I would like to welcome everyone to the Graphic Packaging Holding Corporation's second quarter 2009 earnings conference call. (Operator Instructions) I would now like to introduce Mr. Scott Winhold, the company's Vice President and Treasurer.

Good morning everyone. Welcome to Graphic Packaging Holding Company's second quarter 2009 earnings call. Commenting on results this morning are David Scheible, the company's President and CEO and Dan Blount, Senior Vice President and CFO. I would like to remind everyone that statements of our expectations on this call constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements including but not limited to statements relating to debt reduction targets, declines in raw material, commodity prices and expected effect on the company's results, additional synergies from the Altivity transaction, consumer purchasing trends, pension contributions and the performance of our Multi-Wall Bag business are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from the company's present expectations. These risks and uncertainties include but are not limited to the company's substantial amount of debt, inflation of and volatility in raw material and energy costs, volatility in the credit and securities markets, cut backs in consumer spending that could affect demand for the company's products, continuing pressure for lower cost products and the company's ability to implement its business strategies including productivity initiatives and cost reduction plans. Undue reliance should not be place on such 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. Additional information regarding these and other risks is contained in the company's periodic filings with the SEC.

We are pleased with overall second quarter results. This is the second quarter in a row in which we delivered EBITDA growth and significantly higher EBITDA margins. The strong operating performance is resulting in substantial cash generation and therefore net debt reduction. Pro forma adjusted EBITDA which excludes alternative fuel tax credits and expenses related to the Altivity combination as well as other non reoccurring items improved to $148 million the second quarter, up from $130 million in the first quarter of this year and $139 million in the second quarter 2008. For the last six months, pro forma adjusted EBITDA improved to $278 million compared to $266 million last year. Pro forma adjusted EBITDA margins have improved to 14.2% in the second quarter which compares to 12.7% in the first quarter this year and 12.3% in the second quarter of last year. That's 150 basis point sequential improvement and 190 basis points year over year improvement in our margin on lower volumes. As we have said previously, generating cash to pay down debt and improving our debt ratios remains a top priority. Last night, we issued a press release indicating that we plan to redeem and pre-pay approximately $20 million of principal and interest on our 2011 8.5% senior secured notes at par value. In the second quarter we generated $121 million operating cash flow and received approximately $52 million of alternative fuel tax credits. We are ahead of our cash flow projections and are raising our full year net reduction target to approximately $200 million from operation which excludes any benefit from the alternative fuel tax credits. We have not built these credits into our debt reduction target due to the uncertainties with how Congress may act on this credit. Our alternative fuel tax credits are averaging roughly…

Good morning everyone. As in the past, my comments will include operating results comparisons. The only pro forma results included will be to adjust both net sales and EBITDA in the prior year to exclude the two mills that were divested as part of the combination with Altivity. This will provide you with accurate year over year comparisons. A reconciliation detailing the pro forma non-GAAP numbers is included with the earnings release. Since cash generation and debt reduction is a top priority, I will start my discussion by going through our cash flow, balance sheet and liquidity metrics, and then come back to a more detailed discussion around the income statement. The other thing we are doing differently this quarter, when appropriate, is commenting on sequential changes from the first quarter in addition to the year over year changes. Starting with cash flow, net cash from operations was $172 million in the quarter, an increase of $170 million over the first quarter this year and an increase of $81 million over the second quarter last year. Over the first six months of 2009 we improved operating cash flow by $158 million. Included in operating cash flow are alternative fuel tax credits. Through June 30, we have applied for $62 million of tax credits and have received $52 million in payments. Excluding the credits, operating cash flow increased by $107 million over the first six months of 2009. As David briefly discussed, continued productivity and cost reduction improvements as well as lower input costs and the alternative fuel tax credit drove the increased cash flow in the quarter and the six month period. Now that we have had a year to integrate Altivity, we are starting to see the acceleration in our cash generation that we expected. One of the key…

In closing, I would like to reinforce strategically, I think we're firmly positioned as the dominant value added packaging supplier in food and beverage sectors. Our global footprint, vertical operations and efficient operations, and ability to create new industry leading products, enable us to compete globally on both price and innovation. With the industry likely to continue to consolidate around bigger global consumer products companies looking for focused and integrative partnerships of packaging suppliers, we think Graphic Packaging is in a great position to grow the business and continue to deliver improving financial results. Our strategic direction is really standing on three principals. The first is improving our core business by focusing on improved operating efficiencies in customer metrics. We know which businesses we are in and which ones we are not. The second key strategic principal is growth. Given our leading market share position in the folding carton, food and beverage markets, our ability to deliver new, innovative products and expand our global geographic footprint, we absolute believe we are in a position to grow and emerge as the stronger player in a global consolidated market. As mentioned, there are some early signs that volumes are beginning to improve sequentially, and we are cautiously optimistic that demand volumes have troughed in this economy. The third principal is improving our financials, specifically accelerating cash flow to reduce debt, to strengthen our balance sheet and improve our leverage ratios. We have now produced two quarters in a row of improving operating EBITDA and delivered over $174 million of operating cash flow over the first six months of this year. Our EBITDA margins are improving significantly both quarter to quarter and year over year and we see further opportunity to improve. So in closing, let me just say we like the positioning of the business today, and I know we need to growth the business and drive shareholder value, and we are focused on execution each and every day. I want to thank all of our dedicated hard working employees who are making it happen. Thank you. We would now like to open the call to your questions.

(Operator Instructions) Your first call comes from Sandy Burns – Stern Agee. Sandy Burns – Stern Agee: Could you remind us, I guess the relationship with the major soft drink companies given that Pepsi is now buying back in their bottlers, does that really change anything in terms of your relationship or create any new opportunities or issues that you see?

PepsiCo has for a long time sort of centralized their purchasing organization for the bottlers as well. Our relationship, we continue to be the ship to locations. So I think it will remain pretty much the same. We certainly will work with PepsiCo as they work their integration synergy targets. It's unknown to us yet and probably to them to some extent if there's going to be any change to the bottler network, but it shouldn't materially change our relationship with them or our financial association with PepsiCo. Sandy Burns – Stern Agee: On the Black Liquor proceeds you mentioned that you mentioned you look at about $10 million a month, yet in the second quarter you had accrued for about $55 million. Is that just more because, is the $55 million in the high end number just because of seasonality or is the $10 million just trying to be conservative for the time being.

If you remember in the second quarter that was more than just the second quarter period. I think we started generating Black Liquor credits in January and so second quarter was a reflection of what we have accumulated year to date through that period.

Your next question comes from [Roger Smits – Banc of America] [Roger Smits – Banc of America]: Was the Q2 '09 SG&A high because it includes that $34.4 million of cost reductions?

That's correct. [Roger Smits – Banc of America]: Does the other income of $71.8 million, does that include that $52 million of Black Liquor tax?

That's correct. We made a management decision to include it in other income and not disrupt gross margins. [Roger Smits – Banc of America]: That other income number is still fairly high. Is there still something else in there between the $72 million and $52 million?

There's some proceeds of some really insignificant assets in there as well that's pushing that number up. And there's also some interest. [Roger Smits – Banc of America]: Are you making the $20 million redemption on the 8.5% senior notes pursuant to the credit agreement, pursuant to the limit of payments under Section 8.13?

Yes we are. The $20 million I think it mirrors our basket.

Your next question comes from William Hoffman – RBC Capital Markets. William Hoffman – RBC Capital Markets: Can you talk a little bit about international. I was kind of interested that you said you had some placements and I just wonder in the international markets what kind of EBITDA margins you get out of that business and whether you see more opportunity there.

As you know our international business is primarily beverage. We don't have a large consumer products business so when I talk about machine placements, it's because our focus is really on expanding the beverage businesses. Our EBITDA margins in Europe are not materially different than what we get in the United States, but of course there's a higher working capital component because we make our board here and then ship it to Europe, so you've got the transition costs and so on. We've struggled in the past in Europe. The past couple of years we've really made a concerted effort in that business and you can see some of the financial results. I think Dan mentioned that of course we had a foreign exchange change this year, but that's not a reflection of the business, more just the economic condition. So we continue to see growth in international business. We signed a joint venture in China last year and that's very much focused on beverage. Our Japan business continues to be, in fact they had an extremely solid quarter. So it's still a small part of our overall business but I like very much the trends in that business. William Hoffman – RBC Capital Markets: I just wonder with some of the new product growth, the $20 million for the most recent quarter, is the international one of the outlets that you see providing you some more opportunity in other regions, even going into Latin America, etc.?

The new products business was split actually between beverage and food and some of that new product growth actually was in Latin America, and also in the Caribbean, some work we've done in baskets for example in Jamaica and the Dominican Republic. So yes, it's a fair split on that. A lot of the consumer based products however in the United States; they don't necessarily translate quite as well into Europe for example. The U.S. distribution system, the network is much different, so we can take advantage of replacing corrugated here in the United States, but as you well know in Europe, that distribution network is materially different. Microwave is a global product and I mentioned in my notes, we've had some new success in Spain and France in microwave. Our Japanese team has created a microwave product for cooking noodles, so you're starting to see those kinds of expansion. The $20 million a quarter from a dollar standpoint, not significant, but as I said in the past, those products tend to carry much higher margins; it acts like a bigger business than it really is relative to the financial results. William Hoffman – RBC Capital Markets: You also talked about a lot of conversation about your debt reduction and upping the targets, etc. What kind of total debt number are you looking at as sort of a target? You've obviously been able to operate with higher leverage than most of the other companies we follow. What point do you start to turn more to pushing growth again?

We have a target. We actually clarify our target in form of the leverage ratio. It's three to three and a half times, is our target range for debt. So as we increase EBITDA, as we reduce debt, we're going to start to hit that ratio and at that point we have different decisions to make in terms of how we use our cash.

I guess the only caveat I would say is, I don't know that those are mutually exclusive. The questions was sort of a two part question which is debt reduction with the implication of growth and I would say that we can grow and still reduce our debt. I think the hard thing to look at right now is the economic impact has a deleterious effect on volumes, but that's not really, I don't believe that's a harbinger of future growth options. It's just the economic impact. But we're going to be able to continue to invest in growing our business and still meet our debt reduction targets. I think we said a year and a half ago we built a brand new facility in Fort Smith, Arkansas to make our Z-Flute cartons, and quite frankly that facility right now is operating five days a week. So we've continued to make capital investments for the growth and still pay our debt. So I just wanted to be clear that it's not a, we don't see it as an either/or scenario. William Hoffman – RBC Capital Markets: I was more focused on more significant acquisition type opportunities, especially now that you're challenged.

I think right now we're 100% go on acquisition stuff. It's an interesting market. I'm not saying we would never look at anything, but right now we're very much focused on that excess cash flow to reduce debt, get our leverage ratios back in areas that make more sense for us long term.

Your next question comes from Joseph Stivaletti – Goldman Sachs. Joseph Stivaletti – Goldman Sachs: I was wondering if you could talk more about the deflation, the cost inflation. I think you saw if I remember right about $240 million of cost inflation in '08 and I wondered if underlying your assumptions for the full year, what you're thinking you might see for the full year in terms of deflation. It seems like you haven't benefited enormously from that so far.

I don't know that I'd give a target for the note, but I think what I would say is that the expanded EBITDA margins clearly are translating from the albatross between higher pricing and lower input costs. I think our margins have gone, 12%, 3% to 14.7%, so a good portion of that is really the lower input costs year on year. So I would say that we are benefiting from the lower input cost year on year.

I think if you move forward to third quarter, if you look at 2008, when did we start suffering from a lot of the inflation? It was in the second half of the year, and so if you look forward to third quarter, you're going to see a much bigger delta in terms of inflation in our numbers on a year over year basis. Through the second quarter and with out two to three month lag, you didn't see significant impact from inflation in the 2008 numbers. You saw it in the second half of the year, and you saw it in the first quarter of 2009. Joseph Stivaletti – Goldman Sachs: I was referring to that $8 million that you were saying…

That $8 million has a lot to do with the pension plan because you're aware of what's happened in terms of pension assets and a lot of that extra expense is the partial recovery because we have to expense more because we have to recover in terms of the market value of the assets. Joseph Stivaletti – Goldman Sachs: The other question I had, just trying as we look out to the rest of the year, trying to understand how much more in terms of synergies and benefits from your continuous improvement program, we should be thinking about versus what actually was reported in your second quarter.

I think our second quarter rate on synergy was around $25 million which is the highest quarter that we've had and as we look forward, you'll see some incremental improvement in that, but I would think that that's pretty much what we would expect to see. You'd sort of see $50 million the second half of the year, you would expect to see $50 million of net synergy contribution. Joseph Stivaletti – Goldman Sachs: On a year over year basis.

On a year over year basis. And I think we started the year, we started about $90 million, so you do the quarters on $25 million, we're certainly in that $100 million range and I think in some ways, we've exceeded our synergy target in the first year and most of that is because of the execution in the process. And so what I would say is that I'll probably do less talking about synergies and more just to give direction on cost, net cost reduction so you can have a better feel for what the business is really performing. So we'll continue to look at that net improvement, but annually we average about $50 million to $60 million a year on our cost improvement targets traditionally, and I see no slowing down in that effort as well. Joseph Stivaletti – Goldman Sachs: So the synergy part of the $25 million in the second quarter year over year, I understand that and that will continue through the rest of the year. The continuous improvement was a separate $50 million to $60 million a year. Where are you through the first half? Is also the second quarter sort of reflective of the run rate or will it bump up from second quarter levels?

Year to date in the continuous improvement, so that includes our lean, we're about $25 million through and actually second quarter was slightly higher than first, so the ramp up from, I think we reported first quarter $10 million or $11 million and this at this point $14 million on an ongoing basis, so that sort of gets you to $25 million. And I don't see any reason why third quarter won't be a similar number. Joseph Stivaletti – Goldman Sachs: So $50 million to $60 million.

Yes. We're definitely on that pace. And that's been the story. As you know historically we've been on a combined basis between Altivity wrapping, that's sort of the run rate.

Your next question comes from [Richard Cass – Jefferies] [Richard Cass – Jefferies]: Could you remind us of your natural gas hedging activities for both the second half of this year and into next year?

We're just over 70% hedged for 2009 and that's at around a $9.00 rate. So our overall natural gas costs are going to be somewhat south of $9.00 somewhere between, maybe around $8.00 when you consider the effect we're buying it at $3.50 on the stock market. For 2010, we're 20% hedged somewhere around the $6.00 rate. We're currently evaluating our hedge activity for 2010, but as we said in the script, we expect significant savings on natural gas in 2010 based on where the spot market is currently. [Richard Cass – Jefferies]: I know OCC costs have come up considerably, more than the $15 a ton that you were talking about. Can you talk a little bit about the differences and what price you pay versus where the spot market is?

I'm not going to get into individual prices on OCC for what we pay versus those. What I would suggest is, and you know OCC is an arbitrage number because it depends upon geographically where you're located. The Midwest where our three big recycle mills are in Battle Creek, Middletown and Kalamazoo, are in a very good basket. As you know the Chicago, Midwest basket for OCC is good and the freight which is a big part of that as well is much lower. We'll pay a market rate for OCC and as Dan has said, I expect it to go up a little bit in the third quarter.

Your next question comes from [Jeff Hollis – Barclays Capital] [Jeff Hollis – Barclays Capital]: The $34 million charge, can you talk about what that related to? What actions? I thought most of the Altivity charges had been taken already.

We had a lot of activity in the second quarter in particular. Some of our initiatives were in regards to spare parts inventory and consolidation of that and taking some of those benefits. I think overall, we'll see the benefits of that resulting in lower cost of spare parts as we consolidate the buy as well as us being able to operate with lower net inventories. In regards to the $34 million, $20 million of that is really non recurring charges for the write down of assets and the remaining is ongoing synergy activity in terms of moving machinery around, severance benefits, IT training and those types of things that we've incurred in integration. I think the key is, how close are we to completing these non recurring charges that are appearing in the P&L and I think $34 million in the second quarter is going to be the highest we're going to see this year and based on our activity, if we look forward, we're expecting to have maybe around $20 million for the remainder of the year in terms of non recurring charges and then our current plan is that that will be the, we will discontinue the practice of adding those back in 2010, even though we might have some straggling activity going on at that point as well.

A lot of it is related to the plant closures, and we've accelerated as I said in my part of the script, some of the plant closure up to first part of the year. Up to this part of the year that we've planned later and in fact some of them were in 2010, and as you do plant closures there are some cash and write offs associated with that process. But most of those things are behind us at this point in time. That does not mean that we won't continue to evaluate our footprint, but I think that's less of a synergy or integration effort than it is simply to say look, we're operating a lot more efficiently than we thought we were. If you look at the through put on our mills and you look at the converting metrics, we haven't needed all the assets that we thought we would need in the integration activities because of the through put, and therefore we'll continue to evaluate those high cost plants. But as Dan said, I think that's going to be more ongoing, continuous improvement objectives which we have done year in and year out and that's the way we'll probably try to characterize those as opposed to getting them confused into integration or synergy. It gives you a better picture. [Jeff Hollis – Barclays Capital]: So the $20 million write down, was that more just excess assets or was it spare parts inventory?

It was a combination of both. It's both excess assets and excess spare parts inventory as we consolidated the buy. [Jeff Hollis – Barclays Capital]: What was the down time? You said you took medium and then you took some other down time. What mill was that or what types of products?

We have a very small uncoded mill in Pekin Illinois and we took downtime in that because the uncoded market is sort of struggling and we had not fully integrated our own purchases from that mill. Now subsequent to second quarter we've been able to do that. But the impact on EBITDA from paper machine number one and the uncoded was diminished quite frankly in the process. The key for us in watching down time as you well know is watching our B mills which we took no market related down time in. I will tell you, we will continue to manage inventory and cash flow, so if the markets don't do, we will take down time in those mills, but right now we need to operate the mills to fill our carton demand. [Jeff Hollis – Barclays Capital]: Where to you stand on your multi-year contract, your beverage contracts? I know you renewed them a few years ago. When do they mature and any discussion on renewals?

They expire over a number of years. I won't go to individual contracts, but we're in negotiation on some customer contract almost continuously in beverage or consumer products businesses. Even if they don't expire until the end of 2010 or 2011, we start talking about them. So that seems to be like an ongoing plan. But I'm not going to talk about individual customer negotiations. [Jeff Hollis – Barclays Capital]: But it's safe to say there are no whole slew of major contracts expiring this year that you need to renew?

No. There's not a whole bunch expiring in 2009. There are some that expire in 2010 and 2011. There are some that we have renegotiated already in 2009, but I don't have the complete customer list of expiring contracts. [Jeff Hollis – Barclays Capital]: Any additional color on food and consumer which is tracking a little weaker than beverage? Is that just the market? Any color on that if you've seen any improvement?

It's interesting because our food business that is tied to what you would consider center of the aisle stuff, so dry food, that' really up. But we have a portion of our food business that's really tied to things like food service or quick service restaurants, and some of that business has been very, very soft because it relies on people eating away from home. And so in the mix, we were down about 1.5%, but in what you would think about what is consumed in an Albertson's or a Wal Mart or Kroger, that is doing really well. In fact I was in Centralia, Illinois not too long ago and I will tell you that we have been running a press down there January making Macaroni and Cheese seven days a week, and we're not caught up. So what I would say is those kinds of products continue to sell very, very well in this economy.

There are no further questions at this time. Are there any further remarks?

Thank you very much. We'll wrap up this morning's call. Thank you.