Stockholders' Equity

3 Months Ended

Mar. 31, 2015

Equity [Abstract]

Stockholders' Equity

Note 15 Stockholders’ Equity

Repurchase of Common Stock

On August 9, 2007, we announced that our Board of Directors had approved a share repurchase program authorizing us to repurchase in the aggregate up to 20 million shares of our outstanding common stock.  This program has no set expiration date.  This program replaced our prior share repurchase program, which we terminated at that time. Refer to Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” for further information.

During the three months ended March 31, 2015, we repurchased 1,014,147 shares for approximately $44 million under a share trading plan we entered into with two of our brokers in accordance with Rule 10b5-1 of the Securities Act of 1933, as amended, and pursuant to the share repurchase program previously approved by our Board of Directors. The Company funded the stock repurchase with cash and cash equivalents.

Additionally, in March 2015, the Company entered into an accelerated shares repurchase agreement (“ASR”) with a third-party financial institution to repurchase $25 million of the Company’s common stock.  Under the agreement, the Company paid $25 million to the financial institution and received an initial delivery of 433,181 shares at an aggregate cost of $20 million, with an average price per share of $46.17.  These shares were included in treasury stock in the accompanying condensed consolidated balance sheet at March 31, 2015.  The remaining $5 million was included in additional paid in capital in the accompanying condensed consolidated balance sheets at March 31, 2015.  The ASR agreement will be settled during the second quarter of 2015.  The final number of shares delivered upon settlement of the March 2015 ASR agreement will be determined with reference to the average price of the Company’s common stock over the term of the ASR agreement. These repurchases were also made under the share repurchase program approved by our Board of Directors referenced above.

Dividends

On February 17, 2015, our Board of Directors declared a quarterly cash dividend of $0.13 per common share, or $28 million, which was paid on March 20, 2015 to stockholders of record at the close of business on March 6, 2015.

The dividend payments 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 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 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. At March 31, 2015, all outstanding SARs are fully vested.  

Since these SARs are settled in cash, the amount of the related future expense will fluctuate based on the forfeiture activity and the changes in the assumptions used in a Black-Scholes valuation model which includes 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 $3 million in the three months ended March 31, 2015 related to SARs that were granted to Diversey employees who remained employees as of March 31, 2015. We recognized SARs expense of $1 million in the three months ended March 31, 2014 related to SARs that were granted to Diversey employees who remained employees as of March 31, 2014. Cash payments due to the exercise of these SARs were $4 million in the three months ended March 31, 2015 and $14 million in the three months ended March 31, 2014. As of March 31, 2015, the remaining liability for these SARs was $19 million and is included in other current liabilities on our condensed consolidated balance sheet.

We did not recognize any SARs-related restructuring expense in the three months ended March 31, 2015 and there was no remaining liability for SARs included in the restructuring programs as of March 31, 2015. We recognized SARs-related restructuring expense of less than $1 million in the three months ended March 31, 2014 that were part of the termination and benefit costs for employees under the IOP.

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 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 PSU awards programs described below, the cumulative amount accrued to date is adjusted up or down to the extent the expected performance against the targets has improved or worsened.

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

	Three Months Ended
	March 31,
(In millions)	2015		2014
Total share-based incentive compensation expense (1)	$	18.3	$	14.5

⁽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 March 31, 2015, our other cash-based awards were not material to our condensed consolidated financial positions or results of operations.

Performance Share Units “PSU” Awards

As part of our long term incentive program initially adopted in 2008, during the first 90 days of each year, the Organization and Compensation Committee of our Board of Directors, or Compensation Committee, has approved PSU awards for our executive officers and other selected key executives, which include for each officer or executive 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 performance period. Following the end of the performance period, 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. We have accrued $1 million for these dividends in other current liabilities on our condensed consolidated balance sheet as of March 31, 2015 and $2 million as of December 31, 2014.

2015 Three-year PSU Awards

In February 2015, the Compensation Committee approved awards with a three-year performance period beginning January 1, 2015 to December 31, 2017 for the named executives. The Compensation Committee established principal performance goals, which are (i) total shareholder return (TSR), and (ii) 2017 consolidated adjusted EBITDA margin.

The targeted number of shares of common stock that can be earned is 224,760 shares for these 2015 PSU awards. The total number of shares to be issued for these awards can range from zero to 200% of the target number of shares depending on the level of achievement of the performance goals and measures.

The expense included in the table above was calculated using a grant date common stock share price of $46.05 per share for the 2017 consolidated adjusted EBITDA margin (this is considered a performance condition) and the Monte Carlo valuation of $59.91 per share for the TSR goal (this is considered a market condition). The expense calculation is based on management’s estimate as of March 31, 2015 of the level of probable achievement of the performance goals and measures, which was determined to be at the target level, or 100% achievement (158,964 shares, net of forfeitures), for the 2017 consolidated adjusted EBITDA margin goal. The TSR portion of the plan is expensed at 100% (65,796 shares, net of forfeitures) of the grant date fair value as required by U.S. GAAP.