Jerome Peribere - President & CEO Carol Lowe - CFO & SVP Ilham Kadri - President, Diversey Care Division.

Albert Kabili - Macquarie Research John McNulty - Credit Suisse George Staphos - Bank of America Merrill Lynch Ghansham Panjabi - Robert W. Baird Scott Gaffner - Barclays Chris Manuel - Wells Fargo Mark Wilde - Bank of Montreal Alex Ovshey - Goldman Sachs Adam Josephson - KeyBanc Chip Dillon - Vertical Research Partners.

Welcome to the Quarter Three 2014 Sealed Air Earnings Conference Call. My name is Matthew and I will be your operator for today. (Operator Instructions), and now I would like to turn the call over to Ms. Lori Chaitman Vice President of Investor Relations. Please proceed, ma'am..

Thank you and good morning everyone. Before we begin our call today I would like to note that we have provided a slide presentation to help guide our discussion. This presentation can be found on today's webcast and can be downloaded from our IR website at sealedair.com.

I'd 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 based solely on information that is now available to us.

We encourage you to review the information in the section entitled forward-looking statements in our earnings release which applies to this call. Additionally, our future performance may differ due to a number of factors.

Many of these factors are listed in our most recent annual report on Form 10-K and as revised and updated on our quarterly reports on Form 10-Q which you can also find on our website. We also discuss financial measures that do not conform to U.S. GAAP. You may find important information on our use of these measures and the reconciliations to the U.S.

GAAP in the financial tables that we have included in our earnings release. Please note that we will end the call by 9:30 AM today. Now I will turn the call over to Jerome Peribere, our President and CEO.

Jerome?.

Thank you Lori and good morning everyone. Our third quarter financial results and operational performance exceeded our expectations across all key metrics. Food Care, Diversey Care and product care all delivered constant and reported sales growth, expanded gross profit and EBITDA margin and had favorable price mix.

We also generated $354 million in free cash flow in the first nine months of the year and as a result of third quarter performance we raising our full year forecast for adjusted EBIT, earnings per share and free cash flow despite a tough protein, uncertain macro-environment and currency headwinds.

Our execution so far in 2014 is a direct result of our commitment to improving the operations at every level of the this organization reimagining Sealed Air and the trends that we have seen and expect to see and what we expect to see is very encouraging.

Before Carol provides you with a detailed discussion on the numbers I wanted to update you on a few things. First I wanted to make you aware that for the first time we are hosting our quarterly earnings call from our temporary site in Charlotte and as you know Charlotte will become the home of our new state of the art global corporate headquarters.

We look forward to taking this significant step in creating a stronger, one company culture. Second I would like to highlight our recent recognition by CDP also known as Carbon Disclosure Project.

Sealed Air was named to CDP's Climate Disclosure leadership's index where our transparency and reporting scored 97 out of 100 points which puts us in the top 10% of S&P companies. We also scored an A- on our performance in achieving energy efficiency and reduction in CO2 emissions.

These are Sealed Air's best ratings to-date and is significantly improved over last year's scores. And integral part of our sustainability strategy is focused on reducing our own and our customer's carbon footprint and providing solutions to help drive that -- that helped drive in a sustainable economy.

This underscores our commitment as a world leader in sustainability and supports our company vision which is to create a better way for life.

Third we’re very pleased to have announced our new President for our Product Care Division, Ken Chrisman, and he has been with Sealed Air for 27 years and most recently has been leading our global cushioning products business.

As many of you know I anticipate great things from this division and I'm confident in Ken's ability to lead the team forward and continue executing on our strategic direction with a very clear focus on innovation, strong discipline and margin expansion. And Ken will join us on our first quarter earnings call in 2015 alongside Carol and me.

For today's call we have invited Dr. Ilham Kadri, President of our Diversey Care Division to provide you with a detailed update on Diversey Care. Under Ilham's leadership the Diversey Care team has made significant progress despite the challenging, the economy challenges in Europe which is Diversey Care's largest market.

Ilham will also highlight, food care and product care's performance and at the conclusion of our prepared remarks Carol, Ilham and myself will be available for questions. With that let's start with an overview of the financial results.

Carol?.

Thank you Jerome. On slide 4 of our presentation you can see our performance by region for the second quarter. I will highlight sales trends on a constant dollar basis as compared to last year unless otherwise noted. Latin America and AMAT continued to be our fastest growing regions with constant dollar growth of 8% and 7% respectively.

Given the currency devaluation of Latin America our as reported sales were essentially flat compared to last year. Brazil and Mexico were up approximately 10% and both constant currency and as reported future growth in both food care and Diversey Care. For the AMAT region China and India delivered 6% and 15% constant currency growth respectively.

China was driven by double-digit growth and Diversey Care and mid-single-digit growth in food care and product care. Strength in India was primarily attributable to Diversey Care and our food hygiene business. North America sales were up 3% compared to last year led by 6% growth in product care.

Both Food Care and Diversey Care increased sales in North America by 2%. In Europe we delivered a 1% increase in sales. The UK reported 5% growth and France, Germany and Spain were essentially unchanged. This was offset by declines in Italy, Switzerland and Holland.

The seven countries I just referenced accounted for approximately 21% of third quarter consolidated sales. Russia and Poland delivered 9% and 6% constant currency sales growth respectively. Sales in Japan Australia and New Zealand increased 5% primarily driven by a 5% increase in Australia and a 3% increase in New Zealand.

While our business in Japan is still relatively small our product care division has been performing well with double-digit growth for the third consecutive quarter. Turning to slide 5 and 6, let me walk you through our net sales and adjusted EBIT performance on a year-over-year basis.

Starting with the net sales on slide 5, we delivered $2 billion in sales an increase of 3.1% on an as reported basis and 3.6% in constant currency. Favorable price mix was 3.1% or $59 million. Volume increased $9 million or 50 basis points.

Unfavorable currency translation of $4 million was mostly due to the currency weakness in Argentina, Turkey and Canada. Now turning to slide 6, for the quarter, adjusted EBIT increased 8% on a year-over-year basis to $300 million or 15.2% of net sales.

For the total company the increase in adjusted EBITDA was due to favorable mix and price cost spread of $31 million and a $5 million increase in volume. Cost synergies were $24 million in the quarter.

SG&A and other expenses increased by $36 million of which $12 million was attributable to an increase in incentives performance-based compensation and $11 million was related to salary inflation.

We delivered a 120 basis point improvement in adjusted gross profit margin and a 70 basis point improvement in adjusted EBITDA margins compared to last year. Adjusted earnings per share for the quarter was $0.52 as compared to $0.42 in the third quarter last year.

As we anticipated the tax rate of 27.8% increased as compared to last year primarily due to greater earnings in the U.S. and other jurisdictions with higher tax rates and the lapse of certain U.S. tax laws including the research and development credit.

Beginning in September and as of yesterday's clothes we have repurchased approximately 800,000 shares for a total value of approximately $27 million. As a reminder our target EBITDA leverage ratio is 3.5 to 4 times.

We continue to evaluate alternatives and are now evaluating our alternatives that will enable us to increase returns to our shareholders and maintain our target leverage. On slide 7, we outline our price mix, volume trends and sales growth on a constant dollar basis by division and by region.

As you can see from the slide we had constant currency sales growth and favorable price mix in every division and in every region. Food Care has had solid performance despite the challenges in the protein market in North America and Europe and both Diversey Care and Product Care have been gaining momentum throughout the year.

For three consecutive quarters the year-over-year growth trends in net sales have improved on an as reported basis and in constant currency. I will now turn the call over to Ilham Kadri, who will provide you with a more detailed review of Diversey Care results and a recap of Food Care and Product Care.

Ilham?.

Thank you Carol and good morning everyone. Slide 8, highlights the results from our Diversey Care division. Diversey Care net sales on constant currency basis were up 4%. Volume was up 3.7% with a favorable price mix of 0.2%.

Developing regions increased 12% Latin America was up 16%, AMAT was up 12% and Eastern European countries were up in the mid-single digits. Turkey, China and India were our fastest growing countries both as reported and in constant currency. We experienced increased demand in the building service contractors, food service and hospitality sectors.

North America sales were up 2% in the quarter growth in the U.S. was partially offset by a slight decline in Canada. Building service contractors and hospitality were our two strongest end markets. In Europe constant currency sales were essentially unchanged.

Positive trends in the UK, Switzerland and Spain were offset by declines in France, Holland, Italy and Germany. We experience growth in the hospitality and retail markets which was offset by declines in building service contractors and food service. In both local North America and Europe we are experiencing healthy demand for our floor care machines.

Our business is beginning to benefit from our focus on quality value and innovation and our commitment to existing low-margin businesses. You may remember that we have talked about this at our Analyst Day last year. I have three examples to share with you to demonstrate our progress.

First in the third quarter we completed our first multimillion dollar sale of IntelliTrail TASKI machine which is an innovative web-based a GPS system optimized for intelligence fleet management. We believe that our TASKI portfolio will be a key driver for future growth.

Second you may recall that earlier this year we announced that we were walking away from customers in the UK that were a drain on our bottom line.

Two targeted sales -- and to focus on the quality advantages we offer sales in UK increased 4% in constant currency in the third quarter as we have more than recouped the lost sales with the higher margin business.

And third we've recently acquired Excel product line from Virox, we continue investing in differentiated disinfection [ph] technology that not only outperforms other technology but also has a much better environmental profile.

Our emphasis on environmental and socially responsible program is being recognized by major brands in the market and we're confident that this will prove to be a competitive advantage over time. You can see that we delivered adjusted EBITDA of $70 million or 12.7% net sales in the quarter.

Last year adjusted EBIT was negatively impacted by $3.8 million reserve related to a large customer in AMAT. Adjusting for these reserves the year-over-year increase in EBITDA would have been 8% which is a solid improvement.

We are making projected investments in R&D sales and marketing and you will see some of that spend in Q4 along with some currency headwinds given our exposure to Europe. With all that said and Carol will provide details pertaining to our outlook we remain confident that we will deliver adjusted EBIT growth and margin expansion for the full year.

Turning to slide 9, with Food Care sales increased 4% in constant dollars with approximately 3% growth in packaging and 4% growth in hygiene. We had 10% constant currency growth in the developing regions. Latin America and AMAT continue to be our fastest growing regions with strong demand for our innovative products and solutions.

Both Brazil and Mexico reported approximately double-digit sales growth on as reported and constant currency basis. Japan and Australia and New Zealand constant currency sales were up approximately 5%. In Europe the protein markets was relatively flat. Our constant dollar net sales increased to 2% on year-over-year basis.

Volumes were up just over 1% and price mix was slightly favorable. On a constant dollar basis double-digit growth in the UK and Russia and positive trends in France were partially offset by declines in Spain, Italy, and Germany. In North America cattle and hog slaughter rates were down approximately 10% and 5% compared to last year.

Despite these market trends we were able to outperform the market and deliver approximately 2% constant currency sales growth with favorable product mix, better pricing, and new product introduction. We believe the quarter will most likely be the bottom of that the cycle.

And the rate of decline to moderate into year and we believe that the PD virus [ph] is now largely behind us and we expect the hog production decline to moderate in the fourth quarter.

It's worth noting that despite volume declines in the beef markets in North America and the soft economy environment in Europe fresh red meat were up in the mid-single digits in the third quarter and for the first nine months of the year in both regions.

The stock performances is a direct result of customer acceptance of our value added solutions including case ready, ready meal, Diversey Care and (indiscernible). Poultry has also been a key growth driver in North America and Latin America. I want to briefly highlight the EBITDA margin performance of the second quarter for food care.

Adjusted EBIT of $178 million or 18.1% of net sales increased 11% as compared to last year. This increase was largely a result of pricing disciplines adoption of our innovative product portfolio and cost synergies.

Despite the anticipated volume declines in the protein market in North America and currency headwinds in the fourth quarter we are well on track to deliver EBITDA growth and margin expansion for the full year. Turning to slide 10 product scale delivered 4% constant currency sales growth with favorable price mix of 4.5% and a slight decline in volume.

North America which accounts for 60% of our product care business increased sales 6%. Europe was flat with last year and accounted for just over 20% of our product scale sales. Constant currency same growth in Germany was offset by declines in the UK, France and Italy.

In AMAT it's worth noting that we have's double-digit growth in Japan and high single-digit growth in China. Similar to last quarter growth in our higher performance solutions including cushioning and packaging systems were driven by an increase in demand from our e-commerce and third-party logistics customers.

I want to briefly highlight the recent market introduction of the -- system presents the first truly mobile instant back platform.

Capable of delivering the damage reduction and optimization benefits that are increasingly demanded by the growing e-commerce market segment, that makes the it's a pack several system so valuable to the e-commerce is also stimulating significant demand in our targeted global emerging markets.

In just a few months we're seeing a strong pipeline global customers and expect this to be a key growth driver going forward. Adjusted EBIT increased 7% to $74 million also -- or 17.7% of net sales. The margin improvements is a -- of the pricing actions and discipline in North America and Europe practical our general business.

Despite some of the pricing and product actions we have taken in our general use business we had positive trends in the third quarter with an improvement in the contribution margin. In product scale we expect to deliver EBITDA growth and margin expansion for the full year. Let me now review cash flow and Outlook.

Carol?.

Thank you Ilham. Turning to slide 11 free cash flow excluding the $930 million payment under the grace settlement agreement made in February this year was a source of $354 million and the first nine months of 2014.

This compares favorably to a source of $154 million in the nine months ending 2013 due to higher earnings and improvement in operating working capital management. Operating working capital as a percent of net sales improved from 20% at September 30, 2013 to 16% at September 30, 2014.

CapEx was $94 million in cash restructuring costs were $76 million in the nine months ending September 30. Cash payments related to SAR S were $18 million in the nine months entering September 24 as compared to $43 million in the prior-year period. Turning to slide 12 our updated guidance for 2014.

Based on our performance on a year-to-date basis and our Outlook into year and we are revising our full-year 2014 guidance. The net sales we estimate approximately $7.7 billion which assumes an estimated unfavorable impact of approximately 2% or $160 million from foreign currency translation.

We most recently guided to an unfavorable impact of approximately 1% from foreign currency translation. Adjusted earnings per share is now expected to be in the range of $1.70 to $1.75 as compared to the previously provided guidance of $1.65 to $1.70. The increased Outlook for adjusted earnings per share is due to higher estimated adjusted EBIT..

It's anticipated to be approximately $1.11 billion an increase from our prior guidance of one point of $1.085 billion to 1.059 to $1.059 billion. We still expect full-year adjusted EBITDA to improve in each of our three divisions as compared to 2013.

The impact on EBIT from an unfavorable foreign currency translation is expected to be approximately $25 million for the full year of rich approximately $11 million is in the fourth quarter.

Adjusted EBIT guidance for the other category which includes our medical and new ventures business and our corporate and unallocated cost is unchanged at approximately $90 million of net costs. We continue to evaluate our total cost structure including as appropriate the possibility for future restructuring programs.

Any such programs would of course require approval by our Board of Directors. We would provide any related update on our Q4 earnings call and early February on any additional restructuring program such programs would be funded with the grace tax refund we expect to receive by mid-2015.

We are increasing our free cash flow Outlook to approximately $540 million from $485 million reflecting our higher adjusted EBIT forecast combined with lower restructuring cash cost. For cash restructuring costs we anticipate approximately $100 million for 2014.

You may recall that at the beginning of the year we had forecasted but hundred $50 million in cash restructuring charges for 2014. As compared to the hundred million dollars we're forecasting today. The remaining $50 million in cash payments is expected to be made in the first half of 2015.

Our forecast for capital expenditures and cash interest are unchanged at $150 million and $273 million respectively. To conclude my mailbox I would like to congratulate our employees around the world for their ongoing commitment to improving the quality of earnings and the execution demonstrated in the third quarter.

We plan to build on this momentum and drive continuous improvement in the years ahead. We look forward to speaking with you again on our first-quarter earnings conference call which is tentatively scheduled for February 10 at 8:30 AM.

I would now like to open the call to Q&A session and I encourage you to focus on diversity care as we have the privilege of having -- with us today. She has done great things and has a lot of information to share with you about the strategies she is leading and the improvements she is driving so far for our Diversey Care business.

With that operator can you please open the call for questions?.

(Operator Instructions). Your first question comes from Albert Kabili of Macquarie Research..

I'll take your suggestion Carol on the Diversey Care. Ilham can you highlight that the volume increase in Diversey Care was surprising to us especially given the macro environment in Europe so can you talk about the sustainability you see in volumes in Diversey Care and how concerned are you with the macro environment.

Are you seeing any recent weakening given the data out there. Thank you..

Indeed a good question I'm very pleased and proud of our team of which I would name is a very good quarter both in the Diversey Care side that also -- company. If you think about this the way look at it is we had started to harvest what we have done in the past two years of previous. Since 2012 we increased our EBIT percent by 120 basis points.

Our organization is much more focused on quality business and is focused on quality is showing up in the numbers although we have (indiscernible) still a lot of work to do. We need customers and hospitality in healthcare. We are extending and building service contractors thanks to our labor productivity programs were our equipment systems.

Throughout 2014 I'm sure you have noticed that year on year trends are improving. We had double-digit growth in Latin America [Technical Difficulty] growth there.

The United States for example grew 2.8% of constant currency and Europe is further improving trends and flattish year on year which is a very good achievement as we were declining since the in Europe and in the U.S..

Your next question comes from John McNulty of Credit Suisse..

Carol maybe a question for you with regard to the pushing off of the restructuring program can you walk us through how we should be -- or at least the cash flows around that.

Can you walk us through have we should be thinking about the timing of cost coming in and give us an update on that as we look to '15 and beyond?.

So we started the year thinking that are synergy costs related to restructuring would be approximately $80 million. We are on track to realize $95 million and cost synergies. We had $27 million in Q3 and we expect approximately 20 21 million for Q4.

So our original the program was integration and optimization program which was to generate cost synergies of $200 million versus the 2011 base. That will wrap up by the end of this year.

Second, program which was our earnings quality improvement program -- that is what is tracking at a more accelerated basis with savings closer to $115 million versus our previous estimate of 90 to 100 and versus our previous estimate of 90 to 110,000,000 versus the 2012 call space.

When we look at 2015 as our reference from cash cost for the restructuring we would expect to have approximately $50 million that we expected to spend in 2015 that we will spend in the first half -- of 2014 that will spend in the first half of 2015.

As we reprioritize our projects for 2014 we've concentrated on the higher returning projects first and that has resulted in some of the projects being pushed out a little bit into 2015.

But again we are on track for that level savings for the equipped program which is what you'll see a lot of in 2015, savings of $115 million versus the 90 the $90-$110 million..

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

What gives you the most confidence in your free cash flow guidance of the next couple of years and in particular how does Diversey Care contribute to that what's made you more comfortable about the diversity contribution to cash. Thanks..

With respect to free cash flow we definitely have a key focus on our working capital management that's been a significant contributor. We've been very open and vocal about our improvement in terms of DSOs reducing past dues.

We also are actively managing our inventory through our sales and operations planning process and that is generated a lot of the cash flow that you've seen today too.

Also our continued discipline around the quality of earnings is providing the EBITDA which we see sitting in our cash flow and all three of the businesses are contributing to that improvement.

So and diversity care has had strong cash flow and we expect them to continue to have strong cash flow with what ill health is driving in terms of the disciplines and the focus that she commented on our Diversey Care we continue to expect them to deliver on free cash flow as we move forward.

Jerome do you want to add anything? You might want to talk about rationalization customer rationalization..

I think you say obviously we had made a great progress in Diversey Care under the DSO basis and looking at our low-margin businesses both from the -- we need to choose our customers as well and we need to pay premium for our breakthrough and innovative technologies. We are having as we speak a big SKU program because we have a big sale.

Our business is about managing complexity but the 8020 will applies to our business and to our technologies and we are as we speak building up that -- optimization which is going to take some time but definitely in the coming year 18 months you'll see a great progress there, so a great discipline.

Now in Diversey Care it's about the culture of discipline and that's what we are engaging and..

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

When you look at the EBITDA bridge for the quarter or so far in 2014 the increase has been disproportionate on the pricing cost side. At the margin expansion both food and product since it -- seems to be well underway.

As we think about it comparable bridge for 2015 how should we think about these various elements of year-over-year basis including foreign exchange and since (indiscernible) on the call may be Ilham more specifically will participate in 2015 on a financial basis. Thanks..

We're not providing 2015 guidance right now.

But what I will say because we know there is concerned around currency and obviously because we have such a large percent -- percentage of our sales better European or based in some countries where there have been devaluation we will share that lets make an assumption that the euro was at a dollar $.25 for 2014.

That could potentially have an impact on our 2015 sales top line for a negative currency of $300 million. Now that is not just the euro but looking at across all of their currencies which could potentially have an impact on (indiscernible), as approximately $40 million on a year-over-year basis.

So we will share that but again not any additional comments on 2015 guidance..

Before I jump on to Diversey Care let me just say this is going to be of course an impact that we are likely to see happen. We haven't seen it in Q3. We will see somewhat sizable amount -- currency impact on (indiscernible) in Q4 it will be it $11 million.

And Carol just talked about the $40 million on the EBITDA level adjustment currency at the exchange rate of today and it is not the euro do evaluating it is all the other -- it is the dollar reevaluating against other major currencies etcetera.

So as far as we're concerned we already have embarked into a plan intervention on which is going to mitigate this. And of course you will hear about our guidance in early February but I want you to know that Ilham said the right word. We're moving towards a culture of discipline.

We are ready proactively are taking actions to mitigate that kind of negative impact..

So on Diversey Care specifically over the market in Q4 is forecasted to be largely flat as compared to Q3 and we continue our journey towards quality business existing low-margin businesses and replacing those -- will with higher-margin customers as we have done in the UK and other places.

We expect Eastern Europe and AMAT Latin America to continue showing good growth. I might as well about the businesses seasonality. Quarter two is our strongest quarter of the year. The difference between quarter three and quarter for is much smaller and depends on distribution channel sales and equipment sales which can travel between one 2 or another.

I also remind you that our business and Diversey Care 45% of our business in Diversey Care is in Europe. The currency exposure as we will say will impact but -- as we speak we're trying to mitigate the currency impact and despite the challenging environment Diversey Care is holding its own with a handful of customer wins and for saving programs.

And also you will CSN quarter for targeting to invest in sales, marketing and R&D which will further allow Diversey Care to differentiate in the marketplace but expect margin growth and margin expansion for the year..

Your next question comes from Scott Gaffner of Barclays..

Just wanted to dig into food care for a moment, adjusted EBITDA margin year-to-date you have it at 17.4%. I think at the Analyst Day you mentioned 16% to 16.5%.

Is there any reason that you can see Jerome why there would be some margin get back and the next couple of years or is there the ability to continue to push hard on price cost even if the -- prices maybe come down next year and in the future. Thanks..

So what you just said is that we are ahead of our program. And yes in 2014 execution is doing extremely well. So my answer to you is no, there is no reason that it would be giving back. You have the present prices and they go up or down. The trend is up. And I think nobody should expect that we're going to see price is going down over time.

There is a decoupling for many years now between the price of -- in North America and the price of gas and shale gas which is why it produces have had so much margin expansion and this is due to tight capacity utilization which are also affecting Europe.

We have prepared ourselves for two years now with the disciplined approach to our pricing and this is about passing the cost increases as they occur.

Next to that you have innovation and you have all the service and the value that we add to our customers and the value that we add to the customers is huge thanks to our innovation especially and if you had have been at that -- which is food show of the world's which happened last week in Europe you would have seen that our -- was the star product.

It was the star attraction. And we have had extreme success with that launch just recently. This is going to be followed into the U.S. We also are launching a higher view -- which is called opted in Europe and in Q4 we will be launching on target in North America (indiscernible) Expo in November do in Chicago.

We have a lot of momentum with innovation and that is how we express the fact that we're bringing value to our customers. And that is the way we approach the situation..

Next question comes from Chris Manuel of Wells Fargo..

You talked about potentially or alluded to potentially doing some further restructuring or some other actions in '15. I want to get a sense as to what we some thoughts as to how you are thinking about what that might look like. Is that focused the next wave of restructuring primarily take a more cost at of the business.

You’re -- on quite a way that way looking through different businesses. Is a more focused maybe on headcount Warren regions or to improve the work to grow the business faster or how do you think about the next way that you would undertake and what it might touch..

So let me introduce the subject and Carol might add some color here. We have a very key metric which is our gross profits ratio. Our work profit ratio is a productivity ratio. We believe that we can improve and should improve this ratio year-over-year in the next several years. So this is not a metric for one to two years.

I believe that we can progress on productivity. You have seen -- we all do projections and you've seen that some areas of the world are softer than some others. And you see some functions which can continue to improve on the productivity. So that is where we are targeting our program. By definition we do to restructuring for the state of restructuring.

You've heard me say several times that we're moving there to become a modern and well-managed company. That is the -- there is still we are to do, we continue in the journey. And we are -- talking about playback time on those restructuring programs to improve our expense profit ratio which is a good way of operating this business.

And in some regions we do have a better ratio than some others, those are to be unaffected than some others..

Chris, just a couple comments to follow one, referencing productivity, metric that we use as part of our annual incentive program. Year-to-date we have had a 240 basis point improvement in that metric so it is a keen focus across the entire company.

And as I stated in my prepared comments in a restructuring program that we can -- conduct going forward that we might take to the board we would expect to fully fund with the grace tax refund that we will receive in 2015 and that is made at approximately $200 million from the cash that we would receive back so we would expect to fully funded and I will also remind you that I talked about last quarter the fact that we had an incentive a special incentive program focused on free cash flow generation.

It's a three-year program that runs through the end of 2016. The starting point to have any payout under the program we have to receive $1.7 billion and free cash flow generation over the three-year period. And we expect to have that program be a very positive program for a large number of our employees in the company..

The next question comes from Mark Wilde of Bank of Montreal..

I wondered if you take a step back now after 24 months if you have any different views on what the growth rate potential is in these different businesses one with the margin potential of the businesses is. You are still a long way from the kind of margins that the legacy Sealed Air business had back in the late 90s and early 2000s..

All right. So it's a good benchmark. It's a good benchmark and you have -- we have laid out the journey. In our invested day September of last year. We're going to have another investor day in June of next year. This one is going to be focused on innovation and change the game. We are ahead of our forecast as you all can see by now.

And in my view is that this company is a company which is continuing on its way to transformation. We are very truly reimagining Sealed Air. For those who would think that are margin is plateauing our view is that it is going to continue to improve.

It's going to continue to improve as a result of our discipline and this is where we would call the quote unquote mathematical aspects of it. And we had very focused and targeted programs on multifunctional and multi-businesses. We also are transforming this company with regards to the value we create to our customers.

And we now price according to the value that we create to our customers. And therefore my view is that the target -- the numbers you are referring to are the good -- are realistic numbers long-term, what is long-term? Probably more than two years. We are not been a good to 20% EBITDA and 2016 or in 2017. We have laid the road.

But you heard me very clearly saying that there are two phases in our transformation. One is called to get that. (Indiscernible), this is the mechanical part of the business. And we are making fabulous progress. We are starting in reimagining Sealed Air in the way of transforming this company and change in the game.

The move to Charlotte having all the divisions together exchanging ideas and you and setting be outcomes because the commonality of the three divisions is about selling the outcome and not selling staffed. That is going to change this company. I am very optimistic. You laid out the journey and I will follow it..

The next question comes from Alex Ovshey of Goldman Sachs..

On Diversey Care and as you think about the marketplace and how you stack up relative to your biggest competitor can you just talk about how over the last couple of years you feel like you've improved the diversity business where you can better compete in the market relative to send competitors..

Diversey Care rather than on a given competitor. Obviously our focus in such that the company was to lose (indiscernible) better quality businesses and this is the name of the game. And I tell you it has been the biggest mine -- our organization has experience in.

For example to give you an example of how we track to win on wins and losses we track all the wins and losses above 500K and this is a low threshold and we did it in -- to allow us building a division culture around quality wins and low-quality business losses.

Year-to-date we’re -- we target to win and offset this with a better quality business and this is what we're doing in many places like in the UK as a shared in my prepared remarks that we're doing it in other places as well. This is key as we cannot lose business -- fixed cost as we are in the service business. The example of a growing in the U.S.

is continued and infrastructure there targeting to expand and hospitality where we are progressing very well and getting more wins in service while our equipment's are being adopted by the U.S. markets in the building service contract and -- education. So all-in-all we are gaining share..

Your next question comes from Adam Josephson of KeyBanc..

I tried a bit late so my apologies but mature mind reminding us about the restrictions on your ability to buy back shares in the next two years and what if anything you might to regarding your notes outstanding to deal with that issue..

Right now what we would have remaining based on since September we repurchased approximately 800,000 shares at an average price of $33 for a total of approximately value of 27 million. That would be best with a capacity of approximately 40,000,000 due to the restricted payment basket.

We've been very focused on having the leverage reach between 3 1/2 and four times as we wrapped up Q3 we have now dropped below four times where at approximately 4.8 times leverage so that gives us flexibility to take a look at our debt structure and maybe step up and how we're going to pursue looks ability to return value to shareholders..

The next question comes from Chip Dillon of Vertical Research Partners..

Question is on the pricing power. It looks like clearly in the quarter both food care and product care side nice -- at least price mix improvement.

I guess the two-part question is how much of it would you say of the roughly 4% improvement was price and how much was mix and as you look ahead to think there still more runway in terms of recapturing some of the value that Sealed Air should of been getting in the past as you talked about its product differentiation.

Do you have more room there?.

First speaking you heard me say in February 2013 that I see this -- the role of a leader leads and that is our responsibility. We have sometimes the market shares and we need to decide what is our approach to the value we create and how we share it. We have clearly determined this.

So when you look at the price mix in the third quarter actually what we think is that -- is increasing but the bulk of it is in price. And if you look at those let me give you some flavor. If you look at food care for example we have a price mix in the third quarter of 4% and almost 3 is just price.

There is a lot in North America just on price and in Latin America you need to remember that we by residents in dollar or in dollar equivalent and as a result we have had a lot of price and out price Latin America and food care up 13% about nine is just right and it is very key because otherwise our margins would go down.

In product care it is about the same kind of trend. When we talk about price mix the bulk is on price and just to give you an example in North America in product care our price mix was 4.6% in the third quarter and almost four was just price.

In Europe you don't have the same kind of environment because you have -- a deflation environment right we're also having margin expansion and we are positive on price alone be on food care be on product care and also in Diversey Care when you look at this. So it is not only about price but it is also about -- but it's not only about price.

What I'm really attentive to is whether we do have margin expansion for margin compression. And we are having margin expansion and we have room to go..

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

Right now you are still in the get fit phase. And it's been growing as you said well.

Does the imperative to innovate does the imperative to drive mix relative to price increase perhaps even on the exponential rate over the next couple of years given what's already been record progress on margin and pricing for the business so that obviously you don't sell product you’re trying to sell value but to also want to maintain your shares, were there is economic profit over time.

So does the imperative to innovate and to raise mix accelerate here in the next couple of years and how do you do that. Thanks and good luck in the quarter..

Actually it's a repeat of your second quarter question which was thank you very much for get fit when it's change the game coming, that was your question. And let me confirm the change the game is not going to be coming.

It is on route, every single division has a change the game commitment and I know what you guys want -- what you want is show me the money. Show me the innovation. Show me the change the game and give me numbers.

And this is why we're going to do that in 2015 at our Investor Day focused on change the game where we are going to give you specific examples of how we tackle the market differently.

It is important for us to bring innovation and we’re bringing innovation because innovation is the mother of differentiation and therefore of margin expansion through creation of value to our customers. I have several examples but I'm going to take -- I already talked about on Food Care, a good trait.

A great innovation, (indiscernible) great innovation. We are going to be talking to you pretty soon about the new type of structure in that which is going to be fairly disruptive.

On product care our Instapak Simple that we have launched on October 1 is a great innovation and it is a great innovation because the main issue of Instapak is that you need to have a fairly big sizable equipment to serve your customers or in the customer premises.

Well this is a smaller equipment which opens a whole lot doors to e-commerce and to smaller type of companies who need strong cushioning. I’ve several examples on Diversey Care and including on some mops [ph] and but you might want to mention one or two Ilham there..

As Jerome said in Diversey Care journey, get fit and change the game. One of sequential events. We started both at the same time. And I believe we shall completely differentiated value proposition.

I remind you that we’re the only player in the market who has chemicals, machines, tools and equipment and the Intellitrail example I shared in my prepared remarks speaks for itself.

We compete by integrating and differentiating the technology and with invoice detergent dollars but we sell productivity and labor productivity program to building service contractors.

Finally and this is something new and we change the conversation with our customers, we are still there and our business puts together can offer to retail store or a quick service restaurants much more that’s just detergents or soaps.

We are leader in food waste and farm to fork chain management and along with Diversey Care food safety program and integrated social we are combining both trends to better service our customers..

We have no more questions..

In that case I am going to make a last comment to George's question. We are having a very strong focus on the long-term because we are determined to transform this company into what I called a knowledge based company. That is what we are. This is a long-term goal and we are truly going to become more and more knowledge based company.

This is a journey and this is why we have those two programs one is about delivering short term and we're very pleased with where we are now. And the second one is about creating additional value to our customers into the company. Thank you very much for attending. I hope to see you soon and we will continue working. Bye..

Thank you for joining in today's conference, gentlemen. This concludes the presentation. You may now disconnect. Good day..