Hello, and welcome to today's Graphic Packaging 1st quarter 2023 earnings call. My name is Bailey, and I'll 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 during today's call, please press star followed by 1 on your telephone keypad. I would now like to pass the call over to our host, Melanie Skijus, Head of Investor Relations. Melanie, please go ahead. Good morning, and welcome to Graphic Packaging Holding Company's first quarter 2023 earnings call. Joining us on the call today are 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 our first quarter earnings presentation, which can be accessed through the webcast and also on the investor section of our website at www.graphicpkg.com. Before I turn the call over to Mike, let me remind you that today's press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and in our filings with the Securities and Exchange Commission. With that, let me turn the call over to Mike. Thank you, Melanie. Good morning, everyone, and thank you for joining us on the call today. Graphic Packaging is off to a great start in 2023. We continue to advance our proven strategy centered around running a different race as we build our leadership in fiber-based consumer packaging. Our strategy is focused on driving growth by executing differentiated strategic capital investments and enhancing long-term partnerships with customers while expanding consumer packaging expertise and innovation capabilities. During the first quarter, strong execution by our global team enabled us to deliver on this strategy, create value for customers and shareholders while positioning the business for the future. Let's start with this quarter's key highlights on slide 3. Amid a challenging macroeconomic backdrop, we drove continued net organic sales growth and margin expansion during the first quarter. This performance is a testament to the resiliency of our business model as well as the strong and growing consumer demand for renewable, recyclable fiber-based packaging. As part of our differentiated strategy, we continue investing to capitalize on this clear consumer preference by building new capabilities and driving innovation. As we will discuss in further detail, our recycled paperboard investment in Kalamazoo is exceeding expectations, and we are making progress to build upon our distinctive competitive advantage with the new mill in Waco, Texas. Importantly, we're not the only ones investing in response to the consumer preference for more sustainable packaging. Leading brands and manufacturers recognize this consumer trend and the solution our new capabilities and innovations can provide. We are pleased to announce today that Chick-fil-A is going to market later this month with our new highly insulated double-wall fiber-based cup as a potential long-term solution for their beverage program. This is the latest example of the significant opportunity for us within the food service space. Given our strong start to the year and confidence in the path ahead, we are raising our full-year EBITDA guidance by $100 million to $1.9 billion at the midpoint of the range and updating other guidance metrics as a result. In 2019, we established our original Vision 2025 goals. With the increased outlook for 2023 we are providing today, we are on track to achieve those original targets two years early and have a clear path to meet the enhanced Vision 2025 financial goals we announced in February 2022 at our Investor Day in New York. Slide 4 captures our key financial metrics for the first quarter. Sales increased 9% over $2.4 billion, driven primarily by positive pricing and organic sales growth. Adjusted EBITDA of $484 million grew at a faster pace than sales as our margin expanded by 430 basis points to 20%. This represents a new high for adjusted EBITDA margin and provides further confidence in achieving our Vision 2025 financial goals. Taken together, our strong sales and EBITDA performance led to adjusted earnings per share of $0.77, an increase of 60% versus the prior year quarter. As we deliver on our near-term financial goals, we are continuing to invest in new capabilities to build on this strong performance in the future. Most notably, we are making considerable progress on our CRB platform optimization, which is detailed on slide 5. Our new K2 machine in Kalamazoo results in Graphic Packaging operating the world's lowest production cost, highest quality coated recycled paperboard mill. The largest capital investment we have made to date, K2, came to life in early 2022 as we successfully ramped production on the machine. Now that we are fully ramped, the capability of K2 is exceeding our expectations in several ways. First is quality. We are now capable of producing a new, innovative, higher quality CRB grade that meaningfully expands opportunities for the substrate and our network overall. I will elaborate more on this exciting development in a moment. Second is yield. Tons of annual production compared to the 500,000 tons we previously announced. Finally, financial benefits. We had previously announced the investment would drive approximately $130 million of incremental annual EBITDA improvement over 3 years. I'm pleased to report that we now expect to reach that target in only 2 years, a full year ahead of schedule. The outstanding execution of the K2 ramp is a testament to the great work and dedication of our Kalamazoo team. Additionally, the success of the investment provides us with the expertise and confidence to continue to strategically invest to redefine the fiber-based consumer packaging landscape as we are doing in Waco. We announced the Waco investment less than 3 months ago. We have already made meaningful progress excavating the site, ordering equipment, completing the foundation, and recruiting key employees. We remain on track to meet our previously communicated timeline, including the start-up of the machine in the first quarter of 2026. Taken together, these investments help us meet the increased demand for CRB at an unmatched cost compared to our competitors. The investments in Kalamazoo and Waco will allow us to optimize our network further by closing higher-cost mills while still expanding capacity strategically over time. Due to the better-than-expected production from K2, we have decided to close our CRB mill in Tama, Iowa, during the second quarter, earlier than we had previously anticipated. Among our recycled paperboard mills, Tama has the smallest capacity and the highest cash production cost per ton. This closure advances our strategy to simplify our paperboard network while strategically expanding capacity and lowering cost. Factoring in both Waco and planned mill closures, our optimized mill network will net approximately 5% more capacity than we currently have today, with flexibility to adjust capacity in line with demand. As I mentioned a moment ago, our CRB investments don't simply deliver cost and production advantages. They enable us to make an entirely new grade of the highest quality coated recycled paperboard available. By utilizing K2 state-of-the-art technology, we can produce the new grade of recycled paperboard with enhanced appearance and performance characteristics as well as superior economics. The improved quality expands the breadth of our opportunities for CRB-based packaging to new consumer end markets that have historically only been served by virgin substrates, such as FBB or SBS or other materials. Slide 6 illustrates a few examples of where we expect CRB to play over time. In short, we expect to see CRB in more products and consumer experiences. We're in the early innings and are currently conducting trials of our higher-quality CRB grades. We look forward to sharing more on these opportunities in the coming year as part of our ongoing innovation story. The adoption of CRB for certain packaging applications historically requiring virgin fiber will enable continued substrate optimization across our mill network. This is important as it frees up virgin capacity in our other mills to capture growing global demand without the need for additional capital investments. Our CRB investments in paperboard grade innovation are clear examples of what I mean by running a different race. We are creating opportunities for ourselves and for our customers to deploy fiber-based consumer packaging options, this is a key factor in driving not only the depth of our customer relationships, but also our growth and performance. Slide 7 is a great example of innovation in our virgin substrates and the enormous opportunity to replace packaging created from non-renewable resources not as widely recycled as fiber-based packaging. Illustrated on this slide is our proprietary, highly insulated double wall fiber-based cup solution developed as an outstanding alternative to the foam cup. Our new cup boasts a number of features that set it apart from others available at quick service restaurants, providing consumers a to-go cup solution that sweats less, is more durable, and has enhanced insulation properties. Delivering added appeal to consumers are the improved sustainability features. The result is a better beverage experience for the consumer. Chick-fil-A is the largest quick service chicken restaurant chain in the United States and an existing Graphic Packaging customer. Today, we are announcing an expansion of that relationship with the launch of our proprietary cup innovation in Chick-fil-A locations from California to Maryland. Stage one of that launch is focused on approximately 10% of the customer's restaurant footprint. Over time, our innovation can be a potential long-term solution for Chick-fil-A's beverage program, including the ability to work in both cold and hot beverages. Driving innovation with industry leaders like Chick-fil-A is a great example of how leading brands are investing to transition toward more sustainable packaging solutions and how we are partnering with them to effectively manage that transition. While progress has been made to transition away from foam and plastic, Americans still use roughly 45 billion of these cups each year. Consumers are calling for a change and an environment with less waste. Our customers are looking for us to help. We believe our new insulated cup innovation has tremendous potential to win in what we estimate is a $2 billion addressable foam and plastic cup market in the U.S. To put that in different terms, our $2 billion addressable market opportunity equates to roughly 600,000 tons of SBS paperboard demand. We are uniquely positioned to service this demand by leveraging our integrated platform as our customers meet the call from consumers. Our CRB mill project underway in Waco, with its enhanced cleaning and separation system, will provide increased cup recycling capabilities. We look forward to partnering with QSR customers like Chick-fil-A on enhanced cup recycling programs in support of a move to a more circular economy. With that, I'll turn the call over to Steve to provide more detail on the quarter's financials. Good morning. Turning to slide 8, the key financial highlights for the first quarter. As Mike mentioned, it was a great start to the year. Net sales increased 9% year-over-year to over $2.4 billion, driven by positive pricing execution and 1% in organic sales growth, partially offset by planned lower open market paperboard sales and foreign exchange impact. As you can see on the right side of the slide, our sales performance benefited from the diversity of our portfolio. Our food, beverage, and consumer markets, which together represent approximately 80% of our portfolio, increased sales 8% year-over-year. The food service market, which represents approximately 20% of our portfolio, grew by 13% compared to the prior year period. Adjusted EBITDA was $484 million, up $134 million over Q1 last year. The 38% year-over-year increase was driven by price execution, organic sales growth, and net performance. We're very pleased to see adjusted EBITDA margins at nearly 20% during the quarter, consistent with our goal for Vision 2025. Adjusted EPS continued to expand, growing 60% year-over-year to $0.77. As a reminder, our sales and EBITDA waterfalls are available for reference in the appendix of today's presentation. Liquidity remains very strong at over $1.2 billion. Our paperboard integration rate increased to 75% during the quarter, up 200 basis points from the prior year period. Meanwhile, we are pleased that our backlogs and operating rates remain healthy across all substrates. This level is more in line with historic norms and supports our growth while allowing us to provide exceptional service to our customers. Operating rates across the business remained high in the mid-90s in the first quarter. We continued to return cash to shareholders, consistent with our balanced capital allocation approach. During the quarter, we paid a quarterly dividend of $0.10 per share, totaling $31 million. We also repurchased $28 million of shares to offset dilution related to long-term incentive compensation. Slide 9 features our current guidance targets for 2023. Given our strong start and outlook for the balance of the year, we are pleased to be in a position to increase our 2023 guidance for adjusted EBITDA by $100 million to $1.9 billion at the midpoint of our guidance range. As a result, we have also increased expectations for adjusted EPS by $0.20 to a range of $2.70-$3.10, and updated our year-end net leverage ratio target to be at or below 2.5x. We are also reiterating our guidance for sales and cash flow. Robust cash flow generated from our business this year will result in further pay-down of debt while providing flexibility for continued investment in the business. Turning to slide 10, you can see the substantial progress we have made since announcing our original Vision 2025 goals in 2019. As Mike already noted, the improved 2023 guidance we are announcing today puts us on track to achieve our original Vision 2025 financial goals 2 years early. We remain confident in the path ahead and our ability to achieve our enhanced Vision 2025 financial goals provided last year. Thank you for your time this morning. With that, let's turn the call back to the operator to begin the question and answer session. Operator? Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star followed by 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question, and please do remember to unmute locally. We please request that you keep to 1 question and 1 follow-up. Thank you. Our first question today comes from the line of Ghanshyam Panjabi from Baird. Please go ahead. Your line is now open. Yeah. Thank you, operator. Good morning, everybody. Could you just start off by giving us more detail on what you exactly saw across the major verticals that you have exposure towards? You know, breakdown between food service, packaged food, beverage, and also if there's any notable divergence across your two major geographies. I'm just asking because there's a lot going on with inventory destocking and so on. Yeah. Ghanshyam, good morning. It's Steve. Just to start that, I think if you look at our organic sales growth, the 1%. We saw continued organic sales growth in Europe, which was driven by the innovation engine that we have there. We saw growth again in our food service platform. All that was partially offset by very slight decline in kind of the core food, beverage, and consumer businesses in the Americas. As we've seen in the past, the portfolio held up extremely well. Some positives and then obviously some of the places, the destocking that you mentioned. Got it. Perfect. To my second question, you know, obviously a very, very strong year in 2023 from an earnings standpoint. I know it's incredibly early, but, you know, as we think about our earnings outlook for 2024, should we expect productivity to be in the vicinity of what you're projecting for this year? At this point, do you foresee a path for earnings growth in 2024 despite, you know, to be up despite what will be a very difficult comparison? Yeah. No, Ghanshyam, I'll start, and then Mike can add some additional color. Obviously, you said it well. It's very early, as we finish the first quarter. You know, as we look out to 2024, we would expect our model to continue to advance forward. We would expect to see 100-200 basis points of organic sales growth that we can earn on, and we would expect very strong productivity again in 2024. We'll have our normal $50 million-$70 million of productivity we would expect that we would always have line of sight to. It is noteworthy, we would expect to have less both planned and unplanned maintenance downtime next year, as we look at it, both based upon some of the unplanned downtime that we've had here in the first quarter, as well as less planned downtime next year. To your question, yes, productivity should be on, you know, the high end of our historical norms. Overall, the balance sheet will be in a great spot. Obviously, if we continue to take debt down, interest costs would move down relative to EPS, or the balance sheet will be in a place that drives strategic optionality. I don't know, Mike, if you want to add anything to that. No, I think that's right. You know, Ghanshyam, like if you look at, you know, the fine point we put on guidance, you know, having our debt-to-EBITDA ratio down at 2.5 times or below here at the end of the year while we're investing in Waco, we've got a tremendous amount of optionality as we go into 2024 to continue to, you know, deploy capital in a way that, you know, benefits shareholders and customers. Okay, fantastic. Congrats on the Chick-fil-A launch as well. Thank you. Thanks. Thanks, Ghanshyam. Thank you. The next question today comes from the line of Cleve Rueckert from UBS. Please go ahead. Your line is now open. Morning, everybody. Thanks for taking my question. Just a couple of brief ones for me because I think the story is pretty clear at this point. I guess to start, can you maybe give us some more color on what's driving that $100 million increase in EBITDA at the midpoint of the guidance? You know, you didn't take revenues up, so, you know, something on the margin. Is that really just the productivity you're getting out of K2? Is there some input cost there? You know, what's kind of driving that change? Yeah. Cleve, it's Steve. I'll be glad to do that. If you kind of look through the guidance, the incremental $100 million is primarily driven by an improvement overall to our price execution. We took the midpoint of that up $50 million, and we took the midpoint of our inflation guide down $50 million. The net of that is the $100 million overall. The Kalamazoo positive is driving incremental productivity. It was offset by, you know, the 1st quarter unplanned downtime that we had at West Monroe. Those two negate out to roughly a 0. The net improvement is a improvement in overall price cost. Got it. Okay. That's very clear. You know, just quickly following up on the sort of the longer term, you know, Vision 2025. You know, I guess the area that maybe you've got some work to do on is in the integration side. I'd just be curious if, you know, you can get to that 90% plus integration level with your existing platform or if, you know, the strategic options that you opened the door to discussing a second ago, would be sort of an area of focus, you know, downstream in terms of integration. Yeah. Cleve, thanks for the question. I think if you go back to 2018 and really look at it on a, you know, combined basis when we acquired the consumer packaging business from International Paper, our combined integration rate at that time was 62%. We just, you know, announced this quarter that we increased 200 basis points over where we finished last year. We're now at 75%. We've made tremendous progress really over the last five years along those lines. As you know, that's been a combination of both, you know, inorganic, you know, some tuck under acquisitions that we've done, as well as our organic growth, which is, you know, on a three-year stack, you know, coming into this year was roughly 10%. We continue to grow here in the quarter. It's gonna be a combination of both of those things. You know, if you just kind of wind the clocks forward as that supply agreement that we talked about at the end of last year unwinds, we'll be pushing towards 80% by the end of this year, as we head into 2024. Our confidence is high that we'll be in that range and be heading towards 90% over the next couple of years. Got it. Thanks very much for that. I'll hand it over. Got it. Thank you. The next question today comes from the line of George Staphos from Bank of America. Please go ahead. Your line is now open. Hi, everyone. Good morning. Thanks for the details, and congratulations on the progress so far this year. I guess the first question on CRB and broadening the application that CRB can get into, including some food end markets. Can you explain how you're getting around the food contact issues with recycled material and the substrate? Is there anything that you need to add? That would ultimately take away from the sustainability of that package. I had a follow on. Yeah. Thanks, George. I appreciate the opportunity to talk a little bit about that new grade, which by the way, we're gonna call Rainier as we put in the materials there. The reason for that is if you look at the appearance properties of that particular grade of paper that we're gonna manufacture, you know, the brightness and the smoothness are substantially similar to, you know, SBS grade. When we think about that grade, how we're gonna position in the marketplace, it'll compete for some food applications for sure, both here and in Canada. The real area that we believe we can push that, you know, is in, you know, some of the health and beauty pharmaceuticals, you know, anything that has a bottle or a blister pack that's kind of, you know, encapsulated with carton. Historically, those have been, you know, upper end products. By definition, they were packaged in SBS, and we did some of that as well. Now that we've got a CRB that can compete with CRB sheets, that can compete with, you know, the appearance properties there, you know, we see a lane there that's quite large that over time that we're gonna continue to find ways to penetrate. That's really where our focus is gonna be with that particular grade. We've got some other grades that we're able to make in Kalamazoo that have high sizing that can work well in freezers. As you know, we've got the ability to make a grade that can, you know, package beverage. That's really what that slide was trying to point out, is that you're gonna see more CRB in more places. You know, it's a couple hundred dollar a ton advantage over SBS when you look at it, what it is. You can imagine, you know, customers, if they can get the appearance capabilities, you know, there's a lot of interest there. We'll be in trials here in the second quarter in a pretty heavy way. Our focus, you know, initially on Kalamazoo is to take the cost out. We committed that we would do that. As you heard Steve say in his prepared remarks, we're on track to deliver the $130 million of EBITDA improvement one year early. Now our focus is turned to, you know, how do we take advantage of what is a very unique formation, you know, back end on or front end on the machine, our calendaring capabilities and our coating capabilities, which, you know, really no one else except for us have in North America here. We've got them in Kalamazoo, and we'll have them in Waco as well. That's what we're doing. Thanks. Mike, I had a couple of other follow ons on that, but I'll save them for the offline. I guess the other question I had. Again, I think so far not many companies that we track had organic revenue growth in this quarter. Having said that, at least from our math, the organic revenue that you put up was a little bit under 1%, you know, 0.6%, 0.7%. Nothing to sneeze at, but a little bit below what you'd been targeting. Can you talk about whether there were any variances that were a bit surprising to you in terms of your key end markets? You know, maybe going back a little bit to Ghanshyam's question and kind of what the exit rate is into 2Q relative to that 100-200 basis points. Relatedly, whether or not we're in a recession, it's obviously a tougher environment out there. Is there anything else that you're rolling out of the playbook as we go through the next couple of years to prepare for this sort of, you know, volume uncertainty that a lot of companies are dealing with? Thank you, guys. I'll start by saying, look, we were really pleased with our performance in Q1 as it relates to volume. When you compare it against kind of the rest of the packaging world, we showed positive growth. It's really a testament to our diversified end use market participation strategies that we've grown on how we built the company. You heard Steve talk about both Europe and food service group. Food service was quite strong, and you'd expect it to be with unemployment at 3.6% and people wanting mobility and convenience. We expect that to continue to be the case. There was a little destocking in the Americas side of the business. As Steve said, we're not immune to that. What you have to remember for most of the products that we package, they've got an expiration date, they've got a born on date. Those things have to be used within a pretty defined period of time. You know, we're not as quite as exposed as maybe some of the industrial segments a lot are along those lines. You know, that actually gives us confidence that we'll continue to find ways to grind out, you know, 100-200 basis points over the medium to long term. If you look at how we exited Q1 and into Q2, you know, I'd say it's substantially similar to what we saw in Q1. Okay. I will turn it over. Thank you. Thanks, George. Thank you. The next question today comes from the line of Kieran deBruin from Mizuho. Please go ahead. Your line is now open. Are you there, Kieran? Please ensure you are unmuted locally. Sorry about that. I was on mute. I apologize. Good morning. Yeah, good morning. It seems like pricing is still trending better even though commodity prices are actually coming down. Can you just talk a little bit more about how we think about that relationship into the back half of the year? If we see raw subside further, how, and I know it's preliminary, but maybe how we should think about that into 2024. Kieran, Steve, you touched on it. I mean, price execution in Q1 was very good, very contractual as we've committed a lot of the changes in overall terms and conditions and the relationships that we've established with our customers short, medium, and long term. Obviously, given that we have until new increases in the marketplace, you'll see some step down on the pricing as you would expect, $230 million will step down into the ones and then down into the under $100 million to kind of get that path towards $500 million. The roll through obviously wouldn't be of substance as you kind of roll into 2024 because most of it would have been realized. That being said, overall inflation, commodity input cost inflation, while lower than, the original expectations we established at the beginning of the year, are still net inflationary. It's pretty neutral in terms of the pricing implications of that overall across the portfolio. To your question, as we kind of roll into 2024, we'll continue to be extremely mindful of monitoring inflation and making price adjustments as needed to offset inflation if we continue to see it come through the business. That, that part of the model wouldn't at all expect to be changed as we march, you know, through 2023 and into 2024. Great. Thank you. Then maybe just one quick follow-up on, this was discussed a little bit before, you know, clearly you're generating strong cash. You have a very strong liquidity position. How do we think about capital deployment priorities as we go into 2024? I mean, specifically, if you were to think about, you know, M&A or any investments along those lines, I think it was discussed, like, is it, is it focused on integration or are there any places where you wanna see, you know, further growth, whether it's geographic or in terms of, you know, health and beauty or some other areas where you maybe have a little bit less exposure? Yeah. Thanks, Kieran. Look, our focus in 2023 is really to make sure that we are at or below the 2.5 times lever, you know, and you heard Steve talk about that in his prepared remarks. That's our focus this year. For 2024, we'll continue to run a balanced capital allocation, you know, process like we've been doing for really the last, you know, 5 to 7 years. You know, there's a variety of levers we can pull there, and we do those, you know, to maximize shareholder value. The good news for us is we're gonna have a lot of cash to be able to do that with in terms of what we're generating as debt balances continue to go down. you know, we're able to do that even with what we're doing in Waco, so we're quite excited about it. Great. Thank you very much. I'll turn it over. Thank you. The next question today comes from the line of Mark Weintraub from Seaport Research. Please go ahead. Your line is now open. Thank you. One just quick clarification. You've obviously raised EBITDA guidance by $100 million, EPS, also nice raise there. You didn't make an adjustment to the adjusted cash flow. I apologize if I missed it, but why no adjustment there? Mark, it's Steve. We're really just providing ourselves with good flexibility, primarily focused on Waco. The project is off to an outstanding start. We've got $1 billion to invest over the next 3 years. As Mike mentioned in his prepared remarks, we're off and running. We're just giving ourselves some flexibility that if we can keep that project, you know, on track and in steady state, there might be a little more CapEx that would take us to the high end of the range there. The more EBITDA we earn, we've got a little bit of cash taxes. We're just really being appropriate around some flexibility. Obviously, debt pay down is job 1 this year. We're on that path into the, you know, mid-4s roughly on a debt balance, which will drive the leverage below 2.5 times. We're just trying to give ourselves some flexibility on Waco. We really like the start we're off to. We're investing. The weather's been good. We're just giving ourselves flexibility on the potential timing of the cash investment there. Nothing, nothing of change of substance other than a positive around, off to a good start in Waco. Got it. That is just you'd be moving the spend forward. It's not that the spend on Waco would be more. That's correct. You know, as Mike mentioned. Got it. -we're on track. No change to the $1 billion. It's just about the timing of the spend. Right. Just wanted to hone in a bit on the open market sales. I realize that, you know, your strategy is really focusing on the organic volume growth, and you're doing a terrific job there. Maybe just give us a little bit more color on what's going on in that part of your business, and, you know, how much of that is export versus domestic and how you are tactically working through that part of your business in the environment that we currently are facing. Thanks, Mark, good morning. Appreciate the question. From our standpoint, our export open market sales are very, very small. We'll start with that. Really, as you've seen us do over the last, really 5 years is, we're systematically, you know, doing a, you know, strategic retreat from certain parts of the open market, North American open market, you know, paperboard, you know, segments because we need those tons to run our own business as it continues to grow. You saw that on the waterfalls there. In all likelihood, you'll see it again in quarter 2 because, you know, Q1 and Q2 last year were pretty, you know, strong quarters. Basically anything that was available was sold. You know, from our standpoint, we're being very thoughtful in terms of how we use those tons, and they're really focused to help us, you know, grow our own, you know, converting cup business and ultimately take care of long-term customers that we've got on the open market side. That's what we're doing. Okay. Appreciate it. Yeah. Thank you. The next question today comes from the line of Mike Roxland from Truist Securities. Please go ahead. Your line is now open. Thank you. Thanks, Mike, Steve, and Melanie. Congrats on a very good quarter. Thank you. Just on I want to get a sense, Mike, from you in terms of how do you think about your portfolio on a go-forward basis? Obviously you built out Kalamazoo ahead of expectations. You're building out Waco right now. Is this something that we should expect to be ongoing so that after you're done with Waco, maybe we should expect another capital spend period where you build out, you know, there's another CRB mill, low cost, efficient, and then basically, you know, that's something you're gonna keep doing on a go-forward basis? You know, similarly, are there any significant enhancements that we should expect from you with respect to both SBS and your CUK? Michael, can you repeat the last part of that question? I wanna make sure I have it. Sure. No, sorry about that, Mike. I'd like to know, in addition to what you're doing in terms of CRB optimization, are there any other significant enhancements we should expect from you guys on SBS and CUK? Got it. No, thanks. Thanks for the question. You know, as I talked about in my prepared comments, and I appreciate you calling it out, is, what we're really excited about here at Graphic is, you know, kind of when we exit, you know, the Waco startup, you know, we're gonna have six world-class mills. Two that make CRB, two that make CUK, and two that make SBS. We've got the redundancy, we've got the cost structure we like. You know, they're very focused on what they do. We've built, you know, strong leadership teams and very large, well-capitalized complexes like we've got there. The net on adding Waco, as I said in my comments, allows us to have roughly 5% additional, you know, tons. We'll call it 200,000 tons across a 4.4.5 billion, you know, million ton network. You know, if you think about that, what we're really excited about is we're gonna be able to kind of shift substrates around within that six mill system, within the substrates, to really help us grow our business. We believe actually that the CapEx requirements into those mills and, you know, the CUK and the SBS mills will actually be less because we're gonna be able to open up additional tons, you know, in order to, you know, balance off the CRB side. You know, that's really one of the reasons why we did what we did in Waco, too, because it frees up those tons that we'll then be able to use. You know, what we'll look to do in those mills is cost reduction projects that, you know, structurally take out carbon, take out input costs, because we're gonna have the tons already that we need to, you know, run and operate and grow our business. Yeah. Mike, it's Steve. Just to add to that, as we've talked from a longer modeling perspective, once we are in, you know, beyond Waco, either over that 3-year period of time, we can see CapEx moving back down into that 5% sale type range similar to historical. That allows us to maintain the assets at a very high level and support that 100 to 200 basis points of growth. Got it. Very clear, and I appreciate the color there. Just 1 quick question on what you're seeing now with respect to demand in terms of April and anything you know April trends and anything thus far. I know it's only the second day of May, but anything you can comment on in terms of trends post 1Q. Thank you. Substantially similar to what we saw in Q1. Got it. Great. Thank you. Thanks. Bye. Thank you. The next question today comes from the line of Adam Samuelson from Goldman Sachs. Please go ahead. Your line is now open. Yes, thank you. Good morning, everyone. Morning. Morning. I guess the first question is actually, it's a clarification. If I just wanna go back to where you were in mid-February at the time of fourth quarter results. It seemed like the price cost kind of benefit that you realized in the first quarter was considerably above what you'd framed back in February. I just wanna make sure that we're properly calibrated on kind of what the source of... Was it just natural gas that really fell and was weak through the first quarter? Or help us think about the key moving pieces that drove that to be such a positive surprise in the quarter. Yeah. Adam and Steve, price execution exceeded our expectations by a bit because of good, strong overall commercial performance and execution of our pricing commitments. Yes, overall inflation in the quarter was modestly below expectations, hence the move in the full year guidance range down. Yes, you touched on the pieces of parts. We've got some things moving down on the commodity front that are well chronicled, nat gas, some logistics costs, some OCC, but it is being offset by items that are moving up still, like the paperboard that we acquire and purchase, like chemicals. We've moved the range down of inflation, you know, down to the $100 million-$300 million range. The current mark to market would be on the lower end of that range, consistent with the, you know, conversations that we've seen and that you just were asking about relative to kind of the mix of commodity cost movements. Okay. No, that's that's really helpful. A second question on K2 and thinking about the implications for Waco, this partially got addressed earlier, but as you think about K2 kind of exceeding design capacity in terms of output, it allowed you to make the actions of Tama earlier. How does that as you kind of get further along with K2 as it continues to kinda reach or exceed its investment case earlier than you thought, how is that informing Waco and how you plan for it and how you think about the potential returns in EBITDA? Where I think some of the network optimization benefits that could come from Waco were still kind of upside to the investment case. Thanks for the question, Adam. I guess, you know, I'll start by saying the success we're seeing in Kalamazoo here in terms of overall productivity continues to give us, you know, increased confidence in, you know, our ability to execute the Waco project and do so in a way that delivers $160 million of improved EBITDA that we announced when we announced the project. You know, that's really an important aspect to that. What Kalamazoo ramping up to 550,000 tons annually does, which is consistent with what we announced we would do, you know, on the Waco machine as well. You know, it really just allows us to pull forward a closure that we had announced that we were going to do later on in the process and deliver, you know, the additional $30 million of EBITDA here in 2023 that Steve outlined in his prepared comments. We're just a little ahead of the game. We're gonna have, you know, the 5%, you know, of net tonnage that we talked about there, 200,000 tons still. That's our plan. Once Waco's, you know, fully operational and ramped to speed. As I said earlier with one couple of questions we got, that gives us a lot of optionality to balance out across our existing, you know, 6 large mill system. Yeah. Okay. All right. That's all. That's all helpful color. I'll pass it on. Thank you. Thank you. Thank you. The next question today comes from the line of Arun Viswanathan from RBC Capital Markets. Please go ahead. Your line is now open. Great. Thanks for taking my question. Hope you guys are well. Congrats on a really good quarter and progress so far. I guess I just wanted to drill down back on the price cost. Appreciating that you did pre-bring down the cost side a little bit, was that kind of chemicals and wood and energy as well, or what were some of the, maybe the bigger categories that drove that as well? Sorry, I'll just start with that. Thank you. Yeah, no, Arun, Steve, it's the items that are pretty well known. I think the $100 million-$400 million of original guide for inflation, we took the top end down to from $400 to $300. It's mostly because of a not necessarily seen yet a re-inflationary environment, which is why we had the original range. Yes, some of the items that are down, nat gas pretty well chronicled some logistics costs and an OCC, which was kind of occurring when we put the original guide together. Those are the items we look at as a basket of commodities. What are our expectations around it? As I mentioned a moment ago, just repeating it, the mark to market, as we sit here today, would be on the lower end of the $100 million-$300 million of commodity input cost inflation. Okay, great. Thanks. As a follow-up, you know, it seems like the pricing environment is also holding up relatively well. Could you just maybe walk through the three grades, and just tell us what you're seeing from a supply demand perspective? It does appear that, you know, there may have been some looseness on the CRB side, but it doesn't appear that it's affecting you. Is it also maybe because, you know, some of the consumer categories are doing better than industrial, that's why, you know, boxboard is holding up a little bit better than container board? Thanks. Arun, it's Mike. Just working off the facts with what the AFPA released here, you know, on Friday is probably the best way to answer your question. Look, you know, just at a high level, you know, you saw that we talked about our backlogs of roughly, you know, 6 weeks across all three substrates, you know, on average. That's a very healthy, you know, backlog, and it really allows us to service our customers, you know, extremely well. As we talked about over a year ago now, I actually went back and looked at that transcript, and we said, you know, at 9-10 weeks, we just don't have the ability to take care of our customers as well as we need to. Now we do. Our customers are really pleased by that. It's important because many of them run, you know, just in time, you know, manufacturing processes, and they need to be able to respond to, you know, the needs of the consumer, which change, you know, pretty wildly as you know. You know, that's solid. You know, the actual operating rate for CRB was 94.7% for the quarter, which, you know, is very healthy. You know, SBS was a little bit divergent in terms of liquid packaging. Food service were up at 95%. General folding was down at 85% for a total of 90%. We also know because they publicly announced it, that one of our competitors is, you know, removing a mill from, you know, the system. At 360,000 tons going away, that would be 5.5% of capacity that goes away. If you kind of normalize for that, you know, it's obviously in the mid-90s as well. Then on the other grade, which is, you know, combined with chips and wall facing, clearly we had some unplanned downtime that factored into it. Presumably chips and wall facing was also, you know, somewhat weak just given the housing market. That's how we're thinking about it. I guess maybe-You know, since you opened the door for me to talk about it, I really want to spend a few minutes on this call, just saying that I think we're making a mistake as we kind of look at it just of trying to define us, you know, Graphic Packaging as, you know, backlogs and, you know, operating rates because at a high level, you know, we're a packaging company that happens to make the raw material that we actually convert in our, in our system. We've got the ability, given the markets that we've got and the high level of integration that we do have, to run that system to demand. That's in fact what we will continue to do, you know, here going forward. It's really more relevant for us and for you, at least in Steve and my opinion, to have you guys think about us in terms of how we're driving overall package growth and cup growth, which was positive in the quarter. You know, we happen to make the raw material that we make. It's not that those statistics aren't relevant because they are, but sometimes I think they're just, you know, an over myopic focus on those two things. I'd ask you guys to kind of consider that as you think about the company here going forward. Okay, great. Thanks a lot. Thank you. The next question today comes from the line of Gabe Hajde from Wells Fargo Securities. Please go ahead. Your line is now open. Mike, Steve, good morning. Hey, Gabe. Appreciating that I'm not a paper maker, and I think it's really great that you guys are, I guess, exceeding kind of nameplate capacity on K2. I'm just curious, it seems pretty early for a project of that size to maybe extrapolate out, you know, the fact that, okay, you know, maybe we exceeded productivity for a few months or 6 months or something like that. Why not keep that? I guess the question is the strategy behind maybe why not keep that in your back pocket and take a little bit of EDT across your CRB system, if and when things do in fact slow as opposed to take this more permanent adjustment to the system kind of shortly after buying that Tama mill. Yeah. I appreciate the question, Gabe. Look, we've had a lot of those discussions internally here. The bottom line is just the momentum we have is incredibly solid. Our confidence level that we can service the business and the optionality we have within the existing assets that we still have is very, very high or we wouldn't do it. The last thing we want to do is, you know, put our customers in a situation where they don't have the material that they need to run their business. We just wouldn't do that. Look, I think, you know, relative to what we've done here, we do have a cautious lens on it, and we've got those contingencies covered. We can make that announcement that we're making, have a lot of confidence that we're gonna be okay. All right. I guess I appreciate you advise us kind of maybe not spend too much time focusing on these statistics. I'll just ask the question to the extent that we roll forward into the second quarter, and maybe you tell us backlogs are at 4 and a half weeks. When do you kind of start to, I don't want to say the alarm bells go off, but just make different decisions internally in terms of running the business, when those backlogs start to compress? Or is that- Yeah, no. I'm assuming that's a determining factor, but not the end all be all. It is. Look, as I mentioned earlier, the great thing that we've got at Graphic given our high integration rates is we got the ability to run to demand. The last thing we're gonna do is run a bunch of paper boards, stick it in, into inventory, and tie up a bunch of working capital. Look, that's all in our, in our outlook. You know, it's all in how we're operating the business, and we do that as a matter of normal course. You can expect us to be very thoughtful in terms of how we're operating the business here. That's why I think it's just so relevant for you to look at the top-line growth of the business relative to, you know, cartons and cups in the markets where we participate in, which are holding up very, very well. You know, just understand that, you happen to be a packager that makes their own material. Yeah, I think, I've covered that topic as best as I can. Appreciate it. Thank you. You bet. Thank you. The next question comes from the line of Kyle White from Deutsche Bank. Please go ahead. Your line is now open. Hey, good morning. Thanks for taking the question. I wanted to focus on the food service opportunity you highlighted in the 600 ton addressable market for foam and plastic cup sector to convert to fiber base in the U.S. Does your asset base and capacity situation allow you to take advantage of this opportunity? Would you need to shift the cup stock versus folding carton improved mix while holding capacity constant? Maybe just what can you do to ensure that you maintain your market share here for this opportunity? Yeah. Kyle, it's Mike. Thanks for the question. The, the answer would be, maybe just take a step back to remind everybody. We make, you know, almost 400,000 tons of, you know, uncoated cup stock, and the vast majority of that runs through our existing systems, a highly integrated machine that we have in Texarkana. We have the ability to make cup stock in Augusta, and we do, and we have here already this year in 2023 in order to kind of service our business and take care of customers. As we have opportunities to grow our cup business, which is a stated strategy, we will absolutely ship SBS general folding carton tons into cup stock. You know, it makes a lot of sense for us to do that and, you know, continue to drive our integration rates up. That's the platform we were talking about that we've got the ability to leverage, and we're kind of uniquely positioned to be able to do that. 'Cause we already have those capabilities. If Chick-fil-A, you know, launches beyond where we currently are with roughly 10% of their stores, there will be investment that's needed in our, in our cup plants to make sure that we've got the capacity to take care of all their needs on a wide distribution national profile, you know, that they operate in. Again, that's all within, you know, the 5% of sales CapEx number that Steve talked about. We'll just deploy the CapEx there because it's where we'll be growing. From a modeling standpoint, really no change. It just really supports, you know, the 100 to 200 BPS of organic growth that we've got a feel a lot of confidence in here over the medium to long term. Yeah, Kyle, I'll just add to that. To Mike's point, we have the SBS capacity capability within the 1.2 million tons to service those growing needs. The only capital requirements would be on the converting the cup making side, which we can do plant by plant. That's excellent optionality, and it's really in support of, you know, the 100-200 basis points of organic growth over the next several years. Okay. Got you. That makes sense. On labor, the labor and benefits inflation is running twice the headwind as it was 2 years ago. Obviously it's on a bigger base with the AR Packaging acquisition, but still a pretty sizable increase. Are there opportunities to kind of reduce this headwind using automation, or is this just kind of new normal inflation run rate for labor going forward? Yeah, Kyle, Steve, it's Steve. Just briefly, it's generally the new norm. However, a lot of our ongoing capital tends to be around automation, so taking labor lower skilled labor out where it makes good sense to do. We've got long-term multi-year strategy to do that within our capital spending expectations. The labor and benefits has also become a big other. Insurance and property taxes and other things that don't fall into the commodity category are fundamentally up. That's, you know, we're obviously attacking all of that in terms of the overall footprint. Yes, AR Packaging came in, the numbers moved up. It's probably modestly escalated because of higher labor rate inflation, which it might more stabilize over time. I think about it more as the new norm, which means that our overall productivity, commitments need to be at or above that, same category as we talked at the beginning of the call. Gotcha. Thank you. I'll turn it over. You bet, Kyle. Thank you. The next question today comes from the line of Philip Ng from Jefferies. Please go ahead. Your line is now open. Good morning, Mike. Good morning, Steve. This is John on for Phil. Thank you for all the details and congrats on the good quarter. I want to just go back quickly to the Texarkana mill for a second. You talked about it closing in the second quarter here. Are there any cash costs associated with the closing that mill? John, it's Steve. They're modest. We had incentive programs in place for the for the team there with the longer term in mind. No, there's nothing that we'd characterize as of substance relative to the cash costs there. They're consistent. We were going to shut the mill down as we announced, it was just a move forward. Right. Okay. If I could just quickly jump to West Monroe in the second quarter. It's already back up and running, but are there any lingering impacts from that in the second quarter? No. Great. Then, if I could just squeeze one more in. During the quarter, it was reported that Graphic Packaging had a new partnership with Fot print Packaging in Bulgaria. I didn't really understand from the press release what exactly the nature of the partnership was. Can you help us understand the nature of that and maybe are there any financial implications from that partnership? No, just an opportunity to have a converting partner that can help us grow our businesses in Europe with- Thank you. Our final question today comes from the line of Anthony Pettinari from Citi. Please go ahead. Your line is now open. Hey, thanks for squeezing me in. I just had a quick one. You know, understanding you don't give quarterly guidance, is there, you know, maybe a way to think about, you know, the cadence of how earnings might flow through over the course of the year in terms of, you know, maybe being a little second-half weighted? As we think about, you know, the remaining three quarters of the year, are there any particular, you know, tough comps from a volume perspective or outages that we should sort of keep in mind for modeling purposes? Yeah, Anthony, it's Steve. Just briefly, you know, we're executing on about 80% of our maintenance downtime here in the first half of this year. You're correct from an earnings cadence perspective, it's slightly edging towards the second half, but it's all planned. Maintenance downtime implications, you'll see in the second half in the details of our guidance that we pick up about $30 million in reduced planned or maintenance downtime in the second half, with some of those being headwinds in the first. You're correct, we don't provide quarterly guidance. I think you can get a sense for last year's EBITDA in the 400 range. You could kind of stare through price cost and a little bit of net maintenance downtime headwind that we've chronicled in the details, to probably give you a good sense for where Q2 would be heading. Okay. That's very helpful. I'll turn it over. You bet. Thank you. That concludes today's question and answer session. I'd like to pass the call over to Mike Doss for any closing remarks. Thank you for joining us today and for your interest in Graphic Packaging. We look forward to talking to you again in August, when we report our second quarter results. Thank you, and have a great day. This concludes today's conference call. Thank you all for your participation. You may now disconnect your line.