Greetings, ladies and gentlemen, and welcome to the Fourth Quarter 2008 Earning Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this call is being recorded. It is now my pleasure to introduce your host Mr. Roger Schrum, Vice President of Investor Relations for Sonoco Products Company. Thank you and Mr. Schrum, you may now begin.

Thank you, Shreya (ph), and good morning, everyone and welcome to Sonoco's 2008 fourth quarter and annual financial results investor call. This call is being conducted on February 5, 2009. Joining me today are Harris DeLoach, Chairman, President, and Chief Executive Officer; and Charlie Hupfer, Senior Vice President and Chief Financial Officer. Our financial results for the fourth quarter and the full year were released before the market opened today and are available via our website at sonoco.com. Let me begin by stating that today's investor call may contain a number of forward-looking statements that are based on current expectations, estimates, and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. Additional information about factors that could cause different results and information about the use by the company of non-GAAP financial measures is available in our annual report and on the company's website. With that I will now turn it over to Charlie Hupfer.

Okay thank you, Roger. Today, Sonoco reported fourth quarter EPS of $0.36 a share and base EPS of $0.49 per share. Base EPS of $0.49 per share excludes restructuring and asset impairment charges and is inside our revised guidance of $0.48 to $0.52. The quarter was a little weaker than we expected when we revised guidance on December 5th. Industrial volume was especially weak in November and December and frankly that seems to have carried over into 2009. And it is reflected in our 2009 guidance that I'll talk about a little bit later. Let me begin by reconciling GAAP net income and EPS to base net income and EPS. In the fourth quarter 2008 we took a restructuring/impairment charge of $22 million pretax. After tax that's 13.1 million or $0.13 a share. The majority of the restructuring charge and impairment charge represents restructuring that we announced on December 5th. The big items were the closure of two paper mills and an asset impairment charge in Brazil. If we add the $0.13 to the as reported EPS of $0.36, we arrive at base EPS of $0.49 a share. Last year in the fourth quarter we had 8.7 million in restructuring and we added 4.1 million to environmental reserves related to the Fox River for a grand total of 12.8 million. After tax that's 8.5% -- or $8.5 million or $0.08 a share. If we add the $0.08 to the as reported $0.54, we arrive at $0.62 EPS for the fourth quarter of 2007. So with those adjustments in mind, I'll read out to you a comparative base income statement starting with net sales which were 934.6 million, down 11.8% from last year's 1.601 billion. Base EBIT is 75.9 million down 17.5% from last year's 92 million. Net interest expense was…

Thank you. Ladies and gentleman, we will be conducting a question and answer session. (Operator Instructions). Our first question comes from Claudia Hueston from J.P. Morgan. Please pose your question.

Hi, thanks very much, good morning.

Good morning.

Hi Claudia.

I was hoping, you could talk just a little bit more about the Consumer Packaging business and if could maybe break out some of the different product markets, composite can, flexible packaging and the like, and just talk about what's happened from a demand standpoint in those markets and maybe if there's any changes in competitive behavior there?

I can certainly give you some -- a little bit more color on the volume and I think the important thing there is in our rigid paper and plastics business in the U.S. and that's largely composite cans. What we actually saw volume there was up slightly. It was up about little less than 0.5%, but that's a bit misleading because what we saw was and I think I commented we saw a range of 6% to 13%. Our snack volume was up 6%; our dough volume was up 13%, concentrate which had been showing a steady decline for decade was up 9%. Miscellaneous food which includes -- was up 13% and that includes some of those coffee conversions we've talked about. And then we also had, and I don't have a percent number, plastic bottles sold to Abbott is a new product this year versus last year. So we have some sizeable increases in volume on the composite can side. But there were some negatives and I mentioned that caulk and adhesives were down 22%, and the nut category, I don't know what the percentage was, but it was a couple million dollars short of last year's number. So when you roll it all up it was... and the volume was up modestly in rigid paper and plastics but really pretty good volume in the basic snack, dough, concentrate, the core part of that business. The matrix business that's the plastic bottle business, their volume was down a little less than 5%. But that's mostly coming out of the Canadian plant and it's really the one customer and FX related. And then risen -- composite cans in Europe was down 7%, that's a little bit of lost market share and the decline in dough business there and then our Phoenix business was relatively flat in dollar terms year-over-year. So, there's some pretty good strength in the consumer side of the business in both the sales side principally volume and also in the -- and then all -- that trips over into the profit side, price cost was good in that segment. Price cost that we did had to absorb a bit of a year-over-year at any rate, metal cost and film cost but we did and so profitability was strong as well.

Okay.

Harris might want to give some color to this.

I think that's fine Charlie.

Okay.

That is good. Paula, you need something else?

Maybe just your confidence in recouping the tin plate cost inflation that you mentioned Charlie?

As Charlie said we did see some of the increase in the fourth quarter of which we absorbed most of as you know most of that is contractual pass through. If we pass through, I don't know what percentage of it was 50, 60% of it the first of the year. The balance of it will come in the second quarter and I think we'd fully recover it by the end of the second quarter of the year.

Okay. That's helpful. And then just finally Charlie, I don't know if you have the foreign exchange impact on sales just in by segment or at least in the sort of two larger segments. That'd be helpful if you have it.

Well, next to none of it in the packaging services and the other segments. So it's probably two-thirds is in the Tube, Core and Paper segment and about one-third is in the Consumer Packaging segment.

Great, thank you.

Thank you.

Thank you. Our next question is coming from George Staphos from Banc of America. Please pose your question.

Thanks, hello and good morning.

Hello George.

Hi George.

Okay. I guess first question would be when you look at the change in guidance from December to current time, is most of that negative variance coming within tubes, cores and paper and I guess some fall along within packaging services. And is there any change, if we could have seen what you were thinking about back in December, any improvement that partly offset that within the consumer segment. How would those shake out as you revise your guidance?

George I would say that probably 95% of net down were guidance was a result of the tube and core and paper operations globally where we have seen as Charlie talked about do we sort of put in perspective we were going through the year through the first 7, 8 months and we were down 4 or 5% year-over-year. We got into September as you may recall I think we said it was down by 8%. October was down about 10% and then it fell off pretty dramatically to the high teens and then in December it was in the mid 20s% year-over-year comparisons. And that was around the globe as Charlie said except for South America. As we looked into January, and had visibility obviously on in the January, we have not seen any improvement in North America over the December run rates. They too have been cold. So I would say that going back to my original statement probably 90% of that is a result of the tube and core business. On the offset that we have seen continued accelerating gains in a couple of sectors that Charlie talked about. Concentrate, I think, was up 9% for the year and that's continued to grow, dough has continued to grow, which says to be once again that the consumer is moving down that value chain, trying to get more value for the dollar, but also staying at home and eating and we continue to see that trend going on into January.

Thanks for that Harris.

Okay.

Now as we think about January, so there's no improvement versus December. Has it deteriorated versus December?

No, it has not deteriorated. I would say it's basically right on target with where December was George, and I'd carry that a step further We haven't seen any further -- we haven't seen deterioration anywhere but clearly the tube and core volume has not improved.

Okay. Now in packaging services, have you seen any incrementally intensified competitive activity since either the fourth quarter or earlier in 2008? Obviously some of the performance that you're seeing reflects previous share losses and apparently you've now anniversaried. So help us -- give us some details in terms of what might be happening or not relative to competition there.

Okay, let me start off by saying we have not seen any increased competition in that business and you are quite correct that the year-over-year reflects the bid that we've talked about a lot; and that we lost some shares on. And that is now grandfathering. Actually we had picked up some nice new business that some of which we've talked about, some of which would be a bit premature to in fact talk about. But we have seen a continuing weakness in that sector with customers and we have delaying launches without getting to specific customers, we had a launch in the December timeframe that was set up for let's say a 100, and they call back and cut it back to about 50, simply because of economic pressures that they were seeing particularly from the larger retailers that didn't want to take that much inventory into their system at this point in time. So, clearly we have seen a slowing on that side of the business not as a result of competitive pressures but what I would characterize as more economic pressure George.

Okay. Is that leading to any changes in your customers' expectations from marketing support for products that utilize your consumer packaging?

Actually, I think it -- what we are sensing and seeing some of is that some of our consumer -- customers are in fact reducing their cost of design, marketing and are relying more on us to provide some of those services which we view as an opportunity going forward.

Okay. I will turn it over, thanks.

Thank you George. Operator: Thank you. Our next question is coming from Mark Wilde from Deutsche Bank. Please start your question.

Good morning Harris, good morning Charlie.

Hi Mark.

Hi Mark, how are you?

Good. I wonder just first globally if you could differentiate at all away from just the comments you made about Latin America being a little stronger. You've got a big position in Europe, variations there and variations in the other places if you do business globally?

Mark, I'll take that and I'll let Charlie get into some specific numbers. What we saw in the fourth quarter in Europe was almost a mirror of what we saw in the U.S. in terms of volume decline year-over-year. Now, we didn't see that in Europe as early as we saw in the U.S. they tended to follow us and we started seeing the softness in Europe probably in the October timeframe particularly after they came out of the vacation time of the summer. Asia has been slowing on the tube and core side, I would say, since mid-year, and Charlie referenced, I referenced both South America being stronger but I will say that in December we started seeing the slowing in South America, particularly Brazil as well. And Charlie, you may have some color on the numbers but -- that I didn't give.

Well and then of course, Europe would be the, besides U.S., the next biggest operation and their volume -- their overall volume was down 14%, I said earlier. The legacy operations and that would be the U.K., France, Germany, Finland, those old mainstay operation at Sonoco were down 11%. But the frontier operations were down 21% and that's unusual for us that we've been seeing good strength there. Turkey was down and that's textile related probably about 17%. Greece was down almost 39%, that's probably economy and strikes. But we generally saw a weakness across all of the regions which -- with really does reflect what Harris said pretty significant drop-off when it occurred.

Okay. And second question I have in the two big core business, you've got a competitor that has a big financial maturity coming up in the second quarter. I just wondered whether you're seeing customers who may want to move business around because they're nervous about that.

Mark, let me cautiously answer this -- that question.

Okay.

Simply by saying there's a lot of interesting things going on in that market and we are having a -- probably a unusual -- more unusual enquiries about RFPs and customer interest than we've seen in the past.

Okay, I appreciate that it's a sensitive issue here, but I think it's also a pretty obvious issue.

Well, I want to be sensitive in that. We are seeing more activity and more interest coming to us than perhaps we have in the past.

Okay, that's fine. The last question I had, you mentioned, Charlie mentioned that the OCC prices were down like $25 in December? Can you just help us understand, at what point does this just get to be completely uneconomic to go out and gather the stuff?

Well, it fell to $20 a ton in December, it popped back up on the 1st of January -- and January $20, it snapped back up to $25. I think that we use to see when we would get a lot of people collecting it, when it got to that level these people quit picking it up because of the economics that you bring out and it starts going to the landfill, then you -- as the economy picks back up it creates quite a spike in it. But I think you are at level where we are having a lot of telephone calls from small independent dealers that are saying, hey, maybe I don't want to be in this business. So this is part of the cycle that you normally see. It's been a long time since I have seen OCC in the $20 and $30 range. But what we are seeing today follows the patterns of the past. So you right on target.

Okay. I guess actually just one other follow one. Just -- can you talk about how you're kind of dealing with credit issues now vis-à-vis your customers?

Well Charlie's got some numbers, 0.5% of current is the -- hasn't fallen off at all. It's where it needs to stay obviously least where it needs to be, we are staying on top of it. We do have a few customers that have dead bullets like you described with other people. And obviously we all -- we're watching those and dealing with them appropriately as we move forward. But we don't have any concerns at this point about our receivables, and we think our percent is where it should be, and I don't know the required number, Charlie does. But we think we are fully reserved against where we need to be in that regard.

Okay. Very good, thanks Harris.

Thank you Mark. Operator: Thank you. Our next question is coming from Chris Manuel from KeyBanc Capital Markets. Please pose your question.

Good morning gentlemen.

Good morning, Chris how are you?

I am okay thank you, couple of questions for you. First as you take a look through your different businesses and having seen an incremental downturn from where you were October and even November, when you were taking a look at restructuring. What additional steps have you taken as you look to the businesses that you could potentially share with us. Have you taken out more temp personnel things of that nature? Have you or are you contemplating further restructuring action should volumes persist at this level for another quarter or so. Can you maybe show us a little bit of the thought process?

Chris, you obviously asked several questions in that. I think that I saw I remember the other day that basically we were about $14 million year-over-year our S&A down from 2007. And against plan we were down some 35-$34 million. So, I think cost control in the company from a discretionary spending standpoint has being climbed down and it continues to climb down. We started last year with some contingency plans which we implemented in the first and third and fourth quarters. We have started as we were in the budget process following then we started with some contingency plans. Some of our businesses have already implemented those as already this year simply because of volume levels which you talk about. We have in place other plans if in fact volume continues to drift down from where we are then we will in fact to execute, we have taken temporary employees out of the system where they need to be out. We have taken a significant amount of downtime in the system not to build inventories. For instance of that is we took our in our mill systems 770 days of downtime in 2008 and of that 769.6 to be exact 70% of it was in the last five months of the year. And that was even compared to '07 there were pretty more paper machines in the system in '07. So, we've taken a significant amount of downtime which has resulted in us for allowing people do in that period of time to control costs and not to build inventories. We have continued to do that in January where we have taken a downtime in our mill systems. So we will continue to match our cost structure to the revenue level that we are experiencing.

Okay. I guess, let me ask one follow on to that. Does there come another point at which you beyond taking downtime, you have to take another layer out of overhead and close another mill or two somewhere around the globe and a few plants, things of that nature.

Chris, we have in those plans and I talked about contingency plans to take that to another if that is necessary those plans, sit on my desk and in my factory what we need to do it.

Okay. Second question I had was, you said that the cash for 2009, it sounds like Charlie you're going to still have a chunk of free cash flow out even after some lower earnings. What are the plans as you look here today? The debt levels are lower they have been? You do have a pension that sounds like you could use a little money. In the press release, it sounded like you're looking at opportunities and things as well. You may be flush out a little of the thought process?

Chris, you are correct. We'll still have good free cash flow next year, good operating cash next year, even reduce levels that we describe to you. We... projections show that we will be out of our commercial paper program sometime in the second quarter or third quarter depending on the earnings level. Frankly, we will continue to conserve that cash and look for opportunities. Don't see us, there is no reason for us to fund this pension plan this year and I don't anticipate using that cash issue. We'll have some payments in 2010 depending upon the degree to which the market comes back and sort of dictate what we would have to do. But I think we will continue to do as we have done in the last 12 months. And that is, watch our cash, debt levels for your point is the lowest level have been in 25 or 30 years as debt to capital and we will look for opportunities which I am reasonably convinced they're going to present themselves in the next few months.

Okay. Thanks very much.

Thank you, Chris.

Thank you. Our next question is coming from Joseph Naya from UBS. Please pose your question.

Yeah, I was just curious. Obviously, quite a bit of I guess the weakness that we're seeing here has been coming in the industrial operations. I was wondering if you were looking for any particular signs or things that might indicate that we would be seeing a turn there?

Joseph, I think you look at just GDP spending. Our GDP basically numbers that are coming in. We are in my mind at least, generally a leading indicator. Somebody described Sonoco to be the other day, so if you'd kind like the canary and the coal man and I'm not sure what the canary is doing right now. But as I look at our various sectors traditionally as most of you on the phone know our customers don't keep a lot of inventory. And we basically don't keep a lot of inventory either so, when we do see a turn around that canary stops revising, Joe we revise pretty quickly and Charlie made the point that volume comes to, I think $34 million the effect of volume on EBIT was about $34 million in the quarter. When that comes back, that comes back pretty quickly. And so I would watch at least I'll the watch daily of the weekly numbers coming out of our industrial products business across all those sectors being textiles, film, and generally that's basic industry and when we start to see that turn, it only turn pretty quickly. But I can't give you much more color on that. Hello?

(Operator Instructions). Our next question is a follow-up from George Staphos from Banc of America. Please say your question.

Thanks, Harris when you look at the business and talk about it, we are hearing a number of comments meaning as your customers don't carry inventory, you don't carry a lot of inventory and I am referring most to your core business. You are also from your data and maybe be picking up a little bit of share and as you're answering Mark's question earlier again given some of the trends that of an out for a while perhaps you are getting even more share of your piece out there. How do we reconcile all that with the downturn that you're seeing in volumes in tubes and cores down 15% on average and 15 to 25% in the most recent months, I mean if the customers don't carry inventory it doesn't reflect de-stocking, so is it purely demand driven and consumption driven?

All right. George, I think it's purely demand driven and consumption driven. I was at a meeting last week with it's a sector of one of our largest sectors in the industrial side of our business, it uses our obviously our cores. And they're leading producer of this particular product, stated to the group said, our fall off in demand in November, December was unprecedented in our industry. And that was echoed by the other six CEOs that were sitting around the table in this particular industry. And I also have an occasion earlier this week to be with another sector. And I heard the same sort of thing about the demand of their products. I think it's purely demand driven. I have been around in Sonoco 20 something years and generally what we see in this downturn is, vis-à-vis downturn of 10-12% sort of see it from the... to the top of the cycle. And this is much deeper than that. And we are clearly are seeing more follow up and so this is deeper than we typically see.

Okay. I appreciate the color there. I guess then well maybe this is a way off in the future, how do you prepare then for that alternate, we hope pick up where the canary starts tripping again. And we know the vinyl (ph) will come back fairly quickly when it does but we also know that the cost can recover fairly quickly too. And so when you hope that you're finance and earnings acceleration, you loose a little bit in terms of spread. What are you doing in advance or is that so far out that you worry about when you have to?

Well, you worry about you do what you can now and obviously there are some things that you can do on the waste paper side and look at that because that is our largest cost and we are in fact preparing for that uptick. I think we are known in Mark's question obviously raises as we look into these projections as Charlie said we are looking at business continuing on the industrial side as it is now. And that's a low end of our guidance and upper end obviously there is a second half recovery. I think we are known in that is, what happens in this market with the weakness of some of the competition and what kind of opportunities that does present itself to take advantage of. And I think that's frankly the upside in this argument, if there is a upside.

Do you think there is more opportunity in conversion or do you think there is may be more opportunity in getting your... way to phrase it... building more flexibility into your supply of furnish and access to it anyway.

Well I think it's a little of both here George, I think improving your access into furnish obviously improves your cost situation. So I think the converting side opportunities obviously drive the volume and that's what all can we drive as looking to profitability. If you have the volume, everybody have volume, you probably wouldn't have 20-$25 OCC, but if you have the volume 20 to $25 OCC this is all the very money in the process.

We'll look forward to buying some umbrellas. Thanks Harris.

Thank you, George.

Thank you. Our next question is a follow-up coming from Mark Wilde from Deutsche Bank.

Yeah, Harris. I'd like if I could just for a couple of minutes just take maybe two or three steps back. If you think about what Sonoco has been trying to do over the last, for a decade and more, of really kind of shifting the company from kind of an industrial packaging the more of a value added consumer packaging focus. It's a strategy it seems to me that we've seen some other companies both kind of small and mid-size companies pursue some with more success than others. And I just wonder, when you look at your own experience in trying to go through this metamorphosis and you've seen what other folks have accomplished or not accomplished, as they've tried to do it. What are the two or three kind of main lessons you take away from that?

Well I think, Mark, I'll just add to that saying that I think the company's business model is working new way. I would expect it to work in this environment. The industrial is down more from a volume standpoint and I would have expected in a recessionary environment and more than we've ever seen in a recessionary environment. But nonetheless it is working the way I would expect it to work. Both OCC following and we have down from basically a 60% industrial, 40% consumer we flipped that where its about 50-50 today. And obviously, as Charley pointed out the consumer side is up nicely year-over-year. I think the learning's in that is probably if we could move it faster and we should and would like to have done that. We generate a lot of cash on that industrial side of the business. We continue to generate a lot of cash on that even it's lower levels. So with moving it faster and its always in my case I think that there is always opportunities to execute better in particular places and so I think those are the two focuses moving faster and continue to improve execution.

Okay, very good thanks.

Thank you.

Thank you. At this time we have no further questions, I would like to turn the call back over to speakers for any closing comments.

Thank you again Shreya. Again let me thank everyone for joining us today. We certainly appreciate your interest in the company. And as always if you have any questions, please don't hesitate to give us a call. Thank you again.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.