Sealed Air Reports Third Quarter 2009 Results

ELMWOOD PARK, N.J.--(BUSINESS WIRE)--Oct. 28, 2009-- Sealed Air Corporation (NYSE:SEE) reported third quarter 2009 earnings per share of $0.34, compared with earnings per share of $0.05 in 2008. Excluding the items detailed in the table below, third quarter 2009 earnings per share would have been $0.38, compared with 2008 earnings per share of $0.28.

Commenting on the Company’s operating performance, William V. Hickey, President and Chief Executive Officer, stated:

“Our results for the third quarter reflect the actions we have taken to manage through the challenging economy. We are executing our plan well, we are continuing to tightly control expenses, and are effectively managing price/cost/mix variances. The result was a 390 basis point improvement in adjusted operating margin to 12.3%, and a 36% increase in adjusted earnings per share to $0.38. Sequentially, on a constant dollar basis, we saw a 6% increase in sales in Protective Packaging and stable sales in our two food businesses. We remain focused on customers and on driving innovation as evidenced by Protective Packaging’s recent introduction of five new products in early October.

Cash generation continues to be strong, with an incremental $111 million in the quarter resulting in $339 million in positive free cash flow year to date. With all the steps we have taken over the past year, we are well positioned for the current economic environment and we expect to see meaningful benefits when markets improve.”

Third Quarter Financial Highlights

• Net sales decreased 11% to $1.08 billion from $1.22 billion in 2008. Excluding the unfavorable effect of currency translation, sales decreased 5%. The decline reflected a 4% reduction in unit volumes principally in the industrials businesses and a 1% unfavorable effect of product price/mix.
• Cost of sales decreased $157 million, or $104 million excluding a favorable effect of currency translation. This decrease resulted primarily from approximately $60 million in lower average petrochemical-based raw material costs and the impact of lower unit volumes. Benefits from the Global Manufacturing Strategy (GMS) and the 2008 cost reduction and productivity program also contributed to the lower cost of sales.
• Operating profit was $130 million, or 12.1% of net sales. This compares with $39 million, or 3.2% of net sales, for the third quarter of 2008. Excluding charges related to GMS and the cost reduction and productivity program, operating profit would have been $133 million, or 12.3% of net sales, as compared with $103 million, or 8.4% of net sales in 2008.
• Benefits from GMS, the cost reduction and productivity program and travel and expense savings were approximately $20 million in the quarter.
• The effective income tax rate decreased to 23.6% from 26.1% in the second quarter of 2009, primarily reflecting the benefits of tax credits identified in the third quarter.
• Free cash flow was a source of $339 million year to date compared to $75 million last year. This increase was attributable in part to a $173 million net increase in cash from working capital items, including the use of our accounts receivable securitization program, and an $82 million decline in capital expenditures. (See the supplementary information provided regarding free cash flow, a non-U.S. GAAP measure.)

Third Quarter Business Segment Review

The following net sales discussions exclude the impact of currency translation, which we refer to as "constant dollar net sales". The attached financial statements present results in accordance with U.S. GAAP and the Components of Change in Net Sales section provides further details on the impact of currency translation.

Food Packaging Segment

Food Packaging recorded a constant dollar 4% increase in net sales, which primarily reflected a favorable comparison in higher unit volumes in North America due to the impact of pre-buying by customers in the second quarter of 2008 in advance of our enterprise software launch on July 1, 2008. After adjusting 2008 for this estimated buy-in, 2009 sales would still have improved compared to last year.

Operating profit increased 72% to $64 million in the quarter, or 13.7% of Food Packaging net sales. This compares with $37 million, or 7.7% of net sales, in 2008. Last year’s margin reflected lower volumes and record high resin costs.

Food Solutions Segment

Food Solutions recorded a constant dollar 4% decrease in net sales, which primarily reflected lower unit volumes in Europe due to reduced meat consumption attributable to economic conditions.

Operating profit increased 25% to $21 million in the quarter, or 9.3% of Food Solutions net sales. This compares with $17 million, or 6.7% of net sales, in 2008. The increase in operating profit was primarily due to lower average petrochemical-based raw material costs.

Protective Packaging Segment

Protective Packaging recorded a constant dollar 15% decrease in net sales, which was primarily due to lower unit volumes in North America and Europe, reflecting continuing weakness in economic conditions in those regions and continues to be generally in line with production and shipping trends.

Operating profit increased 5% to $41 million in the quarter, or 13.5% of Protective Packaging net sales. This compares with $40 million, or 10.5% of net sales, in 2008. The increase in operating profit was primarily due to lower average petrochemical-based raw material costs.

Other Category

Other category recorded a constant dollar 20% decrease in net sales, which was primarily due to lower unit volumes in North America in the Specialty Materials business, reflecting ongoing weak economic conditions in that region.

Operating profit decreased 29% to $5 million in the quarter, or 5.9% of Other net sales. This compares with $7 million, or 6.5% of net sales in 2008. The decrease in operating profit was primarily due to the decline in volumes, partially offset by product price/mix and lower average petrochemical-based raw material costs.

2009 Outlook and Earnings Guidance

Commenting on the Company’s outlook, Mr. Hickey stated:

“For the fourth quarter, we expect to continue to realize the benefits from our various programs, to remain disciplined on operating expenses, and to experience only a modest increase in raw material prices. However, we do remain cautious on fourth quarter sequential sales growth due to the uncertainty in consumer confidence and discretionary spending, particularly during the upcoming holiday shopping season.”

As a result, our full year 2009 earnings per share guidance is now expected to be in the range of $1.27 to $1.35 as compared to our previous guidance of $1.17 to $1.37. This includes full year charges of $20 million net of taxes, or $0.08 per share, for GMS related projects and $4 million net of taxes, or $0.02 per share, related to the loss on debt redemption and impairment of available-for-sale securities recorded in the third quarter. Excluding these items, our full year 2009 earnings per share guidance is now expected to be in the range of $1.37 to $1.45 as compared to our previous guidance of $1.25 to $1.45.

Updated assumptions include a full year effective income tax rate of approximately 26.0%, reduced from 27.7% and capital expenditures of approximately $80 to $100 million, reduced from $100 to $125 million.

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 pre-register and to download and install any necessary audio software. Prior to the call, the Company will also post supplemental financial and statistical information, as well as other supplemental information including the reconciliations of certain non-GAAP measures on its web site in the Investor Information section under the Quarterly Results 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 conference call live via telephone by dialing (888) 713-4218 (domestic) or (617) 213-4870 (international) and use participant code 88854178. Telephonic replay will be available beginning today at 2:00 p.m. (ET) and ending on Wednesday, November 4, 2009 at 11:59 p.m. (ET). To listen to the replay, please dial (888) 286-8010 (domestic) or (617) 801-6888 (international) and use the confirmation code 43378489.

Business

Sealed Air is a leading global innovator and manufacturer of a wide range of packaging and performance-based materials and equipment systems that serve an array of food, industrial, medical, and consumer applications. Operating in 52 countries, Sealed Air’s international reach generated revenue of $4.8 billion in 2008. With widely recognized brands such as Bubble Wrap^® brand cushioning, Jiffy^® protective mailers, Instapak^® foam-in-place systems and Cryovac^® packaging technology, Sealed Air continues to identify new trends, foster new markets, and deliver innovative solutions to its customers. For more information about Sealed Air, please visit the Company’s web site at www.sealedair.com.

Non-U.S. GAAP Information

In this press release, Sealed Air has presented financial measures that exclude items that are included in U.S. GAAP calculations of such measures. This release sets forth earnings per share excluding charges related to GMS and restructuring and other charges, a loss on debt redemption, the reversal of tax accruals and charges related to the impairment of the Company’s auction rate securities investments. The Company’s adjusted 2009 earnings guidance also excludes certain of these charges. Operating profit and operating margin are presented excluding GMS and restructuring and other charges. This release also sets forth measures of net sales, cost of sales, and operating profit excluding currency translation effects. Presenting results and guidance excluding the items indicated in this press release aids in the comparisons with other periods or prior guidance. Earnings per share, changes in net sales, measures of expense control, and operating profit, adjusted to eliminate the effects of specified items that would otherwise be included under U.S. GAAP, are among the criteria upon which the Company may determine performance-based compensation. The Company’s management generally uses changes in net sales, cost of sales and operating profit, excluding the effects of currency translation, in measuring the performance of the Company’s operations. Thus, management believes that this information may be useful to investors. Also, see the supplementary information provided regarding free cash flow, a non-U.S. GAAP measure.

Forward-Looking Statements

Some of the Company’s statements in this press release are forward-looking. These statements include comments as to future events that may affect the Company, which are based upon management's current expectations and are subject to uncertainties, many of which are outside the Company's control. Forward-looking statements can be identified by such words as “anticipates,” “expects,” “may,” “plans,” “should,” “will” and similar expressions. Important factors that the Company believes could cause actual results to differ materially from those in the Company's forward-looking statements include: general economic conditions, particularly as they affect packaging utilization; changes in raw material and energy costs; currency translation effects; 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 Notice Regarding Forward-Looking Statements,” which appear in the Company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, as filed with the Securities and Exchange Commission.

Source: Sealed Air Corporation

Sealed Air Corporation
Amanda Butler, 201-791-7600