SEALED AIR CORP/DE - Quarter Report: 2010 March (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
Or
o		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)


Delaware (State or other jurisdiction of incorporation or organization)		65-0654331 (I.R.S. Employer Identification Number)
200 Riverfront Boulevard Elmwood Park, New Jersey (Address of principal executive offices)		07407-1033 (Zip Code)

Registrant's telephone number, including area code:
(201) 791-7600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

There were 159,472,219 shares of the registrant's common stock, par value $0.10 per share, issued and outstanding as of April 30, 2010.

SEALED AIR CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010
TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			1
	Item 1.	Financial Statements (Unaudited)	1
		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009	1
		Condensed Consolidated Balance Sheets—March 31, 2010 and December 31, 2009	2
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009	3
		Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2010 and 2009	4
		Notes to Condensed Consolidated Financial Statements	5
		Note 1 Organization and Basis of Presentation	5
		Note 2 Recently Issued Accounting Standards	6
		Note 3 Segments	7
		Note 4 Global Manufacturing Strategy and 2008 Cost Reduction and Productivity Program	8
		Note 5 Available-for-Sale Investments	11
		Note 6 Accounts Receivable Securitization Program	12
		Note 7 Inventories	14
		Note 8 Property and Equipment, net	14
		Note 9 Goodwill and Identifiable Intangible Assets	15
		Note 10 Debt and Credit Facilities	16
		Note 11 Derivatives and Hedging Activities	19
		Note 12 Fair Value Measurements and Other Financial Instruments	22
		Note 13 Income Taxes	25
		Note 14 Commitments and Contingencies	26
		Note 15 Stockholders' Equity	35
		Note 16 Net Earnings Per Common Share	39
		Note 17 Other Income (Expense), net	40
		Note 18 Subsequent Event	40
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	41
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
	Item 4.	Controls and Procedures	61
PART II. OTHER INFORMATION			62
	Item 1.	Legal Proceedings	62
	Item 1A.	Risk Factors	62
		Cautionary Notice Regarding Forward-Looking Statements	62
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
	Item 6.	Exhibits	64
Signature			66
Certifications

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SEALED AIR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions, except per share amounts)

			Three Months Ended March 31,

			2010			2009
Net sales:
	Food Packaging		$	447.2		$	424.0
	Food Solutions			219.1			205.2
	Protective Packaging			306.5			280.1
	Other			88.4			79.2

		Total net sales		1,061.2			988.5
Cost of sales				761.2			702.8

	Gross profit			300.0			285.7
Marketing, administrative and development expenses				175.5			166.2
Restructuring and other charges (credits)				0.6			(0.4	)

	Operating profit			123.9			119.9
Interest expense				(40.7	)		(34.9	)
Impairment of available-for-sale securities				(0.7	)		—
Other income (expense), net				3.5			(3.4	)

	Earnings before income tax provision			86.0			81.6
Income tax provision				24.8			23.5

	Net earnings available to common stockholders		$	61.2		$	58.1

Net earnings per common share:
	Basic		$	0.38		$	0.37

	Diluted		$	0.35		$	0.32

Dividends per common share			$	0.12		$	0.12

Weighted average number of common shares outstanding:
	Basic			157.8			156.7

	Diluted			176.1			187.9

See accompanying Notes to Condensed Consolidated Financial Statements.

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SEALED AIR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

		March 31, 2010			December 31, 2009

Assets
Current assets:
	Cash and cash equivalents	$	627.5		$	694.5
	Receivables, net of allowance for doubtful accounts of $18.1 in 2010 and $17.5 in 2009		641.5			666.7
	Inventories		502.1			469.4
	Deferred tax assets		193.8			176.1
	Prepaid expenses and other current assets		71.1			66.7

Total current assets			2,036.0			2,073.4
Property and equipment, net			979.7			1,010.7
Goodwill			1,941.4			1,948.7
Non-current deferred tax assets			143.7			146.0
Other assets, net			235.1			241.3

Total assets		$	5,335.9		$	5,420.1

Liabilities and stockholders' equity
Current liabilities:
	Short-term borrowings	$	14.0		$	28.2
	Current portion of long-term debt		7.5			6.5
	Accounts payable		223.9			214.2
	Deferred tax liabilities		7.9			8.0
	Settlement agreement and related accrued interest		757.0			746.8
	Accrued restructuring costs		9.6			15.8
	Other current liabilities		367.0			414.3

	Total current liabilities		1,386.9			1,433.8
Long-term debt, less current portion			1,560.6			1,626.3
Non-current deferred tax liabilities			7.3			6.4
Other liabilities			150.1			153.3

Total liabilities			3,104.9			3,219.8
Commitments and contingencies
Stockholders' equity:
	Preferred stock, $0.10 par value per share, 50,000,000 shares authorized; no shares issued in 2010 and 2009		—			—
	Common stock, $0.10 par value per share, 400,000,000 shares authorized; shares issued: 168,949,008 in 2010 and 168,749,681 in 2009; shares outstanding: 159,457,641 in 2010 and 158,938,174 in 2009		16.9			16.9
	Common stock reserved for issuance related to Settlement agreement, $0.10 par value per share, 18,000,000 shares in 2010 and 2009		1.8			1.8
	Additional paid-in capital		1,128.8			1,127.1
	Retained earnings		1,573.1			1,531.1
	Common stock in treasury, 9,491,367 in 2010 and 9,811,507 shares in 2009		(352.1	)		(364.6	)
Accumulated other comprehensive loss, net of taxes:
	Unrecognized pension items		(68.7	)		(70.4	)
	Cumulative translation adjustment		(77.7	)		(50.8	)
	Unrealized gain on derivative instruments		3.9			4.1
	Unrealized gain on available-for-sale securities		4.9			4.4

	Total accumulated other comprehensive loss, net of taxes		(137.6	)		(112.7	)

Total parent company stockholders' equity			2,230.9			2,199.6
Noncontrolling interests			0.1			0.7

Total stockholders' equity			2,231.0			2,200.3

Total liabilities and stockholders' equity		$	5,335.9		$	5,420.1

See accompanying Notes to Condensed Consolidated Financial Statements.

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SEALED AIR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

			Three Months Ended March 31,

			2010			2009
Cash flows from operating activities:
Net earnings			$	61.2		$	58.1
Adjustments to reconcile net earnings to net cash provided by operating activities:
	Depreciation and amortization			39.6			38.2
	Share-based compensation			7.5			6.3
	Amortization of senior debt related items and other			0.5			0.5
	Provisions for bad debt			1.8			3.4
	Provisions for inventory obsolescence			0.6			4.7
	Impairment of available-for-sale securities			0.7			—
	Deferred taxes, net			(5.1	)		(3.8	)
	Net gain on disposals of property and equipment and other			(0.4	)		(0.9	)
Changes in operating assets and liabilities, net of effects of businesses and certain assets acquired:
	Receivables, net			26.1			96.6
	Accounts receivable securitization program			—			(80.0	)
	Inventories			(33.3	)		(5.8	)
	Other assets, net			3.4			3.4
	Accounts payable			12.2			(53.4	)
	Income taxes payable			17.5			3.7
	Other liabilities			(49.0	)		(14.8	)

	Net cash provided by operating activities			83.3			56.2

Cash flows from investing activities:
	Capital expenditures for property and equipment			(15.4	)		(24.4	)
	Proceeds from sales of property and equipment			2.4			1.7
	Other investing activities			1.2			(1.2	)

	Net cash used in investing activities			(11.8	)		(23.9	)

Cash flows from financing activities:
	Proceeds from long-term debt			—			299.1
	Payments of long-term debt			(71.0	)		—
	Net payments of short-term borrowings			(14.1	)		(0.3	)
	Dividends paid on common stock			(19.1	)		(19.0	)

	Net cash (used in) provided by financing activities			(104.2	)		279.8

Effect of foreign currency exchange rate changes on cash and cash equivalents				(34.3	)		(14.8	)

Cash and cash equivalents:
	Balance, beginning of period		$	694.5		$	128.9
	Net change during the period			(67.0	)		297.3

	Balance, end of period		$	627.5		$	426.2

Supplemental Cash Flow Information:
	Interest payments, net of amounts capitalized		$	44.7		$	26.6

	Income tax payments		$	13.0		$	27.8

	Non-cash item:
		Transfers of shares of our common stock from treasury as part of our 2009 and 2008 profit-sharing plan contributions	$	7.2		$	5.9

		Unrealized gain on available-for-sale securities	$	0.9		$	—

See accompanying Notes to Condensed Consolidated Financial Statements.

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SEALED AIR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)

		Three Months Ended March 31,

		2010			2009
Net earnings		$	61.2		$	58.1
Other comprehensive income, net of income taxes:
	Recognition of deferred pension items, net of income tax provision of $0.4 in 2010 and 2009		1.7			1.8
	Unrealized losses on derivative instruments, net of income tax benefit of $0.1 in 2010 and 2009		(0.2	)		(0.3	)
	Unrealized gains on available-for-sale securities, reclassified to net earnings, net of income tax benefit of $0.1 in 2010		(0.1	)		—
	Unrealized gains on available-for-sale securities, net of income tax provision of $0.3 in 2010		0.6			—
	Foreign currency translation adjustments		(26.9	)		(58.9	)

Comprehensive income, net of taxes		$	36.3		$	0.7

See accompanying Notes to Condensed Consolidated Financial Statements.

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SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in tables are in millions, except per share data)

(1) Organization and Basis of Presentation

Organization

We are a leading global innovator and manufacturer of a wide range of packaging and performance-based materials and equipment systems that serve an array of food, industrial, medical and consumer applications.

We conduct substantially all of our business through two direct wholly-owned subsidiaries, Cryovac, Inc. and Sealed Air Corporation (US). These two subsidiaries, directly and indirectly, own substantially all of the assets of the business and conduct operations themselves and through subsidiaries around the world. We adopted this corporate structure in connection with the Cryovac transaction. See "Cryovac Transaction Commitments and Contingencies," of Note 14, "Commitments and Contingencies," for a description of the Cryovac transaction and related terms used in these Notes to Condensed Consolidated Financial Statements.

Basis of Presentation

Our condensed consolidated financial statements include all of the accounts of the Company and our subsidiaries. We have eliminated all significant intercompany transactions and balances in consolidation. In management's opinion, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of our condensed consolidated balance sheet as of March 31, 2010 and the condensed consolidated statements of operations for the three months ended March 31, 2010 and 2009 have been made. The results set forth in the condensed consolidated statements of operations for the three months ended March 31, 2010 are not necessarily indicative of the results to be expected for the full year. All amounts are approximate due to rounding. Some prior period amounts have been reclassified to conform to the current year presentation. These reclassifications, individually and in the aggregate, had no impact on our consolidated financial position, results of operations and cash flows.

We have evaluated subsequent events for recognition or disclosure in these condensed consolidated financial statements through the date these financial statements were issued.

The condensed consolidated financial statements were prepared following the interim reporting requirements of the Securities and Exchange Commission, or the SEC. As permitted under those rules, annual footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America, or U.S. GAAP, have been condensed or omitted. The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

We are responsible for the unaudited condensed consolidated financial statements and notes included in this document. As these are condensed financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and with the information contained in other publicly-available filings with the SEC.

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SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(2) Recently Issued Accounting Standards

Adopted in the Three Months Ended March 31, 2010

In January 2010, the FASB issued an amendment to accounting standards addressing fair value measurements and disclosures which requires reporting entities to make new disclosures about recurring and nonrecurring fair-value measurements, including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information about purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. The revised accounting standard also clarifies existing fair-value measurement disclosure guidance about the level of disaggregation, inputs and valuation techniques. The adoption of this new standard in 2010 did not impact our consolidated financial position or results of operations as it is disclosure-only in nature.

In June 2009, the FASB issued new accounting standards relating to the transfer of financial assets. These standards require entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. They also eliminate the concept of a "qualifying special-purpose entity," change the requirements for derecognizing financial assets and require additional disclosures. We adopted this standard on January 1, 2010. In the future, any transfers of ownership interests of receivables under our receivables securitization program to the issuer of commercial paper or to the participating bank are no longer considered sales of receivables but are considered secured borrowings and will be recorded as liabilities on our consolidated balance sheets. See Note 6, "Accounts Receivable Securitization Program," for additional information about this program.

Also, in June 2009, the FASB issued new accounting standards which change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. These standards were effective beginning January 1, 2010. The adoption of this new standard in 2010 did not impact our consolidated financial position or results of operations.

Pending Adoption

In September 2009, the FASB ratified an amendment to accounting standards addressing revenue recognition for arrangements with multiple revenue-generating activities. The amendment addresses how revenue should be allocated to separate elements that could impact the timing of revenue recognition. The amendment is effective for us on a prospective basis for revenue arrangements entered into or materially modified on or after January 1, 2011, and earlier application is permitted. We may elect, but are not required, to apply the standards retrospectively to all prior periods. We are currently evaluating the impact this amendment may have on our consolidated financial position and results of operations.

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SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(3) Segments

The following table shows net sales, depreciation and amortization and operating profit by our segment reporting structure.

		Three Months Ended March 31,

		2010		2009
Net sales
	Food Packaging	$	447.2	$	424.0
	Food Solutions		219.1		205.2
	Protective Packaging		306.5		280.1
	Other		88.4		79.2

	Total	$	1,061.2	$	988.5

Depreciation and amortization(1)
	Food Packaging	$	18.9	$	17.7
	Food Solutions		7.9		7.5
	Protective Packaging		7.8		8.6
	Other		5.0		4.4

	Total	$	39.6	$	38.2

Operating profit(2)
	Food Packaging	$	56.5	$	58.6
	Food Solutions		20.9		22.5
	Protective Packaging		39.5		34.2
	Other		7.6		4.2

	Total segments and other		124.5		119.5
	Restructuring and other charges (credits)(3)		0.6		(0.4	)

	Total	$	123.9	$	119.9

(1): The 2009 depreciation and amortization amounts have been adjusted to exclude share-based compensation expense to conform to the 2010 presentation. Share-based compensation expense was $6.3 million in 2009 and is included in marketing, administrative and development expenses on our condensed consolidated statement of operations for all periods.
(2): Before taking into consideration restructuring and other charges (credits).
(3): The 2010 amount represents charges associated with the implementation of our global manufacturing strategy, primarily in our Food Packaging segment. See Note 4, "Global Manufacturing Strategy and 2008 Cost Reduction and Productivity Program," for further discussion.

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SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(3) Segments (Continued)

Assets by Reportable Segments

The following table shows assets allocated to our reportable segments. Only assets which are identifiable by segment and reviewed by our chief operating decision maker by segment are allocated to the reportable segment assets, which are trade receivables, net, and finished goods inventories, net. All other assets are included in "Assets not allocated." Assets not allocated include goodwill of $1,941.4 million at March 31, 2010 and $1,948.7 million at December 31, 2009 and total property and equipment, net, of $979.7 million at March 31, 2010 and $1,010.7 million at December 31, 2009.

			March 31, 2010		December 31, 2009

Assets:
	Trade receivables, net, and finished goods inventory, net
		Food Packaging	$	393.1	$	401.2
		Food Solutions		205.4		210.6
		Protective Packaging		271.4		266.1
		Other		58.8		57.9

	Total segments and other			928.7		935.8
	Assets not allocated			4,407.2		4,484.3

	Total		$	5,335.9	$	5,420.1

Allocation of Goodwill to Reportable Segments

Our management views goodwill as a corporate asset, so we do not allocate our goodwill balance to the reportable segments. However, we are required to allocate goodwill to each reporting unit to perform our annual impairment review of goodwill under U.S. GAAP, which we do during the fourth quarter of the year. See Note 9, "Goodwill and Identifiable Intangible Assets," for the allocation of goodwill and the changes in goodwill balances in the three months ended March 31, 2010 by our segment reporting structure.

(4) Global Manufacturing Strategy and 2008 Cost Reduction and Productivity Program

Global Manufacturing Strategy

Our global manufacturing strategy expanded our production capabilities in regions where demand for our products and services has been growing significantly. Additionally, we have been optimizing certain manufacturing platforms in North America and Europe into centers of excellence. The goals of this multi-year program have been to expand capacity in growing markets, further improve our operating efficiencies, and implement new technologies more effectively. By taking advantage of new technologies and streamlining production on a global scale, we have continued to enhance our profitable growth and our global leadership position and have produced meaningful benefits.

We announced this multi-year global manufacturing strategy in 2006. In 2009, we substantially finished the construction phase of GMS with the launch of our manufacturing facility in Duchnice,

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SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(4) Global Manufacturing Strategy and 2008 Cost Reduction and Productivity Program (Continued)

Poland. This facility along with our other new facilities in Qingpu, China and Monterrey, Mexico substantially completed the construction phase related to this program. We anticipate an additional $2 million of associated costs in mid-2010, marking the completion of GMS.

The capital expenditures, associated costs and related restructuring charges and the total amounts incurred since inception of this multi-year strategy are included in the table below.

	Three Months Ended March 31,

	Three Months Ended March 31,					Cumulative Through March 31, 2010
	2010		2009			Cumulative Through March 31, 2010
Capital expenditures	$	2.0	$	6.2		$	154.7
Associated costs(1)		1.8		3.1			34.1
Restructuring and other charges (credits)(2)		0.9		(0.2	)		39.2

(1): The associated costs principally include facility start-up costs, which are primarily included in cost of sales on the condensed consolidated statements of operations. These charges by our reporting structure were as follows:

	Three Months Ended March 31,

	2010		2009
Food Packaging	$	1.4	$	2.5
Food Solutions		0.4		0.1
Protective Packaging		—		0.5

Total	$	1.8	$	3.1

(2): The restructuring and other charges (credits) were primarily for costs of termination benefits, the majority of which were related to the Food Packaging segment. The restructuring and other charges (credits) for the three months ended March 31, 2010 were primarily related to our previously announced plan to cease certain operations at one of our German locations. These charges were included in restructuring and other charges (credits) on the condensed consolidated statements of operations. See Note 3, "Segments," for restructuring and other charges (credits) by reportable segment and Other. A reconciliation of the restructuring accrual for GMS is included below.

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SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(4) Global Manufacturing Strategy and 2008 Cost Reduction and Productivity Program (Continued)

The components of the restructuring accrual for GMS through March 31, 2010 and the accrual balance remaining on our condensed consolidated balance sheet at March 31, 2010 were as follows:


Restructuring accrual at December 31, 2009	$	9.4
Provision for termination benefits		0.9
Adjustment to accrual for termination benefits		(0.1	)
Cash payments during 2010		(3.1	)
Effect of changes in foreign currency rates		(0.3	)

Restructuring accrual at March 31, 2010	$	6.8

We expect to pay $6.6 million of the accrual balance remaining at March 31, 2010 within the next 12 months. This amount is included in other current liabilities on our condensed consolidated balance sheet at March 31, 2010. The remaining accrual of $0.2 million is expected to be paid in 2011 and is included in other liabilities on our condensed consolidated balance sheet at March 31, 2010.

2008 Cost Reduction and Productivity Program

In 2008, we implemented a cost reduction and productivity program. As a result, we recorded $65.8 million of pre-tax charges primarily for costs for termination benefits in 2008. The components of the restructuring accrual through March 31, 2010 and the accrual balance remaining on our condensed consolidated balance sheet at March 31, 2010 related to this program are included in the table below.


Restructuring accrual at December 31, 2009	$	6.6
Adjustment to accrual for termination benefits		(0.2	)
Cash payments made during 2010		(3.2	)
Effect of changes in foreign currency rates		(0.1	)

Restructuring accrual at March 31, 2010	$	3.1

We expect to pay $3.0 million of the accrual balance remaining at March 31, 2010 within the next 12 months. This amount is included in other current liabilities on the condensed consolidated balance sheet at March 31, 2010. The remaining accrual of $0.1 million is expected to be paid in 2011 and is included in other liabilities on the condensed consolidated balance sheet at March 31, 2010.

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SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(5) Available-for-Sale Investments

The following tables summarize our investments in available-for-sale securities:

		Estimated Fair Value at December 31, 2009		Gross Unrealized Gains		Gross Other Than Temporary Impairment			Gross Unrealized Gains Reclassified to Net Earnings			Estimated Fair Value at March 31, 2010

Auction rate securities:
	Debt instruments with contractual maturity dates in 2021, 2033, and 2036	$	13.5	$	0.9	$	(0.6	)	$	(0.1	)	$	13.7
	Non-cumulative perpetual preferred stock		0.2		—		(0.1	)		—			0.1

Total		$	13.7	$	0.9	$	(0.7	)	$	(0.1	)	$	13.8

		Estimated Fair Value at December 31, 2008		Gross Unrealized Gains		Gross Other Than Temporary Impairment			Estimated Fair Value at December 31, 2009

Auction rate securities:
	Debt instruments with contractual maturity dates in 2021, 2033, and 2036	$	7.7	$	7.0	$	(1.2	)	$	13.5
	Non-cumulative perpetual preferred stock		3.0		—		(2.8	)		0.2

Total		$	10.7	$	7.0	$	(4.0	)	$	13.7

Our available-for-sale investments, consisting of auction rate securities at March 31, 2010 and December 31, 2009, are exposed to market risk related to changes in conditions in the U.S. financial markets and in the financial condition of the issuers of these securities. Our investment in auction rate securities at March 31, 2010 and December 31, 2009 had an original cost of $44.7 million (debt instruments of $24.7 million and non-cumulative perpetual preferred stock of $20.0 million).

These auction rate securities consisted of two contingent capital securities that were converted into perpetual preferred stock of AMBAC Assurance Corporation, the issuer, in December 2008 and three debt instruments issued individually by Primus Financial Products LLC (maturity date 2021), River Lake Insurance Company, a wholly-owned subsidiary of Genworth Financial, Inc. (maturity date 2033) and Ballantyne Re Plc (maturity date 2036). We received interest and dividend payments of $0.2 million for the three months ended March 31, 2010 and $0.4 million for the three months ended March 31, 2009. In August 2009, AMBAC discontinued paying dividends on its perpetual preferred stock.

These five securities historically were re-auctioned every twenty-eight days, which had provided a liquid market for them. However, as a result of continuing liquidity concerns in the U.S. for these types of asset-backed securities, every auction held by the issuers for these auction rate securities since late 2007 has failed.

Table of Contents

SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(5) Available-for-Sale Investments (Continued)

We account for these investments as available-for-sale investments on a security-by-security basis and determine whether a decline in fair value below its cost is temporary or other than temporary. The objective of other than temporary impairment analysis under U.S. GAAP is to determine whether the holder of an investment in a debt or equity security for which changes in fair value are not regularly recognized in earnings should recognize a loss in earnings when the investment is impaired. An investment is impaired if the fair value of the investment is less than its amortized cost.

After considering impairment indicators under U.S. GAAP and the severity of declines in estimated fair value, we determined that these investments were impaired. Our evaluation in determining whether this impairment is temporary or other than temporary included, among other factors, the creditworthiness of the issuers and the timelines and level of interest payments received from the issuers, downgrades of credit ratings of some of the issuers and the potential recovery of the investment value. Based on the evaluations discussed above, in the three months ended March 31, 2010, we determined that the securities incurred other than temporary decline in fair market value of $0.7 million.

In the three months ended March 31, 2010, we recorded $0.9 million of unrealized gains ($0.6 million, net of taxes) in other comprehensive income related to an increase in the estimated fair value of the River Lake securities, which was primarily due to an improvement in River Lake's credit spread following their previous decline in value.

See Note 12, "Fair Value Measurements and Other Financial Instruments," for details on the inputs and valuation methodology used to calculate the estimated fair value of these investments.

We continue to monitor developments in the market for auction rate securities including the specific securities in which we have invested. If credit or liquidity conditions relating to these securities or the issuers worsen, we may recognize additional other than temporary impairments, which would result in the recognition of additional losses on our condensed consolidated statement of operations.

(6) Accounts Receivable Securitization Program

We and a group of our U.S. subsidiaries maintain an accounts receivable securitization program with a bank and an issuer of commercial paper administered by the bank. As of March 31, 2010, the maximum purchase limit for receivable interests was $125.0 million.

The amounts available from time to time under the program may be less than $125.0 million due to a number of factors, including but not limited to our credit ratings, accounts receivable balances, the creditworthiness of our customers and our receivables collection experience. Although we do not believe that these restrictive provisions presently materially restrict our operations, if an event occurs that triggers one of these restrictive provisions, we could experience a further decline in the amounts available under the program or termination of the program. During the three months ended March 31, 2010, the level of eligible assets available under the program was lower than $125.0 million primarily due to our current credit rating. As a result, the amount available to us under the program was approximately $79.3 million at March 31, 2010.

Table of Contents

SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(6) Accounts Receivable Securitization Program (Continued)

The program is scheduled to expire in December 2012. The program includes a bank financing commitment that must be renewed annually. The bank financing commitment is scheduled to expire on December 3, 2010. We plan to seek an additional 364 day renewal of the bank commitment before its expiration, but the bank is not obligated to renew the bank financing commitment. While the bank is not obligated to renew the bank financing commitment, we have negotiated annual renewals since the commencement of the program in 2001.

Under limited circumstances, the bank and the issuer of commercial paper can end purchases of receivables interests before the above dates. A downgrade of our long-term senior unsecured debt to BB- or below by Standard & Poor's Rating Services or Ba3 or below by Moody's Investors Service, Inc., or failure to comply with interest coverage, debt leverage ratios or various other ratios related to our receivables collection experience could result in termination of the receivables program. We were in compliance with these ratios at March 31, 2010 and December 31, 2009.

Other income (expense), net, includes the costs associated with our receivables securitization program. These costs primarily relate to program fees, commitment fees, other associated costs and the losses on the sale of the undivided ownership interests in 2009, all of which totaled $0.2 million in 2010 and $0.3 million in 2009.

As of March 31, 2010 and December 31, 2009, we had no amounts outstanding under this program.

As a result of our adoption of new accounting standards related to the transfer of financial assets on January 1, 2010, any transfers of ownership interests in receivables under this program will be considered secured borrowings and will be recorded as liabilities on our condensed consolidated balance sheets. Also, the costs associated with this program related to program fees on any outstanding borrowings under this program will now be included in interest expense, and the costs related to commitment fees on the unused portion of this program will continue to be included in other income (expense), net, on our condensed consolidated statements of operations.

Table of Contents

SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

(7) Inventories

The following table details our inventories and the reduction of certain inventories to a LIFO basis:

			March 31, 2010			December 31, 2009

Inventories (at FIFO, which approximates replacement value):
	Raw materials		$	96.8		$	90.1
	Work in process			103.3			97.2
	Finished goods			347.0			326.3

		Subtotal (at FIFO)		547.1			513.6
Reduction of certain inventories to LIFO basis				(45.0	)		(44.2	)

	Total		$	502.1		$	469.4

We determine the value of non-equipment U.S. inventories by the last-in, first-out or LIFO inventory method. U.S. inventories determined by the LIFO method were $120.3 million at March 31, 2010 and $111.2 million at December 31, 2009.

(8) Property and Equipment, net

The following table details our property and equipment, net, at March 31, 2010 and December 31, 2009.

	March 31, 2010			December 31, 2009

Land and improvements	$	49.3		$	49.7
Buildings		596.0			604.1
Machinery and equipment		2,302.0			2,332.0
Other property and equipment		116.9			124.1
Construction-in-progress		46.9			42.7

		3,111.1			3,152.6
Accumulated depreciation and amortization		(2,131.4	)		(2,141.9	)

Property and equipment, net	$	979.7		$	1,010.7

The following table details our interest cost capitalized and depreciation and amortization expense for property and equipment for the three months ended March 31, 2010 and 2009.

	Three Months Ended March 31,

	2010		2009
Interest cost capitalized	$	1.3	$	2.2
Depreciation and amortization expense for property and equipment		36.8		35.3

Table of Contents

SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(Amounts in tables are in millions, except per share data)

		Carrying Value at December 31, 2009		Impact of Foreign Currency Translation			Carrying Value at March 31, 2010

Food Packaging segment		$	383.6	$	(1.4	)	$	382.2
Food Solutions segment			148.1		(0.6	)		147.5
Protective Packaging segment:
	Protective Packaging		1,145.9		(4.3	)		1,141.6
	Shrink Packaging		115.3		(0.4	)		114.9

Total Protective Packaging segment			1,261.2		(4.7	)		1,256.5
Other:
	Specialty Materials		110.1		(0.4	)		109.7
	Medical Applications		45.7		(0.2	)		45.5
	New Ventures		—		—			—

Total Other			155.8		(0.6	)		155.2

Total Company		$	1,948.7	$	(7.3	)	$	1,941.4

	March 31, 2010			December 31, 2009

Gross carrying value	$	116.5		$	116.8
Accumulated amortization		(60.6	)		(58.4	)

Total	$	55.9		$	58.4

		March 31, 2010		December 31, 2009

Short-term borrowings		$	14.0	$	28.2
Current portion of long-term debt			7.5		6.5

Total current debt			21.5		34.7
	12% Senior Notes due February 2014(1)		303.2		299.5
	7.875% Senior Notes due June 2017, less unamortized discount of $8.0 in 2010 and $8.2 in 2009		392.0		391.8
	6.875% Senior Notes due July 2033, less unamortized discount of $1.5 in 2010 and 2009		448.5		448.5
	5.625% Senior Notes due July 2013, less unamortized discount of $0.5 in 2010 and $0.6 in 2009		399.5		399.4
	Other		17.4		87.1

Total long-term debt, less current portion			1,560.6		1,626.3

Total debt		$	1,582.1	$	1,661.0

	March 31, 2010		December 31, 2009

Used lines of credit	$	25.7	$	107.1
Unused lines of credit		913.9		846.3

Total available lines of credit	$	939.6	$	953.4

Available lines of credit—committed	$	674.2	$	686.1
Available lines of credit—uncommitted		265.4		267.3

Total available lines of credit	$	939.6	$	953.4

	March 31, 2010			December 31, 2009

Available lines of credit	$	265.4		$	267.3
Unused lines of credit		239.7			224.4
Weighted average interest rate		7.8	%		5.5	%


2010	$	8.0
2011		7.8
2012		6.2
2013		5.2
2014		4.7
Thereafter		15.1

Total	$	47.0

March 31, 2010		Total Fair Value		Level 1		Level 2		Level 3

Cash equivalents		$	7.4	$	—	$	7.4	$	—

Available-for-sale securities		$	13.8	$	—	$	—	$	13.8

Derivative financial instruments net asset:
	Interest rate swaps	$	3.2	$	—	$	3.2	$	—

	Foreign currency forward contracts	$	1.1	$	—	$	1.1	$	—

December 31, 2009		Total Fair Value		Level 1		Level 2		Level 3

Cash equivalents		$	65.0	$	—	$	65.0	$	—

Available-for-sale securities		$	13.7	$	—	$	—	$	13.7

Derivative financial instruments net liability:
	Interest rate swaps	$	0.5	$	—	$	0.5	$	—

	Foreign currency forward contracts	$	3.6	$	—	$	3.6	$	—


Estimated fair value as of December 31, 2009		$	13.7
Unrealized gains recorded in other comprehensive income in 2010			0.9
Other than temporary impairment included in earnings in 2010			(0.7	)
Unrealized gains reclassified to net earnings from other comprehensive income in 2010			(0.1	)

	Estimated fair value as of March 31, 2010	$	13.8

	March 31, 2010				December 31, 2009

	Carrying Amount		Fair Value		Carrying Amount		Fair Value
12% Senior Notes due February 2014(1)	$	303.2	$	365.8	$	299.5	$	372.5
7.875% Senior Notes due June 2017		392.0		428.0		391.8		424.0
6.875% Senior Notes due July 2033		448.5		433.1		448.5		423.0
5.625% Senior Notes due July 2013		399.5		422.0		399.4		416.0
Other foreign loans		27.5		20.9		109.0		115.4
Other loans		11.4		22.2		12.8		23.8

Total debt	$	1,582.1	$	1,692.0	$	1,661.0	$	1,774.7

			Three Months Ended March 31,

			2010			2009
*Basic Net Earnings Per Common Share:*
Numerator
	Net earnings available to common stockholders		$	61.2		$	58.1
	Distributed and allocated undistributed net earnings to non-vested restricted stockholders			(0.4	)		(0.5	)

	Distributed and allocated undistributed net earnings to common stockholders			60.8			57.6
	Distributed net earnings—dividends paid to common stockholders			(19.0	)		(18.9	)

Allocation of undistributed net earnings to common stockholders			$	41.8		$	38.7

Denominator
	Weighted average number of common shares outstanding—basic			157.8			156.7

Basic net earnings per common share:
	Distributed net earnings to common stockholders		$	0.12		$	0.12
	Allocated undistributed net earnings to common stockholders			0.26			0.25

Basic net earnings per common share:			$	0.38		$	0.37

*Diluted Net Earnings Per Common Share:*
Numerator
	Distributed and allocated undistributed net earnings to common stockholders		$	60.8		$	57.6
	Add: Allocated undistributed net earnings to non-vested restricted stockholders			0.3			0.3
		Interest on 3% Convertible Senior Notes, net of taxes(1)		—			2.0
	Less: Undistributed net earnings reallocated to non-vested restricted stockholders			(0.3	)		(0.3	)

Net earnings available to common stockholders—diluted			$	60.8		$	59.6

Denominator
Weighted average number of common shares outstanding—basic				157.8			156.7
		Effect of assumed issuance of Settlement agreement shares		18.0			18.0
		Effect of non-vested restricted stock and restricted stock units		0.3			0.2
		Effect of conversion of 3% Convertible Senior Notes(1)		—			13.0

	Weighted average number of common shares outstanding—diluted			176.1			187.9

Diluted net earnings per common share			$	0.35		$	0.32

	Three Months Ended March 31,

	2010			2009
Interest and dividend income	$	2.0		$	1.7
Net foreign exchange transaction gains (losses)		0.7			(2.9	)
Settlement agreement and related costs		(0.3	)		(0.5	)
Noncontrolling interests		0.5			0.3
Costs associated with our accounts receivable securitization program		(0.2	)		(0.3	)
Other, net		0.8			(1.7	)

Other income (expense), net	$	3.5		$	(3.4	)

		First Quarter of

		First Quarter of						% Change
		2010			2009			% Change
Net sales		$	1,061.2		$	988.5			7

Gross profit		$	300.0		$	285.7			5
	As a % of total net sales		28.3	%		28.9	%
Marketing, administrative and development expenses			175.5			166.2			6
	As a % of total net sales		16.5	%		16.8	%
Restructuring and other charges (credits)			0.6			(0.4	)		#

Operating profit		$	123.9		$	119.9			3

	As a % of total net sales		11.7	%		12.1	%
Net earnings available to common stockholders		$	61.2		$	58.1			5	%

Net earnings per common share:
	Basic	$	0.38		$	0.37			3	%

	Diluted	$	0.35		$	0.32			9	%

Weighted average number of common shares outstanding:
	Basic		157.8			156.7

	Diluted(1)		176.1			187.9

First Quarter of 2010		U.S.					International					Total Company

Volume—Units		$	26.0		5.5	%	$	16.0		3.1	%	$	42.0		4.2	%
Volume—Acquired businesses, net of dispositions			—		—			(1.1	)	(0.2	)		(1.1	)	(0.1	)
Product price/mix			(13.4	)	(2.8	)		(13.4	)	(2.6	)		(26.8	)	(2.7	)
Foreign currency translation			—		—			58.6		11.3			58.6		5.9

	Total	$	12.6		2.7	%	$	60.1		11.6	%	$	72.7		7.3	%

First Quarter of 2010		Food Packaging					Food Solutions					Protective Packaging					Other					Total Company

Volume—Units		$	9.1		2.1	%	$	3.2		1.5	%	$	21.7		7.8	%	$	8.0		10.0	%	$	42.0		4.2	%
Volume—Acquired businesses, net of (dispositions)			—		—			—		—			—		—			(1.1	)	(1.3	)		(1.1	)	(0.1	)
Product price/mix			(15.8	)	(3.7	)		(3.4	)	(1.7	)		(6.9	)	(2.5	)		(0.7	)	(0.9	)		(26.8	)	(2.7	)
Foreign currency translation			29.9		7.0			14.1		6.9			11.6		4.2			3.0		3.8			58.6		5.9

	Total change (U.S. GAAP)	$	23.2		5.4	%	$	13.9		6.7	%	$	26.4		9.5	%	$	9.2		11.6	%	$	72.7		7.3	%

Impact of foreign currency translation			(29.9	)	(7.0	)		(14.1	)	(6.9	)		(11.6	)	(4.2	)		(3.0	)	(3.8	)		(58.6	)	(5.9	)

	Total constant dollar change (Non-U.S. GAAP)	$	(6.7	)	(1.6	)%	$	(0.2	)	(0.2	)%	$	14.8		5.3	%	$	6.2		7.8	%	$	14.1		1.4	%

			First Quarter of

			First Quarter of						% Change
			2010			2009			% Change
Net sales:
	Food Packaging		$	447.2		$	424.0			5	%
		As a % of total net sales		42.1	%		42.9	%
	Food Solutions			219.1			205.2			7
		As a % of total net sales		20.7	%		20.8	%
	Protective Packaging			306.5			280.1			9
		As a % of total net sales		28.9	%		28.3	%
	Other			88.4			79.2			12
		As a % of total net sales		8.3	%		8.0	%

Total			$	1,061.2		$	988.5			7	%

	Three Months Ended March 31,

	Three Months Ended March 31,					Cumulative Through March 31, 2010
	2010		2009			Cumulative Through March 31, 2010
Capital expenditures	$	2.0	$	6.2		$	154.7
Associated costs(1)		1.8		3.1			34.1
Restructuring and other charges (credits)(2)		0.9		(0.2	)		39.2

		First Quarter of

		First Quarter of						% Change
		2010			2009			% Change
Food Packaging		$	56.5		$	58.6			(4	)%
	As a % of Food Packaging net sales		12.6	%		13.8	%
Food Solutions			20.9			22.5			(7	)
	As a % of Food Solutions net sales		9.5	%		11.0	%
Protective Packaging			39.5			34.2			15
	As a % of Protective Packaging net sales		12.9	%		12.2	%
Other			7.6			4.2			81
	As a % of Other net sales		8.6	%		5.3	%

Total segments and other			124.5			119.5			4
	As a % of total net sales		11.7	%		12.1	%
Restructuring and other charges (credits)(1)			0.6			(0.4	)		#

Total operating profit		$	123.9		$	119.9			3

	As a % of total net sales		11.7	%		12.1	%

		First Quarter of

		First Quarter of						2010 vs. 2009 Change
		2010			2009			2010 vs. 2009 Change
Interest expense on the amount payable for the Settlement agreement		$	10.2		$	9.8		$	0.4
Interest expense on our senior notes:
	12% Senior Notes due February 2014		8.1			5.4			2.7
	7.875% Senior Notes due June 2017		8.3			—			8.3
	6.875% Senior Notes due July 2033		7.7			7.7			—
	5.625% Senior Notes due July 2013		5.5			5.5			—
	3% Convertible Senior Notes redeemed July 2009		—			3.6			(3.6	)
	6.95% Senior Notes matured May 2009		—			2.4			(2.4	)
Other interest expense			2.2			2.7			(0.5	)
Less: capitalized interest			(1.3	)		(2.2	)		0.9

Total		$	40.7		$	34.9		$	5.8

	First Quarter of

	First Quarter of						Increase (Decrease)			% Increase (Decrease)
	2010			2009			Increase (Decrease)			% Increase (Decrease)
Net cash provided by operating activities	$	83.3		$	56.2		$	27.1			48	%
Net cash used in investing activities		(11.8	)		(23.9	)		(12.1	)		(51	)
Net cash (used in) provided by financing activities		(104.2	)		279.8			(384.0	)		#

	March 31, 2010		December 31, 2009		Increase

Working capital (current assets less current liabilities)	$	649.1	$	639.6	$	9.5
Current ratio (current assets divided by current liabilities)		1.5x		1.4x
Quick ratio (current assets, less inventories divided by current liabilities)		1.1x		1.1x

Exhibit Number			Description

	3.1		Unofficial Composite Amended and Restated Certificate of Incorporation of the Company as currently in effect. (Exhibit 3.1 to the Company's Registration Statement on Form S-3, Registration No. 333-108544, is incorporated herein by reference.)
	3.2		Amended and Restated By-Laws of the Company as currently in effect. (Exhibit 3.1 to the Company's Current Report on Form 8-K, Date of Report May 20, 2009, File No. 1-12139, is incorporated herein by reference.)
	10.1		Fees to be paid to the Company's Non-Employee Directors—2010. (Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009, File No. 1-12139, is incorporated herein by reference.)
	10.2		Written description of Compensatory Arrangement between the Company and David B. Crosier, effective February 18, 2010. (Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009, File No. 1-12139, is incorporated herein by reference.)
	10.3		Employment Agreement between Robert A. Pesci and Sealed Air Corporation (US), a subsidiary of the Company, effective February 18, 2010. (Exhibit 10.1 to the Company's Current Report on Form 8-K, Date of Report February 18, 2010, File No. 1-12139, is incorporated herein by reference.)
	10.4		Sealed Air Corporation Policy on Recoupment of Incentive Compensation from Executives in the Event of Certain Restatements, as amended February 18, 2010. (Exhibit 10.2 to the Company's Current Report on Form 8-K, Date of Report February 18, 2010, File No. 1-12139, is incorporated herein by reference.)

Exhibit Number			Description

	10.5		Performance-Based Compensation Program of the Company, as amended February 18, 2010. (Exhibit 10.3 to the Company's Current Report on Form 8-K, Date of Report February 18, 2010, File No. 1-12139, is incorporated herein by reference.)
	10.6		Form of Sealed Air Corporation Performance Share Units Award Grant 2010-2012. (Exhibit 10.1 to the Company's Current Report on Form 8-K, Date of Report April 14, 2010, File No. 1-12139, is incorporated herein by reference.)
	10.7		Sealed Air Corporation 2002 Stock Plan for Non-Employee Directors, as amended April 13, 2010.
	10.8		Sealed Air Corporation Deferred Compensation Plan for Directors, as amended January 1, 2007.
	31.1		Certification of William V. Hickey pursuant to Rule 13a-14(a), dated May 7, 2010.
	31.2		Certification of David H. Kelsey pursuant to Rule 13a-14(a), dated May 7, 2010.
	32		Certification of William V. Hickey and David H. Kelsey, pursuant to 18 U.S.C. § 1350, dated May 7, 2010.


	SEALED AIR CORPORATION
Date: May 7, 2010	By:	/s/ JEFFREY S. WARREN Jeffrey S. Warren Controller (Duly Authorized Executive Officer and Chief Accounting Officer)