Q2 2019 Earnings Call

July 25, 2019

Operator: Thank you for joining Packaging Corporation of America's Q2 2019 earnings results conference call. Your host today will be Mark Kowlzan, Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question-and-answer session. I would now like to turn the conference over to Mr. Kowlzan. Please proceed when you are ready, sir.

Your host today will be Mark Colton.

Keith Executive Officer S.P.C.

Upon conclusion of this narrative there will be a question and answer session.

I would now like to turn the conference over to Mr. Colson and please proceed when you are ready Sir.

Mark Kowlzan: Good morning. Thank you for participating in Packaging Corp of America's Q2 2019 earnings release conference call. I'm Mark Kowlzan, Chairman and CEO of PCA. With me on the call today is Tom Hassfurther, Executive Vice President who runs the packaging business, and Bob Mundy, our Chief Financial Officer. I'll begin the call with an overview of our Q2 results, and then I'm going to turn the call over to Tom and Bob, who will provide more details. Then I'll wrap things up, and then we'd be glad to take questions. Yesterday, we reported Q2 net income of $194 million, or $2.04 per share. This compares to a Q2 2018 net income of $197 million, or $2.08 per share, excluding special items. Q2 net sales were $1.8 billion in both 2019 and 2018.

And thank you for participating in packaging Corporation of America's second quarter 2019 earnings release Conference call.

I'm more colds, and chairman and CEO PCAM and with me on the call today is Tom Hassfurther Executive Vice President who runs the packaging business and Bob Mundy, Our Chief Financial Officer.

I'll begin the call with an overview of our second quarter results and then I'm going to turn the call over to Tom and Bob will provide more details.

And then I'll wrap things up and then we'll be glad to take questions.

Yesterday, we reported second quarter, net income of $194 million or $2.04 per share.

This compares to a second quarter 2018, net income of $197 million or $2, an eight cents per share excluding special items.

Second quarter net sales were $1.8 billion in both 2019 and 2018.

Total company EBITDA for the second quarter was $376 million in 2019.

Mark Kowlzan: Total company EBITDA for Q2 was $376 million in 2019 and $382 million in 2018, excluding special items. The $0.04 per share decrease in Q2 2019 earnings compared to Q2 2018, excluding special items, was driven primarily by higher operating costs of $0.27, higher converting costs of $0.05, lower volume in our paper segment, $0.04, higher annual outage expenses, $0.06, and a higher tax rate, $0.01. These higher operating and converting costs were primarily due to cost increases with labor and benefits expenses, as well as indirect costs such as repair and operating materials, outside services, equipment and building rental expenses, property taxes, and insurance.

Total company EBITDA for Q2 was $376 million in 2019 and $382 million in 2018, excluding special items. The $0.04 per share decrease in Q2 2019 earnings compared to Q2 2018, excluding special items, was driven primarily by higher operating costs of $0.27, higher converting costs of $0.05, lower volume in our paper segment, $0.04, higher annual outage expenses, $0.06, and a higher tax rate, $0.01. These higher operating and converting costs were primarily due to cost increases with labor and benefits expenses, as well as indirect costs such as repair and operating materials, outside services, equipment and building rental expenses, property taxes, and insurance.

And $382 million in 2018, excluding special items.

The four cents per share decrease in second quarter 2019 earnings compared to the second quarter of 2018, excluding special items was driven primarily by higher operating costs of 27 cents.

Higher converting costs five cents.

Lower volume in our paper segment four cents.

Higher annual outage expenses six cents.

And the higher tax rate once said.

These higher operating and converting costs were primarily due to cost increases with labor and benefits expenses as well as indirect costs, such as repair and operating materials.

Outside services equipment, and building rental expenses property taxes and insurance.

These items were partially offset by higher volume of nine cents and prices and mix eight cents in our packaging segment.

Mark Kowlzan: These items were partially offset by higher volume of $0.09, and prices in mix, $0.08 in our packaging segment, higher prices in mix in our paper segment of $0.16, and lower Wallula, number three paper machine conversion-related costs of $0.04, and lower freight costs, $0.02. Looking at the packaging business, EBITDA in Q2 2019 of $349 million, with sales of $1.5 billion, resulted in a margin of 23.2% versus last year's EBITDA, excluding special items, of $363 million and sales of $1.5 billion, or a 24.2% margin. We continue to run our containerboard mills to demand as we lowered our inventory levels from Q1 and maintained our industry-leading integration rate by supplying our box plants with the necessary containerboard to establish a new Q2 record for box shipments per day.

These items were partially offset by higher volume of $0.09, and prices in mix, $0.08 in our packaging segment, higher prices in mix in our paper segment of $0.16, and lower Wallula, number three paper machine conversion-related costs of $0.04, and lower freight costs, $0.02. Looking at the packaging business, EBITDA in Q2 2019 of $349 million, with sales of $1.5 billion, resulted in a margin of 23.2% versus last year's EBITDA, excluding special items, of $363 million and sales of $1.5 billion, or a 24.2% margin. We continue to run our containerboard mills to demand as we lowered our inventory levels from Q1 and maintained our industry-leading integration rate by supplying our box plants with the necessary containerboard to establish a new Q2 record for box shipments per day.

Higher prices and mix in our paper segment of 16 cents and lower will Lula number three paper machine conversion related costs of four cents and lower freight costs two cents.

Looking at the packaging business EBITDA in the second quarter of 2019 of $349 million with sales of $1.5 billion resulted in a margin of 23.2% versus last year's EBITDA, excluding special items.

Oh $363 million and sales of $1.5 billion or 24.2% margin.

We continue to run our containerboard mills to demand as we lowered our inventory levels from the first quarter and maintained our industry, leading integration rate by supplying our box plants with the necessary containerboard to establish a new second quarter record for box shipments per day.

Our employees did an outstanding job of running cost effectively while balancing supply with demand and optimizing our containerboard footprint to minimize freight and logistics costs across the system.

Mark Kowlzan: Our employees did an outstanding job of running cost-effectively while balancing supply with demand and optimizing our containerboard footprint to minimize freight and logistics costs across the system. We ended the quarter with inventories at the appropriate level to meet our seasonally stronger third quarter demand. I'll now turn it over to Tom who will provide more details on containerboard sales and the corrugating business in general.

Our employees did an outstanding job of running cost-effectively while balancing supply with demand and optimizing our containerboard footprint to minimize freight and logistics costs across the system. We ended the quarter with inventories at the appropriate level to meet our seasonally stronger third quarter demand. I'll now turn it over to Tom who will provide more details on containerboard sales and the corrugating business in general.

We ended the quarter with inventories at the appropriate level to meet our seasonally stronger third quarter demand.

I'll now turn it over to Tom will provide more details on containerboard sales and the Corrugating business in general.

Thank you Mark.

Thomas Hassfurther: Thank you, Mark. As Mark indicated, our corrugated products plants had record Q2 box shipments per day, which were up 0.3% compared to last year's Q2 in spite of the significant business loss we incurred at Sacramento Container due to a purchase of two large sheet customers by another integrated. Outside sales volumes of containerboard were about 16,000 tons below last year's Q2 as we ran our containerboard system to demand and supplied the increased needs of our box plants. Domestic containerboard and corrugated products prices and mixed together were $0.16 per share above Q2 2018 and down $0.09 per share compared to Q1 2019. Export containerboard prices were down $0.08 per share compared to Q2 2018 and down $0.04 per share compared to Q1 2019.

Tom Hassfurther: Thank you, Mark. As Mark indicated, our corrugated products plants had record Q2 box shipments per day, which were up 0.3% compared to last year's Q2 in spite of the significant business loss we incurred at Sacramento Container due to a purchase of two large sheet customers by another integrated. Outside sales volumes of containerboard were about 16,000 tons below last year's Q2 as we ran our containerboard system to demand and supplied the increased needs of our box plants. Domestic containerboard and corrugated products prices and mixed together were $0.16 per share above Q2 2018 and down $0.09 per share compared to Q1 2019. Export containerboard prices were down $0.08 per share compared to Q2 2018 and down $0.04 per share compared to Q1 2019.I'll now turn it back to Mark.

As Mark indicated our corrugated products plants had record second quarter box shipments per day, which were up 8.3% compared to last year's second quarter. In spite of the significant business loss, we incurred a sacramento container due to a purchase of two large sheet customers by another integrated.

Outside sales volumes of containerboard was about 16000 tons below last year's second quarter as we ran our containerboard system to demand and supply the increase needs of our box plants.

Domestic containerboard and corrugated products prices and mix together were 16 cents per share above the second quarter of 2018 and down nine cents per share compared to the first quarter of 2019 export containerboard prices were down eight cents per share compared to the second quarter 2018, and down four cents per share compared to the first quarter of 2019, I'll now turn it back to Mark.

Thomas Hassfurther: I'll now turn it back to Mark.

Thanks, Tom.

Mark Kowlzan: Thanks, Tom. Looking at our paper segment, EBITDA in the second quarter was $48 million with sales of $238 million, or a 20.3% margin, compared to second quarter 2018 EBITDA of $38 million, excluding special items, and sales of $251 million, or a 15.0% margin. Our cut size in printing and converting volumes were slightly above the second quarter of 2018. Overall, prices moved higher during the quarter, but industry conditions seemed to soften a bit in June. We successfully completed an annual outage at our International Falls Mill, and our mill system is currently running extremely well with increased focus on our most profitable products. The lower revenues compared to last year's second quarter are a result of the exit from the white papers business at the Wallula Mill last year.

Looking at our paper segment EBITDA in the second quarter was $48 million with sales of $238 million or a 20.3% margin compared to second quarter 2018, EBITDA of $38 million, excluding special items and sales of $251 million or a 15.0% margin.

Our cut size and printing and converting volumes were slightly above the second quarter of 2018.

Overall prices moved higher during the quarter, but industry conditions seem to soften a bit in June .

We successfully completed an annual outage.

At our International Falls Mill, and our mill system is currently running extremely well.

With increased focus on our most profitable products.

The lower revenues compared to last year's second quarter are result of the exit from the White papers business at the will Lula mill last year, we continue to improve our profitability and margins in the paper segment in part by exiting this business that will rule or rather and continuing to allocate people and capital resources to it.

Mark Kowlzan: We continue to improve our profitability and margins in the paper segment in part by exiting this business at Wallula rather than continuing to allocate people and capital resources to it. I'll now turn it over to Bob.

We continue to improve our profitability and margins in the paper segment in part by exiting this business at Wallula rather than continuing to allocate people and capital resources to it. I'll now turn it over to Bob.

I'll now turn it over to Bob.

Robert Mundy: Thanks, Mark. For the second quarter, cash provided by operations was $302 million, and Free Cash Flow was a record $210 million. The primary uses of cash during the quarter included capital expenditures of $92 million, common stock dividends totaled $75 million, $78 million for federal and state income tax payments, net interest payments of $36 million, and pension contributions of $4 million. We ended the quarter with $569 million of cash on hand. I'll now turn it back over to Mark.

Bob Mundy: Thanks, Mark. For the second quarter, cash provided by operations was $302 million, and Free Cash Flow was a record $210 million. The primary uses of cash during the quarter included capital expenditures of $92 million, common stock dividends totaled $75 million, $78 million for federal and state income tax payments, net interest payments of $36 million, and pension contributions of $4 million. We ended the quarter with $569 million of cash on hand. I'll now turn it back over to Mark.

Thanks Mark.

For the second quarter cash provided by operations was $302 million and free cash flow was a record 210 million.

The primary uses of cash during the quarter.

Included capital expenditures of 92 million common stock dividends totaled $75 million.

$78 million for federal and state income tax payments.

Net interest payments of 36 million.

And pension contributions of $4 million.

We ended the quarter with $569 million of cash on hand.

I'll now turn it back over to Mark.

Thanks, Bob.

Mark Kowlzan: Thanks, Bob. Looking ahead as we move forward from Q2 into Q3, in our packaging segment, we expect seasonally higher containerboard and corrugated products shipments with lower prices as a result of the published domestic containerboard price decreases and lower export prices. In the paper segment, we expect volume to be seasonally stronger but prices in mix to move lower. Converting and other costs should be slightly higher, but operating costs and scheduled maintenance outage costs should be lower. Considering these items, we expect Q3 earnings of $1.91 per share. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call today constituted forward-looking statements.

Looking ahead as we move forward into the SEC from the second into the third quarter.

In our packaging segment, we expect seasonally higher containerboard and corrugated product shipments with lower prices as a result of the published domestic containerboard price decreases and lower export prices.

In the paper segment, we expect volumes to be seasonally stronger.

But prices and mix to move lower.

Converting and other costs should be slightly higher but operating costs and scheduled maintenance outage costs should be lower.

Considering these items, we expect third quarter earnings of $1.91 cents per share.

With that we'd be happy to entertain any questions, but I must remind you that some of the statements. We've made on the call today constitute forward looking statements.

Mark Kowlzan: The statements were based on current estimates, expectations, and projections of the company and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in these forward-looking statements. And with that, Operator, I'd like to go ahead and open up the call to questions, please.

The statements were based on current estimates, expectations, and projections of the company and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in these forward-looking statements. And with that, Operator, I'd like to go ahead and open up the call to questions, please.

The statements were based on current estimates expectations and projections of the company and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors.

In our annual report on Form 10-K on file with the SEC actual results could differ materially from those expressed in these forward looking statements.

And with that operator, I would like to go ahead and open up the call to questions. Please.

Thank you ladies and gentlemen at this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad again that is star one to ask a question.

Operator: Thank you. Ladies and gentlemen, at this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. Again, that is star one to ask a question. Your first question is from the line of Brian Maguire with Goldman Sachs.

Your first question is from the line of Brian Maguire with Goldman Sachs.

Good morning, Brian Hi, good morning.

[Analyst] (Goldman Sachs): Morning, Brian.

Mark Kowlzan: Morning, Brian.

Thomas Hassfurther: Hey. Hey, good morning. Just a question on the outlook for Q3. Obviously, we saw some deterioration in index prices from the publication, as you noted. Just wondering how much of the already recognized price declines will be in that $1.91 guide and how much of that you'd still have to flow through into Q4.

Brian Maguire: Hey. Hey, good morning. Just a question on the outlook for Q3. Obviously, we saw some deterioration in index prices from the publication, as you noted. Just wondering how much of the already recognized price declines will be in that $1.91 guide and how much of that you'd still have to flow through into Q4.

Just a question on the outlook for the third quarter.

Obviously, we saw some deterioration in index prices from the publication as you noted just wondered how much are they already recognized price declines will be in that dollar 91 guide and how much of that you'd still have to.

Flow through into the fourth quarter.

You know as we mentioned in the past the published price changes impact the domestic containerboard volume fairly quickly. So all of the published price decreases impacted our domestic and trade prices to varying degrees during the second quarter.

Mark Kowlzan: As we've mentioned in the past, the published price changes impact the domestic containerboard volume fairly quickly. So all of the published price decreases impacted our domestic and trade prices to varying degrees during Q2. But also keep in mind, we've talked in the past about how price increases roll through the box side of the business, and that also applies to price decreases. And these businesses have various triggers, factors, and timing mechanisms across our 18,000 or so customers, whereby the vast majority of the changes will flow through typically over a 90-day period. So you'd have to expect and you can assume that the same cadence once the published price index moved down in March, May, and June, and we'll see that happen now. So we'll finish seeing the remainder of the price decreases flow through in this Q3.

But also keep in mind, we've talked in the past about how price increases roll through the box side of the business and that also applies to price decreases.

And the lease.

Businesses have various triggers and factors and timely mechanisms across our 18000 or so customers.

Whereby the vast majority of the changes will flow through typically over a 90 day period.

So you'd have to expect and you can assume that the same cadence once the published price index moved down in March, May, and June, and we'll see that happen now. So we'll finish seeing the remainder of the price decreases flow through in this Q3. Bob, you want to add to that, or Tom, you want to add to that?

So you'd have to expect and you can assume that the same cadence once the published price index moved down in March May and June and we'll see that happen now so.

Well you're seeing the.

The remainder of the price decreases.

Flow through in this third quarter.

Mark Kowlzan: Bob, you want to add to that, or Tom, you want to add to that?

Bob you want to add to that or Tom you want to add to that.

Robert Mundy: No, I've got nothing to add. Next question, please.

Bob Mundy: No, I've got nothing to add.Next question, please.

Okay a question please.

Just on the volumes.

Thomas Hassfurther: Just on the volumes, I think you noted that packaging volumes added $0.09 to EPS in the quarter, but I was just hoping you could reconcile that with the fact that the box shipments were down around 1.3%. Just how did it drive that earnings contribution year-over-year?

Brian Maguire: Just on the volumes, I think you noted that packaging volumes added $0.09 to EPS in the quarter, but I was just hoping you could reconcile that with the fact that the box shipments were down around 1.3%. Just how did it drive that earnings contribution year-over-year?

I think you noted that packaging volumes added nine cents EPS in the quarter, but as I was just hoping you could reconcile that with the fact that the box shipments were down around 1.3% just how did it drive that earnings contribution year over year.

Yeah, Let me comment and Bob can give you a little more clarity don't forget that we.

Mark Kowlzan: Yeah, let me comment and then Bob can give you a little more clarity. Don't forget that as we exited the paper business last year, we brought Wallula up in June, and so we had Wallula coming on, and there was a change taking place between segments. Bob, you want to elaborate on it?

As we exited the paper business last year, we brought will look up in June and so we had we'll lose coming on and there was a change taking place between segments. Bob you want to elaborate on that yes, the packaging volume.

Robert Mundy: Yeah. On the packaging volume, Brian, last year with the work we finished up at DeRidder early last year and, of course, the Wallula conversion, when you look at our volume year-over-year, we actually reduced outside purchases by almost 75,000 tons. And now we've internalized those tons, so you get the benefit of own-make tons, which is one of our high integration rate provides us that benefit of own-make versus outside purchases. And so you saw that, and that definitely has an income positive effect, even though volumes in total may not have moved so much.

Bob Mundy: Yeah. On the packaging volume, Brian, last year with the work we finished up at DeRidder early last year and, of course, the Wallula conversion, when you look at our volume year-over-year, we actually reduced outside purchases by almost 75,000 tons. And now we've internalized those tons, so you get the benefit of own-make tons, which is one of our high integration rate provides us that benefit of own-make versus outside purchases. And so you saw that, and that definitely has an income positive effect, even though volumes in total may not have moved so much.

Brian You know last year, you know with the work we finished up at at Deridder.

Early last year and of course, the lunar conversion.

When you look at.

Our volume year over year, we actually reduced outside purchases by almost 75000 tons. So and so we're now we've internalized those tons. So you get the benefit of.

Own make tons, which is one of the you know our high integration rate.

You know provides us.

That benefit of own make versus outside purchases and so you saw that.

And that definitely has a.

Income positive effect, even though volumes in total I may not have moved so much.

Okay. So that is reflected in the volume number more than the input cost number aspect just trying to reconcile got it okay I'll turn it over now thanks.

Thomas Hassfurther: Okay. So that's reflected in the volume number more than the input cost number. That's what I was just trying to reconcile. Got it. Okay. I'll turn it over now. Thanks.

Brian Maguire: Okay. So that's reflected in the volume number more than the input cost number. That's what I was just trying to reconcile. Got it. Okay. I'll turn it over now. Thanks.

Thank you next question please.

Mark Kowlzan: Thank you. Next question, please.

Your next question is from the line of Gabe I imagine with Wells Fargo Securities.

Operator: Your next question is from the line of Gabe Hajde with Wells Fargo Securities.

Good morning, gentlemen.

[Analyst] (Goldman Sachs): Good morning, gentlemen.

Gabe Hajde: Good morning, gentlemen.

Good morning, good evening.

Robert Mundy: Morning, Gabe.

Bob Mundy: Morning, Gabe.

[Analyst] (Goldman Sachs): Morning. Tom, you normally give us a little bit of insight into sort of trends into July. I was curious if you could do that for us and then touch on any particular end markets where you're seeing softness or strength.

Gabe Hajde: Morning. Tom, you normally give us a little bit of insight into sort of trends into July. I was curious if you could do that for us and then touch on any particular end markets where you're seeing softness or strength.

Tom you normally give us a little bit of insight into sort of trends into July I was curious if you could do that for us and then touch on.

Any particular end markets, where you're seeing softness or strength.

Okay Gabe.

Robert Mundy: Okay. Gabe, yeah, through 14 days, our billings and bookings are up about 5.8%. So we're starting out the month and the quarter very well. One of the key driver areas for us right now going into the second half is the ag business out in the west and the Pacific Northwest. Those crops came in late this year due to weather, but they're coming on strong now. So we're very encouraged with the outlook going into the quarter.

Tom Hassfurther: Okay. Gabe, yeah, through 14 days, our billings and bookings are up about 5.8%. So we're starting out the month and the quarter very well. One of the key driver areas for us right now going into the second half is the ag business out in the west and the Pacific Northwest. Those crops came in late this year due to weather, but they're coming on strong now. So we're very encouraged with the outlook going into the quarter.

Yes, the through 14 days.

Our billings and bookings are up about 5.8%. So we're starting out the the month in the quarter very well.

You know one of the key driver areas for US right now going into the second half as the AG business out in the west and the Pacific Northwest It's.

Those crops came in late this year due to weather and but they're coming on strong now. So so we're very encouraged with the with the outlook going into the quarter.

Okay. Thank you and then.

[Analyst] (Goldman Sachs): Okay. Thank you. And then if you could maybe comment at all, I don't know, Mark or Bob, regarding capital allocation priorities and how you're thinking about, I guess, returning some cash to shareholders, whether through increased dividends or opportunities in the market otherwise?

Gabe Hajde: Okay. Thank you. And then if you could maybe comment at all, I don't know, Mark or Bob, regarding capital allocation priorities and how you're thinking about, I guess, returning some cash to shareholders, whether through increased dividends or opportunities in the market otherwise?

If you could maybe comment at all.

So mark or Bob.

Regarding capital allocation priorities and how you're thinking about.

I guess, returning some cash to shareholders rather through.

Increased dividends or opportunities in the market otherwise.

Yes regarding general capital spending we're still on target for this year to be in the low 400 area.

Mark Kowlzan: Yeah. Regarding general capital spending, we're still on target for this year to be in that low $400 million area, and that's proceeding well in terms of we've got the big Richland project that's going to be coming on later this year. As far as uses of cash, it's always applied. You've got share buyback, dividends, capital spending, acquisition-type opportunities, and we'll continue to be opportunistic and look at the best value for shareholders. That's about as straightforward as it gets.

And that's proceeding well in terms of we've got the big ritual and project Thats coming on later this year.

As far as uses of cash the same that's always applied.

You know you've got share buyback dividends capital spending.

You know acquisition type.

Opportunities and we will continue to be opportunistic and opportunistic and look at the best value for shareholders.

That's that's above as straightforward as it gets.

Thank you.

[Analyst] (Goldman Sachs): Thank you.

Gabe Hajde: Thank you.

All right next question please.

Mark Kowlzan: All right. Next question, please.

Your next question is from the line of Chip Dillon with vertical research.

Operator: Your next question is from the line of Chip Dillon with Vertical Research.

Yes, Hi, good morning, Marc Bob and Tom I appreciate the comments.

Robert Mundy: Yes. Hey, good morning, Mark, Bob, and Tom. Appreciate the comments. First question is, we know that there are some changes in the marketplace, I guess, with lighter weighting taking place. And I was just curious. I know you have just recently started up some virgin capacity at Wallula, but would you be interested in buying from others, recycled boards, say, in some of your Western box plants?

Mark Connelly: Yes. Hey, good morning, Mark, Bob, and Tom. Appreciate the comments. First question is, we know that there are some changes in the marketplace, I guess, with lighter weighting taking place. And I was just curious. I know you have just recently started up some virgin capacity at Wallula, but would you be interested in buying from others, recycled boards, say, in some of your Western box plants?

First question is we know that there is some changing changes the marketplace I guess with.

Lighter weight waiting taking place and I was just curious I know you have just recently started up from Virgin capacity It will lula.

But would you be interested in buying from others, you know recycle board say in your some of your western box plants.

You know chip.

Mark Kowlzan: Chip, my answer to that is no. We will always buy some board from the outside market, but that's generally specialty grades. Now, keep in mind, when we were at our integration rate, it basically went from 0 to 100%. We were open-market buyers for general containerboard, medium, and linerboard. But in general, as long as we can supply our own, we would not be interested in any kind of joint venture or partnership with anybody. Tom, you want to elaborate on that?

My answer to that is no and.

We will always buy some board from the outside market, but thats generally specialty grades now keep in mind when when we were.

Our integration it basically gotten over 100% we were open market buyers.

For general containerboard medium and linerboard, but but in general.

As long as we can supply our own.

We wouldn't be interested in any kind of.

Joint venture or partnership with with anybody Tom you want to elaborate on that I'll, just talk about the end market little bit chip.

Robert Mundy: Yeah. I'll just talk about the end market a little bit, Chip. We really see the end market moving much more towards performance-based products, which we consider recycled having a little more difficult time getting there. And we've got a long-term reputation for meeting quality standards, adding value, and doing all those other sorts of things, even though it's a commodity product to some extent. And we're certainly not going to be in a position where we're going to perhaps risk that reputation over aligning ourselves with somebody with recycled board. I totally understand. Thank you. And just as a quick follow-up, you mentioned, Mark, the low 400s CapEx for this year. I know it's early days, but can you at least give us some directional guidance in terms of where that number could be next year if you have any inkling at this point?

Tom Hassfurther: Yeah. I'll just talk about the end market a little bit, Chip. We really see the end market moving much more towards performance-based products, which we consider recycled having a little more difficult time getting there. And we've got a long-term reputation for meeting quality standards, adding value, and doing all those other sorts of things, even though it's a commodity product to some extent. And we're certainly not going to be in a position where we're going to perhaps risk that reputation over aligning ourselves with somebody with recycled board.

We really see the end market moving much more towards performance based products.

Which you know we consider recycle having a little more difficult time getting there so.

We've and we've got a long term reputation for meeting quality standards and adding value in doing all those other sorts of things, even though it's a commodity product to some extent.

And we're certainly not going to be in a position, where we are going to.

Yes, perhaps risk that reputation over over you know aligning ourselves with somebody with recycle board.

Mark Connelly: I totally understand. Thank you. And just as a quick follow-up, you mentioned, Mark, the low 400s CapEx for this year. I know it's early days, but can you at least give us some directional guidance in terms of where that number could be next year if you have any inkling at this point? Not that we would hold you to it. Then if Bob could just remind us of the maintenance expense per quarter in Q2 and then what it will be in Q3 and Q4. I know you've given it in the past. I didn't know if that's changed either.

Totally understand thank you and then just as a quick follow up you mentioned.

Mark the low 400 years Capex for this year I know, it's early days, but can you at least give us some.

Directional guidance in terms of where that number could be next year.

If you have any inkling at this point not that we would hold you to it and then if Bob could just remind us of the of the maintenance expense per quarter.

Robert Mundy: Not that we would hold you to it. Then if Bob could just remind us of the maintenance expense per quarter in Q2 and then what it will be in Q3 and Q4. I know you've given it in the past. I didn't know if that's changed either.

In the second and then what it will be in the third and the fourth I know you've given in the past and no thats changed either.

Yes, chip you know as regarding capital spending you know we always give.

Mark Kowlzan: Yeah. Chip, regarding capital spending, we always give basically one-quarter updates. And then for the new year coming up, 2020, we'll give you an update in January. Let me answer a little bit of that this way. We've identified some very good opportunities for us. We've got some efficiency cost takeout opportunities in the mill side, as we always do, that we'll spend some small amount of capital on, very risk-free, high-return capital for next year. And then we've got some projects in the box plants that we're going to continue to aggressively go after. It not only adds capacity opportunity as we grow the business, but also through some of the new technology, we'll take cost out. But we'll wait until January and give you next year's number.

Sickly.

One quarter updates.

And then for the new year coming up 2020 will give you an update in January .

I think let me answer a little bit of that this way we've identified some some very good opportunities for us we've got some.

Efficiency cost takeout opportunities in the mill side as we always do that we'll spend.

Some small amount of capital loan very risk free high return capital for next year and then we've got some projects in the box plants that we're going to continue to.

Aggressively go after that.

In not only adds capacity opportunity as we grow the business, but also it's a to some of the new technology will take cost out, but we'll we'll wait until January and give you next year's number okay. Yes, if you want to be up on that on the outage.

Robert Mundy: Okay. Bob, you want to?

Mark Connelly: Okay.

Mark Kowlzan: Bob, you want to?

Robert Mundy: Yeah. Chip, on the outage impact in Q2, it was $0.18. We expect it to be around $0.08 in Q3 and somewhere between $0.14 and $0.15 in Q4.

Bob Mundy: Yeah. Chip, on the outage impact in Q2, it was $0.18. We expect it to be around $0.08 in Q3 and somewhere between $0.14 and $0.15 in Q4.

Impact in the second it was it was.

18 cents.

We expect it to be around.

Eight in the third and Smartpoint 14, 15 cents in the fourth.

Great. Thanks for the color for the details.

Robert Mundy: Great. Thanks for the details. Next question, please.

Mark Connelly: Great. Thanks for the details.

Mark Kowlzan: Next question, please.

Next question please.

Your next question comes from the line of Mark Connelly with Stephens.

Operator: Your next question is from the line of Mark Connelly with Stephens.

Mark if I could just follow up on that question about the box plants.

[Analyst] (Goldman Sachs): Mark, if I could just follow up on that question about the box plants. I think you're saying that the reinvestment in the box plants is still primarily focused on productivity, but is there sort of a directional trend that you're trying to take your equipment as well to meet some sort of changing performance expectations of the market?

Mark Connelly: Mark, if I could just follow up on that question about the box plants. I think you're saying that the reinvestment in the box plants is still primarily focused on productivity, but is there sort of a directional trend that you're trying to take your equipment as well to meet some sort of changing performance expectations of the market?

I think you're saying that the reinvestment in the box plants are still primarily focused on productivity, but is there sort of a directional trend that you are trying to take your equipment as well too.

Meet some sort of changing performance expectations of the market.

Well, it's I think you've got to look at this way. It's a two for you get you get.

Mark Kowlzan: Well, I think you got to look at it this way. It's a twofer. You get two bangs for your buck here. With any new capital spending we have going on in the box plants, you theoretically are going to improve your capacity opportunity. But also from a technology point of view, you're making the overall process more efficient in terms of unit labor input per conversion unit. So we're looking at that. In the last few years, as we've reached, in many cases, some capacity limitations in these box plants, it behooves us to take advantage of the technology that's available. And as we've also said earlier this year, we also have the manpower to execute in a very effective manner. The big projects are done in the mills.

To Bang for your Buck here.

With any new capital spending we have going on in the box plants, you theoretically you're going to improve your your capacity opportunity, but also from a technology point of view, you're making the the overall process more efficient in terms of.

You know unit labor input for or a conversion.

Unit. So we're looking at that as in the last few years as Weve.

Reached.

In many cases.

Some capacity limitations in these box plants it behooves us to take advantage of the technology that's available and.

As Weve also said earlier this year, we also have the manpower to execute in a moment.

Very effective manner.

The big projects are done in the mills, so with the new Engineering technology organization, we have a very broad capability to.

Mark Kowlzan: So with the new engineering technology organization, we have a very broad capability to go ahead and engineer and construct these box plant projects through in-house PCA personnel. Tom, you want to have a little more comment?

So with the new engineering technology organization, we have a very broad capability to go ahead and engineer and construct these box plant projects through in-house PCA personnel. Tom, you want to have a little more comment?

Go ahead, an engineer and construct these box plant projects.

Through in House PPA personnel, so Tom you want to have a little more.

Robert Mundy: Yeah. No, Mark, I think the best way to put it is that our reinvestment in the box plants is driven by profitable growth and operating efficiencies, which are really driven by our customers' demands and their needs. That's primarily, as I've said many times, I mean, we don't build it and hope they will come. I mean, we really react to what our customers' needs are.

Tom Hassfurther: Yeah. No, Mark, I think the best way to put it is that our reinvestment in the box plants is driven by profitable growth and operating efficiencies, which are really driven by our customers' demands and their needs. That's primarily, as I've said many times, I mean, we don't build it and hope they will come. I mean, we really react to what our customers' needs are.

Yes, no Mark Mark I think the best way to put it is that you know our reinvestment in the box plants is driven by profitable growth and operating efficiencies, which which are really driven by our customers demands and their needs. That's that's primarily you know as I as I've said many times I mean, we don't build it and hope they will come and we we really react to what our customers' needs are.

Okay. That's super helpful. Just one more question.

[Analyst] (Goldman Sachs): Okay. That's super helpful. Just one more question. Your white paper performance is obviously a little better than what the industry is telling us is happening overall. Are you surprised, as you go out to the market, do you see what the AF&PA numbers are showing with these huge drops, and you're just outperforming that by a mile? Because we see a disconnect between the AF&PA numbers and what's going on in the market, and I'm just curious whether you do.

Mark Connelly: Okay. That's super helpful. Just one more question. Your white paper performance is obviously a little better than what the industry is telling us is happening overall. Are you surprised, as you go out to the market, do you see what the AF&PA numbers are showing with these huge drops, and you're just outperforming that by a mile? Because we see a disconnect between the AF&PA numbers and what's going on in the market, and I'm just curious whether you do.

Your white paper for performance is obviously.

A little better than than what the industry is.

Telling us is happening overall are you surprised.

As you go out to the market.

Do you see what the numbers are showing.

You know with these huge drops and you're just outperforming that.

Because we see a disconnect between the.

And what's going on in the market and I'm just curious whether you do.

Well you know regarding volume.

Mark Kowlzan: Well, regarding volume, our marketplace is such that our customer base relies on our logistics and distribution capability. And so we really have a great customer mix that relies on our capability to take care of their needs, generally going from a B2B type of distribution for them. And so we've worked really hard, and this goes back to comments I've made over the last five years, that one of Boise's strengths that was built over probably four decades was that logistic supply capability for their customers. And so we aren't seeing what the general marketplace is seeing. And don't forget too, we've got just a nice tidy business, I'll use that term. We've got International Falls in Jackson supplying the North American system, and we're pretty well in balance. So we're feeling pretty good about our business in particular.

Our marketplaces such though.

Our customer base relies on our logistics since end.

Distribution capability, and so we really having a great customer mix that relies on our capability to take care of their needs generally going from a b to b type of distribution for them.

And so we worked really hard and this goes back to comments I've made over the last five years that want to Boise strains that was built over probably four decades was that logistics supplies capability for their customers.

And so we aren't seeing what the general marketplace is seeing and don't forget too we.

We've got just a nice tidy business I use that term, we've got I falls in Jackson supplying the North American system, and and were pretty well in balance. So we're feeling pretty good about our our business in particular.

Very helpful. Thank you.

[Analyst] (Goldman Sachs): Very helpful, as always. Thank you.

Mark Connelly: Very helpful, as always. Thank you.

Okay next question please.

Mark Kowlzan: Okay. Next question, please.

Your next question is from the line of George Staphos with Bank of America Merrill Lynch.

Operator: Your next question is from the line of George Staphos with Bank of America Merrill Lynch.

Thanks, everyone. Good morning, Thanks for all the details.

[Analyst]: Thanks. Hi, everyone. Good morning. Thanks for all of the details. I wanted to first dig in a little bit to the cost trends you talked about in the quarter, Mark and Bob. Can you remind us, was the quarterly and, for that matter, year trend that you've been seeing in things like labor and benefits, have there been any things that have been affecting it more than normal? Was the quarter performance more or less as you'd expected on these operating costs? And could some of these projects that you're working on over time take a little bit of the edge off of what we'll see in inflation in 2020 and 2021?

George Staphos: Thanks. Hi, everyone. Good morning. Thanks for all of the details. I wanted to first dig in a little bit to the cost trends you talked about in the quarter, Mark and Bob. Can you remind us, was the quarterly and, for that matter, year trend that you've been seeing in things like labor and benefits, have there been any things that have been affecting it more than normal? Was the quarter performance more or less as you'd expected on these operating costs? And could some of these projects that you're working on over time take a little bit of the edge off of what we'll see in inflation in 2020 and 2021?

I wanted to first dig in a little bit to the cost trends you talked about in the quarter Mark and Bob.

Can you remind us was the quarterly and for that matter your trends, you've been seeing and things like labor and benefits has there been any things that have been affecting more than normal with the quarter performance more or less as you had expected.

On on these operating costs and.

Some of these projects that you're working on over time take a little bit of the edge off of what we'll see in inflation in 2020 2021.

Yes, George I would say that you know.

Mark Kowlzan: Yeah, George. I would say that costs were actually, as far as what we expected in the quarter, were actually a little better than we thought. And I think as we look into Q3, we are seeing some of that. Last year, there was certainly going from Q2 to Q3, a lot of inflation that was still coming through. This year, I don't think we're seeing that. Actually, all in, probably all the operating costs should be a slight positive going into Q3 this year.

Costs were actually.

As far as what we expected in the quarter.

We're actually a little better than then.

Than we thought and I think you know as we look into the third.

We are seeing some of that.

Last year was there were certainly going from from two to three.

You know a lot of inflation that was still coming through this year I don't think we're seeing that actually all in probably all the operating costs.

Should be a slight positive this going to the third quarter of this year.

Okay.

Robert Mundy: Okay. Would you say, just related to the projects in the box plants, are they probably more? I know you said, Mark, you get a twofer, but is the benefit more so in terms of the ability to grow into the future, or do you get a disproportionate benefit in terms of margin over time from those investments? How would you have us think about that?

George Staphos: Okay. Would you say, just related to the projects in the box plants, are they probably more? I know you said, Mark, you get a twofer, but is the benefit more so in terms of the ability to grow into the future, or do you get a disproportionate benefit in terms of margin over time from those investments? How would you have us think about that?

Would you say just related.

Two.

The projects.

And the box plants are they probably more I know you said Mark you get a two for but is the benefit more so in terms of the.

Ability to grow into the future or do you get.

Disproportionate benefit in terms of margin over time from those investments how would you have us.

Think about that.

Again, each plant is unique each each project is unique.

Mark Kowlzan: Again, each plant is unique. Each project is unique. And again, it just depends on quite frankly, it just depends on how you're going to run that particular operation. So again, there's no one formula that fits all.

And again, it just depends quite frankly, it just depends on on how.

How you're going to run that particular operation.

So.

Again, it's there's no no one formula that fits all.

That's fair that's fair.

Robert Mundy: That's fair. That's fair. Mark, you had mentioned that you had industry-leading integration, which we obviously would know intuitively, given all that you say across the quarter over the years. But could you provide an integration level that you expect for the year or where you came in during the quarter? If you had that, that would be helpful. And then I had one last question. I'll turn it over.

George Staphos: That's fair. That's fair. Mark, you had mentioned that you had industry-leading integration, which we obviously would know intuitively, given all that you say across the quarter over the years. But could you provide an integration level that you expect for the year or where you came in during the quarter? If you had that, that would be helpful. And then I had one last question. I'll turn it over.

Mark you had mentioned that you had.

Our industry, leading integration, which we obviously wouldnt know.

Intuitively having.

Given all of that you say are across the quarters.

Over the years, but could you provide an integration level.

That you expect for the year or where you came in during the quarter. If you had that that would be helpful.

Yes.

And then I had one last question I will turn it over.

Yes.

Mark Kowlzan: Yeah. Our integration is sitting in that low 90s% area.

Mark Kowlzan: Yeah. Our integration is sitting in that low 90% area.

Our integration is sitting in the low ninetys percent area.

Okay. Thank you for that.

Robert Mundy: Okay. Thank you for that. And then lastly, back to the earlier question on near-term July or recent July trends. If we extract agriculture, are you seeing a similar improvement, call it low to mid-single digits, across all of your end markets? And relatedly, one of the things that we've been seeing in the markets over the last, I'd say, couple of years, we've had kind of a weak end-of-quarter month as customers are still somewhat concerned about the macro outlook. So they pull inventories down, and then as we enter the new quarter, there's some rebuilding of stock. So one, what are you seeing in other end markets, if you can share that data? And two, would you agree that we've had that kind of hand-to-mouth ordering, destocking, then restocking over the last couple of years? Thanks, and good luck in the quarter, guys.

George Staphos: Okay. Thank you for that. And then lastly, back to the earlier question on near-term July or recent July trends. If we extract agriculture, are you seeing a similar improvement, call it low to mid-single digits, across all of your end markets? And relatedly, one of the things that we've been seeing in the markets over the last, I'd say, couple of years, we've had kind of a weak end-of-quarter month as customers are still somewhat concerned about the macro outlook. So they pull inventories down, and then as we enter the new quarter, there's some rebuilding of stock. So one, what are you seeing in other end markets, if you can share that data? And two, would you agree that we've had that kind of hand-to-mouth ordering, destocking, then restocking over the last couple of years? Thanks, and good luck in the quarter, guys.

And then lastly back to the earlier question on.

Near term July or recent July trends.

If we extract agriculture are you seeing a similar improvement call. It low to mid single digits across all of your end markets and related really one of the things that we've been seeing.

In the markets over the last I'd say couple of years.

We've had kind of a weak end of quarter month as customers are still.

Somewhat concerned about the macro outlook so they they pull inventories down and then as we enter the new quarter. There's some rebuilding of stocks. So one what are you seeing in other end markets. If you can share that data and two would you agree that we've had that kind of hand to mouth watering destocking and restocking over the last couple of years, Thanks, and good luck in the quarter guys.

George you're you're quite observant in my opinion.

Robert Mundy: George, you're quite observant, in my opinion. Yes, that has been the trend in the past. We start out the quarter quite strong, and we get a little weaker at the end of the quarter. I think that we saw more destocking this past first half of the year, probably, than we've typically seen. And I think that's driven by a lot of the questions regarding the global marketplace. Of course, the export markets have definitely been impacted as the rest of the globe slows down some. So outside of ag, I mean, I think our business has been relatively stable, and I think it is strengthening going into the second half. I feel more optimistic about it. However, that's one prediction. But I can tell you that I'm hearing from our customers that they feel better about the second half of the year as well.

Bob Mundy: George, you're quite observant, in my opinion. Yes, that has been the trend in the past. We start out the quarter quite strong, and we get a little weaker at the end of the quarter. I think that we saw more destocking this past first half of the year, probably, than we've typically seen. And I think that's driven by a lot of the questions regarding the global marketplace. Of course, the export markets have definitely been impacted as the rest of the globe slows down some. So outside of ag, I mean, I think our business has been relatively stable, and I think it is strengthening going into the second half. I feel more optimistic about it. However, that's one prediction. But I can tell you that I'm hearing from our customers that they feel better about the second half of the year as well.

Yes that has been the trend in the past we started out the quarter quite strong and we get a little weaker at the end of the quarter.

I think that we saw more de stocking.

This past first half of the year probably than weve than we've typically seen.

And I think thats driven by a lot of the questions regarding the global marketplace.

Of course, the export markets have have definitely been impacted as the rate as the rest of the globe slows down some so you know.

Outside of AG, I mean, I think our business has been relatively stable and and I think it is strengthening going into the second half I feel more optimistic about it.

However, that said that unites one prediction, but I can tell you that I'm hearing from our customers that they feel better about the second half of the year as well.

Robert Mundy: So I think they've adjusted their business to kind of meet the global demand right now and the domestic demand and feel somewhat confident about the growth prospects going forward.

So I think they've adjusted their business to kind of meet the global demand right now and the domestic demand and feel somewhat confident about the growth prospects going forward.

So I think they've adjusted their business to kind of meet the global demand right now and the domestic demand.

And and feel somewhat confident about the growth prospects going forward.

Thank you both very clear I will turn it over.

[Analyst]: Thank you, Bob. Very clear. I'll turn it over.

George Staphos: Thank you, Bob. Very clear. I'll turn it over.

Thanks next question please.

Mark Kowlzan: Thanks. Next question, please.

Your next question is from the line of Mark loyalty with BMO capital markets.

Operator: Your next question is from the line of Mark Wilde with the BMO Capital Markets.

Good morning, Mark Tom Corning.

[Analyst] (Goldman Sachs): Good morning, Mark. Tom, Bob.

Mark Wilde: Good morning, Mark. Tom, Bob.

Robert Mundy: Morning.

Bob Mundy: Morning.

[Analyst]: Morning.

Morning.

Robert Mundy: Mark, I wondered, in the release, you do call out that you're running to demand. I wondered if you could just give us a little bit of color on how you kind of are managing the downtime or the slowback, if it's just reducing production across the system, or if you're taking some smaller machines out. Just a bit of color on that.

Mark Wilde: Mark, I wondered, in the release, you do call out that you're running to demand. I wondered if you could just give us a little bit of color on how you kind of are managing the downtime or the slowback, if it's just reducing production across the system, or if you're taking some smaller machines out. Just a bit of color on that.

Mark I wondered.

Release, you do call out that you're running to demand and I wondered if you could just give us a little bit of color on how you kind of are managing the downtime or the flow back.

Maybe just reducing production across the system or if you're taking some smaller machines out just a bit of color on that.

You know we've been really this was some commentary back from the April earnings call.

Mark Kowlzan: Yeah. We've been really, and this was some commentary back from the April earnings call. It's pretty evident if you look at the math. Wallula obviously is not running to its design capacity. So we've got the extra capacity there. So essentially, we're running Wallula slowed back, and so that's accommodating the Pacific Northwest and West Coast needs. And then from time to time, through the quarter and through the first half of the year, some of our machines have run at a slower pace, but we've been able to flex that as Tom needed tons and outside customer orders had to be filled. So that's how we've been addressing the running to demand.

It's pretty evident if you look at the math.

Lula, obviously is not running to its design capacity. So we've got the extra capacity there. So essentially we're running lula slowed back and so that's that's common dating the Pacific Northwest and West Coast needs and then from time to time through the quarter and through the first half of the year.

Some of our machines have run it.

A slower pace.

But we've been able to flex that as Tom needed tons and outside customer orders had to be filled so.

That's how we've been addressing the running to demand.

Hi.

Okay. That's helpful. And then just as we think about the start up.

Robert Mundy: Okay. That's helpful. And then just as we think about the startup at Richland, how much of an impact will that have? And when would you start to build some inventory in front of that?

Mark Wilde: Okay. That's helpful. And then just as we think about the startup at Richland, how much of an impact will that have? And when would you start to build some inventory in front of that?

Richland.

How much of an impact will that have been when when would you start.

You know build some inventory in front of that.

You know, we're planning on having Richland up at the end of the year and it will be a very positive impact to the we'll lose the mill.

Mark Kowlzan: We're planning on having Richland up at the end of the year, and it will be a very positive impact for the Wallula mill. Our plans are to supply all of the medium and linerboard that Richland will consume from Wallula. So that's about an 18-mile drive up the interstate. And so 2020 should be a very, very positive year for how the Wallula mill runs its business in terms of ramping up its production capability. We're very optimistic.

Our plans are to supply all of the medium and linerboard that Richland will will consume from will so that's about it.

18 mile drive up the Interstate and so 2020 should be.

You know a very very positive year for how the Loulo mill runs its business in terms of ramping up its production capability, we're very optimistic.

Robert Mundy: Okay. All right. Last one for me. You're sitting on about $6 a share in cash, so I imagine Bob Mundy's getting kind of sore from hauling all that cash. But can you just help us think about managing that cash versus putting some of that cash to use in other ways, and how high you'd be willing to take that cash balance?

Mark Wilde: Okay. All right. Last one for me. You're sitting on about $6 a share in cash, so I imagine Bob Mundy's getting kind of sore from hauling all that cash. But can you just help us think about managing that cash versus putting some of that cash to use in other ways, and how high you'd be willing to take that cash balance?

Okay and last one for me.

You know you're sitting on about six bucks a share in cash.

Imagine Bob Mundy, it's getting kind of store from hauling all that cash, but can you just help us think about.

Managing that cash versus putting some of that cash to use in other ways and how high you'd be willing to take that cash balance.

You know it's.

If you look at our net debt to EBITDA ratio, we're sitting at probably around 1.3. Historically you know if you went back to 2007, we were below one.

Mark Kowlzan: If you look at our Net Debt to EBITDA ratio, we're sitting at probably around 1.3 historically. If you went back to 2007, we were below 1. So our cash, we're feeling really, really good in terms of the world around us. We've taken all the risk off the table over the last year with our big conversion projects. We've got some really good high-impact projects taking place in the box plants. They're low-risk, immediate return activity. But again, I think as we look at the world around us and some of the uncertainty, we feel pretty good about building somewhat of a war chest, shall we say, for any opportunity that may present itself, whether it could be a stock buyback, any type of acquisition opportunity. And so we're feeling good.

So it.

Cash.

We're feeling really really good in terms of the world around us Weve taken all the risk off the table over the last year with our big conversion projects.

We've got some really good high impact projects, taking place in the box plants are low risk.

Immediate return activity, but again.

You know I think as we look at the world around us and some of the uncertainty we feel pretty pretty good about.

You know building some somewhat of a war chest shall we say for or any opportunity that may present itself, whether it could be a stock buyback.

Any type of acquisition opportunity.

You know so we're feeling good but again, where we are we are and have been living in an uncertain world and so.

Mark Kowlzan: But again, we are and have been living in an uncertain world, and so we're feeling pretty good about where we are with cash. And we don't feel compelled that we have to go out and quickly utilize that. Each dollar of cash that's sitting in the bank right now, it's certainly not going to waste. And again, one of our virtues has been patience, and I think we're exercising that virtue very well in terms of how we look at the utilization of cash for the future returns to the shareholders. So you got to just bear with us.

But again, we are and have been living in an uncertain world, and so we're feeling pretty good about where we are with cash. And we don't feel compelled that we have to go out and quickly utilize that. Each dollar of cash that's sitting in the bank right now, it's certainly not going to waste. And again, one of our virtues has been patience, and I think we're exercising that virtue very well in terms of how we look at the utilization of cash for the future returns to the shareholders. So you got to just bear with us.

We're feeling pretty good about where we are with cash in we don't feel compelled that we have to have to go out and quickly utilize that each dollar cash that's sitting sitting in the bank right now, it's certainly not going to waste and.

And again, one of our Virtusa has been patients and I think we're exercising at Virtu very well in terms of how we we look at the utilization of cash for the future returns to the shareholders. So you got to just bear bear with us.

Robert Mundy: All right. Sounds good to me. Good luck in the second half.

Mark Wilde: All right. Sounds good to me. Good luck in the second half.

All right sounds good to me good luck in the second half.

All right. Thanks next question please.

Mark Kowlzan: All right. Thanks. Next question, please.

Your next question, if I'm to line of Anthony Pettinari with Citi.

Operator: Your next question is from the line of Anthony Pettinari with Citi.

Hi, good morning.

[Analyst]: Good morning. Mark, in your comments, I think you said white paper industry conditions seemed to soften a bit in June. Just wondering if that was a comment on the demand side or the supply side, maybe with some imports coming in, or if you could just elaborate on that? And then maybe it's too soon to tell, but is it possible to say how July has trended on the white paper side?

Anthony Pettinari: Good morning. Mark, in your comments, I think you said white paper industry conditions seemed to soften a bit in June. Just wondering if that was a comment on the demand side or the supply side, maybe with some imports coming in, or if you could just elaborate on that? And then maybe it's too soon to tell, but is it possible to say how July has trended on the white paper side?

Mark in your earnings and your in your comments I think you said white paper industry conditions seem to soften a bit in June just wondering if that was a comment on the demand side or the supply side, maybe with some imports coming in or if you could just elaborate on that and then maybe it's too soon to tell but it's impossible to say how July has trended on white paper side.

Yeah.

Mark Kowlzan: Yeah. First part of your question, it was demand softening up in that June period. And part of what we typically start seeing are the back-to-school buying. And we see that now in July, but we did not see the typical earlier June back-to-school activity. So that was pretty fundamental. We saw that. It was pretty evident. But things have taken off, and they're strong right now. So again, we're feeling really good with where we are in July. And I'd have to use the term, we're pretty well flat year-over-year with where we are. And then you commented about imports. It's no doubt imports are up. But don't forget, that's to fill a big hole that the industry couldn't fill when some of the industry capacity came out in the earlier part of the year. And so that was a given that everyone expected.

First part of your question it was demand softening up in the June period.

And part of what we we typically start seeing the back to school buying and we we see that now in July but we did not see the typical earlier June back to school activity. So that was pretty fundamental we saw that it was pretty evident but things have taken off and they are strong right. Now. So again, we're feeling really good with where we are in July and and.

I'd have to use the term were pretty well flat year over year with where we are.

And then you can you comment about imports.

It's no doubt imports are up.

But thats don't forget thats to fill a big hole that the industry couldn't fill in some of the industry capacity came out in the earlier part of the year and so.

That was a given everyone expected.

Got it got it and then on the corrugated side looking at the quarter. You know you had lower shipment growth than you usually do but you had the Sacramento.

[Analyst]: Got it. Got it. And then on the corrugated side, looking at the quarter, you had lower shipment growth than you usually do, but you had the Sacramento loss. Putting aside that loss, I was wondering just how shipments trended versus your expectations kind of going into the quarter. And then for modeling purposes, is it possible to remind us when that business loss started to impact your shipments?

Anthony Pettinari: Got it. Got it. And then on the corrugated side, looking at the quarter, you had lower shipment growth than you usually do, but you had the Sacramento loss. Putting aside that loss, I was wondering just how shipments trended versus your expectations kind of going into the quarter. And then for modeling purposes, is it possible to remind us when that business loss started to impact your shipments?

Loss, putting aside battle off I was wondering just how shipments trended versus your expectations kind of going into the quarter.

And then for modeling purposes is it possible to remind us when that that business lost started to impact your shipments.

Yes, Anthony this is Tom.

Robert Mundy: Yeah, Anthony. This time, our quarter or actually, our last quarter's performance would have been significantly higher, obviously, without that loss. It's a pretty good-sized number. And so we feel really good about the trend going in. And of course, where we are through the first 14 days that I reported, that includes that loss in Sacramento. So that should give you a little idea of the momentum we have, at least going into the quarter. What was the second half of your question?

Bob Mundy: Yeah, Anthony. This time, our quarter or actually, our last quarter's performance would have been significantly higher, obviously, without that loss. It's a pretty good-sized number. And so we feel really good about the trend going in. And of course, where we are through the first 14 days that I reported, that includes that loss in Sacramento. So that should give you a little idea of the momentum we have, at least going into the quarter. What was the second half of your question?

You know our.

Our quarter, our actually our our last quarter's performance would have been significantly higher obviously without that loss.

It's a it's pretty good sized number and so we feel really good about the trend going in and of course the.

Where we are through the through the first 14 days that I reported that includes that loss in Sacramento. So that should give you a little idea of the of the momentum we have at least going into the quarter.

What was the second half your question in terms of when it started to impact your shipments that Oh, yeah that was in the fourth quarter of last year as one to really start to impact or shipments. So.

[Analyst]: In terms of when it started to impact your shipments, that business loss?

Anthony Pettinari: In terms of when it started to impact your shipments, that business loss?

Robert Mundy: Oh. Yeah. That was in the Q4 of last year, [the time] is when it really started to impact our shipments. So we've got a tough comparative going forward until we get to the end of the year.

Bob Mundy: Oh. Yeah. That was in the Q4 of last year, [the time] is when it really started to impact our shipments. So we've got a tough comparative going forward until we get to the end of the year.

We've got we've got a tough comparative going forward until we get to the end of the year.

Okay. That's helpful I'll turn it over.

[Analyst]: Okay. That's helpful. I'll turn it over.

Anthony Pettinari: Okay. That's helpful. I'll turn it over.

Thank you next question please.

Mark Kowlzan: Thank you. Next question, please.

Your next question is from the line of Mark Weintraub with Seaport Global.

Operator: Your next question is from the line of Mark Weintraub with the Seaport Global.

Thank you. So just following up on the often just to clarify so does the fourth quarter comparisons get easier.

[Analyst]: Thank you. So just following up on that last one, just to clarify. So does the Q4 comparison get easier on the box shipments, or is it Q1 of next year?

Mark Weintraub: Thank you. So just following up on that last one, just to clarify. So does the Q4 comparison get easier on the box shipments, or is it Q1 of next year?

On the box shipments or is that first quarter of next year. It gets slightly easier in the fourth quarter, but the real move will be in the first quarter. The following year.

Robert Mundy: It gets slightly easier in Q4, but the real move will be in Q1 of the following year.

Bob Mundy: It gets slightly easier in Q4, but the real move will be in Q1 of the following year.

[Analyst]: Okay. And is it possible to sort of give a rough sense? Is it like a 2% to 3% type impact, or could you give us any indication as to the magnitude from Sacramento?

Mark Weintraub: Okay. And is it possible to sort of give a rough sense? Is it like a 2% to 3% type impact, or could you give us any indication as to the magnitude from Sacramento?

Okay and is it possible to sort of.

Give a rough sense is that like a 2% to 3% type impact or.

Could you give us any indication is that the magnitude from Sacramento.

Robert Mundy: It's somewhere in the 1.5% range, something like that.

Bob Mundy: It's somewhere in the 1.5% range, something like that.

It's somewhere in the 1.5% range something like that okay, great and then.

[Analyst]: Okay. Great. And then would it be possible to get a sense as to how much the cut-up at Richland order of magnitude might be?

Mark Weintraub: Okay. Great. And then would it be possible to get a sense as to how much the cut-up at Richland order of magnitude might be?

Would it be possible get a sense as to how much the caught up at Richland order of magnitude might be.

Not at this time I don't think thats appropriate really to talk about that that's driven by a number of different factors certainly customer demand.

Robert Mundy: Not at this time. I don't think that's appropriate, really, to talk about that. That's driven by a number of different factors. Certainly, customer demand is one of the key, that's the key element of us putting in Richland. But also keep in mind that we've been supplying that marketplace from a number of different plants quite a ways away. So we're going to be able to take advantage of those transportation savings, both from the box plant and from the mill. So Richland's going to be an outstanding project that's going to start out in very good shape.

Bob Mundy: Not at this time. I don't think that's appropriate, really, to talk about that. That's driven by a number of different factors. Certainly, customer demand is one of the key, that's the key element of us putting in Richland. But also keep in mind that we've been supplying that marketplace from a number of different plants quite a ways away. So we're going to be able to take advantage of those transportation savings, both from the box plant and from the mill. So Richland's going to be an outstanding project that's going to start out in very good shape.

It is one of the key is that's the key element of us putting in Richland, but also keep in mind that we have been supplying that market place from a number of different plants quite a ways away.

So we're going to be able to take advantage of those transportation savings both from the box plant and from the mill.

So you know Richland is going to be a ritual is going to be an outstanding project, it's going to start out in very good shape.

Okay, and just one other one.

[Analyst]: Okay. And just one other one. One of your competitors this morning was talking about lower wood costs Q3 versus Q2. I realize this tends to be a very local markets here. Could you give us more color as to what's been going on with your wood costs and how you see them playing out for the balance of the year?

Mark Weintraub: Okay. And just one other one. One of your competitors this morning was talking about lower wood costs Q3 versus Q2. I realize this tends to be a very local markets here. Could you give us more color as to what's been going on with your wood costs and how you see them playing out for the balance of the year?

Hey, one of your competitors. This morning was talking about lower wood cost third quarter versus second quarter I realize this tends to be a very local local markets here could you give us more color as to what's been going on with your wood costs and how you see that playing out for the balance of the year.

You know Mark is it again it is it's a localized regional it's weather impacted.

Mark Kowlzan: Mark, again, it's a localized, regional, and it's weather-impacted. We're pretty flat. Wood cost has been behaving itself throughout the country this year. So we're in a pretty good place with overall wood cost.

You know, we're pretty flat would cost has been behaving itself.

Throughout the country. This year. So we're we're you know.

We're in a pretty good place with the overall would cost.

Okay. Thank you.

[Analyst]: Okay. Thank you.

Mark Weintraub: Okay. Thank you.

Next question please.

Mark Kowlzan: Next question, please.

Your next question is from the line of Adam Josephson with Keybanc.

Operator: Your next question is from the line of Adam Josephson with KeyBank.

Hi, Good morning, everyone. Thanks for taking my question.

[Analyst] (KeyBank): Good morning, everyone. Thanks for taking my questions. Bob, just one on guidance for a moment, if you can help me. In terms of the Q3 guidance, what is implied in there in terms of the sequential change in paper price mix? Just if you can give me any sense of that.

Adam Josephson: Good morning, everyone. Thanks for taking my questions. Bob, just one on guidance for a moment, if you can help me. In terms of the Q3 guidance, what is implied in there in terms of the sequential change in paper price mix? Just if you can give me any sense of that.

Bob just one on guidance for a moment. If you can help me in terms of the the Threeq guidance what is implied in there in terms of the sequential change in paper price mix. Just if you can give me any any sense of that.

Well, it's it's as we said in the in a in the release you know it's it's.

Mark Kowlzan: Well, as we said in the release, it's lower on average than it was in Q2 because, as we said, it started to soften a bit in June, and that sort of will carry through into Q3. So on average, it's down. We didn't quantify, obviously, how much down, but it's $15 to $20, possibly.

Bob Mundy: Well, as we said in the release, it's lower on average than it was in Q2 because, as we said, it started to soften a bit in June, and that sort of will carry through into Q3. So on average, it's down. We didn't quantify, obviously, how much down, but it's $15 to $20, possibly.

It's it's lower.

On average than it was in the second quarter, because as we said it started to soften a bit.

In June and that sort of will carry through into the third so on average you know.

It's it's down we didn't quantify obviously, how much down but.

You know, it's you know.

15, 20 Bucks, possibly.

A ton okay got it thanks.

[Analyst] (KeyBank): A ton. Okay. Got it. Thanks, Bob. And just, Tom, on your demand commentary for a moment, you talked about, obviously, the global economy having slowed and your domestic customers just becoming more cautious, managing inventories more tightly. But then you also talked about expecting a second-half improvement because your customers are doing so. So I'm just trying to tie those two together. I mean, what is driving your customers to expect a second-half improvement just given the slowdown in the global economy that you were talking about?

Adam Josephson: A ton. Okay. Got it. Thanks, Bob. And just, Tom, on your demand commentary for a moment, you talked about, obviously, the global economy having slowed and your domestic customers just becoming more cautious, managing inventories more tightly. But then you also talked about expecting a second-half improvement because your customers are doing so. So I'm just trying to tie those two together. I mean, what is driving your customers to expect a second-half improvement just given the slowdown in the global economy that you were talking about?

And just Tom on your demand commentary from mom and I know you talked about obviously, the global economy, having slowed and your domestic customers just becoming more cautious managing inventories more tightly. But then you also talked about expecting a second half improvement in that because your customers are doing so so I'm just trying to tie those two together what what is driving your customers to expect the second half improvement just given the slowdown in the global economy that you were talking about.

Well I guess, what I'm really referring to Adam is the fact that.

Robert Mundy: Well, what I'm really referring to, Adam, is the fact that there was significant inventory reduction that took place throughout the first half of the year. That's basically done. People feel good about the consumer demand and the economy here in the United States, which is obviously where we've got our large footprint. However, some of our customers do export. So they've adjusted to all of these dynamics that have gone on globally, and I think feel pretty good about the second half of the year. Also, as I said, we've got some segments, agriculture being one of them, is a big segment that really is driven much more in the second half of the year, especially given the weather-related issues that we had out on the West Coast and the Pacific Northwest.

Tom Hassfurther: Well, what I'm really referring to, Adam, is the fact that there was significant inventory reduction that took place throughout the first half of the year. That's basically done. People feel good about the consumer demand and the economy here in the United States, which is obviously where we've got our large footprint. However, some of our customers do export. So they've adjusted to all of these dynamics that have gone on globally, and I think feel pretty good about the second half of the year. Also, as I said, we've got some segments, agriculture being one of them, is a big segment that really is driven much more in the second half of the year, especially given the weather-related issues that we had out on the West Coast and the Pacific Northwest.

There was significant inventory reduction.

That took place throughout the first half of the year, that's basically done and.

People feel good about the consumer demand and the economy here in the United States, which is obviously, where we've got our large footprint. However, some of our customers do export so they've adjusted to all of these all of these dynamics that have gone on globally and I think feel pretty good about the about the second half of the year also as I said, we've got some segments agriculture being one of them is a big segment that really is driven much more in the second half of the year, especially given the weather related issues that we had out on the west coast in the Pacific Northwest.

Thanks, a lot Tom appreciate it.

[Analyst] (KeyBank): Thanks a lot, Tom. Appreciate it.

Adam Josephson: Thanks a lot, Tom. Appreciate it.

Next question please.

Mark Kowlzan: Next question, please.

Your next question is from the line of Atlanta Rodriguez with CBS .

Operator: Your next question is from the line of Edwin Rodriguez with UBS.

Thank you good morning, guys.

[Analyst] (UBS): Thank you. Good morning, guys.

Edwin Rodriguez: Thank you. Good morning, guys.

One quick one quick question on the.

Robert Mundy: Morning.

Bob Mundy: Morning.

[Analyst] (UBS): One quick question on the e-commerce and market. You have companies like Amazon. They're taking all sorts of actions to reduce packaging materials. What kind of impact do you expect this to have on the industry? And is this something that keeps you awake at night?

Edwin Rodriguez: One quick question on the e-commerce and market. You have companies like Amazon. They're taking all sorts of actions to reduce packaging materials. What kind of impact do you expect this to have on the industry? And is this something that keeps you awake at night?

E Commerce and market you know you have companies like Amazon like they've taken all sorts of actions to reduce packaging materials.

What kind of impact do you expect this to have on the end to end alright and is this something that keeps you awake at night.

Let me answer this time I'll answer that real quickly.

Robert Mundy: Let me answer. This time, I'll answer that real quickly. I think over the next couple of years, Amazon's initiatives are going to still be net neutral to the business. It's easy, I think, on the surface to make assumptions that it's probably going to impact the corrugated box business, but I think there's some puts and takes here. One is that as we get into this ship-in-own-container, or SIOC as it's referred to, you're going to have a lot more products that are going to have to gravitate towards corrugated because there still is no better product that can compete when it comes to containing, protecting, and marketing large products. So our customer base is very attuned to this, and they're asking for a lot of redesign. That redesign has been significant because keep in mind that they want to protect their brand.

Mark Kowlzan: Let me answer. This time, I'll answer that real quickly. I think over the next couple of years, Amazon's initiatives are going to still be net neutral to the business. It's easy, I think, on the surface to make assumptions that it's probably going to impact the corrugated box business, but I think there's some puts and takes here. One is that as we get into this ship-in-own-container, or SIOC as it's referred to, you're going to have a lot more products that are going to have to gravitate towards corrugated because there still is no better product that can compete when it comes to containing, protecting, and marketing large products. So our customer base is very attuned to this, and they're asking for a lot of redesign. That redesign has been significant because keep in mind that they want to protect their brand.

I think over the next couple of years.

Amazon's initiatives are going to still be net neutral to the business.

You know, it's it's easy I think on the surface to make assumptions that it's probably going to impact the corrugated box business, but I think there's some puts and takes here. One is is that as we get into this a shipping container cyacq as it's referred to.

You're going to have a lot more products that are going to have to gravitate towards corrugated.

Because you know there still is no better product that can compete and when it comes to containing.

Protecting and marketing large products. So our customer base is very attuned to this and they are asking for a lot of redesign.

That redesign is has been significant because keep in mind that they want to protect their brand they've got to make sure now that that brand goes through it goes through a longer cycle of handling all the way through Amazon fulfillment centers and distribution centers and all the way to the to the customer and they want that box to be in perfect shape by the time. It gets there and they also want to advertise their products. So.

Robert Mundy: They've got to make sure now that that brand goes through a longer cycle of handling all the way through Amazon fulfillment centers and distribution centers and all the way to the customer. And they want that box to be in perfect shape by the time it gets there, and they also want it to advertise their product. So I think as Amazon requires more of these larger products to be ready to ship-in-own-container, that I think we're going to get some growth from one market and a little less from another market.

They've got to make sure now that that brand goes through a longer cycle of handling all the way through Amazon fulfillment centers and distribution centers and all the way to the customer. And they want that box to be in perfect shape by the time it gets there, and they also want it to advertise their product. So I think as Amazon requires more of these larger products to be ready to ship-in-own-container, that I think we're going to get some growth from one market and a little less from another market.

I think as as Amazon requires more of these larger products to be ready to ship and own container that.

I think we will we're going to get some we're going to get some growth from one market and a little less from a from another market.

Okay that makes sense and one quick one on uncoated free sheet.

[Analyst] (UBS): Okay. That makes sense. And one quick one on uncoated free sheet. I mean, could producers have done a better job managing the supply reduction that happened in the industry without inviting so much in terms of imports? I mean, all of a sudden, the price increases have to be rolled back. I mean, could the industry have done a better job managing that supply-demand issue?

Edwin Rodriguez: Okay. That makes sense. And one quick one on uncoated free sheet. I mean, could producers have done a better job managing the supply reduction that happened in the industry without inviting so much in terms of imports? I mean, all of a sudden, the price increases have to be rolled back. I mean, could the industry have done a better job managing that supply-demand issue?

Good producers have done a better job managing the supply reduction that happened in the industry without inviting so much in terms of inputs all of a sudden price increases you know how to be will back me like.

Could the industry have done a better job managing that supply demand issue.

Let me answer it this way if you go back and you you.

Mark Kowlzan: Let me answer it this way. If you go back and I've been in this industry for 40 years now. And Uncoated Free Sheet, back then, was a world-supplied product, the Europeans, the North Americans, and then it's spread out through South America and Asia. So imports have always been a factor. So that's how I'm going to answer that.

I've been in this industry for 40 years now and.

Uncoated freesheet.

Back then was a world.

Supplied product the Europeans and North Americans and then it's it's spread out through South America and Asia. So imports have always been a factor.

So that's how I'm going to answer that.

Okay. Thank you.

[Analyst] (UBS): Okay. Thank you.

Edwin Rodriguez: Okay. Thank you.

Next question please.

Mark Kowlzan: Next question, please.

And we have a follow up from the line of gave option with Wells Fargo Securities.

Operator: We have a follow-up from the line of Gabe Hajde with Wells Fargo Securities.

Thank you guys.

[Analyst] (KeyBank): Thank you, guys. I'm curious from an operational perspective. You brought up something interesting, Tom, I think, kind of value through the supply chain, particularly thinking about e-commerce. And one of the things that you guys have differentiated yourselves with has been high customer touch and customization, things like that. When I think about branding through the e-commerce supply chain and porch bandits, I think, as they're called, have you had any inquiries or discussion dialogue with customers as to kind of dumbing down what might be found on the outside of the box versus depending if it's going through a retail chain or something like that?

Gabe Hajde: Thank you, guys. I'm curious from an operational perspective. You brought up something interesting, Tom, I think, kind of value through the supply chain, particularly thinking about e-commerce. And one of the things that you guys have differentiated yourselves with has been high customer touch and customization, things like that. When I think about branding through the e-commerce supply chain and porch bandits, I think, as they're called, have you had any inquiries or discussion dialogue with customers as to kind of dumbing down what might be found on the outside of the box versus depending if it's going through a retail chain or something like that?

I'm curious from an operational perspective, you brought something interesting Tom I think.

Kind of value through the supply chain, particularly thinking about e-commerce and.

One of the things that you guys have differentiate yourselves with has been high customer touch and customization things like that.

When I think about branding through the the ecommerce supply chain.

And ports bandits I think as they're called.

Have you had any inquiries or discussion dialogue with customers as to kind of dumbing down what might be found on the outside of the box.

Versus.

Depending if it's going through a retail chain or something like that.

Gabe I think it's a I think it's a mixed bag quite frankly, but I would say the trend is more towards our customers really interested in protecting their brand and advertising their brand in any way they can.

Robert Mundy: Gabe, I think it's a mixed bag, quite frankly. But I would say the trend is more towards our customers really interested in protecting their brand and advertising their brand in any way they can. And when you're talking about, especially this SIOC, as I mentioned, you're talking about a product not showing on a shelf. So guess where the best place to advertise your product is? On the box. And that fits us very, very well because, as I've said many times, I mean, we're focused on this hard-to-do. We're very focused on helping our customers grow the business and adding value in any way we can. And that really is a core competency that we have and that we can take to the marketplace. And all of our 18,000+ customers have various needs when it comes to that kind of value.

Bob Mundy: Gabe, I think it's a mixed bag, quite frankly. But I would say the trend is more towards our customers really interested in protecting their brand and advertising their brand in any way they can. And when you're talking about, especially this SIOC, as I mentioned, you're talking about a product not showing on a shelf. So guess where the best place to advertise your product is? On the box. And that fits us very, very well because, as I've said many times, I mean, we're focused on this hard-to-do. We're very focused on helping our customers grow the business and adding value in any way we can. And that really is a core competency that we have and that we can take to the marketplace. And all of our 18,000+ customers have various needs when it comes to that kind of value.

And when you're talking about a specialty this IOC as I mentioned.

Are you talking about a product not showing on a shelf, so guess where the best place to advertise your product is on the box and that fits that fits us very very well because as I've said many times. We were focused on this hard to do we're very focused on helping our customers grow the business and adding value in any way we can and.

You know that that really is.

Is a core competency that we have and that we can take to the marketplace and.

All of our 18000 plus customers.

Have various needs.

When it comes to that kind of value.

Thank you.

[Analyst] (UBS): Thank you.

Edwin Rodriguez: Thank you.

Next question please.

Mark Kowlzan: Next question, please.

Again, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad again that is star one to ask a question.

Operator: Again, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Again, that is star 1 to ask a question. All right. And Mr. Rosen.

Operator: Again, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Again, that is star one to ask a question. All right. And Mr. Rosen.

That's great and him operator.

Robert Mundy: Operator.

Bob Mundy: Operator.

Operator: I see that there are no further questions. Do you have any closing comments?

I see that there are no further questions do you have any closing comments.

Mark Kowlzan: Yes. Thank you, everyone, for joining us today. We look forward to talking with you in October during the third quarter call. Have a nice day. Bye-bye.

Yes.

Thank you everyone for joining us today, and we look forward to talking with you in October during the third quarter call.

Have a nice day bye bye.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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