FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Sealright Co., Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SRCO)") else Response.Write("(NASDAQ: SRCO)") end if %>
7101 College Boulevard, Suite 1400
Overland Park, KS 66210-1891
(913) 344-9000

UNION CITY, Ca., October 27, 1996/FOOLWIRE/ --- Sealright reported third quarter 1996 results on Thursday October 24th and had their analyst conference call on Friday. Sealright reported earnings for the quarter ended September 30 of $1.7 million, or $0.15 per share, on sales of $68.4 million, versus earnings of $1 million, or $0.09 per share, on sales of $76.2 million a year ago.

GROSS MARGINS AND EARNINGS PER SHARE. The progress of their restructuring program is reflected in strong margin improvements in many operations. Gross margins for the quarter were 19%, up 11% from third quarter last year. They also posted a signficant reduction in SG&A. It fell to 11.4% of sales, down 19% from last year. Those positive factors are responsible for the higher third quarter earnings the company reported. This is the first time in nearly two years that they company has enjoyed a quarter-over-quarter gain in earnings per share. And it would have been even better without the $800,000 restructuring charge that cost them $0.04 per share in the third quarter.

COMPANY DID NOT MEET REVENUE GOALS. On the other hand, they were not able to meet their ambitious goals, primarily because of sales shortfalls and because of continuing problems at their Los Angeles facility that produces rigid plastic containers. So, in order to capitalize on their gains and position the company for a much stronger 1997, they have decided to accelerate their planned facilities consolidation and bring most restructuring expenses into 1996.

At the same time they will aggressively attack their two largest problems by strengthening their sales operation to concentrate on growth areas and by making a final decision in the fourth quarter on the future of the Los Angeles plastics operation. These decisions will allow them to substantially complete their restructuring in 1996 and will allow them to focus on profitable growth in 1997.

FINANCIAL IMPACT OF THESE MOVES. Sealright is very pleased to report a 66% gain in earnings for the quarter, even though sales slipped almost 10% and the Charlotte and Los Angeles plastics operations were unprofitable. This earnings improvement was possible because production operations in their four key domestic plants continued to benefit from the restructuring launched last December. By quarter's end, the paperboard operations in Fulton and Los Angeles had achieved their targets. And, in 1997 they see potential for additional efficiencies. Also, the San Leandro flexible operations continues to improve as a result of the management changes that they made during the first quarter of the year.

Similarly, SG&A percentage plunged 19% compared with Q3 last year, reflecting their focus on driving costs out wherever possible. SG&A was 11.4% of net sales. During the quarter they also incurred restructuring costs of $815,000 equating to $0.04 per share. Net earnings would have been $0.20 per share versus $0.09 per share in 1995 when they had higher net sales. This gives an idea of the benefits they are generating, benefits that will be fully realized when the restructuring charges are behind them.

Sealright is proceeding immediately to consolidate the flexible packaging operations formerly conducted at Charlotte into the more productive facilities at Akron Ohio and San Leandro California. This will result in a slight reduction in total capacity but they will save nearly $1 million in overhead annually. Operating in Akron and San Leandro will give them the geographic scope to serve customers throughout North America. This is especially important now that their competitor, PrintPak has closed down its own San Leandro plant.

They also announced that they will move the operation that manufactures their styrotech labeling equipment from Raleigh to DeSoto Kansas. This will bring all of their engineering and machine building operations together. They will reduce overhead by about $500,000 while increasing the opportunity for synergy and cooperation. They expect to have the Raleigh operations consolidated into DeSoto by the end of this year and the Charlotte operations wrapped up in very early 1997.

The moves will cost an additional $1.5 million in the fourth quarter but will save them about the same amount in 1997. Their net reduction in force will be about 115 positions related to that consolidation. So, with the 1996 performance below their goals, they decided to accelerate consolidation plans and position themselves for a much stronger 1997.

The West Coast rigid plastics operation has been a dilemma for some time. Two years ago the company attempted to make a breakthrough by investing in new manufacturing technology. Transitioning to the new equipment and converting customers to the new packaging has been slow and costly. They had anticipated breaking even in 1996 but losses have increased as sales have fallen. The loss for the quarter in the plastics operation was $800,000 on $2.9 million in sales. Through September, the plastics operation lost $2.3 million on sales of $8.6 million. While they believe the technology and the business have potential, it is not in their core business and they have to decide whether or not the long term prospects for Sealright justify the short term losses. So, for that reason, they are considering the sale of the Los Angeles plastics operation. They will make a firm decision on its future during the fourth quarter. If they decide to sell or otherwise discontinue the operation, they will take a one-time charge in 1996 of up to $4 million. They believe this $4 million is worst-case and would include both continuing operating loss subsequent to a decision date and the estimated loss of the disposal.

OUTLOOK FOR THE REST OF THE YEAR. They anticipate that the fourth quarter operating performance should be stronger than prior years. But, they expect revenues to decline. Combine that with an estimated $2.3 million in total restructuring expenses for the quarter and they may not record a profit for 1996.

Considering the potential charge against earnings if it is decided that Sealright will sell or otherwise discontinue the plastics operation in Los Angeles, they could finish with a net loss for 1996 between $0.21 and $0.25 per share for the year. However, they have not made a final decision on the future of the plastics plant and will do so in Q4.

Because of these prospects for the fourth quarter the board of directors has voted to suspend dividends until performance warrants resumption. That could be late 1997 or early 1998.

SALES PROBLEMS. Because they had a significant revenue shortfall this year, they are taking aggressive steps to build sales momentum in Q4 and early 1997. For the first 3 quarters net sales are down about 9% year to year. For the entire year, they expect net sales to drop by about $25 million. That's unacceptable. It won't be repeated.

In previous teleconferences they did anticipate a large portion of the 1996 sales shortfall, about $8 million. Because it can be attributed to businesses they lost prior to the year. This included key frozen dessert customers like Haagen Dazs, Breyers, and Wells. They also anticipated dropping another $1 million in revenue because it came from markets or accounts they chose to leave behind. That's a mixture of low-margin, no growth businesses or customers who had credit problems. They decided they wanted these customers off their accounts receivable reports more than they wanted them on the customer lists. That is an example of the discipline they are applying to their balance sheet management and the benefits show up in the long run. Those two categories account for $9 million of the $25 million revenue shortfall they anticipate by year end.

Another portion of the revenue shortfall came from unanticipated lost business. By the end of 1996 this will total about $5 million. More than half of these lost revenues are directy attributable to the problems they are having at their Los Angeles plastics operation. The other portion is business they lost one little piece at a time. In focusing on their key accounts, sometimes they lost sight of service to smaller accounts. Over time, Sealright's success will depend on its ability to forge strategic partnerships with key accounts. But they will still have room for profitable smaller accounts that offer growth opportunity.

Finally, they believe that $11 million of the revenue shortfall can be attributed to market factors which they have cited throughout the year. For instance, a cool wet Spring hurt ice cream and beverage sales. Unit sales of all frozen desserts were down 3% for the year ended Labor Day. In specific frozen dessert categories, segments dominant by Sealright packaging were weak. Sales of frozen yogurt, a product that in most cases is packaged in Sealright round containers, fell 18%. Perhaps the most damaging market factor was this year's disappointing demand for premium-priced ice cream. Escalating costs for raw materials, especially the butter fat needed for ice cream, squeezed their customers' margins. Seeking to avoid raising retail prices, ice cream marketers spent less to promote their premium products. Of course, prices often had to go up anyway. In the end, the result this year is that consumers were more likely to buy cheaper or value price products that generally are packaged in plastic or folding paper cartons. Consumers were less likely to buy the premium priced products that typically go to market in Sealright packaging. That hurt Sealright's customers and hurt them.

The frozen dessert packaging market is Sealright's largest market. They are going after business very aggressively and they are winning. In fact, they have won every single major piece of frozen dessert business up for bid during the last quarter. They are keeping the business with their existing customers and they are winning new business. For instance, they just landed the nationwide business for Healthy Choice frozen desserts with an estimated incremental value of $2 million to Sealright in 1997. They had half the US business and now they will be supplying all of their packaging.

Sealright is aggressively attacking all of these sales issues with a four-point action plan. This revenue building plan directly supports three of their key strategic initiatives -- building stronger customer partnerships, delivering world-class service, and developing innovative new packaging solutions. First, their marketing team is focused on growth opportunities. In the frozen dessert arena this means better quality and new features for existing packages. It means new equipment systems so their customers can form packages in their own plants. And it means new packaging sizes that target consumer preferences and that allow their customers to offer more price points at retail. They already have agreements with customer to introduce three new innovative packaging sizes in 1997.

For beverages, they are focusing on labels and labeling equipment for milk and other drinks produced in a dairy plant as well as a new value added roll-fed label that runs significantly more efficiently in their customers' plants. Customers can also run more copies because they can print the entire front of the label. Their emphasis on sleeve and roll-fed labeling for dairy customers has produced their first big contract, labels for a line of flavored beverages produced by a New England creamery. These single serve products include all sorts of drinks from juices to flavored milks to regular milks. Flexible packaging products for dairies also includes lidding and they are also targeting cheese with their pinch-and-seal recloseable bags. Candy and cookie customers will also be targets for pinch-and-seal.

They are aggressively following up on their success with a quick-spread condiment package used by MacDonald's by increasing their attention to other forms of packaging where dispensing sauces include service. They have recently sold a new bag-and-box packaging system to Hunt Wesson Food Service Division which will yield important sales gains in 1997. In addition, they have expanded sales of single-serve condiment packages to Heinz.

Point 2 of their plan is a reorganized management structure in their North American Sales organization. Introduced in September, this new more specialized organization will bring more focus to their efforts in key growth areas.

The third point of their plan is to work with customers to produce packaging to meet their needs. This is especially true for their key accounts. The sales group is being divided into industry segments to accomplish this.

The fourth point of their sales action plan involves stepping up their efforts overseas to strengthen partnerships and develop new opportunities. They have key relationships overseas with Coca-Cola and MacDonald's. They expect to do much more business with Coca-Cola in Australia as they enter their Summer season. They also are in the door to bid on additional Coke business in Indonesia, Malaysia, and China. They also have some other important accounts they are fostering in the Australia and Pacific Rim area.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.