Sealed Air Reports Second Quarter Results

• Net Earnings from Continuing Operations $83 million (up 187%) or $0.52 per diluted share (up 271%)
• Adjusted Earnings from Continuing Operations per diluted share increased 88% year-over-year to $0.64
• Net Sales from Continuing Operations increased 8% year-over-year to $1.2 billion
• Adjusted EBITDA from Continuing Operations increased 11% year-over-year to $218 million
• Acquired AFP, Inc., a leading, U.S.-based fabricator of specialty packaging solutions
• Reaffirm 2018 outlook for Net Sales approx. $4.75 billion, Adjusted EBITDA $890 to $910 million, Adjusted EPS $2.45 to $2.55 and Free Cash Flow approx. $400 million

CHARLOTTE, N.C.--(BUSINESS WIRE)--Aug. 2, 2018-- Sealed Air Corporation (NYSE:SEE) today announced financial results for the second quarter 2018. "In the second quarter, Net Sales and Adjusted EBITDA increased 8% and 11%, respectively. Our differentiated and innovative solutions portfolio allows us to capitalize on the rapidly growing fresh food and e-commerce markets. This solid top line performance combined with our efforts to reduce costs and drive operational excellence resulted in improved operating leverage for the second consecutive quarter compared to the same period last year," said Ted Doheny, President and Chief Executive Officer.

"We are excited to announce the acquisition of AFP, Inc., a leading, U.S.-based fabricator of specialty packaging solutions. AFP complements our recent Fagerdala acquisition and expands our design capabilities for the electronics, transportation and industrial markets. Building on our first half 2018 results and continued business momentum, we are on track to deliver our full year objectives despite anticipated currency headwinds."

Unless otherwise stated, all results compare second quarter 2018 results to second quarter 2017 results from continuing operations. Year-over-year financial discussions present operating results from continuing operations as reported, and on a constant dollar basis. Constant dollar refers to unit volume and price/mix performance and excludes the impact of currency translation 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 specified items ("Special Items"), such as restructuring charges, charges related to the sale of Diversey, gains and losses related to acquisition and divestiture of businesses, special tax items ("Tax Special Items") and certain other infrequent or one-time items. Please refer to the supplemental information included with this press release for a reconciliation of Non-U.S. GAAP to U.S. GAAP financial measures.

Business Highlights

Food Care second quarter net sales of $713 million increased 5% as reported and on a constant dollar basis. The 5% increase was attributable to favorable price/mix of 3% and volume growth of 2%. Adjusted EBITDA increased 3% to $135 million or 19.0% of net sales. Adjusted EBITDA performance was primarily due to favorable mix and price/cost spread, restructuring savings and positive volume trends partially offset by higher operating costs. Currency had a $1 million unfavorable impact on Adjusted EBITDA.

Product Care second quarter net sales of $442 million increased 13% as reported. Currency had a positive impact on Product Care net sales of 2%, or $8 million. On a constant dollar basis, net sales increased 11%, including 6%, or $24 million, from Fagerdala, 5% from favorable price/mix and a slight increase in volume. Adjusted EBITDA increased 13% to $79 million or 17.8% of net sales. Adjusted EBITDA performance was primarily attributable to favorable mix and price/cost spread, restructuring savings and contributions from the Fagerdala acquisition partially offset by higher operating costs. Currency had a $2 million favorable impact on Adjusted EBITDA.

From April 1, 2018 through July 31, 2018, Sealed Air repurchased approximately $125 million or 2.9 million shares bringing the total year to date share repurchases to approximately $530 million or 11.7 million shares. The Company has approximately $900 million remaining under the current share repurchase authorization.

On July 12, 2018, Sealed Air entered into a third amended and restated syndicated facility agreement whereby its existing revolver was increased from $700 million to $1.0 billion and existing term loans were rolled over. The maturity of the new facilities was extended to July 2023 with more favorable terms.

On August 1, 2018, Sealed Air acquired AFP, Inc., a leading, privately held fabricator of foam, corrugated, molded pulp and wood packaging solutions. This acquisition expands Sealed Air's protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications. Acquiring the company will allow Sealed Air to better position its fabricated foam innovations such as EcoPure, a sustainable solution made from plant-based resin. AFP generated $125 million in net sales in 2017 and operates six facilities across the U.S. with further presence in Asia and Mexico.

Second Quarter 2018 U.S. GAAP Summary

Net sales of $1.2 billion increased 8% on an as reported basis. Currency had a positive impact on total net sales of 1%, or $8 million. As reported, net sales increased 4% in North America, 7% in Latin America, 10% in EMEA and 22% in Asia Pacific.

Net earnings from continuing operations on an as reported basis was $83 million, or $0.52 per diluted share, which was unfavorably impacted by $19 million of special items, primarily related to restructuring charges and charges related to the sale of Diversey. This compares to net earnings in the second quarter 2017 of $29 million, or $0.14 per diluted share, which was unfavorably impacted by $40 million of special items, including $18 million of tax expense and $18 million of pre-tax charges related the sale of Diversey.

The effective tax rate in the second quarter of 2018 was of 28.7%, compared to 66.0% in the second quarter of 2017. The 2017 rate was negatively affected by tax expense related to the sale of Diversey, an increase in tax related to earnings mix, and the settlement of an audit in Europe for $3 million.

Second Quarter 2018 Non-U.S. GAAP Summary

On a constant dollar basis, net sales increased 7% reflecting favorable price/mix of 4%, contribution from the Fagerdala acquisition of 2%, and an increase in volume of 1%. The Company experienced increased demand for its differentiated solutions on a global basis. This was partially offset by a decline in equipment sales, particularly in Food Care North America due to timing and strong prior year comparable results. Equipment sales are expected to grow in the second half of the year. By region, constant dollar sales increased 4% in North America and EMEA, 19% in Latin America, and 20% in Asia Pacific.

Adjusted EBITDA increased 11% to $218 million, or 18.8% of net sales. This compares to $196 million, or 18.3% of net sales for the second quarter of 2017. Currency had a favorable $2 million, or 1%, impact on Adjusted EBITDA in the quarter. The year-over-year margin increase was primarily attributable to favorable mix and price/cost spread, restructuring savings and contributions from the Fagerdala acquisition partially offset by higher operating costs.

Adjusted EPS was $0.64 for the second quarter 2018 compared to $0.34 in the second quarter 2017. The Adjusted Tax Rate was 22.6% in the second quarter 2018, compared to 38.9% in the second quarter 2017. The 2017 rate was unfavorably impacted by earnings mix.

Cash Flow and Net Debt

Cash flow provided by operating activities in the six months ended June 30, 2018 was an inflow of $37 million, which includes the previously announced one-time payment of $42 million in lieu of future royalty payments and $33 million of payments related to the sale of Diversey and efforts to address related stranded costs.

Capital expenditures were $74 million in the six months ended June 30, 2018. Free Cash Flow, defined as net cash provided by operating activities less capital expenditures and excluding payments related to the sale of Diversey and efforts to address related stranded costs, was an outflow of $5 million in the six months ended June 30, 2018.

During the six months ended June 30, 2018, the Company had cash used in financing activities of $408 million related to share repurchases and cash dividends of $54 million.

Net Debt, defined as total debt less cash and cash equivalents, increased to $3.2 billion as of June 30, 2018 from $2.7 billion as of December 31, 2017. This increase resulted from a use of cash related to working capital and share repurchases.

Outlook for Full Year 2018

For the full year 2018, Sealed Air anticipates Net Sales to be approximately $4.75 billion, a constant dollar growth rate of approximately 7%. This compares to previous guidance of constant dollar sales growth of 4.5%. The company reaffirms its outlook for Adjusted EBITDA from continuing operations to be in the range of $890 million to $910 million. The forecast for Adjusted EPS remains in the range of $2.45 to $2.55, which is based on 161 million shares outstanding and an anticipated Adjusted Tax Rate of 28.0%. Full year outlook assumes five months of contribution from AFP.

Currency headwinds are expected to negatively impact Net Sales and Adjusted EBITDA by $20 million and $5 million, respectively. This compares to the prior forecast which assumed a favorable impact from currency of approximately $110 million on Net Sales and $20 million on Adjusted EBITDA.

The outlook for Free Cash Flow continues to be approximately $400 million, assuming capital expenditures of approximately $160 million and cash restructuring payments of approximately $20 million, which excludes restructuring payments of $30 million to address related stranded costs.

Conference Call Information

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

Conference Call Replay Information

Business

Sealed Air Corporation is a knowledge-based company focused on packaging solutions that help 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 and Bubble Wrap^® brand cushioning, enable a safer and less wasteful food supply chain and protect valuable goods shipped around the world. Sealed Air generated $4.5 billion in sales in 2017 and has approximately 15,000 employees who serve customers in 122 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 "Investors" 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 Net Debt, Adjusted Net Earnings and Adjusted EPS, net sales on a "constant dollar" 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 U.S. GAAP measures to non-U.S. GAAP measures 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 Net Earnings and Net Earnings Common Per Share to Non-U.S. GAAP Adjusted Net Earnings and Non-U.S. GAAP Adjusted Net Earnings Per Common Share," "Reconciliation of Net Earnings to Non-U.S. GAAP Total Company Adjusted EBITDA," "Components of Change in Net Sales by Segment" and "Components of Changes in Net Sales by Region." Information reconciling forward-looking U.S. GAAP measures to non-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 restructuring charges, gains and losses related to acquisition and divestiture of businesses, the ultimate outcome of certain legal or tax proceedings, 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: global economic and political conditions, currency translation and devaluation effects, changes in raw material pricing and availability, competitive conditions, the success of new product offerings, consumer preferences, the effects of animal and food-related health issues, pandemics, changes in energy costs, environmental matters, the success of our restructuring activities, the success of our financial growth, profitability, cash generation and manufacturing strategies and our cost reduction and productivity efforts, changes in our credit ratings, the tax benefit associated with the Settlement agreement (as defined in our 2017 Annual Report on Form 10-K), 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 because of new information, future developments or otherwise.

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Source: Sealed Air Corporation

Sealed Air Corporation
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