Erin M. Winters - Director of Investor Relations Jerry S. Krempa - Principal Financial Officer, Principal Accounting Officer, Vice President and Controller William F. Austen - Chief Executive Officer and President Melanie E. R. Miller - Vice President of Investor Relations and Treasurer

Alaxandar Wang - BofA Merrill Lynch, Research Division Mehul M. Dalia - Robert W. Baird & Co. Incorporated, Research Division Usha Chundru Guntupalli - Goldman Sachs Group Inc., Research Division Mark Wilde - BMO Capital Markets Canada Adam J. Josephson - KeyBanc Capital Markets Inc., Research Division Albert T. Kabili - Macquarie Research Scott L. Gaffner - Barclays Capital, Research Division Christopher D. Manuel - Wells Fargo Securities, LLC, Research Division Anthony Pettinari - Citigroup Inc, Research Division Philip Ng - Jefferies LLC, Research Division Chip A. Dillon - Vertical Research Partners, LLC Deborah Jones - Deutsche Bank AG, Research Division George L. Staphos - BofA Merrill Lynch, Research Division

Good day, and welcome to the Bemis Company Third Quarter 2014 Earnings Conference Call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Erin Winters. Please go ahead, ma'am.

Thank you. Welcome to our third quarter 2014 conference call. Today is October 23, 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 President and Chief Executive Officer, Bill Austen; our Vice President and Controller and Interim Principal Financial Officer, Jerry Krempa; and our Vice President and Treasurer, Melanie Miller. Today, Jerry will begin with comments on the quarter's financial performance. Bill will then provide color on business performance and outlook. After our comments, we will answer any questions you have. [Operator Instructions] At this time, I'd like to direct you to our website, bemis.com, under the Investor Relations tab, where you will find our press release along with our supplemental schedules. We'll be referring to these schedules that points throughout today's discussion. On today's call, we will also discuss non-GAAP financial measures as we talk about 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 during this teleconference are forward-looking and are therefore subject to certain risks and uncertainties. Actual results may differ materially from historical, expected or projected results due to a variety of factors. Please refer to Bemis Company's regular SEC filings, including the most recently filed Form 10-K for the year ended December 31, 2013 to review these risk factors. Now I'll turn the call over to Jerry Krempa.

Thank you, Erin, and hello, everyone. This morning, we reported record total company adjusted diluted earnings per share of $0.67, which is near the middle of our most recent guidance. This is an 11.7% increase compared with 2013 third quarter adjusted diluted earnings per share of $0.60. As previously announced, during the third quarter, we entered into an agreement to sell our global Pressure Sensitive Materials business. The third quarter operating results of this segment as well as a pretax impairment charge of about $45 million are aggregated and reported as discontinued operations in our financial statements. Consequently, my discussion of our financial results will reference only continuing operations, which consists of our U.S. and global Flexible Packaging businesses. We have included supplemental schedules on our website that recasts certain financial information on a continuing operations basis. Specifically, we have provided a recast of both our historical earnings per share amounts and our income statement. Looking to Page 3 of these supplemental schedules, you can see record third quarter adjusted diluted earnings per share from continuing operations of $0.61, a 10.9% increase compared with last year's recast third quarter results of $0.55 per share. I will now discuss the sales and operating profit performance of each of our Flexible Packaging reportable segments. As I discuss sales figures, please refer to Page 5 of the supplemental schedules, which provides detail on year-over-year changes in net sales. In our U.S. Packaging segment, which represents approximately 2/3 of total Bemis sales from continuing operations, we saw a decrease in third quarter net sales compared with the third quarter of last year. This decrease is attributable to the divestiture of our Paper Packaging Division earlier this year. Excluding the impact of this divestiture, overall organic sales in U.S. Packaging increased 1.1%, driven by favorable…

Thank you, Jerry, and good morning, everyone. Before discussing my thoughts on the most recent quarter, I'd like to step back a bit and share with you my perspective as I begin my new role as CEO of Bemis. I am truly honored to be leading the company at this important and exciting time in its history. We are at a turning point. As you are aware, we have been internally focused for the last few years. Specifically, we integrated our largest acquisition in company history. We closed 9 plants as part of our facility consolidation program and we divested 3 non-core businesses, a tremendous amount of internally focused effort that is over. And now, it is time to focus our resources externally, on accelerating disciplined growth, delivering innovation and continuously improving all we do. We will accomplish this in a variety of ways and the result will be improved performance metrics. Specifically, I am committed to improving return on invested capital, operating margins and earnings per share. In the months ahead, you will hear more details about our external focus and the long-term financial objectives to which we will hold ourselves accountable. We begin this next chapter from a position of strength. The facts are, we made great products that are differentiated from the competition. We have deep and valued customer relationships and we have the scale, capital and dedicated employees to provide our solutions to customers anywhere in the world. Now turning to our most recent third quarter. As Jerry mentioned, we had a strong quarter. We delivered record EPS and operating margin improvement. We grew sales in our target end markets and positioned our business for additional value-added volume growth in future periods. In our U.S. Packaging segment, we improved operating margin to 13.3% as compared to…

[Operator Instructions] And we'll take our first question from George Staphos with Bank of America Merrill Lynch.

It's actually Alax Wang sitting in for George. Quickly on resin trends. I know you touched on it on your prepared remarks but we've seen some upward movement, both in polyethylene and polypropylene. Can you talk about your anticipation for resin maybe going forward?

Right now, Alax, we see resin as being stable right where it is. We don't -- we haven't built anything in that shows an increase where basically stable resin prices moving forward.

Great. And just as a follow-up, touching on Global Packaging. Are you seeing any change in tone in 4Q versus 3Q other than normal seasonality? What are your expectations for trends in 4Q?

Alax, I am-- I really like our Global Packaging business. We have put in some capacity over the last couple of years. We've gotten that capacity positioned where we want it. We're making great inroads by introducing new technologies into the Global Packaging arena and we're going to continue to be bullish and push on our Global Packaging business. If you look at the Global Packaging formats, right? It's like a staircase. At the bottom of the staircase is low sophistication, at the top of the staircase is high sophistication in packaging and higher margins. The capacities we've put in, the investments we've made over the last few years help our customers move up that sophistication staircase, and we feel really good about what we're doing in global and where we're headed both in the food side and in the health care side of things. So we see that while I can't say that we're going to see 100 basis points move every 90 days in our margins, we're going to see an upward trend as we go through the next many, many quarters. Thanks.

And we'll now go to Ghansham Panjabi with Robert W. Baird and Company Mehul M. Dalia - Robert W. Baird & Co. Incorporated, Research Division: It's actually Mehul Dalia sitting in for Ghansham. Can you help us understand why the trend's actual multiple for PSM was so much lower than recent multiples in the packaging industry?

Yes, let me take that one, this is Bill. When I came to Bemis, it was 14 years ago, I actually came into Bemis as the President of our Pressure Sensitive business. And I know that business very well. I know that market very well. And that business, on it's -- when it's on the top of its game in its best day, it's going to be a 6% to 7% return on sales business. And we, Bemis, stopped making investments in that business some time ago. So if you go back 14 years ago to when I started, a lot of new capacity in MACtac came online. A couple of new coders were started up in the year 2000, 1999 to 2000. Since that time, the industry has moved forward. The market has moved forward. Technology has moved forward. Wider Web widths, faster speeds, different adhesive technologies. And we didn't really stay up with those market improvements. So there's going to be, while the business will grow minimally, to really grow that business, it's going to require some new capital injections, some new capital investment. And if you look at Bemis Company as a packaging portfolio, we've got much higher and better returns and higher margins in our Flexible Packaging business that don't -- so the MACtac's pressure sensitive margins really don't compare with our Flexible Packaging in margin and return. Some we're going to take money and put it into Flexible Packaging. We weren't going to continue to invest to make business at 7% returns. So it was just a function of where best to focus the company. We've got the company focused on its core around Flexible Packaging, that's where we have better growth opportunities and we have better rates of return. Mehul M. Dalia - Robert W. Baird & Co. Incorporated, Research Division: Great. And just another one for you Bill. Where do you think the strategic focus is going to be as we think ahead to the next 5 years or so. Is Europe still a market with strategic significance for the company? And should we expect more capital to be allocated towards Asia?

Yes, it's a very good question. Europe, for us, we're on a -- we're doing quite nicely in Europe. We like the position we have in Europe as a niche player. As a niche supplier in high-barrier, health care and protein packaging. And we will be making some targeted investments in Europe that are focused at healthcare and high-barrier packaging. This example of the skin cook film that I mentioned in my verbiage, that's a product that's skin tight, which is a really great product that helps sell a new format for fresh meats and preprepared foods in Europe. And one of the large U.K. grocery chain has just moved their volume of fresh meat cook-in type meets to our skin cook package, which is a great example of the investments we've made over the last few years coming now into the market with new technologies. And in Asia, we're going to continue to invest in the emerging economies because as I talk about that staircase of low sophistication to high sophistication, as food safety standards continue to move upscale across the entire Asia region, not just China, our products are ideally positioned to help those customers sell their products in the market. So we're going to continue to invest in those regions of the world where we have an advantage and where we can be differentiated.

And we'll now go to Alex Ovshey with Goldman Sachs.

This is actually Usha Guntupalli on behalf of Alex. Looking at the U.S. Packaging segment, could you provide more color on the margin improvement initiatives, particularly pricing and better operations? What are you doing differently now versus a few years back?

Well, I'll take that question here in that if you look at what we're doing differently is it's really the focus on the higher-margin value-added product portfolio that was not as -- it isn't that we weren't there a few years back, it's just that now we've got some unique technologies, some unique assets focused at these higher-margin, higher technology types of packaging applications and that's where we're putting our focus. And third quarter, some of the improvements that we're going to be making going forward now is we have made some key personnel changes within the U.S. Packaging segment. We're putting some more engineering resources around the commercialization of new products so that we can bring those products to market quicker without hiccups and we're accelerating the installation -- we're accelerating the capital deployment into the U.S. Packaging segment so we can bring some equipment to that region quicker and reduce some of the bottlenecks that we've had.

So are we talking about 100 to 200 basis points improvement over the next few years from this?

Yes. Our target that we've stated, I've stated, for U.S. Packaging is that we want to be between 15% and 18% operating profit within the next 3 or 5 years.

And we'll now go to Mark Wilde with BMO Capital Markets.

Very refreshing comments, Bill. I want to just turn back to global. I mean, your margins are still quite a lot lower there. What are going to be the kind of 2 or 3 keys to driving that margin up? And can you get it to the target you just laid out there for the North American business?

Yes. Mark, first off, our target for global is 10%-plus operating profit, and it goes back to that staircase, okay? Just think about that staircase. At the bottom of the staircase, low sophistication packaging, low value, low margin. Top of the staircase, high value, high margin. And we're helping our customers because we're introducing technologies in those parts of the world that come from the developed world, right? They come from Europe. They come from the United States. We're bringing formats to the customers that they've never seen before, that they haven't had the opportunity to market their products in. So we're bringing those formats to those regions of the world and that's going to help us move up that staircase and get the higher margins and that's our focus in the emerging world, along with health care. The health care packaging, if you look at now across Asia, there's more and more healthcare being afforded to the population. So there's a good portion of healthcare pharmaceutical medical device packaging that we're now getting into the Asian marketplace. With our footprint in Kuala Lumpur, with our plant in Suzhou, China, and now our film platform we can actually make films for that region in the region from our film plant in China. So we no longer have to ship films from around the world into that region. So we can better serve those customers with new technologies developed within the region.

Okay. Just as a follow-on. That business skews pretty heavily, I think, in terms of sales right now to Latin America. Is that going to change? And right now, are you seeing any impact from the slowdown in Brazil?

A couple of questions there, right? The first one would be, yes, we are heavily skewed in Latin America, right? And it's going to take us a while to build the Asian business to that size. But we are growing the Asian business quite nicely. Now have we seen improvements in Latin America from a volume standpoint? We have target end markets, right, that we'd like to talk about, liquid, dairy, meat, cheese, protein, if you will, as well as health care. We've seen nice gains in meat and cheese in Latin America and we've seen some gains in our pharmaceutical business down in Latin America. So these are target markets that we like to be in and that's where we're pushing and that's where we're seeing volume growth.

And we'll now go to Adam Josephson with KeyBanc.

In terms of the cash flow guidance you gave, how much of the $60 million to $65 million operating cash flow guidance reduction was attributable to the divestiture of PSM versus the inflation and high working capital that you talked about? And can you just put into context to what extent you're expecting the inflation and/or working capital and how much that surprised you?

Yes, Adam, I'm going to have Jerry answer that one.

Hi, Adam. Well, in terms of the range we gave in terms of the reduction, just one thing I want to point out is where we end up in that range will partially depend on the timing of the pressure-sensitive divestiture. As we indicated, we're targeting closing that transaction in the fourth quarter, but depending on exactly when we do will impact where we are in that range. For instance, out of the reduction, about $10 million to $20 million of that reduction relates to pressure-sensitive. Considering the lack of operations we'll have in the fourth quarter, whether it be 1 month or 2 months or whatever. And also, some related closing costs to the transaction. The balance of that reduction is roughly 50-50 split between 2 items. One item being raw material inflation, that becomes part of inventory costs, and eventually works its way to accounts receivable as these cost increases are passed on to our customers. And secondly, it's the inventory quantity increases in the supply chain resulting from the inefficiencies we experienced as we commercialized some of the new business that Bill talked about. We will see these levels shrink over time as the action plan Bill mentioned is implemented and as we install some new equipment that will add capacity and help alleviate some of these bottlenecks. So the balance of it, like I said, is split between those 2 items.

So along those lines, to the extent there'll be some of those issues as transitory, what do you consider normalized operating cash flow for the company following the sale of PSM?

Right. I think, historically, pressure-sensitive contributed about $30 million a year to our cash flow. This year, it was substantially lower because of the Stow closure costs, which included the withdrawal liability from the multi-employer pension plan. So that's the impact pressure-sensitive would typically have on our cash flow. I think, as we get -- come out next quarter, we'll be giving you guidance for the future.

And we'll now go to Al Kabili with Macquarie.

I wanted to follow up on Adam's question on the cash flow. And can you give us a sense for how you're thinking about working capital? It looks like it's going to be a use for the year? How you see that ranging that's factored in your operating cash flow outlook?

Well, as I think I just indicated, we talked about pressure-sensitive impact for the balance of the year. We talked about raw material inflation that's become part of inventory and it becomes part of AR as we pass those costs through. It's the inventory quantity increases that we've seen in the supply chain because of the commercialization of new business that Bill talked about. That will take a little longer to flow out. We need to implement our action plan, we need to add the capacity that's in process and that will help alleviate some of those bottlenecks. So over time, we expect that to shrink.

Okay. And are we thinking like a use of $20 million, $25 million net of working cap this year? And just can you help us quantify the sort of inefficiencies, what that was as far as cost in this quarter and how long you think it's going to take for that to alleviate? Thanks.

In terms of the use for the year, Al, I would imagine that's going to be about $50 million for the year. And like I said, the balance I laid out for Adam, we talked about the reduction, $10 million to $20 million is PSM, the balance of it is roughly between the raw material inflation and the inventory ramp-ups. The inventory ramp-ups, I would think that throughout next year, as we get through first and second quarter, we'll see some pretty significant decreases in that.

And we'll now go to Scott Gaffner with Barclays Capital.

I just wanted to talk a little bit more about the growth investments that you're making. A couple of things. One, can you talk about how you look at the returns profile on those investments, whether payback period, et cetera? And then, also at the same time, are your customers investing alongside you? Is that a requirement? Or is this investment you're making irrespective of customer contribution?

Yes. First off, let me -- as I've said earlier in my comments, one thing I'm committed to is improving our performance metrics, one of which is ROIC. And what we're now looking at from a capital investment perspective, we have an ROIC hurdle. Now let me explain this, okay? What we're saying to the teams that want to invest in capacity and invest in growth is that their investment in capital has got to have a 5-year average of 15% return on invested capital hurdle. So at that period, they look at it and they say, okay, does it have a 15% average ROIC over the first 5 years of the project? And we have got plenty of opportunities that the guys -- that the teams are coming in with that have got those -- that hurdle in excess of. So again, it's not a one point in time but it's a 5-year average for that investment, needs to have a 15% average ROIC. And if it does, we just gauge them next to all the other projects and go about it that way. Now the second point to your question was our customers investing. Some of them, yes. And some of our investments are geared up and matched with some of our customers' investments that they're making in some new type of packaging technologies. A lot of that takes place in the emerging world because there's new packaging formats coming to the emerging world, so we're linked up with some of our customers in the emerging world as well as the developed markets as well.

Okay. And just following up on that. You said you had plenty of opportunity that the teams are coming in with. I mean, was it just not a desire maybe over the last few years to aggressively go after these projects? And on the CapEx equaling D&A, I assume you mean ex PSM, if you could just clarify that?

Yes that is correct, your comment about ex PSM, yes that is correct. Over the last couple of years, as I talked earlier and I talked to a lot of folks already, we had a very big internal focus over the last few years because we made the purchase of Alcan. We consumed a lot of capacity when we purchased Alcan, and we first coordinated specifications in that Alcan hotdog film. We had a hotdog film. They had cheese packaging, we had cheese packaging. We took our resources and had them go through the portfolio and say, okay, which is the better spec. We determined which were the better specs and then we determined where is the best place to run all these specs. So that was the plant consolidation effort where we moved pieces of equipment around our portfolio around the footprint of plants to determine where best to run things and where best to move equipment. We now have absorbed that capacity that we purchased with Alcan and now we're back on the trail of investing for growth with new capital.

We'll now go to Chris Manuel with Wells Fargo Securities.

I first want to say, the excitement and the -- some of the ideas that you're bringing on the table here, particularly looking at returns and margin profile is very, very exciting and refreshing, and we look forward to having all these goals unveiled to us.

Thanks. And coming from you, that's a complement.

A couple of questions I wanted to ask. First was when we think about some of the volume trajectory through the quarter. On the surface, looking at the slides, it would appear as though you kind of doubled previous rates as much better. But I think, in earlier comments, you mentioned a good chunk of it was price. Can you give us a sense as to where you are in the price curve? If we look over the last few years, seemingly, you're probably still a bit behind, but it sounds like you're starting to catch up. The pricing actions you're taking, are they more formulaic material-based? Are you out looking for areas to recover higher labor, other miscellaneous, inflation costs? Where are you at kind of in this process?

Yes. First off, we are aggressively driving price. Now we do have, within the United -- within North America, we have a large percentage of our business on contract, so that's formulaic, as you put it, Chris, right, where we have a price adjustment formula and we adjust our price that way. The portion of the business that is not under those types of formulaic contracts, we're out there aggressively managing price to our advantage when we can. Outside the United States, we don't have these large formulaic price adjustment formulas with customers, and we are outdriving price outside in Global Packaging and in our health care area all the time. It's just part of the way the business teams are now metric-ed for their performance. It's on price and pushing price and not being in a lag.

Okay. So this is something then that takes a little bit of time, maybe a couple of years to work through, but this is -- that's -- the crux is it's in process?

It's in process and I wouldn't say it's going to take a couple of years. This is -- we got to get this done now and there's a sense of urgency around it with the teams.

We'll now go to Anthony Pettinari with Citi.

Bill, you talked about using the proceeds of PSM to fund growth. And as you look at growth over the next 2 to 3 years, do you have a bias towards organic internal opportunities versus M&A? And then, on the M&A front, you obviously had the large Alcan acquisition a few years back, and since then, everything has been kind of smaller bolt-on, below $100 million. As you work towards M&A, given that you're pretty much at your target range, is there an opportunity to do something a little bit bigger? Or how do you think about that going forward?

Yes. I'll tell you, here's how we're thinking about it. First off, obviously, the best or close to the best use of cash is to fund organic growth where we have high-margin, differentiated product technologies that we can bring to customers to help them grow, that's what we're going to do, okay? That's number one. We want to grow organically and we think that's the best use of our cash. We're also going to be out looking for acquisitions. There's no question that we are going to get back on the acquisition trail and we're going to be looking for those things that add footprint, add scale, add technology. And that's going to be -- that's not going to be consistent around the world, if you will. It will be different in different regions of the world. So yes, we're funding organic growth, funding acquisitions, paying a dividend, we paid a dividend for -- increased our dividend for 31 years, and I've jokingly told people, I'm not going to be the guy that goes down in history that's changing that, and the fourth one would be opportunistic buys of share buyback. And we have an authorization, I think, of 8.3 million shares from our board.

Okay. That's helpful. And then, just following up in the U.S., you spoke about the weakness in dry food, confectionary, snack food, and we've been seeing this for a number of quarters. I'm just wondering, as you went through the 3 months of the quarter and maybe in October, consumer confidence has picked up, gasoline prices are down, grain prices are down. Are you seeing any indication that there's just a little bit stronger growth for packaged food demand in the U.S. or is it pretty much steady as she goes?

I really like the way you think because one of the -- and it's anecdotal, right? As you talk to some of the major CPG companies, they will tell you that gasoline price directly impacts the sale through convenience stores. And that's where they make their highest margins, is that impulse buy, somebody puts $20 into their tank, goes inside, and it's got $5 left or $4 left and they buy the P3, the Kraft P3 protein pack. They buy the Hormel prewrapped turkey wrap. We like that because those are our packages. That's where we sell and it's that on-the-go grab-and-go type foods that we like. So I don't have any data wrapped around it, but I would hope to see that as gasoline prices come down, we're going to start to see food volumes go up. And that helps us, it helps our customers, and in turn, then that helps us. But as we get into October, we've got nice orders, trends going on in October right now, so I can't say that it's related to lower gasoline prices, as you might suggest, but we could certainly use that low gas price as a tailwind.

We'll now go to Philip Ng with Jefferies and Company.

Bill, encouraged to hear about some of these longer-term margin targets going forward. Is that mostly going to be driven by price or some of these growth investments you're making? And then, I was pleased to hear you're taking a more aggressive stance on price going forward, but with oil falling, at least in the short to medium term, how is that conversation going to go for your customer, because I would imagine it's going to have an impact on resin at some point.

We like the fact that we got a robust pipeline of innovation and new products coming out because that's when you can price the product the highest, right? It's when you launch a new product to meet a customer demand, to help them get the package off the shelf, get it into the consumers' cart better right out of the chute, you get high prices. With a falling demand, if you will, or low oil prices, the Asian demand is softening, so, yes, could there be some weakness in resin pricing or in specialty chemicals going forward? Maybe. But we're really driving this thing from a mix perspective and increasing the mix of higher value-add products and that's where we have higher margins and higher prices. Right now, we haven't had the conversation, obviously, about falling resin prices because they haven't fallen. So we're going to continue to push on price the way we have been, not just in the U.S. but around the world.

Okay. And just switching gears a little bit into your Global Packaging business, it's nice to see margins tick up pretty nicely in Q3. What's driving that improvement? Is that mostly mix? Mostly price? And this level of improvement, is it sustainable going forward?

Yes. It's really the fact that we're starting to get traction with new product introductions in the emerging world. I mean, a large -- one of the largest or the largest processed meat company in Brazil has taken their entire line of processed meats and cheese to one of our packages that we've had no traction in before because they were just selling it in a 3-side seal nylon poly pouch before. Now it is in a very, very upscale, high-end, high graphics, peelable, resealable package that sells in Europe. They're now taking across their entire line in Latin America. So it's new product introductions. The skin cook film over in Europe is a brand-new technology that comes from our skin film format, which we're just putting in additional capacity so we can meet those customers' demands. So it's really the introduction of new products, higher-end value-added products. Just keep thinking about that staircase. We're helping our customers move up the staircase to higher value-add, higher-margin products.

We'll now go to Chip Dillon with Vertical Research Partners.

First question is just a couple of housecleaning things. The 15% average ROIC, is that pretax or after-tax?

After-tax.

Okay. After. Okay. And I might have missed this and I apologize, but you mentioned some long-term margin goals. And I know you've, in the past, the company has said that the global segment is something more than 10%. Do you have a similar -- do you have a target for the U.S. business? And I think, you said that there was an overall target as well?

For U.S. packaging, it's 15% to 18% operating profit. That's our goal. That's where those guys are headed. That's their target. And what you said, Chip, about global is correct, 10%-plus.

And we'll now go to Debbie Jones with Deutsche Bank.

As we sit here today, I guess, more importantly, I guess, as we go into 2015, I was wondering what your -- what is your rough mix of business between your high-barrier, value-added products versus low barrier and commodity business, and how should we expect that to trend over time?

In the U.S., our current mix of high barrier, so we think of high barrier being meat, cheese, dairy, liquid, it's roughly half of our U.S. business. And then, the other, dry foods, candies, snacks, et cetera, all those things would make up the second half. And Bill, I'll let you comment on your thoughts of mix of business as we move forward.

The mix of -- we want to shift. Obviously, we've wanted to shift and we have been shifting and we've been moving from the lower barrier, if you will, and to the middle -- to the high barrier. So we've been moving away from more and more of the bottle over-wraps, snack food packaging, candy confection packaging, up to the left-hand side, if you recall, our investor presentation, the left-hand bars of meat, cheese, dairy, liquid, where there's high barrier, more technology. Customers aren't willing to put those brands at risk so they've got to have high quality, great service and constant differentiation of products. So we'll continue to move in the direction of high barrier. And right now, I don't have a percentage in my mind as to where that's going to be. It will -- the trend will continue to increase toward the high barrier side of the equation.

Okay. And I guess, as a follow-up, you mentioned a focus on ROIC targets for your new products, product development. And I'm just wondering, what type of incentives or potential changes to accountability that your team now has to achieve those targets? And to be fair, I think, in the past, the industry as a whole has kind of just struggled to get paid for some of these innovation and benefits from long-term projects?

Right. Well, in 2015, not just the officer team at Bemis but the regional teams and people in the regions will be incentive comped on ROIC, ROS, growth and safety. So ROIC becomes a part of the regional teams and so does return on sales. So we're really putting a hard push and a drive on return metrics and improving those return metrics.

We'll now go to with Frederick [indiscernible] with Lumbar Investment Partners [ph].

A couple of follow ups. But really, I wondered if you could talk about what the use of proceeds from the pressure-sensitive divestiture, whether given the underperformance of the shares, whether you expect, given the authorization of insured repurchase, to resume that? And then, thinking about your targets, it's great with ROIC, but can you commit on any M&A that you -- that these deals will be accretive to earnings having just divested a business that was -- it turned out to be heavily dilutive to earnings. Can you commit to making acquisitions if you do even bolt-ons that will be accretive to free cash flow earnings?

Yes. First off, the question around M&A, yes, we are looking at -- when we look at M&A right now as a -- 3 years, it needs to be accretive to ROIC, that's one of the goals we have as we look at that and how we're going to drive synergies and now we're going to drive growth so that we can achieve the accretive ROIC. And the other part of your question was around? Oh, share repurchase, I'm sorry.

Share repurchase.

We're authorized from our board for 8.3 million shares. And again, we've got a view of capital allocation as organic growth, inorganic growth, share repurchase, dividend, not necessarily in that order, but that is one of our criteria that we look at with our capital allocation.

And just as a follow-on, it seems like one of the most interesting opportunities you have is really on the health care side, pharma and medical device and the packaging there. And can you tell us just where you are in terms of that and how much new business you gained? You sort of hinted, I thought, when you said the commercialization of new business, am I to assume that, that really is coming increasingly from Pharma? And what should the impact? Should that also increase margins? Is that a higher-margin business? And is the trend really that, that's where the lion's share of your new wins should come from?

Yes. We really like what we would call health care, okay, which is medical device and pharma. And we have been making investments in that area for quite some time, and good investments for the reasons you stated. It does have good margins. And it has very nice margins and healthy margins. And if you look at our growth in that segment, we're up mid-single digits from a volume growth perspective. So another reason we like that. Also you have very sticky customers in health care and pharma. As long as you continue to produce high-quality, on-time products with new innovation, you keep those customers for a long time. And it's all about quality, it's all about cleanliness, it's all about having world-class manufacturing, which we do. And just along those lines, we talk about our CapEx investment. We just broke ground a couple of weeks ago on an expansion for growth in our health care business here in Wisconsin, a $25 million investment to double the size of one of our health care facilities. And that's about growth. So that's where we're headed with pharma, it's a great question, because that's where we're going.

We'll now go back to Mark Wilde with BMO Capital Markets.

Yes. I wondered if you could just put a little color or perhaps some numbers about how the roll-in from some of these new business wins will occur as we move through 2015?

Yes. It's not like there's a step function there. As customers begin to commercialize and they begin to trial market and then the trial market goes to -- more of a trial market goes to more states, goes to more regions, it ramps up. So you got to really view the incoming business as a ramp, not a step.

Okay. But it sounds like, in the quarter, you must have been building some inventory in front of some -- I would assume some pretty significant product rollouts.

Yes. We were. We did bring on some business within the quarter that will ramp up through 2015 and we had to get it through trial, we had to get it through customer, I can't think of the word right now, but it's where they do trial marketing. It's taken off quite well. And now, it's going to ramp up as we go through 2015. In the long run, it's -- in baseball terms, it might be a double or a triple, but when you start out, it's a single.

And we will now go back with George Staphos with Bank of America Merrill Lynch.

I jumped on late. I've been listening and we'll do a little bit of catch up afterwards but I've covered Bemis for a long time and I'm looking at my long-term models here and a lot of what you're talking about, focusing on high barrier, focusing on health care, investing in growth, we've heard from the company for a number of years. Return on invested capital is flat to down over a 15-year period and I'm looking at margins are down over that time and the resins had an effect here. So what is, in your view, most different about the new Bemis now with all of this focus relative to the old Bemis? Is it that you finally put teeth into the incentives driving more return on invested capital, would you say that's it, or what else is it?

George, I would say that what you just described as teeth in the incentives, that's going to be a piece of it. But the other part of it is, we've got a vision that's externally focused, okay? It's focused on the markets, it's focused on customers, it's focused on helping those customers succeed in the marketplace versus we've been very internally focused over the last several years. Let's grind out harder, turn the wheel, turn the crank harder. Now we've got to take that and get it focused on the marketplaces, which is what we're doing. Which is why we're growing in our footprint in other parts of the world, which is why customers are asking us to come to other parts of the world and service them the way that we service them in the U.S. It's just getting more customer-centric, if you will, getting more market-centric, where do we have differentiation, where can we drive that differentiation and how do we extrapolate that differentiation from a developed business to an emerging business. And that's helping us grow and that's going to help us grow in the future.

What -- my follow-up would be then, what adjustment or what component in your analysis have you left for the world not being static? In other words, your competition also trying to emulate what you're doing and trying to move up the food chain, so to speak, with what they're offering their customers as well. How much do you think your customer -- excuse me, your competition might be able to derail your plans through their own offerings?

Thanks. In a simple world, it would be technology, right? We view ourselves as having somewhat of a technology advantage to already be differentiated and continuing to push on that differentiation. It was about 1.5 years ago, we hired a chief technology officer, came in from Dow Chemical. We have now wrapped ourselves around a much different technology model than we had in the past. We've got a technology center where we start to leverage that technology across regions, across market segments, meat and cheese into health care. Meat and cheese into medium barrier snack food packaging for Asia Pacific because the snack food packaging in Asia Pacific is much different than the snack food packaging in the United States. Snack food packaging in Asia has got to have barrier components, it has to have anti-scalping agents. It has to have components that you wouldn't see in snack food in the U.S. So we're able to extrapolate that into the other parts of the world. It's getting this big technology engine that we have at Bemis focused on the customer and focused on the markets and that's what's going to drive our growth.

We'll now go to Adam Josephson with KeyBanc.

One housekeeping one and just a strategic one. Jerry, what are you expecting in terms of decreases in interest expense next year and potential increases in pension expense?

In terms of decrease in interest expense, I think, I did lay out the change in our bonds, it's the only bonds that we have retiring here in the near term, so we did reduce that interest rate on that $400 million of debt based on current interest rates over 4%, 4.5%. In terms of pension costs, we have not completed our final calculations for the year. We'll have to see where discount rates are at the end of the year as we do our calculations, and next quarter, we'll be able to talk about that.

All right. And Bill, you talked about driving price across your business wherever possible and that you're doing so as quickly as possible. Can you just give us some perspective as to how -- what you're doing represents a notable change from what you and the company have been doing over the past several years?

Simply, we built a lot of analytics now into what we're doing in pricing. And it's not so much guesswork. We're really looking at the analytics of pricing and value pricing versus I think it should be this, I think it should be that. It's not a cost buildup, it's a price. And it's a market price analysis as to what's the value of this versus the value of something else. So it's really more wrapped around analytics and value pricing.

And Bill, just one last one. You referred to the key personnel changes you made in U.S. Packaging recently. Why the need for those changes? Were they all related to the inefficiencies in ways that you talked about that affected you this quarter? Or is there something else going on as well that led to those changes?

I don't want to get real specific on that but -- because it did impact people. But a combination of both, it's a combination of building a better, efficient business in North America, and it's a function of putting in the right skill set for the size of the business that it is today.

For our last question in the question queue, we'll go to Chip Dillon with Vertical Research Partners.

Quick question. As I look at your earnings from continuing operations for the year and your prior guidance before you sold the Pressure Sensitive Materials business, it looks like you're kind of starting out about $0.19 to $0.29 below the 8 ball, if I do my math right -- I'm sorry, $0.24 behind the 8 ball, so call it $0.22. And some of that, I assume, will be made up next year from either lower interest or lower shares. But the bulk of that is going to have to be made up in the future. And now, I'm just wondering, would some of that have gone away because without investing in pressure -- PSM, you would have saw results go down? Or do you really have to just go on offense to make up all of that? And how long do you think that will take? Do you think it will take 1 year or 2?

Well, your math is pretty accurate on what Pressure Sensitive was meaning from the sense of earnings per share. But as we take our investments and we put it into flexible packaging, we have much better growth opportunities, more substantial growth opportunities at higher margin rates then we did in Pressure Sensitive Materials. And we can grow the margins.

No, I understand that, but I didn't know why you couldn't just keep Pressure Sensitive Materials and then keep -- just keep it, and then, maybe add a little bit of modest leverage to do those other things, is it just because it might have been too distracting?

I'm sorry, I didn't quite get the question, I got it now. If you look at that business, and as I said earlier, I'm very familiar with it, those margins in that business are going to be, on the best day, 7%, okay? I mean, we're not just going to be able -- we were not going to be able to want to keep that going and invest in our high-margin Flexible Packaging growth areas. So it was best for us to put it into the hands of somebody that wants to invest in it and wants to grow it versus us where we've got our business focused on flexible packaging, our people focused on flexible packaging, and that's where our best opportunities for growth are.

It appears we do not have any additional questions in our queue. And I'll turn the call back to Erin Winters.

Thank you. Thank you, all, for joining us today and that concludes our conference call.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation.