Good day, ladies and gentlemen. And welcome to the Quarter 1, 2015 Sonoco Earnings Conference Call. My name is Shaun, and I will be your operator for today. At this time, all participants are in a listen only mode. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I'd like to turn the call over Mr. Roger Schrum, Vice President of Investor Relations. Please proceed.

Thank you, Shaun. Good morning, everyone. And welcome to Sonoco's first quarter 2015 earnings investor call. This call is being conducted on April 16, 2015. Joining me today are Jack Sanders, President and Chief Executive Officer; and Barry Saunders, Chief Financial Officer. A news release reviewing the company's financial results was issued before the market opened today and is available on the Investor Relations section of our website at www.sonoco.com. In addition, we will refer to a presentation that is also posted on the investor site during the call. Let me remind you that today's call contains forward-looking statements that are based on current expectations, estimates and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. Additional information about factors that could cause different results and information about the use by the company of non-GAAP financial measures is available in today's news release and on the company's website. With that now I'll turn it over to Barry.

Thank you, Roger. I will begin on Slide 3. We see that this morning we reported 2015 first quarter earnings per share on GAAP basis of $0.86 and base earnings of $0.56 in the range of our previous guidance of $0.56 to $0.61. And compares favorably to last year's base EPS of $0.52. Before reviewing the base P&L for the quarter, I'll mention as Roger just said again that a reconciliation of the GAAP to base earnings is in today's press release and on the website. But it is also summarized on this slide, and let me spend a bit more time than usual talking about these since they were significant. First of all, we are most pleased to have concluded what we believe was the most significant portion of the Fox River environment litigation as the time period for the appeal of the quarter per settlement we reached last year expired. As a result, we reversed $32.5 million of the reserve which after tax resulted in $0.19 per share favorable impact on GAAP earnings. We also benefited from a gain on sale of two metal ends processing plant located in Canton, Ohio. These two locations were not strategic to us since they produce metal ends for trade sales and not part of our other plants which we retain to make ends for our internal consumption. This transaction resulted in a pretax book gain as well as a book tax gain on the disposition having a combined benefit of $0.16 per share on GAAP earnings. Offsetting this gains were restructuring charges of $0.04 per share most notably related to the first phase of fixed cost reductions stemming from an overall organizational effect in the study. As previously communicated we are targeting about $25 million in reductions which will be phased…

Thanks, Barry. Let me add a little color to our first quarter performance and review what we see entering the second quarter. First as Barry mentioned we are extremely pleased to be able to move beyond nearly a decade of litigation around the Fox River environment issue. It is important to understand Sonoco inherited this issue through the acquisition of US Paper Mills in De Pere, Wisconsin, which is located on the Fox River. Additionally, the mills' involvement was strictly around the recycling of carbonless paper products produced by a third party. It was important for us to be able to remove much of the potential exposure associated to one of the largest environment cleanups under the EPA's circular program. On the acquisition and divesture front. We are extremely pleased to complete the purchase of a two third interest in Graffo; these operations are located in Southern Brazil. Graffo adds about $35 million in sales and operates high quality rotogravure as well as sophisticated lamination equipment. We wanted to partner with Graffo not only they give us a footprint in Brazil but allow us to bring our application capabilities to our much of multi national companies, customers. In addition to grow in Brazil yesterday we announced we are investing about $20 million to purchase a new trackless laminator and rotogravure press service growth and stand up pouches and applications enhanced by easy open and re-close features. Reflecting on the first quarter we improved earnings nearly 8% and that's low end of our guidance despite headwinds from severe winter weather, the impact of a stronger dollar, higher pension cost and weak volume. We had another solid performance in our consumer related businesses particularly from our rigid plastic and flexibles businesses as both has solid volume growth. I should point out that…

[Operator Instructions] Thank you. Your first question comes from the line George Staphos of BofA Merrill Lynch. Please proceed.

Thanks. Hi everyone. Good morning. Thanks for all the details. I guess the first question, Jack, could you provide us maybe you mentioned it, but could you provide us -- what volume expectation is embedded in the low end and high end of your annual guidance? And then I had a couple of follow-ons.

Well, I think that what we came out within -- at New York was we had volume growth expect in the 2.2% range. And that really would take us from the mid point to the high end somewhere around there and operations would be around the rest of it. So with 1% growth in the first quarter, I think what we -- we are now projecting volumes to more or less be back -- excuse me -- what we expected them to be, so for the year I think it should be somewhere a bit less than 2%.

Okay. Thanks for that.

That will take us to that mid point number so that should give you some indication.

That's helpful Jack. I appreciate it. And so similarly, should we assume that the primary reason that you wound up at the low end of your guidance range for the quarter was the volume effect? And in turn if you had to think about whether it was weather or consumer or, excuse me, customer inventory patterns or something else for that matter, what do you think was the driving force in the less than 1% volume growth in the quarter from where you sat?

Well, I think certainly weather impacted consumer demand probably more than they impacted our operations for the quarter. We had nothing, no impact this year like last year on our operation. So volumes were affected, certainly on the consumer side I think by weather. The quarter unfolded very similar to last year. We had a weak January, started very slow, we had a disrupted February. And we had a very strong March and those volumes have continued now as we go into April expected level. So there is a feel to 2014 here that's very similar. But outside of this segment volume was impacted; I really can't put my finger on exactly why other than slow start for year and weather.

No, Jack, that's helpful. Obviously, even though you have much greater visibility in terms of what your customers are doing and why, certainly you don't have a crystal ball with that regard as well, so that's helpful commentary. I had two quick ones and I'll turn it over just in terms of housekeeping. What was the impact of the Company-owned life insurance in the quarter? Can you go back to what that $2 million increase in the innerco deferred profit reserve was, and were either of these in your guidance going into the quarter? Thanks.

I let Barry answer that one.

First of all, it was less than $2 million that we are recovering on some company on life insurance in the quarter. And then again that was really largely offset by the increase in the innerco profit reserves simply due to the improved operational results in our paper operation which then means we have to eliminate any of the profit recognized on the transfer of paper from that business to a sister division. And so again that's just kind of step up in that reserve that we would not expected there for change through the balance of the year. Again unless operating results change or inventory levels change. So it is probably the one time step up based on the improved performance in the business. Really highlighted the impact, the run rate on the segment for the quarter.

Thank you. The next question you have comes from the line of Scott Gaffner of Barclays. Please proceed.

Thanks, good morning. Just following on some of those volume questions more specifically within consumer packaging, the volume there I think you said was up 1%. But it's a little bit bifurcated. It looks like the plastic packaging businesses did rather well and the rigid containers business not as well in the quarter. Can you talk about the trends there? Was that as you expected to have the plastic packaging businesses perform like that or is the mix of volume performance a little bit different than you were thinking coming into the year?

Well, let make a point of clarification. Plastics were actually up 2.5% and were strong in our blow molding operations in general. So we were pleased with that outcome, flexibles was up 5%, that's probably around what we were perceive it to be up and I'd also tell you the bookings in flexible was strong which is a solid forward indicator. The volume weakness was really in the cans business and really in the cans business in North America. It was kind of strong around the world or at expectations around the world and we are just weak in North America. And it kind of goes back to something I said in the fourth quarter when cans volume was so strong, it really goes to the product that we are packaging and how they perform in that particular time, and that's kind of what we saw. I'd also say that we had some -- some of our major customers that are dealing with their own issues during the quarter, I know that impacted their sales to their customers and consequently impacted ours.

Okay. And if I remember correctly from last year, the weather in the first quarter didn't really impact your sales that much until the second quarter. Was that the case, and are you concerned at all that the weather issues in 1Q this year will have more of an impact on the second quarter?

No. Well, you are talk in consumer

In consumer specifically.

No. I don't think we are going to see that repeat this year because the weather was now isolated to the north east now. I don't know if people in Minnesota would agree with that but it was more or less isolated to the north east this year. So we don't expect that. And last year we didn't really get an impact from weather in the first quarter on the consumer side of the business. Again the only impact that I would put on weather is the impact it had on what customers actually bought in that; I really don't have a feel for that might be.

Okay. And then on -- last question, on the input costs for that segment; you mentioned lower resin prices had a positive impact on the segment in the quarter. Can you quantify that first a little bit, and talk about whether or not you think that can continue maybe in future quarters?

Well, I think we reported the price cost was positive $7 million for the corporation in total, about $4 million that was on the consumer side. So what normally happen in our business is that we get the past two mechanisms that work in the second -- work from quarter to quarter. So certainly some of that's going to pass due to the customer as we move into the second quarter.

Thank you. The next question you have comes from the line of Ghanshyam Panjabi of Robert W. Baird & Company. Please proceed.

Hi, good morning. It's actually Navel Ghalia [ph] sitting in for Ghansham. How are you doing? Great, can you talk about overall competitive activity in the consumer market, especially given the lower raw material costs? Any change in competitive dynamics as a result of that?

Not that we see.

Okay, great. And it seemed like volumes in industrial were soft during the quarter. What led to that weakness in particular?

Well, we certainly did see weakness on the industrial side. It is hard for us to pinpoint exactly. I think we saw weakness in the -- certainly in paper and some of the other segments as well. Film was a segment where we did weakness and that's an interesting situation with film, we've always seen situations where film producers will wait to buy resin and wait to produce when they think it's on the bottom. So we think they were selling out of inventory on the film side, so that they could buy resin at lower price and then start producing again. But that's anecdotal. I wouldn't tell you that's an absolute, that's what our experience has been. But just a little bit weaker start to the year on industrial side maybe impacted by some exports but we certainly saw as I said earlier the rebound occur in March back to expectations and continues now as we get into April. So we think it is back to our expected level.

Okay. Thanks for the color. Just one last one, on the flipside, protective solutions was particularly strong during the quarter. Was there any one-ons driving that or is that just pure demand?

You know not really, that business continue to improve throughout the year. They had a very slow start in 2014, got better second quarter, third quarter, fourth quarter pretty strong and now their volume solid and their plants are up and running at expectation and they are producing the results that we expected them to produce. They did start little bit slow but finished very strong in March but I think that business is ready to roll in 2015.

Thank you. The next question you have comes from the line of Chip Dillon of Vertical Research Partners. Please proceed.

Good morning. How are you guys? Hi, I had a question. I know on the slides, I just wasn't sure of something. You mentioned on like Slide 5 that, on the sales bridge, that it looks like acquisitions and divestitures combined were $72 million. And when I look at the text, it looks like somewhere here it says Weidenhammer was responsible for $67 million. And so I know -- I guess I just want to make sure I understand the moving pieces that maybe there were other acquisitions, small things, and I wondered what the impact of the divestiture of the two plants were as well.

Chip, we did have impact in the paper industrial converted products segment related to that small acquisition made in Georgia, I think about last May, that added roughly $5 million to sales, so that really reconciles between the Weidenhammer earnings and the total that Weidenhammer sales and the total as we reported. The impact of the disposition was pretty insignificant in the quarter.

Got you. And then I guess the second question is you mentioned that FX had a little over a $0.02 a share impact going in the first quarter. And I guess obviously things can change from day to day, but we saw a lot of the decline occur in the first half of the quarter. But maybe given that the euro was still around its low in particular, should we see a greater year-over-year impact in the second quarter? And maybe you got to that and I missed it. But what do you think it would be? If we stayed where we were now, it would be like $0.03 year-over-year, or could it be bigger?

I don't think that it would be notably larger than that $0.02 to $0.03 range which is pretty much exactly in line with our expectations. Again we based our -- continued outlook on a rate of right at $1.10 per euro so again if moves from that, it can move a little bit but I think that's still representative of what our expectations would be.

Got you. And then the last question is you mentioned the accretion from Weidenhammer. I know that there's the potential to sell more or I guess to have more internal self supply of your recycled board as a result of that deal. And has that process started? I guess that's another way of asking how far along the synergy curve are we with respect to that acquisition?

Well, I think that we've made progress along the synergy curve specifically to the internal supply of board. We haven't even started that process, in order to effectively do that, we are going to have make some investments in our mills in Europe to produce the board that we need to produce. So that's much later date type of action that we have on the list. But we are really beginning to look at, how do we leverage their technology from a manufacturing perspective to the US and how do we leverage our material signs to them in Europe. So that's our focus right now beyond just initial removal of some costs.

Thank you. The next question you have comes from the line of Philip Ng of Jefferies. Please proceed.

Good morning guys. Margins in your industrial business were negatively impacted by the deflationary environment in commodity prices and weather to a certain degree. Was there anything else that impacted the quarter, and how much of that headwind should we expect to reverse in 2Q and 3Q?

Yes. Margins were pretty much in line with where they were last year and they were affected quarter-to-quarter, I think from the fourth quarter. And that definitely was around really price cost and the price of commodities. About the third of what we recycle is non OCC. Price for recycle plastics, metals and other fiber are really very, very low. So it is having an impact and I would say that's probably the primary impact in that business. The mills actually performed fairly well. And between tube and core volume and then that price cost impact I guess almost recycled materials that really were what is causing that change.

Are you seeing the dynamic change now, or it's still kind of pretty depressed at this juncture?

Well, I certainly think the volume in tubes and core will improve and we will pick that back up. Right now we do see our projections for OCC is to be up to $10 about mid summer and stay there. The good news is I never right about OCC so more-- and the other materials it kind of depends upon how I guess what you call virgin cost for those from metals and plastics et cetera actually how they react because those prices will follow what happens to virgin pricing in those materials. Right now we don't see any particular momentum.

Okay. That's helpful.

So I would also add to that, pension does disproportionately impact that segment and so the pension impact alone was about $2.3 million. So absent that you would be looking another more like a 7.1% EBIT margin for the business and the paper product reserve would have impact as well which is another $2 million. So it's probably not what you -- it appears to be.

Okay. That's actually very helpful. And in terms of the favorable price cost spread you talked about in 1Q for both consumer and protective due to lower resin prices; do you expect that spread to narrow in 2Q? And what is your view on the May increase for polyethylene by the chemical producers? Do you think it's going to stick or too early to call?

Well, let me just say that, I mean the Wall Street projecting price increases for plastic and for paper. I certainly think that there is demand out there but there is plenty of supply. My guess is that it has a chance to stick and I would just leave it at that. And yes we do expect to pass, because of the contract mechanism we have in place on both the consumer and industrial side, certainly some of that price cost benefit will pass through.

Okay. And just one last one for me, just bigger picture. I understand you're starting to transition your tube and core contracts to be tied more to paper board prices rather than OCC. Has the industry followed your move? And can you give us an update on how we should be thinking about your RB prices in general? Obviously, you guys announced something early in the year.

Let me ask; let me answer the second part first. We certainly have not seen the support for that increase that we had hoped that we went out for it, we still standby the fact that margins have declined in this business over the last five to six years. And that we do need to return to more reinvestment economic type margin situation. And we will continue to push that price increase. That's I remain very positive that as the year progresses we will see support for that increase because it is needed. As far as the second -- the first question which was remind me now --

Yes. You guys started transitioning your tubes and core contracts to be more tied to paper board prices rather than OCC. Have your competitors matched? Because longer-term, if paper prices move higher that would help your effort to drive margins higher. I just wanted to see if anyone else has matched that initiative.

Well, I certainly think that as we transition to reduce the support for moving to an indices type pricing mechanism and away from a specific component like OCC and we continue to work on that. And I believe that the industry will support that as we go forward. Now the critical piece is what are the right indices to choose so that it is easily available, people can see it and have faith that it's accurate. So we continue to work on that because it is fairly small industry not lot like liner board.

Thank you. The next question you have comes from the line of Adam Josephson of KeyBanc. Please proceed.

Thanks. Good morning Jack and Barry. Hope you're well. Jack, it sounds like you're expecting an improvement in economic conditions as the year progresses, but you're only expecting OCC to go up by $10 a ton I think you said by midsummer, which would still be a pretty low level. Can you talk about what seems like it's a disconnect between your economic expectations and your OCC price expectations, if there is a disconnect?

Well, first of all, Adam, I want to remind you that I am never right when I talk about the OCC pricing always. So we have to put that in table. I also don't see any impetus for China and other markets to look to the US to-- for OCC supply. So I think that any increase in demand is going to be local demand driven so the increase that I see of $10 maybe it is $15, I think that would support economic level of activity that we would need to see tube and core volumes move up to the levels that we expect.

Sure. A couple others. One is obviously there was a large transaction in the packaged food industry of late. Do you expect that or other such transactions to have any impact on your business? And if not, why wouldn't you expect more pressure from them, given their increased size and scale?

Well, that's an interesting thought and I would look at a bit differently. First of all, these are very large sophisticated companies today. And they have sophisticated purchasing models and capability so how much more advance they can get, I am not certain, they certainly have more volume. But really I think what they are looking for is to reduce their cost to be more efficient. And I believe that it actually creates an opportunity for us with our portfolio to create innovation and bring to them new ideas that not only help reduce the cost but maybe actually drive some top line growth as you do with customers. So I see that as an opportunity for us to step in, help them impact their cost positively and drive growth for Sonoco. Will there be pressure on price? Absolutely but that's nothing different than it is today.

Sure Jack. Thanks for that. And just a couple others. One is on container board. I know you're a small producer, but what is your view of industry conditions at the moment? Obviously the March data came out this morning. Inventories are pretty high and capacity is getting added. But can you share any thoughts you have with us?

You are right. Let me add the word very small player in the corrugated industry. To me the biggest impact today is probably the lack of export market for corrugated product because of the strength of the dollar. If that changes and I think that you would see that tightening of the market domestically, but really for us specifically, that's probably the greatest impact is the strong dollar and the strength of the export market.

Thanks Jack. Just one last one. There's been a notable pickup obviously in deal activity and deal speculation in the sector so far this year. Does that signal anything to you?

Well, obviously, it is cheap money. That's part of it. These tend to be events driven, whenever there is a deal, an opportunity is matched to someone that one seeking an opportunity so not in particular, I think for us, it tells me that we are on path. We are focused on growing flexibles; we are focused on growing composite cans around the world organically. We are focused on consolidating acquisitions in tubes and cores. And also focused on growing protected packaging. We did that in Brazil that was a conscious decision. We feel good about that. And we continue to look for opportunities in other areas as I just outlined and so for us, is it bigger -- does it mean more, not really we are continue to follow our strategy and our path.

Thank you. The next question you have comes from the line of Alex Ovshey of Goldman Sachs. Please proceed.

Thank you. Good morning, guys. A couple of questions. The ramp up of the composite cans facility is outside of North America, so Poland and Malaysia. Can you talk about the competitive landscape there for the composite can, how long you expect it will take to really fill those facilities up and how you guys are thinking about when we would see the financial contribution of those facilities?

Well, I would tell you beginning to see it now. Kutno, Poland is doing well. We had a second can line that planned at the end of the last year. It is ramping up. And I think over the course of the next two to three years we will probably add two more lines to that facility as they ramp up production for Eastern Europe and other areas. In Southeast Asia, we -- the plant in Johor Baru that we opened at the first part of 2014 is now operational. We are just now starting the plant near Kuala Lumpur. And that will ramp over, up over the course of the year. And the plant in China, we are going to be pressed, let me back up, we put a new can line in Taichung, that's doing very well. That's basically sold out and the can plant that's going into Southern China, that's kind of expedited path. And we expect to open that sometime third quarter and ramp it up during the course of the year. So I think that where we are is that Kutno plants beginning to produce, the plant in Thailand and Johor Baru producing or adding economic value. The one in Malaysia and the one in China will be 16 events and continue to add beyond that.

Excellent. Thanks for that color Jack. And then turning to US flexibles, it seems like that business has grown faster than the overall market. I'm not sure if that's right because I don't have the market data. But if it is, I'm curious to hear why you think you're able to show such strong volume numbers in the flexibles business.

Well, so it is growing faster than the market in general. And I think that if you survey our customers they would tell you that we are applications people. We are not basic in film but we are very good and coming up with ideas that create value for customers. Pouches are one of the areas of growth. We have the unique capability in dye cutting; those types of things, innovations are driving our growth there. And I will honestly tell you, honestly believe this and I think it is true is it our understanding of other formats, our understanding of rigid plastics, our understanding of rigid papers and alterative is something drive growth in flexibles.

Thank you. The next question you have comes from the line of Chris Manuel of Wells Fargo. Please proceed.

Hi, good morning gentlemen. A couple of questions, first one for Barry. I get the adjustment in free cash flow guidance from $150 million to $140 million, given the raise of the dividend. I guess the piece maybe I'd like your view on is the $29 million from asset dispositions. Was that -- I wasn't aware if that was in the original number or not, or at least I didn't have it in numbers originally. So it kind of feels like a $29 million, $30 million reduction if you will. How would you have us think about that?

It absolutely was in our guidance for the full year, Chris. Obviously, we couldn't talk about it that time but we've talked about net capital spending being in the $220 million range and that include the benefit of the proceeds from that. And again netting that against the CapEx seem pretty natural because again we got a lot of plant expansion. So we are adding plants that's driving the CapEx number up. So we just netted it against the proceeds. So it was in our original guidance.

Okay. So maybe just help me understand it then. Gross CapEx this year might be $250 million, net $220 million?

That's correct.

Okay, that's the difference. Okay. Jack, you speculated a few minutes ago about maybe some of the softer volumes in your tube and core in particular headed towards folks that make film or other things because as resin prices fall, they are holding back to manufacture, et cetera. Would it be illogical maybe that something similar could have happened in your consumer businesses as bottle costs or other flexibles or other products you're making were held back a bit as you pull those through? So presumably, as you sit now, the lower price resins rolled through into your, most of your consumer business, and you mentioned strong volumes in March and into April. I mean when you say strong, have you seen stuff beyond the couple points that you would've anticipated that may suggest some of that is being made up or not? How would we maybe think about that?

Strong would mean at expected level. So they come up to what we expected they would be. And, Chris, I have some view into the film industry having run that tube and core business as I did and deal with those customers. So I feel a little more confident that, that's something that does happen on the consumer side that would be shear speculation on my part. And I just prefer not to do that.

Okay. That's helpful. And then last question I had was -- and I appreciate when you talked about the price cost benefit being $4 million. I think it was a little more towards the consumer than the industrial side. Can you maybe give us a sense as to -- I know you don't like to get this granular in the divisions or individual product lines but how big the swing was? We've anticipated a pretty good lift from lower OCC in the industrial business. But the collection business I guess, so the recovered paper and the recycling component, how big maybe on a year-over-year difference was the swing in profitability there? And I guess I am presuming that it's breakeven or less than that as we sit today for that particular piece. And is that accurate and how would we think about a year over your swing from that business?

To clarify, Chris, we expect the price cost was favorable by right at $7 million for the company as a whole. We went on to say about $4 million of that was in consumer. Again most notably impacted by lower resin pricing and then about -- the balance was really in protected solutions due to price increase and some lower materials cost. In Paper and Industrial Converted products, it really was relatively flat year-over-year due to the impact of recycling business which obviously as we've said at these levels reports losses based their current commodity pricing.

Okay. So it's a pretty good swing in a year. I think OCC was maybe $110-ish million or so average last year in the quarter. So it's a pretty big swing year-over-year. Okay, that's helpful.

I think last year being positive in industrial on our price cost in the first quarter.

Okay. Last question I had, and it kind of falls along an earlier one, the kraft pine is coming together. I know when kraft split into a couple of pieces; it was pretty disruptive for your consumer business for two or three quarters and had a noticeable impact to volumes. You talked about the long-term opportunity to go in and potentially win some additional businesses that are doing work. But in the short run, and I appreciate it hasn't been finalized yet, but in the short run, would it be surprising to see a little bit of disruption again?

No. I think that's -- we probably saw some in the first quarter, but again I can't swear to that but it would seem logical to me that as a disruptive event.

Thank you. The next question you have comes from the line of Al Kabili of Macquarie. Please proceed.

Hi, thanks. Good morning. Jack, I just wondered if you could elaborate on the tubes and cores trends. How are volumes as far as North America and also Europe?

I think Europe was less -- that less than a 1%. So it was more or less okay. North America was the one that have the greatest shortfall in volume. I think that as I said that trend was very weak January, weak February really to disruption but then back to kind of expected levels on a per ton day basis in March. Around the world, Brazil was down; China was down as we voluntarily repositioning that business in China to the more upper end section of the market. But with exception of Europe and Latin America actually was strong for us which would be the Northern South America and Mexico region was positive. Outside of that everything else was fairly weak other than Europe being flat.

Okay. So it sounds like versus your expectations, it was North America, and you are seeing it get better. Were the end markets, were there any particular end markets that were particularly soft in tubes and cores that brought it down, or was it broad-based, if you have it handy?

Film was particularly weak which we would not have normally expected. And again I think that there maybe some of that resin issue at play there. And it may be region why we are seeing the improvement in March and coming into April.

Okay, that makes --

Paper continues to be weak as well.

Okay. That makes sense. On the dividend, the increase -- yes, it's good to see the increase in -- it's actually a little more than it has been the last few years and a little more than the targeted EPS growth this year. So I was wondering if you could just address some of the thinking and the level of the dividend increase.

Well, to your note it has been running about 3% over the last several years. The last record earning year we had is 2007 and that time I think we raised on an annualized basis about $0.08, 2014 was a record year. We made some solid acquisition. We've expanded the can and feel good about forward earnings momentum. So a big part of return to shareholder is dividend it has been, so we felt like it was time to reward shareholders for being holding the stock so we did so. Feel good about it. It is kind of in the range of what we would normally play out that we say 45% to 50% maybe a little bit high but I think going forward over the next year or two we will be able to cover that. And bring it back right to the range and as I said reward our shareholders at this time.

Okay. All right. That's helpful. Last -- I guess the last question is just on the displays business. And I think one of your competitors talked about slowing promotional activity, which it doesn't sound like you saw per se. But I wonder if you could address displays a little bit, what you are seeing there, how the competitive environment is and how the backlogs in that business look. Thanks.

Well, when you look at display business, FX have a significant effect on the revenue in that business as well as we have reported that one of the pack centers that we operate was going to be closing. Having said that volume in that business was up 3% domestically and displays was up double digit. So our volume strong and we have a lot of activity running to that business today and feel good, feel good about the business and feel good about what's going on there.

Okay. And the backlogs are looking healthy to support. Excluding the sort of business loss from the pack center move, how are the backlogs looking?

As we expected. Right, in line with our expectations.

Thank you. Your final question comes from the line of George Staphos of BofA Merrill Lynch. Please proceed

Thanks, hi, guys. Just a few cleanup questions on my side. Jack, we've talked about composite cans being a mature sector for a number of years. And every so often, you have a tougher quarter. You keep focusing on innovation and then we get some rebound. How do you feel about the growth outlook for composite cans not just in emerging markets where it's a new medium and has some advantages but domestically? And what can you do and what should we see in the next couple of years from any kind of innovation related to composite cans domestically?

Well, I certainly think composite cans domestically are mature product. We wouldn't argue with that. We are looking at innovation. We are looking at ways to make the product more robust, maybe use some warm fill applications. And those types of situations, we are looking at different markets for the can. But at that there is continued erosion in concentrated orange juice, so domestically we are looking at it and try to grow it to offset that erosion and develop new applications as we can. The real growth is in the emerging market and that's where our focus has been. That's where our investment has been. Now having said that, that's the round composite can. Weidenhammer, when we bought Weidenhammer, they are bringing new technologies, reset membrane, they are bringing non round containers, so we are just about the front end of bringing those technologies into the US and beginning to show them in certain applications. And I recall maybe three or four years ago we were doing a study of something. It was one of those deals and every time we show the package, we show the multiplicity of package as plastic, flexibles et cetera. The number one was non round paper container was always viewed as the most positive container by the consumers. So I think our upside is going to be domestically not so much in round containers but in the new technology of non round as well as perhaps recessed membrane and some other things that we will be able to introduce from Weidenhammer.

How far along are you in terms of introducing? It sounds like it still pretty new, and so maybe we are looking at three years down the road before you start bringing some of these into the market.

Well, I think we are putting the teams together now. The people are beginning to converge back and forth, both European based and US based. I certainly think it will take all of this year to kind of get the pieces on the chessboard and then probably take us 2016 to find the opportunities, but I wouldn't be surprised to see something actually pop in 2016, maybe after the second half of the year, something along that line.

Okay. Two others, one shorter-term and one longer-term. On cylinder board pricing, if you were able to ultimately implement the price increase that you tried earlier in the year, would that get you to reinvestment returns within cylinder board, or would you still need further net price cost in that business?

Well, that particular increase alone by itself, no, we still need to improve the margins in that business going forward.

Okay. And then in recycling it sounded like, and maybe I misheard you, that you are adjusting your strategy. A few years ago, there was a reasonably large focus by the Company around MRFs and other ways of using what at the time was an inflating commodity environment to grow your own share with your customer and also turn to a P&L benefit. It sounds like to us that you are sort of retracing from that commentary or that strategy. Is that correct? What might that mean in terms of the portfolio if that is correct? And how much would that actually add, given current levels of commodity inflation to your P&L on a go-forward basis? If you can even answer that part of the question. Thanks guys and good luck in the quarter.

Thanks, George. Yes, I really can't answer the last part. I am not real certain of that. And you are right; we are beginning to take a look at that. I don't want to convey that we made that decision. We are beginning to look at that. We did perceive this is an opportunity perhaps that we should explore several years ago, made some investments. Some of them are very still, very positive. But as we look on a go forward basis the question is really, do we want to be a recycler -- the top priority has always been to paper the mill with the best paper and the lowest cost fiber. And that is got to stay our number one priority, our number one focus. So we are asking ourselves, are we diluting that effort? Are we not getting the best that we could get to the mills by trying to do other things? So that is -- your view that is correct, we are asking ourselves those own questions and will be looking at that over the coming months.

Thank you. I would now like to turn the call over to Roger Schrum for closing remarks.

Thank you again, Shaun. So now we expect to report a second quarter financial results on Thursday, July 16 at 11 AM. And a news release supporting our financial results will be issued before the market opens that day. As usual our conference call will be webcast. And you can access that information from our website later on. Let me again thank you all for joining us today. We appreciate your interest in the company. And as always if you have any further questions, please don't hesitate to contact us. Thank you very much.