William McCarthy - VP, Financial Analysis & IR John O'Donnell - President and CEO Bonnie Lind - SVP, CFO and Treasurer.

Jonathan Tanwanteng - CJS Securities, Inc. Daniel Jacome - Sidoti & Company, LLC Steven Chercover - D.A. Davidson & Co. Mark Weintraub - The Buckingham Research Group.

Good morning, and welcome to the Neenah's Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask a question. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Bill McCarthy, Vice President of Investor Relations. Please go ahead..

Thank you, and good morning. On the call with me today are John O'Donnell, our Chief Executive Officer; and Bonnie Lind, our Chief Financial Officer. After our prepared remarks covering progress against key initiatives and quarterly financial results, John and Bonnie will open up the call for questions.

We released earnings yesterday afternoon and reported record quarterly revenue of $271 million. This reflected continued strong organic growth and added acquired sales and technical products. And Fine Paper and Packaging revenues that were equal to last year.

Both segments benefited from increased selling prices, and a higher value mix and Technical products results were also helped by currency translation. As we communicated in our May call, second quarter results included an impairment charge related to the plant sale of our office product mill in Brattleboro, Vermont.

This $32 million noncash charge, along with $1.3 million of expense related to withdraw from a multi-employer pension plan and other restructuring activities, resulted in a GAAP operating loss for the quarter of $4.3 million or $0.29 per share.

Excluding these items, adjusted operating income was $29 million, in line with last year and adjusted earnings per share were $1.18 versus a $1.22 in 2017.

We have reported adjusted earnings, when it improves understanding of results and comparability between periods and provide a reconciliation of these measures to comparable GAAP figures in our press release.

I'd also note that our comments today include forward statements and actual results could differ from these statements due to the uncertainties and risks outlined on our website and SEC filings. With that, I'd like to turn things over to John O'Donnell..

Good morning everyone. I'll start with a brief overview of segment results and then update you on some of our ongoing growth initiatives. Our business has performed well in the second quarter, as it grew consolidated sales 9%. Offset heightened input costs pressures-and significantly improved cash flows.

Starting with Technical Products, both top and bottom line grew at a double-digit pace. This resulted from organic sales growth of 5% to 6% both filtration and in performance materials, complemented by added sales from our Coldenhove acquisition. Filtration growth was led by higher sales out of Appleton and I'll talk more about that shortly.

In Performance Materials, sales were up in backings, label and other specialties, with backing groups helped by added distribution of a premium tape product.

In Fine Paper and Packaging, sales were in line with last year and we made significant progress mitigating fiber and freight cost pressures to restore EBIT margins, while adjusted EBIT was down versus last year was up substantially from the first quarter.

The improvement came from actions taken to revamp our shipping practices to be more cost effective as well as additional selling price realization. Next, I'd like to comment on progress against a few of our long-term growth catalyst. First, we're continuing to ramp up sales from our Appleton filtration facility.

Projected 2018 sales are now likely to be in the top half of the $15 million to $20 million range we previously communicated. At this point, 80% of the sales are A qualified with customers up from 70% on our last call. Even more encouraging is the number of North American customers that are engaging with us regarding future projects and opportunities.

As I've noted before our capacity addition comes out at good time. Global market demand continues to grow and there have been no other meaningful capacity additions. So, customers are seeking suppliers who have the ability to grow with them. Our investment provides these customers with best-in-class quality and costs.

While we're excited about what we're seeing on the top-line, I'd be reminisce [ph] if I didn't mention that there have been a few challenges. In addition to be in squeeze by increasing input cost qualifications, this year we're currently below desired internal productivity and yield targets.

To address the needed improvements, we've implemented teams focused on specific operational areas and made some necessary organizational changes. While still early in these efforts, I believe we're on the right track.

We continue to expect this investment to turn profitable next year and for profits to grow each year as we move forward ultimately delivering an attractive into curve cash flow and return. Our second growth catalyst is the acquisition of Coldenhove late last year.

This gave us a leading position in the fast growing $200 million market for digital transfer media. I've been extremely pleased with what the team has been able to deliver.

As noted on the last call, we've realized synergies more quickly than anticipated as we implemented go-to-market strategies for our complementary products and customers and expanded our market reach.

We acquired this business with $45 million of sales, sales and profits are well ahead of original projections and should easily top $50 million this year with a double-digit EBIT margin. Finally, we continue to realize attractive growth opportunities in premium packaging.

In the second quarter, sales again grew by double-digits with increases in label, premium folding board and live format products. And almost 20% of Fine Paper and Packaging sales, we remain believers that premium packaging can transform the segment into organically growing one while maintaining its very attractive margins.

While on the subject of Fine Paper and Packaging, I'll note that our sale process for Brattleboro is on track and we'll communicate update as we progress. With sales of over $30 million most of this business was not a strategic fit with Neenah and the divestiture is a part of a broader effort to increase efficiencies in Fine Paper and Packaging.

As I mentioned on our last call, we expect these efforts to lead to an annual improvement in operating income up around $5 million. So, in summary I'm pleased with the results in the second quarter and progress on our strategic growth initiatives.

Given expectations of a continued inflationary environment for commodity input cost, we still got plenty of work ahead. I'll talk about this later, but first I'll turn things over to Bonnie to cover quarterly financial results in detail..

Sure. Thanks, John and good morning everyone. At the start of the call, we mentioned the $32 million non-cash impairment charges to write-down the long-lived assets that are largely related to Brattleboro.

As noted on our last call, Brattleboro came with a Fiber In addition to the impairment charge, we had one-time cost of $1 million to exit a multi-employer pension plan and $300,000 for restructuring of our U.S. filtration business. All of these one-time costs were allocated to segments in details are shown in our press release.

This morning, I'll be commenting on adjusted numbers which exclude these costs and I'll start with technical products. At the risk of sending like a of Mat's call, Technical Products had another great quarter in their seasonally strong first half of the year. Sales were $150 million, a new record and up 18% versus the prior year.

This reflected strong organic growth and acquired sales as well as a higher value mix, selling price realization and currency translation benefits. In filtration, sales were up just over 6%.

In addition to currency, growth reflected higher sales of transportation filtration with North American sales up almost 50% year-on-year as we continue to ramp up Appleton utilization. This helped offset lower sales and other filtration products, following a strong first quarter for these grades.

We also benefited from an improved mix with sales of our higher advanced grades up 12% in the quarter, as our German team has worked to optimize mix given their current capacity limitations. Performance materials revenues grew 27% with organic growth of more than 5%.

As John noted, sales were up broadly with gains and backings, labels and other specialties. The specialty growth included our heritage digital transfer grades as we realize synergies with media Coldenhove. Technical Products adjusted operating income of $17.6 million was up 10% from $16 million in 2017.

In addition to increase volumes, earnings benefited from higher selling prices and more favorable mix of product sold and currency translation. These items fully offset higher input and distribution costs as well as less efficient manufacturing operations in the quarter.

Turning next to Fine Paper and Packaging, revenues of $116 million, we're about equal to last year. Increase selling prices, growth and packaging and consumer and the higher value mix more than offset lower commercial print volumes which included a large reduction in marginal business, that doesn't make sense in a high input costs environment.

Premium packaging sales were up by more than 10% and sales to the retail channel grew by 15%. The strong consumer sales reflected incremental distribution at new customers, but also acceleration of some back-to-school sales that typically occur in the third quarter. Adjusted operating income of $16.7 million was down from $17.5 million last year.

But up significantly from first quarter income of $12.8 million versus the prior year. Higher net selling prices and lower SG&A spending were not able to fully offset higher pulp and freight costs.

Versus the first quarter income increased as a result of additional selling price realization, higher volumes and actions we've taken a reduced distribution costs operating margin top 14% and we're back within our expected range of 14% to 16% of sales. Turning the SG&A, expense with $25.2 million in the second quarter from $24.5 million last year.

The increase was due to SG&A acquired with Coldenhove. That was partly offset by the lower Fine Paper & Packaging and marketing expenditures. Mostly timing related. Well, second quarter spending was below our guidance of $26 million, year-to-date SG&A spending is right at $52 million.

Unallocated corporate SG&A $5 million was up from $4.5 million in the prior year in-line with our expectation of approximately $5 million per quarter. Next, I'll cover some of our corporate items. Interest expense was $3.3 million, compared to $3 million in 2017.

The increase resulted from incremental short-term borrowings to finance the Coldenhove acquisition. On the taxes are adjusted tax rate for the quarter was 21%. This was largely in line with last year second quarter rate which benefited from our election not repatriate overseas funds.

Beyond going book tax rate this year is still expected to be around 23%. That is down from 29% last year. Due to the changes in the U.S. tax law which took effect in January. Our cash tax rate this year is projected to be under 10% and reflect benefits from consuming our prior period R&D credits over the next 2 to 3 years.

Following this our cash tax rate will start to converge with our booked tax rate. Moving to our balance sheet, debt declined $17 million in the quarter to $253 million as we use available cash flow to pay down short term borrowings. Most of our debt is comprised of $175 million U.S. bonds that are due in 2021.

The remaining debt is split between the U.S. and Germany as we've shifted more debt to Europe this year to take advantage of lower interest rates. With debt to EBITDA below two times and plenty of available borrowing capacity, we remain conservatively financed and have the ability to take advantage of attractive investment opportunities.

Cash from operations was a very strong $32 million in the quarter, as we bounce back from a slow start to the year, mostly due to seasonal timing of accounts receivables which remains very healthy.

In the second quarter, we chose to exit a multi-employer pension plan at one of our mills and took a charge of $1 million to establish a liability equaled to the present value of required future cash payments over the next 20 years, meaning it was an extremely small part of the plan and given the plans perceived financial risks and ability to change funding rule unilaterally, we saw the better for our employees and for the company to exit and offer a more stable retirement alternative.

In total, our post-employment benefit plans are in great shape. We expect cash outlays for these plans to be around $17 million this year, which is slightly below where we were last year, and $6 million higher than related ongoing expense. On the capital spending, outlays were $8 million in both the second quarter of 2018 and 2017.

For the full year, spending is projected to be similar to last year and within our stated range of 3% to 5% of sales. Around 60% of spending will occur in the second half of this year when we take our annual maintenance down. Finally, we returned almost $8 million of cash to our shareholders mostly through our dividend which is up 11% from a year ago.

To wrap up, Neenah's financial position remains very strong. Our business generates sizeable cash flows, our balance sheet is in great shape, and we have a disciplined approach to deploying capital.

Our priority is to act on organic investments and acquisition opportunities that add value and we remain committed to returning a portion of our cash flow to shareholders through an attractive dividend. With that, I'll turn it back to you, John..

Thank you, Bonnie. I'll finish up with some comments on the external environment and a few other items impacting the remainder of the year. With currency, while currency was benefited in the first half due to stronger Euro, the current rate of 116 is now about $0.05 lower.

We've noted before that a $0.05 change represents about $2.5 million in sales and $0.5 million of EBIT per quarter. And that should approximate the quarterly reduction in translation benefit in the second half versus the first half of the year. As a reminder, we scheduled our annual maintenance downs at most of our facilities in the third quarter.

Typically, the added cost for these downs as $3 million to $4 million. This year we expect cost to be $1 million to $2 million higher due in part to additional infrastructure work in Germany that's only required once every few years.

Filtration and other technical products are also impacted by seasonality with second half demand typically lower than the first half. Global economies generally remain on sound footing supporting growing demand for our products. The U.S. economy continues to do well and about two-thirds of our sales are in the U.S.

with Fine Paper and Packaging being the largest part. In Europe, conditions have improved versus a couple of years ago notwithstanding recent worries surrounding global trade issues. One subject hitting a lot of attention has been tariffs. We sell into about 80 countries and like other U.S. companies we're dealing with a number of uncertainties.

While our global technical products manufacturing base provides flexibility. It's unlikely will be able to completely offset a loss in sales are significant remittable tariffs are enacted. In addition, there could be audit cost for imported materials.

As I'm sure you can appreciate, this remains a fluid process and as a global manufacturer, we'll manage our business to minimize any value impact. However, the bigger and more certain story, this year has been the steep rise in commodity prices. In the first half, input cost was up $10 year-on-year.

We expect cost in the second half to be up $14 million as prices for pulp and other materials have continued to rise. $24 million of higher cost in the year for company our size is a significant headwind and it will take time to completely recover the added increase in the second half of the year.

With that said, we still expect to more than up - we still expect to offset more than 80% of input cost increases this year through our pricing actions and anticipate that we will offset the remainder as we head into 2019.

In addition to increases already implemented in Fine Paper and Packaging, we recently announced the third increase in certain rates and we'll take effect in the fourth quarter.

The Technical Products pricing discussions are held on a customer-by-customer basis, once customers with cost adjusters should expect to see these triggered as prices continue to rise.

As you know each of our business has demonstrated its ability to cover input cost or the time, and in this year's high inflationary environment, our market activity is higher than any time in the past. On our last call, I spoke about higher freight rates and have disproportionately impacted our Fine Paper and Packaging business.

Freight rate started rising in the back end of the last year and were up by over $4 million in the first half of this year. Our teams have done a nice job, making changes to improve our cost structure, while ensuring they did not impact customer service.

Consequently, while it's still higher year-on-year, we expect the impact to be more modest in the second half. So, as I wrap up, you can see our teams are actively and successfully addressing an unusually challenging cost environment. Our market positions are strong and demand for our products is growing.

They have important catalyst for the longer-term growth, as we gain share geographically in global transportation filtration, realized synergies from our leadership position in fast growing digital transfer market and maintaining our goal of double-digit growth in Premium Packaging.

Our balance sheet affords just a financial flexibility to pursue and act on attractive opportunities and as always, we're actively seeking acquisitions that will add value and have change our growth trajectory, as Neenah continues to evolve into a faster growing and more profitable specialty materials company.

Thank you for your interest and we'll now open the call for questions..

Thank you, [Operator Instructions] Our first question comes from Jon Tanwanteng with CJS Securities. Please go ahead..

Good morning and thank you for taking my questions. Nice quarter..

Hi, Jon..

John, when you - when do you actually see Packaging tipping the growth of Fine Paper and say kind of a higher sustainable growth rate, is that something in the near-term radar?.

It's well, we see within the five-year horizon. I think mathematically just looking at, that's the business that 3% to 5% decline about 75% or so of the businesses in that decline and growing at double-digit on the other, as we continue to gain scale in that. We see it in the near-term horizon..

Okay great.

And then Bonnie, if you could, how much of the drag was Brattleboro in the quarter, if you pick that up?.

We don't break out our results by mill, but I would tell you it was not a cash drag..

Okay, got it.

And then, I asked this question every quarter, John, but can you talk about the pipeline for M&A and if you active there, where do you see the opportunity the headwinds to deals caution in the finish line?.

Yes, and thank you for that, the continued interest in that Jon, you ask every quarter. This is slower time of the year in the summer time from an M&A standpoint. But with that said, I - majority of our acquisitions have really been [indiscernible] not books in. So, we really identify which companies we think could have a good fit.

So, we do have an active radar and we're only nine months or 10 months from Coldenhove acquisition, so, which we believe we've got a very good cadence. A number of companies that are out there, that we're trying to work with, but as we address or find opportunities, you know I'll come back and communicate that to you..

Jon, - I am going to do a redo on your first question. So, we didn't have, we have minimal impact from Brattleboro on that quarter. We have communicated that we expect to have $5 million benefit, once we divest the facility and we complete the rest of our Fine Paper portfolio, optimization and other activities that we're doing.

I would say in the quarter, we probably had somewhat less than a $0.5 million of benefit from the stuff that we have already got underway. And we see that's the bulk of that $5 million will start after that divestiture of Brattleboro..

Got it. That's very helpful. And then one final one for me, just on the Tech Product segment, it's obviously been strong for two quarters in a row. How sustainable do you see that year-over-year strength as we head into the second half.

It seems like Q1 you had some one-offs in terms of lumpier products sell through sounds in Q2 you pulled something in Q3 is the improved expectation absent offset and can we expect that trend to continue?.

Yeah, that's a great question, a couple of things, it's not a surprised first and second quarter. We're very strong, Tech Products they are always, and we try to reference and remind that.

As we move in the first quarter we had actually really strong filtration the second quarter had a really strong performance material, so it's been nice adds from both businesses as we've moved through the first half of the year.

In the back half of the year there is no way that Appleton we're talking about $15 million to $20 million this year that already that's going to be in the back half as we ramp that up.

But I think we wouldn't be able to offset I think technical products seasonality remember that Coldenhove we acquired last year in the fourth quarter so that's a vertical add back and as far as pulling anything from the third quarter to second quarter if I'd said anything I gave you that an impression I didn't mean to do that because I don't think that's necessary the case.

As we've got two strong quarters they're seasonally strong overall, we definitely expected diminish seasonality and impact from our outages as we move into the back half of the year and Appleton will be from a revenue standpoint a bit of the misnomer as we ramp up to that $15 million to $20 million..

Yeah, we did pull through some consumer over in the Fine Paper business some consumer business from the third into the second..

Got you okay thank you that's very helpful appreciate it..

Our next question comes from Dan Jacome with Sidoti & Company. Please go ahead..

Hi, good morning..

Hey Dan..

So I just want to follow-up on that last point on the pull forward not to overdo it but it sounds like there was some pull forward on the retail side if you see from the back to school do you think that third quarter overall that area of the Fine Paper segment that you're selling to those retail channels can stay what you call it stable in the quarter?.

Yeah, Dan, you cautioned at the beginning not to overdo it.

Our retail business is call it $80 million to a $100 million and what really drives of the movements, we talk about back to school, so it can just be the timing of back to school, but also distribution recess, so you get a strong soft reset, pick up new distribution, you can have a big quarter and then the next quarter behind that you can have a challenging quarter as well.

So, I'd really hate to suggest that that is a big trend. What we consciously never do is pull things from one quarter to the other quarter. So, if anything moves from one quarter, it's really when they decide to stock up for back to school and hit so….

Right. Okay, inventory rebalancing out of control, okay it makes sense.

And then I wanted to touch quickly on the sort of higher distribution trucking cost afflicting anything that most North American paper packaging providers, you guys seem to be managing that well thus far and I think you talked a little bit about it, can you share maybe one or two extra comments on how exactly you've been doing that.

I know that you work with a lot of distributors, but there are a couple that are the majority your distribution network if I'm not mistaken?.

I think our overall - first of all, a lot of them were policy changes associated with the amount of freight that we would like to ship economically or without surcharges.

As a reminder, we have high value products, ships often in smaller order, so many of our go-to-market strategies are pool trucks and how we optimize those pool trucks are a big part of that. A lot of that was from customer standpoint can be viewed as pricing as well, but it really does diminish the deadweight or aerospace in our shipments from that.

We do have customer specific programs where we have opportunities to really working with them whether it's in the pickups or whatever diminish the amount of cost from a freight standpoint and I would want to leave you with the fact that we'll be adding elevated freights level, but these - but I didn't want you to think we're sitting here quietly doing nothing.

I think the team's really done a lot of work to offset the chair of that..

Okay.

If I've understood, it sounds like you have some sort of intrinsic benefit to your given the business model in terms of like order sizes and maybe like back size or something that's on the trucks?.

Yeah, we determined for prepaid freight, we determined the size of an order that we will pay and so, if in fact we can influence the customer's order size, the order less frequently and optimize the truck more. And that's really what we were able to do, we change the order size requirements for our customers..

Okay. And then someone had asked about the Fine Paper mix as you scale up to premium packaging.

You said it's a five-year target that you, but that five years referring to like a plan you guys have announced to us in the past, right?.

No.

What I'm saying is that Jon asked when do we believe that would cross?.

Right..

The decline from the other and I say it within 5 years, okay. So, I gave you a big horizon. But one we still see is fairly near-term..

Okay. It's a terrific question, so wanted to clarify on that. And then last question, housekeeping. I should know this, but I don't when. So, what was your last time, you kind of refinanced the senior tranche of your capital structure that you still at 5 in a quarter.

Is there any opportunity to refinance down the road near-term? Or is this just kind of wait and see..

Dan, the bonds are due in a quarter. They're due in 2021, we've got 130 basis points called premium until May of next year, and then it becomes a no call. So, we're not looking at hard anything with that 130 basis points call premium..

I know, but that's helpful. Okay. Thanks a lot..

Our next question comes from Steve Chercover with D.A. Davidson. Please go ahead..

Thanks. Good morning, everyone..

Good morning..

So, apologies if these questions are kind of similar to the other two. But in the Fine Paper and Packaging, it sounds like your initiatives are on freight provided the upside to margins, because we know that pulp did not get any better.

Is there more to come on the freight or any of the other input costs?.

Yes, I think the freight activity is, you can say stable at a higher level, if you would like. And as much energy has been around freight, there was significant pricing activities that did offset input costs. So, I think for, to characterize that for fine paper. They were able to offset the input costs.

And that's, it's not all of them in the first half. The second half is going to be the real challenge. And that's what I was trying to do in the call, we're expecting higher input costs, and we had in the first and they'll likely have some of that role into the 2019..

But nonetheless, I mean, pulp won't be high forever, who knows what it'll turn.

Let's just - I assume that's not and you would just rebate your clients and as you finally get a bit of a tailwind on the input costs?.

The way our pricing strategy is exactly right. In the Fine Papers that we're very cautious about announcing a lot of price increases, because as we know, there's not a lot of price movement, as commodities go up and down. In fact, we can minimize the amount of fluctuation for our customers and make it more stable the better off we are.

That's why I think, I mentioned that a third increase in this year is, you can say you were there, it doesn't happen for quite some time around that and we're seeing prices go up in the mid-teens from that standpoint..

Okay. Well, that's terrific. And then, again, not wanting to get into guidance. But we know the typical seasonality of your business particularly due to maintenance and the sales cadence of filtration. But after Q1, we certainly have the impression that freight and input inflation wouldn't be offset until the second half.

And then of course you've got this increased ramp out of Appleton.

So, is it fair to say that this could be an atypical year nonetheless where the second half is as good or better than the first half?.

I want to be as much of a believer as anyone on that. But I can tell you that's not going to be the case necessarily, I think while Appleton is began to ramp up, a small portion of Appleton's revenue actually happened in the first half of the year. We're definitely ramping up and one of the challenges I mentioned is the overall costs at on the yield.

Because as customers order one roll and 10 rolls and then much larger. We're just now starting to build the order size that gives us the opportunity to really drive down our costs. Input costs are going to continue to drive up and then the higher down costs.

So, I'm not ready to say that we're going to change historical seasonality right now necessarily..

Sure. You'll do your best nonetheless. Okay. And then final one with respect to Brattleboro, I mean you said that, your EBIT will go up by about $5 million, once it's out of the mix, and there's a little bit of that will be operational improvement elsewhere in your system.

But is that fair to say, that once it's out of the mix that we bring down our sales by about $30 million bucks and basically are depreciation pay around $5 million..

Yes, the sales part I absolutely agree, but depreciation..

No, our depreciation there is about two..

Yes, not maybe that high. But you're right. Those are big components, it's really as you look across the rest of the system and that's where we're built up to the $5 million in the Fine Paper side of the business.

The value of those $30 million in sales too, we have suggested being, because they were non-strategic as we talked about are not a historical high teen margin..

But it's not as if you're going to be transferring the production elsewhere because it's not really product that you want to make..

Right, and we're doing this in big buckets, but I would say, if there is A customer or A product that might be there and they chose to continue to work across our systems, that might happened but yes you 're exactly right, these are ones we are excited, that's clearly doesn't fit our portfolio on an ongoing basis, it not strategic to us to that end and that' show we came to the conclusion to rationalize our footprint..

Thank you, both..

You bet. Thank you..

Operator:.

Mark Weintraub :.

Thank you, just first, to clarify make sure I understand. So, with Brattleboro, the $5 million is that largely reflective of the book losses, it was occurring, or I mean you seem to be referencing that there is going to be some profit pickup elsewhere, but then it's not clear transferring business. I am a little bit confused there..

Sure, and I'll take - you can if there is.

So, its trigger predominantly from divestiture of the facility and then from our standpoint when we divest that, the opportunity to run more efficiently some of the across our whole asset base, we're scooping all of them improvement efforts in for Fine Paper and I think we're probably and appropriately tie them all the Brattleboro, the Brattleboro is one big step in the efforts we have going forward.

I really should suggest, we've got improvement efforts, cost efforts, going on in Fine Paper that we continue to work behind, and you should expect the ultimate value be $5 million when we're done from that. I know by the way, our biggest flagship effort is the best in the Brattleboro facility, it's probably done away..

That's better..

Got it, okay. Thank you. And then just also trying to understand, you would be indicated that pulp would be, I did my math right, about $24 million headwind this year, and that you anticipated, you would recoup about 80% of that, the price - maybe mix et cetera.

And then should we be viewing any freight escalation as above and beyond that and then you're offsetting that through some of your internal actions.

Is that the way to think about the input cost side?.

Yes, so freights probably had an $8 million impact to us..

Year-on-year..

Yes, and we've upside a couple million of that. So, for the full year maybe borrowing first half two in the back half, probably the way looks at that. So that there is $6 million impact, the $24 million we talked about it - cost, you're dealing with really $30 million.

The difference between the two - we've not pushed them together, necessarily once more systemic, and once more from a commodity movement.

We have announced pricing and have activities underway, but given the implementation timing associated with those, we announced the price halfway through the area, you're going to get a half a year is worth of that price. That's why it rolls into 2019.

I want to be sure, that I am clear to say that, all-in per cost, we're going to be able to recoup through our price and mix activities that we have in the marketplace. I wonder to view a kind of definitive line for the fiscal year, that we won't get it all off done by the end of the year, but more in three quarters of that I think..

Okay, and understood and just that 80% reference, I assume that is fiscal 2018 and its entirety versus fiscal 2017, in its entirety, not year-end exit rates..

That's correct..

Okay. Very good, and then on the cost side, we've got Appleton, we've got Coldenhove. We've got organic growth. And then I guess just as that other negative we've got the higher outage cost in the back half of the year than usual. Are those, any other big drivers that I am missing..

You've got mystery guest of tariffs, called the mystery guest. Because I don't know how to size that. I wanted to make sure that my tone on the call was one that we've dealt with the currency check and global sales, we're going to deal with this and those not going to be an excuse, but it might have an impact.

And I also referenced I think just have my sole claims here, that the back half we expect lower currency benefit slightly..

Right.

Are there presumably was a benefit in the first half or maybe for the full year it's not negative, it might even be?.

Yes..

Yet to be soon.

Just maybe a little bit if there any more color you can give us on the tariff? What are you watching closely?.

I would be - I didn't say I'm looking at China, right. So, we sell to a lot of countries. We have a global footprint. And I think that gives us at least somewhat of an advantage for somebody who does not have a global footprint at least in our Technical Products business. Our Fine Paper business that's not an advantage to that end.

We don't know the magnitude 5%, 25%, but we know it's not beneficial, okay, so that's what we're watching across here. And across our overall businesses, China we do less than $50 million in sales in China today. So that's not a huge amount.

And I don't want you to walk away if it feels like it's a big bogeyman to that end or to continue to manage our business in a way that ideally, we can deal with this as an ongoing part of cost of doing business. But I try and would be the one that is most concerned. But then many of the others we've got capabilities in Germany and in the U.S.

that have overlapping capabilities and we'll continue to try to manage our portfolios in a way that provides the best returns..

Okay. Thank you..

You bet. Thanks, Mark..

This concludes our question-and-answer session. I would like to turn the conference back over to Bill McCarthy for any closing remarks..

Okay great. Well, for those you in the New York Metro area, I note that we'll be presenting at the Jefferies Industrials Conference tomorrow morning. And for everyone, thank you for your time and please feel free to reach out if you have any questions. Thank you..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..