Good morning, ladies and gentlemen, and welcome to the PolyOne Corporation Third Quarter 2019 Conference Call. My name is Shannon, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. At this time, I would like to turn the call over to Joe Di Salvo, Vice President, Treasurer, and Investor Relations. Please proceed.

Thank you, Shannon. Good morning and welcome to everyone joining us on the call today. Before beginning, we’d like to remind you that statements made during the 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 the 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. Unless otherwise stated, operating results referenced during today’s call will be comparing the third quarter of 2019 to the third quarter of 2018 on a continuing operations basis, which excludes the PP&S business, that is presented as a discontinued operation. Also note that included in attachment 8 to the earnings release issued today is an updated summary of the prior period earnings per share showing the impact of the discontinued operations. Joining me today on the call is our Chairman, President and Chief Executive Officer, Bob Patterson; and Executive Vice President, Chief Financial Officer, Brad Richardson. Now I would turn the call over to Bob.

Thanks, Joe, and good morning, everyone. I’m pleased to report that for the third quarter we delivered adjusted EPS of $0.44. That’s a 7% increase over the prior year. Our investments in recent acquisitions and sustainable solutions, combined with our cost reduction initiatives, continue to offset a weak demand environment. Specialty Engineered Materials led the way this quarter growing operating income 7%, highlighted by our recent acquisition of Fiber-Line and new business gains in our composites portfolio. In fact, organic sales of composite technologies grew 8% in the quarter, and operating income more than doubled over the prior year. Composites along with performance additives are two of our high-growth technology platforms, and the difference these technologies are making is reflected in our now less-cyclical more specialty portfolio. With the announced agreement to divest our Performance Products and Solutions segment, we have taken yet another significant step to further establish us as a specialty company. Following the sale, 80% of PolyOne’s EBITDA will be generated from specialty formulations. And that’s up from 7% from when we began our specialty journey. This latest portfolio enhancement reduces our exposure to cyclical end markets, while at the same time strengthens our balance sheet. The proceeds from the sale will provide us increased financial flexibility to accelerate growth by acquiring additional specialty technologies and investing in innovation-focused and sustainable solutions. More on this strategic approach is captured in our just released sustainability report. It’s our first ever of PolyOne and I’m going to spend some more time on that – this topic in my closing remarks. To our customers, colleagues and friends in the PP&S business, we are excited about your future with SK Capital. We are grateful for your partnership, innovation and the success we have had together. Since 2006 we have invested in…

Well, thank you very much, Bob, and good morning. Let me first start with our GAAP results. We reported GAAP earnings per share from continuing operations of $0.30. Special items in the quarter resulted in a net after-tax charge of $10.5 million compared to $0.5 million in the prior year. The increase in special items is primarily related to the earnout adjustment associated with the Fiber-Line acquisition as the businesses’ performance has been exceptional, exceeding our original expectations. To reinforce Joe’s earlier comments, our results are presented on a continuing operations basis, which excludes the PP&S business, that is presented as a discontinued operation as a discontinued operation. Adjusted EPS for the quarter was $0.44, 7% higher than the prior year third quarter. This increase includes a headwind from a higher effective tax rate. At a constant tax rate, EPS would have been up 10%. Driving the growth in adjusted EPS was a 5% improvement in operating income, contributions from our Fiber-Line acquisitions, our growing composite portfolio and barrier additives continue to perform and differentiate us in what can be only characterized as a challenging economic environment. And as Bob said, we are benefiting from our earlier efforts to reduce cost and improve pricing and mix. From a regional perspective, organic sales in Europe were down 11%, primarily due to weak demand in automotive applications and unfavorable foreign currencies. Foreign currencies negatively impacted the region’s overall sales by 5%. Asia sales were down 7% as growth in the packaging end market from our barrier additive technologies was more than offset by weakness in the automotive and electronic end markets. Weaker foreign currencies impacted overall sales in the region by 2%. Still, despite the top line weakness in Asia, operating income grew 11% for the quarter due to improved mix from…

Well thanks, Brad. Our prepared remarks today are being [Audio Gap] continue. Related to our sustainability report, certainly, it does cover a number of things such as environmental, social and governance activities as we go to market, but it goes well beyond that. It demonstrates how we are adding value to all of our stakeholders, and positively impacting the planet and our communities. It also provides an inspiring look forward at what’s to come. For those of you who have read our two previous annual reports, you know we approach sustainability from the standpoint of four cornerstones: people, product, planet and performance. The 4Ps are inextricably linked to one another and our recently issued report provides a tremendous amount of insight into the progress we have made in each area. For example, we share our environmental performance metrics and renewable energy outlook. Product stewardship and supplier expectations are also discussed. We review some of the many leadership development, technical trainings and other educational offerings, which work in concert to help us attract, retain and promote tomorrow’s leaders today. We also address our PolyOne’s formulations. In particular, we’ll play an important part in improving sustainability in nearly every industry. In the report, we showcased how our performance additives for packaging helped reduce material usage, energy requirements, and ultimately, spoilage while increasing protection for food and beverage content. Many of our additives also improve recyclability of packaging thus promoting a more circular economy. While other additives offer – we often rely upon renewable energy applications. Our eco-conscious formulations like Nymax utilize reclaimed nylon in our formulations, a growing interest among brand owners. And at the core of any polymer solution is the opportunity for lightweighting when used as a substitute material for metal, glass or wood. Our composite solutions take material replacement…

[Operator Instructions] Your first question comes from Mike Harrison with Seaport Global. Your line is open.

Hi. Good morning. Can you hear me okay?

Yes, Mike. We can hear you.

Thanks. Appreciate the chance to ask some questions here. Wanted to ask about the composites business. You referenced the growth rate, I believe, 8% is what you were seeing there. Do you feel like the – like that business has slowed or decelerated at all with some of the macro uncertainty? And can you maybe comment on the pipeline of new applications that you’re seeing within that Composites business?

It’s actually been in the opposite. We haven’t seen it slow and, in fact, I think it’s been picking up as demand for those applications seems to be moving in a different direction than some of the other macro pulls. That may be because we are heavily aligned now with Fiber-Line and the fiber object infrastructure buildout, which will and does include 5G, but also I think of there’s just a lot of demand for composites for reinforcement materials that a number of industries are looking at. So we’ve seen growth in Fiber-Line this year, but we’ve also seen growth from our legacy composites business, Mike, really all around the world.

All right. And then also wanted to ask a question about your sustainability efforts. You just went into some level of detail there and I look forward to looking through that report. But I know one of the issues you’ve been working on and you mentioned recyclability. Can you talk a little bit about kind of what inning we’re in, in the process of making plastics more recyclable? And whether you see that being driven more by regulations? Or is it more of an economic decision on the part of your customers where the cost of recycled resin might be lower than virgin resin?

Well I think we’re in the early innings. And I really do believe that’s being driven by: first, consumer preference; and then second, a brand owner desire to serve that preference. So I think there is a lot of customer pull for sustainability initiatives. And what I love about our portfolio is that it is really going to enable data. As you know, we’re not a base resin manufacturer but rather a formulator, and many of our formulations are aimed at doing just that, if it’s to help use less plastic in some cases, or I think, what you will see in the future is it just a higher use of recycled content. And that, I think, has been a big area of focus for brand owners, many of whom, as you know, are stating some public goals about where they want to be in five or 10 years from now, and I think that’s a good thing for our portfolio.

All right. Last question I have is maybe one more for Brad. Just wanted to get some guidance on the corporate segment. Wondering if that $18 million number for Q3, does that reflect a full quarter of stranded cost from the PP&S business? Or maybe how should we think about that $18 million number as we look into Q4 and 2020?

The answer is, yes. So all of the periods have been adjusted for the retained cost. So those will be part of our continuing operations. I think the $18 million was maybe a little on the low side. I would say, it’s going to be more like $19 million to $20 million on an ongoing basis. But, as you know, our plans are, between now and the end of 2020, would be to take about $12 million out of our retained cost, and that’s our plan for 2020.

All right. Thanks very much.

Thank you. Your next question comes from Mike Sison with Wells Fargo. Your line is open.

Hey, guys. Nice growth there given the difficult environment. Hello can you hear me?

Yes, we hear you.

Yes. So I might have missed this, I apologize, but in terms of your guidance for 2019, I think, you guys said fourth quarter would be up 10% year-over-year. I think I missed the full year, but could you give us a basis for the fourth quarter? Is that based on the $0.25 pro forma ex PP&S? And then what the basis is for 2020?

Right. It’s based on if you look at the attachment 8 in the release that has a split of continuing ops and disco ops. So the 10% increase is using last year’s fourth quarter from continuing ops.

Which was $0.24. If you look at attachment 8, we fine-tuned the numbers here trying to – and so $0.24 would be up fourth quarter of 2018.

Got it. Okay. And then, Bob, you’re getting a lot of cash here soon with – in the fourth quarter, can you maybe walk us through what sort of the plans are there? There is – I think there’s press saying Clariant business is up for sales. Is that something of interest to you? And how fast do you hope to deploy some of that cash back into either acquisitions or debt paydown, et cetera?

So, we will immediately put the cash proceeds to work and paying down the revolver balance. There will be some remaining cash that sits on the balance sheet, at least, for the time being with the expectation that we can put that to use again to support our growth initiatives going forward. I can’t comment on the Clariant speculation.

Okay. And then last one on 2020. Can you maybe frame up how earnings growth looks next year? And in a difficult environment, just maybe walk through some of the things you can control where you see some growth? And what type of earnings growth PolyOne can provide, given you’re much leaner and generating a lot of cost savings this year?

Well, I think we’re going to defer our comments broadly on 2020 until we get to the end of this year and release our numbers in January. What I can say is that I believe there’s still going to be strong pull for composites and sustainable solutions. I think those things will continue to see a positive trajectory in the way that we’ve seen them play out this year. I think when we get to the end of the year, hopefully, we’ll get a little bit more clarity on some of the bigger industries and macro dynamics, primarily around auto in Asia and Europe. If I look back on this year, those have been the two areas of most significant demand decline that we’ve experienced. So I don’t really want to prognosticate on those two at this point, but hopefully, we’re in a better spot to do so in January.

Got it. Thank you.

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

Thank you so much. Could you talk a little bit about input costs and what your opportunity is there to reduce cost over the next period of time? But then also, talk a little bit about the opportunity to integrate some renewable input materials so that you end up with a bit better full cycle life with some of these products?

Yes. I mean the first thing I’d say is that we have – there have been a little bit of a deflation in a couple of, again, base resin inputs that we have. I’d say that is helping a little bit in the current period but not a significant amount. But then, of course, there also are some ongoing, I’d say, inflationary areas like nylon and now maybe that’s just a hangover from prior year cost, but we’re still seeing that up some. So if I look at a whole basket, Colin, maybe it’s all down 1% or something. It’s pretty close to zero. Your next question, I believe, relates to what opportunities we may have for a greater degree of recycled content? And I think there’s a tremendous amount of opportunity. But that has to be done in concert with what our customers want, right? So our customers need to specify, I think, material content that works for them. I think we’re going to see a lot more pull for recycled content, and we hope to support that.

Okay. I have some follow-ups on that, I’ll take offline. And then in the specialty materials business, the operating margins are holding kind of flat as you grow. What sort of opportunities are you seeing to increase or expand operating margins as you continue to grow that business?

Yes. I mean the first thing I’d say is that bringing Fiber-Line in that was it a little bit lower operating margin than where we are from legacy perspective on EM. That’s pretty consistent with acquisitions we’ve made over the last four or five years, as you know, and the intent is to expand that over time. So I view that actually as a good thing. So we are in good stead there. But it is influencing the year-over-year comparisons. Your second question on that was what with respect to margins.

Just the opportunity to expand operating margins on a percentage basis.

Right. So I mean obviously, Fiber-Line and where we are with respect to composites presents a good opportunity. As you know, I mean, a legacy composites business inside of PolyOne to date still has a relatively lower return on sales because of the significant amount of investment we have made. And so as that grows, I think that will have the greatest impact on margin improvement.

All right. Thanks so much guys.

Sure. Thanks.

Your next question comes from the line of Ben Kallo with Baird. Your line is open.

Hey, thanks for taking my questions. I guess first maybe coming back to Mike’s question, just how do we think about your debt capacity if you want to make an acquisition out there? What do you feel comfortable with following the sale of PP&S? And then number two, just following on to the EM margin question. Could you just talk through your kind of the Q-over-Q decline? And I think you said that’s related to composite growth, but just maybe a more detail there. Thanks.

Yes. I’d say, first of all, with respect to leverage, our view on that is conservative. We have said that for the right acquisition, we can certainly take leverage above three times. Obviously, with the sale of PP&S and cash on the balance sheet, we’ll be sitting around two. So that’s pretty low from where we’ve been historically. To the extent that we are going above that, obviously, we have got to have a line of sight to getting back down below that number, again, in the event that we do an acquisition. So I’d say our view on that is still pretty conservative, Ben. With respect to Engineered Materials, again, I think the biggest thing that’s kind of influencing things is the addition of Fiber-Line, but I would also point out that the European auto decline in demand has sort of disproportionately impacted our EM business in that region, and that’s another reason why the margins are down this year versus last year. Those are the two biggest reasons for that. Ben?

Thank you. Your next question comes from Jim Sheehan with SunTrust. Your line is open.

Thank you. Good morning. Could you just – how would you characterize your interest in expanding your existing masterbatches business? Is the broader masterbatches business attractive? Or are you really just focused on niche specialty areas of that market?

I mean I think the broader masterbatch business is very attractive and continues to be. It’s, I think, going to be an important enabler for our sustainable solutions going forward. I mean for example, just the use of a higher degree of recycled content for beverage packaging, for example, is going to require, I think, additional color in order to facilitate that. Certainly additives will enable it as well. But I feel very good about the overall Color portfolio. We have a tendency to point out, I guess, probably in the last two or three quarters, some of the additives in specifically sustainable solutions because they have been growing this year. But that’s not to detract at all from the balance of the masterbatch portfolio.

Good. And you sound pretty bullish on barrier technologies and sustainability overall. I’m just wondering, how are customers deciding what materials to use? Are they sticking with PET? Or are they switching more to aluminum containers? And how are you trying to balance that?

Well I think, you are seeing some experimentation, if you will, with doing some things a little different out there from a consumer perspective. But broadly speaking, I believe consumers are still using the materials that they have historically for food and beverage containment, but where they’re looking to make changes is to try to increase the degree of recycled content, certainly there is a focus on using less overall if they can as well. And that could be thinner-gauge material and/or an absence of material. So I’d say the biggest push on the material substitution is probably around using a higher degree of recycled content versus an outright switch to something different.

Great. And can you comment on where you see your customer inventories? And when would you start to expect some restocking next year?

Again, I’m going to defer probably comments on 2020 till we get into January to see if we’ve got some better clarity on that. Hopefully, we do. As I pointed out earlier, maybe to Mike’s earlier question was, we’ve seen pretty significant pullback in auto in Europe and Asia. And I’m not really – don’t really have a clear vision on when that actually starts to improve. So hopefully, we’ll see something between now and when we report back in January.

Thank you.

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

Good morning, thank you for taking my question, guys. Just wanted to understand sort of on some of the economically challenged regions like Europe and Asia Pacific. What were the trends like during the quarter? In other words, were they sort of getting weaker as the quarter progressed? Where there’s some level of stabilization? And then, kind of how do you look within that context on the fourth quarter kind of going beyond the earnings guidance that you provided if we think about sort of above the EBIT line items? Where do you see kind of growth in those regions going in the fourth quarter?

Yes. I’m not sure that I would say there was any noticeable difference between, let’s say, July and the other months of Q3. I will say that as a general observation about the two regions and specifically auto, there were down more in the third quarter than they were in the first and second quarter. That may just coincide with the time of the year, I’m not sure. But with respect to our estimated 10% increase in EPS in Q4, that takes that all into consideration.

Okay. And then your outlook on raw materials, you mentioned that in the quarter there were an aggregate balance of about 1%, so almost flat year-over-year. Would you expect that to get better in the fourth quarter on year-over-year comps? Or are we sort of at the end of the modest deflation cycle that we hit in raw materials over the last year and a half?

I mean again I think it’s really difficult to answer for the portfolio in its entirety, but I’m expecting to see probably something that looks a lot like what we had in the third quarter with respect to year-over-year changes. Maybe it starts to get a little bit better, but really that remains to be seen as the quarter plays out. But at this point in time, I’m not seeing much different.

Got you. And then final question, you mentioned in the press release and in your prepared remarks seeing some cracks in domestic consumer market demand. Were you referring to any particular segments of your business or segments of the economy where those consumers in the U.S. are slowing?

I think more so than anything else is probably some – we have called it consumer, but it may be right on the edge of saying consumer electronics. As you know, sometimes it’s not a perfect science on where things go into from an end market standpoint. But I’d say I’d point that out as one area that seems to be a little bit weaker this year than it was last year. I don’t know whether or not that’s a tariff thing or trade thing, I don’t really know. I mean our customers say that to us sometimes, but it’s really hard to determine if that’s the case. For us, we focus on our new business gains and taking care of the customer, and from that standpoint, I think, things are going well as they could be.

Okay. Thanks, Bob.

Your next question comes from Bob Koort with Goldman Sachs. Your line is open. Bob Koort, your line is open, please check your mute button.

Good morning. This is Don Campbell on for Bob. You mentioned on the Color business, in the first half of the year, it seems like there’s pretty decent margin declines on a year-over-year basis but actually improved this quarter where it’s relatively flat in terms of margins year-over-year. Can you give a kind of a breakdown? I think volumes still were relatively pressured this quarter on a year-over-year basis? So can you give a little bit of breakdown on what improved this quarter to make that differential between this year and last year’s margins a little bit smoother?

Yes. Look, I think it’s a combination of a number of sort of actions that we have sort of called self-help here over the course of this year. There have been some cost reductions. But we have also worked on pricing and probably benefiting a little bit here from mix in the third quarter, notably, around additives in the sustainable solutions, I mentioned, carried a little bit better margins than some of our other products. I think that’s really what is lending to it. So I think what you are seeing in the third quarter is really just sort of cycling past where we were last year and finally seeing some benefit from those actions.

Got it. That’s helpful. And then sort of barrier additive technologies, I think you guys said that grew 3% this quarter. How does that compare, I guess, to last handful, of course? I’m just trying to get a sense of whether that’s decelerating or accelerating in terms of trend there?

Yes. Look, we did see some stronger sales in that market in the first quarter, but I’d also say there’s some seasonality effect to that, and a lot of that, of course, is outside the U.S. So I’m not sure I would conclude that while it is a little bit slower growth in Q3 from where it was in Q1, I’m not putting that in the alarming category. I think, we’ll see more here as we get into the fourth quarter, but certainly customers in every industry are thinking about how much inventory they have and why and always they’re concerned just in general about what’s going on with the macro economy.

Got it. Thank you.

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

Good morning. How much was FX as an impact on profits for Q3? And how are – and your thoughts for Q4? And then on the Q4 outlook, are you factoring any significant year-end destocking or shutdowns by your customers?

So FX I think was about $1.5 million bad guy for the quarter. A lot of that shows up in Color, some in Engineered Materials, as you know. And I think we’re going to continue to see a little bit of a headwind in that respect. It’s been interesting over the last eight quarters, the dollar just doesn’t seem to be – I see the dollar is doing well, the euro hasn’t been pulling back up where we hoped that it might. With respect to destocking, I think our customers basically are very cautious about the year and how the next year starts. And so I think they have been kind of on high alert here for a period of time. So I’m not sure if you’re going to see something unusual in the fourth quarter. Typically, you do see much lower levels of inventory at the end of the year, and I really don’t know if that’s going to be different this year than what we’ve experienced last year.

And with respect to the sustainability push that you were emphasizing this morning, how much of this is going to lead to a change in skill sets or hiring patterns? And how much of it is just disclosing and reframing initiatives that you had already well underway?

Well one of the things I’m really proud of what we have done, as you know, Laurence, we’ve added a lot of commercial resources over the last four years. Often times, people hear commercial and they think sales. But for us that really has been sales, marketing and technology, and in fact, the technology increase has really been on par with sales. So it’s almost been one-for-one, as we’ve added a sales person, we’ve added somebody in technology. And I think that’s aligned with having a greater degree of engineered complexity in the portfolio, but a lot more focus on the sustainable solutions. And that is inside the business units as well as what we sponsor at corporate from a research and development standpoint.

And then lastly, are there any end markets that have longer selling cycles that we should see shift as a factor in your growth algorithm in, say, three to five years?

Well look, with respect to sustainability, particularly for food and beverage packaging, that has historically been a long sales cycle just because of FDA and related regulatory requirements. What I do think you will see is brand owners pushing for that to happen faster. So as they look to use more recycled content or streamline their products, they will be pushing that faster if they can. I think it will still be a relatively longer sales cycle, but I do think that’s one that could actually get a little bit faster. Outside of that, I wouldn’t say there’s any change to how I’m viewing sales cycles today versus a year or two ago, with healthcare being the longest and some of the other, I’d say, maybe standard packaging materials being shorter.

Thank you.

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

Hey, good morning, everybody. So just curious, in this you guys referenced earlier $1.51 in EPS from continuing operations that you highlighted at the end of this press release. In the – when you announced the divestiture of PP&S, it was – you had $1.54 in there. So wondering what the delta is that $0.03 delta? Is there more stranded costs maybe than you initially thought? Or why the slight difference in those numbers?

No, Kevin, really, what – as you can appreciate, when we had to split the PP&S out, there was a lot of work that we have done since that announcement on our overall effective tax rate for PP&S as well as from continuing operations. So the change really was associated with the tax rate.

Okay. Got you. Makes sense. And then, Brad, the cash generation this year has been really good and working capital, in particular, looks like it’s – you’ve managed that quite well. So wondering what you would attribute that to? And did anything reverse out, perhaps, in the fourth quarter? What is your outlook here for free cash generation? And do you see – are there more opportunities to drive working capital even lower?

Well, I think it will. We have the normal seasonality in the fourth quarter. Typically, there’s a further release of our working capital. As you know, this has continued to be a strong focus of the corporation, it has been for a long time, and appreciate your comments on that. The free cash flow this year from continuing operations is about $135 million, and that’s on $60 million of our capital investment, which is really a large chunk of that associated with supporting the overall growth. So that’s kind of what we’re thinking in terms of the overall cash generation for the year.

Okay, perfect. And last one for me is the, with the PP&S divestiture outside of the stranded cost, are there any top line synergies that you might lose from between things that might be sold through the Distribution business or any procurement synergies, anything like that outside of the stranded cost that might go away when you lose that business?

I think, Kevin, first of all, we have a supply agreement that will be an ongoing part of how we work with – between Distribution and PP&S. So it will be one of the largest suppliers that we actually represent on our line card and I think a very important relationship for us. So I think the Geon brand use that as a very good and effective way to go to market. Obviously, as a supplier that we represent, we need to work hard to make sure that they feel that way a year and two and three years from now so that we continue to have them as a supplier. So I don’t see that changing. I think we have a very good relationship and it will continue that way. I don’t know if there is really an impact here on the supply chain with respect to purchasing, primarily because the underlying base resin going into PP&S, or on PVC for example is not something we use in our other businesses. So there may be some small things here and there, but nothing related to point out as significant.

Okay, perfect. Thank you very much.

Your next question comes from Rosemarie Morbelli with G. Research. Your line is open.

Thank you. I apologize if it has been asked, but I was somehow pumped out of the call. So I missed some of the comments. Do you think, Bob, that there is enough recycled material currently to supply customers should they move very quickly towards increasing that particular level?

I don’t. I think that’s one of the challenges that the world is facing right now is that brand owners are making some pretty big statements about where they want to be in five or 10 years with respect to the use of recycled content. And presently, we don’t have enough supply to meet those needs. So fortunately, I think we have organizations like The Alliance to End Plastic Waste that’s very much focused on improving the amount and degree at which we can harvest recycled content. But right now, that’s a huge challenge.

So was this in mind when we hear from a lot of large beverage companies that they are planning in switching from plastic bottles, single served to aluminum cans and some of them have already announced that they are going to add capacity. So if this is actually the case, how much of an impact is it going to have on your barrier technologies? I’m assuming that a lot of that is going into those plastic bottle, cans or maybe I’m wrong.

No, a lot of the barrier technology is going into food and beverage applications and PET for beverages, for example, is a really good place for that work. So what to the extent that somebody switched out of a PET like 20-ounce bottle and 1 to an aluminum can, yes, that would impact us. We are really seeing that in very small areas, the ones you’ve probably read about. I’d say, we’re getting way more pull from customers though to actually help them continue to use PET but to do so with a greater degree of recycled content. So what I’m hearing from customers really is more of the latter than an outright switch out of material content.

Okay. Thanks. And I have two quick questions. Your EPS growth of 10% in the fourth quarter, does that include additional share buyback? Or is it just pure operations improvement?

That’s just operational improvement.

Okay. And then could you remind me of the size of the revolver you are going to pay down?

Yes, Rosemarie, if you look at our Q, which will be filed here momentarily, there’s about $194 million on the ABL right now that will be paid down.

Okay. So that leaves you with quite a bit of cash in hand to play with, if I can use that word? All right, thank you.

All right. Well, thanks, Rosemarie. We appreciate your question and all the others that we got today. We apologize for what seemed to be a little bit of a technical difficulties on the call. We did hear everyone okay, but we know there were some people who were bounced and fell off. So we’re available to answer questions and take those over the course of the next day or two as you have them. But for now, we’d just say thank you for joining us on the call today. We look forward to updating you on our progress at our next regularly scheduled call in January. Take care.

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