Good day, ladies and gentlemen and welcome to the Quarter Three 2014 Sonoco Earnings Conference Call. My name is Sheila, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Roger Schrum, Vice President of Investor Relations. Please proceed sir.

Thank you very much. Good morning and welcome to Sonoco’s third quarter earnings investor call. This call is being conducted on October 16, 2014. Joining me today are Jack Sanders, President and Chief Executive Officer and Barry Saunders, Vice President and Chief Financial Officer. A news release reviewing the company’s financial results was issued before the market opened today and is available on the Investor Relations section of our website at sonoco.com. In addition, we will refer to a presentation that is also posted on our Investor site during the call. Let me remind you that today’s call contains 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 on today’s news release and of course on the company’s website. Now, with that, I will turn it over to Barry.

Thank you, Roger. I will begin on Slide 3 where you see that this morning we reported third quarter earnings per share on a GAAP basis of $0.69 per diluted share and base earnings of $0.72, $0.02 above our guidance of $0.66 to $0.70. Before reviewing the base P&L for the quarter, I will mention a reconciliation of the GAAP to base earnings is in today’s press release and on our website, but also summarized on this slide, where you can see that the difference this quarter is due to charges related primarily to previously announced restructuring activities and a small intangible asset impairment charge. So, turning to Slide 4, you find our base P&L, where you see sales were $1.264 billion, up 2.9% year-over-year and you will see all the drivers of the change on the sales bridge in just a moment. Gross profit was $227.7 million with our gross profit margin declining only slightly to 18% due to the mix of business and light productivity. Base S&A expenses and other items were a net expense of $111.4 million which was lower than last year due to the settlement of the lawsuit resulting in a net $5 million pick up after related expenses, as well as lower management incentive accruals in this year’s third quarter plus resulting an EBIT of $116.3 million, which was 10% over last year. Below EBIT interest was $12.9 million and favorable to last year due to lower average borrowings and taxes of $30.7 million were higher than last year as higher pretax earnings were partially offset by lower effective tax rate of 29.7% this year versus 31.3% last year. Equity and earnings of affiliates was $2.3 million and essentially in line with the prior year, thus resulting in base earnings of $74.6 million or…

Thanks, Barry. Let me make a few comments on the quarter, talk more about the Weidenhammer acquisition, and finally review what we see going into the fourth quarter. First, let me start with the Weidenhammer acquisition. We received approval from the German regulators on September 30 and expect to close on the acquisition by November 1. You have heard me say this before Weidenhammer is truly a premium asset with well-invested and highly automated operations, solid customer relationships and a talented workforce to meet the future needs of our combined customers. In addition, we are anxious to begin exploring opportunities to leverage Weidenhammer’s technical expertise in non-round paper cans, recessed membrane closures, paper bottom cans, and finally, thin-walled injection molded containers that utilize in-mold labeling for barrier capabilities. At our December Analyst Meeting in New York, we will further detail our expectations for this acquisition and the benefits these assets bring as we grow the composite can into the emerging markets of Southeast Asia, China, Eastern Europe and South America. Now let me switch gears and talk about Sonoco’s performance in the third quarter. As Barry mentioned, we did benefit from a legal settlement and a lower effective tax rate which when combined with our operating performance produced record results for the quarter. Also for the first time in 12 years, operating margins in our paper and industrial converting segment exceeded 10% and were 9.2% without the European legal settlement included. North American tube and core volumes grew 6% on a tons per day basis. This improvement is primarily due to the recent acquisition of a small tube and core operation in Georgia and solid year-over-year improvement in our tape and specialties segment, which more than offset declines in the paper industry. Tons per day sold in Europe in the…

Thank you. (Operator Instructions) Your first question comes from the line of George Staphos, Bank of America. Please proceed, sir.

Hi, everyone. Good morning. Thanks for taking my call and thanks for all the details. I guess first question I had was on overall the lack of incremental margin that we saw this quarter and you talked through some of the details, Jack and Barry. There has been, and correct me if you disagree the premise – there has been this trend over the last couple of years, where one, we have operational problems that will pop up either in the paper mills or in flexibles, you have this mix issue. Can you – what would you relate to us that would make us confident that on the operational front, Sonoco will continue to be what it has historically been, which is a real good board manufacturer? Specifically, what do you expect the consultants to tell you about making paper better that you don’t know already? And on the mix side in consumer, I wasn’t quite sure exactly what had gone negative for you in the mix in this quarter? And then a couple of follow-ons and I will turn it over.

Okay. George, let me address the first part relative to productivity. I can’t disagree. Obviously, over the last couple of years, we have been pretty inconsistent. I think last third quarter was pretty strong, but that’s really the last one we have had. I do want to point out that when we talk about productivity to the community, we are actually talking about manufacturing and capital productivity and we were not talking about material productivity, we are not talking about fixed cost productivity, which we also track. And those have been doing reasonably well. But specifically to manufacturing productivity, what we expect the Sinclair Group to bring us is really a way to accelerate the deployment of SPS through the mill. I’d also tell you that the biggest issue relative to productivity on a consistent basis has been this Hartsville mill complex. It’s by far our largest complex and the issues have kind of been isolated here on the industrial side. And they have a method to really help us speed up the deployment of SPS and stitch together all the pieces, so that we can get our results faster. As they look at the SPS process and how we make paper, they understand like you that they really can’t help us do that, but they can help us deploy our process that does drive productivity and does drive it forward. Specifically to the issue in flexibles right now, it is a unique issue confined to one plant and one specific material. And we have an idea about the root cause. And we understand it, but we are driving to fix it. And as I mentioned, we are also going to drive for restitution.

Okay. On the mix side, what’s happening in consumer, you said there were some issues within and without the segment? And then I guess my follow-on would be could you give us a bit more color in aggregate? And then within the business in terms of how tube, core and paper volumes are trending, I think you said flat, but then there were some acquisitions in there? Thank you.

Okay. Certainly, from a mix perspective and consumer, there were several things going on. As Jack mentioned, composite can volume in North America was down little less than 2% or so. And even within composite cans, there was little change in mix within that business. Then of course that was partially offset by some higher sales of metal ends, which just happened to carry a lower contribution. So, those were two of the factors affecting that as well as some negative mix just between customers in blow molded plastics. So, that sort of noise that impacts us in a particular quarter as it relates to mix. And as it relates to the volume in the individual categories, as Jack mentioned, volume was up slightly in tubes and cores North America driven primarily by the acquisition, because excluding that, we actually saw total volume in the paper related business being down almost 3% for the quarter. And again that was then partially offset by some improved volume and tape and specialty in some of the other categories.

You don’t have those numbers Barry for tape, specialties and some of the others?

Yes. Tape and specialty was up 4.4% year-over-year, film largely unchanged for the category as a whole and textiles down just very slightly.

Thank you. I will turn it over.

Thank you. And your next question comes from the line of Ghansham Panjabi of Robert W. Baird. Please go ahead.

Jack, can you just first off characterize what you are seeing in the macro side across the major regions that you have exposure to, did any month look materially different from a volume perspective?

No I think it’s been kind of a continuation of what we are seeing, we see the U.S. getting the economy actually getting a little bit stronger and then that underlying tube and core demand firming a little bit. As Barry said we were up in tape and specialty, that’s of course being offset by paper. Europe, a little weaker, in general, that’s certainly what we see. Asia, Asia was up a solid 10% on a year-over-year basis, so that’s solid. And then the continued weakness in Brazil that we don’t expect to kind of improve anytime soon until we are probably through the elections.

And then just on Europe, just for a clarification, how did that progress throughout the quarter?

It’s normal. It was obviously we start in the summer month when everybody is on holiday and it strengthens into the – the end of the quarter.

Okay. And then just on Weidenhammer in terms of the earnings accretion that you laid out when you announced the acquisition for 2015 I think it was $0.09 to $0.14 initially, how does that change post the devaluation of the currency recently and I guess I am asking because we can sort of calculate the translation exposure, but what about – are there any cross currency transaction exposures you have in that business?

Not a substantial amount, of course as we get this closed we will have better ideas as we go through. We don’t expect much impact from the acquisition for the balance of this year, but by the time we get to New York we will have a better feel for what the actual impact will be in 2015.

Okay. Thanks.

You bet.

Your next question comes from the line of Adam Josephson of KeyBanc. Please go ahead.

Thanks. Good morning everyone.

Good morning Adam.

Just on composite cans in North America, can one of you discuss what led to the 2% or so volume decline in that business and share your expectations for future quarters in that business in terms of volume?

Well, I think, we can go through segment by segment and I can give you a quick look at it. PIF and coffee each were up substantially as much as 9%. Snacks were down 6%. The real categories down is frozen concentrate that was down 12%. And I think one of the issues that we are having in frozen concentrate is they did not have a good crop this year due to some winter weather. And what that translates into is less orange juice and normally that goes into ready to drink and not into concentrate, so a bumper crop would mean more concentrate, a weak crop would mean less. I think we are certainly experiencing that. That’s down about 4% and miscellaneous food down 12%, so some up, but some down. Also we are finally seeing some increase in fiber caulk, which is or I should say caulk, we have been plastic caulk is up, but fiber caulk has been pretty weak, but we are seeing some pickup in that as well.

Thanks, Jack. Just a couple of others, one is in terms of your full year guidance now, I estimate it came down by about $0.03 at the midpoint using the previous tax rate what led to your lower pretax income expectations for the year, is it simply just the production problems in paper and flexible that you talked about earlier, is there something else going on?

Well, no, I certainly expect production problems to being to mitigate certainly in paper and also in flexibles. We can see it beginning to happen. It’s volume related, I –we have expected all year about a 2% volume improvement and we simply haven’t seen it, I think that I don’t expect to see it now since we are kind of into the holiday season if we were going to see it that have been here. So, we are just not projecting that 2% increase for it.

Got it. Thanks, Jack. And then just Barry, in terms, I know you are not giving 2015 guidance at this juncture, but just in broad terms, you have got the accretion of $0.09 to $0.14 from Weidenhammer, is there anything else we ought to be aware of at this point in terms of pension expense, the tax rate, etcetera just in light of what’s happened to the 10-year and in light of the fact that your tax rate is coming in a bit lower than expected this year?

Certainly, in terms of pension, we will be updating our estimate of what pension expense is projected to be for next year and providing that at the meeting in December. Of course, that won’t even then be finalized until rates are established and asset values finalize at the end of December. But it is fair to say certainly at this point with the rates falling that we would see some impact on both pension expense and the funded status as a result of the lower rates at this point. We provide in our 10-K guidance on that, where each 25 basis point change and rates impacts expense by right at $3 million for our U.S. plans and impacts the funded status by right at $40 million. So, that’s just kind of a ballpark estimate of the impact on those two elements. We are also expecting to have to adopt some new actuarial tables that will also impact both expense and the funded status of the plan. Right now, rough projections indicate that, that mortality impact would be about $7 million on expense and about $60 million on the liability. Again, all very rough numbers just providing some frame of reference around what we will be looking at as we move through the balance of this quarter.

Thanks a lot, Barry. Thanks, Jack.

You bet.

Your next question comes from the line of Philip Ng of Jefferies. Please proceed.

Hey, good morning guys. With oil falling pretty sharply, can you give us a sense how that impacts your business, I know it’s going to be different for each segment? And then on your resin exposure, polyethylene is up a bit in September, but I would imagine that’s going to correct, just want to get your view on that front and how are you setup contractually?

Well, I think oil is going to have a positive impact on the consumer side of our business. I continue to believe that new jobs coming into the market has been consistent. Wages are actually rising in some part of the country. That’s a positive. And now, one of the major expenses for all consumers, oil, gasoline here in South Carolina is under $3 a gallon. So, that has to be positive on consumer and consumer spending. So, I envision that and on industry as well on our freight cost etcetera. So, I think that’s all going to be positive. As far as specific oil derivatives, I do think that on the – in the protective business, we do expect EPS prices to drift down maybe even EPP prices during the quarter. So, that will be a positive when you net that against the price increases that we have been able to get in the market. So, we should have a price cost situation in the fourth quarter. And as far as our plastics and film business, most of that is on a quarterly change – price change mechanism that’s driven by the CAMI or whatever that thing is called. And that moves quarterly, so whatever it reset at, it’s already reset. If it falls during the quarter, we may get some gain from that.

Got it. That’s very helpful. And then your margins in industrial were actually quite strong. I know you did get like the one-time benefit from legal going to OCC prices, they pulled back a bit. I just want to get your thoughts on how are you thinking about your margin profile for industrial in Q4 and just higher level what’s your view on price costs overall?

Yes. Well, certainly as I said if you take that legal settlement out, it was around 9.2. We also have some positive pension costs in there that’s aiding that margin. I do think however we have done a good job with price cost. We have managed to push through some open market price increases and we are keeping those. Of course, the contractual agreements push through, but I think we are doing a pretty good job there. I think inside the tube and core business, they are doing an excellent job virtually in every facet of that business in North America. Great job in productivity, price cost management etcetera. I do think we are going to be able to hold on to some of these margins even as we go forward into ‘15 because of the way they are managing that business.

Okay.

If I could add one thing, it certainly is fair to say we wouldn’t generally expect them to be as strong in the fourth quarter just due to the impact of December.

Right, December.

On the margin.

Got it. And then just one last question, I know you sounded a bit more cautious on Europe overall, which isn’t surprising, but can you give us a sense how that impacts your various businesses, especially Weidenhammer, which is obviously big in Europe. Does that business tend to be little more insulated or it’s pretty broad-based that you are cautious on?

Well, to tell you the truth, I am not exactly sure I know, but I would assume that it would impact them somewhat if consumer spending falls off given that to a large degree, they are packaging similar type products to what we package in the state. So, I would estimate it to be similar.

Okay. Alright, thanks guys.

Your next question comes from the line of Chip Dillon of Vertical Research Partners. Please proceed.

Yes, good morning.

Good morning, Chip.

First question is could you just update us on your thoughts about the buyback. It looks like you bought back a little over 1 million shares so far this year and do you think you are going to get to the 2 million by year end? And how do you think about buybacks as we look into next year and of course recognizing that you are incurring a little bit more debt here with the German acquisition?

Yes, Chip. Normally, the fourth quarter is usually a pretty good cash flow quarter for us, but we have kind of laid out a strategy to buying back and certainly our intent to get to that 2 million share count. So, a normal fourth quarter from a cash flow standpoint we should be able to achieve that number barring any unusual circumstance. As far as…

As next year.

As far as next year, we have committed to use free cash flow to pay down the term loan that we took or pay down the monies that we borrowed for Weidenhammer. So, next year I don’t see us doing any share buyback, but coming out of 2015, we are back into the metrics that we want to be into and we will have optionality as to what to do with the free cash flow.

Okay. And then speaking about Weidenhammer and I think it’s in Malaysia, I might have the country wrong where you are adding a new plant for composite cans, are there going to be any changes to either the way you will scope that project or maybe the output based on some of the new technologies you expect to attain through the Weidenhammer deal?

Not specifically in the Malaysia plant, but I will tell you that their technology is pretty strong. And what we are going to do is combine our capabilities, our material science and their manufacturing technology, so that the plants we do install going forward are as good as they can possibly be. So, there maybe some, we are down the line a little bit in the new plant we opened up. The one that we will start to open up next year, maybe some of that will flow into there. We are certainly going to be putting in potentially a new line and a new plant in China. They will have some of the advantages of the Weidenhammer technology as well.

Okay. And one last quick one, when you look at the industrial papers business, if we let’s say see a change in uncoated recycled board prices, is that something that benefits you or do you somehow have to pass along those benefits to your customers?

Well, I would tell you, Chip on the uncoated recycled board side, some of our external customers are under contract and some are not. So, those that are under contract they get the pass through of the cost changes. Those that are not, don’t.

Got it. Okay, thank you very much.

Okay, thank you.

Your next question comes from the line of George Livadas of BMO Capital Markets. Please proceed.

Good morning. Thanks for taking my questions. I had I guess just on the consumer side your margins were pretty strong despite some of the continued production issues in flexibles. I am wondering if you could provide a little color on I guess what’s driving those margins and if you have any sense for when those operational issues might be resolved?

Well, again outside of that one flexible issue, I think the business is ran pretty well given the situations they were facing. I would also tell you our plastics business continues to perform well and is improving and so that’s a positive.

Okay. And then no sense I guess at this point for when those operational issues might be resolved?

In flexibles, I will tell you it is a – it’s a very strong focus areas. It’s a work in process. As I mentioned earlier, we believe we understand what the situation is and we are trying desperately to get back to ground zero including qualifying other suppliers to help us do just that.

Okay, great. And I guess just one other follow-up question on I guess Bill’s question before regarding some of the recent volatility in energy prices. Wondering if you might expect any impact down the road within your reels business in terms of demand from falling oil prices?

Not right off the back. I would tell you that some of the decline we have seen in the reel business this year has been in the steel reel market and it’s been in the steel reel market for the shale gas business. So we have already experienced this year some of that impact.

Okay, great. Thank you very much.

Your next question comes from the line of Chris Manuel of Wells Fargo. Please proceed.

Good morning, gentlemen.

Good morning Chris.

A couple of questions for you. First, if we could start on pricing I think you had several price initiatives through the quarter I think there were some in protective and I believe there may have been some industrial converted products as well, could you maybe give us an update as to where you are in that process, could you have those in as you sit here today, is there more yet to go or kind of sort of a tally of where you are?

Well, on the industrial side, no we wage very solid price cost. Of course, it presets in the fourth quarter but the non-contract items are still – have the same prices they had going in from the third quarter. So it’s not only industrial, we did some – the protective issue was negative price cost. Again, I think it improved $200,000 or $300,000 from the third quarter and prices continue to go in and that’s going to be combined with a falling resin price. I think one thing that happened in the third quarter is that prices actually continued to rise for resin, so that we didn’t make up as much as we had hoped but what we see now is that resin prices will fall into the third quarter – fourth quarter and we should be able to hold our pricing.

Okay, alright. For some reason I was thinking I saw announcements of like 5%, 6% increase there, but I may be mistaken. Okay. So if I can switch gears for a second and talk about what you are seeing most recently as we looked at some of the industrial production trends of what you used to call or maybe still call frontier Europe it seems as though some of those regions are off deep in the double digits 10%, 20% plus, have you seen any similar type fall offs in your businesses in those regions?

Well, no, I would say not – we have not seen that type of falloff, but certainly those regions are not growing at the rate they were maybe a year ago at this time when we were seeing solid double-digit numbers. But they are still up. They are up in the mid-single digit range, but not like I mean like a year ago. They were they were up 10% or so, maybe even a little bit more occasionally. And I am absolutely certain that we are seeing some impact of the situation in the Ukraine impacting textile shipments into that area as well as others areas of Eastern Europe.

Okay. That’s helpful. Thank you. And then one last question I had was – actually two last questions, but the first is the 360 ideation process you are now 18 plus months or so working through that, any wins that you can talk about or opportunities that you have unearthed, maybe you can give us an update on that give you confidence that maybe heading into ‘15 and beyond that your growth rates can get back to if GDP is a couple percent that we could still have something close to that or better within your growth rate?

Well, first of all, Chris it’s only about 12 months old since we actually kind of pieced the whole thing together. So it’s only been effective for about 12 months. And yes there are some significant opportunities that are manifesting themselves and expect to be able to talk about that more in New York. I can’t say that we have recently had a Board meeting and one of the customers that is involved in this process actually came to the Board meeting to talk to the Board. So I think that’s a very strong endorsement of the process of. But we will more to say in New York.

Okay, that’s helpful. Thank you gentlemen.

Hey, Chris, one other thing is that if you ask about price increases, we did put price increases into the protective packaging market and we are getting some traction with that. And I was saying the combination of that with falling resin prices should have a positive impact in fourth quarter.

Okay. And then just maybe as a kind of cleanup along those lines, you talked about – what are your anticipations for resin? Are we seeing some really sizable nominations in polypropylene working their way through the system, I want to say $0.10, $0.11 in that range and some polyethylene as well? Have you seen those maybe received that you are now anticipating that they fall or help us maybe put the two things?

Projecting resin prices are even more difficult than projecting OCC prices. And I am no good at OCC prices, so – but logically…

If you have a really pretty crystal ball?

But logically with increasing oil production and increasing capacity to produce resin coming on in the Midwest etcetera, I would expect that resin pricing should be somewhat stable to down over a longer period of time. And that’s about as good as I am at projecting resin. I do think it should trend down.

Okay, thank you very much.

Your next question comes from the line of Al Kabili of Macquarie. Please proceed.

Hi, thanks. Good morning.

Good morning, Al.

Jack, I just wanted to clarify your – the extra or the incremental caution in Europe in some of the emerging markets, which seems prudent. And I guess the clarification I would like is, is it something that you are currently seeing right now that gives you some of that extra caution or is it more just from some of the macro data we are seeing, you haven’t seen it yet, but given the macro data we are seeing that’s what’s driving it? And if you have any color on, I know it’s very early, but if there is any color on October trends that you could give us that would be helpful too?

Well, I would, Al, for the most part, it’s more macro trend oriented. And I really don’t have a window into October. I can tell you I have heard of nothing extraordinarily bad or extraordinarily good. So, I would assume it’s trending as it normally would.

Okay. Alright, that’s helpful. I appreciate that. And on the raw materials production issues in flexible, any idea as far as a timeframe of when you think you will resolve that? I think it was a $3 million hit in the third quarter, is it that order of magnitude you are assuming in the fourth quarter and any update as when you think you might get that resolved?

Well, certainly, actually there was a hit in the second quarter and the third quarter and I suspect – like I said, we do understand what’s causing it. We are making some strides. I expect it to be down as far as the incremental hit to the P&L should fall noticeably into the fourth quarter and then by the time we expect that to continue to go down as we open up the first of the year. We are working diligently on it and understanding it was point one and we are there. So, now getting this fix in is the critical part.

Okay, great. Alright, thank you for that. And then a follow-on to that is I think you indicated you weren’t expecting too much improvement in packaged food per se, but given the momentum you are seeing on the flexibles side, do you think you can grow your volume still year-on-year with the momentum you are seeing or given the sluggish packaged food end markets you are thinking it’s more stable? I just wanted to get a clarification on that one as well.

Well, I think again as we look forward and project into the fourth quarter, we are projecting volumes to be up on a year-over-year basis probably in that 1% range something along that line. Little more conservative than we were when we started the year.

Okay, alright. And then final question on the protective packaging in addition to sort of the price cost, I think there is some start-up cost as well and I don’t know if that’s something you could help us with magnitude of and when the startup cost from the new facilities tail off, which should also help the earnings of the segment down the road?

And those startup costs are there and they are real and they are in Mexico and now of course Kentucky we are beginning to start that process as well. On a quarterly basis, somewhat less than $1 million Al was – is what we would probably experience. But we need to be getting better in Mexico, that’s been online now long enough and then we will experience some from Kentucky, but that should – we are doing that a bit of a different way, so I expect that to improve a little bit faster than we saw in Mexico.

Okay, alright. I appreciate it. And good luck for the remainder of the year. Thanks a lot, Jack.

Thank you.

Your next question comes from the line of from the line of Alex Ovshey of Goldman Sachs. Please proceed.

Thank you. Good morning everyone.

Good morning, Alex.

A couple questions for you guys. One is just on the EBIT bridge and the other category, which is $35 million drag so far year-to-date, can you expand a little bit on what would fall under that other category and has there been unusual this year that would make that category a bigger drag than it would typically be?

Generally, the other category is inflation on everything other than materials. And we would expect that to normally run between $10 million and $12 million a quarter. So really there hasn’t been anything of an unusual nature of any significance. The most notable one would actually be what I mentioned earlier about the fact that we did have the favorable legal settlement in this quarter and is one of the reason that it’s only $5 million negative for the third quarter this year.

Got it. Barry and I think I heard you mentioned that there was some drag to earnings from the containerboard mill in Hartsville, was that related to lower price for containerboard given reports around some discounting for recycled containerboard, what was the main driver if I heard you correctly that there was a drag from the containerboard mill to earnings?

Yes. No, that was correct. The main drag was that we had a major rebuild of a winder for that particular operation. And it took us a little bit longer to bring that back up to speed. We struggled a little bit bringing the mill back up as fast as we wanted and that resulted in those 6,000 fewer tons.

Okay. Got it. Jack, so it was operational. And just one last one for me kind of looking at the overall volume environment for you guys also the packaged food pretty flat for a little while now and especially on the plastic side the competitive landscape is pretty fragmented, I mean have we seen any pickup in churn as a result of sort of being flat volumes and well I would characterize it somewhat fragmented supply base and is there any meaningful parts of your business that are coming up for renewal where there is some concern around making sure you can keep the business at the right price?

Well, I would like to tell you that’s probably true across all our business all of the time. Is it any different than normal? Not really. We are seeing like I said we expect about a percentage up on the consumer side into the fourth quarter, but nothing any greater than normal activity relatively to churn.

Okay. And that’s what I was looking for. Thank you, Jack.

You bet.

Your next question comes from the line of Steve Chercover of D.A. Davidson. Please proceed.

Good morning everyone. I just had one quick question. You mentioned the Fox River litigation as being a charge in the third quarter, as I understand it the judge vacated ruling on Fox River also during the quarter. So, I am just wondering did that reopen a liability for you guys?

No, I don’t think that there was a charge, there was a – we did enter into a potential settlement of that with the EPA. And the Judge’s ruling simply kind of put that on hold for a little bit until a further ruling can be issued. And the Judge asked really the fundamental issues he asked for clarity about how the ruling Judge got to his decision point. So it’s just been I guess sent to lower court for clarification and then we will see how it phases out, how it comes…

So it’s unlikely to increase the magnitude of you potential liability?

That is correct.

Very good. Thank you

Your next question comes from the line of Scott Gaffner of Barclays. Please proceed.

Good morning. Just want to follow-up a little bit on the resin commentary, Jack, you did mention obviously the margin pickup in 4Q if resin prices started to come down, but I wanted to look at it a little bit longer term, what do you normally see in a declining resin environment? How quickly do you have to give those reduced costs back to your customers in lower prices? What have you seen over time?

Well, again on a traditional plastics business, consumer and flexibles – excuse me not consumer – plastics and flexibles, those are quarterly adjustments. So, we have about a quarter window. One of the issues in Protective Solutions is that they don’t have that many contracts that have pass-through mechanism. It’s more of open market announcement. So, inside that industry, it will simply be adjustments to market price versus contract adjustments.

Okay. And do you know if that business historically has been able to maintain pricing even in a down cost environment?

Look, probably it would have a tendency to expand margin in the down cost environment because of the way the industry works now. I think I have said this publicly we are trying hard to be the leader in that industry and build the discipline around recovering cost as they go up. And we tend to be getting more and more support in that industry to do that, but that just takes time to come teach everyone that we think it’s imperative that you recover the cost that you experienced or the inflationary costs that you get.

Okay. And then in display and packaging, anything that you are seeing around holiday promotional trends, my understanding is a lot of the display and packaging product for like the end caps comes through that business. Anything you are seeing there so far gives you a read on North American holiday promotional trends or anywhere else in the world?

Nothing of that significant other than we are probably being pushed closer to the actual promotional time than maybe we have in the past as opposed to building in the September-October we maybe sliding into October-November to build out the displays.

Okay. And which of your businesses would you normally look to as leading indicators? I mean, you have talked a lot about macro and as far as your leading guidance, but any businesses that we really should be looking at as the primary leading indicators for you?

I am not really sure what you are asking me leading indicators for….

I am asking if any of your businesses, do you look at any one of your business segments as a leading indicator of where the rest of your business is going?

Well, certainly on the consumer side, we tend to look at the display and packaging and the volume that’s flowing through there to kind of tell us where are the CPGs going with promotions and what would that eventually mean to the products that we sell. That’s one way we would look. And tubes and cores historically continue to be one of our leading indicators on the industrial side of our business.

Okay. Just last question then on display and packaging, is there anything – have the trends changed at all with CPG volumes within display and packaging?

We saw some good activity early in the year. As I said, I think some of it is being pushed right now. We will have to see how it manifests itself over the next couple of months, but nothing of significance that would – that would tell me that we are going to see 2% to 3% consumer growth going forward.

Okay, thank you.

Certainly.

Your next question comes from the line of Adam Josephson of KeyBanc. Please proceed.

Thanks for taking my follow-up. Jack, just one longer term issue, obviously volume in U.S. packaged food has been consistently weaker than you and many others expected over the past few years really since the recession. Does this protracted weakness influence how you are thinking about your businesses, particularly flexible, blowmold, thermoforming in anyway? And what if anything can you do to adjust for what seems to be a consistently lower than expected volume in these businesses?

Well, certainly, it does impact how we think about the business and it turns our attention to the international markets. Obviously, we are expanding and growing the composite can fairly rapidly and that’s going to be our footprint, our anchor consumer business in many of these markets. As I have said before, we are actively seeking an opportunity to expand our flexibles business outside the U.S. and looking for that right now as we speak. So certainly we see the need to expand our consumer business and our consumer franchise on a global basis in a more expeditious rate.

But in terms of managing the U.S. business there is nothing appreciably different you can do short-term or even medium-term to adjust the footprint or what have you?

Well, I think that as I mentioned we are we are taking a look at optimizing what we call the fixed cost structure in the company and how we sell and go to market. So that’s that we are doing that right now. But I will also point out that flexible business is growing. We have had some solid volume growth in that business over the last couple of years and expected to continue to grow. So promoting and building our flexible capability in North America is also very high on our radar screen.

Good. Jack thanks a lot. Best of luck in the quarter.

Thank you.

Your next question comes from the line of George Staphos of Bank of America. Please proceed.

Thanks everyone. A couple of cleanups, one smaller, one bigger picture, just in terms of your guidance for the fourth quarter, can you relate to us what kind of price cost you are looking at within industrial and specifically tube and core, if you had some positives in the third quarter, as it sounds like in that business might the recent changes in OCC means some – at least transitory margin compression in 4Q?

Yes, obviously prices reset for contracts but did not reset for non-contract volume which is about half of what we do. And if OCC trends down during the quarter, we will tend to pick some of that up throughout the quarter.

So I mean Jack, would $1 million be a reasonable price cost negative $5 million, is there anyway to ballpark it, recognizing that it all depends on what happens with your favorite commodity?

On a year-over-year – are you talking about on a quarter-over-quarter change basis obviously that’s real hard to project but between $1 million and $2 million maybe.

Fair enough. That’s good enough for government as we say here, Jack. I guess the last question I had bigger picture and taking a different (swing) if you will what Adam I was getting at, given how difficult it’s been for your customers to move the ball on volume with promotion, with rebranding, with innovation, does it make you rethink perhaps the i6, 360 strategy and if not how are you going to measure the return on investment off of that program in an environment, again where it’s going to be seemingly more difficult to get any of your customers to do something new and for that matter be more effective in generating volume growth. Thanks guys and good luck in the quarter.

Thank you, George. Well actually I think i6 and our customers in this environment want to do more things differently. They want to use packaging to help promote their product and distinguish it on the shelf, so I think that actually plays to the i6 process. I think that what you hear us saying is that we believe in i6, we believe it will generate the opportunities. We are seeing it happen. We are seeing us – our sales being brought to the table early in processes and evaluating options. For us the biggest thing is one of the best options what are customer seeing and what do they like when they see it, what are the types of formats that they prefer and so we want to make sure that we are in a position to be able to supply those formats at a very cost effective position relative to the others. So that’s how we are evaluating it. But i6 is definitely generating opportunities across the portfolio. And I think that this environment will actually cause more opportunity than a fast growth environment.

Okay. Thank you very much.

Thank you. I would now like to turn the call over to Roger Schrum for closing remarks.

Thank you very much. Just a couple of before we close, we do invite the financial community to join us at Pack Expo in Chicago from November 2 through November 5. We will have a number of events and some news coming out of the – throughout the week. So come by at anytime, you can join us at our booth which is booth number 2153 in the South Hall in Chicago’s McCormick Place. In addition, we invite financial community to attend our Annual Analyst Meeting on Friday, December 5. We have changed the venue this year as it will be held in the Villard Ballroom at the New York Palace, which is located at 455 Madison Avenue. Today, we are sending out electronic invitations and we ask that you RSVP whether you can join us in person by November 14. As usual, breakfast will be served around 7:30 AM and presentations will begin just before 8 o’clock and we should conclude thereabout around 9:30 AM. The meeting will be carried live via teleconference and webcast and as always we will provide some samples of our more well-known products. Again, thank you for joining us for the call today. And if you have any further questions, please don’t hesitate to give me a call directly. Thanks, again.