Sealed Air Reports Fourth Quarter and Full Year 2012 Results

Q4 Adjusted EBITDA of $267 million from continuing operations

17% increase over Q4 2011 Adjusted EBITDA

Q4 Adjusted EPS of $0.34, Reported loss of $(0.06) per share

Full Year Adjusted EPS of $0.95, Reported loss of $(6.63) per share

ELMWOOD PARK, N.J.--(BUSINESS WIRE)--Feb. 19, 2013-- Sealed Air Corporation (NYSE:SEE) today announced financial results for fourth quarter and full year 2012. Net sales for the fourth quarter 2012 totaled $2 billion. Adjusted EPS was $0.34 for the fourth quarter and Adjusted EBITDA for the quarter was $267 million or 13.5% of net sales. On a reported basis, net loss was $(10.9) million, or $(0.06) per share.

Unless otherwise stated, all results are presented on a continuing operations basis, excluding Diversey Japan, which the Company sold in November 2012 and is presented as discontinued operations. Reported information is defined as U.S. GAAP. Pro forma information for 2011 includes the full year results of the Diversey business the Company acquired on October 3, 2011. Year-over-year net sales discussions present both reported and constant dollar performance. The constant dollar performance excludes the impact of currency translation. Organic performance includes volume and product price/mix but excludes the impact of currency translation and acquisitions. Additionally, Adjusted EBITDA and Adjusted Earnings exclude impairment of goodwill and other intangible assets, restructuring and other special items.

Fourth Quarter Highlights:

Net sales for the fourth quarter 2012 totaled $2 billion. Net sales increased 0.8% over 2011 with 2.6% higher volumes, offset by 1.7% of unfavorable currency translation. Reported regional net sales increased over 2011 levels by 9.6% for AMAT (Asia, Middle East, Africa and Turkey), 7.5% for Latin America, 2.3% for North America and 2.0% for Japan/Australia/New Zealand, offset by 5.6% lower net sales in Europe. Additionally, fourth quarter net sales to Developing Regions¹ account for 24% of global net sales.

Adjusted EBITDA for the quarter was $267 million or 13.5% of net sales. On an actual and constant dollar basis, this represented a 16.6% increase compared with 2011 adjusted EBITDA of $229 million, primarily driven by higher volume demand and cost synergies. Cost synergies were $35 million for the fourth quarter of 2012 and resulted from a mix of headcount reductions, elimination of redundant costs, plant consolidations and procurement and logistics savings.

Adjusted EPS was $0.34 for the fourth quarter, compared with fourth quarter 2011 Adjusted EPS of $0.06. On a reported basis, fourth quarter 2012 EPS was a loss of $0.06 per share as compared with a loss of $0.31 per share in the fourth quarter of 2011. The reported losses were due to certain special items including debt redemption and non-cash impairment charges in 2012 and restructuring charges and costs related to the acquisition and integration of Diversey in both years.

Jerome A. Peribere, President and Chief Operating Officer, commented: “The headwinds in Europe, particularly Southern Europe, have been strong, and we saw some de-stocking in North America late in the fourth quarter. Protein supply factors also continue to challenge us from a top line perspective. However, we are pleased to report our focus on profitable growth continues with all divisions reflecting improved adjusted EBITDA on a year over year basis. Additionally, we are now reporting our results based on our new segment structure – an important step as we continue the integration of our Diversey acquisition.”

Fourth Quarter Segment Review

Fourth quarter segment information is presented using three new reportable segments and an Other category: Food & Beverage (F&B), Institutional & Laundry (I&L), Protective Packaging, as well as the Medical Applications and New Ventures businesses (Other category). Management also refers to the segments as “divisions.” F&B represents the legacy Food Packaging and Food Solutions businesses and the food and beverage hygiene solutions business from Diversey. I&L represents the remainder of the Diversey segment (solutions for the building services, food service, health care, hospitality and retail markets) and Protective Packaging represents legacy Protective Packaging and the specialty materials foam business, which was previously included in the Other category. Additionally, the Company reported regional results using the following structure: North America, Europe, Latin America, AMAT, and Japan/Australia/New Zealand. Detailed segment financial information and revised prior period and pro forma information is available in the attached financial schedules.

Food & Beverage (F&B) Division

Total division net sales increased 2.4% on a constant dollar basis, or increased 0.9% on a reported basis. F&B achieved 3.1% higher volumes, led by 3.6% volume growth in hygiene solutions and 2.9% volume growth in the food packaging and food solutions businesses. The volume gains were partially offset by 0.7% lower price/mix due to pricing pressures in Europe and the impact of contract pricing in North America, as well as 1.5% unfavorable currency translation. Regionally, on a constant dollar basis, F&B experienced double-digit net sales growth in Latin America and AMAT, due to strong domestic and export markets, offsetting a 3% decline in Europe. F&B Adjusted EBITDA increased 10.4% to $154 million, or 15.6% of net sales, primarily from higher volumes and cost synergies, compared with $139 million, or 14.3% of net sales, in 2011. Reported operating profit was $115 million for fourth quarter 2012, compared with $97 million in fourth quarter 2011.

Institutional & Laundry (I&L) Division

Net sales increased 2.3% on a constant dollar basis and were flat on a reported basis. I&L achieved 0.7% higher volumes and 1.6% higher price/mix, offset by 2.4% of unfavorable currency translation. Volume growth was led by new healthcare business, offset by a decline in consumer brands and lower equipment sales in Europe. Regionally, growth was led by AMAT and Latin America, partially offset by a decline in Southern Europe. Adjusted EBITDA increased 9.1% to $42 million, or 7.9% of net sales, compared with $39 million or 7.2% of net sales in 2011. Adjusted EBITDA improved in fourth quarter 2012 compared with 2011 primarily due to volume, cost synergies and a favorable price-cost spread partially offset by higher sales and marketing spending. The additional spending includes higher compensation costs and additional resources to support growth in developing regions. Reported operating profit was $4 million for fourth quarter 2012, compared with a loss of $15 million in fourth quarter 2011.

Protective Packaging Division

Net sales increased 1.5% on a constant dollar basis, or 0.6% on a reported basis, with 2.6% higher volumes and 1.1% lower price/mix, as well as unfavorable currency translation of 0.9%. Volume increased 4.4% in North America due to expanded market presence and strength in solutions targeting e-commerce applications. Adjusted EBITDA increased 4.2% to $68 million, or 16.6% of net sales, compared with $65 million or 16.0% of net sales, in 2011. Adjusted EBITDA improved due in large part to higher volumes and cost synergies. Reported operating profit was $57 million for fourth quarter 2012 compared with $54 million in fourth quarter 2011.

Medical Applications and New Ventures (Other category)

Net sales increased 13.4% on a constant dollar basis, or 9.1% on a reported basis, with 12.7% higher volumes and 1.1% from an acquisition. This sales increase was primarily driven by increased market penetration in Europe. Adjusted EBITDA increased to $0.8 million, compared with $0.4 million in 2011. Reported operating loss was $22 million and includes a non-cash impairment charge of $22 million related to a decision to stop development work related to a project included in the new ventures business. Reported operating loss was $2 million for the fourth quarter of 2011.

Full Year 2012 Summary

Net sales for 2012 totaled $7.6 billion. Net sales increased 37.8% over 2011, including a 38.2% increase from the Diversey acquisition, a 2.3% increase in organic sales, offset by 2.7% unfavorable currency translation. Compared to pro forma 2011, net sales declined 1.7% from 3.6% unfavorable currency translation, offset by 1.8% organic growth, including a 0.8% volume increase from expansion in Developing Regions, partially offset by ongoing weakness in Europe.

Full year Adjusted EBITDA was $996 million, or 13.0% of net sales. On a constant dollar basis, Adjusted EBITDA was $1.02 billion, a 2.8% increase over pro forma 2011 Adjusted EBITDA of $996 million. This increase was primarily due to the realization of cost synergies, partially offset by higher operating expenses, mainly in I&L related to compensation costs and additional resources to support growth in developing regions. Reported net loss was $1.3 billion in 2012, primarily due to impairment of goodwill and other intangibles. Pro forma net earnings were $106 million in 2011. The Company is working to finalize its impairment analysis prior to the filing of its Annual Report on Form 10-K for the year ended December 31, 2012, and as a result may incur additional impairment charges.

Adjusted EPS was $0.95. On a reported basis, the Company had a loss of $6.63 per share, which includes an estimated $5.97 per share non-cash impairment of goodwill and other intangibles. Adjusted EPS on a pro forma basis was $0.81 per share for 2011.

Cash Flow and Net Debt

Net cash provided by operating activities for full year 2012 was $404 million and is net of $81 million of restructuring payments. Working capital used cash, including a decrease in accounts payable of $71 million and a $12 million increase in receivables, partially offset by a $41 million reduction in inventories. This cash flow compares with $372 million of net cash provided by operating activities in 2011. Capital expenditures were $124 million in 2012 and in 2011.

In 2012, the Company reduced its net debt by approximately $352 million to $4.8 billion. Net debt includes the W. R. Grace settlement liability of $877 million. Also, during the fourth quarter of 2012, the Company finalized the sale of the Diversey Japan business and used net cash proceeds and available cash on hand to reduce term loan balances by $370 million.

2013 Outlook for Continuing Operations

Mr. Peribere commented, “We continue to operate in a challenging economic environment, particularly in Europe. However, we are confident in the fundamentals of our business. We are committed to increase profitability and aggressively manage our cost structure.

We expect modest sales and EBITDA growth, despite our significant exposure to European markets and a recent increase in raw material costs. We intend to take decisive actions to adjust pricing in product lines impacted by escalating raw material costs. As a result, we estimate 2013 net sales in the range of approximately $7.7–7.9 billion, adjusted EBITDA of $1.01 billion to $1.03 billion, and Adjusted EPS between $1.10 and $1.20. We also estimate Free Cash Flow for 2013 of approximately $300 million to $350 million, which represents cash flow from operations less capital expenditures. This compares with $280 million in 2012.”

Adjusted EPS guidance excludes the payment of the W. R. Grace settlement, as the exact timing of the settlement is unknown. Final payment of the W. R. Grace settlement is expected to be accretive to adjusted EPS by approximately $0.13 annually following the payment date under the assumption of using a substantial portion of cash on hand for the payment and ceasing to accrue interest on the settlement amount. Additionally, guidance excludes any non-operating gains or losses that may be recognized in 2013 due to currency fluctuations in Venezuela.

Web Site and Conference Call Information

Jerome A. Peribere, Sealed Air’s President and COO and Carol P. Lowe, Senior Vice President and CFO, will conduct an investor conference call today at 11:00 a.m. (ET) to discuss the Company’s earnings results. The conference call will be webcast live on the Company’s web site at www.sealedair.com in the Investor Information section. The link to the event can be found on the Investor Information home page as well as under the Presentations & Events tab. Listeners should go to the web site prior to the call to register and to download and install any necessary audio software. A replay of the webcast will also be available on the Company’s web site.

Investors who cannot access the webcast may listen to the conference call live via telephone by dialing (888) 680-0865 (domestic) or (617) 213-4853 (international) and use the participant code 95851262. Telephonic replay will be available beginning today at 1:00 p.m. (ET) and ending on Tuesday, March 12, 2013 at 11:59 p.m. (ET). To listen to the replay, please dial (888) 286-8010 (domestic) or (617) 801-6888 (international) and use the confirmation code 21264331.

Business

Sealed Air is a global leader in food safety and security, facility hygiene and product protection. With widely recognized and inventive brands such as Bubble Wrap^® brand cushioning, Cryovac^® brand food packaging solutions and Diversey^TM brand cleaning and hygiene solutions, Sealed Air offers efficient and sustainable solutions that create business value for customers, enhance the quality of life for consumers and provide a cleaner and healthier environment for future generations. Sealed Air generated revenue of approximately $7.6 billion in 2012, and has approximately 25,000 employees who serve customers in 175 countries. To learn more, visit www.sealedair.com.

Non-U.S. GAAP Information

In this press release and supplement, we have included several non-U.S. GAAP financial measures, including adjusted EPS, net sales on a "constant dollar" basis, adjusted gross profit, adjusted operating profit, adjusted net earnings, free cash flow and EBIT, EBITDA and Adjusted EBITDA. We present results and guidance, adjusted to exclude the effects of certain specified items that would otherwise be included under U.S. GAAP, to aid in comparisons with other periods or prior guidance. We may use adjusted EPS, net sales on a constant dollar basis, adjusted net earnings, adjusted gross profit, adjusted operating profit, measures of cash flow, net debt, and EBITDA figures to determine performance-based compensation. Our management uses financial measures excluding the effects of foreign currency translation in evaluating operating performance. Management believes that this information may be useful to investors. For a reconciliation of these non-U.S. GAAP metrics to U.S. GAAP and other important information on our use of non-U.S. GAAP financial measures, see the attached supplementary information entitled “Condensed Consolidated Cash Flow Statement,” “Reconciliation of U.S. GAAP Gross Profit and Operating Profit to Non-U.S. GAAP Adjusted Gross Profit and Operating Profit,” “Reconciliation of U.S. GAAP Gross Profit and Operating Profit to Non-U.S. GAAP Adjusted Gross Profit and Operating Profit Per Share,” “Reconciliation of U.S. GAAP Diluted Net (Loss) Earnings Per Common Share to Non-U.S. GAAP Adjusted Diluted Net Earnings per Common Share,” “Revision for Discontinued Operations,” “Additional Pro Forma Information,” “Reconciliation of U.S. GAAP Diluted Net (Loss) Earnings to Non-U.S. GAAP Adjusted EBITDA,” “Non-U.S. GAAP Adjusted Free Cash Flow,” “Reconciliation of Net (Loss) Earnings Available to Common Stockholders to Non-U.S. GAAP EBIT, EBITDA and Adjusted EBITDA,” “Segment and Consolidated Adjusted Operating Profit and Adjusted EBITDA,” “Components of Change in Net Sales - Business Segments and Other” and “Components of Change in Net Sales-Geographic Region.”

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans to,” “will” and similar expressions. These statements reflect our beliefs and expectations as to future events and trends affecting our business, our consolidated financial position and our results of operations. Examples of these forward-looking statements include expectations regarding the potential cash tax benefits associated with the W.R. Grace settlement, potential volume, revenue and operating growth for future periods, expectations and assumptions associated with our 2011-2014 Integration & Optimization Program, availability and pricing of raw materials, success of our growth initiatives, economic conditions, and the success of pricing actions. A variety of factors may cause actual results to differ materially from these expectations, including general domestic and international economic and political conditions; changes in our raw material and energy costs; credit ratings; the success of restructuring plans; currency translation and devaluation effects, including Venezuela; the competitive environment; the effects of animal and food-related health issues; environmental matters; and regulatory actions and legal matters. For more extensive information, see “Risk Factors” and “Cautionary Notice Regarding Forward-Looking Statements,” which appear 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. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, whether as a result of new information, future events, or otherwise.

¹ Developing Regions are Africa, Asia (excluding Japan and South Korea), Central and Eastern Europe, and Latin America.