Hello, and welcome to today's Graphic Packaging Q1 2022 earnings call. My name is Bailey, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to Melanie Skijus, Vice President of Investor Relations. Melanie, please go ahead. Good morning, and welcome to Graphic Packaging Holding Company's conference call to discuss our Q1 2022 results. Speaking on the call will be Mike Doss, the company's President and Chief Executive Officer, and Steve Scherger, Executive Vice President and Chief Financial Officer. To help you follow along with today's call, we will be referencing our Q1 presentation, which can be accessed through the webcast via self-directed slides and also in 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 and 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 on the call on this webcast this morning. We're off to a great start in 2022, and I'm pleased to share with you a very strong first quarter. We're operating well and doing what we said we'd do, including delivering another quarter of net organic sales growth, pivoting to a positive price to commodity input cost relationship, driving margins higher, and executing a very significant step-up in adjusted EBITDA. We'll spend some time on today's call discussing these positive results and operating model we've put in place to drive continued profitable growth and returns to our stakeholders. On slide three, let's briefly walk through the key highlights from the quarter. Adjusted EBITDA was $350 million, an increase of 46% year-over-year. Adjusted earnings per share, excluding amortization of purchased intangibles, improved 78% to $0.48. Net sales for the quarter were a record $2.2 billion, up 36% year-over-year, driven by a 3% net organic sales growth, successful execution of pricing initiatives, and contributions from acquisitions. Notably, the Q1 marks the eight out of nine quarters that we have delivered net organic sales growth, building on our track record of consistent long-term organic sales growth performance. During the quarter, we advanced two transformative company investments we initiated to extend our global leadership in fiber-based packaging. Both have recently been completed, bringing months, in the case of Kalamazoo, years of hard work to fruition. After closing the AR Packaging acquisition in the Q4 of 2021, we continued to actively integrate our expanded European platform in the Q1. Our dedicated teams have been working collaboratively, meeting early integration targets, and are on track to deliver $40 million of synergies over the next two and a half years. Separately, our new K2 machine and CRB platform optimization investment in Kalamazoo, first announced in 2019, came to life during the quarter. The K2 machine is operating and continues to ramp up production. The startup is meeting expectations. The investment in our CRB platform will yield substantial quality and efficiency enhancements, provide environmental benefits, including lower greenhouse gas emissions and water usage, and deliver $130 million of incremental EBITDA over the next three years. $50 million in incremental EBITDA is expected this year. Finally, before moving on from this slide, a comment on our financial strength. While we are clearly operating in unprecedented times, we continue to see robust demand for innovative fiber-based consumer packaging solutions. Given strong underlying demand, company-specific initiatives driving expansion and profitable growth and overall excellent performance globally, we are reiterating our 2022 financial guidance provided at our Investor Day in February. We have a strong business, we are quickly deleveraging, and we have greater than $1 billion in global liquidity. While we are performing very well as a company, we aren't operating in a vacuum, and I would be remiss not to acknowledge the geopolitical events that are impacting our global communities. As humanitarians and global citizens, we are living in very unsettling times. Our hearts go out to the people of Ukraine and all those standing in harm's way. On slide four, let me provide an update on the business we acquired in Russia in the Q4 of 2021 as part of the AR Packaging acquisition. Our business in Russia consists of two folding carton facilities, one in St. Petersburg and the other in Timashevsk. The converting facilities primarily serve multinational food service and tobacco customers for local Russian consumption. The business is small, accounting for roughly 1% of total sales and less than 1% of annualized EBITDA. We are adhering to all U.S. and European Union sanctions and are currently operating to meet existing customer contractual commitments where possible. We are not making any new investments in the region, nor are we entering into agreements with new customers. We will continue to explore all options for the business as existing customer agreements expire. Turning back to the quarter and expected full year 2022 financial results on slide 5, I will discuss pricing actions implemented and recognized over the 2021 and 2022 time frame. In Q1, as we guided, we pivoted to a $46 million positive price cost relationship. $222 million of price flowed through the business and more than offset $176 million of commodity input cost inflation. Importantly, in Q2, pricing momentum continues, and we expect the positive price cost relationship to expand into the range of $80 million-$100 million as we make further headway recovering the price cost dislocation experienced in 2021. You can see on the right hand of slide five, our implemented and recognized price actions are expected to result in approximately $850 million of positive pricing flowing through the business in 2022. Our current price expectations are $150 million higher than our original guidance. The unprecedented inflationary environment in which we are operating continued throughout the Q1. Accordingly, we have increased our 2022 inflation range by $150 million to $450 million-$650 million. We continue to forecast that pricing initiatives will more than offset commodity input cost inflation in the range of $200 million-$400 million in 2022, more than fully recovering the 2021 price cost dislocation. Turning to slide six and the integration of our recently expanded European platform. The new leadership team in Europe is in place and is made up equally of Graphic Packaging and AR Packaging executives with strong packaging and sustainability backgrounds, customer relationships, and commercial and operating expertise. The team has exhibited immediate chemistry, quickly coming together as a cohesive group focused on results. With the best practices of both organizations leveraged, we are realizing efficiencies while strengthening our global innovation engine. We are energized as interest from existing and new customers is on the rise, and we are identifying customer and geographic expansion opportunities. Our dedicated employees have maintained a steadfast approach to integration activities, and we are on track to deliver $40 million of synergies over the next two and a half years. With approximately $2 billion in annualized sales, our European business has scale, best resources, and is benefiting our entire global book of business by leading in the sustainability-supported packaging innovation while also delivering on trends that we believe will continue to drive organic sales growth around the world. The second transformative investment being successfully executed, a source of anticipated large-scale benefits for customers and returns for stakeholders, is our new K2 CRB machine and platform optimization project. On slide seven, you will see a snapshot of the new K2 machine hall during the final stages of our startup. We began operating at scale during the quarter and are continuing to ramp up production. New paperboard produced on the K2 machine is being integrated into our converting facilities, and customers are delighted with the formation, quality, and printability of the paperboard. We are continuing to ramp up to service the increased demand for CRB we are experiencing. This, in turn, will continue to drive company integration rates higher. $50 million of the expected $130 million in total incremental EBITDA from this investment will be achieved in 2022 as we bring down one of the higher cost mill locations designated in our original optimization plan. In February, we notified our Battle Creek employees that we will decommission the mill over the coming months as the K2 ramp up progresses on plan. I'm extremely pleased to report that some of our Battle Creek employees will transition to Kalamazoo to support the volume we will be producing on our expanded campus. I want to personally thank all of the hardworking men and women in the Battle Creek mill that supported this project and ensured continuity for our customers as we made this important transition. I will wrap up my comments on slide eight with an update on innovation and organic growth we see as our new and evolving suite of fiber-based packaging solutions are adopted globally. We launched PaperSeal in 2020, a new barrier-lined fiber-based packaging alternative to plastic trays for fresh meat, cheeses and salads. From its original innovation, we introduced new iterations including PaperSeal Slice, PaperSeal Wedge, and PaperSeal Cook, broadening the number of customers and markets served to include fresh pasta, deli meats, and frozen items. Customer adoption of PaperSeal, following similar sustainability adoption trends around the world, was first commercialized by major retailers across Europe and Australia. With the pasta package showcased here for New Seasons Market, it goes around the West Coast. We are now commercial in the United States. New Seasons Market was the first mover in the U.S., adopting PaperSeal to replace plastic clam shells in an effort to shift to more sustainable packaging with less waste. As typically occurs, once new packaging innovation is commercialized by a first mover in the market, we expect to see additional customers converting, and we have a second group. As another example, our ProducePack solution, first commercialized by Michigan apple distributor BelleHarvest in the U.S. in the Q3 of 2021, gained great interest from producers and grocers eager to learn more about its sustainability benefits. We are excited to see that our ProducePack punnet line will be launching with a very large grocery retailer in the U.S. during the Q2. As you can see, we've been working hard and remain laser focused on servicing customers and executing our strategic initiatives. We are focused on results and remain on track to achieve our enhanced Vision 2025 goals. With that, I will hand the call over to Steve for a review of financials. Steve, over to you. Thanks, Mike, and good morning. Moving to slide nine, focused on key financial highlights. Net sales increased 36% or $596 million from the prior year period to a record $2.2 billion. The year-over-year increase in sales was driven by 3% net organic sales growth, higher price flowing through the business, and contributions from acquisitions. We delivered 100 basis points of margin expansion on higher sales as a result of ongoing disciplined pricing actions to offset the inflationary environment, higher volume mix, and strong operating execution. Given the operating leverage we are driving, adjusted EBITDA increased an even greater 46% year-over-year to $350 million. Adjusted earnings per share, excluding amortization of purchased intangibles, grew 78% to $0.48 a share. We are including an adjustment for purchased intangibles in the adjusted EPS calculation moving forward as it more accurately reflects the operating earnings and cash flow capabilities of the company and is a metric used by investors. Our integration rate increased 200 basis points year-over-year to 73% as we internalize paperboard into our global converting operations. As a reminder, we currently purchase 1,000,000 tons of paperboard to support our global converting operations. On slides 10 and 11, you will find our revenue and EBITDA waterfalls. The drivers of the 36% year-over-year increase in sales were $222 million in pricing and $385 million of higher volume mix from organic sales growth and acquisitions, slightly offset by $11 million of unfavorable foreign exchange. Adjusted EBITDA increased $110 million or 46% year-over-year to $350 million in the Q1 versus the prior year period. Commodity input cost inflation increased sequentially from Q4 by $34 million to $176 million. Labor and benefits and other inflation was $19 million. Despite the larger inflationary headwinds in Q1, we produced significant growth in EBITDA, driven by $222 million of positive price, $68 million of volume mix, and $14 million of net performance. On slide 12, let me dive deeper into our quarterly performance. It was a solid quarter by any measure. Our recent acquisitions are performing well and delivering expected returns. Our food service business continued to recover year-over-year, with sales up 30% driven by price and organic sales growth. Our food, beverage, and consumer businesses grew sales 14% year-over-year before acquisitions, also driven by positive price and organic sales growth. As it relates to paperboard market data, the AF&PA will be reporting industry operating rates for the Q1 on April 29. We continue to experience strong demand for our products. Backlogs have increased across all three substrates, with all at 10+ weeks at the end of the Q1. Our paperboard inventory levels remain low. Focusing briefly on capital allocation, pro forma net leverage at the end of the Q1 was 4.6x. We continue to expect year-end net leverage to be between 3x and 3.5x as we utilize significant cash flow generation to reduce debt while adjusted EBITDA and EBITDA margins grow substantially year-over-year. Finally, we continue to maintain significant liquidity in the business at over $1 billion. Turning now to full year 2022 guidance on slide 13. Given Q1 financial results and the confidence we have in the critical initiatives we are executing this year, we are reiterating our guidance today for adjusted EBITDA, cash flow, sales, and year-end leverage. The EBITDA and cash flow year-over-year details have not changed. Pricing will more than offset commodity input cost inflation. Acquisitions will meet our expectations. Organic sales growth will continue to be at or above our 100-200 basis point commitment. Performance, including the ramp at Kalamazoo, will drive real benefits to EBITDA and cash flow. On slide 14, I will wrap up my prepared remarks with our guidance for adjusted EPS, excluding amortization of purchased intangibles. Adjusted earnings per share growth during the quarter was significant, up 78% year-over-year. We remain on track to deliver adjusted earnings per share for the year in a range of $1.75-$2.25. That concludes our prepared commentary this morning. Let me now turn the call over to the operator for questions. Operator? Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove your question, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We would like to request that you would please stick to one question and one follow-up. Our first question today comes from Ghansham Panjabi from Baird. Please go ahead. Your line is now open. Thank you. Good morning, everyone. Congrats on a strong start to the year. Hi, good morning. Maybe you could just give us an update with, you know, what you're seeing as it relates to operating and supply chain efficiency, the way you see it at this point. I mean, in the past, you've called out labor constraints that had an impact on you along with your customers, tightness in trucking, et cetera. Just give us a high-level assessment of where things stand at this point. Ghansham, I'm gonna have Steve kind of talk about the inflationary impact of that, and then I'll give you a little color commentary on what that means from an operating backdrop. Yeah. Ghansham, how are you? Within the quarter, I think what we certainly did see was the continued acceleration on the commodity input cost inflation. The $176 million that we had in inflation in Q1, we saw continued increases, $34 million, as I mentioned in the prepared commentary from Q4 to Q1. Some of that was certainly our suppliers continuing to have supply chain challenges. We saw about $20 million-$50 million of inflation across the big categories of our spend, fiber, paperboard that we acquire, chemicals, energy, and logistics. It certainly showed up in the form of the inflation in Q1, which we discussed here. Mike, wanna talk a little bit about the supply chain? Yeah, I think, Ghansham, if you take a look at labor, you know, in January, like most, we were struggling a bit with the Omicron, you know, variant. That impacted some of our operations, as it did some of our suppliers as well. That pretty much abated mid-February. March was a clean month. We ran well. One of our biggest challenges was rebuilding our labor force back in our food service, you know, specifically our cup plants. As you know, that had been hit very hard during the pandemic. We saw that volume come back very strong, starting really in Q4 and into Q1. As a matter of fact, our Q1 volumes were actually slightly ahead of, you know, the pre-pandemic levels. We're pleased about that. It was a bit of a scramble. We still got some work to do on efficiencies in terms of how we operate those locations, but we're able to get the product out. I would expect as we grind through the Q2 and into the second half of the year, we'll continue to make progress along those lines. Okay, great. Thanks for that, Mike, and Steve. Then for my second question, as it relates to U.S. natural gas prices, which are starting to break out towards, you know, multi-year highs, just remind us as to how you know, sort of approach managing exposure to this commodity, which may just become much more volatile than it has been in over a decade. No, Ghansham, you're absolutely right. We certainly have seen that volatility play itself out. We're not materially hedged as we kinda move through Q2 through Q4. We'll absorb some of the impact of that. I think our MMBtus are in the- Around $22 million. In the $22 million range, currently. That'll just give you a sense for the scale of it relative to the financial impact, which is obviously included in our guide. We can talk about that a little bit along the way here as well. Maybe just a little finer point on that, Ghansham. We continue to look for opportunities to burn bark and biomass in our virgin builds that allow us to just use less nat gas. Our new Kalamazoo platform obviously is gonna be more efficient than some of the smaller builds. Finding ways to use less is always a good solution to kind of managing that kind of input cost inflation. Perfect. Thanks so much, Mike. All right. You bet. Thank you. The next question today comes from George Staphos from Bank of America. George, please go ahead. Your line is now open. Thanks very much. Good morning, everybody, and thanks for the details, Steve and Mike. If you could go back through where you're seeing the input cost pressure and to the extent possible and to the extent prudent on a call, quantify it? I heard some of your answer with Ghansham, but the connection on the call, at least from my side, wasn't so good. Relatedly on price-cost, where or what would you think currently the tail on pricing that's already been implemented this year might look like for 2023? If you're getting $850 million or so this year, could that look like perhaps another couple or 300 million dollars? I haven't done the math on it, but if you had any thoughts on that, we'd take it. I had a follow on volume. Yeah, George and Steve, I'll take the inflation walk for you, and then Mike can talk a little bit about pricing. Let me just provide a little bit of detail that I think you were looking for. As I mentioned, $176 million of- Yep. Inflation in Q1, a bit of a high water mark, up $34 million from Q4 to Q1, and was really across the board in terms of all of the major commodities. What we currently see is inflation in Q2 should be around $150 million. We'll see some modest decline on a year-over-year basis as we start to begin to lap some of the inflation that was occurring last year, which will put us at the midway point in the year of inflation in the low 300 range, $325 million or so. Our current mark-to-market, which we tend to talk about, which is where are we currently if everything kind of held as is, for the year is approximately $475 million. It's at the lower end of our range of $450 million-$650 million. As certainly we've all seen, we're in extremely unusual and at times volatile times like we were just discussing on nat gas and other commodities. We feel like we've got an appropriate range for the year at the $450 million-$650 million. We've all seen some possibilities of some abatement. Generally speaking, commodities have really just continued to move up, and that's inherent in the full year range that we provided. The mark-to-market is roughly $475 million for full year 2022 currently. Mike, wanna talk about the price? Yeah. In terms of price, George, I, you know, I think if we just kind of take a look at the pricing actions we've announced and executed on year to date, they've all been recognized and in full. What we're doing right now is, you know, pushing those recognitions through our contracts. You saw that we increased our, you know, pricing for the year by $150 million, to upwards now of $850 million for 2022. We're certainly on track to deliver that. What our plan would be is to, you know, quantify what our preliminary views of 2023 would be at our mid-year mark, which would be, you know, in July like we did last year for you, give you a preliminary look into what that looks like. It's meaningful, you know, from a carryover standpoint, and we'll make sure that you've got that. As is our case, we'll do that mid-year. Understood, Mike, and thanks for that. Actually, for my second question, I'll switch it up from what I initially thought. Are you seeing any kind of demand destruction or any pushing off of innovation launches, pilots that your customers were going to go ahead with on the paperboard side because of the pricing that you've needed to put into the market, obviously given the inflation you talked about? Or is it really not from your vantage point having an effect yet on commercialization, trials, pilots and the like? On the margin, do you think there's any pre-buying in your numbers in 1Q? Thanks, guys. Good luck in the quarter. Yeah, thanks, George. I'll take the pre-buy upfront. Given the backlogs we have, you know, I'm confident we have not seen pre-buy at Graphic Packaging, that's for sure. You saw our organic volumes of 3.3% in the quarter. Steve talked about, you know, backlogs increasing to 10 weeks across all three substrates. We're busy. Quite frankly, our board mills are sold out through the summer and into the fall already in terms of what the demand looks like. I think if I could point to one area that I've been a little disappointed we haven't seen more traction on, it'd probably be the OptiCycle. You know, it's a great technology that, by way of reminder, George, replaces polyethylene on the inside of your paper cups. Right. It's a great product. Many of our customers have been so focused on just getting their operations back in and, you know, fully staffed, that we haven't had the real opportunity to really work with them on, you know, that particular initiative. That would be the one I'd probably point to of any materiality. Overall, our volumes are very busy. Demand is solid. It's broad-based. We're seeing conversions out of, you know, single-use plastics and into paperboard. It's clearly evidenced by the organic volume we talked about here and the products that we've been showing you in terms of our you know, displays. All in all, very strong operating backdrop for us right now. Thank you, Mike. Thanks, George. Thank you. The next question today comes from Mark Wilde of Bank of Montreal. Mark, please go ahead. Your line is now open. Morning, Mike. Morning, Steve and Melanie. Mark. Hey, Mark. I'm wondering, Mike, if you can just give us, you know, any color on potential impact from the Russian sanctions on boxboard flows over in Europe. Yeah. From that standpoint, we profiled our Russian business for you, Mark. As you can kind of see, it's very small and, you know, from both the sales and the EBITDA standpoint, not overly significant to the corporation. As a matter of fact, they call it de minimis. What we have seen, though, is some shifts on a net basis. We'd actually call it probably net positive for us in terms of volume of material that has flown into some of our other plants, you know, as a result of some of the dislocation in the Ukraine in particular. We've seen a lot written about, a lot talked about, around, you know, kind of what that all means in terms of overall demand profiles behind the fall and early next year. Again, right now as we sit here today, our backlogs are quite solid at all our carton plants in Europe. As you well know, we're a buyer of paperboard in that market. We do import some of our own paperboard into Europe, specifically for the beverage application. Our team's done a really good job in the fall securing tonnage, you know, from producers to make sure that we are in a position to respond to customers' needs this year, albeit at higher prices. We locked down at higher prices, and we've been able to, you know, pass that along in the form of price, you know, for cartons because we have the paperboard and demand has remained, you know, strong in that market. That'd be the color I'd kind of paint for you there. Net-net may be a slight positive for us. We're watching closely because it's a fluid and dynamic market as you can well appreciate. You know, the early reads for us relative to what it means with the large AR Packaging. Performing at expectations or maybe slightly ahead. Yeah, Mark and Steve, just to put a little color on that, as Mike was saying, I mean, we saw positive organic sales growth from our packaging business in the quarter, and operating EBITDA was right at, in fact, a little better than our expectations, around $40 million. We were really pleased with the start that the team there established as Mike articulated as well, just relative to the team coming together exceptionally well. Okay. For my follow-on, Mike, I wondered if you could just give us some general thoughts on sort of the progress on plastic substitution in Europe versus North America. It does seem like maybe North America is finally picking up a little steam relative to Europe. I notice, you know, some of the like warehouse clubs seem to be moving kind of produce out of out of clam shells and into paperboard alternatives. Yeah. I would say Mark, it's playing out as our thesis when we originally announced in May last year that, you know, Europe was ground zero for sustainability, that hasn't changed. The amount of initiatives we see, you know, going on in that market to replace single-use plastics and shrink wrap film in a variety of different products is very strong. As a matter of fact, imports into the U.S. from European producers were actually down for the first couple of months of this year because, you know, board is needed in that market. Of course, they'd rather sell it in that market than, you know, deal with shipping costs, you know, bringing it here. I think that's another, you know, interesting, you know, point to be made relative to, you know, kind of the trade flows paperboard. I would also agree with you that with your statement that we're seeing acceleration here in the North American market around the similar trends. I mean, our PaperSeal in the variety of different, you know, applications that we talked about profiled for you is strong around the perimeter of the store, is strong replacing rigid applications, you know, with paperboard. We're seeing it in fruits and vegetables and packaging for take-home, you know, meals, you know, for that evening or for lunch. You know, so it's a lot of, you know, singles and base hits. They're pretty broad-based. Again, Mark, I'd point to that's really when you look at, you know, some of the volumes of some of the larger CPGs, and some of the analysts have written about that being largely flat, we're growing. That's where it's coming from. It's coming from those types of substitutions really around the perimeter of the store and, you know, just getting out of, you know, rigid applications kind of in general. In Europe, certainly shrink wrap film, because that was a big, big market, as you know, for carbonated soft drink and beer. Okay, very good. I'll turn it over. Thanks, Mike. Thanks, Steve. Sure. Thanks, Mark. Thank you. Our next question today comes from Mark Weintraub from Seaport Research Partners. Mark, please go ahead. Your line is now open. Thank you. I realize you're gonna give us more specifics at mid-year on the rollover into 2023 for pricing potentially. In terms of how to think about it, I understand that part of it's driven by, you know, the pricing that we see in Pulp & Paper Week, and there's a lag in terms of how that flows through. I assume also some of it is related to cost escalators. It looks to me, you can correct me if I'm wrong, but some of that increase to $850 for this year even was probably an increase in cost escalators. A, I'd like to get confirmation on that just to see I'm understanding it correctly. Is it fair to say that given the very extensive amount of inflation, there probably would be something related to that in 2023? Of course, if we end up at the high end of the inflationary ranges that you've laid out, that number for next year would presumably be bigger. Is it kind of big picture, are those the right ways to think about it? Yeah, Mark and Steve, you are directionally correct, and you know the business well. I mean, we have a combination of market-based models and cost-based models, and that six-month lag, you're absolutely right. We will see flow-through of the initiatives that we're just now executing on that will roll into 2023, along with movement through for cost models dependent upon where in the range inflation flows. If it is, like you said, at the mid to high end, then that would result in additional price action that would flow through. I think that absolutely the imperative is the one we've executed on for years is ensuring that we have momentum for price continuing to offset commodity input cost inflation effectively. We had a very positive pivot in that direction in Q1, and we expect to see that positive impact make its way through Q2 and really for the rest of the year. Great. Thank you. Then, second question. So you're now talking about $130 million in incremental EBITDA related to K2, and I think you may have already made that adjustment from the original $100 million. But just a little clarity that is that the footprint you now expect down the line is different from what you originally had anticipated? 'Cause clearly actions to date, we haven't seen as much in the way of offsetting capacity reduction as was originally contemplated. Is that now revised, and is that incorporated in the higher $130 million incremental EBITDA from this project you expect? Yeah, Mark. Really what that reflects, and there's actually a slide in the deck, slide 17, which is also one of them that we used, you know, on our Investor Day, where we said that we were going to continue to operate the Middletown facility, Middletown Paperboard Mill, which in our original plan was to shut that down. That is what's driving the incremental $30 million of EBITDA, you know, across that platform. And we need those tons to run the business. With that footprint we've got right now, as you heard Steve say, we've got a 10-week backlog on every one of our substrates. You know, there's an incremental 240,000 tons that when K2 is fully ramped, which will take, you know, over the next 18-24 months, that will be in the market, and it will be largely going to ourselves because of the growth and demand that we're seeing in our own products. Great. Thanks very much. You bet. Thank you. The next question today comes from Cleve Rueckert from UBS. Cleve, please go ahead. Your line is now open. Great. Good morning, everybody. Thanks for taking my questions. I wanted to just dig into the organic growth a little bit, and maybe if you could give us some color on how the European market is progressing versus the North America market. You know, I mean, I think you've alluded to it a couple of times throughout the call, but it is frankly, we've heard probably investors and, you know, others mention the word recession more times in the last two months than probably in the last five years. So I just like if you could just spell out some specifics on, you know, how you're seeing demand and organic growth trending in Europe and maybe the US independently. Yeah, Cleve, thanks for that. It's Steve. I'll start, and then Mike can add some additional color. You know, we're very pleased that our organic sales growth is really across the business globally as well as markets. Overall, Europe organic growth was modestly, as you know, above the number that we're articulating. As we just talked about, we've seen a little more early adoption of conversions, and the consumer is proving to be resilient and continues, of course, given its food and beverage consumption and consumer packaging in Europe predominantly. Europe as a European platform has organic sales growth at or above where we're at in total. The Americas or the North American platform, positive as well. As Mike mentioned, at the market level, food service has rebounded nicely in terms of organic sales growth. But even there, we have organic positive sales growth in our core food, beverage, and consumer businesses in North America. It's both market and geography across the totality of the platform, which emerged into the 3.3% in total. I think maybe, Cleve, to think a little bit about it for Graphic and if you think about our end use markets as a corporation, you know, 56% of what we do globally is food and beverage. Another 20% is food service, and then you got consumer products at 20, and health and beauty aids around 4. In Europe, as you heard Steve mention, we're actually over-indexed to food and beverage. While, you know, we're talking potentially about a recession or you're hearing about that from, you know, investors, you know, it's still a physiological human need that you have to eat and drink. The question is, where are they going to get that stuff? When you think about, you know, on-premise versus at home and inflationary pressures, you know, historically, our business has been pretty recession-resistant, as you know. We've got a slide in there at the very back that kind of shows what happened in 2008 versus what the company we are actually today in 2022, which is very different. Our debt's a lot lower, our cash interest cost is a lot lower. We're a lot bigger company. Relative positioning for our business to kind of handle, you know, a variety of macroeconomic developments, I think we're pretty well positioned to be able to weather those things. Hopefully, that gives you a little bit of color into how we're thinking about it. Yeah. That's great. That's really helpful, and thank you for the detail. You know, maybe just to follow up, Steve, I think you said in your prepared remarks earlier that backlogs are at about 10 weeks. I'd just be curious to know how that compares to sort of the average or your target, you know, how you want to run the company, you know, where you like backlogs to be or where they just sort of sit naturally in the past. Well, certainly, we like them strong, but I would tell you that at 10 weeks, we're actually beyond a little bit where I would hope we would be just to be able to service customers effectively, Cleve, because we're having to basically, you know, be very pedantic around how we schedule our facilities and where the paperboard goes, given some of the longer transit times we have on the international business, for sure. You know, I guess if you went back historically, we've been more in the 6-8 week range over the last 3 or 4 years. They're definitely up from where they were for Graphic. Got it. That's very clear. Thanks very much. Thanks, Cleve. Thank you. The next question today comes from Adam Samuelson from Goldman Sachs. Adam, please go ahead. Your line is now open. Yes, thank you. Good morning, everyone. So I guess the first question is, it's kind of falling on the same line of questioning as before, but just thinking about your exposure to private label, is one area especially within retail that you could see some of the higher end branded names struggle a little bit more to raise price and see consumers trade down. Just trying to get a sense of how your business on the food and HPC side looks in private label, and is there mix implications of those shifts if those brands see volume growth at the expense of some of the brands that you sell to? Yeah, thanks for that, Adam. I guess I would answer it this way. I mean, our customers that have announced earnings in the last couple weeks have talked about greater price elasticity than they've seen in the past. I mean, you know, that's what they're currently experiencing. Relative to how that plays out through a recession, I guess what we try to do is build the company to be a bit resilient in that regard. You remember we had a slide that we showed at the Investor Day back in February that talked about 80% of what we do is branded, 20% is store brand or private label, and that is a global comment. You know, so we're kind of in all markets capable of, you know, handling that kind of a mix. That would be kind of right on top of what you would see as normal distribution of branded versus private label. We're well positioned to handle the growth, almost regardless of where it goes in terms of overall consumer demand. That's purposeful on our behalf, and we've made a number of acquisitions here over the last 10 years versus where we were even in 2008 and 2009, where we were more heavily indexed branded to make sure that we build our operating model to be able to perform well in that kind of an environment. That is in fact what happens. Okay, that's helpful. I just a second question maybe on Europe, and it's, I'm trying to just get a sense of how much, if there is issues around supply paperboard in Europe, how much just the flexibility you have to. Doesn't sound like you have much in the short term because of capacity constraints, but flexibility to source more board from the U.S. The corollary or driver that I'm thinking about is the energy costs for European paper mills. Does that actually provide a bit more of a pricing halo to. It's not. They're distinct markets, but there's relationships in terms of does that provide a pricing halo into the U.S. because of the energy costs in Europe? Well, if you're looking at a relative competitive cash cost curve, the answer would be yes. I mean, North America is moving lower as a result of the impact of nat gas, for sure, on a number of those grades. In terms of your question around what that means to us in Europe, as I mentioned, our team, you know, kind of saw this coming and started in the fall of last year locking down tonnage to make sure that we had, you know, commitments to the paperboard mills that we buy from, for tonnage to take care of customers. They did an excellent job making sure they were out in front of that. As I mentioned, we are paying more for that material, but it's embedded in our pricing and inflation assumptions you see here that we share. The customers have actually, you know, pivoted more towards making sure that they have security of supply. Don't get me wrong, they don't wanna pay more, but ever. They understand that that's the environment that they're in right now, and they're more interested in making sure they have the materials to make the products and keep, you know, products on the store shelves. I would anticipate that that will continue to be the case, you know, through the balance of the year. To your point, you know, we do import around 250,000 tons of our own material for the beverage business. You know, that is about the extent of what we're capable of doing right now just given the demand we've got here in the North American market. As I mentioned also, though, we are seeing, at least in the preliminary data for the first couple months of this year, that some of the imports are actually down year-over-year into North America. I would assume, although I don't know factually, you know, that that stuff is staying, you know, in the European market given some of the challenges they have and growth opportunities that are available to them. They're gonna make more money on it in the North American market than they are shipping it, or excuse me, in the European market than they will shipping it to North America. Adam, just to add one point to Mike's dialogue there. As such, given the inflation in Europe, whether it be nat gas or paperboard that we acquire, pricing environment has become much more fluid. That's just been a reality of having to effectively manage through what is an unprecedented overall inflationary environment. All right. That's all really helpful color. I'll pass it on. Thank you. Thanks, Adam. Thank you. The next question today comes from Anthony Pettinari from Citigroup. Anthony, please go ahead. Your line is now open. Good morning. On demand trends for food service versus, you know, food and bev and consumer, you know, during the pandemic, we talked a lot about the teeter-totter. Can you just remind us, is that sort of, you know, fully unwound now or normalized now? Or how might you expect those two, you know, end markets might perform, you know, over the course of the year, just given the year-over-year comps and kind of the demand trends that you're seeing? Yeah. Thanks, Anthony, for the question, and I appreciate your reference to kind of how we talked about it over the last couple years. I'm also happy to tell you that as of this quarter, as I mentioned, our food service business is actually slightly ahead of pre-pandemic levels. I'd say that we're more in equilibrium of where we would expect ourselves to be, with you know, growth on you know, some of the plastic replacements, some of the other things we've already talked about on the call. You know, continuing to buffer some of our food and beverage business and food service returning back to kind of that strong, you know, growth profile. We'd expect that over the next few years, as mobility continues to improve, that we would you know, see growth in that vertical. We've got relative to end-use markets that we're servicing. Okay. That's very helpful. Then, you know, you ramped up Kalamazoo, which is obviously a massive project, I think the largest you've undertaken. Before that you had a couple big projects at West Monroe and the project at Texarkana. Just any thoughts on sort of the next opportunities for optimization and operational performance going forward? Is optimizing K2 and sort of the CRB platform really gonna still take, you know, most of your time and energy this year, maybe into next year? Well, it's certainly gonna take, you know, as the majority of our focus and effort, this year and into next year, make sure we deliver or exceed, you know, the commitments that we've made on K2. That's a critical, you know, set of initiatives for us. We're off to a decent start. As we told you, if we were performing better, we would shut Battle Creek down sooner, which in fact, is what we're doing. We're averaging somewhere month to date, you know, above 800 tons a day. Our target for that machine is 1,500 tons. We're 2 months in and slightly ahead of our targets. Quality looks great. Our team's done a wonderful job. I just give a shout-out to them. It's you know a tremendous accomplishment for them to be able to pull off what they've done with you know COVID in the background and over the last couple of years. They've done it. Our hourly folks that are ramping that machine up are performing very well too, so I'll give them a shout-out. Look, we continue to run trials on fiber, as we told you at the Investor Day, to see if you know an FBB you know project for us makes sense. You know, we don't have a project right now, but we're running those trials. The trials actually you know continue to show promise. As we go forward here, we'll look at you know that potentially, and then we'll let you know if we come up with something that actually is a project there. It's all in the context, again, Anthony, of that 7% of sales CapEx and 20% EBITDA margins. I want you to think about that because that's really how we want you to model the company going forward. If we do increase our capital spending, it'll be also with us increasing our EBITDA margin you know targets because we expect those projects to have you know returns. Historically, Graphic's done a really good job along those lines. That's how I'd ask you to think about it. Focus maniacally on K2 ramp up this year. Again, you know, beyond that, we continue to look at other things, and if we think we've got something, we'll bring it forward. Okay, that's very helpful. I'll turn it over. Thank you. The next question today comes from Arun Viswanathan from RBC Capital Markets. Please go ahead. Your line is now open. Great. Thanks for taking my question. Just curious about the price cost, I guess, outlook. You know, given the recent inflation and maybe some tightening in the market as well, what should we expect as far as pricing actions that you get to realize in 2022, the rest of 2022, and I guess how much did it impact our 2023 outlook? Thanks. Arun, you know we're not going to, you know, prognosticate around, you know, future pricing actions that we would take. I mean, all I would tell you is that every one of the announcements that we've made have now been recognized in full. We're implementing those through our roll-through on our contracts. Our backlogs are at 10 weeks. We'll continue to monitor that and make sure that we're making good, you know, decisions for the company. I'm not gonna talk about future pricing actions on a call like this. Understood. Then on the volume outlook, as you said, are you seeing anything, you know, whether it relates to maybe substrate conversion, you know, some of those paper steel and other new product initiatives you discussed that would, you know, potentially help you increase your organic growth outlook, or are we still kind of thinking about 100 basis points -200 basis points as the right range? Yeah, thanks for the question. Look, we've actually now, as I said in my pre-prepared comments, you know, beat our goal eight out of the nine last quarters if you look at it. It's a logical question, do you raise another 100 basis points -200 basis points? What we've decided to do is just keep outperforming. I don't want to sound snarky here, but on the other side of things, we actually want to get credit for the 100 basis points -200 basis points that we put out there and the fact we've been able to consistently beat that now for the last eight quarters in a row. Rather than, you know, try to put a higher goal out there, we're just gonna keep performing. We believe that, you know, sooner or later, the markets will see that and we'll be rewarded for it. Great. Thanks. I'll turn it over. You bet. Thanks, Arun. Thank you. The next question today comes from Gabe Hajde from Wells Fargo. Please go ahead. Your line is now open. Mike, Steve. Good morning. Hey, Gabe. Wanted to ask about the guidance or the outlook, if you will. I'm thinking about kind of the pretty strong start to the year. I know you don't give quarterly guidance, but if I look at the maintenance impact, and I think what you said, the $80 million-$90 million of price realization. The sequential incremental there will be, let's say, pick the midpoint, I don't know, $50 million or so. Q2 guidance, let's say, for EBITDA is in that $400 million-$405 million range. Appreciating the fact, I mean, it looks like price realization, I think relative to when you last updated us at your Investor Day, you know, recently recognized a couple other price increases that were not in your outlook. It feels like things are tracking a little bit better maybe. Appreciating it's early in the year and there's some uncertainty, any reason why you guys aren't adjusting that pretty wide guidance range for us today? Yeah, Gabe, Steve, in terms of Q2, you're correct. We don't provide guidance, but we provide the components, and you just set them back appropriately relative to where Q2 is likely heading relative to price cost and relative to planned maintenance downtime. Relative to your question on the width, if you will, of the range, we really felt like Q1. Let's maintain this range of $200 million on the inflation front, and we'll dial that in after Q2. Just given the incredible uncertainty that we've seen, our mark-to-market today at $475 million is clear to us, but the mark-to-market has moved up every month for the last year. Hence the little bit of a wider range. It feels appropriate, it's prudent, and gives us then the ability to navigate inside of that. Certainly relative to a couple of questions today, 2023 pricing, the range, if you will, around inflation, we'll absolutely be dialing that in as we work through Q2, and we'll talk about that pretty specifically in July. All right. Thank you, Steve, for that. Then, I guess sort of a disclosure/point of clarification. Last quarter you'd given us tons, and unless I missed it, I didn't see that this quarter. So I know you kind of talked to us about not focusing too much on a tonnage number. Just curious, I'm assuming that's intentional and that we won't be getting that going forward. So that's kinda question number one. Then number two, I guess as I think about rolling forward to 2023, and again, we can make our own assumptions about volume and price cost, but the other moving items would be a few extra $ million of synergy realization from AR Packaging acquisition, as well as an incremental 50, I wanna say from Kalamazoo. Are there other big ticket items that we should be thinking about? Sure. Let me just take both of those real quick for you. You know, we're a packaging company. What we really did here with this set of reporting, and we've added it in the supplemental materials, is to provide the line of sight with our organic sales growth calculation, which was 3.3%, this quarter. That calculation represents almost 90% of the company, and so we felt like that was the appropriate tool to look to as we talked about organic sales growth. We're moving away from tons. As we talked at our Investor Day, we're now at, you know, acquiring 1 million tons of paperboard. We produced 4 million tons, and in the quarter that grew, given the investments that we've been making, particularly in Kalamazoo. As a tool to report against, we really are continuing to make that pivot towards the integrated packaging company that we are into the organic sales growth calculation. Relative to 2023, you're correct relative to the things that we were articulating. We've got synergies on acquisitions. We've got the continuation of Kalamazoo. Those are both good examples of improvement initiatives that will be a part of our 2023 expectations. It goes to what Mike was just talking about a moment ago. All of those fit inside of the context of the goals and the march we have from today's EBITDA margins up towards 20% over the next several years. Great. Thank you, and good luck. Thank you. Thank you. Our final question today comes from Kieran de Brun from Mizuho. Please go ahead. Your line is now open. Good morning, thank you for taking my question. I just had a really quick one in terms of the AR Packaging acquisition. Is there any color you can give us in terms of how we should think about the cadence of those $40 million of synergies over the next three years? And also, you know, now that you've had a few months since the integration has began, you know, are there any kind of positive or negative surprises that you've experienced? And if you could just touch a little bit in terms of the opportunities you're seeing from like a cross-selling or co-product development perspective, I would appreciate it. Thank you. Yeah, you bet, Kieran. Steve, I'll kick it off, and Mike can add some of the specifics. The $40 million over a three-year period of time with this 2022 being year one, pretty evenly over that period feels still about right for us. That being said, I think how it will come in, and Mike can add on to this, but I think we are very optimistic about what's possible relative to growth and commercial opportunities. There will be cost opportunities, and we'll manage through those and optimizing facilities. I think our confidence in it is very high and how it's likely to come in may be more growth oriented in a positive way in addition to those natural things that we'll do on the cost side. Mike? Yeah, that's absolutely correct, Steve. I think, look, our confidence is high in the 40, and I would actually say it'll probably be a bit indexed, you know, to 2023, quite frankly, given some of the opportunities and things that we're seeing in terms of the teams executing there. Again, I don't wanna overplay it. I talked about it in my prepared comments, but, you know, we expected the chemistry to be solid, given the cultural backgrounds of both companies were very similar. It's exceeded my expectations. They got down quickly to working on, you know, real work. And of course, you know, Europe is anything but easy right now, so that's, you know, a good crisis sometimes helps the team, you know, congeal and gel together, and that's what we're seeing. In terms of geographic expansion, we've got a big book of innovation that we're opening up to those new customers, and they have the same for us. We're leveraging that inertia, and that again was part of our hypothesis when we did the deal, and it's playing out the way that we expected it would. All in all, Kieran, you know, we're off to a really strong start and, you know, fully expect to deliver on all the commitments that we made for the business acquisition of AR Packaging. Great. Thank you very much for the color, and congratulations again on a good quarter. Thank you. That concludes today's question and answer session. I'd like to pass the conference over to Michael Doss for closing remarks. Please go ahead. Mike, thank everybody for joining the call today, and we will look forward to talking to you again in July with our Q2 results. Have a great day. That concludes the Graphic Packaging Q1 2022 earnings call. Thank you for your participation. You may now disconnect your lines.