see-10q_20170331.htm

 

e2-

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-12139

 

SEALED AIR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

65-0654331

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

2415 Cascade Pointe Boulevard

Charlotte, North Carolina

 

28208

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (980) 221-3235

 

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      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

There were 195,812,519 shares of the registrant’s common stock, par value $0.10 per share, issued and outstanding as of April 28, 2017.

 

 

 

 


 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

Condensed Consolidated Balance Sheets — March 31, 2017 and December 31, 2016

 

5

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016

 

6

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016

 

7

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016

 

8

Notes to Condensed Consolidated Financial Statements

 

9

Note 1 Organization and Basis of Presentation

 

9

Note 2 Recently Issued Accounting Standards

 

10

Note 3 Discontinued Operations

 

12

Note 4 Segments

 

14

Note 5 Inventories

 

17

Note 6 Property Plant and Equipment, net

 

17

Note 7 Goodwill and Identifiable Assets

 

17

Note 8 Accounts Receivable Securitization Programs

 

18

Note 9 Restructuring and Relocation Activities

 

19

Note 10 Debt and Credit Facilities

 

21

Note 11 Derivatives and Hedging Activities

 

22

Note 12 Fair Value Measurements and Other Financial Instruments

 

25

Note 13 Defined Benefit Pension Plans and Other Post-Employment Benefit Plans

 

28

Note 14 Income Taxes

 

28

Note 15 Commitments and Contingencies

 

29

Note 16 Stockholders’ Equity

 

29

Note 17 Accumulated Other Comprehensive Income (Loss)

 

31

Note 18 Other Expense, net

 

32

Note 19 Net (Loss) Earnings Per Common Share

 

33

Item 2.      Management’s Discussion and Analysis of Financial Condition And Results of Operation

 

34

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

 

50

Item 4.      Controls and Procedures

 

53

PART II. OTHER INFORMATION

 

 

Item 1.      Legal Proceedings

 

54

Item 1A.   Risk Factors

 

54

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds

 

54

Item 6.      Exhibits

 

56

Signature

 

57

 

2


 

Cautionary Notice Regarding Forward-Looking Statements

This report 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. The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking statements so that investors can better understand a company’s future prospects and make informed investment decisions. 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 “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report 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: the tax benefits associated with the Settlement agreement (as defined in our Annual Report on Form 10-K for the year ended December 31, 2016), global economic and political conditions, changes in our credit ratings, changes in raw material pricing and availability, changes in energy costs, competitive conditions, the success of the sale of the Diversey Care division and food hygiene and cleaning business (together “Diversey”), the success of our restructuring activities, currency translation and devaluation effects, the success of our financial growth, profitability, cash generation and manufacturing strategies and our cost reduction and productivity efforts, the success of new product offerings, the effects of animal and food-related health issues, pandemics, consumer preferences, environmental matters, regulatory actions and legal matters, and the other information referenced in Part I, Item IA, "Risk Factors", of our Annual Report on Form 10-K for the year ended December 31, 2016 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 in this report 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 as a result of new information, future developments or otherwise.

Non-U.S. GAAP Information

We present financial information that conforms to Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). We also present financial information that does not conform to U.S. GAAP, which we refer to as non-U.S. GAAP, as our management believes it is useful to investors. 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. 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. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures. See Note 4, “Segments” of the Notes to Consolidated Financial Statements and our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) for reconciliations of our U.S. GAAP financial measures to non-U.S. GAAP.  Information reconciling forward-looking U.S. GAAP measures to non-U.S. GAAP measures is not available without unreasonable effort.

Our management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. Non-U.S. GAAP financial measures provide management with additional means to understand and evaluate the core operating results and trends in our ongoing business by eliminating certain one-time expenses and/or gains (which may not occur in each period presented) and other items that management believes might otherwise make comparisons of our ongoing business with prior periods and peers more difficult, obscure trends in ongoing operations or reduce management’s ability to make useful forecasts.

3


 

Our non-U.S. GAAP financial measures may also be considered in calculations of our performance measures set by the Organization and Compensation Committee of our Board of Directors for purposes of determining incentive compensation. The non-U.S. GAAP financial metrics mentioned above exclude items that we consider to be certain specified items (“Special Items”), such as restructuring charges, charges related to ceasing operations in Venezuela, cash-settled stock appreciation rights (“SARs”) granted as part of the original Diversey acquisition, special tax items (“Tax Special Items”) and certain other infrequent or one-time items. We evaluate unusual or Special Items on an individual basis. Our evaluation of whether to exclude an unusual or special item for purposes of determining our non-U.S. GAAP financial measures considers both the quantitative and qualitative aspects of the item, including among other things (i) its nature, (ii) whether or not it relates to our ongoing business operations, and (iii) whether or not we expect it to occur as part of our normal business on a regular basis.

The Company measures segment performance using Adjusted EBITDA (a non-U.S. GAAP financial measure). Adjusted EBITDA is defined as Earnings before Interest Expense, Taxes, Depreciation and Amortization, adjusted to exclude the impact of Special Items.

We also present our adjusted income tax rate or provision (“Adjusted Tax Rate”). The Adjusted Tax Rate is a measure of our U.S. GAAP effective tax rate, adjusted to exclude the tax impact from the Special Items that are excluded from our Adjusted Net Earnings and Adjusted EPS metrics as well as expense or benefit from any special taxes or tax benefits (“Tax Special Items”). The Adjusted Tax Rate is an indicator of the taxes on our core business. The tax situation and effective tax rate in the specific countries where the excluded or Special Items occur will determine the impact (positive or negative) to the Adjusted Tax Rate.

In our “Net Sales by Geographic Region,” “Components of Change in Net Sales by Segment” and in some of the discussions and tables that follow, we exclude the impact of foreign currency translation when presenting net sales information, which we define as “constant dollar.” Changes in net sales excluding the impact of foreign currency translation are non-U.S. GAAP financial measures. As a worldwide business, it is important that we take into account the effects of foreign currency translation when we view our results and plan our strategies. Nonetheless, we cannot control changes in foreign currency exchange rates. Consequently, when our management looks at our financial results to measure the core performance of our business, we may exclude the impact of foreign currency translation by translating our current period results at prior period foreign currency exchange rates. We also may exclude the impact of foreign currency translation when making incentive compensation determinations. As a result, our management believes that these presentations are useful internally and may be useful to investors.

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 gains and losses on the disposition of businesses, the ultimate outcome of certain legal or tax proceedings, foreign currency gains or losses 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. 

 

4


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

(In millions, except share data)

 

March 31, 2017

(unaudited)

 

 

December 31,

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

258.4

 

 

$

333.7

 

Trade receivables, net of allowance for doubtful accounts of $8.5 in 2017 and $8.4 in 2016

 

 

450.5

 

 

 

460.5

 

Income tax receivables

 

 

10.3

 

 

 

11.5

 

Other receivables

 

 

73.7

 

 

 

72.7

 

Inventories, net of inventory reserves of $14.9 in 2017 and $13.4 in 2016

 

 

507.0

 

 

 

456.7

 

Current assets held for sale

 

 

2,891.8

 

 

 

825.7

 

Prepaid expenses and other current assets

 

 

95.8

 

 

 

54.5

 

Total current assets

 

 

4,287.5

 

 

 

2,215.3

 

Property and equipment, net

 

 

910.1

 

 

 

889.6

 

Goodwill

 

 

1,884.7

 

 

 

1,882.9

 

Intangible assets, net

 

 

39.3

 

 

 

40.1

 

Deferred taxes

 

 

122.4

 

 

 

169.9

 

Non-current assets held for sale

 

 

 

 

 

2,026.0

 

Other non-current assets

 

 

177.2

 

 

 

175.4

 

Total assets

 

$

7,421.2

 

 

$

7,399.2

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

96.9

 

 

$

83.0

 

Current portion of long-term debt

 

 

296.5

 

 

 

297.0

 

Accounts payable

 

 

581.1

 

 

 

539.2

 

Current liabilities held for sale

 

 

1,215.4

 

 

 

683.3

 

Accrued restructuring costs

 

 

35.1

 

 

 

44.8

 

Other current liabilities

 

 

436.6

 

 

 

471.7

 

Total current liabilities

 

 

2,661.6

 

 

 

2,119.0

 

Long-term debt, less current portion

 

 

3,762.7

 

 

 

3,762.6

 

Deferred taxes

 

 

4.3

 

 

 

4.9

 

Non-current liabilities held for sale

 

 

 

 

 

501.0

 

Other non-current liabilities

 

 

397.8

 

 

 

402.0

 

Total liabilities

 

 

6,826.4

 

 

 

6,789.5

 

Commitments and contingencies - Note 15

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.10 par value per share, 50,000,000 shares authorized; no shares issued in

   2017 and 2016

 

 

 

 

 

 

Common stock, $0.10 par value per share, 400,000,000 shares authorized; shares issued:

229,942,206 in 2017 and 227,638,738 in 2016; shares outstanding: 195,824,449 in 2017 and 193,482,383 in 2016

 

 

23.0

 

 

 

22.8

 

Additional paid-in capital

 

 

1,983.5

 

 

 

1,974.1

 

Retained earnings

 

 

965.4

 

 

 

1,040.0

 

Common stock in treasury, 34,117,757 shares in 2017 and 34,156,355 shares in 2016

 

 

(1,478.1

)

 

 

(1,478.1

)

Accumulated other comprehensive loss, net of taxes

 

 

(899.0

)

 

 

(949.1

)

Total stockholders’ equity

 

 

594.8

 

 

 

609.7

 

Total liabilities and stockholders’ equity

 

$

7,421.2

 

 

$

7,399.2

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

5


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

 

 

`

Three Months Ended

 

 

 

March 31,

(unaudited)

 

(In millions, except share data)

 

2017

 

 

2016(1)

 

Net sales

 

$

1,032.2

 

 

$

1,005.9

 

Cost of sales

 

 

695.8

 

 

 

670.3

 

Gross profit

 

 

336.4

 

 

 

335.6

 

Selling, general and administrative expenses

 

 

195.8

 

 

 

185.1

 

Amortization expense of intangible assets acquired

 

 

5.0

 

 

 

2.8

 

Restructuring and other charges

 

 

1.9

 

 

 

(0.2

)

Operating profit

 

 

133.7

 

 

 

147.9

 

Interest expense

 

 

(48.8

)

 

 

(50.9

)

Foreign currency exchange loss related to Venezuelan subsidiaries

 

 

 

 

 

(1.0

)

Other expense, net

 

 

(2.3

)

 

 

(3.5

)

Earnings from continuing operations before income tax provision

 

 

82.6

 

 

 

92.5

 

Income tax provision(1)

 

 

136.4

 

 

 

17.6

 

Net (loss) earnings from continuing operations

 

 

(53.8

)

 

 

74.9

 

Net earnings from discontinued operations, net of tax

 

 

10.6

 

 

 

27.5

 

Net (loss) earnings available to common stockholders

 

$

(43.2

)

 

$

102.4

 

Basic:

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.27

)

 

$

0.37

 

Discontinued operations

 

 

0.05

 

 

 

0.14

 

Net (loss) earnings per common share - basic(1)

 

$

(0.22

)

 

$

0.51

 

Diluted:

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.27

)

 

$

0.37

 

Discontinued operations

 

 

0.05

 

 

 

0.14

 

Net (loss) earnings per common share - diluted(1)

 

$

(0.22

)

 

$

0.51

 

Dividends per common share

 

$

0.16

 

 

$

0.13

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

193.4

 

 

 

195.2

 

Diluted(1)

 

 

195.7

 

 

 

197.5

 

 

  

 

(1)

The Company early adopted ASU 2016-09 on a prospective basis, related to the recognition of excess tax benefits to the income statement which were previously recorded in additional paid-in capital, effective January 1, 2016. This resulted in an additional 404,347 diluted weighted average number of common shares outstanding for the three months ended March 31, 2016, and recognition of excess tax benefits of $9.6 million in net earnings from continuing operations, and $1.0 million in net earnings from discontinued operations for the three months ended March 31, 2016. As a result, continuing operations net earnings per common share increased by $0.05 per share for the three months ended March 31, 2016. Refer to Note 2, “Recently Issued Accounting Standards” of the Notes to Condensed Consolidated Financial Statements for further details.

 

6


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

 

 

 

Three Months Ended

 

 

 

March 31,

(unaudited)

 

(In millions)

 

2017

 

 

2016

 

Net (loss) earnings available to common stockholders

 

$

(43.2

)

 

$

102.4

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

Recognition of deferred pension items, net of taxes of $0.2 for

   the three months ended March 31, 2017 and $(0.6) for the

   three months ended March 31, 2016

 

 

4.5

 

 

 

1.7

 

Unrealized  (losses) gains on derivative instruments for net

   investment hedge,  net of taxes of $3.0 for

   three months ended March 31, 2017 and $14.0 for the

   three months ended March 31, 2016

 

 

(4.9

)

 

 

(22.6

)

Unrealized (losses) gains on derivative instruments for cash flow

   hedge, net of taxes of $1.2 for

   the three months ended March 31, 2017 and $1.9 for the

   three months ended March 31, 2016

 

 

(4.7

)

 

 

(4.1

)

Foreign currency translation adjustments, net of taxes of $1.9 for

   the three months ended March 31, 2017 and $2.1 for the

   three months ended March 31, 2016

 

 

55.2

 

 

 

(9.3

)

Other comprehensive income (loss), net of taxes

 

 

50.1

 

 

 

(34.3

)

Comprehensive income, net of taxes

 

$

6.9

 

 

$

68.1

 

 

See accompanying notes to condensed consolidated financial statements.

 

7


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 

 

 

Three Months Ended

 

 

 

March 31,

(unaudited)

 

(In millions)

 

 

2017

 

 

 

2016(1)(2)

 

Net (loss) earnings available to common stockholders

 

$

(43.2

)

 

$

102.4

 

Adjustments to reconcile net earnings to net cash  provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

52.8

 

 

 

49.1

 

Share-based incentive compensation

 

 

8.9

 

 

 

9.7

 

Profit sharing expense

 

 

8.8

 

 

 

6.8

 

Remeasurement loss related to Venezuelan subsidiaries

 

 

0.2

 

 

 

1.7

 

Provisions for bad debt

 

 

1.8

 

 

 

1.0

 

Provisions for inventory obsolescence

 

 

2.4

 

 

 

3.6

 

Deferred taxes, net

 

 

112.2

 

 

 

(11.4

)

Net (gain) loss on sale of business

 

 

(2.3

)

 

 

2.5

 

Other non-cash items

 

 

0.1

 

 

 

3.7

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade receivables, net

 

 

(3.3

)

 

 

(22.3

)

Inventories

 

 

(64.3

)

 

 

(65.1

)

Accounts payable

 

 

56.1

 

 

 

39.0

 

Other assets and liabilities

 

 

(113.0

)

 

 

(106.0

)

Net cash  provided by operating activities

 

 

17.2

 

 

 

14.7

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(50.4

)

 

 

(51.8

)

Proceeds, net from sale of business

 

 

2.3

 

 

 

4.2

 

Proceeds from sales of property, equipment and other assets

 

 

0.1

 

 

 

1.3

 

Settlement of foreign currency forward contracts

 

 

(7.3

)

 

 

(22.4

)

Net cash used in investing activities

 

 

(55.3

)

 

 

(68.7

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from borrowings

 

 

10.2

 

 

 

106.8

 

Cash used as collateral on borrowing arrangements

 

 

(1.2

)

 

 

(0.2

)

Dividends paid on common stock

 

 

(31.4

)

 

 

(26.2

)

Acquisition of common stock for tax withholding obligations under our Omnibus stock plan and 2005 Contingent Stock plan

 

 

(21.5

)

 

 

(22.3

)

Repurchases of common stock

 

 

 

 

 

(32.0

)

Other financing activities

 

 

(1.8

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(45.7

)

 

 

26.1

 

Effect of foreign currency exchange rate changes on cash and cash equivalents

 

 

8.5

 

 

 

(10.9

)

Balance, beginning of period

 

 

333.7

 

 

 

321.7

 

Net change during the period

 

 

(75.3

)

 

 

(38.8

)

Balance, end of period

 

$

258.4

 

 

$

282.9

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Interest payments, net of amounts capitalized

 

$

48.0

 

 

$

48.9

 

Income tax payments

 

$

46.2

 

 

$

29.6

 

Stock appreciation rights payments (less amounts included in restructuring payments)

 

$

 

 

$

0.1

 

Restructuring payments including associated costs

 

$

15.2

 

 

$

18.7

 

Non-cash items:

 

 

 

 

 

 

 

 

Transfers of shares of our common stock from treasury for our 2016 and 2015 profit-sharing  plan

   contributions

 

$

22.3

 

 

$

37.6

 

 

  

 

(1)

The Company early adopted ASU 2016-09 on a retrospective basis related to the classification of excess tax benefits on the Statement of Cash Flows, effective January 1, 2016, which resulted in an increase in operating cash flow of $6.8 million and a decrease in financing activities of $6.8 million for the three months ended March 31, 2016. Refer to Note 2, “Recently Issued Accounting Standards” of the notes to the condensed consolidated financial statements for further details.

(2)

Due to changes in the accounting treatment of a factoring agreement the Company reclassified amounts from cash and cash equivalents to other receivables of $2.8 million as of March 31, 2016. This reclassification resulted in a decrease in cash provided by operating activities of $3.9 million for the three months ended March 31, 2016.

 

8


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (unaudited)

 

 

Note 1 Organization and Basis of Presentation

Organization

We are a global leader in food safety and security, facility hygiene and product protection. We serve an array of end markets including food and beverage processing, food service, retail, healthcare and industrial, and commercial and consumer applications. Our focus is on achieving quality sales growth through leveraging our geographic footprint, technological know-how and leading market positions to bring measurable, sustainable value to our customers and investors.

We conduct substantially all of our business through three wholly-owned subsidiaries, Cryovac, Inc., Sealed Air Corporation (US) and Diversey, Inc. Throughout this report, when we refer to “Sealed Air,” the “Company,” “we,” “our,” or “us,” we are referring to Sealed Air Corporation and all of our subsidiaries, except where the context indicates otherwise.

Basis of Presentation

Our Condensed Consolidated Financial Statements include all of the accounts of the Company and our subsidiaries. We have eliminated all significant intercompany transactions and balances in consolidation. In management’s opinion, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of our Condensed Consolidated Balance Sheet as of March 31, 2017 and our Condensed Consolidated Statement of Operations for the three months ended March 31, 2017 and 2016 have been made. The results set forth in our Condensed Consolidated Statement of Operations for the three months ended March 31, 2017 and in our Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year. All amounts are in millions, except per share amounts, and approximate due to rounding. Some prior period amounts have been reclassified to conform to the current year presentation. These reclassifications, individually and in the aggregate, did not have a material impact on our condensed consolidated financial condition, results of operations or cash flows.

Our Condensed Consolidated Financial Statements were prepared in accordance with the interim reporting requirements of the U.S. Securities and Exchange Commission (“SEC”). As permitted under those rules, annual footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ from these estimates.

We are responsible for the unaudited Condensed Consolidated Financial Statements and notes included in this report. As these are condensed financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 as filed with the SEC on February 15, 2017 (“2016 Form 10-K”) and with the information contained in other publicly-available filings with the SEC.

On March 25, 2017, we entered into a definitive agreement to sell the Diversey Care division and the food hygiene and cleaning business within the Food Care division.  The net assets of Diversey have met the criteria to be classified as “held for sale” and are reported as such in all periods presented.  Results of operations for Diversey are reported as discontinued operations in all periods presented.  See Note 3 “Discontinued Operations” for further information.

As a result of the Diversey transaction, we have also changed our segment reporting structure effective as of January 1, 2017. See Note 4, “Segments” for further information.

Impact of Inflation and Currency Fluctuation

Venezuela

Economic and political events in Venezuela have continued to expose us to heightened levels of foreign currency exchange risk.  Accordingly, Venezuela has been designated a highly inflationary economy under U.S. GAAP, and the U.S. dollar replaced the bolivar fuerte as the functional currency for our subsidiaries in Venezuela. All bolivar-denominated monetary assets and liabilities are remeasured into U.S. dollars using the current exchange rate available to us, and any changes in the exchange rate are reflected in foreign currency exchange loss related to our Venezuelan subsidiaries on the Condensed Consolidated Statements of Operations.

9


 

2016 Activity 

Effective March 10, 2016, there were only two legal mechanisms in Venezuela to access U.S. dollars.  This included the DIPRO (10.0 bolivars per U.S. dollar), which replaced the CENCOEX rate and is the preferential rate for essential goods and services and; the DICOM rate, which replaced the SIMADI rate,  which is allowed to float freely.

At March 31, 2016, we evaluated which legal mechanisms were available to our Venezuelan subsidiaries to access U.S. dollars.   We concluded that we would use the DICOM rate to remeasure our bolivar denominated monetary assets and liabilities since it was our only legally available option and our intent on a go-forward basis to utilize this market to settle any future transactions based on the then current facts and circumstances. The DICOM rate as of March 31, 2016 was 272.9123.  During the first quarter of 2016, we were only able to access the SIMADI market (during the period the market was available) and only received minimal amounts of U.S. dollars.  We did not receive any U.S. dollars via the CENCOEX (at an official rate of 6.3) or the DIPRO (at an official rate of 10.0).  For any U.S. dollar denominated monetary asset or liability, such amounts do not get remeasured at month-end since it is already an asset or liability denominated in U.S. dollars.  As a result of this evaluation, the Company reported a remeasurement loss of $1.7 million (of which $1.0 million related to continuing operations) for the three months ended March 31, 2016.

2017 Activity

At March 31, 2017, we concluded that we would continue to use the DICOM rate to remeasure our remaining bolivar denominated monetary assets and liabilities since it was our only legally available option and our intent on a go-forward basis to utilize this market if needed, to settle any future transactions based on current facts and circumstances.  During the first quarter of 2017, we did not receive any U.S dollars via any of the legal mechanisms noted above.  The DICOM rate as of March 31, 2017 was 710.3638.  As a result of this evaluation, the Company reported a remeasurement loss of less than $1.0 million (all of which was included in continuing operations) for the three months ended March 31, 2017.

We will continue to evaluate each reporting period the appropriate exchange rate to remeasure our financial statements based on the facts and circumstances as applicable.

Note 2 Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 was effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption was permitted. The Company elected to early adopt ASU 2016-09 in the third quarter of 2016 which required us to reflect any adjustments as of January 1, 2016, the beginning of the annual period that included the interim period of adoption.

Under previous guidance, excess tax benefits and certain tax deficiencies from share-based compensation arrangements were recorded in additional paid-in-capital within equity when the awards vested or were settled. ASU 2016-09 requires that all excess tax benefits and all tax deficiencies be recognized as income tax expense or benefit in the income statement and adoption was on a prospective basis.  As a result of the adoption,  the Company recognized excess tax benefits of $9.6 million in net earnings from continuing operations and $1.0 million in net earnings from discontinued operations for the three months ended March 31, 2016.  ASU 2016-09 also requires excess tax benefits to be prospectively excluded from assumed future proceeds in the calculation of diluted shares.  As a result of the adoption,  it resulted in an additional 404,347 of diluted weighted average number of common shares outstanding for the three months ended March 31, 2016. As a result, continuing operations net earnings per common share increased by $0.05 per share for the three months ended March 31, 2016. Additionally, the Company elected to apply the cash flow classification guidance of ASU 2016-09 retrospectively. For the three months ended March 31, 2016 this resulted in an increase in operating cash flow of $6.8 million and a decrease in financing activities of $6.8 million.

10


 

Recently Issued Accounting Standards

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Benefit Postretirement Benefit Cost (“ASU 2017-07”). ASU 2017-017 changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement. This new guidance requires entities to report the service cost component in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component outside of income from operations. The amendments in ASU 2017-07 are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. We are currently in the process of evaluating this new standard update.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).  ASU 2017-04 eliminates Step 2 as part of the goodwill impairment test.  The amount of the impairment charge to be recognized would now be the amount by which the carrying value exceeds the reporting unit’s fair value.  The loss to be recognized cannot exceed the amount of goodwill allocated to that reporting unit.  The amendments in ASU 2017-04 are effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017.  We are currently in the process of evaluating this new standard update.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”).  ASU 2017-01 provides a screen to determine when a set is not a business.  This screen states that when substantially all of the fair value of the group assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business.  The amendments in ASU 2017-01 are effective for annual periods beginning after December 15, 2017, including interim periods within those periods.  Early application is permitted for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued. We are currently in the process of evaluating this new standard update.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that entities include restricted cash and restricted cash equivalents with cash and cash equivalents in the beginning-of-period and end-of-period total amounts shown on the Statement of Cash Flows. The amendments in ASU 2016-18 are effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption, including adoption in interim periods, is permitted for all entities. Retrospective transition method is to be applied to each period presented.  We are currently in the process of evaluating this new standard update.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”).  ASU 2016-16 requires entities to recognize income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.  The amendments in ASU 2016-16 are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods.  Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. We are currently in the process of evaluating this new standard update.

In August 2015, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 provides guidance on eight specific cash flow issues in regard to how cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in ASU 2016-15 are effective for fiscal years beginning after December 15, 2017, including interim periods within those years, with early adoption permitted. We are currently in the process of evaluating this new standard update.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts.  Entities will now use forward-looking information to better form their credit loss estimates.  The ASU also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal periods. Entities may adopt earlier as of the fiscal year beginning after December 15, 2018, including interim periods within those fiscal years. We are currently in the process of evaluating this new standard update.

11


 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASU 2016-02”). This ASU requires an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The updated guidance requires a modified retrospective adoption. We are currently in the process of evaluating this new standard update.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”).  This ASU requires equity investments except those under the equity method of accounting to be measured at fair value with the changes in fair value recognized in net income.  The amendment simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. In addition, it also requires enhanced disclosures about investments.  The amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application for certain provisions is allowed but early adoption of the amendments is not permitted.  An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We are currently in the process of evaluating this new standard update.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”) and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016 and May 2016 within ASU 2015-04, ASU 2016-08, ASU 2016-10 and ASU 2016-12, respectively (ASU 2014-09, ASU 2015-04, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2017-05 collectively, Topic 606). Previous revenue recognition guidance in U.S. GAAP comprised broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 expands and enhances disclosure requirements which require disclosing sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This includes both qualitative and quantitative information. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, (“ASU 2015-14”). The amendments in ASU 2015-14 delay the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017 and allow early adoption as of the original public entity effective date. The amendments in ASU 2016-08, ASU 2016-10 and ASU 2016-12 are effective in conjunction with ASU 2015-14.

The guidance permits two methods of adoption: full retrospective in which the standard is applied to all of the periods presented or modified retrospective where an entity will have to recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings.  We currently anticipate adopting the modified retrospective method.

Our efforts to adopt this standard to date have focused on contract analysis at a regional level. We currently estimate the most significant impact will be on the accounting for Free on Loan equipment in our Food Care division. Whereas today we do not recognize revenue on Free on Loan equipment, under the new standard, we anticipate allocating revenue to that equipment and treating it as a performance obligation. We are in the process of assessing the timing of when revenue assigned to Free on Loan equipment would be recognized. We have not completed our analysis at a segment level, and are in the process of quantifying the potential impact of the new standard.

Note 3 Discontinued Operations         

On March 25, 2017, we entered into a definitive agreement to sell our Diversey Care division and the food hygiene and cleaning business within our Food Care division for gross proceeds of USD equivalent $3.2 billion, subject to customary closing conditions. The transaction is expected to be completed in the third quarter of 2017. The transaction is expected to generate approximately $2.5 billion in net cash, on an after tax basis. We intend to use the cash generated from this transaction to repay debt and maintain our credit profile, repurchase shares to minimize earnings dilution, and fund core growth initiatives, including potential complementary acquisitions to our Food Care and Product Care divisions.

12


 

The sale of Diversey will allow us to enhance our strategic focus on the Food Care and Product Care divisions and simplify our operating structure. We have classified the operating results from this business, together with certain costs related to the divestiture transaction, as discontinued operations, net of tax, in the condensed consolidated statements of operations for the three months March 31, 2017 and 2016. Assets and liabilities of this business are classified as “held for sale” in the condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016.

Summary operating results of Diversey were as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2017

 

 

2016

 

Net sales

 

$

581.7

 

 

$

584.7

 

Cost of sales

 

 

330.5

 

 

 

330.9

 

Gross profit

 

 

251.2

 

 

 

253.8

 

Selling, general and administrative expenses

 

 

198.9

 

 

 

211.4

 

Amortization expense of intangible assets acquired

 

 

17.7

 

 

 

18.7

 

Operating profit

 

 

34.6

 

 

 

23.7

 

Other expense, net

 

 

(2.9

)

 

 

(4.0

)

Earnings from discontinued operations before income tax

   provision (benefit)

 

 

31.7

 

 

 

19.7

 

Income tax provision (benefit)

 

 

21.1

 

 

 

(7.8

)

Net earnings from discontinued operations

 

$

10.6

 

 

$

27.5

 

 

For the three months ended March 31, 2017, net earnings from discontinued operations was negatively impacted by $19.5 million of tax expense related to a change in the repatriation strategy of foreign earnings. For the three months ended March 31, 2016, net earnings from discontinued operations was favorably impacted by $9.3 million primarily from a benefit related to repatriation strategy and the release of reserves.

The carrying value of the major classes of assets and liabilities of Diversey were as follows:

 

 

 

March 31,

 

 

December 31,

 

(In millions)

 

2017

 

 

2016

 

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

30.0

 

 

$

30.0

 

Receivables, net

 

 

436.2

 

 

 

438.2

 

Inventories

 

 

227.9

 

 

 

203.2

 

Other receivables

 

 

82.8

 

 

 

70.3

 

Prepaid expenses and other current assets

 

 

87.8

 

 

 

80.6

 

Property and equipment, net

 

 

172.6

 

 

 

170.6

 

Goodwill

 

 

986.8

 

 

 

972.8

 

Intangible assets, net

 

 

653.9

 

 

 

669.9

 

Non-current deferred tax assets

 

 

43.0

 

 

 

50.7

 

Other non-current assets

 

 

167.4

 

 

 

162.0

 

Total assets held for sale

 

$

2,888.4

 

 

$

2,848.3

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

20.6

 

 

$

9.6

 

Current portion of long-term debt

 

 

30.5

 

 

 

31.1

 

Accounts payable

 

 

359.9

 

 

 

346.5

 

Other current liabilities

 

 

260.0

 

 

 

296.1

 

Long term debt

 

 

175.5

 

 

 

175.7

 

Deferred tax liabilities

 

 

107.7

 

 

 

56.3

 

Other non-current liabilities

 

 

261.2

 

 

 

269.0

 

Total liabilities held for sale

 

$

1,215.4

 

 

$

1,184.3

 

 

13


 

The following table presents selected financial information regarding cash flows of Diversey that are included within discontinued operations in the consolidated statements of cash flows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2017

 

 

2016

 

Non-cash items included in net earnings from discontinued operations:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

$

23.4

 

 

$

25.7

 

Share-based incentive compensation

 

 

3.3

 

 

 

2.8

 

Profit sharing expense

 

 

1.0

 

 

 

0.8

 

Provision for bad debt

 

 

1.3

 

 

 

1.4

 

Capital expenditures

 

 

3.4

 

 

 

7.8

 

 

The amounts disclosed in the tables above have been excluded from disclosures unless otherwise noted.

Acquisitions

On April 1, 2017 the Diversey Care division  acquired the UVC disinfection portfolio of  Daylight Medical, a manufacturer of innovative medical devices. The preliminary fair value of the consideration transferred was approximately $28.7 million which included $3.5 million of cash paid at closing as well as a preliminary fair value of $25.2 milllion related to noncontingent considerations which will be paid in the future and a preliminary fair value for liability-classified contingent consideration . The assets and liabilities acquired as part of the acquisition will be classified as held for sale on the Condensed Consolidated Balance Sheet in future periods.

 

Note 4 Segments

As a result of the Diversey transaction, we have changed our segment reporting structure. The Food Care division now excludes the food hygiene and cleaning business, which is included in discontinued operations, and includes our Medical Applications and New Ventures businesses, which were previously reported in the “Other” category. The Other category also previously included “Corporate” which is now its own category.

The Company’s segment reporting structure now consists of two reportable segments and a Corporate category as follows:

 

Food Care (includes Medical Applications and New Ventures businesses);

 

Product Care; and

 

Corporate.

The Company’s Food Care and Product Care segments are considered reportable segments under FASB ASC Topic 280. Our reportable segments are aligned with similar groups of products. Corporate includes certain costs that are not allocated to the reportable segments, primarily consisting of unallocated corporate overhead costs, including administrative functions and cost recovery variances not allocated to the reportable segments from global functional expenses.

We allocate and disclose depreciation and amortization expense to our segments, although property and equipment, net is not allocated to the segment assets, nor is depreciation and amortization included in the segment performance metric Adjusted EBITDA. As of January 1, 2017 we modified our calculation of Adjusted EBITDA to exclude interest income. The impact in this modification was $1.6 million for the three months ended March 31, 2016. We also disclose restructuring and other charges by segment, although these items are not included in the segment performance metric Adjusted EBITDA since restructuring and other charges are categorized as special items as outlined in the table reconciling Non-U.S. GAAP Total Company Adjusted EBITDA to U.S. GAAP net earnings from continuing operations set forth below. The accounting policies of the reportable segments and Other are the same as those applied to the Condensed Consolidated Financial Statements.

14


 

The following tables show Net Sales and Adjusted EBITDA by our segment reporting structure:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2017

 

 

2016

 

Net Sales:

 

 

 

 

 

 

 

 

Food Care

 

$

655.6

 

 

$

638.4

 

As a % of Total Company net sales

 

 

63.5

%

 

 

63.5

%

Product Care

 

 

376.6

 

 

 

367.5

 

As a % of Total Company net sales

 

 

36.5

%

 

 

36.5

%

Total Company Net Sales

 

$

1,032.2

 

 

$

1,005.9

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2017

 

 

2016

 

Adjusted EBITDA from continuing operations:

 

 

 

 

 

 

 

 

Food Care

 

 

141.5

 

 

$

138.6

 

Adjusted EBITDA Margin

 

 

21.6

%

 

 

21.7

%

Product Care

 

74.1

 

 

 

77.1

 

Adjusted EBITDA Margin

 

 

19.7

%

 

 

21.0

%

Corporate(1)

 

 

(33.7

)

 

 

(29.5

)

Non-U.S. GAAP Total Company Adjusted EBITDA

   from continuing operations

 

$

181.9

 

 

$

186.2

 

Adjusted EBITDA Margin

 

 

17.6

%

 

 

18.5

%

 

(1)

Corporate includes costs previously allocated to the Diversey Care segment and food hygiene and cleaning business of our Food Care segment reported within discontinued operations of $8.0 million and $5.1 million for three months ended March 31, 2017 and 2016, respectively.

    

The following table shows a reconciliation of U.S. GAAP net earnings from continuing operations to Non-U.S. GAAP Total Company Adjusted EBITDA from continuing operations:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2017

 

 

2016

 

Net (loss) earnings from continuing operations

 

$

(53.8

)

 

$

74.9

 

Interest expense

 

 

(48.8

)

 

 

(50.9

)

Interest income

 

 

2.2

 

 

 

1.6

 

Income tax provision

 

 

136.4

 

 

 

17.6

 

Depreciation and amortization(2)

 

 

(37.2

)

 

 

(34.9

)

Special items:

 

 

 

 

 

 

 

 

Restructuring and other charges(3)

 

 

(1.9

)

 

 

0.2

 

Other restructuring associated costs included in cost of

   sales and selling, general and administrative expenses

 

 

(3.9

)

 

 

(3.9

)

SARs

 

 

 

 

 

(0.1

)

Foreign currency exchange loss related to

   Venezuelan subsidiaries

 

 

 

 

 

(1.0

)

Gain on sale of European food trays business

 

 

2.3

 

 

 

(1.6

)

Loss related to the sale of other businesses,

   investments and property, plant and equipment

 

 

 

 

 

(1.7

)

Charges incurred related to the sale of Diversey

 

 

(16.1

)

 

 

 

Other special items(1)

 

 

4.1

 

 

 

(1.4

)

Pre-tax impact of Special items

 

 

(15.5

)

 

 

(9.5

)

Non-U.S. GAAP Total Company Adjusted EBITDA

   from continuing operations

 

$

181.9

 

 

$

186.2

 

15


 

 

(1)

Other Special Items for the three months ended March 31, 2017 primarily included a recovered wage tax as the result of a court ruling partially offset by legal fees associated with restructuring and acquisitions. Other Special Items for the three months ended March 31, 2016 primarily included legal fees associated with restructuring and acquisitions.    

(2)

Depreciation and amortization by segment is as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2017

 

 

2016

 

Food Care

 

$

25.1

 

 

$

22.9

 

Product Care

 

 

11.5

 

 

 

9.6

 

Corporate

 

 

0.6

 

 

 

2.4

 

Total Company depreciation and amortization(1)

 

$

37.2

 

 

$

34.9

 

 

 

(1)

Includes share-based incentive compensation of $8.0 million for the three months ended March 31, 2017 and $11.5 million for the three months ended March 31, 2016. 

 

(3)

Restructuring and other charges by segment were as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

 

2017

 

 

 

2016

 

Food Care

 

$

1.2

 

 

$

(0.1

)

Product Care

 

 

0.7

 

 

 

(0.1

)

Total Company restructuring and other charges

 

$

1.9

 

 

$

(0.2

)

 

Assets by Reportable Segments

The following table shows assets allocated by our segment reporting structure.  Only assets identifiable by segment and reviewed by our chief operating decision maker by segment are allocated by the reportable segment assets, which are trade receivables, net, and finished goods inventory, net.  All other assets are included in “Assets not allocated.”

 

 

 

March 31,

 

 

December 31,

 

(In millions)

 

2017

 

 

2016

 

Assets:

 

 

 

 

 

 

 

 

Trade receivables, net, and finished goods inventories, net

 

 

 

 

 

 

 

 

Food Care

 

$

461.4

 

 

$

459.8

 

Product Care

 

 

279.2

 

 

 

261.5

 

Total segments and other

 

 

740.6

 

 

 

721.3

 

Assets not allocated

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

258.4

 

 

 

333.7

 

Property and equipment, net

 

 

910.1

 

 

 

889.6

 

Goodwill

 

 

1,884.7

 

 

 

1,882.9

 

Intangible assets, net

 

 

39.3

 

 

 

40.1

 

Assets held for sale

 

 

2,891.8

 

 

 

2,851.7

 

Other

 

 

696.3

 

 

 

679.9

 

Total

 

$

7,421.2

 

 

$

7,399.2

 

 

 

16


 

Note 5 Inventories

The following table details our inventories, net:

 

 

March 31,

 

 

December 31,

 

(In millions)

 

2017

 

 

2016

 

Inventories:

 

 

 

 

 

 

 

 

Raw materials

 

$

88.1

 

 

$

81.5

 

Work in process

 

 

128.8

 

 

 

114.4

 

Finished goods

 

 

290.1

 

 

 

260.8

 

Total

 

$

507.0

 

 

$

456.7

 

 

Note 6 Property and Equipment, net

 

The following table details our property and equipment, net:

 

 

March 31,

 

 

December 31,

 

(In millions)

 

2017

 

 

2016

 

Land and improvements

 

$

42.9

 

 

$

41.6

 

Buildings

 

 

609.7

 

 

 

600.2

 

Machinery and equipment

 

 

2,128.0

 

 

 

2,091.5

 

Other property and equipment

 

 

105.4

 

 

 

104.3

 

Construction-in-progress

 

 

232.8

 

 

 

210.1

 

Property and equipment, gross

 

 

3,118.8

 

 

 

3,047.7

 

Accumulated depreciation and amortization

 

 

(2,208.7

)

 

 

(2,158.1

)

Property and equipment, net

 

$

910.1

 

 

$

889.6

 

 

The following table details our interest cost capitalized and depreciation and amortization expense for property and equipment.

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

(In millions)

 

2017

 

 

2016

 

 

Interest cost capitalized

 

$

3.0

 

 

$

1.6

 

 

Depreciation and amortization expense for

   property and equipment

 

$

24.1

 

 

$

20.6

 

 

 

Note 7 Goodwill and Identifiable Assets

 

Goodwill

The following table shows our goodwill balances by our segment reporting structure.  We review goodwill for impairment on a reporting unit basis annually during the fourth quarter of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.  As of March 31, 2017, we did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable.

 

(In millions)

 

Food Care

 

 

Product Care

 

 

Total