Erin M. Winters - Director-Investor Relations William F. Austen - President and Chief Executive Officer Michael B. Clauer - Vice President and Chief Financial Officer.

Anthony Pettinari - Citigroup Global Markets, Inc. (Broker) Matthew T. Krueger - Robert W. Baird & Co., Inc. (Broker) Scott Louis Gaffner - Barclays Capital, Inc. Chris D. Manuel - Wells Fargo Securities LLC Chip A.

Dillon - Vertical Research Partners LLC Frederick Searby - Dunbar Mark William Wilde - BMO Capital Markets (United States) Philip Ng - Jefferies LLC Adam Jesse Josephson - KeyBanc Capital Markets, Inc. George Leon Staphos - Bank of America Merrill Lynch Arun Viswanathan - RBC Capital Markets LLC.

Good day, and welcome to the Bemis Company Hosted Fourth Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Erin Winters. Please go ahead..

Thank you. Good morning, everyone and welcome to our fourth quarter 2015 conference call. Today is January 28, 2016. After today's call, a replay will be available on our website, bemis.com, under the Investor Relations section.

Joining me for this call today are Bemis Company's President and Chief Executive Officer, Bill Austen, our Vice President and Chief Financial Officer, Mike Clauer, and our Vice President and Controller, Jerry Krempa. Following Bill and Mike's comments on our business and outlook, we will 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 question.

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 schedule. In Mike's discussion of the financials, he'll specifically be referring to page five of the supplemental schedule.

On today's call, we will also discuss non-GAAP financial measures as we talk about our performance. Reconciliations of these non-GAAP measures to GAAP measures that we consider most comparable can be found in the press release and supplemental schedules on our website.

And finally, a reminder that statements regarding future performance of the company made during this call are forward-looking, and are therefore subject to certain risks and uncertainties. Actual results may differ materially from historical, expected or projected results due to a variety of factors.

Please refer to Bemis Company's regular SEC filings, including the most recently filed form 10-K to review these risk factors. Now, I'll turn the call over to Bill Austen..

Thank you, Erin, and good morning everyone. I'm pleased with the strong performance Bemis delivered in 2015. We exceeded my expectations and made great progress toward our long-term financial objectives. I couldn't be more proud of the effort and execution demonstrated by our global team throughout 2015. Looking at the full year.

We achieved record adjusted earnings per share of $2.55, almost an 11% increase over last year, despite currency translation headwinds of $0.16 per share.

We increased gross profit margins 170 basis points over the last year, driven by productivity improvements from our asset recapitalization program, mix benefits from our focus on innovation and strong operational performance across the entire company. We increased operating profit return on sales in our U.S.

Packaging segment to 14.3% a 140 basis points point increase over the prior year, reflecting great progress toward our long-term goal of 15% to 18% in this segment.

We increased adjusted operating profit return on sales in our Global Packaging segment to 8.8% a 120 basis point increase over the prior year, and above pace toward our goal of double-digit returns in this segment, over the three year to give year horizon. We increased ROIC to 10.5% versus 9.7% one year ago.

We generated $552 million of operating cash flow more than doubling last year's performance in this area. An example of the focus, discipline, accountability and urgency we are driving throughout the company. We acquired the rigid plastic operation of Emplal in Brazil during December, a step toward our long term inorganic growth targets.

We continued to focus on innovation as reflected in our product vitality measure, which continued at 15% this year, in line with our strategy and expectations.

We invested $219 million in capital to expand and improve our business, positioning us well for additional margin expansion in 2016, and we returned value to shareholders through our 32 annual dividend increase, and through the repurchase of 3.3 million shares of stock. We have initiated change and improved performance this year at Bemis.

We will continue to execute our strategy of accelerating growth, focusing innovation and continuously improving all we do to deliver continued return on sales and ROIC improvement during 2016. I'll now turn the call over to Mike to discuss details of our 2015 financial performance and 2016 guidance.

Then I'll come back to discuss my view of priorities as we enter 2016.

Mike?.

Thanks Bill and good morning. We reported adjusted earnings of $0.60 per share for the fourth quarter and $2.55 for the full year of 2015, a 5.3% increase over the prior fourth quarter and 10.9% increase over the prior year.

This includes overcoming a currency translation headwind of approximately $0.04 per share during the fourth quarter and $0.16 per share for the full year, primarily driven by currencies in Latin America that devalued against the dollar.

We delivered solid improvement in gross margins for the full-year 2015 at 21.5%, compares to 19.8% in the prior year.

This improvement was driven by the benefits of our asset recapitalization program in increasing the margin profile of our existing business and by improved price mix as we execute our strategy to sell a higher portion of sophisticated packages.

I will comment next on each reportable segment followed by overall company performance, and then wrap up with guidance for 2016. First U.S. Packaging, following page five of the supplemental schedules posted on our website, sales dollars in our U.S. segment declined by 4% for the full year 2015.

Excluding the impact of the 2014 Paper Packaging divestiture, net sales decreased 2.7%. Overall unit volumes were down approximately 2% for the full year 2015 as compared to 2014.

As discussed throughout the year about two-thirds of this unit volume decline was driven by our pricing decision to exit some low-margin bottled water overwrap business and the remainder was driven by a select customer who lost share with their beverage pouches at the retail level.

Specific to Q4, volume was up 2%, better than previous quarters in 2015. However, a single quarter doesn't form a trend and the bottled water overwrap and beverage pouch comps won't fully lapse until Q2 of 2016. Aside from volume, net sales in U.S.

Packaging were impacted by contractual price reductions to pass-through lower raw material cost throughout the year which for all intents and purposes is neutral to profit. Partially offset by favorable mix in line with our strategy. U.S.

Packaging operating profit return on sales for 2015 was 14.3% compared to 13.1% the prior year, great progress towards our goals of 15% to 18% over our strategic horizon. This improvement was driven by operational efficiency from our asset recapitalization programs, favorable sales mix and continued diligence in controlling cost.

Moving to our Global Packaging segment. Net sales for 2015 were down 10.7%, currency translation reduced sales by 18.2% driven by currencies in Latin America that significantly devalued throughout the year. The December acquisition of Emplal contributed 0.

3% increase when included in full year net sales, excluding the impact of currencies and acquisition, our global business delivered strong organic growth of 7.2% in 2015, driven fully by positive sales price and mix. Overall, Global Packaging units were flat during 2015. Some regional details.

As expected, unit volumes were up single-digits in Europe, Asia and healthcare excluding Latin American healthcare products. Overall unit volume decreased in Latin America were result of a tough economic environment in the region.

However, even in Latin America, we saw positive mix from increased sales of high barrier packages, particularly for meat and other proteins. We are pleased with the success we continue to have globally and growing sales of this sophisticated packaging.

Global Packaging operating profit return on sales for 2015 was 8.8% compared to 7.6% the prior year, on pace towards that goal of a 10% plus over our strategic horizon. Higher returns in Global Packaging were a result of improved price mix from sales of meat and cheese, dairy, liquid and also Healthcare Packaging.

Currency translation negatively impacted operating profit by $24 million for the year or about $0.16 a share of the total company's earnings. This negative impact is related primarily to translation of profits in Brazil to the U.S. dollar, compared to the prior full-year.

Currency was a challenge in 2015, but I'm pleased with our performance in local currency, where we are improving returns and growing sales of sophisticated packaging. Now on to consolidated Bemis. Total Bemis Company SG&A expense for the full year was $420 million basically flat with last year.

We continue to be focused on implementing discipline and accountability to keep SG&A dollars flat over our long-term. Research and development expense for the full year was $44 million, flat with the prior year. We see this as the appropriate level to support new product innovation and commercialization.

The income tax rate for 2015 was 33.6% in line with our expectations. We anticipate the tax rate for 2016 to be slightly above 33%. Cash flow from operations for the full-year 2015 totaled $552 million above my expectation of $500 million and a vast improvement over the $248 million last year.

Most of our improvement year-over-year came from our sharp focus on working capital, which was a use of cash in 2014, but a strong source of cash in 2015 as we extended payable terms and managed inventory levels well.

I also recognize that the mathematical flow through of lower raw material cost during 2015 bolstered our cash flow by approximately $20 million to $25 million.

As you may recall on Investor Day, we shared our targets to reduce primary working capital as a percentage of sales to the 14% to 16% range by the end of 2016, which equated to taking out approximately $140 million of primary working capital throughout 2015 and 2016.

During 2015, we realized approximately $110 million of this improvement, primarily driven by improved payment terms with our vendors. Capital expenditures in 2015 were $219 million, in line with our expectations. Incremental spend in 2015 funded our asset recapitalization program, as well as expansions to support projected growth.

Look next at return on invested capital. Our goal is to improve this metric year-over-year toward our long-term goal of being in the upper quartile of our peer group. In 2015, ROIC increased to 10.5% compared to 9.7% in 2014.

This improvement is driven by sound capital investments that meet or beat our 15% ROIC hurdle rate over a five-year period, and our improvements in working capital. During the fourth quarter, we repurchased 1 million shares for a total of $45.8 million for the full year 2015, we purchased a total of 3.3 million shares for $150.1 million.

At December 31, the remaining board authorization for share repurchase was 3.4 million shares. Now turning to guidance. Established adjusted EPS range for 2016 of $2.68 to $2.83, which is in line with our long-term targeted strategy to increase EPS by 10% annually on a currency neutral basis. Currency translation will continue to challenge us in 2016.

Our guidance assumes foreign currencies remain at current levels, specifically, since we have a significant business in Latin America, I will mention that the mid-point of our guidance assumes the Brazil real at 4.1 to the U.S. dollar.

With this assumption, we have naturally accounted for a $0.10 per share impact from the currency in our 2016 guidance versus 2015 actuals. Specific to the Brazil reais the majority of this headwind will occur in the first two quarters of 2016. Next, I will discuss a few unique items that we have considered in our EPS guidance range.

First, the benefit of our acquisition of Emplal, our EPS guidance range includes approximately $0.02 to $0.03 from our recently acquired business in Brazil, dependent on timing of synergy impacts. In these early stages after the December acquisition, we are developing our execution plan.

We have identified $7 million to $8 million of synergies in the form of SG&A, procurement and plant and equipment rationalizations. We will start implementing these in 2016 and fully realize the benefits in 2017. Second, the benefit of our healthcare expansion.

Our EPS guidance range includes about $0.03 per share related to the expansion of our healthcare operations in Wisconsin. Based on our successful completion of the project in December, we fully realize the expected 200 basis point margin improvement in our U.S. healthcare business during 2016.

We're pleased to start out the year with this momentum that will elevate our industry-leading quality in the Healthcare Packaging space. Third, interest expense. Our EPS guidance range includes a headwind of approximately $6 million from interest expense as a result of generally higher interest rates following the forward curve.

The remaining year-over-year increase in EPS reflects the improvement that will result as we continue to see margin benefits from our asset recapitalization program. And we continue to execute our strategy to sell more higher margin products while controlling cost.

Where we are in the EPS range of $2.68 to $2.83 will depend on further movement of currencies, the successful commercialization of new products, and volumes in our business. Similar to history, you continue to expect second quarters and third quarters to be seasonally stronger, while the first quarters and the fourth quarters are typically lighter.

An additional unique comp to recall is that the first quarter of 2015, we had a one-time $3 million tailwind from resin driven by the abnormal decrease in resin prices for four consecutive months during that timeframe.

Turning to capital expenditure guidance for 2016, we continue to expect to spend $200 million per year, of this about $60 million is for maintenance and safety at our 60 plants around the world.

That leaves approximately $140 million, which we target roughly half for growth projects to support new high-barrier, innovative applications and the other half for asset recapitalizations that support all of our end markets, including those that are less differentiated.

And finally, we have established 2016 guidance for cash from operations in the range of $450 million to $500 million. As I mentioned earlier at Investor Day, we committed to taking out approximately $140 million of primary working capital by the end of 2016.

While we realized approximately $110 million of this in 2015, I expect to see another $50 million to $75 million of working capital takeout take out during 2016, primarily from global payment terms improving. This will drive us to the low-end of our target, primary working cap percentage of net sales range of 14% to 16%.

I anticipate normal seasonality in cash flow throughout the year with cash from operations lighter in the first quarter and then building from there. In summary, I remain confident in our business and in our ability to further improve financial performance to create long-term shareholder value.

With that, I will turn the call back to Bill for his comments on 2016..

one, retortable films technology that we developed in Asia has now transferred to Latin America for local manufacture and sale of tuna packaging. And two, hard-to-hold liquid technology developed in U.S. is now being used in Latin America to package motor oil.

We are well positioned to meet the growing needs and packaging demands in these evolving economies. And we are working cohesively across the globe to leverage our technologies, but I believe we can drive this effort harder. Innovation is important to our growth. And I'm confident in our process and plans to execute in 2016.

Turning for a minute to my view on growth in 2016. In North America, I anticipate market demand for packaged foods to be flat to slightly down.

I expect our business to grow above this at approximately 1% driven by new innovations that grow our high-technology business and by our asset recapitalization program that will help us maintain overall volumes in our less differentiated product lines. These two in combination will deliver overall unit volume growth in our U.S. business.

Based on my current view, I would anticipate volumes in the second half of 2016 to be slightly better than the first half of the year. In our global business, I expect us to grow in Europe, Asia, and our healthcare business at approximately 4%. In Latin America where the environment remains tough, I expect us to grow slightly in 2016.

Circling back to the key items of our success in 2015, the final piece is our relentless pursuit of continuous improvement in all we do. Here are just a few examples. We will continue to manage SG&A cost targeting flat dollars over our long-term planning horizon.

We will continue to find ways to improve our operations such that our cost takeout programs overcome annual inflation. We will continue to control and decrease working capital globally in the form of inventory reductions and increased payable terms, all in support of generating cash.

We will continue with the rigor and accountability in our capital expansions including finding new opportunities and executing our existing projects to plan. I am confident as we begin 2016. Our focus on customers is more intense than ever when we help our customers succeed, we succeed. Our culture continues to evolve toward high performance.

We have momentum from our success in 2015 and we have high expectations of ourselves. And we will continue to aggressively execute our strategy in 2016 to increase earnings and create shareholder value. With that, I'll turn the call over for questions..

Thank you. The first question comes from Anthony Pettinari of Citi. Please go ahead..

Good morning. Just to clarify on the volume outlook in 2016, I think you said U.S. volumes would be up 1% and maybe better in the second half than the first half, and you referenced I guess 2Q is when a specific customer loss was lapped.

Is that correct? And then, I mean, for the first quarter, could volume still be flattish or negative or just how do you think about the trajectory of that volume growth in the U.S.

as you kind of go through 2016?.

Hi, Anthony this is Bill. The way you described it is correct. What you heard on the call was correct. And yes, we see first quarter could be flat, because we still have not lapped some of the loss business if you will.

So we see second half, we have much better visibility, much into our innovation pipeline, the commercialization of products that are going to hit in the second half is going to drive those volume increases higher in the second half than the first half, once we lap some of that business that was lost in the first half of 2015..

Great. Great, that's helpful. And then just thinking about capital allocation for 2016. Obviously you bought back a little bit more stock, how do you think about the M&A environment versus share repurchases and are there other opportunities like Emplal and with valuations coming down especially in emerging markets.

So, are you seeing – how are you seeing that pipeline?.

Anthony this is Mike. I mean, as we've stated in the past, we're not going to de lever the company. So, if there is no acquisitions available, we would buy back stock. There are a few things we're looking at right now, nothing is eminent, but I feel like we've got a pretty nice pipeline being developed, and that's what I have to say for now..

Thank you. The next question comes from Ghansham Panjabi of Robert W. Baird. Please go ahead..

Hi, good morning. This is actually Matt Krueger sitting in for Ghansham.

How are you guys doing today?.

Doing well. Thank you..

Great.

And then my first question is on the Global Packaging, organic results, can you break those out by volumes versus pricing, both as a whole and then kind of by region in terms of Europe, healthcare, Latin America and then Asia?.

I got it..

You got it, Bill?.

Yes. If you're talking about 2015, organic growth was 7.2%, price mix was 7.5%, so volume was flat in 2015. Remember that Latin America was down significantly, so the rest of the business performed really well, that's how it shaped up for 2015..

Okay. Great. That's helpful. I'm sorry...

Go ahead..

What was that?.

As Bill mentioned in his comments, you asked about regional detail and if you look at the year 2015 in terms of unit volumes, we saw a good growth in Latin America – excuse me, in Asia and Europe in our healthcare business and Latin America, given the tough environment there was just a piece that was down a bit..

Yeah..

Okay. Great. And then kind of moving to pricing within the marketplace, what are you guys seeing in terms of competition, given the customer consolidation and then lower raw material costs, excluding the contractual pass-throughs.

Has price remained pretty stable?.

This has always been a ultra-competitive environment and the way that we've built our model, you may or may not be familiar with, but we built our model such that, we don't see volatility, we try to minimize the volatility in our earnings based on what's happening with raw materials.

So it's always been a competitive environment and the recapitalization effort that we've going on in the company is helping us to be much more competitive in some of the less differentiated product lines at current market prices..

Thank you. The next question comes from comes from Scott Gaffner of Barclays. Please go ahead..

Thanks. Good morning..

Good morning, Scott..

Hey, Bill. Just had a question. So, you said the volumes in the U.S. were up 2% in the fourth quarter and you were quick to note – not to call that a trend, obviously that – after that came the 1% U.S. volume guidance for 2016.

So, was there something in the fourth quarter that was out of the ordinary like a product launch or something that really led to that accelerating organic growth in the second quarter – sorry; in the fourth quarter, that doesn't repeat again in 2016?.

We're quick to point out it's not a trend. The fourth quarter is always a very fluid quarter. Yeah, the holidays, you have customers that have launched products, which has taken off on shelf, do they have promotions, do they not have promotions.

So, fourth quarter, is kind of a – it's not a good one to look at to determine what it looks like going forward. So, we performed well in Q4, more so in the less differentiated product lines than in the core product line.

So, we got some nice movement in Q4, but it's hard to say that Q4 is a good quarter to look at for what a trend is going to established..

Okay. And the other question, then, is your year end to the targets you put out, 2015 to 2019, organic growth in 2015 was below that the targets you were looking for, and 2016 looks like it could be the same.

Realizing that's as much a function of the macro environment as it is your ability to push organic growth higher, I mean, are you thinking about managing the business in any different way, are you putting more money into the recapitalization of the equipment versus some of these growth projects? I mean, how are you – how has the plan changed on the edge with the slower organic growth?.

Scott, we haven't changed our plan. We're sticking with the plan. We're sticking with our strategy. We're seeing that as – we're seeing that gain a lot of traction. We're going to continue, as Mike said, to invest in the recapitalization programs and we're still funding our R&D levels at the same levels as we did this past year.

Some of the things that we see, we see commercializations coming on stream in the latter part of this year, which are very encouraging. And we think our plan is working, we see our strategy working, and we're seeing it in our results.

So I'm confident that what we presented on the Investor Day a year ago, we're sticking with it and we're driving hard to maintain it..

Thank you. The next question comes from Chris Manuel of Wells Fargo Securities. Please go ahead..

Good morning, gentlemen. A couple of questions for you....

Good morning..

If I could, I wanted to ask a little bit about the Emplal acquisition. I think, from the time you first announced it you talked about 2014 revenues, that were $75 million and then $58 million in 2015, as you got it closed. I'm sure a good slug of that's currency, but it would seem as though the business kind of fell off a little bit, 2014 to 2015.

Maybe what's the trajectory like, as you look forward to 2016 or how we think about that?.

Okay. This is Mike, Chris. You're correct, it's all a result of the translation. The real value of the revenue acquired hasn't changed at all. So the business is still quite some strong. The way I'm thinking about it right now, we're still at that – at the current exchange rate we'd still be at $53 million to $55 million of sales associated with Emplal.

We also mentioned, we're really embarking on starting our integration and we feel really good about the synergies and our ability to deliver them. Feel very confident that all activities will be implemented in 2016 and we'll see the full benefit in 2017..

I did have one follow-up regarding your new center there in Neenah. I think you've now had it a quarter or two in operation.

Can you give us any – maybe build some updates or color on how customer activity has been coming through there? How response has been? Do you think it's helping you win some new business, et cetera? Kind of us give us a gauge as to how efficacy of the center is perhaps..

Yes. The center is gaining great – it has gained great traction with the customer base. We've had many, many, many customers. We have multiple customers in on a daily basis. We've had close to probably 100 ideation sessions thus far.

And we're driving new ideas and new thoughts for different types of packaging out of that location, not just for the United States, but the interesting thing is, it's gaining traction with our international customer base as well.

So people are coming from all over the globe to use our equipment, use our labs, use our process technologies to develop new packaging ideas..

Thank you. Our next question comes from Chip Dillon of Vertical. Please go ahead..

Good afternoon, or morning still there. First question has to do with the volumes in the global segment overall.

You mentioned that for the year the volumes were flat, but could you tell us what the fourth quarter was?.

The fourth quarter unit volumes overall in global were down about 2%, and trend wise pretty must just the same concept, as the full year meaning, LatAm slightly tough and the rest of the regions of the world were doing well or flat..

Got you. And obviously, if we look at that number that means that volume, I'm sorry the price and mix were up a huge, I mean 9.5%.

How should we think as we – you mentioned next year, probably the segment overall, I don't know if you said but it sounds to me it will be maybe flat to up a little bit, probably up a little bit because, Europe is up 4% and LatAm is up slightly.

But what kind of progression should we expect on that, price mix aspect?.

Well if you look at the 2015 number, that you just quoted, probably half of that came from inflation just and primarily in the Latin American companies is just higher cost, pass-through and the other half was price mix. So, we've made very good progress on price mix and our guidance for 2016 expects that same level of performance..

Thank you. The next question comes from Frederick Searby of Dunbar Investment Partners. Please go ahead..

Yeah. Congratulations on the cash flow, it was exceptionally strong. I'm not sure you've delineated this but you hinted at it. How much was structural changes versus resin and raw mats being weak and the improvement in the working capital. And if most of that....

Yeah. Okay..

And if most of that's structural why are you guiding down even though you are still growing free cash flow? I mean, it was a massive number.

And then just secondly, if you could give us some color on what the trends are right now in Latin America? You managed through a fairly apocalyptic environment in Brazil and also, it's not as relevant to you but Argentina with the devaluation and things that have gone on in Latin America this year.

Can you just talk about trends right now, you've been seeing in the last couple of months given how well you've handled what's been a very, very challenging environment?.

Okay. I'll start first with your questions on cash flow. The structural improvement was about $110 million and that was really driven by focusing on vendor terms and getting back to what we perceive – what we expect is reasonable terms with our vendors. The benefit we got from lower resin cost was about $20 million to $25 million.

So, I think we've made a really good overall progress. As far as guiding down I think what I would probably say is if you think about the mid-point of our EPS guidance, that would represent about $420 million of operating cash flow if working capital was not a source or a use of cash.

So, being at that $400 million-$500 million we continue to go after some additional structural improvements that I commented would be $50 million to $75 million. And, Bill, do you want to ....

Yeah. Frederick, this is Bill Austen. I'll give you some color on the Latin American environment. It's a difficult environment, it's a high inflation. However, our customer base is continuing to innovate and want new products and launch new products and remember, we are not building automobiles and we are not building white goods or electronics.

We provide packaging for everyday products that people use in their households.

So while maybe some package architecture gets smaller to hit a smaller price point that allows us to innovate and develop a new product for them around the smaller size, different print, different medium and we're bringing in technologies from other parts of the world and introducing it to our Latin American customers, who now want new product and new product innovation.

So, we continue to see, our core customers wanting innovation, wanting new products developed and launching new products.

So we are managing our way through this environment, the team down there is doing a great job of staying ahead of inflation, continuing to push on price and continuing to innovate with product technologies that we're bringing in from other parts of the world..

Thank you. The next question comes from Mark Wilde of BMO. Please go ahead..

Good morning, Bill, Mike, Erin..

Good morning..

Good morning, Mark..

I wondered, Mike, could you just update us on the acquisition process. Right now, I think the focus over the last several quarters has been mainly the Pacific side of Latin America and maybe Central Europe.

So if you could maybe talk about that a little bit? And also just kind of whether that slowdown in Latin America has affected sort of valuation expectations?.

Yeah. I could, I mean the update is that we continue to be more focused on businesses and assets that would benefit our Global Packaging business. I would say our pipeline if everybody remembers, we're not as interested in being involved in processes, we are more interested in getting to know companies and having a conversation with them.

I would tell you we shifted from kind of creating a pipeline to actually having one where it's more active, as far as relationships being created, meetings, dinners, et cetera.

So that's my update right now, and again I'd say there's nothing out there that would be a transformational typed acquisition, these companies tend to still be at that $50 million – $100 million to maybe $450 million, $500 million of revenue..

Okay.

And any thoughts on valuation, Mike?.

When I like – first of all, Mark, I know my valuation, I mean, we're trading at 9.2 times EBITDA, so I'm not going to pay more than that.

I look at Emplal, we had a – we were lower than what we're trading at and that's kind of how we think about it, as it relates to businesses that would be more associated with food, clearly as we're looking at healthcare type assets those would have much higher multiple, because they got much higher growth projections.

But, I'm still thinking for the food side of the business kind of 8 times we could get it done in that range, depending on synergies..

Thank you. The next question comes from Philip Ng of Jefferies. Please go ahead..

Hey, guys, nice to see volumes up nicely in the U.S., but if I do my back of envelop math, it would imply price was down significant, I know it's not a P&L impact from a EBIT end point, but was most of that step down a function of negative mix from the recap or just the raw material pass-throughs? And net-net when you go to 2016 you expect top line to be actually up with pricing down?.

Yeah. This is Mike. I don't if you are asking Q4 or full year, but in Q4 a lot of the actually the whole revenue down is a result of the resin pass-through. And then volume was up 2% and price mix was down 1.6%, so and that is completely related to this mix of the business. We just sold more, less differentiated packaging in Q4..

Okay..

I think that concerns us at all..

Okay. And then I guess you noted packaged food demand for this year in the U.S. you're expecting to be flat to down. I'm just curious have you seen any changes in your customer order patterns with the stock market obviously concerned about potentially a recession. I just wanted to get your thoughts in terms of how your customers are behaving? Thanks..

Phil, this is Bill. No, we haven't seen any changes in our customers ordering patterns. Not as we went out of Q4 and not as we've been now in the Q1 for several weeks. We haven't seen any changes in order patterns..

Thank you. The next question comes from Adam Josephson of KeyBanc. Please go ahead..

Thanks a lot. Good morning, everyone. Mike, one resin, I think you said there was a $3 million earnings benefit for the full year. Correct me, if I'm wrong, but I thought it was $3 million benefit in the first quarter alone.

If I'm wrong about that, was it neutral in the later three quarters even though polyethylene prices fell in both the third quarter and the fourth quarter? And just lastly along those lines, do you expect a comparable resin benefit in 2016, given that polyethylene prices continue to decline?.

First of all you're correct, it was a $3 million benefit for the full year of 2015, that all happened in Q1. And that was really driven by a very unusual exceptional period where resin fell pretty significantly for four months in a row. We did not get any benefit at all in two, three or four.

We're not anticipating any benefit or determent in 2016 other than, we're comping up against the favorable tailwind in Q1 last year..

Thanks, Mike.

Just one on price mix, I know you said it was – in the U.S., it was a negative I think 1.6 and in previous quarters, it had been a positive and you're talking about it being a positive as you get rid of this lower margin business and sell more value added products and now, it was down in the fourth quarter and you're saying don't worry about that.

So, can you just help us with why it would be kind of more relevant in the first three quarters than it was in the fourth quarter?.

I think the best way to think about it is this. We just sold a lot more, less differentiated product which would just normally have a lower margin. So, when you're calculating your price mix on your total business, it would trend down. For the full year, our price mix for U.S. Packaging was up 2%.

And that – those are the type of expectations we have of our business going forward..

As I said earlier Adam, Q4 is not a good quarter to use because there's so many, there's a lot of moving parts from a customer's perspective, where they're adding inventory, running inventories down, do they promotions going out, did the promotion that they have at the end cap take off or not? So, there's a lot of things that move around in the fourth quarter, due to the holidays that are in there as well as customer order patterns, take patterns if you will from their end markets.

So, tough to use fourth quarter as a trend setter..

Thank you. The next question comes from George Staphos of Bank of America Merrill Lynch. Please go ahead..

Thanks. Hi, everyone, good morning, good afternoon. Thanks for taking my questions and congratulations on the progress so far.

I guess, first question I had, Bill could you remind us why you think that you can keep R&D at around whatever you said $44 million, so while keeping up innovation? I recognize some of this related to the discipline around stage gating and the like, but could you go through some of the color there? What your learnings have been so far in 2015 about your ability to get leverage off your R&D related innovation? Because obviously innovation is very important in terms of – what you want to do in terms of volume and price mix longer term..

Yeah. George, you're absolutely right.

The rigor and accountability of that stage-gate has driven into our R&D organization allows us to move resources quicker to new projects as a project gets cancelled or walked away from partway through stage-gate, because a customer doesn't want to implement it, they don't see there is going to be any market traction.

So, we're able to redeploy resources much faster than we ever have before.

The other part of that goes to our -- this whole concept of a global operation company, where we can move technology from region A to region B much faster because we now have an R&D organization in our regions that's headed up by a Vice President of Research and Development that's connected back to the innovation center.

So, that as they see an emerging trend for instance, duck part packaging becoming hygienic in China, we can move that technology from Europe immediately to China. We have the assets in China that can produce it, and we can produce it quickly and meet the customers' demand very quickly.

So, we got a network and it's getting much, much better, and we're able to deploy those resources and technologies around the world much faster with the existing base that we have..

Okay. Appreciate the thoughts there. And then, I want to take one more question in terms of this turn on price mix, so as we think about this coming year or the year that we're in right now, if I heard you correctly, I thought you said price mix would be relatively flat other than the comparison that's offered in the first quarter.

Or is that purely a resin comment and you'd expect price mix to be up this year? And if you did mention that, what's the figure we should be at least thinking about, as we're modeling you for 2016? Thank you..

This is Mike, George. I think the way to think about it is our price mix, unlike U.S. Packaging, was up 2% in 2015, that's a good number at the midpoint of our guidance to use for 2016.

And could reference on the first half is more to do with – we're still going to live with lapping the bottle water overwrap and the Capri Sun (48:33) that really started occurring in Q1 and Q2 next year or so.

Once we can kind of get over those comps, which is, as you know, is a lot of volume, low calorie – I think Bill's comment was more that we would expect to see more positive volume growth in the second half. And the same on global. I mean, we had call it 3.5% to 4% price mix without inflation in 2015.

I would not expect to see anything less than that in 2017. And then if you add in just what we're doing in healthcare, you are going to have a much stronger number in Global Packaging..

Thank you. The next question comes from Arun Viswanathan of RBC. Please go ahead..

Morning. Thanks for taking my question. Just had a couple quick questions on your outlook for 2016. Maybe you can just describe how you kind of come to that flat to slightly down for consumer packaging industry.

I understand you guys have the new products and the asset recap, but is that more of a macro call or something that your customers are alluding to or what drives that outlook?.

Arun, we triangulated off of a couple of different data points and it's – so it's a much more of a macro view that we look at being flat to down and flat to down 1% for the packaged food environment, and our view is, is that we'll be flat to up 1% in our U.S. Packaging business..

Okay. Great. And just a little bit more on that.

Is there another period in history where you saw a decline in raw materials ,and was there any commensurate rebound or increase in demand on consumer packaging, or is it mainly to track GDP?.

My history would say it mainly tracks GDP..

Thank you. The next question comes from Scott Gaffner of Barclays. Please go ahead..

2015 you're up in about a 100 – over 100 basis points on the margin progression. You were up maybe similar amount 2013, 2014.

Is there the possibility of getting to another 100 basis points of margin improvement in 2016?.

Good question Scott. The way we look at it is, is that what we said at Investor Day, 2015 to 2018 in U.S. Packaging, 10% plus in Global. We're on that trend. We're on that slope that we'll be within those ranges that we called out.

Is that 100 basis points? Is it 80 basis points? Is it 70 basis points? Our goal is to push it as fast and as hard as we can..

Okay. And then, Mike, in your prepared comments in answer to one other questions I think, you mentioned you weren't prepared to de-lever the balance sheet.

What about levering the balance sheet?.

I'm going to stick with what I have been saying at this point, Scott, that I'm comfortable with where we are at. If you noticed our leverage ticked up with the Emplal acquisition and the share repurchase in Q4. We're going to continue use our free cash flow.

If there's an acquisition available, we're going to do it, and if there's not, we're going to return it to our shareholders..

Thank you. The next question comes from Chris Manuel of Wells Fargo Securities. Please go ahead..

Hello, again. One is maybe a request for future – the way we present some things going for future, and then I do have a second question.

The first request is perhaps, because we're all kind of focusing on the organic volume growth particularly in North America and in the other regions and then price mix separate, could you perhaps on slide five when you present things maybe break out the difference between price mix and volume, so that we can kind of look at those? That's, I guess, kind of maybe request one.

And then, my second question was could you help us with the scope of the kind of business recap where you're going back into some of your existing products and recapping them? How would we think about the scope of revenue that that covers? Is that – are you recapping 10%, 20%, 30% of your business or how significant maybe is it isolated to certain products in particular, where you're seeing the most need to do that, how would we think about that process as it goes on and maybe perhaps how long it might go on?.

Hi, Chris this is Bill. What primarily gets recapitalized, our printing presses, slitters, rewinders, pieces of equipment that are old, they run slower, they create higher waste, they don't have the same quality, they're low tech.

So and a printing press it doesn't matter whether it runs a high end product or a low end product, it runs the same product. So to try to delineate, what side of the business it's on, we see the biggest benefit in the less differentiated products than you would see at the – but it benefits both sides of our product portfolio.

But it benefits the high end products and they also benefit the low end products more, so the low end products, because it's got different price points, right, so we can generate productivity and efficiency to expand margins at existing market prices.

So, there's still a long way, we're still in the early innings of this overall recapitalization effort and we're going to continue to stay on this path, because it is benefiting the shareholder and it's benefiting the company..

Okay.

Maybe let me come at the question just a little differently, see you're spending $140 million on of all of these projects and I think it was about half, for some of the recap stuff, so $70-ish million, is this something that I am guessing, it's going to be an ongoing thing, it will be – always be looking at it, but perhaps being this is the first year, so that you're really going at it hard, it's a little higher than maybe it would be on a go forward basis.

So, perhaps does it maybe stay at $70-ish million the next one, two, three years and then get dialed back some – really I'm kind of coming at it thinking of what CapEx needs might end up being longer-term?.

Scott, you should think about it – Chris, I'm sorry Chris. Chris, you should think about it that we – what we're doing is catching up, if you go back to when we bought Alcan all of our energy was on taking capacity out and moving things around and what we weren't doing was investing in new capabilities.

So, I would think about 2014, 2015, 2016, probably 2017 as we're just kind of catching ourselves up. And then we're going to be back into what I would consider a normal spend where we're still going to be redoing – recapitalizing, it just won't be quite at the stepped level as it is today.

And I'd like – the other thing to think about too is just – when we throw out those numbers of half or $70 million, that's – those are assets that are going to get a 15% plus ROIC in the future. And it's pretty easy to do the math on that, that it's a big driver of our margin expansion in the future..

Thank you. The next question comes from George Staphos of Bank of America, Merrill Lynch. Please go ahead..

Hi, guys. I actually have three cat and dog types of questions and so I'll ask them in sequence. That way you don't have to come back to me in queue. One, what have you found out of the consumer studies that you've been underwriting thus far in terms of what it's telling you about consumer behavior and what that means for Bemis going forward.

And then secondly, Mike, other operating income on the P&L had a $4.7 million versus a lesser number in the year-ago.

What was driving that? And then within free cash flow and working capital, it sounds like it's more inventories and payables but are you using any kind of factoring program to drive the working capital improvement as well? Thanks, guys and good luck in the quarter..

Thanks, George. George, what we're getting out of the consumer information and consumer study work that we're doing. Is that it's confirming everything that you read in the press today.

It confirms that there is a new buying pattern, it confirms that there is new habits of people that natural, fresh, less ingredients, cleaner labels are all what consumers are looking for. And that's generating a new and smaller food companies that go-to-market through different channels.

So what we're going to be doing is investigating those channels and driving harder to generate traction around the new channels. And it's – when you see companies like General Mills by a jerky company called the Epic. It's driving the large CPG companies to do new things and look for different ways to get to market with different products.

And that's what's our – that's what the study work is confirming and it's driving us to go after new channels and new markets..

And George, I'll follow-up with you on all those details on that other operating line, it's a fair amount of small, small items just talk to, so I'll take that offline..

And I'll answer your last question on cash flow, you kind of – our real focus had been in 2015, going after improving payable terms with our vendors we really didn't use any as you refer to factoring programs.

We are going to in 2016, we have implemented a supplier financing program that we will make available to our kind of next set of suppliers that we're going to be working with and that in essence allows them to determine how quickly, so – I may give you an example, if we make our terms, net 65, they can decide it, if they want to take it earlier and that – so that will be a big part of our progress.

And then on the AR side, there are supplier financing programs that put in place all the time by our customers. We participated in them but we generally do not take the cash early from that reason of the factoring..

Thank you..

You're welcome..

Thank you. There are no further questions at this time, please continue..

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

Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line and have a great day..