SADDLE BROOK, N.J., Oct. 24, 2001 (PRIMEZONE) -- Sealed Air Corporation (NYSE:SEE) reported third quarter operating results today which include Restructuring and other charges. Basic and diluted earnings per common share for the third quarter of 2001, which reflect these charges, were $0.40 and $0.37, respectively.
The conversion of the Company's outstanding preferred stock is not considered in the calculation of diluted earnings per common share because the effect would be anti-dilutive. If earnings per share were calculated as if the Company's outstanding preferred stock had been converted into common stock, however, earnings per share, before reflecting the impact of the Restructuring and other charges mentioned above, would have amounted to $0.43 for the third quarter.
Commenting on the Company's performance, William V. Hickey, President and Chief Executive Officer, stated, "While there may be uncertainty surrounding near-term economic conditions, our organization remains focused on managing and improving our business. During the quarter we continued to maintain tight control over expenses and to manage for cash flow. We further reduced expenses in absolute dollars and as a percentage of net sales. We generated EBITDA (a measure of cash flow) of over 21% of net sales, excluding the Restructuring and other charges. We used our substantial free cash flow principally to reduce debt by approximately $56 million and to repurchase over $9 million of the Company's outstanding stock. In addition, our food packaging business in Europe continued to progress as meat supply and consumption returned to more normal levels following disruptions earlier in the year, and our case ready and fluid food packaging businesses continued to show solid growth. In our protective packaging business, despite lower volumes related to current economic conditions, we continued to add new customers and introduce new products which will benefit our future growth.
"As part of our business review initiated in the second quarter, we are continuing to reduce costs and expenses and simplify our business processes and organizational structure. We expect to enter next year as an even stronger company and well positioned to benefit from an upturn in the economy."
Highlights for the Third Quarter of 2001 include:
-- Net sales increased 2%, excluding the negative effect of foreign
currency translation, compared to the third quarter of 2000, due
primarily to the added net sales of acquired businesses and, to a
lesser extent, higher average selling prices for certain of the
Company's products, partially offset by lower sales volume for
certain of the Company's products. Including the negative effect
of foreign currency translation, net sales decreased 1% to
$766,221,000 compared to $773,255,000 for the third quarter of
2000.
-- Net sales of the Company's food packaging segment increased 5%,
excluding the negative effect of foreign currency translation,
compared to the third quarter of 2000. This increase was due
primarily to higher sales volume, the added net sales of acquired
businesses and, to a lesser extent, higher average selling prices
for certain products. Including the negative effect of foreign
currency translation, net sales for this segment increased 2%
compared to the third quarter of 2000.
-- The continuing soft economic conditions in the third quarter
resulted in lower sales volume of certain of the Company's
protective packaging products. Net sales of the Company's
protective and specialty packaging segment decreased 3%, excluding
the negative effect of foreign currency translation, compared to
the third quarter of 2000. This decrease was due primarily to
lower sales volume of certain products, partially offset by the
added net sales of acquired businesses and, to a lesser extent,
higher average selling prices for certain products. Including the
negative effect of foreign currency translation, net sales for
this segment decreased 5% compared to the third quarter of 2000.
-- Gross profit was $249,604,000 or 32.6% of net sales compared to
$253,434,000 or 32.8% of net sales for the third quarter of 2000.
These decreases were due primarily to the lower sales volume of
certain protective packaging products and changes in product mix
compared to the 2000 period, and were partially offset by lower
costs for certain raw materials.
-- Marketing, administrative, development and goodwill amortization
expenses decreased modestly to $140,430,000 or 18.3% of net sales
compared to $143,228,000 or 18.5% of net sales for the third
quarter of 2000.
-- The Company incurred Restructuring and other charges of $3,944,000
in the third quarter and $10,001,000 through the first nine months
of 2001. These charges are associated with the Company's planned
review of its business, announced at the time of its first quarter
earnings release, which the Company expects to complete by the end
of the fourth quarter of 2001. The Company is undertaking the
review to reduce costs and expenses, simplify business processes
and organizational structure and to refine further its
manufacturing operations and product offerings. Actions resulting
from this review should enhance the fundamental strengths and
growth prospects of the business as the Company continues to focus
on bringing packaging solutions to its customers. The
Restructuring and other charges incurred through the first nine
months of 2001 were for actions identified and underway and
include $7,314,000 of employee termination costs, $656,000 of
facility exit costs and $2,031,000 of asset impairments. From the
charges incurred through the first nine months of 2001, the
Company expects annual savings of approximately $9.8 million by
the end of 2002. Based on actions identified to date, the Company
is eliminating approximately 300 positions, including the 230
positions already indicated in the second quarter earnings release
and an additional 70 identified in the third quarter. The Company
plans to continue its review and to take additional actions in the
fourth quarter which will result in additional charges within the
range of, or greater than, those incurred in the second and third
quarters of this year.
-- Operating profit was $105,230,000 compared to $110,206,000 for the
third quarter of 2000. This decrease was due primarily to the
lower gross profit and to the Restructuring and other charges,
both discussed above. Excluding the Restructuring and other
charges, operating profit was 14.2% of net sales compared to 14.3%
of net sales for the third quarter of 2000.
-- Other expense, net, which consists primarily of interest expense,
increased due primarily to the higher level of debt outstanding
compared to the third quarter of 2000. In addition, the third
quarter of 2000 included income from a one-time fee of $10 million
received from a third party for the assignment of a contract.
-- The effective tax rate was 46.8%. This effective tax rate was
higher than applicable statutory rates due primarily to non-
deductible goodwill amortization. The Company expects that its
effective tax rate will remain higher than statutory rates for
2001.
-- Net earnings were $44,410,000 compared to $54,714,000 for the
third quarter of 2000.
-- Assuming conversion of the Company's outstanding preferred stock,
and excluding goodwill amortization and the impact of the
Restructuring and other charges discussed above, earnings per
common share were $0.56 for the third quarter.
Commenting on the Company's outlook, Mr. Hickey stated, "Although it may be too early to fully assess the short-term implications that recent events may have on the economy in the fourth quarter and next year, we remain confident in the long-term future of our business and our leadership position in the industry. Based on current business conditions, we expect full year earnings in the range of $1.62 to $1.72 per share, assuming conversion of the Company's outstanding preferred stock and excluding Restructuring and other charges and the debt guarantee provision incurred in the first quarter. This outlook assumes a continuing soft but stable economy, steady raw material and energy prices, and stable foreign exchange rates."
Business
Sealed Air is a leading global manufacturer of a wide range of food, protective and specialty packaging materials and systems including such widely recognized brands as Bubble Wrap(r) air cellular cushioning, Jiffy(r) protective mailers and Cryovac(r) food packaging products. For more information about Sealed Air Corporation, please visit the Company's Web site at www.sealedair.com.
Certain statements made by the Company in this press release may be 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 "expects," "intends," "plans," "estimates" and similar expressions. Actual results may differ materially from these expectations due to a number of factors, including changes in economic, political, business and market conditions in the geographic areas in which the Company conducts business, acts of war or terrorism, factors affecting customers, exchange rates, the success of new products, raw material and energy costs and legal proceedings, including those related to W. R. Grace & Co. A more extensive list and description of these factors can be found under the heading "Forward-Looking Statements" in Management's Discussion and Analysis of Results of Operations and Financial Condition, which appears in the Company's most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and in the Company's other publicly available filings with the Securities and Exchange Commission.
SEALED AIR CORPORATION
Results for the period ended September 30
(Unaudited)
(In thousands of dollars, except share data)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Quarter Ended September 30
--------------------------
% Increase
2001 2000 (Decrease)
--------- --------- --------
Net sales by business
segment: (a)
Food packaging $ 472,505 $ 464,195 2
Protective and specialty
packaging 293,716 309,060 (5)
--------- --------- ----
Total net sales 766,221 773,255 (1)
Cost of sales (a) 516,617 519,821 (1)
--------- --------- ----
Gross profit 249,604 253,434 (2)
Marketing, administrative and
development expenses 126,341 129,790 (3)
Goodwill amortization 14,089 13,438 5
Restructuring and other charges 3,944 0 NA
--------- --------- ----
Operating profit 105,230 110,206 (5)
Other (expense), net (21,725) (9,813) NA
--------- --------- ----
Earnings before income taxes 83,505 100,393 (17)
Income taxes 39,095 45,679 (14)
--------- --------- ----
Net earnings $ 44,410 $ 54,714 (19)
========= ========= ====
Net earnings ascribed to
common shareholders $ 33,647 $ 47,637 (29)
========= ========= ====
Basic earnings per
common share (b) $ 0.40 $ 0.57
========= =========
Diluted earnings per
common share (b) $ 0.37 $ 0.46
========= =========
Weighted average number of
common shares outstanding
(000's):
Basic 83,712 83,723
========= =========
Diluted 83,905 85,116
========= =========
Nine Months Ended September 30
------------------------------
% Increase
2001 2000 (Decrease)
----------- ----------- --------
Net sales by business
segment:(a)
Food packaging $ 1,389,756 $ 1,354,778 3
Protective and specialty
packaging 896,336 916,782 (2)
----------- ----------- ---
Total net sales 2,286,092 2,271,560 1
Cost of sales (a) 1,554,089 1,506,164 3
----------- ----------- ---
Gross profit 732,003 765,396 (4)
Marketing, administrative and
development expenses 385,185 388,774 (1)
Goodwill amortization 42,453 38,129 11
Restructuring and other charges 10,001 0 NA
----------- ----------- ---
Operating profit 294,364 338,493 (13)
Other (expense), net (72,180) (38,441) 88
----------- ----------- ---
Earnings before income taxes 222,184 300,052 (26)
Income taxes 103,950 136,524 (24)
----------- ----------- ---
Net earnings $ 118,234 $ 163,528 (28)
=========== =========== ===
Net earnings ascribed to
common shareholders $ 83,948 $ 125,163 (33)
=========== =========== ===
Basic earnings per
common share (b) $ 1.00 $ 1.50
=========== ===========
Diluted earnings per
common share (b) $ 0.92 $ 1.36
=========== ===========
Weighted average number of
common shares outstanding
(000's):
Basic 83,674 83,675
=========== ===========
Diluted 83,913 86,367
=========== ===========
(a) Prior period net sales and cost of sales have been
reclassified to conform to the current year's presentation
with respect to Emerging Issues Task Force Issue No. 00-10,
"Accounting for Shipping and Handling Fees and Costs," which
the Company adopted during the fourth quarter of 2000.
(b) See the Supplementary Information included with this release
for the calculation of basic and diluted earnings per common
share.
Supplementary Information
SEALED AIR CORPORATION
Results for the period ended September 30
(Unaudited)
(In thousands of dollars, except share data)
CALCULATION OF EARNINGS PER COMMON SHARE
Quarter Ended Nine Months Ended
September 30 September 30
------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net earnings $ 44,410 $ 54,714 $118,234 $163,528
Add: Excess of book
value over repurchase
price of preferred
stock 3,041 8,914 7,076 11,725
Less: Preferred
dividend (13,804) (15,991) (41,362) (50,090)
-------- -------- -------- --------
Net earnings ascribed
to common shareholders $ 33,647 $ 47,637 $ 83,948 $125,163
======== ======== ======== ========
Weighted average number
of common shares
outstanding (000's):
Basic 83,712 83,723 83,674 83,675
======== ======== ======== ========
Diluted 83,905 85,116 83,913 86,367
======== ======== ======== ========
EPS - Basic (a) $ 0.40 $ 0.57 $ 1.00 $ 1.50
======== ======== ======== ========
EPS - Diluted (a)(b) $ 0.37 $ 0.46 $ 0.92 $ 1.36
======== ======== ======== ========
EPS - As If Converted
(a)(c) $ 0.41 $ 0.49 $ 1.09 $ 1.44
======== ======== ======== ========
(a) The basic earnings per common share calculations for the quarters
ended September 30, 2001 and 2000 include $0.04 and $0.11 per
share gains, respectively, and for the nine months ended
September 30, 2001 and 2000 include $0.08 and $0.14 per share
gains, respectively, attributable to the repurchase of preferred
stock. Such gains are not included in the calculations of diluted
earnings per common share or as if converted earnings per common
share for the quarter and nine months ended September 30, 2001
and 2000.
(b) For the purpose of calculating diluted earnings per common share,
net earnings ascribed to common shareholders have been adjusted
to exclude the gain attributable to the repurchase of preferred
stock and to add back dividends attributable to such repurchased
preferred stock in each period, and the weighted average common
shares outstanding have been adjusted to assume conversion of the
shares of preferred stock repurchased during each period in
accordance with the Financial Accounting Standards Board's
Emerging Issues Task Force Topic D-53 guidance.
(c) The assumed conversion of the outstanding convertible preferred
stock is not considered in the calculation of diluted earnings
per common share for all periods presented as the effect is
antidilutive (i.e., would increase the diluted earnings per
common share for the quarters ended September 30, 2001 and 2000
to $0.41 and $0.49, respectively, and for the nine months ended
September 30, 2001 and 2000 to $1.09 and $1.44, respectively).
The weighted average number of common shares outstanding,
assuming conversion of the outstanding convertible preferred
stock, was 108,105,000 and 112,287,000 for the quarters ended
September 30, 2001 and 2000, respectively, and 108,113,000 and
113,538,000 for the nine months ended September 30, 2001 and
2000, respectively.