Good day, ladies and gentlemen and thank you for standing by. Welcome to the Bemis Second Quarter 2018 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 second quarter 2018 conference call. Today is July 26, 2018. 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. On today's call, we will also discuss non-GAAP financial measures as we talk about performance. Reconciliation 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 filing, including the most recently filed Form 10-K to review these factors. Now, I'll turn the call over to Bill.

Thank you, Erin, and good morning, everyone. We delivered a strong second quarter in line with our expectations. Earnings per share increased more than 40% versus one year ago, and we saw a strong operating profit improvement in all of our reportable segments totaling $20 million. Our teams are advancing Agility according to plan and are finding ways to continuously improve all areas of our business including operations, planning and back office work. The Agility mindset to fix, strengthen and grow Bemis is continuing to permeate our thinking and actions. Before walking around the globe on financial performance, I'll take a minute to talk about one of Bemis' most valuable assets, our people. Over the past few years, we have driven and experienced much change. We have new leadership in our U.S., Latin American and healthcare businesses, and those leaders are bolstering their teams by infusing new talent were needed and by providing new opportunities for high performing employees to expand influence, and all of this while driving out costs and laying the foundation for long-term growth. Change of this magnitude and breadth can be taxing on an organization and its people, but our employees have risen to the challenge. And not just with actions, but also with positivity and pride in their work. Bemis was recently named one of Forbes' Best Large Employers in America. This honor is awarded to companies whose anonymously surveyed employees would recommend their employer to family and friends. So what makes Bemis one of the best employers in America? Our people, who are making the right decisions and are contributing to our improvement both in the near-term and long-term. Specifically throughout the past year, our organization has made decisions in taking out cost that many companies would describe as difficult. But those decisions have…

Thanks, Bill, and good morning. Today, I will discuss the financial details of our segments and total company followed by comments on the balance of 2018. U.S. Packaging segment. During the second quarter, our U.S. business performed well and delivered improvement compared to one year ago. Sales dollars were up 3.4% compared to the prior year, reflecting higher sales prices, partially offset by unit volume decline of 1%, directionally in line with our expectations. Excluding the impact of the infant care business at our Shelbyville, Tennessee facility, unit volumes for the U.S. segment would have been flat. U.S. Packaging operating profit of $89.9 million increased from $80.1 million last year, driven by the benefits of Agility, improving operations, including improvement related to the plant that struggled with an ERP system implementation one year ago, partially offset by freight cost. Volume did not have an impact on profits during the quarter, as we were able to offset the infant care business at Shelbyville, Tennessee with new business wins at good margin levels. Our operations ran well and we managed cost appropriately. Turning to Latin America. Second quarter sales were down 7.3%, as compared to the prior year, driven by a 16.1% decrease from currency translation as the Brazil real and the Argentine peso devalued. Remaining organic growth of 8.8% was driven by increased selling prices and mix versus one year ago, partially offset by unit volumes down 2%, driven by the impact of the truck driver strike in Brazil. Without this impact, volumes in Latin America Packaging would have been up low-single digits. Latin America operating profit of $9 million increased from $2.9 million last year. Currency translation hurt profits by $1.5 million, leaving an operational improvement of $7.6 million during the quarter, which was driven by the planned variable and…

Thanks, Mike. In summary, our second quarter and first half performance demonstrate progress. I continue to be encouraged by our actions to improve operationally, to lay the foundation for long-term growth, and to deliver our earnings commitments. Regarding Agility, our progress goes beyond creating an effective cost structure to strengthen and grow aspects of Agility, position our business strategically to drive value for the long-term. We continue to focus on delivering higher levels of quality and service across our entire business, and we continue to lay the foundation to penetrate short run business at large, medium and small-sized customers through agile lane, which aligns our people, assets, processes, and products to serve the pockets of growth in North America. As of July, we've hired 14 new sales reps. These hunters are incentivized to pursue and win the new business targets we have developed. We have received positive feedback on our core spec product portfolio from our initial customer outreach. We have received positive feedback on our ability to service this new business and also to be a partner to these customers. And we have won a handful of awards for short run packaging at both, new and existing customers, and are on track to reaching our target of $25 million in revenue during 2018. In summary, we are making progress to improve Bemis today and for the future. Our improving financials are an indication that we are on the right path. We are serving our customers better through improved quality and service. We are extending our sales reach to more short run business through agile lane. We are finding ways to continuously improve operational effectiveness and efficiency. And through all of this, we are laying a strong foundation for long-term net growth. We have a dedicated workforce, a world-class customer base, a comprehensive and innovative product portfolio, and good positions in the markets we serve. And we are confident that we will continue to deliver our planned improvements in 2018 that create value for shareholders and that position our business for the future. With that, I'll turn the call over to questions.

Thank you. And we'll go first to Scott Gaffner with Barclays.

Thanks. Good morning, Bill. Good morning, Mike.

Hey, Scott.

Good morning.

When we look at the U.S. Packaging business, margins there were better than we expected, so was operating profit, but didn't sound like from your comments. I mean, it sounded strong and you're making a lot of progress on Agility, but it didn't necessarily sound as if it was ahead of your expectation. Can you talk a little bit about that? I know you don't give quarterly guidance, but how did 2Q in U.S. Packaging sort of compare to what you expected, what you thought coming into the quarter?

Yeah. Scott, right on track. We've identified $35 million of benefit from Agility in 2018, and we are right on path to do that. All the work streams are on track. They're on pace. They're doing just what they had anticipated they would do. And we feel good about the progress that we're making there in Agility. Our volumes were a bit better in Q2 than we had thought going in, because we are getting some traction from the short-run business that we're bringing in, primarily at existing customer base, right. As we've talked in the past, it's easier to get business from customers you already have. So, we're targeting share of wallet gains on the short run side of the operation. So, made some good progress there in the quarter, as well as with these 14 new people that we brought onboard, they're out there making progress, albeit they haven't been onboard long. Some of them come from other companies that have connections and contacts at what would be some of the smaller-sized customers. So, we've been able to open the door to some of these smaller customers and actually through the Agile Lane process get product in their hands quickly, trial it quickly, and then get some fairly quick wins on the short side of business from new customers. So, that was a help in Q2 that we did not anticipate.

Okay. Thanks, Bill. And, Mike, one quick one on the working capital improvement. Are you saying is it interest rates going up that's causing a little bit of the slowdown in the planned inventory reductions or is there something else going on with the customer base or higher resin prices?

No. No. It's really more – we have developed specific actions to go after primarily work in progress. And I feel really good that we've developed strong plans and actions. We know what we've got to get done. It's just the pace is a little bit slower than we're anticipating. I want to be clear, we're not giving up at all on the total objective of the program. It's just how much we'll see in 2018 versus in 2019.

Thank you. We'll go next to Anthony Pettinari with Citi.

Hi. This is actually Bryan Burgmeier sitting in for Anthony. Rising freight costs have been a bit of a theme in 2Q earnings so far. What impact did that have on your U.S. Packaging results? And do you have any costs left to recover in the back half of the year?

As far as your question on freight, primarily in the U.S., it was a couple million dollars headwind that we faced and we will continue to see that as we go through the remainder of the year. But be certain that's included in our guidance.

Got you. Thanks. And then in terms of Latin America, it seems like it's been a little bit better down there. How would you characterize mix as we get into the back half of the year? Do you find customers are still trading down for cheaper alternatives or is that largely played out now?

That's largely played out. Our mix will be consistent in the back half of the year to what it's traditionally been.

Excluding the folding box.

Yeah.

We'll go next to George Staphos of Bank of America.

Hi. This is actually Molly Baum sitting in for George. So, just kind of going back to Agility. My first question is, can you just quickly review how the sources of the Agility gains are going to change over the next few quarters? Thanks.

There would be no change to the sources of the Agility gains. The work streams are all in place and running and we'll continue to get gains out of those work streams as we go across. And maybe there'll be a little bit more coming from the global side of the business as the work streams offshore kick in. But it's all the same work streams. We're not changing that.

Okay, great. And my second question, we have said in past research that it's typically easier to fix than it is to grow. While, you saw some nice progress in the short runs, at what point do you think you can kind of safely project the sustained moderate growth for Bemis?

Well, I think you've got to step back and look at the customer base that we serve. We serve 27 of the top global CPGs primarily in North America. If you look at where those CPGs have been over the last few years, down three – down low-single digits to down mid-single digits, our volumes have maintained in and around the zero line if you will, maybe down one, up one, zero down one, up one, up one. So, if you go through that, we've continuing to find growth at the CPG because this year we're up at 19 of our top 25 CPG accounts we have flosses on, which tells us that we're finding the growth in the pockets where their SKUs are growing, not necessarily the headlines that you read about some of these CPGs. So, we're finding those pockets of growth with technologies that we've deployed, with some of the new sales tools and core products that we've deployed. We're finding growth in those areas. So, we're outpacing our customers' growth rate. So, we're just going to continue down that road and on that path.

We'll go next to Ghansham Panjabi with Robert Baird. Ghansham Panjabi - Robert W. Baird & Co., Inc.: Hey, guys. Good morning and congrats on the initial progress that you're seeing. It's nice to see that.

Thank you. Ghansham Panjabi - Robert W. Baird & Co., Inc.: I guess first off on U.S. Packaging, just to clarify did the second quarter fully encapsulate the full extent of the volume loss in infant care? And can you just sort of update us with your view on volumes for the segment during the back half of 2018, in context of the new volume that you secured?

Yeah. Ghansham, the second quarter fully reflected the loss of the infant care business. So, as Bill mentioned, our volumes in general were a little better than we had anticipated to end up flattish. Ghansham Panjabi - Robert W. Baird & Co., Inc.: And is that a consequence of the end markets themselves having improved, or is that a consequence of the new business that you gained?

Ghansham, we look at it and say it's a function of the new business pickups that we've gained in the short run side of the business and primarily from existing customers as I said. So, we're getting traction there. Ghansham Panjabi - Robert W. Baird & Co., Inc.: Got it. And then, Bill, just your thoughts on the current war on plastics and the media et cetera, what are your customers coming back to you with in terms of their requirements, whether it's using recycled content of resin, or decontenting resin as it is. Just your perspective there, maybe some of the opportunities that you see that could actually benefit you with your capabilities et cetera. Thank you.

Yeah. Ghansham, it's a great question. So, we've just launched in Q2 of product line that we call Encore. Encore is a recyclable material, monomaterial if you will, that can be used for flexible standup pouches. We're getting a lot of inquiries and a lot of draw, if you will, pull from customers about that product line and the capabilities of that material. A little bit further out, it would be Gen2 of that material that we have not launched yet. We still have some work to do there. But, we are getting a lot inquiries for it. We're getting a lot of thoughts of how can you deploy this, how can we use this within our product portfolio. From the stand standpoint of the single use plastics some of the things that we do and now I'm going to talk switch gears here to Europe for a second. We're very heavily weighted in the high barrier packaging in Europe for protein and that has not yet come. The single use plastic has not been an attack on the protein side of the equation yet because you need barrier properties to maintain the shelf life of that material. But in Europe, we do have a product line that is couples up with a fiberboard box to create barrier properties for takeaway type foods and cook at home foods. So, there is a lot of push. There's a lot of pull and our R&D guys are continuing to invest time there to develop the next generation films.

We'll go next to Edlain Rodriguez with UBS.

Thank you. Good morning, guys. Just one quick one on the...

Good morning.

...on the resins. I mean again you've been aggressive anyways in prices. Have you finally been able to catch up with costs there and what does the price cost gap look like now have you completely closed that yet?

As you know the way we think about it on average, we have a 90-day pass through. And then when you take into contemplate inventory levels, we don't believe this is a bigger hurt when resins is going up. We're a big help when it's going down. So, resins' been relatively stable for the last few months. So, I would surmise that we've kind of – we're getting close to being everything pass through.

Okay. It makes sense. And my other question is on the share repurchase, like what should we expect in the second half of the year because in the first half you didn't get to do any share buyback? So what does the second half look like and what does it depend on?

I'll just read – I'll just restate kind of our philosophy that we return free cash flow to our shareholders in the form of dividends and share repurchases. And you need to contemplate also cash being spent for restructuring. And our desire to stay investment grade is really important to us. So, we're kind of cognizant of our leverage res levels when we look at things.

Okay. Thank you.

We'll go next to Arun Viswanathan with RBC Capital Markets.

Great. Thanks. Just a quick question on the second half guidance. So, as far as I understand the tax implications, so it looks like there maybe a couple pennies benefit versus your prior outlook. And then, I guess, Agility also helps you with that. Would you say – I know you went through the swing factors so that was helpful. But I guess, would you kind of characterize overall performance as benefiting more from the cost saves or more of your volume growth in both U.S. Packaging outside of Shelbyville and healthcare, maybe just give us an overview aspects?

Yeah. I'll start with the tax rate. As I try to get across, we do things in halves when we guide. We do in wholes when we guide. It's about $0.01 if even that the rest of the year the change in our tax rate. As far as the kind of first half of the year, I think that more of the improvements have come out of the Agility cost outs. But also we've seen some pretty significant improvement in plant operations, specifically in North America that have done a really good job of offsetting other types of headwinds, freight, utility costs going up, just labor rates are going up, benefit costs et cetera. So things are going really well is the way I think about it. I would consider the second half is going to be so much the same. We're going to continue to benefit from what is another $18 million of Agility savings. And we would expect the productivity gains and momentum going on in the U.S. will continue.

Great. Thanks. And then as a quick follow-up, if you look out over time, will Agility and this current restructuring program address your footprint overall, or do you think you'd have to take further measures there to address the different types of growth within your business? Thanks.

I think at this point, the way we are looking at Agility will continue in this organization. It's not just a fix. It's a, strengthen, and grow, it's become a mindset. It's becoming our way of doing business. And I think for the foreseeable future, we believe we have the right assets in place to meet the upcoming demands of what we hope is a very successful growth in the short run business category.

We'll go next to Chip Dillon with Vertical Research.

Hey, guys. This is Salvator Tiano, fill in for Chip. How are you?

Good.

Great. So, my first question is on the Rest of the World business. I think the volumes decelerated quite sharply and it seems from the mix impact that's from Asia. So, can you give us a little bit some more color on what is going on in that part of the business?

Sure. Salvator, when we look at the Q1 you're referencing, we had some pretty high volumes in Asia, double-digit, which we've called out of the ordinary and those returned to single-digit type levels in Q2. So, I think on the whole, our Q2 performance in Rest of World was roughly on par with what we'd expect. What did continue in Rest of World was strong growth in our healthcare business. So, that's both on the revenue line and, obviously, there's great operating profit help there as well.

Okay, great. And my second question is on CapEx, as we are kind of past the midpoint of the year, what are kind of your expectations directionally for CapEx, especially since you seem to be winning some more short-run business? So, could we see a slight pickup in that as you try to accommodate new business?

Salvator, no, we're right on track to spend what we had guided to spend. We're not going to go beyond that. We've put in some capital over the last few years, if you recall, for the recap program. We're now absorbing that new capital into our portfolio. So, no, we don't see any increase in our CapEx guidance.

Okay. Perfect. Thanks.

We'll go next to Daniel Rizzo with Jefferies.

Hi, guys. How are you?

Good.

Just a quick question on Agility. As you kind of implement that and change things, is that leading to or has it led to a high employee turnover and is that kind of slowing things down at all?

No, not at all. Obviously, we have had some reductions in our employee base, and just the fact that we were awarded from Forbes, The Best Large Employer in America award this year just kind of tell us that leadership's doing the right thing. The leadership is engaged. The employees are engaged. They're leveraging that. People are doing the right thing. So, the messaging that our leadership has out in the business right now is really clear that Agility is not just about fix, it's about, strengthen and grow. And that's where we have to have people head is towards strengthen and grow. And that's what we're starting to see come through in the business.

And then, healthcare seems to be – is a growth area for you guys. Is there a way you can kind of position yourself better where you can kind of capitalize on the opportunity there that hasn't been really addressed yet or something you can do?

The piece there that – we look constantly for acquisitions, okay, outside of the normal pipeline and we have a very robust pipeline, because if you think about how this business layers in, there's somewhere between a 24 to a 36 month validation period for new devices or new pieces of medical business to come home to roost, if you will. So, you've got to have a strong pipeline that layers in over the course of multiple years. We're seeing the benefits of a strong pipeline and we look for acquisitions in this space, but quite frankly, they're very hard to find because they're usually embedded inside of another large packaging company and they are not readily carvable, if you will. You can't pull them out to try to acquire them. So, I think we really rely on a strong pipeline.

Thank you. And we'll go next to Anojja Shah with BMO Capital Markets.

Hi. Good morning. I just wanted to go back to the U.S. volumes or the North America volumes, I know you said flat, part of your Shelbyville issue, flat volumes were within your expectations. But we're looking at how plastic packaging is growing. You're gaining more short-run business. We probably would have expected a little higher than flat, so what are we missing there? Is there some sort of lag when you get the short-run business? Just some more color there would be great.

Well, yeah, first of all, there is a lag. When you secure new business, there is some qualifications depending on the customer, not dissimilar from medical, but not quite as long, but there is shelf life, tests, et cetera. So, I think our revenue was really in line with what we're expecting and, Bill, I don't know if you have anything to add.

I guess, to put another way...

Yeah. We're up with 14 of the – 19 of the top 25 customers in the U.S., our volumes are up with them. The commercialization period does take a little while. Onboarding takes a little while. We feel good about where we are and the fact that we've added 14 new commercial people in the field to go attack the pockets of growth that exist at new customers, feel good about what we're doing. The team in North America is doing a nice job there.

Okay. Thank you. And then along those lines, then can you give us an idea of your expectation for volumes in the rest of this year in the U.S.?

I would consider – for the U.S., I would consider pacing what we've seen in Q1 and Q2. We still have the Shelbyville, Tennessee volumes for the rest of the year leaving and...

Yeah.

We'll go next to Brian Maguire with Goldman Sachs. Connor Robbins - Goldman Sachs & Co. LLC: Hey. Good morning, guys. This is actually Connor Robbins sitting in for Brian Maguire. I just wanted to come back to the freight environment and some of the resin input costs you guys are seeing. I wondered if you could provide a little bit more color on how your contractual mechanisms work. Obviously, you guys pass through your resin costs pretty well, was there – to what extent can you pass through those input costs through contracts or is that mostly just on you guys to try to recover those?

Well, our contracts primarily pass through the raw materials, i.e., the different types of resins, et cetera. So, what we would attempt to do in the contract renewals is see if we can get something going on with freight. Not in all cases do we pay the freight. It's kind of a mixed bag across the board of who pays the freight and our pricing. But I think that answers your question. We would not normally pass through freight or labor increases. That would – we try to attack that with other productivity initiatives. Connor Robbins - Goldman Sachs & Co. LLC: Okay. Got you. That's helpful. And then another note with kind of the FX environment. Obviously, in your Latin America segment, I mean, there was a pretty big headwind. I think it was 16% or so. I just wondered if you could give any sort of sensitivity analysis for the movements in that environment.

They'll move about Connor, I think the thing that we did call out is that for the full year roughly a $0.05 impact on the EPS and that's primarily from the REITs from Latin America both the real and the Argentinian peso.

Those are translation rates. It doesn't get – the business on itself at local currency is doing what they said they would do. So it's just a matter of translation.

Translation. Not a transaction. Connor Robbins - Goldman Sachs & Co. LLC: Right. Thank you.

And we'll go back to George Staphos with Bank of America.

Hi, everyone. Good morning. Sorry, joined the call late, so, you might have answered these questions previously, apologies in advance, if you did. I guess the first question I had, when we look at the implied guidance for the back half of the year using the midpoint of your range in the release, it would imply earnings roughly around a $1.50 for the second half, which is pretty much I think where consensus is. Would we expect because of Agility and the fact that you're still gaining momentum there, I mean, that the fourth quarter is a little bit heavier than the third quarter proportionally? Traditionally, third quarter is a heavier quarter. How would you have us think about that and some of the key factors that ultimately drive your end result over 3Q and 4Q? That's question number one. Question number two. There has been changes at the board level of the company over the last six months. Has – Bill, the day-to-day running of the business changed at all, or is it pretty much the same? How has the input from the board impacted the way the company is proceeding on a going forward basis? And by the way, congratulations on the quarter as well. I forgot to mention that earlier.

Thanks. Thanks, George. Yeah. The back half of the question first. The day-to-day running of the company is the same, okay. Where everyone is aligned. We want to continue to improve operationally. We want to continue to improve our operations globally and we want to continue to do what's in the best interest of shareholders. So everyone is completely aligned and that's how we run the company. That's how we ran it before, that's how we run it today. So there's really been no change there. On your other part of the question, Q3, Q4. Traditionally, seasonality, Q3 is always larger than Q4. And that's how the plan rolls out in the back half of this year. Q3 is again our seasonally highest quarter. Traditionally, our highest quarter and it is higher this year as it has been in all the past years.

Would be.

Yeah.

And we'll go back to George Staphos.

One last one from me. I didn't want to overdo it with the two question limit. Bill again, you've been in the seat for a few years now. Maybe this has come up earlier in the call., if it has, again apologies in advance. How is the culture within the organization changed, would you say in terms of accomplishing what you and Mike kind of set out as the course for the organization? And I know the standard response for coming will be, it's fine and getting better. But if you could give some particular instances where the culture is now really driving performance for instance it would be helpful there. Good luck in the quarter.

Thanks. Thanks, George. Yeah. The culture change, the culture drum never stops right. And we embarked on this to change the culture of Bemis some years ago to create a high performing culture. And I think we're starting to get a really good traction there now. It took a lot of hard work, but it also took – we had to change out some of the leadership to get there. And when – as that leadership changes out, they bring in new leaders and they bring people from the bottom of the organization or the high performers. They bring them up into the organization and that's what takes a little while. And once it gets started, I don't want to say it snowballs, but it continues to feed upon itself and move forward and move the company forward which we've been able to do. And I think we're seeing that now with Agility. We're also seeing that with the fact that Forbes named us as one of the Best Large Employers in America this past year. So, I think we're doing a really good job in that area. The leadership is completely engaged around that and continuing to push and drive our results and our performance.

Thank you.

And there are no further questions in queue. I'd like to turn the conference back over to Ms. Winters for any additional or closing remarks.

Great, thanks. Thanks everyone for joining us today. This concludes our conference call.