see-10q_20160331.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

Or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-12139

 

SEALED AIR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

65-0654331

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

8215 Forest Point Boulevard

Charlotte, North Carolina

 

28273

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (201) 791-7600

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

 

 

 

 

 

 

 

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

There were 197,142,884 shares of the registrant’s common stock, par value $0.10 per share, issued and outstanding as of April 29, 2016.

 

 

 

 

 


 

 

 

 

Page

          PART I. FINANCIAL INFORMATION

 

 

Condensed Consolidated Balance Sheets — March 31, 2016 and December 31, 2015

 

5

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015

 

6

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015

 

7

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015

 

8

Notes to Condensed Consolidated Financial Statements

 

9

Note 1 Organization and Basis of Presentation

 

9

Note 2 Recently Issued Accounting Standards

 

11

Note 3 Divestitures

 

13

Note 4 Segments

 

14

Note 5 Inventories

 

16

Note 6 Property Plant and Equipment, net

 

16

Note 7 Goodwill and Identifiable Assets

 

17

Note 8 Accounts Receivable Securitization Programs

 

18

Note 9 Restructuring and Relocation Activities

 

19

Note 10 Debt and Credit Facilities

 

21

Note 11 Derivatives and Hedging Activities

 

22

Note 12 Fair Value Measurements and Other Financial Instruments

 

25

Note 13 Defined Benefit Pension Plans and Other Post-Employment Benefit Plans

 

27

Note 14 Income Taxes

 

28

Note 15 Commitments and Contingencies

 

28

Note 16 Stockholders’ Equity

 

29

Note 17 Accumulated Other Comprehensive Income (Loss)

 

32

Note 18 Other Income (Expense), net

 

33

Note 19 Net Earnings Per Common Share

 

34

Item 2.      Management’s Discussion and Analysis of Financial Condition And Results of Operation

 

35

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

 

51

Item 4.      Controls and Procedures

 

53

          PART II.  OTHER INFORMATION

 

 

Item 1.      Legal Proceedings

 

54

Item 1A.   Risk Factors

 

54

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds

 

54

Item 6.      Exhibits

 

56

Signature

 

57

 

 

 

 

 

 

 

2


 

Cautionary Notice Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking statements so that investors can better understand a company’s future prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expected future operating results, expectations regarding the results of restructuring and other programs, anticipated levels of capital expenditures and expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations and proceedings.

Please refer to Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Non-U.S. GAAP Information

We present financial information that conforms to Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). We also present financial information that does not conform to U.S. GAAP, which we refer to as non-U.S. GAAP, as our management believes it is useful to investors. In addition, non-U.S. GAAP measures are used by management to review and analyze our operating performance and, along with other data, as internal measures for setting annual budgets and forecasts, assessing financial performance, providing guidance and comparing our financial performance with our peers. The non-U.S. GAAP information has limitations as an analytical tool and should not be considered in isolation from or as a substitute for U.S. GAAP information. It does not purport to represent any similarly titled U.S. GAAP information and is not an indicator of our performance under U.S. GAAP. Non-U.S. GAAP financial measures that we present may not be comparable with similarly titled measures used by others. Investors are cautioned against placing undue reliance on these non-U.S. GAAP measures. Further, investors are urged to review and consider carefully the adjustments made by management to the most directly comparable U.S. GAAP financial measure to arrive at these non-U.S. GAAP financial measures. See Note 4, “Segments” and our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) for reconciliations of our non-U.S. GAAP financial measures to U.S. GAAP.

Our management may assess our financial results both on a U.S. GAAP basis and on a non-U.S. GAAP basis. Non-U.S. GAAP financial measures provide management with additional means to understand and evaluate the core operating results and trends in our ongoing business by eliminating certain one-time expenses and/or gains (which may not occur in each period presented) and other items that management believes might otherwise make comparisons of our ongoing business with prior periods and peers more difficult, obscure trends in ongoing operations or reduce management’s ability to make useful forecasts.

Our non-U.S. GAAP financial measures may also be considered in calculations of our performance measures set by the Organization and Compensation Committee of our Board of Directors for purposes of determining incentive compensation. The non-U.S. GAAP financial metrics mentioned above exclude items that we consider as unusual or special items. We evaluate unusual or special items on an individual basis. Our evaluation of whether to exclude an unusual or special item for purposes of determining our non-U.S. GAAP financial measures considers both the quantitative and qualitative aspects of the item, including among other things (i) its nature, (ii) whether or not it relates to our ongoing business operations, and (iii) whether or not we expect it to occur as part of our normal business on a regular basis.

We also present our adjusted income tax rate or provision (“Adjusted Tax Rate”). The Adjusted Tax Rate is a Non-U.S. GAAP measure of our U.S. GAAP effective tax rate, adjusted to exclude the tax impact from the special items that are excluded from our Adjusted Net Earnings and Adjusted EPS metrics as well as expense or benefit from any special taxes or tax benefits. The Adjusted Tax Rate is an indicator of the taxes on our core business. The tax situation and effective tax rate in the specific countries where the excluded or special items occur will determine the impact (positive or negative) to the Adjusted Tax Rate.

3


 

In our “Net Sales by Geographic Region,” “Components of Change in Net Sales by Segment” and in some of the discussions and tables that follow, we exclude the impact of foreign currency translation when presenting net sales information, which we define as “constant dollar.” Changes in net sales excluding the impact of foreign currency translation are non-U.S. GAAP financial measures. As a worldwide business, it is important that we take into account the effects of foreign currency translation when we view our results and plan our strategies. Nonetheless, we cannot control changes in foreign currency exchange rates. Consequently, when our management looks at our financial results to measure the core performance of our business, we may exclude the impact of foreign currency translation by translating our current period results at prior period foreign currency exchange rates. We also may exclude the impact of foreign currency translation when making incentive compensation determinations. As a result, our management believes that these presentations are useful internally and may be useful to investors.

We also exclude the impact of divestitures and acquisitions when comparing results to prior periods.  Changes in operating results excluding the impact of divestitures are non-U.S. GAAP financial measures; however, we feel it is important to exclude the impact of divestitures on year-over-year results in order to evaluate performance on a more comparable basis.

 

4


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

(In millions, except share data)

 

March 31,

2016

(unaudited)

 

 

December 31,

2015(1)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

315.7

 

 

$

358.4

 

Trade receivables, net of allowance for doubtful accounts of $24.6 in 2016 and $24.9 in 2015

 

 

787.6

 

 

 

758.4

 

Income tax receivables

 

 

25.3

 

 

 

22.7

 

Other receivables

 

 

141.8

 

 

 

124.8

 

Inventories, net of inventory reserves of $25.6 in 2016 and $21.9 in 2015

 

 

736.5

 

 

 

660.8

 

Assets held for sale

 

 

3.5

 

 

 

10.3

 

Prepaid expenses and other current assets

 

 

308.7

 

 

 

280.2

 

Total current assets

 

 

2,319.1

 

 

 

2,215.6

 

Property and equipment, net

 

 

954.4

 

 

 

930.7

 

Goodwill

 

 

2,929.4

 

 

 

2,909.5

 

Intangible assets, net

 

 

783.6

 

 

 

784.3

 

Non-current deferred taxes

 

 

201.6

 

 

 

204.7

 

Other non-current assets(1)

 

 

351.2

 

 

 

345.2

 

Total assets

 

$

7,539.3

 

 

$

7,390.0

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

353.1

 

 

$

241.9

 

Current portion of long-term debt

 

 

61.6

 

 

 

46.6

 

Accounts payable

 

 

719.7

 

 

 

675.3

 

Accrued restructuring costs

 

 

61.2

 

 

 

53.6

 

Other current liabilities

 

 

704.3

 

 

 

789.7

 

Total current liabilities

 

 

1,899.9

 

 

 

1,807.1

 

Long-term debt, less current portion(1)

 

 

4,280.0

 

 

 

4,266.8

 

Non-current deferred taxes

 

 

63.6

 

 

 

75.0

 

Other non-current liabilities

 

 

734.7

 

 

 

714.0

 

Total liabilities

 

 

6,978.2

 

 

 

6,862.9

 

Commitments and contingencies - Note 15

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.10 par value per share, 50,000,000 shares authorized; no shares issued in

   2016 and 2015

 

 

 

 

 

 

Common stock, $0.10 par value per share, 400,000,000 shares authorized; shares issued:

   227,151,277 in 2016 and 225,625,636 in 2015; shares outstanding: 197,157,078 in 2016 and

   196,013,299 in 2015

 

 

22.7

 

 

 

22.6

 

Additional paid-in capital

 

 

1,936.6

 

 

 

1,915.0

 

Retained earnings

 

 

740.8

 

 

 

675.2

 

Common stock in treasury, 29,994,199 shares in 2016 and 29,612,337 shares in 2015

 

 

(1,284.7

)

 

 

(1,265.7

)

Accumulated other comprehensive loss, net of taxes

 

 

(854.3

)

 

 

(820.0

)

Total stockholders’ equity

 

 

561.1

 

 

 

527.1

 

Total liabilities and stockholders’ equity

 

$

7,539.3

 

 

$

7,390.0

 

 

See accompanying notes to condensed consolidated financial statements.

 

(1)

As of January 1, 2016, we have adopted ASU 2015-03 and ASU 2015-15 with retrospective application. This resulted in a reclassification from other non-current assets to long-term debt, less current portion for debt issuance costs. Refer to Note 2, “Recently Issued Accounting Standards” of the notes to the condensed consolidated financial statements for further details.

5


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

 

 

 

Three Months Ended

 

 

 

March 31,

(unaudited)

 

(In millions, except share data)

 

2016

 

 

2015

 

Net sales

 

$

1,590.6

 

 

$

1,746.4

 

Cost of sales

 

 

1,001.3

 

 

 

1,096.8

 

Gross profit

 

 

589.3

 

 

 

649.6

 

Selling, general and administrative expenses

 

 

396.0

 

 

 

427.8

 

Amortization expense of intangible assets acquired

 

 

21.4

 

 

 

22.6

 

Stock appreciation rights expense

 

 

0.3

 

 

 

2.9

 

Restructuring and other charges

 

 

 

 

 

12.7

 

Operating profit

 

 

171.6

 

 

 

183.6

 

Interest expense

 

 

(54.7

)

 

 

(58.5

)

Foreign currency exchange (loss) gain related to Venezuelan subsidiaries

 

 

(1.7

)

 

 

0.8

 

Other (expense) income , net

 

 

(2.9

)

 

 

5.4

 

Earnings before income tax provision

 

 

112.3

 

 

 

131.3

 

Income tax provision

 

 

20.4

 

 

 

34.1

 

Net earnings available to common stockholders

 

$

91.9

 

 

$

97.2

 

Net earnings per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.47

 

 

$

0.46

 

Diluted

 

$

0.46

 

 

$

0.46

 

Dividends per common share

 

$

0.13

 

 

$

0.13

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

195.2

 

 

 

208.9

 

Diluted

 

 

197.0

 

 

 

211.7

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

6


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

 

 

 

Three Month Ended

 

 

 

March 31,

(unaudited)

 

(In millions)

 

2016

 

 

2015(1)

 

Net earnings available to common stockholders

 

$

91.9

 

 

$

97.2

 

Other comprehensive income, net of taxes:

 

 

 

 

 

 

 

 

Recognition of deferred pension items, net of taxes of $(0.6) for

   the three months ended March 31, 2016 and $(0.8) for the

   three months ended March 31, 2015

 

 

1.7

 

 

 

2.0

 

Unrealized losses on derivative instruments for net investment

   hedge,  net of taxes of $14.0 for the three months ended

   March 31, 2016 and $4.9 for the three months ended March 31, 2015

 

 

(22.6

)

 

 

(8.0

)

Unrealized losses on derivative instruments for cash flow hedge,

   net of taxes of $1.9 for the three months ended

   March 31, 2016 and $(0.1) for the three months ended

   March 31, 2015

 

 

(4.1

)

 

 

2.6

 

Foreign currency translation adjustments, net of taxes of $2.1 for

   the three months ended March 31, 2016 and $4.0 for the three months

   ended March 31, 2015

 

 

(9.3

)

 

 

(58.1

)

Other comprehensive (loss), net of taxes

 

 

(34.3

)

 

 

(61.5

)

Comprehensive income, net of taxes

 

$

57.6

 

 

$

35.7

 

 

See accompanying notes to condensed consolidated financial statements.

 

(1)

For the three months ended March 31, 2015, certain foreign currency translation adjustments were misclassified on the Condensed Consolidated Statement of Comprehensive Income in deferred pension items and unrealized losses on cash flow hedge derivative instruments. See Note 1 “Organization and Basis of Presentation” under the heading “Reclassifications and Revisions” for further discussion of the revisions.

7


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 

 

 

Three Months Ended

 

 

 

March 31,

(unaudited)

 

(In millions)

 

2016

 

 

2015(1)

 

Net earnings available to common stockholders

 

$

91.9

 

 

$

97.2

 

Adjustments to reconcile net earnings to net cash  provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

49.1

 

 

 

54.8

 

Share-based incentive compensation

 

 

12.6

 

 

 

18.3

 

Profit sharing expense

 

 

6.8

 

 

 

9.8

 

Loss on debt redemption and refinancing activities

 

 

 

 

 

0.5

 

Remeasurement loss (gain) related to Venezuelan subsidiaries

 

 

1.7

 

 

 

(0.8

)

Provisions for bad debt

 

 

1.0

 

 

 

2.1

 

Provisions for inventory obsolescence

 

 

3.6

 

 

 

3.2

 

Deferred taxes, net

 

 

(11.4

)

 

 

16.0

 

Excess tax benefit from stock based compensation

 

 

(6.8

)

 

 

 

Net (gain) on disposals of property and equipment and other

 

 

 

 

 

(3.3

)

Net loss on sale of business

 

 

2.5

 

 

 

 

Other non-cash items

 

 

3.7

 

 

 

(0.1

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade receivables, net

 

 

(22.3

)

 

 

8.5

 

Inventories

 

 

(65.1

)

 

 

(83.8

)

Accounts payable

 

 

39.0

 

 

 

75.0

 

Settlement agreement and related items

 

 

 

 

 

235.2

 

Other assets and liabilities

 

 

(102.3

)

 

 

(107.5

)

Net cash  provided by operating activities

 

 

4.0

 

 

 

325.1

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(51.8

)

 

 

(20.7

)

Proceeds, net from sale of business

 

 

4.2

 

 

 

 

Businesses acquired in purchase transactions, net of cash and cash equivalents acquired

 

 

 

 

 

(8.5

)

Proceeds from sales of property, equipment and other assets

 

 

1.3

 

 

 

25.4

 

Settlement of foreign currency forward contracts

 

 

(22.4

)

 

 

32.0

 

Net cash (used in) provided by investing activities

 

 

(68.7

)

 

 

28.2

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from (re-payments of) borrowings

 

 

106.8

 

 

 

(39.1

)

Excess tax benefit from stock based compensation

 

 

6.8

 

 

 

 

Cash used as collateral on borrowing arrangements

 

 

(0.2

)

 

 

(14.2

)

Dividends paid on common stock

 

 

(26.2

)

 

 

(27.5

)

Acquisition of common stock for tax withholding obligations under our Omnibus stock plan and 2005

   Contingent Stock Plan

 

 

(22.3

)

 

 

(6.2

)

Repurchases of common stock

 

 

(32.0

)

 

 

(69.2

)

Net cash provided by (used in) financing activities

 

 

32.9

 

 

 

(156.2

)

Effect of foreign currency exchange rate changes on cash and cash equivalents

 

 

(10.9

)

 

 

2.5

 

Balance, beginning of period

 

 

358.4

 

 

 

286.4

 

Net change during the period

 

 

(42.7

)

 

 

199.6

 

Balance, end of period

 

$

315.7

 

 

$

486.0

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Interest payments, net of amounts capitalized

 

$

48.9

 

 

$

58.7

 

Income tax payments

 

$

29.6

 

 

$

23.8

 

Stock appreciation rights payments (less amounts included in restructuring payments)

 

$

0.1

 

 

$

3.7

 

Restructuring payments including associated costs

 

$

18.7

 

 

$

22.0

 

Non-cash items:

 

 

 

 

 

 

 

 

Transfers of shares of our common stock from treasury for our 2015 and 2014 profit-sharing  plan

   contributions

 

$

37.6

 

 

$

36.7

 

 

See accompanying notes to condensed consolidated financial statements.

 

(1)

For the three months ended March 31, 2015, certain amounts related to foreign currency gains and losses, including the remeasurement loss related to Venezuelan subsidiaries in 2015, and the settlement of foreign currency forward contracts were misclassified. Additional revisions were made to the Condensed Consolidated Balance Sheets for the three months ended March 31, 2015. As a result, corresponding changes were made on the Condensed Consolidated Statement of Cash Flows. See Note 1 “Organization and Basis of Presentation” under the heading “Reclassifications and Revisions” for further discussion of the revisions.

 

8


 

SEALED AIR CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (unaudited)

 

 

Note 1 Organization and Basis of Presentation

Organization

We are a global leader in food safety and security, facility hygiene and product protection. We serve an array of end markets including food and beverage processing, food service, retail, healthcare and industrial, and commercial and consumer applications. Our focus is on achieving quality sales growth through leveraging our geographic footprint, technological know-how and leading market positions to bring measurable, sustainable value to our customers and investors.

We conduct substantially all of our business through three wholly-owned subsidiaries, Cryovac, Inc., Sealed Air Corporation (US) and Diversey, Inc. Throughout this report, when we refer to “Sealed Air,” the “Company,” “we,” “our,” or “us,” we are referring to Sealed Air Corporation and all of our subsidiaries, except where the context indicates otherwise.

Basis of Presentation

Our Condensed Consolidated Financial Statements include all of the accounts of the Company and our subsidiaries. We have eliminated all significant intercompany transactions and balances in consolidation. In management’s opinion, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of our Condensed Consolidated Balance Sheets as of March 31, 2016 and our Condensed Consolidated Statement of Operations for the three months ended March 31, 2016 and 2015 have been made. The results set forth in our Condensed Consolidated Statement of Operations for the three months ended March 31, 2016 and in our Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year. All amounts are in millions, except per share amounts, and approximate due to rounding. Some prior period amounts have been reclassified to conform to the current year presentation. These reclassifications, individually and in the aggregate, did not have a material impact on our condensed consolidated financial condition, results of operations or cash flows.

Our Condensed Consolidated Financial Statements were prepared in accordance with the interim reporting requirements of the SEC. As permitted under those rules, annual footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ from these estimates.

We are responsible for the unaudited Condensed Consolidated Financial Statements and notes included in this report. As these are condensed financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as filed with the SEC on February 22, 2016 (“2015 Form 10-K”) and with the information contained in other publicly-available filings with the SEC.

As of April 15, 2015, we realigned our regional organization. There was no change to our previously reported Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Stockholders’ Equity or Consolidated Statements of Cash Flows due to our change in regional organization.  Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further details on the realignment.

Reclassifications and Revisions

For the three months ended March 31, 2015, certain amounts related to foreign currency gains and losses, including the remeasurement loss related to Venezuelan subsidiaries in 2015, and the settlement of foreign currency forward contracts were misclassified on the Condensed Consolidated Statement of Cash Flows.  The reclassification of these items in the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2015 resulted in an increase in cash provided by operating activities of $6.1 million, an increase to cash provided by investing activities of $32.0 million, and a decrease of $38.1 million due to the effect of foreign currency exchange rate changes on cash.  

9


 

Additionally, for the three months ended March 31, 2015, certain amounts related to compensating balance arrangements were misclassified in the Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Cash Flows. The revision of these items resulted in a decrease of $50.1 million in cash and an increase in other current assets ($23.9 million) and other non-current assets ($26.2 million) related to cash deposits held in compensating balance arrangements for certain short-term borrowing agreements on the Condensed Consolidated Balance Sheet. The revision of these items on the Condensed Consolidated Statement of Cash Flows resulted in an increase to cash provided by financing activities of $14.2 million.

For the three months ended March 31, 2015, foreign currency translation adjustments were misclassified on the Condensed Consolidated Statement of Comprehensive Income (Loss) in deferred pension items and unrealized losses on cash flow hedge derivative instruments.  The reclassification of these items in the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2015 resulted in a decrease in recognition of deferred pension items of $15.3 million, an increase in unrealized losses on derivative instruments for cash flow hedge of $0.6 million, and an increase in the foreign currency translation adjustments of $14.7 million. These classification adjustments did not result in a change to total stockholder’s equity.

Impact of Inflation and Currency Fluctuation

Venezuela

Economic and political events in Venezuela have continued to expose us to heightened levels of foreign currency exchange risk.  Accordingly, Venezuela has been designated a highly inflationary economy under U.S. GAAP, and the U.S. dollar replaced the bolivar fuerte as the functional currency for our subsidiaries in Venezuela. All bolivar-denominated monetary assets and liabilities are re-measured into U.S. dollars using the current exchange rate available to us, and any changes in the exchange rate are reflected in foreign currency exchange gains and losses related to our Venezuelan subsidiaries on the Condensed Consolidated Statements of Operations.

2015 Activity  

In February 2015, the Venezuelan government announced a new foreign exchange platform called the Marginal Currency System or SIMADI.  The SIMADI basically replaced the SICAD 2 rate.  When this market opened on February 12, 2015 the SIMADI rate was 170.0390 and then at March 31, 2015 it was 192.9537.  The SICAD 1 and the SICAD 2 were merged into the SICAD.  The opening rate was 12 for the SICAD. In addition, the CENCOEX will continue and provide preferential treatment for certain import operations such as food and medicines.  

Since these changes were announced by the Venezuelan government, the new SIMADI market has had very little activity and companies have not been able to access this market to obtain U.S. dollars.  In addition, the SICAD rate which is established via auctions has had no auctions held since October 2014.  However, in June 2015 an auction was held for the automotive parts and school supplies industries.

Therefore, in 2015 there were three legal mechanisms to exchange bolivars for US dollars:

 

·

CENCOEX at the official rate at 6.3;

 

·

SICAD auction process at the awarded exchange rate (opening rate at 12); and

 

·

SIMADI at the negotiated rate (rate of 192.9537 at March 31, 2015).

During the three months ended March 31, 2015, we evaluated which legal mechanisms were available to each Venezuelan subsidiary to access U.S. dollars and also estimated the excess cash position over the next 18 months. We concluded that as of March 31, 2015 the excess cash position for our Venezuelan subsidiaries would be remeasured at the SIMADI rate, which was 192.9537 at March 31, 2015, since the SICAD 2 rate which was 49.9883 at December 31, 2014 (and used for the December 31, 2014 remeasurement) no longer existed at March 31, 2015.   For the remaining Bolívar cash balance and all other Bolívar denominated monetary assets and liabilities, the Company determined that it would continue to remeasure these items at the CENCOEX official rate of 6.3.  As a result of this evaluation, the Company reported a remeasurement net gain of $0.8 million for the three months ended March 31, 2015.  

During the remainder of 2015, we continued to evaluate which legal mechanisms were available to our Venezuelan subsidiaries to access U.S. dollars.  Starting June 30, 2015 through to December 31, 2015, we concluded that we would use the SIMADI rate to remeasure our bolivar denominated monetary assets and liabilities since it was our only legally available option and at that time, our intent on a go-forward basis to utilize this market to settle any future transactions based on the then current facts and circumstances. The SIMADI rate as of December 31, 2015 was 198.6986. During 2015, the Company did not receive U.S. dollars via the CENCOEX

10


 

official rate of 6.3.  We expected that we would only have limited access to the CENCOEX market to settle certain past transactions.  However, if the option did become available to us to use the CENCOEX in the future, the Company would consider this further.  In addition, there were no SICAD auctions for the food or chemical industries as of December 31, 2015.  During 2015, we were only able to access the SIMADI market and only received minimal amounts of U.S. dollars.  

2016 Activity

On February 17, 2016, the Venezuelan government made further changes to the exchange rates including a further devaluation and on March 9, 2016 published in Exchange Agreement No. 35 further rules governing foreign exchange transactions which were effective March 10, 2016.  This includes the following key changes:

 

·

The preferential rate for essential goods and services was changed from 6.3 to 10 bolivars per U.S. dollars and is no longer called CENCOEX but is now DIPRO;

 

·

The SICAD rate was eliminated which reduced the number of legal mechanisms from three down to only two; and

 

·

Eliminated the SIMADI rate which was replaced by the DICOM rate which will be allowed to float freely beginning at a rate of approximately 203 bolivars to U.S. dollar.

At March 31, 2016, we evaluated which legal mechanisms were available to our Venezuelan subsidiaries to access U.S. dollars.  As noted above, the SIMADI rate was replaced with the DICOM rate.  We concluded that we will use the DICOM rate to remeasure our bolivar denominated monetary assets and liabilities since it is our only legally available option and our intent on a go-forward basis to utilize this market to settle any future transactions based on the current facts and circumstances. The DICOM rate as of March 31, 2016 was 272.9123.

During the first quarter of 2016, we were only able to access the SIMADI market (during the period the market was available) and only received minimal amounts of U.S. dollars.  We did not receive any U.S. dollars via the CENCOEX (at an official rate of 6.3) or the DIPRO (at an official rate of 10.0).  We expect that we will only have limited access to the DIPRO market to settle certain past transactions.  However, if the option becomes available to us to use the DIPRO in the future, the Company will consider this further.  For any U.S. dollar denominated monetary asset or liability, such amounts do not get remeasured at month-end since it is already an asset or liability denominated in U.S. dollars.  As a result of this evaluation, the Company reported a remeasurement loss of $1.7 million for the three months ended March 31, 2016.  We will continue to evaluate each reporting period the appropriate exchange rate to remeasure our financial statements based on the facts and circumstances at that time.

For the three months ended March 31, 2016, less than 1% of our consolidated net sales and operating income were derived from our businesses in Venezuela. As of March 31, 2016, we had net assets of $4 million in Venezuela, which included cash and cash equivalents of $1 million. Also, as of March 31, 2016, our Venezuelan subsidiaries had a negative cumulative translation adjustment balance of $46 million.

The Company is currently evaluating options regarding the future operations of its Venezuelan subsidiaries.

Note 2 Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In November 2015, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2015-17 Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). This ASU will simplify the presentation of deferred tax assets and liabilities by requiring companies to classify all deferred tax as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 31, 2016 and interim periods within those annual periods. However, as early adoption is available, we have adopted this standard as of December 31, 2015 with retrospective application.

In September 2015, the FASB issued ASU 2015-16 – Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.  This ASU requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustments amounts are determined.  The ASU also requires that in the same period, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  The amendments in ASU 2015-16 are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years and will be applied prospectively for adjustments to provisional amounts that occur after that date.  The impact of ASU 2015-16 will depend on any future events whereby we have any business combinations and any adjustments to the provisional amounts identified during the measurement period are recorded.

11


 

In August 2015, the FASB issued ASU 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient (“ASU 2015-12”). This ASU designates contract value as the only required measure for fully benefit-responsive investment contracts; simplifies the investment disclosure requirements under Accounting Standards Codification (“ASC”) topic 820 for fair value, and topics 960, 962 and 965 for employee benefit plans; and provides a similar measurement date practical expedient for employee benefit plans. The amendments in ASU 2015-12 were effective as of January 1, 2016. We do not expect ASU 2015-12 to have a material impact on our financial statements.

In April 2015, the FASB issued ASU 2015-03 Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”).  This ASU will simplify the presentation of debt issuance costs.  It will require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU 2015-15, Interest—Imputation of Interest (Subtopic 835-30), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements — Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 Emerging Issues Task Forces (“EITF”) Meeting (SEC Update) (“ASU 2015-15”). This ASU clarifies that as line of credit arrangements were not specifically discussed in ASU 2015-03, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement.  ASU 2015-15 should be adopted concurrent with the adoption of ASU 2015-03.  The amendments in ASU 2015-03 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015.  We have adopted this standard as of January 1, 2016 with retroactive application. Adoption of ASU 2015-03 and ASU 2015-15 resulted in a decrease in other assets of $35.9 million and a decrease in long-term debt of $35.9 million as of December 31, 2015 on the Condensed Consolidated Balance Sheet.

In April 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2015-05”).  This ASU will help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement.  It provides guidance about whether a cloud computing arrangement includes a software license.  The amendments in ASU 2015-05 have been adopted prospectively. The adoption of ASU 2015-05 does not have a material impact on the financial statements.

Recently Issued Accounting Standards

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted. We are currently in the process of evaluating this new standard update.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASU 2016-02”). This ASU requires an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. The amendments in ASU 2016-02 are effective for fiscal years ending after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The updated guidance requires a modified retrospective adoption. We are currently in the process of evaluating this new standard update.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”).  This ASU requires equity investments except those under the equity method of accounting to be measured at fair value with the changes in fair value recognized in net income.  The amendment simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. In addition, it also requires enhanced disclosures about investments.  The amendments in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application for certain provisions is allowed but early adoption of the amendments is not permitted.  An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We are currently in the process of evaluating this new standard update.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”), which applies to inventory valued at first-in, first-out (FIFO) or average cost.  ASU 2015-11 requires inventory to be measured at the lower of cost and net realizable value, rather than at the lower of cost or market.  ASU 2015-11 is effective on a prospective basis for annual periods, including interim reporting periods within those periods, beginning after December 15, 2016.  We are currently in the process of evaluating this new standard update.

12


 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). Previous revenue recognition guidance in U.S. GAAP comprised broad revenue recognition concepts together with numerous revenue requirements for particular industries or transactions, which sometimes resulted in different accounting for economically similar transactions. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principal, five steps are required to be applied. In addition, ASU 2014-09 expands and enhances disclosure requirements which require disclosing sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This includes both qualitative and quantitative information. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” (“ASU 2015-14”). The amendments in ASU 2015-14 delay the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017 and allow early adoption as of the original public entity effective date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), (“ASU 2016-08”). This ASU clarifies the implementation guidance on principal versus agent considerations. The updated guidance improves the understandability of determining whether an entity is a principal or agent, the nature of the good or service, and involvement of other parties in a sale. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”). ASU 2016-10 clarifies two aspects of Topic 606: identifying performance obligation and the licensing implementation guidance, while retaining the related principles for those areas.  The amendments in ASU 2016-08 and ASU 2016-10 are effective in conjunction with ASU 2015-14. We are currently in the process of evaluating this new standard update.

Note 3 Divestitures

Sale of North American foam trays and absorbent pads business

On April 1, 2015, we completed the sale of our North American foam trays and absorbent pads business to NOVIPAX, a portfolio company of Atlas Holdings LLC, for net proceeds of $76 million, net of certain purchase price adjustments of $6 million and subject to final purchase price adjustment. In 2015, we recorded a $27 million pre-tax gain on the sale of business which was reflected in our Condensed Consolidated Statement of Operations.  There was no impact to the Condensed Consolidated Statement of Operations for the three months ended March 31, 2016 or March 31, 2015 due to this disposition.

The decision to sell this business was consistent with the Company's overall strategy to focus on innovation and differentiation in its portfolio of products within the flexible packaging industry. The sale included our manufacturing facilities in Paxinos and Reading, PA, Indianapolis, IN, Rockingham, NC, and Grenada, MS.

The North American foam trays and absorbent pads business was part of the Company’s Food Care division.

For the three months ended March 31, 2015, the North American foam trays and absorbent pads businesses contributed approximately $53 million of net sales and $10 million of earnings before income taxes, which excludes certain allocated costs, including corporate support services, for which the Company would normally include in measuring its performance.

Sale of European food trays business

On November 1, 2015, we completed the sale of our European food trays business to Faerch Plast A/S, a European food packaging solutions provider, for net proceeds at that time of €18 million euros or approximately $19 million, net of certain purchase price adjustments of €2 million euros or approximately $2 million and subject to final purchase price adjustments. The net proceeds excluded contingent consideration which will be received if certain performance targets are met. This transaction follows the sale of our North American foam trays and absorbent pads business in April 2015 and is aligned with our continued commitment to a disciplined approach to portfolio management strategy. The European sale included the manufacturing facilities in Poole, UK and Bunol, Spain.

In the Condensed Consolidated Statement of Operations for the three months ended March 31, 2016 we recorded an additional $2 million pre-tax loss on the sale of business primarily due to a reduction in the net proceeds that occurred during the three months ended March 31, 2016.  This resulted in cumulative net proceeds of €16 million euros or approximately $17 million which is still subject to final purchase price adjustments.

The European food trays business was part of the Company’s Food Care division.

13


 

For the three months ended March 31, 2015, the European food trays business contributed approximately $14 million of net sales and $2 million of earnings from continuing operations before income tax provision, respectively, which excludes certain allocated costs, including corporate support services for which the Company would normally include in measuring its performance.

 

Note 4 Segments

The Company’s segment reporting structure consists of three reportable segments and an “Other” category and is as follows:

 

·

Food Care;

 

·

Diversey Care;

 

·

Product Care; and

 

·

Other (includes Corporate, Medical Applications and New Ventures businesses).

The Company’s Food Care, Diversey Care and Product Care segments are considered reportable segments under FASB ASC Topic 280. Our reportable segments are aligned with similar groups of products. Other includes Corporate and the Medical Applications and New Ventures businesses. Other includes certain costs that are not allocated to the reportable segments, primarily consisting of unallocated corporate overhead costs, including administrative functions and cost recovery variances not allocated to the reportable segments from global functional expenses.

We allocate and disclose depreciation and amortization expense to our segments, although property and equipment, net is not allocated to the segment assets, nor is depreciation and amortization included in the segment performance metric Adjusted EBITDA. We also disclose restructuring and other charges by segment, although these items are not included in the segment performance metric Adjusted EBITDA since restructuring and other charges are categorized as special items as outlined in the table reconciling Non-U.S. GAAP Total Company Adjusted EBITDA to U.S. GAAP net earnings from continuing operations set forth below. The accounting policies of the reportable segments and Other are the same as those applied to the Consolidated Financial Statements.

The following tables show Net Sales and Adjusted EBITDA by our segment reporting structure:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2016

 

 

2015

 

Net Sales:

 

 

 

 

 

 

 

 

Food Care

 

$

764.7

 

 

$

879.8

 

As a % of Total Company net sales

 

 

48.1

%

 

 

50.4

%

Diversey Care

 

 

441.4

 

 

 

467.9

 

As a % of Total Company net sales

 

 

27.8

%

 

 

26.8

%

Product Care(1)

 

 

367.2

 

 

 

379.9

 

As a % of Total Company net sales

 

 

23.1

%

 

 

21.8

%

Total Reportable Segments Net Sales

 

 

1,573.3

 

 

 

1,727.6

 

Other(1)

 

 

17.3

 

 

 

18.8

 

Total Company Net Sales

 

$

1,590.6

 

 

$

1,746.4

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2016

 

 

2015

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

Food Care

 

$

147.8

 

 

$

190.5

 

Adjusted EBITDA Margin

 

 

19.3

%

 

 

21.7

%

Diversey Care

 

 

36.3

 

 

41.1

 

Adjusted EBITDA Margin

 

 

8.2

%

 

 

8.8

%

Product Care(1)

 

77.1

 

 

76.4

 

Adjusted EBITDA Margin

 

 

21.0

%

 

 

20.1

%

Total Reportable Segments Adjusted EBITDA

 

 

261.2

 

 

 

308.0

 

Other(1)

 

 

(18.1

)

 

 

(23.8

)

Non-U.S. GAAP Total Company Adjusted EBITDA

 

$

243.1

 

 

$

284.2

 

Adjusted EBITDA Margin

 

 

15.3

%

 

 

16.3

%

14


 

 

(1)

As of January 1, 2016, our Kevothermal business was moved from Other to our Product Care Segment. This resulted in a reclassification of $2.8 million of net sales and $0.8 million of adjusted EBITDA for the three months ended March 31, 2015.

The following table shows a reconciliation of Total Company Adjusted EBITDA to Net earnings available to common stockholders:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2016

 

 

2015

 

Total Company Adjusted EBITDA

 

$

243.1

 

 

$

284.2

 

Depreciation and amortization (1)

 

 

(63.5

)

 

 

(73.1

)

Special items:

 

 

 

 

 

 

 

 

Accelerated depreciation of non-strategic assets related

   to restructuring programs

 

 

 

 

 

0.6

 

Restructuring and other charges(2)

 

 

 

 

 

(12.7

)

Other restructuring associated costs included in cost of

   sales and selling, general and administrative expenses

 

 

(6.1

)

 

 

(8.6

)

Gain from sale of building in connection with relocation

 

 

 

 

 

3.5

 

SARs

 

 

(0.3

)

 

 

(2.9

)

Foreign currency exchange (loss) gains related to

   Venezuelan subsidiaries

 

 

(1.7

)

 

 

0.8

 

Loss from sale of European food trays business

 

 

(1.6

)

 

 

 

Other special items

 

 

(2.9

)

 

 

(2.0

)

Interest expense

 

 

(54.7

)

 

 

(58.5

)

Income tax provision

 

 

20.4

 

 

 

34.1

 

Net earnings available to common stockholders

 

$

91.9

 

 

$

97.2

 

 

(1)

Depreciation and amortization by segment is as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2016

 

 

2015

 

Food Care

 

$

25.7

 

 

$

28.5

 

Diversey Care

 

 

23.0

 

 

 

26.1

 

Product Care

 

 

9.6

 

 

 

10.1

 

Total reportable segments

 

 

58.3

 

 

 

64.7

 

Other

 

 

5.2

 

 

 

8.4

 

Total Company depreciation and amortization(1)

 

$

63.5

 

 

$

73.1

 

 

 

(1)

Includes share-based incentive compensation of $14.4 million for the three months ended March 31, 2016 and $18.3 million for the three months ended March 31, 2015.

(2)

Restructuring and other charges by segment were as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2016

 

 

2015

 

Food Care

 

$

 

 

$

6.9

 

Diversey Care

 

 

 

 

 

3.2

 

Product Care

 

 

 

 

 

2.6

 

Total reportable segments

 

 

 

 

 

12.7

 

Other

 

 

 

 

 

 

Total Company restructuring and other charges

 

$

 

 

$

12.7

 

 

15


 

Assets by Reportable Segments

The following table shows assets allocated by our segment reporting structure.  Only assets identifiable by segment and reviewed by our chief operating decision maker by segment are allocated by the reportable segment assets, which are trade receivables, net, and finished goods inventory, net.  All other assets are included in “Assets not allocated.”

 

 

 

March 31,

 

 

December 31,

 

(In millions)

 

2016

 

 

2015

 

Assets:

 

 

 

 

 

 

 

 

Trade receivables, net, and finished goods inventories, net

 

 

 

 

 

 

 

 

Food Care

 

$

555.6

 

 

$

522.4

 

Diversey Care

 

 

467.6

 

 

 

440.3

 

Product Care

 

 

230.1

 

 

 

222.0

 

Other

 

 

17.8

 

 

 

12.5

 

Total segments and other

 

 

1,271.1

 

 

 

1,197.2

 

Assets not allocated

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

315.7

 

 

 

358.4

 

Property and equipment, net

 

 

954.4

 

 

 

930.7

 

Goodwill

 

 

2,929.4

 

 

 

2,909.5

 

Intangible assets, net

 

 

783.6

 

 

 

784.3

 

Assets held for sale

 

 

3.5

 

 

 

10.3

 

Other

 

 

1,281.6

 

 

 

1,199.6

 

Total

 

$

7,539.3

 

 

$

7,390.0

 

 

 

Note 5 Inventories

The following table details our inventories:

 

 

 

March 31,

 

 

December 31,

 

(In millions)

 

2016

 

 

2015

 

Inventories:

 

 

 

 

 

 

 

 

Raw materials

 

$

130.8

 

 

$

109.6

 

Work in process

 

$

122.2

 

 

 

112.4

 

Finished goods

 

$

483.5

 

 

 

438.8

 

Total

 

$

736.5

 

 

$

660.8

 

 

Note 6 Property and Equipment, net

The following table details our property and equipment, net:

 

 

 

March 31,

 

 

December 31,

 

(In millions)

 

2016

 

 

2015

 

Land and improvements

 

$

89.0

 

 

$

86.7

 

Buildings

 

 

617.5

 

 

 

602.0

 

Machinery and equipment

 

 

2,177.3

 

 

 

2,141.3

 

Other property and equipment

 

 

131.4

 

 

 

129.1

 

Construction-in-progress

 

 

210.9

 

 

 

190.7

 

Property and equipment, gross

 

 

3,226.1

 

 

 

3,149.8

 

Accumulated depreciation and amortization

 

 

(2,271.7

)

 

 

(2,219.1

)

Property and equipment, net

 

$

954.4

 

 

$

930.7

 

16


 

 

The following table details our interest cost capitalized and depreciation and amortization expense for property and equipment.

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In millions)

 

2016

 

 

2015

 

Interest cost capitalized

 

$

1.6

 

 

$

1.0

 

Depreciation and amortization expense for property and equipment

 

$

27.7

 

 

$

32.2

 

 

Note 7 Goodwill and Identifiable Assets

 

Goodwill

The following table shows our goodwill balances by our segment reporting structure.  We review goodwill for impairment on a reporting unit basis annually during the fourth quarter of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.  As of March 31, 2016, we did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable.

 

(In millions)

 

Food Care

 

 

Diversey Care

 

 

Product Care

 

 

Other

 

 

Total

 

Gross Carrying Value at

   December 31, 2015

 

$

804.3

 

 

$

1,820.9

 

 

$

1,373.7

 

 

$

1.6

 

 

$

4,000.5

 

Accumulated impairment

 

 

(208.0

)

 

 

(883.0

)

 

 

 

 

 

 

 

 

(1,091.0

)

Carrying Value at December 31, 2015

 

$

596.3

 

 

$

937.9

 

 

$

1,373.7

 

 

$

1.6

 

 

$

2,909.5

 

Acquisition method adjustments

 

 

(0.3

)

 

 

 

 

 

 

 

 

 

 

 

(0.3

)

Currency translation

 

 

0.2

 

 

 

19.4

 

 

 

0.7

 

 

 

(0.1

)

 

 

20.2

 

Gross Carrying Value at

   March 31, 2016

 

 

804.2

 

 

 

1,840.3

 

 

 

1,374.4

 

 

 

1.5

 

 

 

4,020.4

 

Accumulated impairment

 

 

(208.0

)

 

 

(883.0

)

 

 

 

 

 

 

 

 

(1,091.0

)

Carrying Value at March 31, 2016

 

$

596.2

 

 

$

957.3

 

 

$

1,374.4

 

 

$

1.5

 

 

$

2,929.4

 

 

 

Identifiable Intangible Assets

The following tables summarize our identifiable intangible assets with definite and indefinite useful lives.  As of March 31, 2016, there were no impairment indicators present.

 

 

 

March 31, 2016

 

 

December 31, 2015

 

 

 

Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

 

Accumulated

 

 

Accumulated

 

 

 

 

 

 

Carrying

 

 

Accumulated

 

 

Accumulated

 

 

 

 

 

(In millions)

 

Value

 

 

Amortization

 

 

Impairment

 

 

Net

 

 

Value

 

 

Amortization

 

 

Impairment

 

 

Net

 

Customer relationships

 

$

861.8

 

 

$

(269.0

)

 

$

(148.9

)

 

$

443.9

 

 

$

846.2

 

 

$

(249.4

)

 

$

(148.9

)

 

$

447.9

 

Trademarks and tradenames

 

 

1.8

 

 

 

(0.6

)

 

 

 

 

 

1.2

 

 

 

1.7

 

 

 

(0.4

)