Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 Sonoco Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Roger Schrum, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Josh. And good morning and welcome to Sonoco's third quarter investor conference call. Joining me today is Howard Coker, President and Chief Executive Officer; Rodger Fuller, Executive Vice President; and Julie Albrecht, Vice President and Chief Financial Officer. A news release reporting our financial results was issued before the market opened today and is available on the Investor Relations website at sonoco.com. In addition, we will reference a presentation on our third quarter results, which also was posted on our website this morning. Before we go further, let me remind you that 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, with that introduction, I will turn it over to Julie.

Thanks Roger. I will begin on Slide 3, where you see that earlier this morning, we reported third quarter earnings per share on a GAAP basis of $0.82, and base earnings of $0.86 per share, which is above our guidance range of $0.73 to $0.83 per share. Due to the negative impact from COVID-19, this $0.86 of base EPS is well below the $0.97 that we delivered in the third quarter of last year. At a high level, our third quarter 2020 earnings reflected mixed demand for our diversified products, and negative price costs in our industrial segments, partially offsetting these headwinds with very strong productivity driven across our business. Our third quarter base earnings were above our expectations, primarily due to better operating performance in certain businesses. Most notable were integrated industrial North American, as well as our Protective Solutions, and display and packaging segments. I will highlight that certain important aspects of our business performed in line with our expectations, including our consumer results and the price cost impact in industrial. In terms of a $0.04 difference between base and GAAP EPS, $0.18 is due to restructuring activities, and $0.06 relates to non-operating pension costs. These non-base expenses were partially offset by a non-base income tax gain of $0.20 driven by a deferred tax write down related to the pending sale of our DNP Europe business. I would like to highlight that of the $24 million of pretax restructuring expense, almost $20 million is non-cash and includes nearly $15 million of non-cash charges related to actions we are taking in our perimeter of store business. Howard will be talking more about this during his comments today. I will add that as you can see, we did not exclude any COVID-19-related items from our base earnings. During the third quarter, we incurred approximately $3.5 million of costs directly related to coronavirus including purchasing protective gear, cleaning our facilities and paying employees who are in quarantine for work related reasons. Now looking briefly at our base income statement on Slide 4, and starting with the top-line. You see that sales were $1,312,000,000, down $42 million from the prior year period. I will review more details about our key sales drivers on that bridge in just a moment. Gross profit was $257 million, $8 million below the prior year period. Despite the reduction in sales, we maintained our gross profit as a percent of sales at 19.6%. SG&A expenses net of other income were $126 million and unchanged year-over-year. Lower expenses tied to COVID such as travel and group medical were offset by health and safety costs incurred for the pandemic, strategic spend on technology applications, as well as the addition of acquisitions. Also, we had almost $5 million of unique other income items in last year's third quarter that did not repeat this year. All thus resulting in operating profit of $131 million, which is $8 million below last year. I will discuss the key drivers on the operating profit bridge in a few minutes. Net interest expense of $19 million was $4 million higher than last year, due to the actions we have taken this year to strengthen our liquidity position by temporarily holding more cash in lieu of debt repayment. Income tax expense of $27 million with $1 million lower than last year, driven by a combination of lower pretax profit, offset with a higher effective tax rate. Our third quarter 2020 effective tax rate of 24.1% was 180 basis points higher than the prior year quarter due primarily to various discrete items. Moving down to net income. Our third quarter 2020 base earnings were $87 million or $0.86 per share. And looking at the sales bridge on Slide 5, you see volume mix was lower by $54 million, or 4% for the company as a whole. I will highlight that while our third quarter volumes remained a challenge due to COVID-19, the year-over-year volume decline was a meaningful improvement from the 6.9% decline in the second quarter. This improvement reflects quarterly sequential demand increases in each of the Protective Solutions, display and packaging and industrial segments. Consumer Packaging segment quarterly volume was down $1 million from the prior year or 30 basis points. We did have nice growth in global rigid paper containers, which saw volumes increase by 2.3%, including 3% higher demand in North America. Within plastics, the prepared and specialty foods market had very strong volume growth at almost 16%, but this was offset by significant weakness in the industrial end use market. Our flexible business saw a continued negative pandemic impact on demand in the confection market due to reduced foot traffic in convenience stores and other venues as well as lower seasonal Halloween volume. I will highlight that when we remove the weak volume in our industrial plastics business, our third quarter consumer segment volumes actually grew by 1%. Display and packaging volume was below last year down $9 million or 6%, due to lower demand and domestic displays, paper amenities and retail security packaging. Volume in paper and industrial converted products was down $41 million, or just over 8% due to weak volumes in our global paper mill network as well as across our two cores and cone operations. I will note that this volume decline, however was a solid sequential improvement over the 10.4% decline that we had in the second quarter. And finally, sales volume in Protective Solutions was down nearly $3 million or almost 2% driven mostly by virus-related demand weakness. Moving over to price, you see that selling prices were lower year-over-year by $6 million. This was primarily in our consumer segments, largely driven by resin price declines in our plastics and flexibles businesses. Moving to acquisitions, you see an impact on the top-line of $30 million from the TEQ and Can Packaging acquisitions in consumer and the Corenso acquisition in our industrial segments. I will note that Corenso is included in the acquisitions category for just over one month of the third quarter since it was acquired in early August of last year. And finally, foreign exchange and other were negative by $12 million, with the largest driver being a $5 million negative impact from foreign exchange translation due to the stronger dollar. In addition, this includes about $4 million of lower sales from our exit of certain small operations in the consumer segment. Moving to the operating profit bridge on Slide 6, and starting with volume mix. Our lower sales volume combined with the impact of mix had a negative impact on operating profit of $17 million driven primarily by the industrial segment. Shifting over to price cost, we had $27 million of unfavorable price costs with about half of this due to non-material inflation. Most of the remaining unfavorable change occurred in our industrial segments, driven by a combination of higher OCC costs and lower market pricing. As usual, there is a slide in the appendix that shows recent OCC price trends. And you will see that Southeast OCC prices averaged $70 per ton in the third quarter, which although down from the second quarter of this year was double the $35 per ton average in last year's third quarter. Moving to acquisitions, you see that our Corenso, TEQ and Can Packaging acquisitions contributed $2 million to our third quarter earnings. Next is the impact of productivity, where you see that our total productivity was a strong $40 million year-over-year. We had solid execution across our productivity levers in materials, shop floor execution, as well as fixed costs, all due to a combination of deliberate cost controls and restructuring benefits. Finally, the change in other was unfavorable by $6 million with various moving pieces. Moving to Slide 7, you will find our segment analysis where you see that Consumer Packaging sales were up 40 basis points driven by the addition of TEQ and Can Packaging, partially offset with a slightly weaker demand, lower prices tied to resin, the exit of certain small operations and negative foreign exchange translation. Consumer segment operating profits increased by almost 20%, primarily driven by strong productivity. Our consumer segment margin increased to 11.6% versus the 9.8% in the third quarter of last year. Display and packaging sales are down almost 5%, mostly due to lower demand. Operating profit, however, was up almost 21% and margins improved by 170 basis points to 7.8%. The negative earnings impact on the lower demand was more than offset by fixed costs productivity. Our industrial segment sales fell by over 7% primarily due to the weak global volumes. Industrial's operating profit declined by 42%. This is a direct result of the significant drop in demand, as well as the much higher OCC market pricing relative to the third quarter of last year. These headwinds were somewhat offset by solid improvements in productivity. The industrial segment's operating profit as a percent of sales was 7.5%, a nice sequential improvement over 6.9% in the second quarter, but lower than the very strong 12% in the third quarter of last year. Finally, although Protective Solutions sales were flat year-over-year, operating profit increased by 25% due to strong productivity. The segment's margins improved to 13.3% from the prior year's quarter of 10.6%. So for the total company, sales were down approximately 3% and operating profit margin declined slightly to 9.9%. Moving to cash flow and Slide 8, our year-to-date third quarter 2020 operating cash flow was $490 million, compared with $239 million in the same period of last year, an increase of $251 million. The largest driver to this increase was the $200 million of voluntary pension contributions, which did reduce last year's operating cash flow. Midway down the slide, you see that our current year-to-date increase in net working capital of $16 million was $26 million lower than the increase in the third quarter of last year. Overall, our working capital management has been very solid this year, despite the challenging business environment. Moving on to free cash flow, which we define as operating cash flow less net CapEx and dividends. Our free cash flow through the first nine months of this year was $252 million, an increase of $284 million over the same period of 2019. Excluding the voluntary pension contributions made last year, free cash flow improved by $84 million year-over-year. Net CapEx spending was $108 million year-to-date, a reduction of $36 million compared to the same period of last year. Finally, our cash dividends paid year-to-date were $129 million compared to $127 million in the prior year period. On Slide 9, you see that our balance sheet is extremely strong and reflects the cash and debt positioning we did earlier this year in response to the pandemic. Our third quarter 2020 consolidated cash balance of $783 million includes $578 million held in short term investments that are very liquid and have high credit quality. Moving on to our debt balances, our consolidated debt totaled $2.14 billion at the end of the third quarter, a decrease of $129 million from the second quarter. These changes in our cash and debt balances during the third quarter reflect debt repayments, the Can Packaging acquisition and our very strong third quarter cash flow generation. Moving to Slide 10, you find our base earnings per share guidance, which is $0.70 to $0.80 per share for the fourth quarter, and $3.29 to $3.39 per share for the full-year. This range continues to reflect the ongoing uncertainties regarding the challenging macroeconomic conditions stemming from the COVID-19 pandemic. You will also see that we are expecting our full-year 2020 operating cash flow to be in a range of $643 million to $663 million and free cash flow to be between $290 million and $310 million. Specific to free cash flow, this updated full-year outlook is a solid $40 million improvement over our original guidance provided in February of this year. Turning to Slide 11, I will cover some of the key assumptions and circumstances impacting our fourth quarter base earnings guidance related to demand and first related to COVID-19. We expect to have a mixed impact on demand for our products, with the net impacting slightly negative to earnings compared to the fourth quarter of last year. In addition, our outlook assumes a typical seasonal year in slowdowns in some of our businesses, such as Protective Solutions, and display and packaging. Howard, will provide more comments about our fourth quarter demand outlook in a few minutes. Also, we will continue our focus on controllable cost reductions in areas such as travel, and we expect to continue driving strong productivity results, although we don't expect our fourth quarter productivity contribution to be as strong as the third quarter. Moving to our price cost expectations for the fourth quarter. While we forecast that OCC prices will remain stable in the near-term, we do expect our industrial segment to have a negative price cost relationship compared to the fourth quarter of last year. We expect this negative earnings impact to be similar to what we experienced in this year’s third quarter. Specific to certain non-operational earnings assumptions, we have assumed a third quarter tax rate of 24.8%, which is 160 basis points higher than our 23.2% tax rate last year. Also, our interest expense will be higher than in the fourth quarter of 2019, due to our increased debt balances that I mentioned a few minutes ago. These two non-operational items combined for an expected $0.03 to $0.05 headwind versus the fourth quarter of last year. Finally, related to our M&A activity, our fourth quarter guidance includes TEQ, Can Packaging and display, and packaging Europe. While we expect the divestiture of E&P Europe to close during the fourth quarter, we don't know the exact timing, so we accept the results in our guidance. This business is expected to contribute about a penny of EPS per month during the fourth quarter. On Slide 12, you see the key assumptions underlying our full-year cash flow outlook. And I will highlight a few of these. We do continue to take advantage of government assistance programs around the world with most of the impacting here in the U.S. For full-year 2020, we expect these programs to provide us with approximately $35 million of positive cash flow and around $25 million has already been recognized through the third quarter. I will note that most of this cash flow impact will reverse in the next couple of years. Next, we have adjusted our 2020 CapEx spending outlook to $180 million from the $195 million that we mentioned in July. This outlook continues to include $15 million to $20 million of capital for project horizon, and Howard will discuss this strategic project more in his comments. We also still plan to defer our voluntary pension contribution estimated at approximately $150 million and related to the termination process into 2021. But we do have a related $37 million cash tax benefits this year. Finally, as you see on Slide 13, our current liquidity position is very strong; it was approximately $1.3 billion at the end of the third quarter. This was composed of the $783 million of cash in short-term investments that I just mentioned a few minutes ago, as well as our $500 million revolver availability. Due to our excellent cash generation, and stability of the financial markets, we are using $300 million of our excess cash balances to proactively repay certain banks' term loans today as we continue our focus on maintaining an investment grade balance sheet. So, this concludes my review of our third quarter financial results and our outlook for the fourth quarter. So, I will turn it over to Howard.

Thanks Julie. And good morning, everyone. Let me start by saying really how proud we all are of the way our associates continue to respond to the critical needs of our customers during these unprecedented times. During the third quarter, diverse mix of consumer and industrial related businesses reflected the improved global macroeconomic conditions coming off of the pandemic induced recession in the second quarter, as we were able to exceed the high end of our bottom line expectations. Our Consumer Packaging segments produced solid year-over-year improvements as at home food demand stabilizes from the preceding quarter's pantry stocking, while our paper and industrial converters products experienced improvement sequentially from the prior quarter's lows, reflecting a partial recovery of our global industrial served markets. In addition, our Protective Solution segment achieved record quarterly results of customer demand rebounded and our Display and Packaging segment achieves one of the best quarters in more than a decade, really driven by cost reduction activities. Julie gave you the details for the quarter, so I won't repeat those achievements. But I do want to spend the bulk of my comments highlighting actions we are taking to further improve our businesses. When I first spoke with you in February, I told you we have been initiating an increased sense of urgency to tackle some of the lingering issues that have been impacting our results. Our first area of focus was addressing our corrugated media machine in Hartsville. As you are aware, Sonoco is the small independent producer of medium and it made no sense long-term for us to remain in this market. As a result, our team of engineers, which are familiar with project horizon to convert the medium machine into 180,000 tons per year uncoated recycled paper bowl machines. When completed in early 2022, two of these machines will be one of the largest and most cost effective European machines in the world. While we are well into design and engineering of this important project, our team is determined we can drive additional cost savings by modernizing and optimizing our raw material and finished goods handling for the entire Hartsville mill complex. As a result, we plan to spend an additional $30 million over the next two years to construct new paper finishing and packaging capabilities, construct a new 160,000 square foot finished goods warehouse to eliminate all site storage and transportation and provide for a 150,000 square foot storage area to accommodate 100% of our OCC furnished for the entire mill complex. When completed in 2022, these projects are expected to drive an incremental $5 million in savings. So, combined with the original $83 million costs for project Horizon, we now expect to invest a total of $113 million over the next two years to drive and combined $29 million in annual savings. And of course, with returns well above the cost of capital. You have probably heard me say that I'm a strong believer in looking in the mirror, rather than looking out the window. What I mean by this is we believe we can achieve greater success by investing in ourselves. We believe that investing in this extended project horizon can create significant long-term value. Next on our list has been to address issues we face in our perimeter of the store operations on the west coast. Based on the experience we have gained over the last few years and the need to adjust to changing market conditions, we have made the decision to consolidate three of our thermoforming converting operations into a single focused plant serving the fresh berry and whole fruit markets across the west coast and into Mexico. Logistically we will be relocating equipment from our facilities in Mexico and Washington State, primarily into our larger Southern California operation. As Julie mentioned, total estimated restructuring costs will be approximately $18 million, and as you have heard, we have recognized most of that in the third quarter. We have not completed, our expectation run rate savings will be approximately $10 million to $12 million. We will continue to serve our west coast and Mexico-based customers as well as expand our capabilities to support the growing fresh egg market by redeploying resources both in California and in operations in Florida. For some time we have discussed the need to optimize our portfolio. We took action a few weeks ago to progress our increased focus on our core consumer and industrial related businesses, the front end and agreement to divest our European contract packaging business for $120 million in cash. Sonoco built this business from scratch over the past 20 years to serve global CPGs, with custom packaging and supply chain management services throughout Europe and into the Middle East Africa, and Asia. This business has grown to nearly $300 million in sales with 2,600 employees, but the nature of the business for this margin that are lower than most of our consumer and industrial converting operations. In fact, if you remove the business from our financial results, our overall EBITDA margin improves by approximately 40 basis points. I want to thank our dedicated management team and employees in our contract packaging operation in Poland for their contributions to Sonoco and wish them all the best with their new owners. We expect the transaction to close during this quarter and we expect to use the proceeds to reduce debt by providing additional capital to invest in our core businesses. Also during the third quarter we completed the acquisition of Can Packaging, a technology-driven designer and manufacturer of sustainable paper packaging and related manufacturing equipment located in France. This acquisition provides us a new option to our paperboard can portfolio, including patented technology to produce high performance paper packaging that can be round, square, rectangular, oval, oblong, or even triangular. Adding Can Packaging innovation, intellectual property and proprietary manufacturing capabilities will allow Sonoco to leverage our strong material science and engineering capabilities to develop paper packaging solutions designed to meet the needs of demanding products and supply chains across a variety of markets. We also see using Can Packaging's unique low-cost machine technology to expand our consumer products offerings into other growth markets. Now looking ahead for the fourth quarter, we assume that global macroeconomic conditions will remain relatively stable, and that our customers' demand will experience a normal year-end slow down. On Slide 14 of our presentation, we show you how we believe our businesses will respond to current market conditions. So looking ahead, we expect our Consumer Packaging segment will continue to benefit from consumers at home eating patterns. Our industrial related served markets are expected to experience weak year-over-year demand, but we do expect these markets continue to show gradual sequential improvement. As Julie mentioned, our paper and industrial converter product segments should continue facing a negative price cost headwind during the fourth quarter due to the higher year-over-year recycled fiber costs and lower market pricing, and we expect our OCC prices to remain relatively stable. I mentioned we announced this week a $50 price increase for uncoated recycled paperboard in the U.S. and Canada effective November 16. We are experiencing significantly longer backlogs in our mill system and inventories are lower than normal. In fact, we put off a scheduled outage this month to continue running to meet demand. In addition, we are seeing inflation of input costs driven by much higher freight and papermaking chemical costs. So this price relief is important to keep up with our customers' needs. We are extremely pleased by the strong third quarter turnaround in our Protective Solutions business and we believe improved demand should continue into the fourth quarter, especially in the pharmaceutical and appliance serve markets. While we do not yet know the role we may play in the potential cold chain transportation of future FDA-approved COVID vaccines and therapeutics. Our industry leading pharmacy temperature packaging experts stand ready to assist in a much-anticipated launch of new life-saving medicines. Finally, in our display and packaging segment, we expect to experience continued slow demand for retail promotional display activity, but the related impacts of operating profit should be mitigated by continued cost controls. While we have not fully recovered from the pandemic-induced recession, we continue to see gradual improvement. I'm extremely pleased with how our team is executing and delivering strong earnings and cash flow during this challenging time. Finally, I'm more confident than ever that Sonoco is poised to emerge as a stronger, more resilient company positioned to generate solid returns for our shareholders. Now, with that operator, would you please review the question-and-answer procedures.

Our first question comes from George Staphos with Bank of America. You may proceed with your question.

Hi, everyone. Good morning. Thank you for all the details. I guess the first question that I had, you mentioned some of the puts and takes within the consumer segments in the third quarter. Howard, how did your customers run during the quarter? Were there any supply chain issues looking at the front end that might have helped, or maybe impaired your ability to generate volume in the quarter? And what is the outlook on that flow through to retail at the present time?

George, our customer, frankly, to the quarter ran well. We certainly saw some disruptions in the second quarter, but really no issues there at all. That I can think of, Rodger do you have anything to add to that? No, thanks. Again, the shock of Q2 has been recovered, and folks seem to be managing through it fairly well.

Okay, thanks for that Howard. The next question I had is on PICP in industrial. Obviously, the pandemic had a pretty big negative effect on you this year. Kudos to you and the team on the productivity there and frankly, across the whole organization. What would you need to see, if we had a crystal ball that was perfectly accurate, what would we need to see in terms of macro or demand? Or whatever else you choose to put into this for paper industrial converted products to be up year-on-year and EBIT in 2021 versus 2020? And for that matter, comparable with 2019? What would have to happen? And related point, do you have the price increases? That you are out with today? Any benefit at all? I wouldn't imagine so. But any of that built into your guidance for the fourth quarter?

Sure, thanks George. I guess what would need to happen? First of all, frankly, we are seeing it on particularly here in North America as relates to the paper business. We noted, we experienced backlogs, not only on the Euro-based side of the business from the number 10. So it is certainly not a volume question as it relates to the paper side of the business. And I'm going to jump ahead and talk about the price increase. Now we didn't build anything really into the quarter based on the timing of the yield. But that would be the second component to your first question for the paper side of the business. So we are feeling pretty good as we finish out the year and go into next year. On the tubes and core side, you really got to look inside the quarter to see the sequential improvements, certainly quarter-over-quarter, but we are seeing month-over-month. So frankly, we will just need to see that continued pace of ramp up. And if it was to continue at the type of rates that we saw from the second half of last quarter onwards, we could be fairly close to the areas that you are talking about within the first quarter of next year, maybe end of the second. But there are a lot of caveats obviously built around that side of it. But Rodger unless you have got any?

No, I think you covered Howard. I mean, George sequentially, we saw improvement, our tubes and core business, the film tape second textile, every month of the quarter and the same for the paper segment. Every month of the quarter, we saw improved output and we saw higher unmade orders. And if you look at operating margins for the industrial segment and improved from July to August, improved from August and September and we expect that to continue in October.

Last one, I will turn it over, thanks. If you think about how COVID and the vaccine might affect the business, I know it is too early to call. I know there would be very, very wide guardrails around this. But in the scenarios as you have thought about them calculated and painted them, what could a vaccine do for Sonoco on an annualized basis within protective? Thank you guys.

We have run - first off, we have for some time, basically, from the beginning have been working very closely with our customers to make sure that we have the available capacity. And we are preparing, we are prepared for that. And, of course, have run various scenarios in terms of what it could mean to us. And I'm not sure at this point down, we know enough for to actually throw a number out there. Because there is such a wide range, it just really depends on, is the solution an existing customer that we are predominant, or 100% supply. That is a beautiful thing to think about on the high side, but it could be a solution that is not a customer. But our expectations are based on the high level of global demand that no matter who comes up with the solutions, that they will have to engage across the supply side to ensure that the demand requirements are met.

So, how much should you increase your capacity, Howard?

Roger, why don't you jump in on that one.

Yes, George, what I would tell you is, obviously we have got great experience already delivering high volume vaccines, we do over half of these seasonal flu vaccine in the U.S. every year. You know, this year, we are seeing a spike of about 30%. So, we are going through that season now. We are about halfway through that season, at the end of the third quarter, we will finish it up in the next, let's call it 30 to 45-days. The nice part about the COVID vaccines coming, seasonally they will be starting to really drive through our system we think in mid first quarter all through second quarter. So seasonally, the vaccines season - that is the slow season for the seasonal vaccines. So, we have got existing capacity ready for these six customers. And we are meeting with many of them today talking about where can we go ahead and upfront add capacity. So, it is hard to give you an exact number except to say we are working closely with all them and trying to be as prepared as possible for the necessary capacity once they are ready to roll out the vaccine.

Thank you very much guys.

Thank you. Our next question comes from Mark Wilde with Bank of Montreal. You may proceed with your question.

Great, thanks Howard, good morning. Howard I want to just start off, if we could talk about the decision to just hold the dividend flat. I think probably the whole time you have been working at Sonoco the dividends gone up every year. So, maybe just provide us with a little color on the board about that decision?

Well, I guess maybe the easiest way to say just a bit of extra precaution as we go into the fourth quarter. And if you are talking about the year-over-year, we did - but we are not doing now we are planning to take a hard look at it in February. And if we take action in February, we maintain that annual year-over-year increase. So, we just felt like at this time, let's operate with an abundance of caution and revisit this in our February Board meeting.

Okay, and then secondly, I wondered without getting too kind of granular on the call just, the potential for any kind of further portfolio moves in the wake of the European display sale?

Yes, and thank you for pointing out non-granular. We are certainly looking at - continue to challenge our portfolio. We see opportunities, and that works in progress.

Okay. And then the last one I want to ask is just, you know if you have given any thought that kind of improving the effectiveness of the company in terms of M&A capital. It seems like over the last 30 years, you have spent a lot of money on various forms of consumer packaging. But if we step back and look at a company today, the biggest piece of Consumer Packaging is probably still the legacy composite canvas where you have not only grown the core, but you have added things like this deal you just did in France, or that deal you did over in Europe about four, five years ago.

Yes, where we are absolutely clear. I think I have mentioned to most of you, certainly, individually, maybe even a previous call, that we have been going through our strategic planning process. And part of that is talking about just what you are suggesting, going back in time looking what has been successful for the company, maybe some things but not so. But to start with, to say that what one walk away is outside of the cleaning up of some businesses that you noted earlier, where we feel like we have got a fairly solid foundation. We don't need to add any more capabilities, if you will from an acquisitive perspective. And the real takeaway from the early view of our strategic plan reviews I spoke to, during my comments, and that is looking in the mirror before you look out the window. And one of the things we are seeing is that we have got as our business units come to us and say, feed me more capital, I have got more returns to deliver for our owners, our shareholders. And we can actually generate even organic growth in businesses otherwise. Maybe previously, we thought not. So that is where I get into that conversation about investing in yourself. And we recognized that is why the highest level of returns correlates to our chain coming through from the paper division saying give us $30 million more and we can improve the flow of this complex and generate a really nice return. So sorry for being long winded is to say, acquisitions are going to be important to us that they are going to be relative to the markets and the products that we produce today. But you are going to hear from us overtime that we are going to spend a lot more activity and dollars around improving the foundation of this business.

Okay, very good. Thank you. I will turn it over.

Thank you. Our next question comes from Gabe Hajde with Wells Fargo. You may proceed with your question.

Good morning. Thanks for taking the question. Just two quick ones, as it relates to project horizon. I just want to confirm, Howard that you are not in fact adding any additional capacity or freeing anything up. This is more about, I guess, improving efficiencies. And then you and the industry has done a pretty good job or some heavy lifting in terms of keeping supply demand and balance and more recently, we heard of someone adding a little bit of capacity on the URB side. I'm just curious if you are still kind of looking across your platform to further optimize or if a lot of that work has already been done.

Thanks Gabe. Yes second phase of project horizon, they are basically two different projects. We have got a 100-year old mill complex and I'm not going to try to explain to you the inefficiencies that we have in terms of how we are handling raw materials and finished goods, but it is all about what you say, it is a step up change in terms of efficiencies, not just related to the number 10. But the machine, but to all of the conflicts. Aware of that new facets coming in the market. But we are going to continue to challenge our output and our footprint on URB side. But it is more related to what we have done over the last call it four plus years, where we have, many of you remember, on AS project, where we have increased capacity in our best machines, and took out capacity by keeping the market relatively stable. Of course the same conversation around project horizon, big fancy coming under market flow. That is the whole point, we are positioning ourselves as low cost producers. We are going to be the strongest player in this market. And if others want to come into the market, so be it, but we are very confident that we are going to be able to be highly, highly competitive, going forward. And yes, we are going to continue to challenge how do we become that much more efficient in everything we do.

Thank you for that. And Julie maybe on the recent divestiture announcement. Now I appreciate there is some timing associated with it. But assuming you kind of redirect capital, I think you said to kind of pay down debt. Can you give us a directional ballpark, I think you said a penny per month. But just what the net impact might look like for next year on a bottom-line basis or something?

Yes sure Gabe. Yes, the full-year estimated EPS impact of DNP Europe is around $0.15. So that is what we would expect kind of full-year 2020 to full-year 2021, roughly.

Thank you. Our next question comes from Steve Chercover with D.A. Davidson. You may proceed with your question.

Thanks. A couple might have already been answered. But there is a new company that is making a bit of a splash in biodegradable plastic packaging. And I'm just wondering how you are pursuing biodegradable plastics for some of your perimeter of the store applications?

Well, not necessarily. There is so much news about so many emerging technologies here. Not completely aware of the company referencing but from our perspective, our focus from the store is PET, it is, they are Orpet content going into the package. And where we are spending a lot of our time and effort is ensuring that first and foremost that first understand that a berry tray is recyclable as a water bottle. In fact, it is components as we built off of recycled water bottles. And so we are spending more time in terms of educating and participating with industry to ensure that folks recognize that. And I will add in knowledge to bring the topic up. I'm really pleased we have announced really last week that we now have, for the first time ever, staff Vice President Head of Global Sustainability reporting to me to really help organize our efforts around our formats within our company and just put a plug in or an envelope with a throw and then with this company for 15-years and a superstar, and I'm really looking forward to her contributions and further position on ourselves as a sustainable company.

Well not be argumentative, but I think the knock on plastic is that we know what's recyclable. And we know that the overwhelming majority isn't being recycled. And that is why people are excited about the biodegradable elements so.

Yes, fair enough. but that is what the industry is working on right now is to get that message out and make sure that the collection programs are in place to increase the amount of material that is coming back into the system versus into the landfill, but don't disagree. If there is a holy grail in terms of a fully biodegradable, that is something to be looked at.

Okay, and one quick clarification from Julie please. So, if the European packaging or contract packaging is a penny per month, then how is the impact in 2021 $0.15, I thought it would be less than $0.12, assuming you pay down some debt?

Yes, well you know I was really focused more on the kind of operating profit after tax and tax of that business. There is some seasonality I think as you know, in the displays business, and so the fourth quarter is generally slightly lower than other particular quarters during the year for that business.

Thank you. Our next question comes from Salvator Tiano with Seaport Global. You may proceed with your question.

Yes, hi. Thanks for taking my questions. So first it will be on your capital structure and capital allocation. Obviously, you raised from that as many others did in Q2 due to COVID uncertainty. But you seem to be paying these quite slowly, even though on a net basis, I see quarter-to-quarter you keep on delivering. So, what is the rationale for maintaining most of this debt even after the 300 million you just mentioned, on your balance sheet at this point? Do you see, for example, any near-term M&A opportunities that presented themselves and you should be ready to add that?

Hey Sal, it is Julie. Yes, I mean, I guess we did repay in the second quarter, and very early in the third quarter, July $250 million term loan. And I mentioned in my comments, we are actually repaying another 300 million of bank term loans today, just drawing down excess cash, and I wouldn't be surprised, depending on - based on what I know, today, if we have already paid all of our short-term prepayable debt by the end of this year. So, we are, we wanted to see how the third quarter went, you know, came through, we are extremely pleased with the results of the business, and especially the cash flow generation, which again, is driving this 300 million today. And again, I expect more debt repayment in the fourth quarter. At that point, I mean, again, we have paid our short-term debt. And we have mentioned for next year, we do have stem for project Horizon, we have our pension termination related contribution. And so, in addition to potential acquisitions, we do have some, kind of call it invest in ourselves higher stem next year that we are also planning for. So, all of that comes into play when we look at our cash in debt.

Okay, perfect. Thank you very much. And my second question is a little bit on the price increase. If you can remind us of how - you came out also the tube and core price increase. And if you can remind us, we see your one million from North America system how many tons of open market URB sales and converted to core sales have been affected by what you announced? And what other pricing mechanisms you have in place.

Yes, Sal, it is Rodger. In round numbers, in both our paper and tube and core business, about 50% or so of our price change mechanisms moves up - moves up the chip index. Probably about 25% or so to move off OCC and another 25% are open market. So as you look at price increases for both paper and tube and core what you need think about what can we do in the open market. So it is about 25% of the volume. And then when does the chip index, which is totally up to that organization as we go forward. So that is why we built in a minor amount of price impact into the fourth quarter. So more than in fact, will come in starting in the first quarter of next year.

Okay.

Thank you. Next question comes from Adam Josephson with KeyBanc. You may proceed with your questions.

Thanks. Good morning, everyone.

Good morning.

Good morning.

Howard, it seems like the construction market is in need of some help. So I hope you and everyone else there is planning to do your part this Halloween season.

I'm hoping, yes, thanks for getting that out, get that message out.

One more on the portfolio, Howard. So I know you are selling the European display business. But just more broadly, tell me if you disagree, but I think Sonoco is viewed as somewhat of a hybrid in that you have many defensive characteristics, the balance sheet, the dividend, the consumer business, but you have some cyclical aspects as well, notably the paper and industrial business. So you don't fit in a neat bucket either by Sonoco in an Armageddon scenario or by Sonoco in some reflationary economic recovery scenario. And I'm just wondering, if at all you think that affects the multiple at which you trade versus your competitors? If you think there are misperceptions in terms of where you fit in a portfolio is saturated? Just if you are satisfied with the stock performance, given what your earnings performance has been in recent quarters and years for that matter?

Yes, thanks Adam. Of course, I'm not satisfied with our stock performance. And, to your point first off, when we talk about cleaning up the portfolio, there are some outliers that I think most of you have even recognized that we are working on. But if you talk on the broad perspective, it has been a long-standing strategy of the company that we participate on the consumer side of the market and on the industrial side of the market. And what that has done and you can go back in time period after period in terms of situations, just like what we went through, and are going through right now are you see a good balance in terms of strength on the consumer side that is able to overcome weaknesses. So in effect, it is kind of built into our internal thesis is that we are a company you can invest in, and we can pretty much guarantee you consistency throughout the good times and the bad times. Got a balance sheet that reflects that and, as Mark pointed out, a record in paying dividends. We feel like these are all things that are extremely important to the owners of the company or investors. And so we are absolutely going to continue maintaining that balance. But I do want to point out again, that the industrial side of the business, if you go back to the last recession. Our even margins were vastly different than they are today. And if you think about the amount of self-help that we put in terms of improving operations. We feel like we have created a new floor as we are walking around this 7% type range. We should get that business back in normal times to that double-digit, low-double-digit type space. So the strategy is a strategy and we are going to clean it up, but we are going to continue to invest so that we can improve the returns on these foundational businesses.

I appreciate that Howard. And Rodger Fuller, just one for you back to the paper backlog in North America, et cetera. So I think what you said was that there was gradual improvement demand a permit throughout the quarter. But you found yourself in a position in which you have very low inventory such that I believe you said you are actually having to postpone maintenance outage. So I just, I guess I don't quite understand if it was gradual improvement, why you would have found yourself short of inventory. And so can you just talk about, again, the pace at which demand got better? Was there a sharp recovery, say in September? Or was it really, in fact, gradual? What you think is driving this improvement? And particularly just given the resurgence of COVID cases throughout the country? Are you at all surprised by the demand or however you are seeing?

Yes, thanks. I think gradual, certainly it was gradual in the season course of out of our business. And again, I think that is even core volumes for the fourth quarter will look a lot like the third quarter. What we have seen is pretty fast improvement, substantial improvement and unmade orders starting really in first July. And it expanded each month throughout the quarter. Recently reported the unmade orders for September they were the highest since January. In October, you are going to see higher number, I'm sure. Which will be the highest and sometimes last year. We are turning away orders. A lot of it is you are seeing the pickup and economic activity. So especially a category for liners external to the core volumes very strong. So were we surprised a little surprised about how fast it came on. But I think the fact is, it looks like it is going to stick and it seems to expand every day and every week. So that is kind of where we are today. So the pickup as quick as it happened, surprised, as far as we are concerned it looks like it will last through the cycle again.

Okay. Thanks Rodger.

Thank you. Our next question comes from Ghansham Panjabi with Baird. You may proceed with your questions.

Hey guys thanks for putting me in. I guess just as a follow-up to Adam's question on paper and industrial. So your volumes were down 10% in Q2 just cut around a little bit and 8% in 3Q? How should we expect that progression over the next, I don't know three quarters? And the reason I ask is because, obviously 2Q was impacted by the shutdown, et cetera. A lot of other companies that haven't done so exposure have commented on a more significant recovery sequentially, and what you showed?

Again, sequentially, I mean, if you even look outside of our industrial businesses. I mean, think about our auto consumer businesses, in the sharp turnaround there. So, in some of the what you may classify as other markets out of industrial, we are seeing that. But yes, we are seeing - going sequentially for paper, we are only giving going so far for the fourth quarter. So, we are seeing that strength really pick-up, tube and core, again, I think you will see flat in the fourth quarter. So, at this point, I think as far as we can see, those paper volumes remain extremely strong. I don’t know if you guys -

Yes. And I can get pretty direct, and just say, as we modeled our Q4, down from this you noted the 10% - 8% last, we are going to say we are modeling about a 5% for Q4. So, that is inclusive of exactly what Rodger talked about with improvement and paper and tube and core as well.

Okay, terrific. And then on consumer, can you just remind us how big industrial plastics is, as a percentage of that segment? How much was a doubt in 3Q? And then the same for flexibles as well. How much how much was flexibles down in the quarter? Yeah, I'm sorry, if I missed that you already said it.

Yes, this is Julie. The industrial business is - of the it is -

130 million in annual sales, for the quarter if it impacts us on a volume basis, around $7 million. So again, it was fairly substantial impact to that plastic space. And as Julie mentioned, if you look at our overall consumer volumes that actually added about 4% in terms of our volumes. So again, that kind of shows the impact of that one particular component. Again, kind of offset really strong performance and, and some of our pure consumer related plastic businesses. Maybe switching deflectable, we were a little bit lower, for the year. And again, as Rodger mentioned, that was principally driven by confectionery being down what it was. The other businesses did fairly well. But again, when you are having people not buying, those sweets that they normally like to get when they are in and out of convenience stores are traveling, as well as the slower build that we see for Halloween this year, that had that negative impact.

Okay, and then just one final one, maybe for Julia is, can you quantify the temporary savings that you experienced in 3Q that may now see going forward? What was the dollar amount of that?

You know our travel, just as an example, was down about $6 million a year-over-year. I mean, I think what is interesting is, there are costs that are down specific to the pandemic. And it is in a group medical is another kind of million or $2. So, then you have got the reality that, unfortunately, incentives are down as well. And so there are various, costs that are lower, so I'd call it in the, kind of maybe $10 million or so.

 And, again, some offsets gone from as we talked about, there are increased costs, because we are having to make sure that our employees are in a safe environment. And that is so we are having to increase additional costs as well, which we don't remove from our discussion.

Okay, that is a good point. Thanks so much.

Thank you. Our next question comes from Josh Spector with UBS. You may proceed with your question.

Hey everyone, thanks for squeezing me in here. Maybe a build from that prior question is just if you look at the productivity that you guys have done year-to-date, and your comments about your expectations around fourth quarter, you know you are probably looking at maybe $100 million $110 million or so in productivity this year. Basically above what you guys have done in the prior years, I guess, if you would have bridged into next year and assume a modest volume recovery, how much productivity should we expected to next year? How much get fast from this year would you expect?

Yes, it is pretty hard to say. but before I'm going to hand it over to Julie on specifics. But I appreciate you bringing that up, if productivity has been really critical to our performance this year, and it is across the board. And I just have to give recognition for the fact of how much energy we have put in and over the last three, four, five years as relates to procurement organizations or SBS operational and direct investments. So, it is amazing, really as we watch these volumes start to slide back in that we are starting to see what we really are able to do a lot more with less. But Julie as it relates to next -

Yes, sure. I'm looking at 2019, we delivered close to $50 million in productivity. And, you are right. This year I think we will easily be above $100 million. So, I think for next year, in between those two, when you look across supply chain, fixed costs, efficiencies in the factories again - we have been really doing a lot of restructuring, as you have probably noticed this year, taking out unnecessary costs, that we will be able to leverage more as long as those businesses as volumes increase. So, I think it is reasonable to assume next year lands basically between 2019 and 2020.

Okay, so you would expect incrementally productivity to be additive to growth next year, and there is not really a headwind we should consider for some of the temporary items. Is that fair?

Yes. Absolutely. When you look back at our history, I mean, we generate productivity every year across the different kind of levers that we focused on. And so absolutely, we would expect the continued contributions from productivity next year.

Okay, thank you.

Thank you.

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Roger Schrum for any further remarks.

Again, thank you all for staying with us. And we appreciate your questions. We certainly also like your interest in the company. As always, if you have any further questions, please don't hesitate to give us a call. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.