Mark Kowlzan: No. We just — as we’ve always done, we’re just going to run to demand and do what we’ve got to do to satisfy our customer base. If you go back and look at the first quarter, when we were in the January period of time, anticipated volume was starting to settle down and improve. We anticipated going through our winter spring annual shutdowns that would have greater need. So our plan was to build a little more inventory. As a matter of fact, I think the number was about 30,000 tons more inventory through the first quarter that we ended the year last year. But in fact, as we saw the deteriorating volume in — especially in February and March, we certainly didn’t need that extra volume. So we trimmed back and scaled back operations and only ended up 6,000 tons at the end of 1Q as opposed to where we thought it would be. So again, we’ll just continue running to demand.
Unidentified Analyst: Okay. That’s helpful. And then I just wanted to pivot over to the cost side. You guys have done a very good job taking out cost in the system. But in terms of the guidance. Just a couple of questions. First, I want to get a better understanding of what’s driving the higher converting costs. Is that maybe more on the labor side? And then on the rail rate increases. Is that something that you can maybe give us a little bit better understanding of the structure of those contracts? Like how long those rates will kind of be in place when they get renegotiated? How much maybe it was weighing on 1Q and going into 2Q? Just to give us some better tools to forecast the models have.
Robert Mundy: Yes, John, it’s Bob. As far as on the rail rate increases, most of that is — some of it occurred during the first quarter, and then we had some that just started at the beginning of the second. So it’s a large impact as you move from 1Q to 2Q because you’ll have all of those pretty much higher as we start the second quarter. So that’s what’s driving the freight cost higher. I’m sorry, your first question was.
Unidentified Analyst: I guess, just to stay on that for a second, are those contracted rates for the next year, the next couple of years?
Robert Mundy: Yes, typically. Typically, that’s probably a good way to think about it.
Unidentified Analyst: And the first question was around the converting costs and what’s driving higher converting costs.
Robert Mundy: Yes, really labor benefits, obviously, with just — that’s just — that’s part of it. The other is really at starch. Starch prices are just skyrocketed and that is something that we had another big increase this year. And as we expect to — our volume to start improving in the box plants and so forth, and you’re using more of those types of things. And so that’s what’s driving labor and some of your some of your material costs that are also included in that converting number.
Unidentified Analyst: Is the starch starting to turn over? Or is it still..
Robert Mundy: No. No, it’s not.
Unidentified Analyst: All right, I appreciate the insight, thank you all.
Mark Kowlzan: Thank you. Next question.
Operator: . Our next question comes from Anthony Pettinari from Citi.
Anthony Pettinari: Kraft liner prices have been stable for a couple of months now. And understanding you don’t sell much board in the open market, and I’m not asking about forward pricing. But I’m just wondering if you had any thoughts about kind of where containerboard markets kind of feel like they are right now. I mean, you’ve seen a number of cycles maybe some of these capacity projects have started up and maybe are being sort of absorbed. I just wanted to get your sense of containerboard markets versus maybe where we were a few months ago?
Thomas Hassfurther: Anthony, this is Tom. I’ll take this one. Yes, prices have stabilized. There’s no question about it. In fact, I can make an argument that there hasn’t been — there really hasn’t been a whole lot of activity relative to price in the past. And I’m not a predictor of price going forward, but I can just tell you that I think the outlook is more positive. Of course, you’ve seen the industry really adjust dramatically to demand. And as I’ve said many times, I mean, the open market is a small open market today. So those that have excess capacity are either taking the downtime or they’re looking to export markets to try to figure out how to sell into those markets. Which are also under some duress. But I think that the — I think the market in general is different than the past, given the small open market that we have today. And I think that leads towards much more stability.
Anthony Pettinari: Got it. Got it. That’s helpful. And then just — I wonder if you could talk a little bit, given the balance sheet flexibility that you have about capital allocation, and from a capital return perspective, I mean, you’re paying an attractive dividend. I don’t know if you can talk about maybe opportunities for repurchases. And then in terms of investing in the business, you’re coming off maybe a big CapEx cycle where you’re doing a lot of internal projects. Just wondering if you could kind of talk about where you’re seeing the opportunities in capital allocation and capital return this year.
Mark Kowlzan: Yes, nothing’s changed. As we’ve talked about for the last year, our plans were to bring capital down this year, and we’re in that $400 million range. And I would anticipate that working through into next year. Also, we’ve done most of the big projects that we could foresee in the mills, and we’re just going to continue with the box plant optimization. As far as utilization of cash in terms of other opportunities like dividends, share repurchases, acquisitions. We’ll remain flexible on any and all opportunities in that regard as we go forward. As we’ve done for many, many years, now, we’ve got that flexibility to take advantage of all of these opportunities as they present themselves. And that’s how we look at it day to day.
Operator: Our next question is a follow-up from George Staphos from Bank of America Securities.
George Staphos: Actually, Anthony took my next question. So I will turn it over to the next person.
Operator: . Our next question is also a follow-up from Mark Weintraub from Seaport Research Partners.
Mark Weintraub: I was thinking a little bit about how — I believe your volumes ended up being down about twice what you had anticipated back in January. I think you’d been talking about flat average day and so it would have been like 6% or 7% down and you ended up down 12.7%. Is it fair to — therefore, if you talked about the negative impact year-over-year on volumes being about $0.95. So if I just took half of that, had you — was that the incremental negative impact from the additional demand weakness that you experienced so that had, in fact, the volumes come through as you anticipated. In theory, you might have been closer to $2.70, particularly if we add the fact that you had the pricing down by $20 in February, which would have had some small impact.
And then if that is the case and everybody maybe that math doesn’t work. But if that was the case, that’s a huge difference from sort of the $2.23, and presumably that relates to all the operating adjustments that you had made. I’m sort of just trying to get a sense as to whether that’s something you couldn’t hang on to or those were measures taken because of what was going on in the business? And maybe a little bit less certain types of spend that you could defer. So sort of just trying to get a sense of that underlying earnings power in a future type of environment.
Robert Mundy: Yes. Mark, this is Bob. So there’s a lot going on there. If you’re saying if our volumes were higher, it were closer to what we had anticipated, you’re looking at that $0.95 being something a lot larger?
