希悅爾 (SEE) 2001 Q1 法說會逐字稿

Good afternoon everyone and welcome to the Sealed Air analysts and stockholders teleconference call. This call is being recorded. With us today, we have William V. Hickey, President and Chief Executive Officer, Daniel S Van Riper, Chief Financial Officer. After our prepared comments, we will be taking questions. You may place yourself in queue by simply pressing #1, followed by the #4 on your touchtone telephone. If your question has already been answered, you can remove yourself from the queue by pressing #1, followed by #3 on your touchtone telephone. Please limit yourself to one question per caller, so that others have a chance to ask their question. Now, I would like to turn the conference over to Mr. Ryan Flanagan, Director of Corporate Communications. Please go ahead Mr. Flanagan.

Good afternoon. Before we begin our call, I would like to remind you that statements may during this call stating management outlook or predictions for the future are forward-looking statements. These statements are based only on information that is now available to us. Our future performance may be materially different due to a number of factors. Many of these factors are listed in our annual report on form 10-K for the year ended December 31, 2000.

Hi to all out there. I am Bill Hickey, president and CEO Sealed Air. With me today are Dan Vanriper, our Chief Financial Officer, and Mary Coventry, Vice President for the development, as well as Ryan. I would like to begin my comments by discussing a number of factors, which are affecting our business. In Europe, we are seeing continued, although declining cases of foot-and-mouth disease primarily in the UK, as well as lingering concerns of mad cow, both of which have contributed to 30% reduction in the consumption of beef over the same period last year. Some of that has been offset by increased consumption of other proteins such as fish and poultry, turkey, as well as pork and lamb. We also continue to see weakness in the economy primarily in the United States, although, clearly there is some spill over into other parts of the world. The continued release of disappointing earnings from the technology sector as well as other sectors are clear indications of the market condition our products are facing. Despite this soft economy and contrary to what ordinarily happens during these periods, petrochemical raw material cost remains stubbornly high. Also, contributing factor in the quarter is the continued high-energy cost, which affects the consumption of power used in manufacturing our products as well as to heed our facilities in addition to fuel cost to shift our products to our customers. In addition to these factors, they were also two internal items, which affected our business in the first quarter. Because of the start and stop process in Europe, particularly in the United Kingdom with the processing of wild animals and the continued stop and go with animals were brought to market the concerns about foot and mouth, we essentially manned our factories at ordinary rates. So, often times, as foot and mouth interfered with animal processing, we found our factories idle. We also encouraged startup cost related to the expansion of our case rating business, particularly in barrier foam and solid plastic trace, both of which started up in the first quarter of this year. But different from many other companies that are reporting results for the quarter, I am confident that the fundamentals of our business remain solid. We have not lost market share. Although, our customers may be buying less than they bought before. We continue to gain new customers. Our new products continue to grow at double-digit rates. But the case rating new product had growth of over 20% in the first quarter. Our Fluid Packaging Business grew by almost 25% in the first quarter and on the protective packaging side our Inflatable Business grew by over 25% in the first quarter. Our growth markets continue to grow. Latin America, despite being slower than last year was still up 8% in the first quarter and Asia Pacific is up 13% in the first quarter. And also our expenses are tightly controlled. Our SG&A are currently running at 1999 levels and except for acquisitions that we have made in the last two years, our core head count is flat. And most importantly, our cash flow continues to be extremely strong and is substantially higher than most other companies in our industry and looking at some information provided by one of our friends on Wall Street, is our cash flow exceeds the packaging industry average as well as the S&P industrial average by at least 30%. In the current environment though, it is helpful also to look at history, because, often the past is prologue to the future. Sealed Air has four periods of particularly difficult economic conditions in our history; 1974-75, 1982, 1989, and 91, and now in 2001. Our management team and employees have been in this environment before. During each of the previous economic environments of difficulty, we used the opportunity to reexamine our business, make appropriate changes, and emerged as a much stronger organization. We intend to do the same thing now. At this point, I would like to turn the comments over to Dan who will give you more specific details on our earnings release and other aspects of the business.

Thank you Bill. Let me spend a few minutes reviewing the quarter. First, let us discuss sales. The company's sales were 758 million for the first quarter of 2001 compared with 741 million for the first quarter last year, an increase of approximately 2%. If we exclude the negative effect of foreign currency translation, which was 4% for the quarter, sales would have increased approximately 6% over last year's first quarter. In terms of top-line numbers in the first quarter, total company sale benefitted from acquisition of approximately 4%, a positive price mix of approximately 2%. Our unit volume was essentially unchanged compared to the first quarter of 2000. These resulted in the 6% growth before effects that I mentioned earlier. Within our two business segments, acquisitions and price mix benefitted through the packaging products, 5% and 2% respectively for the quarter resulting in a 7% before effects growth rate discussed in our press release this morning. The unit volume in food packaging was essentially flat. Acquisitions and price mix benefitted protective and specialty packaging products, 4% and 1% respectively for the quarter, offset by a slightly negative unit volume resulting in the 4% before effects growth rate shown in our press release. The company's gross profit was 240 million for the first quarter. Lower sales of food packaging products in Europe, changes in product mix, and the continuing higher raw material and other energy-related cost compared to the prior year resulted in a decline in growth profit as the percentage of sales to 31.7% from 34.8% for the 2000 period. As we have discussed previously, we have seen increases in prices for our broader way of our raw materials over the last year. In general, raw material prices remained above last year's first quarter, commodity polythene pricing, one component of our raw materials, which had fallen modestly during the fourth quarter of 2000, increased during the first quarter, and is now near the peak pricing experienced midsummer last year. As a remainder, these commodity residents represent a relatively small portion of our cost. As I mentioned before, we have seen increases in the broader rates of our raw materials and prices for these other materials that have not flown. In general, we would expect that polyol ethylene prices would fall, given the slower economic growth in many countries and the incremental production capacity added to that industry over the last year. Indeed, there are industry signs that these prices may begin to abate. However, high-energy cost, including natural gas and oil as polyol ethylene piece stocks suggest that a continuing cautious outlook for raw material prices going forward as appropriate. Operating profit for the first quarter was $94 million. Operating profit as a percentage of net sales was 12.4% compared to 15.6% for the first quarter of last year. The lower operating profit was largely driven by the lower gross profit. As mentioned in our press release, a provision related to a debt guarantee is included in the quarter results. The provision amount of $7.8 million is related to the company's guarantee of certain debt payable by a subsidiary of WR Grace & Company, which filed for bankruptcy on April 2, 2001. The guarantee arose from the 1998 trial-back transaction. As a result of Grace's filing and in accordance with appropriate accounting principles, the company has provided inflow for its guarantee of section indebtness. Earnings per share, assuming conversion of the company's outstanding preferred stock and excluding the special provision were 36 cents for the quarter, and earnings per share further excluding the Goodwill amortization, which is sometimes referred to as cash earnings per share were 49 cents per share for the quarter. Both of these figures exclude, as I had pointed out, the debt guarantee provision. Now, let me quickly spend a moment, telling you where we ended up the quarter on a balance sheet basis. We have cash on hand of approximately $102 million, total long and short term debt of approximately $1.232 billion. Our depreciation and amortization for the quarter was $57 million including the amortization of Goodwill. EBITDA for the quarter at approximately $148 million excluding the special provision approximated 19.6% of net sales. Capital expenditures were 49 for the quarter and trade working capital amounts to $457 million at the end of the quarter. Now I would like to turn it back over to Bill.

Thank you Dan. That concludes our formal comments and we will now welcome any questions.

Ladies and gentlemen. We will now begin the question and answer session. If you have a question, you will need to press the #1 followed by the #4 on your pushbutton phone. You will hear three tones prompt acknowledging your request and your question will be polled in the order that they are received. If your question has been answered and you wish to withdraw your polling request, you may do so by pressing #1 followed by #3 on your pushbutton phone. If you are on a speakerphone, please pick up your handset before pressing the numbers. One moment, please for the first question. The first question is from Scott Davis of Morgan Stanley. Please proceed with your question.

Good afternoon gentleman. I was wondering whether you could finish off, you were going around the world, if you could finish off, your volumes around the world. You gave Latin American, Asia Pacific. I did not hear Europe and US.

Sure okay. Scott, this is excluding foreign currency, US is 2% and Europe is 2% excluding acquisition, with acquisition it is 9%, Latin America, as I said was 8%, and Asia Pacific was 13 ex-foreign exchange.

Europe ended up even with all of the problems over there ended up positive volumes year-over-year.

That is what we feel good about it. That is a kind of good news. The encouraging news is if you read the press release, 6% ex-currency, and if we had any kind of volume growth historically, the number would be pushing double digits. Europe is 2% ex-currency, ex-acquisitions.

Some of the real gross profit during the non-Euro in Europe. Some of the frictional issues that happened in down time and agitate, are that going to continue through Q2.

Scott, I had explained this clearly as I could, but I think you may have heard it say on the earlier conference call is as foot and mouth progressed through the UK, there were various periods of time, where the authorities essentially stopped the processing pipeline. So, customers would have borders in the pipeline and they will be stopped and then will be restarted again. So, that resulted in higher factory cost compared to the amount that we actually shipped in. Now, foot and mouth has continued into the second quarter, although the number of cases has continued to decline. I received the chart this morning, which takes us to April 19, 2001 which shows a fair decline and I think on March 30th call, we indicated that it appears that it had peaked the week of March 23rd and the information we have shows continued decline in the weekly number of foot and mouth cases from March 23rd through the 19th April. So, it appears to be on a downward side of the curve, but it has carried over into the second quarter and it depends on how soon it is brought totally under control before we have packed the business as usual so to speak.

The last thing I would like to comment on. I was trying to figure out what is going on with polyethylene, I just received my chem.-data for the monsoon and they showed polyethylene prices are flat and some of your competitors over the last couple of days have said that that the polyethylene prices are going down after the 5 cents and 3 cents price increase. Can you give us some commentary on what you are seeing?

I can say that probably true to both stories. A lot of it depends on the supplier. There are different actions being taken by different suppliers, Scott. Some have basically been flat. Some would indicate a slight tendency to ease. But I cannot say that there is a broad movement at this time.

Okay thanks guys.

The next question is from George Staphuss of Salomon Smith Barney. Please proceed with your question.

Thanks. Good afternoon everybody. Just on the scheme of sequential trends here. I remember back a few weeks ago, operational inefficiencies that you had in curve, because you had to be ready for the customer. The comment was some of the larger packers were starting to figure out ways of procuring animals, filling the supply, translating half the stop and start. Maybe you mentioned before I missed it. Are you seeing that continue and any color on that?

It has come off quite a bit George, and that there is more order to the market and in fact, I think, the numbers I was looking at here recently is cattle processing is currently running up to 80% of pre-foot and mouth disease, which is a sort of come back quite a bit from where it was. There is becoming to be more orderly flow here. But I would not want to say it is totally or orderly at this point. Because there will continue to be outbreaks, although it is much smaller in numbers in different parts of the UK.

Remember you shared some numbers with us about slaughter rates. Was that the drop in numbers you had showed back in March?

That was the drop in fact I am looking from my March numbers now. But that seemed to be the drop, which I think to 40-60% number.

Okay. In terms of again sequentially looking ahead, you mentioned things seemed to be getting better, fewer outbreaks. Have you seen any kind of pickup in demand?

Really that is more of the mad cow issue than the supply issue for foot and mouth.

I would say that it is not as clear. I know what is interesting. McDonald's to give you an example, in France has introduced what they call "all muscle burger", which is interesting because what they have done is essentially grind; their hamburger meat from farm. Only muscle cuts, which are farthest away from the possible contamination area from mad cow. There seems some recovery in their sales and since hamburger is good 60% on those markets, I think that would say that there has been some slight pickup, but consumers are being cautious as to what cuts they are buying.

Okay. One last follow in on volume you saw a nice pick up and some other new products like fluid packaging, is anything going on there? What specific customers are we talking about or any other market developments?

The principal market right now continue to be institutional condiments, institutional salad dressings and a lot of opportunities in institutional suits. That is really where the growth is coming from right now. Basically, we are placing the #10 can, which has been part of our longer-term strategy here.

Have that number before you by the way Bill.

Yes.

Anyway, I will turn over later guys. Thanks very much.

The next question is from Joe Kris of Lehman Brothers. Please proceed with your question.

Hey guys! How is it going? I wonder if we can give us the sense, I am sure it is a little bit erratic, but can you give us a sense what the operating rates were through your different businesses in the quarter.

Operating rates in terms of factory rates?

Yes.

I will have to tell you that per terms of the UK, there were staff like probably for 90% may have operated only 70% with disruptions in supply. But I would say around the world the number is probably 80-85. I don't think we have seen a real drop up in operating rates.

And there is no reason to reexamine the infrastructure and all that and may have got a couple of plans there?

I think you saw our press release and you heard my opening comments is that, in times like these in difficult environments where we as a company have used the opportunity to take a fresh look at our business and reinvent how we do business. Those programs are underway. No conclusions at this time.

Okay. Can you also share with us some of the highlights from your new product pipeline?

I think as we had said that particularly the trend that are out there in the market place. The least, I can tell you that our ongoing sales are in the case rates, which continues to penetrate the market both in this country and other parts of the world? I can say that there are number of other retailers who will come on board with the program following the lead set probably by Wall Mart is one of the first movers. On the fluid side, we are seeing a greater acceptance of the flexible materials as a substitute for the #10 Can and inflatables just continue to do remarkably well in terms of acceptance not only in the e-commerce field, which is really where it started but now in anyone who is packaging materials for shipment, even conventional catalogs in warehouses. In terms of those which are coming down the pipeline, we do have a new version of the fluid packaging product which is reportable, which means basically we use for shell stable material and we are continuing to develop a new technology that we believe will change the print of laminate business and we expect to be a leader there and we are working on a number of others, but spin off from the inflatable packaging concept that we may be able to talk about it later in the year.

Okay. And then, lastly, can you give us a sense on the parcel side of the business. UPS numbers were pretty weak, any sense, is that starting to come back or we are going to continue to drift into the second quarter?

I think I would say you that the numbers you are seeing from Fed Ex or from UPS and from a variety of other people who are users or whose customers are users of our packaging products to get from point A to point B. There has been no perceptible change come thus far in the second quarter and that is through the middle of April.

Thank you. Next question is from Mark Eli of Banc of American Securities. Please proceed with your question.

Hi good afternoon. This is Kevin McCarty for Mark.

Hi Kevin.

Bill, we normally wait for the 10-Q for operating profit by segment. Given the extraordinary environment in Europe and in food, I was wondering if you could shell some light on how that broke down this quarter?

I think Dan has it.

As I mentioned, the operating profit overall was 12.4% and in April down essentially close to 18% for the protective and specialty packaging and 13% for food packaging. That relationship is consistent with the past, but the amounts are somewhat lower, of course.

Okay.

Then house keeping item on the other expense line looks like after we back out the origin for the bad debts, we are up grossly $6 million sequentially measuring a higher interest expense, but what else is going on in that line?

It is essentially higher interest rate on higher debt borrowings.

That is it most sequentially. What is your net debt for the quarter?

It was approximately 1.2 at the beginning of the quarter and 1.2 at the end of the quarter.

Okay.

We met that out for the cash. We did have excess additional cash at the end of the quarter, so at the end of the net basis is 1.1, but it averaged at 1.1 to 1.2 during the quarter.

Obviously, less than our last year's first quarter.

Okay. Finally, on the gross margin line. Obviously, it has been a very tough environment with energy, in the past you talked about at 35%-37% for long-term target range. Do you still think you can get back there longer term or is the environment with regards to energy in loss a little bit more chronic or systemic?

Yes, Kevin I think you may not be aware, but at the end of the fourth quarter we actually changed the accounting for free, so that in affect brought down the gross margin by accounting change. Although, this is comfortable for both periods and we kind of, restated our long-term goal as 33%-36%, and then I honestly believe this business will get back there energy. We are finding and we are seeking actively new ways to reduce the energy components of how we do business.

Okay. Thank you. Next question is from Doug Grow of JP Morgan, please proceed with your question.

Thank you operator. Good afternoon everyone.

Good afternoon.

Hi. On those release comments you made at the beginning of the call Bill, regarding some of the things you have seen in the past. I wonder if you could elaborate a little bit on how you at Sealed Air are looking at your history and how is this environment different from 74-75 time frame, 82, 89, 91 and what you can do, what you were not back then that can apply to today's circumstances?

That is an extensive answer to an extensive question. It is interesting the environment today is more like 75 than it is like 82 and 91. The difference being in 74-75, there was a slowdown in economic growth and high-energy and high petrochemical cost. Whereas in 82 and 91, at the sign of slow down in the economy, most commodities and chemicals dropped precipitously. But, what we did in the earlier periods was essentially look at our factories one of the generations are bubble wrapped, which reduced our material component by about 20%-25%, really grew out of the 75 economic slowdown, and we were able to reformulate the product, re-engineer it, substitute some component outlook, and essentially we were able to bring the cost down. In 1982, where we used the opportunity in terms of new products is to really bill share for our new product when the economy was slow, and in 1983, when the market turned and recovered, you see we reported a 68% growth rate because we well positioned ourselves during the slow down. So, we are looking at all aspects of how we do business, how we go to market, how we manufacture products, and we intend on we are doing some of the same things again.

Are there some particular elements of this downturn, are a little bit more troubling, I mean, you have a little bit in the meat markets back down 15 years ago or 25 years ago. Assuming that presents some unique challenges and certainly has some opportunities, but I guess, I am also wondering why not use this opportunity to make the most of the evaluations that the market supplying to Sealed Air, and truly maximize your equity value and make your acquisitions. We hear so much about the consolidation activity in the market place in packaging. Sealed Air as a leader in packaging has the best valuation and yet, when I am seeing a lot of acquisition activity though you did talk about. I know you did one last year.

Actually, we have done a fair number of acquisition and over the last two years and most of them do not make the radar screen, but I would say we have probably done half a dozen in the year 2000, only one of which was of sufficient size to make the radar screen, but acquisitions are part of our business model and as valuations may be fall in to line for possible acquisition candidate. That will appear on our radar screen.

Anything in the first quarter?

Nothing in the first quarter.

Okay.

Do you think you are on the target this year?

We always are. That is the working list that continues and sometimes climbing is part of the process.

Great. Thanks a lot. Next question is from Rosemary Morbilli of Ingleton Snyder. Please proceed with your question.

Good afternoon all. Bill you mentioned that on the food environment the number of new cases in and so there was a slow down in the number that you specifically were talking about the UK. Have you started seeing some new cases in all the geographic areas, which have not been mentioned before?

The only other place for, I think we have seen recent cases is in Holland and we do fair amount of cheese packaging in Holland, and so we all watching now closely, but that has been in the principle place outside the UK where there has been any recent activity.

Anything new in Argentina where the first few cases discovered?

Actually, we understand it is all in the cellars that are in Argentina about a week ago and they were telling me that they were expecting a delegation from Europe to come to Argentina to review the situation and determine that Argentina has it under control. I think one of the advantages Argentina has Rosemary, is that it is such a huge country geographically, that the cases can be isolated much quicker than they can in the UK were the farms and ranches tend to be much closer together.

No that is true I forgot about that. When given the steps, you have mentioned you were considering and so on. Do you think that you will have some benefit in the second quarter or if not, when do you think you will see it excluding any change in the external environment?

Well, excluding any change in the external environment, we should see modest improvement. We should say modest, because as I said, some of the stabilization is coming into Europe with particularly foot and mouth. The industry is now finding orderly ways to move animals to market, which really was the real issue for probably half of the first quarter.

Okay, and on the protective side. I did not really catch what you said about the trend until April. Is it similar to what it was or is it getting a little better?

No, we actually saw a modest improvement the first week in April and that may have been people adjusting inventories from the end of the first quarter, but through the middle of April the trend has really not shown any signs of sustained improvement.

Was it declining throughout the first quarter, on a monthly basis?

In January, it was a little bit stronger, January was stronger I would say, February may have been the slowest month of the quarter, March was slightly better, but really not much not as strong as January. So, we are looking to see what Mr. Greenspan's most recent interest rate cut does for the second quarter.

Okay. Thanks. Next question is from Dan Chrisharber of Deutsche Bank. Please proceed with your question.

Hi. Good afternoon everyone and I just wanted you to clarify if you could some opening remarks which you said, I thought you said that food in the quarter was basically about flat and protected with modestly down. And then today when we gazed the different regions of the rural, all of the regions were up. Can you reconcile to of this correctly?

I can do that. The price, I know a number of you and I have what number and I have not got the questions so far in this quarter that have asked about price. We have actually had a 2% positive price contribution from the series of price increases we have implemented over the last year. So, the numbers that we have used have included the price component, they excluded the Foreign Exchange component.

Okay. Can you tell us the beginning of the number at the beginning of the call what you gave us was volume and when you went into the segments you gave the sales. Then secondly, you said that revenue in Europe was up about 2%, which I was surprised to hear, that is better than I would have thought. Given, kind of, financial performance, which is down, but under a little bit of pressure here. What kind of volumes in Europe would you consider normal?

Europe has been traditionally running close to 4% Dan and in fact if you go back to a couple of quarters it has been around the 4%. So, you can almost, I would contribute probably almost a 2% drop primarily to the foot and mouth and, kind of, mad cow syndrome. The protective business actually hasn't had the same economic effect in Europe as it has had in the US.

Okay. So, then a part of the problem is a little bit of volume, I suspect, the rest is really cost related?

Yes.

Okay. Another kind of direction, you have this provision that debt agreement, I think was $7.8 million that you had to incur from a subsidiary of Grace in the quarter. Can you give us a little color on what that actually was in and do you anticipate anymore of those kinds of incurred costs over the next several quarters.

Dan there was a specific instrument that was guaranteed by the business at the time of the private transaction. And we assume that guarantee as part of the deal and obviously, with the expectation that we will never be called upon for a guarantee. The accounts have essentially viewed the filing of Grace's bankruptcy as an event, which causes us to at least record a provision for a possible loss. Now, it has not happened yet, we have not paid any money yet, we may not ever pay any money, but is on the books, our accounting has always been conservative, and the fact that it was in there has been discussed even back to the proxy statement in 1998; when we did the deal. And it is interesting should we ever have to pay anything on that, we would essentially have a claim for a like amount in the Grace bankruptcy process, which hopefully would give us some recovery.

Is this somewhat related to the indemnification?

No this is unrelated to the indemnification, unrelated, totally separate element, it was just one kind of a worn off aspect of the 98 deal.

A last question if I could quickly since the W.R. Grace filing, have you seen an uptake at all or any changes in the types of suits?

It is quite interesting as you probably heard us say in one of our earlier calls as this is part of the filing, Sealed Air was granted a stay against any litigation, so in effect, the sort of door has been closed for filing suits against us. So, I think we can say there has not really been anything that happened.

You have any idea how long that the stay will be in?

We are in the process of having it extended, I think, part of the bankruptcy process is that it will be reviewed, and then I think the case would be fully and permanently for the duration of Grace's bankruptcy would be our expectation.

As your request if that is right?

Yes.

Okay and thank you.

The next question is from Nick Redfield of Bank One. Please proceed with your question.

Yes. Two questions. One, do you think foot and mouth has peaked in the UK and what is the situation in Europe?

Okay. First, foot and mouth that you have heard me say earlier on the call is information as of the 19th of April shows a gradual, but continuing decline in cases of foot and mouth, which peaked probably around March 23, peaked some where in the range of about 48 cases per week, and now number is down to around 15, and it has been gradually coming off, and the expectation is this outbreak is being brought under control. The only other outbreak that is come in the news in Europe recently is in Holland, which has had a couple of cases break out. That is the extent of the activity in Europe right now.

Lastly, what was the guarantee for?

Guarantee was for a note.

A note from a subsidiary of Grace to third party?

Yes.

Was Sealed Air involved in the transaction?

No.

Okay. Thank you. Next question is from Jeff Ban nick of RS CB Investment Management. Please proceed with your question.

Good morning gentlemen. I was wondering specifically in varying court pay set in regard to making the stay permanent?

We expect that to be some time in the next couple of weeks.

Is this a court pay set or they will be a court decision on the stay?

I think both happened at the same time, I mean, the bankruptcy process is as I understand extremely complicated, that the judge in hearing, and number of items on a day by day basis, our situation will come up in a couple of weeks, and I believe it will all happen reasonably quickly.

And you are petitioning to make it permanent and are the Asbestos folks are petitioning to remove it?

I think the issue is the debtor makes these motions, which in this case is Grace. That actions against parties that it is involved with because, obviously, any actions against Sealed Air would require involvement by Grace as the custodian of the records, and the history and essentially everything that goes along with it. So, it is in the interest of Grace and of the Grace assets to minimize Graces cost in this bankruptcy process, and there I think is the reason for the stay.

The next question is Curt Lemitz of _____ 00:46:08. Please proceed with your question.

Hi guys. A quick clarification on something you said and the last time we talked you said that you could not really give guidance for the year. And in this press release you said results for remainder of 2000 may not reach our previously stated outlook. You, kind of, clarify which outlook you are talking about here?

I think the outlook we are talking about is the one where actually the one, we did after the fourth quarter. We said that we expected earnings per share in the low to mid single digits for the first part of the year, and then assuming an improvement in economic conditions in raw material costs in the second half of the year that we will return to double-digit growth in the second half of 2001. That is for our reference.

Okay.

Final question is from Stuart Fill of Myers & Company. Please proceed with your question.

Dan I have just looked at the yearend balance sheet versus the numbers you gave us, it looks like the cash balance is up about $90 million, and the debt balance is flat. I am wondering where all those cash came from, as net income is only about $30 million.

No, we generated cash during the quarter and, you know, given the cash base that we had very early in April for the first stock dividend, the decrease, and sale that comes to early in April, we elected to keep the cash on hand. It is interesting to note that cash on hand earnings interest at approximately same rate that we pay on our five-year debt.

Okay so most of this is build up in the payable balance?

We have a build up there, but keep in mind the first quarter is one of our best quarters of the year, not the best. So, we collected receivables. Receivables were down from year-end to March 31. So there is cash flow that comes in the first quarter.

Can you give us the receivables and inventory numbers?

Yes, I can do that. The inventory number as mentioned earlier was $313 million and the receivable at the end of the quarter, were up 475 million.

But Stuart this is Bill, I think your question is really in good ink and an illustration of this companies solid cash flow, I mean, you mentioned earnings of 35 million. I am saying the 8 million that you got for the guarantee didn't require any cash so you are up to 42, and then DDNA was 57 less capital of 40 and another 17, and that takes some cash out of receivables. Even in tough time, this business generates a very, very positive cash flow, and I think that is the positive sign, not only for the company going forward, but for the long-term valuation, which you akin today is cash driven.

I am sitting in the gallery for a long time and I am ready. Thank you.

Sir, please continue with your presentation or closing remarks.

Okay, That sets the final question. I would like to just conclude our comments by again following my remarks to Stuart. At the end of the day, I think, one of the strengths of Sealed Air is the continued and consistent ability of the company to generate very positive cash flows in good economic times as well as soft economic times. I think the first quarter this year is a good example, where we showed that despite the operating environment that we find ourselves in, we were able to generate almost 20 cents of cash per dollar of sales, which I think makes this company very special than most of the other companies in our industry as well as in the border S & P 500. Our cash flow per percent on sales is 30-50% higher than most other companies out there in the market place, and I think that is why we have the value that we have, and why we tend on focussing our efforts to continue in the companies positive cash flow, and drive the top line as opportunities present themselves. I thank you all for participating in our call and we will talk again in the next quarter. Thank you.

Ladies and Gentlemen, this concludes the conference call for today. We thank you for participating and now I may ask you to please disconnect your line.