Sealed Air Corporation
Q4 2020 Earnings Call Transcript

Published: 9 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Sealed Air Q4 Earnings Call. At this time all participants are in a listen-only mode. After the speaker’s presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lori Chaitman. Thank you. Please go ahead, ma'am.

[Lori Chaitman:]

Thank you, and good morning, everyone. I hope you and your family are healthy and staying safe.

[Ted Doheny:]

Thank you, Lori, and thank all of you for joining our fourth quarter and year-end 2020 earnings call. I hope you and your families are staying healthy and safe. I want to welcome Chris Stephens to his first Sealed Air conference call. Chris, we're excited to have you on our team. Throughout, 2020 the pandemic presented new challenges for all of us around the world. Our purpose, which you can see here on slide 3 is guiding us in the pandemic and become even more clear, we are in the business to protect to solve critical packaging challenges and to leave our world better than we found it. Our employees delivered, and I'm proud of our team's tremendous commitment to our customers, and our business throughout this pandemic. On today's call, I'll recap our performance in 2020. I'll share how we're accelerating growth in an uncertain environment and the exciting opportunities we see ahead. Our global markets are evolving, and we're leading the way with automation, digital and sustainability. Jim will review our financial results in more detail and Chris will provide our 2021 outlook. I'll close the call and we'll end with Q&A.

[Jim Sullivan:]

Thank you Ted. Let's turn to slide 8 for a review of our year-over-year net sales growth by region. In the fourth quarter, net sales totaled $1.3 billion, up 3% as reported and 3% in constant dollars. In constant dollars, North America our largest region representing 58% of our sales increased 3%. South America was up 13% largely due to US dollar index pricing and volume growth of 4%. Constant dollar sales in Asia Pacific were up 4% and EMEA was up 1%. On slide 9, you can see our full year 2020 results. Net sales totaled $4.9 billion, up 2% as reported and 4% in constant dollars. Similar to the quarterly results, we delivered constant dollar sales growth across all regions and exceeded our most recent outlook by approximately $50 million, most of which was driven by volume growth in protective. Starting in the first quarter 2021 for reporting purposes, we will be consolidating North America and South America into one region, the Americas. This will align with our new one Sealed Air regional structure and organizational changes that went into effect in January. On Slide 10, here you see our organic sales volume and pricing trends by segment and region. In the fourth quarter, overall, volume increased 3%. Protective volumes accelerated into year-end delivering 7% growth, up from 4% growth last quarter. As expected, we also saw modest volume growth in food after a couple of quarters of low single-digit percent declines. By region, volumes in North America, South America and APAC were up 4%. Protective volumes were up across all regions due to e-commerce and fulfillment strength and growth in our industrial portfolios in North America and APAC. Food delivered volume growth in North America and South America due to strength in retail formats and equipment. This volume growth in food was offset by declines in EMEA and APAC where food service softness and COVID-related restrictions outweighed solid retail demand.

[Chris Stephens:]

Thanks Jim. It's an exciting time to join the Sealed Air team and I'm happy to be here. Since joining in early January, I have spent a great deal of time working with Ted and the team executing my 100-day game plan focused on people process and results. I have met virtually with many of our leaders and teams around the world and had the opportunity to tour a few of our facilities in a safe way. There is more to learn and many more people to meet and places to visit. But in my short time, you could see the passion and commitment by the Sealed Air team to drive success and continue to execute to exceed customer expectations. So, let's turn to slide 18 to review our 2021 outlook. We anticipate net sales to increase 4.5% to 6.5% as reported or $5.1 billion to $5.2 billion. On a constant dollar basis, net sales are expected to increase 2.5% to 4.5%, driven by favorable volume and price in both food and protected. We expect food to deliver 2% to 4% constant dollar growth and protected to deliver 3% to 5%. Automated equipment and sustainable solutions are expected to drive growth in food and protected in 2021. In food, we expect the retail channel and protein exports to remain strong. We also expect the food service industry to recover as we progress through the year. In protective, we expect continued growth in e-commerce and fulfillment and the industrial end markets to gradually improve. We expect favorable currency translation in 2021 sales and adjusted EBITDA of approximately 2%, mainly due to the euro and the Australian and New Zealand dollars. Adjusted EBITDA is expected to be $1.1 billion to $1.13 billion. At the midpoint, this would imply a modest increase in adjusted EBITDA margin compared to 2020. Margins are being impacted by higher input costs and continued COVID-related expenses. To help alleviate higher raw material and freight costs, we initiated market price increases in Q4 with more actions going into effect this quarter. Also keep in mind that our formulas in food North America are typically on a six-month lag and are expected to turn favorable midyear. We expect adjusted EPS to be $3.25 to $3.40. Given the current impact of higher material costs and the timing of pricing actions many driven by formulas, we expect 2021 adjusted EPS to be split approximately 45% first half 55% second half versus what we realized in 2020, which was a split of 47% first half, 53% second half. Our outlook assumes approximately 157 million average shares outstanding and an adjusted tax rate of 26% to 27%. The higher adjusted tax rate is primarily due to the absence of a valuation reserve release that benefited the rate in 2020. For free cash flow, we expect to generate $500 million to $550 million. This is net of capital expenditures approximately $210 million or 4% of sales and Reinvent SEE restructuring associated payments of approximately $40 million. The year-over-year anticipated decline in free cash flow is largely attributable to higher trade working capital from sales growth and higher employee bonus payments in 2021 given the strong performance in 2020. Let me now pass the call to Ted for closing remarks.

[Ted Doheny:]

Thanks, Chris. Before we open up the call for questions, turning to slide 19, I wanted to reiterate our 4Ps of Reinvent SEE. We start with a purpose statement. We are in the business to protect to solve critical packaging challenges and to leave our world better than we found it. Our performance continues to improve. We are keeping people out of harm's way while strengthening our business. We're enabling fast decision-making by operating under a One SEE culture. Our strategy to deliver the best solutions at the right price and make them sustainable is working. Our broad and innovative product portfolio, global scale and agility has enabled us to address the evolving customer needs across our diverse, end markets and geographies. Our One SEE operational excellence processes are focused on flawless quality, world-class productivity and yield improvement as well as customer service enhancements that are creating customer references. Reinvent SEE is our operating engine that is driving profitable growth. Sustainability and ESG are strategic imperatives, embedded in our purpose and fueling our growth. Our most recent sustainability report, which you can find on our website, includes progress on environmental and social initiatives including climate, our 2025 sustainability pledge in diversity equity and inclusion. We exceeded nearly every one of our 2020 sustainability goals and we'll be releasing our new 2025 and beyond goal shortly. We delivered exceptional results in a very challenging and unpredictable environment. I want to thank all of our employees in our plants, in our innovation centers, out in the field and working remotely for their dedication and commitment to business continuity. We recently shared that Jim Sullivan is planning to retire at the end of March 2021. Jim joined our team at a critical time and provided tremendous leadership throughout his tenure. He's contributed an incredible amount of value and I'm personally so appreciative for Jim's support and leadership. I along with his colleagues here at Sealed Air want to thank Jim for his contributions. With that, I'll now open up the call for questions. Operator, we'd like to begin the Q&A.

[Operator:]

Our first question comes from the line of Ghansham Panjabi from Baird. Your line is now open.

[Ghansham Panjabi:]

Hey, guys good morning. Jim, you will be missed. And Chris, congrats on your new role.

[Jim Sullivan:]

Thank you.

[Chris Stephens:]

Thanks.

[Lori Chaitman:]

Ghansham.

[Ghansham Panjabi:]

Yeah. I guess first off maybe on the food segment, growth in the grocery channel has been elevated through the course of the pandemic. There's some theorization that consumption in packaged food will just be at a higher volume baseline relative to pre-COVID levels. I guess the question is, is there an opportunity here for Sealed Air to better balance channel exposure against that backdrop versus the current weighting towards fresher food? And if so how will your automation platform play into that dynamic?

[Ted Doheny:]

Sure. Hi, Ghansham.

[Ghansham Panjabi:]

Good morning.

[Ted Doheny:]

Yeah, if we look at where we are with food and just to recap, basically the food service side that is getting hit with us and reproduces the bags and tying into the restaurants as we all know what's happening there. But on the retail format, that's changing dramatically. And so what we're seeing is we look – if you look at our movie reel slide on Slide 5, we see that shift. We have e-commerce actually on the right side where we talk about protective. That's the shift that we see happening very, very quickly in the retail formats to your question. If you go to a grocery store, we all see it you see people packing next to you. And those packers we're already working with customers and some of the start-ups on where e-groceries is going. So what is that doing to the packaging format to your question. Bringing our Darfresh line, Darfresh On Tray, how do we actually package that that's now by a pick and pack but actually that's going to be going into cobots and robots. So we actually see that format moving quite aggressively. Also we see the market still moving on to sustainability. Those secular trends of automation, fresh food and food safety is going to even drive harder as we go into those formats in the grocery stores. So our Cryovac leading barrier bag right now, we're working on new barrier materials that not only are lighter in weight. We're looking with recyclability with our investment with Plastic Energy. They want the PVdC out. So we've actually new designs already coming in that we're going to use chlorine-free material because the chemical recycling plants don't want that. We had an announcement with Plastic Energy and Tesco. And so we're leading the way in that. So these new formats we think we're well positioned for. In the fourth quarter and going next year we're dealing with still the pandemic so that shift is happening as we speak, but we definitely think there's an opportunity. The other part of our protein side as we talk about that bag and the box and pouches. We are definitely seeing that slowed with the QSRs. But we are – that's where we're seeing a lot of opportunity to actually go into the liquids and fluids business. So actually excited. We think we have a lot of opportunity. We've got to get through some of these headwinds with our markets in the pandemic but we think we're well positioned in the food side of our business for that new format that just seeing in The Wall Street Journal today, it's heartening saying that they think this pandemic will be with us forever. So once again, we're planning for the worst hoping for the best. But we think our portfolio is well positioned to take advantage of that new normal that's coming in 2021 and beyond. Operator, next question?

[Operator:]

Thank you. Our next question comes from the line of Jeff Zekauskas from JPMorgan. Your line is now open.

[Jeff Zekauskas:]

Thanks very much. I was puzzled about your EBITDA guidance in that your EBITDA in 2020 was 10 50 and you thought that you would get $65 million and benefits from your cost synergy program, which would get you to 11 15, which is the midpoint of your guidance for 2021. So is the meaning of the guidance that there's no real benefit from the growth in sales in 2021, or why isn't the guidance higher?

[Jim Sullivan:]

Hi, Jeff, this is Jim Sullivan. Let me clarify. I know you're new to the name. When we talk about Reinvent benefits, we're talking about those productivity actions that we're driving within our factories. And we talked in the call about how we delivered $118 million last year. And this year we're coming down to $65 million. Our plan is to continue to drive those benefits at a level higher than our inflation. If you look at our wage inflation across the enterprise, it's roughly $50 million. So what you're seeing that kind of offsets part of those Reinvent benefits is that. So the flow-through, if you look at the benefits and the inflation it's about $15 million not the full $65 million. Now having said that, I've been around now Sealed Air for 1.5 years. And I continue to be very encouraged by the continuous improvement culture, the high-performance culture that we have here in Sealed Air. And I think we thought after the three-year restructuring transition that we would just kind of be on par. It would be an inflation fighter not add value if you will above inflation. I think that we're well positioned. The pipeline for Reinvent is very strong. We're saying $65 million next year. Hopefully, we beat that. We've got – 50% of that is flow-through from actions we've already taken in 2020. So, we're well positioned to deliver that. And we'll continue to drive actions that will allow us to add more to it in 2022 and beyond. Hopefully, that helps clarify a little bit of the math.

[Operator:]

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

[George Staphos:]

Hi everyone. Good morning. Thanks for all the details. Chris and Jim, congratulations, and congratulations on the progress. I guess my question is around volume growth and translating that into your operating leverage target and return on capital if you could give us a target there. So, Ted, if you could talk about some of the key platforms that you're working on. Darfresh On Tray, you're mentioning to Ghansham some of the sustainability-driven products. What would you say, you're expecting in terms of growth for those products in 2021? And how does the growth in these products and e-commerce factor into your operating leverage target, which is now 30% plus? I think, a couple of years ago, last time you talked about, it was more like a 40%. And in turn, we like the return on capital discussion that you have in the deck and how you calculated it. What kind of target, if you have 30% plus in terms of ROI -- in terms of margin what kind of ROIC target should we expect over the next two to three to four years? Thank you.

[Ted Doheny:]

Thanks, George. A lot in that question, but very thoughtful. So I'll try to unpack it and actually build off of Jeff's question that Jim went through the financials because, it ties into the operating model that we talked about on slide 4. So, what we're going into and we're looking at very current state of what happened in the fourth quarter, the operating leverage in the fourth quarter was actually below the target of where we've been driving, less than 20% operating leverage, but for the year 77%. So, well what's going on with our portfolio in this tumultuous market, we've had huge spikes, but then we've also had parts of the portfolio go down. So now, if we look at operating leverage, take a look at our top three product lines. So, if we look at food, what's going on with bags? What's going on with bags is affected by all those restaurants being shut down. Bags are flat to down. Our highest-margin product, so there's actually a deleverage on the portfolio. There's a lot of things that are going on. Great progress with Darfresh On Tray. Great progress with some of the sustainable products. But if you look at net-net in the fourth quarter and then we had some rising input costs. Did we get ahead on the pricing that we talked about? So if you look at that in the quarter then you play that through to 2021, you say huh that leverage in the midpoint, is below that 30%. It's at 25% because we've got to get through this first half by what we know in the pandemic. So, we look on the protective side. Wow how many -- I've been here three years now and seeing that growth can you grow that protective? Yes we can. Yes we will. Well, we're dealing with our largest product line in that portfolio. It's dependent on the industrial rebound with our Instapak. So deleveraging really heavy. So we have all these ups and with that major down on both sides of the business is delevering. So, is it where we want to be for the year 70% -- 7%, that's good? So what we wanted to give you was where we're taking the business and where this engine is gone. So we left out a three-year plan. And that's what we're going to do. We're going to put it with very stable markets. Though even in the pandemic, some go way up and some go down. So net-net, we think we can beat that stable market that we serve. We think with our innovations and sustainability, we can take that to two to four. And the excitement is, where we're taking automation to take that to three to five. Well, then to the second part of your question, you asked about leverage. Hey Ted, when you came in, you did your assessment of this business. Hey you thought you could leverage at 40%. Well, we did pretty well. We actually -- if you look at our last three-year average, we leveraged way over that 40% to 50%, but we also had restructuring in that number. So we're now building off a base of almost 260 basis points higher than we started. And there is a greater sign next to the 30%, but that's where we think the model is going. And then to your last part of your question was on ROIC. We shared with you day one when we got here we are going to change the guardrails on this business. We are going to measure leverage. And I believe it. And this is part of the mantra, you get what you measure. So we put operating leverage in there. It's all the way through. But we also put in ROIC day one all of our investments, the capital. We look at a return on investment and you can now see you get what you measure. Through this tumultuous market our ROIC has moved up. But George the last part of your question, where are you going to take your ROIC? Our investors know that we're way over our cost of capital want to put assets on this engine and generate value. And that's where we mentioned in there. That's what we're driving. This high-powered value creation engine is going to be driving these assets that we put on place far above our cost of capital. But it's not about taking that to 15 to 17. It's driving growth on this engine and that's where we're taking it. So again why on slide 3, we feel confident. The engine is in place. It's moving despite the tumultuous markets that we face. We feel confident and we wanted our investors to know this is where we're going. And we're quite confident we're going to get there despite the market that we're dealing with really hard in the first half of 2021. Next question, sorry, operator?

[Operator:]

Thank you. Our next question comes from the line of Anthony Pettinari from Citi. Your line is now open.

[Anthony Pettinari:]

Hi, good morning. You talked about the price initiatives you're taking to recover higher resin costs. And I'm just wondering, if your guidance assumes resin basically remaining at current levels or maybe some relief or incremental inflation over the course of the year. And then with other cost categories maybe things like freight corrugated, we've seen some sharp inflation. Can you talk a little bit about the inflation that you're seeing in non-resin raws? Is that an issue? And are there any initiatives or actions that you're taking there?

[Ted Doheny:]

Sure. Thanks Anthony. Well, I'll give you a view and then Jim can maybe give you more detail if you'd like. But basically you're exactly right. It's more than just resin. As we've -- since I've been here, we've been talking about resin. Our team does an excellent job and part of our Reinvent is to really focus with multiple different suppliers on the resin. And we have specialty resins. So how can we beat the market and we think we will do that. But what has happened with resins there's no secret. It has gone up significantly with what the chemical industry is doing. So we've been ahead of that on the price especially with protective. We went out with price in the fourth quarter. But the second part of your -- and also the formulas are coming. We have that six-month lag there. But we believe we're ahead of it. We are the leader in the market. We can lead with price. We don't talk to our customers about price. We are actually embedded with our customers and actually bringing automation in on how we can solve this problem together. So I just want to highlight that. But the second part of your question, you're exactly right. We're seeing it beyond. It's the freight costs that have gone up significantly and other input costs. So we're managing that. Again we're using price to stay ahead of it. But the issue that we have to really work with our customers is look at maybe different product portfolio and look at automation. But the other piece that we're not giving up with this rising input cost is the sustainability side. So we're also continuously looking at our material change on recycled content. Is it more challenging? Absolutely. But believe on the price side we're going to lead. We're going to get our costs right and we're going to be driving automation. And by the way automation internally as well as externally we think we're going to be ahead get through this. It's tough though. Right now fourth quarter first half of 2021, you're exactly right. It's a tough market on there on input costs. I don't know Jim if you want to add anything to that, or…

[Jim Sullivan:]

No that was good. I mean, I think the other piece of the question was, what are we expecting in terms of the back half of the year, the current environment, or are we expecting relief? As everyone knows the cost curve on inputs, across 2020 was increasing across the year. So as we plan the business, we're certainly planning for the materials, the resins to be at a high level that they are now. And we're initiating the price actions that Ted talked about. We're very comfortable, even in this environment we can manage the spread, the price/cost spread very well. Over the course of our range of guidance, certainly on the low-end you could see, input cost exceeding our ability to price. And a big part of that is timing. How is the timing of the raw materials coming in. And how quickly can we get the price in place? Many of our pricing -- much of our pricing in North America is formula-based on the food side. So we won't get that right away. But certainly we have mechanisms to deal with it. And then, the final piece of the question was on, other raw materials. So think about resin, polyethylene, representing about, 50% of our overall resin buy and resins in total are about half of our total input cost. The other half is only inflating in low-single digits. So again, the takeaway I think Ted is what you said, we're managing both the input side and the price side very well.

[Anthony Pettinari:]

Perfect.

[Ted Doheny:]

I was waiting for Jim to say, he's going to take care of the hard part. Chris has the easy part of the second half of the year. Operator, next question.

[Operator:]

Thank you. Our next question comes from the line of Phil Ng from Jefferies. Your line is now open.

[Phil Ng:]

Hey, digging into that price/cost question a little bit. Well, I first of all, thanks, Jim for all the help. Really appreciate it and looking forward to working with you Chris. But just digging in a little more …

[Chris Stephens:]

Thanks, Phil.

[Phil Ng:]

…digging in a little more into that question that Anthony asked about resin, it seems like you're managing it pretty well. Any handholding you could provide, in terms of price/cost in the next few quarters? How material it would be relative, let's say, fourth quarter? How are you tackling this headwind between, like price versus cost? And just lastly, have you seen some of your competitors take a similar approach on pricing? Thanks a lot.

[Jim Sullivan:]

So the last question first. Yeah, So I think the whole industry is looking at price and doing what it can to recover materials. As you noted Phil, we did have negative price/cost spread in the fourth quarter. Year-over-year it was about $7 million. And we would expect that, the first half of the year will continue to be a little bit challenged that way, which is why when Chris talked about the, adjusted EPS guidance for the full year, he said kind of expect 45% coming in the first half of the year and 55% in the back half of the year. We're thinking about that cadence of price/cost spread being a little bit more challenged in the first half, as we get pricing into the business. Right now volumes are very robust. We feel good about our ability to get price. We're not doing anything than anyone else isn't doing. And as Ted said, we're focused on doing what we can to differentiate ourselves. And really be more value sellers than just pass-through resin. And then, the only other thing I would say is, we continue to drive Reinvent above our inflation. We got $15 million spread as we talked about earlier. We're going to continue to drive that. And I think there's some upside there that will help us mitigate some of the raw material pressures that we see.

[Ted Doheny:]

Yeah. And Phil, I just want to add one thing, because I want to make sure that we've spent a lot of time with changing the model about, how we handle price with customers. And so we are going directly with our customers. We are not sending price increases over the transom. We're there with them. How can we work together? I was personally at one of our factories one of our largest customers on the protective side, just last week. And the conversation they're seeing it, what can we do together to handle this? I just want to make sure, because our customers are listening right now. We are going to handle this together with them. And if we even have to move the portfolio, so I do think we're very different than our competitors. We have a very unique portfolio that we can respond, in a much better way on this pricing situation with resins, than we've ever done before. And I really think we're going to come out on the other side, well ahead of the competition. Okay, next question Operator.

[Operator:]

Thank you. Our next question comes from the line of Adam Josephson from KeyBanc. Your line is now open.

[Adam Josephson:]

Thanks. Good morning, everyone and congrats on a really good end of the year. Question on, just the organizational shift seemingly from Reinvent SEE to looking for a significant organic sales growth in the 2022 to 2024 period. In the last two years, obviously, you've saved about $300 million of costs. During which time your organic sales have been flat. And I know there's been a pandemic and a weak global economy even before the pandemic. But nonetheless, you had flat organic sales while you're saving a significant amount on cost via Reinvent SEE. So, I think, you're talking about a major organizational shift in terms of focusing on cost reductions, to focusing on top line. I'm just wondering how difficult you think that transition may be to pull off or it's perhaps not much at all. But we'd like to hear your thoughts about how you accelerate sales growth so dramatically. And will you -- will there be any more restructuring required over that period? Thank you.

[Ted Doheny:]

Well, it's good. I wanted to listen carefully to your question. So my answer to that would be, we're reinventing on how we grow the business. So the restructuring side on the cost, you're exactly right. But the portfolio change is a big part of this difference that where we're going. We're moving from being a product-driven business to be a market-driven business. So 2020 was a pivotal year for us. That portfolio shifted dramatically. So we're pointing that portfolio to the secular trends in the industry that we believe are going to be there post-pandemic. What does that mean? Automation. How do you put more stuff in a package more effectively, more efficiently, safely, securely, that is what we're focused on. So we think that can drive our portfolio across food product, across the region significantly and that's what we're focused on. But we have to do it more efficiently. So we've invested -- part of our investments have been in innovation and our R&D. And as Jim even mentioned, we're giving visibility what we're doing with SEE ventures. If we can't develop it fast enough, we have that innovation rate on top of the team and we're going to move. We're going to move this portfolio faster to innovate faster, to satisfy those secular trends. And that's what the exciting part of this packaging business, it's a stable market. It's up to us to move the organization, because you use the word organization a lot, to move this organization to where the growth is. And I think 2020 was a pivotal year to show us that we can do it. It takes time. And by the way, I'm dealing with our scientists and all the time and getting FDA approval. Our products are unique. We're testing. If you came to our innovation center, we're testing things, but we're doing it now virtually. But we've got to move faster. So the innovations is one of the keys that I believe is that next phase that's happening in 2020, but we got to drive it even faster to support that 3% to 5% growth that we're going after. I definitely believe we're going to get it. And the final piece that I will mention, it's got to be sustainable. So some of the churn and that's a term we use internally, why are you seeing some of the growth for the innovations? And this is where our team says that I'm too tough on them. It's because the churn is, we're now actually bringing sustainable solutions like Bubble Wrap on demand. The Bubble Wrap if you looked at our facilities, the dramatic shift on that is, now we have Bubble Wrap in our portfolio with 90% recycled content. We did that in less than a year. So that's part of our Bubble Wrap portfolio, but it's fully redesigned with recycled content. So I'm quite excited about that 3% to 5% growth that we can make and leverage it at over 30%. So, operator, we have time for one more question.

[Operator:]

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

[Neel Kumar:]

Great. Thank you. In protective, e-commerce has been a clear driver of segment performance in the past two quarters. How are you thinking about the end market exposure of protective longer term? Is that 55% segment exposure to industrials versus 45% from e-commerce in sales mix, the right mix going forward, or do you see opportunity to meaningfully increase e-commerce exposure from there?

[Ted Doheny:]

Yes. Hi, Neel, and by the way Neel, I have to recognize you, when I did my fireside chat with you at your Laguna Conference, you asked me about changing CFOs on the spot. And I shared with you with Jim a friend in need is a friend indeed. So I'd like to use this as an opportunity to thank Jim, again, when you put me on the spot there on your conference. So if we look at that portfolio in protective, in e-commerce we talked about. I just want to say it, again, e-commerce is affecting food too. But for right now, let's go to your question. So the industrial piece as you highlighted the 55% that said, negative deleverage that we've had. We had slight growth in the fourth quarter, which is good. I have the example on here, if we look at our movie reel slide. What's going on with industrial? We saw automotive. We have seen automotive turn. We haven't seen it turn at the same levels, but we did see positive. So here's an example of what does automation mean and this is actually a tire solution. So what are we going to do? We're going to go package tires. We're going to be working with the customers, which by the way they get huge penalties because those tires roll off e-commerce conveyor systems. So we designed a shrink tunnel. We're going to put the tires in the shrink tunnel. By the way, it's a few hundred thousand dollars. But we were going to do even more. We're going to put the full system in for a couple of million dollars. So we're going to wrap those tires. By the way, they're going to have paper and plastic so they don't roll off. We're going to shrink them and we're going to wrap them, so they won't – they don't want to have anybody who know it's inside. And so the materials they're going to flow through that are going to be at 2x, the cost of the system. So that's a solution that we're bringing right now as we speak into that industrial automotive segment. So we see that picking back up. And boy does that leverage nicely. Just like our bags business that's the industrial side of our business leverages quite nicely. So that's a link of industrial with e-commerce et cetera. So the industrial piece is beyond that. We've also seen a pickup on the electronics that's in the industrial side. Also, on the protective you see that we're kind of merging on the market. As we do with our Autobag system, we're actually using the Autobag system now to package food. So it's in our protective versus food portfolio. But again, it's – I'm talking about where that automation is coming in. And by the way on the top of the slide, it's personal. We have pet care up there. For all of you in staying at home that is an area that really had a pickup in the business with pet care. Pet food, pet accessories that's going. We're packaging that stuff that you're getting at home right now. But that's going through our side pouch Autobag system. So, just giving you a little color and flavor. We're going after that industrial piece. It's coming back. But right now in 2020, it was a wait on 2020, an opportunity in 2021.

[Ted Doheny:]

So with that, operator that's the close for our call today. I want to thank everyone. I hope everyone stays safe and healthy. And thanks again, Jim. I know, you'll be watching. And Chris, really excited to have you on board. So, thanks everyone. And we'll see you next quarter. Take care.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.