.
21 Subsidiaries of the Company.
23.1 Consent of KPMG LLP.
23.2 Consent of PricewaterhouseCoopers 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, 1998.
20
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 29, 1999 By S/T. J. DERMOT DUNPHY
------------------------------------
T. J. Dermot Dunphy
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
DATE
----
By S/ T. J. DERMOT DUNPHY March 29, 1999
------------------------------
T. J. Dermot Dunphy
Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
By S/DANIEL S. VAN RIPER March 29, 1999
---------------------------------
Daniel S. Van Riper
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
By S/ JEFFREY S. WARREN March 29, 1999
---------------------------------
Jeffrey S. Warren
Controller
(Principal Accounting Officer)
By S/HANK BROWN March 29, 1999
---------------------------------
Hank Brown
Director
21
By S/ JOHN K. CASTLE March 29, 1999
---------------------------------
John K. Castle
Director
By S/CHRISTOPHER CHENG March 29, 1999
---------------------------------
Christopher Cheng
Director
By S/ LAWRENCE R. CODEY March 29, 1999
---------------------------------
Lawrence R. Codey
Director
By S/ CHARLES F. FARRELL, JR. March 29, 1999
---------------------------------
Charles F. Farrell, Jr.
Director
By S/ DAVID FREEMAN March 29, 1999
---------------------------------
David Freeman
Director
By S/ VIRGINIA A. KAMSKY March 29, 1999
---------------------------------
Virginia A. Kamsky
Director
By S/ ALAN H. MILLER March 29, 1999
---------------------------------
Alan H. Miller
Director
By S/JOHN E. PHIPPS March 29, 1999
---------------------------------
John E. Phipps
Director
By S/ R. L. SAN SOUCIE March 29, 1999
---------------------------------
R. L. San Soucie
Director
22
SEALED AIR CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Years ended December 31, 1998, 1997 and 1996
F-1
SEALED AIR CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Page
Independent Auditors' Reports *
Financial Statements:
Consolidated Statements of Earnings for the years
ended December 31, 1998, 1997 and 1996 *
Consolidated Balance Sheets - December 31, 1998 and 1997 *
Consolidated Statements of Equity
for the years ended December 31, 1998, 1997 and 1996 *
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997, and 1996 *
Consolidated Statements of Comprehensive Income
for the years ended December 31, 1998, 1997 and 1996 *
Notes to Consolidated Financial Statements *
Independent Auditors' Reports on Schedule F-3
Consolidated Schedule:
II - Valuation and Qualifying Accounts F-5
* The information required appears on pages 26 through 58 of the Company's
1998 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 AUDITORS' REPORT ON SCHEDULE
The Board of Directors
Sealed Air Corporation:
Under date of January 27, 1999, we reported on the consolidated balance sheet of
Sealed Air Corporation and subsidiaries as of December 31, 1998, and the related
consolidated statements of earnings, equity, comprehensive income, and cash
flows for the year then ended, as contained in the 1998 Annual Report to
Shareholders of Sealed Air Corporation. These consolidated financial statements
and our report thereon are incorporated by reference in this Annual Report on
Form 10-K. In connection with our audit of the aforementioned consolidated
financial statements, we also audited the related 1998 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
audit.
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.
KPMG LLP
s/KPMG LLP
Short Hills, New Jersey
January 27, 1999
F-3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Sealed Air Corporation
Our audits of the consolidated financial statements referred to in our report
dated February 23, 1998, contained in the 1998 Annual Report to Shareholders of
Sealed Air Corporation (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule for each of the two years in the
period ended December 31, 1997, listed in the Index to Consolidated Financial
Statements and Schedule of this Form 10-K. In our opinion, the Financial
Statement Schedule for the periods referred to above presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PRICEWATERHOUSECOOPERS LLP
s/PRICEWATERHOUSECOOPERS LLP
Ft. Lauderdale, Florida
February 23, 1998
F-4
SEALED AIR CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1998, 1997 and 1996
(In thousands of dollars)
Additions
Balance At Charged To Charged Balance At
Beginning Costs And To Other End
Description Of Year Expenses Accounts 1 Deductions 2 Of Year
Year ended December 31, 1998
Allowance for doubtful accounts $7,256 $11,300 $5,539 $(6,150) $17,945
- -----------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997
Allowance for doubtful accounts $5,734 $ 2,695 $1,511 $(2,684) $ 7,256
- -----------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1996
Allowance for doubtful accounts $4,259 $ 5,772 $ _ $(4,297) $ 5,734
- -----------------------------------------------------------------------------------------------------------------------------
1 In 1998, primarily allowance for doubtful accounts of old Sealed Air
acquired on March 31, 1998.
2 Primarily accounts receivable balances written off.
F-5