Good day, ladies and gentlemen, and welcome to the Second Quarter 2015 Sealed Air Earnings Conference Call. My name is Denise, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now turn the conference over to your host for today, Lori Chaitman, Vice President, Investor Relations. Please proceed.

Thank you. And good morning, everyone. Before we begin our call today, I would like to note that we have provided a slide presentation to help guide our discussion. This presentation can be found on today's webcast and can be downloaded from our IR website at sealedair.com. I would like to remind you that statements made during this call stating management's outlook or predictions for the future are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the information in the section entitled Forward-Looking Statements in our earnings release, which applies to this call. Additionally, our future performance may differ due to a number of factors. Many of these factors are listed in our most recent Annual Report on Form 10-K, and as revised and updated on our Quarterly Reports, Form 10-Q, which you can also find on our website. We also discuss financial measures that do not conform to U.S. GAAP. You may find important information on our use of these measures and their reconciliation to U.S. GAAP in the financial tables that we have included in our earnings release. Please note that we will end the call by 11 AM today. Now, I'll turn the call over to Jerome Peribere, our President and CEO. Jerome?

Well, thank you, Lori. And good morning, everyone. Our comments today will focus on the second quarter and our outlook. But before I get started, I want to briefly highlight significant events that have taken place in June and July. First, let me highlight our Analyst Day that took place on June 18. For those of you who couldn't make it, if you haven't done so already, I would encourage you to visit our IR website, download the presentation and listen to the replay. To quickly recap, we outlined our financial and operational objectives for 2018 and our key targets for 2020. We discussed in detail how those objectives and targets will be achieved as we continue executing on our Get Fit and Change the Game strategy. We have executed on many Get Fit programs to-date, but as we discussed at our Analyst Day, we still have more to be done. And we will stay focused on driving profitable growth and margin expansion opportunities. We clearly defined our Change the Game strategy and outlined the investments that we're making in new markets, new business models, and disruptive innovation. You have all heard me say this before, but let me remind you that our Get Fit and Change the Game strategy is not a destination, it is a journey. And that journey is already transforming us into a knowledge-based company with unique knowhow, resolutely dedicated to making our customers win and sharing in the value being created. Second, earlier in June, we completed the refinancing of our 2021 senior notes and issued new U.S. and euro senior notes that extended maturities, increased covenants flexibility, and reduced our annualized interest expense. With the completion of this transaction, we announced a new $1.5 billion share repurchase program on July 15, which reflects our…

Thank you, Jerome. Turning to slide eight, let me walk you through our net sales performance on a year-over-year basis. We delivered $1.8 billion in sales, an increase of 3.3% on an organic basis. Favorable price mix was 2.4%, or $48 million, and volume was up 1%, or $18 million. Unfavorable currency translation had an impact on net sales of $199 million, or 10%, mostly due to the declines in the euro and Russian ruble. Net sales on an as reported basis were down 9.6%. Turning to slide nine, you can see our adjusted EBITDA performance for the quarter and first half of 2015. Adjusted EBITDA increased 8.4% as reported to $308 million, or 17.2% of net sales. For the total company, the increase in adjusted EBITDA was largely due to favorable mix and price cost spread of $58 million. Cost synergies also made a positive contribution of $16 million in the quarter. The North America trays and pads divesture had a $12 million negative comparison for adjusted EBITDA, and unfavorable currency translation was $34 million. Despite currency headwind, we still delivered a 260 basis point improvement in adjusted gross margin and a 280 basis point improvement in adjusted EBITDA margins compared to last year. On an organic basis, our adjusted EBITDA increased 25% as compared to the 2014 results for the same period. Adjusted earnings per share for the quarter was $0.60 as compared to $0.42 in the second quarter last year. Currency negatively impacted EPS by $0.09. The tax rate for the second quarter of 2015 was 29% as compared with 29.5% for the second quarter 2014. In the first quarter 2015, the tax rate was 25%, and we are still anticipating a 25% tax rate for the full year of 2015. The sequential increase from the first…

Sure. Our first question comes from Ghansham Panjabi with Baird. Please proceed. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Hey, guys, good morning.

Good morning, Ghansham.

Good morning. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Can you first off update us on the volume outlook for each of the segments for the back half of the year? On protective packaging, do you think it'll remain down for the rest of the year? Diversey, there seems to be some momentum, should we expect that to continue into the back half? And also in Food, do you see any deviation from the first half volume run rate, anything else that we should think about? Thanks so much.

So, good question, Ghansham. The volumes are there except in Product Care, but this is mostly the results of rationalization. So, what we had is a negative almost 2.5% globally in the first quarter in Product Care, and now it's about 1%. We're seeing this improve over time, and probably in the second half, definitely we are going to be hitting the e-commerce season and we're putting lots of efforts in some very specific sectors in there. And I must say that we are having or we are on the verge of having some pretty nice customer wins and so. We also are introducing quite nice new products, which have a lot of momentum. And this is in both equipment and in the new products themselves. So I would be – I'm quite positive that the very forceful efforts put by Ken and his forceful leadership are going to bring pretty good results.

And Food Care?

On Food Care – but on Food Care, it's quite interesting. We have had nice volume growth in an environment which is not necessarily very favorable. When you look at the overall market, you see that the red fresh meat market in the U.S. has been very depressed in the second quarter. I think I remember 8% reduction, which is one of the biggest negative percentages. We believe that the percentages of reduction are going to slowly taper down, but we haven't seen that yet. In Brazil, the situation is really bad. There are many slaughterhouses which have been closing. I think the number is 15; JBS has recently published that they have closed five. And this is the result of drought, high prices of red meat at the cattle level, reducing purchasing power, and you know that red meat is an expensive meat and, as a result, there's been transfers into poultry. So we have had negative volume in Brazil. For the rest of the year, we are going to see – we're carefully optimistic – but the poultry market has been good for us and we expect that it is going to continue being good. Our EMEA business is actually pulled by new products. And OptiDure, Darfresh on Tray are doing absolutely wonderful, and we're expecting those new products to continue pulling our business there. So we had positive growth, not as much in the second quarter as we had in the first quarter, but we believe that it's going to be okay. Diversey has been improving its volume. And we had flat volume in Q1; we had definitely growth in Q2, and we're happy with what we're seeing here. So having said that, in Diversey, the comp in third quarter is not going to be very favorable because we had strong TASKI sales in Q3 of last year.

Operator, next question, please.

Our next question comes from Scott Gaffner with Barclays. Please proceed.

Thanks. Good morning.

Good morning, Scott.

Good morning, Scott.

Just looking at the change in EBITDA year-to-date, you put up about $114 million of mix and price-cost spread. Can you talk about that a little bit? How much is really coming from mix, how much is coming from price-cost spread, and how should we expect that to trend in the second half of the year?

Yeah. So Scott, we really – we don't break that out – and I know Jerome will have a comment as it relates to some of our input costs. But we would expect for the second half of the year, and specifically with Food Care, we will have a benefit from some lower input costs. But at the same time, as everyone's aware, we do have the formula pricing for Food Care, as Jerome referenced in this opening remarks. And so that will narrow that positive price cost spread that we'll see in the second half compared to the first half. So, Jerome, I don't know if you want to make any specific comment.

Yeah. I always like to – in a growing – in an increasing raw material environment, it is very important to see whether you've got price increases and whether you've got price. In a decreasing environment, and we have had that compared to 12 months ago, with resin, what is important is mostly to see whether you get margin expansion or whether you don't, to see – to look at your pricing discipline. The interesting thing is that we've got positive pricing. And we've got positive pricing in every single of our divisions, not as much as we got in the first quarter, but we've got positive pricing, and that is important. That lead me to the second half and the resin prices. There have been attempts in North America to raise resin prices in July, it's not going through. And we'll see what August gives. But the volume overall is – and the business is fairly weak in the polyethylene arena, olefins arena globally. And we just don't believe at this point in time that there's going to be major price increases. And as a result of that, what we're going to be seeing is formula pricing gets its impact during the third quarter.

And, Scott, I'll add to that just that when we referenced pricing, it isn't necessarily general across the board pricing increases. We've communicated frequently that we're being very focused in understanding the value that we're bringing to our customers, helping them understand that. And so some of our pricing actions are just going to our customers and making sure we're getting the value for what we've created. And again, just to emphasize it, it's very specific based on the values that we're bringing. So from that standpoint, there is a portion of it that is – it really is definitely mix because it's higher value solutions that we're bringing to the marketplace.

Operator, next question, please.

Our next question comes from Mark Wilde with BMO. Please proceed.

Yeah. I wondered, Jerome, if you can just talk about the impact of FX in terms of just sort of changing mix within any of your businesses as we look around the globe? For example, you would think that the weaker currency would be helping like fresh meat exports from places like Australia and Brazil.

So what you do have is – so I'm starting with Australia and Brazil and stuff. Yes, normally you should have that. It happens that the export markets for Brazil, as an example, is fairly weak. And you have some major companies out of Brazil, which I have made comments recently saying that not only the local market is very weak, their local market is extremely weak for fresh red meat, but also the export market is fairly weak for them also. And yes, you're right that normally a lower real should help, but it seems that the export markets are fairly weak. With regards to Australia, the slaughter rates of the herds has been double-digits in the first quarter and is slightly coming down. And the reason is very normal. Those levels are completely unsustainable, completely unsustainable. And as a result of that, we are seeing a little bit less growth – very strong growth actually in Australia on our business, but a little bit less growth, not – the first quarter was, if I remember well, double-digits and here we're talking about high single-digit. With regards to currency in general, we had $57 million of negative EBITDA as a result of currency translation when you take first quarter and second quarter combined. And we have said that we are seeing – that we are forecasting $110 million. My view is that it's likely to be slightly higher than that, because with oil being very low, with commodities, ag commodities, minerals being very low, countries like Brazil and so are going to be – have seen the real and their local currency devalue compared to the dollar – versus the dollar. And we might see further devaluations. I'm not going to anticipate too much, but this is why we need to be a little bit cautious, because the real is – was yesterday, I didn't check today, but it was at BRL 3.36 versus a forecast of – or versus what it was a year ago exactly at this time at about BRL 2.22, BRL 2.23 and versus the second quarter this year at BRL 3.10. So we have to be careful there.

Operator, next question, please.

Our next question comes from George Staphos with Bank of America. Please proceed.

Hi, everyone. Good morning. Thanks for all the details. Jerome, I had a couple of question again on volume. I guess, first of all, if possible, can you comment at all how much of the decline in Product Care was related to the downturn in manufacturing electronics, as you term it, how much of it was rationalization? And if I could tack on a part two, in Diversey, it was nice to see the volume growth there. Could you provide a bit more color in terms of what initiatives are working? Are you getting any actual traction in terms of volumes from things like Internet of Clean and robotics or is that just increasing the interest? Thank you.

Okay. Good to hear from you, George. Good question, again. The Product Care in North America would have been up if we would exclude voluntary rationalization of our portfolio. You know that I am keen in margin expansion and the quality of business and, as a result of that, we are leading there and being very forceful. The other thing that we have done is that in Latin American countries, starting with Mexico, we had a commodity business, which was really unprofitable and, therefore, we just – we did that out. Having said that, we would have seen higher growth in volume in North America, should the electronic business be more positive. And actually it's been fairly negative when you look at the computers consumption, when you look at the – those kind of devices consumption, it's been fairly weak. On the positive, we're seeing a lot of momentum in 3PL and e-commerce, and we are introducing some very, very interesting solutions here, which make me very positive for the next 12 months. On Diversey, I'm pretty happy of what I'm seeing, because the trend is a positive trend, and we're having nice volume in every single region. So volume growth is accelerating. We think we had a bad quarter for all kind of reasons at the beginning of the year in Canada. We're seeing a strong volume growth there. We're seeing very nice in the U.S. EMEA is doing much better and we're seeing volume growth there. And when I compare quarter one and quarter two, I'm just seeing a trend. So these are not businesses which turn around very quickly, because customer wins and the share of wallet at the customer is just a long-term process, but I'm positive. So coming to the Internet of Clean, et cetera, Internet of Clean was a Change the Game initiative that we talked to you during our Analyst Day. These are not big products today. We are starting – we're having very interesting pilots with customers and things are moving favorably. But you're not going to see a huge swing all of a sudden out of this. Intellibot, I can tell you how happy I am, I really am. We have seen a pickup in our machine ordering, pickup in our sales, and we are investing a lot. We're going to lose money in 2015 out of this Intellibot operations, because in fact we are accelerating our R&D and our commitment to that. So actually this is going to impact the second half of the year. But I'm very happy with that.

Operator, next question, please.

Our next question comes from Philip Ng with Jefferies. Please proceed.

Hey, good morning, guys. Impressive quarter, congratulations on that front. You mentioned the contractual pass-through will kick in a little more fully in the back half for Food Care. Should we still expect positive pricing in that business and the amount of pricing you're seeing in Product Care? Is this a good level, especially with a potential uptick in the back half from a favorable mix?

So, well, formula pricing is going to have a negative impact on our pricing in Food Care in the third quarter, there is no doubt about that. So I think it's important. We have had positive pricing in the U.S. specifically, because formula pricing is mostly in the U.S. or in North America, I should say. We have seen in Q1 and Q2 the price only just – the percentage increase come down because we have positive pricing – and I think it's going to continue to come down in the third quarter for the mechanical reason I just talked to you about. With regards to Product Care, we are seeing – we're having price increases – but again, not as much. And the main reason I told you earlier is that when you have an environment where the resins don't go up, and when they have been going down, if you retain pricing, you have margin expansion, you don't have price.

Operator, next question, please.

Our next question comes from John McNulty with Credit Suisse. Please proceed.

Good morning. This is (46:42) for John McNulty. Just one question, on the cash flow front. What should we think about your ability to further improve working capital throughout the remainder of the year, through either efficiency improvement, inventory management, other things you could do?

So, good morning and thank you. So in terms of the working capital, what we had previously discussed was that for the full year of 2015, we were expecting a little bit more than $100 million positive contribution from working capital and other. And so, you can think somewhere between probably $100 million to $120 million. It will depend on, obviously, our activity within Q4. That will drive receivables and payables, but somewhere between $100 million and $120 million for the full year.

Operator, next question.

Our next question comes from Anthony Pettinari with Citi. Please proceed.

Good morning. I was wondering if you could discuss the realization of the European price hikes you announced in the quarter, if you were satisfied with the progress there. And then if you could just talk generally about price-cost in Europe, maybe views on the second half? Price mix in Europe has been positive; that's lagged the company a little bit. Is that just a tilt towards Diversey or if could you just give some color there?

So, yes, we announced a price increase. We have – and this is on the back of resin prices which have increased in March and April and May – and we have had favorable responses on this situation. And we don't think that there are going to be much more – or there's going to be price increases on olefins in the rest of the year. So just to cut the story short, yes, we have had price in EMEA as a result of oil price increases.

Operator, next question, please.

Our next question comes from Chip Dillon with Vertical Research. Please proceed.

Yes, good morning, Jerome. Question I had for you all was, basically looking at the two things. One, the pace of the buybacks certainly in July was quite strong, and it looks like if you kept that pace, you would actually use up the authorization in about another eight or nine months. Now, I don't want to pin you down, but would you be disappointed that if you didn't have the opportunity to complete that buyback, say, by the end of next year? Is that a fair statement? And then, if Carol could just talk a little bit about the amortization that's very elevated at Diversey, does that at some point start to come down? I know it's not a cash flow issue, but it would be an earnings issue as we look at the out-years?

Okay. So, thank you, Chip. So with the share repurchase program, as you know, the program itself does not have an expiration date, and the board authorized the $1.5 billion share buyback program. We're active in the market. We have the 10b5 program. And I've discussed at the Analyst Day how a lot of companies think they can time these things and it doesn't necessarily prove out. So, we're just being very prudent in how we have structured the program, so they can operate automatically when we have our blackout period and things like that, and we'll just continue to operate that way. So, the market will determine whether that $1.5 billion in shares is used quicker or if it takes more time. That's really going to largely depend on a lot of the market dynamics. And with respect to the amortization, we are – obviously, what you see with Diversey Care is the amortization of the intangibles that was acquired through the Diversey acquisition. And we will see a decrease in that as we go forward. But for example, if we look at the amortization of intangibles for 2014, it was approximately $120 million and for 2015, it's approximately $95 million. So we will continue to see that come down around that scale.

Operator, next question, please.

We have a follow-up question from Mark Wilde. Please proceed.

Yeah, Jerome, just curious, you're mostly focused on kind of taking the company ahead. I wonder if there are any remaining portfolio moves just in terms of cleanup. You have a lot of equity interests in different business. I think you've got some assets like small paper mills out in Pennsylvania. Any more moves in just sort of portfolio cleansing?

Actually, probably not. If we do things, they're going to be smaller ones or really non-core. So that's the way I'm thinking about it. It might be a product line that we believe is either distracting us or it might be a given little product in a given country. The challenge I'm putting to our division leaders is that when we have something that we don't believe we can fix and is distracting us is we should that action. And the reason is that we all know that non-profitable things or non-profitable businesses or product lines are in fact taking the bulk of our time.

And Mark, I'll add just one thing. You referenced that we have some equity investments. The company previously has had a variety of joint ventures, small in scale or some equity investments largely around specific types of innovation. And one thing, when Jerome joined the company and he really emphasized and we talked about it publicly is that our investments – we were going to make sure that we could realize a good return. And we went through a process of analyzing all of those investments and where we did not see opportunity for a fair return and we had been investing in those ventures sometimes three-plus years, we made decisions to exit. And we have exited substantially all of those equity investments that were not wholly-owned.

So the focus is on margin and profitable growth. That's where the focus is. We know that we can fix things. So priority one is to see whether a given product line in a given country is core or non-core. If it is non-core, it's got to be disproportionately profitable. And if it's core, we have proven to ourselves then we can fix things. And if after being fixed, they are still disproportionately less profitable then we take action.

Operator, I think we have time for one more question.

Sure. Our next question comes from George Staphos with Bank of America. Please proceed.

Hi, everyone. Thanks for taking my follow-on. I guess, Jerome, to the extent that you can in a public forum, can you size or provide a bit more qualitative commentary on what you're doing in 3PL and e-commerce in terms of what kind of impact that you have back half of 2015 and into 2016? Thank you.

So, good question, and welcome back. Ken Chrisman has been very outspoken during our Analyst Day as to where he is taking this division. And we are intervening a lot on dim weights and we are intervening a lot on helping e-commerce companies and third-party logistics to be more productive. So, on dim weight, we have fabulous solutions to create value to third-party logistics and e-commerce companies in their fulfillment operations. And as a result of that – and by the way, stay tuned, because we are taking actions that we're going to publish soon on those things. But there is very key that for everybody to understand that dim weights is a problem to anybody which ships something, and we have the solutions to help them there. So is this an on/off and immediate action? Not necessarily, but we're making progress every single day.

Thank you all for joining our call today. Operator, I'll pass it back to you.