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Sealed Air Corporation (NYSE:SEE)

February 21, 2013 8:55 am ET

Executives

Jerome A. Peribere - President, Chief Operating Officer and Director

Carol P. Lowe - Chief Financial Officer and Senior Vice President

Analysts

Scott Gaffner - Barclays Capital, Research Division

Joseph Shaposhnik

Scott Gaffner - Barclays Capital, Research Division

All right, good morning. I'm excited to have with us today Sealed Air. We've got Jerome Peribere, Chief Operating Officer of Sealed Air; and Carol Lowe, Senior Vice President and Chief Financial Officer of Sealed Air. I wanted to just turn it over to Jerome and Carol to get some opening remarks, maybe an update on where we are. I know you just had earnings the other day, but a lot of people were traveling for the conference, so maybe we could just get an update on where we are in the, I'll call it, transformation of the business, under your leadership. So I'll turn it over to you.

Jerome A. Peribere

Okay. Well, thank you, Scott. Good morning, everyone. So we had our earnings this week, so you probably had the opportunity to see them. I will become the CEO on March 1, taking over from Bill Hickey, who's been 13 years at the top of Sealed Air.

I would characterize 2012 as a year of transition. This was -- Sealed Air was a $5 billion company, acquired Diversey. That was a big fish to take on because of the relative size of both companies. But I would say that year 1 has gone by. We are now on year 2. What I would say about this is that this company is getting reenergized around some very basic principles, and those are that we need to improve the quality of this company. We have had -- when you look at the history: The '90s was a fabulous decade for Sealed Air. The 2000 was what has -- could be considered as a lost decade in terms of total shareholder return. And we have the ambition to take -- with Carol and the executive team, to take this company to new heights. And this is starting by not chasing sales but by chasing value growth, which is, first, improving the quality of this company. That's our objective.

The integration is ongoing. I would say that it's going well given where we are. We -- I have changed the leadership of the Diversey or now called the Institutional & Laundry business, which -- and I have brought somebody from Dow, who has decided to follow me and did the same thing that Carol did, because she brought a controller from her former company. And I would say these are good signs. It's good signs because we're bringing people who we have been working with and who we know are best in class.

The management team is fairly large but has been very new. And I have shrunk it to an executive team of 8 people, out of which we have a lot of diversity. We are talking about this, this morning. We have 3 women there. Carol is the most senior of them. Ilham Kadri, who I brought from Dow, is another one. And Ruth Roper is in charge of strategy.

This executive team is made of Emile Chammas, who is the Head of Supply Chain and Manufacturing and Procurement. He's 2 years with Sealed Air. He's coming from Wrigley, former Procter & Gamble, et cetera. He's an extraordinary leader. We have Yagmur Sagnak, who is our in charge of Asia Pacific and Middle East. And the reason why I had in my executive team the representative of that region is because this is the region which is going to pull our growth in the next few years. And I -- it's not our largest, but it's the one on which we absolutely need to continue because we're doing extremely well but to continue to make big inroads. And we also have the 3 division presidents and the person in charge of strategy.

This team is executing. I consider that it's not rocket science. What I want to do here at Sealed Air, in my tenure, is to simplify things and just do what creates value. We're going to simplify everything which can be simplified. We are going to change this company from moving stuff to being the leader that it is, which means that we have a lot of know-how that we need to extract value from. And this is valid for the 3 divisions.

And we are making good inroads. I -- if you talk with our people in our executive team in the areas [ph] below, you would see a renewed sense of excitement. This company has much more in itself than it has been delivering. So this is why it makes me fairly positive about the renewed sense of urgency and what we can -- what we are going to be achieving.

Maybe, Carol, you take over from there and give some color on our 2012 and 2013?

Carol P. Lowe

Okay. Thank you, Jerome. So as we reported on our earnings call on Tuesday, we did have what we view as an acceptable quarter for Q4, with improvement in all of the divisions' performance on a year-over-year basis, positive improvement at the EBITDA line and at the EBITDA margin. And as Jerome has referenced, looking at quality of earnings, that is going to be critical for us as we move forward. And the EBITDA margin will be a component that will measure our performance on an individual, on a business basis and on a regional basis as we go forward.

We had 2.6% higher volumes in the quarter, which we were pleased with relative to overall market performance. In many of our businesses, we did outperform the market and specifically within our Food & Beverage business on the Food Packaging Side.

So as we look forward to 2013, I know we are being challenged in the fact that our estimates for the guidance that we provided, we're being conservative. I guess I would like to characterize it that we're being reasonable. We're setting targets that we feel we're comfortable with given the economic challenges that we see. But we also -- we're putting numbers out there that we do have confidence in relative to maybe how in the past the company has tended to disappoint in terms of its guidance. So if we have the opportunity, when we move through 2013, as we see improved performance, then we will take measures to increase the guidance that we're providing.

Again, I think something that a big transition for the company is going to be the accountability and the focus on quality of earnings and not just on a top line focus. So we're setting those goals, having that regular communication. The financial team understands that one of their priorities is to help the business leaders measure and manage that to really understand all of the component and to track and to have accountability. So from a cultural standpoint, I think this is a significant improvement for Sealed Air in having that ownership. And the executive committee that Jerome referenced, we meet twice a month, focused on sales and operations planning performance; having those scorecards, those stoplights, to know where we're performing, where we're underperforming, being able to implement contingency measures for the company; and again, most importantly, holding people accountable.

So I think we've got a lot of exciting things that are happening at Sealed Air. There is a lot of energy about all the positive things that are being put in place.

Question-and-Answer Session

Scott Gaffner - Barclays Capital, Research Division

Carol, I'm glad you mentioned accountability because that was actually going to be my next question. And so, Jerome, can you talk about accountability from a compensation standpoint? Everybody can see your contract maybe, but you could sort of address that a little bit, how you're held accountable from a compensation standpoint, relative to investors. How are you going to push that accountability through the organization from a compensation level or the changes that you've already made or the changes that you're going to make in regards to compensation so that everybody in the organization is accountable for these goals?

Jerome A. Peribere

Sure. I think accountability doesn't necessarily have a direct correlation with personal income or those kind of things. In some people, it works; in some other, it doesn't. Actually, surveys show that it is not the financial rewards which make you go every single morning. But it works for some people. As far as I'm concerned, if you have my contract, you keep seeing that $30 a share. And if it goes higher, hallelujah, it's great. So that's not what drives me. What drives me is the passion that I have to take something where it is and to take it to better heights. That is what drives me. I do believe that this company can do better. I do believe that we are not exploiting the potential that it has in terms of know-how and in terms of opportunities. And I have fun creating passion in an environment where people thrive and fight for winning. So with regards to our accountability: our short-term and long-term incentive program, which have been approved by the board. Short term is going to be based on 3 metrics. One which is in achieving our EBITDA plan; two, it is -- which is within the guidance that we have published. Two, it is in improving working capital from -- where -- from 2012, and the threshold for that metric is above -- is improving from 2012 already, and the 1x is higher than that, working capital as a percentage of sale lower than that. And the third metric is a productivity measure. I have used that productivity measure that I'm going to -- talked about in the last 15 years, and it works well. It is a measure -- a ratio which is taking operational expenses divided by gross margin, which allows you to -- and this productivity, this ratio, needs to improve. So you take our income statement and you take the expenses, you take the gross margin, you divide one by the other, you have a ratio. And you will see -- and my view is that the company always have to become more and more productive no matter what. So this ratio should improve until it reaches a satisfactory level. We are, by far, not there. The advantage is that this is not a company ratio. You can try and look at this ratio every single -- in every single place in a given country, in every single place in a given business unit or in the product segments. And you will find out that in some -- when you really take that ratio down to this kind of levels, you will find out that sometimes you spend more expenses per dollar of gross margin generated. And this is when the sin gets obvious, and that's where you can start improving those kind of things. And that was a way I explain it internally. It is, how much expenses do you have to generate -- or do you have to have to generate $1 of gross margin? And if you work at improving on those ones, you really put your finger on something. And you have 2 choices: You just go and can say you need the resources that you are deploying to generate this. So in order to improve your ratio, you need to improve your margin. Or you are spending much too much per dollar of gross margin generated. And if you can't improve this margin, then you've got to cut your resources. So this is the shorter metric: EBITDA plan, improving productivity ratio that I just talked about; and improving the -- of working capital, inventories, payables, receivables. Our long term is based on TSR and is based also on EBITDA percentage improvements. And when you will see those, you will -- in fact, you will realize that -- and when you look at the history, you'll see that Sealed Air has had reducing EBITDA percentage year-over-year since 2003, with the exception of 1 year. And therefore, we need to number one, stop that downtrend, and number two, reverse it and improve it. And that's what we're going to be doing.

Scott Gaffner - Barclays Capital, Research Division

Maybe we could go to the audience response system and then we'll get to - one question right here. Let's do the first 2 audience response questions.

So the first question is -- this will give us a feel who's in the room: "Do you currently own a Sealed Air stock?" 1, overweight; 2, equal weight; 3, underweight; or 4, no. All right.

[Voting]

Scott Gaffner - Barclays Capital, Research Division

All right.

Jerome A. Peribere

There is opportunity.

Scott Gaffner - Barclays Capital, Research Division

Half and half. Could we just go to the second question?

"So what is your general bias for the stock right now?" 1, positive; 2, negative; or 3, neutral.

[Voting]

Carol P. Lowe

That's good.

Scott Gaffner - Barclays Capital, Research Division

So you have 50% of the room doesn't own the stock. You've got more than that, that are positive on the shares right now. So like you said, a lot of opportunity.

Charlie Rose

Welcome from Charlie Rose. I have, like, 3 questions, but I don't want to monopolize anything. So they're really complicated issues. One issue is basically this company's decade of success, which I was a large shareholder, and it's...

Jerome A. Peribere

I can't hear you well, Charlie.

Charlie Rose

The decade of success was driven by innovation: new products, new markets, new ways of selling protective packaging materials. Putting bubbles inside envelopes, putting bubbles around envelopes, doing all types of creative things. On the call, you talked about the beginning of some innovation, and I'd like you to expand on that for me. Where do you see the opportunities of innovation, differentiation and future ideas or creativity? That's the first question. The second question is, the Dow Chemicals and Lyondells of your history are now in the process of improving their own pricing. So how does that -- is -- the old Sealed Air was always able to manage their margins irrespective of raw material inputs through innovation. So as we are in a period of reflating petrochemical and plastic prices, how do you people respond to those issues? And the third issue is, basically, what are, obviously, EBITDA goals? Not what they are today. I love your press release, I love your conference call, but give me sort of a 5-year look, Jerome. What do you think is possible? Those are my 3. And I'm -- thank God you're here. Thank God you're both here, because I was frustrated to watch this company be hurt for so long.

Jerome A. Peribere

Okay, so thank you, Charlie, for your nice words. Innovation. Yes, this company has started with Bubble Wrap. And I learned recently that bubble -- it was -- it started with Bubble Wrap not to have Bubble Wrap as a packaging product but Bubble Wrap on the walls for decoration. And it didn't work very well, by the way. But then it ended up and move into that. Well, today Bubble Wrap is a commodity. It's not everywhere, by the way, but it's a commodity and it's a small part of our portfolio. Talking about innovation: Very frankly, I'm not impressed by the innovation of Sealed Air in the last decades. We're spending quite a lot of money. We're spending $140 million this year on R&D. And as this is not a company bending molecules, et cetera, et cetera, we can call it essentially being innovation -- application innovation and those kind of things. So step number one is about making kind of a knowledge, which is what we are starting right now, a little bit late. I wish I would have started that a few months ago, but everything is in order and needs to be done in order. We're going to be doing a very clear assessment. We have 3 divisions, 3 distinctive parts of Air -- actually 4, because we have a lot of -- we spend quite a lot of money on external innovation. And we're going to see what is the return on these innovations. I have 0 intention to spend more. I think that $140 million on a less-than-$8 billion company is quite a lot of money. I want to make sure that we spend better. If the returns are not satisfactory and by definition, we can do better always. So we'll do that. There's -- one thing which this company does very well is open innovation, external innovation. So we work with some individuals and small companies who work only for us but are only paid based on the inventions that we decide to take or not. And this is a model which is quite interesting, that we had with Dow with sciences, that Dow Chemical doesn't have very much of, but that I really like because it's variable cost and you pay for those inventors who win. One of the reasons why the EBITDA percentage has gone down can be attributed to the lack of innovation, actually; and two, what is generally called commoditization, and you heard me say in the conference call that every single specialty is a product on its way to commoditization. So therefore, you need to have a pipeline of rejuvenation and of improvements which make your products new and changing. There are some great things. There are absolutely great new products. I could just go and give you the list. In I&L, we have a new product for -- which -- for ware washing which is combining the detergent with the rinsing aids into one. That is, believe it or not, an innovation which really simplifies the life of ware, dishwashing, et cetera, which is called Bira [ph]. And we are having -- we have launched it and we're having initially good success with that. We are launching a new product for PET bottles. It's a little a bit complicated to explain that, but in plants like Coke, Pepsi, et cetera, et cetera, you have those huge conveyor belts which are hanging 10 or 15 feet above ground which are very difficult to clean and so on. We are going to be launching very soon Little Robert [ph], which is going to be saving money, improving environmental health and safety, et cetera, et cetera, and which should be a very nice type of very creative different type of product or service because we're not going to sell it for those companies. We're having all kinds of new protective packaging, which are having an interesting pull. We are launching a new shrink film in Protective Packaging which is using -- which is having a better clarity, which is a consumer benefit. When you take 2 of those bottles or 2 bottles of shampoos, you put them together, they are bundled, you have a shrink film there. Well, we're launching a new line of shrink film which is absolutely fabulous and which is having an internal -- which is having an initial success and which is going to continue. And just 2 words on this: better clarity, so consumer benefit, and 20% to 40% less plastic, which is a huge sustainable advantage. And all of the large companies. You talk to the Unilevers, the P&Gs, the Walmarts, et cetera -- the [indiscernible], et cetera, they all have sustainability metrics. So you come and you say, "You can have consumer benefit, 20% to 40% less plastic and not more costs," and they say, lower cost, they say. "No, it's different specialty resins, et cetera." Not more cost, you've got a pull on this kind of things. So we have innovation, never enough. We'll have to boost creativity. The motto I want to leave you with is that this company is just going to get a nice little kick in the back so we have a new sense of urgency. And it is in innovation, in the productivity of our resources, in selling differently, in pricing because we can do better in pricing. Sealed Air was not known for being the price leader in the marketplace. Well, my motto internally is, a leader leads. We need to take the leadership on that [indiscernible]. Cyclical industry, sometimes you sit on top, sometimes you don't. Right now, they seem to be. And thank God for that part of it. The demand is not skyrocketing. And we -- for polyethylene, not having 3% GDP growth is good for us because capacity utilizations are tight in the U.S. for ethylene and they are -- if you let them loose and with the economy running, they would have a ball. But -- and what you have seen is that ethane is at its lowest ever. You have seen that they have jacked up prices in January and they're trying to do -- continue to do the same, et cetera. Our role is to take things as they are -- by the way, same on propylene, et cetera, et cetera. Our role is not to have to swallow and absorb those things, because ethylene or naphtha, et cetera, are moving much more -- are much more volatile than they were 10 years ago. And the type of pricing formula which would give 1 year, sometimes 6 months, 3 months lag are just simply impossible. So that's something that we'll need to change. And we're going to be taking a little bit of risks here and there, calculated risks. But again, the leader must lead and we need to be in a position where our margins are not squeezed on those things.

Charlie Rose

Are you able to raise your prices immediately?

Jerome A. Peribere

We are -- well, some of our businesses are formula businesses. Some of our customers are formula-based and there are things -- there are fine lags that -- which are what they are. And we are going to respect them, unless we'd have a force merger, which is not the case, but so we'll respect our words, but we're going to change them over time. And then on other things, we have -- no, we don't have formula, then that is yes, we are moving. And we're moving and you can count on me for moving hard and quick. And we just -- and by installing this course of urgency. In all honesty, have I surprised my direct reports with some of my drive and will and determination on this? Yes. Why? Because I came from an industry where you take it or leave it, you get it done. And that's what we need to have as a mentality. And it works, by the way. We have had right recently some very nice -- not some, we are implementing price increases because it's out of question that we're going to swallow those kind of costs that the Lyondells, the Dows and the Exxons of this world are just shoveling on us right now.

Charlie Rose

[indiscernible] about goals, EBIT goals?

Jerome A. Peribere

Goals. So we haven't published them.

Charlie Rose

What's that?

Jerome A. Peribere

Yes, we do have. I've been fairly vocal on those internally, but I haven't published them. And therefore, we are going to have an investors conference sometimes. We are right now debating whether it should be in June or whether it should be late August, September. Maybe we could vote on this. What would you prefer?

Scott Gaffner - Barclays Capital, Research Division

Actually, we can. We can put it in the questions and then...

Jerome A. Peribere

All right, okay. So what's you preferred date? And but we are thinking about either making this sometimes in June or second half of June or something or probably late August, before Labor Day. Some of you would like it -- to have it earlier. Some say, "Take your time and give us quality." What you're going to have is a roadmap. It's going to be a 3-years roadmap. This roadmap is going to tell you what kind of quality company we will build. It's going to tell you about our innovation and how we intend to go after that and show you where -- how we're driving. It's going to talk to you about customer relationships and how we're building those and really give you a financial roadmap. I could -- my predecessor has thrown a number in here, thrown a number of 18% EBITDA. But he has done that and the numbers continue to go down. My -- the reason why I want to take my time is that I want to have each of our division presidents do a thorough homework and have 3- and 5-years plans which are worth more than the paper than on which they are written. And, yes, we are living in an uncertain world, but I want to see in this plan margin improvement. I want to see in this plan a better return on capital invested. We're not earning our cost of capital, and it's -- our ROIC is pitiful. I want to see growth in emerging regions, as a result of which our geographic portfolio is not going to be 33% in Europe anymore, 49% in the -- 30 -- 49% in the U.S. anymore and the -- and 24% in emerging countries. I want to see emerging countries much bigger, because the mega trends on which we are capitalizing are so strong out of Asia and Latin America that it is so obvious that this is where we have to put our resources. Urbanization plays for us. It is a mega trend and it works for us. Why? Because out of urbanization, you have more prepared food, packaged food and therefore is great for our business. Out of urbanization, you normally have an increased standard of living. As a result of that, you have more animal protein consumption. That plays for us. Out of urbanization, you have more leisure and hotel time and tourism, et cetera, et cetera. That plays for us. Out of increase of standard of living, you have more e-commerce and those kind of things, and that's where we are. So all of this tells you that it is so obvious that we need to put our resources disproportionately into Asia Pacific, Middle East and Africa, Eastern Europe and some countries in Latin America, that it's a no-brainer. And if you see differently, tell me what. I can't count on Europe. Unfortunately, Europe is 35% -- or 33% of our sales. I can't change that. It is what it is. What I can change is the total percentage over time, and we're working on that.

Scott Gaffner - Barclays Capital, Research Division

We're going to take a question here. And then maybe afterwards, we can go back to the audience response system and just have a question around when the Investor Day should be held, June versus August. We'll just give people 1 -- 2 choices. And then we'll see -- at least, you can have that feedback at the end of the day.

Carol P. Lowe

That's 100% genius.

Joseph Shaposhnik

Jerome, Joseph Shaposhnik from TCW. No better way to show a sense of urgency than a June Analyst Day. That's just my opinion. If you could, give us your thoughts on the Diversey business now that you've had time to analyze it. And give us your thoughts on which segment among your segments shows the most opportunity for improvement.

Jerome A. Peribere

So Diversey. The second question was...

Joseph Shaposhnik

Which segment of your business segments, in your view, has the most opportunity for improvement?

Jerome A. Peribere

Okay. So, Diversey. When I got interviewed by the board during -- when was that, May, June -- May, June, July, for the job, several board members were asking me, "So what do you think about the Diversey acquisition?" And my answer has been very simple: "It's an irrelevant question. We made it, and now we're not going to turn our back on it." Some people actually -- in companies, it's quite interesting to observe. When something has been done and doesn't seem to work, people turn their backs, thinking that hope is a strategy and that things are going to get fixed by themselves. It's the opposite which needs to be done. There is a problem, go get and fix it. The returns or the EBITDA percentage of our Diversey business is, what, 8% or so?

Carol P. Lowe

8%, yes.

Jerome A. Peribere

8% or so. Ecolab, 18%. As far as I'm concerned, it's a no-brainer. Should we go and aim at the Ecolab return on this? No, not even that. Just go aim halfway, and there's a lot of value in there. So it's not going to be 18% a few years from now. I can guarantee you this. We are going to improve the quality of this business. It has the potential for doing this. The reason why it is so low is because of some kind of coziness, too much change of ownership over the past few years, too much entitlement and, let's not overdo it, but pretty much the mentality could be when things were bad, when results were bad, employees were doing well; just like when results were good, employees were doing well, so why work harder? Everything is fine. And that's not the way I see it. I see the employees' fate and the shareholders' fate joined at the hip. When shareholders do well, employees must do well. When shareholders do bad, employees must do bad. And they need to see substantially the difference. And that's what I told them loud and clear. And perhaps very clear messages even recently during performance reviews. We can do better. Actually, I announced at the investors call 2 days ago that we got a major contract. Yes, we got. We are putting the -- that contract that we have signed with a major U.S.-based hotel chain has -- it needs to be signed by the board, but it's done. We are starting to deploy, actually, this week. And this is a major hotel chain. What is the problem of the heritage Diversey business? It's that it didn't have critical mass in the U.S. That's the problem. So we believe -- I firmly believe that if we can be a credible alternative, we are going to have success. So, therefore, become credible. That's what we're doing. In the U.S., many of hotel chains were considering that Diversey was mostly a European-based company. So we have Accor globally, big huge hotel chain but not present in the U.S., 12 Sofitels and et cetera. And since -- they sold Motel 6 and so -- but we're doing very well. We have Shangri-La globally. We have Hilton International. We have et cetera, et cetera, et cetera. But in the U.S., some companies were hesitant. We have this contract and we won that contract based on simplification of portfolio and based on sustainability and based on performance metrics that we have taken -- took -- taken responsibility for. And we know we can deliver. So we saved them money through this simplification, and we are going to execute flawlessly. We know we have to prove that we can do it well. And don't worry, we'll do it well in here. Once we have done that, you'll see competitors saying, "Wow. Those guys can make it happen also in the U.S." So in the U.S., we have to gain critical mass. The previous owners have left the U.S., have just served it on a tray to their competitors and said, "Bye-bye. You can have it. Thank you." So we're going to do that. And then we're going to continue to grow double digits in emerging countries. We are winning like you can't believe. We are taking share after share in almost all of the countries where we participate in the emerging world. We have double-digit growth everywhere in Asia, in the Middle East, in Latin America, et cetera. And that's not what our competitors are publishing. So we are going to continue to accelerate our competitive advantage in that part of the world.

Scott Gaffner - Barclays Capital, Research Division

Can we go to the audience response system for a minute? It's -- Oswald, do you have the question on the Investor Day? Okay, we'll go to...

Carol P. Lowe

100%...

Scott Gaffner - Barclays Capital, Research Division

All right, the Investor Day, should it be June or August?

[Voting]

Jerome A. Peribere

August. Fabulous.

Scott Gaffner - Barclays Capital, Research Division

Everybody wants their information sooner and quicker.

Jerome A. Peribere

Okay, well, thank you. Thank you for your feedback.

Scott Gaffner - Barclays Capital, Research Division

Could we go to audience response question #4? We'll do 4, 5, 6 and then back to #3.

Jerome A. Peribere

The only issue with this one is that I need to -- we need to make sure we have the board's support before showing it to you.

Carol P. Lowe

And they don't meet until -- they'll meet in July, yes.

Jerome A. Peribere

But we'll see.

Scott Gaffner - Barclays Capital, Research Division

Okay. "So in your opinion, what should Sealed Air Corporation do with excess cash?" 1, bolt-on M&A; larger M&A; share repurchases, dividend, debt paydown; or internal investments.

Jerome A. Peribere

That's easy. Larger M&A, right?

[Voting]

Scott Gaffner - Barclays Capital, Research Division

Debt paydown. I think that's...

Carol P. Lowe

Yes.

Scott Gaffner - Barclays Capital, Research Division

With respect to that answer, if we could go to #5. "In your opinion," -- we can just pick on this question.

Jerome A. Peribere

Do you want comments on this, or later on?

Scott Gaffner - Barclays Capital, Research Division

Yes, we've only got 5 minutes left, so yes, if you want to -- I do have a question on the debt paydown in a minute.

"In your opinion, on what multiple of 2013 earnings should Sealed Air trade on?" Less than 10, 10 to 12, 13 to 15, 16 to 18, or 19 to 21, or higher than that?

[Voting]

Scott Gaffner - Barclays Capital, Research Division

16 to 18. I think that's a positive response there. If we could go to the next.

Jerome A. Peribere

Sure. I like #6.

Scott Gaffner - Barclays Capital, Research Division

"What do you see is the most significant investment issue for Sealed Air Corporation?" 1, core growth; 2, margin performance; 3, capital deployment; and 4, execution/strategy.

[Voting]

Jerome A. Peribere

Okay, so I disagree with this one. I don't think that we are going to have much of an execution/strategy issue. We -- I am believer of setting goals high, and I am a believer at military execution: simplifying what is important and getting it done. So is there a risk that we are not followed? Always a risk. But I tell you, fairly low as long as I'm here because it's on our shift. And so far, we are the ones who decide who has a job and who doesn't. With margin performance, I fully agree.

Scott Gaffner - Barclays Capital, Research Division

So could we go back to the debt reduction? Obviously, everybody is...

Jerome A. Peribere

Yes, I think you were -- I think it was great answer. This is it.

Scott Gaffner - Barclays Capital, Research Division

Can we talk about debt reduction for a minute, just quickly? Just because -- do you see...

Jerome A. Peribere

We have much less than $5 billion debt, $4.8 billion. And we're going to continue working at this. And this is #1 priority.

Scott Gaffner - Barclays Capital, Research Division

But do you see additional asset sales above? You sold the Japanese business. Are there any additional asset sales? And two, can you talk about the dividend? And would you ever think about doing it [indiscernible]?

Jerome A. Peribere

So we sold the Japanese business because it was low growth, because it was separate, had distinctive products and so -- and it was therefore easy to separate. Would we have sold the Japanese business if we had 0 debt? No. But it was a good opportunity to do this. We are not going to sell all the Diversey-based businesses because you need to show to your customers that you are global. And the minute you go and sell Latin America or Western Europe or the U.S., those guys can go to you -- cannot go to you anymore. And we are dealing with a lot of global companies. So we are not in a hurry to divest businesses. We are going to continue to look at businesses which have low return, which are distracting us from doing what we want to do and concentrate. So we're going to take our time. We have set an objective of $500 million. We're going to reach it, or not, but we're going to get there. At the base, we need to go to extract the maximum value. We are not in the need of having these reserves and we're not going to do this reserve.

Carol P. Lowe

And then there's...

Jerome A. Peribere

So step number one, debt reduction. Until we reach less than 4 debt-to-EBITDA. Once we reach less than 4, there are all kind of other options there.

Carol P. Lowe

Okay, all right. And with respect to the dividends, obviously, the board makes the decision about the dividends. And there's been no indication that there's not a commitment to continuing the dividend.

Scott Gaffner - Barclays Capital, Research Division

Make it quick because we've only got 1 minute.

Charlie Rose

About the -- sometime later this year, you're going to have an 8 -- $800 million payment to W.R. Grace's asbestos trust. And that'll trigger also -- as you -- as that money is spent, you're going to have a tax shield from that as well. Can you discuss what are the sources of funds? Have you already gone out to the banks to set up a borrowing for that money? And do you expect that this year? And how would that tax shield -- is there -- would that tax shield basically eliminate most of the U.S. taxes for the next year or 2? Is that how it plays out? I'm not -- I don't understand all of the tax ramifications of the Grace transaction.

Carol P. Lowe

Right. Yes, so for Grace, the last word that we have from W.R. Grace is that they plan to emerge in the last half of 2013, probably fourth quarter. There's been no update since that. We are hopeful that they will emerge. We'll stand ready to fund. It's one reason we currently have in excess of $600 million in cash that is sitting on our balance sheet. So we're ready to fund that. We'll have additional availability within our revolver. We have the liquidity that will be able to address that. And we treat it as net debt every day. We will have a benefit from not having the interest expense at that level as we move forward. Obviously, we'll have interest expense for the portion that we have to borrow. In addition to that, we have a deferred tax asset that will actually be a refund. So we'll get the cash back and it will be -- so if we fund in December 2013, we would apply for that refund and we would receive it in 2014. And it's in excess of, at this time, it's approximately $350 million. So it is a meaningful number. Now whether we get it all upfront or whether it takes -- we get -- we're -- we expect to get a substantial portion of it within 12 months after funding Grace.

Scott Gaffner - Barclays Capital, Research Division

I hate that we do have to wrap. I apologize. But I just want to thank Jerome and Carol for coming here. It's an exciting time to be at Sealed Air for you guys. And it's an exciting time to follow this stock, so we look forward to your -- all the changes. Thank you also.

Jerome A. Peribere

Thank you very much. Thank you, Scott.

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Source: Sealed Air Corporation Presents at Barclays Industrial Select Conference, Feb-21-2013 08:55 AM

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