Sealed Air Corporation - Company Profile, Information, Business Description, History, Background Information on Sealed Air Corporation

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History of Sealed Air Corporation

Sealed Air Corporation is one of the world's leading manufacturers of protective and specialty packaging materials. Some of the company's best-known products include Instapak, a system for injecting a protective, expanding polyurethane foam into shipping cartons and other containers; protective mailers and bags sold under the Jiffy brand name; and AirCap, which is the trade name for the bubble wrap that almost everybody loves to pop one cell at a time. In addition to a wide variety of other foam and air cushioning products, Sealed Air also makes food packaging products, such as its absorbent Dri-Loc pads found underneath meat, fish, and poultry sold in supermarkets. The company operated manufacturing facilities all over the world, including 27 locations in North America, 16 in Europe, and six in the Far East.

Sealed Air was founded by U.S. engineer Al Fielding and Swiss inventor Marc Chavannes, the two men who gave the world bubble wrap. Fielding and Chavannes first developed their AirCap material in 1957 but lacked the funding necessary to begin producing it commercially. After a few years of tinkering with manufacturing methods and hustling for seed capital, they launched Sealed Air in 1960. With $85,000 raised through an initial public stock offering, production of AirCap material began in earnest the following year. In its earliest form AirCap packaging material suffered from slightly leaky bubbles. In spite of the problems, however, the product gained popularity throughout the 1960s, and by the middle of the decade research efforts had led to the development of a special coating that prevented the bubbles from losing air. By 1969 bubble wrap was beginning to catch on. For that year, Sealed Air reported sales of $4 million. This represented nearly the entire market for bubble wrap, since the product was still proprietary at the time.

In 1970 Sealed Air suffered a small deficit, despite continuing gains in sales. In the face of criticism from some members of the company's board, President Ted Bowers suddenly resigned. To replace him, the board turned to one of its members, T. J. Dermot Dunphy, an Irishman who had studied at Oxford and at Harvard Business School. Dunphy had arrived on the Sealed Air board after selling his own small packaging company, Custom-Made Packaging (which sold popsicle wrappers and the like), to Hammermill Paper. With cash on hand from that sale, Dunphy had asked friends at the investment firm Donaldson, Lufkin & Jenrette to find a public company for him to lead. Bowers's unexpected departure created that opportunity at Sealed Air.

Just prior to the beginning of the Dunphy era, Sealed Air had added a set of products to its line. By laminating AirCap cushioning material to kraft paper, the company developed its Mail Lite shipping envelopes, first sold in 1971. A smaller, cheaper version of Mail Lite called Bubble-Lite was introduced a few years later. The company also became international around this time, with the 1970 acquisition of Smith Packaging Ltd., later renamed Sealed Air of Canada, Ltd. Under Dunphy, the company's minor stumble of 1970 was quickly reversed, and by 1972 Sealed Air's sales had passed the $10 million mark. Another new product, PolyMask, was introduced in 1973. PolyMask, a pressure sensitive polyethylene film for protecting delicate surfaces against scratches, was the first Sealed Air product not based on its air bubble technology. For 1973, the company's after-tax profits topped $1 million for the first time. Of its $13.6 million in sales for that year, about 60 percent came from AirCap and about 20 percent from Mail Lite. The rest came mostly from the manufacture and distribution of a variety of packaging products by its Canadian subsidiary. The company's biggest customer was the electronics industry, which accounted for about 40 percent of sales.

Sealed Air made its first foray into Europe in 1973, acquiring ten percent of Sibco Universal, S.A., a French manufacturing firm. Over the next few years, Sealed Air bought the rest of Sibco. During the mid-1970s Sealed Air's researchers came up with another innovative use for the company's air cell technology. The Sealed Air Solar Pool Blanket was essentially a big sheet of bubble wrap that was placed on swimming pools. The Solar Pool Blanket allowed the sun's rays to heat the water and sharply reduced the evaporative loss of water and treatment chemicals. By 1977 the Solar Pool Blanket was generating six percent of company sales. As an offshoot of the pool blanket, the company also began making a roof-mounted solar water heater designed mainly for heating swimming pools.

The most important development of 1977 was the acquisition of Instapak Corporation, producers of a revolutionary "foam-in-place" cushioning system. The foam-in-place process, initially conceived in the 1950s by engineers at Lockheed Corporation, involves surrounding a product with urethane in a liquid form that would then quickly expand into a semirigid foam. The idea was finally made practical in 1969 by inventor Richard Sperry (whose grandfather, Elmer Sperry, invented the gyroscope). Instapak was made a division of Sealed Air, and it quickly became one of the company's most important products, generating almost as great a share of total sales as bubble wrap by the end of the decade. Foreign sales also increased dramatically during the second half of the 1970s, accounting for nearly a quarter of the company's total by 1977. By 1979 Sealed Air's annual sales had grown to more than $70 million.

By the beginning of the 1980s, foam-in-place was clearly a product destined for bigger things, and Sealed Air still had virtually no competition in the area. The pool blankets were also doing well, selling as fast as the company could make them. In 1981 Sealed Air added PolyCap to its product line. PolyCap was essentially a lower-cost, less durable version of AirCap, without the barrier coating, providing a less expensive option for products that required only a relatively short period of protection. Sealed Air broadened its product line further in 1983 by purchasing Cellu-Products Co., a Hickory, North Carolina, manufacturer of packaging materials, for $20 million. The Cellu-Products acquisition added thin-grade polyethylene foam, coated films, and other plastic and paper materials to the company's growing collection of packaging products. Although the recession of 1982 took a bite out of Sealed Air's revenue and earnings figures, the emergence of personal computers and other related electronic gizmos brought a new wave of business, and by 1983 the company's sales had grown to $124 million.

In an effort to diversify its product line further, and in part to prepare itself for the impending expiration of its bubble wrap patents, Sealed Air acquired several smaller companies during the middle part of the 1980s. In 1984 the company acquired Cortec Corporation, a small anticorrosive chemical firm. Cortec was sold off only a few years later, after being caught illegally shipping chemicals to Libya. Other acquisitions that yielded happier results included Static, Inc., in 1985; a Canadian spa manufacturer in 1987; and a Swedish packaging company in 1987. More important was the company's 1987 purchase of Jiffy Packaging, which manufactured padded mailers for items such as floppy disks and books. The addition of Jiffy solidified Sealed Air's dominant position in the protective mailer market. During this period, Sealed Air also began incorporating recycled materials into a number of its air bubble and paper packaging products, at a time when few companies in the industry were doing so.

By 1988 Sealed Air had annual sales of $346 million, and it earned $42 million in profit that year. All told, $127 million of the company's sales came from Instapak, which by this time had more or less replaced bubble wrap as the flagship product. The company boosted its presence in the food packaging business that year with the acquisition of a company that made absorbent pads for poultry. Meanwhile, Sealed Air's researchers, as well as freelancer Sperry (who had developed Instapak), kept busy at the drawing board. One new wrinkle was a pair of systems called Instapacker and VersaPacker, which could produce bags full of protective foam at the touch of a button.

Dunphy pulled off a remarkable financial maneuver in 1989. The company had been so profitable over the previous few years that it found itself with a huge cash surplus. Since Dunphy could not find any more companies that he felt were good acquisition candidates, he had no obvious outlets for this cash buildup. In order to avoid becoming too attractive a target for a takeover, as well as to create what he called a "controlled crisis" to shake his managers out of their complacency, Dunphy decided to give the money away. He announced a $40-per-share special dividend, amounting to a $328 million gift to shareholders. The move increased the company's long-term debt from $19 million to over $300 million, made up of a combination of bank loans and junk bonds.

Dunphy hoped that leveraging the company would push it to new heights of efficiency, and he was correct. The new debt situation necessitated changes in the way the company handled inventory and led to other cost-cutting measures. These changes enabled the company to begin repaying its debts ahead of schedule, creating further savings. At the same time, an unexpected reduction in the cost of raw materials resulted in yet more opportunities to work down part of the debt with extra cash. By the early 1990s it was clear that the gamble had paid off, and Sealed Air was ready to go shopping once again. In 1991 the company acquired a small company called KorrVu, which produced transparent suspension packaging. Sentinel Foam & Envelope Corporation, a packaging firm based in Philadelphia, was also acquired that year.

Sealed Air's sales figures stalled somewhat during the first part of the 1990s, advancing from $413 million in 1990 to only $452 million in 1993. Nevertheless, the company was able to generate solid profits each year. In order to boost revenue, Dunphy began concentrating heavily on worldwide expansion. Instapak was introduced in Mexico, and the company opened manufacturing facilities in Germany and Spain. Throughout, the company continued to emphasize research and development, and new products were unveiled at a steady pace. One such product was Floral, introduced in 1993. Floral was a foam that served as a base in artificial flower arrangements. Within a year of its first appearance, Floral was generating sales in the neighborhood of $5 million.

As the 1990s continued, Sealed Air made additional strategic acquisitions. In 1993 the company purchased the Shurtuff Division of Shuford Mills, Inc. Shurtuff's extremely durable plastic-based mailers meshed well with Sealed Air's existing protective mailer product line. On the product development front, the company developed a new inflatable packaging system called VoidPak. The acquisition department was very active in 1994. The company reinforced its European food pad business with the purchase of Hereford Paper and Allied Products Ltd., an English food pad manufacturing firm. Packaging companies based in Norway, France, and Italy were also acquired during the year. The French acquisition added two product lines, Sup-Air-Pack and Fill Air, to the company's collection of inflation-based systems, an area considered to hold great promise for the future. Toward the end of the year the company reorganized its management structure so that its important product lines were coordinated globally rather than country-by-country. This move reflected an increasing focus on the international market, which was expected to continue through the rest of the century. For 1994 sales numbers at Sealed Air made their first significant jump in several years, exceeding $500 million for the first time in company history. Earnings, at $31.6 million, reached record levels as well.

Sealed Air's biggest acquisition of this period came in January 1995, when it acquired Trigon Industries Ltd., a New Zealand company with operations in Australia, England, Germany, and the United States. With annual sales of $72 million, the addition of Trigon was expected to have an immediate and dramatic impact on Sealed Air's balance sheet as well as on its geographic reach. Trigon's products included food packaging systems, durable mailers and bags, and specialty adhesive products. With its successful global expansion program of the first half 1990s, Sealed Air appeared poised to extend to the worldwide market the commanding position it has enjoyed for many years in the domestic specialty packaging material industry.

Principal Subsidiaries: Aire Sellado, S.S. de C.V. (Mexico); Cascades Sealed Air Inc. (Canada, 50 percent); Danco (NZ) Ltd. (New Zealand, 95 percent); Delsopak S.A. (France); Emballasje Teknikk A/S (Norway); Europads Sarl (France); Hereford Paper and Allied Products Ltd. (England); Instapak France S.A.; PolyMask Corporation (50 percent); Polypride, Inc.; Sealed Air N.V. (Belgium); Sealed Air of Canada Ltd.; Sealed Air España, S.A.; Sealed Air Ltd. (England); Sealed Air (Far East) Ltd. (Hong Kong); Sealed Air GmbH (Germany); Sealed Air Holdings (NZ) Ltd. (New Zealand); Sealed Air Japan Ltd.; Sealed Air S.p.A. (Italy); Sealed Air (Korea) Ltd.; Sealed Air (Malaysia) Sdn. Bhd.; Sealed Air B.V. (Netherlands); Sealed Air (Puerto Rico) Inc.; Sealed Air (Singapore) Pte. Ltd.; Sealed Air Svenska AB (Sweden); Sealed Air Taiwan Ltd.; Sealed Air Thailand Ltd.; Sealed Air Trucking, Inc.; SPEC Srl (Italy); Static, Inc.; Trigon Industries Ltd. (New Zealand); Trigon Packaging Systems (NZ) Ltd. (New Zealand); Trigon Engineering Ltd. (New Zealand); Trigon Packaging Systems (Aust) Pty Ltd. (Australia); Trigon Packaging Corporation; Trigon Cambridge Ltd. (England); Trigon Packaging Systems (UK) Ltd.; Trigon Verpackungsysteme GmbH (Germany).

Additional Details

Further Reference

"By the Throat," Economist, September 14, 1991, p. 78.David, Gregory E., "Make My Day!" Financial World, January 17, 1995, pp. 38--39.Dunphy, T. J. Dermot, Sealed Air Corporation: Our Products Protect Your Products, New York: Newcomen Society in North America, 1982.Fadiman, Mark, "If the Bubble Bursts, Try Foam," Forbes, June 18, 1984, p. 104.Gordon, Mitchell, "Sealed Air, Packaging Specialist, Headed for Eighth Straight Advance," Barron's, February 6, 1978, pp. 40--41;------ "Sealed Air's Bag," Barron's, August 25, 1980, pp. 36--37."How This Bubble-Wrap Maker Boomed by Popping Its Own Bubble," Money, March 1994, p. 56."It's All in the Packaging," Financial World, May 1, 1980, pp. 48--49.McGough, Robert, "Controlled Crisis," Financial World, February 6, 1990, pp. 74--75."Packaging That's Light But Strong Enables Sealed Air to Keep Growing," Barron's, December 2, 1974, pp. 44--45.Smith, Geoffrey, "What Turnaround?" Forbes, October 1, 1979, pp. 89--92.

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