Sealed Air Corporation
) reported fourth-quarter 2013 adjusted net earnings from
continuing operations of 34 cents per share, up 6% from the
year-ago earnings of 32 cents per share. The results, however,
fell short of the Zacks Consensus Estimate of 37 cents per
The adjusted earnings per share in the reported quarter
excluded special items of 32 cents per share. Among other items,
this included 23 cents per share increase to the company's
income-tax provision related to the
W.R. Grace & Co.
) settlement agreement.
Including such one-time items, earnings per share in the
fourth quarter reached 2 cents. In the year-ago quarter, Sealed
Air had reported a loss of $1.70 per share, including special
items worth $2.11, mostly due to the non-cash impairment of
goodwill and other intangible assets.
Total revenue climbed 2.9% (4.1% in constant dollars) year
over year to $2.01 billion, ahead of the Zacks Consensus Estimate
of $2 billion. Volumes improved 1.4% and a price/mix contributed
2.7% to the increase.
Region-wise, sales were led by 8% growth in AMAT (Asia, Middle
East, Africa and Turkey), followed by 6.7% in Latin America.
Sales also increased 3.6% in North America and 2.7% in Japan,
Australia and New Zealand (JANZ),while Europe rose 2.6%.
Cost and Margins
Adjusted cost of sales increased 3% year over year to $1.35
billion. Adjusted gross profit from continuing operations
increased 2% year over year to $668 million. Gross margin
contracted 20 basis points (bps) to 33% in the quarter from the
Selling, general and administrative expenses increased 3% to
$439 million in the quarter from $426 million in the prior-year
quarter. Adjusted operating profit from continuing operations
grew 5% year over year to $193 million. Adjusted operating margin
expanded 20 bps to 9.6%.
Food Care: Net sales in this segment increased 4.2% in
constant dollars year over year to $1.01 billion. Favorable
price/mix of 3.2% and continued strength in Latin America as well
as Asia, Middle East, Africa and Turkey (AMAT) led to the
improvement. Adjusted operating profit increased 4% year over
year to $123 million in the quarter.
Diversey Care: In this segment, net sales were $546 million,
up 2.3% year over year on a reported basis. The segment reported
an adjusted operating profit of $12.4 million, compared with
$10.5 million in the year-ago quarter.
Product Care: The segment reported net sales of $424 million,
up 4% year over year on a reported basis. Volumes were up 3.1%
and a 1.7% favorable price/mix was recorded. Adjusted operating
profit remained flat at $59 million, compared to the year-ago
Medical Applications and New Ventures (Other Category): Net
sales for this segment rose 8% year over year to $31 million. The
segment reported adjusted operating loss of $1.4 million in the
quarter, narrower than the year-ago quarter's operating loss of
Fiscal 2013 Performance
Sealed Air reported adjusted earnings per share of $1.23 in
fiscal 2013, up 35% from the prior year's earnings per share of
91 cents. Results fell short of the Zacks Consensus Estimate of
$1.28. Including one-time items, earnings per share were at 44
cents compared with the year-ago loss per share of $8.39.
Revenues edged up 1.7% (2.7% in constant dollars) year over
year to $7.69 billion but fell short of the Zacks Consensus
Estimate of $7.76 billion.
Cash and cash equivalents were $992 million as of Dec 31,
2013, an increase from $680 million as of Dec 31, 2012. Cash from
operations in fiscal 2013 was $625 million, up from $394 million
in the prior year.
Long-term debt, excluding current portion, amounted to $4.1
billion as of Dec 31, 2013, compared with $4.8 billion as of Dec
31, 2012. The debt-to-capitalization ratio remained flat at 79%
as of Dec 31, 2013, compared with Dec 31, 2012.
Completed W. R. Grace & Co. Settlement
In Feb 2014, Sealed Air completed the W. R. Grace & Co.
settlement agreement. Sealed Air will no longer incur interest
expenses related to the settlement liability, which amounted to
$48 million in 2013.
The company anticipates a cash tax benefit of more than $200
million in 2015. Sealed Air funded the $930-million liability
with cash on hand and committed liquidity and issued 18 million
shares which were previously reserved for the settlement
For fiscal 2014, Sealed Air expects net sales to be relatively
flat compared to net sales of $7.7 billion in 2013. Organic
growth will be compensated by product rationalization and an
estimated unfavorable impact of more than 2% from foreign
Adjusted earnings per share, excluding the impact of stock
appreciation rights (SARs) is projected in the range of $1.50 to
$1.60. Compared with the adjusted EPS (excluding SARs) of $1.39,
this reflects an increase of 8% to 15%. The Company's core tax
rate for 2014 is expected to increase to approximately
Adjusted earnings before interest, taxes and depreciation and
amortization (EBITDA) for 2014, are estimated to be in the range
of $1.050 billion to $1.070 billion, a projected 1% to 3% climb
from adjusted EBITDA in 2013. For 2014, Sealed Air anticipates
capital expenditures of approximately $170 million and cash
restructuring payments of approximately $150 million. Free Cash
Flow is expected to be approximately $410 million.
The completion of the W. R. Grace & Co. settlement
agreement removes an overhang for Sealed Air as it brings closure
to this matter after more than a decade. The company will no
longer incur interest on the settlement liability and will
benefit from cash tax benefits over the next several years. This
will provide Sealed Air with more financial flexibility.
Moreover, Sealed Air will benefit from cost savings from its
ongoing Integration & Optimization Program as well as its
recent additional restructuring plan. The company is doing a good
job of generating volume growth and realizing significant cost
Elmwood Park, NJ-based Sealed Air is a major specialty
packaging service provider to a diverse range of end markets. The
company operates in the United States and in 50 other countries,
producing packaging and performance-based materials, and
equipment systems serving food, medical, industrial and consumer
Sealed Air retains a short-term Zacks Rank #3
Among Sealed Air's peers,
Bemis Company, Inc.
) reported fourth-quarter 2013 adjusted earnings of 54 cents per
share, in line with the Zacks Consensus Estimate but up 4% from
the year-ago quarter. Earnings were within the management's
guidance range of 50-56 cents per share.
) reported fourth-quarter 2013 adjusted earnings from continuing
operations of 29 cents per share, reversing the year-ago
quarter's loss of 5 cents. Despite sluggish consumer demand,
growth across targeted packaging and specialty chemicals end
markets, improved pricing and operational performance led to the
year-over-year rise. Earnings surpassed the Zacks Consensus
Estimate of 23 cents.
BEMIS (BMS): Free Stock Analysis Report
GRACE (WR) NEW (GRA): Free Stock Analysis
MEADWESTVACO CP (MWV): Free Stock Analysis
SEALED AIR CORP (SEE): Free Stock Analysis
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