Sealed Air Reports Fourth Quarter and Full Year 2016 Results

• 2016 Sales of $6.8 Billion, Net Income of $486 Million and Reported EPS of $2.46
• 2016 Adjusted EPS of $2.66 and Adjusted EBITDA of $1.16 Billion, or 17.1% of Net Sales, including unfavorable currency translation of $0.11 per share and $35 million, respectively
• Provides Full Year 2017 Outlook
• Pursuing Tax-Free Spin-Off and Other Strategic Alternatives, Including Potential Sale of New Diversey

CHARLOTTE, N.C.--(BUSINESS WIRE)--Feb. 9, 2017-- Sealed Air Corporation (NYSE:SEE) today announced financial results for fourth quarter and full year 2016. Commenting on these results, Jerome A. Peribere, President and Chief Executive Officer, said, "In 2016, we generated a record level of cash flow, delivered margin improvement for the fifth consecutive year and introduced an unprecedented number of new and innovative solutions to our customers around the world. These innovations coupled with end-market growth opportunities lead to increased demand for our protein packaging, hygiene and e-Commerce solutions. Similar to our third quarter, these positive trends were offset by unfavorable currency, challenging business environments in emerging countries and Australia, and softness in the industrial market. We are confident the underlying fundamentals of our strategy are intact and expect accelerated top line growth and profitability improvements in 2017."

Peribere continued, "As we proceed with our plans to pursue a tax-free spin-off of our Diversey Care and related food hygiene and cleaning business, or ‘New Diversey,' we are also exploring other strategic alternatives, including a potential sale of New Diversey. This is the appropriate next step in our Company's transformation and will enable us to unlock meaningful value for customers and shareholders."

Unless otherwise stated, all results compare fourth quarter 2016 results to fourth quarter 2015 results. Year-over-year financial discussions present operating results as reported, and on an organic or constant dollar basis. Constant dollar refers to unit volume and price/mix performance and excludes the impact of currency translation from all periods referenced. Organic refers to unit volume and price/mix performance and excludes the impact of currency translation and the results from the divestiture of the North American foam trays and absorbent pads business, which was divested on April 1, 2015, and the divestiture of the European food trays business on November 1, 2015 (together "divestitures"), from all periods referenced. Additionally, non-U.S. GAAP adjusted financial measures, such as Adjusted Earnings Before Interest Expense, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), Adjusted Net Earnings, Adjusted Diluted Earnings Per Share ("Adjusted EPS") and Adjusted Tax Rate, exclude the impact of 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 Diversey acquisition, special tax items ("Tax Special Items") and certain other infrequent or one-time items. Please refer to the financial statements included with this press release for a reconciliation of U.S. GAAP to Non-U.S. GAAP financial measures.

Fourth Quarter 2016 Highlights by Division

• Food Care net sales of $841 million were flat as reported. Currency had a negative impact on Food Care net sales of 2.3%, or $20 million, and divestitures had a negative impact of 0.6%, or $5 million. On an organic basis, net sales increased 2.7% due to positive volume of 2.0% and favorable price/mix of 0.7%. Volume growth of more than 5% in North America and positive trends in EMEA were partially offset by weakness in Latin America and Australia. Adjusted EBITDA of $178 million was attributable to favorable price/cost spread, positive volumes, restructuring savings and lower operating expenses, which were partially offset by unfavorable currency translation and divestitures. Adjusted EBITDA margins of 21.2% expanded 250 basis points compared to last year.
• Diversey Care net sales of $493 million decreased 0.4% as reported and increased 2.8% on a constant dollar basis. Currency had a negative impact on Diversey Care net sales of 3.2%, or $16 million in the quarter. Price/mix and volume increased 2.4% and 0.4% respectively. Volume growth of 7% in Asia-Pacific and 3% in North America were offset by lower volumes in the Middle East and Latin America. Diversey Care's Adjusted EBITDA was $64 million or 13.0% of net sales. Adjusted EBITDA margins improved 180 basis points compared to the fourth quarter 2015 as a result of favorable price/cost spread and restructuring savings, which were offset by higher operating expenses.
• Product Care net sales of $394 million decreased 1.7% as reported and 0.5% on a constant dollar basis. Currency had a negative impact on Product Care net sales of 1.2%, or $5 million. Sales volume increased 1.5%, which was offset by unfavorable price/mix of 2.0%. North America volumes were up more than 3% as a result of continued strength in e-Commerce offset by rationalization efforts, ongoing softness in the industrial market and unfavorable price/mix. Adjusted EBITDA was $88 million or 22.3% of net sales. Adjusted EBITDA margins expanded 80 basis points compared to the same period a year ago due to higher volumes, which were partially offset by negative price/cost spread.

Company Updates on Separation of New Diversey

In mid-October the Company announced plans to pursue a tax-free spin-off of New Diversey. As the Company considers that plan, it is also exploring other strategic alternatives, including a potential sale of New Diversey.

Fourth Quarter and Full Year 2016 U.S. GAAP Summary

Fourth quarter net sales of $1.7 billion decreased 0.6% on an as reported basis. Currency had a negative impact on total net sales of 2.3%, or $40 million, and the Food Care divestitures had a negative impact on total sales of 0.3%, or $5 million, in the fourth quarter 2016.

For the full year 2016, net sales of $6.8 billion decreased 3.6% on an as reported basis. Currency had a negative impact on total net sales of 3.4%, or $243 million, and the Food Care divestitures had a negative impact on total sales of 1.4%, or $102 million, in 2016.

Fourth quarter net income on a reported basis was $171 million, or $0.87 per diluted share as compared to $124 million, or $0.62 per diluted share in the fourth quarter 2015. Net income in the fourth quarter 2016 was favorably impacted by $22 million of Special Items, primarily related to the release of certain tax reserves, as described more fully below, partially offset by costs related to restructuring activities and costs incurred regarding the pursuit of strategic alternatives for New Diversey. Net income in the fourth quarter 2015 was negatively impacted by $28 million of Special Items, primarily consisting of costs related to restructuring activities and a tax reserve related to the tax refund received on the Settlement agreement (as defined in our 2015 Annual Report on Form 10-K), partially offset by the release of certain tax reserves recorded at the time of the Diversey Holdings, Inc. acquisition, for which the statute of limitations had expired.

Full year 2016 net income on a reported basis was $486 million, or $2.46 per diluted share as compared to $335 million, or $1.62 per diluted share for the full year 2015. Net earnings in the full year 2016 were favorably impacted by $40 million of Special Items, primarily related to the release of certain tax reserves, as described more fully below, partially offset by expenses related to restructuring activities and costs incurred regarding the pursuit of strategic alternatives for New Diversey. Net income for the full year 2015 included $201 million of Special Items, primarily consisting of expenses related to restructuring activities and a tax reserve recorded in relation to the tax refund received on the Settlement agreement, partially offset by the release of certain tax reserves recorded at the time of the Diversey Holdings, Inc. acquisition, for which the statute of limitations had expired.

The effective tax rate in the fourth quarter of 2016 was (8.4)%, compared to the effective tax rate of 1.8% in the fourth quarter of 2015. The effective tax rate in 2016 was favorably impacted by the release of certain valuation allowances and tax reserves recorded at the time of the Diversey Holdings, Inc. acquisition (the "Diversey acquisition"), primarily resulting from the settlement of an audit, and a decrease in liability related to future repatriation of foreign earnings.

For the full year 2016, the effective tax rate was 14.0%, compared to the effective tax rate of 21.2% in 2015. The effective tax rate was favorably impacted in 2016 primarily by tax benefits for the release of certain tax reserves and valuation allowances recorded at the time of the Diversey acquisition, current year foreign tax credit generation, a decrease in liability related to future repatriation of foreign earnings, favorable mix of foreign and US earnings, and a tax benefit related to the Company's early adoption of ASU 2016-09, effective January 1, 2016.

Fourth Quarter and Full Year 2016 Non-U.S. GAAP Summary

In the fourth quarter net sales on an organic basis increased 2.0% driven by an increase in North American sales volumes across all segments. Favorable price/mix contributed to organic sales growth, reflecting positive trends in Diversey Care and Food Care, which offset declines in Product Care.

For the full year 2016 net sales on an organic basis increased 1.3% driven by an increase in North American sales volumes primarily in Food Care and Product Care. Favorable price/mix also contributed to performance and reflected positive trends in Diversey Care and Food Care which offset declines in Product Care.

Adjusted EBITDA for the fourth quarter 2016 was $304 million, or 17.5% of net sales. This margin performance was attributable to a favorable price/cost spread, restructuring savings and higher sales volumes, partially offset by higher operating expenses, unfavorable currency translation and the impact of divestitures.

Full year 2016 Adjusted EBITDA was $1.16 billion, or 17.1% of net sales. This margin performance was attributable to a favorable price/cost spread, restructuring savings and higher sales volumes, partially offset by higher operating expenses, unfavorable currency translation and the impact of divestitures.

Adjusted EPS was $0.76 for the fourth quarter 2016. This compares to Adjusted EPS of $0.76 in the fourth quarter 2015. The Adjusted Tax Rate was 18.4% in the fourth quarter 2016, compared to 7.6% in the fourth quarter 2015. The Adjusted Tax Rate in the fourth quarter of 2016 was favorably impacted by an increase in foreign tax credits and decrease in liability related to future repatriation of foreign earnings.

Full year 2016 adjusted EPS was $2.66. This compares to Adjusted EPS of $2.59 in 2015. The Adjusted Tax Rate was 21.6% for the full year 2016, compared to 20.2% in 2015. The 2016 Adjusted Tax Rate was positively impacted by a favorable mix of domestic versus foreign sourced income, an increase in foreign tax credits and decrease in liability related to future repatriation of foreign earnings.

Cash Flow and Net Debt

Cash flow provided by operating activities in 2016 was $907 million, which is net of $66 million of restructuring payments. This compares with cash provided by operating activities of $982 million in 2015. Cash provided by operating activities in 2015 included a tax refund of $235 million related to the payment of funds in connection with the Settlement agreement (as defined in the Company's Form 10-K for the year ended December 31, 2015). Excluding the tax refund, cash flow provided by operating activities in 2015 was $747 million, which is net of $98 million of restructuring and $21 million of SARs payments.

Capital expenditures increased to $276 million, as planned, in the full year 2016 and compared to $184 million in 2015. Free Cash Flow, defined as net cash provided by (used in) operating activities (excluding the Settlement agreement and excess tax benefit) less capital expenditures, was an inflow of $631 million in 2016. This compares to an inflow of $609 million in 2015, excluding the tax refund related to the payment of funds in connection with the Settlement agreement.

Compared to December 31, 2015, the Company's net debt decreased $215 million to $4.0 billion as of December 31, 2016. This decrease in borrowings primarily resulted from working capital management and cash generated from operating activities, partially offset by higher capital expenditures and amounts paid for share repurchases and dividends.

During 2016, the Company repurchased approximately 4.7 million shares for approximately $217 million, and paid cash dividends of $122 million. The Company's decision to pursue the separation of New Diversey through either a tax-free spin-off or other strategic alternatives restricts the ability to repurchase shares under the current share buyback program. Once the separation process is concluded, the Company currently intends to resume share repurchases.

Updated Outlook for Full Year 2017*

The Company estimates net sales to be essentially unchanged with 2016 as reported results, which assumes an unfavorable impact of approximately 3% from foreign currency translation. Adjusted for unfavorable currency, net sales in 2017 are expected to increase approximately 2.5%. The Company's Food Care division and Product Care division are expected to grow at approximately 3% in constant dollars and Diversey Care is expected to grow at a constant dollar rate of 1%.

Adjusted EBITDA is estimated to be approximately $1.18 billion, which assumes approximately $40 million of unfavorable currency translation. The Company's Food Care division and Product Care division are expected to deliver Adjusted EBITDA growth and margin expansion as compared with 2016 results. Diversey Care's Adjusted EBITDA margin is expected to be consistent with 2016 results.

Adjusted EPS is expected to be approximately $2.70 per share, which assumes approximately $0.14 per share of unfavorable currency translation. Adjusted EPS guidance excludes the impact of Special Items. The Company estimates an Adjusted Tax Rate of 23% and 197 million diluted shares outstanding.

The Company anticipates 2017 Free Cash Flow to be approximately $600 million, including capital expenditures of approximately $185 million and cash restructuring payments in the range of $85 to $100 million. Estimated Free Cash Flow for 2017 does not include any material fees associated with the New Diversey tax free spin-off or other strategic alternatives, including a possible sale. Costs of the separation of New Diversey are expected to be managed within existing programs and funds generated as a result of the separation.

Conference Call Information

A supplemental presentation accompanying the conference call will be available on the Company's website at www.sealedair.com/investors.

Conference Call Replay Information

Business

Sealed Air Corporation creates a world that feels, tastes and works better. In 2016, the Company generated revenue of approximately $6.8 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, enables 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 23,000 employees who serve customers in 171 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 Adjusted EPS, net sales on a "constant dollar" or "organic" basis, Free Cash Flow, Adjusted EBITDA and Adjusted Tax Rate, as our management believes these measures are useful to investors. We present results and guidance, adjusted to exclude the effects of Special Items and their related tax impact that would otherwise be included under U.S. GAAP, to aid in comparisons with other periods or prior guidance. In addition, non-U.S. GAAP measures are used by management to review and analyze our operating performance and, along with other data, as internal measures for setting annual budgets and forecasts, assessing financial performance, providing guidance and comparing our financial performance with our peers and may also be used for purposes of determining incentive compensation. The non-U.S. GAAP information has limitations as an analytical tool and should not be considered in isolation from or as a substitute for U.S. GAAP information. It does not purport to represent any similarly titled U.S. GAAP information and is not an indicator of our performance under U.S. GAAP. Non-U.S. GAAP financial measures that we present may not be comparable with similarly titled measures used by others. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. For a reconciliation of these non-U.S. GAAP measures 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 Net Earnings and U.S. GAAP Net Earnings Per Share to Non-U.S. GAAP Adjusted Net Earnings and Non-U.S. GAAP Adjusted Net Earnings Per Share" "Segment Information," "Reconciliation of U.S. GAAP Net Earnings to Non-U.S. GAAP Total Company Adjusted EBITDA," "Components of Change in Net Sales by Segment," "Components of Changes in Net Sales by Region," "Components of Organic Change in Net Sales by Segment," and "Components of Organic Changes in Net Sales by Region." Information reconciling forward-looking non-U.S. GAAP measures to U.S. GAAP measures is not available without unreasonable effort.

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

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as "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 press release regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expected future operating results, expectations regarding the results of restructuring and other programs, anticipated levels of capital expenditures and expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations and proceedings. The following are important factors that we believe could cause actual results to differ materially from those in our forward-looking statements: the tax benefits associated with the Settlement agreement (as defined in our 2015 Annual Report on Form 10-K), 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 separation of the Diversey Care division and food hygiene business, 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 the "Risk Factors" section appearing in our most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, and as revised and updated by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statement made by us is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.