Sealed Air Reports Second Quarter 2014 Results

• Adjusted EBITDA Increased 8.4% to $284 Million or 14.4% of Net Sales
• 2014 Adjusted EPS of $0.42 Increased 20%; Reported EPS of $0.28
• Repurchased Approximately 3.9 million Shares for $130 Million and Recently Refinanced Credit Facility
• Company Raises 2014 Financial Outlook

ELMWOOD PARK, N.J.--(BUSINESS WIRE)--Jul. 30, 2014-- Sealed Air Corporation (NYSE:SEE) today announced financial results for the second quarter 2014. Commenting on these results, Jerome A. Peribere, President and Chief Executive Officer, said, “Second quarter 2014 net sales of $2.0 billion increased 3.0% on a constant dollar basis compared to last year primarily due to favorable price/mix of 3.4%. We delivered favorable price/mix across all divisions, which contributed to a year-over-year improvement of 50 basis points in gross profit margin. Adjusted EBITDA margin in the quarter increased 90 basis points to 14.4% as compared to 13.5% in the previous year. Based on our performance in the first half of 2014 and outlook for the remainder of the year, we are raising our full year 2014 guidance for Net Sales, Adjusted EBITDA, Adjusted EPS and Free Cash Flow. Our second quarter results and increased outlook for the full year demonstrate that our continued focus on quality of earnings is progressing ahead of our original expectations.”

“As part of our ‘Change the Game’ strategy and as a significant step in transforming Sealed Air into a knowledge-based company, we announced last week that we are relocating our global headquarters to a new, state-of-the-art campus in Charlotte, North Carolina. This move will create a stronger, one-company culture that enables greater collaboration, accelerates innovation and drives operating efficiencies. The new campus is expected to be completed by late 2016, and during this period we do not expect the cash costs to have a material impact on our financial outlook,” Peribere continued.

All results presented in this release include results on a continuing operations basis and reflect the change in the Company’s segment structure as previously disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2014. The Rigid Medical Packaging business, which the Company sold in December 2013, has been presented as discontinued operations. Reported information is defined as U.S. GAAP. Year-over-year net sales discussions present both reported and constant dollar performance. Constant dollar sales performance excludes the impact of currency translation. Additionally, non-U.S. GAAP adjusted financial measures, such as Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization (“Adjusted EBITDA”), Adjusted Net Earnings, Adjusted Diluted Earnings Per Share (“Adjusted EPS”) and Tax Rate, exclude the impact of special items, such as restructuring charges, cash-settled stock appreciation rights (“SARs”) granted as part of the Diversey acquisition and certain other one-time items.

Business and Financial Highlights

• Net sales in the Food Care division of $962 million increased 1.6% compared to last year and 3.7% on a constant dollar basis. The increase in net sales was primarily due to favorable price/mix of 4.6%, partially offset by a decline in volume of 0.9%. Lower volume was largely attributable to a decline in beef production in North America and PED virus impact related to the pork market in both North America and Mexico. Food Care’s Adjusted EBITDA increased 7.6% to $159 million, or 16.6% of net sales. This increase was due to favorable mix and price/cost spread as well as cost synergies, partially offset by non-material inflation, negative currency translation and lower volumes.
• The Diversey Care division reported net sales of $581 million, a 2.0% increase compared to last year. On a constant dollar basis, net sales increased 2.7% as a result of strong growth in developing regions as well as improving trends in Europe. Diversey Care’s Adjusted EBITDA of $72 million was essentially unchanged on a year-over-year basis. Adjusted EBITDA margin in the second quarter was 12.4%.
• The Product Care division reported net sales of $409 million, a 3.5% increase compared to last year. On a constant dollar basis, net sales increased by 3.2% primarily due to a favorable price/mix of 3.0%. Product Care’s Adjusted EBITDA increased 15.5% to $71 million, or 17.3% of net sales. This increase was largely attributable to favorable mix and price/cost spread as well as cost synergies.

Second Quarter 2014 Summary

Second quarter 2014 net sales of $2.0 billion increased 1.9% on a reported basis and 3.0% on a constant dollar basis. Favorable product price/mix of 3.4% was offset by a 0.4% decline in volume. The Company delivered constant dollar sales growth in all regions with 8.0% growth in Latin America, 6.6% in AMAT¹, 2.7% in North America, 1.7% in JANZ², and 0.7% in Europe. Additionally, second quarter 2014 reported net sales from Developing Regions³ increased 7.6% in constant dollars, accounting for 25.5% of total net sales. The increase in Developing Regions was primarily attributable to strong demand in China, which delivered 12.6% constant dollar sales growth as compared to last year.

Adjusted EBITDA for the second quarter 2014 increased 8.4% to $284 million, or 14.4% of net sales. This compares to second quarter 2013 of $262 million, or 13.5% of net sales. The 90 basis point improvement in Adjusted EBITDA margin in the second quarter 2014 was primarily attributable to favorable mix and price/cost spread and cost synergies, partially offset by non-material inflation, lower volumes and $4 million negative currency translation.

Reported second quarter 2014 net earnings were $60 million, or $0.28 per share, which included special items largely comprised of costs associated with previously announced restructuring programs. This compares to reported net earnings of $54 million in the same period a year ago, or $0.25 per share. Adjusted Net Earnings were $91 million or $0.42 per share in second quarter 2014. This compares to Adjusted Net Earnings of $74 million, or $0.35 per share in second quarter 2013. The Tax Rate in second quarter 2014 was 29.5% as compared with 22.8% in second quarter 2013. This year-over-year increase was primarily due to the lapse of certain U.S. tax laws, including certain foreign rules and the research and development credit, as well as greater earnings in the U.S. and other jurisdictions with higher tax rates. In addition, second quarter 2013 benefited from a favorable settlement of a tax dispute.

Share Repurchase

As previously announced, on June 13, 2014, Sealed Air repurchased $130 million, or 3,932,244 shares, of common stock at a price of $33.06 per share from the WRG Asbestos PI Trust. The Company funded the stock repurchase with $110 million from committed credit facilities and $20 million of accumulated cash and cash equivalents.

Credit Facility

On July 25, 2014, the Company amended and restated its senior secured credit facilities, including repayment of the outstanding Term Loan B. The amended and restated facility refinanced the Company’s Term Loan A, Term Loan B and revolving facilities. The new facilities, totaling $2.13 billion, are comprised of $1.33 billion for Term Loan A facilities and $700 million of revolving commitments. The Company also established a new $100 million delayed draw term Loan A facility. The amended and restated facility will provide approximately $15 million of annualized interest savings, in addition to a maturity extension and increased covenant flexibility.

Cash Flow and Net Debt

Cash flow used in operating activities for the six months ended June 30, 2014 was $762 million, which includes the $930 million payment in February 2014 pursuant to the W. R. Grace & Co. Settlement agreement (“Settlement agreement”). Excluding the Settlement agreement payment, cash flow provided by operating activities was $167 million, which is net of $50 million of restructuring and $17 million of SARs payments. This compares with cash provided by operating activities of $60 million in the six months ended June 30, 2013, which is net of $45 million of restructuring and $28 million of SARs payments. Capital expenditures were $55 million for the six months ended June 30, 2014 compared to $51 million for the six months ended June 30, 2013.

Free Cash Flow, defined as net cash used in operating activities less capital expenditures, was a use of $817 million in the six months ended June 30, 2014. Excluding the Settlement agreement payment, Free Cash Flow was a source of $112 million, compared with a source of $9 million during the same period a year ago. Compared to December 31, 2013, the Company’s net debt increased $80 million to $4.4 billion as of June 30, 2014. This increase was primarily a result of the Company’s share repurchase.

Outlook for Full Year 2014

The Company is increasing its full year 2014 outlook for Net Sales, Adjusted EBITDA, Adjusted EPS and Free Cash Flow. For Net Sales, the Company estimates approximately $7.75 billion, a $50 million increase from previously provided guidance. This assumes an estimated unfavorable impact of approximately 1% from foreign currency translation. Adjusted EPS is expected to be in the range of $1.65 to $1.70 as compared to the previously provided guidance of $1.50 to $1.60.

Adjusted EBITDA is anticipated to be in the range of approximately $1.085 billion to $1.095 billion, an increase from the previously provided guidance of $1.050 billion to $1.070 billion. Free Cash Flow is estimated to be approximately $485 million as compared to the previously provided outlook of $425 million. The Company is revising its 2014 estimates for cash restructuring charges and capital expenditures to be approximately $135 million and approximately $150 million, respectively. The Company’s Free Cash Flow target excludes the Settlement agreement payment referenced above.

Business

Sealed Air Corporation creates a world that feels, tastes and works better. In 2013, the Company generated revenue of approximately $7.7 billion by helping our customers achieve their sustainability goals in the face of today’s biggest social and environmental challenges. Our portfolio of widely recognized brands, including Cryovac® brand food packaging solutions, Bubble Wrap® brand cushioning and Diversey™ cleaning and hygiene solutions, ensures a safer and less wasteful food supply chain, protects valuable goods shipped around the world, and improves health through clean environments. Sealed Air has approximately 25,000 employees who serve customers in 175 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 "Investor Relations" 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 Investor Relations 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 Adjusted Net Earnings and EPS, net sales on a "constant dollar" basis, Adjusted Gross Profit, Adjusted Operating Profit, Free Cash Flow, EBITDA, Adjusted EBITDA and Tax Rate. We present results and guidance, adjusted to exclude the effects of certain specified items (“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. We may use Adjusted EPS, net sales on a constant dollar basis, Adjusted Net Earnings, Adjusted Gross Profit, Adjusted Operating Profit, measures of free 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 Statements of Cash Flows” (under the section entitled “Non-U.S. GAAP Free Cash Flow”), “Reconciliation of U.S. GAAP Condensed Consolidated Statements of Operations to Non-U.S. GAAP Adjusted Condensed Consolidated Statements of Operations and Non-U.S. GAAP Adjusted EBITDA,” “Segment Information,” and “Components of Change in Net Sales by Segment.”

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 our anticipated effective income tax rate, the potential cash tax benefits associated with the W. R. Grace & Co. Settlement agreement (as defined in the Company’s Annual Report on Form 10-K), potential volume, revenue and operating growth for future periods, expectations and assumptions associated with our restructuring programs, 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 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, 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 AMAT is comprised of Asia, Middle East, Africa and Turkey.

² JANZ is comprised of Japan, Australia and New Zealand.

³ Developing Regions are Africa, Asia (excluding Japan and South Korea), Central and Eastern Europe, and Latin America.