Packaging Corporation of America (PKG) 26 Oct 172017 Q3 Earnings call transcript

Company Profile

Participants

Mark Kowlzan	Chief Executive Officer
Tom Hassfurther	Executive Vice President
Bob Mundy	Chief Financial Officer
Chip Dillon	Vertical Research
Mark Wilde	BMO Capital Markets
George Staphos	Bank of America
Mark Connelly	Stephens
Anthony Pettinari	Citi
Debbie Jones	Deutsche Bank
Adam Josephson	KeyBanc
Mark Weintraub	Buckingham Research
James Armstrong	Armstrong Investments
Chris Manuel	Wells Fargo Securities
Scott Gaffner	Barclays
Steve Chercover	D.A. Davidson
Brian Maguire	Goldman Sachs
Gail Glazerman	Roe Equity Research
Blutenthal	Hartline Investment Corp

Call transcript

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Operator

Packaging Corp Of America (PKG) Q3 2017 Earnings Conference Call October 26, 2017 09:00 AM ET

Operator

Thank you for joining Packaging Corporation of America’s Third Quarter 2017 Earnings Results Conference Call.

Your host today will be Mark Kowlzan, Chief Executive Officer of PCA. [Operator Instructions] I will now turn the conference call over to Mr. Kowlzan, and please proceed when you’re ready.

Mark Kowlzan

you XXXX in Earnings thank America’s Corporation and Quarter Third Release morning, for Packaging participating of Good Conference Call. Chairman call Hassfurther, Officer. Kowlzan, me and Bob who Mark and Chief PCA, Business; of I’m Financial our and runs on Packaging the Executive today our Tom Mundy, is Vice President, CEO with then Tom call turn the to the of and begin details. going who’ll an I’ll more our third over to I’m overview with quarter Bob, provide results, and call we’d then be to I’ll then and wrap things questions. glad up, take Yesterday, third or net of $X.XX income per we quarter reported $XXX share. million Reported primarily No. earnings with paper include previously the to associated impact of special items operations the related expense announced of conversion discontinuing in machine Wallula, linerboard. to X Washington our mill

share of quarter XXXX special the third compared net $XXX these the per items, XXXX net $X.XX third million quarter was per share. $XXX or income income Excluding to million $X.XX or

billion XXXX were included third for and Third special in million in special $X.X press billion net the that the excluding release. XXXX. in the items EBITDA earnings quarter, in quarter company for XXXX. accompany were the of quarter Details in and million XXXX the $XXX $XXX Total was schedules sales $X.X items,

prices offset of lower related Paper DeRidder volume incident Mill the by These in Excluding mix and primarily and the $X.XX the the special were insurance to Packaging share quarter and sales was per $X.XX, to the segment. segment, mix, the earnings a XXXX partially recovery in partial by in compared and third of increase $X.XX. XXXX items, of prices quarter of third driven $X.XX items sales and higher $X.XX, volume, $X.XX

of costs. to higher, offset and were $X.XX, Operating costs by repair costs. input lower due with $X.XX higher energy all fiber recycled partially labor, converting primarily chemical costs up and wood higher costs, have fiber, We

products and costs negatively the Compared of which these depreciation at freight were offset third for due primarily was DeRidder expenses related corporate a per interest of other share. hurricane-related by results higher facilities. and expense. the per $X.XX $X.XX to And by impacted $X.XX as outages recovery higher of share to and $X.XX corrugated were $X.XX to insurance incident had Mill also per of items guidance, as in mills well certain annual partial higher We share, quarter

expected, Looking our at packaging – of the $XXX segment, of looking million margin. in our did negative sales or XXXX EBITDA, job $X.XX year-over-year of of mills where inflation special the employees year’s hurricanes. quarter came last items in XX.X% to $X.XX of resulted Packaging corrugated Higher XX.X% at and the products we and recent of from billion billion the at mitigating with excluding third sales and a versus facilities impact the in $XXX margins close million EBITDA outstanding an

Counce the earlier production mills the Mill of outages and previously. successful scheduled in the our were Containerboard reflecting for preparing XXX,XXX fourth third Tomahawk set as as our that X,XXX demand plan tons Mills. segment, containerboard continued year all-time about tons, in strong spoken for quarter, quarter of Our improvements as outages at scheduled DeRidder while we’ve last year’s well record our above we Packaging inventories quarterly results at incremental

business. production the that to quarter will business also Tom, turn the I’ll mills We reduce now our platform. early the containerboard provide corrugated it And packaging acquisition for year. of preparing our on X and began Container integration Sacramento the over next at more sales first also scheduled across of we’re significantly outages who’ll our details XXXX

Tom Hassfurther

to last Corrugated per second and X X% in of days work with compared $X.XX segment X.X% above quarter demand strong third Thanks, up with third XXXX. Overall, product contributing volumes production sales Packaging year’s above remained quarter. last year’s or very and $X.XX total share less the shipments Mark. per were work day quarter

levels back quarter X% higher quarter Continued were our XX,XXX $X.XX tons of versus prices this of the containerboard to very the to year’s and per Domestic strong Mark. Export third year. together XX% improved the by compared or outside our compared mix up price it of quarter tons second third turn volume $X.XX and markets export prices I versus the executed implementation share during share per containerboard per quarter above than of segment XXXX. sales third last to were and about XXXX X,XXX the up corrugated over $X.XX demand almost in second and of XXXX. increases XXXX Packaging containerboard up quarter and And will quarter second share third well We both products domestic of quarter. our the and

Mark Kowlzan

Tom. you, Thank

margin. our Paper at the $XX the a items $XX XXXX or third million XX% million of was to million XX% special EBITDA segment, sales with quarter sales of in compared EBITDA, third $XXX and of or Looking $XXX or excluding quarter million margin

stronger prices, second Paper to quarter price industry below X.X% quarter, below sales flat seasonally quarter pulp mix the were Paper of versus the segment the and over segment quarter was published third last our market volumes about and levels with quarter third X.X% to second X% the the overall of Similar due from paper volume white XXXX Paper in exit was third was XXXX. year’s about Although up down business. XXXX. volume

were having impacted I’ll to quarter. over at results outage scheduled turn now a in quarter year’s by outages maintenance third no also third Bob. annual Mill it Finally, Wallula last our negatively versus

Bob Mundy

Thanks, Mark.

Mill to third recoveries providing share, of the mentioned or quarter this per DeRidder As XXXX did $X.XX potential any our not claim. include anticipated guidance costs insurance when related additional

share. able per partial During insurance $X.XX another to were quarter, report of recovery we the

$X.XX our mills However, no range other on recurring impacted box earlier, the share, and in our Florida our quarter other. small estimate $XXX in the million $X.XX ended share $XXX with total to they were $XX each items the key make in as damage to change million interruption back up DeRidder but on a gets related losses, of guidance the differences per property cash including million million offset that state of quarter dividends There basis. negatively of costs estimate, of effectively and hurricane-related There’s per business in plants million at indicated Mark included; items the for $XX capital for hand. certain third us pension by loan million incident. stock totaling Usage of payments, cash and and million, to $X the repayments. tax $XX $XX term capital common million, $XX We contributions expenditures federal which

quarter planned the resulting fourth total a annual from quarter, the moving are XXXX our balance I’ll of $X.XX in the year maintenance back previous per a impact to full third of to from $X.XX turn negative share our for Mark. year Finally, impact reflects unchanged guidance, per which now outages share. of the it

Mark Kowlzan

Thanks, Bob.

third of of know, during into agreement debt-free million. LLC Central the a quarter, we’d to we interest purchase announced you a Container an and As for Corporation. that cash substantially membership Sheets, all acquire At Sacramento price entered $XXX of transaction of most of Northern assets XXX% cash-free, of the California the in Sheets, LLC

year XXXX We in the Wallula, and also No. announced virgin of Washington we of one-side the are business machine. ton to to per month, announced and at per integrate quarter that XXX,XXX this had second coated conversion will a activities discontinue kraft Packaging mill XXX,XXX grades begin Earlier high-performance machine X the to acquisition of platform. and XXX% into underway we uncoated the production our year linerboard these optimize well our we Sacramento completed that ton facilities Container the freesheet

production virgin Additionally, No. on of production preparations of X machine and at our the linerboard to Wallula begin on the in quarter Mill are schedule second cease paper beginning XXXX.

quarter shipping third in as demand into move Looking seasonally the to strong, a as the well seasonally Packaging products. ahead, volumes, as less one less we lower we includes expect rich fourth which day mix although quarter, and from corrugated at remain segment

Paper the We will Sacramento expect In the and mix. announced have implementing rich segment, a Container lower quarter. recently but in our operations newly price our we’ve less increases, addition started acquired seasonally volumes sales fourth also our of

costs, higher should are fiber chemicals prices move with and lower, for higher certain expected. higher wood also prices and costs energy along recycled freight While key

annual those statements estimates, our we paper The share cost than these risks the Considering our constituted you annual containerboard statements. to mentioned on $X.XX earlier, scheduled projections current the of mills expectations Bob company be including third mills. two of on work two the as the the involve inherent Finally, to economy maintenance and outage that the and higher were quarter any forward-looking from of with on some due claim. I’d must estimate of With per we insurance items, quarter $X.XX direction share. SEC. those does include be the per not Mill and based differ or This we’d annual of of statements uncertainties, remind and costs made additional expressed as call and anticipated report statements. identified open DeRidder for forward-looking to we Actual potential the results earnings the to factors but expect that, entertain fourth file I questions. the with that, to questions, happy related recoveries on that’s the could materially any risk our XX-K in call operator, like in And at Form

Operator

Your line of comes [Operator Dillon question Chip first Instructions] from with the Vertical Research.

Chip Dillon

one, have we are tied to – buy larger that small and question becomes am curious is e-commerce change some historically, need some done strategy – producers. on world as feel sense participate just the to you to a of participate job to there to first and of – in the the little you in have the maybe would the And that broader guys tied middle e-commerce, other or customers bigger because in order has to a it’s would but do you box great growth My in companies with any more the focusing relative sized boxes? I that that get and to in

Mark Kowlzan

think going people provide course, our And that’s know, a lot segment. with there about products as of about the you of I way part lot which of more And Chip, I e-commerce but – to consumers, that let of color to directly think to to I’m say one is Tom it is an But that and I get it’s customers other think of well. And no. the channel Amazon, important. e-commerce, actually a somewhere XX% business. customers channels XX% of is important just to I use a in. e-commerce and our between I’m because many listen, would participate answer that going

many at place because participate customers taking again, those e-commerce sell-through, lot – such we e-commerce. a I Amazon, of broad-based is customer in many with to we’ve along and fortunate got instances, find think channels a So we’re of different where including based

we’ve with e-commerce growing them segment. that been able and grow So to along

Tom Hassfurther

go why, the and dynamics customers That’s capability strategy for We nationwide. it the XX,XXX change, just changed and have the years. we take will many approximately market Chip, of the hasn’t again, inherently advantage of

Chip Dillon

Got you.

beyond, in most white suppose, about you or pulp you’re I not and think and is fourth might forgo at think And kind to or whatever shut also we Wallula segment disruption work we Okay. either pressure you at have of it how let’s to what is running just Obviously, quick, more take And by as then – conversions I about as Whether lost very follow-up can’t, the payback be model you much income running then unusual last also, be make next some the for as as could can year. know example. the you that that important paper? XXXX something second pulp at I look this revenue Paper will doing is, the as and quarters, an look And there you And advantage that, which or down but year. Wallula we the as Bob you’re the us, any there. income the help used quarters? it’s from actually on if uniquely second of and

Mark Kowlzan

years. we’re that Regarding last of growth exiting have other because the the the the declining we side, seen the mill of side take corrugated part, business opportunity being of to business, margins asset. coated business advantage And first obviously, the we’ve over primarily on our the that products couple

add that? do a decline be to the and reported the be you revenues will little to it Bob, there color more a but want obviously, so earnings, will in small. And

Bob Mundy

margins were as and going business the we direction. out, with saying, certainly Chip, and wrong in were we marketplace and Yes. so the where we were that in forth positioned as looked

significant. not So lose impact when what convert we will is extremely of the we

in we’re you of Wallula and yes, a coming want as first out all – we’re that, coming When the the linerboard. year. put again, the at be we the we the but XXXX, that like the the that but Then we Regarding the sort first but not into as to – some will Mill, in there outage that’s be and will of, running will costs, run would out work then it quarter we we the on and we be later it improved, costs more will quarter, so of still – extra maybe bells that But that the expectations to conversion, out finish quarter, lumpy in certainly, feel they’ll where to be then coming coming will up we to then that, that that maybe a we the when like built be begin have the the into we be rate whistles business fourth think have year, about usual, come at. go cost second we ultimately in, meets be on have outage project. of for

Operator

of with line Wilde the from Mark Markets. comes question Capital next BMO Your

Mark Wilde

if give well your guidance we’ve of Sacramento integrations us you some will – kind first level quarter or terms what the of Tom, What’s those once sheet in, the I and quarter as say, in year? fourth could next integration, your your got wondered, plants. of as be

Tom Hassfurther

XX%, even when level. we’ll and the the to that full And Sacramento we are after up at Mark. completion level and integration running XX% is currently Wallula integration Wallula, back then Our of at right be work about

Mark Wilde

be that, Okay. other of the help conversions you, like years I either terms is can just seems – guys just on like? for a what think the of about next And But you demand buying growth. then internal in don’t us of sort it – of so of kind following sort of internal know, couple the might acquisitions, looks palette what what options you Wallula

Mark Kowlzan

the Obviously, to one-off we is from last of all this for Mark, or to Yes, year Mark. continue so. evaluate the mills been will that We’ve acquisitions asked options conversions.

and at looking we what are that are frequently trust do and that. we so point would our understand how And this options

go And so high-class our problem – and we think before, that’s used as I’ve I this term forward.

Mark Wilde

expect particularly last Okay. there chemicals. just Mark, All quantify issue And you with kind mentioned the you kind kind then can the whether wood, quarter because Is fourth of think in inputs wet right. you of is wood, anyway, from weather? a me. one And like of of some these pressure transitory you on of that freight, the this

Mark Kowlzan

through wetter Jackson period, from from hurricanes in impacted. Yes, the board, on But mid-south we’d the Louisiana the wood basket with the wetter a to region, Georgia September issue, all way into primarily wood the obviously, we summer had the mill deal wood the the weather. the with August the basked, across

overhang we So got It’s that. be still been continuing to some from wet.

So we’ll add caustic like wood on some And why more those Bob, the overhang you regions. just latexes year-over-year don’t dries up, that. the weather on year-over-year. it’s then in unless color And, see it and a chemical changes, little general others to cost

Bob Mundy

Yes, yes.

is, usage and inflation. also wood as weather cooler some related So, we that the have into Mark, as a lower. And everyone should other as thing when when go when go as getting not impacted much they and will move, the lower benefit we’re months, by certainly that impacted we some there’s lot not there’s and energy, but we’re have some yes, from across are inflation freight OCC get prices, anticipate. a items much prices those we the and of And they that is but chemicals higher so you benefit not know

all freight net other. those not is types So the lot with – it of doesn’t way that the or the a those just one a of needle including is move – inputs

Mark Wilde

row. Okay that’s all from the

Mark Kowlzan

please. question Next

Operator

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

George Staphos

good everyone, morning. for Thanks detail. Thanks the

production. had I was question on first The

did production DeRidder so, out the up narrower next the X% remaining containerboard to were or had terms anyway, juncture this looking you up a be in there have up it at in Wallula the or you are shows looking year. a shows bit running or until gain debottlenecking we here and is we for available? fair squeeze side, much what’s continue you than Or you the at a this record How for. ability in demand can of better more if project, obviously X%? So quarter, period and in Can

Mark Kowlzan

year’s an DeRidder And from get out said improvements called this tons And XX,XXX We other year, projects production we’ve on continued is from around if probably No. a did we’d improving the the just think our mills that if that to you then ongoing then constant basis. this No. – XXX,XXX and on we’re be both X. benefit about the benefiting year. last attention shutdowns Well, year-over-year to be DeRidder and X we’ve probably benefit the to efficiencies we’re on got facing. we’re DeRidder going obviously versus that. estimate seeing i.e., then an for to tons you up over detail XXXX, XXXX going the But

wet return obviously, at is – mindful very dollar times, will to outage every looking first No. about. of opportunities, opportunity faced provide at the at of benefits big the and that DeRidder have final point the run we X achieve how the said just time. on some DeRidder the continue the that quarter behind be been So do the that then will on does we that different lined work then capital from going spent I’ve diminishing of just but to opportunity will we we’ve this of talking in And and are rate many point, the and then the we And coming, some remaining out tons a full take and of during to after there be X work first get No. the end quarter care machine. then annual so we to need work and us

prudent we’d very that from. at how comes are where look we in So opportunity

George Staphos

what trends the for question. follow-on the one at last you that of had of you thank in paper seeing in fourth both And in in then box quarter seeing all for what that. early you’re Can shipments? And Mark terms terms matter, you’re comment Okay I market?

Mark Kowlzan

handle to let Yes, corrugated on me up, give products. expect. the the and would as is holding is Paper Paper going Tom you the side details we

typical. fourth The quarter in you’d the as into mix right off, as third We’re seen rich fallen has not quarter. you’ve as It’s expect.

the and the in all some be. we’re some the particular to during seasonally converting But grade. expect offset volume cut in all, we with seen activity of and where slower You’ve size,

to give just business, Tom, flat don’t And continue that? year- details on some so from you fairly with our Paper move along sales why over-year. we quarter-to-quarter,

Tom Hassfurther

of terms business strong. Through Container, very of packaging remains per-day on in days specifically, excludes the that the George, X% boxes good, side course. of basis very higher and returning demand a XX and Sacramento

current So of we’re the level demand. very pleased with

George Staphos

Thomas, includes Sacramento saying are or excludes that X%? you that in

Tom Hassfurther

Sacramento excludes that Container.

George Staphos

to quite Okay. Thank opportunity. more mean, the term. margin between good – given service-oriented, – way corrugated longer parallels what more My an seems of in and research be for your can think are sorts question in and you is therefore, recently, in relative our out the like you to saw things more you’re out but TimBar implicitly, then of margin any costs, that if any customers it’s you tie good of And also its tends provides Thank luck quarter. similarly, a at means Columbus? we and Sacramento, about last guys we opportunity that. bit and e-commerce required opportunity return for I potentially around the travels which maybe more it means

Mark Kowlzan

We, have the a large value force requirements very obviously, make the of provides that comment, to me to to customer that add customer a the and a and then sales base. caters could Let that. and of focus quick base Tom

level demand of be, Corrugated consider continue given a any us, that quality, and service, course, well. value the market. somewhat again time, that, just to what’s a Sacramento happen advantage that really bit go Products high goes as as whatever Every add our we be And to little that the an might of then, Tom, of Container, wheelhouse, a time – for Yes. has fits will for customer that Mark, to cost takeout, we I’ll way extract to to into on grow of We that’s opportunity.

we and it all for So a of lot us. that’s value great a down can goes provide to value, opportunity

yes, we’ve Sacramento. in Sacramento, opportunities we – Regarding have got many

there. of We and a are off are companies of lot to think, well aligned a different returns there I our the that, a terrific that lot are and at Culturally, moving Sacramento are – very there start. parts

the So in sheet talk about when are that well. acquired we you the that feeders as especially plant

lot done So to be a opportunities. of lot there that a is is there

George Staphos

Thank you very much.

Mark Kowlzan

please. question Next

Operator

Mark next question Connelly Your comes of from Stephens. line the with

Mark Connelly

morning. you, good Thank

reoptimize coated So and But just some of already there production the going white another. the those project a in change much made one-side to you’ve about think you mills? shifting Jackson. and I going mix place progress costs, is Wallula you’re good and to as the Mark, down. Is on one at I big have up and to Falls paper, the other sense a to opportunity affect that don’t how from

Mark Kowlzan

no on effect. very has the We No. over machine. freesheet But a made – some time That up of of uncoated acquisition. really It printing a was amount off that amount machine separate number truly we did years, just of fill some small and business. to a X primarily very the came that grade converting small make the the of since Wallula last

with that has little two Falls marketing we on I us very away just from business mills now none the very force better it concentrate can – on the think helps business again, that is and impact group so focus to will that And operations and sales remain. and move Again, just that Jackson.

Mark Connelly

you’re that’s outside just new stuff one that or Wallula how tons? much for? linerboard And trading Okay, replacing And is helpful. shipping much of How the clarification. is replacing

Mark Kowlzan

a home think I our best look we with it system. at when is, for come the we within to way immediately have Wallula, that on

spoken And already. it’s for so

Mark Connelly

thank enough that’s you. Okay,

Mark Kowlzan

Alright.

please. question, Next

Operator

Your Pettinari line from the of comes Anthony next Citi. question with

Anthony Pettinari

morning. good Hi,

Mark Kowlzan

morning. Good

Anthony Pettinari

degree you’re you’ve of to done how at conversion earlier judge then Wallula the doing possible do conversions versus spend difficulty of of And Wallula terms DeRidder? XXXX? How the the wondering, picture perspective, complexity in much versus in is if XXXX at what before. was say this you kind CapEx or of I just big from it’s a

Mark Kowlzan

got neighborhood as way. in item long-lease And Yes, on our committed have and in as equipment to the to far $XX to with things, lot obviously, million capital, of well a we’ve started a go capital lot so that getting of plan. our somewhere ordering year that, we’re of this

Wallula the very as of very, twin newer the almost is DeRidder X complexity, much machine. the similar. It’s the machine it��s far As a a machine of only version No. DeRidder,

technically it’s years. now more capable And mind keep we owned also in have speaking, machine. that, So a much that four business for

right mills, the that So number the efficiencies were be beginning, opportunities we spending an that converted. from identified opportunity as we capital the on as and of always working mill the looked we’ve that could last over years, at

the of the little very be and as the capital upon throwaway was future of the that always so was spent mill. we how looked that capital spent was enhance would could And capital

it the so opportunities. already And addressed a unit lot issues of and operations

our we’ve done with complexity ensuring equipment that the just installation now conversion good the a and the and then a right in job manner. so is And engineering of done precision of the

have we of high So confidence execute. level how will we in extremely

and waiting back a it’s down and the up. install equipment matter so just deliveries And the in and start the machine for spring of take

Anthony Pettinari

be strong kind very of the of kraft say it shrink it possible very quarter exported domestic and helpful. strong very Or demand prices stable? to just the share Could to could in production would been expect that seen? you’ve given Is much how export And quarter? year. that’s rise? linerboard you it the then Okay, throughout And have your you the

Mark Kowlzan

to exported you the mill quarter-to-quarter that going Tom what Tom? well. was let have change we that – available how system they Yes, and what exceptionally from through I’m because ran – a in seen much walk the we obviously,

Tom Hassfurther

we I has A The significantly strong. with very up been you the export had some catch market. quarter Yes, from said, in previous that been, to It’s over second been in as export the rapidly. of it’s the more terms did do Anthony, pricing up mentioned, demand quarter that the booming I as lot of third has we mean, over and year.

after the it in was So the we allowed do. well, and day moved – us fact us the allowed needed move did opportunity service. we’ve not a long to by long, period the on And many we that to And means, we’re we’ve in as given boxes, quarter I those customers time. Again, certainly for to continue long any produced it to an time then, catch up some one those we that and less some huge that so satisfy and some of and but the market export those outage mills fourth of that times, the customers. have we the into players a selling customers said of had got we’ve market the take to Counce continue types to export obligation of really key course, feel really care

Anthony Pettinari

Okay, that’s over. helpful. turn it I’ll

Mark Kowlzan

please. Next question,

Operator

from Jones Deutsche with comes Debbie Bank. the question of next Your line

Debbie Jones

morning. good Hi,

Mark Kowlzan

Good morning, Debbie.

Debbie Jones

pull-forward at remarks prepared is that think to you might maintenance of next next I locations. expect the mean or year? Is walk in recurring? about comments maintenance some you year when higher Wallula? made any three early just Could you we think through a should this related I be this

Mark Kowlzan

details the the shutdown our next on quarter go details for not year for of We’ll into guidance. give you year. call get to the full all we when and We’re first plans going January

on so, And work of our work big big three work that of machine. going No. phases the we and just have first heavy that during at plan the machine final regarding to period X time the the understand outage X obviously, most the with And be then No. will quarter on and the operations. DeRidder a of complex

for quarters, produce. So we’re calling increasing got every we’ll give fact you it’s have the out the details on demand that. don’t But that again, just it’s we that we’ve ton heavy we not

So how critical into are we that we prepared just more the year. our year-after-year new much look it at becomes inventories going well that on

inventory then call we’ll out, it is So next the our we when of obviously and But have impact. maintenance that part cost direct call.

Debbie Jones

lot Okay, of There’s Sacramento that to want at back – activity in I appreciate second point, thanks. Northern the in QX looking I at region just so is California. Container. a just move question, helpful to this been I when

Western box attractive plant, is I there? Golden talked get and What that also think sense Saxton, about region? think a end-market I in exposure wanted believe, your is is building expanding. just I a of what to about packaging And I Amazon better

you [indiscernible] have talk forward through what exports your I well. if and exposure as you looking what is about Could to? us are You just talk

Mark Kowlzan

Yes. don’t Tom, you take question? why that

Tom Hassfurther

if segment want things fact, – into get the certain also we got ag we listen, then don’t region go enormous break of Northern of all you as outside of is, But, Area to we just well. we located out you’ve businesses California customers anything. number into, the that have Yes. of I and specifically don’t Debbie, Sacramento Bay think at itself or sell specifically, the a is certain say about the and we mean, course,

a So as you base large have well. industrial

there customers of one things state on a be Valley it’s course, the is and country growing. And of talked frankly. lot back a of the the it the But – quite faster and Amazon, growing to about talk it the So segment regions of is Silicon and go of there. in you just is then of to a broad other of country, can supplied that you area about

a us opportunities. provides it lot So great of

Debbie Jones

turn over. will I thanks Okay

Tom Hassfurther

next you question Thank please.

Operator

question line of comes KeyBanc. Josephson with from next Your Adam the

Adam Josephson

everyone. morning good Thanks

Tom Hassfurther

morning Good

Adam Josephson

on clarification that an October. that Columbus one is organic just last from Tom, Is number? the Or X% year? of inclusive

Tom Hassfurther

I��m we this rate. factoring about numbers year that last Columbus it’s I now, in, either, at growing got really But it because they’re because do have time. didn’t Well, of I’ve because not know at inclusive

because plant. number So to that I anyway, impact roll our just dramatically are it one into being that not they X% going

Adam Josephson

Okay.

that what the XQ, for terms In contribution the guidance? uncoated of Sacramento price guidance what’s you of announced that terms And increase for October? freesheet does XQ incorporate then any in your to

Mark Kowlzan

Yes.

benefit. very the a have pricing small increase, On paper increase we amount the was price of Obviously, announced.

through but working trader the base that, some don’t billing piece we We’re until moved with start index, big customers. up the that volume of the into you see paper we that of customer picks

quarter. a minimal be to very going it’s So for fourth positive

Adam Josephson

Yes

Bob Mundy

There some like Yes. Adam Jesse. there that expect. benefit something is $X.XX and $X.XX, probably certainly

Adam Josephson

one Mark, then, And last Okay. just one.

shrinking, been additional presumably you’re from of Appreciating export pulling of Just terms also the acquisitions related Obviously, that up. that your recent tons partly to tons in synergies out DeRidder of and integrating markets. export moving you have lower-priced prices with. converters the dramatically. it’s clearly small begin the a and is, shrinking sustainable expected from those acquisitions? prices reduce export Does spread presence between I don’t domestic the that been know that to have export synergies pretty with and but But how

Mark Kowlzan

we mentioned our have The system very through worldwide. in way we And No. and Tom look as mentioned move tons customers the entire opportunistic nationwide, the we can. some our we manner many I most at legacy good has times, footprint

to take opportunistic And to regarding But on footprint to continue into these that. as and we advantage consider And so we of nation are tons only make cost the our trades of have the tons then, tons opposed how transportation we take we of the that very we it’s of across some mills system. that a tons able the being our local to selling move own either advantage how will through or analysis. systems, tons and complex purchasing differential move doing move move then out between part our nationwide, what to we you of those offshore,

Adam Josephson

Thanks a lot Mark.

Mark Kowlzan

next Okay, question please.

Operator

Your comes next the Weintraub Buckingham of Mark Research. from question line with

Mark Weintraub

just say, will down first point. as sounds it’s year, XQ guiding as $X.XX – quarter, much than not first closer that only on to Fourth assuming, $X.XX outage. But you’re you’re first I – $X.XX think, to follow-up in it at XXXX quarter, to it maintenance like much I ‘XX? should the should there realize quarter be giving last we that XX of And ‘XX the specifics or be this going the And from the $X.XX. about in I One year this was quarter. mills

Mark Kowlzan

We’ll earlier, Mark EPS Mark, year. one given a heaviest as the the I the to first relative long we haven’t said numbers next in of next as that – any But outages. out in as far one be tons the it maybe do will time think, on heavy call. impacted quarter

you year, the be don’t hitting it will certainly year. of year, the of some of the expenses beginning you you so this fourth quarter advertising have do early those sizable. the of it So in as But is

Mark Weintraub

year, quarter? Can you remind first in you us many down mills how had the this

Mark Kowlzan

of notes. too and being being scope first X work many the could not bigger have it you lot Yes, X. had, have have of But quarter. X a but could done, done, the again, But year’s We it’s impact there down, down work so believe, mill it was were last I a

Mark Weintraub

Okay, great.

said clarify, Did The you right? second, that I XQ. had corrugated business think provided I to want just in the I that price mix hear versus improvement $X.XX XQ

Mark Kowlzan

Yes

Mark Weintraub

better. I’m believe, just was it guess, you trying that I And year-over-year, I of $X.XX kind note understand, to

Mark Kowlzan

box. and containerboard includes export That and

Mark Weintraub

the Okay. And what include. $X.XX did

Mark Kowlzan

primarily That’s side. the corrugated on

Mark Weintraub

Okay.

So containerboard? export not or

Mark Kowlzan

but was Export mentioned. it positive, $X.XX of part a that a that no. wasn’t Tom No,

Mark Weintraub

one last Okay, one. okay. Then

far that right, of going X% all year. understanding to I per improvement just more last sure make So than this to day one the be because there want this month, is shipping October month, for day so I’m this

And that we that, – how XX%. month, basis, you should interpret if to is a that improvement an then be realize it per day up I the could interpret you’d had it? so for absolute Because Is X% necessarily how maybe on full it. not

wanted just I to clarify. So

Mark Kowlzan

an the that’s typically as of we things try app Mark, find what speed smooth the is average often the says. kind and to math out, in I what per But in mean out amount to take I mean, you total those. the do we day of know,

for you it gives that year the bit opposed flavor, the as just a better day. having So I out extra X think, these over with spike little to monthly smoothing

I’m saying? what understand, You

Mark Weintraub

I you do thank

Mark Kowlzan

Next question please

Operator

Armstrong Investments. James with comes from Armstrong question next Your

James Armstrong

good Good morning congrats and a quarter.

Mark Kowlzan

Good James thank you. morning

James Armstrong

what’s even as nice mix change to pricing. is, The changed you how first Could we your and a quarter? Packaging into go beyond was question give going the a your more on help the us color in mix little fourth segment

Mark Kowlzan

you what’s going add quarter. displays to then falls in off that? a on holiday business up.But color again, off it activity. and what always And rich us and of to Tom in and finish the I’ll Tom, is a quarter obviously very that the mix start very, want that, third market, terms with the do fourth good of for then lot can we’re producing

Tom Hassfurther

the we when a to might better us side the perhaps primarily, It’s that the little others. tend talk be primarily about graphics-related the than return then of tend business. on side, give to richer – mix, some And there ag krafts it’s

James Armstrong

are seasonal from change any e-commerce. That gears, seeing Switching helps you a lot.

hadn’t Specifically, November in through are is demand previous December it extending any you years? seeing evidence that and that

Mark Kowlzan

see continue that in smoothing think, into volume downturn part of the benefit year, latter the we we I of again, new seen year-after-year, into going the to have activity. year and then less

channel obviously, So year-around. the becoming the important very to industry e-commerce is

Tom Hassfurther

mean, up that the in quarter. large is ramps quite comm of Yes. there rapidly a ships XX I fourth a over period. And percentage it XX-day e- and

James Armstrong

Okay that helps thank you.

Mark Kowlzan

question Next please.

Operator

comes Manuel Wells the Your next with question Securities. from Chris line Fargo of

Chris Manuel

a Just couple me. of questions from

system. the how when kind about you about term you your First, talked for earlier, mills door purposes them in long- you opened think of within

to Sacramento So of I’m spent about free buying allocation, when – kind think try capital going Wallula. or year’s But this you cash at conversion flow to that. the capital doing you this exploit and effectively year’s

where years, maybe capacity, As perhaps International think you as continue other going kind forward but softwood another to would likelihood the of you say think you X Jackson, not those? in kind you out next whether and as the needs your one the how it’s much of to go X perhaps how the some forward, – containerboard maybe you’re done paper of you mill in to but handicap of expand Falls, about do that have Opportunities basket. of mills,

Mark Kowlzan

it’s cost system We, is, kind necessary the is as a positions at and is, different and paper generate this and purchasing unique means also containerboard I And it going as outright remains versus tons. on don’t that’s it’s or more looking the the a it what various portfolio. And again, the of a assume pure mill speculation. market have you asset your to want an good doing is long buying paper consideration, very the business, mill. to speculate cash a as business the long have continues of and to either conversion piece it of and supplying generating out then to that and convert as our each

But, to complex considerations. Obviously, I various that’s there’s on don’t speculate wide So the again, open. future. want

Chris Manuel

back for second. All Sacramento fair. right. a to I That’s could come If

to do I ability about the or through number? XXX,XXX One, you to supplying is the today, or to A release mean tons today? And your or smaller, were be guess doesn’t integrate I is at Kind you what’s part just question. more size? think, could that it them integrate. it parts that? XXX,XXX time, use this as I X talked any roughly read more Sacramento – organic so that bigger something Is the tons try roughly is to through it you than Or what couldn’t that has an to because up press to that that what ton, two, but is of

Mark Kowlzan

will him is a Yes, XXX,XXX little be supplying. on number good more any because us Chris. business? weren’t that’s not indicated, And that we I just you used, to were opportunity all a detail – to right tons. good Tom, now. use the no, you That’s customers. Yes, for we number it’s of And that supplying as XXX,XXX give those all want a Mark [indiscernible] mean

Chris Manuel

do there? Or for size? that you’re similar timing, X quick have getting predict you more over you’re insurance not but anticipating are X, done X know question last And to Bob. I trying Is X, you Okay. it quarters? just next any the

Bob Mundy

Chris. do, We No.

you If more expecting quarters. I what take range a to little were we couple the still expect of – to compared what over I’ve $X.XX, was what of There’s still bit indicated been there’s a last we’ve able would maybe and see. record than to

Chris Manuel

guys thank you Okay, luck. good

Bob Mundy

Thanks.

Operator

next question Your of the Gaffner from comes line Barclays. with Scott

Scott Gaffner

in a Just the in Packaging segment. particular on follow-up mix the

say, should pronounced move suggest pretty that they have year? that than versus are Or into XQ, that’s the last anything would So similar? been, we this is think XQ, year, there you mix more issues as

Mark Kowlzan

this very similar. very, quarter. just It’s every It’s marketplace. nature fourth the see We the of

Scott Gaffner

Have seen to in issues you quarter. Obviously, and both Okay. in experienced those did on abate cost some perspective? a the the start you of freight well. availability And just as others [indiscernible]

Mark Kowlzan

Some but regions overall nationwide. have,

with then in manage the railroad, through trucking you We’re driver I availability rail, the with rails of dealing faced on issue. all withX in the we’re country And it’s Class particular, mid-part – everyone’s the on to the particular, I side, have is still East around. that Class dealing Coast that that the we’re having X changes and that the with on Southeast

in demand. trucking what did And continues headwind. a then the hurricane period and be during So general, to to transportation what that happened

the foreseeable to radar my be future, one day-to-day. again, very So transportation the high continues on that screen, items for is of

Scott Gaffner

we moving about just, then don’t of into versus But and think year-over-year similar? move to sort cadence you the outage should the lower, XXXX, as companies outages know, Okay. as And just more higher, XXXX I I I are mean, intoXXXX. we of get how XX-month want absolute more schedules. to realize, maintenance outages the

Mark Kowlzan

last details the again, already, for month I of number a our to been And to on depends and ago base XX- few the the the available taking We’ve mill. that. of advantage it on asset the into and cycles that into years, within few mills. don’t flexibility get want on we programs a our technology extended periods run a years mills out, time. But on of maintenance started

next into plans. get have we I of mentioned, already reasons the all for again, but details – want So don’t to year the

Scott Gaffner

a at multiples one been Okay. the post converting. driven the has look part When synergy me, buying, of just multiples, on box assets. you I been export assets, on integrating domestic large Last by from has tons in taking up – those a or system mean multiples your integration the converting Adam’s into follow- question and

post decision-making synergy if higher, that export all prices go of after around Does almost definition at by higher. to go these impact therefore, would some whether assets? that multiples So go your

Mark Kowlzan

be to basically opportunity an that. acquire business. assume If great continue evaluate. interested fits will portfolio, of We in very will business to you a of It’s the have to we’d book Tom we book our have that

Thomas Hassfurther

opportunities. they’re one outside of They’ve perfect able sense us. – these be got to have level just to also of integration those their stand to each what Yes, And make be I X for integration is feet. on add standalones and would own acquisitions or the

I for each analyze like one said, to going to they’re individually. we And So have themselves. pay

Mark Kowlzan

Okay thanks.

Thomas Hassfurther

Next question please.

Operator

question next D.A. Steve the Your of line from with Chercover comes Davidson.

Steve Chercover

It’s late session. in the

they buy So But OCC. when were need China that if they a assume to going ask purchasing one. did to resume XXXX? to Everyone again, us going from would they never buy linerboard to is I’m about like another before we ton talks weird virgin

Mark Kowlzan

they want fiber on system. up you again, speculate That’s how you can all would their

even not worth time. that’s the So wasting

Steve Chercover

River? Okay. But Columbia wasn’t you to Well, you could trying export that waste on time. Wallula, did, assume the if they it’s from your I

Mark Kowlzan

Again, an not speculation, not on – that’s opportunity even our screen. that’s radar pure

Operator

Your with Goldman of next line the question Brian Maguire comes Sachs. from

Brian Maguire

– higher really that trying the to Most to it sort the response to at at just spending are do of than that questions a of release? conversion. it But that do of last have conversion. Mark, Wallula higher bit little I to for my And question that capital been all-in press a recorded already for conversion was what the did somebody costs capital be are on I’m a for the want your answered. up, this fair in follow of asked already number some say quarter Would you Anthony’s quoted the and about is, lot to get position to you kind

a as get Or Just maybe sense of laid come already minds? update kind down you where in whether a to think involved you’ve would your just years And do is like trying that of to this? just capital this a whatever cost that’s in out in a an to lot company your program a you maintenance on conversion and be other earlier projects. different trying to opportunity

Mark Kowlzan

there ago, advantage their were the also unique, of, unique. asset have and were. Every these and of mill where is all understanding and every we taking strength what weaknesses years is And assets opportunities X

a each And dollar that we time return. capital spent this own on of of of period mills, amount the effort metrics of into in over was as so optimizing its as put standalone massive a

so asset And containerboard platform and improvements dollars money through understanding example. to an spent as improvement that capital i.e., we that spent we mindful that that, follow could are a of and how efficiency Wallula on in

its conversion spent has for year standalone, needs the the capital. any that And in And every is that will require other kraft. opportunities. capital unique then and and we So and/or is or machine that maintenance that again, current to per million of capital the its spent virgin be will today up take opportunities been XXX,XXX mill again, high return its from we ton capital called position $XXX is

Brian Maguire

in Okay, that quarter. good for the thanks luck

Mark Kowlzan

Alright, thank you. questions? other Any

Operator

question the comes line next with Your from Gail Glazerman Research. Equity Roe of

Gail Glazerman

Hi, to a the near was that? they anywhere manageable were Or on back Are comments more your carrying it very have been things where morning. Mark, a inventory? very, would more when going ago, is to good concerns year-or-so and the transport. industry tight compared lot

Mark Kowlzan

now. demand their trucking you we everybody in of matter the southeast, that’s say driver very class manageable, country have I’m and issues manageable. to also it’s And it’s through is are eastern the mentioned the the the faced working But right then I strong not part industry. have to railroad, latter. with one going own just of as They Well, to regard more in with the going shortages, manageable.

the up, per industry the have logbooks wraps in trucking will throughout no are industry. se year As required, electronic regulations regarding that place is mandatory the

But So is years. there’s requires it’s past a the did lot just manageable, one than items attention it of moving in parts. that more but it much of

Gail Glazerman

demand OCC Okay. And a think concern by prolonged actual driven you if might underlying time export on kraftliner markets, do export for just impact Or that globally? stay any of pricing that down period pricing? it’s and been for

Mark Kowlzan

about. I to don’t worth even want talking something on that. That’s speculate not that’s

Gail Glazerman

announcement? walk – increase the seeing the you’re to just going what that market I’m And price you supported through Okay. appreciate can in

Mark Kowlzan

is that’s discuss and matters, something between pricing something we customers. regarding we Again, about. Pricing talk don’t ourselves our

that. And to so leave going I’m at it

Gail Glazerman

you Thank Okay.

Mark Kowlzan

please. Alright, next question

Operator

comes of the Hartline next Your Corp. from line Herb Investment Blutenthal question with

Herb Blutenthal

basically. is, one that want have brought ask hasn’t I two I morning. debt. up Good subject and been that to questions

The first reduction. debt is

times spending the thoughts about et the about to first and You machines, talked question, my what the of high up the acquisitions percentage range. That’s XX% And you is cetera, relatively sir. talked debt in on internally that? wanted on at your – after conversion

Mark Kowlzan

I not understand XX% I’m sure, when range. say you

our below If now. look X down right debt-to-EBITDA we’re you ratios,

We’re around down X.X. probably

on very So sheet. on range comfortable a balance in our our position debt

Herb Blutenthal

Value combined, relate Line. net about XX% looking according it – total to to long-term long-term I trying at. The was was was stockholder X I I to what is to debt debt worth. that’s

Mark Kowlzan

it we, to it we something quite pay is that much frankly, routinely. It’s it is. don’t attention Well, what

Herb Blutenthal

words. a don’t in problem other think it’s You

So major your a debt – for, that correct? there debt you paydown no is see [indiscernible] that is

Mark Kowlzan

Correct.

Herb Blutenthal

give any Okay. all – of of which proportionally indication much And email profit? other is anything know it about online Amazon any to revenue second is give the information approximately general with comments but question, specific, merchants, about et the the I cetera. can size can’t you Amazon, that the and the – Do us then and how give that you you it?

Mark Kowlzan

degree That’s one We particular call to the se you’re item that don’t for. per that in measure we’ve past. out. the mentioned don’t We asking that

mentioned Tom we that of every is earlier, broad opportunity deal a with portion the very it day. As

And We we ongoing. so again, to important appreciate to continue it’s channel for and quantify the customer an understand with that the – it’s through our working just that everyone [indiscernible]. and measure But It’s base. opportunity exact don’t has try know it to industry impact.

Herb Blutenthal

look. the at impressed. great that say I – bottom long-term historical previously, the it. guys – you would job that have doing I a but followed company I quite That’s line, are am your

Mark Kowlzan

giving you, With that, are call talking out you. you seeing up of We Thank we for January, with you first Thank wrap quarter and in to when All we today. outlook. Okay. right. full operator, on time. the look forward year us our joining the

Operator

your today’s participation concludes for conference disconnect lines. your please ask call. you you We This that thank and

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