Executive Summary

Business. The Company's operations are organized into four operating segments: Consumer Packaging International, Consumer Packaging North America, Engineered Materials and Health, Hygiene & Specialties, in order to better align our various businesses for future growth. The structure is designed to align us with our customers, provide improved service, drive future growth, and to facilitate synergies realization. The Consumer Packaging International segment primarily consists of containers, closures, dispensing systems, pharmaceutical devices and packaging, and technical components. The Consumer Packaging North America segment primarily consists of containers, foodservice items, closures, overcaps, bottles, and tubes. The Engineered Materials segment primarily consists of polyethylene-based film products, can liners, and specialty coated and laminated products. The Health, Hygiene & Specialties segment primarily consists of nonwoven specialty materials, tapes and adhesives, and films used in hygiene, infection prevention, personal care, industrial, construction, and filtration applications.

Acquisitions and Dispositions. Our acquisition strategy is focused on improving our long-term financial performance, enhancing our market positions, and expanding our existing and complementary product lines. We seek to obtain businesses for attractive post-synergy multiples, creating value for our stockholders from synergy realization, leveraging the acquired products across our customer base, creating new platforms for future growth, and assuming best practices from the businesses we acquire. While the expected benefits on earnings is estimated at the commencement of each transaction, once the execution of the plan and integration occur, we are generally unable to accurately estimate or track what the ultimate effects have been due to system integrations and movements of activities to multiple facilities. As historical business combinations and restructuring plans have not allowed us to accurately separate realized synergies compared to what was initially identified, we estimate the synergy realization based on the overall segment profitability post integration.

U.S. Flexible Packaging Converting Disposition

In November 2020, the Company completed the sale of its U.S. Flexible Packaging Converting business which was primarily operated in its Engineered Materials reporting segment for net proceeds of $140 million. The sold business recorded $203 million in net sales during fiscal 2020.

Raw Material Trends. Our primary raw material is plastic resin. Due to differences in the timing of passing through resin cost changes to our customers on escalator/de-escalator programs, segments are negatively impacted in the short term when plastic resin costs increase and are positively impacted when plastic resin costs decrease. This timing lag and competitor behaviors related to passing through raw material cost changes could affect our results as plastic resin costs fluctuate. In addition, we use other materials such as butyl rubber, adhesives, paper and packaging materials, linerboard, rayon, polyester fiber, and foil, in various manufacturing processes. These raw materials are available from multiple sources and we purchase from a variety of global suppliers. While temporary shortages of raw materials can occur, we expect to continue to successfully manage raw materials supplies without significant supply interruptions.

Outlook. The Company is affected by general economic and industrial growth, plastic resin availability and affordability, and general industrial production. Covid-19 pandemic has resulted in both advantaged and disadvantage products within all segments. Our results are affected by both the duration certain products remain advantaged and timing of when disadvantage products normalize. Our business has both geographic and end market diversity, which reduces the effect of any one of these factors on our overall performance. Our results are affected by our ability to pass through raw material and other cost changes to our customers, improve manufacturing productivity and adapt to volume changes of our customers. By providing advantaged products in targeted markets, we continue to believe our underlying long-term demand fundamental in all divisions will remain strong as we focus on delivering protective solutions that enhance consumer safety and execute on the Company's mission of "Always Advancing to Protect What's Important." For fiscal 2021, we project cash flow from operations between $1,625 to $1,525 million and $650 million of capital spending.


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Results of Operations

Comparison of the Quarterly Period Ended January 2, 2021 (the "Quarter") and the Quarterly Period Ended December 28, 2019 (the "Prior Quarter")

The Company's U.S. based results for the Quarter and Prior Quarter are based on a fourteen and thirteen week period, respectively. Business integration expenses consist of restructuring and impairment charges, acquisition related costs, and other business optimization costs. Tables present dollars in millions.

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