Good morning, ladies and gentlemen, and welcome to the PolyOne Corporation Third Quarter 2017 Conference Call. My name is James and I will be your operator for today. At this time, all participants are in listen-only mode. We will have a question-and-answer session at the end of the conference. As a reminder, this conference is being recorded for replay purposes. At this time, I’d like to turn the call over to Eric Swanson, Director of Investor Relations. Please proceed.

Thank you, James. Good morning and welcome to everyone joining us on the call today. Before beginning, we would like to remind you that statements made during this conference call may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements will give current expectations or forecasts of future events and are not guarantees of future performance. They’re based on management’s expectation and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statement. Some of these risks and uncertainties can be found in the company’s filings with the Securities and Exchange Commission as well as in today’s press release. During the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the earnings release posted on the PolyOne website, where the company describes the non-GAAP measures and provides a reconciliation from the most comparable GAAP financial measures. Operating results referenced during today’s call will be comparing the third quarter of 2017 to the third quarter of 2016, unless otherwise stated. Joining me today on the call today is our Chairman, President and Chief Executive Officer, Bob Patterson; and Executive Vice President and Chief Financial Officer Brad Richardson. Now, I will turn the call over to Bob.

Well thanks, Eric, and good morning to everyone. I am pleased to report third quarter adjusted earnings per share of $0.58, an increase from $0.55 per share reported last year. Operationally, our Color, Additives and Inks segment lead our growth with a 20% increase in sales and a 16% year-over-year improvement in operating income. Color reported its highest ever third quarter sales and operating income with notable gains in packaging and high-end wire and cable colorants for the oil and gas industry. Overall, we grew sales by 10% this quarter, gained $818 million with 5% organic growth, a 4% contribution from our recent acquisitions and favorable FX adding 1%. For those of you who know us well, you know that we have been investing heavily in additional commercial resources, and they are paying off. We’re growing in our focus end markets, levering our key technologies and converting sales opportunities at a higher rate than ever before. Our innovation pipeline is brimming with unique solutions and our acquisitions are integrating very well. Over the last six months, we've also taken numerous steps to strengthen our portfolio. We divested the underperforming DSS segment and we’ve reinvested those proceeds to fund the acquisitions of Rutland and Mesa. Our cash flow generation, financial profile and earnings potential have never been stronger. And we have tremendous confidence in our ability to deliver our eight consecutive year of EPS growth in 2017 and returned to double-digit EPS growth in 2018. This was a precursor to announcing a 30% increase to our dividend and a plan whereby we will raise our dividend by 60% or more cumulatively over the next three years. We are very pleased with our recent performance. However, like many companies, we have been focused on the safety and welfare of employees, families and communities impacted by hurricanes Harvey and Irma. While our facilities were undamaged and all of our employees are safe, others were not as fortunate. Like many companies, we are experiencing raw material supply destructions and incurring additional expenses as a result of Hurricane Harvey. Brad will outline them for you in a few moments, but understand that most importantly we remain focused on assisting local communities and residents where needed as serving our customers. And I believe we are doing just that, thanks to the great work of our associates in the Houston area, who hosted an outstanding job keeping our employees safe and are now focused on providing exemplary service to our customers. A lot more of these said and was to come and I'll do that in a moment, but first let me turn the call over to Brad to review our third quarter performance in more detail.

Well, thank you, Bob, and good morning, everyone. I'm starting with our GAAP results: in the third quarter, reported earnings of $0.49 per share; adjusting for special items, EPS from continuing operations for the quarter was $0.58, a 5% year-over-year increase from $0.55 in the third quarter of 2016; record setting operating income and our Color, Additives and Inks segments and top line growth drove that success. But it required a company-wide effort to overcome several challenges in the quarter, including hurricane Harvey and raw material costs that continue to be substantially higher than last year. As Bob already mentioned regarding Hurricane Harvey, I'm very thankful that all of our employees in the region are safe. We have two manufacturing facilities and a distribution center in the Houston area, all three of which reported no structural damage and our returning to normal operation. The impact of Harvey on PolyOne can be divided into three buckets: logistics, supply and raw material cost. Beginning with logistics, we are entering higher shipping cost as suppliers deal with route disruptions. Although the rail system is back online, we are still facing some difficulties with truck shipments. On the supply side, we have several suppliers put customers on our allocations, but we have not. Issues like this remind us of the importance of inventory and supply chain management. I’m pleased to report the PolyOne’s operations and sourcing teams were proactive, which helped us prepare for and mitigate supply disruptions and related challenges. Unfortunately, we have seen the majority of our input cost increased sequentially in September and October, and the basket of base resin cost we’ve purchased remained 15% to 20% higher than last year. In total, we expect to incur $3 million to $4 million of expenses in the fourth quarter related to the…

Well, thanks, Brad. It has been an important transformative year for PolyOne thus far. We've grown sales. We've streamlined our portfolio, and we have acquired new businesses with complimentary and new technologies. All those steps have given us great confidence in our future earnings potential. For the last couple of years, we have stressed the importance of increased investments in commercial resources to drive growth. And here are some of the biggest reasons why. Our portfolio has become more specialized with a higher degree of engineered complexity. Sellers and technology support spend more time with existing accounts on current applications, which is great, but it reduces the amount of time we have to prospect for view business even within those customers or for new accounts altogether. Thus we needed to add more sales resources to expand our reach and we also needed to add more technology associates who support them. There impact has been unquestionable and the strategy is work to grow the top line as our organic sales growth is the highest expense as we first come out of recession. Investors often ask us for metrics and data to help articulate how this has worked, so consider the following. Over the last three years, we’ve increase our sales force by 19%. Sales falls to both existing customer expects has increased 28% since 2014. And over that same time period, our sales level is up over 50%. More calls equal more opportunities which our talented and technical sales teams have translated to more business. We only had just over 600 sellers in the company and just as many in research and development and technology support, which is almost a one-to-one ratio which is required for these specialty sales. Our recent hires were gaining momentum. Our sellers are increasingly focused on…

[Operator Instructions] Our first question comes from Frank Mitsch with Wells Fargo. Your line is open.

You talked a lot about some of the specialization and the fact that your one-for-one sales to tech and doing more in advanced materials and -- but one of the things I noticed is that -- that would normally suggest that you might get pricing and mix up and it was up 2% last quarter. This quarter, it went back down to zero. Was there anything specific that happened this quarter? And what would your expectation be in terms of the pricing side of things?

I’m pretty surprised the mix is actually up 2% for this quarter as well. Maybe we can go through that when the number should be out in the queue as well by segment. But on a consolidated basis, pricing mix should be up. But look, with respect to those initiatives and down driving price and mix, I absolutely expect that to be the case as we go forward. Certainly what we experienced in the third quarter, and you see that’s most notably and Engineered Materials has been the rising impact of raw material costs, which continued into the third quarter. So as I look at margins year-over-year, that had the most significant impact on our results.

Frank, I would third to Bod’s point. Again, we had overall organic revenue growth of 5% that was 3% volume and 2% price.

I see. Okay. We have thought that that was all on the volume side of thing, so our bad here. But in terms that you mentioned that on the ROS side, Brad, that it was the resins were 15% to 30% year-over-year and you highlighted some of that in the Engineered Materials side of things. But my expectation is that a lot of that may have also played out in POD and how are you -- what is the timing in terms of being able to mitigate the higher ROS in that more commodity sort of business? What’s the timeframe we’re looking at before you can fully capture pricing to offset the higher ROS and the POD side of things?

On POD, for the most past, if you see prices moving in an upward direction for a short period of time, that can actually at times be a margin good guy, if you’re selling slightly lower cost inventory, higher price environment, of course it goes the other way when prices come back down. So from a POD perspective, I think that we’re doing a pretty good job of staying ahead of that. So I’m not sure that there is much more of a lag to get passed. The bigger lag that we really have to get passed is in EM, Frank, and that’s where, I’d say, we probably still have another three to six months to go with respect to pricing offsetting or getting back to and lapping the cost increases we’ve seen in that segment.

So by the early part of next year that should be all taken care of?

Right.

All right. Thank you.

Thank you. Our next question comes from Mike Sison with KeyBanc. Your line is open.

Bob, when you think about the squeeze for raw materials, how big is that is going to be in total in '17? And then I would imagine, as that stabilizes, hopefully, that that would an earnings maybe plus next year, as you get pricing?

Yes, I think towards the second half of the year and next year it should be a plus certainly as been lapped the impact this year. My estimate would be that we saw a lot of press as well as industry increases going up in the first quarter of '17 but really didn’t experience much in the lay of higher cost in our P&L and focus second quarter, and the second and the third have been by far in a way the most challenging to the tune of probably $3 million in each -- when I net pricing, et cetera and everything against that, a lot of that falling in new EM. So I think that helps maybe give you some sense of how much the impact will be on a annual basis. We should get a little bit better in the fourth quarter here, but I still expect it to be a year-over-year negative for us.

Okay, and then when you think about 2018, given you've suggested double-digit EPS growth, can you give us sort of a frame what type of volume you hope to see next year? Is there some stock buyback there, acquisitions? And then maybe which are the segments do you think will really lead the charge in terms of earnings growth?

Yes, I mean – well, first of all I would just point out as we kind of calibrate next year's expectations versus where we are right now, when I look at the third quarter results, and I think everybody is aware of this, if you went back one year, that's really when DSS I think swung to a loss, that significantly impacted incentives for the company overall. And so if you look at -- we didn’t reverse any incentives in the third quarter last year, we just recorded less. It is we understand that. But now that we've return to closer to target payout this year, we actually had -- we incur $10 million more of incentive expense across all the businesses and the company as a whole in Q3 this year than we did last year. So I mean that's close to $0.075, something to just think about, right? That’s probably another $6 million of GAAP coming in the fourth quarter, which will overcome and deliver EPS growth but just to set the stage for that. So one thing to just consider is that we've gotten back to target-level performance, and as you think about the gross margin expansion that we have already seen in our businesses this year, I expect that to continue into ‘18 without the same level of SG&A burden. So there it is -- there is EPS growth that comes from that. When I think about the segment performances, I mean Color has outstanding momentum right now and I expect them to lead 2018, some of which is coming from acquisitions. As you know, we've just done Rutland and Mesa, both of them, well, helped, and I expect that to be the case in '18. As you know, with respect to share repurchases, we remain opportunistic and we’ll see how things go through the balance of this year, but we always like to try to put that cash to use first in the business and M&A. And if those opportunities present themselves, that’s where we’ll go with it. Lastly I’d say, look, Brad and his team have done an outstanding job of lowering our overall effective tax rate over the last few years. It’s really been kind of three-year journey, and that’s another reason why I have confidence in EPS expectations for next year. So a little bit of a long-winded response to your question there, but I guess a lot of things kind of go into that view for next year.

Our next question comes from Mike Harrison with Seaport Global. Your line is open.

Bob, just look at the PP&S business and the gross margin decline sequentially, we also saw that last year I know you mentioned that there was some hurricane impact in there. But is this just really how the wrongs are hitting you both years? Or is there something seasonal issue there? And then maybe if I can do another one on PP&S, just wondering how potential improvement in housing market could impact to your margins going forward. Is it a positive because it helps improve fixed cost absorption? Or could that be a negative because that’s lower-margin business?

I’m sorry, the first question was around year-over-year margins for EM?

PP&S

PP&S has started sequential last year…

Sequential this year.

Right. So as you look forward, if the question is sort of going towards what to expect for the fourth quarter, I mean, typically, as you know, that’s our weakest quarter of the year seasonally in that business and so margins come down something that. What you see in Q3 versus Q2 this year versus -- Q3, Q2 this year really looks pretty similar to what it did last year, so nothing new there in my opinion. However, had it not been for Harvey, I think we actually would have been better than last year. I mean, that’s probably the best way to think about that. Brad in his comments talked about probably $2 million of expenses in PP&S, and so you can probably add that to Q3 and get a better sense of where margins would have been, absent Harvey. So hopefully I answer the margin questions. And then the second, will you repeat your second question for me on PP&S to make sure – I missed that.

Yes, the second question. The vinyl business historically was very sensitive to the housing market, both construction as well as appliances. There are a lot of indicators out there suggesting that new housing starts could be growing, I’m just wondering, at this point with kind of the new PP&S, how much impact do we see on margins as housing improves? Is that a positive to margins because it helps fixed cost absorption? Or does it drag because of those products being lower-margin products versus some of the higher-end stuff you’re selling now?

Right. And look I think growth in single-family construction is a good guide for us and would help margins. I think, as you know, from an application standpoint, our positioning in the single-family home side is much bigger than it is on multi-family. So as you look at how housing starts recover since the recession, we – our growth really hasn’t followed that as closely as the overall starts because they’re most connected single family. So that starts to pick up steam and move faster than multifamily. I think it’s a great guide for us on sales and margins.

Got it. And then specific to the Colors segment, I guess I was really surprised to hear the strength in Europe it sounds like both on the sales and the operating income side. Can you talk a little bit about what's driving that strength in terms of end markets or your own internal efforts?

Yes, let's say a couple of things. The first I’d say is that recall from prior years, and this is probably going back to '16 and '15 where we would have talked about how the oil and gas industry was impacting us, and one other things we would have referenced than was we sell some very high-end colors that are used for wire and cable applications that find their way into high-e applications like those being used for oil and gas. And so that business is coming back. They had a very strong quarter and is a big part of the explanation for us for what we are seeing in Europe, because it’s primarily coming out of Europe. That's where that business is. So I’d say that was very end-markets specific with respect to being driven by energy less than being driven by a European economic recovery of some kind. But Europe has been getting better. We have actually seen some upside from transportation as well. Our North American auto was down, but European and auto was up, and those are the two reasons why I would say improving performance in Europe, Mike.

Thank you. Our next question comes from Bob Koort with Goldman Sachs. Your line is open.

Couple of quick ones here, one on the pretty sizeable dividend hike. I'm just curious if you can talk about the various factors that one of your thinking of the base is for such an increase, what the target was and how you came to that conclusion and that particular level of dividends?

Yes, really there were two things, Bob, that played into that. The first was related to the portfolio changes that we've made this year, as I said divesting DSS and then reinvesting in Rutland and Mesa, but part of that really is just associated with improvement in cash flow generation. So by not having to further invest in restructuring actions or other things that we believe would have been required to grow and improve DSS, we have a structural improvement in our cash flow, and that was a big driver in the 30% increase this year, which was say taking a portion of that and really just permanently putting that back into what we pay out to shareholders as a dividend. If you look at the future increases, it's much more closely tied to an expectation that we are going to return to double-digit EPS growth, and so we could do even better than that as our earnings improve. But when you look at our yield, we're not trying to get to be a retirement yield type company stock, but we do see room for growth in our yield when we look at where others are in our space. And so accelerating the growth to get there, as I say, really driven by those three things.

Then secondly, you mentioned -- I think, partially in response to and earlier question, some Hurricane impacting third quarter results, could you quantify in aggregate what the hit was relative to the three to four-year expect next quarter?

Yes, Bob. I mean we basically said the impact on the third quarter was $2 million, again primarily in PP&S, and then another $3 million to $4 million on its way here in the fourth quarter.

Okay, thanks. I missed that. And then lastly, Bob, you’ve been on a program here for a couple of years now that strength the sales force, obviously a new product development, a key part of your offering. Have you got an update again, any predictive analytics that you can refine and give some sense of what that sell-through is going to be maybe if the -- if time to attraction, profitable attraction for this new hires, if it’s increased or decreased. So just some metrics around that so we can get a sense for what might be coming down the pipe?

Yes. It’s not perfect yet with respect to when you add a seller, you get X results in Y period of time. But what I was trying to do with my earlier remarks today was that we know we’ve increased the sales force 19%, calls are up 28%, the funnels increasing 50%, and we know that organic sales growth this year is up 6% or 7%. So what that tells you, of course, is that not every call results in sale. I mean, obviously everyone knows that. But 7% sales growth is very good. Now as you go through – and ultimately you’d like to see that sales growth get closer and closer to the number of people you’ve added; however, we know that we’re spending more and more time on applications with our customers, and so every sales call is longer and the work that we’re doing on specification is longer. So it’s not perfect yet, but our data is showing us that typically when you bring somebody and it’s brand new and let’s say the right out of school and may never have sold professionally, they probably have an 18-month to two-year type run time really before they’re paying for themselves, and we’re seen that now, whereas an experienced hire can come in and hit the ground running and have more of an impact. So it’s not perfectly up. Bob, but that’s directionally what we know about the investments we’ve made.

Our next question comes from Tyler Frank with Robert Baird. Your line is open.

Can you just discuss your 2020 Platinum Vision? How kind of you’ll be able to hit those numbers in each segment? And how we should think about that margins ramping, I guess, through Q4 and into 2018?

I mean what we’ve got really three primary financial measures in the 2020 Platinum Vision, their return on invested capital, double-digit EPS growth and segment margin targets. I’m very confident in getting to the return on invested capital and double-digit EPS growth. And when you look at segment profitability, that really is a means to an end, right? That’s part of how we drive ROIC and EPS growth. One of the things that we have observed in this last year too since we set the goals has been that the acquisitions that we have been doing are all very good acquisitions, but they’ve been dilutive to our existing segment margins. So they still make all the sense in the world from an ROIC standpoint and will ultimately have better margins in the future. But when I think about how M&A impacts the margins, and I'm really referring to Color and EM now when I say this, I think that takes the expectation down some. The additional thing that we just need to factor in is the investments that we're making in composite, for example. And we know what we spend to acquire Gordon and Polystrand last year. We continue to invest at a higher rate. And so while that's going to drive future growth, I think in the near term that dilution margins a little bit. So as I look at all of the, again, targets we have for 2020, feel very good of our ROIC, EPS growth. PP&S and distribution and really already there with some upside to come and really comes down to Color and EM. I think it’s one of things that on our investor day earlier next year we will revisit in a little more detail to try to outline for everyone just so much of M&A is impacting things, how much the investment in composites is impacting margins. But look, most importantly, we're improving ROIC and we’re getting back to double-digit EPS growth.

Thanks, guys, and then a quick follow-up. How should we think about acquisitions going forward? Are you going to continue to look at smaller tuck-in acquisitions or could we see a potentially larger acquisition on horizon? And does you increased in the dividend make that less likely?

No, the change in the dividend doesn’t change our outlook or perspective or ability to do acquisitions going forward at all. And as I mentioned, part of this really was a return of cash that we’re saving from the long investing and some of these restructuring activities we had in the past. So dividend doesn’t change that at all and really when I think about what's in the pipeline now is a more of what we've seen over the last couple of years, which has been smaller bolt-on acquisitions. I don’t want anyone to get the impression that we wouldn’t do a larger deal but many of the ones that we know about like aren’t for sale and that is what it is. But we are not running out there to do a bigger deals as for the sake of doing one. At present we've been really happy with the smaller deals we've done and got more of those I think in the future.

Thank you. Our next question comes from Colin Rusch with Oppenheimer. Your line is open.

Can you talk about the opportunity to cross-selling leveraging the Color success that you've had in the Asia, particularly given the big push towards electric vehicles options in China and we will assume this is the need for some incremental light weight in?

Yes, I mean I think that's one of the things that we have really gotten better at and cross-selling has been some that we’ve been talking about for I'm sure seven or eight years now. You really do see it coming together around application opportunities like that, for example, in light weighting. I would highlight the work that our key accounts team does with customers like Tesla. It’s probably some of our best examples where you have a point person and key accounts coordinating all of the solutions that we have and provide not only supporting them and a Megatran toward light weighting and electrification, but candidly they also want this thing to look good, right? And that's what color is all about as well as protecting the materials. So I think that we've done a really good job improving collaboration within the company, and that’s a really good example I can provide you.

And then can you talk just a little bit more specifically about the cadence of operating leverage? I appreciate all the color on the sales force metrics, but how should we see that translating and improved operating margin as we go through the balance of this year and into next year?

I mean, like first of all, I just remind everybody that the fourth quarter is always our seasonally weakest in the year, and often times the most difficult to predict just because of how difficult December is to predict. So in the near term, no doubt you’ll see margins sequentially go down from where they are in Q3 just due to the seasonality, but I think that with respect to -- with the exception of Engineered Materials, I think we get start to see some positive progress in margins. And excluding the impact of Harvey, I think you would have seen a positive impact in PP&S as well. But maybe looking a little bit longer term and thinking about ’18, I do expect to see margin expansion across the board with the exception of how raw materials are really impacting EM, and I expect that to be a bad guy here through the first half of next year.

Our next question comes from Laurence Alexander with Jefferies. Your line is open.

Hi, guys. It’s Tim on for Laurence.

Hi.

You mentioned on some of the example of new products picking in heath care that our helping I think support growth. I was just wondering, if into product, if you can quantify how much that means in terms of revenue, I know for a year?

Yes. I mean, for little most problem, we have wins like that, there are somewhere in the order of magnitude of $100,000 to $150,000, sometimes $250,000 in terms of order of magnitude. It’s one of the things that when people ask questions about PolyOne and understand what we do sometimes. They are surprise that how small individual wins with specific customers are, but that’s the nature of what we do. The power really is in the ability to translate that across markets in a different application. So when I look at specifically what we’ve done in those markets for those particular customers, that’s probably the right or der of magnitude.

And then are you mentioned in the past vitality mix, I was just wondered what your thoughts are around that and do it at your outlook going forward?

Yes. Actually the vitality index is any, at the third quarter is between 38% and 39%. So we have always said that anything above 35% is world class. So we’re happy where we are. Still I have a very good mixture, I think of customization work as well as innovation work to goes to our pipeline.

Our next question comes from Dmitry Silversteyn with Longbow Research. Your line is open.

A lot of my questions have been answered. I just want to follow-up, make sure I heard this correctly. The $3 million to $4 million in impact that you’re going to see in the fourth quarter from the hurricanes ancillary transportation and logistics issue. That’s all going to be PP&S. Is that the way to think about it and why still focused in that division versus your other divisions?

No. There could be a little bit of that shows up in EM, but really I think most of that's going to be in PP&S and largely it's around if Brad talk about different buckets of cost but shipping is about material is coming out of the Houston area. But when you look at what's going on with raw materials and inflation there that is going to impact the EM business. So there is a portion of that that goes to EM as well.

Okay, but not so much color or the distribution business.

No, and as I said I think distribution is doing a good job of staying ahead of that. Look as prices go up typically the distribution side the suppliers were setting those prices and they are what they are and for us that's a sometimes there is a plus or a minus based on unhand inventory but nothing to really I think report or expect for Q4.

Okay, thanks, And then just a follow-up question on the gross margins. So it's kind of hard to compare sort of annual numbers year-over-year, or quarterly numbers year-over-year because of the actual of the desired systems so our solutions construction business, but it does look like your margins are up mainly a mix on the gross margin line. Despite a pretty significant raw material impact that's all basically the absence of ideas that's right. I mean, there is not a mucher to do in there in terms of kind of mix within the existing business and so how should we think about I guess and to your gross margin resilience given the raw material pressures primarily for 2018, if we have a pieces that in the back into the year you may see flattening is not role over for our material cost it does sound like it can be a pretty good lift in the margins for back end of next year.

With the assess in the numbers for last year margins have improved from there you are right in pointing out that the absence of DSS is driving that. Because when you look at things really on a continuing operations basis this year we've had really good margin results in PP&S and distribution but in EM we've had the most challenging raw materials and year-over-year EM probably has lower margins by about 1% just due to the composites investments we were making. So if I look at things on a continuing operations basis it's down a little bit from what was last year.

Okay, but that mean it hasn’t yet my point is that given the 20% increase of raw material cost. The decline is just not dramatic as you would expect typically is that just a functions of how special to your portfolio has become where there is such a disconnect between raw material cost and the selling price that given at 20% moving raw materials does include your margin?

Yes, I mean I appreciate you are coming out of from that angle you don’t for modestly seems always well. And as long as where the opportunities exists to get better but….

Yes, there is no doubt. I mean, look, we’re doing everything that we can from a pricing standpoint and I probably have said this before in other quarters, but it's been a really unique year in the sense that done very challenging to get priced in this environment with how fast things spiked up in the first part of the year and then people thought they were going to come down and really haven't. So but the answer to your question, yes, I think we've been mitigating much of that with our own pricing I think that you probably see that a little better in color then you do in EM, but directionally you are correct.

Our next question comes from Kevin Hocevar with Northcoast Research. Your line is open.

Back to the dividend. From here I want to understand correctly. It seems like the increased in the dividend is really a function of your expectation for better cash flow as oppose to canalizing share purchases or M&A or anything like that. So wondering, what your expectations are for free cash conversion going forward? I think, Brad, you mentioned earlier in the call you expect the $180 million to $200 million of free cash this year. If I heard you right, I think that’s a 100% plus net income, so 100% plus free cash conversion. So wondering if you have any metrics, we should think about in terms of free cash conversion going forward?

I mean, I think that is a good metric $180 million to $200 million of free cash flow. Again, Bob mentioned really the portfolio changes that we’ve made. And I would also point out related to the portfolio changes, I mean you look at our overall capital expenditures when we have DSS, we were putting $90 million to $95 million a year back into the business, which included $20 million for DSS. That’s now gone. And so our capital next year will be in the $70 million to $75 million range. So again that just lowering restructuring expenditures for DSS but also significantly lower capital investment required for our core business. So those are examples of how we’re improving the free cash flow generation of the company.

And then, Bob, it seem very confident in the ability to grow EPS double-digit in 2018, obviously that’s a pretty big range. So wondering if you’re ready to narrow that down at this point or we’re going to have to wait for the fourth quarter call?

No further guidance at this time. I think when we get to the end of the year, we’ll have more we can say about that. And also we’re still kind of honing in on the day and Investor Day to hold next year at which time we’ll have not only about next year, but beyond that.

Okay, no problem. And then just last question. I think you expected to drive down some of the stranded costs from the DS&S business. It’s not all of them I know, you said some of those that money would be reinvested in the business. But expectation to drive down a couple of million dollars in stranded costs, so wondering how that’s going and that’s progressing as expected?

Yes, I think that’s going fine. We’re really probably to read on pace is where we thought would be would bem, which was not a whole lot to come out in the third quarter here, but we’ll see more in the fourth quarter and next year.

Our next question comes from Jason Freuchtel with SunTrust. Your line is open.

I guess just a follow-up on the free cash flow commentary that Brad just provided. In terms of looking at the kind of the $180 million to $200 million in free cash flow and bringing into next year beyond, Earnings improvement and I guess lower normalized CapEx. Are there any kind of puts and takes that we should think about?

No, I mean, I think those are the drivers. I mean clearly, as we look at next year, I mean as we grow the business, we’ll be putting additional working capital to working support of that growth. But overall, I gave some puts and takes.

Okay. And interest expense, I guess maybe stay around the same level?

Roughly the same level.

Okay, great. Thanks guys and good luck for next quarter.

Well, thank you very much for everyone who is joining us on the call today. We appreciate for your time and support and we look forward to giving an update on our next call to conclusion in the fourth quarter. Bye for now.

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you very much for your participation. You may all disconnect. Have a wonderful day.