Sealed Air Reports Record First Quarter Earnings
First Quarter 2007 Supplemental Financial
ELMWOOD PARK, N.J.--(BUSINESS WIRE)--April 25, 2007--Sealed Air Corporation (NYSE:SEE) reported post-split diluted earnings per common share of $0.67 for the first quarter of 2007, which includes a gain of $0.11 per share related to the sale of the Company's investment in the PolyMask joint venture, an $0.18 per share favorable impact from the reversal of previous tax accruals, and charges of $0.01 per share related to the implementation of the Company's global manufacturing strategy. Excluding these items, diluted earnings per common share for the quarter would have been $0.39 per share, a 30% increase over prior year diluted earnings per common share of $0.30. Sealed Air's net sales for the quarter increased 7% to $1.09 billion, compared with $1.02 billion in 2006.
Commenting on the Company's operating performance, William V. Hickey, President and Chief Executive Officer, stated:
"We are encouraged by our positive start to the year. We experienced solid operating results compared with the prior year as we continue to focus our business on opportunities for profitable growth. Our sales in Latin America and Asia Pacific grew at double-digit rates within both our food packaging segment and our protective packaging segment. Our food packaging business demonstrated improved operating performance as we leveraged steady volume growth in the quarter. We also increased the profitability of our protective packaging business despite signs of slower economic growth in North America during the quarter."
Commenting on the Company's outlook, Mr. Hickey stated:
"We see opportunities to accelerate growth by increasing the focus of our sales and marketing organization on core markets and new business opportunities. This includes developing technologies and innovative new products for food and protective packaging applications as well as identifying new performance solutions for specialty materials. One consequence of this focus on markets is that we will modify our segment reporting to reflect the way we will manage the growth and profitability of our business going forward."
Financial Highlights for the First Quarter
-- Net sales increased 7% to $1.09 billion compared with $1.02
billion for the first quarter of 2006. The increase in net
sales resulted from the combined effect of $27 million in unit
volume growth, a $12 million favorable change in product
price/mix, $8 million from acquisitions and $29 million from
the favorable effect of foreign currency translation.
Excluding the favorable effect of $29 million in foreign
currency translation, net sales would have increased 5%.
-- Gross profit increased to $314 million, or 28.7% of net sales,
compared with $284 million, or 27.8% of net sales, for the
first quarter of 2006. The increase in gross profit as a
percentage of net sales was primarily due to lower average
petrochemical-based raw material costs and a favorable shift
in product price/mix. The Company's first quarter 2007 cost of
sales included $2.5 million in expenses related to the
implementation of its global manufacturing strategy.
-- Marketing, administrative and development expenses were $178
million, or 16.3% of net sales, compared with $168 million, or
16.4% of net sales, for the first quarter of 2006.
-- Operating profit increased to $136 million, or 12.4% of net
sales, compared with $116 million, or 11.4% of net sales, in
the first quarter of 2006. Operating profit in 2007 included
charges of $2.5 million related to the implementation of the
Company's global manufacturing strategy and $0.4 million in
restructuring charges. Operating profit in 2006 included
restructuring charges of $0.2 million. Excluding these
charges, operating profit as a percentage of net sales for the
first quarter of 2007 would have been 12.7% compared with
11.4% in 2006.
-- Interest expense was $36 million compared with $38 million in
the first quarter of 2006 primarily reflecting savings from
the retirement of the Company's 5.625% euro notes on July 19,
2006.
-- As previously reported, on February 9, 2007, the Company sold
its 50% investment in PolyMask Corporation to its joint
venture partner, 3M. The Company received an aggregate cash
amount of $36 million for the transaction and other related
assets and recorded a pre-tax gain of $35 million in the first
quarter of 2007 as a result.
-- The Company's tax expense in the first quarter of 2007 was
reduced by the reversal of $34 million of tax accruals, and
related interest, for contingencies that did not materialize
due to outcomes of tax audits and the expiration of relevant
statutes of limitations. This reversal includes multiple
jurisdictions and multiple tax years up to and including the
year 2000. Including this amount and the tax effect of the
gain related to the sale of the PolyMask investment, the
Company expects its full year effective income tax rate to be
25.5%. Excluding these items, the Company's estimated full
year effective income tax rate is 32.0%.
Business Segment Review
Food Packaging Segment
The Company's food packaging segment net sales for the first quarter increased 9% to $682 million compared with $626 million last year. Double-digit volume growth in Latin America and Asia Pacific, along with mid-single-digit sales growth in North America, helped contribute to performance in the quarter. Excluding the $18 million favorable effect of foreign currency translation, segment net sales would have increased 6%. Operating profit for the first quarter was $77 million, or 11.3% of net sales, compared with $65 million, or 10.3% of net sales, in 2006. The increase in operating profit as a percentage of net sales was due to a favorable shift in product price/mix combined with slightly lower average raw material costs.
Protective Packaging Segment
The Company's protective packaging segment net sales for the first quarter increased 5% to $412 million compared with $394 million last year. Strength in Asia and Latin America was offset by weakness in North America due to signs of slowing economic growth. Excluding the $11 million favorable effect of foreign currency translation, segment net sales would have increased 2%. Operating profit for the first quarter was $60 million, or 14.5% of net sales, compared with $52 million, or 13.1% of net sales, in 2006. The increase in operating profit as a percentage of net sales was due to favorable product price/mix combined with lower average raw material costs.
Stock Split and Cash Dividend
As previously announced, on February 16, 2007, the Company's Board of Directors declared a two-for-one stock split that was effected in the form of a stock dividend paid on March 16, 2007 to stockholders of record of outstanding shares of its common stock at the close of business on March 2, 2007. The Company's Board of Directors also increased the Company's quarterly cash dividend by 33% to $0.20 per common share, declaring a quarterly cash dividend that was paid on the pre-split shares of the Company's common stock on March 16, 2007 to stockholders of record at the close of business on March 2, 2007.
Global Manufacturing Strategy
The Company incurred $2.5 million in expenses during the first quarter related to the implementation of its global manufacturing strategy that were recorded as cost of sales. The Company now expects to incur approximately $30 million in total expenses related to this strategy in 2007. The actual timing of these additional expenses is subject to change due to a variety of factors that may cause a portion of the charges to occur in future periods.
Earnings Guidance
Sealed Air expects its full year 2007 diluted earnings per common share to be in the range of $1.83 to $1.93, which includes the previously mentioned gain of $0.11 per share related to the sale of the Company's investment in the PolyMask joint venture, the $0.18 per share favorable impact from the reversal of tax accruals, and total charges of $30 million, or $0.11 per share, expected to be incurred relating to its global manufacturing strategy. Excluding these items, the Company maintains its full year 2007 diluted earnings per common share guidance range of $1.65 to $1.75 after adjusting for the recent two-for-one stock split.
Web Site and Conference Call Information
Mr. Hickey and David H. Kelsey, the Company's Chief Financial Officer, will conduct an investor conference call today at 11:00 a.m. (ET). The conference call will be webcast live on Sealed Air's web site at www.sealedair.com in the Investor Information section under the Presentations & Events tab. Listeners should go to the web site prior to the call to register, and to download and install any necessary audio software. Prior to the call, the Company will also post supplemental financial and statistical information on its web site in the Investor Information section under the Reports & Filings tab. A replay of the webcast will also be available on the Company's web site.
Investors who cannot access the webcast may listen to the live conference call via telephone by dialing (888) 857-6930 (domestic) or (719) 457-2602 (international). Telephonic replay will be available beginning today at 2:00 p.m. (ET) and ending on Sunday, April 29, 2007 at 12:00 midnight (ET). To listen to the replay, please dial (888) 203-1112 (domestic) or (719) 457-0820 (international) and use the confirmation code 4371803.
Business
Sealed Air is a leading global manufacturer of a wide range of food and protective packaging materials and systems including such widely recognized brands as Bubble Wrap(R) cushioning, Jiffy(R) protective mailers and Cryovac(R) food packaging products. For more information about Sealed Air, please visit the Company's web site at www.sealedair.com.
Non-GAAP Information
The Company's management from time to time presents information that does not conform to U.S. Generally Accepted Accounting Principles, commonly referred to as "GAAP." Diluted earnings per common share, operating profit as a percentage of net sales, and full year effective tax rates, excluding, as applicable, the gain on the sale of the joint venture investment, tax expense reductions, restructuring charges and charges related to the Company's global manufacturing strategy are non-GAAP measures. The Company's management believes that presenting these non-GAAP figures reflects the Company's operating performance on a basis consistent with the Company's most recent earnings guidance. The Company may utilize these diluted earnings per share and operating profit measures to determine performance-based compensation. Management also presents changes in net sales excluding the effects of foreign currency translation. The Company's management uses changes in net sales excluding the effects of foreign currency translation to measure the performance of the Company's operations. Thus, management believes that this information may be useful to investors.
Forward-Looking Statements
Some of the statements made by the Company in this press release are forward-looking. These statements include comments as to future events and trends affecting the Company's business, which are based upon management's current expectations and are necessarily subject to risks and uncertainties, many of which are outside the control of the Company. Forward-looking statements can be identified by such words as "anticipates," "estimates," "expects," "intends," "plans," "will" and similar expressions. The following are important factors that the Company believes could cause actual results to differ materially from those in the Company's forward-looking statements: the success of the Company's growth, profitability and global manufacturing strategies; changes in raw material and energy costs; the effects of animal and food-related health issues; market conditions; tax, interest and exchange rates; and legal proceedings. A more extensive list and description of these and other such factors can be found under the headings "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements," which appear in the Company's most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission.
SEALED AIR CORPORATION AND SUBSIDIARIES
Results for the periods ended March 31
(Unaudited)
(In millions, except per share data)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended
March 31
-----------------
% Increase
2007 2006 (Decrease)
-------- -------- ----------
Net sales by business segment:
Food packaging $ 682.4 $ 625.6 9
Protective packaging 412.3 393.5 5
-------- --------
Total net sales 1,094.7 1,019.1 7
Cost of sales 780.5 735.5 6
-------- --------
Gross profit 314.2 283.6 11
As a % of total net sales 28.7% 27.8%
Marketing, administrative and
development expenses 177.9 167.5 6
As a % of total net sales 16.3% 16.4%
Restructuring charges (1) 0.4 0.2 100
-------- --------
Operating profit 135.9 115.9 17
As a % of total net sales 12.4% 11.4%
Interest expense (35.6) (38.4) (7)
Gain on the sale of equity method
investment 35.3 - ---
Other income, net 4.5 4.5 ---
-------- --------
Earnings before income tax expense 140.1 82.0 71
Income tax expense 13.1 26.2 (50)
-------- --------
Net earnings $ 127.0 $ 55.8 128
======== ========
As a % of total net sales 11.6% 5.5%
Basic earnings per common share (2) $ 0.79 $ 0.34
======== ========
Diluted earnings per common share (2) $ 0.67 $ 0.30
======== ========
Weighted average number of common
shares outstanding:
Basic 161.4 163.0
======== ========
Diluted 191.9 193.4
======== ========
(1) In the quarter ended March 31, 2007, the Company recorded $0.4
million of restructuring charges related to the consolidation of its
customer service activities in North America. In the quarter ended
March 31, 2006, the Company incurred $0.2 million of restructuring
charges for additional costs related to its global profit initiatives
announced in the fourth quarter of 2004.
(2) See the Supplementary Information included in this release for the
calculation of basic and diluted earnings per common share.
SEALED AIR CORPORATION AND SUBSIDIARIES
Supplementary Information
Results for the periods ended March 31
(Unaudited)
(In millions, except per share data)
CALCULATION OF EARNINGS PER COMMON SHARE
Quarter Ended March 31
----------------------
2007 2006 (1)
---------------------------------------------- ---------- ----------
Basic EPS:
----------------------------------------------
Numerator
Net earnings ascribed to common shareholders -
basic $ 127.0 $ 55.8
========== ==========
Denominator
Weighted average number of common shares
outstanding - basic 161.4 163.0
========== ==========
Basic earnings per common share $ 0.79 $ 0.34
========== ==========
----------------------------------------------
Diluted EPS:
----------------------------------------------
Numerator
Net earnings ascribed to common shareholders -
basic $ 127.0 $ 55.8
Add: Interest on 3% convertible senior notes,
net of income taxes 1.9 1.9
---------- ----------
Net earnings ascribed to common shareholders -
diluted $ 128.9 $ 57.7
========== ==========
Denominator
Weighted average number of common shares
outstanding - basic 161.4 163.0
Effect of conversion of 3% convertible senior
notes 12.5 12.4
Effect of assumed issuance of asbestos
settlement shares 18.0 18.0
---------- ----------
Weighted average number of common shares
outstanding - diluted (2) 191.9 193.4
========== ==========
Diluted earnings per common share $ 0.67 $ 0.30
========== ==========
(1) On February 16, 2007, the Company's Board of Directors declared a
two-for-one stock split of the Company's common stock that was
effected in the form of a stock dividend. The stock dividend was paid
on March 16, 2007 at the rate of one additional share of the
Company's common stock for each share of the Company's common stock
issued and outstanding to stockholders of record at the close of
business on March 2, 2007. The par value of the Company's common
stock remains at $0.10 per share. All share and per share amounts
have been restated to reflect the two-for-one stock split.
(2) In calculating diluted earnings per common share, the Company's
calculation of the weighted average number of common shares
outstanding for the quarters ended March 31, 2007 and 2006 provides
for the conversion of the Company's 3% convertible senior notes due
June 2033 due to the application of Emerging Issues Task Force, known
as the EITF, Issue No. 04-08, "The Effect of Contingently Convertible
Debt on Diluted Earnings per Share," the assumed issuance of eighteen
million shares of common stock reserved for the Company's previously
announced asbestos settlement, which is discussed in the Company's
annual report on Form 10-K for the year ended December 31, 2006, and
the exercise of dilutive stock options, net of assumed treasury stock
repurchases.
SEALED AIR CORPORATION AND SUBSIDIARIES
Supplementary Information
Results for the periods ended March 31
(Unaudited)
RECONCILIATION OF DILUTED EARNINGS PER COMMON SHARE (1)
Quarter Ended
March 31
-------------
2007 2006
------ -----
Reported U.S. GAAP diluted earnings per common share $ 0.67 $0.30
Earnings effect resulting from the following:
Gain on the sale of equity method investment, net of
income tax expense (0.11) -
Reversal of tax accruals and related interest (0.18) -
Total global manufacturing strategy charges, net of
income tax expense 0.01 -
------ -----
Diluted earnings per common share excluding the gain
on the sale of equity method investment, the reversal
of tax accruals and related interest and total global
manufacturing strategy charges $ 0.39 $0.30
====== =====
----------------------------------------------------------------------
RECONCILIATION OF THE EXPECTED ANNUAL EFFECTIVE INCOME TAX RATE (1)
As of March 31,
2007
------
Expected U.S. GAAP effective income tax rate for the
full year 2007 25.5 %
Effective income tax rate effect resulting from the
following:
Reversal of tax accruals and related interest 7.1
Gain on the sale of equity method investment (0.6)
------
Expected effective income tax rate for the full year
2007 excluding the reversal of tax accruals and
related interest and the gain on the sale of equity
method investment 32.0 %
======
(1) The Company's management believes that presenting diluted earnings
per common share and the effective income tax rate excluding the
items noted above reflects the Company's operating performance on a
basis consistent with the Company's most recent earnings guidance and
thus management believes that this information may be useful to
investors. Diluted earnings per common share excluding these items is
among the criteria upon which performance-based compensation may be
determined.
SEALED AIR CORPORATION AND SUBSIDIARIES
Supplementary Information
Results for the periods ended March 31
(Unaudited)
(In millions)
BUSINESS SEGMENT INFORMATION AND CAPITAL EXPENDITURES (2)
BUSINESS SEGMENT INFORMATION:
------------------------------------------------------
Quarter Ended
March 31
---------------
2007 2006
------- -------
Operating profit
Food Packaging $ 76.8 $ 64.6
As a % of food packaging net sales 11.3% 10.3%
Protective Packaging 59.7 51.7
As a % of protective packaging net sales 14.5% 13.1%
------- -------
Total segments 136.5 116.3
Restructuring charges (1) (0.4) (0.2)
Unallocated corporate operating expenses (0.2) (0.2)
------- -------
Total $135.9 $115.9
======= =======
As a % of total net sales 12.4% 11.4%
Depreciation and amortization
Food Packaging $ 28.4 $ 28.0
Protective Packaging 12.2 13.3
------- -------
Total $ 40.6 $ 41.3
======= =======
(1) The quarter ended March 31, 2007 includes a $0.1 million charge
related to Food Packaging and a $0.3 million charge related to
Protective Packaging. The quarter ended March 31, 2006 includes a
$0.3 million charge related to Food Packaging and $0.1 million credit
related to Protective Packaging.
----------------------------------------------------------------------
Quarter Ended
March 31
---------------
2007 2006
------- -------
CAPITAL EXPENDITURES: $ 50.9 $ 28.9
======= =======
----------------------------------------------------------------------
(2) The amounts shown are subject to change prior to the filing of the
Company's upcoming quarterly report on Form 10-Q.
SEALED AIR CORPORATION AND SUBSIDIARIES
Supplementary Information
March 31, 2007 and December 31, 2006
(Unaudited)
(In millions)
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2007 (1) 2006
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 415.9 $ 373.1
Short-term investments --- available-for-
sale securities 39.9 33.9
Accounts receivable, net of allowances for
doubtful accounts 704.2 721.3
Inventories 545.6 509.4
Other current assets 119.5 119.0
------------ ------------
Total current assets 1,825.1 1,756.7
Property and equipment:
Land and improvements 39.1 35.7
Buildings 520.7 516.2
Machinery and equipment 2,021.1 2,054.2
Other property and equipment 136.1 135.9
Construction-in-progress 164.1 139.6
------------ ------------
2,881.1 2,881.6
Accumulated depreciation and amortization (1,889.5) (1,911.5)
------------ ------------
Property and equipment, net 991.6 970.1
Goodwill 1,967.1 1,957.1
Other assets 333.1 337.0
------------ ------------
Total Assets $ 5,116.9 $ 5,020.9
============ ============
(1) The amounts shown are subject to change prior to the filing of the
Company's upcoming quarterly report on Form 10-Q.
SEALED AIR CORPORATION AND SUBSIDIARIES
Supplementary Information
March 31, 2007 and December 31, 2006
(Unaudited)
(In millions)
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2007 (1) 2006
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 16.8 $ 20.2
Current portion of long-term debt 5.6 5.5
Accounts payable 292.9 283.9
Asbestos settlement liability 512.5 512.5
Other current liabilities 465.8 497.8
Income taxes payable 48.9 86.2
------------ ------------
Total current liabilities 1,342.5 1,406.1
Long-term debt, less current portion 1,827.1 1,826.6
Other liabilities 155.7 133.4
------------ ------------
Total Liabilities 3,325.3 3,366.1
------------ ------------
Total Shareholders' Equity 1,791.6 1,654.8
------------ ------------
Total Liabilities and Shareholders' Equity $ 5,116.9 $ 5,020.9
============ ============
(1) The amounts shown are subject to change prior to the filing of the
Company's upcoming quarterly report on Form 10-Q.
CONTACT: Sealed Air Corporation
Eric D. Burrell, 201-791-7600
SOURCE: Sealed Air Corporation