Stockholders' Equity

3 Months Ended

Mar. 31, 2014

Equity [Abstract]

Stockholders' Equity

(15) Stockholders’ Equity

Quarterly Cash Dividends

On February 18, 2014, our Board of Directors declared a quarterly cash dividend of $0.13 per common share, or $28 million paid on March 21, 2014 to stockholders of record at the close of business on March 7, 2014.

The dividend payments for the three months ended March 31, 2014 discussed above are recorded as reductions to cash and cash equivalents and retained earnings on our condensed consolidated balance sheets. Our credit facility and our senior 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 financial condition and results of operations. There is no guarantee that our Board of Directors will declare any further dividends.

Stock Appreciation Rights (“SARs”)

In connection with the acquisition of Diversey, Sealed Air exchanged Diversey’s cash-settled stock appreciation rights and stock options that were unvested as of May 31, 2011 and unexercised at October 3, 2011 into cash-settled stock appreciation rights based on Sealed Air common stock. As of March 31, 2014, total outstanding SARs was 0.8 million, and the total remaining unvested SARs was 0.3 million. The weighted average remaining vesting life of outstanding SARs was less than one year.

Since these SARs are settled in cash, the amount of the related expense has fluctuated and the related future expense will fluctuate based on exercise and forfeiture activity and the changes in the assumptions used in a Black-Scholes valuation model, which include Sealed Air’s stock price, risk-free interest rates, expected volatility and a dividend yield. In addition, once vested, the related expense will continue to fluctuate due to the changes in the assumptions used in the Black-Scholes valuation model for any SARs that are not exercised until their respective expiration dates, the last of which is currently in March 2021.

We recognized SARs expense of $1 million in the three months ended March 31, 2014 and $18 million in the three months ended March 31, 2013, related to SARs that were granted to Diversey employees who remained employees as of March 31, 2014 and 2013. Cash payments due to the exercise of these SARs were $14 million for the three months ended March 31, 2014 and $17 million for the three months ended March 31, 2013. As of March 31, 2014, the liability for the remaining outstanding SARs was $20 million and is included in other current ($11 million) and non-current liabilities ($9 million) on the condensed consolidated balance sheet.

In addition to the amounts discussed above, we recognized restructuring expense of less than $1 million in the three months ended March 31, 2014 and 2013 for SARs payments that were part of the termination and benefit costs for employees under the IOP. This expense was included in restructuring and other charges on our condensed consolidated statements of operations. There were no cash payments due to the exercise of these SARs for the three months ended March 31, 2014. The remaining liability for SARs included in the restructuring programs was less than $1 million as of March 31, 2014.

Share-based Incentive Compensation

We record share-based incentive compensation expense in selling, general and administrative expenses on our condensed consolidated statements of operations with a corresponding credit to additional paid-in capital within stockholders’ equity based on the fair value of the share-based incentive compensation awards at the date of grant. We recognize an expense or credit reflecting the straight-line recognition, net of estimated forfeitures, of the expected cost of the program. For the various performance share unit (“PSU”) awards programs and our stock leverage opportunity (“SLO”) award programs, the cumulative amount accrued to date is adjusted up or down to the extent the expected performance against the targets has improved or worsened for the performance conditions components of the awards.

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

	Three Months Ended March 31,
	2014		2013
Total share-based incentive compensation expense(1)	$	14.5	$	7.6

⁽¹⁾  The amounts included 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 SARs as such contributions are not considered share-based incentive compensation.

Special PSU Program for 2014

During March 2014, the Compensation Committee approved a special PSU award to the executive officers and a broader group of other employees under the 2005 Contingent Stock Plan. The following summarizes the key features of the PSU awards:

• The PSU awards are earned principally based on achievement of specified levels of free cash flow (as defined in the award), above targets established in the Company’s three-year strategic plan, over the three-year performance period of 2014-2016.

• In addition, no portion of an award is earned unless we achieve a minimum specified level of cumulative earnings per share during the performance period, in order to balance the free cash flow goal with an appropriate focus on generating earnings.

• To further balance the incentives, the amount earned based on free cash flow performance will be reduced by 25% if our relative TSR (as defined in the award) for the performance period is below a certain percentile of an approved peer group of companies.

• Any PSUs earned will be paid out in equal installments over two years, in early 2017 and, subject to an additional 2017 performance requirement, in early 2018.

These PSU awards are in addition to other 2014 long-term incentive compensation opportunities. We recognized $2 million of share-based compensation expense related to this award in the three months ended March 31, 2014.

Accumulated Other Comprehensive Loss

Included in stockholders’ equity on our condensed consolidated balance sheets is accumulated other comprehensive loss, the majority of which is unrecognized pension items of $144 million as of March 31, 2014. For the three months ended March 31, 2014, we reclassified $2 million of unrecognized pension items, net of taxes from accumulated other comprehensive income to other assets and other liabilities on the condensed consolidated balance sheets. See Note 15, “Profit Sharing, Retirement Savings Plans and Defined Benefit Plans,” of the Notes to the Condensed Consolidated Financial Statements included in our 2013 Annual Report on Form 10-K for additional information related to unrecognized pension items included in accumulated other comprehensive loss.