Graphic Packaging Holding Company (NYSE:GPK) Q4 2022 Earnings Conference Call February 7, 2023 10:00 AM ET
Company Participants
Melanie Skijus – Vice President of Investor Relations
Michael Doss – President and Chief Executive Officer
Stephen Scherger – Executive Vice President and Chief Financial Officer
Conference Call Participants
Ghansham Panjabi – Robert W. Baird & Co.
Mark Weintraub – Seaport Research Partners
George Staphos – Bank of America Merrill Lynch
Kyle White – Deutsche Bank AG
Adam Samuelson – Goldman Sachs Group, Inc.
Gabrial Hajde – Wells Fargo Securities, LLC
Kieran de Brun – Mizuho Securities
Michael Roxland – Truist Securities, Inc.
Cleveland Rueckert – UBS
Operator
Hello, and welcome to the Graphic Packaging Q4 and Full-Year 2022 Earnings Call and Webcast. My name is Elliot, and I’ll be coordinating your call today. [Operator Instructions]
I would now like to hand over to Melanie Skijus, Vice President of Investor Relations. The floor is yours. Please go ahead.
Melanie Skijus
Good morning, and welcome to Graphic Packaging Holding Company’s fourth quarter and full-year 2022 earnings call. Joining us on our call today are Mike Doss, the company’s President and CEO; and Steve Scherger, Executive Vice President and CFO. To help you follow along with today’s call, we will be referencing our fourth quarter earnings presentation, which can be accessed through the webcast and also on the Investors section of our website at www.graphicpkg.com.
Before I turn the call over to Mike, let me remind you that today’s press release and the presentations made by our executives 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. These risks and uncertainties include but are not limited to the factors identified in the release and in our filings with the Securities and Exchange Commission.
With that, let me now turn the call over to Mike.
Michael Doss
Thank you, Melanie. Good morning. Thank you for joining us on the call today. 2022 was an outstanding year of Graphic Packaging. We significantly grew our business and continued executing strategic initiatives focused on extending our leadership in fiber-based consumer packaging. Our focus on consumer packaging is driving profitable growth and delivering returns for shareholders in line with our Vision 2025 goals.
Turning to Slide 4, let me walk you through the year’s accomplishments and a brief look into 2023 before sharing the details of the exciting new strategic capital investment we are announcing this morning. Our financial results in both quarter and the full-year were excellent, characterized by strong growth and margin expansion. Sales for the full-year increased 32% to $9.4 billion, driven by $1.1 billion positive pricing, 3% organic sales growth and acquisitions.
Adjusted EBITDA of $1.6 billion grew in a faster pace sales of 52% as margins expanded by 210 basis points to 16.9%. New coated recycled paperboard or CRB K2 machine investment, the largest capital investment we have made today came to life in early 2022 as we successfully ramped production of the machine on our original timeline. The investment is evidence of our long-term commitment to high-quality, low cost production of fiber-based consumer packaging utilizing recycled content.
The investment returned the first $47 million of EBITDA in 2022 and remains on track to achieve the total annual run rate of $130 million of incremental EBITDA in 2024. The success this investment has provided us with the expertise the confidence to continue to strategically invest as we will detail further in a few moments.
The AR Packaging acquisition in Europe continues to meet our high expectations. Growth opportunities provided by new consumer markets, geographic expansion and proprietary solutions protected by intellectual property have further accelerated our excellent momentum. Our combined team successfully integrated the business and the initial targeted $40 million synergy goal remains on track with the first $15 million realized in 2022.
As committed, our net leverage ratio declined 3.2x at year-end from pro forma 4.6x at year-end 2021. Through new product innovations and expanded geographies, we increased the addressable market for organic growth of $12.5 billion from $5 billion just a few years ago. We remain confident in our ability to achieve 100 basis points to 200 basis points annual net organic sales growth in 2023 and beyond, given strong demand from global customers for our robust pipeline of innovative fiber-based consumer packaging.
Looking briefly into 2023, and as Steve will describe in his remarks, we expect sales for adjusted EBITDA and adjusted EPS to again grow year-over-year, generating strong cash flow we will invest for long-term value creation while having balance sheet prudent for today’s uncertain economic environment.
Before I walk through the details of the significant new investment we are announcing today, let me take a moment on Slide 5 to reflect on our performance over the past three-year period since announcing Vision 2025 in September 2019. Our global team has successfully executed a pivot to sustainability supported organic growth with net organic sales up approximately 10% since 2019. We have pursued and achieved critical milestones on our journey to Vision 2025, including growing net sales, expanding margins and building a much larger scale business focused almost entirely on a fiber-based consumer packaging.
Over the past three years, sales have grown by over $3 billion to $9.4 billion, representing a 15% compound annual growth rate. Adjusted EBITDA and adjusted earnings per share have expanded at a faster pace than sales driven by margin expansion. Our financial results and achievements over the last three years have resulted in a total shareholder return of 41%, outperforming the S&P 500 return by 1,600 basis points.
We are creating value through our leadership of Vision 2025. The investments we have made to advance our capabilities as a fiber-based consumer packaging company differentiate us. As you’ve heard me say before, we are running a different race.
Let me now turn to Slide 6 to provide details regarding our announcement this morning and the role it will play in our long-term commitment to meeting consumer demand for sustainable package. Graphic Packaging is the only North American producer investing to meaningfully upgrade and expand CRB capabilities. We are confident this is the right strategy to deliver value to our customers and to our investors. We recognize the distinct opportunities that substrate can provide. The future of Consumer Packaging will include more CRB and more places, and we are taking steps to position our paperboard network to meet this growing demand.
We have a strong leadership position in CRB from a cost and capability perspective, and this investment will further these advances. We will be leveraging our unique expertise in CRB production, our [muscle member] from the recent K2 investment and our leading North American mill system to build a new CRB mill in Waco, Texas.
Importantly, this investment not only enhances our CRB capabilities, but supports optimization of our full paperboard network and improves our environmental footprint to further distinguish Graphic Packaging as the low-cost highest-quality paperboard producer in North America. As a result, we expect to drive significant and sustainable EBITDA improvement well into the future.
Referring to Slide 7, the growing demand for packaging made with recycled materials is driven by the consumer. Today’s consumer is more environmentally aware than ever. And according to a recent survey, consumers rank packaging made from the cyclical materials as the most appealing sustainability claim. Dual package made with CRB, consumers see the benefit of their recycling efforts each time they place a fiber-based packaging to a recycling bin.
As you can imagine, our customers are responding to what consumers are telling them by seeking to use more recycled materials in their packaging. Not only is doing so in line with consumer trends and preferences is also a key driver for advancing their recyclability goals and support their overall publicly committed sustainability programs. This growing demand, combined with the improved quality of CRB produced by Graphic Packaging’s modern mills utilizing the latest state-of-the-art technology is expanding the breadth of our opportunities for CRB-based packaging.
Slide 8 demonstrates how we believe this new investment will meet the increased demand for CRB at an unmatched cost compared to our competitors. As you can see, the addition of Waco allows us to further optimize our network by closing higher-cost mills over time while still expanding capacity to meet growing global demand. We expect the new machine in Waco will mirror the capacity and cost per ton of recently completed K2 machine Kalamazoo. It’s clear to see that the modern technology inherent in these new machines provides meaningful cost to produce step-change improvement compared to the decades-old machines used elsewhere.
Notably, this expansive competitive cost differentiation is unique to the CRB substrate as compared to other fiber-based substrates. We are building for the future in a manner that is far more efficient than what was built in the past.
Turning to Slide 9. In addition to the efficiency of the mill itself, we are very excited to have secured a location that is ideally positioned within a growing economic center. The city of Waco is situated in the Texas Triangle. Our new mill will be strategically located within 200 miles of approximately 80% of the population in Texas providing easy access to a strong existing recycled fiber basket. Waco also has existing infrastructure to support a mill as well as advantaged logistics from a rail and roadway perspective to supply our packaging facilities and our customers.
We are looking forward to joining the Waco community and working with the great talent base in the area. We appreciate the strong support and engagement we have received from the city and the county as we conducted our site selection process. From a timing perspective, we expect to start construction this quarter and begin commissioning the machine by the end of 2025 with production ramping up in early 2026. Our decision to build this mill shortly after K2 allows us to leverage key learnings from that process, both internally with our external partners, which gives us added confidence in our ability to meet the projected timeline and quickly ramp-up production on the new recycled paperboard machine.
Slide 10 shows an updated map for our current future mill network. With this new investment and targeted mill closures, we are looking at a simplified and optimized mill network that will lower cost and strategically increase capacity. Our virgin paperboard mills are located throughout the Southeast, which is the best virgin fiber basket in the country.
Our two industry-leading CRB mills in the future will be geographically located to provide strong coverage across the United States as well as in Canada and Mexico. We estimate the optimized mill network will have 5% more capacity than we have today with the flexibility to adjust capacity in line with demand.
Importantly, while the capacity expansion is driven by the addition of the new Waco mill, the benefits run across other substrates. The improved CRB quality made possible by our new machines will enable substrate optimization across our mill system as some packages that historically require virgin fiber can now be made with CRB. This will free up incremental virgin capacity in our other mills to meet our growing global demand.
The combination of our global packaging growth plans and our mill network optimization plans will support integration rates in excess of 90% once the new mill is in operation. Overall, this investment will extend our position as the lowest cost, highest quality paperboard producer in North America.
Beyond cost quality and capacity there are also significant sustainability advantages to this new investment as outlined on Slide 11. First, we will be increasing circularity of our system through an enhanced drum pulper investment. This investment increases our ability to clean and separate a broader range of secondary fibers. Today, a large percentage of our paperboard waste that we cannot recycle is exported. Our Waco mills designed to enable the recycling a 100% of our own internally generated paperboard side rolls and waste.
We plan to capture the value of that fiber as well as reduce the environmental impact of shipping the fiber offshore for processing. We are estimating around 200,000 tons of side rolls and waste will be processed at the Waco mill versus purchasing external secondary fiber as we do today. This will also significantly enhance the security of the secondary fiber supply. This machine also increases our paper cup recycling ability.
The drum pulper has the capacity to process up to 15 million paper cups per day. To take advantage of this increased recycling capacity, we have launched teams to engage with our customers and recycling partners to increase the collection rate of paper cups to further support recovery and a more circular economy. As you would expect, initial interest from customers is very high.
Additionally, the CRB mill network optimization is expected to improve our environmental footprint. Our absolute greenhouse gas emissions are expected to decrease in our optimized North American CRB mill network by 12%. Investments in technologies such as the gas turbine to generate all electricity needed by the mill as well as produce steam for paperboard drying will improve overall efficiency and reliability.
Lastly, let me cover the financial highlights of the project on Slide 12. This approximately $1 billion investment will be internally funded with operating cash flow over the course of three years and is consistent with our balanced approach to capital allocation. We have flexibility to invest in our business and have a strong balance sheet with manageable debt levels. As Steve will detail further, we remain focused on continuing to reduce our net leverage in 2023.
We expect the state-of-the-art mill will generate $160 million of incremental annual EBITDA at its full run rate, driven by approximately $100 million of cost reduction and $60 million benefit through optimized mill capacity. We expect to realize approximately $80 million in the return on the investment in 2026, the machine’s first year of operation. In summary, the strategic investment showcases how we are extending our leadership in fiber-based consumer packaging to meet growing demand for more sustainable packaging solutions.
With that, I’ll turn the call over to Steve to provide more detail on the quarter and full-year financials along with 2023 guidance. Steve?
Stephen Scherger
Thanks, Mike, and good morning. Turning to Slide 13 and the key financial highlights for the fourth quarter and full-year. Net sales increased 20% in the fourth quarter to $2.4 billion and 32% for the full-year to $9.4 billion. Fourth quarter net organic sales growth of a 1% was in line with their expectations as our customers manage year-end inventory position resulting in full-year net organic sales growth of 3%. This represents our third consecutive year of delivering organic sales growth at or above the high-end of our targeted range.
Q4 adjusted EBITDA of $413 million increased to $128 million or 45% year-over-year, meeting our expectations despite the $20 million unfavorable impact from the late December winter storm, which impacted paperboard production by roughly 40,000 tons during the month. Adjusted EBITDA margin of 17.3% improved to 300 basis points from the prior year period. Full-year adjusted EBITDA of $1.6 billion increased to $544 million or 52% from 2021. Adjusted EBITDA margin of 16.9% was up 210 basis points year-over-year. Adjusted EPS excluding amortization of purchase intangibles, continue to expand, growing 78% for the full-year $2.33.
On Slide 14, let me walkthrough additional details of financial performance, markets, operations and capital allocation. Our food, beverage and consumer sales grew 37% in 2022, driven by positive price, organic sales growth and acquisitions. Full-year sales were up 16% before acquisitions. Foodservice sales also achieved strong growth of 25% from 2021. Significant growth in both sales and adjusted EBITDA were driven by positive pricing, organic sales growth and acquisitions partially offset by unfavorable foreign exchange.
Full-year adjusted EBITDA was also positively impacted by $47 million from the K2 CRB investment and $15 million in synergies realized from the AR Packaging acquisition. These positive benefits were partially offset by supply chain challenges and costs that our teams successfully managed throughout 2022 in order to meet customer demand. For your reference, our sales and EBITDA waterfalls are available in the appendix of today’s presentation.
Turning to paperboard market data. Industry operating rates reported by the FPA remained solid across substrates in the fourth quarter. SBS was 91% and CRB was 95%, our CUK operating rate remains over 95%. Company backlogs of seven to eight weeks remain healthy and are reflective of a balance supply demand environment. During the year, our strong cash flow engine really was on full split.
In addition to investing strategic capital to grow our business, we return capital to shareholders while significantly delivering our balance sheet. Net debt declined by $526 million to $5.1 billion and as committed, we reduced leverage to 3.2x at year-end 2022 from pro forma of 4.6x at the end of 2021, a significant achievement. Liquidity remains very strong at over $1.5 billion.
As a reminder, our Board of Directors announced a quarterly dividend increase to $0.10 per share that was affected in January, 2023 given the strength of our cash flows and the progress we have made toward achieving our Vision 2025 goals.
On Slide 15, let me provide our guidance for 2023. Many of the positive drivers that fuel growth in 2022 will continue in 2023. We believe net organic sales growth driven by innovative packaging solutions, positive pricing, returns from the K2 investment, synergy capture, and core productivity will drive financial performance improvements year-over-year. 2023 sales are expected to grow over $500 million to approximately $10 billion.
Adjusted EBITDA is expected to be in a range of $1.7 billion to $1.9 billion, reflecting an increase of 13% or $200 million at midpoint. Adjusted EPS excluding amortization of purchased intangible is expected to increase to a range of $2.50 to $2.90 per share. We expect to generate robust cash flow of $600 million to $800 million, which includes an initial $250 million to $300 million investment to support the new CRB mill in Waco, Texas. We are targeting further reduction in our net leverage ratio to approximately 2.5x by year-end.
Slide 16 presents strong progress we have made toward achieving our Vision 2025 goal over the last three years. Our 2023 guidance reflects momentum in the business towards achieving the enhanced financial goals, we established last February. We expect to further expand our margins, grow returns on invested capital, increase our paperboard integration rate and deploy capital to support growth and reduce costs.
Finally, let’s move on Slide 16. We believe Graphic Packaging is well positioned to consider pursuing an investment grade credit rating, our leadership position and progress today achieving Vision 2025 growth and return milestones coupled with our confidence in the sustain future cash flows of the business, provide us with the flexibility required to continue to invest for growth while pursuing an enhanced credit rating. We will be engaging with the rating agencies in 2023 to assess options and the associated benefits of a potential upgrade.
Thank you for your time this morning. I will turn the call back to Mike for closing remarks.
Michael Doss
Steve, thank you. Building on Steve’s comments, cash flow generation in our business is significant and provides the means and financial flexibility to make investments such as the new CRB mill in Waco, we announced today while simultaneously further reducing debt and exploring an investment grade credit rate.
Let me now wrap up my prepared remarks on Slide 17. Through our established track record of delivering net organic sales growth and productivity gains, along with our long history of deploying capital strategically to strengthen and grow the business, we are creating value for all stakeholders. We are executing strategic initiatives that answer the call from consumers from more sustainable packaging options and expanding the breadth of consumer packaging solutions we offer. As a pure-play, global private base consumer packaging leader, we are running a different race. Thank you for your time this morning.
Let’s turn the call back to the operator now to begin the question-and-answer session.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question today comes from Ghansham Panjabi from Baird. Your line is open.
Ghansham Panjabi
Yes. Hey guys, good morning.
Michael Doss
Hi, Ghansham.
Ghansham Panjabi
I guess, first off, Mike, kind of stepping back – good morning. A lot of the CPGs that have been reporting calendar year 4Q numbers, a lot of their volumes, almost without exception are down mid-single digits. And then I look at your volumes, and they seem to have substantially decorrelated from them. So can you just give us some perspective on that? And also maybe you can parse out volumes between Europe and the U.S. as well for you?
Michael Doss
Yes. Sure. Happy to do that. First, our growth last year was broad-based really in all geographies. So I’ll start with that comment. Obviously, in Q4, we saw some deceleration as we talked to you about when we got on our call at the end of Q3. And that played out through the quarter. October and November were quite strong and December was weaker as we expected it to be, quite frankly, given some of the destocking that our customers have talked to us about. But look, we were able to finish the quarter with positive growth.
And really, it’s all about, as I said in my prepared remarks, look, we’re attacking this market differently with our new product innovation, the products that we have, focused on plastic substitution around the margin and we’ve been profiling a number of those different examples on our calls over the last couple of years. And I think it’s really evident to see over a three-year period of time, if you look at a three-year stack, as Steve talked about in his prepared comments, over 10% volume growth. And so it’s real. And even though some of those elasticities to your point, are down a bit, we like defense nature of our portfolio. If you think about what we’ve done over the last really five years in terms of differentiating end-use market participation, our core food and beverage, as we talked about in our February Investor Day is 56%, which is down dramatically from where it was.
Five years ago, we’ve got a food service business that really is in the heart of this mobility movement and convenience movement. And when you see things like, last Friday’s job announcement of over 500,000 jobs, I mean, people are on the go and they’re busy and so they like and appreciate those kind of products. And so, yes, that to a consumer business, it’s now almost 20% and diversified defensive end products like cat litters and dog food and glue and filter frames, I mean we’re kind of hitting those on multiple fronts. And then the last piece, that would be our health and beauty business that we acquired with AR Packaging to kind of build off a 100% profile.
I think the other part of it that I’d point to, Ghansham, and you know this is the defensive nature of that portfolio, we’ve got almost 20% of that is right in the heart of store brands, private label type offerings. So if the consumer trades down, we kind of catch it there, too. And so we’re participating on the branded side. They see some weakness. We have it on the retail side in the private label sectors. And then ultimately, this foodservice business has been a real winner for us as customers continue to be mobile.
Ghansham Panjabi
Got you. And then for my second question, back to the announcement in Waco, just the thought process of building a brand new mill versus perhaps pursuing an expansion with an existing mill system sort of like you did with Kalamazoo. Is it just the world has changed from a geographic standpoint as it relates to your customers and the cost is overwhelming in terms of optimization by doing this? Or just give us more perspective on that?
Michael Doss
Yes, thanks for the question. It’s a good one. I think, look, if you – we looked at expanding every existing CRB facility. We had to do a similar type project to what we did in Kalamazoo. But if you really take a step back from it for a minute, what you need to do if you’re making high-quality, low-cost CRBs, being a fiber basket that’s growing and very resilient. And so when we looked at kind of our profile, you see if they’re on the slide, the reduction down to six mills, which I’ll come back to in terms of why that’s important from a simplification standpoint.
We really needed to be kind of in that Southwest area. It gives us great optionality to go down into our growing Mexico business. We can hit the West Coast, we can go back to the East, and you’ve got a basket of 20 million people in that Texas Triangle area there with very little pressure on that fiber basket. As a matter of fact, a lot of that fiber goes down into Mexico right now. So we’ll grab that process and turn it back into high-quality materials.
And then on top of that, as you heard in my prepared remarks, we’re really excited about is we’re making some other very big investments with this mill in terms of kind of owning our own energy production relative to electricity, with the gas turbine generator there, we will put into cogen-type setup. So we’ll take the steam from that turned in electricity and we’ll drive the paperboard. And then a lot of money going into a specialized hydro pulping system there that’s going to give us maximum optionality to internalize. Side trim rolls right now are sold 4x worth in the open market and then trim things like some of our Aquacode trim that we haven’t been able to process effectively at our existing CRB mills and we’ll be able to take all that trim from our garden plants and bring it back to our mill in Waco and process it.
So that really allows us to have the reliability we’re looking for. It allows us to have the security supply. And of course, that fiber is fiber, we already own. So from a cash standpoint, it’s a real winner for us. So we really like how that’s kind of coming together. And then you have the tangential knock-on benefits of the muscle memory that was just built in Kalamazoo with our engineers and our contractors that have done this once, this machine will be an identical machine to the one we built in Kalamazoo, it will be a single machine operation.
So we’ve got the costs associated with the infrastructure that we didn’t have there. But geographically, locating one mill in Michigan between Chicago and Detroit and then this new mill in the Texas Triangle, you couldn’t geographically position two coated recycled paperboard mills in better spots. So that really over the next three decades, drives the highest cost – or excuse me, the highest-quality and lowest cost platform that we can have.
Stephen Scherger
Ghansham, it’s Steve. Just one thing to add that we mentioned in the prepared remarks, is also with the drum pulping the ability to also recycle up to 15 million cups a day. And so it’s really an incredible investment in the circular economy, the ability to capture more fiber in better ways and we’re looking forward to advancing that over the next couple of years as well. So it just kind of rounded out some of the net positive benefits of the investment.
Michael Doss
And maybe one final thing that I would share, Ghansham, since you went there. I mean if you really take a step back and think about what we’re doing here over the next three years, we’re really building a moat around our business. We’re simplifying our mill structure, we’re going to be the lowest cost by far. As you saw in our prepared comments and again, our track record would support this, we’re going to be over 90% integrated. We get a lot of questions around other paperboard that’s being added globally, primarily and a little bit here in North America.
On the virgin grades, we’re the only one investing on the recycled side, and we see the end-use consumer really appreciating that much more. They like the materials that are recycled. They get the benefit of seeing their work when they put in a recycling bin or have some other container that’s going to go back. I mean recovery rates for paper and paper packaging in the U.S. last year were almost 68%, much higher than almost any other substrate, with the exception of maybe aluminum.
So if you look at that, it’s right at the center of it, and you’re going to see CRB in more applications. We have low caliber rates that we can run now that we have the capability on these modern machines to be able to do it. We can do freeze grade boards and beverage boards. And so as both Steve and I said in our prepared comments, it allows us to really optimize our whole system. And you have to remember, we buy million tons on the external market. So now we will not be able to have to buy that many as we optimize that system because between what we’ve got and the new investment in Waco and our emerging mills will be able to optimize things. So our confidence in the $160 million is very high and largely within our control.
Ghansham Panjabi
Thanks so much.
Michael Doss
Thanks so much.
Operator
Our next question comes from Mark Weintraub from Seaport. Your line is open.
Mark Weintraub
Thank you. A few, I’ll keep them really quick though. Run rate for price costs, the spread as we look at it today, recognizing, of course, your guidance is going to be factoring possibilities for changes in costs, et cetera. But I think like last quarter, the midpoint had been about $2.25. If we were to just look at the midpoint today, what would it be?
Stephen Scherger
Yes, Mark, it’s Steve. Glad to take that on. The range we provided in the $100 million to $400 million, we think is a good, prudent range just given the volatility that we’ve seen over the last couple of years. So it feels like a very appropriate range for us. Obviously, we’ve got some commodities moving up and down right now of paperboard that we buy chemicals that we buy down fiber, obviously, energy and some logistics.
On a mark-to-market basis, sitting here today, it would be at the low end of the range, so closer to the low end of the $100 million to $400 million but it’s also in February. And so obviously, we’ll continue to refine as the year plays out. There’s certainly dialogue around some acceleration of costs in the second half of the year that could occur. So we’re trying to keep a range that makes good sense. But the mark-to-market currently would be closer to the low end of the range, $100 million to $400 million.
Mark Weintraub
Okay. Appreciate that. And then just a follow-up on the organic sales growth. The 1% to 2% for 2023 understood. In curiosity, as you’re looking at the first quarter, are you expecting to be in that type of range? Or are you thinking that it’s perhaps a little weaker at the start of the year and you make up ground, later in the year against easier comps?
Stephen Scherger
Yes, Mark. I’ll start it and Mike can add any color. I think, one of the positives sitting here on the call today is we’ve got a good view into January. We’re off to the kind of start we expected to be in line with that 100 to 200 basis points. So as we talked, we saw some almost across the board, all packagers slow down in December for us, things to cycle back order patterns to where we expected them to be. So no, we would expect Q1 to be in line with those kind of expectations as we move into the year. Obviously, a lot of that is supported by the new product development activities that have been commercialized. Maybe the only [indiscernible] Mark is that that confidence in January was broad based. It was really all geographies. So we’re seeing it really across our business.
Mark Weintraub
Okay. I have a few more. Yes, I’ll get back in queue though because I realize others have questions.
Michael Doss
Thank you, Mark.
Stephen Scherger
Thank you.
Operator
Our next question comes from George Staphos from Bank of America. Your line is open.
George Staphos
Hi, everyone. Good morning. Thanks for all the details. Congratulations on a good end to the year. I wanted to turn back to Waco. And you mentioned the comment, Mike, building a moat around your business. And certainly, that’s been one of the things you’ve talked about a lot, we’ve talked about. Is one way to think about this as well that you obviously have had very strong results the last year? And it looks like given your guidance, you’re expecting that in 2023. And so the prudent thing to do ahead of potentially additional supply and competition is build the return, build the ability to grow your earnings ahead of when that capacity hits in 2025 and 2026? You’ll have potentially pulp plays out as you expect, a lot of tools at your disposal in 2025 and 2026, you use cash for buybacks, you’ll have growth off this new machine in terms of EBITDA. Is that one way to look at this or would you totally disagree with that and why, why not?
Michael Doss
It’s the absolute right way to look at it, George. And again, just building on some of the comments, that I made earlier to Ghansham’s question. I mean, the part of that we really liked is simplified build structure, six, well capitalized, low cost high-quality mills and the substrates that we need driving towards 90% vertical integration between our organic growth and just kind of some additional growth that we anticipate that we’ll see here over that time. If you just do the math on the 100 to 200 basis points. So it positions us very well for 25, 26 regardless of kind of what those outcomes look like.
And what I’d also say, George, and you’ve seen this, you’ve done this a long time, we’ll have to kind of watch and see what others are doing there because our experience in this industry, and it’s quite a bit for Steve and I is that over time, low-cost wins, high-cost loses. And I’d expect that to be similar to this go-around. But the great thing about how we’re positioned in Graphic Packaging is not only are we low cost on the middle side, but our converting systems largely tied into that. And of course, we spent over the years to create capability there, too, which is really supporting our growth. So you’re thinking about the absolute right way.
George Staphos
All right. Thanks, Mike. I don’t want to turn this into kind of an algebra class, but when I do some rough math on East Angus, Middletown and Tama and look at the slide deck and also make a conversion for metric to short ton. It seems like Waco adds about 550,000 short tons, if I did the math right. Would you agree with that? And if so, it seems like the profit per ton is a bit more $20, $30 versus K2. Could you talk to that? And if it is higher, why would that be the case?
Stephen Scherger
Yes, George, it’s Steve. I’ll start, and Mike can add on as well. But you got it correct. The Waco investment 550,000 short tons addition the assumption as you see in the slide, the cumulative capacity of the other three facilities that are the higher cost facilities are 350,000 tons across Middletown, East Angus and Tama. And so that’s the net incremental 200. Obviously, that can move over the years, dependent upon the growth profile, the supply-demand environment from what they’re doing, but that’s the math that you’re seeing there. And yes, we’re seeing a slightly higher net improvement because of the singularity of this investment if you will, in terms of its ability to kind of stand on its own. And with some of the incremental investments that Mike was talking about on recovery and energy production and the like, I said again.
Michael Doss
No, that’s right.
Stephen Scherger
So again, fiber costs will be a little lower in the aggregate here because of the capabilities we have George, in internalizing some of that material. We’re just not getting much money for right now in the export markets. So like I said, that’s a pickup for us there. From cost standpoint also from a sustainability standpoint, which we’re quite excited about. And the other part of that is making our own electricity with our own steam, and that’s going to lower the overall cost. So you’re thinking about it the right.
George Staphos
Okay guys, I will turn it over. Thanks very much.
Michael Doss
Thanks, George.
Operator
I’ll turn to Kyle White from Deutsche Bank. Your line is open.
Kyle White
Hey, good morning. Thanks for taking the question. A lot of investors are concerned that pricing for your paperboard grades will begin to roll over as this happened in other markets. Looks like backlogs came down just a touch, but remain pretty healthy. I guess, what do you say when asked about this standpoint and environment, do you see any increased competition in any of your markets with any kind of discounting taking place?
Michael Doss
So Kyle, as you know overall capacity based on what’s been publicly announced is going to be relatively flat over the next couple of years for sure. And then there’s some ads that happen into 2025, 2026. But if you just take a step back and look at what we are talking about at Graphic Packaging, which is what I’ll talk about, speak to, we expect our volumes to grow in 2023, meaning we’re going to need more paperboard. And so we expect those markets to remain [indiscernible]. Our backlogs are solid as we reported here, and that’s our expectation going forward.
Kyle White
And then on the cost, you increased the range by quite a bit on the commodity cost bucket relative to the preliminary outlook last quarter. What was kind of the reasoning behind this? You talked about a little bit, but what was, where do you see the most uncertainty and costs that could see the most inflation throughout the year that caused you to increase this range?
Stephen Scherger
Yes, Kyle. It’s Steve. I mean, I think we’re just being prudent to, if you look back over the last two years, we’ve seen hundreds of millions of dollars of inflation come at the business in short order at times. And you’ve seen very high volatility in cost categories like nat gas, like recycled fiber. And so we’re just looking at this saying, listen, we don’t know where it will land. We think the 100 to 400 is a good assumption. I just provided the mark-to-market a little bit earlier, which is on the lower end. But could you see some reinflation in the back half of the year? Is that plausible? And certainly we don’t have a point of view on it, but we’re recognizing that it is in fact plausible. And if it occurs, then we’ll take appropriate price action to recover. But we’re just trying to be mindful of the fact that we’ve been for now over two years, operating in a pretty volatile commodity input cost environment.
Michael Doss
I mean, if you think about it, Kyle, just to build on that, I mean, if someone would’ve told us in August we’d have $2.50 mmbtu nat gas, I don’t know if you would’ve believed it either. So I mean, things can move around in a hurry, based on geopolitical things and other events. And a couple of the analysts on the call have actually wrote about reinflation in the second half of this year. So I think it’s prudent to be a bit conservative here in terms of how we’re looking at it because as Steve said, we just don’t know for sure.
Stephen Scherger
And Kyle to that, just to round that out.
Kyle White
Yes. Sounds good. I’ll turn it over.
Stephen Scherger
Yes. Thanks, Kyle.
Michael Doss
Thank you.
Operator
We now turn to Adam Samuelson from Goldman Sachs. Your line is open.
Adam Samuelson
Yes. Thank you. Good morning, everyone.
Michael Doss
Hi, Adam.
Adam Samuelson
So I guess, hi. So I wanted to come back to the Waco investment and just, I mean, talk about a 12% kind of return on cash return and 11% ROIC. And I’m just trying to get a sense of how you’ve risk adjusted that versus your cost of capital for the size of the project and alternative uses of capital in terms of buying whether it’s buying stock or M&A which obviously delivers earnings on a much shorter order, just would seem like the spread versus the cost of capital for sizeable project doesn’t have a big project risk premium in there. I just want to make sure [indiscernible] how you are viewing that?
Michael Doss
Yes. Thanks for the question, Adam. So first off, you know, part of how we derisk the project is the experience and the knowledge we have coming out of K2. So I’ll start with that. I mean, as I mentioned in my prepared remarks, this is an identical machine, the one we just got done building. So all the engineering is done. If you think about the operating system on this machine, it’ll be all debugged by the time we lift and shift it down to Waco, so all those things really give us confidence in our ability to have a vertical ramp. And I think you’d actually have to agree our ramp in Kalamazoo and then 11 month fashion getting up to full run rate. I’ve exceeded most people’s expectations, including mine, which were high. And so I think if you think about it in those terms, that’s that gives us confidence in the project.
Having said that, I think the other thing you’ve got to factor into an investment like a mill like this is, a three decade plus, a type investment. And one other benefit about CRB versus some of the virgin stuff is the ongoing capital requirements to run a CRB mill are much lower than that of a virgin mill because you don’t have all the pulping and backend things that you got to deal with. So the drop through on that 160 once, we’re at full run rate is pretty large. And, our stakeholders and investors will be the beneficiaries of that kind of cash dropping through each and every year, just like they were, if you recall when we talked about, when we did K2, what we saw in K1, it had been running for three decades thrown off a $100 million of cash for $120 million investment. So that’s how we think about it in a high level capital allocation.
You’re right, there’s things like, acquisitions that you could do that could have a little bit more immediate, but they come with risk too, as we know in a situation in the macro like we’re dealing with right now. But we’ve done all of those. I mean, if you think about the AR deal we did, it was winner for us. Synergies are on track. We’re growing our topline there. We have done buybacks in the past, if you go back to 2015 almost a $1 billion of buybacks that we’ve done over that period of time. So we look at it as truly a balance capital allocation process. And we think this one is a real winner for our shareholders.
Stephen Scherger
Yes. And just add on to that. It’s Steve. I think, there’s a couple things in there that Mike was articulating. One is the returns are actually in many ways mechanical. It is fixed cost reduction, variable cost reduction. We can see it, it’s in our control. We know how to execute against it. And echoing the point, a 30-year return profile for besting class cost structure at 11%, 12% returns is quite value creating. But we’re also, with what we’re sharing today, there’s a both end, and we’re investing for the long-term growth, but we’re going to reduce debt again in 2023, probably by another $0.5 billion, leverage is going to drop from 3.2x to 2.5x. And so we are returning very significant cash flows in a balanced way back to all stakeholders in this case by investing for the long-term to build the modes around the mode up around the business while returning value to shareholders in a significant way, driving leverage down to the low end of our targeted range.
Adam Samuelson
Okay. That’s all very helpful. And I am going to ask a follow up. You talked about kind of reoptimizing the mill, the mill network and some of the different kind of products that that can come out of the virgin grade mills. How do you think this positions your footprint to compete against some of the FBB kind of SBS type capacity that’s being put up by others and what kind of how it, how your cost position in those markets are impacted by putting Waco in directing that capacity to CRB?
Stephen Scherger
I think it creates very tough environment for them in many ways. And when you think about it, we’re going to have an optimized six mill system coming out this lowest cost domicile here in the U.S. and the best fiber baskets both on the virgin and on the CRB side. And over time, we’re going to take our tons the 5% growth that we’re talking about and grow organically driving our integration rates up above 90%. So we always have said, Adam, that we want to have the ability to have leverage the full and different optionality and growing our global spend to the point now where we’re buying a $1 million tons of paperboard, creates a situation where we can pull a lot of different levers that allow us to optimize our core and continue to have to buy on the outside as we grow our converting business both organically and with strategic M&A. So that’s our strategy and I think it positions us well from a moat standpoint. So as those funds come online in 2025 and 2026.
Adam Samuelson
Okay. All right. That’s all. That’s all very helpful. I’ll pass it on. Thank you.
Michael Doss
Thank you.
Operator
[Operator Instructions] Our next question comes from Gabe Hajde from Wells Fargo Securities. Your line is open.
Gabrial Hajde
Mike, Steve, good morning.
Michael Doss
Good morning, Gabe.
Gabrial Hajde
Two, I guess, points of clarification. Thank you. This Tama mill with, I guess a footnote one on there. It sounds like it was required at the end of January. Maybe just a little bit of color there as to what was driving that decision because it seems like it’s not on the map when I look at the right side of Slide 10. And then on the cash flow discussion or guide that you’re giving us, I don’t know if you talked about it much, Steve, the $300 million to $400 million that’s working capital interest, taxes, pension, what do you are trying to tell us there?
Michael Doss
So I’ll take the first part of Gabe and then let Steve handle your second part of the question. But the first part of it is, if you take a step back and remember we had a supply agreement with Greif when we bought their converting business back in February of 2020, that was pretty large, almost a 100,000 tons [indiscernible] centrally into that. We’re over half the volume of that mill, so relative to what we’re doing here, we need those tons to make sure that we can run our business over the next few years and ultimately integrate that into our overall business. We’re very committed to CRB as evidenced by the investments that we’re making. So it made sense for us to kind of de-risk that part of our business here going forward.
Stephen Scherger
Yes. Just add that, a couple of context points there as terms of expectations inside of the guide were our expectation for the mill for the Tama mill this year is about $15 million of EBITDA. It’ll get offset a little bit by the exit from Russia that we’ve articulated earlier that we’re continuing to work through. Relative to the other cash items, all we’re really doing there is just providing you with the range of what we expect or the really the other uses of cash for the business this year. And that’s where interest taxes, working capital and pension will fall. Our interest costs are going to be in the low to mid-2s. Our cash taxes will be a 100 plus or minus, and then working capital and pension in a range, probably zero to $75 million.
So all we’re doing there is just putting it into the appropriate category, $300 million to $400 million, that’s really what it costs to operate the business beyond the capital that we’re putting to work. And hence, it’s your walk from the midpoint of our EBITDA less the CapEx, less the $300 million to $400 million get you to the cash flow of $600 million to $800 million. Take the dividend off of that any other small things that we do. And that’s where the debt reduction [indiscernible] the benefits to get you down to leverage in two and half range. So we’re just providing you with the walk.
Gabrial Hajde
Understood. It was just the aggregate of those numbers and I think maybe previously you guys had kind of broken those off for us. I appreciate it. Thank you, Steve. And maybe what you’re hearing, the next question is kind of two parts and I guess what you’re hearing from our side of the table is maybe a little bit of surprise on behalf of investors and in terms of the magnitude and timing of this investment. So I’ll start by saying, look, I think you guys have proven a lot of success with Kzoo, so, congrats there.
So the two part question is, one, as you look across the existing system, one of the things from a timing perspective that, that may have accelerated this or brought it to the forefront could be, I guess some existing capital requirements of some of the existing footprint. So, can you talk about whether or not that was part of the decision making?
And then the second point, Steve, from a financial standpoint, I think the Middletown mill enabled you to maybe capture some of this incremental 200,000 tons of growth. So in other words, as a part of your original Kzoo project, you guys were going to close that, you kept it open because as you’ve talked about, you’ve seen the growth. If I were to ascribe that kind of $400 million EBITDA per ton figure to that, it would say, well they were already on track to get some $70 million of incremental EBITDA that they weren’t expecting before. And so looking at the project from that perspective, maybe the return potential is really $90 million from the cost saves that you’d be getting because you could have already gotten that growth with Middletown. I know it’s not that simple, but just maybe flaws in that logic if you will?
Stephen Scherger
Yes. Let take second one first and then Mike can attack the first, no, real clarity. We got first $50 million from K2. We’ll get the next $50 million this year. We’ll get the final $30 million in 2024, and the 160 is incremental to that, 80 and 80. So you’ve got an accumulation here of 130, 160. I mean, this is a very substantial multi nearly decade level improvement of EBITDA from this investment in a very unique and world class, low cost, high quality CRB platform. So there is not, if you’re asking that question, there is not a plus and minus 50, plus 50, plus 30, plus 80, plus 80. That’s what’s common.
Michael Doss
Yes. And so, Gabe the other part of that I think is important. You said it is, three mills that we will look to shut down once Waco is operational. I mean, these are small end of life type assets. To be fair, the folks that run those mills and work in those mills have done an excellent job with what they have for a really long time. And these kind of decisions are always hard. But our ability to attract new talent to work in places like that, it’s diminishing quite frankly, we need to have modern facilities that are well capitalized, control rooms that are digital in nature, you know people will work in those kind of environments. We see it in Kalamazoo in terms of our hiring process.
And then the other thing I’ll point out, and this is important, our customers are under increasing pressure because of the public proclamations they’re making and commitments they’re making around sustainability that really we have to have the ability to service them and help them accomplish those objectives that they have over the next five to 10 years. And when you look at an investment like we did in Kalamazoo and now in Waco, Waco alone is going to reduce our absolute greenhouse gas emissions across our CRB platform by 12%. And if you’re just serious about sustainability and circularity, you’ve got to make those kind of investments because you can’t get there relancing the converting facility with led lights. So these are major moves that we’re making to support our customers and position this company over a multi-decade period of time to really generate ongoing cash flows then margins, that are consistent with our Vision 2025 goals and aspirations that we’ve outlined.
Gabrial Hajde
I appreciate it, gentlemen. Thank you.
Michael Doss
Thank you.
Operator
Our next question comes from Kieran de Brun from Mizuho. Your line is open.
Kieran de Brun
Hey, good morning. Yes, a lot of the questions have been answered, but just to touch again on kind of the capital deployment priorities, I guess as we look out towards 2025, if I just got to look at that adjusted EBITDA and sales range, it implies to may not so much on the sales front, but on the EBITDA front implies that there might be some room there at the midpoint or even towards the higher end for M&A. So, where do you think about adding capabilities in the future if there is kind of that focus on, bolt-on acquisitions or even larger M&A? Thank you.
Michael Doss
Thanks for the question, Kieran. So one of the things that Steve and I are both happy about is we head into 2023, a bit of an uncertain macro to say the least. If you have self-help things that you can work on, what a great thing for a CEO and a CFO to have and to be able to align your organization around and we’ve got that. We’ve got the continued ramp up in Kalamazoo, that’s going to deliver another $50 million this year of ongoing savings as Steve has outlined. We’ve got synergies and growth that we can drive with our AR Packaging acquisition. And ultimately, of course, our teams will be getting busy now, down in Waco. So these are things that we control and we can execute on. And our track record around execution is really, really high as you know. And so, we like that.
And so as we’ve said before, and we’ll continue to say, I mean our bar for any M&A is, is extremely high, given some of the things that we’re working on internally. Having said that, we don’t always get to control when something would come to market. And so there are certain things obviously we would take a look at, but it’s going to have a really, really high bar, given the other priorities that we’ve got in front of us and the ability to really improve our EBITDA through our own actions over the next two to three years. So that’s kind of how we think about that. And as Steve has said, we’re going to pay down another $500 million worth of debt roughly here this year. If you take a look at what that looks like, our debt ratio goes 2.5x.
We like how we’re positioning this company not just into the future, but in 2023, so the optionality we will have, we’ll continue to grow and then it’ll expand as we go into 2024 and 2025. But, again, we like our internal self-help story, and that’s where we’re going to spend our focus here unless something very compelling would come along. And as we’ve said, it’d have to have an incredibly high bar.
Stephen Scherger
Yes. And Kieran to Mike’s point, big part of that high bar is integration and that’s we look out over the next several years, that’s where we can really drive value moving that integration up towards 90%. So that’s a big part of the bar, if you will, that we set around return expectations for anything we would assess.
Kieran de Brun
Great. Thank you.
Michael Doss
You bet.
Operator
We now turn to Mike Roxland from Truist Securities. Your line is open.
Michael Roxland
Thanks. Mike, Steve, Melanie. Appreciate taking the questions. Nowhere approaching, we’re over the hour here, but just one quick one on the Waco acquisition. If you just look at some of your initial estimates on cost and EBITDA, it seems like there’s, that Waco is yielding a lower return than Kalamazoo based on those initial EBITDA generation and the cost kind of spend. Can you help us frame what’s driving that lower return at the outset, and is that primarily due to the fact you’re dealing with the Greenfield versus Brownfield?
Michael Doss
Well, I’ll start with the absolute answer in terms of the increase some of the increased costs is a function we have to build the infrastructure. So wastewater treatment in Power Island, those kinds of things, we’ve got to construct. And as we said, Michael, we’re actually going to have enhanced capabilities here too, both in terms of our pulping capabilities and our ability to generate our own electricity within the mill. But the overall returns is a ratio. If you think about what we spent in Kalamazoo and what the public talked about spending in Kalamazoo, it’s substantially similar.
Michael Roxland
Okay. And just quickly on Texarkana, can you remind us what the metrics are you’re looking at to determine whether to proceed with a potential conversion of that mill, particularly given all the capacity that has been announced at the start here domestically? I remember you mentioned that you postponed the conversion because it would take about 90 days of downtime. Obviously not partly favorable in line of current tight supply demand, but just wondering if that’s something that’s on your radar as well, given the capacity additions that are targeted for the U.S.
Michael Doss
Yes. So as we’ve talked publicly about Michael, we’ve got, we looked at projects to do FBB, we looked at projects to expand our CUK capacity. We looked at this project to expand our CRB capacity. Obviously today in the near term we’re talking about CRB, for all the reasons I’ve already outlined, I won’t recover those points. But having said that, we’ve got good projects on both those different substrates over time, we see a need for those. Right now, our focus is going to be on CRB. I’ll tell you that our Texarkana mill is quite busy because that machine that took downtime that you’re referencing correctly. So that was during the pandemic when your food service volumes were down substantially. And of course, since, the reopening here in the U.S. and all through last year and into January here, our food service business is accelerating in terms of volumes and growth. And so we need those tons coming out of that mill now. And ultimately, that’s how we’re thinking about that.
Michael Roxland
Thank you.
Michael Doss
You bet.
Operator
Next question comes from Cleve Rueckert from UBS. Your line is open.
Cleveland Rueckert
Hey. Good morning, everybody. Thanks for sneaking me in here past the hour. Appreciate it. My thought is follow-up something on something you said or I thought I heard you said in your prepared remarks. Like you said, I think the CRB cost advantage exceeds other substrates or the potential cost advantage in CRB. Did I hear that right? Maybe could you expand on that a little bit?
Stephen Scherger
Yes, Cleve. It’s Steve, I’ll start. I think what we were articulating there is that there’s a unique opportunity that we began with K2 and that exists with Waco for very distinctive and substantial cost to produce differences with CRB. When you compare these investments to the other capabilities in the industry, our own remaining and others. Whereas in virgin substrates, that level of difference tends to be smaller, whether you’re making a current investment or maintaining your assets. So there’s a unique competitive differentiation of substrates with CRB that is larger than you would see, being capable or being captured with virgin paperboard investments, I think is what we were articulating there.
Michael Doss
Right. And so if you look at that cash cost curve that’s in the slide, Cleve, what Steve is referencing is that advantage is much larger on CRB that you saw the same cash cost curve for SBS, which, if you can go get the Fisher curve, the low, if you look at North America between the lowest cost and the highest cost on SBS, it’s within a $50 bill. And so our advantage is going to be when this is done, $135 a ton. So that’s the substantial nature of it that we’re talking about.
Cleveland Rueckert
Yes. I just wanted to make sure that point was clear. And then Mike, I really liked your point earlier about the lower capital intensity of recycled grain versus virgin…
Michael Doss
So it’s really true, sorry.
Cleveland Rueckert
Yes, no, it’s a great point. And then there’s one quick follow up. We’re talking more about integration now and vertical integration, and I’m just wondering, if you guys could quantify a little bit for us what it means to go from 73% to 90% integration, what that does for you in other areas of your business just as a reminder. And then maybe just remind us what the restricting factor is on integration. In other markets we kind of think of the downstream as being the restriction, but I think Mike, you were talking about you’d buy, a 1 million tons of paper every year. So, and maybe it’s, it’s really just this upstream investment that, that enables that integration? And that’s it for me. Thank you.
Michael Doss
Yes. I think, look, if you think about that, and I appreciate the question, we really take a look at that 1 million tons we buy as make versus buy and that calculus will change over time based on freight and other things that go into that around some of the places we purchase the paperboard around the globe, particularly if we want to optimize our mill network, which we’ll be able to do once we’re done here with this Waco investment. So I think the biggest thing for driving integration rates up is our organic growth. Every time we grow each year we grow, like we’ve done over the last three, we need more tons next year and we have to have low cost, high quality material paperboard to be able to convert it for our customers.
Our customers really appreciate the vertical integration and they were reminded of how important that was during the pandemic and ultimately through some of the dislocations associated with these supply chain difficulties. So being an integrated supplier to these large brands and these large retailers really helps de-risk their overall supply chain profile. And so it’s an important part of that calculus.
Having said that, you got to invest in your converting too, and we’ve done a good job on that over the years. To make sure that you’ve got, good converting plants that are geographically located to where your customers are. We like to say that all packaging is local. And so that, that end conversion has to be done in a way that helps service our customers facilities and plants. And again, our selection of Waco is, great because we’ve got a 100 converting facilities here in the U.S. and it’s a great location for us to be able to service them geographically, as I mentioned, down into Mexico, the West Coast, back east, and even up into the upper Midwest. So that’s how we think about it, Cleve, why vertical integration is such a key part of our strategy and has been really for well over a decade now.
Cleveland Rueckert
Appreciate it. Thank you very much.
Michael Doss
You bet.
Operator
This concludes the call today and I’ll now turn the call back to Mike Doss, President and CEO for closing remarks.
Michael Doss
Thank you, Elliot. And I do want to thank everybody for joining us for our call today. We’ll look forward to talking to you again towards the end of April with our updated first quarter results. Have a great day.
Operator
Today’s call is now concluded. We like to thank you for your participation. You may now disconnect your lines.
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