Q3 2025 Graphic Packaging Holding Co Earnings Call

In a listen only mode and we will open the floor for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host Mark Connelly.

Senior Vice President of Investor strategy and development.

The floor is yours.

Good morning, we have with US today, Mike Doss, President Chief Executive Officer, Steve Scherger, Executive Vice President and Chief Financial Officer, and truck Leisure Senior Vice President and Chief Accounting Officer during.

During this call we will reference our third quarter 2025 earnings presentation available through this webcast and on our website at www graphic Teekay G Dot com.

Today's presentation will include forward looking statements as defined in the private Securities Litigation Reform Act of 1095. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to the factors identified in today's press release and in our SEC file.

Thanks.

Speaker #4: Good morning and welcome to the graphic packaging . Third quarter 2025 Earnings Call . At this time , all participants have been placed on a listen only mode and we will open the floor for your questions and comments .

Now, let me turn the call over to Mike.

Thank you Mark and good morning, and good afternoon. Thank you for joining our call today I want to start by taking a moment to acknowledge the enormous contributions as Steve Scherger has made over the past decade as graphic packaging as Chief Financial Officer.

Speaker #4: After the presentation . It is now my pleasure to turn the floor over to your host , Mark Connolly , Senior Vice President of Investor Strategy and Development .

As announced last month, Steve has decided to meet graphic packaging to take on a new challenge.

Stayed with us through this week to close the books on our third quarter and I appreciate that.

Speaker #4: The floor is yours .

Seamless my partner in the development and execution of our business transformation.

Speaker #5: Good morning . We have with us today , Mike Doss , President and Chief Executive Officer Stephen Scherger Executive Vice President and Chief Financial Officer and Chuck Lisher , senior vice president and chief accounting officer .

The acquisition of international paper's consumer business and more than a dozen acquisitions to our Kalamazoo and away from investments.

Tax on the team we have built and the culture. We have created that graphic packaging will shape our company for years to come I will Miss his counsel.

Speaker #5: During this call , we will reference our third quarter 2025 earnings presentation available through this webcast and on our website , WW . Com .

I am pleased to introduce Chuck listener, who Steve hired in 2019, as our Chief Accounting Officer, Chuck will take on a new role as interim Chief Financial Officer. Chuck has been a key member of our leadership team and involved in every major decision. Stephen I have made we are fortunate to have someone with chuck's deep knowledge stepping in as we pivoted from vision 2025 investments.

Speaker #5: Today's presentation will include forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 . These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections .

Speaker #5: These risks and uncertainties include, but are not limited to, the factors identified in today's press release and in our SEC filings.

The vision 2030, <unk> free cash flow.

Speaker #5: Now , I want to start by taking .

Now, let's turn to the quarter graphic packaging sales were $2 2 billion adjusted EBITDA was $383 million adjusted EBITDA margin was 17, 5% and adjusted EPS was <unk> 58.

Speaker #5: let me turn the call over to Mike . Thank you . Mark , and good morning and good afternoon . Thank you for joining our call today .

Speaker #6: A moment to acknowledge the enormous contributions that Stephen Scherger has made over the past decade as graphic Packaging's chief Financial officer . As announced last month , Steve has decided to leave Graphic Packaging to take on a new challenge .

While the challenges of a stretch consumer and the impact on grocery volumes will chronicle, we're focused on what we can control.

Speaker #6: He has stayed with us through this week to close the books on our third quarter , and I appreciate that . Steve was my partner in the development and execution of our business transformation from the acquisition of international papers , consumer , business , and more than a dozen acquisitions to our Kalamazoo and Waco investments .

We executed well in the quarter and progress on costs and reduced inventory. Meanwhile, our intervention platform continues to open up new markets for paperboard packaging once again, allowing us to outperform the broader markets we serve.

Turning to slide three I'm pleased to announce that we produced first commercially saleable roll paperboard at our Waco recycled paperboard manufacturing facility on October 24 that was significantly earlier than our plan and faster even than our highly successful K two startup in Kalamazoo in 2022.

Speaker #6: His impact on the team we have built and the culture we have created at Graphic Packaging will shape our company for years to come .

Speaker #6: I will miss his counsel . I'm pleased to introduce Chuck Lisher , who Steve hired in 2019 as our Chief accounting officer . Chuck will take on the new role of Interim chief financial officer .

I could not be more proud of our team many of whom are part of our team that built our Kalamazoo can't do machine.

Speaker #6: Chuck has been a key member of our leadership team and involved in every major decision . Steve and I have made . We are fortunate to have someone with Chuck's deep knowledge stepping in as we pivot from vision 2025 investment to vision 2030 free cash flow .

I want to thank our contractors and I'm incredibly grateful for the strong support we received from the wafer community from Governor Abbott and the state of Texas, Waco, with graphic packaging largest capital investment.

Speaker #6: Now let's turn to the quarter. Graphic Packaging sales were $2.2 billion. Adjusted EBITDA was $383 million. Adjusted EBITDA margin was 17.5%, and adjusted EPS was $0.58.

And extends our economic and quality advantage and recycled paperboard across all of North America Waco is a critical enabler for the consumer packaging with self improving shortage supply, reducing waste, allowing us to only offer the highest quality packaging materials and expanding the markets are recycled paperboard packaging serve having.

Speaker #6: While the challenges of a stretch consumer and the impact on grocery volumes is well chronicled , we are focused on what we can control .

Waco, and our system gives us a competitive advantage that will last for decades.

Speaker #6: We executed well in the quarter , made progress on costs , and reduced inventory . Meanwhile , our innovation platform continues to open up new markets for paperboard packaging once again , allowing us to outperform the broader markets we serve .

The Waco facility sits in the Texas triangle, which is a highly attractive location for recovered fiber sourcing given its proximity to four major cities.

Our team also developed an internal fiber sourcing plan, which allows us to bring scrap paperboard from our packaging facilities to Waco. This is exceptionally clean and very low cost by <unk>.

Speaker #6: Turning to slide three . I'm pleased to announce that we produced the first commercially available roll of paperboard at our Waco Recycled Paperboard manufacturing facility on October 24th .

Speaker #6: That was significantly earlier than our plan , and faster even than our highly successful k two startup in Kalamazoo . In 2022 . I could not be more proud of our team .

Drew circularity isn't just about the environment right. It's also about some business economics by closing the loop between our own manufacturing system scrap and windows recovered fiber sourcing we dramatically reduce overall system waste, while simultaneously improving our production economics.

Speaker #6: Many of whom were part of our team that built our Kalamazoo K2 machine . I want to thank our contractors , and I'm incredibly grateful for the strong support we received from the Waco community , from Governor Abbott and the state of Texas .

And with the inclusion of paper Cups, and the recycled materials associations recently updated guidelines are key strategic investment we made at Waco looks even better we designed wafer to have the capability to process up to 15 million paper Cups, a day and has cup collection ramps up graphic packaging will play a key role in assuring this high value fiber sources with the goods.

Speaker #6: Waco was Graphic Packaging's largest capital investment and extends our economic and quality advantage in recycled paperboard across all of North America . Waco is a critical enabler for the consumer packaging .

Speaker #6: We sell . Improving surety of supply , reducing waste , allowing us to only offer the highest quality packaging materials and expanding the markets .

Rather than ending up as landfill.

As previously announced the ramp up to full production at Westwood is expected to take 12 to 18 months.

Speaker #6: Our recycled paperboard packaging can serve . Having Waco in our system gives us competitive advantage that will last for decades . The Waco facility sits in the Texas Triangle , which is a highly attractive location for recovered fiber sourcing given its proximity to four major cities .

The startup of Waco marks the end of our vision 2025 transformation program. We now have everything we need strong positions across a wide range of markets to drive top line consistency the.

The packaging industry best innovation team to open new markets for paperboard, and an integrated packaging platform with durable substantial long term competitive advantage on.

Speaker #6: Our team also developed an internal fiber sourcing plan , which allows us to bring scrap paperboard from our packaging facilities to Waco . This is exceptionally clean and very low cost fiber through circularity .

On October 30, we formally announced that our east Angus recycled paperboard manufacturing facility will cease production December 2003.

Speaker #6: Isn't just about the environment done right , it's also about sound business economics . By closing the loop between our own manufacturing system , scrap and Waco's recovered fiber sourcing , we dramatically reduce overall system waste while simultaneously improving our production economics .

Taken together with our earlier Middletown closure and the recent closures by others wafer will add just a couple of percent of total capacity only about 75000 tons more than the industry had started 2025.

Speaker #6: And with the inclusion of paper cups in recycled materials Association's recently updated guidelines , a key strategic investment we made at Waco looks even better .

As was the case in Kalamazoo, we do not expect the startup of wafer to materially impact recycled paperboard market balance graphic packaging has a long and consistent practice of matching our production to our demand for our packaging.

Speaker #6: We designed Waco to have the capability to process up to 15 million paper cups a day , and as Cup collection ramps up , graphic packaging will play a key role in assuring this high value fiber source is put to good use .

Turning to slide four the pressure on the consumers as evidenced by the grocery volumes increasingly we hear from our CPG customers that the consumer market is bifurcated.

Speaker #6: Rather than ending up as landfill . As previously announced , the ramp up to full production at Waco is expected to take 12 to 18 months .

Upper income consumers are still spending for our spending differently and more carefully lower income consumers continue to cut back as food prices rise further and in the third quarter. We also saw more of our CPG customers timing their purchases as a way to manage cash which has made order flows less predictable.

Speaker #6: The start up of Waco marks the end of our vision 2025 transformation program . We now have everything we need strong positions across a wide range of markets to drive top line consistency .

Speaker #6: The packaging industry's best innovation team to open new markets for paperboard , and an integrated packaging platform with durable , substantial , long term competitive advantage .

In the third quarter, our volumes were down 2% year on year again outperforming most of the markets. We serve we also saw some incremental price deterioration not so much in paperboard, but in packaging pricing resets.

Speaker #6: On October 30th , we formally announced that our East Angus recycled paperboard manufacturing facility will cease production December 23rd . Taken together with our earlier Middletown closure and the recent closures by others , Waco will add just a couple of percent to total capacity .

Recycled and unbleached packaging markets are in good balance, but we continue to see highly unusual competitive pressure from bleached packaging producers normally once used to compete directly with recycled because their costs are so much higher yet we are seeing competitors offering discounts on bleached packaging that essentially matches recycled packaging pricing despite.

Speaker #6: Only about 75,000 tons more than the industry had at the start of 2025 . As was the case in Kalamazoo , we do not expect to start up Waco to materially impact recycled paperboard market balance .

The obvious lack of profitability that those kinds of prices.

Speaker #6: Graphic packaging has a long and consistent practice of matching our board production to our demand for our packaging . Turning to slide four .

Given that bleach capital costs and annual sustaining capital requirements are dramatically higher we don't believe that the situation is sustainable.

Speaker #6: The pressure on the is evident by the grocery volumes . Increasingly , we hear from our CPG customers that the consumer market has bifurcated upper income consumers are still spending for our spending differently , and more carefully .

With the investments we have made at Kalamazoo in Waco, we can match bleached paperboard appearance and print performance was achieved a cost significantly less to make on equipment that requires a fraction of the capital maintain we.

Speaker #6: Lower income consumers continue to cut back as food prices rise further . And in the third quarter , we also saw more of our CPG customers timing their purchases as a way to manage cash , which has made order flows less predictable .

We believe that our investments have put us in the sweet spot for all three packaging substrates and that our economics and quality create a durable long term competitive advantage over time, we expect our recycled paperboard to replace more expensive bleach paperboard in our range markets as we discussed last quarter, we are not a meaningful participant in open market bleach paperboard.

Speaker #6: In the third quarter . Our volumes are down 2% year on year . Again outperforming most of the markets we serve . We also saw some incremental price deterioration , not so much in paperboard , but in packaging , pricing , recycled and unbleached packaging markets are in good balance , but we continue to see highly unusual competitive pressure from bleach packaging producers who normally wouldn't choose to compete directly with recycled because their costs are so much higher .

Sure.

The impact of a large imbalance in that market has been to reduce the pricing power and recycled bleached packaging.

Cycled and unbleached, our primary markets and both are healthy and good balance. So this is really about margin pressure rather than market share.

Looking at our markets food and household products steady overall, while beverage in foodservice weaker health and beauty, which is most of the European business for US was again solid.

Speaker #6: Yet we are seeing competitors offering discounts on bleached packaging that essentially matches recycled packaging pricing . Despite the obvious lack of profitability that those kinds of prices apply , given that bleach capital costs and annual sustaining capital requirements are dramatically higher , we don't believe that the situation is sustainable with the investments we have made at Kalamazoo in Waco , we can match bleach , paperboards appearance in print performance with a sheet that costs significantly less to make on equipment that requires a fraction of the capital to maintain .

Average promotion returned to a relatively normal pattern this year, but promotional activity for food and foodservice remains highly targeted and approach, which has not driven a meaningful volume or foot traffic.

Retail superstores discount grocers continue to take share from traditional grocers that is one of the driving forces behind a surge in private label offerings, although traditional grocers have increasingly embraced store brands as well in the past two years literally thousands of private label and store brands Skus have been introduced and trademark data suggest that trend will continue in.

Speaker #6: We believe that our investments have put us in the sweet spot for all three packaging substrates and that our economics and quality create a durable, long-term competitive advantage.

Speaker #6: Over time , we expect our recycled paperboard to replace more expensive bleached paperboard and arranged markets . As we discussed last quarter , we are not a meaningful participant in open market , bleached paperboard , but the impact of a large imbalance in that market has been to reduce the pricing power and recycled and unbleached packaging , recycled and unbleached are our primary markets , and both our healthy and in good balance .

2026.

Meanwhile, our innovation portfolio continues to expand innovation is steadily opening up new markets for our paperboard packaging from household products to protein to produce.

Turning to slide five the breadth and depth of our consumer Staples packaging portfolio is especially important in times like these where consumer purchasing patterns are rapidly evolving.

We are every grocery outlets supermarkets in superstores and are a major packaging supplier to quick service restaurants.

Speaker #6: So, this is really about margin pressure rather than market share. Looking at our markets, food and household products were steady overall.

We're introducing recycled paperboard packaging to more markets and more categories, including household products in health and beauty as customers increasingly embraced our paperboard is a less expensive more responsible choice that consumers performance.

Speaker #6: While beverage and foodservice were weaker . Health and beauty , which is mostly a European business for us , was again solid beverage promotion , returned to a relatively normal pattern this year .

Speaker #6: But promotional activity for food and food service remains highly targeted and approach , which is not driven , meaningful volume or foot traffic mass retail superstores and discount grocers continue to take share from traditional grocers .

Turning to slide six excluding the effect of FX third quarter packaging sales were down approximately 2% year over year, a modest deceleration from second quarter market trends.

Food results were roughly flat overall with continued uneven performance in the Americas, partially offset by strength in international although as we have previously noted consumers in our international markets are also feeling the stress of high prices.

Speaker #6: That is one of the driving forces behind the surge in private label offerings . Although traditional grocers have increasingly embraced store brands as well , in the past two years , literally thousands of private label and store brand SKUs have been introduced and trademark data suggests the trend will continue into 2026 .

As in past quarters, no clear category trends are emerging we see targeted promotion that shift from product to product and brand to brand, but has been insufficient to drive overall volumes higher.

Speaker #6: Meanwhile , our innovation portfolio continues to expand . Innovation is steadily opening up new markets for our paperboard packaging , from household products to protein to produce .

As our customers evaluate the effectiveness motion, they're also developing clear insights into price points, where customer purchases either grow or decline rapid so.

Speaker #6: Turning to slide five , the breadth and depth of our consumer staples packaging portfolio is especially important at times like these , where consumer purchasing patterns are rapidly evolving .

So for example, a 25% price increase of $4 50 to $4 75 may not cause a change in demand, but a 25% increase from $4 75 to $5 by causing major decline in sales getting a better handle on that sort of price sensitivity should help our customers as they are.

Speaker #6: We are in every grocery aisle and supermarkets and superstores and are a major packaging supplier to quick service restaurants . We are introducing recycled paperboard packaging to more markets and more categories , including household products and health and beauty .

Speaker #6: As customers increasingly embrace our paperboard as a less expensive , more responsible choice than consumers prefer . Turning to slide six . Excluding the effect of FX , third quarter packaging sales were down approximately 2% year over year .

Work to reposition resize and reformulated.

In beverage we saw what we returned to a more normal promotional activity this summer, which helped drive soft drink multi <unk> manner.

The longer term trend towards less beer consumption continued both in the Americas and in international markets keep in mind that while trends in multi pack demand do track referenced just like Nielsen over the medium term leads and lags can vary, particularly when average are purchased and when they are concerned.

Speaker #6: A modest deceleration from second quarter market trends . Food results were roughly flat overall , with continued uneven performance in the Americas , partially offset by strength in international .

Speaker #6: Although , as we have previously noted , consumers in our international markets are also feeling the stress of high prices . As in past quarters , no clear category trends are emerging .

<unk> for example will tend to be consumed more quickly if it goes directly into the refrigerator. So when you have a two for one promotion it can be a bit harder to predict when consumers won't be back to buy more.

Speaker #6: We see targeted promotion that shifts from product to product and brand to brand, but it has been insufficient to drive overall volumes higher.

Some of the normal second quarter beer production shutdowns that typically occur around the sport. The July holidays for deferred this year and are now scheduled for the fourth quarter. The impact of that shift is difficult to predict but represents an effort by our customers to match their own production to demand.

Speaker #6: As our customers evaluate the effectiveness of promotion . They are also developing clearer insights into price points where customer purchases either grow or decline rapidly .

Speaker #6: So , for example , a 25 cent price increase from $4.50 to $4.75 may not cause a big change in demand , but a 25 cent increase from $4.75 to $5 might cause a major decline in sales .

We serve beverage producers all kinds of silence with multi packs for cans bottles and plastic.

Over time, we expect to outperform the overall beverage market both in the Americas and in our international business. Thanks to our innovation portfolio and the strength of our integrated beverage packaging Bob.

Speaker #6: Getting a better handle on that sort of price sensitivity should help our customers as they work to reposition , resize and reformulate in beverage .

Speaker #6: We saw a welcome return to a more normal promotional activity this summer , which helped drive soft drink Multi-pack demand . The longer term trend towards less beer consumption continued both in the Americas and in international markets .

Foodservice results broadly weaker as has been well telegraphed by the meeting while affordability is in the primary challenge to foot traffic and volumes.

This is also the category with the most bleach paperboard packaging and bleached packaging is where we've seen the most unusual additive behavior, which is affecting sales as well as profitability.

Speaker #6: Keep in mind that while trends in multi-pack demand do track references like Nielsen over the medium term , leads and legs can vary , particularly when beverage are purchased and when they're concerned .

Our smaller international Foodservice business continues to perform very well with new product innovation and strong execution driving continued volume improvement.

Speaker #6: A 12 pack , for example , will tend to be consumed more quickly if it goes directly into the refrigerator . So when you have a two for one promotion , it can be a bit harder to predict when consumers will be back to buy more .

In household products in the Americas, we see consumers, reducing purchases and shifting to private label alternatives. Our international business continues to provide significant offset largely driven by our product innovation.

Speaker #6: Some of the normal second-quarter beer production shutdowns that typically occur around the Fourth of July holiday were deferred this year and are now scheduled for the fourth quarter.

Speaker #6: The impact of that shift is difficult to predict , but represents an effort by our customers to match their own production , to demand .

And beauty is a relatively small and most of the international business for us that has significant potential to grow over time in the Americas.

Speaker #6: We serve beverage producers of all kinds and sizes with multi-packs for cans, bottles, and plastic. Over time, we expect to outperform the overall beverage market both in the Americas and in our international business.

Slide seven highlights our five imaging innovation platforms innovation is a critical component of our strategy because our innovation team is opening up entirely new markets paperboard packaging in the past couple of years, our innovations have taken us since meat protein, especially prepared food ready meals in Europe.

Speaker #6: Thanks to our innovation portfolio and the strength of our integrated beverage packaging model, food service results were broadly weaker, as has been well telegraphed by the media.

Coffee and a host of markets, which were traditionally dominated by plastic foam inner.

Speaker #6: While affordability has been the primary challenge to foot traffic and volumes . This is also the category with most bleached paperboard packaging and bleached packaging is where we have seen the most unusual additive behavior , which is affecting sales as well as profitability .

<unk> is why we are confident in our ability to grow faster than the <unk> CPG markets we serve.

On slide eight we highlight an innovation that demonstrates our market expansion in the produce aisle and especially with small fruits and vegetables plastic plants are the traditional plant packaging standards, but while plastic components are cost effective performance in consumer appeal is mixed at best and recycling rates low as.

Speaker #6: Our smaller international food business continues to perform very well with new product innovation and strong execution , driving continued volume improvement in household products in the Americas .

Our customers look for better functionality and greater consumer appeal, we have developed a family of paperboard pundits, including open top seal and clamshell designs and use up to 95% less plastic and a recyclable and most existing programs.

Speaker #6: We see consumers reducing purchases and shifting to private label alternatives. Our international business continues to provide a significant offset, largely driven by our product innovation.

Speaker #6: Health and beauty is a relatively small and mostly international business for us . That is significant potential to grow over time in the Americas .

On this slide we highlight our protein packed top ceiling punit.

These examples are from two of our large store brand customers marks <unk> Spencer and Tesco in the UK fruits and vegetables are impacted in many different ways, depending on the grower to scale in the market. So we design our punished to work on the same automated lines as plastic pundits and minimize switching costs and to be secured plastic alternative.

Speaker #6: Slide seven highlights our five packaging innovation platforms . Innovation is a critical component of our strategy because our innovation team is opening up entirely new markets for paperboard packaging .

Speaker #6: In the past couple of years , our innovations have taken us into meat , protein , freshly prepared food ready meals in Europe , ground coffee and a host of markets which were traditionally dominated by plastic and foam .

We're more handling has involved our clamshell design for example serves a impact market, but unlike the plastic clamshell ours can be locked into close position with one hand, improving labor efficiency.

Speaker #6: Innovation is why we are confident our ability to grow faster than the QSR and CPG markets we serve . On slide eight , we highlight an innovation that demonstrates our market expansion in the produce aisle , and especially with small fruits and vegetables .

When we began this project our team studied science food ripening and develop containers that have a meaningfully positive impact on how long some fruits and vegetables, a fresh and Cherry Tomatoes. For example are third party verified increase in shelf life of more than three days, a really big advantage, we're highly perishable products.

Speaker #6: Plastic punnets are the traditional packaging standard , but while plastic pundits are cost effective , their performance and consumer appeal is mixed at best , and recycling rates are low .

Speaker #6: As our customers look for better functionality and greater consumer appeal , we have developed a family of paperboard punnets , including open top seal and clamshell designs that use up to 95% less plastic and are recyclable in most existing programs .

Other testing demonstrated that our paperboard punit slowed the bulk growth compared to plastic alternatives are.

Our partners also offer outstanding portability inside now something you can't get with plastic that keeps the growers and retailers are a way to increase the brand marketing impact to distinguish more easily between products and quality levels and to educate consumers about what they are buying.

Speaker #6: On this slide , we highlight our produce pack , top selling punnet . These examples are from two of our large store brand customers , Marks and Spencer and Tesco .

Speaker #6: In the UK , fruits and vegetables are packed in many different ways depending on the grower . The scale and the market . So we design our punnets to work on the same automated lines as plastic punnets and minimize switching costs , and to be superior to plastic alternatives , where more handling is involved .

Our paperboard punished along with other new innovations like our paper steel lines are perfect fit with today's trends towards healthier eating and the growing use of <unk> and they are great. Examples of just how effectively graphic packaging goes with the consumer.

Turning to slide nine our vision for graphic packaging is clear and my confidence in our business model remains strong innovation culture, and the commitment to making packaging that is better for the planet are fundamental to driving best in class results for our customers and for all of our stakeholders with wasteful Enel ramping up we have everything we need to reach.

Speaker #6: Our clamshell design , for example , serves a hand packed market . But unlike the plastic clamshell , ours can be locked into closed position with one hand improving labor efficiency .

Speaker #6: When we began this project , our team studied the science of food ripening and developed containers that have a meaningfully positive impact on how long some fruits and vegetables stay fresh in cherry tomatoes , for example , a third party is verified .

Our vision 2030 goals than.

And that means we can turn our full attention to execution and driving cash flow.

Speaker #6: An increase in shelf life of more than three days , a really big advantage for highly perishable product . Other testing demonstrated that our paperboard punnets slowed the mold growth compared to plastic alternatives .

On slide 10, we summarize our financial results I've already described the big drivers of sales and margin performance.

Slide 11 highlights the still challenging consumer packaging environment on the left and the strength of our business model and execution on the right <unk>.

Speaker #6: Our punnets also offer outstanding printability inside . Now , something you can't get with plastic that gives the growers and retailers a way to increase their brand marketing impact to distinguish more easily between products and quality levels , and to educate consumers about what they are buying .

Delivering margin improvement in the face of sequential price and volume pressures are testament to the strength of our model and the value we bring to our customers. While we're not satisfied earned results. We are confident that we can meaningfully improve margins as demand and competitive behavior normalizes.

Speaker #6: Our paperboard Punnets , along with other new innovations like our paper seal line , are perfect fit with today's trends towards healthier eating and the growing use of GLP one .

Turning to slide 12, we used $150 million to repurchase approximately $6 $8 million of the company's outstanding shares year to date.

Speaker #6: And there are great examples of just how effectively graphic packaging moves with the consumer . Turning to slide nine . Our vision for graphic packaging is clear , and my confidence in our business model remains strong .

Reducing shares outstanding by two 3% in 2025 after a similar reduction in 2024, we have repurchased approximately 24% of the company since 2018.

Speaker #6: Innovation , culture and the commitment to making packaging that is better for the planet are fundamental to providing best in class results for our customers and for all of our stakeholders .

Turning to the outlook on slide 13, we have modestly revised our guidance to reflect performance to date and our best view of what's been an increasingly difficult to predict volume outlook.

Speaker #6: With Waco now ramping up , we have everything we need to reach our vision 2030 goals , and that means we can turn our full attention to execution and driving cash flow .

In this environment, we are focused on the things we can control and that includes cost and inventory we are assessing opportunities to further reduce SG&A and finding other opportunities to reduce costs, which I believe will further cement our significant efficiency and margin advantage over competitors.

Speaker #6: On slide ten , we summarize our financial results . I've already described the big drivers of sales and margin performance . Slide 11 highlights the still challenging consumer packaging environment on the left and the strength of our business model and execution on the right .

You saw us take action to reduce inventory in the second third quarters, and we will continue to drive inventory out of our system is optimized around Waco in Kalamazoo and the fourth quarter, we will take further action to balance production with customer demand, which we expect to have approximately a $15 million impact on EBITDA.

Speaker #6: Delivering margin improvement in the face of sequential price and volume pressures is a testament to the strength of our model and the value we bring to our customers .

Speaker #6: While we are not satisfied with the current results , we are confident that we can meaningfully improve margins as demand and competitive behavior normalize .

These decisions are intended to protect our margin profile and to protect our volumes at a time when competitors are running for cash and signing contracts that we believe carry margins well below the cost of capital. We are focused on protecting our industry, leading margins and protecting share where we are at the best and most logical supplier in the medium and long term.

Speaker #6: Turning to slide 12 . We used $150 million to repurchase approximately 6.8 million of the company's outstanding shares . Year to date , reducing shares outstanding by 2.3% in 2025 .

Speaker #6: After a similar reduction in 2024 . We have repurchased approximately 24% of the company since 2018 . Turning to the outlook on slide 13 , we have modestly revised our guidance to reflect performance to date in our best view of what's been an increasingly difficult to predict volume outlook in this environment .

We are using this period of unusual competitive behavior to align our order books with customers understand the durable competitive advantages that we have an innovation cost efficiency and quality.

Our year end leverage target is up modestly.

Speaker #6: We are focused on the things we can control and that includes cost and inventory . We are assessing opportunities to further reduce SG&A and finding other opportunities to reduce costs , which I believe will further cement our significant efficiency and margin advantage over competitors .

As mainly a function of the change in our EBITDA expectations as well as our decision to take advantage of the dislocation in our share price with additional share repurchases in the third quarter.

Graphic packaging is doubled in sales and EBITDA since 2017 and maintain prudent debt levels has always been a major factor in the company's success.

Speaker #6: You saw us take action to reduce inventory in the second and third quarters , and we will continue to drive inventory out of our system as we optimize around Waco in Kalamazoo , in the fourth quarter , we will take further action to balance production with customer demand , which we expect to have approximately a $15 million impact on EBITDA .

With our wafer investment during completion, we expect a significant free cash flow inflection and we will prioritize deleveraging alongside our other uses of cash in 2026 and beyond.

In keeping with our commitment to prudent use of leverage and maintaining financial flexibility. We made an important financing transaction in October as detailed in our recent 8-K, we've entered into a $400 million delayed draw term loan, which will be used to repay the bonds maturing in April 2026. This loan has a floating rate.

Speaker #6: These decisions are intended to protect our margin profile and to protect our volume at a time when competitors are running for cash and signing contracts that we believe carry margins well below the cost of capital , we are focused on protecting our industry , leading margins and protecting share where we are the best and most logical supplier in the medium and long term .

<unk> 35 basis points lower than our revolver matures in June of 2027.

Speaker #6: We are using this period of unusual competitive behavior to align our order books with customers who understand the durable competitive advantages that we have in innovation , cost , efficiency , and quality .

This new financing addresses the upcoming bond maturity, while giving us more time to decide what the longer term financing is needed.

Given the substantial cash flow, we expect to generate in 2026 and beyond the flexibility of pre payable debt is particularly attractive now our current cost of debt is approximately four 5%.

Speaker #6: Our year end leverage target is up modestly . That is mainly a function of the change in our EBITDA expectations , as well as our decision to take advantage of the dislocation in our share price with additional share repurchases in the third quarter .

As a reminder, with the Waco investment effectively complete our capital spending will decline significantly to approximately 5% of sales capital spending is the largest driver of our expected cash flow inflection.

Speaker #6: Graphic Packaging has doubled its sales and EBITDA since 2017, and maintaining prudent debt levels has always been a major factor in the company's success. With our Waco investment nearing completion, we expect a significant free cash flow inflection and will prioritize deleveraging.

With the team we now have in place and the levers we have the full I'm confident in our ability to generate our targeted $700 million to $800 million free cash flow in 2026.

Speaker #6: The our other uses of cash in 2026 and beyond . In keeping with our commitment to prudent use of leverage and maintaining financial flexibility , we made an important financing transaction in October , as detailed in a recent 8-K .

Let me be very clear about this we can't control demand and lately, we cant predict it any better than our customers of our competitors cant.

Packaging has had a very different place today with Winco complete we have the industry's best assets in best cost position.

Speaker #6: We have entered into a $400 million delayed draw term loan , which will be used to repay the bonds maturing in April of 2026 .

And we have far greater control over our ability to generate free cash flow than we did a year ago, while competitors are restructuring spending and lately, making short term deals that don't generate cost capital returns graphic packaging is to focus on delivering results for our customers and our stockholders.

Speaker #6: This loan has a floating rate 35 basis points lower than our revolver and matures in June 2027. This new financing addresses the upcoming bond maturity while giving us more time to decide whether longer-term financing is needed, given the substantial cash flow we expect to generate in 2026 and beyond.

We have everything we need in the next five years are about innovation execution and free cash flow graphic packaging is in a better place to create lasting value for our stockholders than ever before.

Speaker #6: The flexibility of repayable debt is particularly attractive . Now . Our current cost of debt is approximately 4.5% . As a reminder , with the Waco investment effectively complete , our capital spending will decline significantly to approximately 5% of sales .

In the appendix that begins with slide 15, Youll find some additional information you may find helpful that concludes our prepared remarks, operator, let's begin with Q&A.

Speaker #6: Capital spending is the largest driver of our expected cash flow inflection . With the team . We now have in place and the levers we have to pull .

Certainly.

Ladies and gentlemen, the floor is now open for questions.

Speaker #6: I'm confident in our ability to generate our targeted 700 to $800 million of free cash flow in 2026 . Let me be very clear about this .

Wish to join the queue to ask a question at this time. Please press star one on your telephone keypad should you wish to remove yourself from queue. You May press star two in the interest of time, we do ask that you limit yourself to one question and one follow up once again that'll be star one on your keypad at this time.

Speaker #6: We can't control demand , and lately we can't predict it any better than our customers or our competitors can . But graphic packaging is at a very different place today , with Waco complete , we have the industry's best assets and best cost position , and we have far greater control over our ability to generate free cash flow than we did a year ago .

If you wish to join the queue to ask a question. Please hold a moment, while we pull for questions.

And the first question today is coming from Ghansham Panjabi from Baird Ghansham. Your line is live. Please go ahead.

Speaker #6: While competitors are restructuring spending and lately making short term deals that don't generate cost of capital returns , graphic packaging continues to focus on delivering results for our customers and our stockholders .

Thank you operator, I guess first off just wanted to congratulate Steve and wish him the best for the future obviously, a great run of the company and look.

Speaker #6: We have everything we need in the next five years . Our about innovation , execution and free cash flow . Graphic packaging is in a better place to create lasting value for our stockholders than ever before .

Look forward to next rule, so congrats again I'm sorry.

My first question, Mike just kind of looking back at <unk> and.

End markets tracked pretty much what you thought but the difference was just the share shift because of the bleach board conversion and you know.

Speaker #6: In the appendix that begins with slide 15 , you'll find some additional information . You may find helpful . That concludes our prepared remarks .

Related to that why would that dynamic change near term barring some sort of inflection higher in volumes.

Speaker #6: Operator . Let's begin with Q&A .

<unk> Steve.

Speaker #4: Certainly , ladies and gentlemen , the floor is now open for questions . If you wish to join the queue to ask a question at this time , please press Star One on your telephone keypad should you wish to remove yourself from queue , you may press star two .

Just thank you for those very kind words, and I'll, let Mike jump into the response here in a moment, but it has been just a phenomenal opportunity over the last 10 years I want to thank Mike personally just a phenomenal partnership a true opportunity to work hand in hand with them, which has been just wonderful.

Speaker #4: In the interest of time , we do ask that you limit yourself to one question and one follow up . Once again , that will be star one on your keypad at this time .

<unk> will experience probably looking ahead, though is excited for the business as it is it could be if you look out now with the investments that have been made and our Waco coming to light above cost of capital returns out into the future of the business is incredibly well positioned for success going forward and the cash flow inflection that's hap.

Speaker #4: If you wish to join , queue to ask a question . Please hold a moment while we pull for questions and the first question today is coming from Ghansham Panjabi from Baird Ghansham .

Speaker #4: Your line is live . Please go ahead .

Speaker #7: Thank you . Operator I guess first off , just wanted to congratulate Steve . Wish him the best for the future . Obviously great run for the company and look forward to your next role .

As we sit here on this call with you today.

Outstanding So my thanks to make personally for all that we did together and looking forward to what lies ahead as well. So thanks for that Mike. Thank you, Steve It's been a real honor to your question Ghansham, but in terms of expectations in the quarter versus the results. We realized first I wanted to clarify there was no share loss for us.

Speaker #7: So congrats again . So so my first question , Mike , you know , just kind of looking back at three Q did the end markets track pretty much what you thought with the difference was just the share shift because of the bleach board conversion ?

Speaker #7: And , you know , related to that , why would that dynamic change near term barring some sort of inflection higher in volumes ?

There that was really a function of.

Customer purchasing patterns and when you look at their volumetric.

Speaker #5: Steve , just thank you for those very kind words . And I let Mike jump into the response here in a moment . But it has been just a phenomenal opportunity over the last ten years .

Performance through second quarter and into the third quarter in the third quarter.

The material that's been released so far by a handful of our larger customers. It. It shows we're actually outperforming.

Speaker #5: I want to thank Mike personally . Just a phenomenal partnership , a true opportunity to work hand in hand with him , which has been just a wonderful and honorable experience .

Their overall volumetric performance and that's really a function of our innovation our innovation in the quarter was another $52 million roughly 2%. So that's helping us kind of outperform some of the challenges that they're seeing in terms of their volumetric performance.

Speaker #5: Probably looking ahead , though , excited for the business as a as it could be . If you look out now with the investments that have been made , Waco coming to life above cost of capital returns out into the future .

Okay, and then in terms of with all the dynamics that are occurring.

Speaker #5: The business is incredibly well positioned for success . Going forward , and the cash flow inflection that's happening as we sit here on this call with you today is outstanding .

Diesel.

We feel confident with the <unk>.

<unk> EBITDA contribution specific to next year or does that depend on some of the some of the dynamics in the marketplace that are taking place at this point.

Speaker #5: So my thanks to Mike personally for all that we did together and looking forward to what lies ahead as well . So thanks for that , Mike .

No. Thank you for that look I'm very confident in Waco ramp up.

To deliver on the $80 million that we talked about and obviously, there's another $80 million behind that by way of reminder, the first $100 million of those savings was really a function of the mill closures Middletown, which was closed the end of May as you know and now we formally announced our Angus facility in Quebec will close by year end.

Speaker #5: Thank you Steve .

Speaker #6: It's been a real honor . to your question . Ghansham in terms of , you know , expectations in the quarter versus the results , we realized .

Speaker #6: First , I want to clarify , there was no share loss . You know , for us , there , that was really a function of , you know , customer purchasing patterns .

Speaker #6: And when you look at their volumetric , you know , performance , you know , through second quarter and into third quarter and the third quarter material that's been released so far by a handful of our larger customers , it it shows we're actually outperforming , you know , their overall volumetric performance .

And so that's all in line relative to the total impact of that in 2026.

To see kind of what the volumes look like as we go into 2026, I mean volumes are largely flat year on year, that's a different outcome than when they are down 2%. So if they were down a little bit next year, then we will need to look at our Kalamazoo K one machine.

Speaker #6: And that's really a function of our innovation , our innovation in the quarter was another $52 million , roughly 2% . So that's helping us kind of outperform , you know , some of the challenges that they're seeing in terms of their volumetric performance .

It will we will run that.

In a way that allows us to optimize opt.

Operating R. K two machine in Kalamazoo, which is our most efficient and Waco, which could be our most efficient paperboard manufacturing facility and if we do need to toggle a little bit we can take some downtime on our K, one machine and we're able to do that at a very reasonable cost.

Speaker #7: Okay . And then in terms of , you know , with all the dynamics that are occurring , do you still feel confident with the , you know , Waco EBITDA contribution specific to next year , or does that depend on some of the some of the dynamics of the marketplace that are taking place at this point ?

Thanks, Mike.

Thank you.

Speaker #6: No . Thank you for that . Look , I'm very confident in Waco's ramp up in delivering the $80 million . You know , that we talked about .

Thank you. Your next question is coming from George Staphos from Bofa. George Your line is live. Please go ahead.

Speaker #6: And obviously there's another $80 million behind that by way of reminder , for the first 100 million of that , those savings was really a function of the mill closures .

Thanks, So much I appreciate all the details also want to make a quick shout out to Steve.

Really important drivers you mentioned, Mike of wood graphics to come in the last 10 years, and really think and want to thank them for all the support he's had he had given us all on this phone.

Speaker #6: Middletown , which was closed at the end of May , as you know . And now we formally announced our East Angus facility in Quebec .

Speaker #6: We'll close by year end . So that's all in line relative to , you know , the total impact of that in 2026 .

Into very industry research when a researcher in graphical Steve Thanks, so much.

Speaker #6: You know , we have to see kind of what the volumes look like as we go into 2026 . I mean , if volumes are largely flat year on year , that's a different outcome than when they're down 2% .

In terms of my questions.

You mentioned, Mike the opportunity, perhaps to further improve productivity.

Speaker #6: So if they're down a little bit next year , then we will need to look at our Kalamazoo , K1 machine and we'll we'll run that , you know , in a way that allows us to optimize , you know , operating our K2 machine in Kalamazoo , which is our most efficient in Waco , which would be our most efficient paperboard manufacturing facility .

And alike, and Thats my phrasing not necessarily yours, what opportunity do you think you have how important is that in terms of <unk>.

<unk> and the commercial opportunities and to some degree.

The commercial challenges now that you're facing in the market to getting to that $80 million plus how much of that additional cost reduction of SG&A and so on is required or would it be would it be additive and then I had a follow on.

Speaker #6: And if we do need to toggle a little bit , we can take some downtime on our K1 machine . And we're able to do that at a very reasonable cost .

Yes, I think the big part of that my confidence in the <unk> on the Waco ramp up for 'twenty six is very high George I mean, the facility is.

Speaker #7: Thanks , Mike .

Speaker #6: Thank you .

Speaker #4: Thank you . Your next question is coming from George Staphos from B of A . George . Your line is live . Please go ahead .

In my prepared comments, it's come up a little faster than we even expected.

We're very happy with what we see so far so that's there I think the bigger question is around your visibility of what the end use markets are doing as we head into 2026 and as I said in my prepared comments, we're really going to focusing on things that we can control. So we've got some unusual competitive activity going on right now as I mentioned around <unk>.

Speaker #8: Thanks so much . I appreciate all the details . Also want to make a quick shout out to Steve . Really important driver .

Speaker #8: As you mentioned Mike , of what graphics become the last ten years . And really thank him . Want to thank him for all the support he's had .

Speaker #8: He's had given us all on this phone , both in terms of our industry research and research on graphics . So Steve , thanks so much .

Paperboard, we don't necessarily control that we don't necessarily control what the overall volumetric performance of our customers are they are working very heavily on that you hear and read about the things. They are trying to do to get their businesses going into right direction. So we're obviously cheering for them, but in the meantime, we.

Speaker #8: You know , in terms of my questions , you mentioned , Mike , the opportunity perhaps to further improve productivity and the like , and that's my phrasing .

Speaker #8: Not necessarily yours . You know what opportunity do you think you have ? How important is that in terms of Waco and the commercial opportunities and to some degree , the commercial challenges ?

We've got a number of levers that we can pull to really make sure that we operate the business as efficiently and effectively as possible and those kind of in order are first thing is capex is going to revert back to a more normalized level to 5% or below that's going to generate in excess of $350 million of free cash flow just like that and.

Speaker #8: Now that you're facing in the market to getting to that 80 million plus , how much of that additional cost reduction and so on , is required , or would it be , would it be additive ?

Speaker #8: And then had a follow on ?

Speaker #6: I think the big part of that , my confidence in the 80 on the Waco ramp up for 26 is very high , George .

<unk>.

Even though as you well know we've got a very low cost structure here. We're looking at every cost SG&A and plant cost that really allow us to make sure that we don't impact customer service levels, but given some of the reality is you've got going on in the market. We've got a challenge all of those things and we're doing that still internally here. So we will continue to do that and ultimately.

Speaker #6: I mean , the facility is , is , as I said in my prepared comments , has come up a little faster than we even expected .

Speaker #6: You know it . We're very happy with what we see so far . So that's there . I think the bigger question is around our visibility and what the end use markets are doing .

Speaker #6: As we head into 2026 . And as I said in my prepared comments , what we're really going to focus in on , in the things that we can control .

Taking a look at our inventory situation you have seen we released had a capital release. So far this year of about $30 million, we expect upwards of another 20 here in Q4.

Speaker #6: So we've got some unusual competitive activity going on right now . As I mentioned around bleach , paperboard , we don't necessarily control that .

And as we go into next year that'll be another area, where we're really looking at heart.

Speaker #6: We don't necessarily control what the you know , the overall volumetric performance of our customers are they're working very heavily on that . You hear and read about the things they're trying to do to get their businesses going in the right direction .

With Waco, and Kalamazoo online do you think about it we now have five very well capitalized or manufacturing facilities and that gives us unique perspective to be able to look at our overall system looked at our supply chain, taking a step back and really make sure that we're challenging kind of where we're at and what we can do so those are the levels levers.

Speaker #6: So we're obviously cheering for them . But in the meantime , you know , we've got a number of levers that we can pull to really make sure that we operate the businesses efficiently and effectively as possible .

Speaker #6: And those kind of in order are first thing is , CapEx is going to revert back to a more normalized level to 5% or below .

We really have in our control that's how I'm thinking about it as I mentioned, the Ghansham, if we need to take to manage our supply and demand on our coated recycled paperboard is waco really ramps up quick.

Speaker #6: That's going to generate , you know , in excess of $350 million of free cash flow just by that . And ultimately , you know , even though , as you well know , we've got a very low cost structure here , we're looking at every cost and a and plant costs that really allow us to make sure that we don't impact customer service levels .

Can toggle our Q1 machine, we're able to do that we're able to do it cost effectively.

Thanks, Mike.

Other question just more of an end market question. So foodservice I think from the chart was one of the end markets. It wasn't doing as well for you in the quarter foodservice <unk> been kind of an interesting market from our observations right you've had.

Speaker #6: But given some of the realities we've got going on in the market, we've got to challenge all those things, and we're doing that stuff internally here.

Speaker #6: So we'll continue to do that . And ultimately , you know , taking a look at our inventory situation , you've seen we released at a capital release so far this year of about $30 million .

Casual not doing so well, but quick service and picking up some steam.

The trends, we're seeing into the fourth quarter and to the extent that customers can know and you can share.

Speaker #6: We expect upwards of another 20 here in Q4 . And as we go into next year , that'll be another area where we're really looking at hard because with Waco and Kalamazoo Online , if you think about it , we now have five very well capitalized paperboard manufacturing facilities , and that gives us a unique perspective to be able to look at our overall system , look at our supply chains , take a step back and really make sure that we're challenging kind of where we're at and what we can do .

You might be limited in either ability what do you think the ability to talk about it what do you think is the outlook for foodservice, there and if that picks up it's actually a relatively higher margin end market for you. Thanks. So much good luck in the quarter and again, Steve. Thanks, So much.

Thanks, Jordan Thanks for that question I think.

You said it well I mean, the fast casuals definitely under pressure I mean last week edge poultry release I won't go through all the comments with the CEO really talked about.

Speaker #6: So those are the levers , levers that we really have in our control . That's how I'm thinking about it . As I mentioned to , if we need to , you know , take a to manage our supply and demand on our coated recycled paperboard as Waco really ramps up quick , you know , we can toggle our k one machine .

The 25% to 35 year old consumer unemployment.

Unemployment levels being higher disposable income being lower.

In his words that was driving them back into the grocery store and again I think thats, a worthwhile comment to make and it bring it up because as you know we built our portfolio to move with the consumer so that should happen given we're in every aisle grocery store. We actually are okay. We do see that trend around more of the <unk> impact, which makes sense given the price points are.

Speaker #6: We're able to do that and we're able to do it . Cost effectively .

Speaker #8: Thanks , Mike . My other question , just more of an end market question . So food service I think from the chart was one of the end markets that wasn't doing as well for you in the quarter .

<unk> versus fast casual and we're there and we also think that we've got a number of innovation ideas that we're working with those customers that ultimately will allow us to continue to earn a place at the table and grow our volume. So that's how we're thinking about that dynamic.

Speaker #8: Food service has been kind of an interesting market from our observations . Right . You've had , you know , fast casual , not doing so well , but quick service has been picking up some steam .

Speaker #8: What kind of trends are you seeing into the fourth quarter ? And to the extent the customers can know and you can share , you might be limited in either ability .

Do you think it grows Mike next year, I guess just to draw a bow on it or tie a bow on it.

Speaker #8: What do you think ability to to talk about it . What do you think is the outlook for food service there ? And if that picks up , it's actually a relatively higher margin end market for you .

Alright I.

I'd like to believe so but.

And George just difficult for me to talk about demand in there.

Speaker #8: Thanks so much . Good luck in the quarter . And again Steve , thanks so much .

Think about a quarter our customers have a hard time doing it if it does for us most likely because of innovation.

Speaker #5: Thanks , George .

Speaker #6: Thanks for that question . I think the you said it well , I mean the fast casual is definitely under pressure . I mean last week you had Chipotle release .

Okay. Thanks, so much.

Thank you. Your next question is coming from Matt Roberts from Raymond James Matt. Your line is live. Please go ahead.

Speaker #6: I won't , you know , go through all the comments . But the CEO really talked about you know , you know , the 25 to 35 year old consumer unemployment levels being higher , disposable income being lower .

Mike Steve Marc Good morning, Steve I'll Echo everybody else's. Thanks, I appreciate your comments and all the time over the years.

Speaker #6: And in his words , that was driving them back into the grocery store . And again , I think that's a worthwhile comment to make .

And if you want to get a risky comment on that last question I'll cede the floor to you.

Speaker #6: And I bring it up because as you know , we've built our portfolio to move with the consumer . So if that shift happens , given we're in every aisle of the grocery store , we actually are okay .

<unk>.

But maybe maybe on the competitive price pressure on SBS into the U K on CRB.

Speaker #6: We do see that trend around more of the QSR impact , which makes sense given the price points of QSR versus fast casual .

Hi, guys, if I missed it how much of a drag was that in <unk>. How long are you expecting to labs and while I believe your Sps is mostly cup stock are you able to sell incremental SBS or C U K.

Speaker #6: And we're there . And we also think that we've got a number of innovation ideas that we're working with . Those customers that ultimately will allow us to continue to earn a place at the table and grow our volumes .

Similar to your competitors at the extended CRB, given that price spread or how is your own sales mix by patient types changed in this environment or do you expect any shift in 'twenty 'twenty six any any incremental color on how the tons from Waco later in over 2026 and that impacts your mix would be helpful. Thank you again.

Speaker #6: So that's how we're thinking about that dynamic.

Speaker #8: Do you think it grows , Mike , next year , I guess just to draw a bow on it or tie a bow on it ?

Speaker #5: Boy .

Speaker #6: You know , I'd like to believe so . But you know , again , George , it's just difficult for me to talk about demand .

Speaker #6: I mean , every time I think about a quarter , our customers have a hard time doing it . If it does for us , it will be most likely because of innovation .

Yes, thanks, Pat so I'm going to address the SBS CRB C U K.

Speaker #8: Okay . Thanks so much .

Comments, we've got a fair amount of inbound and that as you can imagine over the last week or so so the first thing you need to know you've seen our volumes we have not lost any share and we are going to be very focused on making sure. We don't lose any share because of that you think about it you've got a.

Speaker #4: Thank you . Your next question is coming from Matt Roberts from Raymond James . Matt , your line is live . Please go ahead .

Speaker #9: Mike . Steve , Mark . Good morning Steve I'll echo everybody else's . Thanks . Appreciate your comments and all the time over the years .

Sure.

We're making Sps and we make it we've got extra.

Speaker #9: And if you want to want to get a comment in on this , this last question , I'll see the floor to you .

Texarkana, we know the cost structure on that.

Much more expensive to make uncoated recycled paperboard so from our standpoint, we would never substitute Sps for CRP given the cost advantage, we happens at its lower cost baked ERP coated recycled paperboard than it is to make bleached paperboard. So the margin profile just simple arithmetic there in terms of what that look.

Speaker #9: But maybe , maybe on the competitive price pressure on SBS and cook on CRB , I apologize if I missed it . How much of a drag was that in for ?

Speaker #9: Q how long are you expecting it to last ? And while I believe you're SBS is mostly cup stock , are you able to sell incremental SBS or cook similar to your competitors at the expense of CRB ?

And again, we're operating that mill, and we operate Kalamazoo and Waco, and what I'll tell you is that the capex requirements of the Virgin Paperboard manufacturing facility are four times, what they are well coated recycled paperboard facility that is again part of the decision. We made when we invest so heavily in Kalamazoo and in Waco.

Speaker #9: Given that price spread ? Or how is your own sales mix by paper types changed in this environment , or do you expect any shift in 2026 ?

Speaker #9: Any any incremental color on on how the tons from Waco layer in over 2026 that impacts your mix would be helpful ? Thank you again .

Because of that phenomenon so over the medium to long term, we're highly confident that we can continue to.

Speaker #6: Yeah . Thanks , Pat . So I'm going to address the SBS Crbc . Okay . You know comments . We've had a fair amount of inbound and that as you can imagine over the last week or so .

Not only protect our share, but wind shear bleached because the cost of capital returns start to getting away there.

Speaker #6: So you know, the first thing you need to know, you see it in our bodies. We have not lost any share.

Ultimately that is something that needs to find its own level. There is I think risky in their last the.

Speaker #6: And we're going to be very focused on making sure we don't lose any share . You know , because of that , if you think about it , you've got a , you know , a product , you know , making SBS and we make it .

Article or so talked about 500000 tons of excess.

Capacity in the North American market, we would agree with that if not a little bit more so that's got to be dealt with that's really not something they graphics will deal with as you know our focus is on package sales make cartons, we make ramps we make comps we.

Speaker #6: We've got , you know , mill that does that Texarkana . So we know the cost structure on that . It's you know much more expensive to make than coated recycled paper board .

Speaker #6: You know , so from our standpoint we would never substitute SBS for CRB given , you know , the cost advantage we have .

Speaker #6: In fact , it's lower cost to make CRB out of recycled paperboard than it is to make bleach paperboard . So , you know , the margin profile is simple arithmetic there in terms of what that looks like .

We sell value added packaging on 95% of everything we do is in that area. So from our standpoint I mentioned this in my prepared comments most of this was on.

Speaker #6: And again , we're operating that mill and we operate Kalamazoo in Waco . And what I'll tell you is that the CapEx requirements of a virgin paperboard manufacturing facility are four times what they are .

And the package price and not on the actual paperboard level itself, which makes sense given the dynamic we saw and what you saw happened with pricing in the quarter.

We're confident in our ability to over time.

Speaker #6: You know , coated , recycled paperboard facility that is , again , part of the decision we made when we invested so heavy in Kalamazoo and in Waco because of that phenomenon .

To protect our share, but continuing to grow it.

The high quality low cost maturity, we have coming out of our coated recycled pulp platform. So hopefully that gives you a little bit of color into how we're thinking about.

Speaker #6: So over the medium to long term , we're highly confident can continue to not only protect our share , but win share from bleached , you know , because the cost of capital returns start to get in the way .

Really appreciate it Mike as always thank you and then maybe if I could squeeze one quick follow up on the cash flow for next year any flexibility in terms of the Capex number you said I think 5% sales are lower any growth projects that you could potentially defer and bring up 5% in any lower or any other cash costs associated with the ramp up thanks again for taking the question.

Speaker #6: There . And ultimately , that's something that , you know , needs to find its own level . There's you know , I think risky in their last article or so talked about 500,000 tons of excess , capacity in the North American market .

Okay.

Speaker #6: We'd agree with that . It's not a little bit more . So that's got to be dealt with . But that's really not something , you know , that graphic will deal with .

Yes.

We're looking at all of that as you would expect and we'll dial. It in next time, we talk to you, we'll give you a little bit clearer view into kind of what that looks like for 2026, obviously, but it's a good question and something we're looking at all the time.

Speaker #6: As you know , our focus is on , you know , package sales make cartons . We make wraps , we make cups , we sell value added packaging , 95% of everything we do is in that area .

But what I'm very confident he does the $350 million of inflection that will occur.

Speaker #6: So from our standpoint , I mentioned this in my prepared comments , you know , most of this was on a on the package price and not on the actual paperboard level itself , which makes sense , you know , given that we saw and what you saw happen with pricing in the quarter , we're confident in our ability to , you know , over time , you know , not only protect our share , but continue to grow it with the high quality , low cost material we have coming out of our coated , recycled platform .

Year on year.

Okay.

Thank you. Your next question is coming from Charlie Muir Sands from BNP Charley. Your line is live you May go ahead.

Yes. Good morning, Thanks for taking my questions.

Supposed to be on.

Can you just.

This empowered patient around.

Yes.

Speaker #6: So hopefully that gives you a little bit of color into how we're thinking about .

Got you.

Watson is $5 million.

Speaker #9: Certainly really appreciate it . Mike , as always , thank you . And maybe I could squeeze one quick follow up in on the cash flow for next year .

Why are you being launched.

Now.

Thanks for that Paul <unk>, the fourth quarter.

Speaker #9: Any flexibility in terms of the CapEx number ? You said , I think 5% of sales are lower . Any growth projects that you could potentially defer and bring that 5% in any lower or any other cash cost associated with the ramp up .

And how should we be thinking about wages.

The key investments.

Next year.

With this backdrop robust what bodies.

Speaker #9: Thanks again for taking the questions .

Speaker #6: Yeah , it's a you know , we're looking at all that as you'd expect . And we'll dial that in next time we talk to you .

Close to $80 million or would that be double counting that's the first question.

Charlie Good afternoon to you my apologies if I don't hit this properly having a difficult time hearing you I think your question was around the phasing of the one time costs associated with Waco, which is outlined in our materials to be $65 million to $75 million assuming that was your question.

<unk> of that is like a two thirds this year one third 2026.

If I didn't get it right. Please please come back.

Great Yeah, thanks very much.

Hopefully you can hear me can you also give us an update on the.

Progressing selling you will set the Rainier premium CRB.

Why you're achieving.

Specific price premium for that now.

And then one final piece. It can you just talk about the deleverage that we're expecting in the fourth quarter I forget.

The three five to three seven times net debt to EBITDA at year end. Thank you.

Yes, thanks for that so.

I'm going to address the.

Okay.

The question around.

Rainier first and then I'll cover the leverage listen on Rainier, It's a great product and Doug one of the great things. We have is we've got the most modern cleaning systems and both Kalamazoo and in Waco that give us a tremendous competitive advantage over anybody else in the North American market, we've got Kurt in quarters on all three of our paper.

Machines that give us the ability to really have brightness.

Approaches.

Bleach paperboard levels now ready or is actually used it's one of the tools, we're using to make sure. We don't lose any share as we're competing against the SBS guys know ultimately that does have some margin impact the pricing. We would expect to get is a little lower as you would appreciate because they are lowering their packaging prices in order to compete with CRB.

So that's something we have to work our way through but we have the levers to pull and we have the capabilities to do it. So I really am happy that we've got that great and our our portfolio mix and relative to year end leverage yet we've got a range of three five to 3.7.

For a year at numbers in terms of overall debt.

That's really a function of a little bit of a reduced EBITDA number as you can imagine and the fact that we wanted to be opportunistic buybacks of shares this year given the dislocation we talked to our board about that given the ultimate <unk>.

A free cash flow that will happen here in 2026.

It made sense to do.

And as I said in my prepared comments as we go into 2026, but that free cash flow will be looking to delever as well as return cash to shareholders in a way that makes sense to drive long term shareholder value.

Charlie This is mark.

Youll recall that Q4 is typically a positive free cash quarter for us and so that that will help us get that leverage down.

Right.

Uh huh.

Right.

Hi.

Thank you. Your next question is coming from Gabe <unk> from Wells Fargo. Gabe. Your line is live. Please go ahead.

Mike Good morning, Steve pleasure working with you Mark good morning as well.

I had a question about working capital and cash flow as well into next year.

Steve can you help us with.

Some of the AR factoring thats been done or reverse factoring just give us a sense for what that looks like and maybe how that will be managed in the 2026.

Hey, Mark would you handle that question Mark.

Mark handle it.

Oh I'm sorry.

This is Steve the question is around <unk>.

Clients accounts receivable financing gave there won't be any material changes year over year relative to that in terms of the expectations of where we would be at the end of 'twenty five 'twenty six that's not really an enabler for cash flow in 2006 as Mike mentioned in his comments the 26 cash flow any.

Um, you know, for a year end numbers, uh, in terms of overall debt. Uh, you know, that's really a function of a little bit of reduced debit on number, as you can imagine. Uh, and the fact that we wanted to be opportunistic to buy back some shares. This year, given the dislocation, we talked to our board about that, and given the ultimate, uh, you know, inflection of free cash flow, that will happen here in 2026 uh, that made sense to do. Uh, and as I said, my prepared comments, you know, as we go into 2026 with that free cash flow, we'll be looking to de-lever as well as

<unk> is really about reduce capex rich.

Return cash to shareholders in a way that makes sense. It drives long-term shareholder value. And Charlie, this is Mark. Um, yeah, you'll recall that Q4 is typically a positive free cash quarter for us, and so that will help us get that leverage down.

Our reduced inventory levels.

The rank. We're looking for.

So some managing of of SG&A costs, those are going to be the levers that'll be pulled to drive cash flow that confidence in the $7 million to $800 million.

So it won't be around it won't be about the accounts receivable programs being materially different and just to clarify gave capex. This year running $854 50 next year, so that delta is $400 million.

Right, thanks. Bye. Thank you. Your next question is coming from Gabe. Haida from Wells, Fargo, Gabe. Your line is live. Please go ahead, Mike. Good morning. Um, Steve pleasure working with you mark. Good morning as well.

Cash flow inflection.

Um I had a, a question about working capital and cash flow as well in the next year. Um Steve can you help us with

Okay and then.

Unfortunately, I feel like there's still some confusion around the startup costs of $65 million to $75 million.

Can you give us a little bit more specificity around it.

Thats interest capitalized interest costs.

Those are kind of I'll call them wasted tons, but.

Um, some of the factoring that's been done or reverse factoring, just give us a sense for what that looks like and maybe how that will be managed in the 2026 handle that question. If you would. Yeah, Mark, we'll let Mark handle it.

Rolling 10 tons, often in recycling them through and if I heard you right. Mike there is $65 million to $75 million this year and that reduces down to $35 million next year. So for a net positive of 30.

And again as that.

Is that the same as the $80 million that we're talking about in terms of contribution from the investment. Thank you.

Okay. So theres a number of things to unpack there at the $80 million EBITDA run rate. So that's all on the EBITDA line into next year.

So I'm sorry it's the this is Steve. The question is around our uh Finance Council receivable financing. Dave there won't be any material changes year over year relative to that in terms of the expectations of where we would be. At the end of 25 verse 26, that's not really an enabler for cash flow in 26. As Mike mentioned in his comments, the 26 cash flow, enablement is really about reduced capex, uh, reduced inventory levels uh also some managing of of sg&a costs. Those are going to be

The $65 million to $75 million. This as we've talked about this a number of quarters now are the onetime costs cash costs associated with the startup of the machine. Charlie's question was what's the phasing of that that $65 million to $75 million two thirds of that and this year. One thirds of it is next year I'm going to ask Chuck.

Be the the levers that will be pulled to drive cash flow that confidence in the 7 to 800 million.

Fischer you give a little bit of detail on the breakdown of that just high level buckets. So then you kind of understand what we're talking about 38, yeah. That's mostly just operating costs associated with running the facility prior to startup so as.

So it it won't be around. It won't be about the accounts receivable programs being materially different and just to clarify Gabe capex, this year running 850, 450 next year so that Delta is million dollars of cash flow reflection.

As we as we train the team and bring the team on board.

At the facility ready to be up and running anything that does not get capitalized as what we've been capturing in that 65 to 70.

$75 million and yes that is a multiyear number not just a signal a year number $65 million to $75 million. The other point on the capitalized interest that of course is something that we do during the period of construction Apple of course stop once the.

Okay. And then unfortunately I I feel like there's still some confusion around these startup costs, the 65 to 75 million. Can you give us a little bit more specificity around if that's interest capitalized interest costs? If those are kind of I'll call them wasted tons. But um, you know, rolling test, tons off and and recycling them through. And if I heard you right, Mike, there's 65 to 75 million this year and that reduces down to 35 million next year. So for a net positive of 30,

And again, is that the same as the $80 million that we're talking about in terms of contribution from the investment? Thank you.

<unk>.

Asset comes into service, so we won't see capitalized interest again in 2026.

Okay or in Q4.

Well, a little bit potentially a little bit in Q4 as the asset came into service during Q4.

And there is a little bit of continued spend but.

And then just regular capitalized interest, but for the primary Waco asset that would cease.

Okay, so there's a a number of things to unpack there, the 800 million is even, uh, run rate. You know? So that's how on the IBA line into next year. Uh, the, the 65 to 75 million is this is we've talked about this. The number of quarters now are the 1 time costs cash costs associated with the startup of the machine. Charlie's question was, you know, what's the phasing of that of that? 65 to 75 million 2/3 of that in this year?

Thank you.

Youre welcome.

Thank you. Your next question is coming from Arun Viswanathan from RBC a ruined your line is live. Please go ahead.

Great. Thanks My question.

Steve Great working with you. Thanks for all the help and insight over the years.

And I look forward to next chapter as well so I guess my question is around.

Maybe initial thoughts on 'twenty six.

And specifically around Waco.

Maybe you can just kind of give us some of the assumptions underlying the $80 million EBITDA uplift and if those are still intact. I believe most of those are around cost per ton.

But is there any volume component and then related matter I guess.

So um as we as we train the team and and bring the team on board to to have the facility ready to be up and running anything that does not get capitalized, um, is what we've been capturing in that, 65 to 75 million. And yeah, that is a, a multi-year number not, not just a single year number, the 65 to 75 million. The other point on the capitalized interest, that, of course, is something that that we do during the period of construction. That will, of course, stop once the the, um, asset comes into service. So once the capitalized interest again, in 2026

Do you still feel the same way about 27 as well another $80 million uplift or is that.

Okay, or in Q4.

Also somewhat volume dependent.

So arun I'm going to kind of take a step back and make sure I kind of walk through this again so that.

Want to make sure that my points are clear here, we're very confident in our ability to deliver $80 million in Waco as it ramps up next year and then in 2027 there'd be another $80 million by way of reminder, that's 160 in total.

Well, a little bit of potentially, like you a little bit in Q4, is the asset came in service during Q4 and and there's a little bit of contingent spend but, um, and and then just regular capitalized interest but for the primary. Whoa, asset. And that would cease

$100 million of that as I mentioned is focused on kind of.

Fixed costs are not running Middletown, and east Angus So that'll come in there next year will be ramping up we won't be at full run rate as I said in my prepared remarks from a volumetric standpoint for 12 to 18 months, but our confidence level in the 80 for next year is very high.

Thank you. You're welcome. You're welcome. Thank you. Your next question is coming from Arun viswanathan from RBC. I ruined your line is live. Please go ahead. Great. Thank you. My question. Uh Steve great work with you. Um, thanks for all the the help and insight over the years. Um,

We had always said that as we kind of brought it online in the outlying years, each volumetric growth that hasn't changed.

And the way, we're going to deal with that as I mentioned to George earlier is we'll toggle between.

Running our K two machine in Kalamazoo, which is the new one we just operate it now for the last four years away co mail those are going to run wide open.

And we will service our business at our lowest cost assets the highest quality lowest cost will use our K one machine, which is the smaller of the three machines to take any.

Downtime than we need to take to make sure that we match our supply and our demand and of course, we will be working quickly to make sure that we fill that out a lot of it depends on you know kind of our customers' volumetric performance as I mentioned earlier, if they're able to get back to at least flat volumes in 2026 or 2026.

That's a big deal for us because our our innovation has consistently added close to 2% of volume. So that's really how to think about Waco and how.

And I look forward to the next chapter as well. So um, I guess my question is around, uh, maybe an initial thoughts on 26, um, and and specifically around Waco. Um, maybe you can just kind of give us uh, some of the assumptions underlying the 80 million. Um, Evita uplift and if those are still intact, uh, I believe most of those are uh, around cost per ton. Um but is there any volume component and then um, related matter, I guess. Uh, you know, do you still feel the same way about 27 as well? Another 800 million uplift or is that um also somewhat volume dependent, thanks so R. I'm going to kind of take a step back and make sure I kind of walk through this again. Um, so that uh I want to make sure that my points are clear here. We're very confident in our ability to deliver 80 million dollars in wages and ramps up next year. Um, and then in 2027, there would be another 800 million dollars by a reminder that's 160 in total. Um,

We're planning for 2016 and beyond.

Yeah.

Okay. Thanks for that Mike.

Just on the markets then it sounds like beverage.

Was a little bit weaker in Q3, and foodservice was as well.

Do you expect that to continue to remain weak as you move into Q4 and 26.

And maybe you can also comment on some of the other markets food.

You know, 100 million of that as I mentioned is focused on kind of the the fixed costs of not running Middletown and he's saying it. So that'll come in there next year. We'll be ramping up. We won't be at full run rate as I said in my prepared remarks from a volumetric standpoint for 12 to 18 months but our confidence level in the 80 for next year is very high. Uh we had always said that as we kind of brought it online and the outline years, we need some volumetric growth uh that hasn't changed. Um and the way we're going to

And household and health and beauty.

Yes.

And have you seen any change in in innovation sales in those markets.

We've been hearing anecdotally that there may be some trade down amongst the consumer packaging companies.

Into traditional substrate, maybe a little bit less willingness to.

Test the waters with some.

Led products I don't know if that's what you're hearing as well, but maybe you can just comment on on what youre seeing on that side. Thanks.

Yeah, I'll start by saying I don't expect to see much change in Q4 versus what we saw in Q3 I mean October started off substantially similar to what we saw in Q3.

You get to read our customers ex serves as I view.

And as I talked about earlier fast casual is down a little bit <unk>, maybe a little better.

It's hard for us to know exactly what our customers' volume performance is right now and I said that in my prepared remarks, given some of the things that they're going to manage their balance sheets and production schedules around.

I deal with that. Is I mentioned to George earlier is, we'll toggle between um, you know, running our K2 machine in kazoo which is the new 1226 or 2026. Uh, you know, that's a big deal for us because our our Innovation is consistently added close to 2% of volume. So that's really how to think about Waco, and how, uh, we're planning, uh, you know, for 26 and Beyond. Okay, thanks for that Mike. Um, just on the markets then, uh, it sounds like, you know, beverage

The holidays, and so on and so forth. So that's part of why we're being a little bit.

Deliberate and calling that out.

As we head into 2026 look I know every one of these customers we talk to them. All are very focused on getting there are the volumetric outperformance back they got a growth.

And they're doing the things that they believe are required to do that we see a lot of new Ceos, we see a number of restructurings that are going on.

Um, you know, was a little bit weaker in Q3 and food service was as well. Um, do you expect that to continue to remain weak as you move into Q4 and 26? Um, and maybe you can also comment on, uh, some of the other markets food and, and, uh, household and health and beauty. Um, I guess I'm, I'm and have you seen any change in in Innovation sales in those markets? Um, you know, we've been hearing anecdotally that there are, uh, maybe some, uh, trade down.

C E education at different levels. So hopefully that's a nurse itself into volumetric performance.

Heading into 2026.

For sure.

I would just add a couple of.

Uh, you know, amongst uh the the the consumer packaging companies, um, into traditional substrate. Um, maybe a little bit less, willingness to assess the waters with some new innovation lead products. I don't know if that's what you're hearing as well, but maybe you can just comment on on what you're seeing on that side. Thanks. Yeah. I

Things.

And I don't expect.

Buena just add a couple of basis Mark in the beverage market typically you see promotion activity in the fourth quarter, but we also saw some changes in production schedules by our customers some time, taking downtime around the.

See much change in Q4.

3, I mean, October.

July four.

Didn't happen to all of our customers. This year some of that may happen in the fourth quarter. So that has a little bit of variability. We're also certainly in the food business continuing to see a lot of unevenness cusp.

Customers moving from one category to another to try to save money and not so much destocking by the by the food suppliers, but strategic stocking as Steve as Mike mentioned in terms of trying to get their year end numbers in cash where they want it so a lot of unusual behavior.

But no real change in any of the trends.

Well, thanks for that Marc and just to clarify so it sounds like you will have the $80 million next year and then aside from that it's mainly volume and price that we should we should be keeping in mind as far as.

What the drivers are for for any kind of EBITDA bridge is that correct.

Um, you know, you get to read, you know, our customers excerpts as as I do, um, and as I talked about earlier fast, casual is down a little bit, you know, qsr maybe a little better. Um, it's hard for us to know exactly what our customers volume performance is right now. And I said that in my prepared remarks given some of the things that they're doing to manage their balance sheets and production schedules around, you know, uh, the holidays and so on and so forth. So that's part of why we're being a little bit, uh, you know, deliberate and and calling that out, um, you know, as we head into 2026. Look, I know every 1 of these customers because we talked to them all are very focused on getting their, uh, their volumetric, uh, performance back. They got to grow, uh, and they're doing the things that they believe are, are required to do that. We see a lot of new CEOs, we see a number of restructurings, you know, that are going on. Uh, we see, you know, agitation at different levels. So hopefully that's a nurse itself in biometric performance. Uh,

Yeah, that's exactly right.

Thanks.

As we head into 2026, um, you know for sure I would just add a couple of things.

Thank you. Your next question is coming from Mark Weintraub from Seaport Research Mark. Your line is live. Please go ahead.

Thank you and thank you Steve for your help over the last few years.

So I just wanted to revisit again on Waco.

In terms of the ramp.

<unk>.

Order of magnitude how much tonnage would you be expecting to produce in 2026.

And I just add a couple of things to Mark. Um, in the beverage Market, typically you see promotion activity in the fourth quarter. But we also saw um, some changes in production schedules by our customers. Um, you know, sometime taking down time around uh, the July 4th uh, that didn't happen till all of our customers this year, some of that may happen in the fourth quarter so that adds a little bit of variability

Yes, Mark I'm, not going to call that out I mean, it's going to be a as you can think about it though we put it into service here in October it's a 12 to 18 month ramp so that's pretty quick.

Youll coming up.

For sure and so it's so let's say we were to assume it's 400000 to say something.

So I guess, what I'm just trying to think through is that east Angus has 100000 tons more.

Um, we're also certainly in the food business. Continuing to see a lot of unevenness, uh, customers moving from 1, uh, category to another, to try to save money and not so much destocking by the, uh, by the Food suppliers, but strategic stocking as Steve as Mike mentioned. Uh, in terms of of trying to uh, get their year end numbers and cash where they want it. So a lot of uh, unusual behavior, but no real change in any of the trends.

Middletown.

I think a little less than 200, but was down for about half of the year correct me if I'm wrong. So we're talking about like 200000 tons of replacement board effectively.

So just it's the rest because youre, bringing down inventory this year or maybe if you can just kind of walk through the math on.

Where the Waco ton what they fill in for Andrew or is there a little bit of growth that does just to kind of.

To meet the full production that youre expecting to have from from Waco next year.

Okay, thanks for that Mark and just to clarify. So it sounds like you will have the 80 million next year. Uh and then aside from that, it's mainly volume and price that we should we should be keeping in mind as far as uh what the drivers are for for any kind of Evita bridge. Is that correct? Yeah that's exactly right. Excellent. Thank you. Your next question is coming from Mark win trial from Seaport research. Mark, your line is live. Please go ahead. Thank you and and thank you Steve for for your help, um, over the last few years. Um,

That'd be super helpful.

Thanks for the question Here's the math I'm going to walk you through if you really look at east Angus and which is our facilities will shut down at the end of the year and our Middletown facility, which closed at the end of May and then what others have announced that Theyre closing its 475000 tons.

So, I just wanted to revisit again on Waco, uh, in terms of the ramp, um, order of magnitude, how much tonnage would you be expecting to produce in 2026?

<unk> of course adds 550000 tons to the overall market so on a net basis there.

Yeah, Mark, I'm not going to call that out. I mean it's it's going to be as you can think about it though. You know, we put it into service here in in October. It's a 12 to 18 month Ram. So that's pretty quick, you know. Uh, you know, coming up

It's about 75000 tons of additional capacity, that's coming online I will tell you. This mark I need Waco, Youll come up right now to make sure that I'm able to service my customers you saw the NPA data our inventories are down pretty dramatically on C U K in CRB.

Yes.

Deliberate plan on our behalf year relative to what we did.

So we need those pumps coming off of the Waco.

Michigan to help service, our customers and make sure that we can take care of our our overall demand, but you're on a good note out earlier. This week, you talked a little bit about.

For sure. And so, so let's say we were to assume, it's 400,000 to say something. Um, so I guess what, I'm just trying to think through is that East Angus is a 100,000 tons, Middle Town. Uh, I think a little less than 200 but was down for about half the year. Correct me if I'm wrong. So, we're talking about like, 200,000 tons of replacement for defectively. Um, and so I just is, is the rest because you're bringing down inventory this year or maybe if you can just kind of walk through the math,

K two in Kalamazoo, and Waco, and balancing that production with RK. One machine I think you got a pretty right. So I don't have a whole lot more that I think I need to add.

Okay and I fully appreciate that.

Once everything is.

On, um, you know, where the wounds what what they fill in for and or is there a little bit of growth that does just to kind of uh to meet the full production that that you're expecting to have from from Waco next year? Um and that that'd be super helpful.

Reset we should be.

At that target levels of profit would be I'm, just trying to make sure that.

I fully understand the transition period, though as we as we go hopefully into kind of a better 2027 demand environment et cetera, and everything is sort of kicking in to gear.

And I guess I'm, a little I, just wanted to clarify because implicit in what you're saying and I don't mean to be.

Thanks for the question. Here's the myth. I'm going to walk you through. If you really look at East Angus, which is our facility, it'll shut down at the end of the year, and our Middletown facility was closed at the end of May. And then what others have announced that they're closing, it's 475,000 tons. Whoa, of course, adds 550,000 tons, you know, to the overall market. So on a net basis there, you know, it's about 75,000.

Our positional anyway here, but implicitly what you're saying is that you basically have gotten a lot of the business from the other capacity that was shot.

And I'm not worried there something I'm missing is it again is that that inventory reduction, which youre doing this year and therefore, you're not doing it next year and so that's why those would be pretty big numbers. So just trying to fully understand.

<unk> I think that's fair we have work to do in our opinion with some of the other optionality with some of the other substrates behalf.

Waco, and killing me, you'll help enable that as well relative to our overall supply chain, but I think like I said, you've got the math pretty well set and we're going to match our supply to our demand on CRB like we always do and that swing machine will be RK, one machine in Kalamazoo.

K2 in Calum, zoo, and and Waco and balancing, that production with rk1 machine. I think you got it, pretty. Alright. So I don't have a whole lot more that I think I need to add.

Okay I appreciate it thank you.

Thank you.

Your next question is coming from Mike Rockland from Truest Securities. Mike. Your line is live. Please go ahead.

Yes, Thank you, Mike Steve chunk and Mark for taking my questions and I'll just echo what everybody else has said Steve. Thank you for all your help over the years and wishing you the best of luck in the future.

In terms of the 26 free cash flow bridge, obviously, you guys have expressed.

Confidence in the $700 million to $800 million of free cash flow next year.

Try to get some more color around that because year to date adjusted free cash flow as you pointed out your premise releases minus $232 million. So you have the $400 million of Capex step down so you're looking at a starting point of $68 million from the free cash flow.

So you get a few hundred million dollars of free cash flow at <unk> due to working capital unwind, but also you are contending with I think.

Okay. And and I fully appreciate that. Um, you know, once everything is uh, reset we we should be, you know, at at the Target levels of profitability. I'm just trying to make sure that um, fully understand the transition period though. Um as we as we go, you know, hopefully into kind of a better 2027 uh, demand environment, Etc, and everything is sort of kicking into gear. Um and and I guess I'm a I'm a little I just want to clarify because implicit in what you're saying and I don't mean to be um oppositional any way here but implicit in what you're saying is that you you basically have gotten a lot of the business from the other capacity that was shot. Um, and, and I'm not or or is there something I'm missing? Uh, is it again, is it that inventory reduction, which you're doing this year and therefore, you're not doing it next year? And so that's why, because those would be pretty big numbers. So just trying to fully understand. Let's see here. I think that's fair, we have work to do in our opinion, you know, with some of the other options out there with some of the other substrate.

A higher working capital cash taxes, and interest and put you called that on your call last quarter about 300 $350 million. So can you help me reconcile those moving pieces I just mentioned with the $7 million to $800 million, you're still confident you will achieve next year.

We have and and Waco, and Kelsey will help enable that as well relative to our overall supply chain. But I think like, I said, you've got the math pretty well said. And we're going to match our our supply and demand on crb like, we always do, you know, and that swing machine will be our K1 machine in Kalamazoo.

Yes, I'm going to focus in on 2026 and give you a little bridge you have to remember Michael and you know this Q4 is always a big cash quarter. So we'd expect that gap to close dramatically.

Okay, appreciate it. Thank you.

Thank you. Your next question is coming from Mike Rockland from truist Securities. Mike, your line is live. Please go ahead.

It always starts every year.

And as we look at next year, we've got the contribution from Weibo and I've already talked about that and then the bridge is really pretty straightforward. It's around the capex reduction, which you've already talked about which is close to $400 million year as Mark just mentioned.

Yes, thank you Mike, Steve Chuck, and Mark for taking my question and I'll just Echo what everybody else says. Uh, Steve, thank you for all the your help over the years and wishing you the best of luck in the future.

Um,

We've got cost control that we've got at our disposal both in terms of SG&A as well as you know things we would do at the plant levels of discretionary spending.

And we've got inventory that.

We're really going to focusing on to it and like I said I'm really excited about our new platform with five large well capitalized.

In terms of the the 26, Free Cash Flow Bridge. Obviously, you guys have expressed confidence in the 700 to 800 million dollars of free cash flow next year, just try to get some more color around it because year to date adjusted free cash flow. As you pointed out in your press release is minus 332 million. So you have a 400 million dollars of capex or, you know, step down. So you're looking at a starting point of 68 million in terms of free cash flow.

Paperboard manufacturing facilities that Theres more capital release that we can work on both in terms of roll stock as well as finished goods as we roll into next year and that's the bridge and that's what gives me a really high level of confidence in the $7 million to $800 million next year.

Uh, I know you get a few hundred million dollars of free cash flow in 4K, due to working capital unwind. But also you are contending with, I think, um,

Got it so would you say.

Right.

I'm sorry, guys.

Hey, this is chuckling here I was just going to add that this is one of the areas that I've dug into over the last few weeks and I share my high level of confidence in this area. He mentioned the levers we know what they are going to pull them. In addition to that cash federal cash taxes are going to be very favorable for us next year near zero.

<unk>.

And so we know what the levers are.

Ready to volume and we have a high level of confidence in the numbers.

Thank you for that Chuck and I didn't mean to interrupt you there.

So it sounds like last quarter, you mentioned 300 $250 million of interest cash taxes, working capital that sounds like that's coming down significantly as well.

Okay.

We're going to have to take that bridging offline, Michael let's flip to that again I'm focused as I said the levers that we're pulling here in the $7 million to $800 million will help you get your model rates that it works, but let's take that offline after the call.

A higher working capital cash taxes and interest you. What you call that on your call last quarter of about 300350 million. So can you help me reconcile? Those moving pieces? I just mentioned with the 7800 million, you're still confident, you will achieve next year. Yeah, I want to focus in on on 2026 and give you a little Bridge. You have to remember Michael and you know, this Q4 is always our big cash quarter, you know. So we'd expect that that Gap to close dramatically uh, you know, as it always does every year. Um, and as we look at next year, we've got the contribution from whoa. We've already talked about that and then you know, the bridge is really pretty straight forward. It's around the capex reduction, you know, once you've already talked about which is, you know, close to 400 million dollars a year as Mark just mentioned. Um, we've got, you know, cost control, you know that we've got on at our disposal, uh, both in terms of sg&a as well as, you know, things we would do with the plant levels and discretionary spending. Um, and we got inventory, you know, that, uh, we're really, really going to focus in on, too. And like I said,

Sam I know Paul one quick follow up here just in terms of the 550000 tonnes per week.

How comfortable are you, bringing on that full amount of the capacity in the next 12 to 18 months in a market that's depressed or what are you assuming that we're not going to be in the same place you know 12 months from now.

I'm really excited about our new platform with 5 large, well capitalized, uh paperboard manufacturing facilities that there's more Capital to release that we can work on you know, both in terms of of roll stock as well as finished goods. You know, as we roll into next year and that's the bridge and that's what gives me really a high level of confidence and uh the 7,800 million dollars next year. Got it. So will be

So just wondering if a lot of times I stand on it.

That basis to $75 until they get that but the market itself as you pointed out your competitors are acting irrationally.

How would you.

You said to bring this fully on much of anything muscle or do you have flexibility to basically pushed out further if SBS folding carton does not improve materially in the near term.

We're going to ramp Waco as fast as we can it's our lowest cost highest quality mill along with our K two machine in Kalamazoo and as I've mentioned in a number of times here now if I need to match.

I'm sorry, I got it. Hey, this is Chuck. I was just going to add that this is one of the areas that I've dug into over the last few weeks, and I share my high level of confidence in this area. He mentioned the levers; we know what they are, and we're going to pull them. In addition to that, cash federal cash taxes are going to be very favorable for us next year—near zero. So, we know what the levers are; we're ready to pull them, and we have a high level of confidence in the number.

Match, my supply or demand will do it on a K one machine so I want to bring it on as fast as we can it's a great facility, that's going to allow us to compete in markets that quite frankly, we haven't been able to compete in before it's going to help us deal with some of that behavior by some of the bleach board producers in a way that allows us to protect our <unk>.

Thank you for that, Chuck. I didn't mean to interrupt you there. Um, it sounds like, you know, last call you mentioned $300 million to $250 million of interest, cash, tax, working capital. That sounds like that's coming down significantly as well.

History, leading margins. So you want us to do that it really makes sense to do so look you'd love to bring a brand new machine. Unlike we brought the K two machine on into a really snug market, but can you make a decision. It takes a number of years in our case, two and a half years, bringing on this is what we've got and we've got a lot of levers to pull and our confidence level is high to delay.

We're going to have to take that bridging offline. Michael. You know. Let's, let's do that again. I'm focused. And as I said, The Leverage that we're pulling here in the 7 to 800 million dollars will help you get your model. Right. So that it works, but let's take that offline after the call.

Follow-up. And we're running out of time here. Just in terms of the 550,000 tons for Waco. I mean,

The free cash flow next year, that's really what our focus is.

Thank you.

Thank you.

Thank you next question is coming from our new Jay Shah from UBS, a new J. Your line is live. Please go ahead.

Hi, guys good morning.

One quick one for me when I think about capital allocation priorities next year, it's going to have a lot of free cash flow you talked about deleveraging of course share repurchases Capex is down significantly is there anything else in there we should be thinking about like.

Is there room for bolt on M&A or expansion international market, how are you thinking about it.

Hey, good morning.

From my standpoint, it's really two things that are a priority sits delevering, our balance sheet, which we've talked about as well as returning cash to shareholders. That's our focus.

How comfortable are you bringing on that full amount of capacity? The next 12 to 18 months in a market that's that's depressed, or are you assuming that we're not going to be in the same place, you know, 12 months from now. And so just I want to. It's it's a lot of capacity. I stand out of that basis at 75,000 times. I get that. But the market itself, as you pointed out, your competitors are acting irrationally. Um, how, you know, would you? I mean, you you you tend to bring this to the 550 fully on to anything much or do you have flexibility to basically push that further? If SPS, the folding card does not improve materially in the near term. Yeah, we're going to ramp Waco as fast as we can. It's our lowest cost highest quality Mill along with our K2 machine and Kel in the zoo, as I mentioned, the number of times here. Now, if I need to, uh, you know, match my plan or demand, we'll do it on our K1 machine. So I want to bring it on as fast as we can. Um, it's a great facility. It's going to allow us to compete, you know in markets that uh you know quite frankly we haven't been able to compete in before and it's going to help us deal with some of that uh you know Behavior Uh by some of the bleach board producers

Yeah.

Great. Thank you very much.

Thank you.

That was all the time, we have for questions I would now like to pass the floor back to Mike Doss for closing remarks.

Thank you operator, and thank you everyone for joining us on our call today with Waco up and running we have five Americans very best Paperboard manufacturing facility, the strongest and most capable global packaging manufacturing network in the World Best packaging innovation team, we are uniquely positioned to deliver exceptional results for our customer.

In a way that allows us to protect our industry-leading margins. So you want us to do that. It really makes sense to do so look, you'd love to bring a brand new machine on like we brought the K2 machine on into a really snug Market, but you you make a decision. It takes a number of years, in our case 2 and a half years to bring it on. This is what we've got um and we got a lot of levers to pull uh and our confidence level is high to deliver the free cash flow next year. And that's that's

That's really what our focus is.

And to generate strong steady cash flow across the next decade and beyond.

I want to thank our employees for their dedication and our stockholders for their confidence in graphic packaging. Thank you and have a great day.

Thank you. Thank you, thank you. Next question, is coming from Anuja Shah from UBS Anuja. Your line is live. Please go ahead. Oh hi guys. Uh, good morning.

Thank you. This does conclude today's conference call. You may disconnect at this time and have a wonderful day. Thank you once again for your participation.

1 quick 1 for me when I think about Capital allocation priorities next year, it's going to have a lot of free cash flow. You've talked about the leveraging of course, share repurchases capex goes down significantly. Is there anything else in there? We should be thinking about? Like, I don't know, is there room for full-time m&a or expansion International markets? How are you thinking about it? Yeah, good morning. It looks from my standpoint. You know, it's it's really 2 things in our priorities, it's de-levering our balance sheet, which we've talked about, as well as returning cash to shareholders, that's our Focus.

Great, thank you very much.

Thank you. Thank you. That was all the time we have for questions. I would now like to pass the floor. Back to Mike Doss for closing remarks.

Thank you, operator. And thank you everyone for joining us on our call today with wake go up and running. We have 5 America's very best paper board manufacturing facilities, the strongest and most capable Global Packaging manufacturing Network, and the world's best packaging Innovation team, we are uniquely positioned to deliver exceptional results for our customers and to generate strong steady cash flow across the next half decade and Beyond.