Erin Winters – Director, Investor Relations William Austen – President and Chief Executive Officer Michael Clauer – Vice President and Chief Financial Officer Jerry Krempa – Vice President and Chief Accounting Officer.

Kyle White – Deutsche Bank Anthony Pettinari – Citi Scott Gaffner – Barclays Jason Freuchtel – SunTrust Mark Wilde – BMO Capital Markets Ghansham Panjabi – Robert W. Baird Adam Josephson – KeyBanc Capital Markets Chris Manuel – Wells Fargo George Staphos – Bank of America/Merrill Lynch Arun Viswanathan – RBC Capital Markets.

Good day and welcome to the Bemis First Quarter 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Erin Winters, Director of Investor Relations. Please go ahead, ma’am..

Thank you. Good morning, everyone. Welcome to our first quarter 2017 conference call. Today is April 27, 2017. After today’s call, a replay will be available on our website, bemis.com, under the Investor Relations section.

Joining me for this call today are Bemis Company’s President and Chief Executive Officer, Bill Austen; our Senior Vice President and Chief Financial Officer, Mike Clauer; and our Vice President and Chief Accounting Officer, Jerry Krempa. Following Bill and Mike’s comments on our business and outlook, we’ll answer any questions you have.

However, in order to allow everyone the opportunity to participate, we do ask that you limit yourself to one question at a time with a related follow-up and then fall back into the queue for any additional 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 schedules. On today’s call, we’ll also discuss non-GAAP financial measures as we talk about our performance.

Reconciliations of these non-GAAP measures to GAAP measures that we consider most comparable can be found in the press release and supplemental schedules on our website.

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

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

Thank you, Erin and good morning, everyone. We are disappointed with our results this quarter, which were driven by both external and internal factors impacting our U.S. Packaging business. Specifically, lower than expected unit volumes and core operational execution.

We are focused on increasing efficiency and accountability across our organization and are targeting specific areas that we know we can improve. We are confident that our efforts and actions will address our challenges and enable Bemis to deliver enhanced value over the long-term.

Let me start by describing what’s happened, and then I’ll move to the more important topic of what we’re doing to course correct. There are two key issues we’re facing in the U.S.; volume call downs from several core customers as a result of softness in their businesses and disappointing operational execution.

Some perspective on the volume call downs. Heading into 2017, we added manufacturing costs and resources predicated on forecasts provided to us by our core big CPG customer base. During March, our customers started calling down their volume outlooks for the balance of the year as their business volumes continued to decline.

We had ramped up our work force and resources for these customers and it is us who bears the impact of a call down in customer volume. To avoid this repeating in the future, I have decided that our U.S. Packaging team will adjust our footprint and cost structure to align with flat-to-down volume outlook instead of a positive outlook.

Next, some perspective on our disappointing operational execution in our U.S. business. Coming into 2017, we planned an aggressive manufacturing cost takeout program. These incremental takeouts focused on elements of cost such as waste reductions, productivity and material usage and substitutions. We have struggled to deliver on these plans.

Waste is high in certain areas. We have pockets of unplanned downtime and we didn’t gain traction on the material usage and substitutions to the degree we had planned. The impact of these two issues on the P&L is considerable as reflected in our new adjusted EPS guidance range of $2.50 to $2.60 for the full year.

This call down considers lower volume and the associated operational impact as well as a realistic assessment of our U.S. operational and cost takeout abilities in the near term. Turning next to what we’re doing to course correct our U.S. business. First, new leadership.

While we didn’t expect the current quarter miss, we did begin to recognize last year that our U.S. business wasn’t changing at the pace we needed it to. During 2016, we started a search for a new President of our U.S. Packaging business and in late February, Fred Stephan joined Bemis Company.

Fred is an outstanding addition to our leadership team and I’m already impressed with his fresh insights, his drive for results and his practical approach. Within just a few weeks, Fred has begun to simplify our U.S. business and start aggressively working on basic operational blocking and tackling.

With Fred’s oversight, we have launched plant profit teams at each of our facilities in U.S. to foster sound, cross-functional business decisions to drive action and improved profitability. Fred is a change agent and we are working closely together to get our U.S. business back on track. Next, human capital.

We continue to carefully assess the talent and capabilities across our U.S. organization to ensure that we have the right people and skill sets in place to meet the demands of our business. We are taking the appropriate actions responsibly and respectfully. Earlier this week, we streamlined the reporting structure of our sales force in the U.S.

which will now report directly to Fred. By eliminating an additional layer in the reporting hierarchy, Fred will have direct oversight over those who most closely and directly interface with our U.S. customers. We are confident this will enable to more quickly recognize, understand and rectify any deficiencies in our sales organization.

We are intently focused on increasing accountability and accelerating decision making as we drive change through the entire U.S. organization. Lastly, cost structure. We are assessing all options to align our business to the current environment to position Bemis for long-term success and to improve earnings.

We are evaluating manufacturing and capacity, footprint rationalization, SG&A reductions, R&D spend and effectiveness and direct and indirect manufacturing spend. Any activity across any function that is deemed non-value add, will be discontinued. The scope of our review is broad. No stone will be left unturned. We have already started taking action.

Hourly labor that was ramped up based on forecast from our customers has been removed. Discretionary spend has been stopped. Hiring freezes have been enacted. These three actions have been considered in our guidance. You can anticipate upcoming announces on our plant and capacity rationalizations that will benefit 2018.

We are committed to establishing a cost structure that’s reflective of the U.S. environment we operate in today. I’ll turn the call over to Mike now to cover performance in our Global Packaging segment and details on the financials, and then I’ll come back to wrap up. .

operational fixes in Latin America over first quarter of last year, efficiency improvements at our Oshkosh healthcare packaging facility and the initial impact of expected benefits from our restructuring program in Latin America.

Summarizing the results of our global packaging segment this quarter; we are improving and overall results were in line with our expectations. Of note, we actually performed above our expectations at our Oshkosh healthcare facility in the quarter. Operations at that facility are running to our efficiency expectations.

Now on to consolidated Bemis results. Total SG&A expense for the first quarter was $94.6 million down from $99.4 million last year. This reduction was due primarily to our pay-for-performance practices and continued strong cost controls. Operating cash flow for the first quarter totaled $94.5 million compared to $52.6 million last year.

Approximately half the improvement of this was driven by continued efforts to extend accounts payable terms which we expected during 2017. Working capital as a percentage of sales was 15% at March 31, a solid improvement from 16.7% one year ago. During the first quarter, we repurchased $1 million for $48.9 million.

We remain committed to returning free cash flow to our shareholders over the long-term through dividends and share repurchases. Turning to guidance. We are lowering our adjusted EPS range to $2.50 to $2.60 from the previous $2.85 to $3 fully unaccounted for U.S. business.

Before purging this, I will discuss the volume assumptions in our new guidance range. You will recall that for the full year we had originally anticipated between 1% and 2% unit volume increases in the U.S. during 2017. As Bill mentioned, we are resetting expectations and we will start to run our U.S.

business for the balance of 2017 with the internal assumptions that our volumes will be down 1% to 2%. We value our base of large CPG food customers but we will not stop our plans for growth given that our customers have called down volume in conjunction with continued declines in processed foods.

Next to bridge our previous EPS guidance range to our new range of $2.50 to $2.60 for the full year ‘17. About two-thirds of the decrease in EPS guidance reflects our new volume outlook for U.S. Packaging.

Beyond the base margin dollars associated with lower volume, we have also considered the inefficiencies directly associated with the volume call down as it is challenging to take out manufacturing conversion cost short-term, prior to completing a plant equipment rationalization.

The remaining one-third of the decrease in EPS guidance relates to operational execution in the U.S. We have reassessed the pace of our original cost takeout plan for 2017, reflecting current performance and upcoming challenges.

For example, one of the challenges we’re facing is the ERP system implementation at three of our largest facilities in Wisconsin during April and the coming months. As background, coming into 2017 we have had a great track record of successful ERP implementations at over half our U.S. facilities.

We knew the implementation of this three plant network will be challenging and we planned for that. However, as we begun implementation in April, we’re finding it even more challenging than anticipated. Our new full year guidance assumes we will incur $5 million to $8 million impact from the implementation as we crawl out during the second quarter.

To be clear, the ERP implementation did not affect our first quarter results. Regarding the balance of 2017, we anticipate that our profit performance in the U.S. will get worse before it gets better sequentially as a result of these incremental impacts from our ERP implementation.

As we head into the second half of the year, we expect profit margins to improvement sequentially as we get better traction in operations. Outlook provided does include the hiring and discretionary spending freezes as well as the reduction of the hourly labor that was ramped up in anticipations of our customers’ original forecast.

The outlook provided does not include any cost or benefits associated with the cost reduction program that we will finalize and announce during the second quarter. Turning to cash flow guidance. Our new guidance range of $415 million to $455 million reflects our revised earnings expectations.

We still anticipate working capital to show improvement for the full year 2017 and where we perform within the guidance range will depend on timing and further traction of various working capital initiatives. Our current financial performance in our U.S. segment is completely unacceptable.

We will use this platform to drive real change in the way our company acts and operates. We will create a lean, nimble U.S. business to match the demand of the packaged food environment and position us for long-term success. With that, I’ll turn the call back to Bill for wrap up. .

Thanks, Mike. We encountered some significant challenges in our U.S. business this quarter, but have identified three key areas; leadership, human capital and cost structure where we can drive change across our organization. The entire management team and I are committed to transforming our U.S.

operations and positioning Bemis to deliver enhanced value to our shareholders. Our path is clear. I remain extremely confident in the long-term success of Bemis. What gives me that confidence? I’ve already seen the change start to permeate through parts of our company. Healthcare packaging and Latin America are prime examples.

We brought in new leadership [indiscernible] and Carlos Santa Cruz and they and their teams are driving change, fostering new ways of thinking, taking accountability to new levels, bringing in new people and changing the financial performance of these businesses. We will continue to drive this across the entire organization.

The way we think, the way we act, the way we perform more than ever, we have urgency and intensity to improve. We continue to move our high-end technologies around the world to create growth and develop new markets, specifically in Latin America and Asia.

We have the technologies, products, and capabilities to drive this effort further and faster in the long-term and we continue to look for opportunities in new markets that will provide long-term growth for Bemis. With that, I’ll turn the call over for questions. .

Thank you. [Operator Instructions]. We’ll take our first question from Debbie Jones with Deutsche Bank. Please go ahead. .

Hi, it’s Kyle, I’m actually filling in for Debbie. Thank you for taking my question. I wanted to talk about the operational institutes, it sounds like you said one-third of the miss was due to performance, two-thirds was due to volumes, so I just want to confirm that.

And what exactly was occurred this quarter, you talked a little bit about ERP but that sounds like that’s more forward-looking?.

Yes, I did say that about two-thirds of the miss in Q1 is directly related to volume and the associated inefficiencies in manufacturing and one-third was – meaning our cost takeout objectives. .

And so the one-third, can you give a little bit more detail the one third related to operational, what specifically – and what you’re going to do to kind of fix that going forward?.

Sure. As we came into the year, the U.S. business had put in place aggressive cost takeout projects, goals and objectives, whether it had to do with waste material substitutions, material down-gauging, product redesigns, very aggressive plan and they didn’t get traction within the first quarter.

That’s just simply put, they did not get traction on those goals and objectives and it was also a function of the volume coming down because some of those cost takeout programs are also associated with an increase in ramp-up in volume. So, just poor traction in the operation to get cost takeout projects put in place. .

Thank you. And we move on to our next question Anthony Pettinari with Citi. .

Good morning. On CapEx, it sounds like you’re keeping the CapEx view unchanged for the year. At the Analyst Day, you had given kind of 2018-2019 projections for CapEx that I think were around $200 million with the vast majority of that being discretionary.

If you’re now kind of recalibrating your footprint and readjusting expectations for flat to down volumes, would you reconsider that CapEx guide, especially in the out years, how does this kind of change in the view of the marketplace change the capital that you’re going to spend this year and maybe in the next couple of years?.

Yeah, good question, Anthony. As both Mike and I said in our prepared remarks, our total focus right now is on fixing the U.S. Packaging business. And as I said in my remarks, everything is under evaluation. Everything is under evaluation including CapEx going forward as we go out into the 2018 and 2019 timeframe.

But right now our focus and our intention is on fixing the U.S. and we’ll address the go-forward CapEx plan as we get closer to 2018. .

Okay, that’s helpful. And then just in terms of the large customers changing or reducing their production plans, I understand you may be limited in what you can say, but is there a certain number of customers you’re talking about or are there specific food categories that were significantly worse than expected.

I’m just asking because the Nielson data and some of these volumes have been fairly poor for a number of years.

So I’m just wondering what it was around the quarter or what you’re seeing in the marketplace that was really different this quarter than what we’ve seen in the last couple of years?.

Yes, good question again, Anthony. You’ve all read and seen a lot of the articles recently in the past week to two weeks in a lot of the trade journals and/or some of the newspapers about how the large CPG branded companies in the U.S.

were surprised and/or disappointed and at unexpected volume declines that were not anticipated in the Q1 period of this year.

It’s across the entire big CPG branded category base that we have seen volume call downs and volume’s not at the levels that we were told we would get forecast for in Q1, it’s across health, hygiene, personal care, confection, just the protein, every category of all the big CPGs that we serve whether it’s infant care to feminine care to carbonated soft drinks, it was across the spectrum and as you’ve read and seen, our customers were surprised and they unexpectedly saw their volumes down in the U.S.

.

Thank you. We’ll now move on to our next question from Scott Gaffner with Barclays. Please go ahead. .

Thanks. Good morning. Bill, if I look back I think it was 2013 going into 2014 you completed a relatively large facility consolidation and savings program in the U.S.

Is there anything when you look back at that today that maybe limited your flexibility to deal with the volume declines here or maybe something that wasn’t done at that point in time, can you just sort of give us some details on that?.

Yeah, Scott I don’t see anything that we would have done differently back then that it’s impacting things today. We made the right moves several years ago with that facility consolidation effort post the Alcan acquisition and no nothing we would have done today would be any different. .

Okay. And if I look at the volume shortfall, I assume it sounded like from your commentary it was from some of your largest customers or maybe your preferred supplier.

Is there anything that you can work into the contracts so that you get more of a heads-up as to when they’re going to slowing down their volume needs in the future part of the contracts?.

Scott, it’s a good question.

Could we work something into the contracts? I think it has to do with the fact that we need to get better commercially, not necessarily from a contract perspective, but from a communications perspective and intensity perspective and get to the right individuals in the customers’ organization that knows where their volumes are headed. .

We will now take our next question from Jason Freuchtel with SunTrust. .

Hey, good morning. .

Good morning. .

Yeah I believe you mentioned that Fred Stephan has a simple and practical approach to the U.S. Packaging business.

Can you provide a little bit more detail on terms of what he’s already done to execute in the business that’s different and maybe how and why your business operated differently in the past?.

Yeah. Fred’s approach is quite simple. He came in and just looked at all of the initiatives, all of the things that were taking place within the U.S. Packaging organization and boiled it down to three things. There are three things we’re going to work on and that’s it.

Let’s forget about all of the noise around the fringe and work on these three things and that’s the approach he’s taken to the organization, that’s the approach he’s going to take forward and that’s what he and I are going to work on jointly as we turn the U.S. business around; simplification and getting the right resources in the right place. .

Okay, great. And then I think you also referenced that you’re going to continue to potentially look for acquisitions but in the near term your focus is really on fixing U.S. Packaging business.

Does that imply that maybe acquisitions are on the backburner in the near term and maybe that’s something for the end of ‘17 or ‘18?.

Jason, nothing’s really changed from an M&A perspective. Clearly at the moment, I support of Bill and – had a lot of time being invested in supporting the turnaround of the U.S. operations. We’ve said before that our primary focus has been global and as you’ve seen over the last couple of years, we did an acquisition in Brazil on the healthcare space.

So we will always take a look at things, but clearly from a U.S. perspective at this point in time, we’ve got to focus on getting the U.S. business turn around.

If something interesting presents itself that makes a lot of sense to Bemis and to be run as a standalone for a period of time, we’d consider it but, at this point, we’re all focused on fixing U.S. Packaging. .

Thank you. We now move on to our next question from Mark Wilde with BMO Capital. .

Good morning, Bill, Mike, Erin. .

Good morning. .

Good morning. .

Good morning. .

I wonder if we could come back to this, you mentioned that you made a pricing kind of concession at some of the high value products. You’ve been talking about this for at least a couple of quarters now.

Was there anything incremental in the first quarter on that count?.

Nothing incremental in Q1, Mark. .

Okay. And do you think Bill, just kind of related to this, is this really just the function of the overall market demand being lower, are you losing share? I know that there’s at least one competitor just up north of you who’s been adding capacity.

So I’m just trying to get a sense of how much of this is just the market and how much of this is kind of competitive dynamics within the market?.

It’s the market, Mark, we haven’t seen any significant loss of share that took place in Q1 or Q4 of last year for that matter. So it’s a market call down for us. .

Okay, very good. I’ll turn it over. .

Thanks, Mark. .

Thank you. We’ll now take our next question from Ghansham Panjabi with Baird. .

Hey guys. Good morning. So Bill, it seems like your customers are finally starting to capitulate volume weakness persisting on what seems inevitable is that they’ll have to strip out even more cost along the supply chain.

You guys are trying to take out cost by your own optimization plan, but without incremental consolidation of your own, do you think that you’ll be able to actually keep those savings with that dynamic in mind?.

Yes, yes, I do Ghansham. Again, we’ve got lot of talented people that figure out how to redesign, remanufacture, take cost out lightly down-gauge.

We might have to rebalance our effort and when that rebalancing what I’m talking about is our rebalancing in our R&D organization where we have got let’s say overweight toward the development of new products for customers that may or may not get traction versus the rebalance toward how do we take cost out, how do we improve our processes and use those technical resources to do that versus the heavily waiting toward new product development.

.

Okay. And then in terms of the optimization efforts and I’m sorry if I missed this, but did you call it any sort of parameters to think about cash cost and also what the timeline would be implementing these initiatives both in terms of actually shutting down plans and then also the cash outflows? Thanks so much. .

Ghansham, what we called out in the press release and in our comments are we are committed to complete that evaluation in Q2 and report it externally. So at this point, we have not given a cost or a benefit outlook. .

We will now take our next question from Adam Josephson with KeyBanc. Please go ahead. .

Thanks. Good morning everyone. Bill, just back to the volume issue, the company’s not had any volume growth for quite a long time. Your customers have not had volume growth for quite a long time. This was the case under Henry’s leadership, it’s the case under your leadership, your customers have been seeing it for eons seemingly.

I just don’t understand why you would have been expecting 1% to 2% volume growth this year given what you’ve seen over the last 5 to 10 years and I appreciate that your customers were saying they were going to see some inflexion, but why would you have thought that?.

Adam, we’re going to face reality right now, our customers aren’t going to grow, that they continue to struggle. We have been given forecast from them about growth. We have been given product specifications that they were going to grow with and it never materialized. So we’re telling the U.S.

organization to stop, we’re not going to face into that any longer. We’re going to size the business from flat to down and that’s how we’re going to do this going forward. And that’s what we’re telling them to do, regardless of what our customers are saying that they’re going to bring in.

Our customers have been focused on cost out, plant consolidations, plant shutdowns and we’re now going to get real with all that and bring our volume and our capacities and our utilizations down. .

Okay. Just a related question Bill, I think late last year, you talked about having hired consultant, I think earlier on the call you talked about looking for a new Head of U.S. Packaging last fall, last winter whatever it was.

And it seems like these things were happening simultaneously around the same time, so can you just help us understand what exactly was going on with the consultant and looking for a new head, it’s just a bit confusing, I’m just trying to understand what exactly has been going on there?.

Yeah, Adam if you recall, we brought in the consultant to help us with our commercialization effort, it was a quick six week, seven week program. We got that finished and moved on. We started the search for the Head of U.S. Packaging at the June timeframe of last year because it takes that long to find someone to come in and run a business like that.

So it takes six months and it took us six months to do that. The two are completely not related. .

Thank you. We’ll now take our next question from Chris Manuel with Wells Fargo. .

Good morning, gentlemen and thank you Bill for the candor in this process, to be candid. Wanted to understand what’s so different with the scope of what you’re doing now is centered on the U.S. operations.

What’s so different with the international operations? You’re still putting a new ERP system there, other than the – I mean the only thing that I can see that’s markedly different is the fact that the volume’s still are growing there.

So, aside from the volume growth issue, what’s managed so differently internationally versus domestically?.

You know Chris, we changed some leadership in our international business over the course of the last 12 to 18 months. And when you do that, it immediately changes the culture.

It changes the way the organization thinks, we brought in people from outside the industry to come in and help run those businesses, it changes the way they look at the business, they way they approach the customers, they way that they look at our ways to add value and they get those business’s cultures moving in the direction that we need them to move.

That’s the – the short of it is that we put in some new leadership, they brought in some new talent, brought in some new ways of thinking, they brought in some new ideas and they energized the organization, both in healthcare and both in our Latin America business.

And in Asia-Pacific, that’s a growing organization and that’s all new blood and new ways of doing things right from the get-go. So, Asia’s got great traction on culture change, Latin America’s got great traction on culture change and our healthcare business has got great traction on culture change.

With Fred coming in, we’re going to drive that culture change in North America much faster and get out of our legacy ways of doing things and thinking about things. .

Okay, that’s helpful. My follow up question is new product development, things of that nature. So, I get that the whole pond that we’re swimming in maybe slowly shrinking, but the component of adding new products and doing new work with customers, customer activity still good i.e. I’m going to make up an example.

I mean maybe it’s smoked turkey, hot dogs that’s not going to add to a category, it’s just going to change out of existing hot dogs that are sold smaller.

But are you still doing new activity, can you maybe somehow characterize to us what new business and other activity is? Are you still picking up new business? It’s just the existing business that’s shrinking or should we think about that?.

That is exactly the situation, Chris. When we - we continue to use the innovation center for customer innovations and customer ideations. It’s continuing to be leveraged by our customer base.

We are attracting smaller customers as we talked about in the big middle, these smaller upstart customers are coming, we’re working with them, we’re developing new products for them.

But let’s face it, when you start up a new product with a small customer, it’s a small order, $1 million, $2 million, $1.5 million and when you get a call down from one of the big branded accounts, it’s a multi-million dollar call down.

So the new business does not offset entirely the call down that you get, but you’re continuing to develop new products, we continue to have the innovation engine moving forward, but we’re going to rebalance some of that right now as we go forward. We’re going to rebalance more towards helping take cost out within the U.S.

packaging organization, but we won’t stop innovating on the other side. .

Thank you. We’ll now move on to our next question from George Staphos with Bank of America/Merrill Lynch. .

Hi, everyone. Good morning. Bill, again thanks for all of the detail and the commentary. I guess I had to top down types of questions, first of all, if the call down effort from your customers began, it sounded like an earnest in March which then triggered all of the internal activity occurring at Bemis.

Do you think you really have enough time to get all of your review and analysis and study of cost and benefits and actions done by the end of the quarter that we’re currently in? And the reason I say that is, this is an important move by the company ultimately to get right.

The related question which I’ll get to and kind of drives this first one is since 2015, and recognized, it’s a tough environment, you all have a much tougher job than we have here just moving numbers around on a spreadsheet. But it’s been a narrative where things don’t quite go as well as you would have expected.

The volume wasn’t necessarily there in ‘15, Brazil surprised you last year, you had to bring a consultant on to commercialize the new products.

So, what, if we look at that has been sort of the overarching theme, the culture you’re trying to change to make more responsive, what’s been driving that narrative? And therefore, do you have enough time to get it all done by the end of the quarter? Thank you guys and good luck in the quarter. .

Yeah, thanks for your question George. You hit the nail on the head, it’s the culture. We’re steeped in tradition and it’s hard to move the culture.

And as I explained in an earlier answer, we moved it in Latin America, we moved it in Asia Pacific, we moved it in healthcare, we’re now going to move it -- we’re using this Q1 issue and the reality of our large CPG and brand customers calling -- continuing to call volume down to drive that culture change in North America whereas before it was just legacy.

That’s at the heart at what we’re changing as we go forward. It’s to change the culture to create the urgency, it’s not that this too will pass, we are using this as our opportunity to get embedded with our U.S.

Packaging teammates and drive culture change that really gets focused on the intensity of how quickly we can move the organization and how quickly we can take the cost out. Now to that point on the question, we started this work already, we started this work in April, starting to look at okay, how can we start to bring down the cost structure.

We feel we get vast majority of it don’t in Q2 and we’ll be able to report out on what our plans are going to be as we leave Q2. .

Okay. Thank you. Good luck. .

Thank you, George. .

Thank you. We’ll take our next question from Phil Ng with Jefferies. .

Good morning, Bill, Mike and Erin. This is [indiscernible] for Phil. .

Good morning. .

Morning. So your focus has shifted significantly over the past couple of years, initially being more focused on mix improvement technology, then recap and now apparently took to more cost cutting.

With the value of hindsight, can you talk about where your prior strategies fell short of your expectation? Whether there’s still some benefit to be added from things like recap and what gives you confidence that you’ll be able to execute better on the restructuring phase of the business rather than the growth initiatives -.

Yes, the recap strategy is still an excellent point in our strategy. We continue to execute on that and that continues to bring us value and our shareholders’ value. Innovation, pushing innovation around the world, that’s how we’re growing our higher margin products in both Asia and in Latin America.

We move those technologies from North America and from Europe into those emerging worlds where those technologies don’t exist and that’s at the core of what we’re doing to improve profitability in both Asia and in Latin America. The next piece comes to cost reductions, completely driven by volume call downs in the U.S.

and a footprint that we have some assets that are over 90% to 95% utilized from a capacity perspective and some that are down at the 70% range. So we need to consolidate some of those assets that are in the lower part of the capacity utilization range. It’s just the ongoing evolution of how the business is going to run.

We need to be quick and we need to get on it and start to get that work done. We’re not going to sit on our hands. We’re going to get these things done. .

Great. Thank you. And then can you talk a bit about Fred’s background as a manager in the installation business, his experience as a cost cutter or change agent. What led you to the decision that he was the right person to turn around U.S.

Packaging, and especially considering prior business was more of a growth business where it seems like you can come to the conclusion that U.S. Packaging is not so much of a volume grower? And also, his prior business U.S.

installation, they recently had some share gains through adding capacity, and can you talk about that impacted?.

Yeah, Fred actually has a 20 year career with General Electric where he ran several businesses at General Electric that were say in the more of the commodity space and he grew the top-line, grew the bottom-line in those businesses, went to Johns Manville and did the exact same thing in the face of the housing downturn in the late-2000s, grew the top-line, grew the bottom-line in all of the businesses that he has been in.

It’s about being simple, taking out the clutter and moving the business toward the goal of both growth and profitability improvement and he’s done that time in and time out. .

Thank you. We’ll now take our next question from Arun Viswanathan with RBC Capital Markets. .

Great. Thanks. I guess just a little bit more of a longer term strategy question, I appreciate that you guys are really positioning the business towards flat to down volumes in U.S. Packaging.

How should we think about the earnings power of the business in that scenario? I guess prior years you’ve been able to achieve 10% earnings growth by increasing exposure to Latin America and some other growing markets, healthcare and whatnot and also deploying capital towards buyback.

So, how should we look at your business from a longer term perspective, understanding that you’re going to take some charges in ‘17 on restructuring, you expect earnings growth in future years to come through? Thanks. .

Arun, at this point in time we’re really focused on just getting the U.S. fixed. We’re not looking at ‘18 yet at this point in time. Clearly, we’re still committed to grow this business over the long-term and we will continue to use our free cash flow as we always have to pay a dividend and buyback stock.

As I mentioned earlier, acquisition growth is still important to us and primarily in our global business, but at this point in time, we’re really going to try to – focused on getting the U.S. fixed, get it back on the track and then we’ll come back later in the year and talk about the future. .

Okay, thanks.

And so on that note then, are there other I guess tactics you can use to increase your exposure to growing markets? Are you looking at increasing acquisitions in Asia or Latin America or other areas you mentioned healthcare in the past? How large can they grow in your business and potentially offsets some of this structural weakness?.

Arun, as you guys know, we don’t typically comment on acquisition activity but I’ll just reiterate again that we at this point in time, we still feel it’s really important to be an investment grade company.

We look at acquisitions in a point that we could absorb it without putting that at risk and we do, as most of you know, we did bring very talented individual in last year in the first quarter to kind of really get us a lot more focused, a lot more discipline and rigor around what’s in the market, what’s come in the market or what we should actually own.

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[Operator Instructions]. We’ll now take our next question from Brian Maguire with Goldman Sachs. .

Good morning. This is actually [indiscernible] sitting in for Brian. I guess the first question I had is piggybacking off an earlier question on the asset recapitalization program. I’m wondering if you think that the program had any impact on some of the current recent issues just in terms of how you’re aligned with your customers.

And if you have any kind of preliminary thoughts on how much of a focus asset recapitalization be going forward that’ll be helpful?.

Yeah, the current asset recapitalization program didn’t have any effect on this current call down. It was not affected by any of that. Those assets that we put into recapitalize older pieces of equipment are some of those pieces that are now in the 90 plus percent utilization range because we had the volume already to run across them.

And we will continue to focus on taking out older pieces of equipment and recapitalizing where we can gain productivity, efficiency and drive margins. We’re going to continue to do that, that will not stop. .

Great. Thanks. And then just a quick second one, I can appreciate that you’re very early on in the process, but do you have any sense of how much capacity you think will need to come out of the U.S.

Packaging business going forward?.

That’s not something that we would comment on at this time. We will do that in Q2. .

Thank you. And that concludes the question-and-answer session for today’s call. I’d now like to turn the conference back over to Ms. Erin Winters for any additional or closing remarks. .

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

Thank you. This does conclude today’s conference. Thank you all for your participation..