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During the course of this call, we will make forward-looking statements involving our plans, expectations, estimates and beliefs related to future events. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those that we discussed.We include a description of these risks and uncertainties in our filings with the Securities and Exchange Commission including our 2011 Form 10-K and our Form 10-Qs filed for the period ending December 31, 2011 and March 31, 2012. During the course of the call, we will refer to non-GAAP financial measures. We provide reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in the appendix to the slide presentation. The slide presentation is available on our website. Jim is going to begin with commentary on the performance of our businesses during the quarter and I will discuss the status of our integration as well as various items on our financial statements. After our prepared comments, Jim and I will be available for questions. Jim? James Rubright Thanks, Steve. Good morning. We had solid operating performance during the quarter with very strong consumer segment earnings performance, a mid lower demand for folding carton board grades. Corrugated results were also generally consistent with our expectations for the quarter with the exception of higher costs than we anticipated in connection with the Hodge rebuilding and capacity increase projects and we continue to make good progress on synergies that Steve will discuss achieving our run rate in excess of $200 million by the end of the quarter. As those of you who follow us closely know, we run our businesses to maximize long-term free cash flow returns and those returns are the primary measure by which we judge our performance. It’s now 13 months since we closed the acquisition of Smurfit-Stone. In the last 12 months ended June 30, we generated $458 million or approximately $6.37 per share in cash that we applied to debt reduction and dividends, two small corrugated acquisitions and for pension contributions in excess of expense, which we used to reduce the liability for the largely closed pension plans we acquired in the Smurfit acquisition. In the three months ended June 30, 2012, we generated $133 million or approximately $1.84 per share in cash flow available for those purposes even though is a major maintenance outage quarter.
Now, I’ll turn to more detail regarding our segment performance. Given seasonally stronger domestic box demand, our corrugated shipments were up 2.1% over the March quarter. And also given our planned maintenance outage of 165,000 tons on the destruction from the Hodge shutdown that I mentioned, we reduced containerboard tons sold in export markets by 42,000 tons compared to the March quarter.During the quarter, we actually completed major maintenance outages at 5 of our 9 virgin containerboard mills, Fernandina Beach, Stevenson, Hodge, West Point, and La Tuque. Four of those went well. We had a disruption at Fernandina Beach where we did the seven year maintenance outage on the mill’s turbine. And we concluded we need to do a rewind of the turbine, so that cost us some production at Fernandina Beach as we operated in a slightly constrained mode, but otherwise those outages went as planned. At Hodge we undertook a number of major rebuilding projects that when fully implemented will modernize a number of important areas of the mill. And with the other changes we’ve made over the course of the last year to mill will increase productive capacity by 100,000 tons per year. But actually in terms of lightweight liner because it shifts the mix by 200,000 tons of lightweight liner since we exited the craft paper business and the medium business. And we will do that on two rather than four paper machines. However, in the course of the outage we ran into a number of issues in completing these complex projects and reduced expected production from the mill by about 20,000 tons in the quarter and caused higher supply chain and other costs that we estimate it cost us approximately $10 million or $0.09 in the quarter. The mill is currently working through the many start-up issues from a complex series of projects and we expect that it will take a number of months to realize the full benefits of these improvements. As a system we don’t expect to take any significant amount of major maintenance or economic downtime in the quarter. By the end of June our inventories were down to our normalized target level. They declined further in July by about 32,000 tons and we expect further tightening that will continue through October and November of this year.
Our largest input costs in the corrugated segment are virgin and recycled fiber and energy. Slightly lower virgin fiber costs compared to Q2 2012 increased earnings by $2.3 million, but that was more than offset by higher system OCC prices which reduced earnings by $5.5 million in a quarter.Nationally, we are seeing low demand for recycled fiber particularly for export sales, so we expect to benefit later in the quarter and likely for the balance of the year including the calendar year from lower OCC prices. Our containerboard only production is approximately 40% of recycled fiber input based as a company as a whole including our consumer segment were approximately 45% recycled fiber input based. Read the rest of this transcript for free on seekingalpha.com