Good day and welcome to the Bemis Company Fourth Quarter 2016 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Erin Winters, Director of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Welcome to our fourth quarter 2016 conference call. Today is January 26, 2017. 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 Senior Vice President and Chief Financial Officer, Mike Clauer; and our Vice President and Chief Accounting Officer, Jerry Krempa. Following Bill and Mike’s comments on our business and outlook, we’ll answer any questions you have. However, in order to allow everyone the 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’ll direct you to our website, bemis.com, under the Investor Relations tab, where you’ll find our press release and supplemental schedules. In Mike’s discussion of the financials, he’ll specifically be referring to pages three and four of the supplemental. On today’s call, we’ll also discuss non-GAAP financial measures as we talk about our 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 on our website. And, finally, a reminder that statements regarding future performance of the company made during this call 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, to review these risk factors. Now, I'll turn the call over to Bill.

Thank you, Erin. And good morning, everyone. As I reflect on 2016 we made progress, most importantly, we truly helped our customers win with new product innovations and improved quality and service. We continue to improve toward our long-term financial objectives. Looking at the full year, we achieved record adjusted earnings per share of $2.69, an 8% increase over last year on a currency neutral basis. We increased operating profit return on sales in our US packaging segment to 15.3%, a 100 basis point increase over the prior year and putting us in the range of our long-term goal of 15% to 18% in this segment. This improvement was fuelled primarily by the success of our asset recapitalization program. We generated $437 million of operating cash flow. We acquired SteriPack in April, a great acquisition, and in addition to our growing healthcare packaging business. We invested $208 million in capital to expand and improve our business, positioning us well for the long-term. And we return value to shareholders through our 33rd annual dividend increase and through the repurchase of 3 million shares of stock. We continued implementing our strategy of accelerating growth, focusing innovation and continuously improving all we do to deliver strong financial performance. That said, 2016 had some operational issues, particularly in our global business, we have and will continue to remedy these and I am confident that we will show improvement in 2017. I'll turn the call over to Mike now to discuss details of our 2016 financial performance and 2017 guidance. And then I'll come back to the call to discuss my view of key priorities as we enter 2017. Mike?

Thanks, Bill, and good morning. We reported adjusted earnings of $0.67 per share for the fourth quarter and $2.69 for the full-year of 2016, an 11.7% increase over the prior fourth-quarter and a 7.8% increase over the prior year on a constant currency basis. Total company gross margins for the full year at 21.16% were roughly in line with the prior year. This reflects the benefits of our asset recapitalization program offset by operational issues in our global business during the year. I will comment next on each reportable segment followed by overall company performance and then wrap up with guidance for 2017. First, US Packaging. Following page 3 of the supplemental schedules starting first with Q4, sales dollars in our US segment declined 3.6% in the quarter. Unit volumes were up 1% in the quarter. We delivered on all expected new or incremental business this quarter, so I am satisfied that our commercialization process is been rectified to deliver our long-term growth plans. While volume could have been better, fourth quarters can be unpredictable because of varying shipment patterns driven by individual customer’s year-end needs. Looking at full-year net sales in US, dollars declined 4.6% compared to the prior year. Volumes were up nearly 1% for the full year. Of the remaining decline in the full year net sales for US Packaging, about half related to lower resin prices that are passed through, which is neutral to profit and the other have to mix driven by the success of our asset recapitalization program. US Packaging operating profit return on sales for 2016 was 15.3% compared to 14.3% in the prior year into our long-term rage target of 15% to 18% in the U.S. This improvement was driven primarily by efficiencies from our asset recapitalization program. Moving to our Global…

Thanks Mike. As I think about the progress we have made and also about the stability and longevity of our business, I remain confident in our continued improvement and our ability to perform well over the long-term. Our US business has seen much success in the past two years. We've expanded margins approximately 200 basis points and increased operating profit dollars almost $25 million. Our business in this region covers a broad spectrum of products and we have great position, particularly in high technology packaging. During 2016, we continued implementing our pricing analytics initiative that helps our sales and marketing teams make good commercial decisions based on data instead of gut instinct. This allows us after inputting products spec and market data to have actionable information at our fingertips, which allows us to make better strategic commercial decisions. When initiating this project, our sense was that we would primarily discover areas where we were below market and would almost with the data to surgically raise prices. While there are many examples of this, there are also instances identified by the analytics, particularly in process proteins where the data showed that we were beyond the market therefore, making us vulnerable. During 2016, we used this data in negotiations with a variety of customers to proactively protect good business for the long-term and to gain new incremental business, considering the output of these negotiations the midpoint of our guidance range assumes US packaging margin percent in 2017 to be roughly in line with 2016. In the US, we will continue our asset recapitalization program which has provided meaningful improvement to date, as it will into the future. Because of this program, we are able to pursue growth in less differentiated products that formerly we would have overlooked given our cost structure with…

[Operator Instructions] We will go first to Scott Gaffner from Barclays. Please go ahead.

Thanks. Good morning Bill, good morning Mike.

Morning.

Good morning, Scott.

Mike, I just wanted to talk a little bit about free cash flow and the shift in working capital. I guess you said that – it sounded like your customers were managing their own working capital or their own cash flow in the fourth quarter and maybe that flow down a little bit to you or was this more the payment terms issue? Can you talk about that in the fourth quarter and then what gives you confidence that we get it back in 2017?

Yes. So first of all, on our own cash from operations, what I'm positive and happy about is that we – it wasn't a source of cash, so - excuse me, use of cash. So we’ve put the discipline in place, and we're really converting our cash pretty well. What I was disappointed and to be completely transparent, I thought we’d be in the range of $450 million to $455 million at the end of the year. And where we saw about the deficiencies, it was about half of that was just in payables, where we just quite didn't get the terms done that we wanted. The other half was just around the world a little bit extra inventory. The confidence I have next year is just the continued focus on this. The plans are in place. The initiatives are being hit on right now as we speak, as most of you are aware with the investment we're making in the new ERP platform in North America. We've talked about in the past that that will start as we implement the system and get completed. We'll drive inventory down as we get into late '17 and into '18. So, my confidence is, we have plans. I've seen them. I've sat down with the organization and I'm very comfortable at this point that they're committed to deliver.

All right. And when you look at the capital allocation for 2017, I think you said, obviously, the cash belongs to the shareholders. Do you have any share buyback included in the guidance today?

I do. We assume we're not going to delever. So if you – you can figure out that by taking cash from ops we’ve given you CapEx, you calculate dividend and there will be additional borrowing associated with not delivering, if we do grow our EBIDTA. So I think you can back into it. And I think consistently with what you saw this year, we buy million shares a quarter unless there’s an eminent acquisition like SteriPack in Q2. And that's kind of what’s the same thing that happened in '15, we bought 3.3 million shares in the quarter, we didn't – it was Q4 when we bought Emplal.

Thank you. We'll take our next question from George Staphos from Bank of America. Please go ahead.

Hi, everyone. Thanks for details and congratulations on the year. My questions are round on margin. And I just want to make sure that I had heard correctly. First question, I think you said margin in '17 should be in aggregate comparable with '16, even though it sounds like global packaging will be up. Bill, you’d said that, US packaging would be roughly in line, but if I do the math it would suggest that maybe it's going to be a little bit below last year. So if you could confirm that and provide details around that. And then the second question I had on operations, you had mentioned that you are in the process of remedying the commercial elements of your business, the new product introductions that you're doing. I just wanted to clear up whether you're now – you feel confident with that process or it's still developing in Brazil, the restructuring and it sounds like it's ongoing. I just want to see where you are in terms of having close that out? Thank you.

Sure George. This is Bill.

Hi, Bill.

On the margin, what I said was that US packaging margins would be comparable to 2016. And global margins would be up in '17. Your second part of that question…

On the commercialization piece…

On the commercialization piece, sorry. We are confident that’s behind us and we've moved on. The point there is that if we looked at the new business that commercialized, the new business, meaning new products that commercialized in Q4 we are right on track with what we had anticipated. We feel that process is fixed, moving forward and it's behind us.

Thank you. We’ll go next to Mark Wilde, BMO Capital Markets. Please go ahead.

Good morning, Bill. Good morning, Erin and Mike.

Good morning. Hi, Mark.

I wondered, Bill if you and Mike could just help on a year-over-year basis, help us think about some of the changes that were likely to see in 2017, the ones that I am focused on how much of a reduction is the drag from the issues in Latin America and the issues up at Oshkosh, how much year-to-year is there from SteriPack? How much benefit is there year-to-year from the Recap Program, plus Latin American restructuring and then what are your pick up from just organic business growth?

Well, I can start with Latin America. We kind of indicated we've got $0.05 related to the restructuring initiatives. And I can tell you in Q1 we wouldn’t repeat kind of the performance we had last year in Q1. So that's anticipated that it was fixed and we will be back at what we would consider normal operating. I don't recall the number right off of my head what that is. SteriPack is about $0.01 and from a integration perspective we continue to integrate. We will see some synergies coming in the later part of the year as we qualify the film that was being purchased from outside of Bemis is now being qualified to run inside of Bemis.

On organic growth. You could expect an organic growth Mark that the EPS impacted that if you sum up the US and global going to be high single-digits EPS type range. Did we cover all of the items?

Yes. I think that's most of them.

Okay.

I just wondered as a follow-on, can you guys just talk about whether you have seen any acceleration or deceleration in business over the last say three months?

Mark, I'll take that. I wouldn’t say there's an acceleration or deceleration. I will talk about Q4 and US Packaging for a moment, we were up about 1% and that's on top of up 2% in Q4 of 2015 and that's from a volume perspective. We felt good about that. We commercialized the new products we wanted, we needed to commercialize. There was some weakness in end markets and let's call it health, hygiene, towel, tissue, over wrap that piece of the market, but I think that's just normal. Q4 customers managing their inventories and their promotions that they have in retail. But I would say from my perspective as we exit 2016 and move into '17 that we're building a little bit of momentum within the business in US.

Thank you. We will go next to Anthony Pettinari from Citi. Please go ahead.

Hi. Good afternoon. Going back to the Analyst Day, I think there was a view that price or pricing analytics could contribute maybe around 20% of the margin expansion that you're ultimately targeting. It sounds like early findings from pricing analytics are maybe contributing to more flattish margins as you protect some business. Does this kind of recalibrate how you think about the potential benefits of pricing analytics maybe in 2018 or 2019 or how do you think about the value of the program going forward given the results might have been a little surprising at the end of the year in 2016.

Yeah. Anthony, you raised a good point. Okay? The way our initial sense with pricing analytics was we would be able to strategically use it and you always look at upside, right, you're always looking for the upside. So we would strategically use it to raise prices that were low, okay. And if you look as we've looked at it and gotten into the details of the analytics, we can look across market segments, product segments, SKUs to determine how our overall portfolio is put together, in any specific segment or at any specific account. Now to use that that way, it gives you a much more strategic focus and not just a tactical focus of the analytics. And that's what our teams have done throughout 2016. They used a very strategically to say, okay, how are we positioned across an entire segment, and where do we need to adjust, so that we can protect lock up, change terms, different materials, whatever happens to be. But it's much more strategic now than we ever thought it was going to be or that we had imagined it could be versus the tactical piece of the tool and use it to raise the low prices. So, yes, to your point it's become more strategic than it is tactical.

Okay. That's helpful. And then just following up on the 2017 guidance, I think in the us you guided to 1% to 2% organic growth, and I guess it’s a little bit lower than the 2% growth in the – at the Analyst Day if I'm comparing the right things. Is there any reason you're kind of maybe at the lower end or below that long-term target? Is that just kind of continued conservatism in a tough process foods market or is there specific categories where you're seeing weakness or any kind of color there would be helpful.

Yes, Anthony, what we had projected at Analyst Day was we would be 2% ahead of food, okay. So, if we look – just take a look at '16 for instance, we finished the year about 1% up. You can look at different data, you can talk to different customers, you can track process food volumes. That would – and most of them were negative, more than 1% or 2%. We see that our customers, the data we look at for '17 says possibly plus 1%. Personally, from my perspective, I don't think it’s going to be that robust. I think maybe its going to be flat. We don't necessarily need all those end markets to grow at big rates to get the 1% to 2% growth that we are projecting for 2017 in US packaging. We have the business in hand. We have the accounts one, we use pricing analytics to lock up some of those accounts for the long-term we don't have to worry about that piece of the business. Commercialization issues are behind us. We've moved on from that. Now it's time for us to execute and make 2017 happen the way the business teams are planning it.

Thank you. We’ll go next to Brian Maguire from Goldman Sachs. Please go ahead.

Hi, good morning. I just had a question following up on the outlook for US packaging in 2017. It sounds like with the EBIDTA margin – EBIT margin being flat you're guiding for generally flat EBIT growth and its sounds like that pricing was going to be a negative component in there, based on the analytics you did. Just wondering if it's a case where you think that you maybe raise price too aggressively in some markets the last couple years and you're retrenching a bit now or does it seem like it was more of a case where the end markets got a little bit softer and there's been a little bit more competition and pricing erosion in those markets?

What we looked at their and as I said in my script, this is primarily in the process protein segment. We've had business in this area for many, many years and have had exceptional kinds of prices in there. We wanted to make sure that we maintained it and locked it up for the future that's what we did. So we negotiated not just price, there's other things that go into this right? Terms, material substitutions, re-qualification of a different product, so the net-net is that our margins are going to be flat in 2017 in US packaging.

Okay. Great. I appreciate that. And then just a follow-up on the volume outlook, I know it's a bit of an acceleration from the trends recently. Is some of that renegotiation work contributing to that and do you expect some of the commercialization improvement activities that lead to little bit of a bounce back as some of that business comes through?

Yes.

Great. Thanks very much.

We'll take our next question from Ghansham Panjabi from Baird. Please go ahead.

Hey, guys, good morning. It's Ghansham.

Hey, Ghansham.

Hi, Ghansham.

So, Bill, just to help us reset expectations or caliber your performance I guess, in the context of your own volume profile in 2016 the way you defined it, what do you think your relative markets grew in '16 in the US, Latin America and Europe?

Ghansham, great question. I don't think our markets grew in the US, I don't think the markets grew in LatAm. Europe was probably flat, Asia-Pacific we had strong single-digit growth rates in Asia-Pacific. I think the markets that we are growing in Asia-Pacific are really because we're transferring technology from the US to Europe and we are creating new packaging styles for the Asian market which are new there. So it's hard to say what the markets grew in Asia-Pacific. But we feel pretty good about what we've done in Asia-Pacific, strong fourth quarter in Asia-Pacific, mid-single to upper digit - upper single-digit growth rates in healthcare. We're probably growing a little bit better than the healthcare market might be for our type of packaging only because we were working through backlog, right. So from the Oshkosh issue that we had and just to point out on Oshkosh, I'll say this now since I'm on it. The metrics that we track to see how our performances there throughput waste, scrap, on-time deliveries are all on track per what we said at the end of third quarter. So we feel good about the execution that's taken place in our Oshkosh healthcare facility.

Okay. And just as my second question, I guess since your last conference call there's been a broad increase in raw material prices across almost every single substrate. I guess, first-off, what are you modeling for inflation not just raw materials but just general inflation wages et cetera. And then as we think about your specific margin targets for 2018 that you sort of outlined for US packaging, being up how does that factor into your thinking for the margin threshold for that year?

Yeah. From a inflation perspective we modeled in 3%, raw materials we pass-through, so we don't spend much time with that, we pass it through quickly. And last point you had their George –

Ghansham.

Ghansham, I'm sorry. I'm thinking through the answer here, I am trying to come up with what the last question was that you had.

I had a couple more Ghansham just back in the US we use 4% inflation on utilities, 2.5% freight, we assumed our benefit plans will cost us about 5% increase and then in the global markets we like in – I think Brazil we use inflation of – I've got the numbers here. We used economic data provided by the economist in country. But back in Brazil, 6.5% inflation, Argentina 20%, Mexico 2%, China we’ve assume 4% inflation So we really try to tie ourselves to the local markets. We use the GDP outlooks. And then in the case of Brazil I think they are looking at plus 1, we were assuming down one just because we were not quite comfortable yet that this is improving. Is that going to help your question?

Ghansham.

Next question operator.

Yes. We will go next to Jason Freuchtel from SunTrust. Please go ahead.

Hi. Good morning.

Good morning, Jason.

Hi, Jason.

Hi. I think you referenced there are some volatility in your order patterns in the US business, maybe in the health hygiene over rep business. Does that imply that that volume is pushed out into 1Q '17 and could that provide a little bit of upside to your estimates objections?

We would know. All we’re saying is - two-four is always kind of challenging because you kind of get orders and commitments in the quarter for the quarter and then if they change their production schedules or when they're going to close their plants down and cancel or delay orders. So I wouldn’t think about – I don't think of it is just shifts, there's too many other variables.

Okay. And I guess secondarily, you've managed your general corporate expenses lower over the course of '16. Should we expect those costs will increase with your inflation expectations you just laid out or are there any other opportunities to potentially manage those costs down over the course of the year?

First of all I said in the comments, I think what you should do is model as percentage of sales consistent year-to-year. And we do use an overall assumption of about 3% and then we target our SG&A organizations to look for areas and opportunities to try to hold those costs constant. I think one of the drivers year-over-year is going to be as we mentioned our pay-per-performance. If we don't perform as we didn't in 2016 our short-term incentive plans globally take a hit. And then when we come to a new year, we start with the assumption that we are going to achieve our targets for 2017.

Thank you. We’ll go next to Arun Viswanathan from RBC Capital Markets.

Thanks. I just wanted to go back to a couple things you mentioned earlier on the call, you said that the $2.85 to $3 range will depend on FX new products business on-boarding and end markets. I wanted to kind of dive into the end markets discussion. Maybe you can just help us understand what you're assuming your own growth would be in some of your areas such as the big middle or medical and so on?

Sure. We don't necessarily model out growth in any one area segment like the big middle. What we do is we looked at U.S. packaging and as we said in Mike's comments 1% to 2% there. On the global side of the business, we looked at – if you boil it down LatAm flat, low single digits in Europe and mid single digits in Asia in healthcare. That’s the – those are the metrics we've used in the plant to model out.

Yeah. Thanks.

And if you look at – and just following on to that, end markets in US, we've looked at data, we’ve talked to customers. There’s a lot of talk that US end markets would be plus one. I'm not necessarily that robust and think that it will be zero to one, but I don't think one is a given.

That's helpful. So – and then just, as a follow-up, the $2.85 to $3 range appears to be a little bit greater than usual. Is that a fair characterization? And maybe you can give me a little bit of confidence around some of those factors of the volatility, i.e., or the new products already booked as new business on-boarding, really confidence in that in those markets, or those factors?

Yeah. So, historically our company always gives a $0.15 range around $0.075 on both sides of the midpoint. Clearly the items I mentioned, currencies, I have no idea. New product introductions, we have pretty good visibility into that. But a lot of the challenge on the new product is end market acceptance and the pace of acceptance. And that’s doesn't mean it's not going to happen but it just means how quickly does it get the traction and get the pool at retail. On-boarding new awards, I'm pretty comfortable. We've rectified our issues. We've reengineered, for a better term, that commercialization process. But not all the time those issues are ours. There are occasions when a new plant’s starting up for customer and it's either delayed or they're having start-up issues. So I think the things that are completely in our control we feel pretty good about. And then Bill just commented on how the end markets perform. We’re going to assume about flat and I hope everybody else is right in their F1.

[Operator Instructions] We’ll go next to Chris Manuel from Wells Fargo. Please go ahead.

Good morning, guys. Thanks for taking the question. Sort of a difficult question to answer and I'm sure it's going to be a much more difficult question to ask and it's going to be more difficult to answer. But what I'm trying to get a sense of is, as you look across the end markets and such that you serve, principally here in the US, processed foods obviously have been struggling for a while and seemingly that the onslaught of a push to more less processed or more fresh or natural foods is changing. How do you think about your business mix and your winning of new business and what you're doing with either smaller or off brand, sort of natural food or non-processed food stuff, is this – and I guess really to kind of tie it altogether, is this a situation where your portfolio seems to be pretty heavily weighted towards the crafts, the PNG, and med [ph] et cetera, and perhaps growth targets are a bit challenging for the next two, three, four, five years is really what I'm trying to get at.

Thanks for this question, Chris. This is at the heart of what we're doing at Bemis Company in North America. We're moving the portfolio to more of the big middle in the flexible packaging space and we've been able to do that through the asset recapitalization program. When you heard me talk about the data analytics and the pricing analytics that we use that was primarily looking at segments across the process meet area, which we all know have been under pressure. So we lock that business up for the long-term. The recap efforts that we have allow us to go into the big middle of the flexible packaging space, which is not necessarily focused at processed foods. While processed foods is a part of that, so our non-food applications for customers that Bemis Company may not observed in the past because we were so wedded to food. So as we move the portfolio to your point, we move the mix away from the food, the processed side, lock up the process to meet side with what we use data analytics for we now have the ability to grow volume because we're taking on new share from new accounts and new customers.

Interesting. Okay. Kind of follow-up question, and you guys touched this earlier; inflation does seem to be really working its way through and thank you for the color on what you're using in there. I appreciate that you need to use productivity to offset chunks of it, but how do you go out or how do your contracts handle inflation, you have pass-through or elements for some of those whether it's freight, energy, labor et cetera. But how can you go out and across most of your business, I guess you probably don't and recapture inflation, can you do general price increases from time-to-time?

Chris, that's more prevalent in places outside of the US where inflation has been much higher, say Argentina and Brazil. In the US, it has not been very prevalent over the years. And we use cost out material science, product substitution and productivity to help offset those increases in inflation.

That we can pass through.

All right.

Thank you. We’ll go next to Chip Dillon from Vertical Research. Please go ahead.

Yes. Hi. Good morning. Question has to do with the restructuring. You mentioned that the cost that you would bear in '17 would be around $15 million. And I suppose as we look beyond the – these last two closures in mid-'17, would it be your expectation looking out that you're done with restructuring for now? I mean, there is been a lot of transformation in the last few years of the sale of the Pressure Sensitive business. Do you think you'll make it through '18 let's say without any major restructuring moves been necessary?

Look, first of all just to be really clear that restructuring numbers is the cash associated with the charges taken in 2016. I'm never going to say were not going to have additional restructurings. I think every business is constantly looking at ways to improve their cost structure. I have no opinions today that there might be an acquisition that would lead to some restructuring associated with it. So I can't say never, but as I sit here today I'm not aware of anything eminent that – I think the big one we did was in Latin America one last year.

Okay. Understood. And then looking at the CapEx, you mentioned 140 million for growth initiatives, and if you could just talk a little bit about when you think those – what they are and when you think they start actually pay off on the bottom line?

Well, its growth and recapitalization initiatives. Those of you that spent some time with our capital projects generally have a 12 to 18 month delivery. So from the time we make the commitment on the capital to commercialization could be 12 to 18 months. Recap projects since we already have the business. Once those are installed, those returns hit almost immediately. And growth projects are a function of you can always add capacity ahead of – you're adding capacity based on your customers and your forecast of how that product is going to kind of accelerate over period of time. So those returns don’t quite happen as quickly as a recap.

Thank you. We’ll go next to Phil Ng from Jefferies. Please go ahead.

Hey, guys. You mentioned you're looking to protect some business in the US and expect flash margins this year. Does this cap your margin profile in the US long return and targets you've kind of set forth at the Analyst Day, is that still realistic?

Yes, Phil. We've locked in that volume the next 3 to 5 years and the asset recapitalization is really what's driving and fueling our growth in margins as well as new product innovations that are being launched in the US. So no, our margin expectations are not capped.

Okay, 18 or 19?

Yeah. We see 15% to 18% as a very achievable objective.

Okay. That's helpful. And I guess, shifting gears to your global packaging business. Volumes have been pretty flat in back half. What's driving the acceleration you're expecting for 2017? Is that driven back to operational issues behind you or just kind of regaining share following some pretty sizable price hikes you've implemented this past year? Thanks.

On the global side, Phil, it's really the slow comeback of Latin America primarily Brazil. Okay? So they've been down -- end markets have been down, GDP has been negative 3.8, next year's its forecast to be plus 1. That drives consumption. We don't think it's going to be one we are looking at zero to flat in LatAm next year, but that drives consumption, that drives our volume growth back in that region.

Thank you. We will go next to Debbie Jones from Deutsche Bank. Please go ahead.

Hi, good morning. It’s Kyle White filling in for Debbie. I wanted to focus on inorganic growth. You laid out the 3% CAGR target at the Analyst Day a while back. Just kind of get your thoughts on if you think that's still a viable target given sort of transaction multiple expansion that we've seen and in order to get that target are you expecting more sort of smaller deals to get to it or a transformational deal?

Well, this is – I'll answer that. It's still a realistic goal. It still is our objective to do some acquisitions. We're going to continue kind of - how we've approached it thus far is that we've, kind of, identified the type of companies we want to add to the portfolio. They typically – that tend to be family type businesses and then we start working on creating the relationship and helping understand their succession plans. And in the case of both Emplal and SteriPack those are prime examples of where we got things taken care of and they really were in the process. I don't want to say we don't look at things in the process as most of you are aware. Second half of 2016 was a pretty robust period of time with assets coming up for sale. We took a look at a lot of them, none of them kind of fit. But we're going to continue focusing on bolt-on's. At this point in time honestly we're not really thinking transformational but if something of interest came along and we would not looked at it.

Thanks. That's helpful. Second question is just more on the clarity, Mike I think you said $0.05 benefit from LatAm I believe that's just the lapping of the headwind that you had in 2016 and not necessarily inclusive of benefits from the restructuring.

The $0.05 is only the synergies associated with the restructuring. We would expect that the problems we had in Q1 that we corrected in Q2 that we're rolling over those so those would be positive. That was about $0.03.

All right. That makes sense. Thanks. I'll turn it over.

Great. And we will take our next question from George Staphos from Bank of America. Please go ahead.

Hi, guys. I had a few more questions. The last two here, I appreciate your patience with this question on US margins, its kind of up there with no good deed goes unpunished and you've gave a lot of details, so it brings out more questions. So if I think about your US packaging business and why margins will ultimately trend up, in '18 and '19, on the one hand you said you've locked up your process meat business and contracts, presumably that came at a price and it's also business that seems to be from what you said, seeing somewhat challenged end market conditions. You are growing in the big middle through your recap program and that's good for return on capital for sure. But with tend to have a lower mix, I would think in margin then call it processed proteins. So what is actually going to lead to better margins starting in '18 and '19 in the US packaging business? The related question and I'll turn it over. And I think Brian, and some of the other folks tried to touch on this as well. You invented in many ways the process meat packaging business a number of years ago, or would did, and you're running a commercial enterprise, so it's a good thing in a way that your pricing was as high because it was generating margin in return. So the fact that you used your analytics to strategically lower pricing and lock up volume, is it driven by your competition beginning to catch up? Are you worried more about other substrates entering the market? I wouldn’t expect if that's the case or is it really more just the function, hey, look the demand picture is a little bit more challenged and we would like to lock up that volume here right now and that's where the action - that's what drove the action? Thank you guys.

George, I'll answer the second half of that first, okay.

Okay

Yes. We have invented a lot of the process meet specifications and develop that whole category, if you will. We've had that business for very long time. It's a very good business it's always going to be a good business. But the analytics now gave us the ability to look across a portfolio of not just process meet, but other specifications within a portfolio for a customer. And said this is a good portfolio, where are we vulnerable because let's face it, people will come in with a me too that may or may not meet the performance characteristics, but they will damage the market price for that specification. And we wanted to take that off the table. So yes, we locked up the business. We looked at it across the portfolio, but it's not just price, there's terms, there is materials, there is product substitutions, there are other things that go into that decision, not just price. Next piece. On the margins, what gives us comfort that we can continue to grow margins in '18 and '19? It's the asset recapitalization program and the fact that things that are converting from glass and cans to flexible is in that big middle. Those are new pieces of business, new volumes, new specs with good margins associated with those, asset recapitalization allows us to lower our cost position in our plans in the United States and if we push more volume across those plants with lower-cost, what happens. We get better absorption and we make money on the manufacturing side of the equation, not just the sale side of the equation. So we are very comfortable with the model we have in place, lowering costs, locking up high-margin business for the next few years, so it won't be attacked, and expanding in the big middle outside of food into non-food categories which allows us to continue to drive margins forward.

Thank you. We'll take our next question from Frederick Searby from Dunbar. Please go ahead.

Yeah. Thank you for the question. Just a question on Latin America with the restructuring. We're at the bottom of the worst recession Brazil pretty much ever seen most severe. What gives you confidence that we won't see a big pickup in 2018 or even in the back half of 2017 and you'll have to add capacity in the medium-term or more quickly than you thought. And with the plant closings what's the capacity utilization you're running at now and so how much room do you scope, do you have for growth, if things indeed rebound?

Right. The restructuring didn't remove capacity from the rigid side of the equation. We put our volume into facilities that had open capacity and much more efficient and effective capacity than we had within one of our old legacy plants. So you've really given us the ability to drive productivity in the short-term and also pick up the business, pick up the volume as consumption begins to accelerate. So we are trying to manage it in the short-term, but we really looked at it over the long-term to say okay, how can we continue to drive the business forward with this new --

So what is capacity utilization right now?

Well it would vary, but if you look at the rigid business, we are probably at about 75% capacity utilization. And in our flexible's business, we are probably somewhere around the same level, 70% to 75%.

Okay. Thank you.

You're welcome.

We’ll go next to Jason Freuchtel from SunTrust. Go ahead Jason.

Hey thanks. Just a couple follow-ups. How dramatic could your end market exposure change as you find new opportunities through your pricing analytic strategy and would you anticipate it to change over the next couple years?

Jason, I'm not sure I quite understand the question, but how could our exposure to end markets change. We are trying to change the exposure now and as I said earlier, we've always been a big player in the food space and we are trying to take our technologies and our capacities into the nonfood areas proactively, so that we change that dynamic ourselves and don't wait for the market to change it on us.

Right. That's exactly what I was asking. And could you see a large shift in that business in one year or would it take multiple years to see a material change in your end market exposure?

That won't happen overnight, Jason. It's a thoughtful planned out way to get there. And it isn't going to be a step change. It will be a ramp.

Thank you. We do have another follow-up question from Chris Manuel from Wells Fargo. Please go ahead.

Hi guys. Just one quick one here because I know we're late in the call. When you guys had laid out objectives through '19, one of the key pieces of that was targeting $750 million or so of revenue in acquisitions. As we sit today, we’re about halfway through the process, and if you guys have in round numbers $100 million, $150 million or so kind of a targeted revenue that you’ve done. Where are you at in the process, I guess, is really what I'm trying to understand, and in particular I think early you mentioned near-term input from related acquisition costs or something like that and a discussion of why SG&A was up. Kind of where are you at in the process of finding things, how does the market look to you, and what did you mean by that question earlier I think in regards to SG&A?

First, I’ll answer the last question. I didn't make any reference to acquisitions in SG&A. So, I don't know what that might have been. As far as M&A, I mean, we still think it's a healthy environment and as we commented at the end of Q3, we did add Jim Ward our new Vice President of Business Development to our team and what Jim really brings, he came from a consumer packaging company, excuse me, consumer products company and prior to that a nice career in investment banking. Jim's really brought an incredible -has been an incredible addition to our team, and I think it's going to be a step change in us looking at more acquisitions. And we clearly fully intend to deliver the 3% in organic objective that we laid out back in '15.

Thank you.

And we have more follow-up questions from George Staphos from Bank of America.

Thanks. I promise that’s it and I’ll make it quick guys. Thanks for the Q&A. One, what were the learning’s from the consultant’s project on commercializing new products, and a few thoughts. And then I wasn’t clear perhaps you mentioned it and if you did I missed it, of the operating issues last year and I want to say they were somewhere in the $0.10 to $0.12 range, correct that number if it's wrong, how much in your guidance this year are you climbing back? Thank you. And good luck in the quarter.

George, I’ll take the last one first, on operating issues, you're correct it was roughly $0.10 here in 2016, you’d expect for full-year '17 for that to be about $0.06 better that’s LatAm in Q1 and a portion of the healthcare improvement. And Bill I’ll turn it to you for learning’s from the…

Yeah. A good set of learning’s that came in quick, tactical work with our team, developed the plan going forward, implemented a plan very quickly and essentially George the learning was that we had a process that was more, and these are my words, ad hoc than it was scientific or process oriented. We assigned accountabilities. We assigned a much tighter screen on the front end of those projects that needed to be commercialized. We back data up to get information earlier in the process and not hand it off. And when I say we assigned accountabilities, we put an owner onto those projects so that they take it from start to finish and get it through the funnel, to build the materials, shop floor, to out the door. So good project, quick and we saw the results benefit us in Q4.

Thank you. And it appears there are no further questions at this time.

Thank you everyone for joining us today. This concludes our conference call.