CHARLOTTE, N.C.--(BUSINESS WIRE)--Sealed Air Corporation (NYSE: SEE) today announced financial results for the second quarter 2020.

“We are navigating through the challenges of the COVID-19 pandemic with a focus on business continuity and our purpose - ‘to protect, to solve critical packaging challenges, and to leave our world better than we found it’. Our broad product portfolio, global scale and organizational agility have enabled us to respond to significant changes across the markets and geographies we serve.

As compared to last year, in the second quarter, Adjusted EBITDA was up 10% and Adjusted EBITDA margin expanded 220 basis points on constant dollar sales growth of 3%. The increase in earnings generated higher cash flow from operations in the first half of the year,” said Ted Doheny, Sealed Air’s President and CEO.

“Our results demonstrate progress towards world-class. Despite adversity, we are driving our Reinvent SEE transformation faster. We are accelerating investments in automation to address market needs as we move to a ‘touchless’ environment in our own operations and with our customers. Our leadership in packaging innovation, sustainability, food safety, minimizing waste and protecting valuable goods, is more critical than ever.

Our execution so far in 2020 and increased clarity of customer demand for our essential packaging solutions give us the confidence to re-issue guidance for the full year, amidst continued overall market uncertainty,” continued Doheny.

Unless otherwise stated, all results compare second quarter 2020 to second quarter 2019 results from continuing operations. Year-over-year financial discussions present operating results from continuing operations as reported. Year-over-year comparisons are also made on an organic basis or constant dollar basis, which are non-U.S. GAAP measures. Organic refers to changes in unit volume and price performance and excludes acquisitions in the first year after closing, divestiture activity and the impact of currency translation. Constant dollar refers to changes in net sales and earnings, excluding the impact of currency translation. 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 specified items ("Special Items"), such as restructuring charges, restructuring associated costs, gains and losses related to acquisition and divestiture of businesses, special tax items ("Tax Special Items") and certain infrequent or one-time items. Please refer to the supplemental information included with this press release for a reconciliation of U.S. GAAP to Non-U.S. GAAP financial measures.

Business Highlights

In the second quarter, net sales in Food (previously named Food Care) were $673 million, a decrease of 5% as reported. Currency negatively impacted Food sales by $36 million, or approximately 5%. On a constant dollar basis, net sales were approximately flat. Volume was down $13 million, or 2%, primarily driven by lower equipment sales, the slowdown in the food service industry and certain food processing plant closures in North America, partially offset by continued strength in the food retail market. Price was favorable $10 million or 1%, due to US dollar based-indexed pricing in South America. Adjusted EBITDA increased 9% to $169 million, or 25.1% of net sales, up 320 basis points compared to the prior year. The increase in Adjusted EBITDA was attributable to favorable price/cost spread and Reinvent SEE initiatives, which included productivity improvements and restructuring savings, and was partially offset by lower organic sales volume and unfavorable foreign currency translation.

Second quarter net sales in Protective (previously named Product Care) were $478 million an increase of 6% as reported. Currency negatively impacted Protective sales by $6 million, or 1%. On a constant dollar basis, net sales increased $34 million, or 8%. The Automated Packaging Systems (“Automated”) acquisition contributed $73 million in sales. Organic volume declined 8%, or $36 million, largely due to the impact of COVID-19 on the global industrial manufacturing sector, partially offset by strength in e-Commerce and distribution of essential goods. Adjusted EBITDA was $92 million, or 19.1% of sales, compared to $84 million, or 18.7% of sales, in the prior year. The increase in Adjusted EBITDA was attributable to contributions from the Automated acquisition and Reinvent SEE initiatives partially offset by lower organic sales volume.

COVID-19 Update: Focus on Business Continuity and Zero Harm

We are monitoring the impact of COVID-19 on all aspects of our business and geographies, including the impact on our employees, customers, suppliers, business partners and distribution channels. Our established crisis management teams, which are comprised of our cross functional and regional leaders, continue to assess the evolving situation and have implemented business continuity plans at both the regional and headquarter levels. The health and safety of Sealed Air’s global employees, suppliers and customers continue to be the Company’s top priority.

Second Quarter 2020 U.S. GAAP Summary

Net sales of $1.2 billion decreased 1% as reported. Currency had a negative impact on total net sales of $42 million or approximately 4%.

Net earnings were $100 million, or $0.64 per diluted share. Special Items had a negative impact of approximately $18 million on net earnings in the quarter, which was largely due to restructuring and restructuring associated charges of $14 million ($11 million, net of taxes). This compares to net earnings in the second quarter 2019 of $26 million, or $0.16 per diluted share, which was unfavorably impacted by $100 million of Special Items. Prior year Special Items included a charge of $59 million ($44 million, net of taxes) in connection with a settlement agreement with Novipax Holdings LLC, and $51 million ($36 million, net of taxes) in restructuring and restructuring associated charges.

The effective tax rate in the second quarter 2020 was 30.8%, compared to 32.5% in the second quarter 2019.

Second Quarter 2020 Non-U.S. GAAP Summary

Net sales increased 3% on a constant dollar basis. Contributions from the Automated acquisition were $73 million or approximately 6%. This was partially offset by a decline in organic volume of $49 million or 4%. Asia Pacific organic volume was up 3% while North America, EMEA and South America declined 6%, 5% and 1%, respectively.

Adjusted EBITDA was $260 million, or 22.6% of net sales in the second quarter 2020 compared to $237 million, or 20.4% in 2019. Currency fluctuations had an unfavorable impact of $8 million, or 3% in the second quarter 2020. The improvement in Adjusted EBITDA was due to Reinvent SEE initiatives, favorable price/cost spread, and contributions from the Automated acquisition, partially offset by lower organic sales volume and unfavorable foreign currency translation.

The Adjusted Tax Rate was 27.5% in the second quarter 2020, compared to 19.4% in the second quarter 2019. The lower prior year tax rate was primarily due to the release of a valuation allowance for Reinvent SEE related profitability improvements in South America.

Adjusted earnings per diluted share was $0.76 for the second quarter 2020 compared to $0.80 in the second quarter 2019, largely due to the higher adjusted tax rate.

Cash Flow and Net Debt

Cash flow provided by operating activities for the six months ended June 30, 2020 was an inflow of $213 million, compared to an inflow of $169 million for the six months ended June 30, 2019. The increase in cash from operating activities was primarily due to higher Adjusted EBITDA partially offset by increased net trade working capital investment. Net trade working capital, which is defined as customer receivables and inventory less customer advance payments and accounts payable, was a use of cash of $100 million in the current year compared to $61 million for the six months ended June 30, 2019. The increase was primarily due to a purposeful inventory build during the quarter for COVID-19 contingency planning. Capital expenditures were $84 million for the six months ended June 30, 2020 compared to $94 million in the same period last year. Free Cash Flow, defined as net cash provided by operating activities less capital expenditures was an inflow of $129 million in the six months ended June 30, 2020, compared to an inflow of $75 million in the six months ended June 30, 2019.

During the six months ended June 30, 2020, the Company paid cash dividends of $51 million.

Net Debt, defined as total debt less cash and cash equivalents, was $3.5 billion as of June 30, 2020 compared to $3.6 billion at December 31, 2019. As of June 30, 2020, Sealed Air had approximately $1.3 billion of liquidity available, comprised of $290 million of cash and undrawn, committed credit facilities of $1,053 million. The Company does not have any debt maturities until August 2022.

2020 Full Year Guidance

For the full year 2020, Sealed Air now expects net sales in the range of $4.725 billion to $4.775 billion, which represents (1%) to flat as reported and 1% to 2% growth in constant dollars. Foreign currency is now expected to have a negative impact on net sales of approximately $120 million. This compares to sales guidance communicated in February 2020 of $4.9 billion to $4.95 billion, which included an estimated unfavorable currency impact of approximately $40 million.

Adjusted EBITDA is expected to be in the range of $1.01 billion to $1.03 billion, which is consistent with the guidance communicated in February 2020. However, foreign currency is now expected to have a negative impact on Adjusted EBITDA of approximately $25 million, compared to the Company's previous forecast of an unfavorable impact of $8 million. Adjusted EPS is expected to be in the range of $2.85 to $2.95, which is based on approximately 156 million shares outstanding and an anticipated Adjusted Tax Rate of approximately 27%. Adjusted EPS, shares outstanding and the tax rate are also consistent with the Company's guidance communicated in February 2020.

Free cash flow is expected to be in the range of $350 million to $375 million, which compares to $350 million communicated in February 2020.