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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 1-12139

SEALED AIR CORPORATION
(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

        Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes ý No o

        Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes o No ý

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

        Large accelerated filer ý        Accelerated filer o        Non-accelerated filer    o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o    No ý

        As of June 30, 2005, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $4,060,000,000, based on the closing sale price as reported on the New York Stock Exchange.

        There were 81,476,998 shares of the registrant's common stock, par value $0.10 per share, issued and outstanding as of January 31, 2006.

        DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's definitive proxy statement for its 2006 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

SEALED AIR CORPORATION AND SUBSIDIARIES
Table Of Contents

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PART I

Item 1.    Business

        Sealed Air Corporation (the "Company"), operating through its subsidiaries, manufactures and sells a wide range of food and protective packaging products.

        The Company conducts substantially all of its business through two direct wholly-owned subsidiaries, Cryovac, Inc. and Sealed Air Corporation (US). These two subsidiaries directly and indirectly own substantially all of the assets of the business and conduct operations themselves and through subsidiaries around the globe. References herein to the Company include, collectively, the Company and its subsidiaries, except where the context indicates otherwise.

Segments

        The Company operates in two reportable business segments: (i) Food Packaging and (ii) Protective Packaging, described more fully below. Information concerning the Company's reportable segments including net sales, operating profit and assets, appears in Note 3 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, which information is incorporated herein by reference.

Food Packaging Products

        The Company's principal food packaging products are flexible materials, associated packaging equipment systems, rigid containers and absorbent pads. These products package a broad range of perishable foods and are marketed globally. The Company primarily sells the products in this segment to food processors, distributors, supermarket retailers and food service businesses.

Flexible Materials and Related Systems

        The Company produces a variety of high-performance proprietary flexible vacuum shrink products, including shrink bags and shrink films as well as non-shrink structures, and associated packaging equipment systems, marketed and sold primarily under the Cryovac® trademark. Customers use these products to package a broad range of perishable foods such as fresh meat and poultry, smoked and processed meat, cheese, produce, seafood, baked goods, and processed and prepared foods such as soups, stews, condiments and sauces for restaurants and institutions.

        The Company's principal food packaging materials offerings are shrink bags, shrink films and non-shrink structures. The bags and films are co-extruded, multi-layered materials that, when exposed to heat, mold themselves to the shape of the product. The non-shrink structures are multi-layered plastic materials used to package perishable foods and shelf-stable products such as syrups and toppings. The Company's flexible materials start with a co-extruded film produced by combining two or more resins into a multi-layered film. Some of these films are subsequently laminated to other films to provide additional properties. The Company generally produces films and bags in barrier and permeable forms, depending on the extent to which customers want oxygen or other gases to pass through the material. For fresh-cut produce, the Company produces films that permit gases to pass through at various rates, matching the varying respiration rates of different vegetables, thereby extending shelf life. For the heat-and-serve category, the Company offers its Simple Steps™ package, which is an easy-open microwavable package designed with Cryovac® vacuum skin packaging technology and a unique self-venting feature. The Company's Darfresh® product offerings provide vacuum skin packaging for a variety of foods. The Company also offers films, tubing and connectors for use in manufacturing bags and pouches for a wide variety of medical applications. These medical products are manufactured using technology comparable to that used to manufacture the Company's food packaging products and are similar in form to those products.

        The Company's principal food packaging equipment offerings are rotary chamber vacuum systems, vertical form-fill-seal pouch packaging systems, dispensing equipment, manual and automated loading units, shrink tunnels, bagging systems and auxiliary equipment. Equipment offerings may be installed to

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package foods in shrink, vacuum or vacuum skin packages, which can utilize the Company's films and bags. The vertical pouch-packaging units may be used to package hot-fill or cold-fill pumpable foods using the Company's non-shrink structures. The Company's case ready packaging customers, principally meat and poultry processors, purchase trays and pads as discussed below, specially designed films, and packaging equipment to package consumer cuts of meat and poultry products at a central location prior to shipment to the supermarket. Case ready packages are ready for the meat case upon arrival at the retail store.

Rigid Packaging and Absorbent Pads

        The Company sells foam and solid plastic trays and containers that customers use to package a wide variety of food products. The Company manufactures such products in its own facilities in various regions or has them fabricated by other manufacturers. Food processors and supermarkets use these products to protect and display fresh meat, poultry, dairy, produce and other food products. The Company also manufactures and sells absorbent pads used for food packaging, such as its Dri-Loc® absorbent pads.

Protective Packaging Products

        The Company's principal protective packaging products provide cushioning, surface protection and void fill. The Company sells its protective packaging products and systems to distributors and manufacturers in a wide variety of industries. The products in this segment enable end users to provide a high degree of protection in packaging their items.

Cushioning and Surface Protection Products

        The Company manufactures and markets Bubble Wrap® and AirCap® air cellular packaging materials, which consist of air encapsulated between two layers of plastic film, each containing a barrier layer to retard air loss. This material forms a pneumatic cushion to protect products from damage through shock or vibration during shipment. Also, the Company sells performance shrink films under the Cryovac®, Opti® and CorTuff® trademarks for product display and merchandising applications. Customers use these films to "shrink-wrap" a wide assortment of industrial and consumer products. The Company offers Shanklin® and Opti® shrink packaging systems for these applications. The Company's Instapak® polyurethane foam packaging systems (which consist of proprietary blends of polyurethane chemicals, high performance polyolefin films and specially designed dispensing equipment) provide protective packaging for a wide variety of products. These products include the Instapak® Continuous Foam Tube packaging system. The Company generally sells CelluPlank® plank foams and Stratocell® laminated polyethylene foams to fabricators and converters for packaging and non-packaging applications. The Company also manufactures thin polyethylene foams in roll and sheet form under the trademarks Cell-Aire® and Cellu-Cushion®. Korrvu® packaging is the Company's suspension and retention packaging offering. In addition, the Company makes insulation products with foil-laminated air cellular materials.

        The Company manufactures and markets Jiffy® protective mailers and other durable mailers and bags in several standard sizes. The Company's principal protective mailers are lightweight, tear-resistant mailers marketed under various trademarks, including Jiffylite®, Mail Lite® and TuffGard®, lined with air cellular cushioning material, as well as the widely used Jiffy® padded mailers made from recycled kraft paper padded with macerated recycled newspaper. The Company's durable mailers and bags, composed of multi-layered polyolefin film, are lightweight, water-resistant and puncture-resistant and are available in tamper-evident varieties. The Company markets these mailers and bags under the ShurTuff®, Trigon®, Lab Pak®, and Keepsafe® trademarks and other brands. The Company also manufactures and sells paper packaging products under the trademarks Kushion Kraft®, Custom Wrap™, Jiffy Packaging™ and Void Kraft™.

        The Company also offers inflatable packaging systems. Its Fill-Air® inflatable packaging system converts rolls of polyethylene film into continuous perforated chains of air-filled cushions. The

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Company's Fill-Air® RF system consists of a compact, portable inflator and self-sealing inflatable plastic bags. In addition, its NewAir I.B.™ 200 packaging system provides on-site, on-demand Barrier Bubble® cushioning material. The Company also recently introduced its PriorityPak™ system, a high-speed product containment and protective packaging solution with advanced sensor technology, used in mail-order and Internet fulfillment applications. Also, the Company produces and markets converting systems that convert some of the Company's packaging materials, such as air cellular cushioning materials, thin polyethylene foam and paper packaging materials, into sheets of a pre-selected size and quantity or, for the Company's recycled kraft paper, into paper dunnage material.

Other Products

        The Company manufactures and sells a number of other products, such as specialty adhesive tapes, solar collectors and covers for swimming pools, and products related to the elimination and neutralization of static electricity. The Company also manufactures loose-fill polystyrene packaging.

Foreign Operations

        The Company operates in the United States and in 50 other countries, and its products are distributed in those countries as well as in other parts of the world. In maintaining its foreign operations, the Company faces risks inherent in these operations, such as those of currency fluctuations. Information on currency exchange risk appears in Part II, Item 7A of this Annual Report on Form 10-K, which information is incorporated herein by reference. Financial information about geographic areas setting forth net sales and total long-lived assets for each of the years in the three-year period ended December 31, 2005 appears in Note 3 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, which information is incorporated herein by reference. The Company maintains programs to comply with the various laws, rules and regulations that it may be subject to in the many countries in which it operates. See "Environmental Matters," below.

Marketing, Distribution and Customers

        The Company's global sales and marketing staff numbers approximately 2,600 employees, who sell and market the Company's products to and through a large number of distributors, fabricators and converters, as well as directly to end users such as food processors, food service businesses, and manufacturers.

        To support its food packaging customers, the Company operates food science laboratories that assist customers in identifying the appropriate food packaging materials and systems to meet their needs. The Company also offers customized graphic design services to its customers.

        To assist its marketing efforts for its protective packaging products and to provide specialized customer services, the Company operates packaging laboratories in many of its facilities. These laboratories are staffed by professional packaging engineers and equipped with drop-testing and other equipment used to develop and test cost-effective package designs to meet the particular protective packaging requirements of each customer.

        The Company has no material long-term contracts for the distribution of its products. In 2005, no customer or affiliated group of customers accounted for 10% or more of the Company's consolidated net sales.

        Although net sales of both food packaging products and protective packaging products tend to be slightly higher in the fourth quarter, the Company does not consider seasonality to be material to its consolidated business or to either reportable business segment.

Competition

        Competition for most of the Company's packaging products is based primarily on packaging performance characteristics, service and price. Since competition is also based upon innovations in

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packaging technology, the Company maintains ongoing research and development programs to enable it to maintain technological leadership. There are other companies producing competing products that are well established and may have greater financial resources than the Company.

        There are other manufacturers of food packaging products, some of which are companies offering similar products that operate on a global basis and others that operate in a region or single country. Competing manufacturers produce a wide variety of food packaging based on plastic, paper, metals and other materials. In rigid packaging, the Company is generally one of many suppliers in the geographic areas in which it operates. The Company believes that it is one of the leading suppliers of (i) flexible food packaging materials and related systems in the principal geographic areas in which it offers those products, (ii) solid plastic trays for case ready meat products in the United States, and (iii) absorbent pads for food products to supermarkets and to meat and poultry processors in the United States.

        The Company's protective packaging products compete with similar products made by other manufacturers and with a number of other packaging materials that customers use to provide protection against damage to their products during shipment and storage. Among the competitive materials are various forms of paper packaging products, expanded plastics, corrugated die cuts, loose fill packaging materials, strapping, envelopes, reinforced bags, boxes and other containers, and various corrugated materials. The Company's Instapak® packaging and its plank and laminated foam products also compete with various types of molded foam plastics, fabricated foam plastics, mechanical shock mounts, and wood blocking and bracing systems. The Company believes that it is one of the leading suppliers of air cellular cushioning materials containing a barrier layer, inflatable packaging, shrink films for industrial and commercial applications, protective mailers, polyethylene foam and polyurethane foam packaging systems in the principal geographic areas in which it sells these products.

Raw Materials

        The principal raw materials used in both of the Company's reportable business segments are polyolefin and other petrochemical-based resins and films, and paper and wood pulp products. The Company also purchases corrugated materials, cores for rolls of products such as films and Bubble Wrap® cushioning, inks for printed materials, and blowing agents used in the expansion of foam packaging products. In addition, the Company offers a wide variety of specialized packaging equipment, some of which it manufactures or has manufactured to its specifications, some of which it assembles and some of which it purchases from other suppliers.

        The raw materials for the Company's products generally have been readily available on the open market and in most cases are available from several suppliers. During 2005, Hurricanes Katrina and Rita temporarily adversely affected the production and delivery capabilities of refineries and natural gas and petrochemical suppliers with operations along the Gulf Coast of the United States. This led to a general curtailment of petrochemical-based raw materials supplies from that area; however, due to the efforts of the Company's supply chain team, the Company was able to operate without interruption. Some materials used in the Company's protective packaging products are sourced from materials recycled in the Company's manufacturing operations or obtained through participation in recycling programs.

Product Development

        The Company maintains a continuing effort to develop new products and to improve its existing products and processes, including developing new packaging and non-packaging applications for its products. From time to time, the Company also acquires and commercializes new packaging designs or techniques developed by others. The Company has joint research and development projects combining the technical capabilities of its food packaging operations and its protective packaging operations. The Company spent $75.8 million for Company-sponsored research and development in 2005, compared with $73.2 million during 2004, and $69.0 million during 2003.

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Patents and Trademarks

        The Company is the owner or licensee of a number of United States and foreign patents, patent applications, trademarks and trademark registrations that relate to many of its products, manufacturing processes and equipment. The Company believes that its patents and trademarks collectively provide a competitive advantage. Neither of the Company's reportable segments is dependent upon any single patent or trademark alone. Rather, the Company believes that its success depends primarily on its marketing, engineering and manufacturing skills and on its ongoing research and development efforts. The Company believes that the expiration or unenforceability of any of its patents, applications, licenses or trademark registrations would not be material to the Company's business or financial position.

Environmental Matters

        As a manufacturer, the Company is subject to various laws, rules and regulations in the countries, jurisdictions and localities in which it operates covering the release of materials into the environment, regarding standards for the treatment, storage and disposal of solid and hazardous wastes or otherwise relating to the protection of the environment. The Company reviews environmental laws and regulations pertaining to its operations and believes that compliance with current environmental laws and regulations has not had a material effect on the Company's capital expenditures or financial position.

        In some jurisdictions in which the Company's packaging products are sold or used, laws and regulations have been adopted or proposed that seek to regulate, among other things, recycled or reprocessed content and sale or disposal of packaging materials. In addition, customer demand continues to evolve for packaging materials that are viewed as being "environmentally sound" or that minimize the generation of solid waste. The Company maintains programs designed to comply with these laws and regulations, to monitor their evolution, and to meet this customer demand. These issues can be a competitive advantage for the Company given the inherent source reduction benefits of many of its processes and products. One advantage inherent in many of the Company's products is that thin, lightweight packaging solutions reduce customer waste and transportation costs in comparison to available alternatives. The Company continues to evaluate and implement new technologies in this area as they become available.

        The Company also supports its customers' interests in eliminating waste by offering or participating in collection programs for some of the Company's products or product packaging and for materials used in some of the Company's products. When possible, materials collected through these programs are reprocessed and either reused in the Company's protective packaging operations or offered to other manufacturers for use in other products. In addition, recent gains made in internal recycling programs have allowed the Company to improve its net raw material yield, thus mitigating the impact of rising resin costs, while lowering solid waste disposal costs.

Employees

        As of December 31, 2005, the Company had approximately 17,000 employees worldwide. Approximately 7,500 of those employees were in the U.S., with approximately 500 of those covered by collective bargaining agreements. Of the approximately 9,500 Company employees who were outside the U.S., approximately 6,900 were covered by collective bargaining agreements. Outside of the U.S., many of the covered employees are represented by works councils or industrial boards, as is customary in the jurisdictions in which they are employed. The Company believes that its employee relations are satisfactory.

Available Information

        The Company's Internet address is www.sealedair.com. The Company makes available, free of charge, on or through its web site at www.sealedair.com, its Annual Report on Form 10-K, quarterly

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reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, known as the Exchange Act, as soon as reasonably practicable after the Company electronically files these materials with, or furnishes them to, the Securities and Exchange Commission.

Item 1A.    Risk Factors

Introduction

        Investors should carefully consider the risks described below before making an investment decision. These are the most significant factors that make investing in the Company risky; however, they are not the only factors that should be considered in making an investment decision.

        This Annual Report on Form 10-K also contains and may incorporate by reference from the Company's Proxy Statement for its 2006 Annual Meeting of Stockholders, or from exhibits, forward-looking statements that involve risks and uncertainties. See the "Cautionary Statement Regarding Forward-Looking Statements" below. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risks faced by the Company described below and elsewhere in this Annual Report on Form 10-K or in documents incorporated by reference in this report.

        The Company's business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of the Company's securities could decline due to any of these risks, and investors in the Company's securities may lose all or part of their investment.

Asbestos Litigation and Related Litigation

        If the settlement of the asbestos claims that the Company has agreed to is not implemented, the Company will not be released from the various asbestos-related, fraudulent transfer, successor liability, and indemnification claims made against it arising from a 1998 transaction with W. R. Grace & Co. Further, the Company has been served with a complaint in a lawsuit seeking class action status concerning the Company's public disclosures regarding these asbestos-related claims. The Company is also a defendant in a number of asbestos-related actions in Canada arising from Grace's activities in Canada prior to 1998.

        On November 27, 2002, the Company reached an agreement in principle with the Official Committee of Asbestos Personal Injury Claimants and the Official Committee of Asbestos Property Damage Claimants appointed to represent asbestos claimants in the W. R. Grace & Co. bankruptcy case to resolve all current and future asbestos-related claims made against the Company and its affiliates. The settlement will also resolve the fraudulent transfer claims and successor liability claims, as well as indemnification claims by Fresenius Medical Care Holdings, Inc. and affiliated companies in connection with the Cryovac transaction. The Cryovac transaction was a multi-step transaction, completed on March 31, 1998, which brought the Cryovac packaging business and the former Sealed Air Corporation's business under the common ownership of the Company. The parties to the agreement in principle signed a definitive settlement agreement as of November 10, 2003 consistent with the terms of the agreement in principle. On June 27, 2005, the U.S. Bankruptcy Court for the District of Delaware, where the Grace bankruptcy case is pending, signed an order approving the definitive settlement agreement. Although Grace is not a party to the settlement agreement, under the terms of the order, Grace is directed to comply with the settlement agreement subject to limited exceptions. If the settlement agreement does not become effective, either because Grace fails to emerge from bankruptcy or because Grace does not emerge from bankruptcy with a plan of reorganization that is consistent with the terms of the settlement agreement, then the Company will not be released from the various asbestos-related, fraudulent transfer, successor liability, and indemnification claims made against the Company and its affiliates noted above, and all of these claims would remain pending and would have to be resolved through other means, such as through agreement on alternative settlement terms or trials. In that case, the Company could face liabilities that are

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significantly different from its obligations under the settlement agreement. The Company cannot estimate at this time what those differences or their magnitude may be. In the event these liabilities are materially larger than the current existing obligations, they could have a material adverse effect on the Company's financial condition and results of operations. Although Grace filed a proposed plan of reorganization with the bankruptcy Court in January 2005, the Company cannot predict when a final plan of reorganization will become effective or whether the final plan will be consistent with the terms of the settlement agreement.

        The Company is a defendant in the case of Senn v. Hickey, et al. (Case No. 03-CV-4372) in the U.S. District Court for the District of New Jersey (Newark). This lawsuit seeks class action status on behalf of all persons who purchased or otherwise acquired securities of the Company during the period from March 27, 2000 through July 30, 2002. The lawsuit names the Company and five current and former officers and directors of the Company as defendants. One of these individuals and the Company remain as defendants after a partial grant of the defendants' motion to dismiss the action. The plaintiff's principal allegations against the defendants are that during the above period the defendants materially misled the investing public, artificially inflated the price of the Company's common stock by publicly issuing false and misleading statements and violated U.S. Generally Accepted Accounting Principles, or GAAP, by failing to properly account and accrue for the Company's contingent liability for asbestos claims arising from past operations of Grace. The plaintiffs seek compensatory damages and other relief. If the Court determines that the Company is liable in this case, the Company could be required to pay substantial damages, which the Company cannot estimate at this time and which could have a material adverse effect on the Company's financial condition and results of operations.

        Since November 2004, the Company and specified subsidiaries have been named as defendants in a number of cases, including a number of putative class actions, brought in Canada as a result of Grace's alleged marketing, manufacturing or distributing of asbestos or asbestos-containing products in Canada. Grace has agreed to defend and indemnify the Company and its subsidiaries in these cases. The Canadian cases are currently stayed, and Grace's proposed plan of reorganization provides for payment of these claims and enforcement of the plan of reorganization in the Canadian courts. However, if Grace's final plan does not make the same provisions or if the Canadian courts refuse to enforce Grace's final plan in the Canadian courts, and if in addition Grace is unwilling or unable to defend and indemnify the Company and its subsidiaries in these cases, then the Company could be required to pay substantial damages, which the Company cannot estimate at this time and which could have a material adverse effect on the Company's financial condition and results of operations.

        For further information concerning these matters, see Note 16, "Commitments and Contingencies," of the Notes to the Consolidated Financial Statements, which is contained in Item 8 of Part II of this Annual Report on Form 10-K, under "Asbestos Settlement and Related Costs," "Cryovac Transaction," and "Contingencies Related to the Cryovac Transaction."

Raw Materials and Energy

        Raw material pricing, availability and allocation by suppliers as well as other energy-related costs may negatively impact the Company's results of operations, including its profit margins.

        During 2005, petrochemical-based raw material and other energy-related costs escalated as a result of strong market demand, exacerbated by the hurricanes in the Gulf Coast of the United States. This negatively impacted the Company's profit margins. Natural disasters such as hurricanes, as well as political instability and terrorist activities, may negatively impact the production or delivery capabilities of refineries and natural gas and petrochemical suppliers in the future. That could lead to increased prices for the Company's raw materials, curtailment of supplies and allocation of raw materials by the Company's suppliers, which could reduce revenues and profit margins and harm relations with its customers, and which could have a material adverse effect on the Company's financial condition and results of operations.

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Animal and Food-Related Health Issues

        The effects of animal and food-related health issues such as bovine spongiform encephalopathy, also known as "mad cow" disease, foot-and-mouth disease and avian influenza or "bird-flu," as well as other health issues affecting the food industry, may lead to decreased revenues for the Company.

        The Company manufactures and sells food packaging products, among other products. Various health issues affecting the food industry have in the past and may in the future have a negative effect on the sales of food packaging products. Outbreaks of animal diseases such as mad cow or foot-and-mouth disease, for example, may lead governments to restrict exports and imports of potentially affected animals and food products, leading to decreased demand for the Company's products and possibly also to the culling or slaughter of significant numbers of the animal population otherwise intended for food supply. Also, consumers may change their eating habits as a result of perceived problems with certain types of food. These restrictions and changes may lead to reduced sales of food packaging products by the Company, which could have a material adverse effect on the Company's financial condition and results of operations.

Global Operations

        The global nature of the Company's operations in the United States and in fifty foreign countries exposes it to numerous risks that could materially adversely affect its financial condition and results of operations.

        The Company operates in the United States and in 50 other countries, and its products are distributed in those countries as well as in other parts of the world. The Company continues to expand its global presence as net sales outside the United States in 2005 made up approximately 52% of the Company's total net sales. Additionally the Company has 75 manufacturing facilities and approximately 9,500 employees located outside the United States.

        As a result of its global operations, the Company is exposed to economic, political, business and market conditions in the geographic areas in which it conducts business. Changes in domestic or foreign laws, rules or regulations, or governmental or agency actions, can negatively affect the Company's ability to carry on its business. Governments may impose restrictive or protective import/export requirements as well as other trade measures that may have a negative impact on the Company. Some of the countries in which the Company's subsidiaries operate have significantly different laws on the enforcement of intellectual property and contract rights. As a global entity, the Company may also have greater exposure to the acts and effects of war or terrorism.

        The Company is exposed to market risk from fluctuations in foreign currency exchange rates. The Company may use financial instruments from time to time to manage exposure to foreign exchange rate fluctuations, which use exposes the Company to counterparty credit risk for nonperformance. Additionally, some of the Company's subsidiaries may operate in countries that have highly inflationary economies.

Global Manufacturing Strategy

        The Company will begin the first phase of a new global manufacturing strategy. While too soon to reasonably estimate, the costs of the global manufacturing strategy could exceed the benefits if market forces or other outside influences negatively impact the execution and fulfillment of the strategy.

        The Company has announced that it will begin the first phase of a new global manufacturing strategy. This strategy would include an expansion of the Company's global production capabilities in developing markets around the world, as well as a realignment of its existing production into manufacturing centers of excellence. The goal of this multi-year program is to further improve the Company's operating efficiencies, lower its overall cost structure and implement new technologies more

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effectively. There are risks inherent in the undertaking of such a program, including the stability and sustainability of developing markets, shifts in customer preferences, competitive forces and technologies, cost overruns and unanticipated consequences, any of which could have a material adverse effect on the Company's financial condition and results of operations.

Reliance on Subsidiaries

        The Company's subsidiaries hold substantially all of its assets and liabilities and conduct substantially all of its operations, and as a result the Company relies on distributions or advances from its subsidiaries.

        The Company conducts substantially all of its business through two direct wholly-owned subsidiaries, Cryovac, Inc. and Sealed Air Corporation (US). These two subsidiaries directly and indirectly own substantially all of the assets of the Company's business and conduct operations themselves and through other subsidiaries around the globe. Therefore, the Company depends on distributions or advances from its subsidiaries to meet its debt service and other obligations and to pay dividends with respect to shares of its common stock. Contractual provisions, laws or regulations to which the Company or any of its subsidiaries may become subject, as well its subsidiaries' financial condition and operating requirements, may reduce funds available for service of its indebtedness, dividends, and general corporate purposes.

Volatility of Stock Price, Volume Sales and Large Holdings

        The price of the Company's common stock historically has experienced significant price and volume fluctuations, which may make it difficult for investors to resell the common stock, and the sale of substantial amounts of the Company's common stock could adversely affect the price of the common stock. One shareholder has been identified as having sole voting and dispositive power with respect to 29,196,437 shares, or approximately 35.87%, of the Company's common stock, and another shareholder has been identified as having sole dispositive power with respect to 8,902,500 shares, or approximately 10.9%, of the Company's common stock.

        The market price of the Company's common stock historically has experienced and may continue to experience significant price and volume fluctuations similar to those experienced by the broader stock market in recent years. In addition, the Company's announcements of its quarterly operating results, future developments relating to the W. R. Grace bankruptcy, additional asbestos or other litigation against the Company, the effects of animal and food-related health issues, spikes in raw material and energy-related costs, changes in general conditions in the economy or the financial markets and other developments affecting the Company, its affiliates or its competitors could cause the market price of the common stock to fluctuate substantially.

        In addition, the sale of substantial amounts of the Company's common stock could adversely affect its price. According to a Schedule 13G/A filed with the Securities and Exchange Commission, or SEC, dated as of December 31, 2005, Davis Selected Advisers, L.P. reported sole voting and investment power with respect to 29,196,437 shares, or approximately 35.87%, of the outstanding shares of the Company's common stock, and according to a Schedule 13G/A filed with the SEC, dated as of February 6, 2006, Capital Research and Management Company reported sole dispositive power with respect to 8,902,500 shares, or approximately 10.9%, of the Company's outstanding common stock. In addition, as of December 31, 2005, 2,403,903 shares of common stock were reserved for issuance under the Company's contingent stock plan and directors' stock plan, and options to purchase 89,761 shares of the common stock were outstanding, all of which options were exercisable. Issuance of such reserved shares would cause dilution of stock holdings. Moreover, as of December 31, 2005, nine million shares of the Company's common stock were reserved for issuance pursuant to the settlement of the asbestos litigation upon the effectiveness of a plan of reorganization in the bankruptcy of W. R. Grace. The sale

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or the availability for sale of a large number of shares of the Company's common stock in the public market could adversely affect the price of the common stock.

        While the Schedules 13G/A filed by Davis Selected Advisers and Capital Research and Management indicate that the referenced shares of the Company's common stock were not acquired for the purpose of changing or influencing the control of the Company, if either stockholder were to change its purpose of holding the Company's common stock from investment to attempting to influence the management of the Company, these concentrations of the Company's common stock could potentially negatively impact the Company and the price of its common stock.

Cautionary Statement Regarding Forward-Looking Statements

        Some of the Company's statements in this report, in documents incorporated by reference into this report and in the Company's future oral and written statements, may be forward-looking. These statements reflect the Company's beliefs and expectations as to future events and trends affecting the Company's business, its financial condition and its results of operations. These forward-looking statements are based upon the Company's current expectations concerning future events and discuss, among other things, anticipated future performance and future business plans. Forward-looking statements are identified by such words and phrases as "anticipates," "believes," "could be," "estimates," "expects," "intends," "plans to," "will" and similar expressions. Forward-looking statements are necessarily subject to risks and uncertainties, many of which are outside the control of the Company, which could cause actual results to differ materially from these statements.

        In addition to the most significant risk factors described above, the following are important factors that the Company believes could cause actual results to differ materially from those in the Company's forward-looking statements:

•

legal and environmental proceedings, claims and matters involving the Company;



•

factors affecting the customers, industries and markets that use the Company's packaging materials and systems;



•

competitive factors;



•

changes in the Company's relationships with customers and suppliers;



•

changes in tax rates, laws and regulations;



•

changes in interest rates, credit availability and ratings;



•

the Company's ability to hire, develop and retain talented employees worldwide;



•

the Company's development and commercialization of successful new products;



•

the Company's accomplishments in entering new markets and acquiring and integrating new businesses;



•

the Company's access to financing and other sources of capital;



•

the costs and success of the Company's key information systems projects;



•

disruptions to data or voice networks;



•

the magnitude and timing of the Company's capital expenditures and the ultimate value generated from those expenditures;



•

the costs and results of any exit and disposal activities and restructuring programs that the Company may undertake;



•

the Company's working capital management proficiency;

12

•

the effect on the Company of new pronouncements by regulatory and accounting authorities;



•

natural disasters, health crises, epidemics and pandemics; and



•

the effects of proposed federal asbestos legislation, if enacted.

        Except as required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Item 1B.    Unresolved Staff Comments

        None.

Item 2.    Properties

        The Company produces products in 119 manufacturing facilities, with 25 of those facilities serving both its food packaging and protective packaging business segments. The Company produced food packaging products in 53 manufacturing facilities, of which 15 were in North America, 14 in the European region, 9 in Latin America, 13 in the Asia Pacific region, and 2 in Africa. The Company produces protective packaging products in 91 manufacturing facilities, of which 39 were in North America, 24 in the European region, 11 in Latin America, 15 in the Asia Pacific region, and 2 in Africa. The Company occupies other facilities containing sales, distribution, technical, warehouse or administrative functions at a number of locations in the United States and in various foreign countries.

        In the United States, the Company manufactures food packaging products at facilities in Arkansas, Indiana, Iowa, Mississippi, Missouri, New York, North Carolina, Pennsylvania, South Carolina and Texas. It manufactures protective packaging products at facilities in California, Connecticut, Florida, Illinois, Indiana, Massachusetts, Mississippi, Missouri, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Texas and Washington. Because of the relatively low density of the Company's air cellular, polyethylene foam and protective mailer products, the Company realizes significant freight savings by locating manufacturing facilities for these products near its customers and distributors.

        The Company owns the large majority of its manufacturing facilities. Some of these facilities are subject to secured or other financing arrangements. The Company also leases sites for warehouse and office needs, as well as for the balance of its manufacturing facilities, which are generally smaller sites. The Company's manufacturing facilities are usually located in general purpose buildings that house the Company's specialized machinery for the manufacture of one or more products. The Company believes that its manufacturing, warehouse and office facilities are well maintained, suitable for their purposes and adequate for the Company's needs.

Item 3.    Legal Proceedings

        The information set forth in Part II, Item 8 of this Annual Report on Form 10-K in Note 16 under the captions "Cryovac Transaction," "Contingencies Related to the Cryovac Transaction" and "Compliance Matters" is incorporated herein by reference.

        At December 31, 2005, the Company was a party to, or otherwise involved in, several federal, state and foreign environmental proceedings and private environmental claims for the cleanup of "Superfund" sites under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 and other sites. The Company may have potential liability for investigation and cleanup of some of these sites. It is the Company's policy to accrue for environmental cleanup costs if it is probable that a liability has been incurred and if the Company can reasonably estimate an amount or range of costs associated with various alternative remediation strategies, without giving effect to any

13

possible future insurance proceeds. As assessments and cleanups proceed, the Company reviews these liabilities periodically and adjusts its reserves as additional information becomes available. At December 31, 2005, environmental related reserves were not material to the Company's financial condition or results of operations. While it is often difficult to estimate potential liabilities and the future impact of environmental matters, based upon the information currently available to the Company and its experience in dealing with these matters, the Company believes that its potential future liability with respect to these sites is not material to the Company's financial condition and results of operations.

        The Company is also involved in various other legal actions incidental to its business. The Company believes, after consulting with counsel, that the disposition of these other legal proceedings and matters will not have a material effect on the Company's financial condition and results of operations.

Item 4.    Submission of Matters to a Vote of Security Holders

        No matters were submitted to a vote of the Company's stockholders during the fourth quarter of 2005.

Executive Officers of the Registrant

        The information appearing in the table below sets forth the current position or positions held by each executive officer of the Company, the officer's age as of February 28, 2006, the year in which the officer was first elected to the position currently held with the Company or with the former Sealed Air Corporation, now known as Sealed Air Corporation (US) and a wholly-owned subsidiary of the Company, and the year in which such person was first elected an officer thereof (as indicated in the footnote to the table).

        All of the Company's officers serve at the pleasure of the Board of Directors. The Company and its subsidiaries have employed all officers for more than five years except for Mr. Kelsey, who first was elected an officer of the Company effective January 1, 2002, and Mr. Crosier, who was first elected an officer effective October 1, 2004. Previously, Mr. Kelsey was, since 1998, Vice President and Chief Financial Officer of Oglebay Norton Company, a public company that mines, processes, transports and markets aggregates and industrial minerals. Mr. Crosier was previously Partner—Supply Chain, Logistics, Operations Practice of C.F.A. & Associates, a privately-held advisor to small/medium sized businesses on domestic and international growth opportunities, from January 2002 through July 2004, and prior to that was Executive Vice President, Supply Chain Management and Logistics, for Staples Inc., a public company and retailer of office supplies, furniture, technology and services, from June 1998 until December 2001.

14

        There are no family relationships among any of the Company's officers or directors.

*

All persons listed in the table who were first elected officers before 1998 were executive officers of the former Sealed Air Corporation, now known as Sealed Air Corporation (US), prior to the Cryovac transaction in March 1998. Mr. Hickey was first elected President in 1996, first elected Chief Executive Officer in 2000 and first elected a director in 1999. Mr. Kelsey was first elected Senior Vice President in 2003 and first elected Chief Financial Officer in 2002. Ms. White was first elected Vice President in 2003, first elected General Counsel in 1998, and first elected Secretary in 1996.

15

Part II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        The Company's Common Stock is listed on the New York Stock Exchange under the trading symbol SEE. The table below sets forth the quarterly high and low closing sales prices of the Common Stock for 2004 and 2005 as reported in the New York Stock Exchange composite listing. The Company did not pay dividends on the Common Stock in either year.

Holders

        As of January 31, 2006, there were approximately 8,367 holders of record of the Company's Common Stock.

Dividends

        Although the Company did not pay dividends on the Common Stock in 2004 or 2005, on January 30, 2006, the Company announced that it is initiating payment of a quarterly cash dividend. The Company's Board of Directors declared a quarterly dividend of $0.15 per common share payable on March 17, 2006 to stockholders of record at the close of business on March 3, 2006. There are no restrictions that currently materially limit the Company's ability to pay dividends or that the Company reasonably believes are likely to limit materially the future payment of dividends on the Common Stock. The Company currently expects that comparable cash dividends will continue to be paid in future quarters. From time to time, the Company will consider other means of returning value to its stockholders based on its financial condition and results of operations. There is no guarantee that the Company's Board of Directors will declare any further dividends.

Issuer Purchases of Equity Securities

        The table below sets forth the total number of shares of the Company's common stock, par value $0.10 per share, that the Company repurchased in each month of the quarter ended December 31,

16

2005. The maximum number of shares that may yet be purchased under the Company's plans or programs is set forth below.

(1)

The Company purchased all shares during the quarter ended December 31, 2005 pursuant to its publicly announced program (described below and under the caption "Repurchases of Capital Stock" in "Management's Discussion and Analysis of Financial Position and Results of Operations") except for shares repurchased or withheld pursuant to the Company's 1998 Contingent Stock Plan. Pursuant to the repurchase option provision of its 1998 Contingent Stock Plan, during the month of December 2005, the Company repurchased 300 shares of the Company's common stock. Pursuant to the provision of its 1998 Contingent Stock Plan that permits tax withholding obligations or other legally required charges to be satisfied by having the Company withhold shares from awards under the plan, the Company withheld 5,831 and 23,027 shares of the Company's common stock in November and December 2005, respectively.

(2)

The price calculations in this column do not include the above-mentioned shares of the Company's common stock repurchased or withheld by the Company pursuant to the repurchase option and share withholding provisions of its 1998 Contingent Stock Plan. In accordance with the repurchase option, the Company repurchased shares at the issue price of the shares, which was $1.00 per share. In accordance with the share withholding provision, the Company withheld shares at a price equal to their fair market value. The average fair market values of the shares withheld were $50.25 and $53.79 per share in November and December 2005, respectively. Also, the price calculations in this column do not include commissions.

(3)

On June 29, 1998, the Company announced that its Board of Directors had authorized the purchase of up to five percent of the Company's then issued and outstanding capital stock on an as-converted basis. On April 14, 2000, the Company announced that its Board of Directors had authorized the purchase of up to an additional five percent of the Company's issued and outstanding capital stock as of March 31, 2000 on an as-converted basis. On November 3, 2000, the Company announced that its Board of Directors had authorized the purchase of up to an additional five percent of the Company's issued and outstanding capital stock as of October 31, 2000 on an as-converted basis. At the time of these authorizations, the Company's capital stock comprised its common stock and its Series A convertible preferred stock. Prior to its redemption in July 2003, each share of the Company's Series A convertible preferred stock was convertible into 0.885 shares of the Company's common stock. These authorizations constitute a single program, which has no set expiration date. As of the close of business on December 31, 2005, approximately 16,977,000 shares of the Company's common stock were authorized to be

17

repurchased under this program, and approximately 14,327,000 shares had been repurchased including preferred shares on an as-converted basis, leaving approximately 2,650,000 shares of common stock authorized for repurchase under the program.

Item 6.    Selected Financial Data

(1)

In November 2002, the Company reached an agreement in principle with the appropriate parties to resolve all current and future asbestos-related claims made against it and its affiliates in connection with the Cryovac transaction. In connection with this settlement, the Company recorded a pre-tax charge of $850.1 million in the consolidated statement of operations in 2002, which resulted in the Company's net loss for the year ended December 31, 2002. The parties signed a definitive settlement agreement as of November 10, 2003 consistent with the terms of the agreement in principle. See Note 16 to the Consolidated Financial Statements.

(2)

Beginning January 1, 2002, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, the Company stopped recording amortization expense related to goodwill. Goodwill amortization expense was $57.0 million in 2001. See Note 8 to the Consolidated Financial Statements.

(3)

In the fourth quarter of 2004, the Company incurred restructuring and other charges of $33 million relating to global profit improvement initiatives implemented to improve the Company's operating efficiencies and cost structure. In 2001, the Company recorded restructuring charges of $32.8 million. See Note 13 to the Consolidated Financial Statements.

(4)

In July 2003, the Company issued $1,281.3 million of senior notes. On July 18, 2003, the Company used the net proceeds from these offerings and additional cash on hand, approximately

18

$1,298.1 million in the aggregate, to redeem its Series A convertible preferred stock at the redemption price of $51.00 per share. See Note 17 to the Consolidated Financial Statements.

(5)

In December 2001, the Company and a group of its U.S. subsidiaries entered into a U.S. accounts receivable securitization program and sold $95.6 million of interests in U.S. accounts receivable to the financial institutions participating in this program. This amount was removed from the consolidated balance sheet and the proceeds were used to pay down outstanding borrowings. At December 31, 2005, 2004, 2003 and 2002, these financial institutions held no interests in accounts receivable under this program. See Note 5 to the Consolidated Financial Statements.

(6)

The Company's 5.625% euro notes with a face value of €200 million, equivalent to U.S. $238.1 million, net of discount, are classified as a current liability on the Company's consolidated balance sheet at December 31, 2005 since the notes mature in July 2006. The Company intends to use available cash to retire this debt when it matures.

(7)

EBIT is defined as earnings (loss) before interest expense and provisions for income taxes. EBITDA is defined as EBIT plus depreciation and amortization. EBIT and EBITDA do not purport to represent net earnings or net cash provided by operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to such measurements or as indicators of the Company's performance. The Company's definitions of EBIT and EBITDA may not be comparable with similarly-titled measures used by other companies. EBIT and EBITDA are among the indicators used by the Company's management to measure the performance of the Company's operations and thus the Company's management believes such information may be useful to investors. Such measures are also among the criteria upon which performance-based compensation may be based. The following is a reconciliation of net earnings (loss) to EBIT and EBITDA:

19

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The information in "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read together with the Company's consolidated financial statements and related notes set forth in Item 8 of Part II of this Annual Report on Form 10-K. All amounts and percentages are approximate due to rounding.

Introduction

        The Company manufactures and sells a wide range of food and protective packaging products, operating in the United States and in 50 other countries, with products distributed in those countries and in other parts of the world.

        The Company operates in two reportable business segments, Food Packaging and Protective Packaging. The Company's principal food packaging products are flexible materials, associated packaging equipment systems, rigid containers and absorbent pads. These products, many of which bear the Cryovac trademark, package a broad range of perishable foods. The Company primarily sells the products in this segment to food processors, distributors, supermarket retailers and food service businesses.

        The Company's principal protective packaging products provide cushioning, surface protection and void fill. The Company primarily sells its protective packaging products and systems to distributors and manufacturers in a wide variety of industries.

        The Company's global sales and marketing staff numbered approximately 2,600 employees in the countries in which it operates, who sell and market the Company's products through a large number of distributors, fabricators and converters, as well as directly to end users such as food processors, food service businesses, and manufacturers. The Company has no material long-term contracts for the distribution of its products. In 2005, no customer or affiliated group of customers accounted for 10% or more of the Company's consolidated net sales. Although net sales of both food packaging products and protective packaging products have tended to be slightly higher in the fourth quarter, the Company does not consider seasonality to be material to its consolidated business or to either reportable business segment.

        Competition for most of the Company's packaging products is based primarily on packaging performance characteristics, service and price. Competition is also based upon innovations in packaging technology and, as a result, the Company maintains ongoing research and development programs to enable it to maintain technological leadership.

        The Company's net sales are sensitive to developments in its customers' business or market conditions, changes in the global economy, and the effects of foreign currency translation. Its costs can vary significantly with changes in petrochemical-related costs, which are not within the Company's control. Consequently, the Company's management focuses on reducing those costs that the Company can control and using petrochemical-based raw materials as efficiently as possible. The Company also believes that its global presence helps to insulate it from localized changes in business conditions that may more strongly affect some of its competitors.

        As is discussed below, the Company's businesses are managed to generate substantial cash flow. The Company believes that its strong cash flow will permit it to continue to spend significantly on innovative research and development and to invest in its business by means of acquisitions and capital expenditures for property and equipment. Moreover, its ability to generate substantial cash flow should provide the Company with the flexibility to modify its capital structure as the need or opportunity arises. The Company also believes that this cash flow, along with accumulated cash and funds available under its credit facilities, will enable the Company to make the settlement payment, including interest, that is expected to be required of the Company upon consummation of a plan of reorganization in the

20

W. R. Grace & Co. bankruptcy, as discussed below. In addition to investing in its business, the Company uses its cash flow to reduce debt and to return value to its shareholders. On January 30, 2006, the Company announced that it is initiating payment of a quarterly cash dividend. The Board of Directors declared a quarterly dividend of $0.15 per common share payable on March 17, 2006 to shareholders of record at the close of business on March 3, 2006.

        Highlights for the Company's year 2005 compared with 2004 and 2003 were:

Net Sales

        The principal factors contributing to changes in net sales in the three years ended December 31, 2005 were changes in unit volume, changes in product mix and average selling prices, and foreign currency translation.

        Net sales in 2005 increased 8% to $4,085.1 million compared with $3,798.1 million in 2004. The components of the increase in net sales for 2005 were as follows (dollars in millions):

21

        Net sales for 2004 increased 8% to $3,798.1 million compared with $3,531.9 million in 2003. The components of the increase in net sales for 2004 were as follows (dollars in millions):

        Foreign currency translation had a favorable impact on net sales of $57.3 million in 2005. Excluding the positive effect of foreign currency translation, net sales would have increased 6% compared with 2004. The favorable foreign currency translation impact on net sales for the full year of 2005 was primarily due to the strengthening of foreign currencies in the Asia Pacific region, Brazil and Europe against the U.S. dollar. The full year favorable impact of $57.3 million includes an unfavorable fourth quarter impact of $10.9 million, primarily due to the weakness of foreign currencies in Europe against the U.S. dollar.

        Foreign currency translation had a favorable impact on net sales of $159.4 million in 2004. Excluding the positive effect of foreign currency translation, net sales would have increased 3% compared with 2003. The favorable foreign currency translation impact on net sales in 2004 was primarily due to the strengthening of foreign currencies in Europe and the Asia Pacific region against the U.S. dollar, partially offset by the weakness of the Brazilian real.

        Net sales of the Company's food packaging segment, which consists primarily of the Company's Cryovac® food packaging products, constituted 62% of net sales in 2005 and 2004 and 63% of net sales in 2003. The Company's protective packaging segment contributed the balance of net sales. This segment aggregates the Company's protective packaging products and shrink packaging products, all of which are used principally for non-food packaging applications.

Food Packaging Segment Sales

        Net sales of food packaging products increased 8% in 2005 to $2,532.1 million compared with $2,346.9 million in 2004 and increased 6% in 2004 compared with $2,218.6 million in 2003. Foreign currency translation had a favorable impact on this segment of $42.3 million in 2005. Excluding the positive foreign currency translation effect, net sales for this segment would have increased 6% in 2005. Excluding the positive foreign currency translation effect of $109.8 million, net sales for this segment would have increased 1% in 2004.

        In 2005, unit volumes increased in all regions of the world, with the Asia Pacific and Latin America regions having the primary impact. The segment also benefited from price/mix due in part to selling price increases. In 2004, unit volumes increased in Latin America and to a lesser extent, in Asia Pacific and Europe, partially offset by a decrease in North America. The decrease in North America was due to import restrictions imposed by several countries on U.S. beef products, which adversely affected the sales of food packaging products to the Company's customers that process U.S. beef for export.

22

        Among the classes of products in the food packaging segment, net sales of flexible packaging materials and related systems increased 7% to $2,122.8 million in 2005 compared with $1,976.5 million in 2004 and increased 6% in 2004 compared with 2003 net sales of $1,868 million. Foreign currency translation had a favorable impact of $37.3 million in 2005 for flexible packaging materials and related systems. Excluding the positive foreign currency translation effect, net sales for flexible packaging materials and related systems would have increased 6% in 2005. Foreign currency translation had a favorable impact of $90.5 million in 2004 for flexible packaging materials and related systems. Excluding the positive foreign currency translation effect, net sales for flexible packaging materials and related systems would have increased 1% in 2004. The components of the increase in net sales for 2005 and 2004 were as follows (dollars in millions):

        Net sales of rigid packaging and absorbent pads, the other class of products in the food packaging segment, increased 11% to $409.3 million compared with $370.4 million in 2004 and increased 6% in 2004 compared with 2003 net sales of $350.6 million. Foreign currency translation had a favorable impact of $5.1 million in 2005 for rigid packaging and absorbent pads. Excluding the positive effect of foreign currency translation, net sales of rigid packaging and absorbent pads would have increased 9% in 2005. Excluding the $19.3 million positive foreign currency translation effect, net sales of rigid packaging and absorbent pads would have remained flat in 2004 compared with 2003.

        The components of the increase in net sales for 2005 and 2004 were as follows (dollars in millions):

        The Company sells foam and solid plastic trays and containers that customers use to package a wide variety of food products. The Company manufactures such products in its own facilities in various regions or has them fabricated by other manufacturers. The Company's net sales of such products fabricated by other manufacturers were $110.4 million, $83.5 million and $70.8 million in 2005, 2004 and 2003, respectively.

Protective Packaging Segment Sales

        Net sales of protective packaging products increased 7% to $1,553 million in 2005 compared with $1,451.2 million in 2004 and increased 11% in 2004 compared with 2003 sales of $1,313.3 million. Sales growth in this segment was balanced between unit volume of $39.7 million, primarily in North America, and a positive price/mix impact of $37.5 million, primarily in North America and to a lesser extent in Europe, in part due to selling price increases. Unit volumes increased in 2004 in all regions of the world with the U.S and Europe having the primary impact.

23

        Foreign currency translation had a favorable impact of $15 million in 2005 for this segment. Excluding the positive foreign currency translation effect, net sales for the protective packaging segment would have increased 6% in 2005. Foreign currency translation had a favorable impact of $49.6 million in 2004 for this segment. Excluding the positive foreign currency translation effect, net sales for the protective packaging segment would have increased 7% in 2004.

        The classes of products within the protective packaging segment are cushioning and surface protection products and other products. Other products within the protective packaging segment represented approximately 1% of consolidated net sales in 2005, 2004 and 2003.

Sales by Geographic Region

        Net sales from operations in the United States represented 48% and 49% of net sales in 2005 and 2004, respectively. Net sales from U.S. operations increased 7% in 2005 to $1,972.9 million compared with $1,851.8 million in 2004. Net sales from international operations increased 9% in 2005 to $2,112.2 million compared with $1,946.3 million in 2004. Excluding the $57.3 million positive foreign currency translation effect, international net sales would have increased 6% compared with 2004. The components of the increase in net sales by geographic region for 2005 were as follows (dollars in millions):

        Net sales from operations in the United States represented 49% and 52% of net sales in 2004 and 2003, respectively. Net sales from U.S. operations remained flat in 2004 at $1,851.8 million compared with $1,844.8 million in 2003. Net sales from international operations increased 15% in 2004 to $1,946.3 million compared with $1,687.1 million in 2003. Excluding the $159.4 million positive foreign currency translation effect, international net sales would have increased 6% compared with 2003. The components of the increase in net sales by geographic region for 2004 were as follows (dollars in millions):

Costs and Margins

        Gross profit as a percentage of net sales was 28.3% in 2005, 30.6% in 2004 and 31.5% in 2003. The principal cause for the reduction since 2003 was significantly higher petrochemical-based raw materials and other energy-related costs. Between 2003 and 2005, the prices of crude oil and natural gas, which serve as feedstocks utilized in the production of many of the resins the Company buys, have approximately doubled. Although changes in prices of crude oil and natural gas are not perfect benchmarks, they are indicative of the variations in raw material and energy-related costs faced by the Company. The decrease in gross profit in 2005 compared with 2004 was also caused in part by an

24

unfavorable shift in product mix, which was partially offset by increases in selling prices. The decrease in 2004 compared with 2003 was also due to a reduction in sales volumes in the North America food packaging business due to import restrictions on U.S. beef products imposed by certain foreign governments.

        Marketing, administrative and development expenses increased 3% in 2005 and 9% in 2004. The increase in 2005 was due to the impact of foreign currency translation, higher professional fees, and, to a lesser extent, expenses for research and development related projects, partially offset by a reduction in management incentive compensation since the Company did not meet earnings growth objectives for 2005 and partial year savings from restructuring activities initiated in the fourth quarter of 2004, as discussed below. The increase in 2004 was primarily due to the effects of foreign currency translation, expenses associated with the upgrade of the Company's information technology platform, and expenses to support the higher volume of net sales. Marketing, administrative and development expenses as a percentage of net sales were 15.8% in 2005, 16.5% in 2004 and 16.2% in 2003.

2004 Restructuring Program

        During the fourth quarter of 2004, the Company announced a series of separate profit improvement plans in various geographic regions in order to complement the Company's long-term growth programs and financial goals, improve the Company's operating efficiencies and lower its overall cost structure. The plans principally reduced the number of employees and consolidated or relocated operations in both of the Company's reportable business segments.

        At December 31, 2004, the Company expected to eliminate 473 full-time positions, and during 2005 the Company revised the number of positions to be eliminated to 475. During 2004, 65 positions were eliminated, and 379 positions were eliminated during 2005 for a total of 444 positions eliminated by the end of 2005. As an element of the program, the Company expects to add approximately 100 positions in connection with the Company's realignment or relocation of some of its manufacturing activities, so that the net reduction in positions is expected to be approximately 375. These actions affected principally production workers and members of the Company's sales force, primarily in Europe. The Company expects to substantially complete this reduction in headcount by March 2006.

        The charges for the year ended December 31, 2004 consisted of the following:

        The long-lived asset impairment of $10.3 million consisted of write-downs and write-offs of property and equipment. The impairments related to decisions to rationalize and realign production of some of the Company's smaller product lines and to close several smaller European manufacturing facilities. Since the undiscounted cash flows associated with these asset groups, including estimated salvage value, were less than the carrying values of these asset groups, they were written down to their estimated fair value. The Company plans to dispose of these facilities and much of the equipment during the first six months of 2006.

25

        The components of the restructuring charges, spending and other activity through December 31, 2005 and the remaining accrual balance at December 31, 2005 were as follows:

        The Company expects to pay $5.0 million of the remaining accrual balance at December 31, 2005 in 2006 and $0.4 million in 2007 and thereafter.

        For the year ended December 31, 2005, the Company recorded $1.7 million of additional charges related to the 2004 restructuring program. This amount includes $1.3 million of costs incurred in 2005 related to the relocation of assets and employees from facilities that were closed as part of the restructuring program. The Company also recorded a net charge of $0.4 million related to the employee termination costs that were accrued as part of the 2004 restructuring program. The modifications to the originally recorded amounts were due to increases in the amounts due to terminated employees ($0.9 million) and reductions based upon certain employees no longer being eligible for the termination benefits ($0.5 million).

        The Company estimates that the cost savings realized in 2005 were $18 to $20 million and estimates that it will realize approximately $25 to $30 million in annualized cost savings on a full year run rate basis by the end of 2006.

Operating Profit

        Operating profit increased 1.5% in 2005 and decreased 7.0% in 2004. The increase in 2005 was due to an increase in net sales and a decrease of $31.3 million in restructuring and other charges, partially offset by higher petrochemical-based raw materials and other energy-related costs and an increase of $19.8 million in marketing, administrative and development expenses. The decrease in operating profit in 2004 was due to $33 million of restructuring and other charges, $53.7 million of higher marketing, administrative and development expenses, an increase in petrochemical-related raw material costs, and reduced sales volumes in the Company's North American food packaging business, offset by an increase in total net sales, all of which are discussed above. As a percentage of net sales, operating profit was 12.5% in 2005, 13.2% in 2004 and 15.3% in 2003.

        Operating profit by business segment for 2005, 2004 and 2003 was as follows (dollars in millions):

        The food packaging segment contributed 63%, 59% and 65% of the Company's operating profit in 2005, 2004 and 2003, respectively, before taking into consideration restructuring and other (charges)

26

credits and unallocated corporate operating expenses. The Company's protective packaging segment contributed the balance of operating profit.

        Food packaging operating profit was 12.8%, 13.6% and 15.7% of food packaging net sales in 2005, 2004 and 2003, respectively. The decline in operating profit as a percentage of net sales in 2005 compared with 2004 was due to higher raw material and energy-related costs combined with an unfavorable shift in product mix, partially offset by selling price increases. The decline in operating profit as a percentage of net sales in 2004 compared with 2003 was due to higher raw material costs and reduced sales volumes in North America due to import restrictions on U.S. beef products.

        Protective packaging operating profit was 12.2%, 15.0% and 14.6% of protective packaging net sales in 2005, 2004 and 2003, respectively. The decline in operating profit as a percentage of net sales in 2005 compared with 2004 was due to higher raw material and energy-related costs combined with an unfavorable shift in product mix, partially offset by selling price increases. The increase in operating profit as a percentage of net sales in 2004 compared with 2003 was due to higher unit volumes, benefits from ongoing productivity initiatives and price increases implemented to help offset rising raw material costs, partially offset by higher raw material costs.

Interest Expense and Other Income, net

        Interest expense (which includes the effects of interest rate swaps and the amortization of capitalized debt issuance costs, bond discount and terminated treasury locks) was $149.7 million in 2005, $153.7 million in 2004, and $136 million in 2003.

        The decrease in interest expense in 2005 compared with 2004 was primarily due to the following:

•

a $12.5 million decrease due to the redemption of the entire outstanding principal amount, $177.5 million, of the Company's 8.75% senior notes due July 2008, the repurchase of $22.7 million face amount of its 6.95% senior notes due May 2009, and the termination of related interest rate swaps with a total notional amount of $150 million, all in the fourth quarter of 2004;

        partially offset by;

•

an increase of $4.7 million due to the impact of higher interest rates on the Company's $300 million of outstanding interest rate swaps entered into to effectively convert its 5.375% senior notes due April 2008 into floating rate debt;



•

an increase of $1.6 million caused by additional expense related to the compounding of interest on the amount payable pursuant to the asbestos settlement agreement; and



•

an increase of $1.4 million related to lower capitalized interest during the construction of capital investment projects in 2005 compared with the 2004 period.

        The increase in interest expense in 2004 compared with 2003 was primarily due to the following:

•

an increase of $37.2 million of interest expense in 2004 due to the Company's issuance of approximately $300 million of senior notes in April 2003 and $1.3 billion of senior notes and convertible senior notes in July 2003 as discussed below;

        partially offset by;

•

a decrease of $16.4 million of interest expense due to the repurchase of $172.5 million face amount of senior notes in the fourth quarter of 2003 and the senior note redemption and repurchases completed in the fourth quarter of 2004.

        Other income, net, was $15.9 million in 2005, $5.8 million in 2004, and $5.6 million in 2003. Included in these amounts are primarily interest and dividend income of $11.1 million, $7.7 million and $6.8 million and net foreign exchange transaction losses of $4.7 million, $9.0 million and $2.8 million in 2005, 2004 and 2003, respectively.

27

Loss on debt redemption and repurchases

        In 2004 and 2003 the Company incurred losses of $32.2 million and $33.6 million, respectively, due to debt redemptions and repurchases. These losses were reflected in the statement of operations in "Loss on debt redemption and repurchases." See below under the caption "Analysis of Historical Cash Flows—Debt Redemption and Repurchases" for further discussion of these transactions.

Income Taxes

        The Company's effective income tax rate was 32.1% in 2005, 33.3% in 2004 and 36.2% in 2003. The decrease in the 2005 effective income tax rate compared with 2004 was primarily due to the reversal of reserves for tax matters for periods that have closed in the relevant jurisdictions. The Company currently expects an effective income tax rate of approximately 33.3% for 2006.

        The decrease in the 2004 effective income tax rate compared with 2003 was primarily due to improved tax efficiencies resulting from reorganizing the Company's international subsidiaries, tax effects from debt retirement, state taxes and a change in foreign tax law, partially offset by some of the 2004 business restructuring expenses which the Company could not recognize for tax purposes.

        In 2005 and 2004, the effective income tax rate was lower than the statutory U.S. federal income tax rate of 35.0% primarily due to the lower net effective income tax rate on foreign earnings, partially offset by the effect of state income taxes. In 2003, the effective income tax rate was higher than the statutory U.S. federal income tax rate primarily due to state income taxes and non-deductible expenses, partially offset by the lower net effective tax rate on foreign earnings.

        The American Jobs Creation Act, known as the AJCA, provided for a deduction of 85% of qualifying foreign earnings that the Company could have repatriated in 2005. After considering global cash management objectives, its overall tax position and restrictions on the use of repatriated cash, the Company did not repatriate any qualifying foreign earnings in 2005.

        The AJCA also provided for a deduction in 2005 for qualified production activities. This deduction did not have a material impact on the Company's 2005 effective income tax rate.

Net Earnings

        As a result of the factors noted above, net earnings were $255.8 million in 2005, $215.6 million in 2004 and $240.4 million in 2003.

Earnings per Common Share

        Basic earnings per common share were $3.09 for 2005, $2.56 for 2004 and $2.21 for 2003. Diluted earnings per common share were $2.69 for 2005, $2.25 for 2004 and $1.97 for 2003.

        The diluted earnings per common share for 2003 includes a $0.26 per common share charge related to the Company's redemption of all of its outstanding shares of Series A convertible preferred stock on July 18, 2003. The Company redeemed all of the outstanding shares of its Series A convertible preferred stock at a redemption price of $51.00 per share. The Company also paid accrued dividends on the preferred stock from July 1, 2003 through July 17, 2003 in the aggregate amount of $2.4 million. The $51.00 per share redemption price included a $1.00 per share redemption premium, or an aggregate premium of $25.5 million. The Company also reflected this redemption price in basic earnings per common share in 2003.

        The basic earnings per common share calculations for 2003 include gains of $0.8 million attributable to the repurchase of preferred stock. The Company did not recognize any such gains for 2005 and 2004 since it had redeemed all shares of its outstanding preferred stock during the third quarter of 2003.

        In calculating diluted earnings per common share, the Company's calculation of the weighted average number of common shares for 2005, 2004 and 2003 provides for the conversion of the Company's 3% convertible senior notes due June 2033 due to the application of EITF Issue No. 04-08, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share," the assumed issuance of

28

nine million shares of common stock reserved for the Company's previously announced asbestos settlement referred to in Note 16, "Commitments and Contingencies" of the Notes to the Consolidated Financial Statements, which is contained in Item 8 of Part II of this Annual Report on Form 10-K, under the caption "Asbestos Settlement and Related Costs," and the exercise of dilutive stock options, net of assumed treasury stock repurchases.

Liquidity and Capital Resources

        The discussion that follows contains:

•

a description of the Company's material commitments and contingencies,



•

a description of the Company's principal sources of liquidity,



•

a description of the Company's outstanding indebtedness,



•

an analysis of the Company's historical cash flows,



•

a description of the Company's derivative financial instruments,



•

a description of the Company's shareholders' equity, and



•

a description of the Company's global manufacturing strategy.

Material Commitments and Contingencies

Asbestos Settlement; Commitments Related to the Cryovac Transaction

        The Company recorded a charge of $850.1 million in the fourth quarter of 2002, of which $512.5 million covers a cash payment that the Company is required to make upon the effectiveness of a plan of reorganization in the bankruptcy of W. R. Grace & Co. The Company did not use cash in 2005, 2004 or 2003 with respect to this liability, and the Company cannot predict when it will be required to make this payment. The Company currently expects to fund this payment by using a combination of accumulated cash and future cash flows from operations and funds available under its $500 million senior unsecured multi-currency credit facility or its accounts receivable securitization program, both described below, or a combination of these alternatives. The cash payment of $512.5 million accrues interest at a 5.5% annual rate, which is compounded annually, from December 21, 2002 to the date of payment. The Company has recorded this accrued interest in other current liabilities in its consolidated balance sheets, and these amounts were $90.3 million and $58.9 million at December 31, 2005 and 2004, respectively.

        The Company is subject to other contingencies related to the Cryovac transaction. Note 16, "Commitments and Contingencies," of the Notes to the Consolidated Financial Statements, which is contained in Item 8 of Part II of this Annual Report on Form 10-K, describes these contingencies under "Contingencies Related to the Cryovac Transaction" and is incorporated herein by reference.

Compliance Matters

        In late 2005, the Company identified travel and related expenses that had been paid by certain of the Company's foreign subsidiaries for trips by government officials who oversee the regulation of the Company's medical products in a foreign country. Although these expenses were accurately recorded as travel and entertainment expenses in the Company's books and records, these activities appeared to have breached the Company's Code of Conduct. More importantly, the Company was concerned that these payments may have violated the Foreign Corrupt Practices Act, and therefore outside counsel was retained and promptly began an internal investigation. In March 2006, the Company voluntarily disclosed to the United States Department of Justice, or the DOJ, and the United States Securities and Exchange Commission, or the SEC, the factual information obtained to date in the Company's internal investigation, including that these payments were made between 2003 and 2005 and totaled less than $0.2 million. The internal investigation is ongoing, and the Company is cooperating with the DOJ and the SEC. The Company cannot predict when this matter will be resolved or the terms upon which this matter will be resolved, although the Company currently does not expect this matter to be material to its consolidated results of operations, financial position or cash flows. In connection with the

29

investigation, the Company is evaluating remedial measures and will take timely and appropriate action where necessary.

Contractual Commitments

        The following table summarizes the Company's principal contractual obligations and sets forth the amounts of required cash outlays in 2006 and future years (amounts in millions):

(1)

Includes principal maturities (at face value) only.

(2)

The 2010 period includes the 3% convertible senior notes since the holders of these notes have the option to require the Company to repurchase the senior notes on June 30 of 2010, 2013, 2018, 2023 and 2028. See Note 10, "Debt and Credit Facilities," to the Consolidated Financial Statements.

(3)

This liability is reflected as a current liability due to the uncertainty of the timing of payment. Interest accrues on this amount at a rate of 5.5% per annum, compounded annually, until it becomes due and payable.

        Current Portion of Long-Term Debt and Long-Term Debt—The debt shown in the above table excludes unamortized bond discounts and interest rate swap adjustments as of December 31, 2005 and, therefore, represents the principal amount of the debt required to be repaid in each period.

        Operating Leases—In addition to the obligation to pay the principal amount of the debt obligations discussed above, the Company is obligated under the terms of various operating leases covering some of the facilities that it occupies and some production equipment, most of which are accounted for as operating leases. The contractual operating lease obligations listed in the table above represent estimated future minimum annual rental commitments under non-cancelable real and personal property leases as of December 31, 2005.

        Asbestos Settlement—The asbestos settlement is described more fully in "Asbestos Settlement; Commitments Related to the Cryovac Transaction," above.

        Acquisition of Nelipak Holdings B.V.—On January 3, 2006, the Company acquired Nelipak Holdings B.V. for cash in the amount of $41.2 million and assumed debt of approximately $9.5 million. Such acquisition has been accounted for under the purchase method of accounting. This acquisition is not material to the Company's consolidated financial statements.

        Cash Dividend—The Company's Board of Directors has declared a quarterly cash dividend of $0.15 per common share, which is payable on March 17, 2006 to shareholders of record at the close of business on March 3, 2006. The estimate of this liability was calculated using the 81,476,998 shares of common stock that were issued and outstanding as of January 31, 2006.

30

        The Company has the following other principal contractual obligations:

•

$10.5 million remaining obligation for the purchase of equipment over a five-year period which began in 2003, together with a potential termination fee in an amount to be determined. The Company's obligation is reduced or increased based on market price changes for the equipment and changes in the Packaging Machinery Manufacturers Index. Estimated future minimum annual commitments are as follows: 2006—$5.0 million; and 2007—$5.5 million. Failure to purchase any of the minimum annual requirements in any year obligates the Company to pay an amount of 45% of such shortfall. During 2005 and 2004, the Company did not meet the minimum equipment purchase requirements and recorded a charge of $1 million and $0.9 million, respectively.



•

$7 million minimum remaining commitment for the purchase of telecommunications and network capacity and services over a four-year period that began in 2004.



•

$6.4 million to a supplier if the Company fails to purchase an additional 95.5 million pounds of specified raw materials, at the then current market price, over a ten-year period that ends in May 2012. The amount of the potential contingent payment declines in proportion to the Company's purchase of minimum quantities required under the contract. At December 31, 2005, the Company's purchases satisfied the minimum quantity requirements under the agreement.



•

$1.2 million to a supplier of equipment and consumables (declining to $0.3 million over the remaining four-year term of the commitment) if the Company fails to purchase approximately $6.5 million of consumables per year over a five-year period that began in 2004.



•

1.5 million euros ($1.7 million at December 31, 2005) to a supplier of electricity over a two-year period that began in 2004.



•

11.1 million euros ($13.3 million at the current exchange rate) to a supplier of storage and transportation service over a four-year period, with the Company having a right to terminate on six months notice under certain circumstances.

Interest Payments

        During 2005 and 2004, the Company paid $117 million and $141.3 million, respectively, in interest payments. The Company currently expects to pay from $118 million to $126 million in interest payments in 2006, including the impact of interest rate swap transactions. The actual interest paid in 2006 may be different from this amount if interest rates change or if the Company repurchases existing indebtedness or incurs indebtedness under its existing lines of credit or otherwise. This 2006 expected interest payment does not reflect payment of any accrued interest related to the asbestos settlement.

Income Tax Payments

        During 2005 and 2004, the Company paid $152.2 million and $141.9 million, respectively, in income taxes. The Company currently expects to pay between $165 million and $175 million in income taxes in 2006, assuming it does not make the asbestos settlement payment in that year.

Contributions to Defined Benefit Pension Plans

        The Company maintains defined benefit pension plans for a limited number of its U.S. employees and for some of its non-U.S. employees. During 2005 and 2004, the Company paid $8.6 million and $15 million, respectively, in employer contributions to these defined benefit pension plans. The Company currently expects employer contributions to be $4.4 million in 2006.

31

Environmental Matters

        The Company is subject to loss contingencies resulting from environmental laws and regulations, and it accrues for anticipated costs associated with investigatory and remediation efforts when an assessment has indicated that a loss is probable and can be reasonably estimated. These accruals do not take into account any discounting for the time value of money and are not reduced by potential insurance recoveries, if any. The Company does not believe that it is reasonably possible that its liability in excess of the amounts that it has accrued for environmental matters will be material to its consolidated statements of operations, balance sheets or cash flows. The Company reassesses environmental liabilities whenever circumstances become better defined or it can better estimate remediation efforts and their costs. The Company evaluates these liabilities periodically based on available information, including the progress of remedial investigations at each site, the current status of discussions with regulatory authorities regarding the methods and extent of remediation and the apportionment of costs among potentially responsible parties. As some of these issues are decided (the outcomes of which are subject to uncertainties) or new sites are assessed and costs can be reasonably estimated, the Company adjusts the recorded accruals, as necessary. The Company believes that these exposures are not material to its consolidated results of operations, balance sheets and cash flows. The Company believes that it has adequately reserved for all probable and estimable environmental exposures.

Principal Sources of Liquidity

        The Company's principal sources of liquidity are accumulated cash and short-term investments, cash flows from operations and amounts available under its existing lines of credit described below, including the 2010 facility (which replaced the 2006 facility), the ANZ facility and its accounts receivable securitization program.

Accumulated Cash and Cash Equivalents and Short-Term Investments

        As of December 31, 2005 and 2004, the Company had accumulated cash and cash equivalents of $455.8 million and $358 million, respectively, and short-term investments of $44.1 million and $54.1 million, respectively. The Company's short-term investments consist of auction rate securities, all of which are classified as available-for-sale securities. See Note 4, "Short Term Investments—Available for Sale Securities," to the Company's Consolidated Financial Statements, which describes these short-term investments.

Cash Flows from Operations

        The Company expects that it will continue to generate significant cash flows from operations. See "Analysis of Historical Cash Flows" below.

Lines of Credit

Revolving Credit Facilities

        The 2010 Facility—In July 2005, the Company entered into a $500 million senior unsecured multi-currency revolving credit facility due 2010, known as the 2010 facility. The 2010 facility replaced the Company's $350 million revolving credit facility due 2006, known as the 2006 facility. The 2010 facility is available for general corporate purposes including the payment of a portion of the $512.5 million cash payment, plus accrued interest (which was $90.3 million at December 31, 2005), required to be paid upon the effectiveness of an appropriate plan of reorganization in the W. R. Grace & Co. bankruptcy. The Company may re-borrow amounts repaid under the 2010

32

facility from time to time prior to the expiration or earlier termination of the 2010 facility. Facility fees are payable at the rate of 0.125% per annum on the total amounts available under the 2010 facility. The 2010 facility provides for changes in facility fees based on the Company's long-term senior unsecured debt ratings.

        The Company's obligations under the 2010 facility bear interest at floating rates, which are generally determined by adding the applicable borrowing margin to the base rate or the interbank rate for the relevant currency and time period. The 2010 facility provides for changes in borrowing margins based on the Company's long-term senior unsecured debt ratings.

        The 2010 facility contains other terms and conditions that are substantially the same as those contained in the 2006 facility. The terms include a requirement that, upon the occurrence of specified events that would adversely affect the settlement agreement in the Grace bankruptcy proceedings or would materially increase the Company's liability in respect of the Grace bankruptcy or the asbestos liability arising from the Cryovac transaction, the Company would be required to repay any amounts outstanding under the 2010 facility, or refinance the facility, within 60 days. See Note 16, "Commitments and Contingencies," of the Notes to the Company's Consolidated Financial Statements under the captions "Asbestos Settlement and Related Costs" and "Cryovac Transaction; Contingencies Related to the Cryovac Transaction" for further discussion of this matter.

        The Company has not borrowed under the 2010 facility, and no borrowings were outstanding under the 2006 facility prior to its termination.

        ANZ Facility—The Company has an Australian dollar 170 million, dual-currency revolving credit facility, known as the ANZ facility, equivalent to U.S. $124.7 million at December 31, 2005. This credit facility was to expire on March 12, 2005 and the Company amended and extended the facility for a 5-year period expiring March 2010 with substantially equivalent terms and conditions. A syndicate of banks made this facility available to a group of the Company's Australian and New Zealand subsidiaries for general corporate purposes including refinancing of previously outstanding indebtedness. The Company may re-borrow amounts repaid under the ANZ facility from time to time prior to the expiration or earlier termination of the facility. The Company did not borrow under the ANZ facility during 2005, and no amounts were outstanding under this facility during the year.

        The Company's obligations under the ANZ facility bear interest at floating rates, which are generally determined by adding the applicable borrowing margin to the base rate or the interbank rate for the relevant currency and time period. The ANZ facility provides for changes in borrowing margins based on the Company's long-term senior unsecured debt ratings.

Other Lines of Credit

        Substantially all the Company's short-term borrowings of $21.8 million and $19.8 million at December 31, 2005 and 2004, respectively, were outstanding under lines of credit available to several of the Company's foreign subsidiaries. The weighted average interest rate on these outstanding lines of credit was 12.3% and 11.4% at December 31, 2005 and 2004, respectively. Amounts available under these credit lines as of December 31, 2005 and 2004 were approximately $200.1 million and $237.9 million, respectively, of which approximately $178.3 million and $218.1 million, respectively, were unused.

33

        The following table summarizes the Company's available lines of credit and committed and uncommitted lines of credit, including the credit lines discussed above, at December 31, 2005 and 2004:

        The Company's principal credit lines were all committed and consisted of the 2010 facility in 2005, the 2006 facility in 2004, and the ANZ facility in 2005 and 2004. The Company is not subject to any material compensating balance requirements in connection with its lines of credit.

Accounts Receivable Securitization Program

        The Company's $125 million receivables program has an expiration date of December 7, 2007. The receivables program contains financial covenants relating to interest coverage and debt leverage. The Company was in compliance with these covenants at December 31, 2005.

        During 2005, the Company's receivables funding subsidiary sold an undivided ownership interest in $35 million of eligible receivables under the receivables program. Payments on the Company's receivables that were applied to these receivables interests in accordance with the terms of the program reduced the amount of receivables interests held by the bank or the issuer of commercial paper that are parties to the program to zero during 2005. Therefore, as of December 31, 2005, neither the bank nor the issuer of commercial paper held any receivables interests, and the Company did not remove any related amounts from the assets reflected on its consolidated balance sheet at December 31, 2005.

        The operating subsidiaries did not sell any receivables interests under the receivables program during 2004, and therefore the Company did not remove any related amounts from the consolidated assets reflected on the Company's consolidated balance sheet at December 31, 2004.

        See Note 5, "Accounts Receivable Securitization," of the Notes to the Consolidated Financial Statements for additional information concerning this program.

Debt Ratings

        The Company's cost of capital and ability to obtain external financing may be affected by its debt ratings, which the credit rating agencies review periodically. The Company's long-term senior unsecured debt is currently rated Baa3 (stable outlook) by Moody's Investors Service, Inc. and BBB (negative outlook) by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. These ratings are among the ratings assigned by each of these organizations for investment grade long-term senior unsecured debt. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating.

34

Outstanding Indebtedness

        At December 31, 2005 and 2004, the Company's total debt outstanding consisted of the amounts set forth on the following table:

(1)

Interest is payable semiannually in arrears, except for interest on the 5.625% euro notes, which is paid annually.

(2)

Amounts include adjustments due to interest rate swaps. See Note 11, "Derivatives and Hedging Activities," of the Notes to the Company's Consolidated Financial Statements.

(3)

Note 10, "Debt," of the Notes to the Company's Consolidated Financial Statements describes the conversion, redemption, put and other special provisions applicable to the 3% convertible senior notes.

5.625% Euro Notes

        Included in the current portion of long-term debt at December 31, 2005 are the 5.625% euro notes with a face value of €200 million, equivalent to U.S. $238.3 million at December 31, 2005. The 5.625% euro notes were classified as a current liability on the Company's consolidated balance sheet at December 31, 2005 since the notes mature in July 2006. The Company intends to use available cash to retire this debt when it matures. The carrying value of the 5.625% euro notes at December 31, 2005 and 2004 was $238.1 million and $267.5 million, respectively. The carrying value of the 5.625% euro notes decreased $29.7 million during 2005 as a result of the weakening of the euro compared with the U.S. dollar.

Senior Notes Issued in July 2003; Recapitalization

        In July 2003, the Company issued a total of $1,281.3 million principal amount of its 5.625% senior notes, 6.875% senior notes and 3% convertible senior notes in transactions exempt from registration in

35

reliance upon Rule 144A and other available exemptions under the Securities Act of 1933, as amended. The total net proceeds from the July 2003 issuances were $1,261.1 million after deducting the initial purchasers' discount, unamortized bond discount (except for the 3% convertible senior notes) and other offering expenses. The net proceeds consisted of $395.6 million from the 5.625% senior notes, $444.0 million from the 6.875% senior notes and $421.5 million from the 3% convertible senior notes.

        On July 18, 2003, the Company used the net proceeds from these offerings and additional cash on hand to redeem its Series A convertible preferred stock at the redemption price of $51.00 per share or $1,298.1 million of cash, plus an amount equal to dividends accrued from July 1, 2003 through July 17, 2003, for which the Company used $2.4 million of cash. As discussed in "Analysis of Historical Cash Flows—Repurchases of Capital Stock" below and Note 17 to the Company's Consolidated Financial Statements, the Company had repurchased an aggregate of 750,600 shares of its Series A convertible preferred stock during 2003 prior to the July 18, 2003 redemption.

Covenants

        Each issue of the Company's outstanding senior notes and the Company's outstanding euro notes imposes limitations on the Company's operations and those of specified subsidiaries. The principal limitations restrict liens, sale and leaseback transactions and mergers, acquisitions and dispositions. The 2010 facility contains financial covenants relating to interest coverage, debt leverage and minimum liquidity and restrictions on the creation of liens, the incurrence of additional indebtedness, acquisitions, mergers and consolidations, asset sales, and amendments to the asbestos settlement agreement discussed above. The ANZ facility contains financial covenants relating to debt leverage, interest coverage and tangible net worth and restrictions on the creation of liens, the incurrence of additional indebtedness and asset sales, in each case relating to the Australian and New Zealand subsidiaries of the Company that are borrowers under the facility. The Company was in compliance with these limitations at December 31, 2005.

Analysis of Historical Cash Flows

Net Cash Provided by Operating Activities

        Net cash provided by operating activities was $358.2 million in 2005, $436.2 million in 2004 and $469.7 million in 2003. The reduction in cash provided from operating activities in 2005 was due to various factors:

•

a reduction in cash generated from accounts payable balances. The cash generated in 2005 was $16.7 million compared with $48.5 million in 2004;



•

cash used of $16.8 million in 2005 compared with cash used of $0.6 million in 2004 for employee termination and facility exit cost payments related to its 2004 restructuring program;



•

an increase in cash used for income tax payments in 2005. The Company made cash payments of $152.2 million in 2005 compared with $141.9 million in 2004; and



•

an increase in notes and accounts receivable due to higher net sales in 2005, partially offset by an increase in cash collections during 2005;

        partially offset by;

•

a reduction in cash used for inventory due to higher inventory turnover in the 2005 period, partially offset by higher raw material costs; and



•

a change in accrued interest of $11.3 million. Accrued interest increased $31.8 million in 2005 compared with an increase of $20.5 million in 2004. The increase in the 2005 period was primarily due to an increase of $31.4 million due to additional accrued interest related to the

36

Company's liability under the asbestos settlement agreement, which is compounded annually. The increase in 2004 was primarily due to an increase in accrued interest of $29.8 million related to the asbestos settlement agreement, partially offset by a reduction of $6.3 million in accrued interest related to the 8.75% senior notes, which were repurchased in 2003.

        The decrease in 2004 compared with 2003 was primarily due to lower net earnings after adjustments for non-cash items, and the following changes:

•

a change in accrued interest of $35 million. Accrued interest increased $20.5 million in 2004 compared with an increase of $55.5 million in 2003. The increase in 2004 was primarily due to an increase in accrued interest of $29.8 million related to the asbestos settlement agreement, partially offset by a reduction of $6.3 million in accrued interest related to the 8.75% senior notes, which were repurchased in 2003. The increase in 2003 was due to the 2003 period including the impact of the senior notes issued in July 2003, as discussed above, and an increase of $28.2 million related to the asbestos settlement.



•

an increase in cash used for inventory in 2004 compared with 2003 due to increased petrochemical-based raw material costs and quantity increases in the ordinary course of business; and



•

an increase in cash payments related to the Company's defined benefit plans. The Company made cash payments of $15 million in 2004 compared with $9.1 million in 2003.

        partially offset by;

•

an increase in the restructuring liability due to the charges recorded in the fourth quarter of 2004 related to the 2004 restructuring program; and



•

an increase in cash generated from accounts payable balances. The cash generated in 2004 was $48.5 million compared with $9.2 million in 2003.

Net Cash Used in Investing Activities

        Net cash used in investing activities amounted to $83.8 million in 2005, $91 million in 2004 and $190.6 million in 2003. In each year, investing activities consisted primarily of capital expenditures and purchases and sales of available-for-sale securities.

        The decrease in net cash used in 2005 compared with 2004 was primarily due to lower capital expenditures and lower levels of cash used for businesses acquired, partially offset by lower net proceeds from the sale of available-for-sale securities. See Note 4, "Short Term Investments—Available for Sale Securities," of the Notes to the Consolidated Financial Statements, which is contained in Item 8 of Part II of this Annual Report on Form 10-K, which describes these available-for-sale securities.

        The decrease in net cash used in 2004 compared with 2003 was primarily due to net cash proceeds in 2004 of $13.1 million from the sale of available-for-sale securities compared with net cash used of $67.2 million from the net purchases of available-for-sale securities in 2004, and, to a lesser extent, lower levels of capital expenditures in the 2004 period.

        Cash used to complete acquisitions was $0.2 million in 2005, $6.4 million in 2004 and $2.5 million in 2003. In each year, cash used for acquisitions was net of cash acquired in those acquisitions and was immaterial. The Company did not assume any debt in acquisitions in 2005, 2004 or 2003.

Capital Expenditures

        Capital expenditures were $96.9 million in 2005, $102.7 million in 2004 and $124.3 million in 2003. Capital expenditures for the Company's food packaging segment amounted to $80.7 million,

37

$81.3 million and $95.5 million and for the protective packaging segment amounted to $16.2 million, $21.4 million and $28.8 million in 2005, 2004 and 2003, respectively.

        The decrease in capital expenditures in 2005 and 2004 from the $124.3 million incurred in 2003 was primarily due to the completion of two new production facilities, one in the United States and one in Hungary, which the Company initiated in 2003 and completed in the early part of 2004. The improved productivity of existing assets allowed the Company to defer spending on incremental capacity in 2005 and 2004.

        The Company expects to continue to make capital expenditures as it deems appropriate to expand its business, to replace depreciating property, plant and equipment and to improve productivity. The Company currently anticipates that capital expenditures for the year ended December 31, 2006 will be in the range of $125 million to $150 million. This estimate includes costs related to new facilities in China that will supply both food packaging and protective packaging products to meet the growing needs of the Chinese market. The Company does not expect this range to change as it initiates projects related to its global manufacturing strategy, described below. This projection is also based upon the Company's capital expenditure budget for 2006, the status of approved but not yet completed capital projects, anticipated future projects and historic spending trends.

Net Cash Used in Financing Activities

        Net cash used in financing activities amounted to $118.4 million in 2005, $300.3 million in 2004 and $108.9 million in 2003.

        The decrease in cash used in financing activities in 2005 compared with 2004 was primarily due to the following:

•

$232.3 million of cash used in 2004 for the debt repurchases and redemptions made in the fourth quarter of 2004,

        partially offset by;

•

an increase in 2005 of $30.2 million in net cash used to repurchase shares of the Company's common stock, as discussed below. In 2005, the Company used $116.4 million to repurchase its common stock compared with $86.2 million in 2004; and



•

a decrease of $20.3 million in proceeds from long-term debt in 2005 compared with 2004.

        The increase in net cash used in financing activities in 2004 compared with 2003 was primarily due to the following:

•

a decrease in proceeds from long-term debt in 2004 due to the receipt of net cash proceeds of $1,557.2 million from the issuance of the 5.375% senior notes in April 2003 and the 5.625% senior notes, the 6.875% senior notes and the 3% convertible senior notes in July 2003, as discussed above;



•

an increase of $49.5 million in cash used to repurchase the Company's capital stock. In 2004, the Company used $86.2 million to purchase its common stock, compared with $36.7 million used in 2003 to purchase its Series A convertible preferred stock;

        partially offset by;

•

$1,298.1 million of cash used to redeem all of the outstanding shares of Series A convertible preferred stock on July 18, 2003, as discussed above;



•

$41.9 million of cash used in 2003 to pay dividends on the Company's Series A convertible preferred stock, prior to its redemption in July 2003;

38

•

an increase of $37.9 million in net proceeds from short-term borrowings, as the Company had net proceeds of $0.6 million in 2004 compared with net payments in 2003 of $37.3 million; and



•

a decrease of $38.9 million for the payment of long-term debt, as the Company used $237.8 million of cash in 2004 compared with $276.7 million in 2003; the amounts in both periods include the cash used to redeem and repurchase long-term debt as discussed below.

Repurchases of Capital Stock

        The Company repurchased 2,430,200 shares of its common stock at a cost of $116.4 million in 2005 and 1,781,000 shares of its common stock at a cost of $86.2 million in 2004. In 2003, prior to redeeming all outstanding shares, the Company repurchased 750,600 shares of its Series A convertible preferred stock at a cost of $36.7 million. The average price per share of the common stock repurchases in 2005 and 2004 was $47.88 and $48.38, respectively, and the average price per share for the preferred stock repurchases in 2003 was $48.94. As discussed in "Outstanding Indebtedness—Senior Notes Issued in July 2003; Recapitalization" above, in July 2003 the Company issued $1,281.3 million of senior notes. The Company used an aggregate of $1,298.1 million from the proceeds of these offerings and additional cash on hand to redeem the outstanding shares of its Series A convertible preferred stock.

        The share repurchases described above were made under a program previously adopted by the Company's Board of Directors. The share repurchase program authorized the repurchase of up to approximately 16,977,000 shares of common stock, which included the Series A convertible preferred stock on an as-converted basis prior to its redemption. As of December 31, 2005, the Company had repurchased approximately 14,327,000 shares of common stock and preferred stock on an as-converted basis, and the remaining repurchase authorization covered approximately 2,650,000 shares of common stock. The Company may from time to time continue to repurchase its common stock.

Debt Redemption and Repurchases

2004 Debt Redemption:

        On November 26, 2004, the Company used net cash of $211.8 million to redeem the entire outstanding aggregate principal amount, $177.5 million, of its 8.75% senior notes due July 1, 2008 and terminated interest rate swaps on the 8.75% senior notes having a total notional amount of $150 million. The Company issued the senior notes on June 26, 2001 under Rule 144A and Regulation S of the Securities Act of 1933. The Company determined the redemption price in accordance with the indenture governing the notes. The net cash used of $211.8 million consisted of cash used to purchase the senior notes at a premium plus accrued interest of $213.4 million and cash received of $1.6 million related to the termination of the interest rate swaps. The Company completed the redemption, funded with available cash, at a premium to the face amount of the notes, which resulted in a loss of $29.6 million, which the Company reflected in the statement of operations as "Loss on debt redemption and repurchases." The annual interest expense on the redeemed notes was approximately $15.5 million, without giving effect to any interest rate swaps and the amortization of amounts related to the senior notes.

2004 and 2003 Debt Repurchases:

        In November and December 2004, the Company used available cash of $25.2 million to repurchase in the open market $22.7 million face amount of its 6.95% senior notes due May 2009, which included accrued interest and related fees. Since the Company completed these repurchases at a premium to the face amount of the notes, it incurred a loss of $2.6 million, which the Company reflected in the statement of operations as "Loss on debt redemption and repurchases."

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        In December 2003, the Company used net cash of $208.2 million to repurchase in the open market $122.5 million face amount of its 8.75% senior notes and $50 million face amount of its 6.95% senior notes and terminated interest rate swaps on the 8.75% senior notes with a total notional amount of $100 million. The net cash used of $208.2 million consisted of cash used to purchase the senior notes at a premium plus accrued interest and related fees of $208.9 million and cash received of $0.7 million related to the termination of the interest rate swaps. The Company completed these repurchases at premiums to the face amounts of the notes, which resulted in a loss of $33.6 million, which the Company reflected in the statement of operations as "Loss on debt redemption and repurchases."

        The Company may from time to time continue to repurchase or otherwise retire its outstanding indebtedness.

Changes in Working Capital

        At December 31, 2005, working capital (current assets less current liabilities) was $161.9 million compared with $307.4 million at December 31, 2004.

        The $145.5 million decrease in the Company's working capital during 2005 arose primarily from the following changes:

•

an increase of $237.6 million in the current portion of long-term debt primarily due to the carrying value of the Company's 5.625% euro notes due July 2006 of $238.1 million now being classified as a current liability on the balance sheet as discussed above in "Outstanding Indebtedness";



•

an increase in accrued interest of $30.9 million primarily due to an additional $31.4 million of accrued interest during 2005 related to the Company's liability under the asbestos settlement agreement; and



•

a decrease of $8.8 million in inventories primarily due to a decrease of $12.9 million from the effects of foreign currency translation, partially offset by quantity increases consistent with the growth of the business and an increase in intra-company shipments primarily to support the growth of the business in the Asia Pacific region and Latin America;

        partially offset by;

•

an increase of $87.8 million in cash and cash equivalents and short-term investments due to cash flow generated from operations;



•

an increase of $11.5 million in notes and accounts receivable. This increase was due to an increase in net sales in 2005 compared with 2004, partially offset by a decrease of $27.6 million from the effects of foreign currency translation;



•

a decrease in accrued payroll of $10.2 million. This decrease was primarily due to reduced payroll-related costs, including a reduction in management incentive compensation in 2005, and $6.1 million from the effects of foreign currency translation;



•

a decrease of $12.7 million in current accrued restructuring costs due to the payment of employee termination and facility exit costs during 2005 related to the 2004 restructuring program; and



•

a decrease of $10.9 million in income taxes payable primarily due to income tax payments during 2005, partially offset by higher income tax expense on 2005 earnings.

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Current and Quick Ratios

        The ratio of current assets to current liabilities, known as the current ratio, was 1.1 at December 31, 2005 and 1.2 at December 31, 2004. The ratio of current assets less inventory to current liabilities, known as the quick ratio, was 0.8 at December 31, 2005 and 0.9 at December 31, 2004.

Derivative Financial Instruments

Interest Rate Swaps

        At December 31, 2005, the Company had outstanding interest rate swaps with a total notional amount of $300 million that qualified and were designated as fair value hedges. The Company entered into these interest rate swaps to effectively convert its 5.375% senior notes due April 2008 into floating rate debt. At December 31, 2005, the Company recorded a mark to market adjustment to record a decrease of $12.5 million in the fair value of the 5.375% senior notes due April 2008 due to changes in interest rates and an offsetting increase to other liabilities to record the fair value of the related interest rate swaps. There was no ineffective portion of the hedges recognized in earnings during the period.

        In 2005, under the terms of the $300 million outstanding interest rate swap agreements, the Company received interest at a fixed rate and paid interest at variable rates that were based on six-month London Interbank Offered Rate, or LIBOR. As a result, interest expense increased by $1.6 million for the year ended December 31, 2005 due to increases in six-month LIBOR.

Foreign Currency Forward Contracts

        At December 31, 2005, the Company was party to foreign currency forward contracts, which did not have a significant impact on the Company's liquidity.

        For further discussion about these contracts and other financial instruments, see Item 7A, "Quantitative and Qualitative Disclosures about Market Risk."

Shareholders' Equity

        The Company's shareholders' equity was $1,392.1 million at December 31, 2005, $1,333.5 million at December 31, 2004 and $1,123.6 million at December 31, 2003.

        Shareholders' equity increased in 2005 primarily due to the following:

•

net earnings of $255.8 million;

        partially offset by;

•

repurchases of the Company's common stock, at a cost of $116.4 million; and



•

an increase in foreign currency translation adjustment of $91.9 million.

        Shareholders' equity increased in 2004 principally due to the following:

•

net earnings of $215.6 million;



•

a reduction of foreign currency translation adjustment of $69.2 million; and



•

the net effect of transactions under the Company's contingent stock plan of $9.8 million;

        partially offset by;

•

repurchases of the Company's common stock in 2004 at a cost of $86.2 million.

41

Global Manufacturing Strategy

        The Company will begin the first phase of a new global manufacturing strategy. This strategy will include an expansion of its global production capabilities in developing markets around the world, as well as a realignment of its existing production into manufacturing centers of excellence. The goal of this multi-year program is to further improve the Company's operating efficiencies, lower the overall cost structure and implement new technologies more effectively. This program, combined with the supply chain initiative, is expected to produce meaningful savings for the Company in future years. By taking advantage of new technologies and streamlining production on a global scale, the Company will continue to enhance profitable growth and its global leadership position.

Recently Issued Statements of Financial Accounting Standards, Accounting Guidance and Disclosure Requirements

        The Company is subject to numerous recently issued statements of financial accounting standards, accounting guidance and disclosure requirements. Note 20, "New Accounting Pronouncements—Recently Issued Statements of Financial Accounting Standards, Accounting Guidance and Disclosure Requirements," of the Notes to the Consolidated Financial Statements, which is contained in Item 8 of Part II of this Annual Report on Form 10-K, describes these new accounting pronouncements and is incorporated herein by reference.

Critical Accounting Policies and Estimates

        The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, known as US GAAP. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Estimates and assumptions are evaluated on an ongoing basis and are based on historical and other factors believed to be reasonable under the circumstances. The results of these estimates may form the basis of the carrying value of assets and liabilities and may not be readily apparent from other sources. Actual results, under conditions and circumstances different from those assumed, may differ from estimates, and while any differences may be material to the Company's consolidated financial statements, the Company does not believe that the differences, taken as a whole, will be material.

        The Company believes the following accounting policies are critical to its business operations and the understanding of results of operations and affect the more significant judgments and estimates used in the preparation of its consolidated financial statements:

        Notes and Accounts Receivable—In the normal course of business, the Company extends credit to customers that satisfy pre-defined credit criteria. Notes and accounts receivable, as shown on the consolidated balance sheets, are net of allowances for doubtful accounts. The Company maintains accounts receivable allowances for estimated losses resulting from the inability of its customers to make required payments. Additional allowances may be required if the financial condition of the Company's customers deteriorates.

        Commitments and Contingencies—Litigation—On an ongoing basis, the Company assesses the potential liabilities related to any lawsuits or claims brought against it. While it is typically very difficult to determine the timing and ultimate outcome of these actions, the Company uses its best judgment to determine if it is probable that it will incur an expense related to the settlement or final adjudication of these matters and whether a reasonable estimation of the probable loss, if any, can be made. In assessing probable losses, the Company makes estimates of the amount of insurance recoveries, if any. The Company accrues a liability when it believes a loss is probable and the amount of loss can be

42

reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recovery, it is possible that disputed matters may be resolved for amounts materially different from any provisions or disclosures that the Company has previously made. The Company expenses legal costs, including those legal costs expected to be incurred in connection with a loss contingency, as incurred.

        Impairment of Long-Lived Assets—The Company periodically reviews long-lived assets, other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Goodwill, in accordance with SFAS No. 142, is reviewed for possible impairment at least annually during the fourth quarter of each fiscal year. A review of goodwill may be initiated prior to conducting the annual analysis if events or changes in circumstances indicate that the carrying value of goodwill may be impaired. Assumptions and estimates used in the determination of impairment losses, such as future cash flows and disposition costs, may affect the carrying value of long-lived assets and possible impairment expense in the Company's consolidated financial statements.

        Self-Insurance—The Company retains the obligation for specified claims and losses related to property, casualty, workers' compensation and employee benefit claims. The Company accrues for outstanding reported claims, claims that have been incurred but not reported, and projected claims based upon management's estimates of the aggregate liability for uninsured claims using historical experience, insurance company estimates and the estimated trends in claim values. Although management believes it has the ability to adequately project and record estimated claim payments, actual results could differ significantly from the recorded liabilities.

        Pensions—The Company maintains a non-contributory profit sharing plan and contributory thrift and retirement savings plan in which most U.S. employees of the Company are eligible to participate. For a limited number of its U.S. employees and for some of its non-U.S. employees, the Company maintains defined benefit pension plans. The Company accounts for these pension plans in accordance with SFAS No. 87, "Employers' Accounting for Pensions." Under these accounting standards, the Company makes assumptions regarding the valuation of benefit obligations and performance of plan assets. The principal assumptions concern the discount rate used to measure future obligations, the expected future rate of return on plan assets, the expected rate of future compensation increases and various other actuarial assumptions. In general, changes to these assumptions could have a significant impact on the costs and liabilities recorded under SFAS No. 87. Since only a limited number of employees are covered by these plans, such impact is not considered material to the Company.

        Income Taxes—The Company's deferred tax assets arise from net deductible temporary differences and tax benefit carry forwards. The Company evaluates whether its taxable earnings during the periods when the temporary differences giving rise to deferred tax assets become deductible or when tax benefit carry forwards may be utilized should be sufficient to realize the related future income tax benefits. For those jurisdictions where the expiration dates of tax benefit carry forwards or the projected taxable earnings indicate that realization is not likely, the Company provides a valuation allowance.

        In assessing the need for a valuation allowance, the Company estimates future taxable earnings, with consideration for the feasibility of ongoing tax planning strategies and the realizability of tax benefit carry forwards, to determine which deferred tax assets are more likely than not to be realized in the future. Valuation allowances related to deferred tax assets can be impacted by changes to tax laws, changes to statutory tax rates and future taxable earnings. In the event that actual results differ from these estimates in future periods, the Company may need to adjust the valuation allowance, which could materially impact the Company's consolidated financial statements.

        In calculating its worldwide provision for income taxes, the Company also evaluates its tax positions for years where the statutes of limitations have not expired. Based on this review, the Company may establish reserves for additional taxes and interest that could be assessed upon examination by relevant tax authorities. The Company adjusts these reserves in light of changing facts and circumstances, including the results of tax audits and changes in tax law.

43

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        The Company is exposed to market risk from changes in interest rates, foreign currency exchange rates and commodity prices, which may adversely affect its financial condition and results of operations. The Company seeks to minimize these risks through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company does not purchase, hold or sell derivative financial instruments for trading purposes.

Interest Rates

        From time to time, the Company may use interest rate swaps, collars or options to manage its exposure to fluctuations in interest rates.

        The Company's interest rate swaps are described in Note 11, "Derivatives and Hedging Activities," of the Notes to the Consolidated Financial Statements, which is contained in Item 8 of Part II of this Annual Report on Form 10-K.

        Under the terms of the Company's outstanding interest rate swap agreements in each year, the Company received interest at a fixed rate and paid interest at variable rates that were based on six-month London Interbank Offered Rate, or LIBOR. As a result, under the terms of the outstanding interest rate swap agreements in each year, interest expense increased $1.6 million, decreased $6.2 million and decreased $4.2 million for the years ended December 31, 2005, 2004 and 2003, respectively, due to changes in six-month LIBOR.

        At December 31, 2005 and 2004, the Company had no collars or options outstanding.

        At December 31, 2005 and 2004, the carrying value of the Company's total debt, which includes the impact of outstanding interest rate swaps, was $2,076.2 million and $2,111.6 million, respectively. The Company's fixed rate debt at December 31, 2005 and 2004, including the impact of interest rate swaps, was $1,767.7 million and $1,800.5 million, respectively. The fair value of the Company's fixed rate debt varies with changes in interest rates. Generally, the fair value of fixed rate debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of the Company's total debt, including the impact of outstanding interest rate swaps, was $2,135.7 million at December 31, 2005 compared with $2,231.6 million at December 31, 2004. A hypothetical 10% decrease in interest rates would result in an increase in the fair value of the total debt balance at December 31, 2005 of $73.4 million. These changes in the fair value of the Company's fixed rate debt do not alter the Company's obligations to repay the outstanding principal amount of such debt.

Foreign Exchange Rates

        The Company uses foreign currency forward contracts to fix the amount payable on transactions denominated in foreign currencies. The terms of these instruments are generally twelve months or less. At December 31, 2005 and 2004, the Company had foreign currency forward contracts with an aggregate notional amount of approximately $309.3 million and $342.3 million, respectively. The estimated fair values of these contracts, which represent the estimated net payments that would be paid or received by the Company in the event of termination of these contracts based on the then current foreign exchange rates, was a net receivable at December 31, 2005 of $0.6 million and zero at December 31, 2004. A hypothetical 10% adverse change in foreign exchange rates at December 31, 2005 would have caused the Company to pay approximately $20.8 million to terminate these contracts.

        The Company may use other derivative instruments from time to time, such as foreign exchange options to manage exposure due to foreign exchange rates and interest rate and currency swaps related to access to additional sources of international financing. These instruments can potentially limit

44

foreign exchange exposure and limit or adjust interest rate exposure by swapping borrowings denominated in one currency for borrowings denominated in another currency. At December 31, 2005 and 2004, the Company had no foreign exchange options or interest rate and currency swap agreements outstanding.

        The Company's outstanding debt is generally denominated in the functional currency of the borrowing subsidiary. The amount of outstanding debt denominated in a functional currency other than the U.S. dollar was $262.9 million and $292.0 million at December 31, 2005 and 2004, respectively. The Company believes that this enables it to better match operating cash flows with debt service requirements and to better match the currency of assets and liabilities.

Commodities

        The Company uses various commodity raw materials such as plastic resins and energy products such as electric power and natural gas in conjunction with its manufacturing processes. Generally, the Company acquires these components at market prices and does not use financial instruments to hedge commodity prices. Moreover, the Company's supply chain team seeks to maintain appropriate levels of commodity raw material inventories thus minimizing the expense and risks of carrying excess inventories. The Company does not typically purchase substantial quantities in advance of production requirements. As a result, the Company is exposed to market risks related to changes in commodity prices of these components.

45

Item 8.    Financial Statements and Supplementary Data

        The following consolidated financial statements of the Company are filed as part of this report.

Sealed Air Corporation

46

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Sealed Air Corporation:

        We have audited the accompanying consolidated balance sheets of Sealed Air Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders' equity, cash flows and comprehensive income for each of the years in the three-year period ended December 31, 2005. In connection with our audits of the consolidated financial statements, we also have audited consolidated financial statement schedule II—valuation and qualifying accounts and reserves. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sealed Air Corporation and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Sealed Air Corporation's internal control over financial reporting as of December 31, 2005, based on criteria established in "Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)," and our report dated March 14, 2006 expressed an unqualified opinion on management's assessment of, and the effective operation of, internal control over financial reporting.

KPMG LLP
Short Hills, New Jersey
March 14, 2006

47

SEALED AIR CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

Years Ended December 31, 2005, 2004 and 2003

(In millions of dollars, except for per share data)