SADDLE BROOK, N.J., July 25, 2001 (PRIMEZONE) -- Sealed Air Corporation (NYSE:SEE) reported second quarter operating results today which include Restructuring and other charges. Basic and diluted earnings per common share for the second quarter of 2001, which reflect the impact of the Restructuring and other charges, were $0.30.
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. However, if earnings per share were calculated as if the Company's outstanding preferred stock had been converted into common stock, earnings per share, before reflecting the impact of the Restructuring and other charges mentioned above, would have amounted to $0.40 for the second quarter.
Commenting on the Company's operating performance, William V. Hickey, President and Chief Executive Officer, stated, "During the second quarter, our protective packaging volumes were affected by further slowing of industrial economies, primarily the U.S. The disruption of meat supply and beef consumption in Europe continued to impact our food packaging business to a moderate extent, but the effect diminished during the quarter. Both of these factors adversely affected net sales and earnings for the quarter.
"Despite these factors, we continued to develop our business and improve our performance in many ways. We reduced expenses in absolute dollars and as a percentage of net sales. We generated EBITDA (a measure of cash flow) of over 20% of net sales, excluding the Restructuring and other charges. We reduced our working capital, generated positive free cash flow, and reduced debt by over $82 million during the quarter. In addition, as mentioned in our first quarter earnings release, we have initiated actions to reduce costs and expenses and simplify our business processes and organizational structure."
Highlights for the Second Quarter of 2001 include:
-- Net sales increased 3%, excluding the negative effect of foreign
currency translation, compared to the second quarter of 2000, due
primarily to the added net sales of several 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 increased 1% to
$761,599,000 compared to $756,841,000 for the second quarter of
2000.
-- Net sales of the Company's food packaging segment increased 6%,
excluding the negative effect of foreign currency translation,
compared to the second quarter of 2000. This increase was due
primarily to the added net sales of several acquired businesses
and, to a lesser extent, higher average selling prices for certain
of the Company's products. Including the negative effect of
foreign currency translation, net sales for this segment increased
3%.
-- The further softening of economic conditions in the second 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 1%, excluding
the negative effect of foreign currency translation, compared to
the second quarter of 2000. The decrease in the second quarter
was due primarily to lower sales volume of certain products,
partially offset by the added net sales of several acquired
businesses. Including the negative effect of foreign currency
translation, net sales for this segment decreased 3%.
-- Gross profit was $242,154,000 or 31.8% of net sales compared to
$253,973,000 or 33.6% of net sales for the second quarter of 2000.
These decreases were due primarily to the lower sales volume of
certain food and protective packaging products and changes in
product mix compared to the 2000 period, and were partially offset
by modestly lower costs for certain raw materials, which the
Company began to realize in the second quarter.
-- Marketing, administrative, development and goodwill amortization
expenses decreased modestly to $140,786,000 or 18.5% of net sales
compared to $141,607,000 or 18.7% of net sales for the second
quarter of 2000.
-- The Company incurred Restructuring and other charges of $6,057,000
in the quarter. These charges are associated with the Company's
planned review of its business announced at the time of its first
quarter earnings release. The review is being undertaken to
reduce costs and expenses, simplify business processes and
organizational structure, and to refine further the Company's
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 charges
incurred in the quarter are for actions currently identified and
underway. However, the Company plans to continue its review and
to take additional actions in the second half of the year. Based
on actions identified to date and underway, as well as actions
identified but not yet begun, the Company expects to incur
additional charges in the second half of 2001 of similar or
greater magnitude to the second quarter charges. Based on actions
identified to date, the Company plans to eliminate approximately
230 positions through 2002. The additional charges will be
recorded when they become recognizable for accounting purposes.
The Restructuring and other charges incurred in the second quarter
include $3,914,000 of employee termination costs, $586,000 of
facility exit costs and $1,557,000 of asset impairments. The
Company anticipates annual savings related to the charges incurred
during the second quarter of 2001 of approximately $5.5 million by
the end of 2002.
-- Operating profit was $95,311,000 compared to $112,366,000 for the
second quarter of 2000. This decrease was due primarily to the
lower gross profit and Restructuring and other charges, both
discussed above. Excluding the Restructuring and other charges,
operating profit was 13.3% of net sales compared to 14.8% of net
sales for the second 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 second quarter of 2000.
-- The effective tax rate was 47.7%. 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 $39,264,000 compared to $53,831,000 for the
second 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 $0.53 for the second quarter.
Commenting on the Company's outlook, Mr. Hickey stated, "At this time, we do not believe a substantial recovery of economic growth around the world is likely in the second half of 2001. At the same time, we remain focused on implementing our growth initiatives and confident in our long-term growth goals. Even during the slower second quarter, growth of certain of our new products, such as case ready packaging, grew well into double-digit rates over last year.
"As previously stated, we have initiated actions to position the Company to achieve our long-term financial goals, even in the face of a challenging environment of sustained higher energy costs and slower economic growth. The action plan we have undertaken is a deliberate process that includes strict controls over marketing, administrative and development expenses and maximizing cash flow, both of which are evident in our second quarter results. We are continuing to review our business processes and organizational structure to further enhance the fundamental strengths of Sealed Air and continue our long-standing history of market leadership."
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 statements. 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, business and market conditions in the geographic areas in which the Company conducts business, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, and in the Company's other publicly available filings with the Securities and Exchange Commission.
SEALED AIR CORPORATION
Results for the period ended June 30
(Unaudited)
(In thousands of dollars, except share data)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Quarter Ended June 30
---------------------
% Increase
2001 2000 (Decrease)
--------- --------- ----------
Net sales by business segment: (a)
Food packaging $ 464,439 $ 450,799 3
Protective and
specialty packaging 297,160 306,042 (3)
--------- ---------
Total net sales 761,599 756,841 1
Cost of sales (a) 519,445 502,868 3
--------- ---------
Gross profit 242,154 253,973 (5)
Marketing, administrative and
development expenses 126,682 129,226 (2)
Goodwill amortization 14,104 12,381 14
Restructuring and other charges 6,057 -- NA
--------- ---------
Operating profit 95,311 112,366 (15)
Other (expense), net (20,278) (13,594) 49
--------- ---------
Earnings before income taxes 75,033 98,772 (24)
Income taxes 35,769 44,941 (20)
--------- ---------
Net earnings $ 39,264 $ 53,831 (27)
========= =========
Net earnings ascribed to
common shareholders $ 25,460 $ 36,861 (31)
========= =========
Basic earnings per
common share (b) $ 0.30 $ 0.44
========= =========
Diluted earnings per
common share (b) $ 0.30 $ 0.44
========= =========
Weighted average number of
common shares outstanding
(000's):
Basic 83,660 83,674
========= =========
Diluted 83,660 83,831
========= =========
Six Months
Ended June 30
---------------------
% Increase
2001 2000 (Decrease)
--------- --------- ----------
Net sales by business segment: (a)
Food packaging $ 917,251 $ 890,583 3
Protective and
specialty packaging 602,620 607,722 (1)
---------- ----------
Total net sales 1,519,871 1,498,305 1
Cost of sales (a) 1,037,472 986,343 5
---------- ----------
Gross profit 482,399 511,962 (6)
Marketing, administrative and
development expenses 258,844 258,984 --
Goodwill amortization 28,364 24,691 15
Restructuring and other charges 6,057 -- NA
---------- ----------
Operating profit 189,134 228,287 (17)
Other (expense), net (50,455) (28,628) 76
---------- ----------
Earnings before income taxes 138,679 199,659 (31)
Income taxes 64,855 90,845 (29)
---------- ----------
Net earnings $ 73,824 $ 108,814 (32)
========== ==========
Net earnings ascribed to
common shareholders $ 50,301 $ 77,526 (35)
========== ==========
Basic earnings per
common share (b) $ 0.60 $ 0.93
========== ==========
Diluted earnings per
common share (b) $ 0.55 $ 0.89
========== ==========
Weighted average number of
common shares outstanding
(000's):
Basic 83,654 83,651
========== ==========
Diluted 83,695 84,134
========== ==========
(a) Prior period net sales and cost of sales have been reclassified
to conform to the current year's presentation related to the
impact of applying 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 June 30
(Unaudited)
(In thousands of dollars, except share data)
CALCULATION OF EARNINGS PER COMMON SHARE
Quarter Ended June 30 Six Months Ended June 30
--------------------- ----------------------
2001 2000 2001 2000
---------- --------- --------- ---------
Net earnings $ 39,264 $ 53,831 $ 73,824 $ 108,814
Add: Excess of
book value over
repurchase price
of preferred stock -- 32 4,035 2,811
Less: Preferred
dividend (13,804) (17,002) (27,558) (34,099)
---------- --------- --------- ---------
Net earnings
ascribed to
common
shareholders $ 25,460 $ 36,861 $ 50,301 $ 77,526
========== ========= ========= =========
Weighted average
number of common
shares outstanding
(000's):
Basic 83,660 83,674 83,654 83,651
========== ========= ========= =========
Diluted 83,660 83,831 83,695 84,134
========== ========= ========= =========
EPS - Basic(a) $ 0.30 $ 0.44 $ 0.60 $ 0.93
========== ========= ========= =========
EPS - Diluted(a)(b) $ 0.30 $ 0.44 $ 0.55 $ 0.89
========== ========= ========= =========
EPS - As If
Converted (a)(c) $ 0.36 $ 0.47 $ 0.68 $ 0.95
========== ========= ========= =========
(a) The basic earnings per common share calculations for the six
months ended June 30, 2001 and 2000 include $0.05 and $0.03 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 six
months ended June 30, 2001 and 2000. The gains attributable to
the repurchase of preferred stock were not significant in the
quarters ended June 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 June 30, 2001 and 2000 to
$0.36 and $0.47, respectively, and for the six months ended
June 30, 2001 and 2000 to $0.68 and $0.95, respectively.) . The
weighted average number of common shares outstanding, assuming
conversion of the outstanding convertible preferred stock, was
108,082 and 113,912 for the quarters ended June 30, 2001 and
2000, respectively, and 108,117 and 114,543 for the six months
ended June 30, 2001 and 2000, respectively.