希悅爾 (SEE) 2009 Q3 法說會逐字稿

Good morning everyone and welcome to the Sealed Air conference call discussing the Company's third quarter 2009 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)

Now at this time I'd like to turn the call over to Amanda Butler, Director of Investor Relations. Please go ahead, Ms. Butler.

Thank you and good morning everyone. Before we begin our call today I'd like to remind that you statements made during this call stating managements outlook or predictions for the future are forward-looking statements. These statements are made solely on information that is now available to us. Our future performance may be different due to a number of factors. Many of these factor are listed in our most recent annual report on Form 10(K). We also posted supplemental financial information and reconciliations of non-US GAAP measures that we discussed o on our website at sealedair.com in the Investor Relations section under quarterly results.

Now I will turn it over Bill Hickey our CEO.

I'm Bill Hickey President and CEO of Sealed Air Corp. With me on the call today in addition to Amanda we have Dave Kelsey, our Chief Financial Officer.

During today's call I'd like to highlight our business performance in the third quarter and update our 2009 guidance. Dave will then discuss details of our financial results. After Dave's remarks we will take your questions from both the telephone lines and via text on our webcast. This morning we reported a 36% increase in our adjusted diluted earnings per share in the third quarter, or $0.38 per share. This figure excludes a number of items which we highlighted in our press release and financial schedules. This increase in earnings reflects incremental $20 million in benefits we delivered in the quarter from our various global manufacturing strategy and cost reduction programs bringing our year to date benefits to approximately $70 million.

Our disciplined management of expenses, a positive $60 million variance in resin cost on a year over year basis and higher volumes in our food packaging business. Together these factors helped drive a 29% increase in our adjusted operating profit and a 390 basis point increase in our adjusted operating margin. Additionally we highlighted an approximate $100 million increase in free cash flow in the third quarter which Dave will speak to in his prepared comments. Overall I believe these results reflect solid execution by the entire Sealed Air team and value creation for the business. We feel that our strategy and operational plans are serving us well today and preparing us for the future.

Looking at topline performance sales declined 5% if you exclude the impact of foreign currency translation. Volumes and product mix price mix decline in the quarter by 4% and 1% respectively. The volume decline largely reflects the ongoing weakness in our protective packaging business in North America and Europe due to the economic conditions. The decline in price mix primarily reflects a decline in price mix in our North American food packaging business where we did renew some long-term contracts and gained new customers that incorporated current resin prices.

Geographically the North American and Western European regions continued to experience year over year declines in volume with the United States showing some improvement in protective packaging sales. The most positive shift occurred in our developing regions of the world where constant dollar sales increased 5% in the quarter on a year over year basis. Sales grew at double-digit rates rates in Russia, Poland and Ukraine, 1% in Brazil and by 8% in the balance of Latin America.

Looking at the Asia region constant dollar sales in greater China where we primarily serve the export markets although they declined 4% this was an improvement over last quarters volumes as export markets picked up modestly in the quarter.

Looking at our three main business segments I would like to highlight that our food packaging segment increased 4% in constant dollar sales reflecting the 5% volume growth and 1% price mix decline. The strong rate of volume growth was largely attributed to favorable volume comparisons which we mentioned in our press release earlier this morning. However, when we exclude this factor we still delivered a 1% plus increase in constant dollar sales. If we were to exclude from the food packaging business our equipment sales which were down in the quarter sales, material sales would have increased by approximately 2%.

Globally volumes largely tracked to regional annual production rates except in the Americas where volume tracked above the usual proxies. In North America, our significant presence in warehouse and discount outlets was a benefit as consumers continued to eat at home and shop for bargains. Additionally we gained market position in our vacuum shrink bags which lifted our volumes further above the market trends. In Latin America a 4% volume increase included growth in Brazil where an increase in domestic beef consumption helped defer lost export sales to Europe.

Switching to price mix, the 1% or $5 million decline in the quarter was really isolated to the North American price variance which I mentioned earlier. All other regions have been doing a great job in maintaining positive price mix in this challenging economy.

As I commented in the press release innovation continues to remain a core focus. Starting today our food packaging and food solutions teams will be out at the worldwide food expo and the American meat institute show in Chicago showcasing our new packaging software solution, PakFormance as well as a number of enhanced cooking bags, two new automatic bag loaders and a deli snack tray all which have will continue to differentiate us in the market and pride measurable value and meaningful cost savings to our customers.

Moving to food solutions, this segment had a 4% decline in constant dollar sales which was due to a 2% decline in both volumes and price mix. Although we are disappointed with the lack of growth, week consumer confidence, more eating at home, less eating in food service outlets and restaurants and economizing overall are resulting in lower meat consumption in Europe which continues to be food solutions business's greatest challenge.

The volume decline was ice late to do western Europe isolated. And in particular southern Europe and largely within our case ready portfolio. North American sales were steady on a year over year basis which was aided by an expanded customer base. In all other regions volume grew at double-digit rates, 10% in Latin America, more than 15% in Australia, new Zealand, and 18% in Asia. Our lower price mix in the quarter was primarily due to normal price adjustments in our trade business which is a largely outsourced product and mainly formula based.

In this environment our team has really focused on growing the topline in new products such as Darfresh, our new easy pack and tray lid products as well as expanding our vertical pouch packaging solutions both geographically in Latin America and in new nonprotein applications such as frostings for bakery applications and consumer food service products like peanut butter.

The protective packaging segment saw the most positive change in the third quarter both on a year over year and on a sequential basis. A seasonal lift combined with modest inventory restocking by our customers and our own new product placements reduced the North American volume decline to 12% in the third quarter as compared with 20% in the second quarter.

Earlier this month the US protective team was at the pack expo show highlighting new products within a number of product families including new platforms for Instapak foam in place, Pak Tiger paper based packaging, Fill air inflatable packaging and Priority Pal automated packaging systems. Our expectation is that these launchings will continue to drive on going adoption as they provide opportunities for our customers to save money in their own internal packaging operations.

Additionally in the quarter our Asian business saw 7% volume growth due to a slight increase in export activity. We believe that these increases appear in line with external trends. Looking ahead at price mix the 3% decline in the quarter reflected some additional price concessions which were made among our more mature product offering.

Before I hand the call over to Dave I'd like to cover our geographical footprint as well as an updated full year 2009 earnings guidance. As you listen to the results today I think you see longer term the significant benefit Sealed Air has with its global footprint. Although the U.S. economy may be slow, we are seeing meaningful growth in other parts of the world and as I continue to remind myself and our organization that 95% of the people in the world live outside the United States and the opportunities in the future are going to be in those parts of the world.

As you saw in our press release earlier today we have now raised the lower end of our full year earnings guidance by $0.10 per share. Our guidance is now $1.27 to $1.35 on a GAAP basis which includes a charge of $20 million net of taxes or $0.08 per share related to our ongoing global manufacturing program and $4 million net of taxes or $0.02 per share for the loss on the early retirement of our convertible securities during the summer and impairment of our available for sale auction rate securities which we recorded in the third quarter. Excluding these items we have now raised the lower end of our full year EPS to $1.37 to $1.45 per share. This compares to our previous guidance of $1.17 to $1.27, or $1.25 to $1.45 on an adjusted basis respectively.

We feel this adequately represents solid business growth on a year over year basis and as we reflect on looking forward to the fourth quarter. We expect to continue to realize benefits from our global manufacturing program and cost reduction productivity programs that we implemented earlier. We will remain disciplined on operating expenses and we expect to experience only a modest increase in raw material prices in the fourth quarter.

Our guidance range is driven by the variance we may see in volumes in the fourth quarter as we remain cautious due to the uncertainty in consumer confidence and discretionary spending; particularly in the upcoming holiday season and further in light of the drop in consumer confidence that was reported yesterday. We do feel that we should continue to see sequential constant dollar growth in our food packaging business due to both seasonality and market position gains. We are expecting food solutions and protective packaging to be stable quarter over quarter based on current economic conditions. Our updated assumptions also reflect the full year effective income tax rate of approximately 26% down slightly from our earlier 27.7% and capital expenditures of approximately $80 million to $100 million reduced from $100 million to $125 million.

Now I'm going to turn the call over to Dave Kelsey to review some additional details on our financial performance and liquidity position and we will be back for your questions later. Dave?

Thank you, Bill. As presented in the financial statements that accompanied our release sales were $1,080,000,000 in the quarter. For additional details on the components of net sales for the quarter please review our supplemental financials posted review our supplemental financials posted on our website, sealedair.com.

Gross profit increased $17 million to $311 million or 6% in the quarter compared to the prior year. Adjusting for the unfavorable 2009 impact of foreign currency translation gross profit would have been $329 million or 12% higher than last year. The margin impact of lower sales volumes was more than offset by approximately $60 million in lower raw material costs, approximately $25 million in benefits from both our global manufacturing strategy and our 2008 cost reduction in productivity program, as well as a $14 million reduction on a constant dollar basis in freight and energy cost.

Marketing, administrative and development expenses decreased $13 million in the quarter compared to the prior year. On a constant dollar basis adjusted operating expenses were $189 million which is $4 million or 2% lower compared to the prior year. Contributing to the reduced operating expenses was an approximate $6 million benefit from our cost reduction and productivity program in lower travel and entertainment expenses of approximately $3 million from the prior year. These benefits were partially offset by variable incentive compensation in the current quarter compared to the reduced accruals in the prior year. Operating profit after adjustments increased 29% to $133 million from $103 million last year. Interest expense increased by $11 million to 200 -- in 2009 compared to 2008 reflecting additional interest expense of $17 million in the third quarter on two first half note issues. Our 12% notes issued in February, 2009, and our seven and seven-eighths percent note issued in June, 2009. Partially offsetting the additional interest expense was a reduction of $7 million of interest expense resulting from the maturity of our five and three-eighths notes in May 2009 and the redemption of our 3% convertible note in July 2009.

Looking ahead to the fourth quarter we are expecting interest expense to be comparable to the $42 million incurred in the third quarter bringing our expected full year interest expense to approximately $155 million. In connection with the redemption of our 3% notes we recorded a loss of $3 million which represented a call premium and the writedown of the remaining balance of the original debt issuance cost. Because the 3% notes were convertible in Sealed Air common stock the redemption reduced the number of common shares outstanding included in our diluted EPS calculation by 10 million shares for the third quarter and by 4 million shares for the nine months ended September 30.

The impact of the seven and seven-eighths percent senior note issuance and the 3% senior note redemption resulted in higher interest expense but a lower number of diluted shares in our EPS calculation which is expected to reduce our full year EPS by approximately $0.03. We have not treated this as an adjustment to our full year guidance.

Next I'd like to summarize the costs and benefits of two of our key programs. First the cost reduction and productivity program we announced in July of 2008 which reduced employment by approximately 900 or 5% of our workforce from June 30, 2008. We realized approximately $12 million of incremental savings in the quarter and approximately $38 million of incremental savings year to date. These savings were split almost equally between cost of sales and operating expenses. From a cash flow perspective we made cash payments of approximately $7 million in the quarter and approximately $32 million year to date primarily for termination benefits. Of the remaining $12 million in payments, $6 million will be made during the balance of the year with approximately $6 million following in 2010.

Second, related to the implementation of our global manufacturing strategy we recorded charges of $3 million largely in cost of sales. Our incremental benefit through nine months has been approximately $15 million and we remain on track to realize incremental benefits of $20 million in 2009. This should bring our cumulative benefit to $45 million at year end increasing to $55 million in 2010 and thereafter.

I'll conclude with some key balance sheet and cash flow items. Our receivables decreased $4 million on a constant dollar basis from June 30, 2009. Also on a constant dollar basis and excluding the repurchase of $135 million of receivables included in our receivable securitization facility in September, 2008, accounts receivable would have decreased approximately 14% compared to September of last year. In the third quarter this year we did not utilize our accounts receivable securitization facility.

We continue to be focused on our credit and collections effort in the current economic environment and to date we have not experienced any material deterioration in our accounts receivable portfolio. Our days sales outstanding were 1 day lower at September 30, 2009, than at September 30, of 2008. Inventory investment at September 30, declined $16 million from June 30, 2009. On a constant dollar basis inventories decreased $30 million, compared to September 30, of last year, inventory investment was down $123 million, or $114 million after adjusting for currency translation.

This continues to be a conference coordinated effort involving sales, supply chain, customer service and support from finance and information systems. Debt, cash, and cash equivalents at September 30, was $1,112,000,000, down $238 million or 17% from the end of December. This decrease is attributable to the free cash flow we generated in the first nine months of 2009. As an aside another use of free cash flow has been to pay $57 million of dividends to our shareholders over the first nine months of the year.

I will conclude by providing an update on Sealed Air's liquidity position and cash flow. First at September 30, we had $487 million in cash and cash equivalents. In addition, we continue to have access to nearly $700 million of committed borrowing capacity. Free cash flow, one of our key metrics as a management team, gets close attention. As shown in the supplemental information furnished with the financial statements we generated $339 million of free cash flow for the nine months ended September, 2009, compared to $75 million last year. In fact, the $339 million is more free cash flow than we've generated annually in any of the past five years. On a constant dollar basis both our accounts receivable and inventory contributed to our positive year to date free cash flow performance. Capital investment has been lower in 2009 than in recent years as work is largely completed on our 3 GMS related new plants.

Our total year capital investment is now expected to be approximately 80 million to $100 million to be used for a combination of maintenance and growth projects. This level of investment is consistent with our spending before commencing our GMS projects in 2006. Our current available liquidity and projected free cash flow positions us to fund both our day-to-day operations and the WR Grace settlement should it become payable within the next 12 months. Please note, though, that there is still no date certain for the funding of the settlement.

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

Thank, Dave. Operator, we'd now like to open up the call to questions from the participants and we will follow up with any questions from our webcast participants as well.

Thank you very much. (Operator Instructions) Your first question comes from the line of George Staphos, please proceed.

Thanks, hi, everyone. Good morning. Bill or Dave, first question I've got is on protective packaging in North America. Could you provide some additional color in terms of how the business trended over the course of the quarter? And then the second related question is, there have been significant changes in the U.S. manufacturing economy, obviously both cyclically but also on a secular basis. How are the new products aimed at addressing some of these changes and leveraging your performance going forward? Thanks.

Sure, George. Let me take your protective question North America and I'm actually looking at numbers month by month. And July and August were pretty flat. I think we said earlier on the July call that we had not seen any real pick up in the business and, at the end of July. And in September or order rate picked up. Now some of that's normal seasonality and we would normally pick up some packaging supply buy for the holiday season so I wouldn't read that much into it but there is a seasonal pick up. And the other part in talking to customers I think that a lot of customers had held back spending for so long in 2009 that they were essentially fully Destocked. So I think there was a modest and I'll say only a modest restocking. We are seeing more frequent orders and smaller orders. But generally September was a couple of percent uptick. I think the numbers turned out to be 9% if you, well, if you take that FX is a nonNorth American number but it was up in single digits in the month of September. And we are crossing our fingers for the rest of the year, George. Do your holiday shopping early.

I will do what I can. Bill, just to be clear, those were year on year percentages you were giving or what was your perspective in giving that?

Those were sequential, George.

Got it.

Your next question comes from the line of Ghansham Panjabi of Robert W. Baird.

As a follow up to George's question on perspective given that volumes still seem week over year and and round trip prices seem a little bit more stable, the credit crunch seems to have eased somewhat what's your view on the competitive landscape for this business not just in the US but just geographically? Thanks.

I don't think the competitive landscape has changed too much. I know one of the smaller competitors changed ownership earlier in the year and delisted from the Toronto Stock Exchange. The rest of the competitors seem to be pretty much holding their own, Ghansham. I haven't seen any particular trends in change in landscape. Right now there is more capacity in the system than there is demand. So we probably, like other people have taken lines out of production. We are running some plants at probably three days a week so we are trying to balance supply with demand. And I would expect the industry overall is probably doing the same thing.

Just as a follow up how much do you estimate that lower fixed cost is going to cost you in the quarter then, do you have that number?

Yes, well, actually, we have taken fixed cost out. We have done on a supply chain team and the manufacturing group have done a remarkable job between not only the GMS program which is as you know several years old in a more strategic level as opposed to the cost reduction program that we began middle of last year when we first saw signs of the economy slipping is of the 900 or so headcount we took out of the Company last year more than half of that was on the supply chain manufacturing side. So we've essentially lowered our fixed cost. I don't have the number off the top of my head but it's in the millions. So that there's less fixed cost to be unabsorbed may be a simple way of saying it but there probably is some but I would say it's less than it would have been had we not reacted as promptly as we did.

Okay. Makes sense.

Thank you.

Your next question comes from the line of Rosemarie Morbelli of Ingalls & Snyder.

Good morning, all. Bill, you mentioned that you experienced some decline in your selling prices as some of your customers signed up new contracts and they really took advantage of the fact that material costs were down for a little while. Now you are looking at raw material costs going back up even if it is not a lot. Should that translate into margin pressure in the fourth quarter or do you think that you can for certain product lines get your selling price increases in line with raw material cost movement?

Yes, Rosemarie, the new contracts we signed, those all have, because they are multiyear contracts they do have price formulas built into them. I think a couple of customers took advantage of the opportunity and said, gee, we've got one year left on our contract or six months left on our contract, we'll do a multiyear renewal but we'll repay the starting point. So in essence there was a little bit of a step down but now they are back on a formula going forward and those are multiyear contracts. So there should not be a meaningful effect on margin should prices change although our expectations is in the fourth quarter the impact is probably going to be less than a penny a pound on our overall resin spend.

Okay. And if I may on the (inaudible) and now that you are making it yourself I think for one full quarter at this stage do you still see a $0.05 on benefit per share and have you seen any in Q3?

Okay, yes, let me, that's a great question, Rosemarie. In fact if any of our special material folks are on the line they have done a remarkable job and got the Dow inventory down to less than $0.5 million and I guess what they like to say is what's left is rats and mice and the new line has started up in Louisville. I was at the plant a week and a half ago. It is a phenomenal production line. It essentially is a significant reduction in our existing lines cost straw. Now the $0.05 a share is going to be a challenge because it has to have some volume to do it. We have to have some volume to do it. The $0.05 a share was based on 2008 volume. That volume has come down as you can see in our numbers so there will be much more positive contribution at the margin line from sales of the FF Foam product but I'm not ready to predict whether we will get $0.05 because of volume levels aren't at the level we used to calculate the $0.05.

It still did not generate any income in Q3?

No.

Okay. Thanks.

Your next question comes from the line of Claudia Houston from JPMorgan.

Thanks very much. Good morning.

Good morning.

Free cash flow continues to surpass our expectations. I was hoping you could comment on the sustainability of your working capital gains and any priorities for cash in near term and in medium term basis.

I'll just make a quick comment before I will ask Dave to. This is the ATM you can own. Dave?

As I mentioned in my prepared remarks our free cash flow the first nine months is higher than what we've generated in a full calendar year over the past five years. The levers are in place for us to have positive free cash flow again in the fourth quarter. We will have cash supplied from operations. We would expect receivables to continue to track with sales so not much movement in the outstanding balance there. In inventories based on the programs we have in place we would expect them to continue to trend down through year end and we've given reduced guidance for CapEx so we don't expect CapEx to use a substantial portion of the cash from operations in the quarter. So I'm not going to give you a number for the total year but all indications are it will be a measurable step up from the June, I mean the September year to date generation.

Thanks, Dave.

Then just your priorities for cash?

Well, I mentioned dividends.

And paying down debt.

And we've been building up our cash balance in anticipation of the W.R. Grace settlement payment occurring in 2010. Beyond that we will use cash to continue to reinvest in the business and achieve our long-term objectives.

Okay. Thank you.

Your next question comes from the line of Sara Magers of Wells Fargo Securities.

Good morning. You mentioned lower volumes in the European food solutions business but within the consolidated segment the year over year volume decline rate moderated from the first half of 2009. Actually it was the same for food packaging. I see that year over year pricing was down as well. Could you give us a bit more detail on the reasons behind that? I mean maybe it was just a mix issue but I'm just wondering about the dynamics.

Okay, you are looking at food solutions or food packaging?

Actually both. I mean, you look at the year over year volume decline rates and I think for food solutions you were down 1.5% in the quarter whereas in Q2 of '09 you were down 5.9 and in Q1 you were down 5.2. I'm wondering about the pricing and the pricing kind of changed as well. I'm just wondering about--?

Let me sort of try and give you a snapshot here, is the pricing is down primarily in trays as I said on my call. As you know from what we've said before is trays are generally an outsourced product. We buy it and we resell it, marry it up with our film solution for case ready. And the trays are generally more contract based because they are more a commodity item. So that we just pass those through. So that affects the price. Now on the volume side the European food solutions numbers are down and it's primarily in Spain and in Italy which are two very meaningful case ready markets for us and with unemployment in Spain I think in the teens and Italy probably not far behind that we are just finding that consumption of product is actually down in those economies. Now that's being somewhat offset because in the rest of the world the food solutions business is growing. So you've got a couple of moving parts here, Sara.

Okay.

You've got price down primarily in Europe. You've got volume down primarily in Europe. And you've got volume up in the rest of the world.

Okay. And just a follow up on that, in Europe, I mean, have you noticed any change in consumption patents so far in Q4, and do you expect any changes going into the holiday season at all?

That's the big question is the holiday season. There is always a seasonal pick up and most of that would be in food packaging which primarily serves if you look at the roasts and the larger cuts, those are more a food packaging product. So we are seeing a seasonal pick up. It's a question of how good it will be. Food solutions relies much more on the more convenient side of eating, caters a lot more to the restaurant trade and to the ready meal prepared foods and we haven't seen consumers step back up to those commitments yet.

Wonderful. Thank you.

Your next question comes from the line of Richard Skidmore of Goldman Sachs.

Thank you. Good morning. Just want to do maybe focus a little bit more on the food packaging volume growth in the quarter. Bill, you mentioned that, I think you said North American volumes were better than production and it looks like the outlook for protein looks to be a little weaker in 2010 versus 2009. Can you elaborate on that as well as you made the comment about Brazil. I thought we were sort of cycled through the Brazil export issue to Europe at this point?

Right, right, let me go back to your first thing and kind of, in North America volumes are actually up you can see on one of the attachments on the website is they're actually up in terms of units 5.2%. In a market that has essentially been flat from a protein point of view but we say we've picked up some new customers, we think we gained market position and I think that's really helped the business in the Americas. On the Brazil side, while we are seeing although we've lapped the European export so it's sort of flat period to period the pick up we are seeing is more of domestic consumption picking up in Brazil rather than a meaningful change in the export situation.

And maybe just a follow up on that do you get the sense that you'll start to see any tick up in the Brazilian exports to Europe or is that a structural change that's now going to be there for a while?

No, I think it's more right now the economy. I think it's more the economy. I think that, I think that structural issues that came up in terms of trade have substantially been resolved. Now it's now basically an economic issue and don't forget the -- one of the things you'll learn when you work this global meet trade is look at the exchange rates because it's a real influence on who is buying what. It's interesting, the Australian just to give you a little quick geography, with the strength of the Australian dollar which is primarily driven by commodities has really made Australian beef noncompetitive or less competitive. So US beef exports eventually benefited in the year. Now for our business it's, it doesn't make much difference, in Brazil the real has really strengthened over the last couple of months and that's really raised the effect of cost of Brazilian beef going to Europe.

Thank you.

Your next question comes from the line of Peter Ruschmeier from Barclays.

Thanks and good morning. Most of my questions were answered but I was hoping, Bill, that I could ask a big picture question on your business. If you could help to differentiate for us what you are seeing from large customers versus small customers and I guess the genesis of the question relates to whether the credit crunch is hitting your smaller customers more than your bigger customers and if so how are you responding in this climate?

Yes, I think that -- I think that you are seeing more effect on smaller customers particularly on the protective side. On the food side it's interesting, the additional business we are picking up and the contracts we are giving out multi-years are generally the larger customers. The smaller customers have been the most trying. The bankruptcies we have faced which very fortunately have been very modest have been at the smaller customer level. And we are seeing that particularly in Latin America where a lot of the smaller producers are struggling much more than kind of the bigger customers. And I think that's, that's true around the world but in the US the segment that you probably heard picked up multiple times in the media is small business has yet to recover and I think that's a fairly accurate statement.

Okay. Thanks. If I could ask just a quick follow on unrelated but I think it's a quick question, it relates to, can you quantify the revenues ballpark that you might be considering with these new product placements in protective packaging, is it tens of millions of dollars, can you quantify that for us?

Well, it's -- they are introduced in the fourth quarter. So very honestly the fourth quarter impact will be probably very modest. Hopefully the volume will pick up with these in 2010. I do think they are really significant developments in terms of product packaging technology and I think are a step ahead of what's available out there in the marketplace. But I wouldn't want to speculate what the number might get to.

Okay. Very good. I'll turn it over. Thanks.

Your next question comes from the line of Joseph Naya of UBS.

Hi, good morning. I'm just wondering, you mentioned that the petrochemical benefit in the quarter was about $60 million. Do you know what that number would be year to date?

It's in the--.

Yes, we've been running about $60 million, $55 million a quarter pretty consistently over the first three quarters.

Just on a related topic, do you have any thoughts at this point in terms of the outlook for resin going into 2010, what you might see with pricing there?

We are essentially looking at reasonable stable resin prices. We've got some slight increases in a couple of the commodities but by and large we are not looking at a significant increase. Our own outlook is overall if we aggregate our spend it's a couple of cents a pound.

Okay. But you are expecting that it will be up year over year?

Yes, but slightly.

Okay. Thanks.

Your next question comes from the line of [Akh Gabelli] of McGuire Securities.

Just want to do clarify a little bit on the outlook. Sounds like seasonally the fourth quarter is a bit stronger yet and you saw a nice pick up in September in the protective packaging business yet in the outlook you commented some caution in seeing sequential sales increases in the fourth quarter. Just wanted to understand what might be driving that caution given the third quarter trends and the seasonality?

Sure, that's a good question and one that I tried to address it earlier when I talked about what we've seen in September in protective. In protective although I felt the 9% increase sequentially was a very positive sign in looking at the order book the real concern is that some of that is a restocking of very, very low levels. And I feel more comfortable weighting until October goes through to know whether it's sustainable or not. The business ordinarily has a seasonable pick up in the fourth quarter and it seasonally is based on packing for holiday shipments. And that generally runs in the September to November period. And depends on how robust the holiday is. It can really drag into the first week in December for some of the Internet retailers. And we are cautious as to whether what we saw in September will carry through as people become more cautious on the holiday outlook and as inventories remain very low.

Okay.

It's kind of caution on my part.

Got it. Okay. That's helpful. Then on the -- I wanted to do clarify on the competitive environment a bit. You mentioned market share gains and food packaging. Could you give us some color on how much additional, what kind of boost of volume that gave you on a year over year basis? And then also are pricing trends at this point in the protective packaging business the more commoditized pricing lines, the pricing trends have they at this point stabilized.

Let me go back to your first question on food. It's really not our practice to kind of talk about where gains come from. I will just same that some of our customers and some other people who had not been our customers have found our products to be a better answer to their packaging for a variety of reasons. On the protective side pricing is relatively stable and probably has been for, from end of the second quarter.

Okay. Thank you.

Your next question comes from the line of Mark Wilde, a private investor. Please proceed.

Firstly, it's Mark Wilde from Deutsche Bank but that's fine. Historically one of the ways that you've grown the Company is you've picked up a lot of small companies that have new technologies, new products. I just wonder with kind of credit continuing to be so tight for small to medium-size companies if this is helping create some more opportunities for you?

Yes, Mark, the answer is yes. I think that we continue to look for those opportunities. As you know Sealed Air has always been, excelled at finding new packaging technologies and giving them the scale and scope and footprint that our organization can bring. There is nothing that we can talk about now but I will say that given this environment we are probably more positively attuned toward looking at M&A opportunities going forward.

Then, Bill, just as a follow on, I'm just curious with the way the global economy and your business seems to be performing right now with the growth in the emerging markets whether that's got you thinking about even more changes in your manufacturing footprint and your global positioning over the next few years?

I think it's too early to the say. We just built out, we just -- as Dave said earlier we just built out our plants in Latin America and Brazil, Latin America, China and Eastern Europe, and I think let's get those settled down. We will take another look as the global economy sort of starts to move forward in 2010 and decide if we need to do anything different.

Thanks, Bill.

Your next question comes from the line of Stephen Simmons from SBT. Please proceed.

Stephen Simmons, Phillips, Bruce and Porter, just to kind of go back to a long-term goal I think the Company had from an operating margin standpoint of 15%. You've talked about that a couple of times and this summer as at a conference you talked about the 15% goal and possibly hitting that in a year or so. Just wondered if from a timing standpoint if you could talk about that a little more?

Well, I'm not sure I can give you a specific time. I will tell you though what actually will be helpful in that is the fact that the various programs we've done in response to the economy and the recession I think have brought down our essentially fixed cost so as we begin to see some recovery in volumes moving towards that number will be I think sooner under the current sort of cost structure we have today than I might have projected a year ago. But I'm still ready to tell when you that's going to be because I'm not sure when volumes are going to get back up to those levels. With our current cost structure and the things we have done and are doing we will become very leveraged to increases in volume and the impact that can have on the bottom line.

If I could just ask one follow up, if you look back at sales in 2008 of $4.8 billion, if you get back to that level, is that what you really need to see or is it something short of that?

That's probably a reasonable place to start.

Thank you.

Your next question comes from George Staphos from Bank of America Merrill Lynch.

Hey, Bill, I want a royalty on that report title by the way.

I thought would you come back on that, George.

Yes, lucky guess. In terms of the prior question that I had had you've launched several new products. We've seen a lot in the way of change in the U.S. manufacturing economy, obviously cyclically but on a secular basis, have these products addressed some of the changes that you have seen in your customer base here domestically?

Well, two things, actually two things, George, it's interesting. One that these are global platforms. So they are not just U.S. North American platforms. What they do do is they enable our customers to take cost out of their packaging operation. They essentially either simplify, automate or reduce the amount of packaging customers need through some of the things that we have introduced. And you can probably find the new products introduced on our website which would be a good place to start but the kind of benefit is lower cost for our customers so they can be competitive in a very challenging economy, but also for that manufacturing which is being done in other parts of the world we can bring solutions to them because even in China wage costs are going up and they are less competitive both on a wage cost basis and on a currency basis. So you are seeing for the first time some interest in taking cost out of the Chinese operation.

Bill, if I could ask a follow on, two part. Are we seeing some of these new products any or, any opportunity for growing foam in place especially outside of North America? And then you mentioned what the GMS net benefits would be for next year, $10 million, is there any residual savings that we should expect out of it from productivity or from the lack of transition cost? Thanks.

Let me answer your first question. Two of the new products that were introduced last week at the, two weeks ago with the packaging show, one is a fully automated Instapak system which essentially creates the Instapak foam cushion without people. So that enables the machine to run continuously for a full shift, produce individual components of the package that essentially a packaging line can just install in a box and put the customers product in without having someone to be there to essentially--.

Pull the trigger?

That's one. The other is a real neat one called Instapak Complete which essentially as you know Instapak has been designed as a semi rigid product. Through the Instapak complete system we have actually created a sheet, a quilted sheet of Instapak where it can become a wrapped product so it can cushion in a more flexible fashion. Those I'm really very positive on.

Okay. And on the cost side?

Let me have Dave address the other issues on GMS.

There is a two-fold opportunity there, George. One that Bill mentioned in response to a question about margin improvement. We've brought our costs down from a number of different programs including benefit from the three GMS facilities. As we see additional volume growth going forth that will be directed to our lowest cost global facilities whenever possible. There is some incremental benefit out there as we get those new facilities up to full volume. We also secured sufficient sized sights that we can ad incremental capacity at relatively modest incremental capital dollars and get benefit from those three greenfield plants five plus years into the future. So there is a lot of untapped potential there based on incremental volumes.

Okay. Thanks.

Operator, we have time for one more question on the phone and then I will take the questions from the tech. Would you take the next question, operator, on the phone?

Your next question comes from the line of Sara Magers from Wells Fargo Securities. Please proceed.

Hi, I just actually wanted to see if I can get an update on those newer facilities, especially the Chinese facility? And then to follow on to that I'm wondering about the motivation behind the reduction of planned CapEx for the year, is it related to these newer facilities or has something else changed to make you a bit more conservative?

I'm sorry, I didn't get the last part of I don't have question.

Reduction in our guidance in CapEx.

Two things is the plants are up and running, very honestly we wish we had more volume. They are doing well. They are achieving their unit cost basis but obviously we don't have enough volume there to have it make a meaningful contribution. The plant in Eastern Europe is doing well. So those are positive. Our guidance in CapEx is primarily related to the economy. We had originally expected that we might possibly need to add capacity going into 2010 with the declines in volumes that we've seen, we are going to push those investments out to the future. And let me let Dave finish up on it.

Yes, I think one thing we've seen there as well as a result of these efficiency programs is we were able to get significantly more production through our existing capacity. So that is in addition to not having all the volume coming our way that we had originally anticipated, we've also made our existing equipment much more productive.

Thank you very much.

Two questions, I have a question from the Internet here from text. Depreciation and amortization stepped up in this quarter. What is the quarterly run rate going forward? What are the outstanding balances on our accounts receivable facilities. Dave?

Yes, I think the run rate on a going forward basis ought to be in line with the third quarter and year to date numbers. The main increase is on a year over year basis and that's two-fold. As we brought some of this new capacity online such as the new Louisville plant that Bill referenced which is in the other line on the chart in the materials we released this morning, the depreciation in that facility is now showing up there. We also have a new form of equity compensation that our performance share units that get amortized through this category. So we've had that amortization increase on a year over year basis. And the other question that had come in related to this or from the same individual was what the quarterly run rate or what is the bouncing balance on our accounts receivable facility. We have not borrowed anything during the quarter on the facility and we have no outstanding balance.

Okay. Great. Thanks, Dave. I do want to thank everyone for your participation on the call today. I think we are pleased with the results we've reported. I think we've got our plan in place. We know where we are going. Cooperation from the economy would be a great benefit. And with a few months replanning in the year we are going to stay the course on our 2009 plans. We are going to remain focused on managing price, managing expenses and delivering incremental benefits from the programs we've already committed. We will differentiate ourselves in the market with compelling innovative products. So as we head towards the fourth quarter we are confident about our position in today's economy and continue to expect meaningful benefits from our efforts when markets improve. Thanks for listening to us today.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.