Packaging Corporation of America (PKG) 25 Apr 182018 Q1 Earnings call transcript

Company Profile

Participants

Mark W. Kowlzan	Packaging Corp. of America
Thomas A. Hassfurther	Packaging Corp. of America
Robert P. Mundy	Packaging Corp. of America
Chip Dillon	Vertical Research Partners LLC
Mark Connelly	Stephens, Inc.
Chris D. Manuel	Wells Fargo Securities LLC
George Leon Staphos	Bank of America/Merrill Lynch
Adam Jesse Josephson	KeyBanc Capital Markets, Inc.
Anthony Pettinari	Citigroup Global Markets, Inc.
Debbie A. Jones	Deutsche Bank Securities, Inc.
Mark Weintraub	The Buckingham Research Group, Inc.
Scott L. Gaffner	Barclays Capital, Inc.
Steven Pierre Chercover	D.A. Davidson & Co.
Gail Glazerman	Roe Equity Research LLC

Call transcript

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Operator

Thank you for joining Packaging Corporation of America's First Quarter 2018 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 Q&A session. I will now turn the conference call over to Mr. Kowlzan, and please proceed when you are ready.

Mark W. Kowlzan

you XXXX in earnings thank America's Corporation and quarter first release morning for Packaging participating of Good conference call. Chairman Kowlzan, America. Mark and Packaging of I'm Corporation CEO of Executive call And on Mundy, our Packaging today Vice Officer. Bob President, Financial is business; with and who the Tom me Chief our runs Hassfurther, will overview the the Tom to call an first provide details. results of who more begin I'll with and quarter over and our call then turn Bob I'll take to questions. and then we'll then I'll things glad wrap up be any we of per Yesterday, quarter million $XXX income reported net first or $X.XX share.

income to $X.XX three previously number net discontinuing linerboard. announced related quarter paper included share the mill the of paper First special machine items of to the conversion per at expenses operations our with associated Washington primarily Wallula,

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

sales XXXX. XXXX. $XXX and XXXX were items XXXX was $XXX $X.X million in EBITDA First quarter special first in million company quarter the and Total net excluding billion in in billion $X.X for

recent building cost and the as to environmental costs totaling as our labor inflation addition Excluding per other the with in first and These above favorable volumes material per Container changes. related offset in acquisition. $X.XX first to were partially due repair and Sacramento reform special rate of segment equipment well per higher $X.XX tax quarter of the services higher share by driven costs, and benefits in a converting XXXX, items tax were the primarily the costs, costs, Packaging mix operating $X.XX and professional was and resulting $X.XX of XXXX and related segment. Higher share rental prices earnings by share, of items, $X.XX our $X.XX volumes quarter primarily from our operating Paper cost $X.XX increases

early in North plants some and in of in some plants costs March again box our impact We that mills the and weather at East. related box did the also incurred quarter our of

in segment $X.XX. our higher higher Paper addition, have and $X.XX; expense, interest freight prices annual lower In expenses, we higher mix $X.XX; higher expense, $X.XX; depreciation, outage in $X.XX; for

share primarily higher Our prices Packaging quarter and $X.XX expenses and due mix first segments, by expected above to in guidance in volumes higher freight per results Paper and partially cost. offset operating were than our

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

tons on below to quarter I'll corrugated shipments acquisition. over will inventory Container it the This inventory the successfully optimization strong our to allowed addition containerboard shipments. DeRidder achieve the Mill us outages ran quarter and primarily our outstanding XXXX and turn more Our inventories start-up. were quarter above at containerboard during XX,XXX year-end after the containerboard Tom provide maintenance very outage were of due to to with business. the production prior We needs now Sacramento details who three sales exceeded build mills the of extremely completed we to containerboard and at box of mills along supply entered record and scheduled scheduled first quarter immediately well. the our our with with first performance able over expectations effort, executed levels XXXX record their tons the XX,XXX outages, We a first the of

Thomas A. Hassfurther

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

or with in X.X% first XXXX. less As which to quarter workday one total by compared Mark products, had workday in of shipments indicated, quarter corrugated first per we the higher box X% record were

about together containerboard quarter and to of XX,XXX first last $X.XX the Domestic were quarter and quarter to containerboard our XXXX compared help of improved Continued per volume order quarter and Export containerboard per now compared corrugated year's to of by per prices in share quarter. up fourth I'll domestic was XXXX plants Mark. outages $X.XX X,XXX supply our first outside internal below share our $X.XX fourth volume share both tons of of tons above quarter products and fourth turn XXXX. the strong mix per markets it mills. the back were versus prices export and $X.XX XXXX. the share our up compared first to XXXX to in of up during demand at scheduled Outside sales the

Mark W. Kowlzan

Thanks, Tom.

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

was and Although volume cut-size we the versus and to primarily decline the and to and we tons compared of pressure-sensitive converting first our as well the volumes up higher freight have XX,XXX as experienced the year of higher strong in all products EBITDA and lower as Also, printing due for quarter, XXXX, operating in our continue costs, lower phase cost last out across we grades, to mix prices mill. on inflation those Wallula out business expenses. input costs quarter

prices X%. average realization business, and and our cut-size almost continue price increases, pressure-sensitive to XXXX, up printing X% of be volumes fourth we However, with compared the to see excluding continue strong, up to converting and and quarter the of recent

this machine beginning to previously, high virgin performance, paper phasing business kraft machine out I'll paper now with supplied to XXX% next linerboard and of As are mill, Bob. three over the XXX,XXX our Wallula turn it the by machine year, conversion schedule a per at May. month in are number on we ton mentioned we the of

Robert P. Mundy

million. $XX totaling and stock I million retirement million full-year tax million, Mark. to dividends note the ended last common state we Thanks, guidance the March We on quarter want call. during quarter's $XX the on of quarter million included we update hand. the mentioned uses you call cash $XXX The on $XXX with $X $XXX the million for payments of of last of that tax provided on payments of cash our for expenditures capital primary with interest

to As tax tax were assumptions for information, in reform the rate estimates have change this their states certain on defined allowing XXXX time, range the combined for of (X:XX) are XX% versus believe decoupling and federal related most and states to our on previously. to This mentioned, was not provided due could better and capital change, XX% revenues. prepared is XX% XXX% changed to based and they The XX% as the tax range tax states the currently from federal these spending over that state the as available estimate provided changes. would has negative impact federal rate expensing ranges

in in provided booked XX% XX% taxes made changes to tax in the we XX% just reform Excluding effective estimate range rate of to XXXX, XX% had tax which state tax for to the so versus the the rate this earlier. in being for impact our remains on range enacted, we changes would The state prior our XXXX, a minimal the and XX%. overpayment December to of federal be our of combined XX%

it first quarter back now of XXXX Our I'll effective the was rate tax turn over for to Mark. XX.X%.

Mark W. Kowlzan

Thank you, Bob.

result into implement second and segment first we containerboard quarter Looking in we Packaging corrugated the continue strong and to in announced our our shipments, continued and expect move quarter, higher demand will from ahead, the to we'll segment implementing previously as paper products increases. volumes segment, price be we continue to we mill begin in Paper And number paper conversion In as the the increases. machine expect we linerboard. three from lower to the our Wallula of announced price previously Packaging our

the anticipate expect costs our constituted of well. and risks pressure into that in move and items, be company as and involve identified statements forward-looking Scheduled lower With you The should seasonally any that estimates, remind made based of slightly economy uncertainties the We that, statements. on will and share. XX-K move second results I tax or continued with including the on those on some questions. these direction to Actual outage Form differ tighter were milder you. we've chemical SEC. as per of the and with these also the statements. we'll energy rate risk on to I'd weather. price $X.XX current a quarter With and lower freight expect costs, call expectations in labor report could of incremental in projections inflation But the that, slightly the or a like forward-looking maintenance the costs file lower expressed statements operator, open Considering annual materially improving inherent market fiber entertain must questions. happy factors earnings from we Thank we to those costs call recycle wage

Operator

comes from Dillon Chip first Research. question Vertical with Your

Your line is open.

Chip Dillon

details. the all for Thanks gentlemen. morning, Good Yes.

Mark W. Kowlzan

Chip. morning, Good

Chip Dillon

I about going pressure-sensitive I you're year $XXX year swing the know or benefit next Wallula lose is question something impact going going $XX I next to to issue of year, you the how business the have equal hopefully could this I like there's swing First whole this tons is those year's and And big those volumes had differently, a this versus again of to of factor is thinking the a to I think ton $XX said to most a could next that to startup pressure-sensitive transformation year. didn't extra Obviously, flow from was or then year. that would statement costs volumes million through of if be it new reasonable tons – assume of be you this lack a income as guess year costs and will year, XXX,XXX startup next million containerboard? available. obviously, the it going and think the swing having as $XXX from

Mark W. Kowlzan

margins then we current cost want don't by to latter to machine to history at you look do the of if cost we and on details I we're benefit capacity to coming and supposed for year. you would estimated up what full but into ton the you quarter, full have get have if assume look our bring per the and our on fourth part and the at our margins, do Chip, next will the

one in the we called as quarter project year the at So, cost the of choppy machine then going June, few release hopefully level the costs certain just in year, in the down we weeks and the summer incurred those two-phase startup October. we're And the and and of higher the part a cost steady calls But then of pace. through linerboard plant production in early again then and a of the a see the take the for is and of tonnage where May for startup was ramp-up exited lower and incurred because machine at we as seeing work beginning again this conversion it you'd liner the cost. months first the to because be year in this a out business

So, do that to know it's talking think one? color year you cost choppy I and if that and margins model are, you you're can that about. but Bob, number a you traditional our what to to want add some get you

Robert P. Mundy

and you (XX:XX). mentioned Yeah. that machine, I in things once at as would that you're what capacity far just seeing Chip, level as as of that as are running new say, far far the that the the ballpark you're up as as

Chip Dillon

Okay, follow-up. And quick a that's helpful. just

And outsourcing think they to you Obviously, e-commerce. the can is, how we've e-commerce? are mixes growth what how overall last business you your maybe industrial will of four with need idea your of to three more now, less what do growth decade. us years of of customers forward? some saying you now, share about of different As And if all going to are that important there I – see not in used What terms in before you business? think we seen guess, your terms in years demand, or demand the

Mark W. Kowlzan

in going color calls. give on few that We've let that. I'm spoken to Tom Yeah. past about you the

So, don't on and you that go one? Tom, elaborate ahead why

Thomas A. Hassfurther

see Chip, I your one have to less on demand. is would I commentary industrial say thing based don't

It's turn continued look a going the when e-commerce, In that only as to I up, that industrial mean, our well. fact, to obviously, and sector biggest customer growth a growth has we'll e-commerce it's it a segment sales. lot a customers. and and in got on good industry. look the I going that been but right think lot now. it's, well. not an whole I focused certainly for the it accrue And for But we occurs And certainly base, when think sector big continue customers the of I anymore new different e-commerce of grow. ways, we're as of times, it's segment, of not segment engine we've customers, of did sector us important number to has have on a important to out that be across a But you we've become it will to packaging at your called see entered important we've it's way outside traditional grow, an started and that course, said, to e-commerce to of And the delivering continue as

Chip Dillon

Okay. Thanks.

Mark W. Kowlzan

right. All

Next question, please.

Operator

Connelly next question Mark Stephens. Your comes from with

Your line is open.

Mark Connelly

KapStone investors have to WestRock to Smurfit seem and with IP that to Kappa, doing Mark, do you some you. do Thank think something. trying

what I'm So more you're position deals your two is overall of do worried make or strength competitive differently you and think about these wondering the doing you what leave now.

Mark W. Kowlzan

have anything first question; we the to part of your don't answer To do differently.

balance organization the that to for plan, sheet would balance that the any the execute determine opportunity sheet. We well It built allows financials assets. anything an they We've where capitalized and on got we sense We've have open with got are. can make on us move the great us. flexibility into

number have organic out expect we We type activities. you internal of our as a as would opportunities enhancing opportunities continue call to of

We continue to advantage number last the of opportunities to years. advantage themselves, of take done will plants as will opportunities we've those take to buy present that. over we if box If continue

on So, different in long don't changing of amount right many story, directions. have plan no, tremendous but to opportunity now we move certainly we anything

Mark Connelly

to You just those you I something your big on or up up? done, rebuilt disappointed bankers. bunch Can mean, projects of like with that sorts any big does is significant and Wallula obviously other of but talk about lined things debottlenecking probably projects? boiler already a have free people DeRidder up a or we take coming

Mark W. Kowlzan

always we've years, on on and As we've pre-engineering opportunities stated portfolio done plants. already that's that box over the we mill have and a the of the

brought to number the the gainfully over just engineers all people XXX been with projects. reiterate, on of last to they're we've just all three into that the employed in hire, on so we And and new able years, these company,

guess cash. we so of forward going in our utilize opportunity to opportunities certainly types a plants looking of at had basis these to answer in shareholders mills question, on the the your how on and capability to And our box I we terms strength And now ultimate returning on high we value the internal on yes, are projects. free return deploy

all about again, to because have you want I want so if to – to think we our I the want I say without details you've goodness getting And look at think don't don't these I into history, something – I DeRidder. give away too always opportunities. And

on. shutdown those phase the DeRidder, a During people period and final to organization XX out assisting about over had of in going a DeRidder. DeRidder out done, the our three-month XX number of conversion people had forces at Wallula technology of and from moved run-up to number No the was of the mills our sooner then we to remaining in from that that a we activity

have to projects, capability now built we tremendous do acquisition do activity. to organization So, into this

a don't again, we've to to want you be we what to some I on capital. It's So, high return. good say have on we're But give for lot, working but details opportunities got going all on. us trust we've the got when

Mark Connelly

It's just was for. what you, I Mark. Thank looking

Mark W. Kowlzan

Good.

Next question.

Operator

Your comes Manuel with Wells from Chris next Fargo. question

open. Your line is

Chris D. Manuel

the strong morning, congratulations for gentlemen, start year. to Good the and

Mark W. Kowlzan

you. Thank

Robert P. Mundy

you. Thank

Chris D. Manuel

you're as to that of being up a a in – is it timeframe. A on we'll get XX% sense – I that Is are you basis? lot One one take wanted freight kind first. kind my due at. questions contracts most is to understanding April-May to coming Do what a range? Freight of XX% component. easy of due freight Two in seeing the year-over-year come of have

Mark W. Kowlzan

point, to varying by a number, good and lane. That's it's region, by your

that We a we number have finished of mechanisms transport goods.

arrangements. We have in that of contractual carriers with have a arrangements we number terms of

a states. have the products opportunities that lower X,XXX given On we work day, probably carriers. XX around We of we're spot finished lot moving with any of truckloads market

establishing last of are the nevertheless, And so number cost good the over that years. with we But facing key inflationary those to was relationships carriers pressures.

number. a that's think I good

Chris D. Manuel

Okay.

grades not answer. it's a the the in of the kraft question the amounts would particular right OCC light how the things do market grades, significant of the term, they we where to of and The difficult things in think second come recycled do next is stay grades it industry goes How I recycled Fox between in balance too incite that? more think few in you profitability could but perhaps grades, intermediate the where and How capacity the at potentially to much as of the and good it paper the industry or capacity. months. the spot in and year more just do the it or opportunity Can different much and two? exceptionally – to River you recycled seem is you spread you state when a for as I And about least me some of see as though And in in last – up or recycled a of up think, Valley the more mix are widens? in kraft think is the the are profitability, think But or of either now, OCC good. do

Mark W. Kowlzan

Right.

some regarding of comment capacity. entry what's the into small First, business is the very been conversions, from announced

is Some that talking of what's of just They're bringing about they're on. that discussing some being that. announced

to talked years, had about how and many In never fact, been that projects just came be. few in the discussed last

profitability, are the Where customer of And it? to to what your and so, opportunity is produce of the have convert there. going going market of day, Who you place convert? of to say and years last what's what think what's And of something. number sell back go that so been about you end there's part you number in the you're can this And the shrinking line you is is type and independents on. the going coming to into at product a minimal of taking to amount and you're

a limited to of with in opportunity. so, freight is tons, very And go terms market tons where

years. And think a so, Tom, I for number some color do this you because, to a that about again, few we of talked want add to

Thomas A. Hassfurther

Yeah, I would say...

Mark W. Kowlzan

Story hasn't changed.

Thomas A. Hassfurther

if right OCC It historically they're time if to you going furnish now, anybody the that know. looks the you if I to primary changed have look pick and higher for at to trend think yet, long and it the point I haul. historic have trends be it yes, their look what hasn't and going fiber, certain in that's now significantly you a than at over but those is right see is you – historic Yeah. is down, like that, to is

and think I So, to to marketplace just those tons generally, needs decision the Mark somewhere come think to being. that's got outside to marketplace into be dynamics And the I that of indicated, able dramatically. as change a you've is certainly the move

Mark W. Kowlzan

are The component, other your and now a board fact that costs this, input all energy, on think is materials when raw fiber major have about input, I but transportation. think the of across you all not – of sometime appreciating labor you the people and your

can make So, you financially. of tell analysis the significant to sense that to project into whether have they number costs go have a make a somebody

in that And that taken so, work to doesn't the have just believe of conversions lack with many cases. you place have truly so the that math far

Chris D. Manuel

luck, you guys. very thank Well, it. appreciate for the I much Good Okay. color.

Mark W. Kowlzan

you. Thank right. All

Thomas A. Hassfurther

Thank you.

Mark W. Kowlzan

please. Next question,

Operator

comes with question Bank George Staphos from of Merrill America next Your Lynch.

open. is line Your

George Leon Staphos

the from have up terms bit, Hi, and and I for guess How capabilities the it in you relative finish back everyone. surprised now question Hey, had I is, to question would question do to have that – so a be parallels I'll well. do look you you of bought The you've in tie-ins if Mark? the first the Wallula I talk on doing, and a details. DeRidder what What you Good there. why DeRidder you'd when might And a been asset? touched and what Thanks process can you there in it terms are came appear you have about first and morning. related a able to by standpoint? or what asset, the are most follow-on of related

Mark W. Kowlzan

Yeah.

the and Regarding tremendous seen to doubt minds on our DeRidder, great execution the we I create there about system at assume would what most productive to linerboard willing as the of from have on mill mill startup most two-machine but the but during containerboard the it March, value have the the two-machine on three, machine, is bet, medium in mill, do the not facility a the of was containerboard based opportunity in with you organization performance productive that tremendous pleased and out DeRidder. mix a because world. a the to we just mill, be coming two-machine costs I'm just I we've of that would is month most that. have say, What go never a And XX line making that any February to number in

over basis, a to taken now mix depending what at there. we At X.X basis depending period, apply a on million the for. opportunity, four-year that called choose capacity a make basis you sits On mill the annualized ton plan had type exceeded on created today's we've so, that basis, what mill, of we've far And an tremendous that weight on just rate a and run mill opportunity.

That a totally into applied this we've done a I view at mean uptime I at only the in And go throw the during applied and machine, platform this Wallula wasn't I quicker the to number went machine point at taken too. the from do ran to time of XX% something same tremendous two machine being fashion DeRidder being forward. conversion the out, phases from giving efficiency pleased. Wallula, a much month just The then to we year. performance in want three shorten and is for the March. to confidence all what's up of us number technology it that it's said, lessons learned and DeRidder conversion so, three us at that's the parallel

got room to improve. we've some So,

George Leon Staphos

Okay.

Mark W. Kowlzan

the as installation precision of execute and we machine on we've of in side done we successful as quality a do then the we're that should buying well ensuring if job the we equipment that Wallula, installation, should our as and the be DeRidder. as (XX:XX) it

we'll so, the give in July. And you details

George Leon Staphos

years more apt to the quarter. and be expensive. have in capital good listening see few deploy opportunities likely that know Thanks it we in follow-on share all, kind might about on comment at where I to us of to when kind cards at touching would your more the or less too trends, who right, or volumes Tom, you are think be two-part relative stock a less now knows might bookings were for Mark what don't How use to any Mark. then given it year, seeing that? when here, you current I about in want be status for deleveraging. you machines be next you And much right. to a ago that the earlier, that, pricing early you My less up can be all, return you to, what in what current quarter? that All comes when of we're was keep Thanks I'll Can going given to flow and you expensive, significant next seeing and a projects a and happen but on. fairly downturn company other powder expensive, of luck to turn and and generating But might you're demand your environment Bob, so month, if question value think of periodically, certainly over. cash would is right the

Thomas A. Hassfurther

XX X%. George, I'll is take that the part our of through up were question first bookings that days and

and about the over continuing it a very good good Mark. volume to quarter, start the So we're off Bob, turn feel for strong back very I'll demand. we to

Robert P. Mundy

our will And right the able Yeah. And if you especially plant fit box want be we acquisitions change for forward. things things Obviously, to to us, somewhat with before, come dry look up your us. the said, play have share there said as historically we conservative that. on we'll the for are they we nice sheet. high when reform a maintain balance available that they're – powder, to how we've about – and And our And point to buyback on We shelf in we'll tax looking suspect on we've ways don't up, of that Mark done But to, way. who goes George, as operating continue things, have some the year. you're how for depending economy it's I can shape. so listening we'll as we and here, if approach about things talked at capital the ready balanced what some is we'll be up still sort we do they be cash and good it well, things make We'll way that we'll been as projects that and prepared at for that we've like the out return has this generated read towards would – be really, go opportunities. sense. have dividends to go always

Mark W. Kowlzan

two we off paid but two again, sheet of rather that We in the But and than changing for us. well recognized our the decades been now have -- of I'd that, opportunities. taking on better a amount of of to tremendous being don't when criticized balance inordinate again, Probably past It's risks. alternatives. take too plan being criticism We've of conservative as conservative. decades, part comes we've shy been it not just

have opportunity and And enterprise risk still tremendous continue yet, so, of the bring value we're inordinate to and enterprise the we tremendous shareholders. putting mindful in to to amount the very not of

that's think I not So, going to change.

George Leon Staphos

Okay. Thank you for the time.

Mark W. Kowlzan

you. Thank

Next question, please.

Operator

KeyBanc. from Josephson Your Adam next question with comes

open. is line Your

Adam Jesse Josephson

morning. Good

Mark W. Kowlzan

Good morning.

Adam Jesse Josephson

what up prices restrictions given have move on know imports? much that on past and where of they'll are I about the pointed earlier than that one to Do OCC. imposed now. out from And just little has historically you prefer it higher are Tom, than talked what OCC level have reason recent term? in you now, a China just think you considerably the bit they been do they longer prices

Thomas A. Hassfurther

other, the to that I state way Well, say to but I'm got out where it's just sell. a preference not point OCC to it's settle that profitable going and the I at on a or have one side, would collect

business, get So, of anything points of when the at than certainly to out low, virgin to to paper times, case I more can't landfill, price that run anybody and the going their have And do numerous order you get is people isn't I've wants. too the tell tend what and to they all have in other made it China that system. fiber to fact goes

So to they're and OCC, restrictions or if collectors more put it able either able going pay like capital going relax it's going to be to they're sort to the either to to it's to way or other, get they're going to in, wants. the to virgin their OCC fiber be to it's China the be and have going one to be

now U.S. prices more sales, too, price is collection from China, The understand going fiber. buy linerboard their sales other which their can right it cost and they of the another option That's way the collection own or their but about up the four imports their that is get to up are also of linerboard got in as linerboard. are import virgin own I They've OCC system it times to

to think just – out indicate of there's So, doesn't business. be going they're there me going whole that on a OCC it dynamic that I there's the to

and I that the at that find me it for all bound to it are makes sense it's up go level level think to but its parties that predict. will think point impossible a back just I will certain for involved. out

Adam Jesse Josephson

you much than was demand one, What you normalized somewhat just do that Do right? X lower it's at it, will actual which talked a it of XX – do for of to about Sure. that earlier and industry out come name for years, last up up particular and e-commerce was growth XX X.X% for or Thanks, level about than you think Tom. indicative And reason? and the you. the years, is significantly last any all think settle you what's was last level been years, over a industry? higher obviously year year think Thank off-shoring you the

Mark W. Kowlzan

you... don't why Tom,

Thomas A. Hassfurther

a GDP they a see but think that lot think is while what tracking like closer basically for than I see to you'll we'll we'll what has. away track think from it back business number. I ever I GDP I got the get a more mean,

Adam Jesse Josephson

a Tom. lot, Thanks

Thomas A. Hassfurther

Yeah.

Mark W. Kowlzan

please. question, Next

Operator

comes Pettinari question Anthony with next Your Citi. from

Your line is open.

Anthony Pettinari

Hi. Good morning.

Mark W. Kowlzan

Anthony. morning, Good

Anthony Pettinari

Last being I inventories. you years. lowest inventories just talked the about to four on containerboard up follow in want quarter,

think kind the like they buying your of another down quarter-over-quarter, just you're a were go then annualized tighter level from little on and season you we tons. comfort look spring, an into the Can XX,XXX I with inventories, talk basis? as might what freight being outside extent to especially and bit about that that summer

Mark W. Kowlzan

Yeah.

to as well stated we've have through during supply of of we demand. mills periods extremely times heavy demand, in many the shutdown this portion year run go light As the heavy many, our the our and to

hard. inventories quarter cut-up type had been why the with would we've some inventory. to fourth was expect pre-build we then it fall you As imperative of again, have experiencing, the to That's the declined. run And or last

mills performed year in is DeRidder bit third comfort into ourselves which on little the We're pre-build run a get more of paid zone with and quarters second forward. nevertheless, and to off hard quarter demand. have still the came quarter, expectations. also into heaviest our the in outstanding Fortunately, an for the we inventories box the to exceeded going But manner. that

a us So, but problem. well, to it high-class behooves execute again, that's

Anthony Pettinari

Okay.

to for XQ, was year? terms talked you year, of the Any of the update $X.XX, of the we in rest But outages the XQ quarter. kind previously, outage for $X.XX of of three I your highest or the schedule obviously XQ, And as quarters think remaining about to think $X.XX. about Okay. cadence changes XQ,

Mark W. Kowlzan

Bob, go ahead.

Robert P. Mundy

that's the of Anthony for – what it's balance call the gave it's year. I we're the what at same. No. looking last you It's

cadence moving So, the will mind at rate. is to have when as same from be the within tax something year you're now I keep you we sequentially tax was still the our just in But to same. rate base same had opposed in – tax big everything, the year-over-year the when looking with the the change

Anthony Pettinari

Got Got it. it.

it Okay. That's turn helpful. I'll over.

Mark W. Kowlzan

Next please. question,

Operator

comes next Bank. Debbie Your with question from Jones Deutsche

is open. line Your

Debbie A. Jones

Hi. Good morning.

Mark W. Kowlzan

Debbie. morning, Good

Debbie A. Jones

attractiveness I it pretty pipeline you've wanted steps because before we what's in is regional take terms the here of acquisitions there containerboard earlier that of to less sense know exposure which of independents that you the of the again a done or the viability more are next is – left, that capacity increasing converting highlighted you to a there or You proceed? bolt-on your step aren't as need attractive of successfully. lot such get

Mark W. Kowlzan

We've spoken about this in the last few earnings calls.

continue have to number we opportunities. and assets, opportunities We a to of of acquisitions have from numerous opportunities projects internal convertible

Wallula out on results. And our continue period question XXX,XXX all we the and you. about the purchases. on called rate have that of sure this the was at on deliver work that would last outside the mills going to We making got the projects at focus of before During legacy which finishing to this buying we're buy just outside time, is that the continue XXXX, rest up of tons January tons year was we of part asked we've

our a have box requirements. means we of so And of supplying number plant

obviously, a have so, continue I have business. ready at it do we're plan that. leave would of for to something. number And Well, We next just we what to the growing do the disclose until, announce we flexibility to years never to

Debbie A. Jones

new right. in for you kind attracting more force? what the around industry think my some don't labor working the there's K the All in through anything language of walk as could Thanks. you're around industry. follow-up, your increased to you doing I make participation that. into And of attractive an changed But just your labor the or

Mark W. Kowlzan

matter competition of it's again, labor. more a think, I for Well, general there's

you metropolitan a nevertheless, pay wages, think story But in so a it's labor in dealing part good market then is the in we and And I are in of currently not willingness so several region? And Are all we competition of which on to based a rural region? is have that tell. a environment highly you a competitive are to terms bad.

Thomas A. Hassfurther

to around industry. I – industry now is with been of universities is working for on the we've working an equipment Debbie, we of time. would side business, long long, cycle, two-year introduce the We're a country. this of working has the the add, certainly But on corrugated the couple to with industry on techs, the put decades. for this design, really the And degree as is we're attracting as into part our better that voc box a industry, And more been an above the around which design manufacturing people in side. universities, schools

I move been in and the that's are So, at for in attractive desire and had the has us, very bringing more people us, hourly been – promotable industry. who an think that's the even worked for very up to well even level qualified we're and

well costs So, to But a that somewhat question short-term. since have be quantity full at the very up least for going been that the that helpful we're limited, are those there's that is our to is industry. at and key knowing no that the element said, labor going looking so

Debbie A. Jones

it I'll Thanks. Okay. turn over.

Mark W. Kowlzan

Thank you.

Next question, please.

Operator

Mark next Weintraub Research. Your Buckingham question comes with from

is line open. Your

Mark Weintraub

Good you. Thank morning.

Mark W. Kowlzan

morning, Good Mark.

Mark Weintraub

percentage I say that if back on way up of provide competitive sense no but four look was you know you should is period? much but month to three-month or what's a anticipate or guidance box would we the a them, if three how would months, historically, any I hoping this just of of in prices. you whatever, would you to you within of say realize would How tend it to would could, in historically we that certainly March, however nothing it what have get the you get, of easiest assume, that of don't – much I months, could the virtually maybe you and first show quickly next that and want and issue kind so this kind that typically how –

Mark W. Kowlzan

– based get on Yeah. Tom, – why don't history. go you its ahead

Thomas A. Hassfurther

mean our we over triggering going and to announced price in of the other get rolled ton starting have mechanisms we've other it We And approach. keep as that agreements per that a in all disciplined March to increase then containerboard of (XX:XX). very than mean with you $XX done effective That that typically to would contracts but billing on we XX-day say primarily have we But I reflected those don't perspective. this well, typically for at March about a to box go increase through about just just in mind announced how specifics I'm That's historical was little did customers. X. out customers some disclose then we containerboard a on begin walk Mark. we period. into the you and a increase in that a Yeah. we bit, this give mean, out we this. about obviously I point,

Mark Weintraub

you XX%, you XX% ended assume possible with, back ballpark it would up historical I tend did historically Okay. be XX%, you – look that be in real just of get would did first you And quarter, information, because type numbers? this to if what

Thomas A. Hassfurther

We more be just there's more so got – obviously – very would the we small number there's that and to to got, come.

Mark Weintraub

Okay. Thank you.

Mark W. Kowlzan

please. question, Next

Operator

from comes question next Barclays. Gaffner Your Scott with

line Your open. is

Scott L. Gaffner

morning. Good Thanks.

Mark W. Kowlzan

morning, Scott. Good

Scott L. Gaffner

mean, prices marketplace? the inflation. you maybe Pacific on OCC, in going Mark, talked the freight virgin on fiber virgin Northwest but we've I or a in seeing fiber trends Are and around up anything pulp more with some Southeast not lot competition about other much and

Mark W. Kowlzan

Yes.

Northwest America. the what it you – publications, continues you're highest of some seeing to the expect Pacific and again Just is in North amongst be would once in

variation. now, into with that's some flat moving Alabama pretty typical our in there. all, mid-lower events, we're region some of also primarily exception about weather, but just down that. at You the looking then, southern of then understand season impacts in that's a weather warmer pricing event, little – and All have with fibers mill been moving and regions And phenomena whole Jackson we're so we've from but it's can we'll month hurricane some weather hardwood portion, availability, but weather a And again, it. be had coming, impacting localized the that regional the into the

Scott L. Gaffner

the are as region? that's Okay. marketplace the there, And bring up place taking in if you any around and the you consolidation look some Pacific in Wallula of at you the Northwest consolidation disruption seeing

Mark W. Kowlzan

agreements two working our We've been how not we're and fiber up the really. line No, of part better years we where for fiber. supply getting our on

so, pretty to flat that And that region. – again, regard it's pretty in whole

Scott L. Gaffner

one clarification on Okay. And just Wallula.

the that? clarify you you just that the running beginning at heard what And in capacity to expect Can we XXX,XXX May. line should to percentage then, I going be it on beginning? think ton in you're I of bring say

Mark W. Kowlzan

What May. of June month full the up. then week during we'd machine schedule the the starting And full and it goes down of down converting May, Yeah. I it's until be week said about second of first wise

than it of it when still on components ton until It half in rate be means that that are of running more a run a could – basis up And the so its fall. year XXX,XXX because comes machine basis. and at delivered not you'll key little be lacking capacity will the some we delivery probably production

us in then the we summer rate. at back key And elements the will when we'll slow final to the install the that run give so, October, a rate. capability get run XXX,XXX at And full ton run to

Scott L. Gaffner

Okay.

then. Just follow-up quick there one

equipment times to components the On conversion really times you this from relationship into question have suppliers, equipment? mean, lead in lengthened hitting the whether anything coming the out is obviously equipment or I sort on not lead seeing and on at industry? key are of suppliers

Mark W. Kowlzan

for there orders. over out place headboxes once complex we're the you for months, components, more What and XX two last delivery seeing components years, again, you're months technical XX like sections, press critical

any hasn't got is timing So, critical. so planning better,

Scott L. Gaffner

Thanks, Mark. Okay.

Mark W. Kowlzan

you. Thank

Next question.

Operator

with next comes Steve Chercover Davidson. from Your question

Your line open. is

Steven Pierre Chercover

Thank Good morning. you.

Mark W. Kowlzan

Morning.

Steven Pierre Chercover

weather to So, first, traditionally generally when maintenance that thought spend I the with is QX respect maintenance, highest that's conducive. was because the

conversion? if year, so focus this peak So, QX Wallula on the can you the

Mark W. Kowlzan

Bob. ahead, Go

Robert P. Mundy

No.

Mark W. Kowlzan

it's... the to color Bring that, because

Robert P. Mundy

than change can that. we more what time wouldn't a heavier any work but at talking I of outage, (XX:XX) as what we DeRidder you out and made so That's the year, we same read at into first quarter It the – really that. had drove mean, down the all the two I well about maintenance had. outage Yeah, which are number the as typically Wallula every machine had quarter

Mark W. Kowlzan

just during DeRidder period were the number of And convert the we Just advantage we over we able a of accounts particular out of human resource from in period – the we machine we time we done it same wanted that were that that take with. ready take want and of to take get and could in care and time. – to demands, to two needed also, fact Wallula deployment of

to us much year. just it activity to spreading on basically was a more out bring benefit some of see but this key really So, of full-year the DeRidder allowing

Steven Pierre Chercover

pressure-sensitive part managerial Wallula to other I mistaken, Jackson? at it. a ago. if to label any white and paper then, about relocate that upgrade was figured bandwidth to you Is ability do the might there And your Yeah, or not an decade that of was I equipment I'm machine there operations, Falls

Mark W. Kowlzan

No.

Steven Pierre Chercover

Serious about that?

Mark W. Kowlzan

short answer. a That's

Steven Pierre Chercover

answer. short a That's

Okay. you. Thank

Mark W. Kowlzan

you. Thank

please. question, Next

Operator

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

line Your is open.

Gail Glazerman

Hi. Good morning.

Mark W. Kowlzan

morning, Good Gail.

Gail Glazerman

you're I noise In is terms is on that that outlook brewing, wars also, following of that, about? demand that would hearing particular ag the any there potential be demand in a with Coast that this trade should be the maybe assume Sacramento. into on peek we front, year? it perspective end-markets And all and you what any from concern the have particular Any West customers? with a concern better thinking in

Mark W. Kowlzan

again Tom, Go second first the I'll answer part. part, and ahead,

Thomas A. Hassfurther

Coast year. it looks The it's be busy West regarding ag, is Gail, very demand to a going strong. like very

to... take when for is just that So, want that plus will – account that we made. obviously you us do Mark, acquisition a Sacramento you into

Mark W. Kowlzan

with about going on of food there's what But in lot how making we out until negotiated trade is deal and manufactured and rhetoric you Washington. United coming customers from obviously, products. then changes, turn finally on, goods Yeah. everything know And a nevertheless, States, what's the understand will to Obviously, out. what it never of we XX,XXX

to (XX:XX). hard what would it's that what negotiations imagine so, trade and be, see we'll so impact just And wait

Gail Glazerman

Okay.

Mark W. Kowlzan

worth speculating. even It's not

Gail Glazerman

then, And mill us on what an just making update talk the in converting us lot of you've obviously been you in have of been on investments Can there's side? side. the give a you going on and investment terms organic the remind Okay.

Mark W. Kowlzan

about projects. Well, talked some yeah, we've

you do we're You want get plant the into a few specifics. new about building? Tom, to talk

Thomas A. Hassfurther

we This earlier. need really in flexibility region. need in better that capital lot as the us do expansions the and years. you've our got going of or on what we goes a big there's got on all plants, than over. And things of lot building that into capital We've Yeah. got financial lot virtually XXX to Pennsylvania, And a We're going to Gail, Wisconsin. what discussed a do, Marshfield, now. demands couple anybody projects all always the large industry. plant think we new going on Virginia times. just We of all the a box else going in right to what We've things projects We've it we the over recapitalized have are. plants. back that allows customers obviously When driven well at also around have consistently a their on of going

Gail Glazerman

Okay. Thank you.

Robert P. Mundy

Thank you.

Next question, please.

Operator

Adam from KeyBanc. with comes question next Your Josephson

line is open. Your

Adam Jesse Josephson

in the expected taking the tax my you know compared Bob, slightly be made lower help you would for then cash XQ? with rate And XQ Thanks can follow-ups. expectation what is, help us can be to your mentioned you to tax of will it XX% long-term just light just I side, your the on tax me guidance? change with sequentially. what you XXXX in your rate

Robert P. Mundy

of the do recorded noise. the creates difference actual between you how stock vest expense it quarter, and and restricted best has to just reform. than goes the last tax second so rather the the guidance, that accounting XX% do in our has majority share-based that during in date at was a In in that nothing that's equity. when this It to employee year benefit And tax while like quarter, that date with rate really with And tax little get accounting It it under down Yeah. we effective quarter, why to made mentioned do change where our around second the it's we have forth (XX:XX). the grant in Adam, is. and now was

the when the went reason. first for to quarter last the We same from thing same have quarter the second down year went we

Adam Jesse Josephson

Bob, cash on the side, longer term? And tax

Robert P. Mundy

Yeah. I gave earlier, Adam. It's range that the same

swinging were we made, this rate range bit XX% -- normal is range. went would cash mentioned year. And basis. our It a because XX% the it's to take states But for know, out of be at gave to the the And tax you range a on XX%. it XX% you overpayment I've that new year was is if what up doing. As just again, for that the what the

Adam Jesse Josephson

in about any Got just to Was been will was And it. business, there Thank any quarter. of you look volume on in what for far It's Mark, have year? X% announced it the this just so last for a then, clarification. compared price the demand, And year. industry of you your Do ahead that terms down paper your up pre-buy increases? little last demand like expectation year. better industry was particular

Mark W. Kowlzan

have curve On assumed little the think there I look but curve. went you'd what pre-buying. you first on would demand or supposed years if the your back years out that of the eight in key the is of portion we've what part the slope in look went that and destruction flattened last like, at have seven like, the was probably to considerably part the second was volume part, wasn't to of it the wasn't look question, And some assume a that pre-buy. then, – much, bit It we

think out I again, going it the also say, and let's speaks business. with two-machine so, economy And and to use production, the down so. Wallula But – about of paper of strong we're paper, a

mill supplying Falls running, business, the goes and back, four Jackson, tidy new have two nice it a with machines So, and I supplies. both we

a worry we've lot to lot just and cash. I'm So, capital generates number business as of happens not generally times. around going the a world, of of about what said it's require And that a the

Adam Jesse Josephson

you, and of best thank Mark, luck.

Mark W. Kowlzan

All right. questions, please? Thank you. other Thank you. Any

Operator

no there you any are Do questions. see closing that I Kowlzan, comments? Mr. have more

Mark W. Kowlzan

a the to call. talking you July. day. Have Thank nice forward look on We for joining in us with you

Operator

today's call. conference concludes This

You may now disconnect.

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