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Sealed Air (SEE)

Q4 2010 Earnings Call

January 24, 2011 11:00 am ET


Amanda Butler - Director of Investor Relations

David Kelsey - Chief Financial Officer and Senior Vice President

William Hickey - Chief Executive Officer, President and Director


Peter Ruschmeier - Barclays Capital

Sara Magers - Wells Fargo Securities, LLC

Ghansham Panjabi - Robert W. Baird & Co. Incorporated

Alex Ovshey - Goldman Sachs Group Inc.

Albert Kabili - Macquarie Research

Rosemarie Morbelli - Ingalls & Snyder LLC

Philip Ng - Jefferies & Company, Inc.

Gilbert Alexandre

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Good morning, everyone, and welcome to the Sealed Air Conference Call discussing the company's fourth quarter and full year 2010 results. Leading the call today, we have William V. Hickey, President and Chief Executive Officer; and David H. Kelsey, Senior Vice President and Chief Financial Officer. After management's prepared comments, they will be taking questions. [Operator Instructions] And now, at this time, I'd like to turn the call over to Amanda Butler, Director of Investor Relations. Please go ahead, Ms. Butler.

Amanda Butler

Thank you, and good morning, everyone. Before we begin our call today, I'd 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 made solely on information that is now available to us, and our future performance may be different due to a number of factors, and many of these factors are listed in our most recent annual report on Form 10-K, which you can find on our website at We also discuss financial measures that do not conform to U.S. GAAP and you may find important information on our use of these measures and the reconciliation to U.S. GAAP in the financial table that we have included in our earnings release today.

And now, I'll turn the call over to Bill Hickey, our CEO. Bill?

William Hickey

Thank you, Amanda, and good morning to everyone. During today's call, I would like to discuss our 2010 business performance and then address our outlook for 2011 and outline our strategy for delivering ongoing growth. Once Dave and I have concluded our prepared remarks, we'll be happy to take questions from both the telephone lines and from our webcast participants who can use text in questions.

This morning, we reported our full year 2010 adjusted earnings per share of $1.60. This figure excludes a number of items which we highlighted in our press release. Our 11% growth in adjusted earnings was primarily driven by a solid 5% annual growth in volumes, $100 million in productivity benefits achieved through various global supply chain initiatives that leverage our world-class manufacturing practices and our Global Manufacturing Strategy program, as well as tight control of expenses.

Unit volume was particularly strong for us in the second half of the year and we achieved peak daily sales rates in the fourth quarter, showing 7% volume growth in the fourth quarter. This resulted in 6% growth in annual sales of $4,500,000,000.

As a quick review of a year that marked our 50th anniversary, we positioned ourselves for future growth and presented a number of strategic and operational goals, including a long-term goal of 5% to 6% organic growth in sales and a return to 15% operating margin by the 2012-2013 period. In driving to those goals, we focused our top 2010 goals on cash flow and improving return on assets, continuing to innovate and accelerate products to market, optimizing our process and operations to maximize profitability, accelerating our growth in India and China, developing our people and finally, expanding our sustainability initiatives.

I am pleased to report that we exceeded our targets in many of these areas and I'd like to touch upon a few highlights. In the area of innovation and commercialization, I'm pleased that we launched over 55 new solutions this year, which compares to about 25 new solutions in 2009. That represents new products or new solutions represent approximately 20% of the sales in 2010.

We expanded our new CT series shrink film, further commercializing our newly patented manufacturing process which we are diligently working on to scale with other product families and to further drive differentiation and efficiencies across our core portfolio.

We are actively engaged in pilot testing our new patented Cryovac 360 shrink sleeve solution, which represents our initial entry into a new market segment for Sealed Air. We've expanded our portfolio of products using alternate raw material components, including our new Instapak RC 45 foam-in-place system which uses up to 25% organic content.

And in December, we acquired a 100% natural biodegradable plant-based buoyed film material, which we just launched under the brand name Pak Nature. We continue to expand equipment solutions in each business segment and benefited from ongoing customer investment. Company-wide equipment sales grew 17% in 2010, which suggests strong ongoing orders in 2011 and a strong quarter base.

We increased our service-on-service-based solutions. This includes the introduction of our PakFormance remote repair diagnostics service that supports our equipment systems, and we further expanded our I-Pack and Ultipack automation services for high volume fulfillment customers, a growing segment for our Protective Packaging business.

Looking at the developing regions on our focus on accelerating growth in China and India, we dedicated a key executive to spearhead this regional growth in 2010. Although we are in the early stages of implementing our new strategic plans in these countries, we generated approximately 30% sales growth in the businesses that are included in this program.

Looking at developing regions overall, we reported a sales growth of 10%, which includes 6% favorable foreign exchange. We saw several areas of strength in the fourth quarter, including a 23% sales increase in Brazil which includes 15% favorable foreign change. China was also solid with approximately 9% sales increase as was Southeast Asia, which achieved a 16% sales growth which included an 8% favorable foreign exchange.

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