Sealed Air(SEE) - 2023 Q4 - Annual Report

Part I Item 1. Business Sealed Air Corporation provides global packaging solutions across Food and Protective segments, achieving $5.5 billion in 2023 net sales and focusing on strategic growth and efficiency initiatives 2023 Financial Highlights | Metric | Amount (USD) | | :--- | :--- | | Net Sales | $5.5 billion | | Net Earnings from Continuing Operations | $339 million | | Net Cash from Operating Activities | $516 million | - The company operates through two reportable segments: Food (including the newly acquired Liquibox) and Protective[12] - In February 2023, SEE acquired Liquibox, expanding its offerings in liquid packaging and dispensing solutions for food, beverage, and industrial markets[11] - The CTO2Grow Program, launched in 2023, aims for annualized savings of $140 to $160 million by the end of 2025 by optimizing operations, the commercial organization, and SG&A productivity[15] - The company has a diverse global presence, with 47% of its 2023 net sales generated from outside the U.S., operating in 46 countries and distributing to 115 countries/territories[20] Item 1A. Risk Factors The company faces strategic, operational, legal, regulatory, and financial risks, including global economic conditions, raw material volatility, and debt obligations - Strategic risks include exposure to global economic and political conditions, competition, and potential failure to realize synergies from acquisitions like Liquibox[72][78][81] - Operational risks are significant, including volatility in raw material pricing (petrochemical-based), supply chain disruptions, and the increasing threat of cybersecurity attacks[101][109][114] - Legal and regulatory risks encompass evolving environmental sustainability rules (e.g., plastics, PFAS), potential product liability claims, and changes in tax laws, such as the OECD's Pillar Two global minimum tax[119][123][131] - Financial risks include material impacts from foreign currency fluctuations (47% of 2023 sales were outside the U.S.), the ability to service significant indebtedness, and restrictive covenants in debt agreements that may limit operational flexibility[138][142][147] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[158] Item 1C. Cybersecurity The company maintains a comprehensive cybersecurity program with CISO oversight, a SOC, and Board-level risk management - The company has a dedicated Chief Information Security Officer (CISO) responsible for the global cyber strategy and risk management[159] - A Security Operation Center (SOC), augmented by a third-party provider, is used to monitor threats and coordinate incident response[161] - The Board of Directors' Audit Committee has specific oversight of cybersecurity risk, receiving updates from the CIO and CISO at least three times per year[166][167] Item 2. Properties Sealed Air operates 105 global manufacturing facilities, primarily owned, with its headquarters in Charlotte, North Carolina Manufacturing Facilities by Region | Region | Number of Facilities | | :--- | :--- | | Americas | 46 | | EMEA | 28 | | APAC | 31 | | Total | 105 | - The company owns the large majority of its manufacturing facilities, with the remainder being leased[171] - The global headquarters is located in an owned property in Charlotte, North Carolina[172] Item 3. Legal Proceedings The company addresses various legal matters, including a securities class action and environmental issues, with no material financial impact expected - Information regarding a settlement agreement tax deduction, a securities class action, and environmental matters is incorporated by reference from Note 20[174] - Stockholder litigation demands, alleging similar wrongdoing as the securities class action, were considered and resolved as of January 2024[175] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[177] Information About Our Executive Officers This section provides biographical information for the company's executive officers, including Interim Co-Presidents and Co-CEOs Emile Z. Chammas and Dustin J. Semach - As of October 2023, Emile Z. Chammas (COO) and Dustin J. Semach (CFO) were appointed as Interim Co-Presidents and Co-Chief Executive Officers[180][181] - The executive team includes regional presidents for the Americas (Tobias Grasso, Jr.), EMEA (Gerd Wichmann), and APAC (Alessandra Faccin Assis)[180][182][183] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under SEE, with no Q4 2023 repurchases and $537 million remaining in its share repurchase program - The company's common stock trades on the NYSE under the symbol SEE[189] - No shares of common stock were repurchased during the fourth quarter of 2023[194][195] - As of December 31, 2023, $537 million remained under the company's $1.0 billion share repurchase program, which has no expiration date[195] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) In 2023, net sales decreased by 2.7% to $5.49 billion due to challenging markets, with Adjusted EBITDA falling 8.6% to $1.11 billion, while the company initiated a savings program and focused on debt repayment Key Financial Metrics (2022 vs. 2023) | Metric | 2023 (USD Millions) | 2022 (USD Millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,488.9 | $5,641.9 | (2.7)% | | Gross Profit | $1,641.3 | $1,772.9 | (7.4)% | | Operating Profit | $754.6 | $944.8 | (20.1)% | | Net Earnings (cont. ops) | $339.3 | $491.3 | (30.9)% | | Adjusted EBITDA (non-GAAP) | $1,106.6 | $1,210.2 | (8.6)% | | Adjusted EPS (non-GAAP) | $3.18 | $4.10 | (22.4)% | - End markets were challenged in 2023 due to soft retail demand in Food markets and destocking in industrial and fulfillment sectors[223] - The company introduced the 3-year CTO2Grow Program, aiming for $140-$160 million in annualized savings by the end of 2025 to improve efficiency and streamline operations[226] - Looking ahead to 2024, overall demand is expected to be consistent with 2023, with the fluids and liquids business being the fastest-growing part of the portfolio[227] - Cash flow from operations decreased from $613 million in 2022 to $516 million in 2023, partly due to a $175 million tax deposit made in April 2023[201][331] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate fluctuations, significant foreign currency exchange rates (with 47% of 2023 sales outside the U.S.), and commodity price volatility - The company is exposed to interest rate risk as borrowings under its senior secured credit facilities are at variable rates. As of Dec 31, 2023, a 1/8% change in interest rates would impact annual interest expense by $1.3 million[150] - Foreign exchange risk is significant, with operations in highly inflationary economies like Argentina leading to a remeasurement loss of $23 million in 2023[389] - In Q1 2023, the company entered into cross-currency swaps with a notional amount of $433 million to hedge its net investment in certain Euro-functional currency subsidiaries[395] - The company is exposed to commodity price risk for raw materials like plastic resins and energy products, which it generally acquires at market prices without using financial hedges[403] Item 8. Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2023, including balance sheets, income statements, and cash flows, with an unqualified audit opinion from PricewaterhouseCoopers LLP - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[409] Consolidated Balance Sheet Highlights (As of Dec 31, 2023) | Account | Amount (USD Millions) | | :--- | :--- | | Total Current Assets | $1,963.3 | | Total Assets | $7,200.6 | | Total Current Liabilities | $1,509.0 | | Total Liabilities | $6,651.1 | | Total Stockholders' Equity | $549.5 | Consolidated Statement of Operations Highlights (Year Ended Dec 31, 2023) | Account | Amount (USD Millions) | | :--- | :--- | | Net Sales | $5,488.9 | | Gross Profit | $1,641.3 | | Operating Profit | $754.6 | | Net Earnings from Continuing Operations | $339.3 | | Diluted EPS from Continuing Operations | $2.34 | Consolidated Statement of Cash Flows Highlights (Year Ended Dec 31, 2023) | Account | Amount (USD Millions) | | :--- | :--- | | Net Cash from Operating Activities | $516.2 | | Net Cash used in Investing Activities | $(1,378.2) | | Net Cash from Financing Activities | $755.7 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[746] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified audit opinion - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[747] - Management concluded that internal control over financial reporting was effective as of December 31, 2023. The assessment excluded the newly acquired Liquibox business[749][750] - There were no material changes to internal control over financial reporting during the fourth quarter of 2023[748] Item 9B. Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q4 2023 - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q4 2023[753] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[754] Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement, including adopted Codes of Conduct and Ethics - Most information required for this item is incorporated by reference from the definitive proxy statement for the 2024 Annual Meeting of Stockholders[756] - The company has adopted a Code of Conduct and a Code of Ethics for Senior Financial Executives, which are available on its website[757] Item 11. Executive Compensation Information on director and executive compensation is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement under captions such as 'Director Compensation' and 'Executive Compensation'[758] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement under captions such as 'Beneficial Ownership Table' and 'Equity Compensation Plan Information'[759] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on director independence and related-person transactions is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement under captions related to director independence and related transactions[760] Item 14. Principal Accountant Fees and Services Information on principal independent auditor fees and audit committee pre-approval policies is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement under captions such as 'Principal Independent Auditor Fees'[761] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed with the Form 10-K, including governance documents, material contracts, and certifications - This section contains the index to Consolidated Financial Statements and Schedule II — Valuation and Qualifying Accounts and Reserves[762] - A comprehensive list of exhibits filed with the report is provided, including agreements related to debt, acquisitions, and executive compensation[764][765][766] Item 16. Form 10-K Summary This item is not applicable to the company - Not applicable[770]