Sealed Air Corporation (NYSE:SEE) today announced financial results for second quarter 2016. Commenting on these results, Jerome A. Peribere, President and Chief Executive Officer, said, “In the second quarter, we delivered $1.7 billion in net sales by leveraging growth opportunities in targeted regions and end markets, offsetting other areas that were challenged by economic uncertainty. These efforts, coupled with our continued focus on new product adoption and operational disciplines, resulted in solid margin performance in our three core divisions. We are delivering on our 2016 objectives, and expect stronger performance in the second half of the year. This performance will be primarily driven by increased demand for our core product portfolio, recently introduced innovations, and accelerated growth in the global protein market and e-Commerce sector. We also anticipate less currency headwinds than previously forecasted.”
Unless otherwise stated, all results compare second quarter 2016 results to second quarter 2015 results. Year-over-year financial discussions present operating results as reported, and on an organic or constant dollar basis. Constant dollar refers to unit volume and price/mix performance and excludes the impact of currency translation from all periods referenced. Organic refers to unit volume and price/mix performance and excludes the impact of currency translation and the results from the divestiture of the North American foam trays and absorbent pads business, which was divested on April 1, 2015, and the divestiture of the European food trays business in November 2015 (together “divestitures”), from all periods referenced. Additionally, non-U.S. GAAP adjusted financial measures, such as Adjusted Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), Adjusted Net Earnings, Adjusted Diluted Earnings Per Share (“Adjusted EPS”) and Adjusted Tax Rate, exclude the impact of special items, such as restructuring charges, charges related to ceasing operations in Venezuela, cash-settled stock appreciation rights (“SARs”) granted as part of the Diversey acquisition and certain other infrequent or one-time items. Please refer to the financial statements included with this press release for a reconciliation of Non-U.S. GAAP to U.S. GAAP financial measures.
Second Quarter 2016 Highlights
• Food Care net sales of $802 million decreased 5.2% as reported. Currency had a negative impact on Food Care net sales of 4.6%, or $39 million and the divestiture had a negative impact of 1.7%, or $15 million. On an organic basis, net sales increased 1.1% due to favorable price/mix of 0.4% and volume growth of 0.7%. Positive volume trends in North America and Europe, Middle East and Africa offset ongoing weakness in Latin America. Adjusted EBITDA of $163 million or 20.3% of net sales was attributable to favorable price/cost spread, positive volume trends and restructuring savings, which were more than offset by higher non-material manufacturing expenses, unfavorable currency translation, divestitures of non-core assets, and salary and wage inflation.
• Diversey Care net sales of $532 million decreased 0.6% as reported and increased 2.4% on a constant dollar basis. Currency had a negative impact on Diversey Care net sales of 3.0%, or $16 million in the quarter. All regions experienced positive constant dollar sales growth driven by favorable price/mix of 2.0% and a slight increase in volumes of 0.4%. Our fastest growing regions in constant dollar sales were Asia Pacific with 6.8% growth and North America with 2.9% growth. Diversey Care’s Adjusted EBITDA was $86 million or 16.2% of net sales. Adjusted EBITDA performance was favorably impacted by a $5.6 million reimbursement of previously incurred environmental expenses, as well as favorable price/cost spread and restructuring savings, which were partially offset by unfavorable currency translation and salary and wage inflation.
• Product Care net sales of $374 million in the second quarter decreased 2.5% as reported and 1.5% on a constant dollar basis. Currency had a negative impact on Product Care net sales of 1.0%, or $4 million. Sales volume increased 0.4% despite continued rationalization efforts and ongoing weakness in the industrial market. Adjusted EBITDA was $79 million or 21.1% of net sales. This performance was primarily attributable to positive volume trends, manufacturing efficiencies and continued price discipline, which were more than offset by salary and wage inflation and unfavorable currency translation.
Second Quarter 2016 U.S. GAAP Summary
Net sales of $1.7 billion decreased 3.2% on an as reported basis. Currency had a negative impact on total net sales of 3.3%, or $59 million, and the Food Care divestitures had a negative impact on total sales of 0.8%, or $15 million, in the second quarter. As reported, Latin America and Asia Pacific declined 11.3% and 3.5%, respectively. EMEA and North America also declined 1.6% and 2.5% on an as reported basis.
Net income on a reported basis was $50 million, or $0.25 per diluted share as compared to $28 million, or $0.13 per diluted share in the second quarter 2015. Net income in the second quarter 2016 included $79 million of special items, charges related to ceasing operations in Venezuela, restructuring charges and other costs associated with our restructuring programs, and a loss on the remeasurement of our Venezuelan subsidiaries. Net earnings in the second quarter 2015 included $99 million of special items, primarily consisting of the loss on debt redemption and refinancing activities, a loss on the remeasurement of our Venezuelan subsidiaries, and restructuring charges and other costs associated with our restructuring programs, partially offset by gains on the sale of our North American foam trays and absorbent pads business.
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