Brad Ankerholz - VP and Treasurer Mike Doss - President and CEO Steve Scherger - SVP and CFO

Mark Wilde - BMO Capital Markets Ghansham Panjabi - Baird Danny Moran - Macquarie Debbie Jones - Deutsche Bank George Staphos - Bank of America/Merrill Lynch Philip Ng - Jefferies Chip Dillon - Vertical Research Anthony Pettinari - Citi

Thank you Lindsey and welcome everyone to the Graphic Packaging Holding Company's first quarter 2016 earnings call. Commenting on results this morning are Mike Doss, the Company's President and CEO, and Steve Scherger, our Senior Vice President and CFO.

To help you follow along with today's call, we have provided a slide presentation, which can be accessed by clicking on the Webcast and Presentations link on the Investors section of our website, which is graphicpkg.com. I would like to remind everyone that statements of our expectations, plans, estimates and beliefs regarding future performance and events constitute forward-looking statements.

Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from the Company's present expectations. Information regarding these risks and uncertainties is contained in the Company's periodic filings with the Securities and Exchange Commission.

Undue reliance should not be placed on forward-looking statements, as such statements speak only as of the date in which they are made and the Company undertakes no obligation to update such statements, except as required by law. Mike, I'll turn it over to you now.

Thank you, Brad. Our first quarter results were in line with our expectations and we are off to a solid start to the year.

This morning we announced adjusted earnings per share of $0.20 versus $0.17 last year. Adjusted EBITDA increased 6.7% and adjusted EBITDA margin increased 70 basis points to 18.7%.

The global macro trends in the quarter were consistent with what we've been experiencing. We continue to drive earnings growth through asset optimization, acquisition integration and improved productivity.

We delivered strong results while executing on our three strategic priorities this included investing $99 million of capital back into our core business, completing three strategic acquisitions and returning over $60 million to our shareholders including $45 million of share repurchases. We are doing what we committed to do and are executing consistent with our strategic priorities.

Core organic volumes in our global paperboard packaging business increased nearly 1% driven by stronger beverage demand and growth in our international markets. When including acquisitions and the extra day due to leap year, volumes from our ongoing business increased 5%.

As a reminder, we did close the Jonquiere Canada, thermo mechanical pulp mill last year and we also took out some non-integrated craft paper production at our West Monroe mill. These tons were sold last year and will not repeat this year.

The overall end market trends we saw in the first quarter were generally similar to what we've been experiencing. The US food and consumer markets were challenging in the quarter with A.C.

Nielsen reporting industry volume declines in the low-to-mid single digits for some of our major categories such as cereal, frozen pizza and facial tissue. In the quarter, our US food business performed in line with the market with core volumes down in low-single digits.

The global beverage market was in much better picture in the first quarter. The strength in the US beverage market continued to be led by growth in specialty drinks, craft beer and bottled water.

Carbonated beverage volumes declined in the quarter as reported by A.C. Nielsen.

Graphic Packaging’s global beverage business was solid in the quarter increasing in the low-single digits driven by US growth in beer, specialty drinks and carbonated soft drink as well as continued strength in Europe. New product development remains an essential component of our organic growth strategy.

Our Microwave Technology provides a superior cooking experience with convenience of eating on the go. We launched several new microwave packages in the quarter and focused on snacking including a hand-held snack from Golden Krust and a stuffed pretzel from J&J Snack.

On the strength packaging side, we launched a new PowerTray product with boulder sausage. Our PowerTray solution which is made from our sauce paperboard offers better performance and sustainability versus the standard polystyrene foam tray.

This substitution is expanding the paperboard business since protein and produce categories around the parameter of the grocery store. Likewise on our beverage side, our paperboard packaging solutions continue to replace plastic packaging.

Juices and teas are transitioning out of corrugated tray and shrink-wrap packaging into paperboard multi packs to deliver a premium brand image at retail. Soft drink producers continue to diversify their size and pack options for greater appeal.

A major CST brand recently launched a new APAC mini-can and paperboard cotton versus the plastic alternative in the quarter. The water category continues to diversify with sparkling waters and we launched several new sparkling water multi-facts.

Our manufacturing operations had another strong quarter with our mills producing more tons of coated board compared to the first quarter of last year. This strong mill productivity along with ongoing continuous improvement programs helped us generate over $16 million of performance improvements in the first quarter.

The improvements are a result of both our commitment to Lean and Six Sigma principles along with targeted high return capital investments. In the quarter, our mills ran full and backlogs remain consistent with year-ago levels.

As we indicated on the last earnings call, the West Monroe co-gen asset came online in late January and energy savings are tracking to our expectations. We also indicated on the last two calls, we would be adding a new press section head box to one of our SUS paperboard machines in West Monroe during the second quarter of this year.

The work commenced earlier this month and we expect to begin bringing the machine back online later this week. The project is expected to cost between $35 million to $40 million and should increase our SUS production capacity by approximately 30,000 tons per year.

Overall, this investment is expected to generate approximately $12 million in annualized EBITDA. We are also planning to install a new curtain coater and make other improvements to one of make a SUS paperboard machines in the second half of the year most likely late in the third quarter.

We installed a similar asset at our Kalamazoo CRB mill in 2014 and have been very pleased with the quality and cost production benefits of the project. The investment at the Macon mill will be approximately $30 million and should drive approximately $10 million of annual EBITDA upon completion.

Since early 2015, we've completed six acquisitions in North America including 11 converting facilities and two paperboard mills. As previously mentioned, we close one of the mills and we are able to consolidate a legacy converting facility in the Pacific Northwest.

The integrations of Rose City and the Canadian-based Norampac assets are now essentially complete while the on boarding Carded Graphics which we acquired last October is well underway. In 2016, we've completed three more transactions including Mexico-based G-Box, W.

G. Anderson in the Upper Midwest and Metro Packaging & Imaging, a New Jersey-based single plant operation focusing on food and away from home markets.

These six acquisitions have added approximately $450 million in topline revenue and $54 million in EBITDA which we will expect to ultimately grow to $70 million to $80 million annually within 12 to 24 months. These transactions represent a continuation of our strategy to grow in key end markets and geographies as well as optimizing our vertically integrated supply chain.

In January, we announced our intention to acquire Australian-based Colorpak. We have received Colorpak’s shareholder and other regulatory approvals and expect to close that transaction later this week.

Colorpak has been our largest converting partner in Australia and its three folding cotton manufacturing facilities allow us to expand our proven integrated supply chain in the Australia and New Zealand food, beverage and consumer product markets. The acquisition is expected to contribute $5 million to $6 million in EBITDA in 2016 and $11 million to $13 million annually within 12 to 24 months.

Let me take a moment to address paperboard pricing. As you've seen on Friday afternoon, Pulp and Paperwork weekly reported a pricing adjustment on several substrates including SBS and CRB.

They lower SBS by $20 per ton and CRB by $30 per ton. The SBS reduction will have a de minimis impact on Graphic Packaging.

Since we don't make the grade, our contracts will reset and price movements will be passed through to our cotton costumers. With regards to CRB, we expect a modestly negative EBITDA impact of less than $10 million in 2016.

As you know, we have a multi-year track record of price offsetting commodity inflation and we expect that relationship to continue over time. And with that, I will turn the call over to Steve Scherger, our Chief Financial Officer to take you through the quarterly financial results in more detail.

Steve?

Thanks Mike, good morning. As Mike shared, we delivered another strong quarter.

EPS, EBITDA and EBITDA margin all improved creating positive momentum for 2016. Let me share a few highlights for the quarter.

Adjusted EBITDA increased $12 million to $193 million. Adjusted EBITDA margin increased 70 basis points from 18% to 18.7% and adjusted EPS increased $0.03 to $0.20.

As Mike said, we closed three previously announced tuck-under acquisitions and announced a fourth which we expect to close later this week. And finally, we repurchased 3.7 million shares or $45 million of our stock in the first quarter.

We remained a disciplined buyer in April. References today to EBITDA, net income and earnings per share will be to adjusted numbers.

Pre-tax adjustments related to business combinations and other special charges were $10.5 million for the quarter. Focusing on first quarter net sales, revenue increased 2.6% driven primarily by volume from our acquired businesses and a modest increase in our legacy business.

Price was lower by $8 million in the quarter and the strong US dollar translated to lower sales of $9 million. Turning to first quarter EBITDA, we posted a strong increase of 6.7% or $12 million, driven by operating performance benefits of over $16 million and modest volume gain which were partially offset by foreign exchange headwinds and labor and benefit inflation.

Price and commodity inflation essentially offset one and other in the quarter. We ended the quarter with over $820 million in global liquidity and $2.24 billion of net debt.

Our net debt grew by just over $400 million during the quarter. The increase was driven by nearly $290 million for acquisitions, $60 million in share repurchases and dividend activity, along with the typical first-quarter seasonal increase in working capital.

The higher debt level resulted in a first-quarter net leverage ratio of 2.93 times, up from 2.44 at the end of 2015. They remain committed to our long-term leverage of target of 2.5 to 3 times.

We ended the first quarter with $386 million of NOLs for US federal income tax purposes. As we mentioned last quarter, we do not expect to be a material cash taxpayer until 2019.

As Mike stated, we remain focused on returning capital to our shareholders. During the first quarter, we repurchased $45 million or 3.7 million shares.

Subsequent to quarter end, we repurchased another $8.2 million or 630,000 shares. Since we initiated the $250 million program in the first quarter of 2015, we’ve utilized $116.2 million to acquire nearly 9 million shares.

We believe that sharing purchase is an important tool to returning capital to shareholders and we expect to remain in the market utilizing a disciplined approach. Now turning to full year 2016 guidance, our EBITDA and cash flow targets remain unchanged.

We remain committed to a 4% to 7% improvement in EBITDA versus 2015. A few of the components however have shifted modestly.

The US dollar has recently pulled back, at current FX rates, our currency impact should not be a significant of a headwind as we guided last quarter. However, this positive change will be offset by an unfavorable price commodity inflation relationship in 2016 as year-over-year commodity deflation comparisons begin to level off and the impact of the recently announced decrease in CRB pricing flows through.

Last quarter, we indicated a $15 million to $25 million negative impact from FX. That range at today's rate is $5 million to $10 million.

The pricing in commodity relationship moves from roughly flat to a $15 million to $20 million negative for the full year inclusive of all known pricing and inflation outlooks. Looking specifically at second quarter 2016 guidance.

The upgrade to the West Monroe sauce machine and corresponding downtime will temper our typical pattern of seasonal improvement in Q2. We expect Q2 EBITDA to be modestly better than our first-quarter results.

The reminder of our guidance is unchanged and is contained in the presentation on our website. Thank you for your time this morning, I’ll now turn the call back to Mike for some closing remarks.

Thank you, Steve. We had a good first quarter and year is off to a solid start.

We are investing in our core business to drive organic growth and lower cost to making strategic acquisitions to enhance growth and expand channels and returning capital to shareholders to drive long-term shareholder value. Regardless of some of the macro trends in our core end markets, we see plenty of opportunities to continue to deploy our capital to drive future profitable growth.

Thank you for participating on today's call and we look forward to speaking with you again in July. I'll now turn the call back to the operator for questions.

Good morning, Steve. Good morning, Mike.

I wondered if you could first of all talk about what you're seeing in terms of waste paper costs right now. It looks to us like we’re seeing a little pick up in the OCC market and I wondered whether you are seeing the same thing and whether you see this as seasonal alone or whether there is something more to it?

Yes, Mark, we would agree with your statement that we're seeing a little modest upward pressure on waste paper pricing. We've been in that $5 to $10 a ton so far this year, so we are seeing a little bit of pressure coming off of pretty low base as you well know.

Okay. And I’ve heard from some people in the Upper Midwest that maybe it’s a little more intense there, you've got that mill in Southern Michigan.

Can you just talk about what you're seeing there?

Yes, I think that would be fair that there's more pull-in in the Midwest, but I won’t characterize it as just the only spot we're seeing that in. I think it’s really pretty balanced across the board at least what we've experienced so far Mark.

Okay. And Mike, can you talk a little bit about how you’re seeing kind of the deal pipeline right now?

You've mainly been buying converting a assets, but there has been kind of talk over time about whether you might broaden your mill portfolio and I’d like to get a sense of whether that's something you think we might see over the next two or three years?

Yes, I’d be happy to do that. I think - we think about and Stephen has spent a fair amount of time talking about this here with the recent acquisitions we've made domestically.

We really want to focus on integrating those operations into our business in North America now. We've got a fair amount of synergies as you can see from the materials that we plan to flow through.

Our business if we execute like we believe are capable of doing over the next 12 to 24 months. In terms of converting in Europe, as we told you, we took 2015 off, really to let that team catch their breath a little bit after three acquisitions we did there.

They've executed very well and we're at a spot now where we can probably take more of a look if something came along the lines that we are interested in converting wise in Europe. Relative to mill assets, I would assume you're specifically enquiring about SBS.

We would continue to be interested to acquire an asset if it became available and we felt the synergies were real and we could integrate into our business, and I think you gave the proper timing horizon over the next two to three years. It’s certainly something we think that would be good for our business, but it's not a necessity in the short-term.

Okay. And then just two other questions.

One is there has been a lot of talk about Chinese ivory board and I was just - I was talking with a privately held competitors over the weekend, it just - it sounded like there might be some issues for them about wanting to bring in like non-certified food contact board into their plants whether they were using it for kind of food related production for that product or not. Can you talk a little bit about some of the issues there?

Yes, my understanding Mark is, there is roughly 11 million tons of ivory board as you well know. We have seen a little bit of modest amount of it on the West Coast in particular.

But the real challenge that they have from our understanding is that the majority of that material uses optical brighteners in their sheet and in their process. And from an FDA compliance standpoint, we understand that to be one of the challenges they have to overcome.

Okay. And the last question I had is just this Metro Packaging that you bought, that was a minority-owned business, which I assume had some benefit to their volumes from being a minority-owned business.

Obviously, it's not a minority-owned business now, it’s graphic-owned business. So when you bought that business, how did you think about sort of the potential volume downside from just change in ownership?

Yes, we handicapped that a bit. We understood that, but what we’re really interested in is we're a little under-served, under-clubbed if you will in the Mid-Atlantic states from an asset point of view.

And it's a very, very efficient and effective converting location, and we believe we can scale it over time and probably also have some capital avoidance as we build out our supply chain into that region.

Okay. I'll turn it over.

Thanks.

Hey, guys. Good morning.

Mike, first of, what do you think is actually going on in the CRB market as it relates to the reported price declines? Is this is a function of just weaker demand on the margin, a slight increase in supply, maybe both?

You guys are obviously the leaders in that grade. And then how should do we think about price for both CRB and CUK from your perspective as the year evolves?

Okay. Got a couple of questions there.

I am going to handle them in sequence here. I guess, Ghansham, from our standpoint, I’m going to speak about what Graphic Packaging is seeing and if you think about our CRB business, we’re a highly integrated business.

So far 82% of our tons flow-through our packaging sales, which is really how we run the business. And now we've actually made some domestic acquisitions here that will allow us to have another 80,000 plus tons of CRB and CUK at over time.

As it makes sense to increase our integration levels and improve our footprint, we will look to do so. So if you think about the first quarter, in particular, our CRB inventories actually went down, our mills ran full and we bought tons to run our business to grow our top line by the 1% in the core and then the 5% when you add the tuck-in acquisition.

So we were fairly busy. We were pleased with what we saw.

Now, in terms of what's happening in the overall market, again the CRB market in particular is a highly integrated market in excess of probably 70% to 80%. And so at some level, we can appreciate the challenge that the industry trade journals have and trying to figure out what's going on there with their channel checks.

We don't actively participate in any of those and what they are really left with doing is trying to figure out with an increasingly smaller independent group of convertors on that 20% to 30% that remains really what their view is on what's happening in the market. So hopefully that gives you a little color in terms of what we're seeing and how we look at it.

In regards to CUK, what I can tell you is this is that operating rates in that space have been very solid as you know if you look at the PA [ph] data. We're heading into the beverage season.

We just got done with a 20-day plus outage on one of our machines in West Monroe. Our inventories are down and we need that machine and expect it to startup up smoothly in order for us to run and operate our business.

Okay. That makes sense.

And then maybe a question for Steve. Steve, I think last quarter you called out a 4% to 7% increase in EBITDA year-over-year for 2016.

You called out FX, the variance there and also price cost. First off, is that range still realistic for this year?

And second, can you update us on productivity if at all any different from last quarter? Thanks.

Yes, sure Ghansham, would be glad to. Yes, as mentioned in the comments, we remain committed to our guidance of 4% to 7%, so no change there.

And as we mentioned, we're seeing a little bit of tailwind, if you will relative to FX, $20 million to $25 million last quarter, it’s now probably $5 million to $10 million, so there is a little bit of a natural pick up there. And as I mentioned, we see that being offset a little bit by this year.

Our price and inflation relationship is likely to be a little bit negative driven by the fact that we're starting to pass over some of the deflation that we - that occurred last year, and as you know, we pass that through to our customers on a lag. So we’re going to see a little bit of negativity there.

And then as Mike just mentioned, we’ll have a little bit of an impact on the pricing with CRB. So we see that relationship this year being a negative in the 15 to 20.

The combination of those two has very little impact on our EBITDA and as such we remain committed to the full year. On productivity, you saw $16 million is a good strong quarter for us.

Our commitment to the $60 million to $80 million remains intact and as Mike mentioned, we’ve got a real critical startup happening in West Monroe that will be an imperative as we come out of the second quarter and drive productivity for the remainder of the year.

Okay, perfect. Thanks so much.

Hey, good morning, Mike. Good morning, Steve.

Congrats on the quarter. Just had a question on the price cost outlook, it sounds like pricing is going to be $10 million or a little less than $10 million more of a headwind that you initially thought given the CRB cuts.

But what specifically changed on the input cost side to drive the remaining $5 million to $10 million headwind versus what you’re initially expecting?

Yes, I think as we entered into the year, Danny, we - of course none of us have perfect line of sight into inflation, deflation. So we really guided for flat and knowing that depending upon where kind of the inflation, deflation in our environment went, it could have some impact at the time we were thinking kind of plus or minus $10 million, which is why we guided just a flat monitor in the year.

What we are seeing as you mentioned other than OCC up a little bit is pretty benign relative to inflation and so that flatness if you will, actually for us on the current year results in a little bit of negativity on the relationship because we are passing through the deflation to our customers a little bit later than it actually occurred. So over time, that will come back, as we look out over time 2017, 2018 and we have got a long history.

If you look back over the last four years, our price and inflation relationship is in check as a corporation over the last four years in total, slightly positive for paper board segment as previously described. So we believe that the relationship will hold.

This will be one of the years, which we do see on occasion where we will have slightly negativity driven by the nine-month lag and what we just talked about on CRB.

Okay. Thanks for that.

And then any concerns on future ships to CRB production from other paper board grades, one of your competitor shifting that we heard through the quarter. Any future concerns here?

Hey, Danny, it’s Mike. I guess the way I would answer that is this.

I mean, in terms of us speculating on what another producer would do, we wouldn’t want to do that. Having said that, I think one of the sell-side analysts had talked about potentially that being a swing machine.

And if in fact that’s a swing machine that could make some sense to us given they are in both of those markets and it’s really in line with the industry’s trend towards higher integration levels for integrated convertors. So we haven’t seen any of those tons in the marketplace yet.

To the best of our knowledge, they’ve not made any public announcements. So we are also watching and monitoring, but that would be our view as we sit here today.

Got it. Thanks, Mike.

And a last question for me, how would you characterize volumes thus far in late April?

I think we would characterize them as consistent with what we saw in Q1.

Okay, great. Good luck in the rest of the year.

Hi, good morning. I was - maybe if could talk about Mexico for a second.

With your G-Box acquisition, I think you made Marcelo Belden, Head of or General Manager of Mexico. He seems to have a pretty good vision around the growth in that country.

And I am curious, your strategy there because it’s not really an integration play. Do you imagine over time that you will be growing through kind of capacity expansions or do you think that there are still opportunities for you to divide by converting assets down there, and how much of a priority is that for you?

First off, thanks for taking the time to visit the facility Debbie, we really appreciate that. And your comments are right on target.

We actually think it’s an attractive market for us to do both things you just described, build out the existing assets we have. As you know, one of the facilities in Tier 1 that was largely built and has excess capacity so we can grow into that one.

We can optimize [ph] our asset that we have in Monterrey with our existing facility in Queretaro and really balance out our business and improve our overall supply chain over time. And we also think as the market continues to grow that there will be further tuck-in acquisitions that we can do as they make sense.

But in the near term, we really want to optimize what we have and think that will give us plenty of work to do over the next 12 to 24 months. And we agree with you that one of the things that we are excited about with acquiring G-Box was having Marcelo join our team because he has really got a nice vision on that market and understands it well.

Okay, thank you. And I guess that my second question, I know it’s smaller part of the market for you, but the reduction in SBS, were you seeing similar things as for Graphic Packaging or was that a surprise to you as well and kind of what you are thinking about the outlook for SBS?

No, I think we’ve talked a lot about the outlook for SBS even at the end of Q4 call particularly as related to Metso tons starting to come into the US. So it wasn’t a real surprise that there's some pressure on that grade.

We've been talking about that for a while, so I would characterize it as consistent with our expectations.

Okay, great. Thanks.

I will turn it over.

Thanks, Debbie.

Hi, guys, good morning. Thanks for all the details.

Although I would ask if it's possible, I know this is no change from prior quarters, but it would be helpful at least if the slide deck was maybe available a little bit earlier just would help us in terms of trying to figure out what the moving parts were in the quarter ahead of the call, but if you can do it would be great. If not, no worries.

First question I had is the return that you're getting in West Monroe on those incremental tons, is that being calculated on a forward integrated basis? That's not just the mill pick up that you're expecting?

Would that be fair? And is there way to - maybe it’s asking for a little bit too much slice relative to the mill side relative to the carton side?

George, it’s Steve and thanks for the input on the slides. Certainly we will look at the timing of that to give you a little more space.

With regards to the West Monroe investment, actually it does stand alone and when we think about that $35 million to $40 million investment and the $12 million of EBITDA improvement, that is the mill base. Those are the mill based economics.

So as you gather from our acquisitions and from other overall productivity that we drive through those acquisitions, that is where we get the integrated benefits. So we try to have these stand on their own, so that is a mill based return, if you will, on the benefits we will get from the 30,000 tons.

Those tons are sold and so there's an assumption for us inherent in there that those were tons that we have sold into the marketplace, so we will get the benefits from those. It does not include the forward integration.

Right, and if I could George, just one little bit of color on that. I mean one of the things that we're pretty excited about, last year we did one of the head boxes in Macon as you know this year with the pressing section and other head box, we will deal with the carton later this fall, and another head box on one of our paper machines in Q4.

In addition to the benefits Steve talked about, I mean the downstream impact on our converting is significant. We're making these cartons at lower cost and we are able to process them more efficiently through our converting operations and that really helps us drive those targets that we put out there at $60 million to $80 million of productivity into the outlying years.

So lower cost on some higher quality, it’s a good combination.

Yeah, thank you for the additional commentary. Perhaps you had mentioned before and I had missed it, but it’s more than I would normally expect kind of an incremental tonnage - profit per ton, so that's very good.

I know the question has come up in the past, I think we've asked it as well. Could you update us in terms of what you think the runway is to the continued $60 million to $80 million productivity ramp that you see per year these sorts of projects being inherent in that?

Can you do that for the next two years, three years, indeterminate, that would be helpful if you could cover that?

Sure. It’s Steve.

As we've talked in the past, we really take a multi-year approach to our productivity commitments in line of sight to that $60 million to $80 million in our current structure and size is important to us as you know. And on the capital front we have ongoing detailed three to five year capital plans, very detail at a three year level that give us confidence that we can continue to make the kind of investments that we have been making to continue to drive the capital component of our productivity.

Obviously the acquisitions continued, we have incremental improvement as we drive integration and capture cost benefits from the tuck-under acquisitions and then of course our ongoing Lean and Six Sigma every day doing better and continuing to drive productivity. So, yeah, George it’s really important to us.

As you know that $60 million to $80 million is a multi-year commitment to us and a good line of sight to it overall.

Thanks for the reaffirmation there. Two last questions, I'll turn over.

I want to piggyback off of some questions or topics that market teed up. So first off in terms of the bleached board market and I think you had begun answering that you are looking at potential investments here if they do become available on a multi-year basis.

How does the trend in pricing and supply/demand affect your view in terms of whether SBS would be more attractive market to get into overtime to a larger degree? Then the other question I had, just the tons that have cropped up in box board broadly both in Europe and in Asia, I mean our understanding from talking to our contact was that the European capacity was really more of a threat here in the US whereas the ivory board in China, the issue is really more than it might just disenfranchise other tonnage that had been coming into Asia that now needs to find another home when you have a ripple effect.

Can you comment a bit in terms of where you're seeing, if any, more pressure and any additional thoughts you have on that topic? Thanks.

I'll be back.

Thanks, George. In regards to the SBS as an attractive business platform for us over time, I mean really if you think about it, we make two of the three major substrates where we don't make one of them, that we buy a significant amount of tonnage for us.

So our overall integrated model works really well when we're able to have mill assets and backward integrated into our converting assets. And if you think about some of the tuck-under acquisitions we’ve done, they have really been focused on assets that largely convert CRB and SUS and we avoid some of the markets that utilize SBS as an example because we don't manufacture that grade.

So having that asset or assets depending on what you're talking about could create some good options for us down the road if in fact it became available, they were priced right, we were able to acquire them right and we felt the synergies were real and we could deliver them to the bottom line. So that's really the consistent message from a strategic standpoint that we’ve talked about over time and that really hasn't changed.

We are actively in those markets. We know the SBS market well.

We buy 200,000 tons of SBS in North America. We buy 100,000 tons of FBB board in Europe, so we understand the dynamics and really what's going on in those markets.

So that's how I would answer the first part of your question. In regards to ivory board versus FBB board into the United States, the ivory board has really been built out for a long period of time as you know.

As I mentioned earlier we have seen a small modest amount of that on the West Coast. To best to my knowledge that pressure hasn't materially changed really over the last 6 to 12 months.

We would agree with your comment that it seems like more of the discussion tends to be on the Scandinavian producers potentially being able to land FBB board into the US. And one of those producers, our understanding, has actually made that sheet in way that it addresses the optical brightener requirements that I talked about earlier.

So they obviously have that in mind that being a point that is important to make. So I guess in that regard, George, it's really not different than what we talked about at our Q4 call and our view really hasn't changed on it.

And George, this is Steve. The only thing I would add to Mike's point there is we also have a pretty defined view around those markets relative to the pricing supply/demand and the like, so that would be - we would take all that into consideration from a valuation perspective as we looked at those alternatives.

So having been a large net buyer we had visibility into the markets and we'd certainly be very disciplined in our approach on how we would pursue one of those strategic alternatives if there was one available.

Thanks for that, Steve. I will turn it over.

Hey, guys. Thanks for the color on the potential EBITDA impact for this year.

I think you said less than $10 million. Should the year-over-year impact be comparable next year and are you considering moving more of your contracts on the folding carton side not tied to PPW just because as you pointed out the spot market is not reflective of your business per se?

Phil, good morning, this is Steve. I will just take the first part.

The under $10 million for this year on an annualized basis would be under $15 million and so we will get a little bit of bleed over next year, take on under $10 million this year and then annualize it's $15 million, so there might be a little $5 million plus next year that would roll over.

Okay.

And in regards to the second part, Phil, the way I would answer that is, as you know, we deal with some of the largest more sophisticated purchasing organizations on the CPG side really in the world. Those are our customers and what they really would want is little more transparency into the process than a single data point in terms of movement up or down in terms of pricing.

And so the trend has been more that direction over the last three or four years and we found that that works well for us and they seem to find benefit in that as well.

Okay, that's helpful. And at least in the 1Q data there seems to be a pack mix shift from PET to cans and CSP, are you seeing that dynamic play out and is that a positive development for you guys or are you pretty agnostic?

Cans is a big part of our CSD business, but I can’t say that that trend has really driven our overall CSD markets materially. I mean it might be a modest benefit, but I wouldn’t point it out as being a big shift in terms of the mix that we're seeing.

Only on the beer side there has been a little, but we are in both cans and bottles, so it's really not material.

On the beer side we are agnostic, soft drink obviously we’d benefit if that was happening.

Okay, that’s helpful. And just one last one for me.

Based on your M&A pipeline and growth in your core business, do you anticipate needing to bring on a little more of CUK capacity in 2017 or is it more of a 2018 event?

I think what we will do now, we're doing some pretty major work in West Monroe and Macon. And we did - we had a pretty major outage in Macon last year, so as we kind of think about going forward here, we want to bring these machines up, let them run, stabilize them and again our strategy is not to make tons that we don't already have sold.

And so if you think about 30,000 tons we are bringing on in West Monroe later this year, we will increase our integration into our European business. Last year we [indiscernible] 150,000 tons.

We believe this year we will be pushing 175,000 tons and then if you add some of these tuck-under acquisitions we’ve done, we've got clear visibility into that 30,000 tons of growth that will be increasing West Monroe. So as we continue to increase our demand through our packaging sales, then we still have 60,000 to 70,000 tons of pulp capacity down in West Monroe that we can bring online as we have the need for to run our business.

Okay. And I guess on the integration front, I mean as you pointed out with the tons that you bring on and some of the acquisitions you’ve just made, how should we think about the integration level all said and done?

Well, we are going to be thoughtful in terms of how we do it. We want to optimize our asset base and supply chain and over time we will see our integration level continue to increase.

That's part of our strategy and it helps us really deliver consistent value to our customers and from being a packaging company in terms of our core selling folding cartons to CPGs, that's really the model we want to employ.

Okay, thanks.

Thanks, Phil.

Yes, good morning, Mike and Steve.

Good morning.

Hey, Chip.

Hey. First question is on the - you gave a good rundown of the six converting - I guess it was a mill that you shut down, but operations you had acquired in '15 and '16, the $450 million in sales, the $54 million EBIT DA growing to $70 million to $80 million and I just wanted to know, if you have an update on how the Australian acquisition which I think you said is about to close would - I assume that's not part of that.

And I do know you said it was accretive, but do you have any kind of rough numbers as to how much that would add both on the top and the EBITDA lines?

Chip, it’s Steve. Just by way of couple of the numbers there that you mentioned and this is in the slide deck online as well.

With regards to the North American acquisitions, the $450 million top line, the $54 million of kind of core EBITDA growing $70 million to $80 million for this year 2016 that's about a $30 million to $35 million increment for us for this year, because we acquired some of them back in '15 and there was overlap, so just as you're doing year-over-year EBITDA. As we’ve mentioned with color pack, we’ve got about $110 million business there in dollars at a 70 exchange rate I believe.

We’ll see forward a $6 million of EBITDA from that this year, given that we’ll close it here at the end of this week and we see that growing into the $11 million to $13 million we’ve got overtime in total. We feel real good about, as we’re starting to get to know the business, there is a nice opportunity there, both for integration and some consolidation of our converting needs.

Got you. And so this is very helpful.

So on this, obviously some of the - if we use 54 as a base, some of that, if you’re saying 30 to 40 in ‘16, I would guess the 14 to 24 that’s remaining, well, actually that’s not true that a small part of this was obviously seen in ‘15 and because some of these other three, G-Box, Anderson and Metro are closing in ‘16, some of that 54 carries over into ‘17 plus whatever you get of the upside you talked about.

That’s right, Chip. You said it well.

Yeah. You want to be careful with the 54 as not a 2016 number.

Our increment in this year is 30 million to 35 million from those specific acquisitions and then Colorpak on top of that.

Okay. Which sounds like that might add an incremental 3 or 4 next year, as you have the four months you didn’t have this year, plus as you start to get to that 11 to 13 level?

That’s correct.

Okay. And then on the volumes, I noticed and the way I think you guys report your volumes is, it can be impacted by, I believe it’s your folding carton sales plus your open market sales.

And so, obviously if you cut back on your open market - if your mix changes, put it that way and maybe that’s because you might actually either I guess the way to say it is, if you elect to sell less in the open market, and therefore, you need to otherwise buy less in the open market, that can hold down that number and it seems like the 1% on that volume number, that’s 600 ahead of right here, 87 I think it was versus 681, does that reflect any year-to-year change and should we, as we get through the year expect the open market component to come down?

Yeah. Let me take you through that and some bridging for you.

If you move from the 681,000 tons to 687,000, that’s the 1% that you mentioned Chip. As Mike mentioned, our core volumes were up about 1%, so roughly 6000 tons or so.

Our acquisitions and the impact of the leap year added another 27,000 tons or roughly 4%, which as Mike mentioned, our core ongoing business was up about 5%. Offsetting that, which is the numbers you’re just seeing, we shut down the Jonquiere mill last year, which took tonnage out along with as Mike mentioned, the shutdown of the West Monroe machine, number 5 machine that was making some craft.

That actually was 27,000 tons of production that we don’t have year-over-year. So there is three components of that 1%, it’s a plus 1% on the core, plus 4% on the acquisitions and a minus 4% on some things we’ve shut down and that’s how you’ll reconcile the tonnage.

Okay. That’s very clear.

And just so I’m clear, when you say your volumes were up 5%, does that include the benefit of the extra day, meaning that if you took the extra day out, that would knock it down a few percent or does it not include that?

Yeah. It does include it in that 4% that I mentioned from acquisitions and leap year.

There is a few tons there from the extra day.

Good morning. Just following up on the CRB impact, you talked about a 15 million annualized impact and when you look at the flow through of that to earnings, does the disproportionate amount of that hit in 2Q or is it more evenly spread out over 9 months or 12 months or can you give any color on how we should think about the timing of that impact?

Yeah. Sure, Anthony.

We’ll see very little impact in Q2. It will start to meter in, in Q3 and Q4.

It will be in by year end, which is why we’ll see a little under 10 of it this year and then the remainder into next year.

Okay. That’s helpful.

And then just switching back to M&A, you’ve talked about the pipeline for converting assets remaining attractive, especially in Europe, with your leverage kind of at the higher end of your target range and just closing three acquisitions and Colorpak closes shortly, are you kind of consciously passing M&A either to kind of work down leverage a little or just to absorb the assets into the organization or do you not necessarily see those as constraints, could you remain kind of as active in M&A in 2Q, 3Q if the targets are there?

So, Anthony, the way I’d answer that question as I outlined a little bit earlier is, we would really look at North America in particular that we want to integrate the acquisitions we’ve recently made. That’s not to say we won’t continue to have dialog with folks and sometimes, the timing comes up and it’s something that makes sense for us to pursue and the synergies are real and it helps complete some aspect of our business that we think is beneficial and we could transact, but right now, with the amount of acquisitions we’ve done in North America, we really want that team to be able to absorb that and really execute on those high level synergies that we’ve outlined for you here.

In terms of Europe, we think our capacity is back again in terms of converting assets in particular towards our long term [ph] that we’ve outlined here publicly here over the last few quarters to really get our converting sales in Europe over $1 billion in sales. And so that’s kind of how we think about the markets and the geographies in terms of where we would pursue M&A activity.

Thank you. Just a few follow-ons.

First, Steve, can you just give us a little more insight into that business combinations and other special charges line, there is about $10.5 million this quarter?

Sure. It’s $10.5 million and most of that is associated with the acquisitions.

So costs that we’re incurring to acquire the businesses, as you can tell, we’ve been pretty active. So a lot of those are acquisition related costs and then we had a couple of one-time SG&A related costs that we were taking on, just to keep our cost structure in line that were on time in their orientation.

So we’ll always make sure we call those out appropriately for you, but they fell in to those two categories.

Okay. Second one I had is just to come back to this SBS market for a minute, it just strikes me Mike Doss that there’s actually been a lot of SBS capacity that’s had to come out of the market over the last 5 to 10 years and in North America, I mean you've got IP closing this big machine that Regal would right now, but I think Evadale or at least two bleached board machines that are not running and that’s after Kempelen want to probably spend $1 billion at that mill.

And then from what I can tell right now, there are bleached board mills, good bleached board mills that are probably running some pulp. So what's going on in that market?

Have you got any kind of additional insight and given all that, why is that a good business for you to invest in?

Well, yeah, I think that's a fair question, Mark and I won't debate the fact that you’ve outlined there. But really in our view, we would run a little bit - our hypothesis is we could run at different rates by vertically integrating the business back into an asset that we would have.

Now, to your point, the EBITDA associated with that asset we would acquire factors in the market things you’ve already described in terms of what we would be transacting at and as Steve said, we wouldn’t be looking to pursue a deal that wouldn’t be accretive to our shareholders there. It's not something we absolutely have to do certainly in the near term, but it is something that strategically if it became available, we would give it a good look and that, yeah, I think that's really consistent with how we've answered that question over time.

Okay. And then a last one I had is just another kind of broader question and that is, you’ve done a great job over the last several years on taking out costs and dropping it to the bottom line.

I just wonder whether there is opportunity, Mike, over on the marketing and sales side to maybe look a little more closely on how you're pricing business and maybe see if there aren’t some opportunities to pick up some incremental margin from how you sell or how you price?

Yeah. Of course, we're always looking for those kind of upselling opportunities and that's why we spend so much time and effort really on our new product innovation efforts to refresh our product portfolio, Mark, find opportunities to integrate more of our tons into value-added products that help our customers ultimately generate lift in the marketplace.

And so and those products tend to carry higher variable margins where we're able to come up with something new and different. So that has been and will continue to be a big strategic focus for us over time.

Thanks. Hi, guys.

Thanks for taking my question at the end. Just to grab I guess some one-off questions.

First of all, I noticed that the Jonquiere mill assets are being liquidated and that's been shown in some ads in the trade press. What ultimately happens to those mill assets potentially and could they somehow come back to running in North America again and compete against you.

That’s question number one. Secondly, how is online purchasing affecting your customers’ business and what are the opportunities and what are the challenges, both in terms of substrate production and also cotton design in that regard?

And then lastly, it was nice to see the core growth be positive, I imagine and you called it out that beverage is a big driver of that, can you call out any specific new products or innovations that you’ve been working on over the last couple of years that helped drive that volume growth. Thanks and good luck in the quarter.

Okay. I’m going to broke those down George here, in regards to Jonquiere, we don’t believe that those assets, even though certain aspects of the mill are being sold by a liquidator are going to have a material impact, if any impact really in terms of the markets that we compete against, we’re pretty thoughtful in terms of how we structure those sales.

So we don’t expect any challenges there. In regards to online, that’s kind of an interesting new avenue for us.

We’re actually learning a lot about that. Many of our customers are spending some time with Amazon, and Amazon Prime, in particular trying to understand what it could mean for their business and we’re having some of those meetings, both with them and with the e-retailers to really understand what the supply chains will look like over a multi-year period of time and we think there are some opportunities for us, although right now, we’re really more in the explorer [Technical Difficulty] but that would fall in our new product development activity that I talked about in response to Mark’s question and something we will continue to work on.

Last question in regards to our core business, specifically beverage, what - the way I would answer that is, our core beer, our global beer sales continue to be quite strong. I was up at our Crosby, Minnesota facility last week, which manufactures the machinery for primarily beer, but also some of our carbonated soft drink customers and for the third year in a row, our demand will exceed the prior year and those were all record years for us.

So we continue to sell machines, this premiumization trend we’ve talked to you about, about putting beer into paperboard packaging is real and something our customers continue to invest behind and that’s really probably the biggest driver of what I would say our beverage volumes would look like. Craft beer continues to be a good market.

We invested in carded graphics, we’re installing another gluer into carded graphics, which will allow us to manufacture even more baskets into that facility and that’s a result of those markets continuing to grow. So that’s really where we’re seeing the growth on the beverage side of the business.

Thank you very much and we’ll look forward to talking to you again at the end of the second quarter.