Good day, and thank you for standing by. Welcome to the Graphic Packaging announcement to acquire AR Packaging. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that time, you will need to press star one on your telephone keypad. Please be advised to limit your questions to one and one follow-up. If you require any further assistance during this time, you can press star zero. I would now like to turn the conference over to your speaker today, Ms. Melanie Skijus, Vice President, Investor Relations. Please go ahead with your conference. Good morning, and welcome to Graphic Packaging's conference call. Speaking on the call will be Mike Doss, the company's President and CEO, and Steve Scherger, Executive Vice President and CFO. To help you follow along with today's call, we will be referencing a presentation which can be accessed through the webcast via self-directed slides and also on the investor section of our website at www.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 on 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. Thank you, Melanie. Good morning to everyone joining us for the call, and thanks for joining us on short notice. This morning, we are excited to share that we've entered into a definitive agreement to acquire AR Packaging, a leading European sustainable fiber-based consumer packaging provider. Steve and I will walk through the transaction details with you, along with the strategic rationale that makes this acquisition very compelling. Back in September of 2019, we shared Vision 2025 with you, outlining our path to becoming a much larger global enterprise with superior returns and an enhanced ability to create value for all stakeholders. This transaction is strategically aligned with the four pillars of our vision and the ambitious growth goals we established for the company, which you will see on slide four. With this acquisition, we are taking a significant step forward in our journey to realizing Vision 2025. Turning to slide five. With its track record and expertise serving broad European markets, the acquisition of AR Packaging expands our presence in a market that is driving global sustainable packaging trends. The combination of our two highly skilled workforces strengthens our innovation capabilities and will enable us to deliver a broader set of products and customer solutions across existing and new high-growth market segments. The proposed transaction will not only provide significant scale through our combined global footprint, but also strengthens our financial platform with a meaningful cash flow and capital return potential. Combining resources and advancing skill sets shared through utilization of best practices will fuel ongoing innovation initiatives and value creation for customers, consumers, and our stockholders. Turning to slide six, you will find a high-level transaction summary. We intend to acquire AR Packaging for approximately $1.45 billion in an all-cash transaction, which will be funded with debt and available cash on hand. In addition to the compelling strategic benefits of the transaction, it's a great fit for us financially. AR Packaging is projected to add $1.1 billion in sales and $160 million in annual adjusted EBITDA to the combined company. We expect to capture an additional $40 million in synergies over 36 months following the close. We expect the transaction will be immediately accretive to EPS and cash flow and will produce returns above the cost of capital. The proposed transaction has been unanimously approved by both companies' boards of directors and is expected to close in the next four-six months, subject to regulatory approvals and customary closing conditions. Both management teams have a proven track record of executing successful integrations, driving real operating efficiencies, and being highly innovative. I look forward to combining our collective capabilities. Moving to slide seven. In AR Packaging, we are acquiring a leader in sustainable packaging and innovation across Europe as the number two manufacturer of folding cartons in the region. The company is headquartered in Sweden, which is consistently recognized as the world's most sustainably conscious country. AR Packaging benefits from seeing and complying with first-mover environmental regulations, gaining invaluable insights into future demand trends and mandates from consumers and regulators globally. Looking forward, these insights will help shape future product roadmaps, R&D initiatives, as well as the company culture. AR Packaging has been in operation since 1929 and has a broad customer base consisting of large international companies and medium-sized regional and local customers in more than 50 countries. AR Packaging serves these customers from 30 global converting facilities with a clear concentration in Europe. Its book of business is complementary to ours with minimal customer overlap. Notably, AR Packaging has capabilities in attractive healthcare and beauty segments, which presents a new growth opportunity for Graphic Packaging. Europe is a highly attractive and growing market for sustainable packaging, driven by strong underlying fundamentals. Turning to slide eight, you can see why we are excited about the opportunity to further expand our footprint. The region is a clear world leader in the move to the circular economy. In response to legislation, including the European Green Deal and the European Single-Use Plastics Directive, the European population is driven to adopt sustainable practices. Consumers in the region are often viewed as the most sustainably focused in the world and are demanding more recyclable packaging options. There is significant growth potential in creating more sustainable solutions that help preserve food and eliminate waste, increase hygiene and consumer safety, and are made from recyclable and renewable resources. While Graphic Packaging has been focused on sustainable packaging solutions based on renewable and recyclable resources for some time, the acquisition of AR Packaging strengthens and accelerates our ability to reach and serve customers and consumers around the world with innovations in sustainable packaging solutions. On slide nine, we show the expanded global scale of our European footprint created by the acquisition. The expansive footprint of AR Packaging's 25 facilities across Eastern and Western Europe accelerates our leadership and scale in these growing markets. The assets complement our existing manufacturing capabilities and enhance our ability to service customers throughout Europe and globally. The combined European footprint of these 37 facilities across 13 countries converts roughly 780,000 tons of paperboard annually with approximately 240,000 tons integrated today. Ongoing financial benefits from operational efficiencies and integration are possible as production is optimized across the combined converting facilities and as we drive integration rates higher over time. Overall, Europe sales are projected to increase from 12% to 22% of the combined company to a total of approximately $2 billion. Moving to slide 10. Our businesses are complementary with AR Packaging providing established packaging solutions and customers in growing market segments, including healthcare and beauty. The resources and capabilities gained with this acquisition provide opportunities for growth in the U.S. and in other global markets. In addition to increasing our scale and expanding our reach, one of the most compelling aspects of the transaction is that it brings together two companies with highly complementary capabilities in fiber-based consumer packaging, creating an innovation powerhouse that can benefit customers, our global communities, and the planet at large as we move to a more circular economy. On slide 11, we have highlighted the combined expertise of the two very talented global workforces in material science, barrier coatings, paperboard forming, and sealing machinery to name a few focus areas. By combining our strengths, we expect to drive innovation and learnings for customers worldwide. By leveraging our increased scale, we will have more resources to drive R&D investment and continued new product development to meet evolving packaging needs and our growth ambitions. Turning to slide 12, I will quickly summarize the transaction and my confidence in the inherent benefits to all stakeholders. The proposed acquisition of AR Packaging brings together two companies with experienced, talented workforces driven by a shared commitment to customer service and efficient collaboration. As a single organization, we will benefit from joint learnings and growth. The complementary cultures are focused on sustainable fiber-based consumer packaging and will drive value for all stakeholders. The combination aligns with our ambitious Vision 2025 growth and return goals and further strengthens our resolve to redefine leadership in the industry. I will now turn it over to Steve, who will walk through more of the financial impacts of the transaction. Steve? Thanks, Mike, and good morning. I'm pleased to be connecting with you on the call this morning to share details of this exciting announcement. Mike covered why this transaction is compelling strategically in terms of increasing our scale and reach in the attractive European packaging market. Turning to slide 13, let me spend a few minutes detailing the financial benefits. We'll be paying approximately $1.45 illion in cash for AR Packaging, which translates into a multiple of about 7 x expected annual adjusted EBITDA, after taking into account $40 million in total synergies expected to be realized over the first 36 months following the close. We also expect the transaction will be immediately accretive to both EPS and cash flow. Before turning to cash flow of the combined business and our plan to reduce leverage over time, let's spend a few minutes covering the synergies associated with the transaction. Of the $40 million in projected total synergies, $30 million is expected to come from cost savings resulting from converting network optimization, board integration, procurement efficiencies, and SG&A cost reductions. The remaining $10 million is expected to result from incremental EBITDA as the business continues to capitalize on its strong position in the market to grow organically. Beyond the synergies we have identified today, we will target multiple incremental sales opportunities over time from the cross-selling of products, such as our PaperSeal innovation and beverage packaging into new geographies in which AR Packaging currently operates. Perhaps the most salient point from my remarks this morning, the transaction will generate significant cash flow that will drive stakeholder returns. We estimate our pro forma leverage ratio will be approximately 4.2 times at close. Importantly, we will have the financial wherewithal to quickly deleverage. We project our leverage ratio will return to approximately 3.5x By the end of 2022, and we'll be back to 3x by the end of 2023. Based on this trajectory, we'll be on track to return to our target leverage ratio range 24 months following close. On slide 14, we have provided an illustration of our current sales and EBITDA trajectory following the successful close of the AR Packaging transaction, as well as the recently announced Americraft acquisition. As you can see, our current trajectory has us on the path to realizing the sales and EBITDA goals in our Vision 2025. Our road to 2025 sales assumes annual increases in volume mix at the high end of our 100-200 basis points organic sales growth target, resulting from continued conversions to fiber-based consumer packaging solutions. On the right side of slide 14 is an illustration of the components we expect will grow adjusted EBITDA through 2025. Starting from a 2021 pro forma EBITDA level of approximately $1.3 billion, we anticipate generating $300 million-$400 million in incremental EBITDA through a combination of $100 million+ in volume mix, realization of returns from our announced capital projects, including approximately $120 million from the Kalamazoo CRB optimization project and the Texarkana SBS CUK swing machine investment, and finally, $100 million+ in net productivity and synergy capture from these two announced acquisitions. The current trajectory, as shown here, does not assume any additional M&A and drives expected adjusted EBITDA into the $1.6 billion-$1.7 billion range, resulting in expected EBITDA margins of 18%+. As discussed earlier, significant cash flow is expected to result in the rapid deleveraging of the balance sheet down to desired long-term levels. Importantly, the long-term cash flow potential of the combined company supports the continued strategic and balanced allocation of capital to capture ongoing organic growth while providing strong financial returns to stockholders. Turning to slide 15. In closing, we're excited about what this transaction enables us to deliver, both strategically and financially. AR Packaging is a leader in the European market, and we will be pleased to add such a strong company to service this attractive and growing market. By combining our two highly complementary businesses, we will drive innovation in sustainable packaging, expand organic growth opportunities, and be one step closer to achieving the growth and return goals established in Vision 2025. In the meantime, prior to close, we will continue to operate the business as we have been, focusing on developing new innovative packaging, delivering industry-best customer service, and capturing sustainability-supported organic growth. I will now turn the call over to the operator. Operator? If you would like to ask a question, please press star one on your telephone keypad. Please limit your questions to one and one follow-up. Your first question comes from the line of Mark Wilde with Bank of Montreal. Thanks. Good morning, Mike. Good morning, Steve. Mark. I guess the main question that I have is, really just revolves around your ability to kind of integrate all of these different operations. If we combine it with the big capital project you've got in the U.S., the acquisition you just announced in the U.S., and then the fact that you're incorporating what looks like it was itself a roll-up of carton businesses, including some fairly recent acquisitions they've made. If you could just talk about that, Mike. I think those of us who've been around the industry a long time, we have seen some carton roll-ups that did not work very well over time. Yeah, fair question. Thanks for that, Mark. Why don't I hit that on a couple of fronts. First, in terms of the number of things that we have going on, as you alluded to, I think the great thing about that is they're all kind of distinct work streams. If you think about what we've got going on in Kalamazoo, as an example, we've got a distinct set of people that are bringing that project to life, and we expect that it'll be operational and making paper, as we've talked to you about here, yet in Q4. We're kind of getting to the final phases of construction. Of course, we've got to ramp that operation up. We're certainly not taking that lightly. At the same time, as we've told you, this is not generation one of anything. It's a paper machine that we've got a lot of experience running. It's just one that has a lot of scale and a lot of efficiency for us. That project's being managed very appropriately and with a great amount of oversight. In terms of Americraft, it's a tuck-under. It's a great business. As we told you on our first quarter earnings call when we announced that, we plan to bolt that onto our Americas business. They have excellent people. We've obviously started to talk about preliminary discussions around how that business gets integrated into our operations. As you know, we've done a lot of roll-ups on those size businesses and been very successful at being able to do those, retain the business, and drive the synergies. Again, a distinct set of people in the U.S. that's doing that. Now, if I kind of pivot over to Europe, you're right. AR has been a highly- Acquisitions, if you think about how they've done it. They've been very successful in terms of being able to do that. As we kind of look through that, when we've been in Europe for a couple of decades with our beverage business, really started getting big there in 2015, and we've had an excellent team on the ground there as well. We've also been acquisitive in terms of how we've built our business over there. There's a lot of muscle memory between the two organizations in terms of how to do this, how to integrate it, how to bring businesses together. I think one of the things that we've been most impressed about, and we've known the leadership over at AR Packaging for some time, as you remember, we bought a business from them, their beverage business in 2015. We know them. Is the job they've done in rolling this up. The leadership team in that organization is highly capable, as is ours. One of the things I'm most excited about is being able to bring that talent together, in a much larger organization in Europe, $2 billion of converting, and let them do what I know they're capable of doing. It's a fair question. There is a lot going on, hopefully I've given you a little color around the distinct work streams, and how we plan to manage them. As an organization, again, Kalamazoo will be a Q4 thing into early next year as we ramp that machine up. The integration with Americraft will be relatively quickly. Then, this one's bigger, obviously, in Europe, and it's going to take more attention and time from senior management as well, and I'm going to have it. It's an important market for us to be in for all the strategic reasons we talked about in the prepared comments and in the deck you see. This is a market that's driving sustainability at a level that we're going to be able to learn from. We're going to be able to learn from it, we're going to be able to leverage it, and we're going to be able to grow faster. So it's really a key acquisition for us to strategically enable our business for ongoing growth. Okay. That's really helpful, Mike. I guess just for a follow-on, I was kind of scratching my head trying to figure out that 240 ton integration number that was in the presentation. Can you give us a little color? Yeah, it's easy. That's our beverage business, if you think about it, in Europe, and it's what we're currently shipping to Europe right now. Yeah, Mark, it's Steve. Those are the tons that we're currently shipping from the U.S. to Europe to service our business. The total tonnage purchase is the 780,000 tons that we referenced as well. It represents a real nice opportunity for us to drive integration rates over time. I think that's a great point too, Mark. As long as Steve made that comment, I'll build on it a little bit. We're going to be one of the largest purchasers of paperboard in Europe, if you think about it that way. Over 500,000 tons that we'll buy now. That creates incredible optionality for us. In the short term, we have scale, and that'll drive purchasing synergies. In the medium to longer term, we have export opportunities as we've grown our CUK business. If you think about that business in 2012, we exported about 90,000 tons into that market. Now it's 240. There's a lot of opportunities for us there. That's a compelling argument for this transaction as well. Okay, sounds good. I'll turn it over. Thank you, Mark. Your next question comes from Mark Connelly with Stephens. Hey, this is actually John Rider on for Mark. Yes. We were hoping, can you just give us a sense of the contract terms that AR has in terms of how they deal with price cost and the benchmarks and contract triggers? Yeah, to the degree we understand them, because this is early days, right? It's a converting business in Europe, and I can speak more to what our business is like over there, and it tends to be shorter tenders. Most people are non-integrated, as was AR, they've got more frequent openers and shorter contracts. Okay. That's helpful. Can you just? Oh, go ahead. John, it's Steve. I'm just going to add to Mike's point. Our business, like theirs as well, that we'll be combining, has a lot of very long-standing customers. They tend to be long-standing relationships. As Mike mentioned, there tend to be more annual discussions around volume commitments and pricing on more of an annual basis. It's long-standing relationships with customers and annual discussions typically around volume and price. Okay. That's really helpful color. Just one last one. Could you just give us an idea of your net long, short position in the various grades in North America and in Europe after this deal? Yeah. I'm going to answer that consistently with how we've talked about it here over time. Our CRB and CUK businesses are highly integrated in North America and Europe, in excess of 85% in both those grades. SBS is lower on a pro forma basis. If you give us credit for the Americraft acquisition, we're probably approaching 50%. Okay. Thank you. Your next question comes from George Staphos with Bank of America. Hi, everyone. Good morning. Good luck with the transaction. Thanks for all the details. I guess my first question is, gentlemen, could you give us a bit more color in terms of how AR Packaging has performed over time? What's been the growth rate over the last five or 10 years? What have been peak and trough types of margins? What spending needs to be done yet in the business, given what you see right now? I had a follow-on. Thanks, George. Good question. I have to give their leadership team and CVC a lot of credit. When you look at that business in 2015, they reset it. They sold some assets. As I mentioned earlier, they sold a beverage business to us, an example. They took that point, started doing a series of acquisitions. I think they've done six of them since that time. They've done an excellent job integrating those businesses and driving EBITDA and expanding margins. Again, as I alluded to with Mark's comment, or question, I should say, that's one of the things we're most excited about relative to having them join our business, is there's a lot of muscle memory and intellectual horsepower in terms of being able to do this and do this well. Okay. Is there a way you could provide what their organic growth has looked like, Mike? Again, what kind of margin oscillation do you see in the business? Maybe the related point is, for all of the higher-end markets that it is in, its margins seem to be a little bit below Graphic. So, I was wondering if you could provide some color on that, recognizing they're good integrators, et cetera. Hey, George, it's Steve. I'll just start that, and Mike can add some color. One of the things we like about the business is that it has a very positive organic growth profile to it. It's been very consistently in that kind of 2%-4% range, if you kind of look across and through the businesses that have been with it for several years and those more recently acquired. As we talked on in our remarks, it gives us confidence in the broader overall organic growth profile of the combined entity. The margin profile has been actually quite steady. It's been improving consistently over the last several years. As a converter, as you know, there's margins in the mills as well. As a converter, the margins in that 15% range are quite solid, and we'll look forward to expanding upon that through the synergies that we talked about. It's been a good, steady margin profile as a non-integrated converter. Kind of great base to build on there, George. As Steve said, you throw the $40 million of synergies on, those margins are excellent in Europe, and we're highly confident we can drive those. I think I'd refer you to page 11 of the deck. When you really think about what this transaction does for us, one of the things AR Packaging is known for in Europe is just they're a highly innovative company, as is Graphic Packaging. We're really excited about being able to combine these capabilities and the ability to network our innovation centers globally and move these trends around into the various markets where we compete to more quickly accelerate our ability to grow and take advantage of that knowledge and those developments and trends. It's certainly a case where we think 1 + 1 = 3, and that's how we're looking at it. Yeah, there's cost synergies we plan to get, but we really did this deal for growth. We think it helps us drive towards the upper end of that 100 to 200 basis points of organic growth that you see in the summary in terms of our walkout on Vision 2025. Thanks for the discussion on the prior growth and margins there, Mike and Steve. Just how does this affect International Paper and the remaining monetization, given your leverage targets? Thanks very much, and good luck the rest of the quarter. Thanks, George. It's Steve. We're moving our leverage up a bit into the low 4s on a pro forma basis, a very clear path back down to 3.5 and three over the next 24 months based upon very strong cash flow generation that we'll probably expect to generate $600 million-$700 million of free cash flow in 2022, assuming we close near year-end. That confidence is high. It will influence how we likely do the International Paper. You saw us be flexible in the first quarter with the combination. I think you'd probably expect that to continue, given the flexibility that we have on how we monetize. We are likely to put more leverage on the balance sheets associated with future monetizations. Thank you very much. Your next question comes from the line of Anthony Pettinari with Citi. Good morning. Hey, Anthony. Hey. In the past, I think you've said that if your European footprint reached a certain size, it might be logical for GPK to actually operate a mill in Europe. Does this acquisition change that thinking at all or accelerate it? In terms of the integration opportunity, sending board from the U.S. to Europe, I apologize if I missed this, but is it possible to quantify how many tons you think that could actually or ultimately reach? From a timeframe perspective, is that sort of like a one-to-two-year opportunity or a three-to-five-year opportunity? Yeah. Just a few facts to reiterate. On a combined basis, we'll convert roughly 780,000 tons of paperboard, various grades. Of that, roughly 240,000 of it is currently integrated. As we mentioned, that's largely our CUK that runs our beverage business largely in Europe. We will be one of the largest purchasers of paperboard in Europe, Anthony, and that'll give us economies of scale given our size in the short term. Over the medium to long term, we have lots of options that we can look at. We could decide that we could export more if it made sense for us to do so. We could, if there was a good value, look at a mill asset at some point in time. That is not a strategic imperative that we must do. As you heard me say, we've been able to grow our own exports of CUK from 90,000 tons in 2012 to now 240,000 tons profitably. We have lots of options here, and what we've always wanted to do is have the downstream converting tons as part of our ability to allocate as it makes more sense, whether that's buying them or manufacturing them ourselves. We like the way this acquisition gives us a number of options to be able to do that going forward. Okay. That's helpful. Then just on potential sales synergies, and maybe I'm thinking especially about healthcare and beauty. Is there anything from previous acquisitions that you could point to that would give us a timeline or just potential opportunity or product set that you've had a lot of success with acquired companies? Just wondering if you could kind of detail that opportunity. Well, I think our track record on being able to leverage best demonstrated practices and businesses we buy stands on its own. Relative to what this one looks like, and then yeah, we're really excited about the expertise they've got in pharmaceuticals and healthcare, and beauty, because what we're going to be able to do is leverage those capabilities relatively quickly, really across our larger platform. We've got a good base there that represents now 4% of the combined company, so that's a nice start for us. As I mentioned, and Steve alluded to as well, we believe that that's what gives us confidence that we can drive towards the upper end of that 100-200 basis points of growth. These are, relatively speaking, faster-growing markets than some of the other ones that we're in, and we'll index now, to be able to take advantage of that growth. Anthony, it's Steve, just to add to Mike's point, a good example of that is both businesses bring some real capabilities on the systems side, on the machinery side that supports cartons, as an example. We really like the potential combination, learning from each other, to drive those kind of very integrated systems-based approaches with customers. They're doing it on the food side. We have a long history on the beverage side. Combining those efforts, too, is something that, to Mike's point, is where we're really looking forward to the mutual learning around certain things, certain components of our innovative capabilities, and that's just another example of one. Okay. That's helpful. I'll turn it over. Your next question comes from the line of Adam Samuelson with Goldman Sachs. Yes, thanks. Good morning, everyone. Hi, Adam. Hi. A lot of ground's already been covered, and I was going to maybe follow up on the point on the synergies on the revenue side and maybe in a different light. Can you talk about how much of the AR growth is coming from substrate substitution? Where, given the expanded portfolio, you're most optimistic about maybe incremental opportunities for fiber to swap in for plastic most notably? Well, I think they're seeing many of the same examples that we've been seeing, Adam, and appreciate your question. Certainly in Europe, given the leadership around sustainability that Europe is driving globally, the AR business has done a very nice job of having certain examples of plastic substitution conversions into paper-based solutions. Some of those systems-based solutions I was just talking about, moving into food, with paperboard-based solutions that oftentimes the prior product was coming out of another substrate. Those examples are very consistent with what we're seeing. Also, the footprint is much more Eastern European in its orientation, which also inheres value from a growth perspective as we look at more growing markets and now access to those markets that we didn't have previously. Those are just good examples of the cross-selling and the support that that provides for the organic sales assumptions that we'll have going forward. I think, Adam, the other aspect of this, we profiled it in a few of the slides that we've got. Europe is the most sustainability-conscious market that we operate in. You've heard us talk in the past, they're 18 to 24 months ahead of the rest of the world in terms of their trends. We're going to have a business now at scale, one of the largest fiber-based consumer packaging businesses in Europe. That's going to allow us just to move faster and take advantage of opportunities and trends as they happen. I think that's the bigger aspect of this for us. The innovation centers are all going to be linked together around the globe. We can move information and knowledge around just so much faster on a combined basis after we close this deal. I'm very confident that's going to help us find opportunities and be able to capture them even faster. I'd ask you to think about that just from a strategy standpoint. The numbers are the numbers, but relative to how this sets up our business, it's a game changer for us. Okay, that's really helpful. Just a quick follow-up on the $30 million of cost synergies. It seems like there might be some facility rationalization contemplated. What's the cost to achieve those synergies? Yeah. Again, we did this deal for growth, but there'll be some cost synergies. There always are. It's a big footprint. It's roughly 4% of COGS if you combine the revenue and the cost piece of it together, which is a fairly conservative number. Our track record's pretty good at being able to deliver that. As you know, Adam, as we've talked about, we look at our converting footprint annually, and just kind of look at where things sit, how can we run the business more efficiently. Yeah, over time, could there be some consolidation? Sure. I'd also say there could be some rationalization in terms of some of the supply lines and where things are shipping to, where things are manufactured, and taking cost out that way. We've now got over 30 facilities in Western and Eastern Europe, before Graphic Packaging had 10, we were indexed largely in Western Europe. Now we've got a great profile in Eastern Europe, it'll be able to fill that out. We'll be able to balance that out and take care of customers in a different way. It's going to be a combination of all those things. Our confidence is high we can deliver that synergy number. Okay. I appreciate all the color. I'll pass it on. Thanks. Your next question comes from the line of Ghansham Panjabi with Baird. Hi, good morning, everyone. This is actually Matt Krueger sitting in for Ghansham. How are you doing today? Good, Matt. Great. I was hoping that you could talk a little bit about how AR Packaging has performed throughout the COVID-19 impacted timeline from a volume perspective. Did the business mirror kind of what the GPK experienced in its legacy North America-centric operations? Then any details on the specific end market performance would be helpful as well over that time frame. Yeah. Thanks for that question. It very similar in terms of how things have played out. They had some segments that were up a little bit, some that were down a little bit due to COVID. Things as you'd expect, like health and beauty, were down a little bit during the pandemic. Now as the economy starts to open back up again, what they're hearing from their customers is they expect that to normalize and move back to more traditional growth patterns. That's all factored in the revenue numbers that we gave you and the EBITDA performance that we provided. I would expect to see, as Europe is a little behind us in terms of their overall reopening, as they go through the summer and into the fall, more normalization, kind of what we're starting to see now here in the U.S. Got it. That's helpful. Obviously, inflationary dynamics can differ significantly on a region-by-region basis. Are there any price cost nuances that we should consider when thinking about AR Packaging in the European footprint moving forward that would differ from Graphic's legacy business? Just trying to get a sense of how inflation might differ there at current than in North America. Yeah. I'll start. Steve, you can add some color as needed. As we mentioned earlier, this is a converting business without any mill assets. The profile of input cost inflation is very different, right? As we mentioned, these contracts with long-term customers tend to be shorter in duration and tend to have more frequent openers. The ability to pass along paperboard inflation and freight inflation is more timely, quite frankly because of the nature of the business that they're running. That's how I'd ask you to think about it. We'll get into that more as we're able to, as we get further down the regulatory process. Everything we understand about the business is that it's very similar to our business in Europe in terms of how it's structured. Great. That's helpful. That's it for me. Thanks. Yeah. Your next question will come from the line of Arun Viswanathan with RBC Capital Markets. Thanks for taking my question. Good morning. Congratulations on announcing the deal. I guess my first question is just on capital allocation. You guys have a lot of stuff going on. You have been buying back stock, I imagine that it gets on hold here. Could you just remind us how you're looking about the priorities of cash use here? You have Kalamazoo going on. You have these couple deals to integrate. I guess going back to the first question that Mark asked, how do you manage all that? Again, what are the priorities going forward? Maybe you could also address the IP stake as well. I think you already have, maybe just reiterate that. Thanks. Yeah. Arun, thanks, and good morning. It's Steve. You really hit on it right there quite nicely. On the capital spending front, we're looking forward to stepping down our CapEx pretty materially as we finish up Kalamazoo, spending $700 million this year. Even with these two transactions that we've announced, we would expect next year's CapEx to be more in the $450 million range max. A major step down there, which is a cash flow generator as we've talked. That's how we'll allocate relative to the CapEx. We'll obviously be in full integration of these acquisitions, and so that will be a heavy priority for us, but that doesn't really allocate much more in the form of capital. Those are just integration activities. As such, with regards to IP, given the leverage, we're more likely to utilize the tools that we have available there for not necessarily utilizing cash for those remaining optimization monetization scenarios. We'll always be mindful of the overall balance sheet and the value of the company. We have all the tools available to us, and we'll continue to have those available to us. As Mike mentioned, what we really like about this and the timing of it overall is actually quite good, is we're able to be very heads down on executing on these two acquisitions, stepping down the CapEx, generating the cash flow, $600 million-$700 million next year which will allow us to allocate capital to debt paydown in a material way in 2022, as well as in 2023 to get us in line with our two and a half to three times target. As we've talked many times, our willingness to leverage up would only come with a confidence in leveraging down. This is consistent with that mantra and that consistent concept around a balanced approach to capital allocation. Arun, I would just add, and I appreciate the question because it's like, "Hey, do you have too much on your plate? I would actually argue that this is the right time for us to take this on. As you think about it, as Kalamazoo comes to an end in terms of the capital spending that's going on there, as Steve mentioned, CapEx reduces materially next year. He just outlined $600 million-$700 million of cash flow we expect. Our teams, they know what they need to do now. It's all about integration, the startup in Kalamazoo, learning and driving growth out of our European markets. The next couple of years, it's heads down, grind it out for Graphic. It's nice to have that roadmap in front of us where we know exactly what we're focused on strategically and what the critical elements are to drive value for stakeholders and shareholders here in that process. I'm really excited about that clear vision and how on top of our Vision 2025 it is. We laid this out in the fall of 2019. We wanted to be a $10 billion company with EBITDA $1.8 billion-$2 billion. We're on that journey. This is strategically on point with what we want to do. We said we'd lever up to 4x for the right deal. We are factoring to do that as long as we had a clear path to de-lever. All those things are really part of what we've been communicating to the market relative to how we want to run the company and create value for shareholders. I'm really excited about this announcement today because it's right on top of that for us. Great. Thanks for that, Mike and Steve. Just as a quick follow-up then, and I know these deals come along, and you got to take them when they do. Could you just think about or highlight for us what you think the growth trajectory is now going forward? You mentioned that as a main attractive part of this deal. I know that you have guided maybe to 1%-2% organic growth now, up from maybe flat before. Does this maybe put you and the others kind of combined with the ESG opportunities in Kalamazoo, put you in maybe a 2%-3% range a couple of years out? Is that the right way to think about it? Thanks. Yeah. Arun, what I'm going to comment today on that is I'm going to say, look, we've got confidence, as we told you, to be at the high end of that 100-200 basis points. In fact, you see that modeled on the slide here that kind of shows the walk on in the deck, number 14. We're getting more confident based on what we're seeing and now with this acquisition for all the reasons I've already articulated, that we'll be able to drive that. That's how I'd ask you to think about it now, and obviously, we'll continue to keep you posted with what we're seeing. Great. Thanks a lot. Your next question will come from the line of Kyle White with Deutsche Bank. Hey, good morning. Thanks for taking the questions. I think there were reports about three years ago that CVC looked to sell the AR Packaging business. Just wondering if you looked at it then and why you didn't pull the trigger then. Yeah, Kyle, it's Steve. I just don't think we'll comment on prior discussions. This is a business that for us strategically has always been part of our potential profile expansion, and they come when they come. Past discussions that occur, we won't comment on. What we do like is the timing of this because this, as part of our overall European expansion plans as we've articulated, this is the most of-substance opportunity. We were pleased that when it did come to the ability to execute on it, that we were in a position to do so. Got it. That's understandable. If I go to slide 14, the Vision 2025. Going back to the Analyst Day in 2019, I believe your Vision 2025 sales target was approximately $10 billion with margins of 18%-20%. Those targets look a little bit lighter today in today's slide. Just wondering what has changed or if today's assumptions only assume things that are already announced strategically. Thanks. Yeah. Thanks for that. Just for clarity, and I mentioned it in the remarks on page 14, this is all what we know. These are all of the announced acquisitions, our organic growth, the productivity initiatives that we have underway. It doesn't include any incremental M&A or any growth beyond what you see there. What we like about it is it's right on the path towards Vision 2025, both in terms of margins and top line. Not all the way there because it's not inclusive of what could occur down the road, as Mike was mentioning earlier. This is as we know today with the investments that we have in front of us with no incremental M&A. That makes sense. I think, Kyle, the other thing I'd add is just it's 2021 right now, and we're making really good progress towards that, right? There's a lot of these things that are laid out, and they're pretty bold and ambitious, and they tend to be more hockey stick. We're right on track with what we said we were going to do, if not a little ahead. Sounds good. Good luck with the integration. Thank you. Thank you. Your next question comes from the line of Neel Kumar with Morgan Stanley. Great. Thank you. I was wondering if you could just talk about some of the cash flow characteristics of AR Packaging, usually with a sense of the capital intensity and free cash flow conversion. Just following up on an earlier question on historical earnings profile. Was the company's EBITDA pre-COVID relatively close to the $160 million figure that you provide? Yeah, Neel, good morning. It's Steve. I'll take your question first. The EBITDA profile over the last couple of years has had good, steady behavior to it. Obviously, as Mike mentioned, there were some up and down with COVID, but we've been able to look through that quite well, and gives us confidence in the acquired EBITDA and at the margins that we talked about. On free cash flow conversion, that's one of the things we're very compelled with, the capital intensity. These are very well-capitalized facilities. The capital intensity overall is lower than our averages, and we see $30 million-$40 million a year of CapEx to sustain and grow the business. The cash conversion is strong. It will be net positive cash flow generation immediately upon close, and so that's a positive, too. They've done a very nice job of putting capital to work back into the business based upon our observations of the facilities. $30 million-$40 million is how we're thinking about the CapEx to support this billion-and-one-plus business. Great. If you could just also expand a bit about AR Packaging's innovation capabilities. Maybe you can give us a sense of what percentage of sales is coming from recent product introductions versus legacy products and how that compares to Graphic? It's a little early for us to be able to give you that kind of level of specificity. Again, I'd refer to page 11, Neel. These guys are recognized as the leaders of fiber-based consumer packaging in Europe in regards to innovation, and as are we here in North America. The combination of those two, you see a whole bunch of things that we've got there. Steve mentioned about the machinery systems. Ours are on beverage, theirs are on food. There's synergies there that I'm sure we haven't even thought of relative to the growth aspects of it. I know with the capabilities that they have and the intellectual horsepower of the two organizations, we're going to be able to leverage that and really drive additional growth. Right. Your next question comes from Mark Weintraub with Seaport Research. Thank you for all the details. Just a couple of cleanup questions at this point. One, understanding, not wanting to go back too far, but can you give us more color on how the transaction came about? Yeah. We've got what I'll call swim lanes here for different geographies that we look at in terms of M&A opportunities that we profile and model and discuss with our board. As I mentioned, and Steve alluded to as well, we've had AR Packaging on our list for a long time. When the opportunity came to take a look at it here, we in fact engaged pretty heavily. As I mentioned, Mark, the timing for us is actually quite good. That's about as much color as I can give you on that. It's a privately owned company. We bought it from CVC, so these things transact when they transact. Okay. Second, looking at the footprint based in Sweden, does look like it's got a lot of facilities in Eastern Europe as well. Was hoping to maybe get more of a breakdown on where the sales come from within Europe, if you could give us some guidance there. Mark, it's Steve. I think as we work towards the close, we'll definitely provide you with more details around more of the country specific. It's a good, strong footprint in the U.K. It's a very good, strong Western European footprint and also Eastern European. You've got a modest and small businesses that you've seen on the charts in Indonesia, Nigeria, which are small businesses, less than $30 million. The vast majority is Eastern and Western Europe. It's nicely distributed throughout the region in a positive way. We'll provide more color as we get closer to the close on kind of the combined $2 billion relative to U.K., Eastern, Western Europe. Great. Maybe when that time comes about, to the extent you'd be comfortable talking about any differences in growth opportunity and profitability from the different regions, that might be helpful as well. Thanks so much. We're happy to do that. I think just to add to that, Mark, though, the whole footprint that we're getting in Eastern Europe is non-existent for Graphic. That balance that Steve talked about is incredibly important for us and incredibly strategic going forward. Europe's the largest market for folding cartons, 750 million people in that market. Now we've got the geography in both Western and Eastern Europe covered quite well, and we think strategically, that's a great spot to be. Your next question comes from Gabe Hajde with Wells Fargo. Mike, Steve, good morning. Morning, Gabe. Quick question. I'm looking at the AR Packaging website, and a few of their product lines kind of extend beyond fiber-based packaging, which is obviously right in your wheelhouse. I did not see it in the presentation materials, kind of a breakdown of product lines. Do you have that? I'm assuming, again, the lion's share of it comes from the folding cartons, but just some of the flexible packaging that I'm seeing there and sort of asking in the context of what you divested in 2014. Yeah, thanks, Gabe. It's Steve. You're correct. The vast majority of the top line does come from fiber-based packaging. They do have a good flexible packaging business that is part of this as well that they've invested in. It's not a material component of the business. For the combined enterprise, we'll be at the 98%, 99% fiber-based, consistent with where we've been. It's relatively small in total, and we're looking forward to getting to know that business as we get towards the close. It's not a significant percentage of the overall enterprise at all. Okay. For the follow-up, I actually have three, so I apologize. One, can you comment if it was structured as an asset or an equity deal and if, in fact, you'll get to step up in basis? For the tax benefits there, number one. Number two, have you thought at all about financing? Obviously, you just raised some debt at pretty attractive rates here locally. I'm assuming some portion of it might be financed in Europe. Three, management team, are they going to be staying with the entity, or do you have someone picked out to head up that business, obviously, because it's getting pretty big over in Europe? Let me take the first two, and then Mike can take the last. It is an equity transaction, so we're acquiring the entities and so it's not an asset purchase. Obviously, we will do some looking at the overall value of depreciation, amortization that comes along with that. There'll be some stepping up associated with that. We're working through that now. Would expect the depreciation amortization numbers to be in that $50 million-$60 million range most likely. That's something we're working through currently. Financing, we feel really good. We've done a nice job. Our team's done a great job of amending and extending our secured facility. Our revolver and our available capacity today is at $1.85 billion. Here over the next four to six months, we'll be very thoughtful and mindful of how to secure the financing for this. It's likely to be a combination of in Europe and in the U.S., a combination of pre-payable and fixed. We're working through that right now. I really like the flexibility we have. We've been borrowing very cost effectively. We'll continue to do so and would expect to be able to do so. The $1.85 billion of liquidity we have is outstanding, so it gives us full flexibility on when and how we execute on that between here and the close. Gabe, just on management, it's early days, and so we're not going to comment on what the structure day one would look like other than to say this. I've said it a couple of times. We've got two really strong teams over there. We have had some preliminary discussions around thoughts and different things and how we could do that. We're going to have a lot of options, and we're going to have a lot of talent. I'm confident we'll be able to put a team on the ground that is capable of accomplishing everything that Steve and I have laid out today. I appreciate that. I didn't want to put you on uncomfortable spot. I didn't know if there was something kind of prenegotiated or in place. Thank you, guys. Thank you. Thank you. All right, your final question will come from Phil Ng with Jefferies. Hey, guys. Thanks for squeezing me in. Some of the recent box board assets that have changed hands in Europe have been a little less than eight times. Your pre-synergy number looks a touch higher for AR, but bigger picture, Mike, when you think about Europe, do you see more value owning the converting assets versus box board? Just because that market seems to be a lot less integrated. I just want to understand the value proposition. Yeah, these are quality assets that are incredibly well capitalized. As you heard Steve say, we're getting a lot of great equipment, a lot of highly automated facilities. Of course, you have to pay for that, right, Phil? That's reflected in the multiple that we were willing to pay for these assets. Obviously, the synergy number glides it down to a 7x, which is very respectful, as you know. We like that. Strategically, I love the way that we're going to be positioned here post this transaction with a $2 billion converting business in Europe for all the optionality that I've talked about in terms of paperboard. Like I said, we are not going to be at a competitive disadvantage for not having a paperboard mill in Europe in the short term. Okay. Going back to the margins, Mike, you addressed a little of that. Margins are pretty impressive for a converting asset. Other than it being well capitalized, anything that AR does a little more different? When you think about the folding carton business in Europe, I understand it's a little more fragmented and you have a number two position, but any more color in terms of your market share, how the industry is structured, and is that a big M&A roll-up opportunity for you going forward? We're going to focus on this one first in getting it done. It's big enough that it's going to be a couple of years worth of work, Phil. I'd ask you to kind of think about it that way. In terms of what they do, in addition to having good capitalized, well-capitalized equipment, they've got a great cost structure, and this is a business that manages their costs very well, consistent with how we do that, too. That's why I think culturally, we're going to have such a good fit. Got it. Any color on their market share, Mike, if you have any color there? Well, no. I don't have all those different segments yet. What I would say, and this is important, there's very little customer overlap between the two businesses, which we're excited about, Phil, for all the reasons you well understand. Okay. Super, guys. Thanks a lot. Yeah. Thank you. Thanks, Phil. I will now turn the conference back over to Mike Doss for closing remarks. Thank you again for joining us on the call today. With this acquisition, we are taking a significant step forward in realizing our Vision 2025. AR Packaging further strengthens our innovation capabilities and provide significant global scale. The combination supports our growth and return goals and positions us for continued organic growth sales at the high end of our targeted range. We look forward to updating you on our progress with this transaction in the months ahead. Thank you, and have a great day. Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.