Good day, and welcome to the Bemis Fourth Quarter 2013 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Melanie Miller. Please go ahead.

Thank you, operator. Welcome to our fourth quarter 2013 conference call. Today is January 13, 2014. After today's call, a replay will be available on our website, bemis.com, under the Investor Relations section. Joining me for this call today are Bemis Company's Chairman and Chief Executive Officer, Henry Theisen; our Chief Operating Officer, Bill Austen; our VP in Controller and interim Principal Financial Officer, Jerry Krempa; and our new Director of Investor Relations, Erin Winters. Erin has been at Bemis for 12 years working in a variety of finance positions and was recently promoted to Director of Investor Relations for Bemis. Now I'd like to turn the call over to Erin.

Thank you, Melanie. Today, Henry will begin with comments on business performance and market trends. Bill will then discuss capital expenditures and growth opportunities. And finally, Jerry will cover financial statements and outlook for 2014. After our comments, we will answer any questions you have. However, in order to allow everyone an opportunity to participate, we do ask that you limit yourself to one question at a time with a related follow-up and then fall back into the queue for any additional questions. At this time, I would like to direct you to our website, bemis.com, under the Investor Relations tab, where you will find our press release along with the supplemental schedules that we have been including each quarter this year. We'll be referring to these schedules at points throughout today's discussion. On today's call, we will also discuss non-GAAP financial measures as we discuss Bemis' performance. Reconciliations of these non-GAAP measures to GAAP measures that we consider most comparable can be found in the press release and supplemental schedules. I'd like to remind everyone that statements regarding future performance of the company made in this teleconference are forward-looking and are subject to certain risks and uncertainties. Actual results may differ materially from historical, expected or projected results due to a variety of factors including currency fluctuations, changes in raw material costs and availability, industry competition, unexpected costs associated with information systems, changes in customer order patterns, the results of competitive bid processes, our ability to pass along increased costs in our selling prices; interest rate fluctuations and regional economic conditions. A more complete list of risk factors is included in our regular SEC filings, including the most recently filed Form 10-K for the year ended December 31, 2012. Now I will turn the call over to Henry Theisen.

Well, thank you, Erin, and thank you for joining us today. Today, we reported $0.54 per share for the fourth quarter and a record $2.28 for the full year 2013, in line with our most recent guidance. Our fourth quarter results benefited from increased year-on-year volumes of high-barrier products across the globe, highlighting the sustainability of improvements that we have made in our sales mix over the last 24 months. Our working capital levels came down nicely, generating $38 million in the fourth quarter alone and completely offsetting the use of cash for working capital during the first 3 quarters of the year. We repurchased 1 million shares of our common stock in the fourth quarter, bringing our remaining share repurchase authorization level to 2.5 million shares. For the total year, gross margins increased by 90 basis points compared to the full year 2012, reflecting the actions that we have taken to improve our product mix, including increased market share of higher-value-added products, where our technologies give us a sustainable advantage, and the completion of the facility consolidation program. While this is a nice improvement, our gross margin would've been at least 30 points higher without the production transition challenges that we faced over the past 6 months. Now that these issues are behind us, we look forward to further improvement in 2014. Our 2014 guidance of $2.40 to $2.55 represents an increase of 5% to 12% compared to last year. Where we are in this range will depend upon the impact of the Brazilian currency, raw material pricing, the momentum of past volume trends and our successful commercialization of new business awards. Let me give you some further color on these factors. First, it is important to note that we have a very successful packaging business centered in Brazil…

Thanks, Henry, and good morning, everyone. We have a robust capital expenditure plan for 2014 that supports our long-term growth strategy. In recent years, we have been focused on integrating 25 acquired plants across 5 countries in addition to closing 9 plants impacted by our facility consolidation program. At the same time, we have been optimizing our specification portfolio. Now that this hard work is complete, we are focused on executing our growth agenda. In 2014, we are investing in state-of-the-art capacity to support top line growth and further strengthen our competitive position. We expect capital expenditures to be in the range of $175 million to $200 million this year. This increased capital spending reflects investments to meet the growing liquid market needs, to enhance our medical packaging capabilities and to expand our sealant and protective film extrusion platform in Asia. In addition, we are investing in select research and development projects that will create long-term growth opportunities. Current market trends support these investments. For example, our customers have started the conversion process from glass and cans to flexible packaging, especially in the liquid area. At Bemis, we offer unique liquid packaging solutions that provide the superior shield strength necessary to withstand lengthy distribution processes into retail markets. As such, we are expanding our operations with equipment that will meet this growing demand for flexible packaging of liquid products such as soups, sauces, fruit slurries, meal kits and even personal care products. For example, in Latin America, our liquid packaging solution helped one of our health and hygiene product customers convert its personal care line from a blow-molded bottle to a flexible standup pouch. These personal care products contain oils and fragrances that are extremely difficult to contain and our unique barrier and sealant technologies solve this challenge. And in Asia, we are expanding our 9-layer extrusion capacity to support the increasing demand for medical device and pharmaceutical packaging from our global customers located in this region of the world. This investment also supports our future expansion into the protein markets in China. Our strategic investments in these key capabilities will support our long-term growth strategy to expand our leading position in high-barrier products, medical and pharmaceutical packaging and in developing economies. Now I'd like to turn the call over to Jerry for his comments on the financial results.

Thank you, Bill, and good morning, everyone. Today, I will be discussing the 2013 financial results and also our 2014 guidance. This morning, Bemis Company reported fourth quarter 2013 adjusted earnings per share of $0.54, which was in the range of our recent quarterly guidance of $0.50 to $0.56 per share. For the full year 2013, Bemis achieved record adjusted diluted earnings per share of $2.20, a 6% increase compared to 2012 earnings of $2.15 per share. This improvement was driven by higher gross margins, which increased to 19.3% of net sales in 2013 as compared to 18.4% in 2012. Next, I will walk through the sales and operating profit performance of each of our reportable segments. When talking about sales today, let's focus on Page 4 of the supplemental schedules that were posted to our website this morning, as Erin had indicated. This page provides detail on the changes in net sales by segment. Looking at the total year column, our U.S. Packaging operations, which represents about 60% of total Bemis annual sales, saw a 1.8% decrease in 2013 total year net sales. Excluding the 1.4% reduction in sales from the divestiture of the Clysar business and the 1.4% reduction from the optimization effect, we experienced positive organic growth of 1% for the year 2013. This 1% organic growth in U.S. Packaging was primarily driven by increases in meat, cheese, dairy and liquid packaging, which is consistent with our strategy to pursue high-barrier packaging applications. As Henry mentioned, we are especially pleased by the sales momentum seen in the fourth quarter of 2013, where organic growth reached 2.8%. This increase is noted on Page 4 of the supplemental schedules in the fourth quarter column. Let me step back for a moment to explain what is meant by the optimization…

[Operator Instructions] And we'll take our first question from Scott Gaffner with Barclays.

I was just curious, on raw material increases for 2014, you said you were only basing your increases an annualized -- or sorry, announced price increases so far. Can you just...

Correct, Scott.

Yes, can you just give us a sense for what sort of year-over-year increase that would be on resin prices, the announced price increases so far?

Well, the announced price increase in polyethylene is $0.04 per pound. And that's what we baked in. We look further down during the year, prices are very volatile in raw material. Sometimes they go up, sometimes they go down. We really can't predict what they're going to do in October, November or July or whatever. So the best thing for us to do is just bake in what we know is on the table today. And that way, everybody can evaluate our guidance.

Okay. And just as a follow-up, there was some discussion in the industry in 4Q around pricing, being a bit more aggressive on pricing to offset some of these raw material increases. What did you see in your business? Were you guys a little bit more aggressive around customers trying to get some of these increased costs back?

I think we've been aggressive for a long period of time, recognizing that when these raw materials come through, we have to pass them on. They're such an important component of our overall operating profit that if we don't pass it through, we don't make our guidance, we don't make our EPS. So I think the -- it's been very competitive in the past. It's still extremely competitive. We work very hard to pass all the raw material costs. And I really don't see a change in this over the year 2013.

And we'll take our next question from George Staphos with Bank of America Merrill Lynch.

My two questions are around CapEx. I guess first question, on the -- you did a good job of delineating where you're spending relative to end markets and products. Is it possible to discuss what kind of required rate of return you're putting on these projects or what kind of payback you are hoping to get in terms of years? And then the other question would be I thought I heard Jerry say some of the spending is also to improve competitive positioning, which, in my view, would be improving productivity, putting in new equipment, replacing older equipment. Can you give us some details there?

Return on invested capital is very important for the Bemis Company. We've been emphasizing this for the last few years and we will continue to emphasize it. Every new CapEx program goes through a rigorous process here, where we take a look at what return on invested capital that will be. It has to be higher than what we currently operate at. It has to be accretive to our ROIC so it grows in the future. We also take a look at risk based on where it is on the globe. Putting capital into Brazil is more risky because of the real than, say, putting it here in the U.S. So we are very concerned about return on invested capital and growing our margins in this business. The second part of your question was around more -- being more competitive. Sometimes we put in equipment that -- we're very happy here. We've got a lot of good R&D projects coming up, a lot of good programs coming in, which we think are going to put us in a better cost position. We're going to be investing in that type of equipment. That will give us a better cost position. It will be more sustainable. We use less polymers to deliver the same convenience features, the same extended shelf life, the same barriers. So part of it is that, part of it is new products coming out and part of it is we're trying to get in some new markets, around pharmaceutical and also some of the things that we picked up with our acquisition in China that give us a little foray into the electronics business. So it's kind of a combination of all those things.

And we'll take our next question from Anthony Pettinari with Citi.

Just a follow-up on CapEx. 2014, obviously you're going to have a bit of a step-up in CapEx to take advantage of some of these opportunities. And I'm just wondering, as we look to '15 or '16, is there a normalized level of CapEx or would you expect to step down, back to kind of the $130 million, $140 million range? Or how should we think about maybe a normalized level of CapEx beyond '14?

I think that'd be a good question, Bill, for you as Chief Operating Officer, to answer.

Thanks, Henry. As we look out into '15 and '16 and beyond, I don't see it stepping down to a normalized rate in '15. But beyond that, we'll probably come down to a normalized, a little bit lower rate than D&A. But as we go through '15, it will be at the D&A rate as well. That's what our plans are today.

Okay, that's helpful. And then maybe just a question on the volume outlook that you had, or that you communicated at the beginning of the call. It seemed like a little bit more of a positive view on order books and what you're seeing in the market or with your customers early in the year. And I'm just wondering, is that a reflection of maybe consumer confidence picking up? Or are you doing better with specific customers? Or, given your weighting to food, are you seeing some improvement in the food category? I'm just wondering if you can give us any kind of color on the order book strength that you referenced and where you think that's coming from?

Well, I think it really comes from 3 areas. The first one is, and we've talked about it in the past, is the rigid to flexible conversion. Our customers don't have to be selling say, for instance, more soup than they did in the past, but you're going to see some of it in a standup pouch versus a can. So we're picking up some growth just by switching from the rigid format to the flexible format. In other areas, we are taking market share based on the products, based on being able to service our customers, based on being able to meet their demands as far as lead times and things because of our size and the amount of equipment we have. And finally, we're starting to get a little bit more growth in our new product platforms. So it's a combination of all 3 things.

And we'll take our next question from Adam Josephson with KeyBanc Capital Markets.

Henry, one question, just a follow-up to the previous question. Are you seeing any underlying improvement in food and beverage volume in the U.S.? Or are they more company-specific factors that are making you more optimistic about volume this year?

Well, overall, beverage has been a weakness for us in 2013, and I think it's going to be a weakness for us in 2014, especially with the carbonated area. So that, I think, is going to continue to perform weaker than it has in the past, much in line with 2013. But if you move to other things, like medical device packaging or even the food packaging, I don't want to say there's an optimism, but our customers just seem to have a little more step than they did a year ago. There just seems to be a little more better feeling about going forward than there was a year ago. I can't pin it down to anything specific, but it's just a general feel.

Got it. And then in terms of your 2014 guidance, obviously you'll have $10 million of additional cost savings. And it looks like you'll have a higher tax rate that could roughly offset lower interest expense. So how do you bridge the gap between the $2.28 that you reported in '13 and the $2.48 or so that you're guiding to this year? Is most of the rest just volume? And are there any acquisitions or buybacks embedded in the guidance?

The guidance -- this is Melanie. The guidance doesn't include any acquisitions or share buybacks. It's essentially the addition of -- it ends up being a nice improvement that we finally get to recognize from the savings in our facility consolidation program now that these additional costs are behind us. In addition, we expect to have some savings associated with a reduction in, we'll call it, general retirement benefit costs, or pension plan costs going down offset by some increase in profit-sharing plan expenses going forward. But that will be a net benefit as well. And then just general improvement. As Henry mentioned, modest growth in volume. We're very leveraged to volume now, so a little bit of volume would be nice to the bottom line.

And we'll take our next question from Chip Dillon with Vertical Research Partners.

I just wanted some guidance, and you might have gone through this, on how we should expect corporate expense to flow both on an annual basis in '14 and '15, and I know there's some compensation variability, and how it might flow through by quarter in '14?

The best way to look at it by quarter is, I think, just to -- we would look at it evenly. Now there are some fluctuations, especially in the second half of the year as we adjust accruals based upon the actual performance in the first half of the year, especially as it relates to incentive programs. But -- and we had a decrease in that corporate expense line in 2013 that really reflects a change in pension costs and incentive costs year-over-year and some one-time charges or, I would say, reversals of charges that occurred back in the end of 2012. Going forward, I think though, 2013 is the more normal year as you look at the expenses and SG&A costs, if you look back on the income statement in general. And so that plus inflation would be a normal number to look towards in 2014.

And does that mean something like around $90 million? Or did you tell us sort of what the full-year number would be about?

Probably in excess of $90 million, if you look at the total year for 2014. But yes, something -- it's something that as we -- we don't really plan that number. We're really looking at the income statement. And on the income statement, you're seeing R&D expense that's a little bit higher in 2013. We think that it'll be a modestly higher number in 2014. And in addition, as we see some modest sales growth in 2014, we think SG&A, as a percent of sales, is going to be still in that 10% range. And you're going to see relatively the same level of growth then as we go into 2014.

We'll take our next question from Philip Ng with Jefferies.

I had a quick question on your Global segment. You guys generally sound a little more upbeat about U.S., but how are you thinking about Global, particularly Brazil, just because you guys flagged the real was going to be a headwind? And how should we be thinking about the earnings sensitivity on currency on that front?

As we look at Brazil, food inflation is a major component of what's going on down in Brazil. And we'll also see other general inflations that -- going on in Brazil. We are being very concerned and sensitized to raising our prices as raw materials go up. We are maintaining our market share in that business and we're expanding into some markets but food inflation is a headwind that we have to fight through this year. And I think we did a very good job of fighting through it in 2013. In reais, our operating profits were up substantial even though the volumes weren't there. And we're going to continue to those same programs that we put in place in 2013 to maintain our operating and grow our operating profit even in the face of these issues.

And as you look at this year, just to talk a little bit about the reais impact, as you're talking about that. This year, the real moved about 10% and that was about a $7 million hit to the Global Packaging segment. So going forward, that sort of sizes the operating profit impact to you as you look at 2014.

And we'll take our next question from Chris Manuel with Wells Fargo.

Just a couple of questions for you. First, an easy one. Could you give us an update on where you are with the CFO search? Are you looking internal, external, maybe some timing of when you anticipate, how far along you are, et cetera?

We have a good process in place. We started that process immediately after Scott moved on. And we have a process in place. We're working the process in place. And I think we'll have a CFO sometime here in the first half of the year.

Okay, first half of the year. Okay, so second question is, and I'd echo George's comments, thank you for the color as you went through the components of the kind of sales bridge as you broke that out for us. Would -- I just want to make sure I'm understanding something correctly. I mean, the optimization effect as you described it was due to as you've gone through and closed 9 facilities and business you chose not to retain any longer. Now that you've got most all of these facilities closed and rebalanced and where you want them, are we effectively done with giving up lower margin business, et cetera, such that, that optimization effect should kind of net to 0? That's kind of first part. So my question really is around kind of movement from here forward in '14. So one, are we effectively done with optimization or is there more of that to go, what's the run rate? And then kind of the element within there is, from an organic basis, what are you anticipating then as we move forward? You talked about your gut feeling being a little bit of growth. Is that 1 point, is that 3 points? Or how do you think about that?

Well, first off, I'll take the optimization question. That is done. The equipment has been moved. The businesses have been moved. We are running the business and serving our customers in the facilities where we want that business to run. That is over with. We will see the normal gain some business, lose some business that goes on every year in a normal fashion. So the optimization effect is over. The second part of your question, we look at, in the -- I'll just kind of break it down by the 3 segments. We kind of look in the U.S., the U.S. Packaging is -- we think we're going to do a little bit better than GDP. So that puts you in that 2%, 3% area. Likewise, we think we think we'll do a little bit better in our Global Operations and that kind of varies, Brazil has a little bit different growth than Europe. But I think, overall, we'll be slightly better than GDP in our rest-of-world operations and in our U.S. Pressure Sensitive is going to depend really on the economy of Europe because that's really a graphics, or advertising-type, business.

And we'll take our next question from Mark Wilde with Deutsche Bank.

I wondered -- I had 2 questions. I wondered, first, if you can just help us in bridging that cash flow from operations, from the $373 million to the $500 plus million in 2014. It sounds like from your EPS guidance that, that should be about a $30 million piece and I just wondered if you could talk about the other elements there. I think you mentioned pension and you mentioned lack of facility rationalization costs.

Right. And so if you look at Page 3 of the supplemental schedules, you'll see that in 2013, we spent $52 million on facility consolidation. That reduced our number -- it was part of the reduction to $373 million in 2013. That we expect to be 0 in 2014. In addition, we had $40 million of pension contributions in 2013. And our pension funds are now -- the ones in the U.S., where we're making large contributions, are over 100% funded. And we do not anticipate any pension contributions in 2014. So with those 2 items behind us, we can even look back and recalculate 2013 cash flow to be substantially higher. And then it's just growth and better management of working capital, our continued good management of working capital going forward.

And we'll take our next question from Al Kabili with Macquarie.

Question, I guess Henry, is on just some of the new business. And if you could help us maybe with the visibility you have there to the degree you do. But if you just aggregate all of that, is there a flavor or a sense you could give us as to what kind of boost to volumes that would be in '14 and maybe how that compared to this time of year last year?

I think that, that kind of goes back to the question that came up a little earlier, that we expect to do slightly better than GDP. And so that puts you -- some of these high-barrier applications are going to give us 2%, 3% growth in volumes. And it's going to be slightly better than the GDP.

And I would add, Al, that if you think about where our new business is, and especially in our new products and the new platforms that we're investing in, some of those new products for Bemis are, as Henry was saying and Bill was saying, too, a conversion from a different format, a glass, a can or a rigid bottle into a plastic. So that would be growth for us. But in addition, there are also opportunities where we will be upgrading or changing the package that we're supplying to an existing customer. So that may be new products, new package for Bemis or increase in using our new products we're issuing. But it's -- the old package was also a Bemis package, just a lower margin one. So we're sort of trading up our existing customers at the same time as we're seeing the market itself for flexible packaging grow with the transition from rigid.

Okay. And then the second question I had is just, as the CapEx ramps up in '14 from some of the new capacity you're adding, just in terms of how that rolls in and ramps up from an earnings perspective. Are there -- is that immediately accretive to earnings? Or, oftentimes when you're adding new capacity, there's fixed cost absorption and D&A headwinds, et cetera, and it takes a little while to sort of fill that all up. So I was just wondering if you could help us with how you see the cadence from the new capacities and how that sort of ramps to earnings?

Well, let me turn that one over to Bill, who's in charge of ramping the stuff up for us.

A lot of this new capacity, Al, comes on as we get through the year of 2014. So you start to see the ramp-up in earnings or the addition to earnings as we get into 2015. There won't be much of an impact in 2014.

And we'll take our next question from Alex Ovshey with Goldman Sachs.

A couple of questions. One, Henry, can you remind us how your contracts work in terms of being able to recover raw material costs and whether there have been any changes, nuance changes as you've gone through the optimization program over the last 12 months?

I will say this, that we worked hard and changes over the last few years have been really cleaning up the contracts that we had inherited with the Alcan acquisition. Most of our contracts are now 3-month contracts. In other words, you get to pass through either the increase in raw materials or the decrease in raw materials on a 90-day basis. And we are very diligent in doing that. If a price increase happens in the first month, it takes 90 days to pass it through; if it happens on the 89th day, it goes immediately. Likewise, if raw materials fall during the course of that time, we can have 89 days of lower raw material costs or we can have 1 day of lower raw material cost. But basically, the contracts fire [indiscernible] escalated the escalators every 90 days. And there really has been no change at all in those contracts since we've cleaned up the Alcan pieces.

That's very helpful, Henry. So essentially, it seems like even there are changes in the raw material cost that may impact the company for a quarter, beyond that really, the way that the contracts are structured, you really have essentially the full pass-through of the raw material?

That's 100% correct.

And then just on the M&A pipeline. What are you guys seeing across the businesses that you're in? And what's the appetite to do further bolt-on deals in '14?

Well, we would like to have some good acquisitions. We look for acquisitions that are going to add technology to our company or give us access to new markets or new customers. There's a lot of stuff that goes on in there. If there is something going on in our industry or something related to our industry, Bemis will know about it and have an opportunity. But right now, there's nothing imminent.

And we'll take a follow-up from George Staphos with Bank of America Merrill Lynch.

Henry, first question is on Global Packaging. So recognizing that we haven't had this segment in its current form for a long period of time, when you look back historically at how the Global segment performed, what kind of growth rate, what kind of margin is possible in, I realize this is subjective, but a normal year, a good year?

My goal and the goal of our company is to get our Global, rest-of-world packaging business to be double digit, to get it up into that 10%-return-on-sales area. And I think you're going to see -- right now, we're about 7%, 7.1%. I think you're going to see us over the next 2 to 3 years make progress and get to that 10% level.

Okay. The second question is more a point of clarification on some of the things that you're just -- you were saying earlier. Number one, realizing that return on capital is important to you, do you in fact have a payback period, a return on capital threshold, with the new projects in? Secondly, on volume, I think you were answering Alex's question before. I know you're saying you should do better, 2% to 3% better than GDP, but -- or you're looking for 2% or 3% volume growth. But GDP is going to be 2%, 3% this year. So really, what kind of volume growth are you looking for across your 2 packaging business?

Well, we're really looking for volume growth that's a little bit better than GDP. Whatever GDP is, we expect to beat that slightly. A little modest growth over GDP.

So if GDP is 2% to 3%, it's reasonable for us to say maybe 2% to 4%. So something a little bit better. With regards to ROIC and the payback period, it really depends upon -- based upon the detailed process that we go through, it's really individual valuation by project and then looking at the return relative to the business that it supports and in the geography that, that particular piece of equipment supports. So it varies but we are specifically focused on, when it comes to production equipment, some pretty quick returns. And as Bill suggested, it's not going to be a 2014 event where we've got a lot of new business coming in 2014. For the most part these are investments in 2014 that we expect to get benefits from very quickly, in 2015 and 2016. So certainly it'll be a pretty quick turnaround with regard to production equipment. When you get to investments in R&D platforms, there, there's a little bit longer timeline. It's a different measure. But still, there's a qualification, a rigorous qualification process that our engineers go through in order to evaluate the appropriates of the investment and when we are going to start seeing commercial sales from those platforms.

And we'll take our next question from Chip Dillon with Vertical Research Partners.

Yes, and you might have addressed this. If I missed it, I apologize. But when you look at your balance sheet and the cash flow changed, and it was great to get that detail about the swing in pension and the restructuring costs going away. How do you kind of look at the priorities of buybacks versus further deleveraging or M&A?

As we said earlier, if we are happy with our position, at about 2.1x leverage that we talked about earlier in the day, and it's just going to depend upon what opportunities are available to us. We're going to take a look at all the M&A opportunities out there. Is it the right one for us? Does it fit us? Do we have opportunities for organic growth that we have to support CapEx or we have to support some R&D investments? And then share repurchases are on the table as the cash comes in. So it's just going to be what opportunities and what things we have that we can do with that cash at the time.

And underscoring that, Henry, I would add that it is not -- we don't intend to accumulate cash. The cash fluctuates a little bit on our balance sheet because of the geography that it happens to sit in but we have made a lot of changes in the way that we're managing cash in order to access that cash, even around the world. And we intend to minimize the cash on the balance sheet and manage to a certain 2.0x leverage level. To the extent that we have excess cash, and we obviously have a lot of strong cash flow expected going forward out of this business, we'll be looking in all those opportunities including share repurchases, as Henry mentioned.

And then just as a quick follow-up. There's been a few questions around the normalized growth rate kicking up to about a GDP level. And I guess if we assume -- if we get back to that past rate of 2.5%, 3%, I guess the question I have is, when you look at population growth, it's tended to be about 1 point of that 3, and productivity has been 2 points of that. And since most of your packaging goes into food, I would have to assume you expect to gain some significant share year-on-year in the packaging space since I certainly wouldn't expect people to -- certainly hope they don't eat 2% more each year. I know my wife tells me I don't need to.

No, I think -- you're right. And it kind of comes from 2 things. I think just our -- the products we make, the size we have, our ability to service our key customers. We're going to get some market share in the products that we currently make. But we're also going to get growth. It may not be growth for the consumer. But as we talked before, it's going to be soup being in a standup pouch instead of a can. It's going to be in ketchup, in a standup pouch instead of a rigid bottle. It's going to be in soups and sauces. When you go onto the baby food aisle and you see the conversion, it used to all be in glass and now it's in a foil standup pouch. So it's kind of a combination of the shift to more and more flexible from the rigid programs and also just where we stand with our current products and what we deliver, we'll gain some market share.

And we'll take a follow-up question from Mark Wilde of Deutsche Bank.

Henry, I'd like to just come back to the Global Packaging segment for a minute. I think in your comments, you mentioned that Brazil was just a little less than $1 billion -- Brazil and Latin America were a little less $1 billion of the $1.5 billion in sales in that segment, and that the EBIT margins were close to 10%. So if I look at the whole segment and it's got 7.1%, it implies that the profitability in the other $0.5 billion of non- Latin American sales is actually quite low. Can you just -- can you talk about that a little bit? Am I missing something?

No, no, no, I think you're analyzing it pretty well. Europe has been a problem for us over the last few years. We've talked about that. We're starting to see a little bit of strength in Europe as we focus on those products. And we're starting to get some market share, but our European Flexible business has been a burden for us over the last few years. And we made some significant investments over the last couple of years in China. And we're starting to take a -- we're starting to get an opportunity to grow our margins there. We bought into that knowing that it wasn't quite time yet for our technological products. So we bought in and we got into some markets there that have some lower margins, and we knowingly did that to get a foot in the door, to develop a business, to develop a management team, to start to understand the area. We know that's a region in the world, longer-term, we're going to have to grow in. So we took a little bit of hits to our margins but we are there now and we are accomplishing developing a management team. We're starting to see more and more needs for our types of packaging. In China, they finally put together their first version of our FDA with some of the food safety issues. So -- and we see quite a few of our medical customers start to put businesses into that part of the world. So that was an investment.

And just to clarify the math for you, as we talk about our Latin America business being slightly under $1 billion, that includes a sizable business in Mexico, which also has a pretty low margin at this point. It's improved since we acquired a big portion of it from Alcan but it still is certainly below average for the Global Packaging business. So Mexico, Europe and Asia are all areas where we have some room for improvement to get up to that double-digit operating profit in the near future for Global Packaging. And offsetting that is a pretty healthy medical and pharma business, as Henry said, where we've got some nice margins around the globe just because it's a more complex, high-barrier type of product line.

And we'll take our next question from Adam Josephson with KeyBanc Capital Markets.

Henry, sorry to harp on the volume issue but you had, if memory serves, some market share gains in 2013. And you've previously talked about the shift from rigid to plastics. So I guess I'm just trying to better understand what's different this year than last year in terms of volume? I know you said your customers are feeling a bit better but anything beyond that? More share gains, perhaps, than what you had last year?

I think there's a couple of things that go into that. First off, we're done with the facility consolidation. There's a lot of effort that goes into doing that. And that frees up our sales team. Instead of our salespeople worrying about how to make sure their customer is serviced, they're now looking for more growth opportunities. They're out there trying to get more market share. Our R&D groups and our manufacturing are working on being, now that they have the business, to be more productive, opening up capacity for us to expand. So I think there's a lot to it. The other is we're not shedding as much off the bottom. It's difficult to show, really, the good, profitable volume growth that we had last year when you have certain areas subtracting from it. So I think what you're going to do is you're just going to see more of an emphasis on growing the business. You're not going to have the detraction of the consolidation. And you're not going to have that bottom end of the business subtracting from the total number.

And we'll take a follow-up from George Staphos with Bank of America Merrill Lynch.

My last 2 questions, guys. First off, I think piggybacking off of Mark's question, you're putting in a 9-layer extrusion line in China. How do you protect the intellectual property around that, around the Bemis know-how that ultimately doesn't walk out the door when your employees go home at night? That's question number one. Question number two, yes, I think we've talked maybe about this a long time ago, not more recently. Pressure Sensitive Material, it's 10% of the portfolio. The company has had, over the years, different approaches to whether that would stay in the portfolio or not. How core do you see PSM in the business? And if it was less core -- well, certainly it is less core than flexible. If it was less core than you wanted it to be, do you see the same obstacles to perhaps divesting of it as had been the case say 10, 15 years ago?

Our Pressure Sensitive business is, you're right, is about 10% of our total sales. Every year that we take a look at our portfolio -- last year, we decided it was time to divest Clysar because it didn't sell. So every year we review our portfolio. Our Pressure Sensitive is part of it now. We are leveraging our medical device business and growing Pressure Sensitive in some areas. But it does remain out there as a question.

George, I'll take the one on China. This is Bill. It's a great question and, obviously, it's a risk. But many companies have put technology into China and been able to keep it and there are processes established, specifically at the company that we purchased, NCS, where they segregate the duties so that there isn't one individual or group of individuals that understands the entire process or package, if you will. So there's a segregation of duties, and those segregation of duties keep that specification unknown to the entire group. So they've been doing this for a while. They actually have patents on some of their film structures and they've been able to maintain those. So we've been able to understand and learn that process and now we have those procedures and practices in the facility, as well.

You bring up a good question on protecting your technology. Just because you put in a 9-layer line doesn't mean you're going to move your most technical and proprietary products. We can use that 9-layer line to make some things and upgrade the technology that they have but not yet send over our most technical and proprietary technologies.

And understand, the packaging sophistication that's there today is -- the requirement for packaging sophistication is nowhere near what it is in the U.S. So you don't put, to Henry's point, the latest and greatest there out of the chute. It develops over time.

And we'll take a follow-up from Alex Ovshey with Goldman Sachs.

Henry, I wanted to go back on the volume question, and again, apologies to harp on it. But I guess where I struggle is, it's not just 2013 that the volumes were below GDP. But if I look at the business during '11 and '12 and '13, they were materially below where GDP growth was. GDP was positive 2%, the volumes were flat to negative even if I adjust for the optimization in my model. And I agree with you that, over the last 20 years, Flexibles has grown a little bit above GDP but, looking at your business that has been the case for the last 3 years. So I guess how do we get comfortable that we see this acceleration in '14 to a 2% to 4% volume number where it's just been nowhere close to that in the last 3 years?

This is Melanie, Alex. The -- if you look at volume over the last 3 years, it's been a very unusual time in Bemis history. In 2010, we acquired the Alcan Food Americas business that increased our business size by 40%. And really, the exercise in 2010 was really focused on the existing customers that we had and that we acquired and making sure that all of them were being serviced properly. So we were very inwardly focused on our existing business and retaining what we had. As we came into 2011, we had this enormous increase in food prices. There was food inflation in the grocery stores. It wasn't net -- it was also increase in resin costs but what impacted demand in 2011 was an increase in food prices that just reduced demand specifically in the areas that we serve, in branded products. With food inflation so high, a lot of the consumers were moving into private label and fewer brand products. And while we serve both sides of that, we do a lot in both areas of the market, we obviously have a very large share in the branded side. And so that impacted our volumes as we got into 2011. 2012, we closed -- started closing some plants. And all of the same-store sales schedule that we showed you, with the optimization effect on Page 4 of the supplemental schedules, all of that was going on in 2012 as well. We didn't start tracking it until 2013, when it became a more difficult conversation to have in trying to explain the changes in our volume. But we had plant closings all through 2012 and plant closings also in 2013. Now, as Henry and Bill said, as we get -- as we ended 2013, we've got a lot of positive momentum within the business organically. If you ignore this optimization effect that we're about to anniversary and is going to 0, now we've got some positive momentum. We're seeing strong orders in backlog. We're seeing conversion to our type of packaging. And all of those things, plus our focus on new products and new customers and new outlets for our products in the market, all of those things give us the confidence that we're going to start seeing some modest volume growth. And modest volume growth being maybe 2% to 3%, 2% to 4%. So we're not talking 10% to 20% growth. We're talking something a little bit more normal -- normalized for our market. And I agree with you that it's been very slow the last couple of years. But we see 2014 as a turning point and a different year for Bemis and for the market compared to what we've seen the last couple of years.

And we have no further questions over the phones. At this time, I'd like to turn the conference over to Erin Winters for any additional or closing remarks.

Thank you, operator. Thank you all for joining us today. This concludes our conference call.

This concludes today's conference. We thank you for your participation.