Sealed Air Reports Third Quarter 2013 Results

• Q3 Adjusted EBITDA of $282 million or 14.5% of Net Sales
• Q3 Adjusted EPS of $0.39, Reported EPS of $0.18 per share
• Nine Months Ended Free Cash Flow of $195 million, and Cash Flow Provided by Operating Activities of $275 Million
• Full Year 2013 Outlook Increased for Adjusted EBITDA, Adjusted EPS and Free Cash Flow

ELMWOOD PARK, N.J.--(BUSINESS WIRE)--Oct. 30, 2013-- Sealed Air Corporation (NYSE:SEE) today announced financial results for third quarter 2013. Net sales for the third quarter 2013 totaled $1.9 billion. Adjusted EPS was $0.39 for the third quarter and Adjusted EBITDA was $282 million, or 14.5% of net sales. On a reported basis, net income was $37.7 million, or $0.18 per share.

Unless otherwise stated, all results compare third quarter 2013 results to third quarter 2012 results and are presented on a continuing operations basis, excluding Diversey Japan, which the Company sold in November 2012 and which results have been presented as discontinued operations. Reported information is defined as U.S. GAAP. Year-over-year net sales discussions present both reported and constant dollar performance. Constant dollar performance excludes the impact of currency translation. Additionally, non-U.S. GAAP adjusted financial measures, such as Adjusted EBITDA and Adjusted EPS, exclude the impact of special items, such as restructuring charges and other one-time items. Cash-settled stock appreciation rights (“SARs”) granted as part of the Diversey acquisition resulted in expense of $8.7 million in third quarter 2013 compared with $2.9 million in 2012. Additional detail on SARs is provided in the supplementary information.

Commenting on these results, Jerome A. Peribere, President and Chief Executive Officer, said, “During the third quarter, not only have we delivered a strong financial quarter, we are continuing to re-invent the new Sealed Air. This quarter we rebranded the Company, reorganized Diversey Care, hired a new Chief Technology Officer, and launched major initiatives in line with our Get Fit and Change the Game strategy. Our transformation is well underway and moving at an accelerated pace.”

Peribere continued, “We generated $195 million of free cash flow in the nine months ended September 30, 2013 and, excluding the impact of SARs, reported a third quarter Adjusted EBITDA margin of 15.0%. We are pleased to report favorable price/mix trends across our three core divisions, but we still have more work to do. We are committed to our overall strategy and are confident that it will enable us to continue investing in our product offerings and innovation to better serve our customers. Based on our third quarter results and estimated performance for the remainder of the year, we are pleased to increase our Adjusted EBITDA, Adjusted EPS and Free Cash Flow guidance for the full year 2013, demonstrating our ongoing commitment to improve the quality of our earnings.”

Third Quarter Highlights

Third quarter net sales of $1.9 billion increased 2.9% on a constant dollar basis and 2.0% on a reported basis. Volume and product price/mix increased by 1.4% and 1.5%, respectively. Reported regional net sales increased 6.9% for AMAT (Asia, Middle East, Africa and Turkey), 3.5% for Europe, 1.9% for North America, 1.3% for Latin America, partially offset by 9.3% lower net sales in JANZ (Japan/Australia/New Zealand). On a constant dollar basis, regional net sales increased 10.2% for AMAT, 8.6% for Latin America, 2.2% for North America, 0.9% for JANZ, partially offset by a 0.4% decline in Europe. Additionally, third quarter net sales from Developing Regions¹ increased 4.7% on a reported basis, or 9% on a constant dollar basis, accounting for 25.8% of total net sales.

Adjusted EBITDA for the third quarter increased 2.7% to $282 million, or 14.5% of net sales, primarily driven by cost synergies and higher volumes. Excluding the impact of SARs, Adjusted EBITDA increased 4.8% to $290.7, or 15.0% of net sales, compared to $277.5 million, or 14.6% of net sales, in 2012. Incremental cost synergies under the 2011-2014 Integration and Optimization Program were $22 million for the third quarter of 2013 and primarily resulted from headcount reductions, elimination of redundant costs, plant consolidations and procurement and logistics savings.

Reported operating profit was $139.9 million for third quarter 2013 compared with an operating loss of $1.2 billion in 2012, which included $1.4 billion of special items, primarily consisting of an estimated $1.3 billion non-cash pre-tax charge for impairment of goodwill and certain intangible assets associated with the Diversey acquisition. Adjusted Operating Profit for the third quarter 2013 was $198.1 million, or 10.2% of net sales, compared to Adjusted Operating Profit of $185.8 million or 9.8% of net sales in the same period a year ago.

Adjusted EPS was $0.39 for the third quarter, compared with Adjusted EPS of $0.28 in 2012. On a reported basis, third quarter 2013 EPS was $0.18 per share as compared with a loss from continuing operations of $6.41 per share in 2012. Third quarter 2013 reported EPS includes $0.22 per share of special items primarily comprised of restructuring charges associated with the previously announced 2013 Earnings Quality Improvement Program. Third quarter 2012 reported loss per share includes $6.72 per share of special items, primarily consisting of the impairment charge noted above. The core tax rate was 23% for third quarter 2013, compared with 36% for third quarter 2012. The lower effective tax rate was due to a favorable mix of earnings in certain jurisdictions with lower tax rates.

Third Quarter Segment Review

During the quarter, the Company rebranded its three core divisions to Food Care (formerly Food & Beverage), Product Care (formerly Protective Packaging), and Diversey Care (formerly Institutional & Laundry). There was no impact to the reported segment results due to this change.

Food Care

Net sales of $950.5 million increased 3.2% on a constant dollar basis and 1.7% on a reported basis. Food Care achieved 1.5% higher volumes, led by positive trends in all regions except for JANZ. Price/mix was higher by 1.7% with positive trends in all regions except for Europe. Regionally, constant dollar net sales increased 11.1% in AMAT, 9.4% in Latin America and 2.9% in North America. In JANZ, constant dollar net sales were essentially unchanged, while in Europe, constant dollar net sales declined by 0.7%.

Food Care Adjusted EBITDA increased 7.4% to $150.5 million, or 15.8% of net sales, compared with $140.1 million, or 15% of net sales, in 2012. Excluding the impact of SARs, Adjusted EBITDA increased 8.5% to $152.8 million, or 16.1% of net sales, compared with $140.8 million, or 15.1% of net sales, in 2012. This increase was primarily due to cost synergies, manufacturing efficiencies and higher volumes. Reported operating profit was $115.3 million for third quarter 2013, compared with an operating loss of $228 million in 2012. The reported operating loss in 2012 included $336.5 million of special items primarily consisting of the non-cash charge for impairment of goodwill and certain intangible assets noted above. Excluding special items, adjusted operating profit of $119.6 million in the third quarter 2013 compares to $108.5 million in the same period a year ago.

Diversey Care

Net sales of $534.6 million increased 1.6% on a constant dollar basis and 1.4% on a reported basis. Volume was essentially flat compared to a year ago with a 7.4% increase in AMAT and 6.1% increase in Latin America, offset by a 1.4% decline in Europe and a 5.4% decline in North America. The decline in North America was driven primarily by lower sales into the distribution channels as a result of customer destocking and a decline in floor care sales specifically in the Government and Education end markets due to budget constraints. Price/mix was up 1.8% with positive trends in all regions. Regionally, constant dollar net sales increased 10.2% in AMAT and 10.9% in Latin America, primarily offset by a 3.3% decline in North America and a slight decline in Europe.

Diversey Care Adjusted EBITDA of $50.1 million, or 9.4% of net sales, compares with $57.6 million, or 10.9% of net sales, in 2012. Excluding the impact of SARs, Adjusted EBITDA of $56.5 million, or 10.6% of net sales, compares with $59.8 million, or 11.3% of net sales, in 2012. This decrease was primarily due to $3.8 million of bad debt expense recorded in connection with a large customer in AMAT. Reported operating profit was $18.1 million for third quarter 2013, compared with an operating loss of $976.2 million in third quarter 2012. The reported operating loss in 2012 included $1 billion of special items primarily consisting of the non-cash charge for impairment of goodwill and certain intangible assets noted above. Excluding special items, adjusted operating profit of $19 million in the third quarter 2013 compares to $25 million in the same period a year ago.

Product Care

Net sales of $402.7 million increased 4.0% on a constant dollar basis and 3.6% on a reported basis. Product Care achieved 3.4% higher volumes and 0.6% in favorable product price/mix. Regionally, constant dollar net sales were led by an increase of 4% and 2.7% in North America and Europe, respectively.

Product Care Adjusted EBITDA of $65.4 million, or 16.2% of net sales, compares to $64.5 million, or 16.6% of net sales, in 2012. The decline in margin was due primarily to raw material cost increases, partially offset by higher sales volumes and tight control over operating expenses. Reported operating profit of $52.9 million for third quarter 2013 was essentially unchanged as compared to the same period a year ago.

Medical Applications and New Ventures (Other Category)

Net sales of $50.8 million increased 1.1% on a constant dollar basis and 4.3% on a reported basis. Favorable price/mix of 1.6% was partially offset by a 0.5% decline in volume.

Adjusted EBITDA increased to $6 million, compared with $3 million in 2012. Reported operating profit was $3.4 million in 2013 as compared with an operating loss of $1.7 million in 2012.

Cash Flow and Net Debt

Net cash provided by operating activities was $275.2 million for the nine months ended September 30, 2013 and is net of $95.9 million of cash payments for restructuring and SARs. This compares with cash provided by operating activities of $64.7 million in the nine months ended September 30, 2012, which is net of $80.6 million of cash payments for restructuring and SARs. Capital expenditures were $80 million in the nine months ended September 30, 2013 as compared to $97.8 million in the same period a year ago. Free Cash Flow, defined as cash flow provided by operating activities less capital expenditures, was a source of $195.2 million in the nine months ended September 30, 2013, as compared with a use of $33.1 million during the nine months ended September 30, 2012. This year-over-year increase primarily reflects higher net earnings, net working capital improvements and lower capital expenditures, partially offset by an increase in SARs payments.

Compared to December 31, 2012, the Company’s net debt decreased $52.3 million to $4.7 billion as of September 30, 2013. This decrease was primarily due to cash generated from operating activities, partially offset by dividend payments of $76 million. Net debt includes the W.R. Grace settlement liability of $913 million that increased by $36.2 million due to additional accrued interest in the nine months ended September 30, 2013.

Outlook for Full Year 2013

The Company expects net sales in 2013 to be approximately $7.7 billion and Adjusted EPS to be in the range of $1.25 to $1.30. Adjusted EBITDA is expected to be approximately $1.055 billion and Free Cash Flow to be approximately $375 million. The Company’s core tax rate for 2013 is now expected to be in the range of 20% to 23%. Adjusted EPS guidance excludes the impact of special items.

Web Site and Conference Call Information

Jerome A. Peribere, Sealed Air’s President and CEO and Carol P. Lowe, Senior Vice President and CFO, will conduct an investor conference call today at 10:00 a.m. (ET) to discuss the Company’s earnings results. The conference call will be webcast live on the Company’s web site at www.sealedair.com in the Investor Relations section. The link to the event can be found on the Investor Relations home page as well as 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. 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) 713-4213 (domestic) or (617) 213-4865 (international) and use the participant code 13298081. Telephonic replay will be available beginning today at 2:00 p.m. (ET) and ending on Wednesday, December 4, 2013 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 97851473.

Business

Sealed Air Corporation creates a world that feels, tastes and works better. In 2012, the Company generated revenue of approximately $7.6 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, ensure a safer and less wasteful food supply chain, protect valuable goods shipped around the world, and improve health through clean environments. Sealed Air has approximately 25,000 employees who serve customers in 175 countries. To learn more, visit www.sealedair.com.

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 EPS, net sales on a "constant dollar" basis, Adjusted Gross Profit, Adjusted Operating Profit, Free Cash Flow and EBIT, EBITDA, Adjusted EBITDA and core tax rate. We present results and guidance, adjusted to exclude the effects of certain specified items (“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. We may use Adjusted EPS, net sales on a constant dollar basis, Adjusted Net Earnings, Adjusted Gross Profit, Adjusted Operating Profit, measures of free cash flow, net debt, and EBITDA figures to determine performance-based compensation. Our management uses financial measures excluding the effects of foreign currency translation in evaluating operating performance. Management believes that this information may be useful to investors. For a reconciliation of these non-U.S. GAAP metrics to U.S. GAAP and other important information on our use of non-U.S. GAAP financial measures, see the attached supplementary information entitled “Non-U.S. GAAP Free Cash Flow,” “Reconciliation of U.S. GAAP Condensed Consolidated Statements of Operations to Non-U.S. GAAP Adjusted Condensed Consolidated Statements of Operations and Non-U.S. GAAP Adjusted EBITDA,” “Segment and Consolidated Adjusted Operating Profit and Adjusted EBITDA,” and “Components of Change in Net Sales - Segments and Other.”

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans to,” “will” and similar expressions. These statements reflect our beliefs and expectations as to future events and trends affecting our business, our consolidated financial position and our results of operations. Examples of these forward-looking statements include expectations regarding our anticipated effective income tax rate, the potential cash tax benefits associated with the W.R. Grace settlement, potential volume, revenue and operating growth for future periods, expectations and assumptions associated with our restructuring programs, availability and pricing of raw materials, success of our growth initiatives, economic conditions, and the success of pricing actions. A variety of factors may cause actual results to differ materially from these expectations, including general domestic and international economic and political conditions; changes in our raw material and energy costs; credit ratings; the success of restructuring plans; currency translation and devaluation effects, including Venezuela; the competitive environment; the effects of animal and food-related health issues; environmental matters; and regulatory actions and legal matters. For more extensive information, see “Risk Factors” and “Cautionary Notice Regarding Forward-Looking Statements,” which appear 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. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, whether as a result of new information, future events, or otherwise.

¹ Developing Regions are Africa, Asia (excluding Japan and South Korea), Central and Eastern Europe, and Latin America.