Stockholders' Equity

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Stockholders' Equity

(15) Stockholders’ Equity

Repurchase of Common Stock

On June 13, 2014, Sealed Air repurchased $130 million, or 3,932,244 shares, of common stock at a price of $33.06 per share from the WRG Asbestos PI Trust. As a result, our common stock in treasury increased $130 million. The Company funded the stock repurchase with $110 million from committed credit facilities and $20 million of accumulated cash and cash equivalents.

Quarterly Cash Dividends

On May 22, 2014, our Board of Directors declared a quarterly cash dividend of $0.13 per common share, or $28 million, which was paid on June 20, 2014 to stockholders of record at the close of business on June 6, 2014. On February 18, 2014, our Board of Directors declared a quarterly cash dividend of $0.13 per common share, or $28 million, which was paid on March 21, 2014 to stockholders of record at the close of business on March 7, 2014.

Our credit facility and certain of 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 June 30, 2014, total outstanding SARs was 0.6 million, and the total remaining unvested SARs was 0.3 million and will vest entirely by March 31, 2015. 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 $2 million in the three months ended June 30, 2014 and $2 million in the six months ended June 30, 2014, related to SARs that were granted to Diversey employees who remained employees as of June 30, 2014. We also recognized SARs expense of less than $1 million in the three months ended June 30, 2013 and $18 million in the six months ended June 30, 2013, related to SARs that were granted to Diversey employees who remained employees as of June 30, 2013. Cash payments due to the exercise of these SARs were $17 million for the six months ended June 30, 2014 and $28 million for the six months ended June 30, 2013. As of June 30, 2014, the liability for the remaining outstanding SARs was $19 million and is included in other current liabilities on the condensed consolidated balance sheets.

In addition to the amounts discussed above, $1 million was recorded in the six months ended June 30, 2013 for SARs payments or cash payments due to the exercise of SARs 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. We did not recognize any SARs-related restructuring expense in the six months ended June 30, 2014, and there was no remaining liability for SARs included in the restructuring programs as of June 30, 2014.

Share-based Incentive Compensation

We record share-based incentive compensation expense in selling, general and administrative expenses and cost of sales on our condensed consolidated statements of operations with a corresponding credit to additional paid-in capital within stockholders’ equity for equity-based awards and to other liabilities for cash-based awards, 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 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				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Total share-based incentive compensation expense(1)	$	11.9	$	7.3	$	26.4	$	14.9

⁽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 and other cash-based awards. See Stock Appreciation Rights above for further details of SARs. At June 30, 2014, our cash-based awards were not material to our condensed consolidated financial positions or results of operations.

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 exceeding $1.7 billion of adjusted 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 earnings per share during the last year of 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 adjusted free cash flow performance will be reduced by 25% if our relative Total Stockholder Return (as defined in the award) for the performance period is below a certain percentile of an approved peer group of companies.

• 50% of any PSUs earned during the performance period will be paid out in early 2017. The remaining 50% of the earned PSUs is subject to an additional 2017 performance requirement, the ratio of working capital to net trade sales for 2017 (as defined in the award) and will be paid out 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 June 30, 2014, and $4 million in the six months ended June 30, 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 June 30, 2014. For the three months ended June 30, 2014, we reclassified $1 million and for the six months ended June 30, 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 consolidated balance sheets. See Note 15, “Profit Sharing, Retirement Savings Plans and Defined Benefit Plans,” of the Notes to the 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.