Good day, ladies and gentlemen and welcome to the Q1 2019 Sealed Air Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference maybe recorded.

I would now like to turn the conference over to your host Miss Lori Chaitman, Vice President of Investor Relations. Ma’am, you may begin..

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 would like to remind you that statements made during this call stating management's outlook or predictions for the future periods 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 and slide presentation, 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 and current reports on Form 8-K, which you can also find on our website at sealedair.com or on the SEC's website at sec.gov. 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 their reconciliation to U.S. GAAP in our earnings release. Included in the appendix of today's presentation, you will find U.S. GAAP financial results that correspond to some of the non-U.S. GAAP measures we reference throughout the presentation.

Now I'd turn the call over to Ted Doheny, our President and CEO.

Ted?.

Thank you, Lori. Thank you for joining us for our first quarter earnings conference call. On today’s call, I'm going to start with a recap of our first quarter results, provide an update on the progress we made with Reinvent SEE and then discuss the exciting acquisition of automated packaging systems, which we announced this morning.

Bill will expand on our financial results for the quarter, and then I'll discuss our outlook for 2019, which excludes the impact of the APS transaction. We expect to close early in the third quarter and update our full year outlook on our second quarter conference call tentatively scheduled for July 31st. Turning now to our first quarter results.

We’re off to a solid start to the year and we’re seeing a positive impact in our financial results, from our Reinvent SEE transformation. Adjusting earnings per share increased 16% compared to last year. Adjusted EBITDA was up 5% as reported and 10% in constant dollars. We're pleased to report that margins expanded by 130 basis points to 19.4%.

Sales were up 3% in constant dollars on favorable pricing and contribution from the Austin Foam acquisition. While organic volume declined 1% in the quarter, this was against macro headwinds that impacted our business particularly in the industrial sector and a tough year-over-year comparable and protective packaging.

We're working hard to recover volume for the remainder of the year and we'll go after opportunities we see by market, by product, by geography and now with M&A. We are reinventing the company. We're encouraged by our progress to date. We're now operating as one Sealed Air.

We're consolidating and delivering across functions, geographies, and divisions to reduce costs. This will enable us to respond faster to our customers and market needs and drive profitable growth. We're making changes to our go-to-market strategy to improve the profitability and smaller, yet growing countries.

We've implemented our new value capture pricing model. We're rationalizing suppliers and vendors, and realizing operational savings with yield improvements and more to come.

Across our manufacturing network, we're selectively upgrading aged assets, investing in new automation technologies, and partnering to develop Sealed Air’s smart factory processes as we move more aggressively to further automate our global manufacturing network. We're still in the early days of Reinvent SEE.

We're focusing on the dollar impact of our initiatives, change management, and process redesign. As we work to double our innovation rate, and drive profitable growth, we're accelerating our investments in sustainable materials to get ahead of market demand.

This morning, we announced the acquisition of automated packaging systems for $510 million on a cash and debt free basis. This transaction accelerates our innovation and automation and sustainability and is closely aligned with Reinvent SEE. APS generated sales of $290 million in 2018, an increase of 10% over 2017.

We expect the transaction to be accretive to our adjusted EBITDA in 2019. Let me expand on how automated packaging systems fits into our strategy.

We've been looking at APS for over a year and how are they performing in the market? APS is a market leader with unique and innovative solutions, complete with automated equipment, advanced materials, investing class, technical and field service.

They have an established track record of growth and innovation through machine automation and integration, supported by a strong patent portfolio. This will accelerate our Reinvent SEE goal of doubling our innovation rate over the next five years.

The combination aligns well with our Reinvent SEE objective to drive channel optimization, while improving customer service. We believe automated packaging systems will thrive within Sealed Air, given our global reach, distribution network and highly complementary portfolio.

We believe, we will learn from automated packaging systems and create cross-selling opportunities to gain access to additional growth in e-commerce, fulfillment and food markets. In Food, APS serves adjacent packaging segments such e-foods, produce, snack foods in portion controlled meals.

We’ll also leverage APS’s engineering and technical service expertise and bring that capability to our customer base around the world. We’ll generate compelling cost and productivity synergies. These include procurement, extrusion, conversion, materials and network efficiency.

We also see synergies with the recycled materials that will benefit our Sealed Air portfolio. Our strategy for Sealed Air to grow faster than the markets we serve, delivering earnings growth with operating leverage above 40% and have a disciplined ROIC strategy to drive economic value well above our cost of capital.

Our acquisition of APS supports our strategic growth objectives and aligns with our four P's of Reinvent SEE. APS’s success in providing sustainable solutions will help us achieve our sustainability pledge sooner. I'll now pass the call to Bill review our results in more detail..

Thank you, Ted. As a reminder, we made two reporting changes this quarter. First, Mexico and Central America are now included in our North America region. We provided you with 2018 quarterly sales by region in the appendix of the earnings deck that is available on our Investor Relations website.

Second, price is now being reported as a standalone metric and mix has been included in volume trends. On Slide 8, let’s start with the review of our net sales by region. In the first quarter, sales declined 2% as reported and increased 3% in constant dollars.

North America was up 3% in constant dollars and accounted for nearly 60% of our sales in the first quarter. Favorable price and contribution from our Austin Foam acquisition were offset by a 2% decline in volume. In Food Care, North America was up 2% on favorable pricing, and positive volume trends.

In Product Care, North America was up 4% also on favorable pricing plus contribution from Austin foam, which was partially offset by a 6% decline in volume. The decline in volume was due to a tough year-over-year comparable as well as a very soft industrial environment. In Europe, Middle East, and Africa sales declined by 1% in constant dollars.

Food Care EMEA was down 2% due to market softness elevated by Brexit concerns. In Product Care, the market headwinds were offset by new customer wins, which resulted in a 1% increase in sales. APAC was up 3% in constant dollars, largely driven by continued growth in Australia in food packaging and demand for packaged proteins.

This was offset by market weakness in protective packaging, primarily in Asia, related to ongoing tariff disputes, and a resulting slowdown in the electronics sector. South America was up 25% due to U.S. dollar index pricing on relatively flat volume. Slide 9 highlights volume and price trends by division, and by region.

In the first quarter, we delivered favorable price across all regions and in both divisions, due to our value capture pricing model and formula pass through in Food Care, North America. Food Care delivered favorable volume trends across all regions, except for EMEA, where we experienced a 2% decline.

In Product Care, we experienced volume declines in both North America and Asia. On slide 10, we present our sales and EBITDA bridges for the first quarter. I covered sales trends in the last two slides. So my comments will focus on EBITDA performance. Adjusted EBITDA of $216 million increased 10% on a constant dollar basis.

Margins were up 130 basis points to 19.4%. We delivered favorable price cost spread of $22 million as a result of actions taken related to our Reinvest SEE strategy, formula pricing and Food Care, North America as well as lower input cost. This was offset by volume declines that impacted EBITDA by $7 million.

We realized $13 million in restructuring savings, which was partially offset by $7 million of higher operating costs, largely related to inflation. Unfavorable currency was $10 million. For the full year, we are on track to realize $70 million in restructuring savings and expect to continue improving our leverage on organic growth.

Adjusted earnings per share in the first quarter was $0.59 on average diluted shares outstanding of 155 million shares. Our adjusted tax rate was 29% in the first quarter. For the full year 2019, we continue to anticipate a 26% adjusted tax rate reflecting our tax optimization efforts. Turning to our results by division.

On Slide 11, we present first quarter results for Food Care. Food Care sales of $680 million were up 3% in constant dollars. Adjusted EBITDA increased 12% in constant dollars to $143 million. Margins in Food Care improved 170 basis points to 21% of net sales. The global protein markets were up slightly in the first quarter.

We expect the protein markets to accelerate for the remainder of the year resulting in 2% to 3% growth for the full year. This compares to our full year outlook for Food Care sales of 4% constant dollar growth.

We expect improved, pasture conditions particularly in North America, continued local protein consumption and strengthening of the export market. Our food packaging business continues to outperform the market due to the strength of our core business and the penetration of our case ready platform.

We have the broadest portfolio in case ready applications for all proteins including seafood. We are expanding solutions that can't contain recycled materials. We are also expanding solutions that are post-consumer recyclable.

We expect growth and these offerings to continue and have increased our investments in renewable and recyclable processes and materials. In March, we announced our plans to make a $24 million capital investment at our largest global manufacturing facility in Simpsonville, South Carolina to produce plant-based food packaging.

This facility is the first one in North America to produce materials made from plant based resins and post consumer plastic. We also have been successful penetrating the fluids market and expect this to be a key driver for our growth in 2019 with new customer wins.

This growth is directly related to our innovative, vertical pouch packaging platforms, where we are seeing increased demand for conversion of rigid containers to flexible packaging. For example, our latest FlexPrep system solution integrates equipment, materials and dispensing technologies which we expect to be a key driver for future growth.

We are confident Food Care will continue to deliver above market growth rates on the top line while driving strong operating leverage. On Slide 12, we highlight results from our Product Care division. In the first quarter, Product Care net sales were $433 million and they were up 2% in constant dollars.

Growth in inflatable Bubble Wrap, paper systems and Korrvu were offset by declines in mailers, void fill solutions and some of our industrial applications. Adjusted EBITDA of $75 million or 17.3% of sales was down slightly on a constant dollar basis.

Favorable price cost spread and restructuring savings were essentially offset by the decline in volume and higher operating costs, which weighed on our margin performance in Product Care.

We have identified opportunities as part of Reinvent SEE that will improve our Product Care performance including optimizing our go-to-market strategy and simplifying our business to better align with our changing end market dynamics.

In 2019, we expect growth in our differentiated portfolio including inflatable Bubble Wrap, paper systems, Korrvu and automated systems. We continue to work with our B2B customers to modify their packaging and ensure their products are parcel ready.

Our broad product portfolio, including integrated fabrication, specialty foam and Instapak, is well positioned to capitalize on this trend. As Ted discussed, we are accelerating our investments in both automation and sustainability with our announced acquisition of automated packaging systems.

We are excited to add such an innovative business to our platform and we're confident that APS is highly complementary, and additive capabilities will be a growth driver for Sealed Air. Let's now turn to our free cash flow for the three months ended March 31st on slide 13.

In the first quarter, we generated $16 million in free cash flow compared to a use of cash of $77 million in the same period a year ago. CapEx was $49 million in the first quarter. Our estimated CapEx budget for the full year remains at $200 million.

Restructuring cash payments were $25 million in Q1, and our plan for $115 million in restructuring spend in 2019 is on track. Net interest payments were $40 million and for the full year, net interest payments are estimated to be $190 million. Cash tax payments were $13 million. We continue to forecast cash tax payments to be $130 million in 2019.

At this point, I will turn the call back over to Ted to discuss our outlook.

Ted?.

Thank you, Bill. Turning to our total company 2019 outlook. We're reaffirming our outlook for the full year. Net sales are expected to be approximately $4.8 billion or 2% growth as reported. On a constant dollar basis, net sales are expected to increase 5% with Food Care up 4% and Product Care up 5.5%.

On an organic basis, we expect Product Care sales to be up 1.5%. We have some work to do on driving our volume for the remainder of the year. We're confident in the opportunities, in our action plans to make this happen. The focus of Reinvent SEE is to drive profitable growth and innovation.

As we reinvent our business, we’re focusing on delivering the best products at the right price and making them sustainable. Adjusted EBITDA for the full year is expected to be approximately $925 million to $945 million, an increase of approximately 4% to 6%. Our operating leverage is expected to reach 40% target in 2019.

Adjusted EPS is expected to be in the range of $2.65 to $2.75, an increase of approximately 6% to 10% compared to the prior year. Our guidance does not assume additional share repurchases for the remainder of the year. For the full year, we continue to estimate free cash flow to be approximately $250 million.

As we noted on our last earnings conference call, our restructuring efforts are behind us -- when our restructuring efforts are behind us, we expect EBITDA to free cash flow conversion to increase over 40% with CapEx of approximately 4% of net sales and an improvement in working capital velocity.

Before we open up the call to your questions, I would like to spend a few minutes on the progress on sustainability. We're leading the packaging industry to a more sustainable future. We committed capital to produce materials made from plant-based resin and post-consumer plastic in our Simpsonville facility.

This is one of the world's largest packaging facilities and the first in North America to produce this type of film. The expansion is underway with planned production scheduled to begin in 2020.

Investing in plant based technology, accelerating our work on fully recycled materials and now with our announced acquisition of automated packaging systems, we're expanding our portfolio of recycled content. This brings us closer to the sustainability commitments outlined in our pledge.

We are committed to delivering 100% recyclable, or reusable packaging offerings in 50% average recycled content across all packaging solutions by 2025.

Later this month, we'll be attending the Ocean Plastics Leadership Summit, a scientific expedition to understand the problem and opportunity to connect leaders across the plastics ecosystem to eliminate plastic waste.

This event is the first of its kind to convene on the Atlantic Ocean, with the purpose of enabling the world's most committed companies and the entire ecosystem to accelerate solutions dedicated to the ocean plastics crisis.

We will have the opportunity to network with other leaders, discuss potential partnerships, joint ventures and new innovation initiatives. We look forward to using and learning from this summit, to create new solutions at Sealed Air and lead the change in the packaging industry.

Our objective is to reinvent everything we do, on our own operations and the entire packaging ecosystem. We look forward to updating you on our continued progress throughout the year. With that, I now open up the call for questions. Hey Valerie, we can begin the Q&A session..

Thank you. [Operator Instructions] Our first question comes from Aaron. Excuse me; our first question comes from Ghansham Panjabi of Baird. Your line is open..

Hi, good morning. It's actually Matt Krueger sitting in for Ghansham.

How are you doing?.

Good..

So my question is, were the volumes that you saw across your segments in line with your internal expectations for 1Q? And then if so, how should we think about growth for the remainder of the year given that the macro backdrop still seems somewhat choppy.

I guess what I'm trying to get at is, what factors give you confidence that you can see kind of a step up in growth in the latter half of 2019?.

Okay. The first piece, I'm looking at we'll break it up in the product and the Food Care in the first quarter. We did anticipate that we would have tough comparables from year-over-year. We also knew that a year ago we had the currency tailwinds and now going to headwinds.

So the other piece in there on the industrial side, we did see the industrial business take a step down in the quarter. So our confidence on the second half of the year is we do think we have some volume that was short in the first quarter we think we can make up in the second half of the year.

On the Food Care side, we do see that we gained a little bit on the markets, and we're still confident that we can beat that 4% growth that we had in the second half of the year. So we feel pretty good on the volume side, on the Food Care..

Okay. That's helpful..

Operator, next question please. Our next question comes from Anthony Pettinari of Citi. Your line is open..

Hi, this is actually Brian Burgmeier sitting in for Anthony. I was just wondering if you can provide any context on the margin profile of APS relative to Product Care and any detail you can share of potential synergies would be helpful as well..

Okay. Well, I'll give you an overview. First of all, we've been looking at this business for well over a year. We're excited as their title suggests automated packaging systems. That's what we see that markets are going in automation. As far as the profit profile, we’ll share at closing. We've got a couple of months out there.

But just to give you guys, we're looking at businesses actually below our multiple, and the synergies that we're looking at over the next three years, we think this will hit our guard rails on our ROIC.

So it will be north -- double-digit in ROIC post synergies what we liked about it is one, getting to know the culture, the people, we don't have in the marketplace. But is there a full system on the automation, where they actually make the equipment, they actually load the bags, their iconic Autobag.

So they have the material, the equipment, in the full system, and also what we liked is their service footprint. They have a very strong loyal customer base that we looked at. So we think, we could not only help them do what they do, but they can help us.

Looking at the other synergies of what we can do on the cost base with Reinvent SEE, we're pretty excited that we think we can bring some cost synergies to the profile. So it fits well strategically, culturally, it feels right. We think, we could learn from them, and we think we can help them. And we also like the fact that they grew 10% last year.

So there, it’s a good strong business, profitable business, family owned business. So lots of pauses and we're pretty excited about it..

Operator, next question please..

Thank you. Our next question comes from George Staphos of Bank of America. Your line is open..

Hi everyone. Thanks for taking my question and the details. Good morning. Ted, I just want to come back to the volume trend and Product Care. Look, we know the comparison was challenging and we appreciate that, but it does seem like industrial has been this nagging issue for the company for a while. You know piggyback on the last question or two.

What volume to the extent that you can comment do you have in hand right now, that makes you feel comfortable you can hit your higher volume goals and then the resulting incremental margin goals? Is it in hand or you have targets that you have to now go and get it? Thank you..

Well, I'll end with your first one, yes. We have our go-get targets that actually feel pretty good about that we get. But just to re-in -- I just want to reconfirm what's going on in the Product Care. We actually did see very strong growth in our inflatable Bubble Wrap.

Also in our core view, and also in our paper systems, we did have a tough year-over-year comparable and the tough issue was mailers, and we'll talk about we got some exciting things working on mailers. But we -- the other piece in there that we didn't anticipate was the industrial slowdown in the first quarter, and that affects our Instapak.

The Instapak business though, and trending in the quarter, we saw it pick up in the last month. So we see the equipment installed. So there's definitely a lead and lag on that. So that gives us confidence that we do see that industrial piece coming back and we have a very strong market share and we think we can recover that.

The other piece on the mailers and it's a common theme and why I'm talking so much about sustainability. We believe, we can recapture some of that mailer market share this year with a sustainable product.

We're aggressively working on a recycled product that we think now the team's target is over 12 months but we're asking them to aggressively see what we can do to have a fully recyclable mailer content into the Bubble Wrap line. And we think, we could create growth.

So just giving an example of one of the projects in place, but we've got some work to do but we think we can recover that volume in our protective packaging businesses..

[Indiscernible].

Oh, so I said it’s focused on the Product Care..

I think there is potential bit of [Indiscernible] on the Food Care..

Sure. And on the Food Care, where I'm always correcting when I get asked the question, I think, we have a tremendous growth opportunity there. With our iconic Cryovac in some of the products that we have going there. So in the first quarter, we did have some issues in Europe with Brexit. So we didn't get the volumes there that we thought.

We did see good penetration still our growth in North America. On the second half of the year, we do think we have penetration in our core market in our Darfresh product line, the case-ready and pretty much all the protein markets around the world. The first half of the year, we're anticipating strong growth in Australia the second half.

We think that will be tempered down. But again, on the sustainability side, we had the full team over in Europe last month at our new platform in Italy, and we got to see the Darfresh line that we're now upto 40%, 94% recycled content in Darfresh and the European market that is really really a big deal on sustainability.

So we think, we can get not only our market share, we can gain market share in food, so we can think we can hit that growth target for the second half of the year..

Operator, next question please?.

Thank you. Our next question comes from Edlain Rodriguez of UBS. Your line is open..

Thank you. Good morning everyone. Ted, I was going to ask you a question about resin costs, but I know you don't like to talk about resin. So I'll ask one on pricing instead. So what, I mean your pricing was quite solid.

Why were prices going up when resins are going down? And is there any relationship between the higher price we saw and the volume softness that we also saw in there?.

I don't think so. And by the way, Edlain, I appreciate because each time now you're opening that you talk, that I don't like to talk about resin, but you keep talking about it. So that is good. As far as the -- the resin piece in our quarter. We've probably got a couple million uplift with what's going on in the resin.

The price -- the cost piece that we made the quarter was really more related to reinvent and what we're doing, and actually, more just getting a better price on resin. We're working quite aggressively with multiple resin suppliers. Bill can actually give you more detail on that. We'll go through some of the Reinvent SEE pieces.

But as far as the pricing piece and raising price and losing volume, do not think that's an issue at all with the resin. We think, we have more cost side going upside potential for the rest of the year. Our outlook on resin, we do, did see that a resin pricing in the first quarter, but our outlook for the year, it's still flattish.

So that does mean if we have other opportunities with resin going down, we have upside on the cost side for the year. But our outlook, our guidance right now has a flat resin story for us. So if it continues to go down, we have upside, but we think we have upside already from what we're working on in Reinvent SEE..

Operator, next question, please?.

Our next question is from Scott Gaffner of Barclays. Your line is open..

Thanks. Morning Ted. Good morning Bill..

Hi, Scott..

Nice to come back at Product Care, but I think that was the area where there was the most variation relative to people's estimates. Ted, if I look at it, you know that you're saying 1.5% organic growth for that business before you'd said 1%. So it seems like maybe you're even more confident in that segment.

Now, can you talk about the growth on a go-forward basis, is it at least in 2019, is it recapture of some of these industrial businesses, or is it more growth in the high value segment at least in 2019 that we should be anticipating and based on that, do you still think you can get segment EBITDA up year-over-year despite some of these challenges..

Well Scott, let me break it up in two pieces because you threw in segment EBITDA in there on the growth. The EBITDA, pretty confident we're going to get that. We're focused pretty hard on the cost and the efficiencies that we've talked about. On the volume side, is just highlighting again. We did have that tough comparables.

The Instapak piece that got hit with that's what we didn't anticipate that the actually industrial market in the first quarter was tepid. So we think we'll recover that. As I mentioned, we are seeing the equipment installs in March alone up 40% year-over-year. That's a positive number for us.

And as you know Instapak, in our product the protective packaging business is our largest and most profitable line so that we feel good about that. The other piece I mentioned, our inflatable bubble on demand is going well. The automation was a gap that we hinted all last year even before we talked about APS coming into the portfolio.

We've been working on the automation side, that's the part of the gap that we got hit in 2018 that we have to recover. So we do have a strong pipeline out there. We got to go make it happen. But we're not given up on the year, on the volume on the protective packaging side..

Operator, next question please..

Our next question is from Tyler Langton of JPMorgan. Your line is open..

Good morning. Thank you. Just had a question on the 70 million price cost benefit to EBITDA that you signed in Food Care I guess.

I wonder if you can give some a little bit more details on what drove that I know so Ted you mentioned resins was a huge part of it, but I think in the release you also mentioned that South America saw a 25% revenue growth from U.S. dollar index pricing.

Just trying to figure out if that played a role or just any more color there would be helpful?.

So we definitely got some lift from resin, we talked about that. There's a lot of our Reinvent SEE activities that are focusing on rationalizing suppliers and getting better resin prices.

We're actually going through accelerated resin qualification processes and substitution processes to basically have better resin prices and we're seeing that reflected through lower cost of goods sold, and ultimately higher margins as we go through. And we're always focusing our activities on our higher margin SKUs.

We talked to you in the fourth quarter call in February about part of our Reinvent SEE being focused on SKU optimization, and we’re leading customers towards those higher margin SKUs. So I think, the combination of our critical evaluation of resin as well as our Reinvent SEE activities is giving that lift in price cost spread that you mentioned..

And just as a reminder, we did say in the prepared remarks that the Reinvent SEE initiative $9 billion was realized in that price cost spread on that EBITDA Bridge and a few million dollars came from lower resin.

When we think actually, those productivity savings will continue as the year progresses, and obviously resin is always a bit of a moving target.

Operator next question please?.

Our next question comes from Gabe Hajde of Wells Fargo Securities. Your line is open. [Operator Instructions].

Operator, we want to move to the next question, or we can pull Gabe back in the queue when he comes back..

Thank you, one moment please. Our next question is from Chip Dillon of Vertical Research. Your line is open. One moment, please. One moment, please. Gabe, your line is open..

Yes, good morning.

Can you hear me now?.

Yes, we can hear you now..

Great. Hello, I was hoping to revisit the APS transaction a little bit, appreciate you on -- maybe those were all the details; but can you talk about maybe capital intensity of that business Ted? And then, perhaps, what the growth profile look like and maybe another 3 years to 5 years leading up to 2018.

Was trying to understand if 2018 was an aberration for some reason, if that's an organic number or if they in fact we're completing some acquisitions on their own? Thanks..

Yes. We looked closely at their growth and that's why are interested. And we also looked at their intellectual property. See what they were doing with their innovation, with the new products, that was a lot of focus for the business. Their growth rates were quite strong. So strong, single-digit to double-digit we mentioned in 2018. And that was organic.

And as far as their footprint, they're pretty concentrated in their markets that they have and also primarily in the U.S. So we think actually taking some of their products and their solutions to our footprint, we see some synergy opportunities there.

As far as their capital intensity, with not sharing that yet, it's still a couple of months away, but we were interested in their profile of their business. They did -- 16% of their business is equipment and plus 70% is material and then the parts and service.

And that profile was quite interesting for us, of how strong of an equipment solution player there were and just to share relatively, that's double our size right now. So that's the part that we were quite interested in.

Then also those adjacent markets, it's always interesting when you study a competitor, you get to learn market share very quickly and you could see it clearly. And some of the markets that we haven't touched, in some of those food markets that they're in, are quite interesting.

And looking at some of those customer bases, that they have access to and some of their largest customers, actually connected to adjacent space for us, but we're not in. And one of those is in the food space..

Operator, next question please..

Thank you. Our next question is from Chip Dillon of Vertical Research. Your line is open..

[Indiscernible]. Great. So, yes, I would like also to ask about the APS, trying to understand actually a little bit better the earnings profile.

And I understand you can not disclose any specific information, but we're little bit puzzled by the wording that it's going to be EBITDA accretive, but obviously that's not that hard unless they have EBITDA losses.

So what this kind of expectation for actual accretion to the bottom line after or even before any incremental interest costs and you also just mentioned in some of the slides, about their equipment sales, material sales.

You mentioned in the presentation -- the press release that you really like the company for the equipment but we still see that three quarters of their revenues come from materials.

Is the breakdown on the income basis very different, than the sales profile and breakdown?.

Thanks for the question. I'll start with the financial piece of the question. And that is we've signed the deal with this point, we've not got to close the transaction, we anticipate that that's going to happen in July. And then at that point, we'll provide more detail in terms of the impact on our full year guidance.

We're clearly focusing on driving the profitable growth, we're looking at the operational synergies, but we've got to be very careful to kind of think through the financial accounting implications of the transaction, as well as the tax benefits that will achieve.

We are going to have that be accretive to adjusted EBITDA in 2019 and we'll talk through the full impact on our guidance in late July.

And when Ted was talking about the APS equipment business, one thing that impressed Ted and me, as we looked at that business, was the exclusivity, arrangement that they had with the materials associated with the equipment.

I think that they do that very, very well, and that's one of the things that seems very attractive to us, as we looked at the various pieces of their business, a significant one being equivalent..

And so if you look at the materials, we're talking about equipment a lot because we see that's an opportunity, especially where the markets are going, if this a food and this is a protected packaging.

If we look at our customers facilities, whether it's a large fulfillment center or meat packing plant, where the opportunity for automation is, how do you load the bag? How do you load the container? This is what they do very well, and it's a gap in our portfolio. The materials piece, I just want to highlight that automation.

That is the customer's words of how they get more efficient with their labor. Now the materials piece, which is over 70% of their business, is also an opportunity for us on synergies. We did analyze what their spend is, what their resin spend is, we know what our cost -- we think that's an uplift for us on the Synergy.

But we also saw across Synergy, that we're quite excited about, is their penetration with recycled materials. We found that their air questioning product is 97% recycle, that's really opened our eyes internally with our team on how we could really ramp-up our Bubble Wrap product lines with recycled content.

And then back to the question of the multiple that we're looking at, again, we're looking at something that we do want to pay more than our multiple. So that's what we're looking at. We'll give more detail that on close, but also the guard rails are there on the ROIC.

That's what we are excited about, that what we can do and what the go-forward multiple is and that translates to being North a double-digit ROIC opportunity for us. So, it matches our guard rails, strategic set, it's definitely going to fit to our operational leverage target. So lots of work, we studied this for quite some time.

So we think this is going to be a nice addition to the Sealed Air portfolio..

Operator, next question please..

Thank you. Our next question comes from Neel Kumar of Morgan Stanley. Your line is open..

Hi, this is actually Michael Slutsky sitting in for Neel Kumar. I'm just wondering if you could elaborate on some of the growth opportunities in e-commerce from the acquisition, given its increasing importance within products there..

Sure. If you look at e-commerce right now, it's again -- it's loading equipment quickly. So if you look at one of our largest e-commerce solutions is a mailer. The mailers today, what used to be in boxes, now comes in mailers. So in the e-commerce that's basically a billion boxes has been eliminated.

So how do you now go from a mailer and how do you load those in a high volume fashion? So instead of a person can load a mailer between 5 and 6 a minutes, how do you move that to 10, to 20, to 30? And that's where the Autobag comes in, so that Synergy there is how do you load back? Now they're pouch, they are not cushion pouches.

It doesn't have to be that way. So they actually are the market leader in loading bags from multiple different industries and again, highlighting food. So we see that Synergy and that's what e-commerce is looking for -- an automation system to load mailers, to load bags, to load pouches -- and they do quite well on the pouch.

We see some nice synergies there..

It also strengthens our sustainability portfolio quite nicely and the other thing that APS is done very, very well, is their innovation skill, is quite nice. I mean, we've heard Ted talk about our vitality index and how we need double that vitality index going forward.

APS's innovation is supported by strong numbers of patents and we've been very impressed by not just what they've done so far, but what they've got in their future plans relative to innovation..

And I'll just highlight it again, we keep hitting this sustainability. Their product on their version of Bubble Wrap, their air pillows is 97% recycled content. That's a big deal..

Operator, next question please..

Our next question is from Brian Maguire of Goldman Sachs. Your line is open..

Hi, good morning. Sort of a two-part question. One just on volumes in Food Care, specifically Europe. You noted some weakness there. I think you attributed it to Brexit.

I don’t think we've heard too many other companies’ kind of call out Brexit specifically, especially in the food and beverage space, do you think that would play a major role? So I just want to if you kind of expand those comments and related to that, are you seeing any negative impact already from sustainability concerns? Given that these are kind of plastic based products.

And then, the second related question was sort of on the acquisition. You had some challenges in Product Care over the last couple of quarters. Just wondering about the timing on this one.

Do you think that integrating this might have too much complexity, given some of the restructuring and reinvention, Reinvent SEE, kind of activities taking place there? Thanks..

So well, I am going to answer about the APS integration question first.

And that was, we had the entire leadership team and their direct reports spend a lot of time due diligence process of this potential acquisition and part of the due diligence is not just understanding the business, but understanding what we need to do in order to integrate that business very, very quickly.

So we do get that accretive lift to adjusted EBITDA that we've been discussing and we feel highly confident in our ability to quickly integrate this business and to highlight the strength that they actually bring to the table..

And then back to the Food Care on EMEA -- other people are not mentioning it. The impact for us on Brexit is basically the U.K., is the largest importer of beef from European countries. I was over there and actually met with the grocery store. So to your comment about is sustainability in plastics and issue there, absolutely.

That's why we're talking about it everywhere, but as far as we think that's recovered issue and with the Brexit but for right now, it's part of our first quarter story. But full year, we think will be correction, it will hit our growth targets on Food Care..

And just to add on what Ted said, actually in EMEA and North America, and really around the world, our sustainability -- our sustainable solutions in Food Care with case-ready is fueling the growth. So what we're seeing in EMEA, actually the U.K. is showing us; U.K.

sales was up a little bit in the quarter, it's the other countries around it that were a little bit weaker and that's usually the Brexit concern. So like Ted said, because U.K. is the biggest importer of feed from other European countries, there is just a little bit uncertainty around what's going to happen with that market and movement.

But sustainability is fueling our growth in Europe and we do think that our recycled trays and some of the sale that we're making with recycled materials is going to continue to drive that growth throughout Europe and we're also seeing it now in North America. I hope that helps clarify and add a little bit to what Ted said.

Operator, next question please..

Our next question comes from Daniel Rizzo of Jefferies. Your line is open..

Hi guys, just two questions. One; the follow-up on that.

Would that suggest that the Brexit issue is going to cause some sort of weakness or stagnation until October because it hasn't been answered and there is still lot of uncertainty? And number two; in terms of Product Care, is there opportunity for SKU rationalization there as you've talked about in Food Care?.

So on the Brexit, I mean, it's really hard to say the total impact that we're going to see as we go into the fall. I mean, EMEA is 21% of our total Food care sales. So we still are very North America centric. We are very comfortable with our outlook relative to Food Care sales for the balance of the year, but we do see some countries in Europe.

If you look at just stand alone Q1, Germany, Italy, France, Russia that are basically flat and it's a Brexit impact just because of the significance of what the U.K. actually imports. And on the SKU's, yes, we absolutely see an opportunity at that to rationalize the SKU's across Product Care as well as Food Care.

The interesting data point on the Product Care is when you add after the closing of the transaction in July. If you add all the SKUs of the APS acquisition, you're going to actually see some very complementary products that get added, and will be able to absorb that portfolio quite well..

And just to be specific, you asked about Brexit over the rest of the year. We actually are expecting volumes rebound going forward, we think that the concern on Brexit is enough to do it.

Some taxes and some tariffs and probably you could -- we probably need to ask our value a little bit more in detail, but with that question it wasn’t anything that was that drastic from these other countries, but when we looked at Germany, Italy, France and U.K. those are our four largest countries in Europe.

Like I said, Europe was up a little bit, but Germany, Italy and France, which is softer -- which is softer than what we had anticipated and it did have to deal with that -- just that slowdown due to Brexit, but again, going forward, it could be more clarity in that market and we do you expect it to recover over the next three quarters.

Operator, next question please..

Our next question comes from Mark Wilde of Bank of Montreal. Your line is open..

Good morning, Ted. Question for you, a company that made kind of paper dunnage and paper dunnage systems got taken out. A few months ago, it got a really high valuation that had high margins and high growth. But when I look at this, some of it is pretty similar to technologies that Sealed Air has had for years.

So I just -- I wonder if there's any lessons from that competitor versus what Sealed Air has done and things you might be able to do different going forward in that business. And then just secondly, if we could get some thought on this African swine flu issue and what impact that might have on your business going forward..

Sure. Let me do the African swine flu first just because it was tied into the previous questions on Food Care. We did see a small impact in the first quarter, basically a couple of million dollars in sales and actually got to see it. Personally, I was over in Russia so I'd see the effect -- global effect.

But what it’s actually doing and it's driving the exports into China. So we're seeing that activity. So we think it's actually shouldn't overall be affecting us.

But we are definitely seeing the impact of it into China and again, it's another great advantage we have of our global footprint and being connected to our global customers that when there is an issue in one area, we will see the corrections sometimes not in the quarter but we'll see it in the year. Good question, Mark.

As you asked about looking and partly just share with you, even on APS is how that looks. We've looked at over 30 different companies in the past year and we looked at paper companies that we've elected not to go after and the -- where we looked is what can we do, what do they have. It could add value to us that we couldn’t do on our own.

So, we're putting M&A side-by-side with our innovation team. And as we've talked about doubling our innovation, so our paper system's actually is up double digit. That's in our product and protective packaging business is quite strong.

It's double-digit on a small number So, we're looking to see what more we can do, definitely looking at paper and what's going in the packaging, looking at phone, looking at plastics, looking at recycle, We want to make sure we have that in our portfolio, anticipate where the market is going.

Also, we're looking at which tied into, looking at other companies in this space, is their go-to-market strategy. So very important on going through direct, through distribution or e-commerce, so it's another piece of Reinvent SEE as we look to further grow our Protective Packaging as we look at in the M&A space now with APS.

But even in our own portfolio, what can we do is the channels to go after those markets beyond actually the innovation piece..

Operator, we have time for one last question, please..

I'm showing no questions at the time, I'd like to turn the call back over to Ted for any closing remarks..

Thank you..

Great. I wasn't expecting that quick. Okay, great. I want to thank everyone for the call today. I think it's important to keep in mind that Reinvent SEE is about driving profitable growth.

We are simplifying our organization, so we can move faster in the markets we serve and through our accelerated innovation, we're increasing our speed to market ensuring that we deliver the best products at the right price and making them sustainable.

Our capital investments are focused on improving our productivity engine and we are excited to bring Automated Packaging Systems into the Sealed Air family. So thank you. And with that, turning to Lori, we'll close the call..

Thank you.

Operator?.

Thank you, ladies and gentlemen. This does conclude today's conference. Thank you for your participation and have a wonderful day. You may all disconnect..