Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2018 Sonoco Earnings Conference Call. [Operator Instructions]. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Roger Schrum, Vice President of Investor Relations. Please go ahead.

Thank you, Jonathan. Good morning, and welcome to Sonoco's investor conference call to discuss our 2018 fourth quarter and full year financial results. Joining me today are Rob Tiede, President and Chief Executive Officer; Barry Saunders, Senior Vice President and Chief Financial Officer; and Julie Albrecht, Vice President, Treasurer and CFO-elect. A news release reporting our financial results were issued before the market opened today and is available in the Investor Relations website at sonoco.com. In addition, we will reference that presentation on our fourth quarter results, which was also posted in our website this morning. Before we go further, let me remind you to today's call and presentation contains a number of forward-looking statements 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. Furthermore, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operations. Further information about the company's use of non-GAAP financial measures, including definitions as well as reconciliations of those measures to the most closely related GAAP measure, is also available on the Investor Relations section of our website. Now let me turn it over to Barry.

Thank you, Roger. I will begin on Slide 3, where you can see that earlier this morning, we reported fourth quarter earnings per share on a GAAP basis of $0.77 per share and base earnings of $0.84, which is near the high-end of our guidance as provided on our Analyst Day in New York of $0.79 to $0.85 per share, all of this compares to base earnings of $0.72 for the same period last year. As you will see in just a moment, we had a lower-than-expected effective tax rate for the quarter, which more than offset some unexpected weakness in December in a few of our businesses. There are several reconciling items between GAAP and base earnings, including restructuring charges of $0.08 per share, acquisition-related cost of $0.10 per share and some tax adjustments with a net favorable impact of $0.11 per share, mostly from further interpretation of last year's U.S. Tax Cuts and Jobs Act. Most notably, a $16 million release of valuation allowances on foreign tax credits. Looking briefly at our base income statement on the next slide starting with the top line. You see sales were $1,356,000,000, up $56.6 million over the prior year due to many moving pieces that you'll see in the sales bridge, but the net increase is really driven by the Highland and Conitex acquisitions. Gross profit was $254.3 million, $9.9 million above the prior year due to several factors, including positive price/cost, the impact of acquisitions and the business interruption insurance recovery from the flood in the third quarter. Selling, general and administrative and other income and expense items of $138 million were unfavorable year-over-year by $11.3 million, driven largely by the acquisitions and normal inflation. All of this resulting in an operating profit of $116.2 million, down slightly from the…

Thanks, Barry. Moving to Slide 8. You see our guidance at first quarter and full year of 2019 for base earnings where we are projecting to earn between $0.77 and $0.83 per share in the first quarter compared to $0.74 per share in the same period of 2018. Our earnings growth in the first quarter and full year is expected to be driven by a combination of positive price/cost, slightly higher volumes and a benefit of the Conitex and Highland acquisitions. Consistent with what we shared at our Investor Day in December, we are projecting full year 2019 earnings to be in the range of $3.47 to $3.57 per share with a midpoint of $3.52 per share. Overall, our assumptions for volume/mix, price/cost, total productivity and our effective tax rate have not significantly changed from what we shared in December. Now turning from earnings to cash flow on Slide 9. You see that for the full year of 2018, operating cash flow was $590 million compared to $348 million in the prior year. In addition to increased operating profits, the main drivers to our strong cash flows in 2018 were solid working capital management and lower U.S. defined-benefit pension contribution. So after capital spending, net of asset sale proceeds of $168 million and after paying dividends of $161 million, free cash flow was $260 million for 2018. Our outlook for 2019 operating cash flow is a range of $600 million to $620 million. And we expect this year's and free cash flow to be in a range of $225 million to $245 million. This outlook is unchanged from what we provided at our December analyst meeting. I'll note that after removing $50 million of unique positive cash flow items in 2018, our guidance for 2019 free cash flow is about a 12% increase over the prior year. On Slide 10, you see that our balance sheet and our liquidity position remained very strong. Our year-end 2018 cash balance of $120 million reflects a decrease of $135 million from our 2017 year-end cash balance. At a high level, during 2018, we used our free cash flow generation and certain of our cash balances to fund around $275 million of acquisitions and repay approximately $60 million of debt. That completes our financial review in the quarter. So I'll now turn it over to Rob for additional comments.

Thank you, Julie. Let me talk about our 2018 performance in a bit more detail, and then I'll comment on what we see entering 2019, and specifically the actions we're taking to meet our financial and operational targets. Sonoco produced extremely strong results in 2018, including record top line, bottom line and cash flow results while further strengthening our balance sheet. Clearly, we believe the performance further demonstrates, how our strong, diversified business makes us allowed us to produce consistent earnings improvement over the past several years. However, this performance was not without its challenges, including the impact of hurricanes, accelerating inflation, tariffs and a choppy performance in our Consumer Packaging segment in quarter four. As you know, I'm a numbers guy, so let me highlight a few of our numbers in 2018. Net sales were up 7% to a record $5.4 billion due to acquisitions, higher selling prices implemented to recover rising material, freight and other operating costs and modest volume/mix growth. GAAP earnings per share increased 78% to a record $3.10 per diluted share while base earnings were up 21% to $3.37 per diluted share. Base earnings grew as a result of a positive price/cost relationship, fixed cost savings and income from acquisitions, which were partially offset by negative manufacturing productivity and a negative volume/mix. And of course, like most companies, we benefited from a lower effective tax rate as a result of the U.S. Jobs and Tax Cuts Act. Looking more closely at our segment results. Let me start with our Paper and Industrial Converted Products segment, which had a record year achieving a 31% improvement in operating profit while operating margin improved 230 basis points to 10.9%. Our global industrial business benefited from a positive price/cost relationship, lower fixed cost and acquisitions, partially offset by negative…

[Operator Instructions]. Our first question comes from the line of Ghansham Panjabi with Baird.

I guess, first off, on consumer. Does that business see any sort of delay from a customer ordering standpoint, just sort of lay in a quarter given the free fall of resin prices? You mentioned, Rob, there's been a bit of an improvement in 1Q so far. So could you also just kind of quantify that aspect as well. I'm just trying to get a sense as to what changed in December versus your initial expectations?

Yes. Let me try to break it down because it was predominantly on the flexibles and the plastics side, Ghansham. So if I take a look at - if I look at our flexibles business, in fact, I was doing this over the last couple of weeks. I was looking at our bookings. Our bookings in November and December were very bullish. What we did see was a couple of things, one, we did see some customers push orders out. But the other thing that we did have happened was we did rebuild one of our [indiscernible] presses in the fourth quarter. As a result, we have to move business to other facilities. And that did create a bit of a backlog for us. If I take a look at the order book, again, in flexibles in January, it met our expectations in terms of what we're looking for. So to give you some context, we expect our flexible business to grow in the range of 4% this year. If I take a look at our plastics business, a couple of things that occurred in terms of the fourth quarter. I think that we clearly saw an impact as it related to our children frozen food segment. And if you recall, we talked about a substitution where we had a customer testing out a - some business in the molded fiber construct. And they have launched the product in that. So we saw the impact of that. But we also saw a significant impact in 3 other areas. One was in the construction side, specifically in our comp tubing business, both on the fiber side as well as on the plastics side. And if you recall, there was a recall of romaine lettuce in the fourth quarter. That had an impact on us and were starting to see that business rebound. And lastly, as I think about our plastics business, we did have a weather issue up in the Northeast, specifically as it impacts - or Northwest, sorry, northwest, specifically as it related to the apple crop and the size of the apples were slightly smaller-than-expected. So they have moved some of those smaller products or smaller apples into a bag versus - a plastic bag versus the trays that we've got in place. So that, if you will, sort of gives you some color in the background. But if we take a look at our plastics performance in the first six weeks, and six weeks does not a quarter make and a quarter does not a year make, as we all know. I am pleased with what I've seen because it's right on track with our growth expectations as we head into 2019 in the plastics side, again, being north of 4%.

Okay, that's super helpful. And then just switching to Paper and Industrial, obviously, a record level of operating profit or very close to it for 2018. Are there any pockets of end market weakness that sort of give you pause for that business as it relates to volumes and margins? And particularly so with Conitex and the related exposure with China?

Sure. Let me start with Conitex and then maybe the best way to answer your question is do a walk around the globe because it's probably what's on a number of people's minds. Conitex is performing as expected. You got to remember, Conitex is a significant player in the South East Asia market. China is just one element of it. So have we seen a slowdown in the market in China, the answer is yes. However, I would tell you that the rest of South East Asia is buoyant, and our plans are very busy with respect to the work that they've got in their portfolio. Again, Conitex also is - has operations in Europe as well as here in the U.S. So that's the Conitex piece. If I think about the second or first part of your question as it relates to softness in the market. If I talk about the industrial side, did we see some softness in the, the converting endpapers side, I would tell you it would start with Europe. I think Barry mentioned that we saw about a 7% softness on the converting side but our paper business was strong. And if I think about North America, are we seeing some mild softness, the answer is yes in comparison to the robustness that we had a year ago. Container board is something that we're watching closely, where our mill is still full. But it's something that we're going to monitor closely. And will it caused some potential challenges on pricing as we move forward? The answer is yes. The good news is OCC has dropped. So in the puts and takes of things, I think those should offset each other. And then we have seen some softness on the industrial side as well in South America specifically Brazil.

Our next question comes from the line of Edlain Rodriguez from UBS.

Rob, can you talk about the performance of the recent plastic acquisitions? And also in terms of like the outlook for M&A, what are you seeing out there?

Sure. So I mean, yes, the plastic acquisitions would be the perimeter of the store acquisitions. So let me start with Highland, which is the most recent one. It is exceeding our expectations as we finish the year. And let me talk about Highland for a moment and how it fits into the context of the perimeter of the store. What we liked about Highland was not just the fact that they had a good business on the East Coast but they had a very solid management team. That team now runs the entire perimeter store focus for us on the rigid plastics side. And that was part of the reason we did the acquisition. When we did the Peninsula deal, we had contemplated closing a facility, which we have now done. But we have contemplated doing that a little earlier so that had an impact on the productivity that Barry referenced earlier. We do see growth continuing, and we're still very excited with respect to the projects that we've got going on with our customers. And not only with respect to it being a rigid plastic construct but also a combination of bringing flexibles and the thermoform constructs together. So we're seeing a lot of opportunity with respect to that. So we expect that, that side of the business will continue to grow with the levels that we talked about in the past.

Okay. One quick one on Tubes & Cores. I mean you're definitely seeing some volume weakness in there. I mean, are you losing volume at the expense of prices? And how much is there left to do in terms of balancing pricing with volume?

Yes. I would tell you that, again, it depends on the region of the world. The only loss of any consequence that we experience would've been in Europe. And we expect that to - we expect the volume to come back moderately with respect to that. Here, in North America, which is the biggest market for us in the tube and core side, it is right in line with what our expectations are as it relates to the focus that we put into that business. And that's - that same focus, in terms of operational excellence, is being applied to our operations in Europe. And that body of work has already begun with our leaders in Europe along with Howard Coker.

Good luck, Barry.

Thank you. Thank you.

You're next question comes from the line of George Staphos from Bank of America Merrill Lynch.

Barry, thanks, again, for all the support of all of us in our research, congratulations and congratulations to you, Julie, as well. I just want to come back to the consumer performance and talk a little about it, Rob. In terms of - it seems like you're saying this is largely a short-term issue in terms of customers pushing out orders and some other factors. Yet the actions you're taking are fairly comprehensive, which would suggest that maybe there were some building issues beneath the surface where they are all long but it was just the fourth quarter kind of brought them to bear. So would you agree or disagree with that premise? I know you said your volumes have come back as you expect in the first quarter. But are there any other structural issues that are starting to worry about in terms of volume or pricing kind of relatedly? And I'll stop here. A lot of times when we hear about businesses struggle for a while, it's not so much - the short-term issue is business might have been missed priced, i.e. like Atlanta. So some thoughts around those questions would be great and I have one follow-up after that.

Sure, George. So yes, let me talk about those businesses. Structural issues, I don't think so. I think - let me just get granular. In the flexibles business, where we rebuilt a press, that was something that have been contemplated because we needed to do that. And we anticipated being able to do that by relocating some business and making that happen over six week time frame. It actually ran longer than the six weeks because of some engineering issues. But that press is now back up and running and we're migrating the business back onto that machine. And that was happening at the tail end of January. We also put in a new press and a new laminator into one of our facilities to be able to retire three old presses and a laminator. And so that should drive productivity improvements. And so that's what's driving that. As I said on the booking side, I was pleased with what I was seeing in November and December. And I looked at it on a monthly basis, as well as January. On the plastics side, the issue around specifically the consolidation of the facility there, I think we may have talked about this in a previous call where we had made a decision upon acquisition that we were going to shutter this facility and that we engaged in a conversation with a prospective customer about taking on a big piece of business. Unfortunately, that customer, while we were in the midst of negotiations, was sold. And as a result, it delayed our closure of that facility. And we - as we're going to the closing process, we were also hiring up people and the other in the new plants that were going to be upscaled and starting training. And so we had duplicate headcount in the system as a result of that. And so I think a lot of that is behind us. We do, having said that, I do expect there will still be a learning curve and some of this people learn and run these machines and run the new product in the first quarter. But I think from a structural standpoint, that's solid. That said, we also, as I made a comment in my opening comments, we do expect to drive price in a number of these areas where we were not as effective in recovering the rising material cost specifically. And then, lastly, as we are moving things around, we also incurred some significant freight charges of shuttling things from facilities further away from the customer than we want. So it's a number of things that played out, George. Hopefully, that gives you some perspective. But from an order standpoint, from what we've seen thus far, it's in line with what we expected.

Okay. That's very clear. I appreciate that, Rob. One quick one for me, and I'll turn it over. Display and Packaging did very well, certainly versus our model. It's not here nor there. But I think you set a record performance relative to the last 10 years. For the analysts sitting on this phone, on this conference call, should we more or less, extrapolate that year-on-year margin trend over the rest of the quarters in 2019? And what effect - if that comes up periodically? What effect are you seeing a nine Display and Packaging volume, which seems real strong from the continued progression of direct-to-consumer, e-commerce and the like?

Yes. I would not project the 6% that we achieved in the fourth quarter throughout the year. I think historically, we've run in that 4%, 4.5% range directionally, somewhere in that range. What we're seeing is we did pick up some new - we picked up some new volume both here in North America as well as internationally. And I think we said, we expect to see continued improvements throughout the course of the year. Part of that is the fact that we had the Atlanta pack center clearly, if you will, in our comparatives through Q3 of this year. And this was a wonderful business. I would tell you, it's a long-term prognosis of displays. I think to do a lot more back out certainly in the international side that really is as display-centric as, if you will, the traditional business that we had here. That said, we still see people buying displays and getting product in front of customers and interrupting their shopping experience or at least positioning product in multiple sites so that their product gets displayed and gets noticed.

Our next question comes from the line of Adam Josephson from KeyBanc Capital Markets.

Rob, I hope you feel better soon. And Barry, congratulations to you. The one commodity question and then one back to consumer for a moment. Just on OCC and resin. Correct me if I'm wrong but OCC has already been weaker so far in 2019 and you were expecting as recently as early December, it went down by $10, $15 in February. We know it's happened to resin prices, at least it happened in November-December. Could you just update us on what you're expecting in 1Q in terms of the OCC benefit? And if you're expecting these low OCC prices to prove [indiscernible] your resin expectations for the year have changed?

Sure. So let me start with the resin. I know you were going to ask that question. With respect to OCC, I think we look forward. What we've done is we've done our forward look based on around $75 for the balance of the year. So there may be some ebbs and flows with sort of looking at it from that perspective. With respect to your question, do we expect to see some benefit or what's the magnitude of the benefit. I think one of the things that we are keeping up a close eye on is its what's happening in the container board market and some of the pricing that might take place in there, which we don't yet know where that ultimately plays out. I would tell you that my expectation certainly as we go through this quarter is that any benefit would be offset by the puts and takes that we otherwise would have in the quarter. So I don't anticipate there being a benefit on what we see - that $10 drop that we experienced in February. I hope I'm wrong. But that's where my head is with respect to that. On the resin side, nothing's really changed. I think we built our forward-look based on an overall decline of about 2%. There's always going to be some movement here and there but we're pretty much standing behind that expectation.

And just on consumer. I know you talked about the first six weeks of the year being better volume-wise after what happened in 4Q. If I go back to 2011, I think your volume is essentially flat over the past 8 years or so in that segment. So there had recurring volume difficulties for a number of years. So do you have any reason to - and obviously, you're not expecting company-wide volume growth of any consequence in '19 either. So do you - was there anything particularly anomalous about the weakness in 4Q and it seems that volume weakness of gone back a lot further than just 4Q '18. And then with respect to - you talked to your Analyst Day about 2% organic sales growth for the foreseeable future and you ready you're talking about volume weakness in 4Q. You still think that 2% organic growth is reasonable in light of what you're expecting at least for this year?

Yes. Over the long term, we talked over the planning horizon. I do think that 2% organic growth is achievable. So let me answer the question that I think you're sort of getting at. If you recall, one of the things we've talked about is that the composite can in the developed world over a number of years have been declining. And part of that was offset by the fact that we were growing in the plastics and the flexibles space. As I looked at expectations and volume, I think we will continue to see some of that in developed world. With that said, we did see growth in Europe. So I take that back in terms of the entire developed world. We did see some nice growth in Europe. And clearly, we continue to see double-digit growth in Asia. So it sort of balance each other in sort of a mathematical calculation but there's no reason for us not to believe that this other both, if you will, the plastics fees and the flexibles piece cannot grow at a rate that we said out.

Our next question comes from the line of Scott Gaffner from Barclays.

Thanks, Barry, for all the help over the years. It's been a pleasure working with you. So good luck on retirement.

Thanks. My pleasure as well.

Rob, just a quick question on consumer. Talk about the perimeter of the store. I just wanted to clarify, I mean, you are closing down, removing some of that plastics business and there was some operational inefficiencies as the one customer, I thank, you mentioned got sold while you are negotiating. Was there anything from a volume perspective with the perimeter of the store that gave you cause for concern in the fourth quarter?

Not really. Obviously, there is a weather impact to this business. The crop keeps growing so the product still gets picked, maybe pushed out a little bit. If I think about, for example, let's use January as an example. We had cold weather here on the East Coast and a lot of rain in California. Has it delayed some things? Yes. But somebody - they were sending me some videos of product being picked and shipped into some of our customers at record levels over the last couple of weeks. So there is a mad scramble to get caught up on things. And so at this point, I would tell you, no. There's nothing that caused me to do that. The one other thing that I would say and that we have talked about, and Howard is driving this, is really taking a look at our customers and saying, where do we make a reasonable margin? And if we're not, are we best suited to serve some of these customers? So we're also taking a look at our customer mix and the ability to generate a reasonable return for the effort and value that we expand on those customers. So that's something that we started, we talked about, initiating in the industrial side, specifically in tubes and cores in North America. We said that, that is not going to be just an industrial-driven activity. That's something that we are going to roll out throughout the entire company. Some of those principles are starting to be applied in all of our businesses.

Okay. And just kind of a follow-up on that. I mean is there learning curve and managing some of these more fresh and natural packaging options? I mean, I'm specifically talking about, I guess, there's a lot more seasonality associated with this than maybe some of your base business products, and therefore, it takes a little different operational mentality when you're running the facilities there. Is that - maybe you found that to be a little bit of a learning curve as you move through these acquisitions?

Yes. I would tell you that there is a number of learnings that you're getting in any acquisition as you go through them. Is there learning curve specifically as it relates to the seasonality? Yes. I think the other one is the intimacy that you need to have with the customer. Again, why did we buy the Highland organization and her team and how they approached customers, how our commercial organization is out of the field with the folks and getting a good read in terms of the forecast and expectations. I think that was a huge benefit as we brought Highland into the equation. And that is - that same approach is being rolled out throughout all the operations on the old Peninsula side.

Okay. Last one for me. Just on Paper and Industrial Converted Products. When you look at it right into change of ownership in one of your competitors. Shall not that's early consolidation. I mean, industry's consolidated a little bit over the last few years and yet you still had some issues as competitors went in and out of different financial situations. How are you feeling about the overall competitive landscape in that business today following the change in ownership and anything we should expect going forward on that?

Well, we welcome the unnamed party into the marketplace. I think that they are a group that understands the industrial space and I have no reason to believe that they won't act appropriately in the marketplace.

Our next question comes from the line of Brian Maguire from Goldman Sachs.

Just add my congrats to Barry on the pending retirement.

Thank you.

Just a question on volumes. Just to put a finer point on the outlook for '19. I know you said slightly higher. Is that kind of a 1%-ish kind of a number and sort of related to that, the strength you're seeing in composite cans in Europe. Do you think is that substrate substitution? Or do you think it's sort of tied into some of the broader environmental sustainability targets that some of your brand owners are having?

No, I don't think it's a substitute - first of all, yes, it is the 1% that you're referencing. And then secondly, I'm not sure that we are seeing a lot of substitution today in terms of product. We're clearly around the world. We're definitely seeing different growth rates. And I mentioned the can business. While we saw growth in the can business in Europe last year, nice growth in Europe. We saw double-digit growth in Asia, and we're expecting to have that and may be a little bit better than last year in terms of overall growth expectations in Asia. We're also starting up a facility in South Africa and another facility in Brazil. So we expect some growth coming from both of those facilities as well.

Okay. And just turning to M&A. You have some explicit targets there for sales contribution in your 2020 targets. Just wondering if you could comment on the overall environment? And have multiples come down after some of the macro choppiness in the last couple of months. And as far as direction of where you're interested. I thought of it being mostly in the perimeter of the store, but it just wanted to get that shifted and I think there might be some closures just comment on the market. I'm wondering if that's part of your business that you'd be looking to expand.

Yes. So what we have always talked about over the last number of years and still very consistent in terms of our focus around acquisitions. We said we want to grow in flexibles. We want to grow in rigid plastics, specifically in thermoforming. And we said that we would do consolidation opportunities where it made good business sense for us on the paper side in the domestic market they are, I'll call it, the developed world. But were also very fixated on growing our position where we have infrastructure and support organization in the developed world as it relates to tube and core business. And that's how we look at the acquisitions side. So it's not just limits the perimeter store. We think about the primitive store as one of the market segments that we are focused on. There are other markets that are very attractive to us as we think about larger macro trends that we want to participate in.

Okay. The last one for me. The price cut in medium that was picked up in pulp and paper. I was wondering if that's included in your guidance. Or was it significant enough to get picked up by your contract mechanism?

Well, I think the way we're looking at is, given where we think the OCC movement is going, that would probably offset at least what we believe to be true in terms of some of those price movements. So they should offset each other.

Our next question comes from the line of Mark Wilde from Bank of Montréal.

Rob, I want to start off just over on protective packaging. And I think for many years, you've talked about kind of a 10% EBIT margin in that business, and I just wondered how you're thinking about the one when on that 10% margin right now.

Let me just grab a sheet I can find out where we're at. So if they think about the business, I think about our protective business in three buckets what we call the old traditional fiber post business. If I think about ThermoSafe and then I both bundle all these together as automotive. There is no reason for me to believe that we could not achieve 10%. The challenge we've got is the automotive sector. And while we've been taking cost out, the biggest challenge you have in that business while you'd love to sit down I was just going to move this part from plan to [indiscernible] is very costly to requalify that another site. So while you can say variable cost, fixed cost will remain you need to deal with that appropriately. So if the cost of the investment of moving it would have paid back given the lifespan of that project. So maybe said another way, Mark, if I didn't have automotive, 10% would be very much achievable.

Is it ultimately achievable with automotive?

You know what, if people - if gas prices go up and you see a shift from SUVs back to cars, then yes. Because we were there once before. But the reality though is given the magnitude of drop in smaller cars, which is where the bulk of those products we make goes into, it's going to be a challenge with automotive.

Okay. And then just staying on kind of margins and thinking about the consumer business, which has seen a fair amount of volatility. Are there things that you can do and I think it talked about a little bit of this already but to try to deliver more stable and consistent margins across that consumer business.

Well, yes, growing some of the other platforms to help offset, if you will, some of the declines that historically we have seen. And obviously, it's got to be priced appropriately, et cetera, et cetera. But the answer is yes. But with that said, I think that 10% to 11% range is a pretty healthy range and something that we have been talking about for a long time to try to stay within. Obviously, we - sometimes you get a little get better than that. But there's no reason for us to believe that we can't drive those types of margins.

Okay. And last one for me. I noticed that your acquisition and divestiture costs were up quite a bit in the fourth quarter relative to what we've seen for the first nine months of the year. Can you shed any light around that?

Mark, this is Barry. Certainly. Actually, acquisition accounting is pretty interesting when you go from a minority position to a fully owned position. So there's some cost that we had to recognize related to what we previously had on our books as part of our investment. And the Conitex Sonoco joint venture, that drove about half of that change.

Our next question comes from the line of Debbie Jones from Deutsche Bank.

Also, congratulations to Barry. My first question I wanted to talk a little bit more about the 4% volume growth you called out for flexibles. And you mentioned some of it was being driven by new business. Could you just give us a sense of how much that is? How it flows that? And also just what's driving that whether it be your technology, your scale items

Yes. Specifically, I can't tell you who and what it all is. But it's being driven by some share gain but it's also being driven by some new products that have been launched into the marketplace. I think - I'm going to go from memory, Debbie, so don't quote me on this. But in terms of new product development, I think are flexibles business of all the new products we developed was the highest, probably somewhere in the $30-plus million range last year and we expect that we would see something in that range or slightly better as move forward into next year. Hopefully, that gives you some color.

Okay. And then Display and Packaging. You mentioned the 4% margin but in your prepared comments, you also said that there was also some things to do in that business relating to volume improvement, some efficiency improvement and what you just said in terms of Atlanta. I'm just curious about the timing and all of it is, what kind of near-term girls versus long-term and where you could take a marketing that business?

Yes. So the team has been refocused and we've done a couple of things in that business. One I think that if I'm being brutally candid, the pack center in Atlanta took a lot of energy and effort and the people's side of opportunity to grow the business and some other areas. And those folks are now redeployed back into what I'll call their normal roles. We did win some new business we do customer executed new business in the fourth quarter. Effectively, that creates opportunity for us to grow further with that customer. And then we also have a number of other customers that are folks have been engaged with. As the specific timing of when all that business will come in, I don't have an answer for you other than to tell you that typically, the display businesses is what somewhat seasonally-driven. So typically, Q3 would be when the new business starts rolling in and into the early part of Q4.

Okay. And if I could ask one last one. I missed it the [indiscernible] you had it there. I know it's in the guidance but the insurance proceeds that you recover this quarter?

I'm sorry. Can you do say that one more time, Debbie, you were breaking up.

Sorry. The insurance proceeds that you recovered in the quarter?

Debbie, it was very much in line with what we shared in New York. If you remember, we expected it about $0.04 and that was the reason for our increase in our guidance at that time.

Our next question comes from the line of Gabe Hajde from Wells Fargo Securities.

And echo the congratulations to Barry and Julie. I don't want to read too much into it all just ask you, Rob. You mentioned slowing economic conditions at year-end in your press release. But at least from our vantage point or mind, the overhang of sort of the government shutdown seems to be averted at this point and looks to be the tone on trade. Is there something specific, I guess, to your product set or customer base set given you pause?

No. If I think about what we saw in the fourth quarter, and I would tell you that when to think about fourth quarter, it was so heavily skewed towards the month of December. And then I saw just recently some data that came out on the retail sector that said it was the worst December since 2009. And when I think about the of the government shutdown and you have 800,000 people not getting a paycheck, you've got a really loud and wacky stock market and consumer confidence declining. I think it was a convergence of all kinds of different things. So that's what drove me back into really taking a look at - let me understand our bookings, what are we doing, how are we doing against that. Where's the disconnect. I mean, I also think that customers are also focused on controlling inventory. And so I think it was a whole bunch of different factors that came into play and how it impacted the outcome, if you will.

Okay. And one quick housekeeping. The CapEx figure of 205, does that still hold true as it sits today?

Yes.

Our next question comes from the line of Chip Dillon from VRP.

I had a question about the pension situation. It looks like the $16 million charge for the nonoperating pension that was pretty material up to now is about $0.12 after tax. And my question is, I couldn't find on the slides the appendix that was referenced from that day. And I just didn't know what you were assuming back then. I would imagine it's worse than you thought then because I would've imagine the stock market selloff in December impacted the degree of what that charge is. I could be wrong about that. But I just wanted to get some clarity on that. And again, if you could confirm that last year in '18, that number was almost 0.

Yes. This is Julie. Yes, you're exactly right that, that line item nonoperating expense in 2018 was very material. And our updated estimate for that amount is about $19 million. And that is slightly higher than we were expecting at the Analyst Day. And you're again exactly right that it's really that weak stock market performance in December that drove that number up. So just as a reminder, we are excluding the nonoperating pension expense from base earnings starting in 2019. And so while something we obviously will continue to monitor very closely, but it will not be a part of our base earnings.

Okay. I know some included some don't, but if you had it, you would be guiding, I guess, a 3 38. That's helpful to know. And then second question is on the - I think earlier in the call, you talked a little bit about the two acquisitions from the side of the store where the fresh food is. And then I know, overall, you were saying, I think, that buying growth in flexibles should be around 4%. How should we look at the subset of buying growth for - that we see for fresh fruits and vegetables that are part of those acquisitions you made in the last couple of years.

Yes. So in the plastic side in total, we said we expect it to grow in the 4% range. I don't know specifically because it's broken inside of the plastic side what they built in on a forward look. But I would tell you that the growth on the perimeter of the store tends to be in the 6% to 9% range. And I'm talking about just the products going out at retail. So we see that as a continued driver of growth and it may be a little higher inside the plastic space versus the 4% at the whole.

Our next question comes from the line of Steve Chercover from D.A. Davidson.

I was just wondering if you could elaborate on what is bundled into the $70 million other bucket that hit you for the year? I'm referring to Slide 6.

Yes, certainly. Most of that would just be the normal nonmaterial inflation that we report each quarter, roughly $15 million a quarter accounts for most of that.

And do you believe that, that inflationary pressure will persist in 2019? Or is it moderating only a bit?

In certain areas it might be moderating a little bit. But for the nonmaterial component, we don't - we wouldn't expect that to be materially different.

Our next question is a follow-up from the line of Adam Josephson from KeyBanc Capital Markets.

Rob, just back to consumer for a couple of questions. The volume kind of challenges you've had are no different than those that many other North American plastic packaging companies have had, both in 4Q and before that. Is there an industry issue that you see such that most of the public companies that operate in that industry just cannot grow volume? Or do you think that for whatever reason, your volume challenges have been more company-specific? And then relatedly, there's a great deal of discussion about sustainability and the concerns about packagings, both in the U.S. and in Europe. So we just love you to address that issue in the context of that question of the volume weakness that many plastic packaging companies have been having of late.

Yes, Adam. I would tell you that from our perspective, it typically tend to be a customer-specific issue as supposed to across the entire spectrum. But as I said, we saw in terms of plastics, we saw weakness where we did lose some share. And we did see some weakness as a result of weather in the Northwest. And I think we saw some weakness that's a result of what I call the construction at the time of year and the construction cycle. So it's really a mixed bag. I think from our perspective, especially on the - as I look at our customer base, we talk about all large customers and serving all of these large customers. We also serve a lot of smaller customers. Let me give you an example. We will have a customer that represents - I'm getting really granular around the perimeter of the store. A customer who represents 500 or 600 growers, we're serving all of those folks with our product line. So I think it's slightly a different model as it relates to maybe some of the other competitors that we have in this space. We have to get specific around companies for me to do a real fair - a compare and contrast. But hopefully, that gives you some [indiscernible]

Yes.

On the sustainability side, let me talk a little bit about that because it's interesting. Now two weeks ago, I was with one of our very large customers talking about specifically this issue along with some of the folks in the company that you've been exposed to and you know. And they have 30 people at this meeting, and it was a very robust discussion around perception and reality. And what we ultimately said to the customer, you do know that 90% of your product is recycled material and you're not being vocal about that and your concern might be is your customer feeling guilty about buying your product in the plastic construct. It should be a very happy story because you're getting a very fresh product and you've also got a great recycling story. So I think it's all about education. It's about engagement and it's about innovation and really bringing all of that together. And so that's something that we are putting together. We are meeting with a number of our customers to a point where one of the thoughts we had is maybe us putting a symposium on this. And that's something that George had talked about a year plus ago saying, how do you do this by yourself or do you bring others into the conversation. And so the narrative around plastics, paper and flexibles is something we put together but we're bringing others together into that conversation and educating people. There's no question there is a requirements for us to do collectively a better job in making sure we leave the earth a better place than when we took it over. And we will work on that. But it really comes back down to there's a reason why plastic is used or packaging is used and why certain materials are selected. And you got a look at it in its entirety as opposed to just, if you will, a small segment of the entire supply chain.

Now I appreciate that. And just one last one along those lines, Rob. And we're hearing from other purveyors of packaging, paper, aluminum, beverage cans that they are the sustainable alternative. And given that you produce not only plastic packaging but also paper packaging and also composite cans. How would you - how do you feel about those claims from some of your packaging competitors that they make the sustainable alternative not a company like yourself that's making plastic packaging.

I think, Adam, you got to look at it, it's not just the material. It's the power, it's the water. It's all of the factors that go into making that product. What's the cost of shipping? So you got to look at all of that. I mean, the good news is, when I think about Sonoco and I get excited about our sustainability story because when I think about what we ship out and if I - I don't have the 2018 data readily available yet. But when I think about the fact that we ship out four point - in 2017, we shipped out 4.7 million tons of packaged product to all our customers around the world. 3.8 million tons was either recycled or caused to be recycled by our business. So I feel really good about what we're doing there. We've also - we are in the recycling business. So I think the other piece that is somewhat unique when we get involved in this is we have a deep understanding of what can and cannot be done. And what it would require to be able to recycle a lot of these materials and in an economic manner. And so in that innovation side that we've got. We've got our head of recycling and our head of technology working together to start looking at alternatives, not just into recycling system but in terms of materials. So you and I need to have a beer and talk about this at length.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Roger Schrum for any further remarks.

Again, thank you to everyone for joining us today, and certainly, if you have any further questions, don't hesitate to give us a call. Thank you, again, for joining us.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.