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Stockholders' Equity | 9 Months Ended
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Sep. 30, 2012
Stockholders' Equity | (16) Stockholders’ Equity Quarterly Cash Dividends On October 11, 2012, our Board of Directors declared a quarterly cash dividend of $0.13 per common share. This dividend is payable on December 14, 2012 to stockholders of record at the close of business on November 30, 2012. The estimated amount of this dividend payment is $25 million based on 195 million shares of our common stock issued and outstanding as of October 31, 2012. On July 12, 2012, our Board of Directors declared a quarterly cash dividend of $0.13 per common share. This dividend was paid on September 14, 2012 to stockholders of record at the close of business on August 31, 2012. We used $25 million of available cash to pay this quarterly cash dividend. On April 19, 2012, our Board of Directors declared a quarterly cash dividend of $0.13 per common share. This dividend was paid on June 15, 2012 to stockholders of record at the close of business on June 1, 2012. We used $25 million of available cash to pay this quarterly cash dividend. On February 16, 2012, our Board of Directors declared a quarterly cash dividend of $0.13 per common share, which was paid on March 16, 2012 to stockholders of record at the close of business on March 2, 2012. We used $25 million of available cash to pay this quarterly cash dividend. Our new Credit Facility and the 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. 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 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 compensation expense of $3 million in the three months ended September 30, 2012 and $13 million in the nine months ended September 30, 2012 related to SARs that were granted to Diversey employees who remained employees as of September 30, 2012. These amounts were based on the assumptions mentioned above and are included in marketing, administrative and development expenses on our condensed consolidated statements of operations except for SARs that were included in restructuring and other charges as discussed below. Cash payments due to the exercise of SARs in the nine months ended September 30, 2012 were $41 million, including $18 million as part of restructuring payments. As of September 30, 2012, the remaining liability for these SARs except for SARs that were included in restructuring and other charges as discussed below was $30 million and is included in other liabilities on our condensed consolidated balance sheet. Included in the amounts discussed above, was the recognition of restructuring expense of less than $1 million in the three months ended September 30, 2012 and $8 million in the nine months ended September 30, 2012 for SARs that were part of the termination and benefit costs for Diversey employees under the 2011 – 2014 Integration & Optimization Program. This expense was included in restructuring and other charges on our condensed consolidated statements of operations. Cash payments upon the exercise of these SARs were $18 million in the nine months ended September 30, 2012. The remaining liability for SARs included in the restructuring program was less than $1 million as of September 30, 2012. 2005 Contingent Stock Plan Share-based Incentive Compensation We record share-based incentive compensation expense in marketing, administrative and development 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 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. These share-based incentive compensation programs are described in more detail below. The table below shows our total share-based incentive compensation expense.
|  |  |  |  | Three Months Ended September 30, |  |  |  |  |  |  |  |  |  | Nine Months Ended September 30, |  |  |
|  | 2012 |  |  |  |  | 2011 |  |  |  |  | 2012 |  |  |  |  | 2011 |
2012 Three-year PSU Awards |  | $ | 0.8 |  |  |  |  | $ | — |  |  |  |  | $ | 2.2 |  |  |  |  | $ | — |
2011 Three-year PSU Awards |  |  | 0.6 |  |  |  |  |  | 0.7 |  |  |  |  |  | 1.4 |  |  |  |  |  | 2.5 |
2010 Three-year PSU Awards |  |  | 0.9 |  |  |  |  |  | 0.8 |  |  |  |  |  | 1.2 |  |  |  |  |  | 4.6 |
2009 Three-year PSU Awards |  |  | — |  |  |  |  |  | 1.2 |  |  |  |  |  | — |  |  |  |  |  | 3.6 |
2012 CEO Incentive Compensation |  |  | 1.1 |  |  |  |  |  | — |  |  |  |  |  | 3.4 |  |  |  |  |  | — |
SLO Awards |  |  | 0.2 |  |  |  |  |  | (0.3 | ) |  |  |  |  | 0.6 |  |  |  |  |  | 0.3 |
Other long-term share-based incentive compensation programs |  |  | 3.0 |  |  |  |  |  | 2.1 |  |  |  |  |  | 8.1 |  |  |  |  |  | 6.7 |
Total share-based incentive compensation expense(1) |  | $ | 6.6 |  |  |  |  | $ | 4.5 |  |  |  |  | $ | 16.9 |  |  |  |  | $ | 17.7 |
(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 as such these contributions are not considered share-based incentive compensation.
The following table shows the estimated amount of total share-based incentive compensation expense expected to be recognized on a straight-line basis over the remaining respective vesting periods by program at September 30, 2012.
|  | 2012 |  |  | 2013 |  |  | 2014 |  |  | 2015 |  |  | Total |
2012 Three-year PSU Awards |  | $ | 0.9 |  |  | $ | 3.7 |  |  | $ | 3.7 |  |  | $ | — |  |  | $ | 8.3 |
2011 Three-year PSU Awards |  |  | 0.6 |  |  |  | 2.4 |  |  |  | — |  |  |  | — |  |  |  | 3.0 |
2010 Three-year PSU Awards |  |  | 0.9 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.9 |
2012 CEO Incentive Compensation |  |  | 1.1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1.1 |
SLO Awards |  |  | 0.2 |  |  |  | 0.2 |  |  |  | — |  |  |  | — |  |  |  | 0.4 |
Other long-term share-based incentive compensation programs |  |  | 3.0 |  |  |  | 9.6 |  |  |  | 5.8 |  |  |  | 1.6 |  |  |  | 20.0 |
Total share-based incentive compensation expense (1) |  | $ | 6.7 |  |  | $ | 15.9 |  |  | $ | 9.5 |  |  | $ | 1.6 |  |  | $ | 33.7 |
(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 as such these contributions are not considered share-based incentive compensation.
The discussion that follows provides further details of our share-based incentive compensation programs. 2012 Three-year PSU Awards The targeted number of shares of common stock that can be earned is 554,381 shares for these 2012 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, plus or minus 55,438 additional shares at the discretion of the Compensation Committee of our Board of Directors (“Compensation Committee”). These performance goals are outlined in further detail in the Proxy Statement for our 2012 Annual Meeting of Stockholders. The expenses included in the tables above were calculated using a grant date common stock share price of $19.72 per share for the awards granted on March 27, 2012 ($14.27 for the awards granted on September 1, 2012) for the three year average return on invested capital (“ROIC”) goal and net trade sales goals (these are considered performance conditions) and the Monte Carlo valuation of $23.40 per share for the awards granted on March 27, 2012 (an estimated $14.27 for the awards granted on September 1, 2012) for the TSR goal (this is considered a market condition). The expense calculation is based on management’s estimate as of September 30, 2012 of the level of probable achievement of the performance goals and measures, which was determined to be at the target level, or 100% achievement (554,381 shares). 2011 Three-year PSU Awards The targeted number of shares of common stock that can be earned is 380,617 shares for these 2011 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, plus or minus 38,062 additional discretionary shares. These performance goals are outlined in further detail in the Proxy Statement for our 2012 Annual Meeting of Stockholders. The expenses included in the tables above were calculated using a grant date common stock share price of $26.18 per share on March 11, 2011 and is based on management’s estimate as of September 30, 2012 of the level of probable achievement of this award’s performance goals and measures, which was determined to be below the target level, or 84% achievement (159,859 shares, net of forfeitures), for the ROIC goal and below the target level, or 66% achievement (125,604 shares, net of forfeitures), for the volume goal. 2010 Three-year PSU Awards The targeted number of shares of common stock that can be earned is 413,642 shares for these 2010 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, plus or minus 41,364 additional discretionary shares. These performance goals are outlined in further detail in the Proxy Statement for our 2011 Annual Meeting of Stockholders. The expenses included in the tables above were calculated using a grant date common stock share price of $20.88 per share on March 8, 2010 and is based on management’s estimate as of September 30, 2012 of the level of probable achievement of the performance goals and measures, which was determined to be below the target level, or 97% achievement (200,616 shares, net of forfeitures) for the ROIC goal and at 159% achievement (328,845, net of forfeitures) for the volume goal. 2012 Chief Executive Officer (“CEO”) Incentive Compensation The targeted number of shares of common stock that can be earned is 273,834 shares for this 2012 CEO award. The total number of shares to be issued for this award can range from zero to 200% of the target number of shares depending on the level of achievement of the performance goals and measures. These performance goals are outlined in further detail in the Proxy Statement for our 2012 Annual Meeting of Stockholders. The expense included in the table above was calculated using a grant date common stock share price of $19.72 per share on March 27, 2012 and is based on management’s estimate as of September 30, 2012 of the level of probable achievement of the performance goals and measures, which was determined to be below the target level, or 79% achievement (150,855 shares), for the adjusted EBITDA goal and at the target level, or 100% achievement (82,150 shares), for the net debt reduction goal. Due to our CEO’s retirement eligibility at grant date, the total expense related to these awards will be recognized on a straight-line basis in the year ended December 31, 2012. For the awards (excluding the portion of the PSU awards related to the TSR goal) that are discussed above, the estimated amount of future share-based incentive compensation expense will fluctuate based on: 1) the expected level of achievement of the respective goals and measures considered probable in future quarters, which impacts the number of shares that could be issued; and 2) the future price of our common stock, which impacts the expense related to additional discretionary shares. Since the TSR metric is considered a market condition, the portion of the compensation expense related to the TSR metric will be recognized regardless of whether the market condition is satisfied provided that the requisite service has been provided. For the 2012 CEO award and for all the PSU awards discussed above, each award recipient will receive also a cash payment in the amount of dividends (without interest) that would have been paid from the start of the performance period on the shares that have been earned until the shares are issued. Stock Leverage Opportunity (“SLO”) Awards The Compensation Committee set the SLO award premium at 25% for the years ending December 31, 2012 and December 31, 2011. The 2012 SLO target awards comprise an aggregate of 77,731 restricted stock shares and restricted stock units as of September 30, 2012. The 2011 SLO awards that were issued on March 9, 2012 comprised an aggregate of 11,212 restricted stock shares and restricted stock units. We record compensation expense for these awards in marketing, administrative and development expenses on the condensed consolidated statement of operations with a corresponding credit to additional paid-in-capital within stockholders’ equity, based on the fair value of the awards at the end of each reporting period, which reflects the effects of stock price changes. For the three and nine months ended September 30, 2012, compensation expense related to the 2012 SLO awards was recognized based on the extent to which the performance goals and measures for our 2012 annual cash bonuses were considered probable of achievement at September 30, 2012. This expense is being recognized over a fifteen month period on a straight-line basis since a majority of the awards will vest at grant date, which will be no later than March 15, 2013, due to the retirement eligibility provision. For the three and nine months ended September 30, 2011, compensation expense related to the 2011 SLO awards was recognized based on the extent to which the performance goals and measures for 2011 annual cash bonuses were considered probable of achievement at September 30, 2011. This expense was recognized over a fifteen month period on a straight-line basis since a majority of the awards vested at grant date, which was March 9, 2012, due to the retirement eligibility provision. Recipients who hold SLO awards in the form of restricted stock receive dividends. Recipients who hold SLO awards in the form of restricted stock units receive a cash payment in the amount of the dividends (without interest) on the shares they have earned at about the same time that shares are issued to them following the period of restriction. As of September 30, 2012, we have accrued for these dividends in other current liabilities on our condensed consolidated balance sheet and the amount was immaterial. Other Long-term Share-based Incentive Compensation Under our 2005 Contingent Stock Plan, the Compensation Committee may grant our employees awards of restricted stock, restricted stock units and cash awards measured by share price as long-term share-based incentive compensation. Our executive officers and other key executives may also receive awards of restricted stock or restricted stock units from time to time.

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- Definition The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Preferred Stock -URI http://asc.fasb.org/extlink&oid=6521494 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187143-122770 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Section B -Paragraph 7, 11A -Chapter 1 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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