希悅爾 (SEE) 2007 Q1 法說會逐字稿

Good morning, everyone and welcome to the Sealed Air conference call discussing Sealed Air's first-quarter 2007 results. This call is being recorded. 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 managements prepared comments they will be taking questions. (OPERATOR INSTRUCTIONS)

And now at this time I'd like to turn the call over to Mr. Eric Burrell, Director of Corporate Communications. Please go ahead, Mr. Burrell.

Good morning. Before we begin our call today 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 made solely on the 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 most recent annual report on form 10-K. We have also posted supplemental financial information and reconciliation of non-GAAP financial measures that we expect to discuss on our web site at www.sealedair.com, in the Investor information section under the reports from filings past.

Now I'll turn it over to Bill Hickey, our President and CEO. Bill?

Thank you, Eric, and good morning, everyone, I'm Bill Hickey, President and CEO of Sealed Air Corporation. With me on the call today in addition to Eric, usually we have Dave Kelsey here but Dave's out of the office today and he's having difficulty calling in on his cell phone. So I've asked our Corporate Controller, Jeff Warren, to stand in until we hear from Dave. As an introduction, I will provide a few highlights of our business during the first quarter of 2007. Jeff, or Dave if he calls in in time, will then review select details of our financial results. After those comments we'll then take time for any questions that you may have.

I am particularly encouraged by our positive start to the year. We continue to drive profitable growth and market leadership through innovative products and services. We experienced solid operating results in the first quarter compared with the prior year as we continue to focus on business opportunities for profitable growth around the world. Our sales increased 7% to $1.09 billion, a record for the quarter. We were particularly pleased with our excellent performance in emerging markets. Our sales in Latin America and Asia-Pacific grew at double-digit rates, both in our food packaging segment and our protective packaging segment. In Brazil we again experienced very strong sales growth driven by increasing domestic consumption and record export volumes of beef. Our sales in the Asia-Pacific region were also very solid. And in particular we experienced greater than 30% growth in China.

As you saw from this morning's press release, we had two special items that led to gains in the quarter. The first was an $0.11 per-share gain related to the sale of our 50% investment in the PolyMask joint venture to 3M. The second was an $0.18 per share favorable tax impact from the reversal of tax accruals. The tax accruals were related to multiple jurisdictions and multiple tax years, up to and including the year 2000. I would like to point out, though, even when you exclude the gains related to these unusual items, we achieved a 17% increase in operating profit for the quarter.

We also achieved a 30% increase in our fully diluted earnings per share to $0.39 per share, which also includes the $0.01 per share impact from spending related to our global manufacturing strategy during the quarter. Our improved performance is attributable to a favorable shift in product mix, lower average raw material costs, and our continued ability to maintain tight control on operating expenses.

Our food packaging segment operating performance improved as we leveraged steady volume growth in the quarter. Our segment net sales increased 9% during the quarter or 6% excluding the favorable impact of foreign currency translation. Double-digit volume growth in Latin America and Asia-Pacific were key contributors to sales in the quarter. We also experienced mid single-digit sales growth in North America and recorded another consecutive quarter of double digit growth in our global case-ready packaging business. An improvement in the mix of products we sell, combined with slightly lower average raw material costs, helped contribute to the 100 basis point profit improvement in our food segment operating profit as a percent of net sales during the quarter.

Our protective packaging net sales increased 5% during the quarter or 2% excluding a favorable impact of foreign currency translation. Previously mentioned strength in Asia and Latin America was partially offset by weakness in North America, where we saw some signs of slower economic growth as we progressed through the end of the quarter. In particular, we did note that this morning U.P.S. released their own numbers, which showed package shipments in the first quarter down approximately .2%.

On the new product front, our new Air IB inflatable cushioning sales continued to grow rapidly as we leveraged the introduction of higher speed equipment. Our protective packaging business also demonstrated solid improvement in profitability compared with the prior year, resulting from favorable product mix combined with lower average raw material costs. As we look ahead, we see opportunities to accelerate our growth by increasing the focus of our sales and marketing organization on both core markets and new business opportunities. This includes developing technologies and innovative, new products for food and protective packaging applications, as well as identifying new performance solutions for specialty materials. We firmly believe that this will create additional opportunities for growth and new product development in our business.

As you saw in our press release this morning, one consequence of this focus on markets is that we will modify our segment reporting to reflect the way we will manage the growth and profitability of our business going forward. We're always looking ahead, and this opportunity is a reflection of evolving market trends and our overall business strategy to focus on expanding opportunities for profitable growth.

As you have heard me state over the past few years, more and more of the food we consume in our daily lives is from meals that are prepared or eaten outside the home. This trend has been driven by busy time-starved consumers, looking for increasing levels of convenience in their lives, while at the same time not being willing to sacrifice quality and taste. It has also been driven by advancements in food and packaging technologies that enable us as consumers to access fresh, consistently prepared, high-quality meals either from a growing variety of food service outlets or from the expanding retail case of fresh and prepared meal alternatives available at your local grocery store.

To best position our business to meet this growing trend, we will focus on developing new and innovative packaging solutions for this market. We will be increasing our focus on newer expanding market opportunities in such areas as case ready packaging, vertical pouch packaging, and our growing array of ready meal solutions. We will also remain focused on enhancing the profitable growth opportunities within our traditional core products and markets.

Within our protective packaging business, we will place an increased emphasis on developing consumer-oriented packaging solutions, including products such as Instapak Quick RT, as well as on broadening our portfolio of traditional industrial applications, as evidenced by our recent acquisition of Pack-Tiger. In addition we are increasing our focus on growing our business in newer markets such as special materials for nonpackaging applications, and in the expanding field of value-added medical packaging.

Last year's acquisition of Nelipak Holdings, which provided us with a greater presence in the highly technical field of medical device packaging, and our recent investment in the majority stake in NanoPore Insulation LLC, a leader in developing super insulation products utilizing vacuum-insulated panel technology, are good examples of our efforts to expand our business in these newer areas to increase business development efforts that build upon our core competencies in material science. These areas are expected to become larger components of our overall business as we look out the next several years. I firmly believe that this strategy will enhance our ability to accelerate growth by developing new and innovative performance solutions that will meet the needs of our growing global customer base.

Now let me turn the call over to Jeff Warren, who will review some of the additional details of our financial performance. Jeff?

Thank you, Bill. Now we'll review some additional details of our financial performance. As Bill mentioned, our sales were a record $1.095 billion for the quarter, slightly more than three quarters of our $76 million of revenue growth, or $58 million came from our international operations. Our volume grew internationally $22 million or 4.1%, and favorable foreign exchange translation contributed $29 million. For the quarter, 53.5% of our revenue came from outside the United States.

For those participating in the call, or would like additional details, tables posted on our web site, Sealedair.com, present the percentage of sales by geographic region, the components of the change in net sales by business segments and by geography, and the impact of foreign currency translation on sales by geographic region.

Moving through our statement of operations, the Company's gross profit was $314 million for the first quarter, compared with $284 million in the first quarter of 2006. The year-over-year increase of $30 million or 11% is attributable to sales volume, a favorable combination of product mix, and lower prices for certain commodity resins. Gross profit margin was 28.7% compared with 27.8% in the first quarter of 2006. The sequential decline from last year's fourth quarter is consistent with the seasonal pattern in both the protective and food segments. Marketing, administrative and development expenses were $178 million compared to $168 million in the first quarter of 2006. As a percent of revenue, these overhead expenses were 16.3%, slightly favorable to the first quarter of 2006. Operating profit was $136 million, and operating profit as a percentage of sales was 12.4% compared to 11.4% in the first quarter of 2006.

By segment, protective packaging contributed $60 million, an increase of $8 million or 15% compared to the first quarter of 2006. As a percent of sales, operating profit was 14.5%. Price increases to offset higher raw material costs contributed to our improved margin in protective packaging.

Our food packaging contributed $77 million, an increase of $12 million or 19% from the prior year. The food segment operating profit margin was 11.3%, up compared to 10.3% in the comparable period last year. Interest expense was $36 million compared to $38 million in 2006. And other income for the quarter was $4.5 million, which is equivalent to last year.

Income tax expense for the first quarter was $13 million. Our provision for income tax, which includes a $34 million reversal of tax accruals. This reversal included approximately $11 million of interest that is required to be accrued on these contingent tax liabilities. In the quarter we also provided for $14 million of income tax expense related to the PolyMask sale using a 39.5% incremental rate. Excluding these items the Company's estimated full-year effective tax rate is 32%. Subject to the successful completion of ongoing tax planning initiatives our effective tax rate could be [lower] than 32%.

Diluted earning per share were $0.67 for the quarter compared to $0.30 in the prior year. As stated in our earnings press release, this diluted EPS for the quarter includes $0.11 per share, representing the after tax gain on the PolyMask sale, and $0.18 per share representing the reversal of these tax accruals. Also, cost related to our global manufacturing strategy, lowered diluted earnings per share by $0.01 in the quarter. Adjusting for these three factors, diluted earnings per share would have been $0.39 or an increase of 30% over 2006.

I will conclude with some key cash flow and balance sheet items. Our combined balance of cash and short-term investments at March 31 was $456 million, up $49 million for the quarter. Some noteworthy sources and uses of cash during the quarter were; $42 million received from the sale of our investment in the PolyMask JV with 3M, and the sale of the security envelope product line, $16million to fund our quarterly dividend payment, and funds to cover employee profit sharing and bonuses earned in 2006 and disbursed in the first quarter of 2007. Our quarter end accounts receivable totaled $704 million, down $17 million from December 31. Compared to March of last year, receivables investment increased $46 million or 7% while quarter-to-quarter sales increase was $76 million, also 7%.

Inventory investment at March 31 was $546 million, up $36 million during the quarter, reflecting the normal pattern within our food business. Compared to March 31 of last year, inventory investment was up $116 million or 27%, reflecting the $46 million related to the SAB108 adjustment we made at year end, $23 million related to foreign exchange, and higher balances to support the growth markets such as Brazil, China, and Russia. Capital expenditures were $51 million for the quarter. Of this spending, $11 million was incurred on projects undertaken as part of our global manufacturing strategy.

Looking ahead, our guidance for 2007 capital spending is expected to be at the upper end of our guidance of 175 to $200 million. This projected range is expected to cover our investment in 2007, the rest of first phase of our new global manufacturing strategy. Total borrowings at the end of March were $1.850 billion, down $2 million during the course of the quarter.

Now I'd like to turn the call back to Bill and to your questions.

Thank you, Jeff. Operator, I would now like to open the call up to any questions from the participants.

Thank you very much. (OPERATOR INSTRUCTIONS) We'll go first to George Staphos with Banc Of America Securities.

Hi, George.

Mr. Staphos, your line is open if you could please release your mute button function or pick up your handset, please.

George, you there?

We'll move next to Ghansham Panjabi with Wachovia Securities.

Hi, guys, good morning. The 0.5% volume increase in protective, could you break out the North American versus international component for us?

I'm trying to remember. North American was about flat, and the rest of the business was up 4 -- Jeff, do you have those numbers handy? It was about flat and up 4. Most of the North American was in the fourth quarter. In -- in the end of the quarter.

Okay. And you sort of commented that resin price comp spreads were a little bit better in the quarter. How should we model the second quarter with oil moving up recently and some resin price increases having been in there?

I was waiting for the resin question. And --

There you go.

Last year, resin started high and ended low. And I think our outlook for 2007 was year over year we would essentially be pretty close to flat with 2006. And I still have that view. I still have the view that perhaps it will creep up a little bit, then come back down toward the end of the year. Averaging in 2007 what it did in 2006, although a slightly different quarterly pattern. But very honestly, I'm really not focusing on the quarterly pattern as much as looking at the whole year number and saying it looks good to me.

But you don't have any price increases announced, right?

No.

Okay, great. Thank you.

Our next question will come from Edings Thibault.

Thanks, Bill. A couple of questions for you. Number one, if you could follow up on that, maybe on that resin outlook, since I know you want to talk so much in detail about it, more just sort of you -- rather than quarterly progression, North America versus rest of the world there. We know rest of the world prices have been sort of stubbornly high, didn't perhaps get as much of a benefit in the first quarter as you did in North America. And just wondering how that might flip around as the year progresses?

Well, actually, as I say, we see Latin America going up a little bit. North America sort of going up and down. Europe sort of staying high, and Asia-Pacific staying level.

Okay.

That's a quick summery.

Okay. And it sounds as if with the bulk of your protective packaging volume coming in the back half of the quarter, has that trend been continuing? In other words, are you seeing a U.S. economy that seems to be finding its feet a little bit more?

Actually, it was interesting, I was encouraged by the report this morning that U.S. durable goods orders are up 3.4%. Most of our customer base in the U.S. is still pretty cautious about spending. I mean, we saw that, particularly on the equipment side of our business. There's a real hesitation on the part of consumers to capital spend. Now, I think that -- that subject is also -- has also come up a couple of times in commentary in the last couple of days. In fact, I think I heard something on CNBC this morning. And I would say one particular area of softness is in the equipment part of our business. But at this point, this -- this far in April, I don't have any predictions for the rest of the quarter.

Got it. Thanks.

Rosemarie Morbelli, with Ingalls & Snyder has our next question.

Good morning, all.

Good morning, Rosemarie.

On the food of the unit growth of 4%, is that -- I mean, it is definitely an improving trend. Do you see it continuing? What is behind it? And if you could give us a little bit of some details on the mix -- on the mix side. The mix improvement, where you see it?

Sure. There's -- there's a lot of, I think, very positive things going on in the food business. One is, I think I mentioned in my opening comments, is kind of the rapid increase in both consumption and exports out of Latin America, particularly in Brazil. Good, early, but positive penetration into the Asian markets. And good product mix, in terms of the more technological focused products. And then of course continued growth in case ready, which is an important driver of our food business. Which continued to post another consecutive quarter of double digit growth in most parts of the world. North America is well in double digits, Europe well the double digits, Asia-Pacific well in the double digits in terms of case ready. So some of the new things we are focusing on, as I also said in my comments, where were really trying to identify new opportunities in food, and we have a focused organization going after, what I'll say is a downstream food packaging business in terms of case-ready meals, restaurant and food service applications for food packaging with our vertical pouch systems. So that's kind of the color on it, Rosemarie.

And so you see that kind of growth continuing -- I am talking about unit continuing throughout the year. There was nothing specific to the first quarter that bumped it a little more than you expect for the year as a whole?

No. Actually, I do think the food business is starting to hit a stride. And we've kind of done that. And despite a little slow growth in our historically historic markets. In terms of beef production, beef production was only up 4% for the quarter in North America. And our sales in North America were up 6%. [Harv] production was up kind of 1%. And, again, our North American sales are up 6%. So I do think that -- I'm optimistic that we're going to continue to see positive growth on the food side of our business.

Before moving on to our next question, I would like to remind everyone to please limit yourself to one initial question. And we'll go next to Ross Galardi with Merrill Lynch.

Good morning, thank you. I'm just wondering is you could elaborate a little bit more on the strength internationally, in reviewing the last year or two of quarters, it looks like you really saw a dramatic pickup in Asia-Pacific. Obviously, China's been pretty strong for a number of years now. So what's that really related to? Is that -- do you have a new facility open or something like that? Or has there really been an acceleration? And then just on Latin America, I know a lot of your growth is tied to the Brazilian beef export market. I'm wondering how that market's impacted by the strength of the Brazilian currency?

Well, let's see. If you looked at the posting on the web site, you'll see that Latin America, sales are up 10.5%, excluding currency. And Asia-Pacific's up about 14. We have had a deliberate focus on China for the last two years. I was actually a keynote speaker at the China Meat Association conference a little less than a year ago. And basically outlined a plan to help the Chinese meat industry upgrade to the 21st century. And I think we've got strong, strong commitment from our customer base. And of course we built our organization there. I mean, of the -- of the global companies that participate in the Chinese market, we're essentially the only ones with feet on the ground and not kind of dropping people in periodically. We've got a plant being built, ground's broken, the structure's up. We expect to be producing products there by the end of -- of this year. So I see that as a real head start for us in that market and it's beginning to pay dividends.

On Brazil, the [Rial] increase does not appear to have had an adverse effect on the export of Brazilian beef. Interestingly enough, we have customers that find that they can produce a kilo of beef in Brazil and land it in Europe at a lower cost than the Europeans can produce it for. So I think even the currency hasn't offset that difference. So both of those markets are good for us right now.

Next we'll hear from Mark Wilde with Deutsche Bank.

Good morning, Bill.

Good morning.

I was struck by that comment that you had in the earnings release in term of kind of some new direction at the Company. And you talked a little bit about what some of this is behind some of this. I wonder, though, if you could just go through it, this is the one that starts with developing new technologies, innovative new products. What is really new in this from kind of prior Sealed Air strategy? And then if you could, maybe to talk a little bit about what this new segment reporting may look like?

Sure. Sure. Let me go as far as I can because we aren't all done with it yet. If you followed Sealed Air for a long time, you -- you probably know that over the years we've sold products into nonpackaging markets. And it's been serendipitous. Customers who have found us, customers who have heard about our products, and entrepreneurial sales rep that finds he can sell a packaging product for an application in insulation or construction or recreation or toys, but it's been pretty much unstructured. And as we're looking for new ways to grow, we sat down and looked at some of our core competencies, and one particular competency is material science. In terms of polymer science, structure, foam science, we've done pretty well in all of those fields in packaging. But there's a -- there are opportunities for a focused effort to bring some of those technologies, some of those competencies into new markets where we currently don't have a large presence.

And parts of the genesis of this is perhaps for the first time in the Company's history has had a deliberate focus, an organizational focus on taking our technology to nontraditional to markets for us. I mean, they are established markets for other people, whether it's insulation with the energy concerns, whether it's in construction with sound deadening and noise abatement, whether it's in recreation, you can protect the person just as well as you can protect the package, whether it's in toys and games, whether it's in consumer applications.

I mean, we've sat down and gone through a thought process that says, we can probably build a -- a very nice part of our business by -- by focusing a part of our organization and a part of our sales and manufacturing and technology effort using the core capabilities that we have in new applications. And that's kind of the genesis of the market. And you'll hear more to come as we go through the year.

Next we'll hear from Claudia Shank with JPMorgan.

Hi, thanks a lot. Good morning. I just wanted to shift back to emerging markets and obviously the volume growth was very impressive. And I just wondered what the competitive landscape is like there? Are you seeing increased competition? How are margins holding up in that region?

Sure, Claudia. In fact, you were the only one that published a pre-call report, so I appreciate that, I was prepared for it. Thank you. Sealed Air's history over the years is, we've developed markets, I've given presentations at the conferences by the major firms that have basically told how we created vacuum package beef market, that we created the shrink packaging market. We essentially created the protective packaging market, we created the case-ready market. Now essentially we're creating kind of markets in emerging countries. And as is always the case in a capitalist environment, people will follow. But ROE has always served us well over the years and I expect it to do the same here.

Next we'll hear from Tim Burns with Cranial Capital.

Good morning from London, Bill, how are you?

Tim, haven't heard from you in ages.

I'm ready to jump that river any time. Meals ready -- I'm going to squeeze this in so I get two. Meals ready-to-eat, talking about it more and more. And then, secondly, Brazil. Used to be kind of a hospital until another region of your meat production arena got fixed. Is your crore strategy, in terms of plants, are they in the right place now, or do we have a little more time to go?

You mean our manufacturing plants, Tim?

Yes, I mean, the example is, mad cow hits Canada, North America, to satisfy Japanese consumption you made it in Brazil.

Or Australia.

Or Australia, right. Right. So -- but even beyond that is the question of, your best plants in the right areas to be able to accommodate that and growth, I guess.

Yes. Tim, we're in that process. I mean, that's really the -- you've hit on really the key objective of our global manufacturing strategy, is take a network of plants that was designed in, kind of the '70's and 80's for a -- a U.S. euro-centric market, and realign that so we are producing in Asia and you're producing in Latin America, and you're producing in eastern Europe and Russia, where the growing markets are. And that's that two-plus year program that we're probably one year into that is going to reposition that manufacturing capacity. So we're in the right place with the right product at the right cost at the right time. You've actually hit the objective of our manufacturing strategy, which we've been talking about, Tim, so thank you for reminding everyone.

Sure. Thanks.

And next we will hear from Scott [Kenim] with UBS O'Connor.

I was just wondering if you could talk about your balance sheets a little bit. And what if anything is going on with Grace and plans for the converts?

Well, that's a pretty good question.

A broad one. I'll let you guys lock yourself into a corner.

Okay. Balance sheet's fine. I mean, balance sheet's fine. We -- I think you heard Jeff's comments about debt. We -- we added cash to the balance sheet. As far as everything I know, there's nothing new on Grace. I think they celebrated their fifth or sixth year in bankruptcy. And that's about all I can tell you, because it's really been moving very, very, very slowly. To our disappointment. It's an era we would like to put totally behind us. But there's been little action as far as I'm aware of, in the Grace bankruptcy. And on the convert, we're looking at our options but haven't made any decisions yet.

Thanks, guys.

Next we'll hear from John McNulty with Credit Suisse . Yes, good

Hey, John.

Just a quick question on the higher CapEx spend or at least coming in at the high end of the range. Is that because you've got more projects or more opportunities than you thought? Is it that you're getting through them faster, or is it just that things cost more these days and so it's -- the capital requirements may be going up a little bit?

Well, I'll tell you -- I think you may have heard that when Jeff made the comments earlier in the call, the 50, $51 million in capital spending, about 11 million of that is for the global manufacturing strategy. Which you know we just announced eight, nine months ago back in July of '06. So that spending is starting. But the remainder of the spending in the quarter, the other 39 million or so, 40 million, is really adding capacity in those two particular areas that we've seen rapid growth for a couple of years. And we've about topped out what we've been able to produce on our current capacity in both vertical pouch and some of the case-ready applications. And we just had to add more capacity to keep up with the growth. I mean, we've had three-plus-years of double-digit growth in both of those products, and it's time to give the manufacturing folks a break.

The other part about it, is that of the capital spending, roughly about 55% of it was North America, about 45% is outside North America. So you can see our continued emphasis on investing outside the U.S. for the -- the opportunities in those parts of the world as came up during -- during the earlier question with Tim Burns.

We'll take a follow-up question from Rosemarie Morbelli with Ingalls & Snyder.

On the sale of the PolyMask share that you own, why did -- why did you sell it? What is behind that decision?

Well, yes, it's interesting, Rosemarie. It's a venture we went into with 3M in 1991. And actually it was a great venture. Over the course of the 16 years of partnership with 3M in this business, we both made a lot of money and grew the business to a degree that I think both companies were happy with it. As in most joint venture agreements, there are ways to end them, and 3M came to us late last year and said "We'd like to buy the whole business." And under the terms of the agreement they had the right to. And we agreed to sell it to them. And that's the way it turned out.

You are happy with that decision? Do you have a choice to refuse?

Well, as I say, it was a partnership, and our agreement provided if we unwound the venture, either party could buy it. And we decided that it didn't necessarily fit a lot of thing in the other parts of our business. It it was really a masking business, which really is much closer to 3M's core competencies than -- than ours. So, although under the terms of the joint venture agreement, we probably could have also offered to buy the business. We con concluded that 3M was the logical owner for the long term. And they -- and they were a great partner for 17 years.

Edings Thibault with Morgan Stanley has a follow-up question.

Thank you very much, Bill. I was hoping we could return to this issue of cash usage, because you guys are starting to turn out some pretty good cash flow here. And obviously, thanks to the PolyMask sale, you've got a nice bump-up in cash. You're at the high end of your historical cash range. Do you anticipate accelerating share buybacks, increasing dividends, you certainly don't have any crying need to pay down debt, how would you prioritize it?

Yes, well it's an interesting challenge. I was going to add to my opening comments that I felt so good about the first quarter and how we're tracking and how the outlook for the business is, that we did raise the dividend 33%. And we did split the shares. And we still have cash coming in. But that's the beauty of this business, Edings. I think though, our first priority is to reinvested in the business. That's always been our first priority. Our -- our second sort of priority has been to pay down debt. And as you say, there's no crying need to do that. And then the third is look for ways to return cash to our shareholders. I like to think raising the dividend in the first quarter was part of that. Buying back stock is always in our -- our tool kit, as you know. And those will continue to be our priorities. But we -- we haven't sort of made any conclusions as to what to do with the extra cash we have right now. But I hope you can count on us. I'm sure you can count on us to spend it wisely.

Okay. Operator, I'm going to take a couple of questions from the internet. We've got a couple of questions that have come over the web site which I'd like to just take to give the people who have taken the time to post questions, to have an answer.

First question is; How has the merger with Pack-Tiger progressed since announced, and how do you expect this to affect Company profitability in the U.S. for 2007?

We just essentially closed the deal on Pack-Tiger. We are in the process of integrating the business into Sealed Air. We're also in the process of doing an equipment build in preparation for an extensive product rollout. Probably at the end of the second quarter of this year. I don't anticipate it will have a material or even a significant effect on our results in 2007. But as the business picks up I expect it to be extremely positive in 2008.

Second question on the internet is; What do we estimate our market share in the protective packaging market in the U.S., and how big is the market?

And the answer is we generally don't answer that question. It's -- it's a market that continues to change, continues to grow, continues to develop. And one of the things we do is, we expand it, so putting out numbers is really not meaningful, nor appropriate.

Third question from the internet; Mentioned reporting is going to be changed. Can you specify what this means? Thanks.

Okay. I mentioned in my opening comments, and also in response to one of the questions, we are in the process of focusing our organization on particular growth opportunities. You heard me answer an earlier question on specialty materials, we have also identified a focus in kind of ready meals and basically foods outside the home. And so, by the nature of the reporting process, is in the interest of communicating to shareholder and how we look at things should be the same way you look at things. We at some point will be recasting how we report to you between food packaging and protective packaging to identify what other areas of focus we have organizationally. And that will be sometime this year.

That's it. Operator, can we take the next question on the phone?

Yes, we'll be going back to George Staphos with Banc Of America Securities.

George, we missed you.

Oh, well, I had another conference call, as well. I apologize. Their result weren't nearly as good as yours, Bill, I'll let you know that.

Thank you, I appreciate that. I appreciate that you went to where you had to go. Somewhere you'd like to go. [laughter]

Sometimes order isn't priorities. In any event, you may have covered any of these questions. And if you have, feel free to direct me to the transcript. But have -- commercialization of new products, particularly in food, you had a nice pickup in volume. If this was a few years ago, it was a bit of a frustration for you. How is that progress getting your customers over the goal line progressing these days?

George, it's still a frustration, getting new products over the goal line in the food business is a challenge. I'm not saying I'm giving up. But, in addition to your internal process of developing the product to fit the consumer and customer need, you then have to go through the -- essentially the regulatory process to be sure you're in compliance with the FDA-type laws and regulations, not only in the U.S., but with the global footprint we have, that you meet the requirements in other parts of the world. And then third, you then have to go through your customers' application process. And that runs anywhere from 13 months to well into 2 years. And there's a particular product that we worked with a customer for two years on before we've gone commercial. So it's still a frustration. I'm open to any help or suggestions anyone has. But we're still working on it. But we do have some things happening. And perhaps later in the year we'll have a session on new products.

We'll now take a follow-up question from Ross Galardi with Merrill Lynch.

Thank you. I was just wondering, Bill, if you could elaborate on the strong price mix that you had in the U.S. this quarter. It actually looks like it was better than international. What's driving that?

Primarily focus on profitability. We -- I mean, market share has never been a Sealed Air focus. We essentially focus on selling the right mix of products at profitable -- that are profitable to us and cost savings to our customers. And that focus really came through in the first quarter.

And our final question will will come from Mark Wilde at Deutsche Bank.

Hi, Bill. Just as a follow-up here, I saw that the first shipment of U.S. beef hit South Korea in about three years. Any thoughts on sort of how this may affect you, if we look out over the next three or four quarters?

Sure, Mark. I think one of the things important things to understand is, and I've learned to appreciate it a lot more since the first mad cow hit Europe six years ago, is that the global meat industry is truly global. And products move around and kind of markets move around. And it's not that South Korea has been without beef. A lot of the growth we've seen in other parts of the world have been their efforts to fill the void by the U.S. essentially being out of the market. So, Korea opening up will benefit our customers in the U.S. But the benefit to us is probably only at the margin, in that we probably could pick up a net increment only if -- only if Korean consumers eat more beef.

So we can supply the beef industry or the meat industry from any part of the world to -- to wherever they ship to, and that's one of the great advantages we have in the industry is that what -- what you lose in one place you pick up someplace else. And -- overall you maintain a pretty strong position. So I -- basically, the conclusion is, increased U.S. exports to Korea will be helpful, but not a big effect because some of that will come from other parts of the world. Okay, Mark?

That is all the time we do have for questions. Gentlemen, I'll turn the conference back over to you for any additional or closing remarks.

Sure. I really want to thank you all for participating in the call today. I think we had a very good quarter. As I mentioned, not only in my earlier commentary, but in answer to the q&a, and we've really got confidence going forward. I think the increase in the dividend, the pickup in capital spending, putting money back into the business to support our growth, progress we're making on our global manufacturing strategy are all very positive signs for the future. Our strong growth in developing markets is a reflection of the many opportunities we have to grow our business around the world.

Our global manufacturing strategy will enable us to meet these long-term opportunities for growth through investments in new capacity, new technology, and an optimized global supply network. Our increased focus on key strategic markets will also create additional opportunities to accelerate growth in our business. I'm very confident that we have the right strategy, the right people in place to successfully execute our plans and deliver enhanced profitability and growth for many years to come. It is for these and many, many more reasons that I personally am very glad and proud to be a Sealed Air shareholder. Thank you all for taking the time to listen to us today.

And that does conclude today's teleconference. We'd like to thank everyone for their participation and wish everyone a great day.