Sealed Air (SEE)

Q4 2011 Earnings Call

February 09, 2012 11:00 am ET


Amanda H. Butler - Director of Investor Relations

William V. Hickey - Chief Executive Officer, President and Director

Tod S. Christie - Interim Chief Financial officer and Treasurer


George L. Staphos - BofA Merrill Lynch, Research Division

Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division

Philip Ng - Jefferies & Company, Inc., Research Division

Chip A. Dillon - Vertical Research Partners Inc.

Rosemarie J. Morbelli - Gabelli & Company, Inc.

Mark Wilde - Deutsche Bank AG, Research Division

Alex Ovshey - Goldman Sachs Group Inc., Research Division

Christopher D. Manuel - Wells Fargo Securities, LLC, Research Division

Albert T. Kabili - Macquarie Research

Unknown Analyst



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Good morning, everyone, and welcome to the Sealed Air conference call discussing the company's fourth quarter and full-year 2011 results. This call is being recorded. Here in the call today, we have William V. Hickey, President and Chief Executive Officer; and Tod S. Christie, Treasurer and Interim Chief Financial Officer. [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 H. Butler

Thank you, and good morning, everyone.

Before we begin our call today, I'd like to remind you that the statements made during this call states 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 we encourage you to review the information in the section entitled Forward-Looking Statements in our earnings release, which applies to this call as well. Additionally, 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 which do not conform to U.S. GAAP. 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.

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

William V. Hickey

Thank you, Amanda, and good morning, everyone. During today's call, I will discuss our 2011 earnings and our sales performance results. Tod will then provide more detail on our financial results, liquidity measures, key balance sheet items, and then we will highlight our 2011, 2014 integration and optimization program, which we noted in our earnings release earlier today. I will then discuss our outlook for 2012, and we will follow with questions from both the phone lines and from our webcast participants who are invited to text in their questions. As our release included a fair amount of data and color, including the use of a standard or conventional adjusted EPS metric along with a cash EPS metric, we will try to keep our prepared remarks brief and move to our Q&A session promptly.

This morning, we recorded our legacy Sealed Air full year 2011 adjusted earnings per share of $1.70 per share, which represents a 6% increase over the $1.60 of adjusted EPS we achieved in 2010, and within our guidance range of $1.70 to $1.75 earnings per share.

For the purposes of looking at the legacy Sealed Air results, we have excluded all of the impacts from the Diversey acquisition which closed on October 3 of last year. Our legacy Sealed Air earnings per share results reflect solid performance in a challenging economic environment while we completed the Diversey acquisition and began the integration process in the fourth quarter. We attribute our legacy Sealed Air annual earnings growth to a number of factors, which include the steady focus we have maintained on our strategic growth programs which held our volume performance above pure levels at a full-year volume growth rate of 2%, even as the global economic recovery slowed most notably in the second half of the year. Our strong R&D pipeline and the incremental launch of nearly 40 new products in 2011 resulted in a 200 basis point increase in the mix of new products as a percent of net sales, which now stands at 17%.

Additionally, the developing regions of the world provided good overall growth with full-year sales growth of 10% on a reported basis or 7% on a constant dollar basis. This growth has increased to developing regions' sales mix of the total company to 18% of consolidated net sales versus 16% in 2010. And as you remember, this is up from the very low teens a number of short years ago.

Thirdly, cost mitigation continue to be a core theme as we effectively manage inflationary pressures and raw materials with appropriate pricing actions and other operational initiatives. As a result, we recovered substantially all of our petrochemical base cost incurred in 2011 with a price/mix performance of 3% or approximately $120 million of positive price variance in the year. We also continued to generate productivity benefits of approximately $30 million per year through our supply chain emphasis on continuing improvement and strategic procurement programs.

Tod will touch a little bit of this in more detail during his comments.

As a result, the combination of solid business model fundamentals, extreme strong team focus on our long-term strategic objectives, even while navigating challenging economic times, and effectively managing cost price spread to maximize profitability. These 3 factors have allowed us to continue to generate solid free cash flow and prepay our bank debt, all value-generating achievement that we intend to build upon in the year ahead.

Let me spend a few minutes discussing, specifically, the results and highlights of the fourth quarter. In early December, we provided a mid-quarter review of our constant dollar sales performance through the month of November. At that time, we indicated that we were seeing positive constant dollars sales growth in most business and most regions. However, rates of growth were generally slowing on a sequential basis but, nevertheless, still tracking above our peer group. Our final fourth quarter constant dollar sales results generally held to the performance levels seen in mid-quarter, except in European, Middle East, and Africa, EMA region. However, we had challenging year-over-year volume growth comparisons in our Food Solutions and Food Packaging business where we realized high single-digit percent rate growth in the fourth quarter of 2010.

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