Good morning. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to the Graphic Packaging First Quarter 2013 Earnings Call. [Operator Instructions] Thank you. I will now turn the call over to Brad Ankerholz, Treasurer and Vice President. Mr. Ankerholz, you may begin your conference.

Thank you, David, and welcome, everybody, to the Graphic Packaging Holding Company's First Quarter 2013 Earnings Call. Commenting on our result this morning are David Scheible, the company's President and CEO; and Dan Blount, our Senior Vice President and Chief Financial Officer. To help you along with today's call, we have provided a slide presentation, which can be accessed by clicking on the Q1 Earnings webcast link on the Investor Relations section of our website, which is located at graphicpkg.com. I would like to remind everyone that statements of our expectations in 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 the effect of our recent acquisitions and costs and synergies related thereto, completion of the Macon biomass boiler project and the related tax benefit, raw material inflation costs, consumer demand and pricing trends, capital expenditures, cash pension contributions and pension expense, depreciation and amortization, interest expense, income tax rates, debt and leverage reduction, annual cash flow, performance improvements, particularly at our Pine Bluff mill in New Philadelphia multi-wall bag facility and cost reduction initiatives 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 include, but are not limited to, the company's substantial amount of debt, volatility in raw material and energy costs, cutbacks in consumer spending that reduce demand for the company's products, continuing pressure for lower cost products and the company's ability to implement its strategies, including productivity initiatives and cost reduction plans. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date of which they are made and the company undertakes no obligation to update such statements. Additionally, information regarding these and other risks is contained in the company's periodic filings with the Securities and Exchange Commission. David, I'll turn it over to you now.

Thanks, Brad. Good morning, everyone. Our first quarter results were in line with our expectations and we're pleased with our ability to continue to grow the business in a challenging environment. Unseasonably cold weather undoubtedly curtailed demand in some of our core end markets like beverage, but we believe, really, the more important factors were high unemployment rate, increased taxes and fuel prices that weighed on discretionary consumer spending, having a much broader impact in Q1. Despite these conditions in the first quarter, we grew our volume, sales and margins. Volumes in our core paperboard segment grew 7%, total sales increased 3% and adjusted EBITDA margin increased 60 basis points to 14.7%. The increase in our folding carton volume outpaced the industry, further evidenced that we are winning new business and taking market share through our strategic focus on developing new products, optimizing our asset base and pursuing bolt-on acquisitions. Sales of newly commercialized products were robust in the first quarter and continue to drive our growth. Corrugated replacement, strength packaging, microwave cook technology, quick serve dining solutions and our proprietary beer bottle cartons, called Tite-Pak, remained our primary focus this quarter. We continue to work on new initiatives in each of these areas and I feel good about our new product pipeline at this point. A good example of this growth occurred in the first quarter as we began providing an innovative packaging sleeve for McDonald's new Premium McWrap. The premium McWrap is the newest item in McDonald's line of premium entrées. Our pillow-pack style folding carton fits snugly around the product and features a convenient perforated pull tab that allows customers to remove the top half of the sleeve and easily eat the wrap right out of the sleeve. The new packaging was featured in the release of…

Thanks, David, and good morning, everyone. David covered the operational highlights, I'll focus on financial results. My comments track our posted presentation. Let's start with Q1 highlights on Page 12. Overall, Q1 financial results show continued improvement with both operational performance and our capital structure. As you can see, all of our key financial metrics improved in the quarter. Our top line grew over 3%. Adjusted EBITDA was up almost 8% on the strength of 14.7% EBITDA margins. And finally, mainly driven by productivity improvements, adjusted earnings per share grew $0.04 to $0.10 for the quarter. As is our practice, we adjusted EBITDA and net income for a specific nonrecurring acquisition, post- acquisition integration and capital structure expenses. For 2013, we expect adjustments to result from integrating our 2 European acquisitions and refinancing high-cost debt. As a reminder, the investments in Europe are expected to achieve nearly $20 million of synergy benefits and the refinancing will generate approximately $20 million of interest expense savings. For Q1, the add backs are small, $1.4 million for EBITDA and less than $1 million for net income. Turning to Slide 13. We see that Q1 revenues grew by more than $33 million to $1.1 billion. The increase was driven by $42 million of higher volume, primarily related to the recent European acquisitions and organic volume growth in Paperboard Packaging, partially offset by weaker flexible packaging sales. As David already covered the volume improvement, I'll concentrate my comments on price. During our last call, we stated that we expected price headwinds of around $35 million in 2013. This is resulting from the pass-through of 2012 input inflation. As you will recall, the reset mechanisms in our contracts provide for pricing adjustments. Up or down, based on input cost movements and changes in board price with…

[Operator Instructions] Your first question comes from the line of Ghansham Panjabi with RWB. Matthew R. Wooten - Robert W. Baird & Co. Incorporated, Research Division: It's actually Matt Wooten sitting in for Ghansham today. I was hoping that you guys could provide some additional detail on Contego and A&R in terms of the EBITDA contribution in the quarter. And I know it's still early, but do you guys already ahead of schedule on the $20 million synergy target?

Most of those synergy targets, as you know, were really going to be in 2014. So all we've really done so far is start some of the purchasing work and some of the headcount adjustments. So I'd say we're slightly ahead. But again, I think the contribution for the year, we said, was only going to be $3 million or $4 million worth of synergies this year and we'll certainly do that, but that's about all we expect out of that at this point in time. And we never break out those individual operating units or operating businesses once we acquire them. So I'll give you color on integration synergies and what we're doing, but we're not going to break out those as separate businesses, because we don't run them that way. Matthew R. Wooten - Robert W. Baird & Co. Incorporated, Research Division: Okay. And considering that your European operations are exposed to the beverage end markets, can you provide some color as to the customer demand trends in the quarter for the past quarter and then your customer mix in the region, any impact there?

Well, I mean certainly the A&R business was predominantly a beverage business, the Contego, of course, had really a no beverage business and our historical legacy business was all beverage. In that particular case, we're exposed to what we saw in Europe. Now most of our business with Heineken, for example, which is a large account, is really export business. Most of that business is business they do there that ends back up in the United States. And if you saw those results, you know that Heineken struggle materially in Europe, I think it was down 7% or 8%, but their export business in the United States was actually okay. And that's the same thing we saw. Craft beer and import business was okay. So our European business, while it's reflected that way, is actually in some ways, certainly the business we acquired, more impacted by export to the United States and Latin America, if you will, of the Heineken brand. So it wasn't terrible. As I said in my results or in my comments, I mean, Europe is continuing to be -- it's a revenue difficult program. They have a lot of countries with austerity programs over there. So overall, our volumes have held up okay in Europe. But we didn't expect a big tailwind in Europe. We sort knew that we are running into a burning building when we did it, but we bought great assets at really good prices. So ultimately, EBITDA will be driven more by integration synergies than they will any real recovery in volume, at least in 2013. I'm hoping that turns around in '14, but pretty difficult to predict that.

Your next question comes from the line of Philip Ng with Jefferies. Philip Ng - Jefferies & Company, Inc., Research Division: The $90 million to $120 million productivity target, does that account for the drag that you're seeing in the first half? I'm sorry if I missed it.

Yes, it does. We're actually overachieving in the Paperboard Packaging segment. So it does account for that. What it doesn't account for is some of the sales mix misses that we had in the Flexible business. Philip Ng - Jefferies & Company, Inc., Research Division: Okay. And can you give me a little more color on the drag on 2Q, I mean you provided color for Q1, just wanted to get more color on Q2.

Well in Q2, like I said, predominantly the bulk of the price reductions that we're going to have there that are driven by deflation are going to hit in the second quarter.

Because they time out. If you think where deflation was last year, in the second quarter. So you're -- 1 year later, it's pretty easy to sort of figure out where those things impact. So Q2 is a bigger quarter for that. Seasonally though, we have bigger volume -- first quarter is always tough, because there's not a lot of really good underlying strength. Beverage is not that strong. Food is not as strong. But as you move into the second and third quarter, you see different volumes. That is a seasonally better market for us, right. And we're busy right now, so we feel good about that. And that sort -- so we expect the productivity increases to offset the price gets back and then the price get backs, as Dan said, they go way as you get to fourth quarter because you have the reverse. If you remember towards the fourth quarter, you start to see inflationary impacts and so you see the reverse of that process. So as you head into '14, you got the board price increases that have announced and recognized and then, of course, you've got the resulting reset bring you the contracts that are on based on costs starting to move up as you head into '14 as well.

So Phil, what I would recommend is, we consider the second quarter as more of a transition quarter for us. I mean, we're going to cycle through a lot of the price reductions. There's going to be some inflation improvement at that point and we're going to continue to have productivity in the business. But based on those 2 negative factors, it's a transition quarter for us and then we look at Q3 and Q4, then we cycle through that pricing in particular, and the business starts to improve. So we're looking at it as more of a flat quarter.

It's also hard, as Dan said, in this calls to sort of give a read on the inflation inputs as well, right. I mean, we saw not much in the first quarter. We still -- I think we told, externally, we expect to see $50 million or so worth of inflation for the year, but it's all going to be -- we expect it to be second half, that depends upon what happens to OCC and natural gas. And I think, right now, trying to figure out what all that's going to do is a little difficult. Philip Ng - Jefferies & Company, Inc., Research Division: Got you. And then you talked about how you're busy right now. But how much of that is seasonal. Just want to get the sense have things picked up from demand perspective after a soft Q1 and I know Q1 had some 2 lost shipping days and just bad weather across the board.

That shipping day thing always feels like sort of a illegitimate excuse. I mean, we can run overtime and ship that stuff, if we really have the demand, so we didn't really factor that into our process. I will tell you that the demand drivers are for Graphic have always been and we've talked about this before is, sort of the unemployment rate and consumer discretionary spending. And I can't say that the dynamics have materially changed. I mean, those tax increases are real. Fuel prices have mitigated a little bit, but I noticed, today, in Georgia, fuel prices are up another $0.07 or $0.08 per gallon or gas is. And so I think our consumers are being clearly impacted by that. Having said that, underlying some of these trends are good. I mean, pizza has been good, cereal is not really -- is not bad right now, craft beer and some big beer is better. So it's really the end-use market by end-use market. So what I would tell you is most of the volume improvement will be new product stuff. It will be the seasonality in the business, but I can't really sit here and say that I've seen any dynamics that would suggest the individual consumer feels better in Q2 than they felt in Q1.

Your next question comes from the line of Alex Ovshey with Goldman Sachs.

Some of the commentary in the new product development front is pretty exciting to hear. And I was wondering if you can help us frame the revenue size of the new product portfolio. What kind of incremental margins do you have there and how you see that revenue pie growing over time?

Well, you and I both know, I'm not going to give by customer or by product margin stuff or otherwise we wouldn't have any. What I would tell you is that if you look at the industry -- if you look at the industry backdrop for folding cartons and food, you saw overall industry decline. And yet with the graphic packaging, you did not. So if you sort of think about that 1% drop down and the difference between us, a lot of that's from new products. So we're probably getting in our paperboard business about a 1% improvement on the new product activity. That's sort of what we've talked about in the past and that's really what we're seeing right now. And that's the flow-through of the stuff that we've done in the past like Capri Sun or like the McWraps I talked about or the Panera transitions from plastic to paper and you put all that together, we get about 1% from the new product activity.

On the flexible side would be the production issues you're now experiencing, do you still think you can grow earnings and EBITDA in that segment in '13 or is that now going to be delayed until next year?

No. We are definitely going to improve our earnings in that business in 2013. There's nobody within Graphic Packaging who is more disappointed than me with our execution in that space. We have a lot of plans or a lot of process. For the most part, we do a really good job executing, but sometimes we don't. And in this case, we did not. There's really no other way to say it. Our New Philadelphia converting plant did not do well and we exacerbated it by not running well in our paperboard mill. We're making some changes in that mill to improve the fiber mix. It has a rich mix of fiber. We used too much fiber to make the paper, certainly, versus the industry. And so we made some changes and, unfortunately, as we made those changes, we really -- we made it worse before making it better. So we're going to continue to work that problem but I would guarantee you that margins will, in fact, improve as we go through 2013. But we have some work to do. Fortunately, Alex, it's not across a whole bunch of sites, a whole -- it's a very concentrated issue and as I said in my remarks, we are working it vigorously, and I do think there's anybody in that business within Graphic Packaging that doesn't understand that they're lying 3.

Got it, David. I mean, thinking about the order of magnitude and the improvement would it likely be somewhat below the synergy target of $20 million, because you get that $20 million benefit and then some offset from the production issues or...

You got to remember, part of the synergy number is impacted by our ability not being able to make paper, right. So some impact, I mean, I haven't defined the entire -- I'm looking at an overall saying we need to -- the overall performance should improve. But if we don't make paper, then we don't necessarily get the synergy impact and that's really what you saw. That's why I said, I think, it's about $8 million impact, right. Probably about half of that was just pure operational issues and the other half of it was really sort of, we didn't get the paper and we didn't get the sales, we didn't get the coverage. So it's sort of mixed in there. So we're going to see the improvement in the -- the synergies are there. We just need to be able to run the mill effectively. And look, we're only talking about running the mill at historical levels, we're not even talking about materially improving the overall output. We're trying to get back to more historical levels using less fiber and energy in the overall process, which is -- this is not rocket science. We just didn't do a good job.

Okay, I understood. And then a question for you on OCC and if you have any insight on the Green Sense initiative in China and whether that's resulting in more tonnage staying here in the U.S. and not moving into the export markets?

Well, I mean, boy, I have no idea. I mean, I've read the same comments as you do. There's a lot -- we don't really collect OCC and send it over to China, so I think there's probably better people to ask about that. What I would tell you is we've seen moderation on in the price of OCC even in April. And I would tell you in April were really haven't seen increase in price of OCC. But that's about all the visibility we have. Trying to define what's going to happen in the fourth quarter here on OCC, we're expecting it to move up and, as what Dan said, we expect natural gas and OCC to move up. That's all based on what we think the economy will do on a global basis and that's why it's a little bit hard to define what's going to happen.

And just my last question and, hopefully, an easier one, just on the CapEx front. I believe in '13 it will be meaningfully higher than '12. Can you just talk to us if you have a sense for how to think about CapEx in '14?

Yes. I think what you're going to see, Alex, the items that are increasing is the investment in Europe and finishing up the biomass boiler. I mean both of those, the investment in Europe should be completed in 2013. And I don't think there's much flow over into '14 based on what I see. So we're thinking to go back to more of a normalized level of CapEx and that's going to be in the $180 million to $190 million range for 2014. That's where we think we're going to be.

So is the entire $40 million investment in Europe, is that on the CapEx line?

No, it is not. It's about half. Half CapEx and half expense. We'll break out -- as I said, we'll breakout the expense for you because it's nonrecurring.

Your next question comes from the line of Anthony Pettinari with Citigroup.

You referenced the folding carton volumes up 8% in the quarter with acquisitions driving most of that. And apologies if you said this before, but, organically, what would've that volume growth have been? And then with the new product pipeline and some customer wins, when you look at the full year, is there kind of an estimate you could give us in terms of what kind of year-over-year volume growth is realistic or achievable?

Well, that's a long question, right? What I would say is that organic folding carton volumes for Graphic in the quarter were about, in the United States, were flat. So new -- I think the market was down 1% or 2%. We were about flat, new products made up a good portion of that and then we had some better mix performance overall. The reason it's really hard to estimate is because the biggest drag on folding carton volumes in the quarter were in the beverage business, right. And so it's a little hard to figure out how much of that was truly weather and how much that will really change. I mean if you look at our customers and their forwards, they believe that there will be an improvement, certainly in organic -- certainly beer and they don't expect neither -- I'm sure, neither Coke nor Pepsi expect soft drink to be down 4% or 5% as it was in the first quarter. So I mean, I think, we'll see a more normalized level back at that. Our projections, I think, we said for the year is that we kind of felt the market will be flat overall and that's organically, and I didn't see any reason to suggest otherwise at this point in time. I'd love to see a little bit better recovery, but I think we're going to need to get more people back to work, I think, to see a structural change, if you will, in organic demand.

Okay and then from your comments earlier, maybe you get 1 point on top of that with new products and customer wins, is that fair?

That's kind of the way that, that thing works.

Okay, that's helpful. And then maybe switching gears to flexible packaging. You referenced some of the issues at Pine Bluff and you called out an $8 million impact on the quarter. Assuming that there's still work going on in April and that work is successful, do you have kind of estimate in terms of what that impact would be in the second quarter versus running very smoothly?

We have not -- I have done not done that math specifically. What I think Dan talked about overall is that we should be at the upper end of our performance targets and that includes all in, including whatever recovery we have in the flexible business for the year. And that's probably the best way to look at it, that I think we'll continue to outperform in paperboard. We're going to struggle a little bit in the quarter. It's not as if it's going to turn itself around in 30 days. So we'll have some second quarter impact. But I don't think it makes sense to sort of try and model that individual thing because it's just not -- it's not going to be that significant.

Your next question comes from the line of Joe Stivaletti with Goldman Sachs.

A few things. One was, could you maybe update us on your sales in Japan and sort of how that -- what the outlook there is?

Well, as you know, Dan mentioned in his script that for first time we thought we saw a negative FX impact and that was predominantly in Asia. I think that Dan said like $4 million of FX in the quarter, something like that.

That was the impact in the quarter, right.

And that's mostly the yen. So we have, certainly, on the top line, had that impact. That doesn't really necessarily affect the EBITDA significantly, but the top line. Overall, our Japan business is pretty consistent. I will tell you, we saw -- certainly, saw a slowdown in our China business. Now, China is hard for me to say -- it's hard for me to talk about, because we think a lot of other people in this space. They have huge exposures to China. Ours is pretty small. But even saying that, we certainly saw a slowdown in machinery placements. We saw a slowdown in customer demand for cartons. It's clear that some of our Chinese customers are beginning to recalibrate for what is -- what appears to be, at least in the segments that we're in, a little bit lower demand profile than they expected. A couple of the dairies are delaying their expansions or pushing them out, if you will. So we did see some of that in China. But Japan was not materially impacted.

Okay. You also -- you mentioned the possibility for future acquisitions. I wondered if you could just update us there in terms of what your main priorities would be when you think about acquisitions and if you think that anything's imminent.

Well, as you know I couldn't -- even if we had something imminent, I couldn't talk about it. What I would tell you is our focus and direction, strategically, is to expand -- is to continue to make legitimate carton acquisitions for the most part and with some geographical bend. We're pretty well covered in North America. There are a couple of places where we might make a move in North America, in U.S., but we feel -- but we feel pretty good about our converting network here. Certainty, we talk and, recently, we made the acquisition, because our converting network in Europe really wasn't that good. And there are other parts in Latin America that we're in or participate, but we don't have a robust converting system. So over time, that would be our expectation to do as well. But again, I want to be clear, these are relatively small bolt-on acquisitions. Strategically, they make sense, they allow us to absorb the excess creep capacity we get in our paperboard mill. But they are -- they're in this $80 million to $100 million sort of range in the process. Dan will look at maybe because he wants to make sure we sort of keep in that debt-to-EBITDA ratio and continue to pay down our debt. So it's going to be around those kinds of strategic alternative. And I never really know when a carton business is going to come up. They tend to be pretty small. A lot of them are privately owned. It's not as well known. When it's going -- when it does, we will be active.

Okay. And then the last question I had was, just to get your perspective. When you talk about, in your release, about flexible packaging and you talked about continued weakness in areas, some of the demand drivers. You talked about continued weakness in areas like construction and -- I guess, I was wondering if you could put that in perspective, because obviously from a bigger picture perspective, we're seeing quite a recovery in housing and whatnot and I wondered if you could just talk about, is it just the nature of your particular product mix in the construction space or...

Well, as you know, a lot of improvement in construction right now is not in single home, it's a multi-dwelling and we're making with multi-wall bags that end up in concrete and they tend to be smaller job-related stuff, not the big booms that come in and dump millions of tons of concrete. So that particular part of the sector is still pretty soft. And it's improving. But if you listen to Home Depot and Lowe's reports as I do, they'll say that part -- that sector is still has a ways to go to get to where they like to see it. So I think maybe that's a long answer and, say, it's -- a lot of it had to do with mix but it's not a rising-tide-lifting-all-boats sort of plan.

Your next question comes from the line of George Staphos with Bank of America.

George, are you sharing your line with [indiscernible]? I assume the lines are working operator, right.

Yes, the lines are working. It looks like Mr. Staphos took his question back. There are no further questions at this time. Do you have any...

We thank you for your participation. We'll talk to you in a quarter.

This concludes today's conference call. You may now disconnect.