SEALED AIR CORP/DE - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			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		65-0654331
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
2415 Cascade Pointe Boulevard
Charlotte	North Carolina	28208
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (980) 221-3235

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.10 per share	SEE	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large Accelerated Filer

☒

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

There were 155,153,238 shares of the registrant’s common stock, par value $0.10 per share, issued and outstanding as of October 23, 2020.


			Page
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets — September 30, 2020 and December 31, 2019			4
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019			5
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019			6
Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2020 and 2019			7
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019			8
Notes to Condensed Consolidated Financial Statements			9
Note 1 Organization and Basis of Presentation			9
Note 2 Recently Adopted and Issued Accounting Standards			10
Note 3 Revenue Recognition, Contracts with Customers			11
Note 4 Leases			15
Note 5 Acquisitions			17
Note 6 Segments			19
Note 7 Inventories, net			22
Note 8 Property and Equipment, net			22
Note 9 Goodwill and Identifiable Intangible Assets, net			22
Note 10 Accounts Receivable Securitization Programs			24
Note 11 Accounts Receivable Factoring Programs			25
Note 12 Credit Losses			25
Note 13 Restructuring Activities			26
Note 14 Debt and Credit Facilities			27
Note 15 Derivatives and Hedging Activities			28
Note 16 Fair Value Measurements and Other Financial Instruments			31
Note 17 Defined Benefit Pension Plans and Other Post-Employment Benefit Plans			33
Note 18 Income Taxes			34
Note 19 Commitments and Contingencies			35
Note 20 Stockholders’ Equity (Deficit)			37
Note 21 Accumulated Other Comprehensive Loss			40
Note 22 Other (Expense) Income, net			41
Note 23 Net Earnings Per Common Share			42
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			43
Item 3. Quantitative and Qualitative Disclosures About Market Risk			66
Item 4. Controls and Procedures			68
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			70
Item 1A. Risk Factors			70
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			71
Item 6. Exhibits			73
Signature			74


			2

Cautionary Notice Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking statements so that investors can better understand a company’s future prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as “anticipate,” “believe,” “plan,” “assume,” “could,” “should,” “estimate,” “expect,” “intend,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expected future operating results, expectations regarding the results of restructuring and other programs, anticipated levels of capital expenditures and expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations and proceedings.

The following are important factors that we believe could cause actual results to differ materially from those in our forward-looking statements: global economic and political conditions, currency translation and devaluation effects, changes in raw material pricing and availability, competitive conditions, the success of new product offerings, consumer preferences, the effects of animal and food-related health issues, pandemics, including the Coronavirus Disease 2019 (COVID-19), changes in energy costs, environmental matters, the success of our restructuring activities, the success of our financial growth, profitability, cash generation and manufacturing strategies and our cost reduction and productivity efforts, changes in our credit ratings, the tax benefit associated with the Settlement agreement (as defined in our Annual Report on Form 10-K for the year ended December 31, 2019), regulatory actions and legal matters, and the other information referenced in Part I, Item 1A, "Risk Factors", of our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC, as revised and updated in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)


(In USD millions, except share and per share data)	September 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	316.8	$	262.4
Trade receivables, net of allowance for doubtful accounts of $11.6 in 2020 and $8.2 in 2019	582.7		556.5
Income tax receivables	15.2		32.8
Other receivables	65.9		80.3
Inventories, net of inventory reserves of $20.5 in 2020 and $19.6 in 2019	630.9		570.3
Current assets held for sale	0.7		2.8
Prepaid expenses and other current assets	55.2		58.9
Total current assets	1,667.4		1,564.0
Property and equipment, net	1,136.4		1,141.9
Goodwill	2,207.7		2,216.9
Identifiable intangible assets, net	167.6		182.1
Deferred taxes	246.3		238.6

Operating lease right-of-use-assets	77.3		90.1
Other non-current assets	325.5		331.6
Total assets	$	5,828.2	$	5,765.2
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Short-term borrowings	$	7.4	$	98.9
Current portion of long-term debt	21.8		16.7
Current portion of operating lease liabilities	24.3		26.2
Accounts payable	718.8		738.5

Accrued restructuring costs	17.0		29.5
Income tax payable	42.9		12.3
Other current liabilities	481.0		514.1
Total current liabilities	1,313.2		1,436.2
Long-term debt, less current portion	3,710.1		3,698.6
Long-term operating lease liabilities, less current portion	54.5		65.7
Deferred taxes	31.5		30.7

Other non-current liabilities	694.4		730.2
Total liabilities	5,803.7		5,961.4
Commitments and contingencies - Note 19
Stockholders’ equity (deficit):
Preferred stock, $0.10 par value per share, 50,000,000 shares authorized; no shares issued in 2020 and 2019	—		—
Common stock, $0.10 par value per share, 400,000,000 shares authorized; shares issued: 231,965,316 in 2020 and 231,622,535 in 2019; shares outstanding: 155,157,663 in 2020 and 154,512,813 in 2019	23.2		23.2
Additional paid-in capital	2,082.7		2,073.5
Retained earnings	2,283.8		1,998.5
Common stock in treasury, 76,807,653 shares in 2020 and 77,109,722 shares in 2019	(3,366.3)		(3,382.4)





Accumulated other comprehensive loss, net of taxes	(998.9)		(909.0)
Total stockholders’ equity (deficit)	24.5		(196.2)
Total liabilities and stockholders’ equity (deficit)	$	5,828.2	$	5,765.2

See accompanying Notes to Condensed Consolidated Financial Statements.

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In USD millions, except per share data)	2020		2019		2020		2019
Net sales	$	1,237.2	$	1,218.5	$	3,562.3	$	3,492.2
Cost of sales	832.7		826.5		2,377.4		2,356.7
Gross profit	404.5		392.0		1,184.9		1,135.5
Selling, general and administrative expenses	199.3		221.6		577.9		699.9
Amortization expense of intangible assets acquired	9.7		9.5		28.0		18.5
Restructuring charges	1.0		6.9		11.7		43.6
Operating profit	194.5		154.0		567.3		373.5
Interest expense, net	(43.0)		(48.5)		(130.7)		(136.6)
Foreign currency exchange loss due to highly inflationary economies	(1.1)		(1.3)		(3.2)		(3.4)
Other (expense) income, net	(1.2)		(1.9)		7.9		1.3
Earnings before income tax provision	149.2		102.3		441.3		234.8
Income tax provision	17.4		22.8		94.7		65.5
Net earnings from continuing operations	131.8		79.5		346.6		169.3
Gain (Loss) on sale of discontinued operations, net of tax	2.2		(11.5)		14.1		(10.6)

Net earnings	$	134.0	$	68.0	$	360.7	$	158.7
Basic:
Continuing operations	$	0.85	$	0.52	$	2.23	$	1.10
Discontinued operations	0.01		(0.08)		0.09		(0.07)
Net earnings per common share - basic	$	0.86	$	0.44	$	2.32	$	1.03
Diluted:
Continuing operations	$	0.85	$	0.51	$	2.22	$	1.09
Discontinued operations	0.01		(0.07)		0.09		(0.07)
Net earnings per common share - diluted	$	0.86	$	0.44	$	2.31	$	1.02
Weighted average number of common shares outstanding:
Basic	155.5		154.0		155.2		154.4
Diluted	156.1		154.8		155.8		155.2

See accompanying Notes to Condensed Consolidated Financial Statements.

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended September 30,												Nine Months Ended September 30,
	2020						2019						2020						2019
(In USD millions)	Gross		Taxes		Net		Gross		Taxes		Net		Gross		Taxes		Net		Gross		Taxes		Net
Net earnings					$	134.0					$	68.0					$	360.7					$	158.7
Other comprehensive income (loss):
Recognition of pension items	$	2.3	$	(0.5)	1.8		$	1.3	$	(0.4)	0.9		$	5.1	$	(1.2)	3.9		$	3.5	$	(0.9)	2.6
Unrealized (losses) gains on derivative instruments for net investment hedge	(20.0)		5.0		(15.0)		17.2		(4.3)		12.9		(21.7)		5.4		(16.3)		20.2		(5.0)		15.2
Unrealized (losses) gains on derivative instruments for cash flow hedge	(3.2)		0.9		(2.3)		1.1		(0.3)		0.8		(0.1)		0.1		—		(0.7)		0.2		(0.5)
Foreign currency translation adjustments	7.2		2.4		9.6		(28.8)		(3.2)		(32.0)		(77.7)		0.2		(77.5)		(22.4)		(3.3)		(25.7)
Other comprehensive (loss) income	$	(13.7)	$	7.8	(5.9)		$	(9.2)	$	(8.2)	(17.4)		$	(94.4)	$	4.5	(89.9)		$	0.6	$	(9.0)	(8.4)
Comprehensive income, net of taxes					$	128.1					$	50.6					$	270.8					$	150.3

See accompanying Notes to Condensed Consolidated Financial Statements.

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)


(In USD millions)	Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock in Treasury		Accumulated Other Comprehensive Loss, Net of Taxes		Total Stockholders’ Equity (Deficit)
Balance at June 30, 2020	$	23.2	$	2,070.9	$	2,175.1	$	(3,346.3)	$	(993.0)	$	(70.1)
Effect of share-based incentive compensation	—		11.8		—		—		—		11.8

Repurchases of common stock	—		—		—		(20.0)		—		(20.0)
Recognition of pension items, net of taxes	—		—		—		—		1.8		1.8
Foreign currency translation adjustments	—		—		—		—		9.6		9.6
Unrealized loss on derivative instruments, net of taxes	—		—		—		—		(17.3)		(17.3)

Net earnings	—		—		134.0		—		—		134.0
Dividends on common stock ($0.16 per share)	—		—		(25.3)		—		—		(25.3)

Balance at September 30, 2020	$	23.2	$	2,082.7	$	2,283.8	$	(3,366.3)	$	(998.9)	$	24.5

Balance at December 31, 2019	$	23.2	$	2,073.5	$	1,998.5	$	(3,382.4)	$	(909.0)	$	(196.2)
Effect of share-based incentive compensation	—		20.9		—		—		—		20.9
Stock issued for profit sharing contribution paid in stock	—		(11.7)		—		36.1		—		24.4
Repurchases of common stock	—		—		—		(20.0)		—		(20.0)
Recognition of pension items, net of taxes	—		—		—		—		3.9		3.9
Foreign currency translation adjustments	—		—		—		—		(77.5)		(77.5)
Unrealized loss on derivative instruments, net of taxes	—		—		—		—		(16.3)		(16.3)

Net earnings	—		—		360.7		—		—		360.7
Dividends on common stock ($0.48 per share)	—		—		(75.4)		—		—		(75.4)

Balance at September 30, 2020	$	23.2	$	2,082.7	$	2,283.8	$	(3,366.3)	$	(998.9)	$	24.5

Balance at June 30, 2019	$	23.2	$	2,053.0	$	1,876.4	$	(3,382.4)	$	(911.4)	$	(341.2)
Effect of share-based incentive compensation	—		11.7		—		—		—		11.7


Recognition of pension items, net of taxes	—		—		—		—		0.9		0.9
Foreign currency translation adjustments	—		—		—		—		(32.0)		(32.0)
Unrealized gain on derivative instruments, net of taxes	—		—		—		—		13.7		13.7

Net earnings	—		—		68.0		—		—		68.0
Dividends on common stock ($0.16 per share)	—		—		(25.2)		—		—		(25.2)

Balance at September 30, 2019	$	23.2	$	2,064.7	$	1,919.2	$	(3,382.4)	$	(928.8)	$	(304.1)

Balance at December 31, 2018	$	23.2	$	2,049.6	$	1,835.5	$	(3,336.5)	$	(920.4)	$	(348.6)
Effect of share-based incentive compensation	—		14.6		—		—		—		14.6
Stock issued for profit sharing contribution paid in stock	—		0.5		—		21.4		—		21.9
Repurchases of common stock	—		—		—		(67.3)		—		(67.3)
Recognition of pension items, net of taxes	—		—		—		—		2.6		2.6
Foreign currency translation adjustments	—		—		—		—		(25.7)		(25.7)
Unrealized gain on derivative instruments, net of taxes	—		—		—		—		14.7		14.7

Net earnings	—		—		158.7		—		—		158.7
Dividends on common stock ($0.48 per share)	—		—		(75.0)		—		—		(75.0)

Balance at September 30, 2019	$	23.2	$	2,064.7	$	1,919.2	$	(3,382.4)	$	(928.8)	$	(304.1)

See accompanying Notes to Condensed Consolidated Financial Statements.

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
(In USD millions)	2020		2019
Net earnings	$	360.7	$	158.7
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	129.7		107.3
Share-based incentive compensation	31.2		24.0
Profit sharing expense	20.8		15.3

Provisions for bad debt	3.4		2.6
Provisions for inventory obsolescence	6.2		6.8
Deferred taxes, net	1.9		(4.3)
Net (gain) loss on sale of business	(14.4)		10.6

Other non-cash items	(0.6)		10.4
Changes in operating assets and liabilities:
Trade receivables, net	(35.2)		(2.5)
Inventories, net	(76.6)		(44.0)
Accounts payable	(14.9)		(56.2)
Customer advance payments	8.1		3.7
Income tax receivable/payable	47.8		16.6
Other assets and liabilities	(57.9)		2.2
Net cash provided by operating activities	$	410.2	$	251.2
Cash flows from investing activities:
Capital expenditures	(118.3)		(141.6)
Receipts (payments) associated with sale of business and property and equipment	7.3		(2.7)
Business acquired, net of cash acquired	1.5		(452.6)


Investment in marketable securities	13.9		(10.3)
Settlement of foreign currency forward contracts	(3.6)		(8.2)
Other investing activities	(1.9)		—
Net cash used in investing activities	$	(101.1)	$	(615.4)
Cash flows from financing activities:
Net (payments) proceeds of short-term borrowings	(98.5)		(19.7)
Proceeds from long-term debt	—		474.6
Payments of long-term debt	(2.8)		—


Dividends paid on common stock	(75.6)		(74.4)
Impact of tax withholding on share-based compensation	(11.5)		(10.8)
Repurchases of common stock	(20.0)		(67.3)
Principal payments related to financing leases	(8.7)		(6.5)
Other financing activities	—		(0.5)
Net cash (used in) provided by financing activities	$	(217.1)	$	295.4
Effect of foreign currency exchange rate changes on cash and cash equivalents	$	(37.6)	$	(2.9)
Cash Reconciliation:
Cash and cash equivalents	262.4		271.7
Restricted cash and cash equivalents	—		—
Balance, beginning of period	$	262.4	$	271.7
Net change during the period	54.4		(71.7)
Cash and cash equivalents	316.8		200.0
Restricted cash and cash equivalents	—		—
Balance, end of period	$	316.8	$	200.0
Supplemental Cash Flow Information:
Interest payments, net of amounts capitalized	$	140.5	$	138.7
Income tax payments, net of cash refunds	$	53.0	$	46.7

Restructuring payments including associated costs	$	58.7	$	76.9

Non-cash items:
Transfers of shares of common stock from treasury for profit-sharing contributions	$	24.4	$	21.9

See accompanying Notes to Condensed Consolidated Financial Statements.

SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 Organization and Basis of Presentation

Organization

We are a leading global provider of packaging solutions for the food, e-Commerce, electronics and industrial markets. We serve an array of end markets including food and beverage processing, food service, retail, commercial and consumer applications, by providing food safety and security, product protection and equipment which allows our customers to automate, reduce waste, simplify processes, and remove people from harm's way. Sealed Air provides solutions integrating packaging materials, automated equipment, and service to provide essential protection for products and people. We are investing in innovations that bring the industry toward a more sustainable future. We have established leading market positions through our iconic brands, differentiated technologies, global scale and market access and well-established customer relationships. Our portfolio of leading packaging solutions includes Cryovac® brand food packaging, Sealed Air® brand protective packaging, Autobag® brand automated packaging systems, and Bubble Wrap® brand packaging.

We conduct substantially all of our business through two wholly-owned subsidiaries, Cryovac, LLC and Sealed Air Corporation (US). Throughout this report, when we refer to “Sealed Air,” the “Company,” “we,” “our,” or “us,” we are referring to Sealed Air Corporation and all of our subsidiaries, except where the context indicates otherwise.

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 statement of our Condensed Consolidated Balance Sheet as of September 30, 2020 and our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 have been made. The results set forth in our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and in our Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year. The Condensed Consolidated Balance Sheet as of December 31, 2019 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Some prior period amounts have been reclassified to conform to the current year presentation. These reclassifications, individually and in the aggregate, did not have a material impact on our condensed consolidated financial condition, results of operations or cash flows. All amounts are in millions, except per share amounts, and approximate due to rounding. All amounts are presented in US Dollar, unless otherwise specified.

Our Condensed Consolidated Financial Statements were prepared in accordance with the interim reporting requirements of the SEC. As permitted under those rules, annual footnotes or other financial information that are normally required by 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 our 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 report. 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, 2019 (“2019 Form 10-K”) and with the information contained in our other publicly-available filings with the SEC.

Starting in the second quarter 2020, we have renamed our reporting segments from Food Care to Food and from Product Care to Protective. This segment reporting name change aligns with our use internally and in the markets we serve. There has been no change in the composition of the segments and no impact on prior period results of our reporting segments.

Impact of Inflation and Currency Fluctuation

Argentina

Economic and political events in Argentina have continued to expose us to heightened levels of foreign currency exchange risk. As of July 1, 2018, Argentina was designated as a highly inflationary economy under U.S. GAAP, and the US dollar replaced the Argentine peso as the functional currency for our subsidiaries in Argentina. All Argentine peso-denominated

monetary assets and liabilities were remeasured into US dollars using the current exchange rate available to us, and any changes in the exchange rate are reflected in net foreign exchange transaction loss, within Foreign currency exchange loss due to highly inflationary economies on the Condensed Consolidated Statements of Operations. For the three and nine months ended September 30, 2020, the Company recorded a $1.1 million and $3.2 million remeasurement loss, respectively. For the three and nine months ended September 30, 2019, the Company recorded a $1.3 million and $3.4 million remeasurement loss, respectively.

Note 2 Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform by providing expedients and exceptions related to accounting for contracts, hedging relationships and other transactions affected by reference rate reform, if certain criteria are met. The amendments only apply to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. This standard update did not have a material impact on the Company's Condensed Consolidated Financial Statements.

In April 2019, the FASB issued 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments, (“ASU 2019-04”). ASU 2019-04 provides updates and amendments to previously issued ASUs. The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments. Codification Improvements to Topic 326, Financial Instruments - Credit Losses were adopted as part of our adoption of ASU 2016-13 as of January 1, 2020. These amendments did not have a material impact on the Company's Condensed Consolidated Financial Statements. The amendments related to Derivatives and Hedging address partial-term fair value hedges and fair value hedge basis adjustments. Codification Improvements to Topic 815, Derivatives and Hedging were effective for us beginning July 1, 2019 and did not have a material impact on the Company's Condensed Consolidated Financial Statements. Amendments on Topic 825, Financial Instruments mainly address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be remeasured at historical exchange rates. We adopted the amendments related to Topic 825, Financial Instruments as of January 1, 2020 with no material impact on the Company's Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 amends Accounting Standards Codification (“ASC 350-40”) and aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted ASU 2018-15 on January 1, 2020, using a prospective approach. The adoption did not have a material impact on the Company's Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). ASU 2018-14 eliminates, adds and clarifies certain disclosure requirements related to defined benefit plans and other postretirement plans. The guidance is effective for fiscal years ending after December 15, 2020. We have adopted ASU 2018-14 for the year ending December 31, 2020, with no impact to our interim disclosures. Our adoption of ASU 2018-14 will only impact our annual disclosures related to Defined Benefit Plans and had no impact on the Company's Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 amends the fair value measurement disclosure requirements of ASC 820, including new, eliminated and modified disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods therein. The Company adopted ASU 2018-13 on January 1, 2020. The adoption did not have an impact on the Company's Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and issued subsequent amendments to the initial guidance, collectively, Topic 326. ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. The ASU also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The Company adopted ASU 2016-13 on January 1, 2020. The Company adopted ASU 2016-13 using a modified retrospective approach which requires that the Company recognize the cumulative effect of the initial adoption, if any, as an adjustment to retained earnings. There was no cumulative gross-up or adjustment to our allowance for credit losses as a result of our adoption of ASU 2016-13. Based on financial instruments currently held by us, the adoption of ASU 2016-13 impacts our trade receivables, specifically our allowance for doubtful accounts. As part of our adoption of ASU 2016-13, we have expanded our disclosures related to credit losses. See Note 12, “Credit Losses,” to the Notes to Condensed Consolidated Financial Statements for additional information related to our credit losses.

Recently Issued Accounting Standards

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323) and Derivatives and Hedging (Topic 815) - Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”). ASU 2020-01 makes improvements related to accounting for certain equity securities when the equity method of accounting is applied or discontinued and provides scope considerations related to forward contracts and purchased options on certain securities. The guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. We do not expect ASU 2020-01 to have a material impact on the Company's consolidated financial results.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 eliminates certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes, enacted change in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. We do not expect ASU 2019-12 to have a material impact on the Company's consolidated financial results.

Note 3 Revenue Recognition, Contracts with Customers

Description of Revenue Generating Activities

We employ sales, marketing and customer service personnel throughout the world who sell and market our systems, products and services to and/or through a large number of distributors, fabricators, converters, e-Commerce and mail order fulfillment firms, and contract packaging firms as well as directly to end-users such as food processors, food service businesses, supermarket retailers, pharmaceutical companies, healthcare facilities, medical device manufacturers, and other manufacturers.

As discussed in Note 6, "Segments," of the Notes to Condensed Consolidated Financial Statements, our reporting segments are Food and Protective. Our Food applications are largely sold directly to end customers, while our Protective products are sold through business supply distributors and directly to the end customer.

Food:

Food largely serves perishable food processors, predominantly in fresh red meat, smoked and processed meats, poultry and dairy (solids and liquids) markets worldwide. Food offers integrated packaging materials and equipment solutions to increase food safety, extend shelf life, and optimize total cost. Its innovative, sustainable packaging enables customers to reduce costs and enhance their brands in the marketplace. Food solutions are marketed under the Cryovac® trademark and other highly recognized trade names including Cryovac Grip & Tear®, Cryovac Darfresh®, Cryovac Mirabella®, Simple Steps® and OptiDure™.

Protective:

Protective packaging solutions are utilized across many global markets and are especially valuable to e-Commerce, electronics and industrial manufacturing. Protective solutions are designed to protect valuable goods in shipping, and drive

operational excellence and automation for our customers, increasing their order fulfillment velocity while minimizing material usage, dimensional weight and packaging labor requirements. Recent acquisitions in Protective include Automated Packaging Systems, LLC (“Automated”) in 2019.

Protective benefits from the continued expansion of e-Commerce, increasing freight costs, scarcity of labor, and increasing demand for more sustainable packaging. Protective solutions are both sold directly to key accounts and through an extensive network of distributors that service business/industrial end-users. Protective solutions are additionally sold directly to fabricators, original equipment manufacturers, contract manufacturers, third-party logistics partners, e-Commerce/fulfillment operations, and at various retail centers. Protective solutions are marketed under brands including Bubble Wrap® brand inflatable packaging, Sealed Air® brand performance shrink films and Autobag® brand bagging systems. Protective product families include additional tradenames such as Instapak® polyurethane foam packaging solutions and Korrvu® suspension and retention packaging. In addition, we provide temperature assurance packaging solutions under the KevothermalTM and TempGuardTM brands.

Identify Contract with Customer:

For Sealed Air, the determination of whether an arrangement meets the definition of a contract under ASC 606 (“Topic 606”) depends on whether it creates enforceable rights and obligations. While enforceability is a matter of law, we believe that enforceable rights and obligations in a contract must be substantive in order for the contract to be in scope of Topic 606. That is, the penalty for noncompliance must be significant relative to the minimum obligation. Fixed or minimum purchase obligations with penalties for noncompliance are the most common examples of substantive enforceable rights present in our contracts. We determined that the contract term is the period of enforceability outlined by the terms of the contract. This means that in many cases, the term stated in the contract is different than the period of enforceability. After the minimum purchase obligation is met, subsequent sales are treated as separate contracts on a purchase order by purchase order basis. If no minimum purchase obligation exists, the next level of enforceability is determined, which often represents the individual purchase orders and the agreed upon terms.

Performance Obligations:

The most common goods and services determined to be distinct performance obligations are materials, equipment sales, and maintenance. Free on loan and leased equipment is typically identified as a separate lease component within the scope of ASC 842. The other goods or services promised in the contract with the customer in most cases do not represent performance obligations because they are neither separate nor distinct, or they are not material in the context of the contract.

Transaction Price and Variable Consideration:

Sealed Air has many forms of variable consideration present in its contracts with customers, including rebates and other discounts. Sealed Air estimates variable consideration using either the expected value method or the most likely amount method as described in the standard. We include in the transaction price some or all of an amount of variable consideration estimated to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

For all contracts that contain a form of variable consideration, Sealed Air estimates at contract inception, and periodically throughout the term of the contract, what volume of goods and/or services the customer will purchase in a given period and determines how much consideration is payable to the customer or how much consideration Sealed Air would be able to recover from the customer based on the structure of the type of variable consideration. In most cases the variable consideration in contracts with customers results in amounts payable to the customer by Sealed Air. Sealed Air adjusts the contract transaction price based on any changes in estimates each reporting period and performs an inception to date cumulative adjustment to the amount of revenue previously recognized. When the contract with a customer contains a minimum purchase obligation, Sealed Air only has enforceable rights to the amount of consideration promised in the minimum purchase obligation through the enforceable term of the contract. This amount of consideration, plus any variable consideration, makes up the transaction price for the contract.

Charges for rebates and other allowances are recognized as a deduction from revenue on an accrual basis in the period in which the associated revenue is recorded. When we estimate our rebate accruals, we consider customer-specific contractual commitments including stated rebate rates and history of actual rebates paid. Our rebate accruals are reviewed at each reporting period and adjusted to reflect data available at that time. We adjust the accruals to reflect any differences between estimated and actual amounts. These adjustments of transaction price impact the amount of net sales recognized by us in the period of adjustment. Revenue recognized for the three and nine months ended September 30, 2020 from performance obligations

satisfied in previous reporting periods was $1.6 million and $3.8 million, respectively, and $2.2 million and $4.0 million for the three and nine months ended September 30, 2019, respectively.

The Company does not adjust consideration in contracts with customers for the effects of a significant financing component if the Company expects that the period between transfer of a good or service and payment for that good or service will be one year or less. This is expected to be the case for the majority of the Company's contracts.

Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales on the Condensed Consolidated Statements of Operations.

Allocation of Transaction Price:

Sealed Air determines the standalone selling price for a performance obligation by first looking for observable selling prices of that performance obligation sold on a standalone basis. If an observable price is not available, we estimate the standalone selling price of the performance obligation using one of the three suggested methods in the following order of preference: adjusted market assessment approach, expected cost plus a margin approach, and residual approach.

Sealed Air often offers rebates to customers in their contracts that are related to the amount of materials purchased. We believe that this form of variable consideration should only be allocated to materials because the entire amount of variable consideration relates to the customer’s purchase of and Sealed Air’s efforts to provide materials. Additionally, Sealed Air has many contracts that have pricing tied to third-party indices. We believe that variability from index-based pricing should be allocated specifically to materials because the pricing formulas in these contracts are related to the cost to produce materials.

Transfer of Control:

Revenue is recognized upon transfer of control to the customer. Revenue for materials and equipment sales is recognized based on shipping terms, which is the point in time the customer obtains control of the promised goods. Maintenance revenue is recognized straight-line on the basis that the level of effort is consistent over the term of the contract. Lease components within contracts with customers are recognized in accordance with Topic 842.

Disaggregated Revenue

For the three and nine months ended September 30, 2020 and 2019, revenues from contracts with customers summarized by Segment Geography were as follows:


	Three Months Ended September 30, 2020
(In millions)	Food		Protective		Total
North America	$	398.3	$	342.3	$	740.6
EMEA	154.2		100.9		255.1
APAC	102.4		83.8		186.2
South America	44.9		3.9		48.8
Topic 606 Segment Revenue	699.8		530.9		1,230.7
Non-Topic 606 Revenue (Leasing: Sales-type and Operating)	4.8		1.7		6.5
Total	$	704.6	$	532.6	$	1,237.2


	Nine Months Ended September 30, 2020
(In millions)	Food		Protective		Total
North America	$	1,178.7	$	959.7	$	2,138.4
EMEA	446.1		292.3		738.4
APAC	288.6		227.6		516.2
South America	139.6		10.0		149.6
Topic 606 Segment Revenue	2,053.0		1,489.6		3,542.6
Non-Topic 606 Revenue (Leasing: Sales-type and Operating)	15.1		4.6		19.7
Total	$	2,068.1	$	1,494.2	$	3,562.3


	Three Months Ended September 30, 2019
(In millions)	Food		Protective		Total
North America	$	415.3	$	310.1	$	725.4
EMEA	152.8		96.3		249.1
APAC	102.6		76.4		179.0
South America	53.7		4.5		58.2
Topic 606 Segment Revenue	724.4		487.3		1,211.7
Non-Topic 606 Revenue (Leasing: Sales-type and Operating)	5.2		1.6		6.8
Total	$	729.6	$	488.9	$	1,218.5


	Nine Months Ended September 30, 2019
(In millions)	Food		Protective		Total
North America	$	1,199.2	$	858.8	$	2,058.0
EMEA	449.5		279.3		728.8
APAC	301.3		216.2		517.5
South America	156.6		12.4		169.0
Topic 606 Segment Revenue	2,106.6		1,366.7		3,473.3
Non-Topic 606 Revenue (Leasing: Sales-type and Operating)	14.0		4.9		18.9
Total	$	2,120.6	$	1,371.6	$	3,492.2

Contract Balances

The time between when a performance obligation is satisfied and when billing and payment occur is closely aligned, with the exception of equipment accruals. An equipment accrual is a contract offering, whereby a customer is incentivized to use a portion of the materials transaction price for future equipment purchases. Long-term contracts that include an equipment accrual create a timing difference between when cash is collected and when the performance obligation is satisfied, resulting in a contract liability (unearned revenue). Contract liabilities arising from contracts with customers as of September 30, 2020 and December 31, 2019 were included within the following line items on our Condensed Consolidated Balance Sheets:


(In millions)	September 30, 2020		December 31, 2019

Other current liabilities	7.0		6.2
Other non-current liabilities	14.6		10.5
Total contract liabilities	$	21.6	$	16.7

The contract liability balances represent deferred revenue, primarily related to equipment accruals. Revenue recognized in the three and nine months ended September 30, 2020 that was included in contract liability balances at the beginning of the period was $2.8 million and $8.1 million, respectively, and $2.9 million and $4.6 million in the three and nine months ended September 30, 2019, respectively. This revenue was driven primarily by equipment performance obligations being satisfied.

There were $0.1 million and no contract asset balances included within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, respectively.

Remaining Performance Obligations

The following table summarizes the estimated transaction price from contracts with customers allocated to performance obligations or portions of performance obligations that have not yet been satisfied as of September 30, 2020, as well as the expected timing of recognition of that transaction price.


(In millions)	Short-Term (12 months or less)(1)		Long-Term		Total
Total transaction price	$	7.0	$	14.6	$	21.6

(1) Our enforceable contractual obligations tend to be short term in nature. The table above does not include the transaction price of any remaining performance obligations that are part of the contracts with expected durations of one year or less.

Assets recognized for the costs to obtain or fulfill a contract

The Company recognizes incremental costs to fulfill a contract as an asset if such incremental costs are expected to be recovered, relate directly to a contract or anticipated contract, and generate or enhance resources that will be used to satisfy performance obligations in the future.

The Company recognizes incremental costs to obtain a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less. For example, the Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses.

Costs for shipping and handling activities performed after a customer obtains control of a good are accounted for as costs to fulfill a contract and are included in cost of goods sold.

Note 4 Leases

Lessor

Sealed Air has contractual obligations as a lessor with respect to some of our automated and equipment solutions including 'free on loan' equipment and leased equipment, both sales-type and operating. The consideration in a contract that contains both lease and non-lease components is allocated based on the standalone selling price.

Our contractual obligations for operating leases can include termination and renewal options. Our contractual obligations for sales-type leases tend to have fixed terms and can include purchase options. We utilize the reasonably certain threshold criteria in determining which options our customers will exercise.

All lease payments are primarily fixed in nature and therefore captured in the lease receivable. Our lease receivable balance at September 30, 2020 was:


(in millions)	Short-Term (12 months or less)		Long-Term		Total
Total lease receivable (Sales-type and Operating)	$	5.5	$	10.5	$	16.0

Lessee

Sealed Air has contractual obligations as a lessee with respect to warehouses, offices, manufacturing facilities, IT equipment, automobiles, and material production equipment.

Under the leasing standard, ASC 842, leases that are more than one year in duration are capitalized and recorded on the balance sheet. Some of our leases, namely for automobiles and real estate, offer an option to extend the term of such leases. We utilize the reasonably certain threshold criteria in determining which options we will exercise. Furthermore, some of our lease payments are based on index rates with minimum annual increases. These represent fixed payments and are captured in the future minimum lease payments calculation.

In determining the discount rate to use in calculating the present value of lease payments, we estimate the rate of interest we would pay on a collateralized loan with the same payment terms as the lease by utilizing our bond yields traded in the secondary market to determine the estimated cost of funds for the particular tenor. We update our assumptions and discount rates on a quarterly basis.

We utilize the short-term lease recognition exemption for all asset classes as part of our on-going accounting under ASC 842. This means, for those leases that qualify, we will not recognize right of use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets. We have also elected the practical expedient to not separate lease and non-lease components for all asset classes, meaning all consideration that is fixed, or in-substance fixed, will be captured as part of our lease components for balance sheet purposes. Furthermore, all variable payments included in lease agreements will be disclosed as variable lease expense when incurred. Generally, variable lease payments are based on usage and common area maintenance. These payments will be included as variable lease expense when recognized.

The following table details our lease obligations included in our Condensed Consolidated Balance Sheets.


(in millions)	September 30, 2020		December 31, 2019
Other non-current assets:
Finance leases - ROU assets	$	58.9	$	54.8
Finance leases - Accumulated depreciation	(22.5)		(15.0)
Operating lease right-of-use-assets:
Operating leases - ROU assets	121.2		118.8
Operating leases - Accumulated depreciation	(43.9)		(28.7)
Total lease assets	$	113.7	$	129.9
Current portion of long-term debt:
Finance leases	$	(10.0)	(10.4)
Current portion of operating lease liabilities:
Operating leases	(24.3)		(26.2)
Long-term debt, less current portion:
Finance leases	(25.3)		(28.7)
Long-term operating lease liabilities, less current portion:
Operating leases	(54.5)		(65.7)
Total lease liabilities	$	(114.1)	$	(131.0)

At September 30, 2020, estimated future minimum annual rental commitments under non-cancelable real and personal property leases were as follows:


(in millions)	Operating leases		Finance leases
Remainder of 2020	$	7.6	$	3.3
2021	26.0		11.9
2022	18.5		7.4
2023	12.7		3.8
2024	8.3		2.1
Thereafter	16.4		13.5
Total lease payments	89.5		42.0
Less: Interest	(10.7)		(6.7)
Present value of lease liabilities	$	78.8	$	35.3

The following lease cost is included in our Condensed Consolidated Statements of Operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Lease cost(1)
Finance leases
Amortization of ROU assets	$	2.6	$	2.4	$	8.1	$	6.5
Interest on lease liabilities	0.5		0.5		1.4		1.5
Operating leases	7.1		7.4		23.0		23.7
Short-term lease cost	1.0		2.0		2.7		3.9
Variable lease cost	1.3		1.6		4.1		4.7
Total lease cost	$	12.5	$	13.9	$	39.3	$	40.3

(1) With the exception of Interest on lease liabilities, we record lease costs to Cost of sales or Selling, general and administrative expenses on the Condensed Consolidated Statements of Operations, depending on the use of the leased asset. Interest on lease liabilities is recorded to Interest expense, net on the Condensed Consolidated Statements of Operations.


	Nine Months Ended September 30,
(in millions)	2020		2019
Other information:

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - finance leases	$	3.3	$	3.9
Operating cash flows - operating leases	$	23.9	$	26.1
Financing cash flows - finance leases	$	8.7	$	6.5

ROU assets obtained in exchange for new finance lease liabilities	$	5.3	$	19.6
ROU assets obtained in exchange for new operating lease liabilities	$	9.6	$	14.5


	Nine Months Ended September 30,
	2020		2019
Weighted average information:
Finance leases
Remaining lease term (in years)	6.1		6.4
Discount rate	4.8	%	5.0	%
Operating leases
Remaining lease term (in years)	4.7		4.9
Discount rate	5.1	%	5.4	%

Note 5 Acquisitions

Acquisitions

Automated Packaging Systems, LLC

On August 1, 2019 the Company acquired 100% of the limited liability company interest in Automated Packaging Systems, LLC, formerly, Automated Packaging Systems, Inc. (“Automated”), a manufacturer of automated bagging systems.

The acquisition is included in our Protective reporting segment. Automated offers opportunities to expand the Company's automated solutions and into adjacent markets.

Cash paid for Automated was $441.4 million. The opening balance sheet includes $58.2 million of assumed liabilities in connection with a deferred incentive compensation plan for Automated's European employees. Of this amount, $19.0 million and $19.7 million were paid during the nine months ending September 30, 2020 and the fourth quarter of 2019, respectively. Sealed Air is expected to make the remaining payment to the deferred incentive compensation plan participants in June 2021.

The purchase price was primarily funded with proceeds from the incremental term facility provided for under an amendment to our Credit Facility, as described in Note 14, "Debt and Credit Facilities," of the Notes to Condensed Consolidated Financial Statements. For the nine months ended September 30, 2020, transaction expenses recognized for the Automated acquisition were $0.3 million. These expenses primarily relate to the first quarter purchase price adjustment and are included within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

The following table summarizes the consideration transferred to acquire Automated and the allocation of purchase price among the assets acquired and liabilities assumed, including measurement period adjustments recorded through the finalized purchase price allocation on August 1, 2020.


	Revised Preliminary Allocation		Measurement Period		Final Allocation
(In millions)	As of August 1, 2019		Adjustments		As of September 30, 2020
Total consideration transferred	$	445.7	$	(4.3)	$	441.4

Assets:
Cash and cash equivalents	16.0		(0.2)		15.8
Trade receivables, net	37.3		—		37.3
Other receivables	0.3		—		0.3
Inventories, net	40.7		(0.7)		40.0
Prepaid expenses and other current assets	2.3		—		2.3
Property and equipment, net(1)	76.9		8.7		85.6
Identifiable intangible assets, net(1)	81.1		(0.6)		80.5
Goodwill	261.3		(14.6)		246.7
Operating lease right-of-use-assets	—		4.3		4.3
Other non-current assets	24.7		1.1		25.8
Total assets	$	540.6	$	(2.0)	$	538.6
Liabilities:
Accounts payable	12.0		—		12.0
Current portion of long-term debt	2.6		(0.5)		2.1
Current portion of operating lease liabilities	—		1.5		1.5

Other current liabilities	56.2		(3.3)		52.9
Long-term debt, less current portion	4.3		(0.3)		4.0
Long-term operating lease liabilities, less current portion	—		2.8		2.8
Deferred taxes	—		0.5		0.5
Other non-current liabilities	19.8		1.6		21.4
Total liabilities	$	94.9	$	2.3	$	97.2

(1)In the Preliminary Allocation as of August 1, 2019, $2.4 million of software was initially recorded as computer hardware within Property and equipment, net as disclosed in the 2019 Form 10-K. The asset represents software acquired and has been reclassified in identifiable intangible assets, net within Revised Preliminary Allocation in the table above.

Measurement period adjustments recorded in the current year through finalization of the purchase price allocation on August 1, 2020 were primarily a result of the deferred incentive compensation payment adjustment and a favorable net working capital and purchase price settlement with the seller of $4.3 million during the first quarter.

The following table summarizes the acquired identifiable intangible assets, net and their useful lives.


	Amount		Useful life
	(in millions)		(in years)
Customer relationships	$	28.9	13.0
Trademarks and tradenames	15.6		9.1
Capitalized software	2.4		3.0
Technology	29.6		6.4
Backlog	4.0		0.4
Total intangible assets with definite lives	$	80.5

Goodwill is a result of the expected synergies and cross-selling opportunities that this acquisition is expected to bring to the Company, as well as the expected growth potential in the acquired automated and sustainable solutions. Goodwill allocated to Automated's U.S. entities is deductible for tax purposes. Goodwill allocated to Automated's foreign entities is not deductible for tax purposes. The goodwill balance has been recorded to the Protective reportable segment.

Other non-current assets include the net overfunded position of a closed defined benefit pension plan in the United Kingdom. Refer to Note 17, "Defined Benefit Pension Plans and Other Post-Employment Benefit Plans," of the Notes to Condensed Consolidated Financial Statements for additional information on the Company's other defined benefit pension plans.

In conjunction with the acquisition and subsequent integration, the Company expects to incur restructuring charges. No restructuring accrual is included in our opening balance sheet as the liability did not exist at the time of acquisition. Refer to Note 13, "Restructuring Activities," of the Notes to Condensed Consolidated Financial Statements for more detail on the Company's restructuring activity.

The inclusion of Automated in our consolidated financial statements is not deemed material with respect to the requirement to provide pro forma results of operations in ASC 805. As such, pro forma information is not presented.

Other 2019 Acquisition Activity

During the second quarter of 2019, Food had acquisition activity resulting in a total purchase price paid of $23.4 million. The Company allocated the consideration transferred to the fair value of assets acquired and liabilities assumed, resulting in an allocation to goodwill of $6.0 million. The final purchase price adjustments resulting in an increase to goodwill of $0.3 million were recorded in the third quarter of 2019. Identifiable intangible assets acquired were not material.

Note 6 Segments

The Company’s segment reporting structure consists of two reportable segments as follows and a Corporate category:

•Food; and

•Protective.

Starting in the second quarter of 2020, we renamed our reporting segments from Food Care to Food and from Product Care to Protective. This segment reporting name change aligns with our use internally and in the markets we serve. There has been no change in the composition of the segments and no impact on prior period results of our reportable segments.

The Company’s Food and Protective segments are considered reportable segments under FASB ASC Topic 280. Our reportable segments are aligned with similar groups of products. Corporate includes certain costs that are not allocated to the reportable segments. The Company evaluates performance of the reportable segments based on the results of each segment. The performance metric used by the Company's chief operating decision maker to evaluate performance of our reportable segments is Adjusted EBITDA. The Company allocates expense to each segment based on various factors including direct usage of resources, allocation of headcount, allocation of software licenses or, in cases where costs are not clearly delineated, costs may be allocated on portion of either net trade sales or an expense factor such as cost of goods sold.

We allocate and disclose depreciation and amortization expense to our segments, although depreciation and amortization are not included in the segment performance metric Adjusted EBITDA. We also allocate and disclose restructuring charges and impairment of goodwill and other intangible assets by segment, although they are not included in the segment performance metric Adjusted EBITDA since restructuring charges and impairment of goodwill and other intangible assets are categorized as Special Items. The accounting policies of the reportable segments and Corporate are the same as those applied to the Consolidated Financial Statements.

The following tables show Net Sales and Adjusted EBITDA by reportable segment:


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2020			2019			2020			2019
Net Sales:
Food	$	704.6		$	729.6		$	2,068.1		$	2,120.6
As a % of Total Company net sales	57.0		%	59.9		%	58.1		%	60.7		%
Protective	532.6			488.9			1,494.2			1,371.6
As a % of Total Company net sales	43.0		%	40.1		%	41.9		%	39.3		%
Total Company Net Sales	$	1,237.2		$	1,218.5		$	3,562.3		$	3,492.2

	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2020			2019			2020			2019
Adjusted EBITDA from continuing operations
Food	$	152.4		$	159.6		$	477.8		$	458.1
Adjusted EBITDA Margin	21.6		%	21.9		%	23.1		%	21.6		%
Protective	108.7			84.0			293.0			243.0
Adjusted EBITDA Margin	20.4		%	17.2		%	19.6		%	17.7		%
Corporate	(1.8)			(2.5)			1.6			(7.5)
Total Company Adjusted EBITDA from continuing operations	$	259.3		$	241.1		$	772.4		$	693.6
Adjusted EBITDA Margin	21.0		%	19.8		%	21.7		%	19.9		%

The following table shows a reconciliation of net earnings before income tax provision to Total Company Adjusted EBITDA from continuing operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Earnings before income tax provision	$	149.2	$	102.3	$	441.3	$	234.8
Interest expense, net	43.0		48.5		130.7		136.6
Depreciation and amortization, net of adjustments(1)	56.2		53.2		161.1		131.4
Special Items:
Restructuring charges(2)	1.0		6.9		11.7		43.6
Other restructuring associated costs(3)	7.2		12.8		15.0		50.8
Foreign currency exchange loss due to highly inflationary economies	1.1		1.3		3.2		3.4

Charges related to the Novipax settlement agreement	—		—		—		59.0
Charges related to acquisition and divestiture activity	1.0		6.0		5.1		9.2



Other Special Items(4)	0.6		10.1		4.3		24.8
Pre-tax impact of Special Items	10.9		37.1		39.3		190.8
Total Company Adjusted EBITDA from continuing operations	$	259.3	$	241.1	$	772.4	$	693.6

(1)Depreciation and amortization by segment were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Food	$	31.7	$	30.6	$	90.9	$	81.8
Protective	24.5		22.7		70.2		50.7

Total Company depreciation and amortization(i)	$	56.2	$	53.3	$	161.1	$	132.5
Depreciation and amortization adjustments	—		(0.1)		—		(1.1)
Depreciation and amortization, net of adjustments	$	56.2	$	53.2	$	161.1	$	131.4

(i) Includes share-based incentive compensation of $12.3 million and $31.3 million for the three and nine months ended September 30, 2020, respectively, and $12.0 million and $25.2 million for the three and nine months ended September 30, 2019, respectively.

(2)Restructuring charges by segment were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Food	$	(1.4)	$	3.9	$	3.8	$	26.3
Protective	2.4		3.0		7.9		17.3
Total Company restructuring charges	$	1.0	$	6.9	$	11.7	$	43.6

(3)Other restructuring associated costs for the three and nine months ended September 30, 2020 primarily relate to fees paid to third-party consultants in support of Reinvent SEE. Other restructuring associated costs for the three and nine months ended September 30, 2019 primarily relate to fees paid to third-party consultants in support of Reinvent SEE and costs associated with property consolidations and machinery and equipment relocations resulting from Reinvent SEE. See Note 13, "Restructuring Activities," to the Condensed Consolidated Financial Statements for additional information related to Reinvent SEE and our restructuring program.

(4)Other Special Items for the three and nine months ended September 30, 2019, primarily included fees related to professional services (mainly legal fees) directly associated with Special Items or events that are considered one-time or infrequent.

Assets by Reportable Segments

The following table shows assets allocated by reportable segment. Assets allocated by reportable segment include: trade receivables, net; inventory, net; property and equipment, net; goodwill; intangible assets, net; and leased systems, net.


(In millions)	September 30, 2020		December 31, 2019
Assets allocated to segments:
Food	$	2,025.5	$	1,997.8
Protective	2,790.1		2,762.9
Total segments	4,815.6		4,760.7
Assets not allocated:
Cash and cash equivalents	$	316.8	$	262.4
Assets held for sale	0.7		2.8
Income tax receivables	15.2		32.8
Other receivables	65.9		80.3
Deferred taxes	246.3		238.6
Other	367.7		387.6
Total	$	5,828.2	$	5,765.2

Note 7 Inventories, net

The following table details our inventories, net:


(In millions)	September 30, 2020		December 31, 2019
Raw materials	$	111.5	$	99.2
Work in process	147.2		136.2
Finished goods	372.2		334.9
Total	$	630.9	$	570.3

Note 8 Property and Equipment, net

The following table details our property and equipment, net:


(In millions)	September 30, 2020		December 31, 2019
Land and improvements	$	49.4	$	50.7
Buildings	764.9		747.0
Machinery and equipment	2,498.4		2,453.2
Other property and equipment	138.8		141.3
Construction-in-progress	122.6		127.9
Property and equipment, gross	3,574.1		3,520.1
Accumulated depreciation and amortization	(2,437.7)		(2,378.2)
Property and equipment, net	$	1,136.4	$	1,141.9

The following table details our interest cost capitalized and depreciation and amortization expense for property and equipment.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Interest cost capitalized	$	1.2	$	2.5	$	4.4	$	6.4
Depreciation and amortization expense for property and equipment	$	34.2	$	31.7	$	101.8	$	88.7

Note 9 Goodwill and Identifiable Intangible Assets, net

Goodwill

The following table shows our goodwill balances by reportable segment. We review goodwill for impairment on a reporting unit basis annually during the fourth quarter of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. As of September 30, 2020, we did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. As part of our on-going assessment of goodwill impairment considerations, the Company considered the impact that COVID-19 has had on the overall economic environment, more specifically on the markets in which our products are sold. The Company does not believe the COVID-19 pandemic has had a material negative impact on our business to date, nor has it triggered a need to perform a quantitative impairment test on our goodwill balances. The assessment is based on the significant headroom of the reporting units' calculated fair value over their carrying value as of our most recent annual test and after consideration of the Company's year-to-date financial results and expected long-term financial performance. We will continue to assess COVID-19's impact on our business, including any indicators of goodwill impairment.


(In millions)	Food		Protective		Total
Gross Carrying Value at December 31, 2019	$	577.2	$	1,830.0	$	2,407.2
Accumulated impairment(1)	(49.3)		(141.0)		(190.3)
Carrying Value at December 31, 2019	$	527.9	$	1,689.0	$	2,216.9
Acquisition, purchase price and other adjustments	—		(5.0)		(5.0)
Currency translation	(4.4)		0.2		(4.2)

Carrying Value at September 30, 2020	$	523.5	$	1,684.2	$	2,207.7

(1)There was no change to our accumulated impairment balance during the nine months ended September 30, 2020.

Identifiable Intangible Assets, net

The following tables summarize our identifiable intangible assets, net. As of September 30, 2020, there were no impairment indicators present.


	September 30, 2020				December 31, 2019
(In millions)	Gross Carrying Value		Accumulated Amortization		Net		Gross Carrying Value		Accumulated Amortization		Net
Customer relationships	$	102.0	$	(34.9)	$	67.1	$	102.0	$	(30.5)	$	71.5
Trademarks and tradenames	30.9		(7.5)		23.4		31.1		(4.3)		26.8
Software	109.3		(78.7)		30.6		95.3		(62.8)		32.5
Technology	67.0		(32.1)		34.9		66.8		(27.2)		39.6
Contracts	13.5		(10.8)		2.7		13.2		(10.4)		2.8
Total intangible assets with definite lives	322.7		(164.0)		158.7		308.4		(135.2)		173.2
Trademarks and tradenames with indefinite lives	8.9		—		8.9		8.9		—		8.9
Total identifiable intangible assets, net	$	331.6	$	(164.0)	$	167.6	$	317.3	$	(135.2)	$	182.1

The following table shows the remaining estimated future amortization expense at September 30, 2020.


Year	Amount (in millions)
Remainder of 2020	$	12.2
2021	29.9
2022	22.2
2023	15.9
2024	14.1
Thereafter	64.4
Total	$	158.7

Note 10 Accounts Receivable Securitization Programs

U.S. Accounts Receivable Securitization Program

We and a group of our U.S. operating subsidiaries maintain an accounts receivable securitization program under which they sell eligible U.S. accounts receivable to an indirectly wholly-owned subsidiary that was formed for the sole purpose of entering into this program. The wholly-owned subsidiary in turn may sell an undivided fractional ownership interest in these receivables to two banks and issuers of commercial paper administered by these banks. The wholly-owned subsidiary retains the receivables it purchases from the operating subsidiaries. Any transfers of fractional ownership interests of receivables under the U.S. receivables securitization program to the two banks and issuers of commercial paper administered by these banks are considered secured borrowings with pledge of collateral and will be classified as short-term borrowings on our Condensed Consolidated Balance Sheets. These banks do not have any recourse against the general credit of the Company. The net trade receivables that served as collateral for these borrowings are reclassified from trade receivables, net to prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

As of September 30, 2020, the maximum purchase limit for receivable interests was $50.0 million, subject to the availability limits described below.

The amounts available from time to time under this program may be less than $50.0 million due to a number of factors, including but not limited to our credit ratings, trade receivable balances, the creditworthiness of our customers and our receivables collection experience. As of September 30, 2020, the amount available under the program was $50.0 million. Although we do not believe restrictions under this program presently materially restrict our operations, if an additional event occurs that triggers one of these restrictive provisions, we could experience a further decline in the amounts available to us under the program or termination of the program.

The program expires annually in the fourth quarter and is renewable.

European Accounts Receivable Securitization Program

We and a group of our European subsidiaries maintain an accounts receivable securitization program with a special purpose vehicle, or SPV, two banks and issuers of commercial paper administered by these banks. The European program is structured to be a securitization of certain trade receivables that are originated by certain of our European subsidiaries. The SPV borrows funds from the banks to fund its acquisition of the receivables and provides the banks with a first priority perfected security interest in the accounts receivable. We do not have an equity interest in the SPV. We concluded the SPV is a variable interest entity because its total equity investment at risk is not sufficient to permit the SPV to finance its activities without additional subordinated financial support from the bank via loans or via the collections from accounts receivable already purchased. Additionally, we are considered the primary beneficiary of the SPV since we control the activities of the SPV and are exposed to the risk of uncollectable receivables held by the SPV. Therefore, the SPV is consolidated in our Condensed Consolidated Financial Statements. Any activity between the participating subsidiaries and the SPV is eliminated in consolidation. Loans from the banks to the SPV will be classified as short-term borrowings on our Condensed Consolidated Balance Sheets. The net trade receivables that served as collateral for these borrowings are reclassified from trade receivables, net to prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

As of September 30, 2020, the maximum purchase limit for receivable interests was €80.0 million ($93.9 million equivalent at September 30, 2020), subject to availability limits. The terms and provisions of this program are similar to our U.S. program discussed above. As of September 30, 2020, the amount available under this program before utilization was €69.9 million ($82.1 million equivalent as of September 30, 2020).

This program expires annually in the third quarter and is renewable.

Utilization of Our Accounts Receivable Securitization Programs

As of September 30, 2020, there were no amounts borrowed under our U.S. or European programs. As of December 31, 2019, there were no amounts borrowed under our U.S. or European programs. We continue to service the trade receivables supporting the programs, and the banks are permitted to re-pledge this collateral. The total interest paid for these programs was $0.1 million and $0.4 million for the three and nine months ended September 30, 2020, respectively, and $0.2 million and $0.6 million for the three and nine months ended September 30, 2019, respectively.

Under limited circumstances, the banks and the issuers of commercial paper can end purchases of receivables interests before the above expiration dates. A failure to comply with debt leverage or various other ratios related to our receivables collection experience could result in termination of the receivables programs. We were in compliance with these ratios at September 30, 2020.

Note 11 Accounts Receivable Factoring Programs

The Company has entered into factoring agreements and customers' supply chain financing arrangements to sell certain receivables to unrelated third-party financial institutions. These programs are entered into in the normal course of business. We account for these transactions in accordance with ASC 860, "Transfers and Servicing" ("ASC 860"). ASC 860 allows for the ownership transfer of accounts receivable to qualify for sale treatment when the appropriate criteria is met, which permits the Company to exclude the balances sold under these programs from Trade receivables, net on the Condensed Consolidated Balance Sheets. Receivables are considered sold when (i) they are transferred beyond the reach of the Company and its creditors, (ii) the purchaser has the right to pledge or exchange the receivables, and (iii) the Company has no continuing involvement in the transferred receivables. In addition, the Company provides no other forms of continued financial support to the purchaser of the receivables once the receivables are sold.

Gross amounts received under these programs for the nine months ended September 30, 2020 and 2019 were $308.7 million and $246.1 million, respectively. The fees associated with transfer of receivables for all programs were approximately $0.4 million and $1.4 million for the three and nine months ended September 30, 2020, respectively, and approximately $1.2 million and $2.5 million for the three and nine months ended September 30, 2019, respectively.

Note 12 Credit Losses

We are exposed to credit losses primarily through our sales of packaging solutions to third-party customers. Our customer's (the counterparty) ability to pay is assessed through our internal credit review processes. Based on the dollar value of credit extended, we assess our customers' credit by reviewing the total expected receivable exposure, expected timing of payments and the customer’s established credit rating. In determining customer creditworthiness, we assess our customers' credit utilizing different resources including external credit validations and/or our own assessment through analysis of the customers' financial statements and review of trade/bank references. We also consider contract terms and conditions, country and political risk, and the customer's mix of products purchased (for example: equipment vs. materials) in our evaluation. A credit limit is established for each customer based on the outcome of this review. Credit limits are reviewed at least annually for existing customers.

We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates. Our activities are performed at both the country/entity level as well as the regional level. Monitoring and review activities include account reconciliations, analysis of aged receivables, resolution status review for disputed amounts, and identification and remediation of counter-parties experiencing payment issues. Our management reviews current credit exposure at least quarterly based on level of risk and amount of exposure.

When necessary, we utilize collection agencies and legal counsel to pursue recovery of defaulted receivables. Trade receivable balances are written off when deemed to be uncollectible and after collection efforts have been exhausted. Our annual historical credit losses have been approximately 0.1%, or less, of net trade sales over the last three years.

Our allowance for credit losses on trade receivables is assessed at the end of each quarter based on an analysis of historical losses and our assessment of future expected losses. We are monitoring the impact that COVID-19 may have on outstanding receivables. All customer accounts are actively managed and no losses in excess of our allowance are expected as of September 30, 2020.

At September 30, 2020, our trade receivable balance was $582.7 million, net of allowances of $11.6 million. At December 31, 2019, our allowance for credit losses on trade receivables (allowance for bad debt) was $8.2 million. Our overall balance of allowance for credit losses on trade receivables has increased by $3.4 million. For the three and nine months ended September 30, 2020, $0.8 million and $3.4 million, respectively, was charged to our allowance for credit losses related to our trade receivables.

Note 13 Restructuring Activities

For the three and nine months ended September 30, 2020, the Company incurred $1.0 million and $11.7 million of restructuring charges, respectively, and $7.2 million and $15.0 million, respectively, of other related costs for our restructuring programs. These charges were primarily a result of restructuring and associated costs incurred in connection with the Company’s Reinvent SEE strategy.

Our primary restructuring program (“Program”) is defined as the initiatives associated with our Reinvent SEE strategy in addition to the conclusion of our previously existing restructuring programs at the time of Reinvent SEE's approval. Reinvent SEE is a three-year program approved by the Board of Directors in December 2018. The expected spend in the previously existing program at the time of Reinvent SEE's approval was primarily related to elimination of stranded costs following the sale of our Diversey segment and Hygiene Solutions business to Diamond (BC) B.V. in 2017. The Company expects restructuring activities associated with the Program to be completed by the end of 2021.

The Board of Directors has approved cumulative restructuring spend of $840 to $885 million for the Program. Restructuring spend is estimated to be incurred as follows:


(in millions)	Total Restructuring Program Range				Less Cumulative Spend to Date		Remaining Restructuring Spend(2)
	Low		High				Low		High
Costs of reduction in headcount as a result of reorganization	$	355	$	370	$	(335)	$	20	$	35
Other expenses associated with the Program	230		245		(213)		17		32
Total expense	$	585	$	615	$	(548)	$	37	$	67
Capital expenditures	255		270		(239)		16		31
Total estimated cash cost(1)	$	840	$	885	$	(787)	$	53	$	98

(1) Total estimated cash cost excludes the impact of proceeds expected from the sale of property and equipment and foreign currency impact.

(2) Remaining restructuring spend primarily consists of restructuring costs associated with the Company’s Reinvent SEE strategy.

The Company also has a restructuring program related to recent acquisitions. We incurred approximately $1.7 million in restructuring charges related to this activity during the three and nine month periods ended September 30, 2020. We incurred no restructuring charges related to this activity during the three or nine month period ended September 30, 2019. See Note 5, "Acquisitions," of the Notes to Condensed Consolidated Financial Statements for additional information related to our acquisitions.

The following table details our restructuring activities reflected in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019

Other associated costs	$	7.2	$	12.8	$	15.0	$	50.8
Restructuring charges	1.0		6.9		11.7		43.6


Total charges	$	8.2	$	19.7	$	26.7	$	94.4
Capital expenditures	$	0.2	$	0.2	$	0.4	$	2.5

The restructuring accrual, spending and other activity for the nine months ended September 30, 2020 and the accrual balance remaining at September 30, 2020 related to these programs were as follows:


(In millions)
Restructuring accrual at December 31, 2018	$	37.5
Accrual and accrual adjustments	41.9
Cash payments during 2019	(47.6)

Effect of changes in foreign currency exchange rates	(0.3)
Restructuring accrual at December 31, 2019	$	31.5
Accrual and accrual adjustments	11.7
Cash payments during 2020	(23.0)

Effect of changes in foreign currency exchange rates	(0.5)
Restructuring accrual at September 30, 2020	$	19.7

We expect to pay $17.0 million of the accrual balance remaining at September 30, 2020 within the next twelve months. This amount is included in accrued restructuring costs on the Condensed Consolidated Balance Sheets at September 30, 2020. Of the remaining accrual of $2.7 million, $0.6 million relating to Reinvent SEE is expected to be paid by the end of 2021 and $2.1 million relating to the restructuring program for recent acquisitions is expected to be paid in periods including, and beyond, 2021. These amounts are included in other non-current liabilities on our Condensed Consolidated Balance Sheets at September 30, 2020.

One of the components of Reinvent SEE was to enhance the operational efficiency of the Company by acting as “One SEE.” The program was approved by our Board of Directors as a consolidated program benefiting both Food and Protective and accordingly the expected program spend by reporting segment is not available. However, of the restructuring accrual of $19.7 million as of September 30, 2020, $9.6 million was attributable to Food and $10.1 million was attributable to Protective.

Note 14 Debt and Credit Facilities

Our total debt outstanding consisted of the amounts set forth in the following table:


(In millions)	Interest rate		September 30, 2020		December 31, 2019
Short-term borrowings(1)			$	7.4	$	98.9
Current portion of long-term debt(2)			21.8		16.7
Total current debt			29.2		115.6
Term Loan A due August 2022			474.6		474.6
Term Loan A due July 2023			209.3		218.2

Senior Notes due December 2022	4.875	%	422.6		421.9
Senior Notes due April 2023	5.250	%	422.7		422.0
Senior Notes due September 2023	4.500	%	467.9		445.6
Senior Notes due December 2024	5.125	%	422.4		421.9
Senior Notes due September 2025	5.500	%	397.7		397.4
Senior Notes due December 2027	4.000	%	420.7		420.4
Senior Notes due July 2033	6.875	%	445.8		445.7
Other(2)			26.4		30.9
Total long-term debt, less current portion(3)			3,710.1		3,698.6
Total debt(4)			$	3,739.3	$	3,814.2

(1)Short-term borrowings of $7.4 million at September 30, 2020 were comprised of short-term borrowings from various lines of credit. Short-term borrowings of $98.9 million at December 31, 2019 were comprised of $89.0 million under our revolving credit facility and $9.9 million from various lines of credit.

(2)Current portion of long-term debt includes finance lease liabilities of $10.0 million and $10.4 million at September 30, 2020 and December 31, 2019, respectively. Other debt includes long-term liabilities associated with our finance leases of $25.3 million and $28.7 million at September 30, 2020 and December 31, 2019, respectively. See Note 4, "Leases," of the Notes to Condensed Consolidated Financial Statements for additional information on finance and operating lease liabilities.

(3)Amounts are shown net of unamortized discounts and issuance costs of $21.4 million as of September 30, 2020 and $24.6 million as of December 31, 2019.

(4)As of September 30, 2020, our weighted average interest rate on our short-term borrowings outstanding was 2.1% and on our long-term debt outstanding was 4.4%. As of December 31, 2019, our weighted average interest rate on our short-term borrowings outstanding was 5.0% and on our long-term debt outstanding was 4.8%.

Senior Notes

2019 Activity

On November 26, 2019, Sealed Air issued $425 million aggregate principal amount of 4.00% Senior Notes due December 1, 2027. The proceeds were used to repurchase and discharge the Company's $425 million 6.50% Senior Notes due 2020. The aggregate repurchase price was $452.0 million, which included the principal amount of $425 million, a premium of $15.5 million and accrued interest of $11.5 million. We recognized a pre-tax loss of $16.1 million on the extinguishment, including the premium mentioned above and $1.2 million of accelerated amortization of non-lender fees partially offset by a $0.6 million gain on the settlement of interest rate swaps. We also capitalized $3.5 million of non-lender fees incurred in connection with the 4.00% Senior Notes which are included in long-term debt, less current portion on our Condensed Consolidated Balance Sheets.

Amended and Restated Senior Secured Credit Facility

On August 1, 2019, Sealed Air Corporation, on behalf of itself and certain of its subsidiaries, and Sealed Air Corporation (US) entered into an amendment and incremental assumption agreement (the “Amendment”) further amending the Third Amended and Restated Syndicated Credit Facility Agreement (the “Credit Facility”). The Amendment provides for a new incremental term facility in an aggregate principal amount of $475 million, to be used, in part, to finance the acquisition of Automated. In addition, we incurred $0.4 million of lender and third-party fees included in carrying amounts of outstanding debt. See Note 5, "Acquisitions," of the Notes to Condensed Consolidated Financial Statements for additional information related to the Automated acquisition.

Short-term Borrowings

The following table summarizes our available lines of credit and committed and uncommitted lines of credit, including the revolving credit facility, and the amounts available under our accounts receivable securitization programs.


(In millions)	September 30, 2020		December 31, 2019
Used lines of credit(1)	$	7.4	$	98.9
Unused lines of credit	1,292.4		1,245.2
Total available lines of credit(2)	$	1,299.8	$	1,344.1

(1)Includes total borrowings under the accounts receivable securitization programs, the revolving credit facility and borrowings under lines of credit available to several subsidiaries.

(2)Of the total available lines of credit, $1,132.1 million was committed as of September 30, 2020.

Covenants

Note 15 Derivatives and Hedging Activities

We report all derivative instruments on our Condensed Consolidated Balance Sheets at fair value and establish criteria for designation and effectiveness of transactions entered into for hedging purposes.

As a global organization, we face exposure to market risks, such as fluctuations in foreign currency exchange rates and interest rates. To manage the volatility relating to these exposures, we enter into various derivative instruments from time to

time under our risk management policies. We designate derivative instruments as hedges on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments offset in part or in whole corresponding changes in the fair value or cash flows of the underlying exposures being hedged. We assess the initial and ongoing effectiveness of our hedging relationships in accordance with our policy. We do not purchase, hold or sell derivative financial instruments for trading purposes. Our practice is to terminate derivative transactions if the underlying asset or liability matures or is sold or terminated, or if we determine the underlying forecasted transaction is no longer probable of occurring.

We record the fair value positions of all derivative financial instruments on a net basis by counterparty for which a master netting arrangement is utilized.

Foreign Currency Forward Contracts Designated as Cash Flow Hedges

The primary purpose of our cash flow hedging activities is to manage the potential changes in value associated with the amounts receivable or payable on equipment and raw material purchases that are denominated in foreign currencies in order to minimize the impact of the changes in foreign currencies. We record gains and losses on foreign currency forward contracts qualifying as cash flow hedges in Accumulated Other Comprehensive Loss (“AOCL”) to the extent that these hedges are effective and until we recognize the underlying transactions in net earnings, at which time we recognize these gains and losses in cost of sales, on our Condensed Consolidated Statements of Operations. Cash flows from derivative financial instruments designated as cash flow hedges are classified as cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. These contracts generally have original maturities of less than 12 months.

Net unrealized after-tax gains/losses related to cash flow hedging activities that were included in AOCL were a $2.4 million loss and a $0.4 million gain for the three and nine months ended September 30, 2020, respectively, and a $0.9 million gain and $0.4 million loss for the three and nine months ended September 30, 2019, respectively. The unrealized amounts in AOCL will fluctuate based on changes in the fair value of open contracts during each reporting period.

We estimate that $1.0 million of net unrealized losses related to cash flow hedging activities included in AOCL will be reclassified into earnings within the next twelve months.

Foreign Currency Forward Contracts Not Designated as Hedges

Our subsidiaries have foreign currency exchange exposure from buying and selling in currencies other than their functional currencies. The primary purposes of our foreign currency hedging activities are to manage the potential changes in value associated with the amounts receivable or payable on transactions denominated in foreign currencies and to minimize the impact of the changes in foreign currencies related to foreign currency-denominated interest-bearing intercompany loans and receivables and payables. The changes in fair value of these derivative contracts are recognized in other (expense) income, net, on our Condensed Consolidated Statements of Operations and are largely offset by the remeasurement of the underlying foreign currency-denominated items indicated above. Cash flows from derivative financial instruments not designated as hedges are classified as cash flows from investing activities in the Condensed Consolidated Statements of Cash Flows. These contracts generally have original maturities of less than 12 months.

Interest Rate Swaps

From time to time, we may use interest rate swaps to manage our fixed and floating interest rates on our outstanding indebtedness. At September 30, 2020 and December 31, 2019, we had no outstanding interest rate swaps.

Net Investment Hedge

The €400.0 million 4.50% notes issued in June 2015 are designated as a net investment hedge, hedging a portion of our net investment in a certain European subsidiary against fluctuations in foreign exchange rates. The increase in the translated value of the debt was $19.8 million ($14.9 million, net of tax) as of September 30, 2020 and is reflected in AOCL on our Condensed Consolidated Balance Sheets.

In March 2015, we entered into a series of cross-currency swaps with a combined notional amount of $425.0 million, hedging a portion of the net investment in a certain European subsidiary against fluctuations in foreign exchange rates. As a result of the sale of Diversey, we terminated these cross-currency swaps in September 2017 and settled these swaps in October 2017. The fair value of the swaps on the date of termination was a liability of $61.9 million which was partially offset by semi-annual interest settlements of $17.7 million. This resulted in a net impact of $(44.2) million which is recorded in AOCL.

For derivative instruments that are designated and qualify as hedges of net investments in foreign operations, changes in fair values of the derivative instruments are recognized in unrealized net gains or loss on derivative instruments for net investment hedge, a component of AOCL, net of taxes, to offset the changes in the values of the net investments being hedged. Any portion of the net investment hedge that is determined to be ineffective is recorded in other (expense) income, net on the Condensed Consolidated Statements of Operations.

Other Derivative Instruments

We may use other derivative instruments from time to time to manage exposure to foreign exchange rates and to access international financing transactions. These instruments can potentially limit foreign exchange exposure by swapping borrowings denominated in one currency for borrowings denominated in another currency.

Fair Value of Derivative Instruments

See Note 16, “Fair Value Measurements and Other Financial Instruments,” of the Notes to Condensed Consolidated Financial Statements for a discussion of the inputs and valuation techniques used to determine the fair value of our outstanding derivative instruments.

The following table details the fair value of our derivative instruments included on our Condensed Consolidated Balance Sheets.


	Cash Flow Hedge				Non-Designated as Hedging Instruments			Total
(In millions)	September 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Derivative Assets
Foreign currency forward contracts and options	$	0.5	$	0.2		$	5.9	$	2.6	$	6.4	$	2.8

Total Derivative Assets	$	0.5	$	0.2		$	5.9	$	2.6	$	6.4	$	2.8

Derivative Liabilities
Foreign currency forward contracts	$	(1.1)	$	(2.0)		$	(2.1)	$	(2.0)	$	(3.2)	$	(4.0)

Total Derivative Liabilities(1)	$	(1.1)	$	(2.0)		$	(2.1)	$	(2.0)	$	(3.2)	$	(4.0)
Net Derivatives(2)	$	(0.6)	$	(1.8)		$	3.8	$	0.6	$	3.2	$	(1.2)

(1)Excludes €400.0 million of euro-denominated debt ($467.9 million equivalent at September 30, 2020 and $445.6 million equivalent at December 31, 2019), which is designated as a net investment hedge.

(2)The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:


	Other Current Assets				Other Current Liabilities
(In millions)	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Gross position	$	6.4	$	2.8	$	(3.2)	$	(4.0)
Impact of master netting agreements	(1.9)		(1.1)		1.9		1.1
Net amounts recognized on the Condensed Consolidated Balance Sheets	$	4.5	$	1.7	$	(1.3)	$	(2.9)

The following table details the effect of our derivative instruments on our Condensed Consolidated Statements of Operations.


		Amount of Gain (Loss) Recognized in Earnings on Derivatives
	Location of Gain (Loss) Recognized on	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	Condensed Consolidated Statements of Operations	2020		2019		2020		2019
Derivatives designated as hedging instruments:
Cash Flow Hedges:
Foreign currency forward contracts	Cost of sales	$	(2.4)	$	—	$	0.7	$	1.5


Treasury locks	Interest expense, net	—		—		0.1		0.1
Sub-total cash flow hedges		(2.4)		—		0.8		1.6
Fair Value Hedges:
Interest rate swaps	Interest expense, net	0.1		0.1		0.4		0.4
Derivatives not designated as hedging instruments:
Foreign currency forward and option contracts	Other (expense) income, net	2.1		(3.5)		(0.3)		(7.8)
Total		$	(0.2)	$	(3.4)	$	0.9	$	(5.8)

Note 16 Fair Value Measurements and Other Financial Instruments

Fair Value Measurements

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels to the fair value hierarchy as follows:

Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly

Level 3 - unobservable inputs for which there is little or no market data, which may require the reporting entity to develop its own assumptions.

The fair value, measured on a recurring basis, of our financial instruments, using the fair value hierarchy under U.S. GAAP are included in the table below.


	September 30, 2020
(In millions)	Total Fair Value		Level 1		Level 2		Level 3
Cash equivalents	$	97.2	$	97.2	$	—	$	—

Derivative financial and hedging instruments net asset (liability):
Foreign currency forward and option contracts	$	3.2	$	—	$	3.2	$	—


	December 31, 2019
(In millions)	Total Fair Value		Level 1		Level 2		Level 3
Cash equivalents	$	41.1	$	41.1	$	—	$	—
Other current assets	$	14.4	$	14.4	$	—	$	—
Derivative financial and hedging instruments net asset (liability):
Foreign currency forward and option contracts	$	(1.2)	$	—	$	(1.2)	$	—

Cash Equivalents

Our cash equivalents consisted of bank time deposits. Since these are short-term highly liquid investments with remaining maturities of 3 months or less, they present negligible risk of changes in fair value due to changes in interest rates and are classified as Level 1 financial instruments.

Other current assets

Other current assets include primarily time deposits, greater than 90 days to maturity at time of purchase at our insurance captive and are classified as Level 1 financial instruments. There were no such items as of September 30, 2020.

Derivative Financial Instruments

Our foreign currency forward contracts, foreign currency options, interest rate swaps and cross-currency swaps are recorded at fair value on our Condensed Consolidated Balance Sheets using a discounted cash flow analysis that incorporates observable market inputs. These market inputs include foreign currency spot and forward rates, and various interest rate curves, and are obtained from pricing data quoted by various banks, third-party sources and foreign currency dealers involving identical or comparable instruments. Such financial instruments are classified as Level 2.

Counterparties to these foreign currency forward contracts have at least an investment grade rating. Credit ratings on some of our counterparties may change during the term of our financial instruments. We closely monitor our counterparties’ credit ratings and, if necessary, will make any appropriate changes to our financial instruments. The fair value generally reflects the estimated amounts that we would receive or pay to terminate the contracts at the reporting date.

Foreign currency forward contracts and options are included in Prepaid expenses and other current assets and Other current liabilities on the Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019.

Other Financial Instruments

The following financial instruments are recorded at fair value or at amounts that approximate fair value: (1) trade receivables, net, (2) certain other current assets, (3) accounts payable and (4) other current liabilities. The carrying amounts reported on our Condensed Consolidated Balance Sheets for the above financial instruments closely approximate their fair value due to the short-term nature of these assets and liabilities.

Other liabilities that are recorded at carrying value on our Condensed Consolidated Balance Sheets include our credit facilities and senior notes. We utilize a market approach to calculate the fair value of our senior notes. Due to their limited investor base and the face value of some of our senior notes, they may not be actively traded on the date we calculate their fair value. Therefore, we may utilize prices and other relevant information generated by market transactions involving similar securities, reflecting U.S. Treasury yields to calculate the yield to maturity and the price on some of our senior notes. These inputs are provided by an independent third party and are considered to be Level 2 inputs.

We derive our fair value estimates of our various other debt instruments by evaluating the nature and terms of each instrument, considering prevailing economic and market conditions, and examining the cost of similar debt offered at the balance sheet date. We also incorporated our credit default swap rates and currency specific swap rates in the valuation of each debt instrument, as applicable.

These estimates are subjective and involve uncertainties and matters of significant judgment, and therefore we cannot determine them with precision. Changes in assumptions could significantly affect our estimates.

The table below shows the carrying amounts and estimated fair values of our debt, excluding our lease liabilities.


			September 30, 2020				December 31, 2019
(In millions)	Interest rate		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan A Facility due August 2022			$	474.6	$	474.6	$	474.6	$	474.6
Term Loan A Facility due July 2023(1)			220.5		220.5		223.8		223.8

Senior Notes due December 2022	4.875	%	422.6		443.8		421.9		450.1
Senior Notes due April 2023	5.250	%	422.7		448.5		422.0		454.1
Senior Notes due September 2023(1)	4.500	%	467.9		510.6		445.6		509.5
Senior Notes due December 2024	5.125	%	422.4		460.8		421.9		458.9
Senior Notes due September 2025	5.500	%	397.7		444.7		397.4		441.2
Senior Notes due December 2027	4.000	%	420.7		443.4		420.4		431.5
Senior Notes due July 2033	6.875	%	445.8		574.1		445.7		528.8
Other foreign borrowings(1)			9.0		9.2		12.1		12.4
Other domestic borrowings			—		—		89.0		89.0
Total debt(2)			$	3,703.9	$	4,030.2	$	3,774.4	$	4,073.9

(1)Includes borrowings denominated in currencies other than US dollars.

(2)The carrying amount and estimated fair value of debt exclude lease liabilities.

Included among our non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis are inventories, net property and equipment, goodwill, intangible assets and asset retirement obligations.

Note 17 Defined Benefit Pension Plans and Other Post-Employment Benefit Plans

The following tables show the components of our net periodic benefit (income) cost for our defined benefit pension plans for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30, 2020						Three Months Ended September 30, 2019
(In millions)	U.S.		International		Total		U.S.		International		Total
Components of net periodic benefit (income) cost:
Service cost	$	—	$	1.1	$	1.1	$	0.1	$	1.0	$	1.1
Interest cost	1.3		3.0		4.3		1.7		3.7		5.4
Expected return on plan assets	(2.2)		(5.0)		(7.2)		(1.9)		(6.2)		(8.1)
Amortization of net prior service cost	—		—		—		—		—		—
Amortization of net actuarial loss	0.4		1.2		1.6		0.3		1.0		1.3
Net periodic (income) cost	(0.5)		0.3		(0.2)		0.2		(0.5)		(0.3)
Cost of settlement	—		0.9		0.9		—		—		—
Total benefit (income) cost	$	(0.5)	$	1.2	$	0.7	$	0.2	$	(0.5)	$	(0.3)


	Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
(In millions)	U.S.		International		Total		U.S.		International		Total
Components of net periodic benefit (income) cost:
Service cost	$	0.1	$	3.3	$	3.4	$	0.1	$	3.0	$	3.1
Interest cost	4.0		8.9		12.9		5.2		11.1		16.3
Expected return on plan assets	(6.7)		(15.0)		(21.7)		(5.5)		(18.4)		(23.9)
Amortization of net prior service cost	—		0.1		0.1		—		0.1		0.1
Amortization of net actuarial loss	1.1		3.6		4.7		1.0		2.8		3.8
Net periodic (income) cost	$	(1.5)	$	0.9	$	(0.6)	$	0.8	$	(1.4)	$	(0.6)
Cost of settlement	—		1.0		1.0		—		0.3		0.3
Total benefit (income) cost	$	(1.5)	$	1.9	$	0.4	$	0.8	$	(1.1)	$	(0.3)

The following table shows the components of our net periodic benefit cost for our other post-retirement employee benefit plans for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Components of net periodic benefit cost:

Interest cost	$	0.3	$	0.4	$	0.8	$	1.2
Amortization of net prior service credit	—		—		(0.2)		(0.2)
Amortization of net actuarial gain	—		—		(0.1)		(0.1)
Net periodic benefit cost	$	0.3	$	0.4	$	0.5	$	0.9

Note 18 Income Taxes

2020 Regulations and Coronavirus Aid, Relief and Economic Security Act

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Corporate taxpayers may carryback net operating losses (NOLs) originating between 2018 and 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitation by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act.

In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to our income tax provision for the three and nine months ended September 30, 2020.

In July 2020, the U.S. Department of Treasury issued final tax regulations with respect to the global intangible low-taxed income (GILTI) proposed tax regulations originally published in 2019. Among other changes, these regulations now permit an election to exclude from the GILTI calculation items of income which are subject to a high effective rate of foreign tax. We have adopted these final regulations and recorded a discrete benefit of $16.1 million related to the 2018 - 2019 tax years and have reflected the 2020 benefit in the annual effective tax rate.

Effective Income Tax Rate and Income Tax Provision

For interim tax reporting, we estimate one annual effective tax rate for tax jurisdictions not subject to a valuation allowance and apply that rate to the year-to-date ordinary income/(loss). Tax effects of significant unusual or infrequently

occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

State income taxes, foreign earnings subject to higher tax rates and non-deductible expenses increase the Company's effective income tax rate compared to the U.S. statutory rate of 21.0%.

Our effective income tax rate was 11.7% and 21.5%, respectively, for the three and nine months ended September 30, 2020. For the three months ended September 30, 2020, the effective income tax rate was favorably impacted by GILTI regulations issued in the third quarter and the favorable resolution of specific uncertain tax positions. For the nine months ended September 30, 2020, the Company's effective income tax rate was positively impacted by recently issued GILTI regulations and the favorable resolution of specific uncertain tax positions.

Our effective income tax rate was 22.3% and 27.9% for the three and nine months ended September 30, 2019, respectively. The Company's effective income tax rate for the three month period ended September 30, 2019 was positively impacted by the benefit of U.S. Research and Development credits for current and prior periods and was negatively impacted by a U.S. audit assessment related to the valuation of an Intellectual Property transfer in 2011. For the nine month period ended September 30, 2019, the Company's effective income tax rate was negatively impacted by U.S. audit assessments associated with 2011 and 2012 transactions, which were partially offset by the benefits for the U.S. Research and Development credit for current and prior periods and the release of valuation allowance on deferred assets in Brazil related to improved profitability from Reinvent SEE initiatives.

There was a negligible change in our valuation allowances for the three and nine months ended September 30, 2020. There was a negligible change in valuation allowance for the three months ended September 30, 2019 and an $8.1 million decrease for the release of valuation allowance on deferred tax assets in Brazil for the nine months ended September 30, 2019.

We reported a net decrease in unrecognized tax positions in the three and nine months ended September 30, 2020 of $2.4 million and $8.1 million, respectively primarily related to the resolution of certain uncertain tax positions. We are not currently able to reasonably estimate the amount by which the liability for unrecognized tax positions may increase or decrease during the next 12 months as a result of the remaining items under IRS audit for those years. We reported a net increase in unrecognized tax positions in the three and nine months ended September 30, 2019 of $16.7 million and $26.4 million, respectively, primarily related to U.S. audit assessments and interest accruals on existing positions. Interest and penalties on tax assessments are included in income tax expense.

With respect to the 2014 tax year, the IRS has proposed to disallow the deduction of approximately $1.49 billion for the settlement payments made pursuant to the Settlement agreement, as defined in Note 19, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements, and the reduction of our U.S. federal tax liability by approximately $525 million. Although we continue to believe that we have meritorious defenses to the proposed disallowance and are protesting it with the IRS, this matter will likely not be resolved in 2020. It is possible that future developments in this matter could have a material impact on the uncertain tax position balances and results of operations, including cash flow, within the next 12 months.

We have no outstanding liability with respect to Transition Tax associated with the U.S. Tax Cuts and Jobs Act of 2017.

Note 19 Commitments and Contingencies

Diversey Sale Clawback Agreement and Receivables

As part of our 2017 sale of Diversey to Diamond (BC) B.V. (the “Buyer”), Sealed Air and the Buyer entered into that certain Letter Agreement (the “Clawback Agreement”), under which Sealed Air could be required to return a portion of the proceeds we received in the sale, if, and to the extent, Diversey failed to achieve a specified minimum gross margin arising from sales of certain products during the one year period following a successful renewal of certain commercial contracts. In the third quarter of 2019, the Buyer submitted a claim to us under the Clawback Agreement seeking such a refund in the amount of $49.2 million, and we delivered a dispute notice to the Buyer in respect to such claim in the fourth quarter of 2019. On April 29, 2020, Sealed Air and the Buyer entered into a Stipulation and Agreement of Settlement and Release (the “Diversey Settlement Agreement”), whereby, among other things, the Buyer released us from any and all claims under the Clawback Agreement, and the parties terminated the Clawback Agreement.

Pursuant to the Diversey Settlement Agreement, the parties settled their disputes relating to certain other Tax Receivables and other receivables arising out of the Diversey sale, including fees owed to Sealed Air from the Buyer pursuant to the Transition Service Agreement entered into in connection with the sale (“TSA”) and cash held by Diversey in certain non-U.S. jurisdictions as of the sale closing date that Buyer was required to cooperate to deliver to Sealed Air when and as permitted, subject to certain limitations (“Trapped Cash”). Under the Diversey Settlement Agreement, Sealed Air relinquished all of its

rights to receive any of the Trapped Cash, and the parties further agreed to release each other from any and all claims arising under or with respect to the TSA, the Trapped Cash, and the Clawback Agreement and such other matters as expressly agreed upon in the Diversey Settlement Agreement (provided, that, except for those specific matters released, the terms of the Purchase Agreement otherwise remain in effect in accordance with their terms).

Settlement Agreement Tax Deduction

On March 31, 1998, the Company completed a multi-step transaction (the “Cryovac transaction”) involving W.R. Grace & Co. (“Grace”) which brought the Cryovac packaging business and the former Sealed Air’s business under the common ownership of the Company. As part of that transaction, Grace and its subsidiaries retained all liabilities arising out of their operations before the Cryovac transaction (including asbestos-related liabilities), other than liabilities relating to Cryovac’s operations, and agreed to indemnify the Company with respect to such retained liabilities. Beginning in 2000, we were served with a number of lawsuits alleging that the Cryovac transaction was a fraudulent transfer or gave rise to successor liability or both, and that, as a result, we were responsible for alleged asbestos liabilities of Grace and its subsidiaries. On April 2, 2001, Grace and a number of its subsidiaries filed petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). In connection with Grace’s Chapter 11 case, the Bankruptcy Court granted the official committees appointed to represent asbestos claimants in Grace’s Chapter 11 case (the “Committees”) permission to pursue against the Company and its subsidiary Cryovac, Inc. fraudulent transfer, successor liability, and other claims based upon the Cryovac transaction. In November 2002, we reached an agreement in principle with the Committees to resolve all current and future asbestos-related claims made against us and our affiliates, as well as indemnification claims by Fresenius Medical Care Holdings, Inc. and affiliated companies, in each case, in connection with the Cryovac transaction. A definitive settlement agreement was entered into in 2003 and approved by the Bankruptcy Court in 2005 (such agreement, the "Settlement agreement"). The Settlement agreement was subsequently incorporated into the plan of reorganization for Grace (the "Plan") and the Plan was confirmed by the Bankruptcy Court in 2011 and the United States District Court in 2012.

On February 3, 2014 (the “Effective Date”), the Plan implementing the Settlement agreement became effective with W. R. Grace & Co., or Grace, emerging from bankruptcy and the injunctions and releases provided by the Plan becoming effective. On the Effective Date, the Company’s subsidiary, Cryovac, Inc., made the payments contemplated by the Settlement agreement, consisting of aggregate cash payments in the amount of $929.7 million to the WRG Asbestos PI Trust (the “PI Trust”) and the WRG Asbestos PD Trust (the “PD Trust”) and the transfer of 18 million shares of Sealed Air common stock (the “Settlement Shares”) to the PI Trust, in each case, reflecting adjustments made in accordance with the Settlement agreement.

The IRS completed its field examination of our U.S. federal income tax returns for the years 2011 through 2014 in the third quarter of 2020. As previously disclosed, the IRS has proposed to disallow for the 2014 taxable year the entirety of the deduction of the approximately $1.49 billion settlement payments made pursuant to the Settlement agreement and the resulting reduction of our U.S. federal tax liability by approximately $525 million. We continue to believe that we have meritorious defenses to the proposed disallowance and have filed a protest with the IRS. We expect to enter the IRS administrative appeals process in late 2020 or early 2021. At this time, we cannot predict when the IRS administrative appeals process will be resolved or the outcome of such process. It is possible that future developments in this matter could have a material impact on the uncertain tax position balances and results of operations, including cash flow, within the next 12 months.

Environmental Matters

We are subject to loss contingencies resulting from environmental laws and regulations, and we accrue for anticipated costs associated with investigatory and remediation efforts when an assessment has indicated that a loss is probable and can be reasonably estimated. These accruals are not reduced by potential insurance recoveries, if any. We do not believe that it is reasonably possible that our liability in excess of the amounts that we have accrued for environmental matters will be material to our Condensed Consolidated Balance Sheets or Statements of Operations. Environmental liabilities are reassessed whenever circumstances become better defined or remediation efforts and their costs can be better estimated.

We evaluate these liabilities periodically based on available information, including the progress of remedial investigations at each site, the current status of discussions with regulatory authorities regarding the methods and extent of remediation and the apportionment of costs among potentially responsible parties. As some of these issues are decided (the outcomes of which are subject to uncertainties) or new sites are assessed and costs can be reasonably estimated, we adjust the recorded accruals, as necessary. We believe that these exposures are not material to our Condensed Consolidated Balance Sheets or Statements of Operations. We believe that we have adequately reserved for all probable and estimable environmental exposures.

Guarantees and Indemnification Obligations

We are a party to many contracts containing guarantees and indemnification obligations. These contracts primarily consist of:

•indemnities in connection with the sale of businesses, primarily related to the sale of Diversey. Our indemnity obligations under the relevant agreements may be limited in terms of time, amount or scope. As it relates to certain income tax related liabilities, the relevant agreements may not provide any cap for such liabilities, and the period in which we would be liable would lapse upon expiration of the statute of limitation for assessment of the underlying taxes. Because of the conditional nature of these obligations and the unique facts and circumstances involved in each particular agreement, we are unable to reasonably estimate the potential maximum exposure associated with these items;

•product warranties with respect to certain products sold to customers in the ordinary course of business. These warranties typically provide that products will conform to specifications. We generally do not establish a liability for product warranty based on a percentage of sales or other formula. We accrue a warranty liability on a transaction-specific basis depending on the individual facts and circumstances related to each sale. Both the liability and annual expense related to product warranties are immaterial to our consolidated financial position and results of operations; and

•licenses of intellectual property by us to third parties in which we have agreed to indemnify the licensee against third-party infringement claims.

As of September 30, 2020, the Company has no reason to believe a loss exceeding amounts already recognized would be incurred.

Other Matters

We are also involved in various other legal actions incidental to our business. We believe, after consulting with counsel, that the disposition of these other legal proceedings and matters will not have a material effect on our consolidated financial condition or results of operations including potential impact to cash flows.

Note 20 Stockholders’ Equity (Deficit)

Repurchase of Common Stock

On May 2, 2018, the Board of Directors increased the total authorization to repurchase the Company's issued and outstanding stock to $1.0 billion. This current program has no expiration date and replaced all previous authorizations.

During the three and nine months ended September 30, 2020, we repurchased 521,498 shares, for approximately $20.0 million, with an average share price of $38.37. These repurchases were made under open market transactions, including through plans complying with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended and pursuant to the share repurchase program previously authorized by our Board of Directors.

During the nine months ended September 30, 2019, we repurchased 1,560,633 shares, for approximately $67.2 million, with an average share price of $43.09. These repurchases were made under open market transactions, including through plans complying with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended and pursuant to the share repurchase program previously authorized by our Board of Directors. We did not repurchase any shares during the three months ended September 30, 2019.

Dividends

On February 13, 2020, our Board of Directors declared a quarterly cash dividend of $0.16 per common share, or $24.9 million, which was paid on March 20, 2020, to stockholders of record at the close of business on March 6, 2020.

On May 21, 2020, our Board of Directors declared a quarterly cash dividend of $0.16 per common share, or $24.9 million, which was paid on June 19, 2020, to stockholders of record at the close of business on June 5, 2020.

On July 17, 2020 our Board of Directors declared a quarterly cash dividend of $0.16 per common share, or $24.9 million, which was paid on September 18, 2020 to shareholders of record at the close of business on September 4, 2020.

On October 21, 2020, our Board of Directors declared a quarterly cash dividend of $0.16 per common share, which will be paid on December 18, 2020 to shareholders of recorded at the close of business on December 4, 2020.

The dividends paid in the nine months ended September 30, 2020 were recorded as a reduction to cash and cash equivalents and retained earnings on our Condensed Consolidated Balance Sheets. Our credit facility and our notes contain covenants that restrict our ability to declare or pay dividends. However, we do not believe these covenants are likely to materially limit the future payment of quarterly cash dividends on our common stock. From time to time, we may consider other means of returning value to our stockholders based on our Condensed Consolidated Statements of Operations. There is no guarantee that our Board of Directors will declare any future dividends.

Share-based Compensation

In 2014, the Board of Directors adopted, and our stockholders approved, the 2014 Omnibus Incentive Plan (“Omnibus Incentive Plan”). Under the Omnibus Incentive Plan, the maximum number of shares of Common Stock authorized was 4,250,000, plus total shares available to be issued as of May 22, 2014 under the 2002 Directors Stock Plan and the 2005 Contingent Stock Plan (collectively, the “Predecessor Plans”). The Omnibus Incentive Plan replaced the Predecessor Plans and no further awards were granted under the Predecessor Plans. The Omnibus Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance share units known as PSU awards, other stock awards and cash awards to officers, non-employee directors, key employees, consultants and advisors.

In 2018, the Board of Directors adopted, and our shareholders approved an amendment and restatement to the Omnibus Incentive Plan. The amended plan adds 2,199,114 shares of common stock to the share pool previously available under the Omnibus Incentive Plan.

We record share-based incentive compensation expense in selling, general and administrative expenses and cost of sales on our Condensed Consolidated Statements of Operations for both equity-classified and liability-classified awards. We record corresponding credit to additional paid-in capital within stockholders’ equity for equity-classified awards, and to either current or non-current liability for liability-classified awards based on the fair value of the share-based incentive compensation awards at the date of grant. Total expense for the liability-classified awards continues to be remeasured to fair value at the end of each reporting period. We recognize an expense or credit reflecting the straight-line recognition, net of estimated forfeitures, of the expected cost of the program. The number of Performance Share Units ("PSUs") earned may equal, exceed or be less than the targeted number of shares depending on whether the performance criteria are met, surpassed or not met.

The table below shows our total share-based incentive compensation expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Total share-based incentive compensation expense(1)	$	12.3	$	12.0	$	31.3	$	25.2

(1)The amounts presented above do not include the expense related to our U.S. profit sharing contributions made in the form of our common stock or the expense or income related to certain cash-based awards, however, the amounts include the expense related to share based awards that are settled in cash.

PSU Awards

During the first 90 days of each year, the Organization and Compensation (“O&C”) Committee of our Board of Directors approves PSU awards for our executive officers and other selected employees, which include for each participant a target number of shares of common stock and performance goals and measures that will determine the percentage of the target award that is earned following the end of the three-year performance period. Following the end of the performance period, in addition to shares earned, participants will also receive a cash payment in the amount of the dividends (without interest) that would have been paid during the performance period on the number of shares that they have earned. Each PSU is subject to forfeiture if the recipient terminates employment with the Company prior to the end of the three-year award performance period for any reason other than death, disability or retirement. In the event of death, disability or retirement, a participant will receive a prorated payment based on such participant’s number of days of service during the award performance period, further adjusted based on the achievement of the performance goals during the award performance period. PSUs are classified as equity in the Condensed

Consolidated Balance Sheets, with the exception of awards that are required by local laws or regulations to be settled in cash. These are classified as either current or non-current liabilities in the Condensed Consolidated Balance Sheets.

2020 Three-year PSU Awards

During the first quarter 2020, the O&C Committee approved awards with a three-year performance period beginning January 1, 2020 to December 31, 2022 for executive officers and other selected employees. The O&C Committee established performance goals, which are (i) relative total shareholder return (Relative TSR) weighted at 34%, (ii) three-year cumulative average growth rate (CAGR) of consolidated Adjusted EBITDA weighted at 33%, and (iii) Return on Invested Capital (ROIC) weighted at 33%. The total number of shares to be issued for these awards can range from zero to 200% of the target number of shares.

The target number of PSUs granted and the grant date fair value of the PSUs are shown in the following table:


	Relative TSR		ROIC		Adjusted EBITDA CAGR
February 12, 2020 grant date
Number of units granted	33,335		35,068		35,068
Fair value on grant date	$	38.87	$	35.86	$	35.86
February 13, 2020 grant date
Number of units granted	44,206		42,507		42,507
Fair value on grant date	$	34.08	$	34.40	$	34.40
March 1, 2020 grant date
Number of units granted	31,064		29,690		29,690
Fair value on grant date	$	29.85	$	30.31	$	30.31

The assumptions used to calculate the grant date fair value of the PSUs based on Relative TSR are shown in the following table:


	February 12, 2020 grant date		February 13, 2020 grant date		March 1, 2020 grant date
Expected price volatility	23.7	%	23.7	%	23.7	%
Risk-free interest rate	1.4	%	1.4	%	0.9	%

2017 Three-year PSU Awards

In February 2020, the O&C Committee reviewed the performance results for the 2017-2019 PSUs. Performance goals for these PSUs were based on Adjusted EBITDA margin, net trade sales CAGR and Relative TSR. Based on overall performance for 2017-2019 PSUs, these awards paid out at 90.3% of target or 216,581 shares.

Note 21 Accumulated Other Comprehensive Loss

The following table provides details of comprehensive income (loss) for the nine months ended September 30, 2020 and 2019:


(In millions)	Unrecognized Pension Items		Cumulative Translation Adjustment		Unrecognized Losses on Derivative Instruments for net investment hedge		Unrecognized Gains on Derivative Instruments for cash flow hedge		Accumulated Other Comprehensive Loss, Net of Taxes
Balance at December 31, 2019	$	(146.1)	$	(728.6)	$	(34.5)	$	0.2	$	(909.0)
Other comprehensive (loss) income before reclassifications	(0.4)		(77.5)		(16.3)		0.7		(93.5)
Less: amounts reclassified from accumulated other comprehensive loss	4.3		—		—		(0.7)		3.6
Net current period other comprehensive income (loss)	3.9		(77.5)		(16.3)		—		(89.9)

Balance at September 30, 2020(1)	$	(142.2)	$	(806.1)	$	(50.8)	$	0.2	$	(998.9)

Balance at December 31, 2018	$	(136.4)	$	(744.8)	$	(41.9)	$	2.7	$	(920.4)
Other comprehensive (loss) income before reclassifications	(0.1)		(25.7)		15.2		0.5		(10.1)
Less: amounts reclassified from accumulated other comprehensive loss	2.7		—		—		(1.0)		1.7
Net current period other comprehensive income (loss)	2.6		(25.7)		15.2		(0.5)		(8.4)
Balance at September 30, 2019(1)	$	(133.8)	$	(770.5)	$	(26.7)	$	2.2	$	(928.8)

(1)The ending balance in AOCL includes gains and losses on intra-entity foreign currency transactions. The intra-entity currency translation adjustment was $19.8 million and $10.8 million as of September 30, 2020 and 2019, respectively.

The following table provides detail of amounts reclassified from AOCL:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020(1)		2019(1)		2020(1)		2019(1)		Location of Amount Reclassified from AOCL
Defined benefit pension plans and other post-employment benefits:
Settlement activity	$	(0.9)	$	—	$	(1.0)	$	—
Prior service credit	—		—		0.1		0.1
Actuarial losses	(1.6)		(1.3)		(4.6)		(3.7)
Total pre-tax amount	(2.5)		(1.3)		(5.5)		(3.6)		Other (expense) income, net
Tax benefit	0.5		0.3		1.2		0.9
Net of tax	(2.0)		(1.0)		(4.3)		(2.7)


Net (losses) gains on cash flow hedging derivatives:(2)
Foreign currency forward contracts	(2.4)		—		0.7		1.5		Cost of sales

Treasury locks	—		—		0.1		0.1		Interest expense, net
Total pre-tax amount	(2.4)		—		0.8		1.6
Tax benefit (expense)	0.7		—		(0.1)		(0.6)
Net of tax	(1.7)		—		0.7		1.0
Total reclassifications for the period	$	(3.7)	$	(1.0)	$	(3.6)	$	(1.7)

(1)Amounts in parenthesis indicate changes to earnings (loss).

(2)These accumulated other comprehensive components are included in our derivative and hedging activities. See Note 15, “Derivatives and Hedging Activities,” of the Notes to Condensed Consolidated Financial Statements for additional details.

Note 22 Other (expense) income, net

The following table provides details of other (expense) income, net:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Net foreign exchange transaction (loss) gain	$	(1.4)	$	(1.5)	$	5.2	$	(4.1)
Bank fee expense	(1.1)		(1.1)		(3.4)		(3.6)
Pension (expense) income other than service costs	(0.1)		0.2		1.1		1.1
Other, net	1.4		0.5		5.0		7.9
Other (expense) income, net	$	(1.2)	$	(1.9)	$	7.9	$	1.3

Note 23 Net Earnings Per Common Share

The following table shows the calculation of basic and diluted net earnings per common share under the two-class method:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share amounts)	2020		2019		2020		2019
Basic Net Earnings Per Common Share:
Numerator:
Net earnings	$	134.0	$	68.0	$	360.7	$	158.7
Distributed and allocated undistributed net earnings to unvested restricted stockholders	—		(0.1)		(0.1)		(0.3)
Distributed and allocated undistributed net earnings	134.0		67.9		360.6		158.4
Distributed net earnings - dividends paid to common stockholders	(24.9)		(24.6)		(74.6)		(74.1)
Allocation of undistributed net earnings to common stockholders	$	109.1	$	43.3	$	286.0	$	84.3
Denominator:
Weighted average number of common shares outstanding - basic	155.5		154.0		155.2		154.4
Basic net earnings per common share:
Distributed net earnings	$	0.16	$	0.16	$	0.48	$	0.48
Allocated undistributed net earnings to common stockholders	0.70		0.28		1.84		0.55
Basic net earnings per common share	$	0.86	$	0.44	$	2.32	$	1.03
Diluted Net Earnings Per Common Share:
Numerator:
Distributed and allocated undistributed net earnings	$	134.0	$	67.9	$	360.6	$	158.4
Add: Allocated undistributed net earnings to unvested restricted stockholders	—		0.1		0.1		0.2
Less: Undistributed net earnings reallocated to unvested restricted stockholders	—		(0.1)		(0.1)		(0.2)
Net earnings available to common stockholders - diluted	$	134.0	$	67.9	$	360.6	$	158.4
Denominator:
Weighted average number of common shares outstanding - basic	155.5		154.0		155.2		154.4
Effect of unvested restricted stock - nonparticipating security	0.1		—		0.1		—
Effect of contingently issuable shares	0.2		0.2		0.2		0.2
Effect of unvested restricted stock units	0.3		0.3		0.3		0.3
Weighted average number of common shares outstanding - diluted under two-class	156.1		154.5		155.8		154.9
Effect of unvested restricted stock - participating security	—		0.3		—		0.3
Weighted average number of common shares outstanding - diluted under treasury stock	156.1		154.8		155.8		155.2
Diluted net earnings per common share	$	0.86	$	0.44	$	2.31	$	1.02

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with our Condensed Consolidated Financial Statements and related notes set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 2019 Form 10-K and our Consolidated Financial Statements and related notes set forth in Item 8 of Part II of our 2019 Form 10-K. See Part II, Item 1A, “Risk Factors,” below and “Cautionary Notice Regarding Forward-Looking Statements,” above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. All amounts and percentages are approximate due to rounding and all dollars are in millions, except per share amounts or where otherwise noted. When we cross-reference to a “Note,” we are referring to our “Notes to Condensed Consolidated Financial Statements,” unless the context indicates otherwise.

Recent Events and Trends

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the Coronavirus Disease 2019 (“COVID-19”) outbreak as a global pandemic. Additionally, many international heads of state, including the President of the United States, declared the COVID-19 outbreak to be a national emergency in their respective countries. In response to these declarations and the rapid spread of COVID-19 across many countries, including the United States, governmental agencies around the world (including federal, state and local governments in the United States) implemented varying degrees of restrictions on social and commercial activities to promote social distancing in an effort to slow the spread of the illness. These measures, as well as future measures, had and will continue to create a significant adverse impact upon many sectors of the global economy. Additionally, the spread of the virus continues to persist in some parts of the world, including regions of the United States.

We continue to monitor the impact that COVID-19 has on all aspects of our business and geographies, including the impact on our employees, customers, suppliers, business partners and distribution channels. Our crisis management teams, which are comprised of cross functional and regional leaders, continue to assess the evolving situation and implement business continuity plans at both the regional and headquarter levels. See Part II, Item 1A, “Risk Factors,” below for additional risks related to the COVID-19 pandemic.

Employee Health and Safety and Business Continuity

The health and safety of Sealed Air’s global employees, suppliers and customers continue to be the Company’s top priority. Safety measures remain in place at Sealed Air sites such as: enhanced cleaning procedures, employee temperature checks, use of personal protective equipment for location-dependent workers, social distancing measures within operating sites, remote work arrangements for non-location dependent employees, visitor access restrictions and limitations on travel, particularly in regions with high transmission of COVID-19.

Remote work arrangements will remain in place for some of our non-location dependent employees as appropriate. In a remote working environment, we continue our efforts to mitigate information technology risks including failures in the physical infrastructure or operating systems that support our businesses and customers, or cyber attacks and security breaches of our networks or systems. Additionally, we continue to execute all activities related to our internal control over financial reporting in our remote environment. There has not been any change in our internal control over financial reporting during the three or nine months ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

While we continue to practice enhanced employee safety and other precautionary measures during this pandemic, there are significant uncertainties regarding the future impact of COVID-19, which we cannot predict.

Supply Chain and Operations

Sealed Air's global operations continue to operate and serve customers' needs. We experienced limited facility closures as a result of initial government orders in response to the pandemic. Additionally, in some jurisdictions, we have at times reduced production capacity due to local social distancing requirements which limit the number of employees in our facility. These

instances have not had a material impact on our operations to date. We continue to closely monitor our location-dependent operations.

The impact of COVID-19 has resulted in approximately $3 million and $12 million in unanticipated net expenses for the three and nine months ended September 30, 2020, respectively. These costs included additional personal protective gear, cleaning and other health and hygiene supplies and related expenses; higher employment costs; and incremental freight due to sourcing changes along with other higher manufacturing related costs.

We cannot predict the impact on our operations of future spread or worsening of the COVID-19 pandemic or future restrictions on commercial activities by governmental agencies to limit the spread of the virus. The health of our workforce, and our ability to meet staffing needs in our manufacturing facilities, distribution of our products and other critical functions are key to our operations.

Markets We Serve

Early during the implementation of initial commercial and social restrictions, employees within “Food and Agriculture” and “Transportation and Logistics,” including their respective supply chains such as packaging material providers, were deemed “Essential Critical Infrastructure Workers” by the U.S. Department of Homeland Security and similarly by other international governmental agencies. These designations covered the majority of Sealed Air employees and allowed us to continue operations in order to serve our customers.

Late in the first quarter and early in the second quarter, as the initial impact of COVID-19 intensified around the world, we experienced an increase in demand for packaging solutions for essential materials including all proteins, frozen foods, pantry items, medical equipment and pharmaceuticals. However, demand contracted mid-second quarter as some of our customers, including certain meat processors and industrial manufacturers, had to temporarily suspend production or were unable to fully staff their operations due to COVID-19 outbreaks. As these customers returned to operation, demand and volume improved late in the second quarter and throughout the third quarter. Subsequent disruption in our customers' operations could negatively impact our future results of operations.

Some sectors, such as industrial goods, capital-intensive equipment and parts of the food industry including food service and restaurants have experienced significant adverse impacts. Capital-intensive equipment that serves food market segments has been negatively impacted due to customers' re-evaluation of investments and delays due to restrictions on third-party visitors and installations in light of current social distancing measures. However, our equipment solutions business increased in the third quarter as customers began to resume essential investments. Despite the positive trends in retail formats and equipment, volume was negatively impacted relative to the same period a year ago due to the lagging recovery in food service and labor challenges slowing production in food processing plants. We cannot predict the impact to the markets we serve due to the future spread or worsening of the COVID-19 pandemic or future restrictions on commercial activities by governmental agencies to limit future spread of the virus.

Liquidity and Financial Position

As of September 30, 2020, Sealed Air had approximately $1.4 billion of liquidity available, comprised of $317 million in cash and $1,132 million of undrawn, committed credit facilities. The Company does not have long-term debt maturing until August 2022. See Note 10, “Accounts Receivable Securitization Programs” and Note 14, “Debt and Credit Facilities” for further details.

Each issue of our outstanding senior notes imposes limitations on our operations and those of specified subsidiaries. Our Credit Facility contains customary affirmative and negative covenants for credit facilities of this type, including limitations on our indebtedness, liens, investments, restricted payments, mergers and acquisitions, dispositions of assets, transactions with affiliates, amendment of documents and sale leasebacks, and a covenant specifying a maximum leverage ratio of debt to EBITDA. As a result of our acquisition of Automated, the maximum covenant leverage ratio of debt to EBITDA was temporarily increased to 5.00 to 1.00 through September 30, 2020. The maximum covenant leverage ratio has returned to 4.50 to 1.00 after September 30, 2020. At September 30, 2020, our leverage ratio of debt to EBITDA, as calculated under the covenant, was 2.83 to 1.00. We expect continued compliance with our debt covenants including the covenant leverage ratio over the next 12 months. See Note 14, “Debt and Credit Facilities” for further details.

Non-U.S. GAAP Information

We present financial information that conforms to U.S. GAAP. We also present financial information that does not conform to U.S. GAAP, as our management believes it is useful to investors. In addition, non-U.S. GAAP financial measures are used by management to review and analyze our operating performance and, along with other data, as internal measures for setting annual budgets and forecasts, assessing financial performance, providing guidance and comparing our financial performance with our peers. Non-U.S. GAAP financial measures also provide management with additional means to understand and evaluate the core operating results and trends in our ongoing business by eliminating certain expenses and/or gains (which may not occur in each period presented) and other items that management believes might otherwise make comparisons of our ongoing business with prior periods and peers more difficult, obscure trends in ongoing operations or reduce management’s ability to make useful forecasts. Non-U.S. GAAP information does not purport to represent any similarly titled U.S. GAAP information and is not an indicator of our performance under U.S. GAAP. Investors are cautioned against placing undue reliance on these non-U.S. GAAP financial measures. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures, described below.

The non-U.S. GAAP financial metrics exclude certain specified items (“Special Items”), including restructuring charges and restructuring associated costs, certain transaction and other charges related to acquisitions and divestitures, gains and losses related to acquisitions and divestitures, special tax items or tax benefits (collectively, “Tax Special Items”) and certain other items. We evaluate unusual or Special Items on an individual basis. Our evaluation of whether to exclude an unusual or special item for purposes of determining our non-U.S. GAAP financial measures considers both the quantitative and qualitative aspects of the item, including among other things (i) its nature, (ii) whether or not it relates to our ongoing business operations, and (iii) whether or not we expect it to occur as part of our normal business on a regular basis.

When we present Non-U.S. GAAP forward-looking guidance, we do not also provide guidance for the most directly comparable U.S. GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain Special Items, including gains and losses on the disposition of businesses, the ultimate outcome of certain legal or tax proceedings, foreign currency gains or losses resulting from the volatile currency market in Argentina, and other unusual gains and losses. These items are uncertain, depend on various factors, and could be material to our results computed in accordance with U.S. GAAP.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA is defined as Earnings before Interest Expense, Taxes, Depreciation and Amortization, adjusted to exclude the impact of Special Items. Management uses Adjusted EBITDA as one of many measures to assess the performance of the business. Additionally, Adjusted EBITDA is the performance metric used by the Company's chief operating decision maker to evaluate performance of our reportable segments. Adjusted EBITDA is also a metric used to determine performance in the Company's Annual Incentive Plan. We do not believe there are estimates underlying the calculation of Adjusted EBITDA, other than those inherent in our U.S. GAAP results of operations, which would render the use and presentation of Adjusted EBITDA misleading. While the nature and amount of individual Special Items vary from period to period, we believe our calculation of Adjusted EBITDA is applied consistently to all periods and, in conjunction with other U.S. GAAP and non-U.S. GAAP financial measures, Adjusted EBITDA provides a useful and consistent comparison of our Company's performance to other periods.

The following table shows a reconciliation of U.S. GAAP Net Earnings from continuing operations to non-U.S. GAAP Total Company Adjusted EBITDA from continuing operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Net earnings from continuing operations	$	131.8	$	79.5	$	346.6	$	169.3
Interest expense, net	43.0		48.5		130.7		136.6
Income tax provision	17.4		22.8		94.7		65.5
Depreciation and amortization, net of adjustments(1)	56.2		53.2		161.1		131.4
Special Items:
Restructuring charges	1.0		6.9		11.7		43.6
Other restructuring associated costs(2)	7.2		12.8		15.0		50.8
Foreign currency exchange loss due to highly inflationary economies	1.1		1.3		3.2		3.4

Charges related to the Novipax settlement agreement	—		—		—		59.0
Charges related to acquisition and divestiture activity	1.0		6.0		5.1		9.2



Other Special Items(3)	0.6		10.1		4.3		24.8
Pre-tax impact of Special Items	10.9		37.1		39.3		190.8
Non-U.S. GAAP Total Company Adjusted EBITDA from continuing operations	$	259.3	$	241.1	$	772.4	$	693.6

(1)Includes depreciation and amortization adjustments of $(0.1) million and $(1.1) million for the three and nine months ended September 30, 2019, respectively.

(2)Other restructuring associated costs for the three and nine months ended September 30, 2020 primarily relate to fees paid to third-party consultants in support of Reinvent SEE. Other restructuring associated costs for the three and nine months ended September 30, 2019 primarily relate to fees paid to third-party consultants in support of Reinvent SEE and costs associated with property consolidations and machinery and equipment relocations resulting from Reinvent SEE. See Note 13, "Restructuring Activities," for additional information related to Reinvent SEE and our restructuring program.

(3)Other Special Items for the three and nine months ended September 30, 2019, primarily included fees related to professional services, mainly legal fees, directly associated with Special Items or events that are considered one-time or infrequent in nature.

The Company may also assess performance using Adjusted EBITDA Margin. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by net trade sales. We believe that Adjusted EBITDA Margin is a useful measure to assess the profitability of sales made to third parties and the efficiency of our core operations.

Adjusted Net Earnings and Adjusted Earnings Per Share

Adjusted Net Earnings and Adjusted Earnings Per Share (“Adjusted EPS”) are also used by the Company to measure total company performance. Adjusted Net Earnings is defined as U.S. GAAP net earnings from continuing operations excluding the impact of Special Items. Adjusted EPS is defined as our Adjusted Net Earnings divided by the number of diluted shares outstanding. We believe that Adjusted Net Earnings and Adjusted EPS are useful measurements of Company performance, along with other U.S. GAAP and non-U.S. GAAP financial measures, because they incorporate non-cash items of depreciation and amortization, including stock-based compensation, which impact the overall performance and net earnings of our business. Additionally, Adjusted Net Earnings and Adjusted EPS reflect the impact of our Adjusted Tax Rate and interest expense on a net and per share basis. While the nature and amount of individual Special Items vary from period to period, we believe our calculation of Adjusted Net Earnings and Adjusted EPS is applied consistently to all periods and, in conjunction with other U.S. GAAP and non-U.S. GAAP financial measures, Adjusted Net Earnings and Adjusted EPS provide a useful and consistent comparison of our Company's performance to other periods.

The following table shows a reconciliation of U.S. GAAP Net Earnings and Diluted Earnings per Share from continuing operations to Non-U.S. GAAP Adjusted Net Earnings and Adjusted EPS from continuing operations.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
(In millions, except per share data)	Net Earnings		Diluted EPS		Net Earnings		Diluted EPS		Net Earnings		Diluted EPS		Net Earnings		Diluted EPS
U.S. GAAP net earnings and diluted EPS from continuing operations(1)	$	131.8	$	0.85	$	79.5	$	0.51	$	346.6	$	2.22	$	169.3	$	1.09
Special Items(2)	(4.7)		(0.03)		20.2		0.13		12.2		0.08		147.9		0.95
Non-U.S. GAAP adjusted net earnings and adjusted diluted EPS from continuing operations	$	127.1	$	0.82	$	99.7	$	0.64	$	358.8	$	2.30	$	317.2	$	2.04
Weighted average number of common shares outstanding - Diluted			156.1				154.8				155.8				155.2

(1)Net earnings per common share are calculated under the two-class method.

(2)Includes pre-tax Special Items, less Tax Special Items and the tax impact of Special Items as seen in the following calculation of non-U.S. GAAP Adjusted income tax rate.

Adjusted Tax Rate

We also present our adjusted income tax rate (“Adjusted Tax Rate”). The Adjusted Tax Rate is a measure of our U.S. GAAP effective tax rate, adjusted to exclude the tax impact from the Special Items that are excluded from our Adjusted Net Earnings and Adjusted EPS metrics as well as expense or benefit from any special taxes or Tax Special Items. The Adjusted Tax Rate is an indicator of the taxes on our core business. The tax circumstances and effective tax rate in the specific countries where the Special Items occur will determine the impact (positive or negative) to the Adjusted Tax Rate. While the nature and amount of Tax Special Items vary from period to period, we believe our calculation of the Adjusted Tax Rate is applied consistently to all periods and, in conjunction with our U.S. GAAP effective income tax rate, the Adjusted Tax Rate provides a useful and consistent comparison of the impact that tax expense has on our Company's performance.

The following table shows our calculation of the non-U.S. GAAP Adjusted income tax rate:


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2020			2019			2020			2019
U.S. GAAP Earnings before income tax provision from continuing operations	$	149.2		$	102.3		$	441.3		$	234.8
Pre-tax impact of Special Items	10.9			37.1			39.3			190.8
Non-U.S. GAAP Adjusted Earnings before income tax provision from continuing operations	$	160.1		$	139.4		$	480.6		$	425.6

U.S. GAAP Income tax provision from continuing operations	$	17.4		$	22.8		$	94.7		$	65.5
Tax Special Items	12.6			7.9			18.0			(3.8)
Tax impact of Special Items	3.0			9.0			9.1			46.7
Non-U.S. GAAP Adjusted Income tax provision from continuing operations	$	33.0		$	39.7		$	121.8		$	108.4

U.S. GAAP Effective income tax rate	11.7		%	22.3		%	21.5		%	27.9		%
Non-U.S. GAAP Adjusted income tax rate	20.6		%	28.5		%	25.3		%	25.5		%

Organic and Constant Dollar Measures

In our “Net Sales by Geographic Region,” “Net Sales by Segment” and in some of the discussions and tables that follow, we exclude the impact of foreign currency translation when presenting net sales information, which we define as “constant

dollar” and we exclude acquisitions in the first year after closing, divestiture activity and the impact of foreign currency translation when presenting net sales information, which we define as "organic." Changes in net sales excluding the impact of foreign currency translation and/or acquisition and divestiture activity are non-U.S. GAAP financial measures. As a worldwide business, it is important that we consider the effects of foreign currency translation when we view our results and plan our strategies. Nonetheless, we cannot control changes in foreign currency exchange rates. Consequently, when our management analyzes our financial results including performance metrics such as sales, cost of goods sold or selling, general and administrative expense, to measure the core performance of our business, we may exclude the impact of foreign currency translation by translating our current period results at prior period foreign currency exchange rates. We also may exclude the impact of foreign currency translation when making incentive compensation determinations. As a result, our management believes that these presentations are useful internally and may be useful to investors.

Refer to these specific tables presented later in our Management’s Discussion and Analysis of Financial Condition and Results of Operations for reconciliations of these non-U.S. GAAP financial measures to their most directly comparable U.S. GAAP measures.

Free Cash Flow

In addition to net cash provided by operating activities, we use free cash flow as a useful measure of performance and an indication of the strength and ability of our operations to generate cash. We define free cash flow as cash provided by operating activities less capital expenditures (which is classified as an investing activity). Free cash flow is not defined under U.S. GAAP. Therefore, free cash flow should not be considered a substitute for net income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. Free cash flow does not represent residual cash available for discretionary expenditures, including certain debt servicing requirements or non-discretionary expenditures that are not deducted from this measure.

Refer to these specific tables presented later in our Management’s Discussion and Analysis of Financial Condition and Results of Operations under Analysis of Historical Cash Flow for reconciliations of these non-U.S. GAAP financial measures to their most directly comparable U.S. GAAP measures.

Highlights of Financial Performance

Below are the highlights of our financial performance for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,						%		Nine Months Ended September 30,						%
(In millions, except per share amounts)	2020			2019			Change		2020			2019			Change
Net sales	$	1,237.2		$	1,218.5		1.5	%	$	3,562.3		$	3,492.2		2.0	%
Gross profit	$	404.5		$	392.0		3.2	%	$	1,184.9		$	1,135.5		4.4	%
As a % of net sales	32.7		%	32.2		%			33.3		%	32.5		%
Operating profit	$	194.5		$	154.0		26.3	%	$	567.3		$	373.5		51.9	%
As a % of net sales	15.7		%	12.6		%			15.9		%	10.7		%
Net earnings from continuing operations	$	131.8		$	79.5		65.8	%	$	346.6		$	169.3		#
Gain (Loss) on sale of discontinued operations, net of tax	2.2			(11.5)			#		14.1			(10.6)			#

Net earnings	$	134.0		$	68.0		97.1	%	$	360.7		$	158.7		#
Basic:
Continuing operations	$	0.85		$	0.52		63.5	%	$	2.23		$	1.10		#
Discontinued operations	0.01			(0.08)			#		0.09			(0.07)			#
Net earnings per common share - basic	$	0.86		$	0.44		95.5	%	$	2.32		$	1.03		#
Diluted:
Continuing operations	$	0.85		$	0.51		66.7	%	$	2.22		$	1.09		#
Discontinued operations	0.01			(0.07)			#		0.09			(0.07)			#
Net earnings per common share - diluted	$	0.86		$	0.44		95.5	%	$	2.31		$	1.02		#
Weighted average numbers of common shares outstanding:
Basic	155.5			154.0					155.2			154.4
Diluted	156.1			154.8					155.8			155.2
Non-U.S. GAAP Adjusted EBITDA from continuing operations(1)	$	259.3		$	241.1		7.5	%	$	772.4		$	693.6		11.4	%
Non-U.S. GAAP Adjusted EPS from continuing operations(2)	$	0.82		$	0.64		28.1	%	$	2.30		$	2.04		12.7	%

# Denotes a variance greater or equal to 100% or equal to or less than (100)%.

(1)See “Non-U.S. GAAP Information” for a reconciliation of U.S. GAAP net earnings from continuing operations to non-U.S. GAAP Total Company Adjusted EBITDA from continuing operations.

(2)See “Non-U.S. GAAP Information” for a reconciliation of U.S. GAAP net earnings and diluted earnings per share from continuing operations to our non-U.S. GAAP Adjusted Net Earnings and Adjusted EPS from continuing operations.

Foreign Currency Translation Impact on Condensed Consolidated Financial Results

Since we are a U.S.-domiciled company, we translate our foreign currency-denominated financial results into U.S. dollars. Due to the changes in the value of foreign currencies relative to the U.S. dollar, translating our financial results from foreign currencies to U.S. dollars may result in a favorable or unfavorable impact. Historically, the most significant currencies that have impacted the translation of our Condensed Consolidated Financial Results are the euro, the Australian dollar, the Mexican peso, the British pound, the Canadian dollar, the Brazilian real and the Chinese Renminbi.

The following table presents the approximate favorable or (unfavorable) impact that foreign currency translation had on our Condensed Consolidated Financial Results from continuing operations:



(In millions)	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Net sales	$	(12.4)	$	(84.4)
Cost of sales	9.8		61.8
Selling, general and administrative expenses	(0.1)		7.1
Net earnings	(0.4)		(10.7)
Adjusted EBITDA	(2.0)		(16.5)

Net Sales by Geographic Region

The following table presents the components of the change in net sales by geographic region for the three and nine months ended September 30, 2020 compared with the same periods in 2019. We also present the change in net sales excluding the impact of foreign currency translation, a non-U.S. GAAP measure, which we define as “constant dollar”, and the change in net sales excluding acquisitions and divestitures and the impact of foreign currency translation, a non-U.S. GAAP measure, which we define as "organic." We believe using constant dollar and organic measures aids in the comparability between periods as it eliminates the volatility of changes in foreign currency exchange rates and large fluctuations due to acquisitions or divestitures.


	Three Months Ended September 30,
(In millions)	North America				EMEA				APAC				South America				Total
2019 Net Sales	$	729.4	59.9	%	$	250.0	20.5	%	$	180.8	14.8	%	$	58.3	4.8	%	$	1,218.5

Price	(10.8)		(1.5)	%	0.9		0.4	%	(0.1)		(0.1)	%	9.3		16.0	%	(0.7)		—	%
Volume(1)	12.9		1.8	%	(5.7)		(2.3)	%	2.3		1.3	%	(1.8)		(3.1)	%	7.7		0.6	%
Total organic change (non-U.S. GAAP)	2.1		0.3	%	(4.8)		(1.9)	%	2.2		1.2	%	7.5		12.9	%	7.0		0.6	%
Acquisitions	19.0		2.6	%	4.6		1.8	%	0.5		0.3	%	—		—	%	24.1		2.0	%
Total constant dollar change (non-U.S. GAAP)	21.1		2.9	%	(0.2)		(0.1)	%	2.7		1.5	%	7.5		12.9	%	31.1		2.6	%
Foreign currency translation	(5.3)		(0.7)	%	5.9		2.4	%	3.8		2.1	%	(16.8)		(28.9)	%	(12.4)		(1.1)	%
Total change (U.S. GAAP)	15.8		2.2	%	5.7		2.3	%	6.5		3.6	%	(9.3)		(16.0)	%	18.7		1.5	%

2020 Net Sales	$	745.2	60.2	%	$	255.7	20.7	%	$	187.3	15.1	%	$	49.0	4.0	%	$	1,237.2


	Nine Months Ended September 30,
(In millions)	North America				EMEA				APAC				South America				Total
2019 Net Sales	$	2,070.2	59.3	%	$	732.4	21.0	%	$	520.3	14.9	%	$	169.3	4.8	%	$	3,492.2

Price	(25.5)		(1.2)	%	(0.4)		—	%	(1.2)		(0.2)	%	28.9		17.1	%	1.8		0.1	%
Volume(1)	(10.4)		(0.5)	%	(15.1)		(2.1)	%	4.1		0.8	%	1.7		1.0	%	(19.7)		(0.6)	%
Total organic change (non-U.S. GAAP)	(35.9)		(1.7)	%	(15.5)		(2.1)	%	2.9		0.6	%	30.6		18.1	%	(17.9)		(0.5)	%
Acquisitions	133.5		6.4	%	33.0		4.5	%	5.6		1.0	%	0.3		0.2	%	172.4		4.9	%
Total constant dollar change (non-U.S. GAAP)	97.6		4.7	%	17.5		2.4	%	8.5		1.6	%	30.9		18.3	%	154.5		4.4	%
Foreign currency translation	(16.3)		(0.8)	%	(8.8)		(1.2)	%	(9.3)		(1.8)	%	(50.0)		(29.6)	%	(84.4)		(2.4)	%
Total change (U.S. GAAP)	81.3		3.9	%	8.7		1.2	%	(0.8)		(0.2)	%	(19.1)		(11.3)	%	70.1		2.0	%

2020 Net Sales	$	2,151.5	60.4	%	$	741.1	20.8	%	$	519.5	14.6	%	$	150.2	4.2	%	$	3,562.3

(1)Our volume reported above includes the net impact of changes in unit volume as well as the period-to-period change in the mix of products sold.

Net Sales by Segment

The following table presents the components of change in net sales by reportable segment for the three and nine months ended September 30, 2020 compared with the same periods in 2019. We also present the change in net sales excluding the impact of foreign currency translation, a non-U.S. GAAP measure, which we define as “constant dollar”, and the change in net sales excluding the impact of foreign currency translation and acquisitions and divestitures, a non-U.S. GAAP measure, which we define as "organic." We believe using constant dollar and organic measures aids in the comparability between periods as it eliminates the volatility of changes in foreign currency exchange rates and large fluctuations due to acquisitions or divestitures.


	Three Months Ended September 30,
(In millions)	Food				Protective				Total Company
2019 Net Sales	$	729.6	59.9	%	$	488.9	40.1	%	$	1,218.5
Price	4.0		0.5	%	(4.7)		(1.0)	%	(0.7)		—	%
Volume(1)	(13.7)		(1.8)	%	21.4		4.4	%	7.7		0.6	%
Total organic change (non-U.S. GAAP)	(9.7)		(1.3)	%	16.7		3.4	%	7.0		0.6	%
Acquisitions	—		—	%	24.1		4.9	%	24.1		2.0	%
Total constant dollar change (non-U.S.GAAP)	(9.7)		(1.3)	%	40.8		8.3	%	31.1		2.6	%
Foreign currency translation	(15.3)		(2.1)	%	2.9		0.6	%	(12.4)		(1.1)	%
Total change (U.S. GAAP)	(25.0)		(3.4)	%	43.7		8.9	%	18.7		1.5	%

2020 Net Sales	$	704.6	57.0	%	$	532.6	43.0	%	$	1,237.2


	Nine Months Ended September 30,
(In millions)	Food				Protective				Total Company
2019 Net Sales	$	2,120.6	60.7	%	$	1,371.6	39.3	%	$	3,492.2

Price	12.7		0.6	%	(10.9)		(0.8)	%	1.8		0.1	%
Volume(1)	4.5		0.2	%	(24.2)		(1.8)	%	(19.7)		(0.6)	%
Total organic change (non-U.S. GAAP)	17.2		0.8	%	(35.1)		(2.6)	%	(17.9)		(0.5)	%
Acquisitions	6.5		0.3	%	165.9		12.1	%	172.4		4.9	%
Total constant dollar change (non-U.S.GAAP)	23.7		1.1	%	130.8		9.5	%	154.5		4.4	%
Foreign currency translation	(76.2)		(3.6)	%	(8.2)		(0.6)	%	(84.4)		(2.4)	%
Total change (U.S. GAAP)	(52.5)		(2.5)	%	122.6		8.9	%	70.1		2.0	%

2020 Net Sales	$	2,068.1	58.1	%	$	1,494.2	41.9	%	$	3,562.3

(1)Our volume reported above includes the net impact of changes in unit volume as well as the period-to-period change in the mix of products sold.

The following net sales discussion is on a reported and constant dollar basis.

Food

Three Months Ended September 30, 2020 Compared with the Same Period in 2019

As reported, net sales decreased $25 million, or 3% in 2020 compared with 2019. Foreign currency had a negative impact of $15 million. On a constant dollar basis, net sales decreased $10 million, or 1% in 2020 compared with 2019 primarily due to the following:

•lower volume of $14 million, primarily due to lower sales resulting from softness in the global food service industry as well as labor challenges in meat processing plants.

This was partially offset by:

•favorable price of $4 million, primarily in South America driven by US dollar-based indexed pricing.

Nine Months Ended September 30, 2020 Compared with the Same Period of 2019

As reported, net sales decreased approximately $53 million, or 2%, in 2020 compared to 2019. Foreign currency had a negative impact of $76 million. On a constant dollar basis, net sales increased approximately $24 million, or 1%, in 2020 compared with 2019 primarily due to the following:

•favorable price of $13 million, primarily in South America on US dollar-based indexed pricing, partially offset by formula-based pricing in North America;

•contributions from acquisitions made in the first half of 2019 of approximately $7 million; and

•higher volume of $5 million, primarily driven by increased demand for protein packaging at the retail level due to COVID-19, partially offset by a decline in sales resulting from softness in the global food service industry as well as labor challenges in meat processing plants.

Protective

Three Months Ended September 30, 2020 Compared with the Same Period in 2019

As reported, net sales increased $44 million, or 9%, in 2020 as compared to 2019. Foreign currency had a positive impact of $3 million. On a constant dollar basis, net sales increased $41 million, or 8%, in 2020 compared with 2019 primarily due to the following:

•the contribution of $24 million in sales through July 2020 from the Automated acquisition; and

•higher organic volume of $21 million, primarily in North America, due to increased demand in e-Commerce, fulfillment and automated equipment.

These were partially offset by:

•unfavorable pricing of approximately $5 million, primarily in North America.

Nine Months Ended September 30, 2020 Compared with the Same Period of 2019

As reported, net sales increased $123 million, or 9%, in 2020 as compared to 2019. Foreign currency had a negative impact of $8 million. On a constant dollar basis, net sales increased $131 million, or 10%, in 2020 compared with 2019 primarily due to the following:

•the contribution of $166 million in sales through July 2020 from the Automated acquisition.

This was partially offset by:

•lower organic volume of $24 million, primarily in EMEA and North America. Decreased volumes were due to deteriorating global industrial manufacturing, partially offset by the increase in e-Commerce demand for consumer staples and medical supplies, both of which were driven by the impact of COVID-19; and

•unfavorable price of $11 million, primarily in North America.

Cost of Sales

Cost of sales for the three and nine months ended September 30, 2020 and 2019 were as follows:


	Three Months Ended September 30,						%		Nine Months Ended September 30,						%
(In millions)	2020			2019			Change		2020			2019			Change
Net sales	$	1,237.2		$	1,218.5		1.5	%	$	3,562.3		$	3,492.2		2.0	%
Cost of sales	832.7			826.5			0.8	%	2,377.4			2,356.7			0.9	%
As a % of net sales	67.3		%	67.8		%			66.7		%	67.5		%

Three Months Ended September 30, 2020 Compared with the Same Period in 2019

As reported, cost of sales increased by $6 million, or 0.8%, in 2020 compared to 2019. Cost of sales was impacted by favorable foreign currency translation of $10 million. As a percentage of net sales, cost of sales decreased by 50 basis points, from 67.8% for the three months ended September 30, 2019 to 67.3% for the three months ended September 30, 2020, primarily due to productivity improvements resulting from our Reinvent SEE initiatives and the impact of lower input costs benefiting price/cost spread during the quarter. Improvements were partially offset by the impact of lower organic volume, inflationary cost increases including non-material and labor and higher incentive compensation expense.

Nine Months Ended September 30, 2020 Compared with the Same Period of 2019

As reported, cost of sales increased by $21 million, or 0.9%, in 2020 as compared to 2019. Cost of sales was impacted by favorable foreign currency translation of $62 million. As a percentage of net sales, cost of sales decreased by 80 basis points, from 67.5% for the nine months ended September 30, 2019 to 66.7% for the nine months ended September 30, 2020, primarily due to productivity improvements resulting from our Reinvent SEE initiatives and lower input costs during the year. Improvements were partially offset by the impact of lower organic volume, inflationary cost increases including non-material and labor, and additional expenses related to COVID-19 (including personal protective gear, cleaning and other health and hygiene supplies and expenses), higher employment costs and incremental freight due to sourcing changes along with other higher manufacturing related costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") for the three and nine months ended September 30, 2020 and 2019 are included in the table below.


	Three Months Ended September 30,						%		Nine Months Ended September 30,						%
(In millions)	2020			2019			Change		2020			2019			Change
Selling, general and administrative expenses	$	199.3		$	221.6		(10.1)	%	$	577.9		$	699.9		(17.4)	%

As a % of net sales	16.1		%	18.2		%			16.2		%	20.0		%

Three Months Ended September 30, 2020 Compared with the Same Period in 2019

As reported, SG&A expenses decreased by $22 million, or 10%, in 2020 compared to 2019. The decrease is primarily driven by lower professional service fees associated with Special Items (primarily legal fees), cost benefits from restructuring actions associated with our Reinvent SEE transformation, lower restructuring associated spend and lower business travel related expenses. These improvements were partially offset by the impact of higher incentive compensation expense and labor inflation.

Nine Months Ended September 30, 2020 Compared with the Same Period of 2019

As reported, SG&A expenses decreased by $122 million, or 17%, in 2020 as compared to 2019. SG&A expenses were impacted by favorable foreign currency translation of $7 million. On a constant dollar basis, SG&A expenses decreased $115 million, or 16%. The decrease is primarily driven by the charge associated with the Novipax settlement incurred in 2019 as well as lower restructuring associated costs and lower professional service fees, including legal fees, associated with Special Items. SG&A has also benefited from reductions driven by our Reinvent SEE transformation, including restructuring associated savings. These improvements were partially offset by the impact of higher incentive compensation expense and labor inflation.

Amortization Expense of Intangible Assets Acquired

Amortization expense of intangible assets acquired for the three and nine months ended September 30, 2020 and 2019 were as follows:


	Three Months Ended September 30,						%		Nine Months Ended September 30,						%
(In millions)	2020			2019			Change		2020			2019			Change
Amortization expense of intangible assets acquired	$	9.7		$	9.5		2.1	%	$	28.0		$	18.5		51.4	%

As a % of net sales	0.8		%	0.8		%			0.8		%	0.5		%

Amortization expense of intangibles for the three months ended September 30, 2020 was approximately flat compared to the three months ending September 30, 2019. The increase in amortization expense of intangibles for the nine months ended September 30, 2020 was primarily related to our August 2019 acquisition of Automated and an increase in amortization for capitalized software.

Reinvent SEE Strategy and Restructuring Activities

See Note 13, “Restructuring Activities” for additional details regarding the Company’s restructuring programs discussed below.

In December 2018 the Sealed Air Board of Directors approved a three-year restructuring program as part of the Reinvent SEE Strategy.

Sealed Air has combined the program associated with Reinvent SEE with its previously existing restructuring program (as combined, “the Program”) that was largely related to the elimination of stranded costs following the sale of Diversey. For the nine months ended September 30, 2020, the Program generated incremental cost savings of $88 million related to reductions in operating costs, including $27 million from restructuring actions. In addition, savings realized related to actions impacting price cost spread were $12 million. We expect the Program to generate incremental cost savings of approximately $340 million by the end of 2021. We expect Program spend for the full year 2020 and 2021 to be in the range of $80 to $110 million.

We also recorded $7 million and $15 million in restructuring associated costs for the three and nine months ended September 30, 2020, respectively. Restructuring associated costs primarily relate to fees paid to third-party consultants in support of Reinvent SEE.

The actual timing of future costs and cash payments related to the Program described above are subject to change due to a variety of factors that may cause a portion of the costs, spending and benefits to occur later than expected. In addition, changes in foreign exchange rates may impact future costs, spending, benefits and cost synergies.

Interest Expense, net

Interest expense, net includes the stated interest rate on our outstanding debt, as well as the net impact of capitalized interest, interest income, the effects of interest rate swaps and the amortization of capitalized senior debt issuance costs and credit facility fees, bond discounts, and terminated treasury locks.

Interest expense, net for the three and nine months ended September 30, 2020 and 2019 was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2020		2019		Change		2020		2019		Change
Interest expense on our various debt instruments:
Term Loan A due August 2022(1)	$	1.6	$	2.7	$	(1.1)	$	7.2	$	2.7	$	4.5
Term Loan A due July 2023	0.9		2.1		(1.2)		4.0		6.4		(2.4)
Revolving credit facility due July 2023	0.4		0.4		—		1.1		1.1		—
6.50% Senior Notes due December 2020(2)	—		7.0		(7.0)		—		21.1		(21.1)
4.875% Senior Notes due December 2022	5.4		5.3		0.1		16.2		16.1		0.1
5.25% Senior Notes due April 2023	5.8		5.7		0.1		17.4		17.3		0.1
4.50% Senior Notes due September 2023	5.5		5.2		0.3		15.7		15.6		0.1
5.125% Senior Notes due December 2024	5.6		5.6		—		16.8		16.8		—
5.50% Senior Notes due September 2025	5.6		5.6		—		16.8		16.8		—
4.00% Senior Notes due December 2027(2)	4.4		—		4.4		13.1		—		13.1
6.875% Senior Notes due July 2033	7.8		7.8		—		23.3		23.3		—
Other interest expense	3.5		5.8		(2.3)		11.3		14.8		(3.5)
Less: capitalized interest	(1.2)		(2.5)		1.3		(4.4)		(6.4)		2.0
Less: interest income	(2.3)		(2.2)		(0.1)		(7.8)		(9.0)		1.2
Total	$	43.0	$	48.5	$	(5.5)	$	130.7	$	136.6	$	(5.9)

(1)On August 1, 2019, Sealed Air Corporation, on behalf of itself and certain of its subsidiaries, and Sealed Air Corporation (US) entered into an amendment to its existing senior secured credit facility with Bank of America, N.A., as agent, and the other financial institutions party thereto. The amendment provided for a new incremental term facility in an aggregate principal amount of up to $475 million, to be used, in part, to finance our acquisition of Automated. See Note 14, "Debt and Credit Facilities" for further details.

(2)In November 2019, the Company issued $425 million of 4.00% Senior Notes due 2027 and used the proceeds to retire the existing $425 million of 6.50% Senior Notes due 2020. See Note 14, "Debt and Credit Facilities" for further details.

Other (expense) income, net

Net foreign exchange transaction (loss) gain

For the three months ended September 30, 2020, we recorded $1.4 million in net foreign exchange transaction losses, within Other (expense) income, net in the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2020, we recorded $5 million in net foreign exchange transaction gain within Other (expense) income, net in the Condensed Consolidated Statements of Operations. The year to date income was primarily recognized in March as a result of volatile foreign currencies, particularly in emerging markets relative to the US Dollar due to macroeconomic conditions resulting from COVID-19. While we use financial instruments to hedge certain foreign currency exposures; however, this does not insulate us completely from foreign currency effects and exposes us to counterparty credit risk for non-performance.

See Note 22, “Other (expense) income, net,” for the remaining components of other (expense) income, net.

Income Taxes

Our effective income tax rate for the three and nine months ended September 30, 2020 was 12% and 22%, respectively.

For the three months ended September 30, 2020, the rate was positively impacted by GILTI regulations issued in the third quarter. For the nine months ended September 30, 2020, the rate was positively impacted by recently issued GILTI regulations and the favorable resolution of specific uncertain tax positions.

Our effective income tax rate for the three and nine months ended September 30, 2019 was 22% and 28%, respectively. The Company's effective income tax rate for the three month period ended September 30, 2019, was positively impacted by the benefits of U.S. Research and Development credits for current and prior periods and was negatively impacted by a U.S. audit

assessment related to the valuation of an Intellectual Property Transfer in a 2011. For the nine month period ended September 30, 2019, the Company's effective income tax rate was negatively impacted by U.S. audit assessments associated with 2011 and 2012 transactions. For the nine month period ended September 30, 2019, the Company's effective income tax rate was positively impacted by the benefits for the U.S. Research and Development credit for current and prior periods and the release of valuation allowance on deferred assets in Brazil related to improved profitability from Reinvent SEE initiatives.

Due to the uncertainty in projecting these items, it is possible that the actual effective tax rate used for financial reporting purposes will change in future periods. The Company expects its annual effective tax rate related to continuing operations for 2020 to be approximately 23% based on its projected mix of earnings, although the actual effective tax rate could vary from the anticipated rate as a result of many factors, including but not limited to the following:

•The actual mix of earnings by jurisdiction, which could fluctuate from the Company’s projection;

•The tax effects of other discrete items, including accruals related to tax contingencies, the resolution of worldwide tax matters, tax audit settlements, statute of limitations expirations and changes in tax regulations, which are reflected in the period in which they occur; and

•Any future legislative changes, and any related additional tax optimization to address these changes.

Our effective income tax rate depends upon the realization of our net deferred tax assets. We have deferred tax assets related to accruals not yet deductible for tax purposes, state and foreign net operating loss carryforwards and investment tax allowances, employee benefit items, and other items.

We have established valuation allowances to reduce our deferred tax assets to an amount that is more likely than not to be realized. Our ability to utilize our deferred tax assets depends, in part, upon our ability to carry back any losses created by the deduction of these temporary differences, the future income from existing temporary differences, and the ability to generate future taxable income within the respective jurisdictions during the periods in which these temporary differences reverse. If we are unable to generate sufficient future taxable income in the U.S. and certain foreign jurisdictions, or if there is a significant change in the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowances against our deferred tax assets. Conversely, if we have sufficient future taxable income in jurisdictions where we have valuation allowances, we may be able to reverse those valuation allowances.

There was a negligible change in our valuation allowances for the three and nine months ended September 30, 2020. The change in valuation allowance for the three months ended September 30, 2019 was not material. For the nine months ending September 30, 2019, there was an $8 million decrease in the valuation allowance in Brazil related to improved profitability from our Reinvent SEE initiatives.

We reported a net decrease of $2 million and $8 million, respectively, in unrecognized tax benefits during the three and nine months ended September 30, 2020, primarily related to the effective settlement of certain uncertain tax positions. We reported a net increase of $17 million and $26 million, respectively, during the three and nine months ended September 30, 2019, primarily related to research credits, an audit assessment in the U.S and interest accruals on existing positions. Interest and penalties on tax assessments are included in income tax expense.

Net Earnings from Continuing Operations

Net earnings for the three and nine months ended September 30, 2020 and 2019 are included in the table below.


	Three Months Ended September 30,				%		Nine Months Ended September 30,				%
(In millions)	2020		2019		Change		2020		2019		Change
Net earnings from continuing operations	$	131.8	$	79.5	65.8	%	$	346.6	$	169.3	104.7	%

Three Months Ended September 30, 2020 Compared with the Same Period in 2019

For the three months ended September 30, 2020, net earnings were favorably impacted by $5 million of Special Items, which were largely due to the benefit of one-time net tax related benefits (“Tax Special Items”) of $13 million. Tax Special Items were partially offset by $11 million ($7 million, net of taxes) of non-tax related Special Items, the largest of which was restructuring and other restructuring associated costs of $8 million ($6 million, net of taxes).

For the three months ended September 30, 2019, net earnings were unfavorably impacted by $20 million of Special Items, after tax, the largest of which resulted from $20 million ($15 million, net of taxes) in restructuring and restructuring associated costs mostly related to our Reinvent SEE program.

Nine Months Ended September 30, 2020 Compared with the Same Period of 2019

For the nine months ended September 30, 2020, net earnings were unfavorably impacted by $12 million of Special Items. Special Items included $39 million ($30 million, net of taxes) of non-tax related Special Items, primarily related to restructuring and other restructuring associated costs of $27 million ($20 million, net of taxes) and charges related to acquisition and divestiture activities of $5 million ($4 million, net of taxes). The impact of non-tax related Special Items was partially offset by Tax Special Items, including the resolution of specific uncertain tax positions, which benefited net earnings by $18 million.

For the nine months ended September 30, 2019, net earnings were unfavorably impacted by $148 million of Special Items after tax, which were primarily the result of a $94 million ($71 million, net of taxes) in restructuring and restructuring associated costs mostly related to our Reinvent SEE program and a $59 million ($44 million, net of taxes) charge related to the Novipax settlement.

Adjusted EBITDA by Segment

The Company evaluates performance of the reportable segments based on the results of each segment. The performance metric used by the Company's chief operating decision maker to evaluate the performance of our reportable segments is Adjusted EBITDA. We allocate and disclose depreciation and amortization expense to our segments, although depreciation and amortization are not included in the segment performance metric Adjusted EBITDA. We also allocate and disclose restructuring and other charges and impairment of goodwill and other intangible assets by segment, although they are not included in the segment performance metric Adjusted EBITDA since restructuring and other charges and impairment of goodwill and other intangible assets are categorized as Special Items. The accounting policies of the reportable segments and Corporate are the same as those applied to the Condensed Consolidated Financial Statements.

See "Non-U.S. GAAP Information” for a reconciliation of U.S. GAAP net earnings from continuing operations to non-U.S. GAAP Total Company Adjusted EBITDA from continuing operations.


	Three Months Ended September 30,						%		Nine Months Ended September 30,						%
(In millions)	2020			2019			Change		2020			2019			Change
Food	$	152.4		$	159.6		(4.5)	%	$	477.8		$	458.1		4.3	%
Adjusted EBITDA Margin	21.6		%	21.9		%			23.1		%	21.6		%
Protective	108.7			84.0			29.4	%	293.0			243.0			20.6	%
Adjusted EBITDA Margin	20.4		%	17.2		%			19.6		%	17.7		%
Corporate	(1.8)			(2.5)			28.0	%	1.6			(7.5)			121.3	%
Non-U.S. GAAP Total Company Adjusted EBITDA from continuing operations	$	259.3		$	241.1		7.5	%	$	772.4		$	693.6		11.4	%
Adjusted EBITDA Margin	21.0		%	19.8		%			21.7		%	19.9		%

The following is a discussion of the factors that contributed to the change in Adjusted EBITDA by segment during the three and nine months ended September 30, 2020, as compared to the same periods in the prior year.

Food

Three Months Ended September 30, 2020 Compared with the Same Period in 2019

On a reported currency basis, Adjusted EBITDA decreased $7 million in 2020 as compared to the same period in 2019. Adjusted EBITDA was impacted by unfavorable foreign currency translation of approximately $4 million. On a constant dollar basis, Adjusted EBITDA decreased approximately $3 million, or 2%, in 2020 compared with the same period in 2019 primarily due to the impact of:

•inflationary impact resulting in higher labor costs and non-raw material manufacturing costs as well as expenses related to COVID-19, partially offset by tighter spend control, including lower travel costs, resulting in a net unfavorable impact of approximately $16 million;

•lower volume and unfavorable product mix of $11 million due to softness in the global food service industry partially offset by strength in equipment; and

•higher incentive compensation accruals of approximately $4 million.

These decreases were partially offset by:

•Reinvent SEE benefits of $20 million driven by actions reducing operating costs by $19 million, including restructuring savings of $4 million, and improvements to price/cost spread of approximately $2 million; and

•favorable price/cost spread of $8 million.

Nine Months Ended September 30, 2020 Compared with the Same Period of 2019

On a reported currency basis, Adjusted EBITDA increased $20 million in 2020 as compared to the same period in 2019. Adjusted EBITDA was impacted by unfavorable foreign currency translation of $17 million. On a constant dollar basis, Adjusted EBITDA increased $37 million, or 8%, in 2020 compared with the same period in 2019 primarily due to the impact of:

•Reinvent SEE benefits of $67 million driven by actions reducing operating costs by approximately $59 million, including restructuring savings of $17 million, and improvements to price/cost spread of $9 million; and

•favorable price/cost spread of $22 million.

These increases were partially offset by:

•the inflationary impact resulting in higher labor costs and non-raw material manufacturing costs as well as higher expenses related to COVID-19, partially offset by tighter spend control, including lower travel costs, resulting in a net unfavorable impact of approximately $36 million;

•the impact of unfavorable product mix on sales volume of $9 million due to softness in the global food service industry partially offset by strength in food retail and equipment; and

•higher incentive compensation accruals of approximately $7 million.

Protective

Three Months Ended September 30, 2020 Compared with the Same Period in 2019

On a reported currency basis, Adjusted EBITDA increased $25 million in 2020 compared to the same period in 2019. Adjusted EBITDA was impacted by favorable foreign currency translation of $1 million. On a constant dollar basis, Adjusted EBITDA increased $24 million, or 28%, in 2020 compared with the same period in 2019 primarily as a result of:

•Reinvent SEE benefits of $12 million driven by actions reducing operating costs by $11 million, including restructuring savings of $2 million, and improvements to price/cost spread of $1 million;

•the benefit of lower operational expenses, excluding Reinvent SEE benefits, yielding a net improvement of $6 million, including the prior year impact of a $7 million non-cash inventory step-up charge associated with the Automated acquisition and lower segment sales and marketing expenses, partially offset by higher incentive compensation and labor inflation;

•$4 million, due to one additional month of contributions from Automated during the quarter following the August 1 close date in the prior year; and

•higher organic volume of $4 million due to strength in e-Commerce, fulfillment and automated equipment.

These increases were partially offset by:

•unfavorable price/cost spread of approximately $2 million.

Nine Months Ended September 30, 2020 Compared with the Same Period of 2019

On a reported currency basis, Adjusted EBITDA increased $50 million in 2020 as compared to the same period in 2019. Adjusted EBITDA was impacted by unfavorable foreign currency translation of $1 million. On a constant dollar basis, Adjusted EBITDA increased $51 million, or 21%, in 2020 compared with the same period in 2019 primarily as a result of:

•Reinvent SEE benefits of $33 million driven by actions reducing operating costs by $29 million, including restructuring savings of $10 million and improvements to price/cost spread of $4 million;

•contributions of $31 million from seven months of incremental Adjusted EBITDA from the Automated acquisition;

•the benefit of lower operational expenses, excluding Reinvent SEE benefits, yielding a net improvement of $3 million, including the prior year impact of a $7 million non-cash inventory step-up charge associated with the Automated acquisition and lower segment sales and marketing expenses, partially offset by higher incentive compensation and labor inflation; and

•favorable price/cost spread of $1 million.

These increases were partially offset by:

•organic volume decline resulting from the deteriorating industrial market of approximately $17 million.

Corporate

Three Months Ended September 30, 2020 Compared with the Same Period in 2019

The impact of Corporate Adjusted EBITDA during the three months ended September 30, 2020 was approximately flat compared to the same period in 2019.

Nine Months Ended September 30, 2020 Compared with the Same Period of 2019

The impact of Corporate was $9 million favorable change in the nine months ended September 30, 2020, primarily driven by foreign currency transaction gains recorded to the Condensed Consolidated Statements of Operations in 2020 compared to foreign currency transaction losses in 2019.

Liquidity and Capital Resources

Principal Sources of Liquidity

Our primary sources of cash are the collection of trade receivables generated from the sales of our products and services to our customers and amounts available under our existing lines of credit, under the Third Amended and Restated Syndicated Facility Agreement (as amended, the “Credit Facility”), and our accounts receivable securitization programs. Our primary uses of cash are payments for operating expenses, investments in working capital, capital expenditures, interest, taxes, stock repurchases, dividends, debt obligations, restructuring expenses and other long-term liabilities.

Throughout the year, COVID-19 has impacted global economic conditions, including, at times causing volatility in the global equity markets and the availability of credit and liquidity. We currently believe that our current liquidity position and future cash flows from operations will enable us to fund our operations, including all of the items mentioned above, over the next twelve months.

As of September 30, 2020, we had cash and cash equivalents of $317 million, of which approximately $235 million, or 74%, was located outside of the U.S. As of September 30, 2020, cash trapped outside of the U.S. was not material. Our U.S. cash balances and committed liquidity facilities available to U.S. borrowers are sufficient to fund our U.S. operating requirements, capital expenditures, current debt obligations and dividends. In the near term, we do not expect cash located outside of the U.S. will be needed to satisfy our obligations, dividends and other demands for cash in the U.S.

Cash and Cash Equivalents

The following table summarizes our accumulated cash and cash equivalents:



(In millions)	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	316.8	$	262.4

See “Analysis of Historical Cash Flow” below.

Accounts Receivable Securitization Programs

At September 30, 2020, we had $132 million available to us under our U.S. and European accounts receivable securitization programs, of which no amounts were borrowed. At December 31, 2019, we had $127 million available to us under our U.S. and Europeans programs of which we had no borrowings under the European or U.S. programs. See Note 10, “Accounts Receivable Securitization Programs” for information concerning these programs.

Our trade receivable securitization program represents a borrowing against outstanding customer receivables. Therefore, the use or repayment of borrowings under this program is classified as a financing activity within our Condensed Consolidated Statement of Cash Flows. We do not recognize the cash flow within operating activities until the outstanding invoice has been paid by our customer. The net trade receivables that served as collateral for these borrowings are reclassified from trade receivables, net to prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. See Note 10, “Accounts Receivables Securitization Programs” for further details.

Accounts Receivable Factoring Programs

We account for our participation in our customers' supply chain financing arrangements and our trade receivable factoring program in accordance with ASC 860 which allows the ownership transfer of accounts receivable to qualify for sale treatment when the appropriate criteria is met. As such, the Company excludes the balances sold under the programs from Trade receivable, net on the Condensed Consolidated Balance Sheets. The sale of outstanding receivables through these programs increases our cash flow from operating activities at the point they are factored. See Note 11, “Accounts Receivable Factoring Programs” for further details.

Gross amounts received under these programs for the nine months ended September 30, 2020 were $309 million, of which $87 million was received in the third quarter. If these programs had not been in effect for the nine months ended September 30, 2020, we would have been required to collect the invoice amounts directly from the relevant customers in accordance with the agreed payment terms. Approximately $50 million in incremental trade receivables would have been outstanding at September 30, 2020 if collection on such invoice amounts were made directly from our customers on the invoice due date and not through our customers' supply chain financing arrangements or our factoring program.

Lines of Credit

At September 30, 2020 and December 31, 2019, we had a $1.0 billion revolving credit facility. We had no amounts outstanding under the facility at September 30, 2020 and $89 million outstanding under the facility at December 31, 2019. There were $7 million and $10 million outstanding under various lines of credit extended to our subsidiaries at September 30, 2020 and December 31, 2019, respectively. See Note 14, “Debt and Credit Facilities” for further details.

LIBOR Phase Out

In July 2017, the United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. An alternative to LIBOR has been contemplated in many of our LIBOR-linked instruments and other financial obligations, including our Credit Facility. We do not expect the phase-out of LIBOR to have a material disruption or impact on our financing or liquidity. In March 2020, the FASB issued ASU 2020-04 to ease the potential burden in accounting for reference rate reform, however, neither the LIBOR phase out or the recently issued ASU is expected to have a material impact on the Company.

Covenants

At September 30, 2020, we were in compliance with our financial covenants and limitations, as discussed in “Covenants” within Note 14, “Debt and Credit Facilities”. As a result of our acquisition of Automated, the maximum covenant leverage ratio

of debt to EBITDA under our Credit Facility was temporarily increased to 5.00 to 1.00 through September 30, 2020. The maximum covenant leverage ratio has returned to 4.50 to 1.00 after September 30, 2020. At September 30, 2020, our leverage ratio of debt to EBITDA, as calculated under the covenant, was 2.83 to 1.00. We expect to be in continued compliance with our debt covenants including the covenant leverage ratio over the next 12 months.

Supply Chain Financing Programs

As part of our ongoing efforts to manage our working capital and improve our cash flow, we work with suppliers to optimize our purchasing terms and conditions, including extending payment terms. We also facilitate a voluntary supply chain financing program to provide some of our suppliers with the opportunity to sell receivables due from us (our accounts payables) to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. These programs are administered by participating financial institutions. Should the supplier choose to participate in the program, it will receive payment from the financial institution in advance of agreed payment terms; our responsibility is limited to making payments to the respective financial institutions on the terms originally negotiated with our supplier. The range of payment terms is consistent regardless of a vendor's participation in the program. We monitor our days payable outstanding relative to our peers and industry trends in order to assess our conclusion that these programs continue to be trade payable programs and not indicative of borrowing arrangements. The liabilities continue to be presented as trade payables in our consolidated balance sheets until they are paid, and they are reflected as cash flows from operating activities when settled.

As of September 30, 2020, our accounts payable balance included $150 million related to invoices from suppliers participating in the programs. As of December 31, 2019, our accounts payable balance included $157 million related to invoices from suppliers participating in the programs. The cumulative amounts settled through the supply chain financing programs for the nine months ended September 30, 2020 were $317 million. These programs did not significantly improve our cash provided by operating activities or free cash flow for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Debt Ratings

Our cost of capital and ability to obtain external financing may be affected by our debt ratings, which the credit rating agencies review periodically. Below is a table that sets forth our credit ratings by the various types of debt.

Moody’s Investor
Services

Standard
& Poor’s

Corporate Rating

Ba2

BB+

Senior Unsecured Rating

Ba3

BB+

Senior Secured Credit Facility Rating

Baa3

BBB-

Outlook

Stable

These credit ratings are considered to be below investment grade (with the exception of the Baa3 and BBB- Senior Secured Credit Facility Rating from Moody’s Investor Services and Standard & Poor’s, respectively, which are classified as investment grade). If our credit ratings are downgraded, there could be a negative impact on our ability to access capital markets and borrowing costs could increase. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating.

Outstanding Indebtedness

At September 30, 2020 and December 31, 2019, our total debt outstanding consisted of the amounts set forth in the following table.




(In millions)	September 30, 2020		December 31, 2019
Short-term borrowings	$	7.4	$	98.9
Current portion of long-term debt	21.8		16.7
Total current debt	29.2		115.6
Total long-term debt, less current portion(1)	3,710.1		3,698.6
Total debt	3,739.3		3,814.2
Less: Cash and cash equivalents	(316.8)		(262.4)
Net Debt	$	3,422.5	$	3,551.8

(1)Amounts shown are net of unamortized discounts and debt issuance costs of $21 million as September 30, 2020 and $25 million as of December 31, 2019. See Note 14, “Debt and Credit Facilities” for further details.

Analysis of Historical Cash Flow

The following table shows the changes in our Condensed Consolidated Statements of Cash Flows during the nine months ended September 30, 2020 and 2019.


	Nine Months Ended September 30,
(In millions)	2020		2019		Change
Net cash provided by operating activities	$	410.2	$	251.2	$	159.0
Net cash used in investing activities	(101.1)		(615.4)		514.3
Net cash (used in) provided by financing activities	(217.1)		295.4		(512.5)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(37.6)		(2.9)		(34.7)


	Nine Months Ended September 30,
(In millions)	2020		2019		Change
Cash flow provided by operating activities	$	410.2	$	251.2	$	159.0
Capital expenditures	(118.3)		(141.6)		23.3
Non-U.S. GAAP free cash flow	$	291.9	$	109.6	$	182.3

Operating Activities

Nine Months Ended September 30, 2020 Compared with the Same Period in 2019

Net cash provided by operating activities was $410 million in the nine months ended September 30, 2020, compared to $251 million in 2019. The increase in cash provided by operating activities was primarily driven by higher earnings and adjustments to reconcile net earnings to net cash provided by operating activities (“non-cash adjustments”) recorded in 2020 compared to the same period in 2019. Net earnings plus non-cash adjustments was a source of cash of $539 million in 2020 compared to $331 million in the nine months ended September 30, 2019. Depreciation and amortization, including share-based

incentive compensation, and profit sharing expense was $182 million in the current year compared to $147 million in the prior year due to higher depreciation and amortization from our Automated acquisition and higher incentive compensation on performance-based metrics.

Higher cash flow generated by increased year over year net earnings plus non-cash adjustments were partially offset by the impact of other assets and liabilities, which was a use of cash of $58 million in the nine months ended September 30, 2020, compared to a source of cash of $2 million in the prior year. Year-over-year changes in our restructuring accrual and uncertain tax position liability had an unfavorable impact to cash flow provided by operating activities of $21 million and $35 million, respectively. Additionally, higher cash contributions to our global pension plans and payments associated with the deferred incentive compensation plan for Automated's European employees resulted in higher cash outflow but were partially offset by increases to payroll tax and Value Added Tax (VAT) accruals.

Cash used by our working capital accounts (inventories, trade receivables and accounts payable) was $127 million in the nine months ended September 30, 2020, compared to $103 million in the prior year. An increase in cash used for inventory was driven by a purposeful build in the second quarter 2020 for contingency planning against the risk of raw material shortages or supply disruptions resulting from the COVID-19 pandemic. The year over year changes in trade receivables and accounts payable were largely to due timing of cash receipts and payments.

Cash generated from customer advance payments increased approximately $4 million in the current year, as the Company focuses on advancing automation and equipment sales.

Investing Activities

Nine Months Ended September 30, 2020 Compared with the Same Period in 2019

Net cash used in investing activities was $101 million in the nine months ended September 30, 2020 compared to $615 million used in the nine months ended September 30, 2019. The change was primarily due to the prior year acquisition of Automated which represented a cash outflow of $446 million. Additionally, capital expenditures were $23 million lower during the nine months ended September 30, 2020 compared to the prior year, as the Company prioritized investments. The maturity of cash deposits with maturities greater than 90 days (marketable securities) and subsequent conversion to cash equivalents generated $13 million in the current year compared to a use of cash of $10 million in the nine months ended September 30, 2019 related to the purchase of time deposits.

Financing Activities

Nine Months Ended September 30, 2020 Compared with the Same Period in 2019

Net cash used in financing activities was $217 million in the nine months ended September 30, 2020, compared to $295 million provided by financing activities in 2019. The change was primarily due to $475 million of proceeds from long term debt in 2019 related to the acquisition of Automated and higher payments on short-term borrowings of $79 million in the current year. Payments on short-term borrowings represents the repayment of amounts outstanding on our credit facility. This was partially offset by a reduction in share repurchases, which were $20 million in the nine months ended September 30, 2020 compared to $67 million for the nine months ended September 30, 2019.

Changes in Working Capital

(In millions)

September 30, 2020

December 31, 2019

Change

Working capital (current assets less current liabilities)

354.2

127.8

226.4

Current ratio (current assets divided by current liabilities)

1.3x

1.1x

Quick ratio (current assets, less inventories divided by current liabilities)

0.8x

0.7x

The $226 million, or 177%, increase in working capital in the nine months ended September 30, 2020 was primarily due to a $92 million decrease in short-term borrowings, a $61 million increase in inventory, a $54 million increase in cash and cash equivalents and a $33 million decrease in other current liabilities, partially offset by a $31 million increase in income taxes payable, primarily on the US income tax accrual. The decrease in short-term borrowings was primarily driven by the credit facility which did not have an outstanding balance as of September 30, 2020. The inventory increase was driven by a purposeful build in the second quarter 2020 for contingency planning against the risk of raw material shortages or supply disruptions

resulting from the COVID-19 pandemic as well as some seasonality in our inventory balance between year-end and the third quarter. The decrease in other current liabilities reflects the settlement of performance-based compensation, profit sharing, volume rebate accruals and certain claims, partially offset by current period accruals.

Changes in Stockholders’ Equity (Deficit)

The $221 million, or 113%, increase in stockholders’ equity (deficit) in the nine months ended September 30, 2020 was primarily due to the following:

•net earnings of $361 million;

•stock issued for profit sharing contribution paid in stock of $24 million;

•the effect of share-based incentive compensation of $21 million, including the impact of share-based compensation expense and netting of shares to cover the employee tax withholding amounts; and

•recognition of pension items of $4 million.

These increases were partially offset by:

•cumulative translation adjustment of $78 million;

•dividends paid on our common stock of $75 million;

•repurchases of common stock of $20 million; and

•unrealized losses on derivative instruments of $16 million.

We repurchased 0.5 million shares of our common stock during the nine months ended September 30, 2020 for $20 million. See Note 20, “Stockholders’ Equity (Deficit)” for further details.

Derivative Financial Instruments

Interest Rate Swaps

The information set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q in Note 15, “Derivatives and Hedging Activities” under the caption “Interest Rate Swaps” is incorporated herein by reference.

Net Investment Hedge

The information set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q in Note 15, “Derivatives and Hedging Activities” under the caption “Net Investment Hedge” is incorporated herein by reference.

Other Derivative Instruments

The information set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q in Note 15, “Derivatives and Hedging Activities” under the caption “Other Derivative Instruments” is incorporated herein by reference.

Foreign Currency Forward Contracts

At September 30, 2020, we were party to foreign currency forward contracts, which did not have a significant impact on our liquidity.

The information set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q in Note 15, “Derivatives and Hedging Activities” under the caption “Foreign Currency Forward Contracts Designated as Cash Flow Hedges” and “Foreign Currency Forward Contracts Not Designated as Hedges” is incorporated herein by reference. For further discussion about these contracts and other financial instruments, see Part I, Item 3, “Quantitative and Qualitative Disclosures About Market Risk.”

Recently Issued Statements of Financial Accounting Standards, Accounting Guidance and Disclosure Requirements

We are subject to numerous recently issued statements of financial accounting standards, accounting guidance and disclosure requirements. Note 2, “Recently Adopted and Issued Accounting Standards” which is contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, describes these new accounting standards and is incorporated herein by reference.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates from those disclosed in our 2019 Form 10-K. For a discussion of our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in Part II, Item 7 of our 2019 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in the conditions in the global financial markets, interest rates, foreign currency exchange rates and commodity prices and the creditworthiness of our customers and suppliers, which may adversely affect our Condensed Consolidated Financial Condition and Results of Operations. We seek to minimize these risks through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We do not purchase, hold or sell derivative financial instruments for trading purposes.

Interest Rates

From time to time, we may use interest rate swaps, collars or options to manage our exposure to fluctuations in interest rates. At September 30, 2020, we had no outstanding interest rate swaps or collars.

The information set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q in Note 15, “Derivatives and Hedging Activities” of the Notes to Condensed Consolidated Financial Statements under the caption “Interest Rate Swaps,” is incorporated herein by reference.

See Note 16, “Fair Value Measurements and Other Financial Instruments,” of the Notes to Condensed Consolidated Financial Statements for details of the methodology and inputs used to determine the fair value of our fixed rate debt. The fair value of our fixed rate debt 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. A hypothetical 10% increase in interest rates would result in a decrease of $49 million in the fair value of the total debt balance at September 30, 2020. These changes in the fair value of our fixed rate debt do not alter our obligations to repay the outstanding principal amount or any related interest of such debt.

Foreign Exchange Rates

Operations

As a large global organization, we face exposure to changes in foreign currency exchange rates. These exposures may change over time as business practices evolve and could materially impact our financial condition and results of operations in the future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” above for the impacts that foreign currency translation had on our operations.

Current Economic Environment

The economic conditions resulting from COVID-19 have created significant volatility in global foreign currency exchange rates, particularly late in the first quarter 2020. Foreign currency exchange rates between the US Dollar and currencies of emerging markets were more acutely impacted. In addition to the currencies discussed below, the Mexican Peso has exposed us to heightened levels of foreign currency exchange risks. Total sales in Mexico represented approximately 3% of our consolidated net sales for the nine months ended September 30, 2020, and our Mexican subsidiaries had a negative cumulative translation adjustment balance of $23 million.

Argentina

Economic events in Argentina, including the default on some of its international debt obligations, have exposed us to heightened levels of foreign currency exchange risks. Despite some recent debt restructuring, fluctuations in foreign exchange rates on the Argentine Peso continue to impact our financial results. As of July 1, 2018, Argentina was designated as a highly inflationary economy. For the three and nine months ended September 30, 2020 and 2019, we recognized a net foreign currency exchange loss of $1 million and $3 million, respectively, in foreign currency exchange loss due to highly inflationary economies on the Condensed Consolidated Statements of Operations, related to the designation of Argentina as a highly inflationary economy under U.S. GAAP. See Note 1, "Organization and Basis of Presentation," of the Notes to Condensed Consolidated Financial Statements for additional information. As of September 30, 2020, approximately 1% of our consolidated

net sales were derived from products sold in Argentina, and our net assets include $11 million of cash and cash equivalents in Argentina. Also, as of September 30, 2020, our Argentina subsidiaries had a negative cumulative translation adjustment balance of $24 million.

Russia

The U.S. and the European Union (EU) have imposed sanctions on various sectors of the Russian economy and on transactions with certain Russian nationals and entities. Russia has also announced economic sanctions against the U.S. and other nations that include a ban on imports of certain products. These sanctions are not expected to have a material impact on our business as much of the operations in Russia support local production; however, they may limit the amount of future business the Company does with customers involved in activities in Russia. However, as of September 30, 2020, we do not anticipate these events will have a material impact to our 2020 result of operations. As of September 30, 2020, approximately 2% of our consolidated net sales were derived from products sold in Russia, and our net assets include $22 million of cash and cash equivalents in Russia. Also, as of September 30, 2020, our Russian subsidiaries had a negative cumulative translation adjustment balance of $42 million.

Brazil

Recent economic events in Brazil, including the decrease in the benchmark interest rate set by the Brazilian Central Bank, have exposed us to heightened levels of foreign currency exchange risks. However, as of September 30, 2020, we do not anticipate these events will have a material impact on our 2020 results of operations. As of September 30, 2020, approximately 2% of our consolidated net sales were derived from products sold in Brazil, and net assets include $13 million of cash and cash equivalents in Brazil. Also, as of September 30, 2020, our Brazil subsidiaries had a negative cumulative translation adjustment balance of $65 million.

United Kingdom

On January 31, 2020, the United Kingdom (UK) exited the European Union (referred to as "Brexit"). The UK has agreed to abide by EU rules during a transition period until the end of the 2020, at which point the EU and the UK expect to have agreements in place regarding future ties including trade, customs, commerce and travel. Although the UK and the EU continue to work out terms of the final arrangements and agreements, particularly around trade, the Company has taken steps to mitigate the impact of Brexit.

As of September 30, 2020, we do not anticipate the above events will have a material impact on our 2020 results of operations. As of September 30, 2020, approximately 3% of our consolidated net sales were derived from products sold in the UK and our net assets include $5 million of cash and cash equivalents in the UK. Also, as of September 30, 2020, our UK subsidiaries had a negative cumulative translation adjustment balance of $26 million.

Foreign Currency Forward Contracts

We use foreign currency forward contracts to fix the amounts payable or receivable on some transactions denominated in foreign currencies. A hypothetical 10% adverse change in foreign exchange rates at September 30, 2020 would have caused us to pay approximately $29 million to terminate these contracts. Based on our overall foreign exchange exposure, we estimate this change would not materially affect our financial position and liquidity. The effect on our results of operations would be substantially offset by the impact of the hedged items.

Our foreign currency forward contracts are described in Note 15, “Derivatives and Hedging Activities,” of the Notes to Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q which is incorporated herein by reference.

Net Investment Hedge

The €400.0 million 4.50% notes issued in June 2015 are designated as a net investment hedge, hedging a portion of our net investment in a certain European subsidiary against fluctuations in foreign exchange rates. The change in the translated value of the debt was $15 million, net of tax as of September 30, 2020 and is reflected in long-term debt on our Condensed Consolidated Balance Sheets.

In March 2015, we entered into a series of cross-currency swaps with a combined notional amount of $425 million, hedging a portion of the net investment in a certain European subsidiary against fluctuations in foreign exchange rates. As a

result of the sale of Diversey, we terminated these cross-currency swaps in September 2017 and settled these swaps in October 2017. The fair value of the swaps on the date of termination was a liability of $62 million which was partially offset by semi-annual interest settlements of $18 million. This resulted in a net impact of $(44) million which is recorded in AOCL.

For derivative instruments that are designated and qualify as hedges of net investments in foreign operations, settlements and changes in fair values of the derivative instruments are recognized in unrealized net gains or loss on derivative instruments for net investment hedge, a component of accumulated other comprehensive loss, net of taxes, to offset the changes in the values of the net investments being hedged. Any portion of the net investment hedge that is determined to be ineffective is recorded in other (expense) income, net on the Condensed Consolidated Statements of Operations.

Other Derivative Instruments

Outstanding Debt

Our outstanding debt is generally denominated in the functional currency of the borrower or in euros as is the case with the issuance of €400 million of 4.50% senior notes due 2023. We believe that this enables us to better match operating cash flows with debt service requirements and to better match the currency of assets and liabilities. The amount of outstanding debt denominated in a functional currency other than the U.S. dollar was $517 million at September 30, 2020 and $500 million at December 31, 2019.

Customer Credit

Effective January 1, 2020, the Company adopted ASU 2016-13, which requires us to measure all expected credit losses for trade receivables held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts.

We are exposed to credit risk from our customers. In the normal course of business, we extend credit to our customers if they satisfy pre-defined credit criteria. We maintain an allowance for credit losses on trade receivables for estimated losses resulting from the failure of our customers to make required payments. An additional allowance may be required if the financial condition of our customers deteriorates. Our customers may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. See Note 12, "Credit Losses," of the Notes to Condensed Consolidated Financial Statements for further details.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended, that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that our employees accumulate this information and communicate it to our management, including our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), as appropriate, to allow timely decisions regarding the required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only “reasonable assurance” of achieving the desired control objectives, and management necessarily must apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures under Rule 13a-15. Our management, including our Chief Executive Officer and Chief Financial Officer, supervised and participated in this evaluation. Based upon that evaluation, our Chief

Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the “reasonable assurance” level.

Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting during the three months ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q in Note 19, “Commitments and Contingencies” under the captions “Settlement Agreement Tax Deduction” and “Environmental Matters” is incorporated herein by reference. See also Part I, Item 3, “Legal Proceedings,” of our 2019 Form 10-K, as subsequently updated by our Quarterly Reports on Form 10-Q, as well as the information incorporated by reference in that item.

On November 1, 2019, purported Company stockholder UA Local 13 & Employers Group Insurance Fund filed a putative class action complaint in the United States District Court for the Southern District of New York against the Company and certain of its current and former officers. On June 4, 2020, the complaint was amended to remove all individual defendants other than the Company’s former CFO and to add a plaintiff, and on July 13, 2020, the complaint was further amended to identify a total of four plaintiffs. The complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder based on allegedly false and misleading statements and omissions concerning the Company’s hiring of Ernst & Young LLP as its independent auditors and concerning the Company’s corporate policies and procedures. The plaintiffs seek to represent a class of purchasers of the Company’s common stock between November 17, 2014 and June 20, 2019. The complaint seeks, among other things, unspecified compensatory damages, including interest, and attorneys’ fees and costs. On September 4, 2020, the Company filed a motion to dismiss the complaint, and after briefing the motion, will await a decision by the court.

On January 14, 2020, a stockholder derivative lawsuit was filed in the United States District Court for the District of Delaware by an alleged stockholder of the Company, purportedly on the Company’s behalf. The suit was brought against certain of the Company’s current and former directors and officers and against the Company, as a nominal defendant. The complaint contains allegations against the individual defendants under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder similar to those in the class action complaint discussed above, as well as allegations of violations of Section 14(a) under the Exchange Act. The complaint also alleges breach of fiduciary duty, unjust enrichment and waste of corporate assets by the individual defendants for, among other things, failure to correct the alleged false and misleading statements, insider sales of the company’s stock, compensation benefiting from the alleged artificially inflated stock value, company repurchases of shares based on the alleged inflated stock value, and costs in connection with lawsuits and internal investigations. The complaint seeks unspecified damages for Sealed Air, restitution, and reformation and improvement of Sealed Air’s corporate governance and internal procedures regarding compliance with laws. On May 8, 2020, this lawsuit was stayed pending resolution of a motion to dismiss the putative class action described above.

The Company has received from the staff of the SEC subpoenas for documents and requests for information in connection with the SEC's previously disclosed investigation. Those subpoenas and requests seek documents and information regarding the Company's accounting for income taxes, its financial reporting and disclosures, the process by which the Company selected its former independent audit firm which audited the fiscal years of 2015 through 2018, the independence of that audit firm, and other matters.

The Company is fully cooperating with the SEC and cannot predict the outcome or duration of the investigation.

Following the announcement on June 20, 2019 that the Company had terminated the employment of William G. Stiehl as Chief Financial Officer, the Company received a Grand Jury subpoena from the United States Attorney's Office for the Western District of North Carolina (the "U.S. Attorney's Office") seeking documents relating to that termination and relating to the process by which the Company selected its former independent audit firm for the fiscal years of 2015 through 2018. The Company has been advised by the U.S. Attorney's Office that it has completed its investigation of these matters and will not be taking any action.

Item 1A. Risk Factors.

Reference is made to Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for information concerning risks that may materially affect our business, financial condition or results of

operations, which we are supplementing with the risk factor discussed below. In addition to the risk factor discussed below, the impact of the COVID-19 pandemic may also exacerbate other risks discussed in Item 1A, “Risk Factors,” in our Form 10-K, any of which could have a material effect on our business.

The COVID-19 pandemic could adversely impact our business, results of operations, financial position and cash flows.

Even though our business operations are deemed essential by many governmental agencies, there could be unpredictable disruptions to the Company’s operations or our customer operations as a result of the current COVID-19 pandemic. We and some of our customers have experienced facility shutdowns during the pandemic. Unpredictable disruptions to the Company’s operations or our customers' operations could reduce our future revenues and negatively impact the Company’s financial condition. The COVID-19 pandemic may result in supply chain and operational disruptions such as the availability and transportation of raw materials or the ability for our packaging and equipment specialists to visit customer facilities. Affected employees could impact the Company’s ability to operate our facilities and distribute products to our customers in a timely fashion.

In addition, the COVID-19 pandemic has resulted in volatility and disruptions in the capital and credit markets as well as widespread economic deterioration including an increase in global unemployment. This economic and market volatility and loss of employment may negatively impact consumer buying habits, which could adversely affect the Company’s financial results.

The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below sets forth the total number of shares of our common stock, par value $0.10 per share, that we repurchased in each month of the quarter ended September 30, 2020, the average price paid per share and the maximum approximate dollar value of shares that may yet be purchased under our publicly announced plans or programs.


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
	(a)	(b)		(c)	(d)
Balance as of June 30, 2020					$	707,648,181
July 1, 2020 through July 31, 2020	—	$	—	—	707,648,181
August 1, 2020 through August 31, 2020	1,343	$	—	—	707,648,181
September 1, 2020 through September 30, 2020	522,524	$	38.37	521,498	687,637,375
Total	523,867			521,498	$	687,637,375

(1)On May 2, 2018, the Board of Directors increased the total authorization to repurchase the Company's issued and outstanding stock to $1.0 billion. This new program has no expiration date and replaces the previous authorizations. From time to time we acquire shares by means of (i) open-market transactions, including through plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and privately negotiated transactions, including accelerated share repurchase programs, pursuant to our publicly announced program described above, (ii) shares withheld from awards under our Omnibus Incentive Plan pursuant to the provision thereof that permits tax withholding obligations or other legally required charges to be satisfied by having us withhold shares from an award under that plan and (iii) shares reacquired pursuant to the forfeiture provision of our Omnibus Incentive Plan. We report price calculations in column (b) in the table above only for shares purchased as part of our publicly announced program, when applicable. For shares withheld for tax withholding obligations or other legally required charges, we withhold shares at a price equal to their fair market value. We do not make payments for shares reacquired by the Company pursuant to the forfeiture provision of the Omnibus Incentive Plan as those shares are simply forfeited.


Period	Shares withheld for tax obligations and charges	Average withholding price for shares in column (a)
	(a)	(b)
July 2020	—	$	—
August 2020	1,343	$	38.75
September 2020	1,026	$	38.52
Total	2,369

Item 6. Exhibits


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 February 12, 2020, File No. 1-12139, is incorporated herein by reference.)

31.1						Certification of Edward L. Doheny II pursuant to Rule 13a-14(a), dated October 28, 2020.
31.2						Certification of James M. Sullivan pursuant to Rule 13a-14(a), dated October 28, 2020.
32						Certification of Edward L. Doheny II and James M. Sullivan pursuant to 18 U.S.C. § 1350, dated October 28, 2020.
101.INS						Inline XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained within Exhibit 101)

SIGNATURE

Pursuant to the requirements 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

Date: October 28, 2020	By:	/S/ JAMES M. SULLIVAN
		James M. Sullivan
		Senior Vice President and Chief Financial Officer (Duly Authorized Officer)