CCL Industries Inc.

Donald Lang - Executive Chairman Geoffrey Martin - President and CEO Sean Washchuk - SVP and CFO

Mark Neville - Scotia Capital Inc. Adam Josephson - KeyBanc Stephen MacLeod - BMO Capital Markets Ben Jekic - GMP Securities Michael Glen - Macquarie Capital Markets Elizabeth Johnston - Laurentian Bank Securities

All right. Thank you, operator.

I want to welcome everybody to our third quarter investor update. The operator mentioned we have a good crowd today.

I know it's been a busy with everything else going on. So thanks for joining us.

And also I know we've been holding these calls in the morning and we apologize. We, as the people who do follow us [indiscernible], we hold our November meetings offsite and (inaudible) for directors to see our manufacturing facility.

So today we are calling up from North Carolina, CCL Label, House and Personal Care operation. As you know, we released the results after hours.

We had a record quarter, and with that I'd like to turn over to Sean Washchuk to walk through the financials. I’ll turn it over to Sean.

Thanks, Don. If everyone can turn to page two of the presentation, draw everyone's attention to our updated disclaimer regarding forward-looking statements.

I’ll remind everyone that our business faces known and unknown risks and opportunities. For further details of these key risks, please take a look at our 2014 and 2015 MD&A, particularly under the section risks and uncertainties.

Our annual and quarterly reports can be found online at the company's website, cclind.com or on sedar.com Turning to the next slide, our statement of earnings for the quarter and nine months. For the third quarter of 2016, it was another successful quarter for CCL and marked the 24th consecutive quarter of year-over-year improvement in quarterly adjusted earnings per class B share.

Sales growth excluding the impact of currency translation was 35% to $1.1 billion, compared to $812.9 million in the third quarter of 2015. The growth in sales can be attributed to organic growth of 0.4%, acquisition related growth of 34.7%, from the 14 acquisitions we've completed since the beginning of 2014.

This was all partially offset by the negative impact of 1.1% from foreign currency translation. Operating income increased 13%, excluding the impact of currency translation to $149.7 million for the third quarter of 2016.

Included in that number is $17.3 million of non-cash expense for the write up of the Checkpoint opening inventory. If not for this expense operating income would have been up 24.3% to $167 million.

Geoff will expand on the segmented operating results of our Label, Avery, Checkpoint and Container segments momentarily. The third quarter of 2016 included restructuring and other expenses of $6 million of which $3.8 million was for severance costs primarily associated with the Checkpoint acquisition.

Another $2.2 million for various acquisition related transaction costs incurred during the quarter. The third quarter of 2015 only included $0.9 million of restructuring and other expenses.

Net finance expense was $10 million for the third quarter of 2016, compared to $6.3 million for 2015. The increase in net finance cost is primarily related to the increase in outstanding debt to fund the acquisitions of Checkpoint in the second quarter of 2016 and Worldmark in the fourth quarter of 2015, plus other acquisitions in the first nine months of this year.

The overall effective tax rate was 30.3% for the 2016 third quarter compared to 29.7% in the 2015 third quarter, reflecting a higher portion of taxable income being earned in higher tax jurisdictions. The tax rate may increase in future periods, should a higher portion of our company's taxable income be earned in higher tax jurisdictions.

Net earnings including the impact of the inventory adjustment and restructuring costs for the 2016 third quarter increased 5% to $86.1 million from $81.8 million for the 2015 third quarter. For the nine month period ended September 30, 2016 sales, operating income and net earnings improved 30%, 18% and 11% respectively, compared to the same nine month period in 2015.

2016, included results from 14 acquisitions completed since January 1, 2015 delivering acquisition related sales growth for the period of 23.7%, organic sales growth of 4% and foreign currency translation added 2.5% to sales. Results for the nine month period of 2016 also included the aforementioned non-cash acquisition accounting adjustments to finished goods inventory of $33.9 million and restructuring and other charges of $27.9 million.

Turning to the next slide, basic earnings per class B share improved 5% to $2.47 for the third quarter of 2016 compared to $2.36 for the third quarter of 2015. Adjusted basic earnings per class B share was a record $2.98 for the 2016 third quarter compared to adjusted basic earnings per class B share of $2.34 for the third quarter of 2015.

The adjustment to basic earnings per class B share included $0.14 for restructuring and other charges as well as $0.37 for non-cash acquisition accounting adjustments to finished goods inventory. The $0.64 improvement in adjusted basic EPS to $2.98 is primarily attributable to improvements in operating income of $0.65, $0.07 impact from the change of tax rate, offset by $0.07 increase in interest expense and $0.01 from other items.

For the nine months period adjusted basic earnings per class B share was $8.43, up a $1.98 or 31% compared to $645 for the same period a year ago. The adjustment to basic earnings per class B share included $0.61 from restructuring and other charges as well as $0.72 for non-cash acquisition accounting adjustments to finished good inventory.

The nine-month improvement in adjusted basic earnings per share was driven principally by the increase in operating income, which accounted for a $1.78, while the impact of currency translation added $0.15, reduction of corporate expenses added $0.06 and all other items interest expense equity earnings, change in tax rate reduced adjusted EPS by $0.01. Turning to the next slide cash flow, for the trailing 12 months, 2016 free cash was $260.7 million, a decrease of $15.8 million compared to $276.5 million for the trailing 12 months of 2015.

This reflects the improved operating results, offset by an increase in net non-cash working capital. The increase in net capital expenditures for the first nine months of 2016 compared to the first nine months of 2015.

The TTM capital expenditures increased by approximately $70 million for the comparative periods. Turning to slide six, our cash and debt summary, net debt as at September 30, 2016 was almost $1.2 billion, an increase of $587.8 million compared to December 31, 2015.

The change in net debt from December 31, reflects the increase in borrowings to fund acquisitions, principally Checkpoint. However this was partially offset by the relative strengthening of the Canadian dollar at September 30, 2016 compared to the rate that was in effect at December 31, 2015.

More importantly CCL reduced its total debt since the end of the second quarter by almost $50 million. During the quarter CCL successfully completed its inaugural public bond offering for $500 million for 10 years at a 3.25% interest rate.

Proceeds were used to reduce the company's revolving credit facilities resulting in US$582 million of available capacity at the end of the third quarter. The company's overall average finance rate was 2.8% at September 30, 2016, compared to 3.1% at December 31, 2015, reflecting the company's current mix of syndicated debt, senior notes, public bonds, compared to a higher portion of senior notes at December 31, 2015.

Despite the acquisitions in 2016, and the associated drawdowns in debt for the first nine months of this year the company's leverage ratio, of net debt-to-EBITDA remains a strong 1.6 times at September 30, 2016. This is also down from 1.83 times at the end of the second quarter.

Geoff?

Thank you, Sean and good evening everybody. I am on slide number 7, just to highlight the capital spending for the year, around $200 million, $194 million net after some dispositions, fork outs for the year to $30 million [ph] and post the Checkpoint acquisition, our annualized D&A is currently running at around $215 million.

Page 8, the numbers for CCL Label, we had expected lower organic sales growth rate this quarter driven by [indiscernible] last year and we grew low single digits in North America, mid-single digits in Europe, Asia was flat and Latin America was up strong double digit. Recent acquisitions led the profit gains but diluted our margins a little bit, compared to very strong third quarter of 2015.

Slide nine I have given you some color here on each of our global business segments of the Label business, Home and Personal Care, low single digit organic growth, versus the prior year, up in the U.S., Asia and Latin America, down a little in Europe pretty much in line with our customer's profits, flat for the quarter but up year-to-date. Healthcare and specialty, low single digit organic growth, augmented by acquisitions.

We've done a few deals there in Europe of late. Business was up in the U.S.

and emerging market and up in Europe on acquisitions, profit increases largely acquisition led and also included a settlement from a patent case. Food and beverage, this was our growth sector, high single-digit organic growth, strong growth in all three product lines.

Profits were flat on mix and FX and FX benefits we had last year, a very strong period and they’re up significantly year-to-date. This is the area of the company where we expect quite a bit on capital to put into capacity expansion to deal with the rate of organic growth.

CCL Design, this is our automotive and durable electronics sector, similar story, low single-digit organic growth, again augmented by acquisitions principally Worldmark but also Zephyr. Automotive stabilized in the U.S.

and we’re seeing some flattening of the demand in automotive in the United States, remain strong in Europe. We had our best quarter so far at Worldmark on some launches, but our alkaline battery business was soft, strong profit gains here on acquisitions.

Page 10, this is top [ph] slide on our Label joint ventures. We give you some details here in line with our accounting, continuing strong growth in all the territories we're operating in, Russia [ph] Middle East and Chile, good strong gains in earnings.

It does not include, [indiscernible] foreign currencies. There was a massive depreciation of the Egyptian pound which we’ll be having to deal with in the fall call that may cost up to $0.01 a share in the fourth quarter and we’ll talk to you more about that end of the year.

Page 11, Avery and pretty much as we signaled lower sales in the same quarter last year with a share loss in mass market economy back to school bundles but we also saw slow sales to the superstore channel, with Staples and Office Depot deals called off and may proceed with a number of their store closure programs and that combination of the two drove us off the [ph] fine quarter in North America. International business was up slightly.

But as we also signaled you continue to see margin expansion in this business we are up 70 basis points year-over-year in the quarter. All of our direct marketing e-commerce businesses that we’ve acquired are all performing well, and we expect them to continue doing so.

Slide 12, CCL Container had very tough prior year comps in this business. The profits have doubled Q4, 2015 over 2014.

So we have a tough comp session going in. Most of the story here is around the weak peso, and courtesy of Mr.

Trump and the lower U.S. dollar sales mix in the same quarter in the prior year, combination of those two things and the translation effect of the weak peso, when we translate these sales and earnings the declining dollar had quite an impact in the quarter.

In the U.S. volume was up, but we had aluminum pass through on lower aluminum prices in the first half of last year and the start of expansion of the new line that we had to spend some money on.

Page 13 good news for the quarter, we had a much better profit result than we had anticipated at Checkpoint, 13% operating margin which we’re very pleased about. That’s before the impact of these inventory adjustments that Sean’s talked about.

So we’re off to a very good start in our third and fourth quarter. We spent another $3 million on restructuring expense of $16 million year-to-date.

Now we’ve now reduced our expected cost of this plan now to $30 million. Probably we’ll complete sometime in the middle of 2017 and the remaining part of the plan we’ll focus on international masses [ph] more than domestic masses here in the United States.

Slide 14, the summary so far for the year, so pretty good results for the quarter, very good for the year. So we’re pretty pleased all around.

Few comments on slide 15 about the outlook. Our Q4 order levels have remained solid so far, pretty much in line with what we’ve seen and as we’ve been going all year but our comps, despite they were in this quarter continue to get challenging on an organic basis.

FX it's a moving target at the moments, the results and elections and things like that so it’s somewhere from neutral to a slight tailwind for Q4 after those rates but it’s obviously a moving target and we’ll see how things kind of, but that's the best comment we can make so far. We also have announced some changes at our Canadian camp line for CCL Container that we’re going to commence with the first phase of the closure there in the first quarter and subject to some agreements we need to make with a couple of key customers and we then expect -- we continue to operate the plant on a reduced basis for the greater part of 2017, the first phase will happen in Q1.

So to remind you that the closure cost were fully provided for this segment, when we announced on an accounting basis in 2013 that we will have the cash cost and the severance baked in Q1. And on Checkpoint just to point out, they make all of their money really in the second half of the fiscal year.

So Q4 will be another good quarter. It's not normally as good as Q3 is and then Q1 has always been historically loss making.

So just want you to think about that as you are doing your models for the full quarter and the beginning part of next year. And as you all know our balance sheet continues to retain quite considerable capacity for us to make acquisitions which remain the priority from the board to use excess cash flow.

So with that operator we'd like to open the call for questions.

Hey guys. Just looking at Checkpoint and looking back historically, and I realize you didn't run the business number.

It looks like Q4 historically was a bit better than Q3. I don't know and I guess it sounds like Q3 you're signaling will be below than Q4.

I am just curious why the difference or why the change and maybe just sort of help us think Q4 versus Q3 in sort of.

You got to bear in mind that reported numbers have a lot of one-offs. So I think if you look at the pure operating margins this is what we're looking at.

Then Q4 is kind of a two month quarter, so retailers buy heavily in October and November, they don't buy a lot in December they are too busy selling. So that's why we normally make that comment.

So they are historical results for one offs. And also the other thing you have to be very careful Mark, you have to remember this company had most of its sales and income probably from outside the United States.

So that prior period there is a lot of currently translation in there.

Okay. So Q4 is sort of you are saying two-thirds of Q3 maybe a little better.

No, nothing like that but it still not as good as Q3. And if we have taken out more cost here who knows what might happen but historically that's been the trend you have that sort of five month period up to Christmas where it's good.

December it kind of it begins to slow off and then January is all over the…

Okay, just on Worldmark, I think earlier in the year, you were talking about -- you talked about some seasonality. I think, I actually think it was a bit softer earlier in the year too.

So just curious how that's trending year-to-date versus the plan and just give a little more color on Worldmark.

Very good quarter, because we had a lot of product launches in there, the device industry likes to plan its launches in that sort of Christmas sale run up. So they begin to plan for that in terms of supply chain and making the product and all of that during the third quarter.

So it was by far the best quarter we ever had. It's certainly the first, well the first quarter we were just buying the business really.

So it is hard to really figure out what was going on. But certainly the interval between old products going out and new products ramping up we certainly saw more of that in Q2 than we thought we might do but we more than made up for that in Q3.

Okay and then just on Avery, the print and media business in North America was down, so much better in international. Are these sort of comparable businesses, or is there a different mix there that we should be thinking about?

Fairly comparable. It's I think the phenomena there is just the superstore, is nowhere near the level of super store activity in Europe, as it in the US.

So these three big superstore chains OfficeMax, Depot and Staples we will try to combine into one. But two of them -- one of them down can get the other one down and they're all involved in store closure programs and when they do that the inventory from store A goes to store B, and I think that's kind of what we felt in the summer there.

That was up with the (inaudible), the Staples, Depot transaction. And the impact of that in Europe is very minimal.

Okay but similar sort of products or product lines in Europe, okay.

Oh, yes, the products are the same. Also in Australia, we didn't see anything in Australia because nothing happen there.

Great. Okay thanks a lot I'll get back in the queue.

All right.

Thanks. Geoff, Sean, hi good afternoon.

Jeff just one on, two part question I guess. Can you talk about the Checkpoint integration and what's going better than you expected.

I know you had this fortunate tendency of better than expected integrations with the acquisitions in recent years. So just hoping for a little more information on what's going on there.

And then you particularly called out checkpoint as having been better than you expected. It didn't seem as if there was anything else that was notably better or worse but any other items that were surprising to you in the quarter that you could highlight I'd appreciate.

Yeah well just on the Checkpoint I think we've found a lot of good people in the company internationally and domestically. So we are very pleased to see that.

And we've been able to take out cost in the US faster than we thought. And we found more low hanging fruit than we thought.

So it's really been around the change management process. It's gone very smoothly.

The people in the company have reacted very well to the change of ownership. You never know what's going to happen when you buy business how people are going to react.

But the reaction from the employees has been very favorable. And so it's just gone really quite well, a lot to do.

So there is still more to do but so far it's gone well.

And just the other part of question is any other surprises positive or negative in the quarter?

I think we've pulled them all out for you in our remarks.

Okay. And you've mentioned order levels in the quarter, fourth quarter are solid so far.

Obviously some of the large CPG companies out there have been talking about pretty weak volume trends. That's nothing new, but have you seen any.

I don't have, Adam. I just -- if you take the home and personal care business L'Oreal announced 9% growth in the United States in Q3.

So some I think it's a mixed picture in the CPG business. You've got some consumer brands doing well, some doing less well.

So and that's what you are seeing there. We definitely see a mixed picture.

But providing you with the right set of customers, we've got swings and rounded our portfolio, when you look at the balance of the portfolio it seems to be just okay. Now that's why I use the solid, it's not spectacular, we wouldn't call it good but it's been solid.

And that's against the very good quarter to start last year. We've seen some slowdown in automotive as I mentioned in my prepared remarks.

So it could be in the United States but we haven't seen that in Germany which still seems to be firing on all cylinders, with BMW and the [indiscernible] and what have you. So that's what I can tell you.

Thanks and just couple of others that you mentioned Mr. Trump earlier -- this is an impossible [ph] question.

But any thoughts as to what any potential impact on your business would be as a result of his Presidency.

Well we were all concerned about what would happen to Mexico. And I think everyone's seen the preferred moved a bit today but not too much.

And so we've got some large operations down there. But as have just about every international company on the plant.

So we expect most politicians in the end have to be pragmatic and big house of Congress, they don't want to get elected two years from now. So everyone in the end probably has to be help [ph] themselves.

Sure. And thanks Geoff and just one last one for you Sean.

Your EBITDA $208 million year ago, 163 can you talk about what the organic improvement was year-on-year?

Kind a flat Adam. Flat, and with the EBITDA improvements it's almost all acquisition lead.

And I guess the issue was the Label comps were quite difficult a year ago as were the Container comps.

And Avery down. So Avery is down.

So most of the impacts really coming from Avery.

Thanks a lot Geoff.

Yeah okay.

Thank you good evening.

Hi Steven.

Just looking at the checkpoint business and acquisition. How much of the $40 million in cost savings is actually been captured?

I wish I could give you a clear answer. WE have only owned this thing for so many weeks.

So we don't have -- it's certainly a chunk of it but I wouldn't be able to quantify more than that. It's a portion of it but I wouldn't like to tell you whether it's 10 or 30, but it’s probably something in that range.

It’s a chunk of it, but I wouldn’t be able to quantify with great precision for you what level it is. We will be to do that probably by the time we get to the end of the year.

So we'll have a much better idea of how much of its flowing through because with so many moving pieces in the system, but a big chunk of it is that the margin [indiscernible] have been okay.

Yeah, okay, that’s helpful. And then looking at the container business.

So you mentioned the plant closures starting in early 2017 so have you already achieved that incremental $10 million that you expected when you first announced that.

Yeah, we did that last year actually.

Okay. That’s great and then I also noticed that you announced a new Director appointment and it looks like that person has a lot of chemistry background.

I'm just curious if that signals anything with respect to potentially expanding more in the material sciences segment of the industry?

Well actually Stephen he's a returning director. He’s been at my Board for several years.

He’s Chief Technology Officer at DuPont, he's on our Board for several years and unfortunately had to leave the board in the middle of all the other things that DuPont's involved in and then we’re very pleased he was able to return. So we’ve known him for a long time and but aside from that we’re definitely interested in doing some things in the material science space as we've often commented.

Okay that’s great, okay, thank you and then finally when I look at the Label margins and we saw some expected margin dilution from acquisitions. What kind of timeline do you expect to see that begin to snap back up as you’re realize synergies in Worldmark and some of the other acquisitions that you’ve done recently?

I think you will see some expansion next year but we’re not unhappy with what they are because you have to remember that CCL's Design business does have a fundamentally lower EBITDA so the one we’re trying to close is the EBIT margin and a lot of the dilution is in that CCL design business so that’s the one we’re focused on. We’re not unhappy with where they are, it’s just the mix.

But we hope overtime to be able to bring them up close to the level where we are. So that’s kind of what we’re working on.

But we don’t have a target to do by days, actual date wise because with automotive business and large customers like that you have to find the moment to do it. So that's where it’s coming from.

It’s driven by new product programs and things like that and much of it is driven by how we operate the business.

Okay that’s great. And then just one last final one if I could.

On the Avery business you have seen some very good margin expansion on a year-over-year basis year-to-date, I know it looks like over the last four quarters. Are you beginning -- do you still see further gains going forward or are you beginning to sort of…

We have this -- we have the announcement we made about closing the plant in the U.S. which we’ve now almost finished.

End of the year we’ll be done with that. So we should get a little pop up from that next year.

So but we’re certainly coming down the straight on it that’s for sure. So when we get into next year we’ll be -- then anything we might do beyond that will be innovation and product driven more than running the business better.

Great okay, that’s great thank you very much.

Okay.

Good afternoon I have a couple of questions. First one on the home and personal care business in CCL Label, there seems to have been some softness in the last couple of quarters is that regional -- kind of regionality related or is there common thread kind of happening within the business?

I think our home and personal care business Ben, looks like our customer’s business. So if you read the reports of all the major players in that space you’ll see they are mixed, that's how we would also characterize how our business looks like.

So we do as well as they do.

Okay and if you can just jog my memory, I think this is the exact same thing you’ve done with the Avery acquisition, the adjustment to the finished goods inventory what does that entail?

Nothing, it’s accounting, pure book accounting. So when you make an acquisition the new accounting rules require you to eliminate all profits in inventory, put it on the balance sheet.

So at the moment what you have in at the start at the time you buy the company you can't declare any profit on that inventory and that's all it this. So there is no cash impact at all, it's just book accounting.

Got it, okay. And the last question.

Under accounting standards it's required.

Right. And the last question is just for Sean, this is I think I saw the number $582 million in credit facilities.

I'm assuming that excludes, I know that there are conditions attached but the accordion feature that I think you have $300 million.

That's correct, the $300 million is included in that number.

Okay, perfect. Thank you so much.

Hi good evening. Can you guys, just in terms of Checkpoint, can you just maybe discuss what your customers are communicating to you in terms of trends in their business?

Well, we sell to everybody in retail world. So our customers include Worldmark, CBS, Staples, Office Depot, TJ Max, Macy's, I mean anyone and everyone in retail.

So some people tell you a good story and some people tell you a bad story and some even say the world's ending. So it's a mixed package we sell to everybody in retail.

And so you've got retailers who are doing well right now, including brick-and-mortar retailers, some that are in the middle of the road and some that are struggling with competing with Amazon. And we hear comments as you would -- as you would expect from [indiscernible] who they are.

But I would like to say that any general view is just -- it's all customer specific.

And are you guys able to measure at all what the organic growth profile of the business looks like?

No. You have to bear in mind what's reported last year was on a different accounting calendar.

So the period aren't even the same. And what they reported last year came through a system consolidated in US dollars and translated.

So it's very difficult to cycle back and we're not going to be making comments on that till we lap the anniversary of the acquisition.

Okay and have you been able to…

The best thing I can tell you Michael is we're reasonably comfortable with the $700 million annualized run rates about right.

Okay. And when we look beyond the restructuring activity that you guys are pursuing, have you been able to establish a growth plan in terms of getting new customers interested in products at all.

We are focused on getting things fixed at the moment.

Okay. And on CCL Label, as I look at the sequential organic growth trends.

I understand the difficult comp, but was there anything in particular that -- was there a segment food and beverage, CCL Design, or CCL Design where you actually saw the volumes slowdown on a sequential basis?

I think we called that out in one of the slides. And we've given you a sort of a view about each of the global business segments.

Wouldn't like to say any more than that. It's a complex mix of 10s of 100s of customers, all of them [ph] that are large in various currencies all around the world.

So we've given you a view about that. But I've told everybody we've talked here in the investment community the rates of growth we had for six quarters of 6% to 10% depends were not sustainable and now here we are.

Okay. And just to circle back on the US election, has that result given you any reason to take a closer look at some of the initiatives.

I know that you're building a new plant down there for CCL design and with…

Yeah, the US election as far as we're concerned has nothing to do with how we run our company.

Okay, that's it from me. Thanks.

Hi. Just you mentioned in your prepared remarks or in your MD&A about the pipeline for acquisitions, and I know you closed two more as indicated recently.

Can you give us a sense of the pipeline indicates strong. Any changes there do you still remain acquisitive.

Or are you really focused on the integration of Checkpoint at this moment?

I think there is a reasonable amounts of expectations out there in the investment community that CCL's a good acquirer. And one of the reasons the stock's valued the way it's valued is because we do that and continue to do it.

So we have a balance sheet that's designed to allow us to continue to acquire good businesses at the right price and we're in the market now and will be for 2017. When and how and who and how much it's as always impossible to say.

Do you have a particular focus on any acquisition within any one segment or…?

I would say we always look at everything and anything. And the transactions we're looking at the in the Avery space are small.

But they are [indiscernible], the trends that we're not looking anything in the Checkpoint arena right now because we owned the company for three or four months. And most of the things we're looking at would be in the broad based retail, space.

Okay great. And just I know the CapEx guidance for 2015 that Sean indicated was $230 million.

Do you have any guidance for 2017.

That’s about 250.

Okay great. Thanks very much.

Thank you.

Al; right. Well thank you everybody for joining the call.

It's a record quarter as you know. And we'll look forward to chatting with you I guess in February at the release of our year end numbers.

But if you have any questions in the meantime you can give on Sean Washchuk a call. With that wish you all the best, and operator we will end the call.