Good day, ladies and gentlemen, and welcome to the Q2 2017 Sealed Air Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Lori Chaitman, Vice President of Investor Relations. Ma'am, please begin.

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 on Form 10-Q and Current Reports on Form 8-K, which you can also find on our website at sealedair.com or at the SEC's website at sec.gov. 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 reconciliations to U.S. GAAP in the financial tables that we have included in our earnings release. Included in today's presentation on slide 3, you will find U.S. GAAP financial results that complement some of the non-U.S. GAAP measures used throughout the presentation. Now, I'll turn the call over to Jerome Peribere, our President and CEO. Jerome?

Thank you, Lori, and good morning, everyone. We will cover our second quarter and first half results, key drivers for the second half, and how we are executing on our strategy. We will also provide an update on our sale of Diversey to Bain, use of proceeds and our share buyback program. And as we review our quarterly results and near-term business trends, you will see that our long-term profitable growth strategy is coming to fruition, presently led by volume growth. You are now seeing renewed top-line growth as a result of our Change the Game execution. In Product Care, our stated strategy to disproportionally grow our e-Commerce and 3PL business and progressively transform it to automated fulfillment solutions that will over time give us equivalent margins to our industrial business. In Food Care, we are benefiting from our focused efforts to deliver unique, differentiated, case-ready application that align with protein processes' productivity imperatives, and retailers' and consumers' demand for longer shelf life and waste reduction. Our execution on our growth initiatives will continue to gain momentum. We are making the right investment and taking the correct actions where needed to drive additional and sustainable EBITDA growth. During our Analyst Day scheduled for the week of December 4, we will provide an update on our strategy and 2018 outlook and longer-term financial objectives. In reviewing our second quarter for continuing operations, sales of $1.1 billion were up 4% in constant dollars after delivering a 3% increase in the first quarter. Food Care sales were up 3% and Product Care sales were up 6%. The acceleration in both divisions was led by outstanding results in North America with growth of 9% in constant dollars on the heel of 6% growth in Q1. This is the highest level of growth we have…

Thank you, Jerome. Let's turn to slides 9 and 10 which provide the sales and EBITDA bridges for Q2 and the first half 2017. Jerome has provided comments on our sales trends in the quarter and first half of the year, so my comments will focus on the bottom of slide 9, which highlights our second quarter adjusted EBITDA from continuing operations on a year-over-year basis. Adjusted EBITDA was $196 million. Volume contributed $19 million in Q2, which was offset by unfavorable mix and price/cost spread of $20 million. Operating expenses decreased $5 million and restructuring savings were $2 million. Currency had an unfavorable impact on adjusted EBITDA of $2 million. Unallocated costs were $3 million in the second quarter 2017, as compared to $4 million in the second quarter 2016. Adjusted earnings per share from continuing operations were $0.35 in the second quarter compared to $0.37 in Q2 2016. Our adjusted tax rate for continuing operations in Q2 2017 was 39% compared to 32% in Q2 2016. The adjusted tax rate in the second quarter 2017 was impacted by our mix of earnings in higher tax jurisdictions. On slide 10, we present our first half sales and EBITDA bridges. Higher volumes in the first half of the year were essentially offset by unfavorable mix and price/cost spread. On slide 11, free cash flow is presented on a consolidated basis, which includes results from continuing and discontinued operations. For the six months ended June 30, consolidated free cash flow, excluding payments related to the sale of Diversey, was a source of cash of $93 million. CapEx was $93 million. Cash interest payments were $105 million and restructuring costs were $33 million. Aligned with our typical free cash flow seasonality, working capital and other assets and liabilities were a use of…

Thank you. And our first question comes from the line of Ghansham Panjabi from Robert W. Baird. Your line is open. Mehul M. Dalia - Robert W. Baird & Co., Inc.: Hi. Good morning. This is actually Mehul Dalia sitting in for Ghansham. How are you all doing?

Good. How are you, Mehul? Mehul M. Dalia - Robert W. Baird & Co., Inc.: Great. Why do you think the previous price increase didn't yield the amount it should have, and I guess what gives you confidence on your September 1 price increase that you've recently implemented?

Very good question. You can go and say competitive forces et cetera. I think that the more important thing was the importance of the price increases. We tend to talk about polyethylene, which year-to-date went up 7%. We are not so much open on the price increases on nylon, which were very, very hefty between the fourth quarter last year and now. About MDI for our polyurethane foams, which has doubled in China, for example, in the period of 12 months, and paper and for example corrugated OCC went up 79% since July of last year. So that was very hefty, very big. We tried to pass important price increases and some of that got passed, but not enough. So, this is not very different than what happens from time-to-time. We had that three years ago where we had to go back with this. We're going back and we are just going to execute that on September 1.

Thank you, Jerome. Operator, next question, please.

Thank you. And our next question comes from the line of George Staphos from Bank of America Merrill Lynch. Your line is open.

Thanks, everyone. I hope you can hear me well.

Yes, George. Good morning.

Good morning. Congratulations on the progress. I just wanted to piggyback on the question of pricing and margin conversion. So, Jerome, is it fair to say that in your view the pricing efforts, maybe not being where you had expected them to be, was more a function of – in terms of their conversion to margin, the pace of the increase in input costs, or in fact was it more competitive activity? And as you looked overall at the quarter, you had very strong volume growth in North America, congratulations on that. We would have expected more conversion in margin. What were the keys in terms of margin conversion relative to volume? Was it really the pace of inputs? Was it competition? What would you single out? Thank you very much and good luck in the quarter.

Thank you, George. All in all, actually, I'm really happy with what's going on. We had a strategy, which is about differentiating our self from competition and introducing our Change the Game strategy. This is clearly ongoing because, actually, it shows in our product mix. New products don't necessarily have the margins that we'll have when they reach bigger volumes and things like this. New products introduction can be somewhat costly. But at the very same time, you're seeing this volume growth and these trends which are very, very different from what you have seen in the industry. And as a result of that, you've got to ask yourself, what's going on? What is going on is that the evolution of our portfolio is ongoing and that we are passing our cost increases and this is something that we know how to do. And when we're not 100% successful, we just come back later on. And it's not so much about pricing of competition, it is about the execution on our strategy, some tactical things. And if we don't get it right, right away, we just come back. The reality is that in Food Care, our case-ready applications are ongoing everywhere. This is not a North American phenomenon, and we're seeing this through our equipment sales. Our equipment sales are strong and our orders book is very strong. This is going to happen later in this year and this is also going to continue next year. And what we're seeing there is that the – it's about replacement equipment and it's also about new installs. This is not in North America only. This is in North America as there is a need for automation and newer and more performing equipment. This is the case in Latin America, which is making…

George, is there a follow up.

No. We got two parts there. I appreciate it.

Okay. Great. Thanks. Operator, next question please.

Thank you. And our next question comes from the line of Edlain Rodriguez from UBS. Your line is open.

Thank you very much. Good morning to all.

Good morning.

A quick one on Product Care. I mean, you've talked in the past, and I think you mentioned that today, shorter term, like lower margins in e-Commerce and 3PL versus the segment margin. How quickly you believe you can close that gap?

So, the pace is going to depend on our placement of new equipment and our reducing manufacturing cost of those equipment as we produced – as we go to mass production. There is a trend in e-Commerce and this trend is that corrugated cardboard prices are going up dramatically. And that as a result of that you are going to see more and more pouchers, which are enabling lower dimension and weight costing for shipping and lower cost of packaging. This is a trend, we have two very strong offering here. For boxes, our I-Pack and e-Cube product line improve dimensional weight costing. And our StealthWrap and FloWrap equipment and the generations to come, which we are going to present at Pack Expo later in the year are tremendous substitute for boxes. So, we have a huge momentum in e-Commerce 3PL, and this is, therefore, accelerating our sales growth in Product Care. Yes we are because of the cost increases, we are having a slightly lower margins. But as I said, we're dealing with those. So, how quickly? We're going to show you during our Investor Day week of December 4, we're going to show you our three-year targets and plan, and you will see that what I said earlier in my prepared remarks, with regards to margin in that segment, you will see that we intend to recoup and have similar margins than in the rest of the portfolio over the next three years.

Operator, next question, please?

Thank you. And our next question comes from the line of Anthony Pettinari from Citibank. Your line is open.

Hey, good morning.

Good morning.

Just following up on the previous question. The $20 million EBITDA hit you saw in the quarter from mix and price/cost spread, is it possible at all to say, roughly, what portion of that was mix shift and what portion is price/cost that, I guess, at some point, you might get recovered?

So, we don't break out between mix and price/cost spread. It's a combination of both, Anthony. But, we do expect, as Jerome has highlighted, to see improvement sequentially in our EBITDA growth as we move through the balance of the year. And we started to see the turn from the formula pricing for Food Care at the end of the second quarter, and will expect to have positive trends from that, obviously depending on how resins play out for the second half of the year and the price increases being implemented for the Product Care division will also favorably impact our improvement sequentially in our EBITDA margins as well as our overall EBITDA growth.

We are in a specialty business. You don't shovel your price increase on to your customers. You collaboratively work to introduce those solutions and at the very same time you have to pass your costs. We understand that, and it's just a question of time. It would have been faster if those cost increases would not have been that important. So, have we absorbed a little bit of those? Yes, we have. But our customers know that we are passing them. This is why we have announced our September 1 price increase, and this is – we have announced those in North America. We have announced those in Europe. So, it's ongoing. In the end, we have a lot of momentum with our customers because they know that in both of those divisions, we are the innovator, and this is what allows us to work collaboratively, positively with them.

Anthony, do you have a follow-up question?

No. That's helpful. I'll turn it over.

Okay. Great. Thank you. Operator, next question please?

Thank you. And our next question comes from the line of Arun Viswanathan from RBC Capital Markets. Your line is open.

Great. Thanks. Thanks for all the detail. Congrats on the progress here, so especially on the volume side. Just trying to understand the guidance for the rest of 2017. So, you increased the EBITDA range to $825 million to $835 million from $825 million, but you also lower the FX headwind to zero from $5 million. You had other lower costs as well in Q2. I'm just trying to understand, is the guidance bump from the lower FX headwind and lower stranded costs? Or are you actually more confident in the Food Care and Product Care segments?

So, what you're seeing is that there are few bubbles in the air right now. The FX is more favorable than anticipated at the beginning of the year. Where is it going to be three or four months from now, I don't know. Just picked the euro. In January, the euro was at $1.03. It is at $1.18 today. And nobody would have thought in January that it would be at $1.18 today. So, I'm not going to go and anticipate, but at this point in time, there is a positive bubble in the air, which is related to currency and that's one thing we have as a possible positive. As a possible negative, we're a little bit concerned with polyethylene prices. We were anticipating that they were going to start to come down in September. And right now, we have some producers who are already just talking about price increases on the heels of possible hurricane. I mean, this is the most fun thing that you can hear, but there's a little bit of momentum there. You have some producers who have announced price increases for July that did not happen. They've been announced for – they've been pushed to August. And then, you have some more announcement, which have been done for September. So, you've got some of those games going on right now. But we are a bit concerned that as a potential negative, we would not have what we were expecting in terms of raw materials on polyethylene for September to December. So, that's why we're seeing that. And next to that, we're very determined to get our price increase through and we might suffer a little bit from volume in some more commoditized segments in there. So, that's what we're doing. Overall, these are short-term tailwinds or headwinds, very short term. We believe that our fourth quarter is going to be very strong and the most important thing is to see that this Change the Game, which was in doubt in 2016 that we were believing was coming, is definitely coming. This is why we're having that growth momentum right now, which we didn't have in 2016 and which in general, the industry doesn't have.

Operator, next question. Go ahead, Arun. Sorry about that. Go ahead. Operator, can you open up back the line or we'll bring him back after? Do you want to go to the next question?

Our next question comes from the line of Adam Josephson from KeyBanc Capital Markets. Your line is open.

Hi. Thanks. Good morning, everyone.

Good morning, Adam.

Jerome, two questions. First is just aside from paying down debt and buying back shares to offset the dilution once the deal closes, what is your just overarching strategic plan for the new company? Do you eventually plan to grow by acquisition, or what exactly do you have in mind? Obviously, EBITDA over the last eight quarters or so has been kind of flat to down. It's just been hard to generate organic EBITDA growth. So, what do you have in mind longer term post the deal closing?

So, we did not have growth in 2016, sales growth, and therefore, EBITDA. We are in transition, and we said that several years ago. There was a Get Fit and there was a Change the Game. It is very important to understand who we are. We're not a simple packaging company. We are solutions driven, and our margins will expand as we expand the value of our solutions to our customers. That is very clear, and there is a fundamental mega trend in the way we're working with our customers. They respond, we are the very big player in the sectors of protein and in the sector of protective packaging through our solutions. We are – that is where we're going. So, we're not going to only buy back share and pay down debt. We are starting to look at some potential acquisition targets, multiples are very high, generally speaking, acquisitions do not return shareholder value, traditionally or most of them don't, or the vast majority of acquisitions do not generate shareholder value in general, and when you look at the multiples right now, you have to be careful. This Deltaplam, very small acquisition, is a very good example of a small acquisition in a given country where we do believe that there is potential. It was the right time, at the right price with the right equipment and technology. They have fabulous equipment and that is going to be a very nice little acquisition. We are looking at some others. At the very same time, you have to understand that we've been very, very busy with the separation of Diversey. Therefore, we're not going to rush into things right away. We are working diligently and with discipline on the next step. But, yeah, we are going to be doing acquisitions over time.

Thanks, Jerome. And just one follow-up. You talked about acquisition multiples being quite high. I know you're buying back your stock just to offset dilution. But you guys are, call it, at 12 times, 13 times EBITDA once you get the proceeds. I mean, do you think your stock is undervalued here? And if so, can you explain why you think that?

Well, you're not going to take me there. Do I personally think our stock is undervalued? Well, looking at the Investor Day as it is coming in our numbers, so you will judge in December whether you think that our stock is overvalued or undervalued. I have my own opinion on those kind of things. We are determined to become a value-add company to our customers with new solutions. We happen to invoice packaging, but our number one asset is to add value to our customers because of longer shelf life, because of the very differentiated equipment that we're bringing and with regards to protective and the e-Commerce and industrial, the dim weight cost increases are important and they become – as e-Commerce is growing very rapidly, you are seeing the absolute need of optimizing e-Commerce packaging and we are in a tremendous position to do that. So, we are specialty of specialty. This is the way you are going to see us over time.

Operator, next question please.

Thank you. And our next question comes from the line of Tyler Langton from JPMorgan. Your line is open.

Yeah. Good morning, thank you. Could you just I guess talk a little bit about the type of volumes that you are seeing on the industrial side of Product Care. I mean, are you seeing growth there or is it really mostly from the e-Commerce and fulfillment?

We're seeing growth in industrial sector. I'm not going to tell you that we're seeing huge growth, but it has bottomed last year, and it is the second quarter where we're seeing some dollars and volume growth, we'd call that in the range of 2%, 2.5%, which is quite good. Not everywhere. It is country-by-country, but we're seeing, in China we're seeing industrial growth, in some West European countries we're seeing industrial growth, in the U.S. we're seeing a little bit of industrial growth, in the UK, we're not. So really, you read the GDP and you see what's going on, but we're doing quite well there.

Tyler, do you have a follow-up?

Yeah. Yeah. I guess, Carol, just on the corporate expense. I think the previous targets were to get rid of the $40 million of stranded costs, eliminate 50% in two years. And then, on the unallocated was to eliminate by 2018. I guess, those unallocated a little bit lower. But has anything sort of materially changed with those targets?

No. We're still on track for that. The $20 million unallocated that was revised down from $25 million should not have any negative impact on 2018. We are already starting activities to address the unallocated as well as stranded costs. So, we're confident that we'll be able to stay on plan, if not outperform what's been previously communicated.

Great. Thanks.

Operator, next question please.

And our next question comes from the line of (48:11). Your line is open.

Hi. Good morning.

Good morning.

I just wanted to go back to Brazil. Did we actually get the volume decline or can you just give us a little more flavor on what happened in the quarter in Brazil? And then, secondly, I think you were embedding some recovery in the second half for Brazil, is that still the case? And if so, some idea of how much?

So, in Brazil, you could see if you look at the detail, the charcoal consumption went down 11% in the second quarter and that local meat consumption is down about 20% in the second quarter as a result of the inspection scandal saga and the related items in the production of fresh red meat. This has been much – the impact has been much bigger than anyone could anticipate. The exports have been impacted also. Our view is that this is temporary. We're seeing that it's stabilizing. We're seeing that you have equipment being sold and placed and ordered by red meat producers. And we are – I was in Brazil three weeks ago and just talking to all of those customers and they believe that the slowed rates are going to start to increase sometime in the third quarter and into the fourth quarter. So, this is not a long-term trend. This is specific to Brazil given the scandals that have happened. Then you look at Argentina. And Argentina is seeing its consumption go up by 2%, which is very little. And you see the exports going up nicely at increasing in year-to-date by 38% except that Argentina is not a big meat exporter anymore, it is the number 17 meat exporter. It is the 17th largest exporter of meat and much smaller than it was a decade ago. That is for Argentina and Brazil. We're seeing some positives in other countries. Very strong business in Mexico where we have extraordinary position. I was there last week. I can assure you that the trends are very, very positive there. We think nice trends in the second quarter in Chile for fish production where we participate very nicely there. So, all in all, total Latin America is negative as a result of the weight of Brazil, but we believe that this is temporary.

Operator, next question please?

Thank you. And the next question comes from the line of Brian Maguire from Goldman Sachs. Your line is open. Brian Maguire - Goldman Sachs & Co. LLC: Hi. Good morning. Just had two questions. One following-up on the last one. Just wondering if you could parse out, if any, of the strength in the non-Brazil Food Care business you think might have been benefiting from some of the reduced exports out of Brazil? Is some of that had to come from other regions? And then, as a second question, Jerome, just wondering if you could comment on the e-Commerce margins, been weak for a couple of quarters and I think a couple of people were alluding to it, but just wondering how you see the margins on some of the new product offerings? Can they be in that 20%-plus range that you've been in, in the past once they start to get a little bit more scale and maturity? Thanks.

So, starting with the export, yes, the U.S. is dramatically benefiting from beef exports. You saw what happened in the first quarter. If I remember well, the April exports were at over 30% growth out of the U.S. So, what Brazil did not export and given the negative cycle in Australia, the U.S. has been a huge winner in this. And you are seeing right now that prices of U.S. beef are very high, but these did not affect the exports, and exports have been freshened and frozen, and cooked beef for the month of June have been almost 12% higher than a year ago. So, this is very strong. It's positive also for us because all of that is packed with our bags, and we are really happy going to see what's going on there. With regards to e-Commerce, yes, we have a product mix, very nice. We have segment mix, which at this point in time is negative. We made no mystery about that already last year. What we were not seeing is the growth that we think. What you have to understand is that we having position, we're building new business with our customers and what I talked about last quarter is something that is happening, which is that it takes time to go and sell equipment. It is a capital spending for our customers. This is not a consumable. So, on one side, you have margin squeeze a little bit to the very strong and steep increases of raw materials, paper, polyethylene, nylon et cetera which are ingredients, which are raw materials for our mailers, for our phones, for our bubble wrap et cetera. But we're going to get over that. And next to that you have this capital equipment. The very strong sign is that our sales of equipment in Product Care year-to-date are up 10% compared to last year knowing that we have some StealthWrap and FloWrap and also made its core view which were equipment were prototypes shown at Pack Expo last year. We're seeing a very nice momentum in there that's going to accelerate. So, we're producing a few of those machines. And when that accelerates also, we're going to see margin expansion.

Operator, we have time for one more question, please.

Thank you. And our next question comes from the line of Jason Freuchtel from SunTrust. Your line is open.

Hey, good morning. Thanks for taking my question. I think it would be helpful to better understand your intended pace of share repurchases versus other uses of capital. Following the completion of the Diversey Care divestiture, should we expect to see a larger purchase in September? Are there any limitations on repurchasing shares in 2017 aside from the size of your share repurchase program? And I think you touched on this, but how do you think about the trade-offs of mitigating near-term dilution through share repurchases versus creating shareholder values through other uses of capital? Thank you.

So, Jason, I'll start and then Jerome may want to address the very last part of your question. But there's nothing that would restrict us from being very active in the market following the close of the Diversey transaction. We have communicated previously that it is our intent to address the dilution. It will take some time. It won't all be done by the end of 2017 and addressing that dilution includes not only the share buyback, but also improvement in our EBITDA as we move forward. So, we do plan to be active in the market. We plan to continue to use a combination of tools such as OMR as well as the ASR as we move forward. We modeled the share price based on our strategic plans and working with the board, set levels of that share price that we feel is the fair value for that share buyback.

And I made comments earlier about our discipline. In the years to come, we are going to be bigger through acquisitions also. We're not going to rush into it. We're going to make sure that we add shareholder value. This is a fundamental approach of this management team and we pursue innovation and strategy execution along the lines that we have already announced. You are going to see during Investor Day early December, how disciplined we are and the importance of this innovation. These are going to be complemented by regional bolt-ons in very strategic places where we believe that we can add tremendous value to deploy our technology. You are going to also see over time that we are going to reinforce those two divisions, and be very focused in making sure that we are the specialty of the specialty company that we say we are becoming, and that we have already announced that we are going to become as a result of our Change the Game (58:02) We are not seeing ourselves as a just simple normal packaging company. We are solutions-driven, oriented there. Our automation is a big part of our offering with the razor/razor blade and you're going to see more of that as the years are coming.

Operator, that concludes our call.