Good day, ladies and gentlemen and welcome to the Q1 2019 Sonoco Earnings Conference Call. [Operator Instructions] As a reminder this conference is being recorded. I would now like to introduce your host for today's conference, Roger Schrum you may begin.

Thank you, Gigi. Good morning everyone. Welcome to Sonoco's investor conference call to discuss our first quarter 2019 financial results. Joining me today are Rob Tiede, President and Chief Executive Officer; and Julie Albrecht, Vice President and Chief Financial Officer. A news release reporting our financial results was issued before the market opened today and is available on the Investor Relations website of sonoco.com. In addition, we will reference a presentation on the first quarter results, which was also posted on the website this morning. Before we go further though let me remind you that today's call and presentation contains a number of forward looking statements 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. Furthermore, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the Company's financial condition and results of operations. Further information about the Company's use of non-GAAP financial measures including definitions, as well as reconciliations of those measures to the most closely related GAAP measure is also available in the Investor Relations section of the website. Now with that, let me turn it over to Julie.

Thank you Roger. I'll begin on Slide 3, where you see that earlier this morning, we reported first quarter earnings per share on a GAAP basis of $0.73. And base earnings of $0.85 per share which is above our guidance of $0.77 to $0.83 per share and also compares very favorably to base EPS of $0.74 in the same period of last year. Overall, we had a solid first quarter results to start the year. Related to the $0.12 difference between base and GAAP EPS $0.08 is due to restructuring activities and $0.04 relates to non-operating pension costs. As a reminder, starting in this quarter we are removing from base earnings the amount reported on our income statement as non-operating pension costs or income. Now looking briefly at our base income statement on Slide 4, starting with the topline you see that sales were $1,352,000,000 up $48 million over the prior year due primarily to the impact of the Conitex and Highland packaging acquisitions. I'll review more details about our key sales drivers on the sales bridge in just a moment. Gross profit was $270 million, $19 million above the prior year due to positive price costs and the impact of these recent acquisitions. SG&A expenses of $142 million or unfavorable year-over-year by almost $5 million driven solely by acquisitions as other expenses were down versus last year's first quarter. All of this resulting in operating profit of approximately $128 million, which is almost $15 million above last year. And I'll review the key drivers on the operating profit bridge shortly. Net interest expense of $15 million was $2 million higher than last year due to increased expense from higher U.S. interest rates that reduced interest income on lower offshore cash balances. Income taxes of $27 million or slightly higher…

Thanks Julie. Let me provide some commentary around our first quarter performance and then I want to talk briefly about efforts we have under way regarding package sustainability and finally I want to speak about capital allocation of what we see going into the second quarter and the remainder of 2019. Sonoco produced solid first quarter results, which exceeded the high end of our guidance as our diverse mix of packaging businesses successfully navigated through what I could describe as a sluggish global economic condition. Julie took you through the numbers for the quarter, but I want to spend some time talking about our improved operating and margin performance. Overall base gross profit margin improved 77 basis points and base operating profit improved 13%, while base operating margin improved 78 basis points. We were extremely pleased that each of our business segments recorded year-over-year improvement in operating earnings during the first quarter. Our Consumer Packaging segment reported slightly improved operating results in the quarter and a slight decline in operating margin. However these results were significantly better than the disappointing 2018 fourth quarter results, as sequentially margins improved by 291 basis points. We were very pleased with the performance of our rigid paper container businesses, where we saw solid volume growth in our two largest markets of North America and Europe. I would also mentioned that during the quarter we started test runs on our new operations in South Africa and Brazil and we expect these facilities to be in commercial operation by the end of the second quarter. In rigid plastic, solid earnings from our 2018 acquisition of Highland packaging along with a positive price cost relationship more than offset the significant volume decline we experienced as extremely wet weather in California and the cold weather in January in…

[Operator Instructions] And our first question is from Ghansham Panjabi from Baird. Your line is now open.

I guess first - kind of looking back at the first quarter, volumes in each of the segments were down. I don't know if they were pretty much in line with your expectations, but they were slightly below ours. Yet you're raising guidance for the full year 2019 very early in the year. So I guess first off Rob, what gives you that level of confidence that you'll be able to offset the sluggish volume backdrop, maybe we could start there?

Sure. Let me start off, Ghansham. First off, in Q1 we have one less day this year than we had last. So if I look at the volume results for the Company overall, we were down directionally about 1%, one day in 91 is directionally 1%. So as I look at it, it's relatively flat year over year. And then when I take a look at it, in sort of the big moving pieces, there are a couple of things that occurred in the quarter. One was as Julie and I both mentioned the issue around weather, specifically for the perimeter of the store, which was rather significant. We got a late start on the East Coast, directionally a month because of cold weather specifically in Florida. And then it hasn't stopped raining. Well it has now, thank God on the West Coast and people are now in the fields picking, but we lost significant volume as a result of that timing delay. And then on the other side - on the paper side we talked about some softening in our core gating business in the fourth quarter that continued in the first quarter, but what we also did do is we had our normal maintenance outage here at the Hartsfield campus for a week and we also extended the downtime on our number 10 machine by a couple of days to allow volume and demand to settle out. Those two big buckets really had an impact. If I look at the volume moving forward, as we head into April and April - one month does not a quarter make, our medium machine is full and so, when I look at that - when I look at what's going on with our perimeter of the store now that they're shipping barring anything else happening as a consequence around the world, that's what gives us some confidence as we look forward.

And then just my second question on the consumer segment. I'm just trying to put the margin improvement on a sequential basis in perspective, was that partly a function of just lower run through cost kind of flowing through? Was it inventories being realigned and you saw commensurate operating profit boost? And then also can you just update us separately on what's been happening with some of the other operating costs such as freight? Thanks so much.

Sure. It's a number of things. It's - did we get some benefit from resin. The answer is yes. If you recall, we were chasing resin for the better part of five or six quarters, it reversed itself in the first quarter. And so we did get some benefit. Some of that was baked in. I would tell you that probably got a little bit more than we had initially thought, but not much. The biggest change is if you recall, we were shutting down a facility in the fourth quarter. We were distributing equipment. We were hiring up people, training up folks in the fourth quarter. We also had two plants in our flexible system where we were bringing in new equipment and we were rebuilding equipment in another site and that work had been completed. There was still in the first quarter some cost associated with that. So we are still doing some training in the first quarter on the plastic side as we're bringing up people, both in the U.S. as well as in Mexico and we are also getting those machines ramped up early in the first quarter on the flexible side. So there was a little bit of lingering that occurred in the first quarter as well from a cost side. And I think the balance of your question was around further material movement was that and freight?

Yes.

I would tell you in the first quarter our freight inflation, we had - I think we had talked about it being up around 6% is what our expectation was as we looked forward. We did see inflation in the first quarter directionally probably around $0.02 worth, which was not far off the line with what we expected in the first quarter. And so we're monitoring that closely. Hope that helps.

Our next question is from George Staphos from Bank of America. Your line is now open.

This is actually Molly Baum sitting in for George. Just two quick questions. The first one going back to consumer packaging. Could you give a breakdown of kind of the performance between plastics flexible and composite cans? And then on the latter point the strong growth in the rigid paper business, do you think that has any correlation to this increased focus on sustainability? Thanks.

You have multiple questions there as you said. So let me start off with the consumer side. We did see strong performance in our composite can paper based construct product line here in North America. We saw it in Asia. We saw it in Europe as well. I would tell you in Europe, did we pick up some volume that was as a result of people having concerns around plastic? The answer is yes. We did commercialize some new business. But that wasn't a significant driver. We just saw a solid performance by pretty much across the portfolio in Europe. And we saw a good performance here in North America as well. On the plastics side, I will - flexibles performed right in line with where we had expected it to be and the rigid plastic side, the biggest impact was what I described that shortfall of product that occurred in the first quarter specifically related to the store.

And then, the last one from me looking at OCC and where prices are right now. In your view are they at a level that could in theory discourage collection and as a result reduce supply? Theoretically, do you think that we've kind of reached a bottom at this point?

Every time somebody asked me about OCC, I'm wrong. So just hammer that what I say, what I'm about to say, and this will be a beating - you're beating Adam to the punch. So we - has it hit bottom. I'm not sure that it's hit bottom yet. I won't be surprised if we see further decline as we head into May. But then I would expect it to start creeping back up when things get a little tight in July, August, September and probably into October and then we typically see a bit of a downturn. Do I think it will discourage collection? No. And the reason I don't believe it's going to discourage collection is, China still has a problem and they need to get their fiber through some other methodology. And so that we're seeing Chinese investment in old mills and they're looking to convert those to create pulpable material that they can ship back in - if you will work through the environmental issues of ascending OCC over. So I don't think that collection will be curtailed.

Our next question is from Edlain Rodriguez from UBS. Your line is now open.

Quick question. You talked about lot like the sluggish mess you saw in the first quarter. Like have that dissipated yet or are you still seeing that not much has changed yet?

Yes. let me maybe Edlain, the best way for me to do it is walk you around the world as to what we're seeing and hopefully that gives you some color in terms of why we talk about the sluggish economy. Let me start with Mexico and then just work my way around. We were entering the year thinking that GDP of Mexico was going to be somewhere in the 3.2% range. I think the latest look is now in 1.3% range 1.4% range. We've clearly seen that on the converting side, on the industrial side of our business. Our paper system is still full. If I moved down to Brazil, we're seeing the same sort of thing. The economy there has gotten a little more sluggish, maybe a little more pessimistic than initially anticipated. They are running around. Their latest forecast is in the 1.3% range and we've seen that market dynamics sort of play out both in the consumer and the industrial side. If I move over to Asia, first quarter is always a challenge because you've got Chinese New Year. But if I take a look at the - if I look at Asia in its totality, clearly China is slow, but we saw the balance of Southeast Asia sort of offset that and then obviously we've had the addition of Conitex that's come into play in the first quarter of this year for us and they had a very solid performance in the first quarter in Asia. On the industrial - I'm sorry, on the consumer side in that part of the world, we did see the growth start to come back again after Chinese New Year, but the volume is not as robust as it was last year. So clearly again, it's in inline with…

Well that was very helpful. And one quick one on M&A pipeline. Can you talk about what you see in there and discussions about valuations between yourselves and potential sellers?

Yes, I would tell you, Edlain, we - the M&A pipeline is robust as it's ever been. In terms of valuations, I think that - again if I go back to December, I thought what we would see is a correction in the marketplace. But then January the market corrected at all the undoing if you will that occurred in December. And so, I do think that expectations are still relatively high for quality assets and probably will be that way for a period of time. So we've got to be very judicious. And selective in terms of where we want to go, we've said that we will look at opportunities in flexibles, thermoforms - our rigid plastics business specifically, the thermoform side of things as well as on the paper assets, both in the developed world as well as the developing world where it makes good sense.

Our next question is from Scott Gaffner from Barclays. Your line is now open.

I hope your team is doing well in the playoff.

They're gone. They're out. It was an early departure.

Sorry to hear that. I just had a few follow ups. First was really around the recycling business. I mean historically when OCC prices have gotten here you had some negative impacts on the recycling business. I mean with the contract restructuring just effective enough last time or is it just a small enough portion of the business that we're not hearing about. I'm just trying to understand that in relationship to the question about declining collections and maybe the industry sort of restructured on the recycling front.

Sure. So as you know I mean because we're an integrated supply, any negative impact gets passed through, then we get the benefit of the positive side on the paper side and vice versa the other way dependent upon which way OCC is going. I mean look at our recycling business two-fold, I mean we're in it to collect the best fiber possible to drive the best product we can offer to our machines. And I look at it from how we go about collecting. I think one of the things that we probably haven't talked about is the derisking of curbside pickup or at the municipality where we had a lot of the risk and as we're now looking at things differently, we're pushing some of that risk back to the municipalities. And so that's having a positive impact for us. And that's not just us doing it. That's an industry wide trend that's occurring, so I think that's probably a throwback to where - when we first started in the recycling business and taking things other than paper, it's more of that model. So I think our recycling business is doing everything they can. And then I think the other thing is as we look at collections, obviously there's the cost of collecting paper. And so as we look at where OCC goes there's a cost even if it goes to lower levels, there's a cost associated with that ultimately gets born in the overall system. And then you and I as a consumer ultimately pay for it.

Going back to your comments on the sluggish global market, I guess if we look at other company commentary, not just packaging companies, I understand that the sort of the economic downshift in Mexico, Brazil and everything that we've been hearing around Asia, but it seems like so far most companies haven't necessarily seen it show up in their results and I just didn't know if maybe, you're feeling it more on the consumer side or on the sort of more industrial related side, if you could get maybe just a touch more granular on where you're seeing some of the weakness?

Yes, if I were to break it down into two - if you will two segments industrial and consumer, the softness was more so in the industrials than it was in the consumer because you've got the consumer, you've got the display and you've got protective solutions that I view as the consumer base and the industrial on the other side. So that's where the softness has been, more so than on the consumer side. And specifically it's more on the converting side than it is on the paper side. So, hopefully that gives you some granularity.

Last one for me is just, coming into the year, you were talking about - you thought I think your overall resin basket would decline about 2% and sounds like maybe that in the first quarter accelerated to the downside a little bit more than you expected, but very moderately so. I mean there's some talk about resin prices actually moving back up on higher oil prices. Can you talk about sort of what you're seeing in the market today and whether or not you still think that overall decline of 2% is achievable?

Yes. So you're right in exactly the comments you've made. We did see a slight - if you will improvement over what we expected in Q1. Not significant, but slight. And are we seeing some upward movement as a result of WTI pricing being up. I think it's around - directionally around $64. We started the year with $54, somewhere in that range. So, our producers using that as an opportunity to move or at least attempt to move things up. The answer is yes. But we also see capacity coming on, certainly in the polyethylene side that we do think it'll then trend back down. PET, I think we're sitting here all waiting to get that Corpus Christi plant online. But that's held reasonably well, slight increases there. But I would tell you with all of that mumbo jumbo, I'd just given you, I do believe that we should be able to stay directionally in that 2% decline. Again keep in perspective we were chasing resin like crazy for the last five or six quarters before this first quarter.

Our next question is from Brian Maguire from Goldman Sachs. Your line is now open.

Just to piggyback on that question, just wondering if it's possible to quantify how much resin the temporary lags in the past three years the resin might have benefited 1Q, just trying to - obviously you had some headwinds in the last couple of years, are you trying to strip those out and tailwind in this quarter. I just wonder if it's like $1 million, $3 million, $5 million something in that kind of ballpark?

I would say that over what we had projected, I would expect it to be directionally $1 million better than what we thought would happen in the first quarter.

It sounds like you're still kind of assuming the same deflation there in the full year guide. The other input that moved around a lot, obviously OCC down. I think you had assumed $75 before. Is there have an updated number you're thinking for the year here?

For the year Brian or is that what you're asking?

Yes, just like the guidance range, just basically trying to parse out how much of that is just the lower OCC and maybe even resin prices versus improvement in the actual business?

Yes. So for OCC, as I think about OCC, I think we - our forward look is in that $50 to $60 range for the year. Yes, that's some fluctuations through the course of Q2, Q3 and Q4. But that's where we think we're going to play out. And then your question around resin, I don't think we've ever really talked about resin other than 2% deflation area effect that we'll see and then there's some ebbs and flows associated with the individual pieces and into the different quarters.

Yes. That's sort of what I was asking, that makes sense. And then just last one for me, I mean the consumer business obviously had a good quarter. And we had some challenges in the last couple of quarters there. I just wondering if you could come out some of the productivity issues that you had if they're all behind us. It's kind of like on the last call you were sort of already coming out of that period where you were pretty confident that was all behind you and these results certainly backed that up. I just wondered if you could update us on how those particular assets are performing and whether there's more improvement from here or we're pretty much at the run rate we'd expect them to be at now?

Sure. So let me answer it this way. My expectation is that our consumer business when running well should be in the 10% to 11% range in normal years. We did see good improvement in Q4 into Q1. However, we still had costs that impacted the results in the first quarter specifically in the plastics and in the flexible space, as it related to those two plants and flexibles and the shutdown of the plant and redistribution of equipment and training up people. Do I expect to see improvement in plastics? Yes, but year goes on, the answer is yes. Do I expect to see improvement in the flexible side as the year goes on, the answer is yes. And I think from the can side, they actually perform very well operationally throughout the quarter in every region of the world.

Our next question is from Adam Josephson from KeyBanc. Your line is now open.

Rob I can't believe you let Molly steal my question.

I'm was just going to say Adam, the OCC question has been answered.

I've got nothing then. Well a couple on volume, just on the media machine for a moment, Rob, I think you correct me if I'm wrong you said it's things slowed quite a bit and 4Q and remained slow in 1Q and then and then it was - it's full in April. Is there any reason why it would suddenly have filled up in April after having been weak for a number of months?

Well I think part of it, Adam, is it's just the balancing that took place. The demand has caught up with the machine. I think the other thing that we really haven't talked about is some of the alternative optionality we have around that medium machine, so as you know we've got our assets in China through the acquisition of Conitex. And as a result of OCC challenges over there, we've got a machine that's capable of running some of that pulpable material that's needed by our mill system in that part of the world. Now having said that, as I look at April I would tell you the vast majority of what we've got on there and what I mean the vast majority, I mean the vast majority is really domestic demand.

Just one more on volume. I think you started the year expecting about 1% volume mix growth. Did anything on the quarter - did volume performance in the quarter change your outlook for the year in terms of the 1% growth?

Yes, I would tell you Adam, as I look out and - again if I look at the first quarter and I'm looking at the enterprise wide and I'm making a generalized statement when I say one less day, we're really flat as a Company from a volume perspective year-over-year.

Yes.

The only thing that would have me concerned at this point based on what I know is will we see some real challenges in the paper side. I have nothing at this point that says that exist. So I'm still comfortable in that 1% plus or minus something range that we started off the year with.

Perfect and just two others, one in the paper business Rob. How much of the year-over-year margin improvement was attributable to the decline in OCC during the quarter versus other factors, because a year ago you had the exact same OCC drop in the quarter. So it makes me wonder why you'd have an incremental margin benefit if you know what I mean. And then you expect just continued margin improvement in 2Q, just given the fall in OCC in April and it sounds like you expect another one in May?

Yes. So let me remind you as we think about the paper, I think a third is open market, a third is OCC, a third is tan bending chip. Tan bending chip is held, so that's obviously a benefit and in line with where we would expect it to be, given the demand in the mill system. On the OCC side, I would tell you that I think I said this Adam, but I'd have to go back to the transcript, but what I think I said in February was that the benefit that we expected from OCC was probably going to be offsetting any price adjustments that we had to have in the marketplace. And I think that pretty much played out just the way we said it would. So, while we - while you would logically think that we should be getting a benefit, that benefit was offset by some of the pricing that we had to put into the market.

And just one on sustainability. Have you seen any drag in your plastics business from whatever sustainability push is happening? And do you expect any volume loss in your plastics business in the foreseeable future?

Adam, I think I talked about this at the end of the third quarter. We did lose some volume in our thermoforming business and it had to do with the frozen food sector, where we had a customer move from a plastic tray to a fiber based construct. And that's the only thing we have seen. What I would tell you is, we've won some new business in the plastics space. My expectation and here's the challenge with it, my expectation was - our flexibles and our plastics business, where both going to grow somewhere in that 3% to 4% range and they are in line to do that. Now the problem we had is this weather related issue in the fourth quarter, which negatively impacted volume, which strawberries aren't going wait and - or the other berries. So that maybe some volume that'll be offset. So based on what we're seeing in our system, we haven't seen any of that kind of decline. What we have had is a lot of conversations with customers to really understand plastic. The impact of plastics and the magnitude of what we already put into our plastics in terms of recycled content. So those are the conversations we're having. The answer - specific answer to your question is we haven't seen anything yet. I'm not saying it won't happen, we just haven't seen anything.

Our next question is from Debbie Jones from Deutsche Bank. Your line is now open.

I have two questions one on the protective solutions and other one on sustainability as well. Julie, I think you mentioned on protective solutions that you said diverging trends both I think you weren't quite expecting on the upside and downside. I was wondering if you just walked through that a little bit more and how you expect things to go in Q2 and beyond?

Debbie, I apologize, if I don't answer this appropriate I'm having a hard time hearing you. So, I think it was around protective solutions and you're asking for just walk through the components and how they performed?

Yes, I thought Julie said that there was some better than expected growth in certain categories and maybe…

So I think I said we had extremely good results out of our ThermoSafe business in fact, it was probably the strongest quarter - certainly the strongest first quarter they've ever had. And that's a couple of reasons, one is just some work that we've done with the pharmaceutical companies and then sort of expanding out the use of our product line for some other applications. And so we've seen some nice growth associated with that. If I break it then go to the automotive side. The automotive molded foam side that volume continues to be what it's been in the last couple of quarters. It's sort of dropped to a level where I think we're at the bottom. And so the things that we're dealing with there is really addressing the cost structure as best we can. And then thirdly is the what I'll call the legacy paper post business specifically the white goods side and from a bottom line perspective performed well, from a volume standpoint, a little bit sluggish just because some of our customers went in with some rather aggressive price increases as it relates to the tariffs that they've been facing. And so they've been - they've lost a few shelf space in retail for that. But I do think that that's starting to correct itself as we're seeing them start to come back into the market in a more assertive way.

My follow up question - my second question on the sustainability. And Rob, I know you've tried to really tackle this subject quite often and get the message out there, but I'm curious what really resonates with your customers, when you're having these conversations? Is it kind of the science behind it, is it working with them to have the recyclable package? What is it - certainly with your form coming up, what is the message or what you're trying to convey?

Sure. I would tell you, it's both. It depends on the market application. Obviously if it's in a healthcare related situation, it's about - it's all about the science. And where it is - where we can introduce post consumer recycled content, the issue is, OK, we would like to make that happen and really communicate the story. So, when I think about the fresh fruit baskets that we do out on the West Coast and along the East Coast and into the Midwest, as it relates to some of the vegetables, there's a tremendous amount of recycled content in and it's getting that story out. So that's resonating. So if I'm eating fresh and natural and I've got a recycled product, that's holding it and it's recyclable, then they've got a wonderful story. The other big question is that we ask is well - how will we get more and more of this product physically collected in the system. So one of the things that we have done because we run MERFs, we capture if you will PET bottles in the system. We have partnered with a processor, and that processor will then grind it down or put it into flake - wash the product, put it into flake and then we ship it to our plants. So that we have created a source of supply for PET, so that then goes back into the product. So as best we can - we're trying to create a closed loop system. The biggest challenge is going to be the behavioral issues for consumers to make sure that they in fact take these bottles and convenience today Trump's recycling. So it's an infrastructure thing or it's a behavioral thing and we're going to have to figure that piece out. That's some of the conversations that we're having with people and saying, OK, what would have to be true in order to be able to capture more of this. And those are the conversations we're having with our customers, who are at the CPG's and those are also the conversations that we're having with some of our suppliers of resins. So I think we're finally starting to get all the right parties together so that when we say the industry is coming together to start talking about this, it's not just the packaging organizations.

Our next question is from Gabe Hajde from Wells Fargo Securities. Your line is now open.

Two quick ones, hopefully the display in packaging performance was a touch better than what we were modeling, not that necessarily means anything, but it was - was it inline with what you were expecting? And can you talk about sort of the cadence or the trajectory over the balance of the year? Should we expect a similar type improvement until we reach the fourth quarter and most of that reflecting the Atlanta pack center?

Yes. The performance was in fact inline with what we expected. Other than what I would say is Europe, as I mentioned earlier during the Q&A here that we saw strong performance in our consumer business beyond the can side in Europe and our display business in Europe performed well as did our business here in North America. As I look out, Gabe, the answer is, yes, I do expect that to see continued improvement and that's largely because we've taken a lot of talented people that were tied up working on this project that we really wanted to be successful in Atlanta, unfortunately it didn't work out. They're back and they're laser focused on the business itself and growing with some of the other customers that are out in the marketplace. And we've been successful in getting some of that business and growing that business and focusing on running that business as opposed to trying to fix a problem.

And I apologize if I missed it, but normally you guys give us a sense for what tube and core volumes looked like by geography and then potentially if there is anything that stood out to you from the end markets that you serve?

Yes. Well, the answer is yes, and we went around that. But let me go through it again. If I go around the world, we saw a decline directionally of about 5% in Europe on the tube and core side and I'm just talking the converting side of things. And here in North America, I think it was directionally in the 3% range, which is in line with our expectations given the holistic work that we've been doing and as I mentioned earlier, while we lost that converting side, we didn't lose the paper that just simply moved to another location and then Asia. Asia is been light and part of that is as a result of us also rationalizing some of our operations and appropriately putting them in place. And we have seen softness on the converting side in both Brazil as well as Mexico.

Our next question is from Steven Chercover from Davidson. Your line is now open.

So a lot of this has been kind of drilled into, but with respect to weather, now that the drought in California is officially over. Does that bode well for the future of fruits and vegetables, I assume?

It does. What it means is, people are out in the fields now picking and we're shipping product out to them to do that. And I would expect to see a rather significant ramp up on that part of that side of the country throughout the second quarter.

But I assume that some of the fruits and vegetables that couldn't be harvested in Q1 and they've gone to waste, right?

Yes. That's what I'm trying - yes, you're right. The answer is some of that volume that we lost in the first quarter is we lost one of the picking opportunities. So we're really harvesting the next round if you will.

And then switching gears, I like how you're defining your sustainability mandate to reduce waste, but there is a tension between that objective and plastic packaging. So at a high level, are you investigating cellulose-derived plastics?

We do have - our technology group is looking at multiple different product lines and trying to understand those economics. So the answer is yes. We are looking into those types of materials.

[Operator Instructions] And our next question is from Mark Wilde from Bank of Montreal. Your line is now open.

Can we - just come back to OCC for a minute or two more. Can you first of all - can you give us some sense about what you think the cost to collect and process OCC looks like?

To collect it Mark and process it, is that what you're asking or just --

Yes, exactly.

I'd say $50 well - help me understand.

Again, I think we've always kind of use a framework within collection and trucking. This is Roger by the way. Somewhere less than $100 a ton, but probably less than that now. So if you continue to take cost out. So the whole purpose of this discussion is that clearly OCC is well below that collection and costs framework. And that's why we're having - we're seeing a lot of different changes in behaviors with regards to our work with our customers in municipalities in which we collect, where we're having to have a different discussion about those options.

Yes, I was at the ISRI last week in Los Angeles. There was a lot of conversation about that. The other thing I guess with OCC, I'm just curious, do your assumptions for this year assume that any of this most recent drop that we've seen. I guess we're down to around $40 right now, does any of this arbitrage is back to the customer in your industrial packaging business?

Now, I think it goes back - I mean what we've built this around is around that $50 to $60 OCC that's how we built that piece in. I don't know that we've looked forward to do anything other than the way we've built our models previously.

Just kind of reestablishing what we've said earlier with regards to how our contracts are reset. Again about a third of that are tied to OCC and so those do change. Another third are a little bit more are actually tied to tan bending chip and of course you can follow that racing metric and then the other one is just open market pricing, which we announce publicly. So again that kind of gives you that framework of how changes can occur within our contract.

And then Rob I take from one of your earlier comments. You're still in the process of kind of rationalizing the business portfolio within tube and core, is that fair to say?

Yes, that body of work is under way and I would tell you that what our expectations were, it is proving out and Howard, who runs our industrial business globally has got that program rolling in Europe as well. So if you will, the hypothesis we laid out seems to be playing out the way we expect it. So we're very bullish on the activities that our teams are undertaking.

And finally can you just talk a little bit about sort of the how you think about display in packaging fitting in within Sonoco just from a strategic and a financial standpoint? Are there links between that business and your other businesses. Do you have some kind of unique competitive advantage in that business, how do you think about it?

Yes, I think when we first got into it, the objective was for us to link primary packaging in through there and we did have some businesses where that worked out well, but those became sort of more one offs and typically to make sense of it, it was really around large deals. It was a business that Mark we said we need to fix before we think about doing anything else and how does it play out. It uses thermoformed materials, it uses backer cards, it uses medium material. So there's linkages, but they're not significant linkages into that business.

Our next question is from Salvator Tiano from Vertical Research. Your line is now open.

So just very quickly, relating the call, just building up on Adam's question about the OCC price. If I heard correctly, you mention that any OCC price declines have you now, well lower OCC prices that you are now seeing, you expect essentially to just be offsetting price adjustments on the marketplace, if I heard correctly? And I'm just looking not broadly about OCC as an input cost, but specifically on leased portion of your business that is tied to a specific amount, south of the OCC price. And that creates kind of a positive or negative spread over the next quarter. Is there a way you can quantify what happened in Q1, if you had the positive spread of let's say $1 million, $3 million or $5 million and what kind of baked into your guidance for Q2 with margin being quite higher than April already?

Well this is Roger. And again let me - let us focus on what we've previously said, which is our expectations for pricing for OCC for the rest of the years is in that $50 to $60 average price range. Clearly right now it's at $50 a ton. Our expectations is that we could see some decline in this quarter, but then probably ticking up as we get into the third, potentially into the fourth quarter. The impact that has on pricing for our customers again based upon our contracts are essentially a tied one third, as a tied to the resets of OCC, which is always done the last month of the prior quarter. So going into this quarter, that pricing would be $65 a ton. It has now gone down since that time. Tan bending chip is also linked to another part of our contracts about one third and again that pricing has stayed relatively stable and is up year-over-year approximately $100 a ton. And then the final portion of it is tied to just market pricing, which is again more linked toward announced pricing that we have in the marketplace. So, benefits, obviously those are linked within our guidance. So the expectations that we have for pricing are tied directly to our expectation of guidance going forward.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Roger Schrum for closing remarks.

Well thank you again, Gigi and again thank you everyone for participating in the call today. We appreciate your interest in the Company, and as always if you have further questions please don't hesitate to contact us. Thank you again.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.