Jan 30, 2008
Executives
Amanda Butler - Director of IR William V. Hickey - President, CEO David H.
Kelsey - Sr. VP, CFO
Analysts
Ghansham Panjabi - Wachovia Claudia Hueston - JP Morgan Rosemarie Morbelli - Ingalls & Snyder Llc Mark Wilde - Deutsche Bank Securities George Staphos - Banc of America Securities
Operator
Good morning everyone and welcome to the Sealed Air Conference Call discussing Sealed Air's fourth quarter and full year 2007 results. This call is being recorded.
Leading the call today, we will have William V. Hickey, President and Chief Executive Officer and David H.
Kelsey, Senior Vice president and Chief Financial Officer. After management's prepared comments, they will be taking questions.
[Operator instructions] We do ask that you please limit yourself to one question per caller so that others will have a chance to ask their questions. And now at this time I'd like to turn the conference over to Ms.
Amanda Butler, Director of Investor Relations. Please go ahead Ms.
Butler.
Amanda Butler - Director of Investor Relations
Good morning everyone. Before we begin our call today, I would like to remind you that statements made during this call stating management's outlook or predictions for the future are forward-looking statements.
These statements are made solely on information that is now available to us. Our future performance may be different due to a number of factors.
Many of these factors are listed in our most recent annual report on Form 10-K or quarterly report on Form 10-Q. We have also posted supplemental financial information and reconciliation of non-GAAP measures that we expect to discuss on our website at sealedair.com in the investor relations information section under Filings.
Now I'll turn it over to Bill Hickey, our CEO. Bill?
William V. Hickey - President, Chief Executive Officer
Thank you Amanda. Good morning everyone.
I am Bill Hickey, President and CEO of Sealed Air Corporation. With me on the call today, in addition to Amanda, we have Dave Kelsey, our Chief Financial Officer.
As an introduction I will provide a few highlights of our business for the fourth quarter and full-year 2007. Dave will then review select details of our financial results.
After Dave's remarks, we will then have time to take all of your questions. We are pleased that we finished the year with steady sales, volume and earnings growth that met the guidance we originally provided to you back in January of 2007.
All during an increasingly challenging year with increasing raw material and energy cost rising to new highs. In 2007, we continued to focus and execute on our growth plans for new product development and geographic expansion.
Our successes in 2007 include the launch of over 20 new products including two new products based on renewable materials. We also expanded our presence in medical applications and specialty materials, two areas where we see high growth in the future.
Looking at our operational initiatives. We finished the year with the completion of our flexible film lines in Shanghai, China, which are now running commercial products for the Chinese market.
We completed the SAP integration in all regions of our company outside of North America, and we centralized our North American customer service center in South Carolina, and at the same time we maintain the efficiency in which we use our raw materials, which added over $30 million to our bottom line during 2007. Looking at our sales results, fourth quarter sales increased 9% setting another record of $1.3 billion.
Excluding the favorable effect of foreign currency translation, our sales growth was largely driven by volume growth in North America, Europe and Asia Pacific primarily in our food business. Our full year sales increased 7% to $4.7 billion compared with $4.3 billion in 2006.
Again, excluding a favorable effect of foreign currency translation, sales growth was largely attributed to the volume growth in our food businesses in North America, Latin America and Asia Pacific. This growth led to a milestone for us in Asia Pacific, with that region reaching over $600 million in sales during 2007.
Additionally our Latin American business grew by 11% in the year with its sales surpassing the $400 million mark in 2007. During the year, we also saw continued strong double-digit growth of 22% in developing countries of the world such as China and Russia and accelerating growth rates in smaller Eastern European countries such as the Czech Republic and Romania.
Our success in these regions is attributable to the strength of our brands, our product portfolio, our strong geographic presence, our people on the ground and continued economic development for both domestic consumption and for export. In the fourth quarter, our diluted earnings per share were $0.45, excluding the special items mentioned in our press release earlier this year.
For the full year, our diluted earnings per share were $1.65 excluding the charges mentioned earlier which was 8% increase over 2006. We accomplished this earnings growth while absorbing rising raw material cost for the full year about $19 million higher than the full year 2006 on an equivalent volume basis.
Taking a closer look at our reportable segments and the other category, our food packaging business again showed solid performance in the fourth quarter as we continued to gain new business with net sales growing at 10% or if you exclude a favorable effect of foreign currency at 4%. Volumes were solid in the quarter with 4% growth rate, which outpaced slaughter rates from those beef categories.
Our business growth reflected strong demand from our roll stock and vacuum shrink bags in the Americas as well as favorable price mix in North America. During the quarter, we announced a number of price increases across various regions that targeted rising raw material cost, but which will largely impact 2008 results.
Additionally we launched several new products, including Marinade on Demand, Grip and Tear bags, and Freshness Plus, which serve both the food service and consumer applications. Looking at our full-year 2007 results, Food Packaging net sales grew 8% or 4% if you exclude the favorable effect of foreign currency translation.
We experienced strong volume growth in Latin America, North America, and Asia-Pacific and strong product price mix in North America and Europe during the year. Looking ahead, we feel that the continued strength in the global red meat slaughter rate and protein demand, as well as innovative product development focused on source reduction and continued expansion of our new products into international markets will support growth in 2008.
We estimate that the Food Packaging segment's core business net sales, excluding foreign exchange and acquisitions, should grow in the range of 4% to 6% on an annual basis over the next few years. We also are expecting ongoing margin improvement in this category with the launch of new manufacturing facilities in 2008 and the creation of centers of excellence on our North American and European manufacturing platforms.
Moving on to our higher growth food segment, Food Solutions, we increased our net sales growth rate to 16% in the fourth quarter or 8% excluding the favorable effect of foreign currency translation. Unit volume growth increased to 6% with our largest unit volume growth in Europe and North America.
Additionally, we experienced solid increases in price mix in Europe and in Asia-Pacific. During the quarter, we also announced price increases across various regions that targeted rising raw material costs.
As I said previously, these will largely impact 2008 results. For the full year, Food Solutions' net sales grew at 12% or again excluding the favorable effect of foreign currency at 7%.
We experienced solid growth across all regions, but most growth was attributable to North America and Europe. Product price mix growth was also solid in North America and Europe, due to a favorable mix of pads and trays in North America and ready meal and vertical pouch packaging flexible films in Europe.
Case-Ready and Vertical Pouch Packaging continue to grow at double-digit rates during the year. Case-Ready continued to expand its leadership position and grew at 12% in 2007.
We also launched Mirabella, a new low-profile format, which partially contributed to full-year Case-Ready sales that exceeded $450 million. Vertical Pouch Packaging also had a strong year, with 16% growth and record global equipment placements and a four-fold increase in sales in the Asia-Pacific region.
Vertical Pouch Packaging sales are now over $125 million per year. Our ready meal solutions continued to expand with pizza, microwavable solutions for frozen foods and new tray solutions driving increased adoption throughout the year.
Looking ahead into 2008, we will continue to expand our presence in Case-Ready, Ready Meals and in various foods… servers applications with widening our customer and application base, in vertical pouch packaging, in order to further our market presence with our new aseptic and retort applications. As consumers may opt to dine in more in 2008, we feel that trend to be favorable to our food business and many of our newest product launches, such as Pizza Fresh and Mirabella.
We estimate that the Food Solutions segment core business net sales, excluding foreign exchange and acquisitions will grow in the range of 10% to 15%, on an annual basis in the next few years. This is a business we are investing in, but we are also expecting ongoing margin improvement during the same time period.
I'd also like to remind you on our food solutions business, particularly Case-Ready that most of our trades are outsourced products, and we are in an average 17% profit margin but with little or no capital invested in. You must consider that a factor in looking at our operating performance on food solutions.
Moving on to protective packaging, fourth quarter net sales increased 2% excluding the favorable impact of foreign exchange and the unfavorable impact from the sale of a small product line, fourth quarter sales decreased slightly by 1%. Despite volume growth being slightly down in the quarter due to the challenging conditions in North America's most end markets, we did experience 6% volume increases in both Asia Pacific and Latin America with increasing sales of inflatables, shrink films and Instapak in Asia Pacific, and shrink films and air cellular products in Latin America.
During the quarter we also announced price increases in this segment that targeted rising raw material cost, but again which will largely impact our 2008 results. For the full year, protective packaging net sales grew by 2% excluding the favorable impact of foreign exchange translation and the unfavorable impact from the sale of smaller more product line, protective packaging sales were even with 2006.
Volumes experienced a very slight decline overall, keeping our performance ahead of common proxys such as corrugated box shipments which declined approximately 2% and we are aided by our 2% volume growth in our International regions. We experienced 9% volume growth in Asia Pacific, and 7% volume growth in Latin America in protective packaging high riding the benefits of our diversified footprint and our global sales mix.
From prior perspective, we saw success in our recent Pack-Tiger acquisitions having placed over 300 systems, and the adoption of new products such as NewAir, Instapak quick and its Room Temperature version. Looking ahead we anticipate comparable slow growth rates in our North American pack protective packaging business in 2008.
However, we expect continued growth in our international markets. We estimate that protective packaging's core business net sales excluding foreign exchange and acquisitions will grow in the range of 3% to 5% on an annual basis in the next few years, and we are expecting to maintain or even improve margins during this period.
Lastly, our other category increased net sales by 23% or 15% excluding the favorable effect of foreign currency translation during the fourth quarter, with all regions experiencing double-digit growth rates. The primary growth driver in the fourth quarter were the acquisitions of Alga Plastics in medical applications in August and the acquisition of certain assets relating to Dow's ETHAFOAM and related polyethylene foam product lines in November.
Despite continued adoption in testing and the launch of new products, particularly in insulation solution in Scandinavia, volumes appeared weak in the quarter largely due to an unfavorable year-over-year volume comparison and our medical applications business resulting from an aggressive 2006 fourth quarter customer purchases in Europe, there we made an anticipation of our SAP conversion in Europe at the end of last year. For the full year, other category net sales increased by 18% or 12%, excluding the favorable effect of foreign currency translation.
Both our special materials and medical businesses had double-digit growth rates for the year, with medical sales increasing by over 20% excluding foreign exchange. Similar to what we experienced in the fourth quarter, growth was largely due to acquisitions.
But we also had a 5% volume growth in the year, led primarily by 12% volume growth in our international regions in both our specialty materials and medical businesses. Looking ahead, we will continue to expand our presence in medical applications and we will be focused on the successful commercialization of new technologies and product lines that exist in our specialty materials business.
We estimate that the other category core business net sales excluding foreign exchange and acquisitions will grow in the range of 15% to 20% on an annual basis in the next few years. And to our Food Solutions, we're also investing in these new businesses.
But we're expecting to improve margins during this period. Before I hand it over to Dave, I'd like to touch upon 2008 and our guidance.
Looking ahead, we are continuing to focus and execute for growth and global diversification in our business. This includes our ongoing investment for growth in the BRIC regions of the world including capacity expansions in countries like Malaysia.
Our continued work to establish new manufacturing sites at Eastern Europe and Mexico as part of our global manufacturing strategy. We will be continuing our investments in product development and product launches which you will see as soon as the first quarter as well as continuing our focus on renewable packaging solutions.
We will continue the expansion of our applications in the adjacent segments using new and existing technologies, both through partnerships and with acquisitions. We will enhance the global promotion of our solutions with the completion of platform product showcase centers in China and the United States.
We will complete our global SAP rollout with the final phase in North America later this year. And finally, we remain focused on optimizing our operations reducing our costs, enhancing our flexibility and beginning supply chain initiatives that are focused on inventory reduction and optimizing our procurement practices.
During the year, we will be monitoring raw material prices and we will make appropriate price adjustments as necessary to continue to manage our profitability. We expect our full year 2008 diluted earnings per share to be in the range of $1.64 to $1.74 on a generally accepted accounting principle basis, which includes charges of $21 million or $0.11 a share expected to be incurred with the implementation of our global manufacturing strategy.
Excluding these charges, we expect our 2008 earnings to be in the range of $1.75 to $1.85 per share. Our guidance assumes full year average raw material cost will increase slightly over 2007.
Used volume growth in 2008 will be comparable to what we saw in 2007 which we feel is consistent with our expectations for moderate growth in the global economy. We are also assuming a full-year effective tax rate of 31% and operating expenses of approximately 16% of net sales.
So, I am expecting 2008 to be another year of growth diversification, but most of all execution for Sealed Air. Now I am going to turn the call over to Dave Kelsey to review some additional details of our financial performance.
Dave?
David H. Kelsey - Senior Vice President, Chief Financial Officer
Thank you Bill. As Bill mentioned, our sales were a record $1.250 billion for the quarter.
More than 85% of our $105 million of revenue growth or $89 million came from our international operations. International volume grew $70 million or 2.8% and favorable foreign currency translation contributed $66 million.
For the quarter, approximately 54% of our revenue came from outside the United States. For those participating in the call, who would like additional detail tables posted on our website Sealedair.com present the percentage of sales by geographic region, the components of the change in net sales by business segment and by geography, and the impact of foreign currency translation on sales by geographic region.
Moving to our statement of operations, the company's gross profit was a record $344 million for the fourth quarter compared with $339 million in the fourth quarter of 2006. Food Solutions gross profit grew $7 million and Food Packaging gross profit grew $3 million.
Strong sales volume growth and price mix gains in both food segments more than offset higher resin prices. Protected packaging gross profit declined $5 million and the other category declined $1 million compared to the fourth quarter of 2006.
Both of these segments experienced lower unit volumes before factoring in the impact of acquisitions and divestitures. And they both had an unfavorable combination of price and mix.
Without the topline support, Protective Packaging and the Other category were unable to offset higher resin costs in the quarter. Moreover, our specialty films product line in North America included in the Other category experienced some of our most pronounced resin increases as a percent of revenues.
The total company, resin costs in the quarter were $19 million higher compared to the prices paid for resins in the fourth quarter of 2006. The selling price increases that we announced in the fourth quarter lagged our increased cost for resins and thus the benefits will not be realized until the first and second quarters of 2008.
Cost related to our global manufacturing strategy did not have a meaningful impact on our fourth quarter gross profit comparison to 2006. Marketing, administrative and development expenses were $198 million compared to $187 million in the fourth quarter of 2006.
As a percent of revenue, these overhead expenses declined to 15.8% compared with 16.3% for the fourth quarter of 2006. Foreign currency translation contributed $9 million of the $11 million dollar year-over-year increase.
These expenses included $4 million related to acquired businesses, $3 million of additional expense to support the opening of our new state-of-the-art customer service center in North America, and $7 million related to new product development activities. Excluding this $14 million of spending to support our growth initiatives and the $9 million impact of foreign exchange, marketing, administrative and development expenses would have been $175 million.
Operating profit was $145 million for the fourth quarter, an improvement of $11 million from the third quarter, despite the absorption of $7 million of sequentially higher resin cost. Operating profit as a percentage of sales was 11.6%, essentially unchanged from the second and third quarter margins, and down compared to 13.2% in the fourth quarter of 2006.
Both the Food Packaging and Food Solutions segments reported modest year-over-year increases in operating profit. Protective Packaging operating profit was $7 million below 2006 due to the sales and resin factors that also impacted gross profit.
The other category, which includes specialty materials, medical applications and our investments in new ventures, reported a year-over-year decline of $2 million of operating profit during the fourth quarter. This decline was attributed to a decline in North American sales volumes before including acquisitions and the more pronounced impact of resin cost on our specialty foams business.
Interest expense was $35 million, essentially unchanged from 2006. Other income for the quarter was $8 million, a decrease of $13 million compared to last year.
The company expensed $8 million in the quarter for services performed by third parties on a transaction for which work has now ceased. Interest income was $5 million this year compared to $4 million in last year's fourth quarter.
Income tax expense for the quarter was $23 million and resulted in an effective income tax rate of 22.7%. The low tax rate for the quarter was primarily the result of the reversal of tax reserves and related interest due to the expiration of statutes of limitations in several jurisdictions.
For 2008, our guidance is that our core income tax rate should be 31%, as we expect a further reduction of our effective blended rate for state taxes. Diluted earnings per common share were $0.43 for the quarter compared to $0.45 in the prior year.
Diluted earnings per share for the full year were $1.89 compared to $1.47 in 2006, a 29% increase. Excluding these items detailed in our supplemental information available on our website sealedair.com, diluted earnings per common share for 2007 were $1.65 compared to $1.53 for 2006, an increase of 8%.
As stated in today's earnings press release, this EPS was consistent with the low end of the EPS guidance range we provided in our earnings press release in January of last year. I will conclude with some key cash flow and balance sheet items.
Our combined balance of cash and short-term investments at December 31st was $471 million, an increase of $52 million from the beginning of the quarter. Some noteworthy sources and uses of cash during the quarter were EBITDA of $181 million, reduced inventory of $22 million, capital expenditures of $53 million, and a dividend payment of $16.2 million.
Our quarter-end accounts receivable totaled $794 million, up a nominal $2 million from September 30th. Compared to December of last year, receivables investment increased to $73 million or 10% while our quarter-over-quarter sales increased to $105 million or 9%.
Customer receivables balances outside North America were up double-digits, with foreign currency translation contributing $34 million or 47% of this year-over-year increase. This increase also reflects our growth internationally and the generally longer payment cycles in these markets.
Also representative of our international business, VAT receivables were up $9 million year-over-year. Inventory investment at December 31st was $582 million, down $22 million during the quarter.
This lower investment is attributed to our supply chain initiative to improve our cash-to-cash cycle time and to reduce our logistics costs. Compared to December 31st of last year, inventory investment was up $72 million or 14%.
Inventories in the US were up only $3 million year-over-year. The increased investment in inventories outside the US was attributable to $24 million of foreign currency translation and to $45 million primarily to support our sales growth internationally.
Total borrowings at the end of December were $1.872 billion, essentially unchanged during the quarter. The outstanding balance of $300 million related to a debt issue that matures in April 2008 is reported in current liabilities.
Our cash position and our available committed borrowing capacity is more than sufficient to retire these notes when they mature. Capital expenditures were $53 million for the quarter.
Of this spending, $13 million was incurred on projects undertaken as part of our global manufacturing strategy. Our capital investments exceeded our guidance for the full-year 2007 of $200 million, primarily to support capacity additions that were independent of our global manufacturing strategy projects.
For the total year, we invested $59 million to towards the completion of the first phase of our global manufacturing strategy. Looking ahead, our guidance is for 2008 capital spending to be in the range of $175 million to $200 million.
This outlook includes $70 million necessary to complete the first phase of our global manufacturing strategy. In concluding my comments on our financial performance, I'd like to summarize the status of our global manufacturing strategy.
The $59 million capital investment in 2007 brings our cumulative capital investment for 2006 and 2007 to $73 million. The additional investment plan for 2008 of $70 million will bring our total capital investment to $143 million.
This will essentially complete the first phase of our global manufacturing strategy within our expected range of $130 million to $150 million. We have already begun limited production at our Greenfield plant in China and our new location in Mexico.
By this time next year, we expect to be producing at our new site in Eastern Europe. In addition to our capital investment, we had previously estimated that other costs associated with expanding our global manufacturing base and establishing centers of excellence would total $90 million to $100 million.
These expenses would be charged to our P&L over the period from 2006 to 2008. In 2007, we expensed $12 million significantly below our original guidance of $35 million.
In 2006, we incurred expenses of $16 million, so that our cumulative spending through 2007 has been $28 million. During 2008, we currently expect to expend an additional $30 million.
The actual timing of these remaining expenses is subject to change due to a variety of factors that could cause a portion of these charges to occur in 2009. This remaining $30 million for other costs would bring our total for these expenses to $58 million, well below our original range of $90 million to $100 million.
In summary, we currently are estimating that our combined capital investment and related expenses will approximate $200 million, where 85% of the amount we envisioned when we announce these global capacity additions in 2006. We are projecting our benefits to come down proportionately with these lower costs.
Also, due to delays in starting construction of the facility in Eastern Europe, we expect a commencement delay in the timing of the savings from this particular facility. Thus our current estimate is for a benefit of approximately $45 million in 2009, increasing to $55 million in 2010.
And now, I will turn the call back to Bill and to your questions.
William V. Hickey - President, Chief Executive Officer
Thank you very much Dave. Operator, I would now like to open up the call to questions from participants.
Question and Answer
Operator
Thank you. [Operator Instructions]
William V. Hickey - President, Chief Executive Officer
First question operator.
Operator
Ghansham Panjabi with Wachovia.
Ghansham Panjabi - Wachovia
Hi guys, good morning.
William V. Hickey - President, Chief Executive Officer
Good morning.
Ghansham Panjabi - Wachovia
Given all the resin price increases that are currently out there and they were implemented in the fourth quarter and given your own selling price increases that you spoke about, is it fair to assume that you might be behind in the price [inaudible] in the first quarter and maybe catch up quickly second quarter onwards? How should we think about it?
William V. Hickey - President, Chief Executive Officer
Yes, I think that's a fair statement. I mean the price increases were announced and it is interesting the outlook we have for resin in 2008, kind of a flip of what it was in 2007.
Remember 2007 started low and proceeded to decline, really peaking in the fourth quarter, actually with the December price increases. Given our price increase, our price announcements in late November or early December, getting those all through the system, we probably have more resin at higher cost and we have selling price increases actually in effect.
So… and I think you have heard some of our peers in the space stay pretty much the same thing.
Ghansham Panjabi - Wachovia
So, in your full-year guidance, Bill are you assuming that resin declines in the second half of the year or just flat with maybe 1Q levels?
William V. Hickey - President, Chief Executive Officer
If you looked at my comments, my comments say we expect we would be slightly higher in 2008 than in 2007, but to come off a little bit from where we are right now to have been in the first month of the year.
Ghansham Panjabi - Wachovia
Okay, and just lastly on, can you just update us on what you think of in terms of share buy backs? You obviously generated a fair amount of cash in '07, probably in '08 as well.
And certainly in '09 as your CapEx comes down, so you have a big authorization out there for share repurchases. Can you just update us on your thoughts there?
William V. Hickey - President, Chief Executive Officer
I just think the stocks are very attractive at the current price. I don't think I can say any more than that.
Ghansham Panjabi - Wachovia
Okay, good enough. Thanks.
Operator
Next we will hear from Robert [inaudible] with Goldman Sachs.
Unidentified Analyst
Hi, good morning guys. Just wanted to talk a little bit about resin again.
I know, if you could just perhaps clarify Bill. I know you said you expect overall a slight increase, but if I look at where the CMAI is for just like a benchmark polyethylene grade, on average right now, they are assuming that 2008 polyethylene is up like low double digit relative to 2007.
So, I know that, that's just one of 15 resins that you buy, but I am wondering if you are taking a more aggressive view of a drop in resins than they [inaudible].
William V. Hickey - President, Chief Executive Officer
Yes, we pretty much follow, we follow CMAI, we follow a couple of different people and again polyethylene is one of 15 and is perhaps the most common and has had the most dramatic change in price, but it is… I am trying to remember the numbers, sort of 48%, less than 50% of our total resin purchases. We are probably of the view that the second half for the year polyethylene will be ...
will flatten out.
Unidentified Analyst
Okay, okay. What's your view on the, on the current increase for polyethylene?
Do you think [inaudible] for renegotiation?
William V. Hickey - President, Chief Executive Officer
Yes, just one comment on current quarter, but most of the increases in the fourth quarter actually happened.
Unidentified Analyst
Okay, okay and then, I guess the last part of the resin question is with all the increase you saw in… I guess in PE in 2007, when you announced the price hike at the end of the year, how much of the increase were inflation in 2007 you were trying to recover? When would have been the last time that you raised price?
William V. Hickey - President, Chief Executive Officer
We raised prices earlier in 2007. I don’t remember the exact date.
Amanda Butler - Director of Investor Relations
That was in range of September.
William V. Hickey - President, Chief Executive Officer
Yes, in September, in September we also had certain product lines got an increase in September, that was from Amanda. Yeah.
So, we have an increase in September in certain products and then it followed up in December on other products as well as some of the polyethylene-based products that also had an increase in September.
Unidentified Analyst
Okay, okay. So, the current increase like the latest one announced just covers basically like the last three months or so of the year?
William V. Hickey - President, Chief Executive Officer
Correct. Our view is that we've essentially with the announced increases have covered the announced resin increases at this time.
Unidentified Analyst
Okay, okay. Okay, a separate topic on the Global Manufacturing Strategies since the timing of the cost savings was pushed out a little bit.
Is that just fully related as I think you alluded to delays in construction, or is there any read across maybe market, there is not enough demand or you don't see much growth in those markets?
William V. Hickey - President, Chief Executive Officer
I will ask David to comment on it, but I will tell you I wish I could get the plant sooner, we are sold out in a couple of products and we really need a plant. But Dave, why don’t you finish off there.
David H. Kelsey - Senior Vice President, Chief Financial Officer
Yeah, if you take the savings that we are now projecting in 2009 of $45 million as a ratio to the $200 million that we are going to be spending between capital and other cost, that is right in line with the earlier numbers of $250 million of spending and $55 million to $60 million of savings. So, it's really been a fine tuning over the three-year course of implementing this phase of the strategy and the… we still even though we are spending less money expect to get to the low end of that 55 to 65 range in 2010 and that is...
that delay is attributable to the issues we had mentioned previously in Central Europe. The ability to take possession of the real estate was delayed as we negotiated for various benefits.
And that's all taken care of, ground has been broken, construction is underway. So, we are on track on a going-forward basis.
Unidentified Analyst
Okay. And just final topic on that.
The only reasons that the expense is related to that strategy are coming in a little bit lower cost, basically?
William V. Hickey - President, Chief Executive Officer
I would say it's more of the real world has overtaken our upfront estimates.
Unidentified Analyst
Okay.
William V. Hickey - President, Chief Executive Officer
We do try to be appropriately conservative, particularly on a project of this magnitude when we introduced it back in 2006.
Unidentified Analyst
Okay, all right, thanks very much guys.
William V. Hickey - President, Chief Executive Officer
Next question operator?
Operator
Next question will come from Claudia Hueston with JP Morgan.
Claudia Hueston – JP Morgan
Hi, thanks very much. Good morning.
I just wanted to talk a little bit about the other segment. I guess I'm still sort of adjusting to the reportings filed here.
And the margins in the segment have sort of jumped around a lot. And I just wondered if you could help me understand what's driving this volatility and then how we should think about the margins there going forward.
I mean I understand it is just about that better over time and this has been a lot of sort of quarter-to-quarter volatility there? Thanks.
William V. Hickey - President, Chief Executive Officer
Other includes a variety of businesses, let me just run through each of them. One is specialty materials, which have been affected by the transaction where we purchased the ETHAFOAM product line from Dow.
It also includes our medical business. We also did an acquisition in.2007.
It includes our renewable products where essentially we are investing for the future, sales are relatively modest. So, that's a negative effect on overall margin segment for the business and the fourth is a new technology we acquired early in '07.
NanoPore, which is a super insulation material, again which is a net investment, and I think what you're seeing in the volatility of margin line is more of the spending on the investments and less the sales growth of the two businesses, specialty materials and medical, which are further down the maturity curve. That is about the simplest way to explain it Claudia.
Claudia Hueston – JP Morgan
That's helpful, and so as I think about sort of 2008, probably looking at more of sort of how the fourth quarter played out is probably a better base to be looking at than necessarily the first quarter of last year just given that you have acquired these businesses, and the investments are sort of going forward in some of the others, is that right?
William V. Hickey - President, Chief Executive Officer
I'm not sure the fourth quarter is anymore representative. I think once you look at the number for the year, the full number, because that balances out some of the bumps that happen when you are spending on new technologies.
Claudia Hueston – JP Morgan
Okay, that's really helpful. Thank you very much.
Operator
Ingalls & Snyder, Rosemarie Morbelli has the next question.
Rosemarie Morbelli - Ingalls & Snyder Llc
Hi, good morning all.
William V. Hickey - President, Chief Executive Officer
Good morning Rosemarie.
Rosemarie Morbelli - Ingalls & Snyder Llc
Just following up. Hello.
William V. Hickey - President, Chief Executive Officer
Rosemarie.
Operator
Rosemarie, please press star one at this time.
William V. Hickey - President, Chief Executive Officer
Well, we've lost Rosemarie for some reason.
Operator
Yes, please go ahead Ma'am.
Rosemarie Morbelli - Ingalls & Snyder Llc
Can you hear me now?
William V. Hickey - President, Chief Executive Officer
Yes, we can Rosemarie.
Rosemarie Morbelli - Ingalls & Snyder Llc
Alright, I should be on TV with that. When… just following up on the segment question.
If you eliminate the impact of the different acquisitions during the year, would the margin of the existing businesses have actually improved '07 over ‘06?
William V. Hickey - President, Chief Executive Officer
Dave.
David H. Kelsey - Senior Vice President, Chief Financial Officer
Yes, as Bill indicated, the acquisitions as well as the spending on new projects, the new ventures had a significant impact. I can't say that in the fourth quarter, there was as I indicated in the prepared remarks an impact in our North American foam business related to volumes in resins.
That I think had a significant impact on some of these other factors in the quarter's performance. I don't have an answer at hand, Rosemarie, for you on the year-to-year comparison given the number of things that took place during the year in that segment, but if you would like to follow up with us after the call, we will try to pass through that with you.
William V. Hickey - President, Chief Executive Officer
The one thing I might say, Rosemarie, and this is just sort of back in the envelope is that if you take out the new ventures out of that and look at the medical and the specialty materials by themselves, specialty materials business is pretty dependent on polyethylene as one of its principal raw materials for polyethylene specialty foams and that was substantially higher in the fourth quarter of '07 than in '06. So, in that particular part of the other category, you would have seen a lower operating margin in '07 than in '06.
Yes, that would be the case.
Rosemarie Morbelli - Ingalls & Snyder Llc
Okay. And in your expectations for 2008, Bill, do you just have a slowdown or flattish North American business or even slightly down or do you actually have a full fledged recession with its impact, whatever impact it is going to have on the global economy, the low end of your range?
William V. Hickey - President, Chief Executive Officer
Well, that's the economist question of the year. My own personal view, and it is my personal view, is that we will see very slow growth in the US.
I am not sure it will turn negative. We will also see a slower growth in Europe, but I don't think a recession, but that's again my view.
Rosemarie Morbelli - Ingalls & Snyder Llc
Okay. And that is...
is that the worst case scenario, which you have at the low end of your range?
William V. Hickey - President, Chief Executive Officer
That could be yes.
Rosemarie Morbelli - Ingalls & Snyder Llc
Okay. I'll get back on queue.
William V. Hickey - President, Chief Executive Officer
Okay thanks. Ross?
Unidentified Analyst
Yes, good morning.
William V. Hickey - President, Chief Executive Officer
Good morning.
Unidentified Analyst
I just had a couple of questions. Bill, could you just talk a little bit more about Food Solutions.
If I heard you correctly, I thought you said that you think you've 10% to 15% organic growth ex-currency acquisitions over the next several years, does that apply to 2008 as well. And could you just elaborate on the drivers a little bit more there?
William V. Hickey - President, Chief Executive Officer
Yeah, the drivers are... I mean Food Solution is basically taking us into a space that we really never had a big footprint, and as you may have heard me say when I outlined where we wanted to take the food part of our business, is we are very well established with a very solid footprint and market presence in kind of prepare at home foods.
We got a... we have been in that segment for a long time.
But as more and more food consumption is either eating outside the home or eating away from home or prepared outside the home and brought in, it's a market that we have really had a very small footprint, and then two years ago, we decided it was a real growth opportunity and we have identified ready meals and food service and prepared meals as segments, where there was a real opportunity for us to grow and whether it’s institutional feeding with bulk packaging of mashed potatoes and cream spinach, which we do for a lot of the food service outlets, we do QSRs, we do table cloth restaurants, we do institutions as well as some of the new products we introduced Pizza Fresh which is an overwrapped fresh pizza that supermarkets are selling. We have got some applications for frozen pizza trays.
It’s just a relatively fast-growing segment and our 10% to 15% number, we feel is a pretty good place to be. We've also introduced in this segment aseptic packaging which gets at a segment of the market where there is really no player which is an aseptic package, that is greater than two leaders, on up to 20 leaders where we think that's an opportunity as well as retort packaging, which [inaudible].
It’s an alternate to the can. So, for us we see all of those as opportunities where we can take our technology.
We are seeing good reception in most parts of the world, we're doing rice and beans in Mexico, we are doing chilly in the United States, we are doing tomato pasta sauce in Europe, offer institutional feeding and it is... I think it is an exciting segment for us to be in.
Unidentified Analyst
Okay.
William V. Hickey - President, Chief Executive Officer
These are 10% growth.
Unidentified Analyst
Pardon me Bill.
William V. Hickey - President, Chief Executive Officer
That's how we see the 10%.
Unidentified Analyst
Yes, okay. Thank you for that.
And then a follow-up question. You pulled out $7.5 million of advisory expenses, which you said are incurred prior to ceasing work on an acquisition.
Can we assume that you're not contemplating a large acquisition at this time?
William V. Hickey - President, Chief Executive Officer
Let me say that the company has always looked at acquisitions. At the end of the day, we make our decisions on value on return to shareholders.
Our goals in an acquisition are to increase our global footprint, to reduce our dependence on fresh meat, to reduce our dependence on the polyethylene cycle, and we look at businesses, which present those opportunities. If at the end of the day, the numbers don't work for either the shareholders or the company, we cease pursuing that particular transaction.
That's about all I can say.
Unidentified Analyst
Thanks a lot.
Operator
[inaudible] has the next question.
Unidentified Analyst
Hi, good morning. Just a follow on the last question, you guys have talked about in previous conference calls that the pilots they are going on with Case-Ready and vertical pouch packaging, can you talk a little bit about, Bill, how many pilots you have going on, the status of those pilots, and then as a part of your comment, you also talked about Mirabella.
Can you talk about what the status is with that product?
William V. Hickey - President, Chief Executive Officer
Actually I go beyond pilots, we are commercial on everything I have said. I mean I said in my prepared comments overall Case-Ready is $450 million plus business, another double-digit growth rate in '07.
We continue.. we continue to expand the Case-Ready formats.
I think we have [inaudible] Mirabella being the latest which is what I particularly like, because it addresses one of the concerns with the earlier Case-Ready formats, where... if you remember, if you look at the supermarket, you see the current Case-Ready formats have a very high tray for a lid on top of it.
Mirabella allows you to reduce the profile of the tray. The film actually goes across the meat, it maintains its red bloom, you do get longer shelf life and you really reduce material usage, so it is not only a lower cost pack, but it is a better environmental pack.
We have only got one supermarket commercial on it, but if you look at the $450 million of Case-ready, there's a variety of tray lid, there is Mirabella, there is Darfresh, there is Darfresh bloom, there is a whole variety of offerings that make up that $450 million of Case-Ready. So, maybe that is one beyond the pilot, so is vertical pouch.
Vertical pouch is a business that we are continuing to grow into, invest in, where we have got aseptic formats, we have got retort formats, we have got refrigerated formats, and again that business grew at 16% in 2007. So those are fully commercial products.
Unidentified Analyst
Yeah, maybe I just want to try to ask that question a little bit differently to understand what you're saying, but I think last quarter you had kind of alluded that there were a number of pilot programs and what I'm getting at is, just the number of incremental opportunities that you see out there, with people that maybe haven't used these products before. What are they looking at in giving you in terms of feedback and readiness to move forward?
William V. Hickey - President, Chief Executive Officer
Well, Mirabella pilot was one company, we have now got three retailers. Darfresh bloom is new, we have got… there we do have pilot customers.
We've got a [inaudible]. Maxine Spencer really like the environmental aspects as well as the ease of handling and machine ability.
[Inaudible], which is another way of displaying fresh cold cuts and cheeses, which has been partnered in North America and Latin America. Those are still being well received.
I mean we haven't... I haven't pulled the plug on any of our new product offerings at this point, maybe that's a simple way of saying it, yes.
Unidentified Analyst
Okay. Great.
And then just one other question. Tyson talked the other day about raising prices substantially.
Kraft their dairy prices announced this morning were 40% up. Can you talk a little bit about as those companies continue increase pricing and you see pricing in general go up, what's the impact on your business and mix from those higher cost?
William V. Hickey - President, Chief Executive Officer
Well, to the extent that the Tysons and the Krafts are our customers and you have seen. And it doesn’t surprise anyone that there has been a worldwide increase in food prices, whether it's in North America or China where pork is up 40% or parts of Europe where dairy.
And I think the fact that our customers are raising prices improves their profitability, which makes them stronger customers to our offerings.
Unidentified Analyst
Great. Thank you.
William V. Hickey - President, Chief Executive Officer
Mark?
Mark Wilde - Deutsche Bank Securities
Hello.
William V. Hickey - President, Chief Executive Officer
Yes. Mark?
Mark Wilde - Deutsche Bank Securities
Yeah, Bill, it's Mark Wilde. Just when you walked us through all of those segment outlook this morning, with everyone you talked about getting margins up and I wonder if we just look at this supplemental sheet that you've provided us this morning.
If you go back to 2003, your EBITDA margins for the company were up around 20.5%. On this last year, you are little over 16, what do you think is a reasonable kind of bogie that we might look for over the next two or three years?
William V. Hickey - President, Chief Executive Officer
Let me start. I mean one of your colleagues mentioned that there has been a multiyear climb in petrochemical feedstocks and what as...
whether they stabilize or whether they decline, I think Mark the vehicle we need is some stability to get those margins back. Right now, we've been chasing the rising prices like many people in our space.
And as you heard me say, it doesn’t matter unless the absolute price of the risen than the stability of it. And I still believe that the business has the capability to get to 18% plus.
20% might be a longer-term target as we bring on some new non-petrochemical based components and yet one of our goals is to build our portfolio to longer-term, reduce our dependency on the petrochemical feedstock cycle. But in my view, some stability over a period of time in petrochemical feedstock will give us the ability to get to an 18% kind of plus EBITDA margin.
Mark Wilde - Deutsche Bank Securities
Okay. This is a follow-on Bill, again the supplemental tables, I noticed that the growth rate in the fourth quarter in Latin America and Asia-Pacific was quite a bit lower than your full year growth rate.
Should we make anything of that, is there any deceleration that you're seeing in those parts of the world?
William V. Hickey - President, Chief Executive Officer
Not really. I mean I haven't seen anything.
There is this whole question of whether the US slow down is going to affect some of our major trading partners. And Mexico is one of our larger businesses in Latin America and of course they're very close trading partner to the US.
In Asia Pacific, I think you're primarily seeing Australia where essentially their beef export; a lot of their meat exports have been adversely affected by the strengths of their currencies. That is necessarily a slowdown in the economy, but their currency, the appreciation of their currencies have made them less competitive on the global market.
So, they probably lost meat share to other parts of the world including Brazil.
Mark Wilde - Deutsche Bank Securities
Okay, thanks. Well, that's very helpful.
Operator
[inaudible].
Unidentified Analyst
Yes. Hi, just a little confusion on, you guys always break out this global manufacturing systems and try a strategy and try and explain it as thoroughly as you can.
I understand that. But I'm just curious as to how it is supposed to show up in the income statements.
You guys talk about $3 million in this quarter being... and then, I'm talking about the excess over CapEx now, what you're charging on the income statement?
You claim $3 million in this quarter, but it doesn't show up as a charge. Now we're talking about $30 million this year and I'm just wondering if we're going to see $7 million as a separate line item charge or is it just going to be embedded in the line item.
And then my follow on question to that is the number never seems to hit... I always think this $100 million number is a really big number.
The number never seems to come close to getting to the numbers that you guys gave in terms of... they're a lot lower which is a positive.
But can you explain to me are they really going to get to that number, I mean is it just a very conservative number? So, that was the second question.
William V. Hickey - President, Chief Executive Officer
I'll ask Dave to respond to that.
David H. Kelsey - Senior Vice President, Chief Financial Officer
The total expense we're referring to here, the other cost that go through the P&L, and back in 2006, when we introduced this strategy, we pegged that spending at $90 million to $100 million. The elements that make up that spending are training of the workforce at these new plants, the inefficiency as those plants build capacity up to full utilization, costs of reducing employment or rearranging equipment at existing facilities, and in the case of a plant we closed early in 2007 restructuring and closure cost.
So, there are a number of costs that go into the estimated $90 million to $100 million. The number this year was $12 million; we've run about $3 million a quarter on that.
It's not significantly out of line; it is actually a little bit less than the spending in 2006. The spending that we're projecting to go through the P&L in 2008 is $30 million.
If we didn't think that was the right estimate, we would have provided a lower number. We always caveat that, these decisions underlying the timing of these investments are subject to change and that some of these expenses may move into a future period or may get eliminated altogether.
But for modeling purposes today, we are guiding that. Those expenses are going to approximate $30 million.
William V. Hickey - President, Chief Executive Officer
Okay, thank you Dave. Operator, I am going to take a few questions that came in over the Internet, and I will read the question and then I will answer it.
First question came in over the Internet says, looking at your Asia-Pacific sales of $600 million, how much of that relates to food packaging versus medical and how would you describe your forward three-year sales goals in that region for food packaging and medical? The break down right now in that part of the world, it's about 68% of the sales were in the food business, about 25% of the sales are in the protective business, and the balance which should be about 7% is in the other category, which combines specialty materials and medical.
Our expectation for growth in that region and I will separate the region into two parts, because the Asia part and the Pacific part, I think have two different profiles. The Pacific part, which includes our business in Australia and New Zealand are more mature and probably more consistent with the guidance I gave for the mature food packaging business in the 4% to 6% range.
I would expect the Asia part of that business, both in food and in medical to continue to grow at double-digit rates for the next three years. Second question coming off of the Internet says, the global manufacturing charge of $3 million is included in what particular operating segment?
The $3 million is, $2.3 million of that is in food packaging, $0.5 million or 500,000 is in protective, and $0.2 million or 200,000 is in other. Next question is you have $300 million worth of Senior Notes coming due in April.
Do you plan to pay it off with cash or draw in your revolver? Dave, would you answer that one?
David H. Kelsey - Senior Vice President, Chief Financial Officer
One or the other. It is a dollar denominated issue.
So, we will need cash in the US to pay that off. There are tax implications involved in repay trading cash into the US.
So, we will be making a determination over the next couple of months as to the most efficient source funds to retire the notes. My best guess right now is it's going to be a mix of some of the cash that we have on the balance sheet and borrowings, both on our committed revolving credit facility and our accounts receivable securitization facility.
William V. Hickey - President, Chief Executive Officer
I think just to add positive comment to Dave's reply is that, I do feel very confident that even in the troubled financial markets of today, Sealed Air does have the ability to issue debt. Let me take another question from the Internet, if I can.
It is a far away from where I am sitting. Is Sealed Air currently participating in any Grace related settlement discussions, would you be surprised if a settlement is not announced in the next six months?
No quarter goes by without one question on that. The answer is no, we are not involved with any settlement discussions with Grace at the present time.
We do know there is hearings going on, and I am not close enough to know the outcome or the progress of those, so I think that's better left to people more knowledgeable than I am. As far as the likelihood of the settlement, Dave has commented every year for the last six years, it is always at least a year away and I see no reasons to change our view on that.
Okay I think we are just about out of time. If I could take one more question from the Internet, because I see on the telephone we are getting repeats.
Okay, I'm trying. Someone asked about our resin purchases as either a percent of sales or percent a cost of sales.
We don't really talk about that, but I just eyeballed the numbers and it's less than 40% of our cost of sales and that is about as kind of granular that I wanted to go. Okay.
I think some of the others begin to repeat. Can we go back to the telephone line?
I don’t know if we heard from George Staphos yet. George, can I take your question?
George Staphos - Banc of America Securities
Is my phone on Bill? I would like to get one question in.
Hi guys, good morning, congrats on the year. I guess a couple of questions very quickly.
It would appear that global manufacturing cost is something on the working capital in the quarter. I jumped on a little bit late in the call, but I did hear some of your discussions Dave.
Could you put a number on that or what you think the working capital billed will be involved in implementing global manufacturing and that's hopefully goes reverse in years coming up?
William V. Hickey - President, Chief Executive Officer
Well, actually George, I think one of the highlights certainly from the CFO seat in the quarter was the $22 million reduction in inventory. Despite the start up of operations in China and sort of the ongoing increase in operating activity in Mexico, there is a...
George Staphos - Banc of America Securities
I understand that, but my point is was there some billed even with those good numbers that will ultimately accrue back to you overtime, once the GMS is more fully operational?
William V. Hickey - President, Chief Executive Officer
I think the answer is yes. In talking about GMS, we've commented that we are currently supplying significant demand in these growing areas of the world with exports from the US and to a lesser extent Western Europe.
That's a very long supply chain, when you consider that inventory on transit as well as the additional inventory that we have to warehouse as a safety stock in these markets. As we expand our local production, we can take significant work in process and finished goods inventory out of the system.
So, the expectation would be that as production at these sites ramps up, while there will be some additional inventory related to maintain those plans that the overall impact on our working capital will be favorable.
George Staphos - Banc of America Securities
Okay. Question on acquisition.
Tagging along on an earlier question. Presumably you are always looking at acquisitions as you already said that.
I don't know if it's Bill, Mary or Ryan shuttling around going target-by-target, but traditionally you had a pretty low key approach on that type of work, and I guess. I think I know the answer here, but what color can you share in terms of why you decided to just close that in this quarter?
You had some cost associated with transactions that ultimately didn't materialize?
William V. Hickey - President, Chief Executive Officer
I am not sure I understood the question George.
George Staphos - Banc of America Securities
Well, you are always looking at acquisition, why this quarter did you decide to reflect on the cost associated with one that didn't across the goal line?
William V. Hickey - President, Chief Executive Officer
Well, I guess the simple reason is that it was a pretty meaningful number, which would suggest we may have gotten pretty far down the path before we saw it... ceased the process and that's basically the only reason.
Most of the... most of the transactions we look at you can pretty much make a decision relatively early in the process before you've committed a lot of resource to it.
In this case that wasn't the case.
George Staphos - Banc of America Securities
I guess that is also a way of conveying that, whatever process might be ongoing is now formally closed. I guess last thing… I know you said that we've raised the settlement and reorganization, you are not close enough to the hearings right now to know what might be occurring, but have you picked up at all from your contact whether there might be any curve balls coming relative to what had been your previously agreed to settlement with the assessment plaintiff.
Thanks guys, good luck in the quarter.
William V. Hickey - President, Chief Executive Officer
George, as far as the Grace issue, the various plans, even the plaintiff’s plans do recognize our settlement as part of any proposed reorganization, I haven't seen anything other than that.
George Staphos - Banc of America Securities
Okay, thanks very much.
William V. Hickey - President, Chief Executive Officer
Okay, we just have two left out there. Rosemarie I can't resist taking your second call.
Rosemarie Morbelli - Ingalls & Snyder Llc
Oh well, that is very sweet of you, I appreciate it. You said something regarding the slower rate of slaughter, and that you were actually… you know, your red meat sales or sales to red meat packaging were growing faster than the slower rate.
Do you think that there is some... I don't know frozen inventories being built up, and at some point you'll will catch up with the slower rate or are you really getting so many more accounts that even in a slower slaughter environment, you can still grow faster than that?
William V. Hickey - President, Chief Executive Officer
Yes, I think the short answer Rosemarie is we've been very successful at gaining business in a slower slaughter environment, that's the simple way of saying it. Yes.
Rosemarie Morbelli - Ingalls & Snyder Llc
And if I may follow up on that, if my memory serves me right, the margin on packaging red meat is higher than that of the other proteins, particularly chicken, but I guess it is also slower than for pork. As we go into a slow environment and maybe recession, do you see some kind of change in mix and therefore we would see a lower margin on your Food Packaging?
William V. Hickey - President, Chief Executive Officer
We went through 2001, if you remember that tech sort of recession in 2001, and I think I might have made the same comment in 2001, and you'll probably have it in your notes somewhere, is that to the extent people who are consuming less beef we were able to make it up on chicken and poultry, even though you are right. It is a lower margin packaging, because less technology goes into packaging poultry than in beef.
I think you've heard me say a number of times, the hierarchy of profitability is beef, pork and chicken. But don't forget ground beef.
Ground beef is oftentimes just as accessible and just as desirable as chicken in periods of economic slowdown. And what I've also learned is one of the faster growing foods in economic slowdowns is pizza, be it frozen or chilled pizza.
So, if you see people ordering more pizza Rosemarie, hold on to your wallet.
Rosemarie Morbelli - Ingalls & Snyder Llc
Oh, fine, I will, thanks a lot.
William V. Hickey - President, Chief Executive Officer
Okay, one more last question from Mark, if you are still there?
George Staphos - Banc of America Securities
Yeah, I am. I just have been watching all these stories on...
you know the pressure on plastic grocery sacks, I guess the Chinese are talking about banning them. Is there something structurally different going on here you think that kind of affects the whole packaging business, particularly the plastic side of the equation or is it just kind of noise?
William V. Hickey - President, Chief Executive Officer
No, no, I think, no, I think, Mark, I am not sure we've reached the tipping point, but you kind of get there over time, and when it happens, you never know what it was till after it has happened. But having been through a number of environmental cycles over the years, I think this one may have more substance than in the past, which is why we've invested in renewable products.
We got two renewable offerings both based on annually renewable crops. One is based on PLAs, which is polylactic acid, which is basically polymerized corn and there is demand for that.
We are essentially sold out. We basically can sell everything we can make.
Our other is from our new startup, Biosphere where we are continuing to approach the market from kind of a different end with a different technology. The advantage of the Biosphere product is it's not in the food chain.
There is longer-term concern about corn-based plastics as being a conflict in the food chain which is yet to be settled out, but that's why I think our second technology, which is based on a non-food chain product may end up also being viable. So, no, we are investing in both of those technologies.
In fact we've just invested capital to expand our capacity to make PLA trays. So, we see it as an important component of our business and something we not only need to be sensitive to, but we've got to make it part of our strategy.
One of the company's strategic goals in 2007 which we sat down with the managing group a year ago and so we wanted to introduce at least one sustainable product by the end of 2007, we actually have two. So, clearly it's high on our priority list, and we think it will be an important component of our business going forward.
Mark Wilde - Deutsche Bank Securities
Okay, that's good. That's the kind of response I was listening for, thanks Bill.
William V. Hickey - President, Chief Executive Officer
Okay. Operator, I would like to wrap up here and I want to thank all of you for participating in the call today.
I'd also like to thank all of our employees and partners around the world for your efforts and hard work in 2007. I know it was a challenging year, but everybody remained focused.
You all continued to execute our plans and contributed to our success and the momentum that we carry into 2008. We will continue to drive sustainable, profitable growth in the New Year, with leading product innovation.
We'll continue to build upon our leadership position globally, by furthering our presence in the BRIC regions as well as the more developed regions of the world. And we will continue to deliver shareholder value as we reduce costs and continue to generate significant cash flow.
We have successfully navigated to the challenging conditions before and demonstrated our ability to insolate our business from downturns. We have continued to build upon these strengths, which have served us well during the year and will continue to serve us into 2008.
It is for these and many more reasons that I am very happy and proud to be a Sealed Air shareholder. Thank you all for taking your time to listen to us today.
Operator
And that does conclude today's teleconference. We would like to thank everyone for their participation and wish everyone a great day.