Good afternoon, ladies and gentlemen, and welcome to the Q1 2021 Sonoco Earnings Conference Call. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder this conference call is being recorded. I would now like to turn the conference over to your host, Roger Schrum. Please, go ahead.

Thank you, Angela, and good morning, everyone, and welcome to Sonoco's first quarter 2021 investor conference call. Joining me today are 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 first quarter financial results, which also 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 operation. 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 in the Investor Relations section of our website. Now, with that, let me turn it over to Julie.

Thanks, Roger. I'll begin on slide three, where you see that earlier this morning we reported first quarter earnings per share on a GAAP basis of $0.71 and base earnings of $0.90 per share, which was at the top end of our guidance range of $0.80 to $0.90 per share. At a high level, our first quarter results reflect solid top and bottom line results, despite various unexpected headwinds from severe weather in the U.S. and global supply chain disruptions. In terms of the $0.19 difference between base and GAAP earnings per share, $0.05 related to restructuring and asset impairments, $0.05 was from non-operating pension costs, $0.03 reflects the loss on our display and packaging U.S. divestiture and $0.06 primarily is related to acquisition and divestiture transaction costs. Moving to our base income statement on slide four and starting with the top line. You see that sales were $1.353 billion, up $50 million from the prior year period. I'll review more details about our key sales drivers on the sales bridge in just a moment. Gross profit was $278 million, $11 million above the prior year's quarter. This performance resulted in a solid 20.5% gross profit as a percent of sales, which was equivalent to the first quarter of last year. SG&A expenses net of other income were $138 million, an increase of $15 million year-over-year. This increase was expected and key drivers were higher expenses for normalized management incentives, strategic IT spend, as well as property insurance premiums, all thus resulting in first quarter 2021 operating profit of $140 million. I'll discuss the key drivers on the operating profit bridge in a few minutes. Net interest expense of $18 million was $2 million higher than last year, due to higher debt balances than in the first quarter of 2020. As a reminder, this relates to our conservative liquidity actions in the uncertain COVID-19 environment. Income tax expense of $31 million was $2 million below last year, due to both our lower pretax profits and slightly lower effective tax rate. Our current quarter's base effective tax rate was 25.7%. Moving down to net income. Our first quarter 2021 base earnings were $92 million compared to $95 million last year. On slide 5, you see our new operating and reporting structure that is more simplified and better reflects how we are managing our businesses going forward. With this change, we are reporting our results in two segments: Consumer Packaging and Industrial Paper Packaging. Our remaining businesses are presented in an All Other group. Our previous Protective Solutions and Display and Packaging segments have been eliminated and their businesses moved into this new structure. Changes to the Consumer Packaging segment include moving our TEQ healthcare packaging and industrial plastics business into All Other. Industrial Paper Packaging is relatively unchanged except that our fiber protective packaging unit has been added from the former Protective Solutions segment. All Other includes our healthcare and protective packaging businesses including TEQ, ThermoSafe, our consumer and automotive molded foam business as well as our alloyed retail security packaging unit. Now looking at the sales bridge on slide 6. You see volume mix was higher by $46 million or 3.5% for the company as a whole. This increase reflects solid demand and two additional shipping days in this quarter versus last year. I will add that the severe U.S. weather event in February of this year had a negative impact on our top line of around $9 million. Our Consumer Packaging segment volume was up $24 million, or 4.5%. We continued to have impressive growth in Global Rigid Paper Containers, which saw volumes increase by 8%. Plastic food volumes were up almost 3%, while our flexibles volumes were essentially flat. In our Industrial Paper Products segment, volume mix was up $13 million, or 2.6% driven by strong recoveries in our protective fiber and our global tubes cores and cones businesses. Finally, our All Other group saw an increase of $9 million, or 3.3%. This was driven by stronger volume across our industrial plastics business as well as our medical plastics and ThermoSafe businesses. Moving to price. You see that selling prices were higher year-over-year by $48 million. This was primarily in our Industrial segment, as we worked to recover escalating OCC costs around the globe. Moving to acquisitions and divestitures. You see a top line reduction of $60 million, which is mostly driven by the Display and Packaging Europe divestiture, but partially offset by the addition of Can Packaging in August of 2020. And finally, the sales impact from foreign exchange and other was positive by $16 million. The primary driver was foreign exchange translation associated with a weaker U.S. dollar year-over-year. So moving to the operating profit bridge and starting with volume mix. Our higher sales volume combined with favorable sales mix had a strong lift on operating profit of $20 million. This favorable impact was spread among the segments, but with a more pronounced impact in industrial due to improved sales mix across our global paper mills. Shifting to price/cost. I will remind you that this category includes the earnings benefit from higher selling prices, as well as the impact of total inflation. In our first quarter, we had $28 million of unfavorable price/cost. Our Industrial segment was hit the hardest with price/cost challenges due to the higher OCC costs internationally as well as higher-than-expected inflation and operating costs like energy and freight. As usual there is a slide in the appendix that shows recent OCC price trends and you'll see that Southeast OCC official board market pricing was at $85 per ton in January and February this year until market pressures caused a jump to $90 in March. This resulted in an average of $87 per ton in the first quarter, a $45 increase over the first quarter of last year. We do anticipate continued headwinds in OCC cost escalation this year and this is evidenced in April when the market moved to $95 per ton. Next is the impact of productivity, which includes all results from our productivity actions including manufacturing, procurement and fixed costs. You see that our total productivity was a solid $22 million year-over-year with a favorable impact across all three segments. Our productivity actions remain an important focus area across our business as we work to overcome inflation and ultimately drive higher margins. Moving to acquisitions and divestitures. The $3 million decrease in operating profit is the net impact from the Display and Packaging Europe divestiture and the Can Packaging acquisition. Finally, the operating profit change in foreign exchange and other was unfavorable by $15 million with various moving pieces mostly within SG&A expense. Moving to slide 8. You'll find our segment analysis where you see that consumer packaging sales were up almost 8%, driven by the addition of Can Packaging and higher volumes driven by COVID eat-at-home behaviors and the two additional shipping days in the period. Consumer segment operating profits increased by almost 19%, driven by strong volume mix and productivity results. Our Consumer segment margins increased by 120 basis points to a very strong 13%. Our industrial segment sales grew by 12.5% due to year-over-year price increases as well as recovering demand and the increased days in the period. However, industrial's operating profit declined by almost 16% due to much weaker price cost dynamics compared to the prior year. These headwinds were somewhat offset by improvements in productivity and volume mix. Our industrial segment's operating profit was 8.9%, down by 300 basis points when compared to the first quarter of last year. And finally all other sales declined by 21%, primarily driven by the sale of display and packaging Europe. Operating profit decreased by 32.5% due to the divestiture as well as price/cost headwinds. For this all other group operating profit margins declined to 6.8%, 110 basis points lower than the prior year period. So for the total company, sales increased almost 4% but operating margin declined slightly to 10.3%. Moving to cash flow on slide 9. Our first quarter 2021 operating cash flow was a very solid $139 million, an increase of $51 million over last year. This increase was primarily driven by a reduced consumption of working capital in this year's first quarter, compared to the same period of last year. Our global team's focus on disciplined working capital management continues to show in our strong cash flow results. Looking at CapEx in the first quarter. Our net spend was $39 million this year compared to $31 million in the first quarter of 2020. We do expect our CapEx spend to ramp up over the balance of this year as we make progress on Project Horizon and other important projects. Howard will be providing additional comments on this activity in a few minutes. This takes us to our free cash flow generation of $99 million for the first quarter of this year compared to $57 million last year. And finally, we paid cash dividends of $45 million in the first quarter of 2021, compared to $43 million in last year's first quarter. On slide 10, you see that our balance sheet and our liquidity position remain extremely strong. Our first quarter 2021 ending consolidated cash balance of $588 million, includes approximately $340 million of cash held in short-term investments that are very liquid and of high credit quality. I will add that while we recognize the Display and Packaging U.S. divestiture in the first quarter, we received the cash proceeds on the first day of our fiscal second quarter. Our consolidated debt totaled $1.7 billion at the end of the first quarter of 2021 essentially flat from year-end. As we move through this year, we expect to reduce these cash balances and rebalance our debt portfolio to our historical splits between floating and fixed rate debt. We expect to take actions focused on putting our cash balances to work, while delivering shareholder value and continuing to position ourselves for further growth. So moving to slide 11. You see that our guidance range for second quarter base EPS is $0.82 to $0.88 per share. As Howard will discuss in more detail, this outlook reflects solid demand trends, but also continued intense inflation headwinds as well as the divestiture of Display and Packaging U.S. Shifting to our updated full year 2021 base earnings per share guidance, we are narrowing our guidance to the upper half of our original full year guidance range. Our new guidance is $3.50 to $3.60 as we have increased confidence in the macroeconomic and environment and the related impact on our business especially as we look into the second half of this year. This outlook does include the impact of the Display and Packaging U.S. divestiture, which removes around $0.09 of base EPS for the last three quarters of this year. I'll also note that our cash flow guidance is unchanged for the full year. Our guidance range for operating cash flow remains at $570 million to $600 million, and our outlook for full year free cash flow is still $270 million to $300 million. This outlook does exclude the approximately $150 million pension contributions that we expect to make later in the second quarter related to our pension termination process. So this concludes my review of our first quarter results and our outlook for the second quarter and full year of this year. So I'll turn it over to Howard.

Thanks Julie and good morning everyone. Let me provide some additional color regarding our first quarter performance, and then I'll talk about what we see entering the second quarter. Let me start by saying how proud I am of how our team came together to work through the challenges stemming from severe winter weather and global supply chain disruptions to meet the needs of our customers, while delivering a better-than-expected start to 2021. Our operations were impacted by winter storm Uri in February with more than 40 of our U.S. plants being temporarily shut down due to a lack of natural gas or electricity. Most of the shutdowns were only for a few days and we were able to meet the needs of our customers. However, the storm aggravated already tight supply chains, which is further impacting the availability and prices for resins, chemicals, adhesives and freight. Despite these headwinds our Consumer Packaging segment had a strong result producing the second-best operating profit ever as many of our products continue to benefit from consumers' at-home eating habits. As an example, our Global Rigid Paper Container business registered an 8% improvement in volume mix with North America up 6%; Europe up 9%; and Asia up nearly 30%. Our customers are telling us they are seeing young consumers rediscovering staple foods as they experiment with cooking at home. For example, we have seen a resurgence in products such as refrigerated dough, which is up 27% this quarter in North America and equally as strong in Europe. Our customers are also telling us that the adoption of remote work is providing a structural change in demand for convenient, frozen and prepared meals. This trend is helping our recyclable plastic food tray business, which has seen double-digit growth for the past several quarters. And as I believe we'll start seeing some COVID-impacted categories start to improve as markets continue to reopen. Categories such as confection, foodservice and some medical products are showing signs of growth and we expect this to continue as the year goes on. Switching to our industrial business, we are clearly seeing global industrial markets reopen, which helped our industrial paper segment report sequential improvement in results for the third consecutive quarter, although operating profits remain down year-over-year. In the first quarter, industrial segment sales grew 12.5%, due primarily to volume growth and higher selling prices implemented to offset higher raw material costs and non-material inflation. Global tube, core and cone volume mix improved 3%, as North America volumes were down about 1%, which was more than offset by strong improvements in Europe, Brazil and Asia. Unfortunately, our industrial business continues to be negatively impacted by price/cost, due to rising recovered paper, chemicals, adhesives, and freight. We have mobilized our inflation recovery plans with targeted pricing actions already in the market, others communicated to our customers and some yet to come. Year-over-year, RISI's tan bending chip index has moved up 11% to $780 a ton and medium prices have moved nearly 20% to $735 per ton. Demand for URB and medium remains strong and backlogs in North America are at the highest levels in recent history. As a result, we fully believe additional increases that have been announced will be reflected later in the second quarter. After a slow start due to the pandemic, we're still making solid progress on Project Horizon and still expect the conversion of our number 10 paper machine to URB to be completed in the second quarter of 2022. As we previously mentioned, we're investing approximately $300 million in capital this year into our consumer and industrial businesses. In addition to Project Horizon, we've identified a number of excellent projects that we expect will provide solid growth and margin improvement with returns well above our cost of capital. For instance, we're building a new thermoforming line in our Waynesville, North Carolina plastic food tray plant to meet the increased demand I spoke to earlier for retail and institutional frozen meals. We're expanding our proprietary SonoPost appliance packaging technology into Europe with the opening of a new manufacturing facility in Poland. This new facility will open this summer to service new customers, with a 100% recycled paper-based protective packaging. I'll mention that we saw a 29% increase in SonoPost appliance packaging volumes in North America in the first quarter alone. In addition, we are funding the launch of two new products in our ThermoSafe temperature assured packaging business, including our new Pegasus ULD system, which offers a first-of-its-kind passive temperature assurance unit load device that can provide a cost-effective alternative for shipping sensitive pharmaceuticals via aircraft around the world. Finally, we're funding a number of automation and technology projects to boost productivity in our operations. Earlier this year, we announced we’ll be partnering with ISI, an advanced manufacturing automation and robotics company to help us advance use of automation throughout our global operations. In addition, we're funding capital projects across multiple businesses that will speed production, lower operating costs and reduce the need for product handling labor, which is proving to be extremely difficult to recruit and retain in the current work environment. After capital spending, returning cash to our shareholders remains a top priority. For 96 consecutive years, we have paid cash dividends to shareholders. And we have increased our dividend for 38 straight years and our payout provides just under a 3% yield, nearly twice the S&P index payout. In addition to approving our regular quarterly dividend yesterday, our Board has approved a new share repurchase authorization of up to $350 million. This new authorization further demonstrates our financial strength and illustrates our focus on a balanced capital allocation strategy. Finally, we'll continue to improve our portfolio by selectively acquiring and divesting businesses to strengthen our core consumer and industrial base. Our strong balance sheet and robust cash flow provide us the flexibility to evaluate and pursue most internal and external opportunities. However, we do remain committed to maintaining our investment-grade credit rating. Let me wrap up with a few remarks regarding our second quarter and full year outlook. While we are cautious near term about inflationary risks, we are becoming more confident in our ability to benefit from the developing post-pandemic economic recovery, particularly in the second half of the year. As I mentioned, we expect to see continued inflation in recycled fiber, resins, chemicals adhesives, freight, and other operational costs. We have a number of operational and commercial levers that we can pull to offset this pressure, of course, including price. We also expect demand in most of our Consumer and Industrial businesses to remain solid for the foreseeable future. The pandemic has provided a period of significant elevated consumer demand and we believe consumers will largely maintain the habits they've acquired over the past year. With 80% of our consumer portfolio focused on fresh frozen and processed foods, we believe we are uniquely positioned to continue benefiting from consumer at-home eating needs. Demand for uncoated recycled paperboard remains strong globally and our tube core and cone products are also seeing a resurgence in demand close to near pre-COVID-19 levels in most of our served markets. Finally, I'd be remiss, if I did not mention our sustainability efforts, particularly since today is the 51st anniversary of Earth Day and we have quite a number of activities planned. Recently, we hired a senior leader of sustainability reporting directly to me to work more closely with our customers to identify opportunities to meet their challenging product requirements. With that in mind, we continue to expand our EnviroSense line of sustainable packaging that incorporates increased recycled content and improved recyclability. EnviroSense is represented across our portfolio from rigid plastics to flexibles, to our iconic paper containers. In fact, we recently began working with a customer in Europe to transition their product to one of our EnviroCan paper containers from a less sustainable substrate. We do expect this trend to continue. Now with that, operator, would you please review the question-and-answer procedures.

Our first question is from Gabe Hajde with Wells Fargo. Please go ahead.

Good morning, guys. Thanks for taking the question and congrats on a solid start to the year. I was curious maybe Howard, if you can talk a little bit about the Consumer segment. And I think one of the questions or a lot of interest that we're getting is folks are somewhat fixated on week-to-week Nielsen data that is obviously negative, because we're comping some pantry stocking. But to the extent, you have any visibility, can you comment at all about inventory levels either within your operations, or again, kind of what you detect on your customer side, and I guess the potential for any kind of choppiness over the course of the year?

Thanks, Gabe. I'd say inventories are tight right now, particularly, if you think in context of the impact of the winter storm. We as well as our customers in terms of their feedstocks have had to go through various different channels just to ensure that we're able to maintain the flow of goods and products. So our inventories are low right now. And what we're hearing from our customers is very similar. So really aren't seeing a big concern there. The other, I would just note that, we've talked about in the past as it relates to the products that we actually serve on the consumer side, they're relatively quickly consumed. So we're just not seeing any of what you're referencing here as it relates to inventory in the system on our side, our customers' side, and their customers' side from that standpoint, and that's my comment about the turnover of our products in the pantries.

All right. Thank you, And then I guess, Julie, the one thing that stood out for me on the operating profit bridge and I think you called it out mostly was maybe some management incentive comp. But that $15 million or so is that expected to kind of continue over the course of the year, or can you give us any look into how that might play out?

Yeah sure. Yeah we actually, I would say that type of variance or bridge item probably will continue as we've mentioned in our full year guidance. We absolutely plan for higher IT strategic spend. We knew property insurance premiums were going up. And as well as long as 2021 played out like we expected, we would be back to accruing incentives at target versus or appropriately depending on our outlook for the business versus what we were doing last year where obviously there was weakness very specific to COVID. So, yeah, I think I mentioned that our SG&A results while higher year-over-year in the first quarter were pretty much as expected. And so I'd expect that to continue generally through the year.

Your next question is from the line of George Staphos with Bank of America. Please go ahead.

Hi, everyone, good morning. Thanks for the details. My line drops, I apologize if you already answered this question. Howard congratulations on the performance in Consumer. When you were talking about where you're adding capital this year, you enumerated a number of projects. One area you didn't really mention was composite cans. Even though the paper can business seems like it's having a great year, why are you spending or why are you not spending behind the growth that you're seeing in composite cans? And if you are spending where are you putting it in terms of the growth outlook there?

Yeah. Thanks George. Yeah, the intent and what the list I went through was just to give you a snapshot across the portfolio. We absolutely are engaged in capital expenditures on the can side of the business. From a project perspective we've got a second line that we're going to be putting into Brazil for growth that we're seeing there. Can packaging is just absolutely starting to – I hate to use the word explode, but it seems like – in fact I got a note that we picked up even another series of customers related to that technology and so we are extremely bullish in putting a lot of dollars deservedly, particularly on an international perspective. And then finally I didn't spend a lot of time talking about automation, but that's across the portfolio. It's something that drives the return in and of itself but it also addresses what I think we have a problem just across the country in terms of labor availability. But no we're very focused and are excited about the opportunities that we have going forward on the can side of the business.

I appreciate that, Howard. Listening to this, it seems you have shown impressive growth and great returns with Can Packaging. You didn't mention much about North America, even though we’re seeing volumes that we haven’t witnessed in the last 25 years of covering your company. Does this imply that you're not very optimistic about the composite side in North America, despite the idea that consumers are rediscovering packaged foods? Or are you being modest about the investment in growth that you expect to sustain? How would you respond to that?

We remain very optimistic about North America and have seen consistent growth over the past several quarters. What surprises us is that some highly seasonal categories have shown significant improvement. We view Can Packaging not just through a European lens but as a global opportunity. This new acquisition was intended for quick technology deployment worldwide, but we were impacted by COVID. Now, we are making progress in Europe and have identified projects elsewhere globally. Our recent automation partnership with ISI aims to enhance our ability to leverage the technologies from the Can Packaging acquisition in North America and beyond. Overall, we are very satisfied with our performance and outlook across all markets in our can business.

Last one and I'll turn it over. Just a quick question. You mentioned growth in rigid plastic, but it seems like fresh food was a bit weak for you. I'm assuming this is related to COVID and shoppers not necessarily being out and shopping around the perimeter of the store. But if I recall correctly, what was driving that relative weakness? Is any of it connected to the ongoing issues you've faced in that business over time? Thanks, and I'll turn it over.

Sure. Thanks, George. Thank you again. From a perimeter perspective, it's somewhat seasonal in relation to the berry harvest. But Rodger, do you have any insights?

Yes, George, Rodger. The only other comment some of that volume weakness you're seeing is from our consolidation efforts that we took on the West Coast last year. And the good news is the EBIT impact is where we expected to be but we did give up some volume in that consolidation.

Your next question is from the line of Adam Josephson with KeyBanc. Please go ahead.

Thanks, good morning everyone. Julie one question on the guidance. So, you lost $0.09 from the sale of US Display. You nonetheless raised your full year range by $0.05 at the midpoint, so $0.14 underlying increase. I assume that's all volume-related. Is there any other moving parts there? Are your inflation expectations higher than they were three months ago? Can you just talk about whatever moving parts there were in that $0.05 uplift?

Yes, you're right that we had Display and Packaging US in our original full year guidance. Specifically, the $0.09 is impacting the latter part of the year. The increase in our guidance is primarily focused on the second half. We are optimistic about volumes continuing to rise as the year progresses, despite anticipating a challenging Q2 in terms of price and cost. We are hopeful that inflation pressures will ease in the third and fourth quarters, allowing us to be better positioned from a price and cost standpoint. Much of this is driven by our positive outlook for the second half of the year. Does Rodger want to add anything, or are we all set?

Nothing, you said it well.

Wonderful. Julie, regarding raw materials, you and Howard mentioned your expectation that OCC will continue to rise beyond its increase to $95 in the Southeast in April. What are your expectations for OCC, as well as for resin and chemicals? Given the significant production disruptions in February and throughout the first quarter, along with ongoing maintenance in the Southeast, one might assume that OCC wouldn't increase much, yet it seems to be rising. Can you elaborate on what you're currently experiencing and how much more you anticipate it will increase? Additionally, I believe OCC is at an all-time high in Europe. Do you have any insights on when you expect that to moderate?

Yes Adam, this is Rodger. I'll start and Howard and Julie can add in. But as we look at the second quarter and some of this is pretty recent, but we're expecting OCC throughout the quarter to get up into the 120s at this point. That's more than probably it was expected 30 days ago. But you know everyone knows the strength of the containerboard market that continues. We're seeing very strong bids for any new open opportunities that come forward for future contracts for OCC. We're starting to see some more availability of containers still pretty tight, but they're coming available. So you'll start to see more exports. So all of that in our opinion is going to drive OCC up a little bit from what was expected probably 30 days ago. So, the answer to your question up into the 120s by the end of the second quarter. To hit the price side of that you've seen the move in RISI last week on both medium and URB. So we fully expect we can offset that, but we do expect the additional OCC headwinds. On resin you've seen the impact in the first quarter tremendous. We expect most resins will peak in the second quarter. About if you look at the basket of Sonoco resins about half of what we buy is PET. We see that peaking this month. Polypropylene probably peaked at the end of the second quarter. The rest of the basket all the other resins will peak sometime in the second quarter. So as Julie said, we expect second quarter to be our toughest quarter from a price/cost standpoint in our resin-based businesses. And finally, Europe we are starting to see those record OCC prices start to peak out in Italy and Spain. So as you said, they are at record levels, but we expect those to sort of moderate. And we're in the midst of our third or fourth price increase announcement in Europe to recover that inflation as well.

Thank you, Rodger. I have one more question. Can you discuss freight and labor? I may have missed it earlier in the call, but do you anticipate those pressures to ease? I assume you're not expecting labor pressures to lessen given the enhanced unemployment benefits. Could you share your thoughts on how significant freight and labor have been for you and what your expectations are?

Yes, labor is very challenging for us. We are having difficulty hiring the staff we require for many of our operations, which ties back to Howard's remarks about automation. We have several strong initiatives in our Tier 1 plants aimed at helping us manage headcount, not to eliminate current jobs, but to ensure our lines run efficiently and we can deliver products to our customers. Therefore, labor will remain a challenge, and we do not expect any improvement this year. Freight has also been tough, particularly in the first quarter. We anticipated a 10% increase in freight costs for the year, and it seems we experienced an even higher increase in the first quarter, although we are seeing some signs of moderation. I still consider that a reasonable estimate for the year, as freight costs fluctuate but the level of inflation remains steady and should be factored into your evaluations.

Your next question is from the line of Josh Spector with UBS. Please go ahead.

Hey, hi. Thanks for taking my question. Just curious on the industrial volumes side of things. Understanding the first quarter impact from storms in the US, just curious what utilization and what output could do from a volume perspective sequentially into the second quarter? I don't know if you could provide any characterization of how you're thinking about that.

Yes, this is Rodger. Looking at the second quarter, we are observing a sequential improvement in volumes of 1% to 2% compared to the first quarter. Year-over-year, this shows a significant improvement since we were at the beginning of the pandemic. If we consider achieving core in the 1% to 1.5% range, we expect to recover from the storm, likely reaching around 3% to 4%. Therefore, I believe that a 2% improvement in volume quarter-over-quarter is a solid estimate.

Thanks. That's helpful. And just within the Consumer Paper Packaging side to kind of come back to that. I don't know if there's a way that you can frame the typical churn that you see in that business or like a win-loss ratio. And just curious if things are any different now versus two years ago. So if some of the consumption trends normalize would you expect sales to be higher or lower versus that time frame?

Yes, Josh, this is Howard. Currently, conditions are quite stable in North America, as I mentioned earlier. We're observing an increase in volume in Europe and Asia, with Europe showing significant growth. This seems to be linked to the Can Packaging acquisition as well as the overall sustainability aspects of the packaging. Asia continues to grow, maintaining double-digit increases for several quarters, and we recorded a 30% increase this quarter. If I had to assess our position, I would say we're currently on the winning side, even though we don't specifically track it globally in terms of a win-loss ratio.

Your next question is from the line of Mark Wilde with Bank of Montreal. Please go ahead.

Good morning Howard. Good morning, Julie.

Good morning.

Just to start off Howard or Julie. I wondered if you could talk about that share repurchase authorization some thoughts on cadencing. And historically you've used repurchases just to offset options dilution. Is there any shift in kind of strategy in terms of how you're thinking about share repurchase maybe as a part of your overall capital deployment strategy?

Yes Mark, I'll start on that Howard can add some comments there. I think our view on share repurchase really as usual is that we have as a tool right as a part of our overall capital allocation strategy and how we return cash and value to shareholders. So we did refresh. The Board refreshed the authorization this week to shift from number of shares to a dollar amount which we do think kind of better signifies again this kind of return of value to shareholders. Although quite frankly we do keep our eye on dilution, but it's not the sole driver for how we would now look at share repurchase. So I think the bottom line is we're just as usual and extremely right now very well positioned with our balance sheet, the cash our leverage to have share repurchase on the table as a way that we again continue returning value to shareholders.

Well said.

Okay. And then I'm just curious in terms of the new divisional segmentation. For a time you've been kind of breaking out protective and temperature assured. And I'm just wondering whether we should read anything into this new segmentation in terms of your strategy for which businesses you're going to grow or not grow?

Yes. Thanks Mark. No really it was triggered because we had the Display and Packaging segment that once we divested Europe we recognized. And as you know today, we've sold the US side, we knew that sector was or segment was going to dissolve. And so, we took a different approach in terms of how we are going to structure ourselves. And that's how we've landed at this point with what you see today. So it was driven by the divestitures frankly.

Okay. And last one for me Howard. Is it possible to just get a few thoughts about how you're thinking about acquisitions at the moment which areas you're focusing on and whether you've shifted focus at all over the last 12 to 18 months as you've settled into the CEO seat?

Yes, Mark. I would say there has been an evolution over time. We've discussed the strategic planning review process that our team has undergone over the past year. Our primary focus remains on market segments where we believe we can actively participate and where we have core competencies. This spans across our portfolio, with some areas stronger than others, but we are committed and engaged. We will keep you updated as additional opportunities arise. Ultimately, it’s about identifying where we have a legitimate place in that business, whether through acquisitions or other means.

Thanks everybody. Howard as you kind of think about previous economic cycles and how your Industrial segment has recovered is there anything that you think could be different with the current recovery cycle than maybe what you've seen in the past from a macro perspective? And also, how is the segment specifically positioned differently if at all this time around?

Thanks to the field effort coming out of last year's recession, if you want to call it that. The growth around the world is looking very positive. From a structural perspective, we think that the markets here in North America are in good shape and orderly, if I can say that. As we go as you say around the world down in South America, we've done a lot of work not only there but Europe and the US in terms of rationalizing our operations, rightsizing the business, positioning ourselves for declines when we see those, but certainly being able to take the opportunity when we see situations like we're seeing right now where it feels like things are really starting to heat up. So barring the inflation that we're facing right now that I think we should see us driving through in the second quarter, we feel like we're structurally in a very, very sound position to come out stronger than possibly we had in previous recoveries over history.

Okay. And then on the Consumer Packaging volumes, I mean, just stripping out the two extra selling days – or shipping days. The growth in rigids was there any pull-forward associated with that? And then also, I'm trying to get a sense maybe Julie, the margin increase in that segment year-over-year. Was that a function of mix, or was there anything else that kind of boosted the margins in the context of obviously higher inflationary costs etc?

Yeah, Ghansham, I'd say on the pull-forward no, I would not classify that that's what's going on right now at all. So we're seeing pretty stable, but much higher demand on a global basis.

And to your second question about the margin improvement, we did have some positive mix absolutely in the – from a – in that sales volume perspective really across that portfolio not in every business but in the larger businesses in consumer very nice mix. As well, just good productivity, right? When you think about the higher volumes we're able to leverage our fixed costs very effectively. That obviously helps margins as well. And there was some pricing increase too. So it's really kind of across the board, but I would definitely attribute a lot of the margin improvement to very nice sales mix, as well as the strong volumes just helping drop-through better productivity to the bottom line.

So Julie just to clarify, so for Q2 which is seasonally I think stronger than 1Q for that segment so 13% operating margins in the first quarter. Do you think margins will be at that level higher or lower for the second quarter?

Our outlook right now because of the price/cost challenges that we've mentioned several times on this call, we don't expect the consumer margins to be quite at the 13%. So maybe 100 basis points or so below that. But – so again, we expect volumes to remain solid sequentially in the segment. But again, a bit of concern over like Rodger was mentioning resins and how we're able to pass-through those costs the timing of that, especially we expect that to be a slight headwind Q1 to Q2 for consumer.

Hi. Good morning. Thanks for taking my question. I actually wanted to ask about resin and follow-up on that. Is there a way to put a finer point on the impact of the lag in the pass-through of resin that was – that occurred this quarter? And then also, what you're expecting for next quarter in terms of the dollar amount?

Yeah. This is Rodger. Everybody is pointing at me, so I'll answer. I can't really give you a specific dollar amount. I think, if you look at the impact, Julie has mentioned the impact in Consumer. The other impact will be in the All Other category, with the removal of the US Display and business – Display and Packaging business that segment will be a 100% resin-based. So we are expecting some margin pressure in that segment as well. But I went through kind of where we saw the resins peaking. So again, I think the second quarter is our toughest quarter. But at this point, I can't put a specific dollar amount for you.

That's fair. Just shifting gears to temperature-assured packaging in regards to the vaccine rollout. How is it going relative to your expectations? And does the current pause in one of the major vaccines have a major impact on you relative to the other vaccines out there?

Yes, this is Rodger. It's going okay. If we look back at history, we provide about half of the packaging for the seasonal flu vaccine each year, generating around $20 million in sales. Over time, we anticipate that the COVID vaccine will achieve a similar routine level and sales for us. Our strongest partnerships are with J&J and AstraZeneca, and there has been some challenges recently. So, we have started off slowly. We experienced some impact in the first quarter due to certain support areas for vaccines. We expect this to pick up as the year progresses and the vaccines receive full FDA approval. Currently, they are mainly being distributed by the government in larger packages. Once they start entering the retail environment in smaller packages, we expect our performance to improve. I foresee it being similar to the flu vaccine for us in the latter half of this year and into 2022.

Got it. Thank you. I’ll turn it over and congrats on the quarter.

Thanks.

Yeah. Hi, Howard, Julie and Rodger. Firstly, a couple of questions on some items that are in your updated guidance. So if I understood correctly with the U.S. display and packaging sales that was $0.09 for just three quarters now. So we're talking about roughly a $0.15 raise in the full year number. So, firstly, with regard to just to the U.S. URB pricing, is it correct to assume based on what you said before that you're now incorporating even the third price hike that you announced in March in the guidance? And secondly, I wanted to ask about productivity here also, because I think your initial bridge from last quarter showed around $50 million, $55 million productivity improvements for the year, but you already delivered $22 million in a single quarter. So is that something that also is coming above what you expected earlier?

Sure. I’ll address the productivity question first, and then Howard and Rodger can elaborate on the pricing increases since there’s a lot happening in that area. The environment is quite dynamic with fluctuating prices and costs. We've made a strong start this year with a $22 million operating profit attributed to productivity, which aligns well with our expectations and guidance. I would suggest that our current guidance reflects a slight increase from what we had anticipated earlier, but nothing drastically different. In fact, we've achieved about one-third of our gross productivity for the full year in just the first quarter, which is a bit better than we forecasted, although not significantly. I do hope we can finish the year exceeding our expectations, but as it stands, our guidance doesn’t show any substantial increase in productivity above our original projections, just a slight adjustment.

And Sal briefly on the URB, our last increase was not included in guidance. It's effective around April 26. And you shouldn't be surprised if there are further increases as we progress through the quarter.

Your next question is from the line of George Staphos with Bank of America. Please go ahead.

Hi, guys. Thanks for taking the follow-on. I'll be quick. So, can you update us on Project Horizon, both in terms of where you stand relative to your prior guidepost? It sounds like you maybe are off to a little bit of slow start with the storms. So, where do you stand in terms of starting the stock prep area? And related what projects beyond this Project Horizon might you have down the pipe? Maybe you can share a little bit of color on in terms of your ability to use mixed waste and other types of furnish relative to OCC. Second question is just one more on composite cans. I think at one point in time you'd expected volume to be down for the year modestly because of the comparison the very strong comp from 2020 that you had. Is that still the case? Could you give us a number for the year? And then last question back maybe to Adam's question on guidance. So I think looking out this year if we were this was two quarters ago the ballpark was somewhere around $3.40-ish when we did the math on the divestitures and dilution. And you've done a good job obviously performing and raising the guidance. When you think about that variance from the $3.40 to $3.50 to $3.60 is it mostly mix? Is it mostly pricing? Is it volumes of productivity if you could just stack rank them? Thank you guys. Good luck in the quarter. Appreciate the time.

Thank you, George. Everything is going very well with Horizon. We are experiencing a delay of about a quarter, primarily due to the machine conversion process. To recap, the project involves converting a medium machine into the largest URB machine in North America and improving logistics and workflow around the campus. If you come to the facility now, you'll see a lot of activity happening. Regarding stock preparation, we anticipate that will be ready by late October, around the end of the third quarter or early in the fourth quarter. This system will include cleaning equipment designed to manage mixed waste. I'm not exactly sure what you meant by other potential future projects, but as I mentioned in my prepared comments, we currently have a $100 million Project Horizon that is visible. We are making progress on that, but it might take some time before we officially move forward. We have numerous projects, as illustrated in my earlier statements. To conclude on Horizon, things are on track despite the one-quarter delay. Additionally, the medium market is performing well at the moment, which does not affect our financial expectations reflected in our models, given how the machine is currently operating.

On cans, I would ask Julie to share a few comments before we move on. Yes, George, you're correct. Initially, we expected our volume for the global paper containers business to decline by about 2% to 3%. However, we are now more optimistic for the full year. We had a strong start, and we believe that the trends associated with at-home dining and cooking will continue to be prevalent, more than we anticipated at the beginning of the year. Therefore, we now expect the rigid paper container business to be flat compared to last year instead of experiencing a decline of 2% to 3%. Regarding guidance, most of this improvement and slight increase in the midpoint is primarily driven by volume mix, with a small contribution from productivity. Overall, I would estimate about two-thirds of the improvement comes from volume mix and one-third from productivity.

Your final question is from the line of Adam Josephson with KeyBanc. Please go ahead.

Yes. Thanks for taking my follow-up. Howard, just one strategic question. So you have Project Horizon, you're talking about these other projects. It seems as though the company is investing more in itself than perhaps it has in years past. And at the same time, you're pruning the portfolio by selling Display just to simplify the business mix, all of which suggests that you're focusing really on growing earnings internally, rather than relying on M&A to do so. But at the same time, obviously, Bloomberg mentioned that you were in the running for the Crown business. So can you just talk about how you're thinking about growing the company in the years to come? How much, just from internal investments, how much from M&A, what your preferences are, to the extent you have any, and why? Thank you.

Thank you, Adam. As we discuss investing in ourselves, we've identified numerous opportunities ahead. We aim for increased profitability, but equally important are the growth prospects we can pursue. We believe that utilizing cash wisely involves growing both the top and bottom lines with what we already have. However, acquisitions remain a crucial focus for us going forward. We are constantly in the market evaluating potential opportunities. I assure you that we will keep you informed about both our acquisition strategies and our commitment to making the right capital investments that strengthen our foundation and broaden our portfolio. You will be the first to know when we make any significant moves.

Yes, just two quick ones. Howard can you just put a little more color on what you think has tightened the URB business up? I mean I'm hearing the one thing that might be coming into play is some URB mills actually running some containerboard where possible?

I have not heard that. Rodger do you? Have you?

Maybe just on the margin on the fringes Mark. It was tight. Really what tightened it up is coming out of pandemic everyone came into the reopening with very low inventories. I think you tack on top of that the storm impacts the demand for tissue and towel due to the pandemic just very low inventories across the system. So yes, there may be on fringes some of the mills running other products on potentially URB mills, but mostly it's just demand from the recovery.

Yes. And I'll also add. We didn't note this, but in our first quarter while we had the outages related to the storm we had two really significant shutdowns. The entire Hartsville complex was down for close to a week with planned downtime that we had pushed and pushed and pushed. And even as tight as we were, there was just no way that we could pass on the shutdown. So some of it self-inflicted as well at least in terms of our position and our performance for the quarter but we had to complete those downtimes.

Okay. And then Howard just the other one. Just a quick update on your efforts to reengineer the composite can. I think a lot of this has been going on over in Europe. But also maybe with that just how important is that reengineering of the can in terms of the structures to the customers around the world, or is it just Europe?

I think Europe is where it really is. Here in North America, I think it's another way to talk about sustainability and our package. We've been collected and recycled through the steel stream for a long, long time and that continues today. So recent data I saw that maybe 90% of our cans were captured in our MRFs and other MRFs. So it's more of a perception issue, I think is what you're seeing in Europe. We're recycled within the carton stream there. But it's – what we're seeing is just right or wrong a perception around plastics and our customers or our future customers are coming to us saying look we'd like to get out of this format that we're in from a perception perspective. Maybe it is or is not recyclable but the customers perceive it as a our package as a more friendly alternative. So it's really Europe where we're seeing the benefit and where we're focusing most of our attention.

Ladies and gentlemen, I would now like to turn the conference back to Roger for closing remarks.

Okay. Thank you again, Angela. And again, let me thank everyone for joining us today. We certainly appreciate your interest in the company. And as always if you have further questions, please don't hesitate to contact us. Have a good day.

Ladies and gentlemen this concludes today's conference call. Thank you for your participation. Have a wonderful day. You may all disconnect.