Sealed Air(US:SEE)2025-05-07 20:04PART I. FINANCIAL INFORMATION Financial Statements The company reported lower Q1 net sales but higher net earnings, alongside a stronger balance sheet and reduced operating cash flow Condensed Consolidated Balance Sheets Total assets slightly increased to $7.05 billion while total liabilities decreased, boosting stockholders' equity to $797.9 million Condensed Consolidated Balance Sheet Highlights (in USD millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $1,905.8 | $1,891.8 | | Total assets | $7,049.2 | $7,022.1 | | Total current liabilities | $1,507.4 | $1,635.5 | | Total liabilities | $6,251.3 | $6,397.6 | | Total stockholders' equity | $797.9 | $624.5 | Condensed Consolidated Statements of Operations Q1 net sales decreased 4.3% to $1.27 billion, while net earnings grew 38.4% to $113.5 million due to a lower tax provision Statement of Operations Summary (in USD millions, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $1,272.5 | $1,329.6 | | Gross profit | $391.7 | $400.8 | | Operating profit | $183.4 | $185.0 | | Net earnings | $113.5 | $82.0 | | Diluted EPS | $0.77 | $0.56 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities declined sharply to $31.9 million, contributing to a negative net change in cash for the quarter Cash Flow Summary (in USD millions) | Cash Flow Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $31.9 | $125.1 | | Net cash used in investing activities | $(43.5) | $(38.0) | | Net cash used in financing activities | $(45.3) | $(69.1) | | Net change in cash | $(36.6) | $6.7 | Notes to Condensed Consolidated Financial Statements Notes detail segment performance, restructuring costs, debt structure, and a significantly lower effective tax rate of 8.0% Note 5: Segments The Food segment's gross profit increased despite lower sales, while the Protective segment saw declines in both sales and profit Segment Performance (in USD millions) | Segment | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | :--- | | Food | Net Sales | $852.1 | $868.4 | | | Gross Profit | $268.1 | $259.5 | | Protective | Net Sales | $420.4 | $461.2 | | | Gross Profit | $124.1 | $141.3 | Note 12: Restructuring Activities The 'CTO2Grow Program' incurred $9.0 million in total charges in Q1 2025 as part of its 3-year, $160 million cost-saving plan - The Board of Directors approved the 'CTO2Grow Program' on August 7, 2023, a 3-year cost take-out initiative with an estimated total cash cost of $160 million84 Restructuring Charges (in USD millions) | Expense Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Restructuring charges | $2.6 | $15.5 | | Other associated costs | $6.4 | $6.8 | | Total charges | $9.0 | $22.2 | Note 13: Debt and Credit Facilities Total debt remained stable at approximately $4.4 billion, with a weighted average interest rate of 5.3% and $1.15 billion in unused credit Total Debt Outstanding (in USD millions) | Debt Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current debt | $208.7 | $205.1 | | Total long-term debt, less current portion | $4,195.5 | $4,198.8 | | Total debt | $4,404.2 | $4,403.9 | - As of March 31, 2025, the weighted average interest rate on long-term debt was 5.3%, and the company had $1,147.0 million in unused lines of credit9092 Note 17: Income Taxes The effective tax rate dropped to 8.0% from 30.0% year-over-year due to the resolution of international tax matters - The effective income tax rate was 8.0% for Q1 2025, compared to 30.0% for Q1 2024130131 - The lower tax rate in Q1 2025 was favorably impacted by the reversal of accruals for uncertain tax positions related to the resolution of previous years' international tax matters130 - Net unrecognized tax positions decreased by $44.2 million in Q1 2025133 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 4.3% sales decline due to lower volumes, offset by cost controls maintaining stable margins and liquidity Highlights of Financial Performance Q1 2025 net sales fell 4.3%, while net earnings grew 40.2% and Adjusted EBITDA decreased by a slight 0.7% Q1 2025 Financial Highlights vs. Q1 2024 (in USD millions, except per share) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $1,272.5 | $1,329.6 | (4.3)% | | Net earnings from continuing operations | $116.9 | $83.4 | 40.2% | | Non-GAAP Consolidated Adjusted EBITDA | $276.3 | $278.3 | (0.7)% | | Non-GAAP Adjusted EPS | $0.81 | $0.78 | 3.8% | Net Sales by Segment The Food segment's constant currency sales grew 0.9%, while the Protective segment's sales fell 7.6% on lower volumes Components of Net Sales Change, Q1 2025 vs Q1 2024 | Segment | Price | Volume | Constant Currency Change | | :--- | :--- | :--- | :--- | | Food | +0.6% | +0.3% | +0.9% | | Protective | -1.4% | -6.2% | -7.6% | | Total Company | -0.1% | -1.9% | -2.0% | Adjusted EBITDA by Segment The Food segment's Adjusted EBITDA grew 6.9% with margin expansion, while the Protective segment's fell 17.4% with margin contraction Adjusted EBITDA by Segment (in USD millions) | Segment | Q1 2025 Adj. EBITDA | Q1 2024 Adj. EBITDA | % Change | | :--- | :--- | :--- | :--- | | Food | $202.7 | $189.6 | 6.9% | | Protective | $73.9 | $89.5 | (17.4)% | | Total | $276.3 | $278.3 | (0.7)% | Liquidity and Capital Resources The company maintains $335.2 million in cash, with total debt at $4.4 billion and a leverage ratio of 3.30 to 1.00 - Primary sources of cash are collections from sales and available credit facilities; as of March 31, 2025, cash and cash equivalents were $335.2 million221223 Cash Flow and Debt Summary (in USD millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $31.9 | $125.1 | | Non-GAAP free cash flow | $(12.0) | $78.0 | | Total Debt (as of Mar 31, 2025) | $4,404.2 | N/A | - The company was in compliance with its debt covenants at March 31, 2025, with a leverage ratio of 3.30 to 1.00, below the maximum of 4.50 to 1.00229 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate, foreign currency, and credit risks, managed through various derivative instruments - A hypothetical 10% increase in interest rates would result in a decrease of $76 million in the fair value of the total debt balance at March 31, 2025259 - The company recognized a remeasurement loss of $2 million in Q1 2025 related to the designation of Argentina as a highly inflationary economy261 - The company uses foreign currency forward contracts and cross-currency swaps (notional amount of $433 million) to manage foreign exchange risk263266 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls in Q1 2025 - Management's evaluation concluded that disclosure controls and procedures were effective at the 'reasonable assurance' level as of the end of the period272 - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls273 PART II. OTHER INFORMATION Legal Proceedings The company is engaged in a legal dispute with Water.IO Ltd. but does not believe a probable loss is associated with the claim - The company is in a legal dispute with Water.IO Ltd. over a 2018 Purchase Agreement for sensors, with complaints filed by both parties135 - The company does not believe it has a probable loss associated with the claim and intends to defend its interests vigorously135 Risk Factors There have been no significant changes to the company's risk factors as disclosed in its 2024 Form 10-K - There have been no significant changes to the company's risk factors since December 31, 2024275 Unregistered Sales of Equity Securities and Use of Proceeds The company transferred 824,393 shares to its 401(K) plan and made no share repurchases, with $537 million remaining on its program - In March 2025, 824,393 shares of common stock were transferred from treasury to the company's 401(K) and Profit Sharing Plan276 - No shares were repurchased during the three months ended March 31, 2025; the remaining authorization under the share repurchase program is approximately $537 million278