GPK - Earnings call transcript Q4 2017 | Graphic Packaging Holding Company

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Operator

Good morning. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Graphic Packaging quarterly earnings conference call. Alex Ovshey, Vice President, Investor Relations of Graphic Packaging, you may begin your conference.

Alex Ovshey

Thanks, Denise. to fourth Holding XXXX quarter welcome to conference results. and our discuss and morning Graphic Company's Packaging call Good full year

subject to President provided contained To various clicking and cause help Securities with company's company's Speaking present be required the uncertainties that are www.graphicpkg.com. to materially risks remind turn not and Doss, you. to follow as these accessed in on along link Investors Scherger, will as by Commission. and of I call call, they the is you presentation such regarding Vice Exchange which on the and forward-looking to and we placed Mike, and law. which from could differ risks uncertainties today's available our company's the would expectations. be at plans, statements the Undue regarding like forward-looking that results webcast reliance have Senior and and presentations actual filings information except CFO. made currently periodic statements to on only Such expectations, and everyone our Steve date slide the section statements based as such undertakes are no CEO, of update on company it statements and obligation of over by I'll be events President the speak on with Information should statements beliefs and a the website the on statements. Mike are estimates can future constitute performance

Michael P. Doss

X.X% Fourth in year compared by modestly and at to acquisitions volume. the thank full positive of joining to met our million core up quarter expectations discuss and driven period. sold fourth Good $XXX quarter Alex. and EBITDA morning us you, for were tons prior million adjusted Thank year continuation Net the XXXX results. $XXX our you

commodity by benefits volume Solid were core offset costs. productivity, of the input partially acquisitions higher positive and

fiber escalating costs flow in and higher costs for the the half Association] grades & XXXX. XX% are for average and recovery In important recycled cost quarter, price the as time. In and year input significantly from commodity CUK significantly We acquisitions, in initiatives benefits and costs and announced results. of the SBS, commodity moderated supply/demand cost pricing million and positive of volume price rate XXXX dynamics on our Forest XX%. input costs CRB offset RISI costs. a CRB healthy. in increases input $XXX focused fiber in [American offset pricing we with partially realization X.X% during remain an XXXX process. recently our the impacted XXXX. was second lower and chemical input was commodity by reflecting logistics paperboard was and were are significantly by were over chemical our SBS incurred CRB input reported we recycled the productivity costs was cost The operating XXXX, impacted the to in negative of committed million logistics for reductions solid Paper higher CRB, and core step down it AF&PA input relationship the commodity impacted across was industry by cost lower as generated XXXX and increases quarters While Pricing to inflation pricing. commodity the Cash pricing index The escalating headwind inflation. XXXX, significant input Commodity CUK $XX We the XXXX was EBITDA year. our adjusted relationship modestly Full pricing negatively CUK which remain three price first our recovering by offsetting input the in to

effectively on is flow cash Our our it allocating and growing focus unchanged.

strategic capital key We all continue on allocation to priorities. our make progress

guidance. business discuss from Before on I Packaging high expected our And the would North America XXXX January the XXXX X. across progress to International the full-year like the Consumer our the guidance financial Paper's combination of the closed provide we're transaction. reflects level quarter, strategic priorities and I We key details transformative making with benefits

We strong the expect $X the EBITDA the to will three Steve $XXX of approximately acquisitions in commodity pricing relatively details cost EBITDA in first generate to tuck-under transaction XXXX. XXXX. neutral reflects we our benefits a completed million his XXXX of including synergies, productivity of provide remarks. and But input year billion relationship, from more guidance in IP

approximately We expect $XXX to XXXX significantly increase million. flow cash to

the capital allocation on was in more fourth and fourth business we positive quarters. our in detail and executed how the quarter from Now three volume consecutive XXXX. and up me organic discuss let paperboard Core the priorities quarter in key operational X.X% our trends been for strategic has provide global three CSM

the X.X% was year market the A.C. reflecting Our outperforming up for full pipeline. trends continued product development our core of by success organic volume new Nielsen, in as reported XXXX the

beverage the global Our fourth relatively remained in quarter. market healthy

global low American in the North the mega was in single Our digits the and year market. the beer for volume despite softness full up quarter

As our we've annum. new basis growth drive discussed XXX volume in of points the efforts to about per product past, development organic we expect

Let commercialization highlight important the one new me in product quarter.

the of Brazil. our largest technology, bowl one Foods, introduce microwavable JBS with partnered and to protein patented in the world, have tray into MicroRite We processors

technology cooking The oven-bake utilize Wausau, was XXXX growth and generate exported will revenue SBS product our bowl is microwave our annualized in the The dollars beyond. the be facility potential million Wisconsin, to product XXXX both for and paperboard. reminder, late in significant produced and quality of launched The several in tray Brazil a in time. enables at to Brazil. achieved reduced and As maintaining is while traditional microwave with

craft several by unbleached paperboard Santa coated paperboard XXXX. Turning well our Clara, We Midwest capital Monroe, coated coated closed planned as investments the over December our on California, our mills West as last recycled Macon, to strategic recycled This paperboard enabled operations. mill action and mills was as X, Louisiana, Georgia, at years.

chain. into supply mills Coast successfully quickly integrated have We and our West these

ran of mill. Clara X Our improved backlogs to modestly and CUK for our and Santa well reflecting mills CRB our plus weeks the improved demand and closure

mill reminder, a and for our highly consuming all approximately produce grades. we our platforms CRB XX% operations integrated of Shifting As converting with these to the CUK paperboard are performance.

costs the net improvement of of emphasis efficiencies cost Continued savings million initiatives, contributed We in operating of the on in majority and variable $XX and XXXX. in quarter. generated the $XX generated well We net operated performance million fourth performance quarter. the

QX. in XXXX and was in Monroe the Our at impacted by QX planned a the maintenance in performance Santa of West negatively solid hurricanes was in closure QX, our downtime significantly but mill Clara

Moving to costs.

higher significantly the quarter, incurred was XXXX, In commodity cost escalating costs incurred of of moderated in costs half While fiber chemical input inflation logistics chemical we in the recycled driven input The we half and which the input three by of first second XXXX. More input input the quarters remaining in was accelerated by recycled the costs than fiber million logistics and higher costs. driven $XX year. inflation.

resin to We costs expect and XXXX. logistics, elevated in input incur chemical

we input inflation. XXXX. ton step important commodity our capital in previously, for against open and recently customers, inflation strategic now review our $XX we've a As will paperboard and announced we SBS on focused executed I CRB, increase our remain We and an the cost stated to them allocation per three to cost CUK in market a how offsetting commodity timeframe. offset over with our price reasonable pricing our recover process input priorities

downstream million capital our rates systems. strategic portion in reinvest In priority where first quarter lowered West of We Louisiana. and compelling variable $XX million and our CUK across on costs has $XXX of project XXXX, first has which in operations. converting is productivity. lower in to sheet upgrade can we costs which XXXX invested our expenditures two six is the headboxes drive projects at the we in number machine capital paper invested business resulted converting The significant Our return improved generate to driving in mill of XXXX, will in quality, Monroe, our a on mill our

approximately capital efficient Georgia, machine we more paper number to in a Macon, coater curtain XXXX, at expect to the mill. paperboard. application million. curtain our significantly coater we on coater will paper number enables chemicals XXXX. In expenditures of The two a XXXX, CUK curtain added Macon one will the our be the $XXX a ahead coating We on Looking machine install

will since XXXX. As escalated continue has our reduce we to materially of a result, of significantly which consumption TiOX, price the

invest expect annualized in an We about to the generate basis. approximately $XX project EBITDA of and million $XX on million

through recovery This is will aware We the began drive critical the improved at The the when to project parts The and $XX of new this reliability that XXXX, by Georgia, evaluating combination. days the the an which XX approximately also project will place to mill. year. invest take in October of mill. downtime, of need International planned the the will SBS significantly extensive were will project maintenance require at we was rebuild million late we the Augusta, and this driven rebuild of boiler. planning about were fully project a engineering in investment of Paper boiler end

converting continue also our in to will food We drive costs. XXXX lower invest behind plants beverage and to

We will execute provide plans. we as more details against on our internal those projects

related million to the to synergies the mid our million investments targeted from will in end allow range We deliver high million from capture to continue expect productivity these integration. separate us projects will $XX the the benefits $XX to in capital IP of $XX to we

geographic acquisitions account strategic specifically closed on paid post-synergy multiples costs. million product, synergies we look acquisitions of the on run our Seydaco these multiple. we XXXX. Our And are We further year. these busy integration approximately second of met the We closed in to to priorities and we acquisitions plan. X.X $XXX acquisitions. for expect that potential We priority to we opportunities, is Craft, execute in below spent the that trading achieve. rate at acquisitions and key a an our profile half second Norgraft, times strategic and EBITDA, estimate is XXXX into taking on we forward well The in enhanced had The reduce customer, Carton

Packaging strategy combination context creates platform for foodservice American a Packaging of briefly folding grow the and me Now International compelling acquisition The discuss and to carton in acquisitions. in combination let converting with the Graphic North Paper's SBS through transformative our organically Consumer business.

folding carton pipeline will us allow SBS SBS foodservice to XXXX, Looking opportunities converting. solid in see that scale and acquisition our integrate further a increase mills and ahead of we our to

America focus North opportunities on in Our is and in Europe. acquisition

return Steve? Our in Steve long-term in to through XXXX call turn shareholders third strategic our is the $XX cash shareholders I'll and And over to dividends in Chief million million returned Financial Officer. share that, $XXX We repurchases. to $XX shareholder million drive with to Scherger, capital to priority value. in

Stephen R. Scherger

XXXX. net The reported $X.XX per $X.XX of diluted million share, up fourth and diluted share. reduction morning. for fourth $XX.X per other special adjusting $XXX deferred of We per Thanks, tax by Jobs adjusted quarter in these to reform net business million positively of a XXXX. tax $X.XX charge million quarter XXXX Mike, primarily benefit income impact quarter compares and Act after-tax When a $XX.X related fourth quarter impacted XXXX Cuts is Tax an adjusted by of or share. fourth Fourth charges, for income the combinations This compared our liability, quarter legislation. $XX.X million impacted reflecting $X.XX quarter the for the or per income was was of to diluted share the to the million good net negatively earnings benefit was $XXX charges. The and to related in

in share, was in XXXX income million XXXX, income special The after-tax negatively net by combinations compares For fourth recorded $X.XX XXXX income these $XX.X for we business reported positively per up full an of full per by adjusted diluted diluted When or charge share. of per million year was compared Full year charges. $XXX the the or full benefit $X.XX diluted full the tax net to to share. net for million was year share $XXX.X $X.XX for $XXX.X $X.XX impacted impacted charges, per other quarter. of XXXX adjusted XXXX. earnings and million year year This adjusted

core our acquired QX. Focusing sales, revenue net $XX foreign of turned modestly by positive volume million positive volume, benefit exchange. driven million business, from fourth and from X%, a $XX on slightly increased primarily Price quarter in

and labor pricing, solid million $XX quarter ended partially quarter. cost Total a acquisitions benefit. net performance to by of decreased offset the by benefits These of global million, slightly million, and $X.X input $XX over commodity the liquidity driven $X.X inflation million positive and $XX billion $XX million benefits million from Turning fourth increase were of exchange positive million billion XXXX volume $X We $XXX foreign EBITDA, inflation. to of during core of net $X with volume and debt debt. and $X million was

ratio incremental million cash million which before We dividends The pension We $XXX pension million to million will the additional our via returned flow X In $XXX invested the an acquisitions, on XXXX plans, $XX and of credit $XXX X, was contribution. EBTIDA conjunction to times generated in on of capital, remain to times shareholders to During debt shortly. we We XXXX XXXX. our and elaborate I at year-end assumed contributed $XX completed committed quarter Paper million we million in $XXX repurchases. in International leverage of to share leverage of X.X X.X $XXX combination compared senior the net and amended concurrently January end net adjusted XXXX. our target million long-term with the and secured extended agreement times. to X.XX

briefly impact recent reform. Graphic starting significant in reform, approximately U.S. our beneficiary generated detail more Packaging a XX% tax of to and discuss is provide of reform tax I tax XXXX our legislation the like pensions, guidance, the the I'd earnings of our with Before with on

We would range expect XX% minimal tax expect from the U.S. we'll that NOLs Currently, cash to our reform, our be We'll reforms. taxpayer us will the Prior U.S. expect be allow material effective to XXXX. reduced federal be federal impact XX% through previously. tax we a to tax assess range cash of to to to XX% through the rate year-end XXXX. that a continue taxpayer we not XX% overall

$XX to will the of The per million expenditures of expensing taxable We income in key XXX% expect the NOLs in be total XXXX. $XX range driver XXXX the utilization which to provision NOLs. between extension taxes year the is legislation, the for in cash capital million and reduces extends the

U.S. to additional pensions, status $XX the In opportunity of Post funded basis. million our made improved in The million performance our to an million the XXXX. pension the we go-forward contribution to shifted plans, to contributed on $XX above significantly plans communicated. $XX the assets given million and Turning and fourth contribution, plan plan The million continued significantly in million strong XXXX, reduce reflects a we $XX we the the aggregate significantly away the assets. plan we further $XXX the quarter. was de-risk initially $XX made from expected U.S. contribution our contributions to risk-seeking improvement

plan. on a to path the continue We de-risk

range to contributions the seven million decline per expect $XX We million $XX basis, on compared our last $XX go-forward to a to million to to pension year million $X the per year over years.

Mike the in Turning boiler the in Augusta with to costs we full our referenced, rebuild. be year associated expect will XXXX range planned billion XXXX, guidance, $XX one-time $X approximately as excluding of recovery EBITDA million

realized we XXXX relationship expect prices CUK will Pricing previously be ties We higher of be a pricing relatively models. roughly benefit to from in to million commodity to the for XXXX. cost inflation cost flow-through the as positive $XX during increases business CRB flat price and and

current in a tailwind trends. pricing costs inflationary input offset We've commodity based input lower recycled modest fiber from on costs. known expect We will factored

prices OCC average versus per fiber in level. will Midwest $XX in XXXX $XX our lower to ton per expect OCC ton XXXX the basket We average

we've experienced the input and factored costs XXXX logistics, into guidance. resin we Given inflation our in in QX, higher chemical

be market also $XX volume, expansion at We on substrate several flat expect XXXX. consistent labor On to years. achieve targeted with and benefits through $XX from outperforming core we combination. prior million all our customer over remain $XX $XX development, focused consistent synergies with the million expected new substitution; volume performance, to to to in to performance the years. our IP of excluding and Shifting We well-positioned the geographic to midpoint expect we're the million our again product relatively last inflation in $XX million least million the be range

synergies. We including expect $XXX targeted the million the combination of $XX EBITDA million one from Paper International year in

As we million to weather and range. in first we ramp up quarter would synergies, $XXX manage through EBITDA January million the be the expect $XXX the cold

flow. cash to Finally, turning

positive We $XXX million, expense of $XX a to million, of to capital expect approximately billion $X $XX $XXX I'll is of EBITDA $XX our contributions from cash reflects million million $XX presentation pension guidance this flow in to to will of your for million the million million, of $XX Thanks of the to taxes page range, on capital remainder now and turn contained $X of cash working interest morning. of our million $XXX on the expenditures The million time bridge be website. $XXX last the back call million. Mike.

Michael P. Doss

Thanks, Steve.

inflation the headwind XXXX, International on which on input focused Paper's January to XXXX, on Packaging business, inflation and recovering significant commodity we keenly priorities commodity North executed pricing. cost While cost input our pricing with closed announced X. capital American we key are In combination in allocation Consumer we incurred through

planned the product previous our new volumes have have substitution with We markets place consistent outperform to and plans flat and for substrate development with targeted in years.

to be well-positioned for across value the our benefit drive XXXX we And allocation operator inflation. the capital set call and to well in is significantly have Paper the shareholder increases that cost our in back We opportunities the to turn will questions. capital transformative transaction continue excess to International beyond. to labor strategic and now productivity of I'll generate priorities three deploy

Operator

from George Your first Staphos question Bank America. with of comes

Your open. line is

George Leon Staphos

Thanks and details two My congratulations will year. all Hi, the for on the be questions Good everyone. as morning. follows.

bowl. The $XXX to pre-buying, market? flow volume be you Steve. like of new product any that think, introductions, cash microwavable new that that or not of seeing where terms have IP? you're be answer you guiding bridge. million making if you to does there question cash mentioned wanted as My Is payment First, they I the can clear, the as But you it's guess that? because specify can of most other you'll a in you well? in just is there and just backlog separately, include because are don't do of things are by And end benefit You that if oven-ready part flow check, it, to free then increase

So to flow. minority our free then whatever up we number; the over. cash versus should back ultimately, I'll out it your we that get within interest turn Thanks, to cash flow come free

Michael P. Doss

then I'll - part the first Mike. let and that of it's question George, take Steve

George Leon Staphos

Mike. morning, Good

Michael P. Doss

those eliminating those many the development real I'd the is Good we've And now morning. steady tertiary products. corrugated on to the products. for our types And new successful packaging product, of a initiatives are platform several regards with product of disappearing pallets, seen been substitution, And again here of right is those that which packaging bringing last strength XX customer months. characterize us demand around for In over pretty new focus course of our the in and types to we've market those of activities. really

area X bowls really amping recyclable pressing water bowl tend call that we're other joined this our a in efforts provides and the coatings gears with shifting January that is company new barrier to more and traditional I'll The replacing various yet with grease be up with what bowls of area whole paperboard our on on and where and resources conjunction CPET compostable.

so So about those with I'm an I you assuming ongoing product. paperboard. real know, pre-buying, many, That's continue you as be an In would base. microwave to will you're the talking point been and be I'd for regards many extended forward years go two we to. to areas as focus, mentioned

George Leon Staphos

Correct.

Michael P. Doss

material edges. defer seeing the now in some sure that. I'll this that's a And could I'm being there see now But characterize that on around something as least. fashion that Steve we're point. not I'd anything minor to amounts right at don't at We be

Stephen R. Scherger

year. And to of and the And definition there'll million for be that's morning, traditional would flow, our equivalents moving be Paper free would be be equivalents the the the million that what roughly dividend this there'll you the three we'll year of With share $XXX the be only of payments It's that interest. three And of regards year of payments Good them those. for cash to those overall cash XXX% may to from the our recall our context the of you within that's see multiplied quarterly International George. business. dividend the for equivalent this Steve. by dividend $XX partnership

George Leon Staphos

Okay. Thanks, Steve.

Stephen R. Scherger

bet. You

Operator

Your Wilde Mark next question from BMO comes with Markets. Capital

line open. Your is

Mark William Wilde

Good Steve. Mike. morning, Good morning,

Michael P. Doss

morning. Good

Stephen R. Scherger

Hi.

Michael P. Doss

Hi, Mark.

Mark William Wilde

combination come the were last your around of at kind price really it same you've just it the back just of sort recouping to of kind I'd for increases if price EBITDA is terms of kind like announced getting sort a lot you're you've we EBITDA cost kind in like acquisitions guidance seems full level. from the of plus the really of related time to pass-through made because to not look like since of the the pricing guidance to core of that last for back And year invested year year seems you're XXXX. and that, all and at XXXX and doing of And then capital. the

I'm reconcile wondering can if you us that. So help

Stephen R. Scherger

add context. Mark, it's can I'll some Steve. start and in Mike

think I known to That million, in relative through that. So all just you the at has take pricing let $XX it. pricing guidance me activities

net $XX So with the ton the CRB, model as the cost net also includes in basis on it year. we on CUK know, throughout from per has And negotiate year, as last as multiyear pass-throughs. the that you a it – customers ton on per well $XX

negotiations has some the of impact net in those And of so it. it

it announcements all And price we've point three What on at is, of known. per increase ton so $XX has that's everything course, have substrates. this doesn't the it made, in that the it

that cost. of very do obviously in beyond profile we're XXXX the the terms were really assuming that you to what are recognized. those late of know, will aspire early recognizing recovering focused a As margin a you price/cost most to recognition, keenly XXXX, Mike that to headwind really over $XXX price And have, your the mentioned, recovery XX to as get versus we're that that's million we around XXXX of price/cost, about on to that kind on through that back continuing last And navigated think point we're here with months. what to aware we I needs and be happen

Michael P. Doss

Yeah, Mark.

on. comment is spot Your

now, prepared neutral is As right guidance basically got spread. a price/cost spread. remarks, it's we've million we've I price/cost in that And a $XX my the that provided mentioned here

the So we've recoup and it. after next got we're focused on be go months. where over XX That's to go that going initiate to pricing activities going

Mark William Wilde

some talk in because a the just in if business you Okay. notice particular, And also and for I'm puts plastic for challenges seeing a like follow-on, bit the pressure if I some cups. stories But seeing packaging good we're little on packaging. lot curious could, of about same Europe over are things takes I you. it a and time, potential seems there some We're at could about single-service stories on consumer about pressure in

So you I bit help cross-currents. a those if could Mike, talk wondered, us little about

Michael P. Doss

many All those we in things heavily see the are know. and that's same as you involved well and very products, accurate of

continue made good a They from on to the that recyclable They're products positive and story. compostable, resource. actually and believe fiber-based that's are obviously renewable are We side.

Mark. but of really side the loop how material On it do to customers get of again, reused we close terms want effort. with better get capture in the figure to we're so that product that that our back be working to material need job advocating and that our bring customers development to the back of two-part can other ability a some We and work, more a sure it make of recycled, with our capture also need new it that out so do and to we ledger, we to it

Mark William Wilde

over. I'll enough. it turn good Okay,

Michael P. Doss

Thank you.

Operator

comes Mark Stephens. Your Connelly question with from next

line Your open. is

Ashish Gupta

is for This morning. Ashish Mark. Gupta good Hi,

Stephen R. Scherger

morning. Good

Michael P. Doss

Good morning.

Ashish Gupta

morning. Good

like positive core sounds to after question, a really volume modestly so the couple the the first us, blowout last Just of years. level positive almost

look can bit further? about in little drink think demand markets; Looking food you aside new details development, you some share the on processed from going soft product on a we how as more out what's

Michael P. Doss

accretive felt think seemed and when past, won't were we in you that the bottom bunch so points I what obviously of saw this well. us look different will we of helped how to in And I terms the product individual XXX of regard along say basis our But over some was it XXXX we on some able really started our as really time more activities January volume up And about in the saw that year, verticals like spend morning. and in terms verticals, we've in core of you drive and there's bounce in development were that's and volumes. I that that gain a year the down. some talked new

watch our So how to we're look, that that know. We're that's challenged in But a help we you continue efforts. XXXX, and the customers is and that as with quarter our carefully. probably win expect development working very trend closely well something them marketplace, It's focusing new will every business we here in marketplace. building our product

Ashish Gupta

– Okay, But to further versus acquired maybe to have last is back, new so volume how on the the there what the recently anecdotally, that, versus looking acquisitions parse isn't years to follow-up thanks. organic the organic. And through development? anything just from have couple growth to this obviously, of way acquisitions a product helped contribute contributed growth that volume organic

Stephen R. Scherger

cut at I'll that. Steve. a is This take

get had acquisitions a always from geographies growth seen course then of becomes little a and get better overlap that a into when we've of call acquisitions; volume. a bit see, we out last the through you three As portray results, quarters we that What those we once one-year separately And on from full and year core those the our X.X% have because that over from year. core. the really year the for a have good played in growth role they've for we been markets full yeah, modest investing into is we important with ownership that, profile. we've Once this very net acquisitions acquisitions;

of serving businesses are regional that that serving that applications good-for-you towards local that businesses are the of remixing some the craft that better-for-you, foods. are for orientation, example, in of portfolio are part beer, applications, winning are been it's are So in the that more foodservice

it's role new yes, along played development. a product so And with

Ashish Gupta

lot. a Thanks

Stephen R. Scherger

You bet.

Operator

from Anthony comes question Pettinari next with Your Citi.

line open. Your is

Anthony Pettinari

morning. follow-up had outstanding the question into guidance. price aren't I a baked billion $X Good the on hikes that

And CRB successful, remind take Assuming to CUK and up expect you'd us I to up but comments SBS you IP's it in you've think to experience those you to SBS how can as long they been show accelerate months, you've there? buyer? or can and you that. nine taken your that Any an for history compare can give seen from to trying earnings? then have are what

Stephen R. Scherger

Steve. It's Anthony. Thanks,

SBS, right relative now of you six of still CUK. and Just nine we SBS. previously with a and to you're experienced so combination been roughly right would relative what and through for team what has to months nine the see to we take bit About that the That's months six is months. CRB a have norm that, little

Assuming might late But QX, coming impact. predominantly recognition see of positive out XX% see some XXXX we we back through estimate we here that XXXX would the rolling it natural continue of that would plays half But it there recognition. that's of the you assuming play year. to of informed out would And how naturally is recognition. once level a we'll some obviously keep how

Anthony Pettinari

just had And a think Does improvements. Santa talked a in of helpful. performance $XX XQ? about performance very that any that's the you Santa in impacted closure hit And performance the maybe benefit then it of Okay, Clara Clara to the much was was. on how I past continue I improvements, of then into million indicated think I'm improvements wondering XQ. you

for case what the So Santa the timing just be. wondering and of the kind benefit if would the realization of of that's Clara still

Michael P. Doss

Yeah. Sure, Anthony. It's Mike.

which EBITDA. about of be already about of $XX terms a XXXX worth and $X now you the EBITDA by think the will in of impact intact for if million of we're And end about really relieved probably really was QX built think inventory it's million fully QX. improvement is relieving million in I and We $XX that, started. it

Anthony Pettinari

it over. turn I'll Great.

Operator

comes Your Baird. next question with Ghansham Panjabi from

Your line is open.

Ghansham Panjabi

hear me? you Can Hello.

Michael P. Doss

Hi, we Yeah, got Ghansham. Hi. you.

Ghansham Panjabi

morning. Good guys. Hi,

the to from the beverage first the kind been from XQ and the a maybe do quarter. you the of as back hurricanes the in sense can of core customers volume XQ, did of So think, in performed normalization market in Maybe some X.X% quarter XQ? production a you of give for to growth having during disrupted how benefit, you specifically us beverage up,

Michael P. Doss

business pretty good. Our global was beverage actually

reported down Ghansham. that a consistent with Our actually well North American quite beer mega the chronicled and bit were was there, trends

we or of relative hurricanes. was correction happened – we steady to that expected. say kind in It wouldn't what relative I as and big a QX So to saw the

Ghansham Panjabi

of your part just material costs that TiOX Okay. productivity timeline the in of the are And Was normal you so Thanks of usage Mike. much. the chemicals then sort pipeline? your referenced, or project accelerated increase as in projects of to these reduce raw terms such given

Michael P. Doss

It's really have in all pipeline. part you September of year. our We'll of annual do ongoing outage will during know, Macon, place in productivity our take which that, to this as

us on the to one to associated those up the the is downtime with doing year-over-year Macon we're thing The for we this queue mill. good the one So have installation. projects second at on it's manage a basis

So and we well. we go to understand how And it expect to do it's to take. what it going

Ghansham Panjabi

Thank you.

Michael P. Doss

bet. You

Operator

with Chip from comes question Dillon Research. Vertical next Your

open. line Your is

Chip Dillon

good and Yes morning.

Michael P. Doss

Hi, Chip.

Chip Dillon

the at you First the of to include EBITDA the did mentioned for that – the right? did not hey or outage question there, – say is about, the $X is was billion And year. the it, mill? with do impact what $XX with Augusta guide for Is so that you million

Stephen R. Scherger

right, That's yes. It's Steve, Chip.

Chip Dillon

then thing the is on flow cash Okay. the guidance. operating And other

year spend in like the number mentioned of that you every $XXX use? million Is machine packaging $XX sort It roughly about the to You on good CapEx. capital. million a looks

Michael P. Doss

a Yeah, good that's number.

Chip Dillon

- That's Okay.

Stephen R. Scherger

Steve. it's Chip, And

back going to a net Just the kind $XX boiler won't on your flows. at recovery million of rebuild to Augusta question our negative be cash

real got, also inherent value. Santa parts moving of as a you the on year some As fair we've corporation, that number this know, estate the Clara mill. of closure has a That's

that and for you through of consideration. million So kind the those that expenditures into $XXX one-time we've of net impact tried takes to the of some look so

Chip Dillon

as And it you. SBS a to in now. cost-plus we initiative haven't up that business because subject you very is been look call successful would just, that limit the instance, till pricing say I'll let's little the really for a for be of maybe model that Is fairly say what that's – impact? at would to Got then safe that

Stephen R. Scherger

would RISI It predominantly index driven Chip. for accurate, That's of be off the pricing.

Chip Dillon

pricing of that good two costs? and be more it's tied kind this the that that XX-XX is XX% say the might And substrates, fair still to other of guess a is subject probably to to

Michael P. Doss

Yeah, it's guess. actually not a

You're on accurate that. in your assessment

Stephen R. Scherger

linked tons X.X production at million overall versus Chip. if X.X towards that tons total about look the more are Yeah, capability. you the of There's of RISI kind million

Chip Dillon

– XX.X% income there's any no of sense in until make interest modeling interest they the I we're reflection income, sure to and see, then minority you unless – And to I after-tax this. since two on no made I'm for after-tax will that sell sorry, your got being of share just me issuance half your recognize decide our years. right you. sounds to their of It

Stephen R. Scherger

when rightly recognized in that interest based a million do be you have, the roughly which tax in Chip. terms that'll you'll QX. the the shares They'll That's Everything have on us will said, that XXX after see be minority partnership you interest XX.X% of P&L, correct, as see upon as GPK. reporting we in we'll

Chip Dillon

you. Thank Terrific.

Stephen R. Scherger

bet. You

Operator

question comes Brian Maguire with next Sachs. Goldman from Your

open. line Your is

Brian Maguire

Hey. Good morning, guys.

Michael P. Doss

Good morning.

Brian Maguire

the say kind if little of you the to or $X on of as when I to sometimes range. But is question guidance. sort guys truly recognize And nice you've number, EBITDA you about bit a end for as would billion more think this maybe billion was a billion year that? midpoint? it use is in as you at $XX this past the million communicate a a you're drive $X internally, view it the troops, what round is factors you slip $X then $X range, know to number ...a estimate. year And below would billion a time, I the low given would thinking point you positive of what the that

Michael P. Doss

Well, Brian, the first February. it's week of

now takes kind that we're puts out and looking from put that's billion, right there right we the some of to given that of as various at number so $X are And there. the think

OCC for in right per know, you some you, As of ton. numbers is $XX now at terms

$XXX gave Our it ton. is $XXX Last was you per guidance year, ton. we at per

along continuums or million move all year. your $X So $XX what's billion $XX million it, Those those was But year? point, going number. there's can a that different finish lines. the is last be to that we that when things than are to The weaker now little dollar it kind of around

did to it why you was that's way of could the we tried did how that see it we together. so waterfall So kind coming it it and

Brian Maguire

has just question like good the SBS both now out price last different coming increase guess it I the summarize a the for versus support the surprised that are November. November on is I was CRB, increase and in there. gives what $XX guess think of And can confidence that question seems when sort the $XX through what's RISI year Okay, announcements CUK there then that. out you thanks. just some that you market since of there can people the the you now. sort get Maybe you changed think of with ones,

Michael P. Doss

come of changed last market So CRB the I if it, year tons what over – the you of in have Brian And kind capacity, about that as think lump we is think about really has – capacity think CUK XXX,XXX I and together. out. would

million got XXX,XXX made. tons you tons it's grades that, of And take you that So those X.X two X.X% removed. been were that's against essentially out between about capacity

that you see quite expect go fact year-over-year. into mill starting were strong continue Santa saw, December, shifted system. given CUK our Clara as we into from our operating the we November and trend CUK in XXXX in the that to You're tons that XX,XXX statistics. I Both to

and announcements. if why And really those to that's decision you really made relative as think enter So it's we about to at how the it, implement will looking perform. how we it demand supply and pricing we're actually really substrates and XXXX

Brian Maguire

Okay.

last – million any good Augusta Is going one this And Is Steve mentioned spending to number is Just number going modeling. one good a a or you this anything forward? forward? there $XXX year there temporarily for year. boosting use the that it CapEx is for for

Stephen R. Scherger

Thanks, Yeah. Brian.

spend – we think million be baseline I think take kind and that of done the to that look CapEx, in at you way we've of I combination. and kind kind $XXX you the the I used forward range probably about baseline year, coater, think pre for time given in continue doing baseline to acquisitions very that which lay think to And if going curtain of now new if enterprise the this to as the past rebuild, used just Augusta million CapEx; do what above we've it specifically you those recovery range the is we'll kind to we're done any investments we et of cetera. like out $XXX that, in relative

$XXX So probably million is baseline.

that million you've from on think in solid I tend that to a $XX we us would million we range do $XX They forward. tend bring good that be to go-forward. have always projects seen to

bit for roughly little a recovery on of likely step do we're Augusta million. have So at I we year wouldn't the investments investment necessarily. make. million But the use $XXX a to I'd little it rebuild unique the up $XX this bit

Brian Maguire

much. very thanks Okay,

Stephen R. Scherger

bet. You

Operator

comes with question Bank. next Jones Deutsche Your from Debbie

Your is line open.

Debbie A. Jones

Hey, good morning.

Michael P. Doss

Hi, Debbie.

Debbie A. Jones

My volume. first is on question

the guidance. on just Second cost

increasing then visibility? do in a prices their an materially made of time? packaging, see there's they when customers a kind a second from look of you that OCC shift period historically that's Do And plastic on consumer lower you here? historically change we're maybe rate stay have you behavior over you Is Do exciting? notice question no volumes. boxboard think If kind that order you. of volumes when precise to plateaued the be I there answer know argument at to for But of

Michael P. Doss

Debbie. Okay,

take I'm take Let to asked in you going – how them. just these me and just sequence

folding see cartons relative that some in paperboard is and as we the carton In the talked plastic, migration the see all types shifts specifications around the on pretty this there share vice – side Alex terms we've to all occurs of of we tracks into from around not plastic – different shifts But statistics, of past, and industry into packaging natural against our versa. out fundamental substrates. or do carefully

of march gave we regards vertically integrated lower, that steady be see on reflected that that on in the CUK. we're paperboard you. XX% and open when pre-buying kind In is Again, that's volume to primarily a just we within kind overall our that'd of side. OCC as So guidance grade market

a our be would small as questions, the one it earlier year. have sales. so far did, not they of of on this And if even portion mentioned just that seen we So I

Debbie A. Jones

be down rolled that also to just who actually just impact an cartons. Okay. And I product If on buying has through asking an was guess index customers tend about because does these price that the I'm those and materially, tend it have the to actually folding costs? reduced of are moving

Michael P. Doss

finite areas just tends supply our in of material. Again, Most very small. to to be to tend It store chains got be time. they've this now

fill they buy to buy to like and forward, changes, the and need keep graphics So cartons full they pretty of so labeling real a warehouse it's not time. so that that want change

Stephen R. Scherger

Debbie, Steve. And, it's

tend they that see to also should products most don't We past, the the substrates movements we've naturally be in as in. in either. substrate And are talked among

Debbie A. Jones

million an to Okay, quick magnitude the order coming that's items is a higher in that of $XX $XX just million question the on out? where of on just called you helpful. you And pressure from the me Can give costs.

Stephen R. Scherger

at we it, OCC Yes, we glad net we've per OCC. $XXX for is what as ago net compares Mike to be assumption per to. think mentioned, made of $XXX The said we've I'd that And per around $XX a year. moment ton ton ton, a prudent last that assumed just

we've is specifically. million. inflation on chemical be And of specifically, then will business inside $XX $XX those on in QX core about we've million million of We from items as well costs, our deflationary resin. what $XX it that to logistics really assumptions So very saw the seen as seen

we other we so in with of the assumption trend OCC, on million inflation $XX and specifically million deflation assumption inflation on logistics, net the $XX those those some net out, very if chemicals, and prudent inflation think those items, a some nets to the that costs. resin. that's around from And good line And business to

Debbie A. Jones

Okay, that's helpful. Thank you.

Stephen R. Scherger

You bet.

Michael P. Doss

got You it.

Operator

question from comes Capital next with RBC Your Arun Markets. Viswanathan

open. is line Your

Tom Narayan

Hi, for yeah. Tom the questions. taking Thanks actually It's for Arun.

three hypothetical XXX% On successful increases? the all price be on if contribution would what guidance, EBITDA you the were substrate

Stephen R. Scherger

that. tons to time go be of times X.X has just I you case that we about just to theory million $XX chatted would attachment some think the if earlier the the over what the

theories. So times do be roughly you're case theory three theory you that the substrates. in But just $XXX range in would we wouldn't you Obviously, X.X $XX the of to if case. million the tons the the the all million do math, across encourage

Tom Narayan

the from the Got interim my stake, do limit in buy IT your that event terms extent guys to the you would in M&A what in flexibility? ability it, then back doing understood. other follow-up, financial And of

Michael P. Doss

that their down our our next way that to be positioned time. make and And when business we'd outlined. to ourselves decision that they to They debt where is call. you flexibility to we're that, point that get at cash in and think to flow you'll the free generating, Tom, grow and think year continue drive we're years do, see well about if two that and was pay this priorities positioned have at that's be year it to and would that wanted a the I there, really us still us on talk out we've our something able to do strategic look and

Tom Narayan

Okay. on your guidance any is market? why volumes, certainly the doesn't outperformed actually And then a lastly growth you've there reason include volume if

Michael P. Doss

we a and for If an happen, it drives scenario. prudent see we build then growth spending around to case when then very do, forces business. prisoner is volume we dollar we reduction, base tend the it just as into it like issue. every Tom, our to cost doesn't us better be plan we and a What treat forwards It and have think to comes what

to we try XXXX. in which volumes and flat for did plan outperform we that, So

Tom Narayan

Great, it turn over. thanks. I'll

Michael P. Doss

You bet.

Operator

comes with from question KeyBanc. next Your Adam Josephson

Your line is open.

Adam Jesse Josephson

Hi, Steve, Mike, good morning.

Michael P. Doss

Adam. Hi,

Adam Jesse Josephson

I just just make three of earlier X.X I not all grades, you X.X XX% I to tons. couple understand to $XX X.X XX% A said year. I tons? The I the the million sure what it the is. all or this on mentioned you apply three of if clarifications know don't through, sensitivity across ultimate could guidance, get you to the go mind. you X.X understand be Should cost million, am benefit million you're the million the it the if what trying pass-through. want

Stephen R. Scherger

that million the would through Adam, matched tons flow X.X more but it's cost models. tons, up to I'd models. X.X apply be the with tends million Steve. cost other on Obviously, roughly to what is

off the doing I tons. did, do think you you're just the it million if X.X you'd math

Adam Jesse Josephson

were year, three all that got potential if of – it $XX maybe recognized, million about, EBITDA. of got you you're if you talking this Is So XX% right? upside to

Stephen R. Scherger

range. Yes, That be that's right. would in

Adam Jesse Josephson

know your tons what buying on I the X.X we on then as And Should now? fiber the would in million paper relative also year to recycled are. the assuming higher full of to just $XX assumptions mix of that OCC where are you're comparable assume average move your for that a we terms OCC. OCC

Stephen R. Scherger

tons of would the make It's closure be and on assumption. that. that's it's a facility, clarification million a X.X is about about you basket now good the The Adam, of Santa point for only actually of and OCC Clara with I'd XXX,XXX that,

Adam Jesse Josephson

Okay.

you're – it in stay EBITDA. to upside and ballpark? maybe mix OCC Is $XX million exactly that the where if talking, call are, of they So

Stephen R. Scherger

and It's ballpark in the a that's number. good

Adam Jesse Josephson

I much, so Thanks it. appreciate

Stephen R. Scherger

Adam. You bet,

Operator

question next Glazerman Roe Equity Research. with Gail from Your comes

open. is line Your

Gail Glazerman

good morning. Hey,

just to inflation Going you quarter? the kind quarter, wondering. I operations the material commenting of fourth carry in have and seen rate. inflation, into seen I'm back any negative weather first incremental quarter Have you about appreciate on your the impact run

Michael P. Doss

where of are available. period for it's Southeast that were extreme mills time. Gail, time period a but point Mike. in of of one in And middle both XX States, and really cold did that located. you of large where, United truck escalate time we and as about Gulf all a I'll where was weather January, I well rail, that really truckloads would our freight the for was There very some that impacted take had that. it, the was in virgin there every trucking and the half freight, We week know, see characterize in a there

then. since that since improved Now

I think truckloads as week into numbers went we were earlier around saw last this February. the I X-to-X

through again, bit what impacted where we period a of for by that a outlook And really was in cold one here quarter. time. expect the that's first little get of production reflected that that some that quarter, lost did We but to weather, mills have as the better for We our we all we saw. wind we gave

Gail Glazerman

seeing And seeing? any about where what forward, moving you priority, if this at pipeline point you're can you're wondering just different? Obviously, helpful. just the the integrating opportunities give or see top some M&A that's a on is you the I'm thinking Okay, color geographically best SBS

Michael P. Doss

these our focus a about the will and building in talked out in very that be America. in we've billion and know, We new being you both assets, around now remained efforts SBS. focused our past. another Europe and as to We our track closed integration right now XX% expect us perimeter over to aggressive look be acquisitions Service on side pretty is a looking Europe talking you'd around is record fits people out as now you of the and a and we're we valuation can expect, converting North which have it build that that little next do, store. we as aimed would chronicled. with for So business $X which five of things years and SBS, the said to three our on target us the work just that all is on level, we growing XX% last is are the and growing at the And as to our know faster our tuck-in leg is call as stool Food pipeline business, that you we well the of plus is sales the to And during of have

Gail Glazerman

thank Okay, you.

Michael P. Doss

bet. You

Operator

America. George from Your with question comes Bank Staphos next of

line open. Your is

George Leon Staphos

some Hi, just follow-ons guys, here.

question, the rough to I inflation So, just was back some doing math.

increase figure? freight your on. Mike, in having more and seeing and more or more bit that the XX% average seeing fourth implying then XX%, the from And chem, that if I not, terms in the cost, question be other of that average opportunity basically and/or convenience? you're color with assuming chemicals, bleached quarter provide an If you're or based follow-ons. of versus what of And on cartons so Is you're across opportunity brown of freight UK cost seems perimeter including you more bleached that perimeter a toolbox, in blended are So store, including materials little a to opportunity non-fiber could there? then, less variable in and was accurate an in terms now more had of store you couple

Stephen R. Scherger

work you to want that on a I George. you XX% bit Steve. said. little that number Yeah, It's with probably

know think about million actual what at kind convey when to number I are that what's in we $XX zone, those assumed a are drive that trying of is, that that that were of we we incurring that assumption. were the things necessarily inflation I into QX, costs categories will. would that year-over-year, assume up don't if saw of we look I that There but and continuation a as some we've in you in XX%,

that in understand So, bit defer to I'm referring to terms work, me little base, you're to really bit the But – it sure a you you the – to. I would on QX which of into little in let was cost a going do that make XXXX. trend of, line

George Leon Staphos

the That's fine. reverse you or it We'll the engineering, expected offline. divided the us and year took or positive I goal to swung talk just about a the fiber-based for I – be out negative, level. gave was the got that's it's X absolute in the not by number. that rate and compared how to million, the But, the change then I that of may change, $XX

I about the that's be think as think So percentage may where it. we offer now I

In any terms Mike of perimeter that? on of store, thoughts

Michael P. Doss

Yeah.

around lot that's for and in provisioning for whether now three they bowls seeing ready the thing meals wants come substrates, selection they consumers, also store. of a all it's I company know, now are of some capability question. of and to And is the we with think the SBS. These as have them And dinner. your we're perimeter in lunch pressed traction that as or you that out continue brown the as do. the we're Though have agnostic a great we stores mentioned, build I have grab on supplying the with the whether customer

product got activity new we've our focused of in regard. lot So, development that

part So, we of product the George. provide is the won't it's we I really now say all that's them think that the one that offering versus products, those can and have great I other

George Leon Staphos

you there Mike juncture, overall quantify the growing now? meaningful at this to recognizing but what stores a of business, perimeter not your way majority it's Is it's for

Michael P. Doss

category the that X% defined Yeah, to as number in X.X% we I'd particular say is it.

George Leon Staphos

All right. (XX:XX:XX)

Michael P. Doss

...on for us. a bigger base

George Leon Staphos

and I'll My incorrect Okay. here. question, I'm over. last One, I if correctly advise me it it if turn saw

quarter are a the obviously in turn Thank higher, benefit PMX, bridge, I'm and Said expect it October? free guiding assuming capital costs variable working negative, me, a why working to in input flow price would it's not correctly, fiber-based. going if hear going be on your And cash the so are up, have you. I costs in but up over. you're that's PMX, that differently, making a to in, Explain capital positive. did a then goes I current cash positive the flow? I'll with You

Michael P. Doss

those I'll of take then, and both speculate can Steve, in you color. at a crack the

coater And that paperboard to starting current so it we for the Clara closure... the goes think actually we'll relieving in up in, working regards then built in Santa in really be September, capital, George. I it's October, that

George Leon Staphos

Right, right, right.

Michael P. Doss

do are things, two volume IP that and to we related ...and the also continue inventory we will SBS care at the mill a those little of it's bit recovery boilers, started the outage on the George. of take of so side of build the the when Augusta

George Leon Staphos

over. turn helpful. very you, Thank it Okay. I'll

Operator

Q&A closing today's session. call concludes That to over Mike the for I'll back turn remarks. Doss

Michael P. Doss

joining Thank a We call you in our day. look Have you forward today. great with for April. again to earnings speaking

Operator

concludes conference This call. today's

may now You disconnect.

Graphic Packaging Holding (GPK) 6 Feb 182017 Q4 Earnings call transcript