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Graphic Packaging Holding Co  (NYSE:GPK)
Q1 2019 Earnings Call
April 23, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Kyle and I will be your conference operator today. At this time I would like to welcome everyone to the Graphic Packaging Company Earnings Call. All lines will be placed on mute to prevent any background noise.

Mr. Alex Ovshey, Vice President of Investor Relations, you may begin your conference.

Alex Ovshey -- Vice President, Investor Relations

Thanks, Kyle. Good morning and welcome to Graphic Packaging Holding Company's Conference Call to discuss our first quarter 2019 results. Speaking on the call will be Mike Doss, the Company's President and CEO; and Steve Scherger, Senior Vice President and CFO.

To help you follow along with today's call, we have provided a slide presentation which can be accessed by clicking on the Webcasts and Presentations link on the Investors section of our website at www.graphicpkg.com. I would like to remind everyone that statements of our expectations, plans, estimates and beliefs regarding future performance and events constitute forward-looking statements. Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from the Company's present expectations. Information regarding these risks and uncertainties is contained in the Company's periodic filings with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements as such statements speak only as of the date on which they are made, and the Company undertakes no obligation to update such statements, except as required by law.

Mike, I'll turn over to you.

Michael P. Doss -- President and Chief Executive Officer

Thank you, Alex. Good morning and thank you for joining us to discuss our first quarter 2019 results. We're very pleased with our performance in the first quarter reflecting a 160 basis point improvement in our adjusted EBITDA margin to 17.2%.

First quarter adjusted EBITDA of $260 million was ahead of our expectations, driven by strong execution on pricing, performance, growth initiatives and synergies. We reported $29 million of year-over-year improvement in adjusted EBITDA. Pricing improved by $32 million during the quarter, reflecting the benefits of pricing initiatives executed throughout 2018. Importantly, our pricing to commodity input cost relationship was a positive $16 million. The business operated well in the quarter generating $31 million of performance improvements. These benefits were partially offset by commodity input cost inflation, specifically increased wood fiber, external paper and freight as well as labor and benefits inflation and unfavorable foreign exchange. As I mentioned, we generated $32 million of positive pricing during the quarter. We expect that pricing will continue to remain strong as we move through 2019.

We successfully implemented an open market $50 per ton CUK paperboard increase in February. Open market SBS folding carton grade prices declined $20 per ton in February. We expect the impact of the February 2019 paperboard price changes will be neutral to our 2019 pricing outlook at a modest positive on an annualized basis. We continue to expect positive 2019 pricing of approximately $110 million. In Q1, we repurchased $60 million of shares at values we estimate to be below the intrinsic value of Graphic Packaging. Over the last two quarters, we've repurchased $180 million of our shares, successfully reducing our share count by a meaningful 5%.

Before I discuss the details of the quarter, I would like to briefly discuss our 2019 financial guidance. We continue to expect 2019 adjusted EBITDA will be in the range of $995 million to $1.015 billion, up compared to $971 million in 2018. While we exceeded our Q1 adjusted EBITDA expectations, we are maintaining our current full year adjusted EBITDA outlook as it is early in 2019 and wood inflation remain stubbornly high. We expect 2019 cash flow to be approximately $525 million from our previous outlook of $500 million and compared to $469 million in 2018. The increase in our 2019 cash flow reflects a continued focus on managing our inventory levels.

Now let me provide more detail on the key operational trends from the first quarter. Volume in our global paperboard packaging business was up modestly in the first quarter driven by acquisitions. Encouragingly, we are starting to see the benefits from the shift away from plastics into our customized paperboard solutions. Notably, our European sales were strong in Q1. Moreover, several new customer wins positioned the business for modest volume growth in the second half of 2019. In Europe, which represents approximately 10% of our total revenue, sales were up mid-single digits in Q1. The growth is being driven by a continued penetration of multi-pack beverage in Europe, targeted conversions from corrugated into CUK paperboard and the continued traction and shifting CPET plastic trays into our paperboard pressed bowl solutions. We have also begun to migrate our customers from plastic and shrink wrap packaging into paperboard solutions.

As we have discussed in the past, we expect our new product development efforts will drive approximately 100 basis points of organic volume growth per annum. Let me highlight one important new product commercialization in the quarter. We recently commercialized the KeelClip, a new proprietary highly efficient solution, to replace plastic rings and shrink wrap for beverage cans. The KeelClip is displayed on Page 6 of our presentation. The KeelClip is a paperboard wrap that securely connect four, six or eight cans while also covering the top of the cans. KeelClip offers excellent merchandising capabilities lining the cans up in a way that allows for maximum visibility of the brand on the retail shelving.

Most of you know that we also manufacture the machines over which our paperboard packaging materials run. We have seen significant interest in this solution from several multi-national beverage customers. Two customers have ordered our machines with sales of the KeelClip expected to commence in Q1 of 2020. We anticipate significant runway for further growth as we expect plastic replacement opportunities to accelerate in 2020 in Europe and around the globe.

Turning to operations. Our mills and converting assets ran well during the quarter. The Augusta SBS mill is benefiting from the extensive rebuild of the recovery boiler and significant upgrade to the mill's mechanical and electrical systems completed in Q4 2018. AF&PA reported operating rates of 95%-plus for all three paperboard grades in the first quarter. Backlogs remain at a healthy five-plus weeks for CRB and CUK. As a reminder, our CRB and CUK mill operations are highly integrated with our converting platform consuming approximately 87% of the paperboard we produce for these grades. Our SBS backlogs are currently approximately four weeks.

Shifting to performance. Continued emphasis on improvement initiatives, variable cost and operating efficiencies, benefits from capital projects and the execution on synergies drove strong performance in the quarter. We operated well and generated $31 million of net performance in the first quarter.

Moving on to costs. We incurred escalating wood fiber costs and modestly higher external paperboard and freight costs resulting in $17 million of commodity input cost inflation during the quarter.

Let me now focus on how we are executing on our strategic vision for integrating the SBS mill and food service converting assets. Our scale position across the CRB, CUK and SBS paperboard grades allows us to optimize our mill production. And as a result, we are driving meaningful efficiencies for the Company. We're also executing on growth opportunities tied to the positive trends in food service and a shift into our innovative paperboard solutions, specifically the shift away from plastic-based cups, trays and clamshells. The integration of the Letica acquisition remains on track and is highly supportive of these growth initiatives. And finally, we continue to have a high confidence in our ability to deliver on our acquisition-related synergies by the end of year three.

And with that, I'll turn the call over to Steve Scherger, our Chief Financial Officer. Steve?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thanks, Mike, and good morning. We reported first quarter earnings of $0.19 per diluted share, up compared to $0.10 in the first quarter of 2018. First quarter 2019 net income was negatively impacted by a net $3.8 million of special charges that are detailed in the reconciliation of non-GAAP financial measures table attached to the earnings release. When adjusting for these charges, adjusted net income for the first quarter was $61.7 million or $0.21 per diluted share. This compares to first quarter 2018 adjusted net income of $58.1 million or $0.19 per diluted share.

Focusing on first quarter net sales, revenue increased 2%, driven primarily by $32 million higher pricing and $17 million of volume-related acquisitions. These benefits were partially offset by $20 million of unfavorable foreign exchange.

Turning to first quarter adjusted EBITDA, the $29 million increase to $260 million was driven by $32 million of positive pricing and $31 million of performance. These benefits were partially offset by $17 million of commodity input cost inflation. (ph) Primarily it would, $11 million of other inflation, primarily labor benefits, $4 million of unfavorable foreign exchange and $3 million of unfavorable volume mix. We ended the first quarter 2019 with over $1 billion of global liquidity and $3.1 billion of net debt. Total net debt increased $229 million during the quarter.

In the first quarter, we invested $80 million in capital. We also repurchased $60 million in shares, paid $23 million in dividends and made a $6 million distribution to our GPIP partner. First quarter pro forma net leverage ratio was 3.13 times adjusted EBITDA compared to 2.98 times at the end of 2018. We remain committed to our long-term net leverage target 2.5 times to 3 times and expect to be well into this range by year end, reflecting our strong cash flow generation.

Now, turning to 2019 full year guidance. As Mike referenced, we continue to expect our full year adjusted EBITDA will be in the range of $995 million to $1.015 billion. Currently, we're not making any material changes to the key drivers of our full year adjusted EBITDA outlook. We expect second quarter adjusted EBITDA will be in the $250 million to $260 million range. We expect our third quarter adjusted EBITDA will be modestly below second quarter levels. The key driver of the mild sequential decline from Q2 levels is related to the timing of our annual maintenance outage schedule. Specifically, we have an extended scheduled maintenance outage at our Texarkana, Texas SBS mill in Q3. In addition to the routine annual work that we will perform at the Texarkana mill, we will replace the bottom tube section of the recovery boiler. We expect this additional work will result in an improved safety and reliability of the boiler.

Turning to cash flow. We now expect cash flow will be approximately $525 million in 2019, up from our previous $500 million outlook. The $25 million increase is driven by our plan to reduce inventory levels.

Finally, we've revised our depreciation and amortization estimate to $450 million from $435 million to reflect a higher depreciation and amortization allocation for the SBS mills and foodservice assets, including the Letica acquisition. The remainder of our guidance is contained on the last page of the presentation on the website.

Thanks for your time this morning, and I'll turn the call back to Mike. Mike?

Michael P. Doss -- President and Chief Executive Officer

Thanks, Steve. We're encouraged by our strong start to the year. We are executing on our strategy of building a highly integrated packaging company that is delivering profitable growth across all three paperboard substrates. We expect to benefit from previously implemented pricing initiatives. We are also well positioned to drive benefits from our productivity, growth and synergy initiatives that we anticipate will be in excess of labor and benefit cost inflation. We expect to generate robust cash flow in 2019 and we will continue to focus on creating shareholder value through effective capital allocation. We believe these actions will create value for all stakeholders in 2019 and beyond.

And with that, I'll turn the call back to the operator for question.

Questions and Answers:

Operator

Ladies and gentlemen, we will now open the lines for questions. (Operator Instructions) Your first question comes from the line of George Staphos from Bank of America. Your line is now open.

George Staphos -- Bank of America -- Analyst

Hi, everyone. Thank you for taking my questions and thanks for all the details. One shorter-term question and one longer-term question for my two. Mike, you might have mentioned, and if you did I apologize in advance, but with the volume growth that you reported, recognizing a lot of that was acquisition, I noticed that the tons shipped were down a couple of percentage points. If you could talk about what was driving that, if I framed it correctly, and what some of the underlying drivers by the end market or what have you were there? And then I'll come back with my second question.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Hey, George. Good morning. It's Steve. Just briefly (multiple speakers)

George Staphos -- Bank of America -- Analyst

Hi, Steve.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Good morning. Briefly on the volume, the volume I'm referring to on the supplemental material, keep in mind to -- we have a fair amount of internalization of paperboard that we've been doing as we've internalized paperboard at the beginning of a year ago when we started the international -- with the SBS and foodservice asset. We've been aggressively internalizing paperboard, which actually kind of impacts that number when you stand back from it. When you stand back from our core volumes, George, in the first quarter at the converting level, the finished product level volumes excluding acquisitions were fundamentally flat. And as Mike mentioned, we see some positive momentum as we move toward the second half of the year relative to core volume.

George Staphos -- Bank of America -- Analyst

So, Steve, just a quick follow on. You could say yes or no, I mean, so in your key end markets, there is nothing that's degraded that's in that 2%. It's largely the volume internalization. Is that fair?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

I think, George, just to put a little final point. I'm Steve Scherger. It's largely the year-over-year integration. The only other thing I'd add, and you know this is, we've been very aggressive in 2018 on pushing price on all three of the substrates that we use. And as such, when you push price that hard, you're going to take a few nicks here and there, but it's all in the numbers that you see the biggest portion of that is really the internalization. We internalize the better part of 140,000 tons. And of course, as you know, we've got to eliminate that.

George Staphos -- Bank of America -- Analyst

Understood. Thanks for that color, Mike. My other question, and I'll turn it over. Certainly everyone on the phone understandably talks a lot about conversions out of graphic paper into various substrates, whether it's containerboard or box board, and that's certainly something that Graphic Packaging has to contend with as well. What are the, in your view, the things that make you most comfortable about your ability to manage against that potential risk? Is it performance improvements that are now seemingly coming to the bottom line from your investment activity the last couple of years? Is it you're finding more and more opportunity to really focus on packaging and innovation which kind of obviates somebody who shows up with just paperboard supply? I know the answer is going to be kind of a combination of all that, but what do you think the key things are and what are we missing in that discussion? And thanks for your time.

Michael P. Doss -- President and Chief Executive Officer

Yeah. Thanks, George. I appreciate the question. I think the first thing I'd point to and you alluded to this a little bit in your question is, we've got a highly integrated packaging business with 75 converting plants geographically distributed across North America, Europe and other geographies where our customers sit. And that drives a high level of integration, often allows us to really be at the touch point with the end-used customer figuring out what they need to make customized packaging solutions. We identified one in here that's come up in the last six months, the KeelClip that's replacing plastic rings, as a great example. We have that knowledge, we have those relationships that uses our paperboard -- of course our SBS, we've got the same thing going on, on the foodservice side. So, I think, the biggest thing that differentiates us from just an open market seller of paperboard for sure is the fact we view ourselves as a packaging company first, and we're kind of driving those relationships and that value back through the end use supply chain in a way that differentiates us.

George Staphos -- Bank of America -- Analyst

All right. Thank you.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah, thank you.

Michael P. Doss -- President and Chief Executive Officer

Thank you, George.

Operator

Your next question comes from the line of Anthony Pettinari from Citi. Your line is now open.

Anthony Pettinari -- Citi -- Analyst

Good morning.

Michael P. Doss -- President and Chief Executive Officer

Hey, Anthony.

Anthony Pettinari -- Citi -- Analyst

One -- hey, the Q1 EBITDA came in, I think, $20 million above guidance, and I think you referenced the pricing and better operations and performance improvements as driving that. And understanding there's a few moving pieces there, is it possible to parse-out how much of that be -- relative to your expectations were from those different buckets?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah. Anthony, it's Steve. It's really two primary drivers. We've really performed and operated very well during the quarter across our mill and converting assets as Mike was just referencing. The integrated platform operated exceptionally well that was probably half of the improvement. And then, we had a steady quarter of very little disruption in areas like weather -- which for the last few years we've had some difficulty in Q1, weather-related non-controllable -- we factor that into some of our thinking, if you will, and it didn't occur. So we had a good clean quarter from an uncontrollable perspective, which is good for us. The one thing that was a bit disruptive as we've already talked is on the inflation side with wood, with all of the rain, that's something that is staying up stubbornly high for us on the inflationary front, but overall very strong operations from the quarter and no real major disruptions that's non-controllable weather-related.

Anthony Pettinari -- Citi -- Analyst

Okay, that's helpful. And then, I was wondering, Mike, maybe if you could talk a little bit about the divergence that we're seeing between SBS folding cartoon grades and cup stock grade in terms of demand and now prices. Can you talk about your split between the two grades, how easy is it to switch over production from one to the other? Can you push some customers from CUK, which seems tighter toward SBS, which is maybe a little bit looser, just your kind of general thoughts on SBS and the two grades?

Michael P. Doss -- President and Chief Executive Officer

Sure. Thanks for that. The first thing I'd point out, Anthony, is that we manufacture all three grades. So we're a little bit agnostic with our end user customers around what grade we're actually making for them. We want to make packaging for them that is best suited for the needs that they have, be those with the commercial needs or the performance needs of the specifications and how they hold up for them in the marketplace. So I'd start with that. The demand on CRB and CUK, which I think is what you're getting has been very solid. On SBS, if you take a step back, it's just the biggest market, 5.4 million tons that are manufactured on SBS, and there's kind of four verticals that it goes into at a really high level, and you've got general folding carton, you've got cup and plate, you've got liquid packaging and you've got bristles. We really don't play in bristles or liquid packaging, the majority of our effort, the 1.2 million tons that we manufacture, our capacity to manufacture really falls into cup and plate and general folding. The splits about little over 400,000 tons of cup and plate, and the rest is general folding. Do you know that cup and plate has been very strong. So that demand has held up very good, and we're continuing to see conversion opportunities on a polystyrene foam and into paper, and that will continue to play itself out here through 2019 and 2020 with some of the wins that we have.

On the general folding carton, it's been steady. There are a few verticals like tobacco that are down and then some others that are up. So, the overall demand of SBS has been OK, but we do have opportunities to convert things from CUK and SBS and back from SBS into CUK where it make sense for customers. So, again, really focusing on being a packaging company and giving customers what they need for them to be successful in the market.

Anthony Pettinari -- Citi -- Analyst

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

Operator

Your next question comes from the line of Mark Wilde from BMO. Your line is now open.

Mark Wilde -- BMO Capital Markets -- Analyst

Good morning, Mike. Good morning, Steve.

Michael P. Doss -- President and Chief Executive Officer

Hey, Mark.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Good morning, Mark.

Mark Wilde -- BMO Capital Markets -- Analyst

I wonder, Mike, if you could talk about some of these new customer wins that will drive volume in the second half, and if there's any way to just help us think about order of magnitude on those wins?

Michael P. Doss -- President and Chief Executive Officer

Yeah, sure. I mean, they continue to be in the categories that we've talked about, Mark. I mean, it's really about in Europe getting out of -- we identified the rings, plastic rings and some shrink wrap going to fully enclosed in wraps for beverage cartons substituting out to CPET trays and into pressed paperboard trays continues to be a trend that's accelerating that we see, and then obviously some strength packaging applications where we're able to ship directly to the end use consumer in a cartoon as opposed to having that cartoon go into an overwrapped package. So those are the types of things that we're working on. In terms of kind of order of magnitude, as you know, you've been following us for a long time, Mark, our goal has always been to generate about 100 basis points of year-on-year growth due to our new product development efforts.

And for the last few years, a lot of that has kind of gone toward buttressing up our overall demand where -- to kind of play to a (ph) drawer play flat. So the way I have you think about in the second half of the year is that, that 100 basis points can be accretive. It can be up 1% or so on a run rate basis. This is kind of how we're thinking about it as we sit here at the end of Q1.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

And Mark, the only thing to add on the growth front is, we have some good cup conversions too happening on the foam and plastic side into the paper-based solutions as well, and that's what gives us good visibility into the second half of the year.

Mark Wilde -- BMO Capital Markets -- Analyst

Yeah. I guess, just as my follow-up, Steve, I'll go on that one. I picked up a cup of coffee and a donut this morning. And donut was in -- or the coffee was in a paper cup. Can you talk about sort of how much volume you think you'll pick up year-over-year in the cup business this year? And also, where you're at in terms of moving toward a polyethylene-free paper cup?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah. And both of those, first, appreciate your support with the paper cup, Mark, always appreciate it. I think the other part of that is, if you think on a year-over-year basis, our volume really starts to come on that Steve alluded to in the second half of this year, sort of we split a little bit between second half of this year and into next year. Obviously there is more opportunities that we're working on, but we can see that being 25,000, 30,000 tons of SBS that come our way year over the next year or so. So it's meaningful for us.

And in terms of the replacement for low density polyethylene, that's the very active set of projects for us with a very distinct set of market requirements that we're working through with our R&D folks and with outside suppliers who manufacture those coatings and our customers, because there are certain requirements that some have and they're different than others. But over the next 12 to 24 months, we feel very confident we can continue to make progress to find coatings that are more composed to loan recycle (ph) approval [0:26:12] than the current offering.

Mark Wilde -- BMO Capital Markets -- Analyst

Okay, very good. I'll turn it over.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thank you.

Michael P. Doss -- President and Chief Executive Officer

Thanks, Mark.

Operator

Your next question comes from the line of Mark Connelly from Stephens. Your line is now open.

Mark Connelly -- Stephens -- Analyst

Thanks. Mike, Just two questions. First, how far along are you in internalizing the board on the (ph) polystyrene foam side? And can you give us a sense of how different the synergies you still have ahead of you are versus what you've already picked up so far?

Michael P. Doss -- President and Chief Executive Officer

Yeah. Thanks, Mark. I would tell you that as of the end of really this quarter, we're all-in on our conversions. They are complete, the ones that we plan to do. So, those cycle through in second and third and fourth quarter on a comp basis there. We were actually able to do that faster than what we had planned. So that -- I'll start with that as being kind of an upside relative to what that looks like. We've done very well against the SG&A targets that we put out there for sure. Some of the targets on the procurement side, we've gotten what we thought we get but then we got some inflation in some other areas like hardwood, so it's a little bit more of a mixed bag. But we've got a lot of confidence in our ability to deliver the full $75 million that we committed to by the end of year three, and we'll make meaningful progress on that here in 2019. I think you can kind of see the firepower we have when we're able to run all our mills wide open as we did here in Q1, as Steve alluded to, with some of the actions that we talked last year really showing up here from productivity standpoint in Q1.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

And Mark, specifically we're operating at about 40% integration level across the SBS platform since we moved through with the integration, so from 25% to 40% on our way to the longer term goal of 70% to 80%. So, we're at 40% run rate today.

Mark Connelly -- Stephens -- Analyst

Okay. That's helpful. And just one last question. You've talked about looking at tuck-in M&A against the value of buying back your stock, has your view of the economics available in one versus the other changed much in the last quarter or two? I'm just curious if the market for asset is changing.

Michael P. Doss -- President and Chief Executive Officer

Thank you for that question. I mean, as we talked about at the end of the last quarterly call, valuations remained in our opinion high. And as a result of that, when we compare those against buying our own stock, I think our actions kind of spoke for ourselves in terms of what we did there. Having said that, our pipeline for acquisitions in both North America and in Europe remained strong. We remain active there, but we're going to be very thoughtful in terms of the valuations that we pay to ensure that we create value as we worked really hard to drive our integration levels up on SBS.

Mark Connelly -- Stephens -- Analyst

Super. Thank you.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thank you.

Michael P. Doss -- President and Chief Executive Officer

Thank you.

Alex Ovshey -- Vice President, Investor Relations

Thanks, Mark.

Operator

Your next question comes from the line of Chip Dillon from Vertical Research. Your line is now open.

Chip Dillon -- Vertical Research -- Analyst

Yes, and good morning, Mike and Steve.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Hi, Chip.

Chip Dillon -- Vertical Research -- Analyst

Hi, yes. My first question is -- it deals with the performance savings, which seemed quite strong at $31 million in the first quarter. And could you just help us understand how we should think about that for the full year and how that splits up between the synergies from the SBS acquisition and just other initiatives?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah, Chip, it's Steve. We added a new slide to Page 12 of the materials to try to provide some insight into kind of our couple of metrics, one of them being mill maintenance schedule, and what we're going to find this year is the majority of our productivity will occur in the first half of this year because we have much more limited down time, very modest in Q1, a little bit more in Q2. But as I mentioned in the remarks, we have a pretty significant amount of downtime particularly focused at Texarkana that will be in Q3. And so, we'll have a bit of a step down in terms of our EBITDA from Q2 to Q3 driven by the additional maintenance downtime. Q4 will be somewhat consistent year-over-year. As such, the majority of our productivity will be driving in the first half of the year because we've got about $20 million headwind in Q3 associated with the incremental downtime in Texarkana. In that context -- that's in the context of the $85 million of productivity, that combination of $60 million of core and $25 million of additional synergies.

Chip Dillon -- Vertical Research -- Analyst

Okay. So you're saying $85 million all in. And then, when you're done with the $25 million this year, how many more -- how much will be left on synergies would you say from the acquisition of SBS?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah. We -- that would be with $35 million last year and $25 million, so we'll be at $60 million, they will be a little bit left in 2020, about another $15 million.

Chip Dillon -- Vertical Research -- Analyst

Okay. And there has been mixed, I guess, signals in terms of what some of us have seen. When we look at paperboard in general, it seems like the market you mentioned the 95% operating rate, and the market has shown some strength certainly in the lower two substrates. But in the highest substrate, we've seen some mixed picture. Was it fair to say most of the competitive activity is more domestic versus export? And in other words, if you were to split it between a new domestic player versus export competition, would you say it's more of a domestic source of where there might be a bit more competition there than -- or competitive pressure, I have to use that term, than what we've seen in some of the other grades?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah. I'll take that one, Chip. Here's what I would tell you just by a few data points that might be helpful to put a finer point on that. As we look at imports in 2018 for FBB, as Alex monitors that for us every month. The census data would suggest that imports were up a modest 20,000 tons in 2018. So it was fairly small relatively speaking. We do have a new competitor that has converted a coated free sheet machine, as you're alluding to, and they are entering the market. And we know what you know relative to that. They publicly said it's going to be a swing machine, and they're going to swing back and forth between SBS and coated free sheet. So we'll have to kind of track that as that goes along. I think the thing I would suggest though, because we've gotten a few questions in on this as well as operating rates for SBS have been up actually year-to-date around 100%, and people look at that and say, well, what's going on?

We have two competitors that have publicly talked about the fact that they've got big outages in Q2 of this year. Steve just got done talking about that we've got a very big outage in Q3. And so, what ends up happening, we have to run and build the inventory in order to make through those outages in order to serve those customers during that period of time. And so, I think it can create some misinterpretation or some mysteries of monthly production data. You really got to look at it even through a quarter or even better through a six-month period of time, because in order to take care of customers you really end up having to operate your business in a run mode, when you're actually producing and obviously you have some big outages in that you release some of that inventory. That's how I would really ask you to think about that.

Chip Dillon -- Vertical Research -- Analyst

Okay. I will. Thank you. That's very helpful.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thank you, Chip.

Operator

Your next question comes from the line of Ghansham Panjabi from Baird. Your line is now open.

Matt Krueger -- Robert W. Baird -- Analyst

Hi, good morning. This is actually Matt Krueger sitting in for Ghansham. I just wanted to touch base on volumes for my first question. So, given the strong performance in Europe during the quarter, up mid-single-digits, can you talk about some of the related offsets elsewhere across the portfolio by region or maybe by product line that yielded the flat overall organic volume performance during the first quarter?

Michael P. Doss -- President and Chief Executive Officer

Well, I think, Matt, the first thing to remember is that Europe is about 10% of our volume. So it's a pretty small portion of our overall revenue basis. And then, as Steve alluded to, the real reason, if you kind of look at that, is kind of the elimination of the internalization of the SBS tons of converting volumes in North America were essentially flat.

Matt Krueger -- Robert W. Baird -- Analyst

Okay.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

I think we've seen that -- at the market level, what we've chided about before is, some of the business challenges in (ph) McBeer, the big beer, we continue to see some modest erosion there on a year-over-year basis that kind of brought the total to flat. So, somewhat consistent with what we had articulated before in terms of small areas where there has been some erosion yielding more flat converting volume for the quarter.

Matt Krueger -- Robert W. Baird -- Analyst

That's helpful. And then, understanding that we talked a little bit about wood costs already and then the extended downtime in the third quarter, can you provide some added detail on why we're reiterating the full year guidance versus the free cash flow kind of guide upwards, are there any other kind of conservative assumptions baked in the guidance what are you expecting from overall (ph) rise versus just paper, any puts and takes like that would be very helpful.

Michael P. Doss -- President and Chief Executive Officer

Well, so again if you kind of take a step back, we're one quarter into a four-quarter game, if you think about 2019. So we'll start with that. And wood cost remains stubbornly high, and yes it's getting warmer outside, the day is getting longer. But in some of our baskets like if you think of Texarkana and Monroe at the end of last week, they got another 4 inches of rain that fell in there. And so, it's going to take a while for those to completely dry out and our wood cost to kind of go back to where they were. Oil touched $70 a barrel here earlier this week. So, there is a lot of variability that still goes in here. Steve has talked about this on our last call. I mean, we've got true line of sight to $60 million to $65 million of year-over-year inflation. And given that we're one quarter in, it seems to be a very prudent guide in terms of how that goes, and I wouldn't look at it as conservative.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah. To Mike's point too -- and to Mike's point, the movement on cash flow was entirely inventory driven, that is us taking a view that we can't take some inventory out of the system by year-end. And so, no EBITDA implications, no change to the metrics in our guide. The improvement in cash flow was inventory driven.

Matt Krueger -- Robert W. Baird -- Analyst

That's very helpful. That makes a lot of sense. Thank you.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thank you.

Operator

Your next question comes from the line of Brian Maguire from Goldman Sachs. Your line is now open.

Brian Maguire -- Goldman Sachs -- Analyst

Hey, good morning, guys.

Michael P. Doss -- President and Chief Executive Officer

Hey, Brian.

Brian Maguire -- Goldman Sachs -- Analyst

Just a quick question back to the sustainability and plastic substitution kind of conversation, the KeelClip looks like a pretty cool solution there and it looks like that picture is pretty much 100% recyclable from what I can tell looking at it, which is obviously a pretty cool innovation. But as I understand it, most -- in most every application or case, the paper-based packaging is going to be more expensive than the plastic that it's trying to replace. Just wanted to know like how are those conversations with people going, obviously I think everyone -- sustainability is on everybody's mind. But is it a trade-off in terms of cost for that performance?

Since you're having those conversations, should we think about these products coming in as a little bit of a lower price point than your average for the company and are there kind of maybe some like introductory lower prices that might be necessary to help kind of spur the penetration here, or just in general kind of how are you kind of overcoming that cost difference between paper and plastic in these applications?

Michael P. Doss -- President and Chief Executive Officer

So, thanks Brian for the commentary on KeelClip, I appreciate that. I think if you kind of think about what's happening in the retail space and with the big CPGs, they are coming out with some pretty significant goals that they're putting out there and targets around sustainability and recyclability of their products. And what that's really being driven by is the end-use consumer who is kind of pushing and prodding them to make sure that the stuff that they're purchasing fits what their beliefs are relative to sustainability. Paper ha got a great story to tell in that regard. It doesn't work for everything, but it works for a lot of things, including some of them we're talking about here. And you have summarized it well.

Paper is always -- paperboard is always going to be more expensive than shrink wrap or plastic rings, but the sustainability story is better. And so what we've got is a positive end-use consumer pull through that's actually creating some of that demand in that interest, which gives us a platform then to really show our end-use customers what we can do and how we can put together our innovative solutions to help them accomplish their objectives. And so, yeah, I want to characterize that those are going in at lower prices than the rest of our materials, because in many cases, they are proprietary and we have machinery solutions that go behind them in the case of KeelClip. And so, we're trying to obviously get a good return on capital invested on those like the rest of our portfolio.

Brian Maguire -- Goldman Sachs -- Analyst

Okay, yeah, it makes sense. Just to switch gears to sort of the input cost, yeah, we've seen a lot of them sort of deflate a little bit and the level of inflation at least that we saw last year seems to be moderating. I'm thinking about OCC freight pops up, things like that. Is there a way for you to kind of update us on what sort of embedded in the guidance at this point for a couple of those factors? I think (ph) Frady had talked about that being up kind of 5% or 6% before (inaudible) OCC being kind of flat with where they were a couple of months ago, but we know those were lower now. Just kind of update us on what you're expecting for those items.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah, Brian, it's Steve. would be glad to, our assumption overall, as Mike mentioned, is still the $85 million of overall inflation for the year, line of sight to about $65 million of that at current rates, if you will. And secondary fiber at the latest rates would actually be a tailwind of about $10 million, but wood overall, hard and soft wood, right now is operating at a rate that would be $35 million-plus for the year, so those both combined end up in that $20 million, $25 million range that we've talked.

Logistics costs are coming in a little better than we articulated, in the $15 million to $20 million range and then external paper that we buy is absolutely where we expected it to be. Some of the variability, as you referenced, is in the chemicals and energy area. Obviously oil moving pretty aggressively here, quite recently hasn't played out in inflation but has potential. Hence why we believe sitting here after Q1 that $85 million is still the right guide.

Brian Maguire -- Goldman Sachs -- Analyst

Okay, makes sense. I'll turn it over. Thanks.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thank you.

Operator

Your next question comes from the line of Debbie Jones from Deutsche Bank. Your line is now open.

Debbie Jones -- Deutsche Bank -- Analyst

Hi. Thanks. Good morning.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Good morning, Debbie.

Michael P. Doss -- President and Chief Executive Officer

Hi, Debbie.

Debbie Jones -- Deutsche Bank -- Analyst

My first question, I wanted to ask about European M&A and whether or not you see any kind of subtle or big changes in that market, whether it be an evaluation or assets available for sale and kind of your thoughts on the strategy there?

Michael P. Doss -- President and Chief Executive Officer

Hey, Debbie, I really wouldn't characterize there is any change. I mean, it -- like all regions valuations needed to adjust as I alluded to earlier. And obviously that's in the process of occurring, but our pipeline remains very solid. We remain in active dialogue with a number of potential (ph) OEM prospects. And obviously as we did this last quarter, those competed against buying our own stock back and you saw what we did. But that doesn't mean that we're not committed to it, it just becomes a timing and an allocation decision. And as we continue to find valuations that we find attractive and synergies that are real, we want to do those particularly in the area that allows us to drive our SBS integration level up.

Debbie Jones -- Deutsche Bank -- Analyst

Okay. And thanks for the clarity on the level of maintenance. My question on that, there was -- I don't have a history of days per quarter, but you've done historically, but it just seemed a little surprising that you had so much in Q3, and perhaps one would see if there is anything they've changed there? And then just if there is any way you can give kind of like the specific financial impact just in Q3 that you're expecting versus the prior year?

Michael P. Doss -- President and Chief Executive Officer

Yeah, I'll handle the days, and then Steve kind of take you through the economics. Really what we're doing this year that is a change, we've always done our make an outage which is between -- call it approximately 10 days on both our machines there in Q3. This year, we're doing both of our machines in Texarkana in Q3. As Steve talked about in his prepared comments, we're doing also some -- in addition to the annual maintenance, we're doing some extensive work on the recovery boiler. Certainly not to the extent that we did at Augusta last year, but meaningful in terms of what its impact will be in Q3 in terms of days down. And then what I think you can expect on both Augusta and Texarkana going forward here in 2020 and beyond is a more normalization of what you would see in your annual outages to be having completed the big work that we want to do on our recovery boilers at both those mills. So it just manifests itself in Q3 this year because of that Texarkana additional time, but again we always have a fairly significant amount of time there because making is always in Q3.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Debbie, as we mentioned earlier, the cumulative impact kind of Q2 to Q3 of that is about $20 million.

Debbie Jones -- Deutsche Bank -- Analyst

Okay. Thanks, and congratulations on a strong quarter. I will check over.

Michael P. Doss -- President and Chief Executive Officer

Thank you, Debbie.

Operator

Your next question comes from the line of Adam Josephson from KeyBanc. Your line is now open.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Mike and Steve, good morning.

Michael P. Doss -- President and Chief Executive Officer

Good morning, Adam.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Good morning, Adam.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Steve, just one on the guidance. Your 2Q guidance implies about a $5 million sequential decline in EBITDA, obviously normally 1Q to 2Q you're up, call it, $10 million to $15 million, is that delta entirely because of the 16 days of additional maintenance sequentially or are there any other factors at work there?

Michael P. Doss -- President and Chief Executive Officer

Yeah. The sequential, as you said it, well, Adam, you can in our materials we're up about 16 days quarter one to quarter two. So that plays a role. We had very limited downtime in Q1. And overall, I think we're going to see inflation be at least at or even slightly higher than where we saw it in Q1 as we look through the realities of kind of wood not abating, it's actually potentially up even a little bit. So, a little bit of a combination of inflation at or above where we were in Q1 and then the additional downtime Q1 to Q2, so that would be correct.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Thanks, Steve. And just on your core volume outlook, just given the plastic substitution that you're talking about, do you expect an inflection in your core volume trends come next year compared to the flattish that they've been over the past few quarters and few years for that matter or do you think you'll stay in that flattish range even with this plastic substitution benefit?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

It is a very good question, Adam. And I think, as I alluded to, I think it was Chip who asked the question on that, or maybe it was Mark. The way we're asking you to think about that right now is our new product development that 100 basis points growth that we've consistently delivered for many years, we should be able to be creative and sort of feel like it's up 1% with core volume basically being flat. That's how we're looking at it right now. We'll have a couple more data points this year. So we'll be able to maybe put a finer point on that. But as we sit here today, that would be how we would guide..

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Thanks a lot, Mike.

Michael P. Doss -- President and Chief Executive Officer

You bet.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thanks, Adam.

Operator

Your next question comes from the line of Steve Chercover from D.A. Davidson. Your line is now open.

Steve Chercover -- D.A. Davidson -- Analyst

Thank you, and good morning, everyone.

Michael P. Doss -- President and Chief Executive Officer

Hi, Steve.

Steve Chercover -- D.A. Davidson -- Analyst

So -- yeah, I just wanted to stay on the kind of sustainability theme as well, if I could. I just want to know how far ahead of North America is Europe when it comes to the shift from plastic packaging to paperboard?

Unidentified Speaker --

I guess, Steve, what I would -- how I would answer that is, we historically see Europe as a bit of a harbinger for trends on packaging. And that's usually in the neighborhood of 12 to 18 months before we see some of those trends translate here in North America. It's not perfect, but it tends to be a pretty good rule of thumb. So that's why we kind of profiled the slide on Europe here to kind of show you some of the early reads and some of the things that we're seeing start to develop over there. And we'll see how that plays out into North America. But we've got interest in similar technology here. So, we'll continue to keep you updated as the year grinds on.

Steve Chercover -- D.A. Davidson -- Analyst

Okay. And as my follow on, some of your competitors in foodservice, and I'm kind of using a broad brush. suggest that they make the world a better place by reducing spoilage. So, I'm just wondering, do you guys have solutions that help food stay fresh longer?

Michael P. Doss -- President and Chief Executive Officer

As I mentioned in previous answer, we're not suggesting that paperboard is for every packaging solution. It's got specific opportunities on things like the stuff that I profiled. Getting out of the rings that aren't really related to trying to protect food or a shrink wrap film, those types of things. Plastic plays a vital role as they're saying in terms of the protection of material, and we're certainly not trying to suggest otherwise. But there is an opportunity for us to expand the pie in terms of the addressable market for our products, and what we're trying to do is to make that pie as big as possible and grab the biggest share that we can.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yes. As a reformed beer drinker, I'd say that KeelClip looks really cool, because there has got to be some hygiene in the actual marketing element as well.

Steve Chercover -- D.A. Davidson -- Analyst

Thank you.

Michael P. Doss -- President and Chief Executive Officer

And it is. Steve, you look at it from a merchandising point of view, it gives you a nice placard on the top. We've got optical liners on those cans so that every one of the brands is perfectly positioned. So, if you think about the end of aisle display or even on the shelf, there are some pretty neat things you can do with. Our team has done a nice job on that. We're pretty excited about the prospects.

Steve Chercover -- D.A. Davidson -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Dan Rizzo from Jefferies. Your line is now open.

Dan Rizzo -- Jefferies -- Analyst

Hey, guys. How are you?

Michael P. Doss -- President and Chief Executive Officer

Good, Dan.

Dan Rizzo -- Jefferies -- Analyst

To continue on the last topi, would a less stringent, I guess, regulatory environment in the U.S. kind of delay the switch from plastic to paper or customers kind of already moving in that direction regardless of, I don't know, just again the regulatory environment here?

Michael P. Doss -- President and Chief Executive Officer

I wouldn't say that is the actual regulation is having an impact on it materially that I can see. It's really all about the unused consumer pulling it through, Dan. I mean, we've been able to recycle materials since I started in the business 30 years ago. But it's the last 18 months where that really seems to be of great importance to the end use consumer, which in turn has been impacting the retailers and the CPGs in terms of some of the objectives that they're setting out there. So I think it's really more around consumer demand than anything else.

Dan Rizzo -- Jefferies -- Analyst

Okay. And then just one quick unrelated question. Could you just remind us when IP can redeem their joint venture interest?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Yeah, Dan, it's Steve. Just for reminder, our partnership with International Paper, their first opportunity where they have a put, as we've discussed, their first opportunity to begin to exit from the partnership is in January of 2020. And contractually, the actual contractual relationship is a metered exit of $250 million of share equivalents every six months. And so kind of the metered approach would be roughly $500 million of share equivalents, which would take two to three years for a natural exit beginning as early as January of 2020.

Dan Rizzo -- Jefferies -- Analyst

Thank you very much.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thanks, Dan.

Operator

Your next question comes from the line of Mark Weintraub from Seaport Global. Your line is now open.

Mark Weintraub -- Seaport Global -- Analyst

Thank you. One question -- I hear a lot that the foodservice business being in better shape than the folding carton side of things for SBS. Just be interested in your color on that and as to -- if that continues to be the case, is there the potential to get pricing in one part of the business i.e. foodservice at a different rate, let's say, than folding carton, or is there too much crossover in production capabilities, et cetera, for that to really happen?

Michael P. Doss -- President and Chief Executive Officer

Yeah. Thanks, Mark I'll take a shot at that, this is Mike. There is real strength on the foodservice side of the business. We've talked a little bit about that. As I mentioned, we make over 400,000 tons that goes specifically into that market. And if you kind of look at what's happened to pricing on cup and plate versus general folding. In fact in February, general folding went down 20 and your cup and plate did not. And so, there is a differentiation in terms of what's occurring there on those grades of paperboard. And I would expect that as those -- as demand for that grade continues to be solid, we could expect that that would continue to be the case. So that's it in fact what we're actually seeing in the marketplace.

Mark Weintraub -- Seaport Global -- Analyst

And I don't think that historically we've ever seen a situation where there has been an increase just say in foodservice and not the complete category. I mean, is that personal, is that accurate and is that necessarily the way it has to be or is it or not necessarily?

Michael P. Doss -- President and Chief Executive Officer

It's accurate relative to our experience since we've owned the assets. I would have to go back and do some work to answer your question completely and we'll, we can do that now, it's a follow up. I just don't know as I sit here today.

Mark Weintraub -- Seaport Global -- Analyst

Okay. Thank you. And then, one quick one. KeelClip does look like a great product. And curious have you been able to scale what the addressable market for something like a KeelClip could be in terms of tons if it were to roll out very successfully?

Michael P. Doss -- President and Chief Executive Officer

Yeah. We were actually having a little discussion on that this week. And I mean, you think there's a lot of plastic rings out there, right. Obviously it's not going to replace everything. There's going to be different solutions that are out there, but it could be meaningful, it could be 25,000 to 50,000 tons over time depending on the application in a quite few machines that we manufacture as well, because it's our machine and our packaging material that has -- it's a kind of a two part equation that goes together for our customers.

Mark Weintraub -- Seaport Global -- Analyst

Super. Thank you.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thanks.

Operator

Your next question comes from the line of Edlain Rodriguez from UBS. Your line is now open.

Unidentified Participant -- -- Analyst

Hi. This is (inaudible) for Edlain. How are you?

Michael P. Doss -- President and Chief Executive Officer

Great. How are you?

Unidentified Participant -- -- Analyst

Doing well. I'm just wondering on slide 10, is it possible to parse out how much let-to-go was in -- is it on the volume bucket or the performance bucket on this one?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

The core economics for Letica were in the volume mix, so that the acquired EBITDA was in volume mix. The synergies that we would capture from internalizing or improving upon that business would be in performance.

Unidentified Participant -- -- Analyst

Okay. Thank you. And then, how much is remaining on the authorized share repurchase program.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Well, we have the $500 million that we gained approval for plus the $30 million, so we've got $500 million plus, because we're still working through the prior approval. So we're just think of it in the $0.5 billion range.

Unidentified Participant -- -- Analyst

Okay. Thank you.

Operator

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

George Staphos -- Bank of America -- Analyst

Hi, guys. Thanks for taking the follow on, I'll make it quick. With the progress that you're seeing in Europe, I think it's relatively small in terms of your overall revenue. Are you seeing any kind of competitive response to you either from your paperboard peers in Europe or maybe the plastic companies in Europe because you're now losing some share may be coming a little bit more competitive on pricing or anything else relative to their offerings?

And then secondly, on Texarkana, you obviously you've spent a little more time or spent some time talking about what you're doing there in terms of recovery boiler. When Texarkana comes back, will it be able to do additional things or run differently than what you've been seeing today or is it just for the next few years you won't have a big recovery boiler outage there? Thank you guys and good luck on the quarter.

Michael P. Doss -- President and Chief Executive Officer

Thanks, George. I can handle those. I think, in Europe, the packaging in general has always been a very competitive marketplace, and we don't expect that to change. So we compete with other paperboard people. We compete with other plastic packaging people for the ability and the right to service customers, and that's not going to change. What we have to do is come up with innovation, like the one we're profiling here that's unique and different and differentiates ourselves. And when we do that, we tend to be rewarded by giving the nod versus someone else. We have a little bit of a tailwind for us right now, George, relative to the preference on sustainability for paperboard, so that's helping us but we still got to earn it. And we're really focused on doing that. And you expect that we'll continue to make progress here as we've alluded to over the course of 2019 and into 2020.

In regards to Texarkana, the big thing we're doing there is driving our reliability up as we talked about when we did the Augusta outage. There were just investments that needed to be made in these two mills. We knew it when we did the diligence on it. We're making them. As I've talked about in the past, the recovery boiler tends to be the heart of the mill and you want to have reliability that's consistent and very capable. And at the end of this, we're going to wind up with a mill that's got incredibly high reliability as we're seeing here in Augusta, and also it doesn't really require significant maintenance back into the recovery boiler for the next decade or so. So we're very excited about that.

George Staphos -- Bank of America -- Analyst

Thank you very much.

Michael P. Doss -- President and Chief Executive Officer

Thanks, George.

Operator

Your next question comes from the line of Mark Wilde with BMO. Your line is now open.

Mark Wilde -- BMO Capital Markets -- Analyst

Yeah, I have got just a couple of quick follow ups. One, I wondered, Steve, if you could just update us on the tax status of the tax shield for cadence to burn off. And then, secondly, on the lockup expiring on IP, can you give us some sense of whether you or we may know before year end what IP is intentive?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Mark, it's Steve, I'll touch on it and then Mike can add. We're still -- we don't believe we'll be a material U.S. cash tax payer until 2021. So think of us as being limited modest in kind of $35 million to $50 million range for 2019 and 2020. And of course, we don't have a point of view with regards to when IP will bring forward their perspective relative to the exit.

Mark Wilde -- BMO Capital Markets -- Analyst

So there's no kind of point at which they have to let you know like three months, six months ahead of time what they might do?

Stephen Scherger -- Chief Financial Officer, Senior Vice President

No. They've got the ability to kind of inform us with the put here at the end of the year, that's their desire. And obviously we'll continue to have dialogue with them at a periodic basis, but they really want us to focus on the same thing, all our stakeholders do. They're making good investments back in the business, trying to drive our integration levels up, and obviously create shareholder value. So that's what we're focused on. When they do -- if and when they do decide, as you've seen, Mark, we've got the balance sheet in good spot. In between now and then, if there's a dislocation in the stock, we'll continue to execute on specific buybacks if it makes sense for us to do it relative to our other capital allocation priorities. So, that's how we're thinking about it.

Mark Wilde -- BMO Capital Markets -- Analyst

All right. Well, fair enough. They and you want to be pretty happy today.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thank you, Mark.

Operator

There are no question at this time, please continue.

Stephen Scherger -- Chief Financial Officer, Senior Vice President

Thank you for joining us on our earnings call. We look forward to speaking with you again in July. Have a great day.

Operator

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

Duration: 62 minutes

Call participants:

Alex Ovshey -- Vice President, Investor Relations

Michael P. Doss -- President and Chief Executive Officer

Stephen Scherger -- Chief Financial Officer, Senior Vice President

George Staphos -- Bank of America -- Analyst

Anthony Pettinari -- Citi -- Analyst

Mark Wilde -- BMO Capital Markets -- Analyst

Mark Connelly -- Stephens -- Analyst

Chip Dillon -- Vertical Research -- Analyst

Matt Krueger -- Robert W. Baird -- Analyst

Brian Maguire -- Goldman Sachs -- Analyst

Debbie Jones -- Deutsche Bank -- Analyst

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Steve Chercover -- D.A. Davidson -- Analyst

Unidentified Speaker --

Dan Rizzo -- Jefferies -- Analyst

Mark Weintraub -- Seaport Global -- Analyst

Unidentified Participant -- -- Analyst

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