Sealed Air Reports Q3 2024 Results
Third Quarter 2024 Highlights and Financial Results
Shifted operating structure into two distinct verticals, Food and Protective, and announced both vertical presidents with strong commercial packaging expertise
Volume growth in Food driven by strong end-market demand and competitive wins
Protective industrial and fulfillment portfolios continue to be weak
Cost take-out on track to generate $90 million of incremental cost savings for full-year 2024
Net leverage ratio reduced to 3.7x with maintained focus on deleveraging the balance sheet
Updating our financial outlook for 2024
CHARLOTTE, N.C., Nov. 7, 2024 /PRNewswire/ -- Sealed Air Corporation (NYSE:SEE) announced third quarter 2024 financial results and business updates.
"With the shift into two verticals, Food and Protective, and the onboarding of new leadership, we have positioned Sealed Air for long-term success," said Patrick Kivits, Sealed Air's CEO. "Over the coming months, we are focused on operationalizing each vertical and finalizing the long-term growth strategy for each business. In parallel, we are stepping up our cost take-out initiatives to right-size each business and improve profitability until our transformation takes hold."
"While our third quarter results were ahead of expectation, the strength of our Food business continues to be offset by continued softness in our Protective portfolio. As a result, we are maintaining the midpoint of our Sales and Adjusted EBITDA guidance," said Dustin Semach, Sealed Air's President and CFO. "We continue to improve underlying cash generation fundamentals, optimize our debt and tax rate, and as a result, we are raising our guidance for Free Cash Flow and Adjusted EPS for the year."
($ millions, except per share data)
GAAP Results
Third Quarter
2024
2023
Reported △%
Constant Currency △%
Net Sales
$1,345.1
$1,381.8
(2.7) %
(2.3) %
Net Earnings
$88.7
$57 .6
54.0 %
Diluted EPS
$0.61
$0.40
52.5 %
Cash Flow from Operations (YTD)
$483.8
$192.5
151.3 %
Non-GAAP Results
Third Quarter
2024
2023
Reported △%
Adjusted EBITDA
$276.0
$284.7
(3.1) %
Adjusted Net Earnings
$115.7
$111.5
3.8 %
Adjusted Diluted EPS
$0.79
$0.77
2.6 %
Free Cash Flow (YTD)
$322.7
$182.5(1)
76.8 %
(1) 2023 excludes the impact of a $175 million tax deposit to resolve certain U.S. tax matters.
Unless otherwise stated, all results compare third quarter 2024 results to third quarter 2023 results from continuing operations. Year-over-year financial discussions present operating results from continuing operations as reported.
Third Quarter 2024 Financial Highlights
Net sales of $1.35 billion decreased 3% as reported, with APAC increasing 4% and the Americas and EMEA regions both decreasing 4%. Net sales decreased $32 million, or 2%, on a constant dollar basis. Price had an unfavorable impact of $26 million, or 2%. Volumes decreased by $6 million, or less than 1%.
Income tax expense was $31 million, resulting in an effective tax rate of 25.7% in the quarter. This compares to an income tax expense of $20 million in the prior year, or an effective tax rate of 26.1%. The Adjusted Tax Rate was 24.0% in the quarter, as compared to 25.7% in the prior year.
Net earnings were $89 million, or $0.61 per diluted share, as compared to net earnings of $58 million, or $0.40 per diluted share in the prior year. The current year results were unfavorably impacted by $33 million of Special Items expense, including $16 million of restructuring and other associated costs related to the cost take-out to grow program ("CTO2Grow Program") and $8 million related to the amortization of Liquibox intangible assets. The prior year results were unfavorably impacted by $72 million of Special Items expense, including $51 million related to business closure activity. Adjusted earnings per diluted share increased to $0.79, from $0.77 in the prior year, primarily due to lower interest and tax expense, partially offset by lower Adjusted EBITDA.
Adjusted EBITDA was $276 million, or 20.5% of net sales, as compared to $285 million, or 20.6% in the prior year. The decrease in Adjusted EBITDA was primarily due to lower volumes and unfavorable net price realization in Protective, partially offset by lower operating costs driven by productivity benefits as a result of the CTO2Grow Program.
Business Segment Highlights
Third quarter net sales in Food were $898 million, an increase of approximately 1% as reported. Currency fluctuations had an unfavorable impact of $5 million, or less than 1%. On a constant dollar basis, net sales increased $9 million, or 1%. Volumes increased $21 million, or 2%, with growth in all regions driven by strength in end-market demand and competitive share gains. Price had an unfavorable impact of $12 million, or 1%. Adjusted EBITDA of $206 million, or 22.9% of net sales, increased 6% from $194 million, or 21.7% of net sales. The increase in Adjusted EBITDA was driven by higher volumes, favorable net price realization and lower operating costs driven by productivity benefits, including our CTO2Grow Program.
Third quarter net sales in Protective were $447 million, a decrease of 8% as reported. Currency fluctuations had an unfavorable impact of less than $1 million. On a constant dollar basis, net sales decreased $41 million, or 8%. Volumes decreased $28 million, or 6%, resulting from continued weakness in our industrial and fulfillment portfolios. Price had an unfavorable impact of $13 million, or 3%. Adjusted EBITDA of $75 million, or 16.9% of net sales, decreased 21% from $95 million, or 19.5% of net sales. The decrease in Adjusted EBITDA was primarily attributable to lower volumes and unfavorable net price realization, partially offset by lower operating costs driven by productivity benefits, including our CTO2Grow Program.
Cash Flow and Net Debt
Cash flow from operating activities during the first nine months of 2024 was a source of $484 million, as compared to a source of $193 million during the prior year period, which included a $175 million tax deposit.
Capital expenditures in the first nine months of 2024 were $161 million, as compared to $185 million during the prior year period. Free Cash Flow, defined as net cash from operating activities less capital expenditures, was a source of $323 million for the first nine months of 2024, as compared to a source of $8 million during the prior year period. Excluding the $175 million tax deposit, Free Cash Flow was a source of $183 million for the first nine months of 2023.
Dividend payments for the first nine months of both 2024 and 2023 were $89 million.
Total debt was $4.5 billion as of September 30, 2024 and $4.7 billion as of December 31, 2023. Net Debt, defined as total debt less cash and cash equivalents, was $4.1 billion as of September 30, 2024 and $4.3 billion as of December 31, 2023. As of September 30, 2024, SEE had approximately $1.4 billion of available liquidity comprised of $386 million of cash and $1.0 billion of available and unused lines of credit under our committed credit facilities. The net leverage ratio, defined as net debt divided by last twelve months Adjusted EBITDA, decreased to 3.7x as of September 30, 2024 as compared to 3.9x as of December 31, 2023.
Updated 2024 Full Year Outlook
Net Sales
$5.375 to $5.425 billion
Adjusted EBITDA
$1.09 to $1.11 billion
Adjusted EPS
$3.00 to $3.10
Free Cash Flow
$350 to $450 million
Adjusted EBITDA, Adjusted EPS and Free Cash Flow are non-GAAP financial measures. We have not provided guidance for the most directly comparable GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity and low visibility of certain Special Items.
Conference Call Information
Sealed Air Corporation will host a conference call and webcast on Thursday, November 7, 2024 at 10:00 a.m. (ET) to discuss our Third Quarter 2024 Results. The conference call will be webcast live on the Investors homepage at www.sealedair.com/investors. A replay of the webcast will also be available thereafter. A slide presentation, which includes supplemental information relating to the Company's third quarter earnings will be made available through the "Presentations & Events" section of the Company's Investor Relations website at https://ir.sealedair.com/events-and-presentations prior to the call.
About Sealed Air
Sealed Air Corporation (NYSE:SEE), is a leading global provider of packaging solutions that integrate sustainable, high-performance materials, automation, equipment and services. Sealed Air designs, manufactures and delivers packaging solutions that preserve food, protect goods and automate packaging processes. We deliver our packaging solutions to an array of end markets including fresh proteins, foods, fluids and liquids, medical and life science, e-commerce retail, logistics and omnichannel fulfillment operations, and industrials. Our globally recognized solution brands include CRYOVAC® brand food packaging, LIQUIBOX® brand liquids systems, SEALED AIR® brand protective packaging, AUTOBAG® brand automated packaging systems, and BUBBLE WRAP® brand packaging. In 2023, Sealed Air generated $5.5 billion in sales and has approximately 17,000 employees who serve customers in 115 countries/territories.
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 Investors 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-GAAP Information
In this press release, we include certain non-GAAP financial measures, including Net Debt, Adjusted Net Earnings and Adjusted EPS, net sales on an "organic" and a "constant dollar" basis, Free Cash Flow, Adjusted EBITDA, Adjusted EBITDA Margin, net leverage ratio and Adjusted Tax Rate. Management uses non-GAAP financial measures to assess operating and financial performance, set budgets, provide guidance and compare with peers' performance. We believe such non-GAAP financial measures are useful to investors. Non-GAAP financial measures should not be considered in isolation from or as a substitute for GAAP information. See the attached supplementary information for reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures. Information reconciling forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures is not presented because it is not available without unreasonable effort. The reconciling information that is not available includes forward-looking ranges of certain Special Items with high variability, complexity and low visibility. We are unable to address the probable significance of such unavailable information, which could have a potential significant impact on our future GAAP financial results.
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 "anticipate," "believe," "plan," "assume," "could," "should," "estimate," "expect," "intend," "potential," "seek," "predict," "may," "will" or the negative of these terms and similar expressions. All statements contained in this press release, other than statements of historical facts, such as those regarding our growth initiatives, business strategies, operating plans, business outlook, restructuring activities and market conditions, are forward-looking statements. These statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties that may cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. These risks include important factors discussed in the "Risk Factors" section in Part I of our most recent Annual Report on Form 10-K, as updated by our other filings with the Securities and Exchange Commission.
Any forward-looking statements made by us in this press release are based solely on management's estimates as of the date of this press release. While we may elect to update such forward-looking statements, we disclaim any obligation to do so even if subsequent events cause our views to change, except as may be required by applicable law.
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Sealed Air Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended September 30,
Nine Months EndedSeptember 30,
(In USD millions, except per share data)
2024
2023
2024
2023
Net sales
$ 1,345.1
$ 1,381.8
$ 4,019.8
$ 4,111.4
Cost of sales
943.6
968.5
2,801.5
2,875.0
Gross profit
401.5
413.3
1,218.3
1,236.4
Selling, general and administrative expenses
187.1
181.8
563.8
582.6
Loss on disposal of businesses and property and equipment, net
(5.4)
(48.7)
(5.8)
(55.2)
Amortization expense of intangible assets
15.9
15.4
47.0
46.0
Restructuring charges
6.8
9.8
24.8
9.2
Operating profit
186.3
157.6
576.9
543.4
Interest expense, net
(60.5)
(70.1)
(188.9)
(196.6)
Other expense, net
(6.4)
(9.6)
(14.0)
(33.0)
Earnings before income tax provision
119.4
77.9
374.0
313.8
Income tax provision
30.7
20.3
104.1
99.4
Net earnings from continuing operations
88.7
57.6
269.9
214.4
Gain (Loss) on sale of discontinued operations, net of tax
3.0
(1.0)
2.1
3.2
Net earnings
$ 91.7
$ 56.6
$ 272.0
$ 217.6
Basic:
Continuing operations
$ 0.61
$ 0.40
$ 1.86
$ 1.49
Discontinued operations
0.02
(0.01)
0.01
0.02
Net earnings per common share - basic
$ 0.63
$ 0.39
$ 1.87
$ 1.51
Weighted average common shares outstanding - basic
145.8
144.5
145.5
144.3
Diluted:
Continuing operations
$ 0.61
$ 0.40
$ 1.85
$ 1.48
Discontinued operations
0.02
(0.01)
0.02
0.02
Net earnings per common share - diluted
$ 0.63
$ 0.39
$ 1.87
$ 1.50
Weighted average common shares outstanding - diluted
146.1
144.9
145.8
144.8
Sealed Air Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(In USD millions)
September 30, 2024
December 31, 2023
Assets
Current assets:
Cash and cash equivalents
$ 386.0
$ 346.1
Trade receivables, net
478.7
442.6
Income tax receivables
19.7
44.9
Other receivables
95.6
94.2
Advances and deposits
67.4
72.8
Inventories, net
807.3
774.3
Prepaid expenses and other current assets
204.8
188.4
Total current assets
2,059.5
1,963.3
Property and equipment, net
1,438.0
1,416.4
Goodwill
2,896.8
2,892.5
Identifiable intangible assets, net
397.6
439.0
Deferred taxes
151.8
130.8
Operating lease right-of-use-assets
97.5
86.5
Other non-current assets
279.9
272.1
Total assets
$ 7,321.1
$ 7,200.6
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings
$ 139.7
$ 140.7
Current portion of long-term debt
58.1
35.7
Current portion of operating lease liabilities
29.1
29.2
Accounts payable
800.9
764.6
Accrued restructuring costs
17.9
23.1
Income tax payable
47.5
28.7
Other current liabilities
499.7
487.0
Total current liabilities
1,592.9
1,509.0
Long-term debt, less current portion
4,334.0
4,513.9
Long-term operating lease liabilities, less current portion
75.0
66.7
Deferred taxes
36.0
35.8
Other non-current liabilities
512.0
525.7
Total liabilities
6,549.9
6,651.1
Stockholders' equity:
Preferred stock
—
—
Common stock
15.5
15.4
Additional paid-in capital
1,438.3
1,429.5
Retained earnings
680.1
496.5
Common stock in treasury
(404.2)
(436.4)
Accumulated other comprehensive loss, net of taxes
(958.5)
(955.5)
Total stockholders' equity
771.2
549.5
Total liabilities and stockholders' equity
$ 7,321.1
$ 7,200.6
Sealed Air Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
