Packaging Corporation of America (PKG) 31 Jan 182017 Q4 Earnings call transcript

Company Profile

Participants

Mark Kowlzan	Chief Executive Officer
Tom Hassfurther	Executive Vice President-Packaging Business
Bob Mundy	Chief Financial Officer
Chip Dillon	Vertical Research Partners
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
Chris Manuel	Wells Fargo Securities
Scott Gaffner	Barclays
Steven Chercover	D.A. Davidson
Gail Glazerman	Roe Equity Business

Call transcript

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Operator

Thank you for joining Packaging Corporation of America’s Fourth Quarter and Full Year 2017 Earnings Results Conference Call.

Your host today will be Mark Kowlzan, Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question-and-answer session. I will now turn the conference call over to Mr. Kowlzan, and please proceed when you’re ready.

Mark Kowlzan

you XXXX in release and thank America’s Corporation conference and quarter fourth full morning, for Packaging participating of call. Good year earnings with Chief today Kowlzan, on runs Executive Packaging Mark Chairman Bob CEO who PCA, I’m Mundy, and our and Vice President, the Officer. Tom is and call Business; Hassfurther, Financial our of me provide turn begin more and year results, full the quarter fourth and Tom call I’ll to then details. with the I’ll our Bob, over an who’ll overview of call and then we’d your I’ll up, glad be then wrap and things to take questions. fourth million, reported share. we quarter $X.XX Yesterday, net income $XXX or of per Fourth minutes. quarter bill, income special reform further which to related million items of discuss net for changes primarily tax included recently Bob few enacted a the will $XXX in

XXXX $X.X company income in were $XXX sales of quarter million, $XXX share. special billion was share, fourth income million in per billion $X.XX XXXX per the $XXX and the $XXX net $X.X to special or items, was fourth XXXX Fourth compared excluding quarter XXXX. for net net quarter or $X.XX million EBITDA XXXX. quarter items XXXX million, Total and in in fourth Excluding

compared share, items $X.X excluding or We year full earnings $X.XX excluding to billion share. Net XXXX special per $X.XX in were to $XXX also billion million, XXXX or special per $X.X items of recorded million, XXXX. compared earnings of $XXX in sales

the $X.XX the XXXX year of the full the compared Excluding included quarter the both company accompany for earnings was $X.XX were billion items fourth billion XXXX that release. total in EBITDA XXXX. in special special to press in Detail items, schedules and

offsetting higher up related incident these higher was to and share. to $X.XX – and XXXX the our and most to the per share final the of increase had $X.XX items, fourth Partially Paper costs higher Packaging special Volumes the costs. and as annual and our higher higher cost share. were in was meet prices mix driven volumes converting fringes customer quarter and per XXXX costs labor periods share and expenses per of mix due our Paper additional lower $X.XX by were per compared higher and the Mill of total holiday $X.XX well higher $X.XX of fiber to our the result of of expense fourth primarily segment. primarily DeRidder fringe which hours, and freight cost were We in $X.XX as in in our chemical needs the prices $X.XX, earnings working $X.XX, of of outage items segment which included quarter operating Excluding was in were input insurance by recovery higher segment medical costs $X.XX by driven $X.XX recycled up

$X.XX were offset although our was than per costs due to share in the share higher fiber share lower interest per per our corporate impacted by negatively of incident depreciation by DeRidder per and a higher rate were the costs slightly $X.XX related $X.XX. final plants. recovery the tax medical Mill higher by $X.XX expected, quarter of Lastly, $XXX to benefits due our and and guidance were box share this up insurance in expense. labor, prices recycled Comparing to Results to offset fourth

a margin. last versus billion with fourth resulted sales in business, of margin at XX.X% or items of year’s the EBITDA $XXX of and $X.X sales in billion Packaging $XXX quarter special Looking XX.X% of XXXX of our excluding million EBITDA $X.X million

the the sales ready for represents our weeks containerboard of of the containerboard We Higher we full year’s production prepare quarter great acquisition products margin. the inventory get came year. box the acquisition the our above billion from billion corrugated tons supply X,XXX,XXX containerboard close inventories Record in integration and of last working and XX,XXX inventory year in second where at XX,XXX as over scheduled excluding mills this to ended inventory of our as meet XXXX customer timely tons third $X special did inventories level. Container EBITDA full XX% was compared our with help corrugated record and manage the of year year about – of sales end with our Sacramento shipments employees $X.X plants and year our hours a items, XX% with margin allowed of Packaging for of billion $X.X needs or including years. or the needs lowest quarters well tons of scheduled Sacramento level EBITDA inflation quarter of $X.X the above This our For in four year-over-year billion a to extra manner. the the a first last and a job facilities the and mills and holiday to Container mills very outages it the support to four during our we at to during expected periods end

and to the off claim our able now which more integration from the us carrier earlier Sacramento impact containerboard the Additionally, details with of a our to enabled finalize Container start Tom, provide on to who’ll corrugated related offset sales the it the to over year. will our negative with to business. turn insurance we’re we’re DeRidder Mill in great facilities earnings to and incident I

Tom Hassfurther

products the and Thanks, quarter. very remained demands corrugated strong containerboard during Overall Mark.

to fourth record workday Mark up had last As X% box products additional X.X% were we total in shipments, which in by indicated quarter. per one with year’s or corrugated compared workday

workday in the X% corrugated or XXXX. up X.X% were over shipments year, per product total For full

export share year��s containerboard products than over were demand volume our share in together of XXXX. third by domestic year. as the as outside both $X.XX and about prices were of compared last seasonally tons containerboard fourth levels and XXXX Continued per versus XXXX. were per markets $X.XX and strong of XXXX in XX,XXX quarter prices tons third containerboard the versus per and we to X,XXX sales expected stronger quarter out quarter moved of quarter quarter of the Domestic quarter this improved we fourth of corrugated and share our above and $X.XX third higher the mix Export lower fourth mix up the

add our fourth like be a we’re would toward seamlessly. to on acquisition have quarter to Sacramento and to sheet bolted I that of operations fit XXXX the our proven Finally, start off and Container achieving goals. great leaders two an excellent These

California been this turn will back outstanding Sheets now I Northern and Of not teams from it course, Mark. could the including newest Sheets. to Central of our Container, all without effort accomplished PCA dedication employees Sacramento of the have and

Mark Kowlzan

Tom. Thanks,

sales higher volumes of fourth above volume outages chemical price grades sales well to major on primarily three our margin. levels. in $XX segment, year. fourth XXXX quarter mix in the fourth million freight Looking Paper sales Lower fourth XX% The million XX% in $XX items excluding of at at no in was of EBITDA two special were with and prices mills as as margin expenses. costs paper million was our of as or last year’s EBITDA all our quarter sales compared the decrease year’s about quarter and or three with outages last and and scheduled XX% results due Paper up of million quarter the this inflation was fiber to $XXX $XXX of

announced slightly year a no began increases to due last somewhat offset and about market price was as the compared to X% of from our Paper levels. our pulp volume this year above third implementation pulp volumes of prices this fourth below quarter the seasonally We average result quarter ended business. the stronger However, we with were third exit quarter.

price million or $X.X XXXX. now year $X.X sales compared turn or mix Bob. XXXX of and the $XXX sales were of items an XX% about to it However million billion I XX% quarter XXXX margin four $XXX still Full margin. excluding full over with X.X% EBITDA special was and to were billion year will below EBITDA of

Bob Mundy

Thanks, Mark.

mentioned Mark insurance able were related the we incident during at to recovery the As DeRidder earlier, the finalize to Mill. quarter the

that EPS full potential share, of our mind we to in as not consistent provided final this to our with calls. recovery guidance earnings you is our the we range previous in keep we our the year on recurring of estimate included negative claim first recovery the per XXXX. any the for in The $X.XX impact final while half earnings for experienced Just include in offsets fourth is that recovery recurring it earnings quarter did three

effective the tax quarter a XXXX tax December XX%. various tax on quarter our tax-related bill, fourth were fourth just from excluded items reform Our benefit creating quarter Due of was recurring in that recurring the basis we’ve fourth to under earnings. impacted, enactment rate late a

$XXX from million benefit provided the of our quarter on per primarily deferred As rate liability one $XXX $X.XX you new just capital to primary share. of tax the yesterday's with that release, excluded of ended is We $XX federal tax The seen Container, state the we reform cash income, net earnings $XXX spending and over recurring quarter benefit, this tax of our generated may of item common interest tax the schedules we lower quarter hand. expenditures Sacramento million $XX during of million, $XXX uses federal cash of XXXX for of million for for dividends $XXX on and capital million the million. Total million. the was $XX with payments, included acquisition stock of have these fourth XX%. The revaluation or million was payments

postretirement outage, rate year of million debt be cash third key costs mills the per impact for fourth refinancing $X.XX quarter DD&A expect XXXX. share contributions year, postretirement and in be XXXX, to notes direct amortized year $XXX interest be to share repair term certain expected $X.XX Based fixed Based at in million current million earnings payments the to annual estimates XXXX The expect and current million. and outages $XXX quarter on the quarter, the interest pension on fourth XXXX. in be will to million. our total per to between second loans lost cash in pension expense above and of first volume, we two $XXX our we in about $XXX and share XXXX current long-term by is full $X.XX Regarding a note is plan expenditures of March our million and share $X.XX the per $XX the of costs XXXX $XXX outages including expected of these in per upcoming the impact of Full $X.XX total and benefit plan the retirement capital quarter. $XX million. $X.XX for approximately versus quarter expected to in in including items of million, make expense maintenance estimated benefit is $XX

outage work is in the share first you’ve the of that quarter what year per to the scheduled at this $X.XX seen than note will due You higher XXXX primarily heavy historically DeRidder. significantly

Finally, that out I XX% federal rate need available regarding tax for currently benefits XXXX of reform, tax our XXXX range cash the paid tax enactment based XXXX which the to information, estimate XXXX. is from on though do were reduce cash taxes to in cash taxes XX%. due the overpayment point that tax prior on will cash to our reform, December state in of of combined and the XX, rate an

cash the federal XX%. rate Excluding state XX% range to of this and our in overpayment, is tax

the and Our rate to now about was back approximately expected to in turn cash XX% it XXXX over was rate XX%. booked tax range I'll our rate effective Pre-tax effective reform, is of tax XX%. XX% to for Mark. our be

Mark Kowlzan

Bob. you, Thank

recently increases up into East We'll move slightly the our expect impacted and Gulf conditions and three containerboard and we implement the although from costs quarter, across will corrugated be regions volume in Paper early from volume lower. the our fourth our Metroplex the scheduled Dallas outages as Coast experienced due extreme to be mill due lower continue during price and Also, demand, states to will continue quarter the segment our the Coast. at we volumes January expect mills ahead, to first be our weather the strong operating Looking of to quarter. announced we to

continued anticipate with inflation annual all areas in entire well benefits expenses. We costs other We our wage across as expect freight and cost as costs higher increases higher timing labor related in almost base.

seasonally expect wood inflation and Although anticipate do price energy material costs. we our usage Also, inflation energy recycled colder will we fiber of weather costs and repair be and increase most on to chemical costs. in and our fairly flat,

that’s the quarter interest Our be I per happy from well. the constituted changes. some these of questions, resulting we expect statements the slightly entertain items, you the earnings call estimates, forward-looking expectations the in based that on as Form our of on but that those any reform statements of will differ tax inherent were first have annual does higher statements. statements. $X.XX we share. the expressed and tax with open could please. best projections involve like the will depreciation operator, must on With call be economy risks those that, from expense remind and on estimate to With of made risk the I’d file These effective the include factors and identified current Considering materially $X.XX report in of and we including SEC. as XX-K rate This questions, Actual direction these results to for forward-looking our uncertainties, up company and

Operator

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

Chip Dillon

morning details. Good and the for thanks all

two very you’ve really down. business move forward, this should the year? that in certainly noting any sort seasonality of What was lighter paper like I is dramatic we had And the there we that expect for as suppose explained First but we lot a downtime mills you question than the schedule expected, segment had well looking – is XXXX?

Mark Kowlzan

a in what declining keep of we call, price with mentioned and now profitability, in time going flat the prices are volume area. And business, we price same that in liner called the mind, period same the the fairly are prices year to of volume release and the volumes it outages, just impact the anticipation everybody about on and that are first had right with out quarter talked this we with that this which October Along was and I the last did. this spring, at on this in as decrease lower declined that conversion little a

with to years. paper mix the and don't the Wallula of that people understand year So over we rich the just that contributor to the in major transition need forget operations business was are Wallula a business component a

year. think when want that the you anymore? outage is So a do to you and year-to-year But Bob, the was also, Jackson about that this there a fact factor. outages QX, do

Bob Mundy

Paper will impact I a with going Yeah, previous is from just segment year. on Chip say standpoint, what's outage scheduled there that versus at Wallula, no

year will will conversion was recurring be be Wallula and segment we Paper will So cost activities the out that impact outages earnings. for the aspect in obviously that well, to but up this in non-recurring the going segment call related Packaging some through a in show there excluding actual be we addition will that there to as those

Chip Dillon

up And that’s – just quick follow a helpful, follow-up. quick a

give As I of you XXXX? year fairly phase first immediate of get should it up? like? up to second late as finished conversion looks the Is expect that the of ramp this Can what image we half would the and an ramp idea obviously into you we how the refined the engineering. Or us curve you’ve

Mark Kowlzan

very as we’ve the as well Chip, ramp should our Yeah, done should job we be up – quick.

we new of With the The significant the bolt-on some amount the the have just equipment of the capability we of first a machine. conversion is to needed phase last us. phase, should behind enhance

So manner, get very properly installed on a then it come up right we curve. quickly we've should equipment the if precision and in has up and engineered been that

Chip Dillon

– will over Okay, it and over us looks XXXX? how I first of then so just I as far maybe turn could in you update quarter the turn business on just

Mark Kowlzan

ahead? Yeah, Tom, why you go don’t

Tom Hassfurther

Mark mentioned have going up the X.X% in that add that and that something that Yeah, days been we’re earlier Chip, per not by workday. we to through is I'm XX weather. the impacted

Texas, customer impact. that very to But have of with days still and Gulf Coast, plants we a between plants plants footprint a pretty X.X% period, per somewhere to workday. a that down number so even we’re Florida that during of have up East up significant and X We and X large through were the Coast

So strong. demand remains

Chip Dillon

Very thank you. helpful,

Mark Kowlzan

Next question, please.

Operator

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

Mark Kowlzan

morning, Mark. Good

Mark Wilde

Good morning, Good Mark. morning Tom. Bob and

Bob Mundy

morning. Good

Tom Hassfurther

Good morning.

Mark Wilde

internal the with curious tax you about in M&A of shifts just all? of the am CapEx? law I at versus How does attractiveness Mark, change think the sort that

Mark Kowlzan

our rate money expensing be return about from there we value seen, is a think Well, but and still to if time, and we’re needs overall and haven’t mindful what that you hurdle internally. value metrics there the of opportunities, immediate

So we’re that quality maintaining change entertaining the still period. and will that of of in discussing we're projects not discipline this

continue to look and precious. very valuables go we earnings, dollar, we at very, penny forward, as every So of

look the think that's I situation. So how at current we

Mark Wilde

Okay, that’s helpful.

follow-on, Just could a to perspective about the flow in move as if capital, I activity about about talk just pricing cash this we want now us you with like ramps two as wondered of talk up a your of through times you uses? uses of with leverage right is and year. well little kind your some as looks the Can ramp just market,

Mark Kowlzan

and Yeah traditionally. in line where we've been it with falls

dividend capabilities high plant that return considerations, share have our reinvestment acquisition our projects and enhance mill volume buyback opportunities just and side. box You the considerations, on in side the on great

to So to have something imagine buckets those the will be four board level. are have you at consider that that the that discussed we there’s and again

Mark Wilde

good. over. I it Thanks. turn very will Okay,

Mark Kowlzan

question, Next please.

Operator

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

George Staphos

morning. everyone. Hi, Thanks. Good

Mark Kowlzan

Good morning.

George Staphos

all the maybe or versus XQ If year. was prior for a bit little If on look fourth will I in congratulations I Thanks get sequentially. hoping possible it the the at details to I do bridging XQ more – either to quarter XQ. quantification and

quarter year $X.XX, of said be maintenance too. level that last around $X.XX for that guiding would somewhere Bob year think, you’re you XQ, this just concluded. think the I around that fourth I

that’s the me that I add if numbers wrong doesn’t sequentially around Correct would something impact Tax the really of $X.XX envelope. So am much. there. that back

in residual of are and parse of a would I And you you seeing what basically that? is inflation follow-ons. So how the couple terms had

Mark Kowlzan

get certainly XQ $X.XX, to we you were, tax that rate you But… that that comparison the XQ. from the using benefit year, $X.XX – again mentioned this George, as Yeah,

George Staphos

Yep…

Bob Mundy

year, we $X.XX. flat. know up – you Last but picked As pricing is

sort type if are each you sort of looking negate at So of of other, comparison. that

XQ you and last so And numbers, to have perspective, XQ year. DeRidder year. increase up also into the you was the would remember a what year, you in that quarter we consideration even had had, from timing have take in that showed a it this actually fourth though $X.XX to our Again, to impact earlier

if So $X.XX that at to through you back XQ XQ out. have to looking you’re

last XQ…. out increases $X.XX you first $X.XX a year that at where about look back XQ had to thing we’re to you same quarter, So the you will about we see the is going which and

George Staphos

Bob, the – related was you that to $X.XX say? did increased $X.XX you just mentioned what

Bob Mundy

if show – if that to I going sort impact quarter will you $X.XX the back-out say DeRidder so you’re $X.XX. the you $X.XX, that starting would fourth of out

George Staphos

understood. Yes,

Bob Mundy

So stand a a three forced last increase – was year sequential versus and increased. in it

had up, last we mentioned we as things things related Mark where mentioned. of the WX and is that bit you direct freight was a the much things year we more year, those as is a is so overcome well. this So that drag Tom a the inflation challenging know higher, it have to weather sequentially also

that the you rate – when it tax even perspective So look it’s though. considering at from fits inline

George Staphos

wasn’t of more I first terms have as you they the is the Are be and get the again thing equally mentioned penalizing Sure. one I would in or to numbers. just sized left WX, that normally one complaining, out was The particularly quarter than trying I the the case? weather at I into input inflation, think well.

Bob Mundy

to each within us. I the one range they're they’re $X.XX saying. normal, And of of No, $X.XX, all more was than as

George Staphos

okay. Okay,

just pricing containerboard second to all what and you of your and but prices to you and customers the strategy, you give you’re in relay terms us typically one talk would up? within the to of on considerations recognize thoughts mic announcing if the those in of to could it hike in you not of it's your freesheet, rationale providing about broadly The terms to similarly call. price I live have one in recognizing, a couple on question terms comment customers the conference like uncoated can need And conversations take difficult

Mark Kowlzan

cut-size side offset fall containerboard the the paper or converting walk I up, about from will and the on have $XX be prices Tom through what appears increases handle $X probably me grades. picked let and side. let indexes the on to so Again, George,

is demand. And cost business so, based again, input and paper factors on the inflation

And not so, say there business. about paper is to of the lot balance a the side

about We’re still on X.X% price. paper average net year-over-year net, down

George Staphos

Right.

Mark Kowlzan

want you handle to announcement? do Tom, containerboard the

Tom Hassfurther

will Let's just just this – it at basically. leave we

and that our notified containerboard increase customers we We $XX increase begin March a have on will billing we implement the that will that effective day. Xst ton

each as really flow us customers. already XX,XXX that's plus between the that Regarding handled through, and before, and with we've customers said our individually

George Staphos

Okay, appreciate it attempt. an I color. guys. Thank saw the is will I worth over. it I turn you

Mark Kowlzan

Thank you.

please. question Next

Operator

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

Mark Connelly

we there are on remind of the us this profitability can more assuming your key higher. – and the to Mark, up? the announce think hike, with deliverables some the you even Should those is I price debottlenecking through from you going things new that debottlenecking projects expect IRRs

Mark Kowlzan

tons well, announced number we year DeRidder coming number We talked opportunities. a on primarily the out XXX,XXX Yeah, three of machine. opportunities approximately one ago but machine, about of projects

XXX,XXX a then the of outage run our We've next. on then, done be conversion of so, a to And after at equipment got we starts by DeRidder at be and running just end that should ton fully rate. basis, see the technically was that and when shutdown the the And annualized we week to contribution matter and up it's run month, completed the rate getting with a we expect that should achieved.

the of amount we If XXX,XXX produced on seeing. we about that we're we about as as with significant spring you last worked what just to alone, XXXX as mills that Very planed well. everything incremental be year system, by at should from DeRidder last talked pleased occurred, has run everything did – a at time But extremely DeRidder, come in year-over-year again, of year-over-year. more and DeRidder rate of XXX,XXX a think year the from XXXX, other running containerboard well tons

Mark Connelly

a that about helpful. assume way how have can sense produce? I us give is got place we conversion it like more necessarily California not you is term One done seems go is to about of outlook, On doesn't that you Wallula, to a the question. unless to when But Coast basis ones the West want Very not Thinking think weather produce to through? much exposure double long come a the down you going market high. you're if

Mark Kowlzan

there. You something said

uniquely we will heavier position that in are making a that We product weight be on machine.

the understood that mix, We convert company how mixes this produce in also, the has only West to world Coast. Tom's to lightweight the type paper the are, financial that knowledge, in weight but need my of only machine the to liner heavier not

big in We the Pacific Northwest have General. a presence Washington state area and in the

as far fulfilling would fully as we West the we on conversion online come So we'll with year, what do Sacramento Container, when Wallula this eventually Coast. be require the

Mark Connelly

helpful. Thank is That you

Mark Kowlzan

Next please. question

Operator

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

Anthony Pettinari

Hi, morning. good

Mark Kowlzan

a question George's that annual on labor expected? are normally up pressure are XQ, Is the reference costs. would seeing cost wage increases that expect? you wage the and have following labor market kind with inflation might you just you incremental any that benefit is in higher seeing to tighter of normal you the not Just on Or

Mark Kowlzan

It's normal year are in inflationary tight to manage pieces. we tight two wage you benefits fringes with increases expect, labor we And see also, every labor but is effect are market. a and going There would market. the that our as that you

a us country I factor labor base. haven't an have in again that years. have economy XX order in the you In that a have this significantly recall, customer for probably with opportunity for that the can to time seen grow do that, we We presents first robust again, to we

Anthony Pettinari

if you listed side Mark, about you then, and on Obviously, an acquisition the you any talked commentator, there helpful. mill Okay, can when color out potentially you side? well think And a would think, still in capital had America give. open as wondering the do are talked competitor think another when about or priorities, that mill I there acquisitions your an you you to the just is as box acquisition acquisitions. I'm you announced perspective major North you about allocation of side, be opportunities from

Mark Kowlzan

to at right this along. the would open the stated acquisition price. we’ve be right We right Yes,

We are and are have of without still leave we that. grow not but opportunities. how that, don't on very various mindful we system, I'll at opportunities the we again, it surely

Anthony Pettinari

a And final Bob. be just may one for

In it XXXX, to is in parse how possible terms guidance off for roll CapEx that related might Wallula of that much of to XXXX? is out

Bob Mundy

$XXX Anthony there million than maybe slightly than about just year. this Yeah, is more that

Anthony Pettinari

Okay, that’s helpful.

Bob Mundy

None will will of this be finished that CapEx That year. be XXXX.

it So is off.

Anthony Pettinari

Thank Got it. you.

Mark Kowlzan

please. question Next

Operator

Jones with Deutsche Debbie have Bank. you Next

Debbie Jones

Hi, good morning.

Mark Kowlzan

Good Debbie. morning,

Debbie Jones

I you issue just the things in cost, it how risk things concerned comment just issue is big this? about is transport. of since to ask you transport thought some you industry, access wanted and are of around some clearly about to an cases an you the on other about of for relative have for to Can this that kind eliminate

Mark Kowlzan

Yes, Debbie.

cost holiday As in a transportation matter especially robust of period, and the fact, my fourth X, transportation. has what quarter, the saw we of the through become significant Number concern, availability the

new laws service electronic as we now trucking Last matter that worked the through of enacted December, industry. have the On regarding has within these been trucking logs. of we side, of year, the hours

drivers tractors one have that’s fleet a putting And some then robust have rail had now on remaining taken obviously and number I demands factors we've and and also, inefficiency big and you that rail a economy, in two you combine side, drivers that then off trailers rail you that of So carrier. the trucks the particular, due on to Class very system. the with of

cost transportation to my add has Number to availability concern. And so, you Tom, become want and that? X

Tom Hassfurther

cars, same cetera, us that with Yeah, of creates equipment us. for quality plant and equipment. lack and competing issue generally, from rail the the mean, Especially we're I’ll real et what’s drivers, plus everybody box rail the that of on real of and the just economy, a new mentioned, boosting perspective, is say, for labor of I the laws service issues certainly trucking shortage lack Mark for the that side,

for that very work to hard possibly headwind a much are as and manage it's we us to minimize have to clearly we So a going as can.

Debbie Jones

Okay, thank on question e-commerce. you. second My

smooth look years I last in how impact think kind on felt you if you or said just call, of that impact the that has few over impacting last – it's the you the you. terms had

you any the how on and Do looking went updated past? you've you accelerating? in quarter what through you do growth Or kind the year-over-year have QX, seen basis? the impacting see similar a just to thoughts into As numbers the on is fourth is it of e-commerce

Mark Kowlzan

want you Tom to?

Tom Hassfurther

comes don’t of it any and versus it continues think seasonally it doubt to is the of I quarter other it the is is grow. all for e-commerce us quarters there I is, year. how The the that think how challenge when strong fourth to

part but and So that probably us, it's box good for growing for fairly a been of creates the angst it's the the biggest business. economy

Debbie Jones

the that your customers it containerboard rightsizing, service, be want the in you terms of Does whether type packaging, of of level it them with to? exposure helping change way that

Tom Hassfurther

working Debbie. things, We always those on

it change the try way always value our doesn't business. to add do So We customers. to we

Debbie Jones

back thanks. over. Okay I’ll it

Mark Kowlzan

Thank you, please. next question

Operator

with Adam from comes question Next Josephson KeyBanc.

Adam Josephson

Thanks good morning everyone.

Mark Kowlzan

Good morning.

Adam Josephson

Bob Mark. couple or of questions, Bob

again. expect sequential how us think to Can the sense the you a go on just some one of of away much timing costs you per related labor share as temporary. Just being post know obviously XQ? give I it's basis, that to, about talked I bridge, on the some colder and weather, seasonally you

Bob Mundy

couple a of probably in ballpark. cents that I’d Adam, say something

Adam Josephson

energy Mark, inflation or like and Bob it's last year, cost was And just transport every issue as it and this right. this Okay, chemicals. seems it's OCC, year, on something year, well, and it

constant you announce time? through have to $XX or at increases, how earnings, us think you of price of do exists inflation that this given us these to about How when think in flow business? increases have the EBITDA these your your cost the right, So you a would

Bob Mundy

robust understand want, it’s doing question mind and if now. economy then that all the is but you I don't entire is raw how you the keep whether factor to it transporting finished what customer, you get want to that materials across goods constant and is input into it to costs, have detail in and a the

said, as factor. I Now a it's high-class

an as so have experienced look all at I'd and out figure this last the it's than to so, And manage. as in rather something I'll to that opportunity. XX shortage a labor what Transportation, environment And we years. over – issues, phenomena, skilled logistics it we’ve how the be workers, nation,

into that And to so, going and thing. not we're the price kind get of

Adam Josephson

Mark. one just last and one, Sure

on share that referred the you Can about this have announced acquisition week to Someone your thoughts you any call. earlier deal?

Mark Kowlzan

No.

Adam Josephson

you. Thank

Mark Kowlzan

please. question Next

Operator

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

Mark Weintraub

I’m of sort would exceptional and for able so more to you the you kind much, just a give cetera. pickup? us you. us would that get inflationary to to also indicative appreciate when be on pressures Is et of that may relay XQ how it's what's because much given. basis of have and a above percent I'm I give and as term are what beyond versus bit not a the a you what have freight little normal way increases about. talking be inflationary of that trend normal on normal line of bridge to all might how to be versus as from you wages there you sense been to wages is a just you trying colors XQ Would a trying Thank parse just sense

Bob Mundy

maybe say it above I’d $X.XX It’s year, would what looking at right see. to we're now. we Mark normally Yeah, this how it's $X.XX

Mark Weintraub

helpful. the is lastly on conditions on That sheet free super uncoated just business, us? update great. for Okay, any business And there

Mark Kowlzan

good. is Volume

We pretty we we are are the business the with with of Again, are specialty pleased out Wallula. well demand. down winding where

pretty cut is well with Jackson fourth quarter, it’s than is the if mill grades about size but So the I'm with think we Again, are the and business lighter converting doing Falls year-over-year and volume. of producing normal, but – in where well, January. is month quite the pleased mill good. volume you Volume that's were I

Mark Weintraub

a there the obviously presumably there or that are lot is factors you any up. cost other to tightening play of things on be which uncoated think across freesheet, going price takeout that in the pulp initiatives, influencing market provide Are industry capacity it helping And is and support

Mark Kowlzan

about on cost, pulp, fiber. with dependent in announced. Again, XXX% of inflation on of input some were what's just people's these thing industry shuts think purchased that on that flowed a And are that some had cost happened has mills factor dramatic I the through some overall of decision the these

us, Jackson of capital for now. said of So require a cash business right mill this Falls again, a we've I out before, of and generates lot the paper as lot the and

at got a Falls year little I just tidy have an the Jackson, – we this So outage are We business there. at we've don't rather.

shape. So starting again, up in shaping good

Mark Weintraub

you. Thank

Mark Kowlzan

question please. Next

Operator

Wells from Chris Next Fargo you Securities. have Manuel

Chris Manuel

a have I gentlemen. questions. morning set of couple Good

tax just me First, bit could Bob, if with little you help a cuts.

about be I of a XX, does made year to XX that ongoing to it XX% Is XX in you would think we what reasonable think … of you said ongoing should normalized payment kind side if not XX, this the say rate, that or past cash XX% December. on for that run kind the

Mark Kowlzan

answer things could that use question, change. your where can but change even say, were to I model that's year, Obviously, I but something right would I'd obviously now, trying if to to this

Chris Manuel

may will helpful. come could little March it like be is WX running that then be this you at… machine X, a sounds And that back just goes and us if will down phasing, it with help Okay Mark on then week,

Mark Kowlzan

work for The during then down down going machine and it’s will be be the The month DeRidder week Wallula annual will work. next the conversion DeRidder after of X May. the

Chris Manuel

During the of okay. May, month

Mark Kowlzan

For first it’s phase.

Chris Manuel

will year be last you or that point put a rest it XQ is XQ XXX,XXX ton in clip Is when piece. the in. equipment of right? that some until when Then the Or

Mark Kowlzan

to out the that few wait through of of we be we months rate. at the the the come pieces reduced summer should down run again we We to on run all and then and And the dependent take we was for. will that items rate that October, of on then at One shutdown full machine lead ready Capital the October and had deliveries

Chris Manuel

is That That’s full helpful. rate. a

the you on of buy are, the present or am you to guessing this days demand? be if happened to where you there? customer having at marketplace run do year together, you us issues I all going any little through X% a you incredibly I'm maybe the little to of Can mentioned half X% if this levels some to XX So a for here you is, bit today. I balance paper? How guess Are think, going I is trading meeting sit probably up I with and you continue put give procuring first kind thought this color in tight. outside we as

Mark Kowlzan

the similar ramped purchased that outside XXX,XXX talked tons had about manner last and continue in about this and on this opportunistic very year, us. for we on Wallula the And of we get up pace and fully a we year, we'll behind containerboard year until

we of making And by through the year, we prepare inventory. the that again, some latter we these run Tom up extremely will outages sure couple very to early hard But of and are be to one and run that. well. the to run going i.e. taking so, is transportation region What built We weeks. advantage we want country, the in to also, coming within ran part for to tight. a add to have DeRidder of well going And to opportunities your point, you has

Tom Hassfurther

Yeah, add Chris I’d to also this.

into good is I up, level to that comes Wallula plus level, XX% think were will after way look going at another be integration that same the that. it even integration we at we

for. all are accounted tons those So

to bloops to going sure remain question. to to on hit that there be, there It's is so system. all make is tight It's And cylinders to in no no tight. the we going have it's and are going

Chris Manuel

opportunities balance last similar partner that other could Do you you how of with my you that conversions? assets that to that could to question years guess potentially do two is do or next target Or how you you have the machines have? type one other think about also convert. acquire over other I thinking you with do to

Mark Kowlzan

various about That we would think that is go forward plans And alternatives. have we and the on we have time. how all something we So,

than something, what's speculating are we best for announce going we to direction not the when that, Other we So start will. on us.

So we have different opportunities.

Chris Manuel

gentlemen. you Thank Fair enough.

Mark Kowlzan

Thank you.

Next question please.

Operator

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

Scott Gaffner

Thanks good morning.

Mark Kowlzan

Scott. Good morning,

Scott Gaffner

of follow Just ups. a couple

of Specifically parse maybe how rail can sort versus truck? on mix between out other? the one versus balance your And you transportation you

Mark Kowlzan

the Well, rail used Scott what’s is of coming is obviously, primarily our used out for primarily corrugated mills, truck shipments.

what If load it from at a have or you're dollar number standpoint, standpoint of you. looking

Scott Gaffner

be Dollars great. would

Mark Kowlzan

dollars, probably I certainly think Yeah, or it XX% so dollars, rail. is

Scott Gaffner

if availability cost look and and positions maybe into decisions inventory XXXX? inventory the then, rising and at is your Okay, how going XXXX

Mark Kowlzan

Container board inventory.

Scott Gaffner

Correct

Mark Kowlzan

that needs satisfy outages we year, could in a of outages fourth have did. that would quarter. coming all last build insurance up and in first and we well, little Again had to order quarter in year more some as we long this policy hard have have we the give had run consideration, the us quarter we we coming the into execute were few that run through inventory was the big second three we the big to to we And which hard

just the everything So to best again, well. ability and run to have else, I of No inventory key have we Tom period our think, said is, to the this then, we built extremely it, other run through explanation.

Scott Gaffner

inflation the on business, press the of we inflation labor in side employees the box more that because maybe then felt side be on the prepared acutely the of the to of markets as unionized of should many that, the have and mill on tight Okay, mentioned you don't I you box the business. on labor the business side the think, versus expect or the piece, remarks release, labor in business. side Is box

Tom Hassfurther

Tom. hey think, I Scott Well is this

is got going think you're find of through more one I a the lot go you is, when the number things plants. to you box that employees one

more. to be people also, So same obviously, you But mix way. union, going our they're care a take of try of the non-union. have do to impacted We

a So fact a the labor for And we're market. same to lot is have could depending that really the and becoming you matter labor good competition in, is, The that. one you is of it marketplace on of tight market tighter. are

in get for be a this down. is lot headwind of a a to straight until federal this policies time we long going government think I So

Obviously, this rates. requires different these a plants sets labor clearly that we that different we and some issue requires can a level. do on inside So out. But even box some it's perhaps capital talent figure with of an the things skill different expenditures and

this to a some having come. time going to it's So problem quite business to be for

Scott Gaffner

that that potential me is with with place thank some the there or into the taking Last on just consolidation Tom. potentially would for table? around conversion added the in Wallula Are Alright, Northwest. Pacific Thanks. one concerns considerations place of the take you consolidation any

Mark Kowlzan

business No. West we Sacramento Coast. we announced Wallula, And the already we in that Again, in acquisition. with conjunction existing Container when [indiscernible] the do the

don't So, we as see any that issue.

Scott Gaffner

the in luck thanks. year good Okay,

Mark Kowlzan

Thank you.

Next question please.

Operator

Davidson. D.A. Steven Next Chercover you have with

Steven Chercover

I in you South prices of was both could was question the and principal virgin bit answered My Northwest. fiber update wondering on but if give Pacific us an

Mark Kowlzan

If states, way South the the have of Valdosta during material especially first up. scenario mill had Virgin deliveries mill Gulf in wood days affected And in been we Metroplex the for late And winter conditions. think this fall, deliveries, number right DeRidder was Alabama and in of impacted. mills the severely and days. always it’s January shaped and a are the raw terms of And primarily we a severely Counce across different mill, you the wood seen Jackson, and far in winter paper much the that compared winter my impacted XX particular containerboard the other from wood that costs prices to of in what periods years as, so earlier now with wet with this all has Dallas that fiber And something weather commentary as phenomenon case, and weather baskets. ice in snow about with is by the through

Steven Chercover

forward? So, as we’ve expectation available? guess going seasonality. But that called your mills ramp up, will chips Is saw I extreme more become that

Mark Kowlzan

with pretty It's that no theoretically we years, last story Southeast last the is Well the but on right weather currently. the been few fiber Northwest, region then and what's winter for month. regarding dramatic in is big stable But Coast over seeing happening question Pacific case, up us the is now are and Gulf in there pricing. phenomena changing the

Steven Chercover

you. thank good Very

Mark Kowlzan

you Thank please. next question

Operator

you with Gail Glazerman Equity Next ‎Roe Business. have

Gail Glazerman

on in more the can that? kind expect seeing a give bit are policy, it to in you perspective shift structural you and out And you are of how fiber on us to rest Maybe of for morning. sticking over OCC Chinese what year? adjustments the Hey and incremental just DLK little seeing play demand good the like like any stuff you particularly, with

Mark Kowlzan

and evidence way licenses permits we $XX fiber fiber, China a many times, does. up. of we OCC ago. on recycled issuing that And it China go are is OCC would see year-over-year assume will this, some will regarding new higher demand year either average that then, on what was and Well recycled of swing said dependent still and they than you this very and

again, always I that's the wildcard. think so, And

the demand what last and I to? will it other going here but year or United China in think, States as is the known, want you needle Tom, significantly, in move did the is way the well pretty down. one coming up

Tom Hassfurther

the think to one about China run I the it's system whether fiber. importing is thing They've think, when in important have have way their to got to it have their other, get you linerboard. virgin OCC, going or is, or And they to virgin they're system. in order DLK fiber

of indicated how OCC So think little they've indicator going. price. if with year it is ago, as OCC as the kind But one OCC is is think stayed importing kind could surprising of come surprising, probably think a from thing been the kind as any that's of which same over and EBITDA stayed is of an direction quarter Mark of – which the I up price and on you about it's dependent and I those sources,

Gail Glazerman

Okay, thank you.

structural you beyond that your would terms anything box pickup the And drive of demand, you seeing in are your the Just guess, manufacturing on on, some investments growth? may give customers what structural is can perspective over just or I demand. just kind in in cyclical box outlook medium term terms just from of of economy, be anything a

Mark Kowlzan

Yeah, Gail.

seen now related indicated, country manufacturer. all I phase remains manufacturing that to a some demand seeing demand the tracking this strong that's though month, where earlier had primarily number said the is we out not and than I closer is said as been absolutely but clearly, it is moving had true. And which lot you're even business a very definitely strong. anymore. related box in GDP We've of think I we're And this weather above one, issues just you

talking going now behind seeing do us a our way, manufacturing great what of of is on more a are that they're our shoring lot are about with of that in are investment a So customers trend lot to kind terms seeing we and more and in facilities. we

demand to be – is remain very strong. think, I going to So is going

Gail Glazerman

last the any that to just and investments of one the invest or you some tightness? of kind projects on in there as labor guys equipment relief capital And the look structural on could of side, are a kind labor

Tom Hassfurther

of which limit justify And capital Well, projects. and side much you that on terms and actually prioritize that do the the we box we time. on can that’s on choose physically opportunities spend the is how have can how time. have you deploy all we to also much take mind the you those and you and all an to mill so there in groups can also, on side opportunity. that ongoing that since But keeping do spending the a that in And many

that's opportunity that an so, we ongoing deal And with.

Gail Glazerman

Okay, thank you.

Mark Kowlzan

Thank you.

question anymore to I think we quick questions? anybody we have more it. time for ask if needs call one anything then Operator, will

Operator

You a have of Bank from America. from George Staphos question

George Staphos

again, into to that XQ performance. as and Hi we you EBITDA guys If the guys so versus How go Thanks XQ rest get residual of at think, the then luck would XQ just good gap of definitely down X.X% away Paper XQ quarter. to is the to much said prices look expect up. and parse, segment, we are the way year you to the on ultimately still XQ in or year-on-year. in reflecting one a quick clean I a and

Mark Kowlzan

about year. that those George, in think I terms thought don't we

want for after we’ll to back you So I and don't answer get it that We’ll don't about the anything. have you. We talk to call.

George Staphos

thank much. enough, Okay, you fair very

Mark Kowlzan

operator, today. you forward you joining call Alright. with April. talking that, the everybody in thank look We for With us on to

you. thank that with So

Operator

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

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