Sealed Air Reports First Quarter Results

Solid Q1, Reinvent SEE on track, Reconfirms guidance, APS acquisition

• Net Earnings per diluted share of $0.41; Adjusted EPS increased 16% to $0.59
• Net Earnings of $64 million; Adjusted EBITDA increased 5% to $216 million
• Net Sales of $1.1 billion declined 2% as reported and increased 3% in constant dollar
• Reconfirms 2019 full year outlook
• Separately announced Automated Packaging Systems acquisition

CHARLOTTE, N.C.--(BUSINESS WIRE)--May 1, 2019-- Sealed Air Corporation (NYSE: SEE) today announced financial results for the first quarter 2019.

"Our solid performance in the first quarter reflects strong execution of our Reinvent SEE strategy, designed to drive growth and earnings power. Adjusted EPS increased 16% on higher EBITDA and share repurchases. Adjusted EBITDA increased 10% in constant dollars and margin was up 130 basis points to over 19%, as a result of our efforts to improve productivity," said Ted Doheny, Sealed Air's President and CEO.

"We are focusing on our 4P'S^SM of Reinvent SEE^TM - Performance, People, Products, Processes and Sustainability, as the foundation of everything we do. In addition, our acquisition of Automated Packaging Systems, which we announced earlier today, expands the breadth of our automation solutions and sustainability offerings and provides access to growth opportunities."

Unless otherwise stated, all results compare first quarter 2019 results to first quarter 2018 results from continuing operations. Year-over-year financial discussions present operating results from continuing operations as reported, on an organic basis and on a constant dollar basis. Organic refers to changes in unit volume and price performance and excludes acquisition and divestiture activity and the impact of currency translation. Constant dollar refers to changes in unit volume, price performance and acquisition and divestiture activity and excludes the impact of currency translation. Additionally, non-U.S. GAAP adjusted financial measures, such as Adjusted Earnings Before Interest Expense, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), Adjusted Net Earnings, Adjusted Diluted Earnings Per Share ("Adjusted EPS") and Adjusted Tax Rate, exclude the impact of specified items ("Special Items"), such as restructuring charges, restructuring associated costs, gains and losses related to acquisition and divestiture of businesses, special tax items ("Tax Special Items") and certain other infrequent or one-time items. Please refer to the supplemental information included with this press release for a reconciliation of U.S. GAAP to Non-U.S. GAAP financial measures.

Business Highlights

In the first quarter, Sealed Air created profitable growth on a constant dollar basis against macro headwinds and a tough year over year comparable.

Food Care first quarter net sales of $680 million decreased 2% as reported. Currency fluctuations had a negative impact on Food Care net sales of 6%, or $40 million. On a constant dollar basis, net sales increased 3%, with favorable price of 3% and a 40 basis point increase in volume. Food Care delivered favorable volume trends across all regions with the exception of EMEA. Adjusted EBITDA increased 6% to $143 million, and margin expanded 170 basis points to 21%. Currency fluctuations had an $8 million unfavorable impact on Adjusted EBITDA. On a constant dollar basis, Adjusted EBITDA increased 12%. Adjusted EBITDA performance was driven by productivity and cost savings related to the Company’s Reinvent SEE initiatives and lower input costs, partially offset by higher operating costs.

Product Care first quarter net sales of $433 million decreased less than 1% as reported. Currency fluctuations had a negative impact on Product Care net sales of 3%, or $13 million. On a constant dollar basis, net sales increased 2%, including 6%, or $26 million, from acquisitions and 1% on favorable pricing. Volume declined 4% predominately in North America and APAC due to a tough year over year comparable and a more challenging industrial sector. Adjusted EBITDA was $75 million compared to $78 million in the first quarter 2018. Currency fluctuations had a $2 million unfavorable impact on Adjusted EBITDA. Adjusted EBITDA margin of 17% declined 70 basis points due to higher operating costs and lower volume, partially offset by productivity and cost savings related to the Company’s Reinvent SEE initiatives and lower input costs.

Sealed Air to Acquire Automated Packaging Systems

In a separate press release issued today, Sealed Air announced an agreement to acquire Automated Packaging Systems, Inc. (APS), a leading manufacturer of high-reliability, automated bagging systems, for a purchase price of $510 million on a cash and debt free basis. The acquisition is expected to close early in the third quarter of 2019. Upon the transaction closing, the Company plans to update its 2019 full year outlook on the second quarter earnings conference call tentatively scheduled for July 31, 2019.

First Quarter 2019 U.S. GAAP Summary

Net sales of $1.1 billion decreased 2% on an as reported basis. Currency had a negative impact on total net sales of 5%, or $53 million.

Net earnings on an as reported basis was $64 million, or $0.41 per diluted share, which was unfavorably impacted by $28 million of Special Items, primarily related to $24 million ($18 million, net of taxes) of restructuring charges and other associated costs. This compares to net loss in the first quarter 2018 of $208 million, or $1.25 per diluted share, which was unfavorably impacted by $293 million of Special Items, primarily composed of $290 million of tax expense for one-time tax on unrepatriated foreign earnings pursuant to the U.S. Tax Cuts and Jobs Act of 2017 ("TCJA").

The effective tax rate in the first quarter 2019 was 32.1%, compared to 283.3% in the first quarter 2018. The 2018 rate was negatively affected by $290 million of provisional tax expense related to TCJA.

First Quarter 2019 Non-U.S. GAAP Summary

Sealed Air generated profitable growth on a constant dollar basis despite macro headwinds and a tough year over year comparable. Net sales increased 3% in constant dollars reflecting favorable price impact of 2% and contribution from acquisitions of 2%, partially offset by a decline in volume of 1%. By region on a constant dollar basis, sales increased 3% in North America (inclusive of Mexico and Central America), 3% in Asia Pacific and 25% in South America. South America growth was driven by USD-based indexed pricing on essentially flat volume. EMEA declined 1% in constant dollars.

Adjusted EBITDA was $216 million, or 19% of net sales in the first quarter 2019 compared to $205 million, or 18% in 2018. Currency fluctuations had an unfavorable $10 million, or 5%, impact on Adjusted EBITDA in the first quarter 2019. The improvement in Adjusted EBITDA was primarily due to productivity and cost savings related to Reinvent SEE initiatives and lower input costs, partially offset by higher operating costs and a decline in volume.

Adjusted earnings per diluted share was $0.59 for the first quarter 2019 compared to $0.51 in the first quarter 2018. The Adjusted Tax Rate was 29.5% in the first quarter 2019, compared to 30.3% in the first quarter 2018.

Cash Flow and Net Debt

Cash flow provided by operating activities for the three months ended March 31, 2019 was an inflow of $65 million, compared to an outflow of $34 million for the three months ended March 31, 2018.

Capital expenditures were $49 million for the three months ended March 31, 2019. Free Cash Flow, defined as net cash provided by operating activities less capital expenditures was an inflow of $16 million in the three months ended March 31, 2019, compared to an outflow of $63 million, excluding $14 million in payments related to the sale of Diversey in the three months ended March 31, 2018.

During the three months ended March 31, 2019, the Company used cash in financing activities of $34 million, which includes share repurchases of $18 million or approximately 406,000 shares and cash dividends paid of $25 million.

Net Debt, defined as total debt less cash and cash equivalents, increased to $3.3 billion as of March 31, 2019 from $3.2 billion as of December 31, 2018.

Outlook for Full Year 2019

For the full year 2019, the Company reconfirms its previously provided outlook. Net Sales are expected to increase 2% as reported and 5% in constant dollars. The Company continues to expect currency to have an unfavorable impact of approximately $130 million on net sales. Adjusted EBITDA is expected to be in the range of $925 to $945 million. The Company continues to expect currency to have an unfavorable impact of approximately $25 million on Adjusted EBITDA. Adjusted EPS is expected to be in the range of $2.65 to $2.75, which is based on 156 million shares outstanding and an anticipated Adjusted Tax Rate of 26%. Free Cash Flow is expected to be approximately $250 million, assuming capital expenditures of approximately $200 million and cash restructuring payments of approximately $115 million.

Conference Call Information

A supplemental presentation will be available on the Company’s website at www.sealedair.com/investors.

Conference Call Replay Information

Business

Sealed Air partners with customers to solve their most critical packaging challenges with innovative solutions that leave our world, environment, and communities better than we found them. Our portfolio of widely recognized brands includes Cryovac^® food packaging and Bubble Wrap^® protective packaging which respectively enable a safer, more efficient food supply chain and protect valuable goods shipped around the world. Sealed Air generated $4.7 billion in sales in 2018 and has approximately 15,500 employees who serve customers in 123 countries. To learn more, visit www.sealedair.com.

Website Information

We routinely post important information for investors on our website, www.sealedair.com, in the Investors section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Non-U.S. GAAP Information

In this press release and supplement, we have included several non-U.S. GAAP financial measures, including Net Debt, Adjusted Net Earnings and Adjusted EPS, net sales on an "organic" and a “constant dollar” basis, Free Cash Flow, Adjusted EBITDA and Adjusted Tax Rate, as our management believes these measures are useful to investors. We present results and guidance, adjusted to exclude the effects of Special Items and their related tax impact that would otherwise be included under U.S. GAAP, to aid in comparisons with other periods or prior guidance. In addition, non-U.S. GAAP measures are used by management to review and analyze our operating performance and, along with other data, as internal measures for setting annual budgets and forecasts, assessing financial performance, providing guidance and comparing our financial performance with our peers and may also be used for purposes of determining incentive compensation. The non-U.S. GAAP information has limitations as an analytical tool and should not be considered in isolation from or as a substitute for U.S. GAAP information. It does not purport to represent any similarly titled U.S. GAAP information and is not an indicator of our performance under U.S. GAAP. Non-U.S. GAAP financial measures that we present may not be comparable with similarly titled measures used by others. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. For a reconciliation of these U.S. GAAP measures to non-U.S. GAAP measures and other important information on our use of non-U.S. GAAP financial measures, see the attached supplementary information entitled “Condensed Consolidated Statements of Cash Flows” (under the section entitled “Non-U.S. GAAP Free Cash Flow”), “Reconciliation of Net Earnings and Net Earnings Per Common Share to Non-U.S. GAAP Adjusted Net Earnings and Non-U.S. GAAP Adjusted Net Earnings Per Common Share,” “Reconciliation of Net Earnings to Non-U.S. GAAP Total Company Adjusted EBITDA,” “Components of Change in Net Sales by Segment” and “Components of Change in Net Sales by Region.” Information reconciling forward-looking U.S. GAAP measures to non-U.S. GAAP measures is not available without unreasonable effort.

We have not provided guidance for the most directly comparable U.S. GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain Special Items, including restructuring charges, gains and losses related to acquisition and divestiture of businesses, the ultimate outcome of certain legal or tax proceedings, and other unusual gains and losses. These items are uncertain, depend on various factors, and could be material to our results computed in accordance with U.S. GAAP.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as “anticipate,” “believe,” “plan,” “assume,” “could,” “should,” “estimate,” “expect,” “intend,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this press release regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expected future operating results, expectations regarding the results of restructuring and other programs, anticipated levels of capital expenditures and expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations and proceedings.

The following are important factors that we believe could cause actual results to differ materially from those in our forward-looking statements: global economic and political conditions, currency translation and devaluation effects, changes in raw material pricing and availability, competitive conditions, the success of new product offerings, consumer preferences, the effects of animal and food-related health issues, pandemics, changes in energy costs, environmental matters, the success of our restructuring activities, the success of our financial growth, profitability, cash generation and manufacturing strategies and our cost reduction and productivity efforts, changes in our credit ratings, the tax benefit associated with the Settlement agreement (as defined in our 2018 Annual Report on Form 10-K), regulatory actions and legal matters and the other information referenced in the “Risk Factors” section appearing in our most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, and as revised and updated by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statement made by us is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether because of new information, future developments or otherwise.

The calculation of the non-U.S. GAAP Adjusted income tax rate is as follows:

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Source: Sealed Air Corporation

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