Packaging Corporation of America (PKG) 26 Jul 182018 Q2 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.
Mark William Wilde	BMO Capital Markets (United States)
George Leon Staphos	Bank of America Merrill Lynch
Debbie A. Jones	Deutsche Bank Securities, Inc.
Mark Weintraub	The Buckingham Research Group, Inc.
Adam Jesse Josephson	KeyBanc Capital Markets, Inc.
Scott L. Gaffner	Barclays Capital, Inc.
Steven Pierre Chercover	D.A. Davidson & Co.
Brian Maguire	Goldman Sachs & Co. LLC
Gail Glazerman	Roe Equity Research LLC
Anthony Pettinari	Citigroup Global Markets, Inc.

Call transcript

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Operator

Thank you for joining Packaging Corporation of America's Second Quarter 2018 Earning 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 second release morning for Packaging participating of Good conference call. Chairman Kowlzan, Mark and PCA. of I'm CEO And Mundy, our Hassfurther, Financial is Officer. runs with call Chief Packaging Vice our Bob President, who me Tom and business; the on Executive today I'll call who Bob, will overview more details. with of results second quarter and begin then to turn Tom the and the an our call over provide take things wrap we'll and questions. up to then I'll be then glad income of net million we or share. quarter Yesterday, reported per $XXX $X.XX second

net income share Wallula, with the No. quarter paper related included Second the of special at associated $X.XX primarily to Washington items mill per previously operations costs of machine expenses announced over conversion for to certain X discontinuing linerboard.

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

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

rental and increases and $X.XX, Sacramento equipment cetera, environmental professional acquisition. due services, changes. OCC our and Paper of which costs, per share well our lower the operating to were totaling partially costs the per quarter $X.XX, lower converting costs items $X.XX offset fiber prices primarily These share XXXX, mix primarily and higher fiber and a material mix Reform was improved inflation-related higher costs Packaging items, as costs favorable Container costs, with primarily and rate the benefits a $X.XX from was in higher prices, and above segment second segment, of costs, and usage $X.XX, second XXXX by $X.XX addition driven by et earnings to prices per in quarter and tax labor repair our $X.XX special volumes Tax of related and as the resulting $X.XX of other Excluding converting share $X.XX, combination building of of

higher Wallula annual $X.XX, had expenses and well machine, expense higher the also of higher as of $X.XX, as $X.XX. conversion costs $X.XX, related $X.XX, costs depreciation to outage other freight X We No. of

$X.XX above and results and in guidance our higher primarily higher Our and and operating share second to the per due lower costs. quarter mix Packaging were Paper segments, prices mill volumes

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

business. box X sales us we and all-time details to now, on going regions help in face. needs XX,XXX machine continued to to the X,XXX executed the containerboard quarter. to machine Container all well will certain build out to issues mills, well XXX% We efforts and the turn all-time the run maintenance due demand outages record first outstanding higher and successfully acquisition ramp-up they of the extremely operating the primarily executed of allowed the extremely I'm These the And Wallula the more our on and above conversion well at XXXX Tom, a about costs record with Sacramento phase that was XXXX, shipments. to tons of of No. tons to the and levels keep first We containerboard corrugating the need both supply and quarter of quarter continue who mill it shipments over work logistics in the high-performance ended with quarter country mitigate the We virgin and scheduled performed curve mills perspective. as at two to to kraft order our a as of up second almost perspective, containerboard addition achieve inventories inventory containerboard in order linerboard inventory to freight provide above from during

Thomas A. Hassfurther

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

indicated, all-time X.X%, box second quarterly achieved or record in for compared in total to per additional were which higher one corrugated products, with Mark XXXX. As workday X.X% we by of quarter workday the shipments

our the up the Continued quarter first Outside well. from than plants. outside year and faster our this tons of was and second XX,XXX per second Domestic which price share implementation containerboard index, $X.XX first was containerboard XXXX. $X.XX as of last prices quarter our last were Mark. per mix and earlier per share quarter XXXX greater products of volume announced were in of compared increases tie the it supply and order second last export executed to help XXXX tons $X.XX to above in year's from to second quarter strong compared occurred per first to, I'll to compared in to record back our and year's year XXXX. The the of $X.XX month was as share demand turn one by shipments share up of price key Export the up volume together than quarter both containerboard over the internal year, improved our XXXX corrugated quarter. contractors last over markets prices domestic to many now versus and compared sales realization XX,XXX containerboard below quarter

Mark W. Kowlzan

Tom. Thanks,

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

quarter were at converting the was in the versus year and strong. pressure remained increases EBITDA and margin volume the printing to sensitive our results price last products and anticipated low cut-size The Wallula business during for than our decline announced due in and realized mill. Our quicker

on freight impacted and well EBITDA higher expenses quarter. input operating logistics and costs Additionally, inflation the as costs as negatively during

quarter. margin out Paper our phasing to I'm Bob. going EBITDA over that sensitive now business it we're to ongoing turn the results of of, business the Excluding for XX% Wallula's pressure was

Robert P. Mundy

$XX $XX Mark. during primary for payments of payments. state with quarter uses federal million, XX%. interest income on $XXX for capital Thanks, quarter of our tax hand. tax combined totaling ended rate to of book included stock million $XXX changes The cash the rate of million, state and range million, our of and tax are We to There and estimate to no expenditures $XX dividends effective cash of the cash XXXX XX% million common our XX% XX%

share guidance planned The fourth be year the by quarter. the lower maintenance now versus January, share the third full in will we be $X.XX per in in total per higher, costs totaling XXXX. share and will back annual However, $X.XX $X.XX outage higher quarter by for provided per our $X.XX

the addressing several to Wisconsin, In enhancement and very opportunities grow flexibility few and earlier regions towards cash fiber The and balanced profitable as that to growth addition, recent increase couple it related compared returns is act we've expansions flow a XX% a XXXX mentioned sheet and high Virginia M&A well between accretive attributable in to provided with of still we maximize this mix adhere on as plants, in to conservative while estimate previously, $XXX million profitably company, in to increase box to our capital we our in range payback balance approach to $XXX along our financial to for the and year quick I'll at plant our to the projects have upon Mark. mills as maintaining Pennsylvania the back going turn the large in allocation order shareholders, updated past. return, dividend spending a $XXX well containerboard approach These year. cash with to our energy. we fit of $XXX you our million million projects expected our full our our opportunities have million now to

Mark W. Kowlzan

Thank you, Bob.

the as our ahead the into continued we Packaging anticipate strong in Looking we move segment. from third quarter, second demand

one corrugated day during shipments shipping will have this quarter. However, product less

As although remaining complete implement Paper in most In we the the previously the price our of second paper segment, quarter, this third implementation expect we the were previously of during Tom the our price portion to to expect announced increase. recognized of mentioned, increases majority announced quarter.

than tight manage as which volumes at should the scheduled outage normal currently the allocation stronger However, already around mill. be we lower levels period Jackson during are inventory our our on seasonally

the the first from should we costs machine X now improved conversion phase as curve have operating to at behind related No. of is our Finally, ramp-up the Wallula the mill, us.

our incremental tighter We prices costs expect most including labor with in a operating slightly continued inflation fiber of market. wage recycled higher pressure and

XX-K per the I outage but freight tax slightly share. per be anticipate the we as maintenance third scheduled a rates. be the our made logistics guidance. some any statements earnings constituted with quarter These Heidi, mentioned, in current we'd risks results statements. third questions, the that costs must identified those based entertain quarter the will $X.XX share higher higher as items, Actual well risk With happy we call original expenses, statements Report open the file differ on involve and could could uncertainties, call forward-looking projections questions, on up on our Annual are inherent that, of economy please? and you expressed for statements. forward-looking and expectations Form and SEC. of $X.XX remind Bob than these and expect these we've estimates, Considering direction And on With as materially company the on including of to that, factors you the those As of from

Operator

question first Research the from Chip comes Vertical Partners. line your of with go Certainly. Please And ahead. Dillon

Chip Dillon

Yes, and hi. Mark, morning, Good Tom. Bob

very – to an with putting has idea export you generally issues for give sell board be many – some do could some pretty you I bid shortage in anything that the can out you China do pricing of of shortage of strong for of you much mentioned relative how benefits with, think sell their very if and the think question OCC, there, tons prices us sold? a markets is in you export and strong what First to

Mark W. Kowlzan

and you go that Yeah. Tom, why talk one? about ahead don't

Thomas A. Hassfurther

we got about strong you know remained The OCC has the to our fiber. other don't the solid, they're and that's that what as you to their market. going export we still detail and than I to market. can into same what back on predict got continuing. the market that by get remained going thing can our holds China, mean, say the have to has future have see will Chip, thing. the to thing, I fiber one get We've whole very I see They've great exact sales nobody But go are really on sales. pricing into Relative indicated

probably different going world. areas that's regions different So, the of to and pool from

the that global think market remain still I should so, very And good.

Mark W. Kowlzan

keep of XX% changed our of to we've the total probably in been dramatically. amount X% year-to-year, in that just the that range Chip, offshore years, mind, production of hasn't moved tons over Yeah. and the

we've relationships still probably around customer continue legacy to throughout about world. the the globe, them got XX we We advantage countries take to of the sell

So, that's pretty consistent.

Chip Dillon

That's question, Got guess, footprint when write-off? it. where, think in the can your almost look very do again, in know stay numbers it area? magnitude footprint, a at in no back tax assuming million any you think $XXX helpful. back words, you you we major do bit, other is we the current maybe the getting footprint? I full incentives and little directionally at the I or maybe your first your off same looking attributable increase you of to there year timing-wise these to that CapEx, In mentioned directionally, the change part the current opportunities to get you the like same And are might And see next the would have change, things of

Mark W. Kowlzan

the converting So, got question, the we've that lower aggressively demand, of business are that on taxes that these opportunity the and got We've we're side and tremendous and the opportunity going us. improved so position. certainly first taking side. we've that demand factor bigger advantage part and especially corrugated fact tax But the the the recognized we're on the is after of opportunities, helps of

Robert P. Mundy

year. Next

Mark W. Kowlzan

a mill conversion you DeRidder have And next – we then, for big capital much activity. this into don't and activity if so cost, went Wallula because those about a one-offs. the are think as Theoretically, year, year it's lot of

projects the something So, you this want there higher of should came shouldn't demand. down side add along to the in because big We the accordingly on unless mill the those product obviously level coming the of do will side the to corrugated But spending advantage year. Tom, that? see to be remain won future. take

Thomas A. Hassfurther

our the in hopes all is opportunities I thing and add business, do one the just just we at customers place. Yeah. the invest what would we what we business what already demands in that don't changed and and us that to capital it get on our the tell hasn't are they do in way based are that the have

it and a isn't come. this they will build So,

you kind would continue at because of you have future, I are we these opportunities say Chip, So, when do expect of I the opportunities the look customer have we'll growth. think kind future, they in what to

Chip Dillon

Thank you. Understood.

Mark W. Kowlzan

Next please. question

Operator

Yes.

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

Mark W. Kowlzan

Good morning, Mark.

Mark Connelly

could come the onto you. your us before And and Thank insight Wallula little already tonnage that to a ramp you give that into I'm thing. turn home. hoping more versus said still you've engineers the expectations, what happens the next what a has

are As purchased going able going from in up to or to to that see get to adjustment be caught that, place inflation? is this we takes internal ton, tons that cost

Mark W. Kowlzan

ramp-up, the we extremely The machine talking pleased are up. first our part, with started about

machine a schedule. I performance of great, of X machine, quickly have quite extremely talk the you performance. No. been we if few within machine, the high has headbox. frequently, selling limited We are that good second again in the don't because product Machine June press but was time the machine became are of and about in I efficiency best company of days in productivity was terms efficiency the the month about essentially section ahead quality think on The with believe and the Wallula that's paper it hours very running Quality a and startup. new the we a – few about

on outage the the rate tons. everything a time in about is of disclose But so, basis, machine mentioned running somewhere calls. that. this of in of learnings I We the And took XX% this to past we probably went at estimated a that the on at around and this one that and design. daily all we're thing lot into don't where October. with wait compressed expected learnings from total three-and-a-half for and we'll we're – we'll May and We running we're DeRidder DeRidder took of years' that prior October, run But we on great essentially all worth finish ahead

we tons, give taking So, home extremely Those as the And tons, half pleased. the few first the other advantage the your tons, take purchased portion tons. tonnage will tons will down. year, so XXX,XXX remaining we tons the Those purchased a of XXX,XXX part have we of somewhere to about productivity some a for far, we're the of thousand for of question, in tons. place rate outside area the or for And the take year then out – bring of Wallula. We're of those we tons. said, of the purchased that

definitely the advantage production. Wallula so, And we'll of take

Mark Connelly

your last up you Once Wallula be? in one overall do position the Just net company running, fully going is and question. is think what to short

Mark W. Kowlzan

our demand – seen, interest we buying best some transportation this these of in now of We're tons assume buy going of in you of and stay XXX,XXX within. if right because tons to continue is see probably what the the from that that we outside and regions depend range purchases benefits we've in outside it remains mean, I trending strong to

Mark Connelly

Makes Mark. Thank sense. you,

Mark W. Kowlzan

All right.

call. Next

Operator

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

Mark William Wilde

Good morning, morning, Good Tom. Mark.

Mark W. Kowlzan

Mark. Hey,

Mark William Wilde

implications for Mark, may if have thoughts we the issue, and be sources PCA in paperboard industry China the the packaging XX on further fiber a what North take back next this X do way step prospective American the just the on for you changes China years? or for and any over

Mark W. Kowlzan

they that think, last XX interesting week, Mark, they're that dynamic could build trying what of what I in system, China. that have We about The ton Yeah. it get somewhere, is about see quite so is coming says news to we run that is, is from to XX, regard. everything the on in years think out source fiber containerboards going fiber if XX million to system. every

don't containerboard your you. So, But discussion a I'd It's with to essentially that want their you not the my I speculative ship part to to needs. supply have have get linerboard going good if buy to speculation box on really get to their do a add pure they or market run fiber, and into to all? rather are system point, at answer. to from Tom, they U.S. linerboard

Thomas A. Hassfurther

course, indicate of a going have has like going you looks I it collecting virgin say would down got what it's reflective as Chinese know, what able firms create primarily where either to to to are it people. somewhere you closed they're depends and it may just and loop that come on what investments I get to of then of more in system the may Mark, from they're – have I'd and as knowledgeable trying from their back some got you fiber other be virgin making mills. fiber But, to they probably like read be Europe mean, that all But, that own the of United recycled their system, hear some of road feeds the the into that U.S., we States that the be to the think which – to well. they

they're Who of at right exporting could into now. around tariff think China. as But the pulp looking be issues revolve back or knows? potential see that's case or containerboard whatever That we it probably way the might I well. the also

Mark William Wilde

Yeah.

Okay.

business XX you XXXX or had The incremental is some investment by high in in of making terms rates and box be business of of this you're the had? think the the growth you're at integration sense to company. with public level you a Tom, been in where going you've you've end I just seen, other than years recall box question more Can I to can us so you've growing be give rapidly the the

Mark W. Kowlzan

answer I it Tom know way. Well, what don't let this me comment.

advantage or that on, when time some outside we it's up domestic – I of out. We're buying call expect containerboard XX% moving especially goes or and or by integrated. for running full some containerboard ability those run tons us. it you in with tons of that's advantageous good we're and next that the XX% our within Especially And continue really and It's be. health to as year, that It integrated. to fully the tons take year, feel in we're we just own define run fully continue Wallula integrated us and our it net comfortable. to be own containerboard And we able integrated. place a a export. XXX%, coming our We XXX% to would source place We're But efficiencies. system, we'll position, as the find to gives fully that to ways us of end the

next And we'll so, lines. that along year, be want same do the you I would talking expect to... Tom,

Thomas A. Hassfurther

at Yeah. prior fully you we'll one we we do when fact know adding think we said is don't said grades. to of we the we've exactly the the Mark, just that that be project, Wallula made reasons I that just we is And around say, plus make And the we ramped that. for add Wallula the we don't where we the demand comments mean, I capacity just add integration the if I'd have XX% and up. were that's all prior the sake outside that for I'd purchase of mean, capacity. about

advantageous those in grades opposed make some so, to And to the more try us internally. as buy cases to those grades for on outside it's

Mark William Wilde

Yeah.

quite related sort to lower on we these do general just per cost seems have than out some that? to the thoughts couple thing, unit of a there. other Okay. conversions your a of you other The be projects on of bit just Mark, see conversions, one the

Mark W. Kowlzan

in has for It's people characteristics, unique, or mill are Well, of to product. this kind converted years willing to much And said pay any every more of product board to certain Any cases. virtually I've a is make can you're number paper how be every less design mill and mill willing pay. now. and obviously, some

phased most effective do and a how capital of approach. apply for at we this be a We for very and have of that what get somewhat to decades we've return the good understanding dollar. part minimum A done to is

prowess. and go when And two first that's then, we in look table, phase phases with leave minimum it's the what make is on one engineering overspend. sure to you did or easier and part excellence don't at opportunities of we and operating our So, done, a the at

has So, it think every its unique and again, I every mill back to, weaknesses. but goes strengths is and mill

that's So, much it. pretty

Mark William Wilde

over. That's it Thank helpful. turn you. I'll

Mark W. Kowlzan

please. question, Next

Operator

George Yes. is next the question from ahead. Lynch. with of Staphos America Merrill line Bank go Please The of

George Leon Staphos

versus I Hi, the changes wanted detail making mic detail or may not everyone. get into you it's you're Good in more on would converting, evolving much terms of and start. any you're a or a recognizing see the bit those helpful can that Mark, in within Pennsylvania? in framing around other what investments to little that give going like that morning. Thanks on e-commerce, to for And one, you in areas, time, in all end you're markets, Tom over more to be details. another that how presentation, start and say live investments the be they're making changes whether one growth Wisconsin color us

Thomas A. Hassfurther

on tomorrow, is investments Tom. really this I But also, at efficiencies. are a to the you're that see at example, be is primary think I primarily The wants. I GDP the had obviously, things. these of up what lowering evolving, and we're based couple be equation of have our we'll looking be as better follow that a are labor – the to we're sectors and general as when get of can right if just automation, a at drivers investments, specifics, One told in want the we're to area the markets around at of a demand and into number to projected looking you Those that more of end seeing in converting And mean, cost customer up. past numbers, things have kind give what it's a well. growing this. now terms you customer We're lot investments. it's But I'll of I We're more we've costs, making are a of sorts these those looking George, those looking obviously, the around order answer you, X%. really to GDP get is, things. and believe, kind I then, mean, of to our happening And for those quarter side you in sectors. lot an in

think we're we're those aligned of many I particular our and that markets. customers fortunate with those because so customers to and react capital And needs changes are different so making that have. entrenched that we're we're quickly those to whatever those around many businesses able subsequently, already thousands there in what driven demands are then we're are those and investments particular

George Leon Staphos

number to the the second of And these obviously roughly that work? factors in had this were of increase about year pricing change difference and at in at the $XX versus there a quarter then, there, in question it of change it Is quarter out in XXXX. a Thanks I'll of in That's turn and ton quarters occurred the And at works second quarter. by over, the on and in to all other quarter maybe price performance nut-and-bolt the explained some going improvement bigger Tom. both a when and types of the the improvement beginning the $XX looking I EBITDA variance in Okay. Packaging, that year-on-year and of thoughts picture second look from XXXX more XXXX for at that, timing ton terms one. questions, versus of the or

are XXXX And about were source quarter turn that, think quarter versus some last that of when year? guys. we inflationary great. numbers be I'll you other seeing trends versus pick-ups could overall, would you third the The some sequential year and you you, this put that inflation, or question, if over. on seeing in of Thank XXXX it third more

Mark W. Kowlzan

Yeah.

can then me this can this Let to and start Tom with or add. add Bob out

first out and So, to that it's energy, in this that's were in primarily timing. what and year, factors as And we significant and freight chemicals second the seen. January then your April called question, reminded such we've everyone question,

just and or the and so, or Bob lanes what to but you does the do just cost of certain regions. want supporting cost not of And availability But, add again, certain to logistics issues, truck, that rail the details? Tom,

Robert P. Mundy

Yeah. big mentioned, some the I one say, period change same was a George, the yeah, infringes compared larger labor year, to in and of going addition the is last markets, to But to the labor just all that charging Mark those whatnot. freight, that ones of tight as these (XX:XX) outside to repairs chemicals talked and that's to due and your more. and about lot all people well things more they're don't as providers pay company, inflation supplies are on and to a and get contractors, having they're like service materials who services you

prior is So, that more sure. in all than we've for seen periods,

George Leon Staphos

quarter, very in the guys. you Thank Good much. luck

Mark W. Kowlzan

Thank you.

please. question, Next

Operator

Thank you.

Your next Fargo comes of question line from the (XX:XX) Wells with Securities. ahead. Please go

Unknown Speaker

the taking question. morning. you for Thank Good

or the October. section? for at putting of the side? risky, see you've press of already The maybe operationally conversion and cost in task with done risks either key in the Is the more from Can you ahead sort headbox and the what highlight than looking you you first us one Wallula centers of some risky around less it the that

Mark W. Kowlzan

this to that risks that has Yeah. comes the same. factors: that. supplied you comes proven with a installing and precision at we've are down The equipment in this down two us good then specifications, building It proper vendor to we're yet manner has to the this a proper very and job equipment done it in

what done over years. just and different am the no well very So, have We to execute the it are do than risks that I saying efficiently. we've

work demanding press a frankly, what section have have component we going than October. change-out. the coming quite work and It's So, change-out. in we we discrete just headbox complex completed was spring more up In October, on. this It's more

So, a through this smaller just it's to we've more gone what concentrated spring. compared region with

again, I'm about So, risks. worried the not

Unknown Speaker

Tom, how business us? you in could for are things you us try in then, thus trending quarter, to And that sense the normally corrugated a for you. Thank do Okay. give far the third

Thomas A. Hassfurther

just be usually an XX July X.X%. Through days because July, to we're year up a unusual Yeah. little is every tends bit slower. month of it

up trending it's It'll the continue month. ramp that to way. So, through

unusual we really a July but strong. very see it'll demand we the through to And Fourth in ramp week still continue why our with up had little month. some So, some customers, again, a changes caused of which the of of middle that's

still So, strong. all in it's all, very

Unknown Speaker

you. Thank

Mark W. Kowlzan

Next question, please.

Operator

From Please with go Deutsche the Jones of Debbie Bank. line ahead.

Debbie A. Jones

related expect QX? morning. ask there the about just around thing guidance? quarter is management material Jackson Good or had just sense should And commentary to how quarter anything Is give of that could us you for just the related your in we it you Hi. a to to I the the wanted a project into in through mill. inventory move to

Mark W. Kowlzan

me answer business. under in allocated the mode been that. first Obviously, part Let an Paper we've of running the

the with have only shutdown, mills two you that in Paper business. have So, a the we fact

half you're for your taking shutdown. annual its Paper business down So, of

to And depleted allocations certain have inventories down levels that where to many of we so, are just we in customers, managed. our we've already

some so, the And business is case just of it's – a strong.

We outage scheduled have get the and that. through will we

been, quarter, allocated run. in And it's will so, continue continues an demand the to be range both running mode. If you'll to run fourth mills in

do on outage are just where October what of so, with it's – And terms not the you're in of to certainly, or customers. we we'll do change some inventories. able in the supporting does metrics update But, you

year the for how that works plan we that's it So, and out.

Debbie A. Jones

else at assets acquisitions, read you desirable converting into Really, CapEx point. should And should through assets attractiveness, or just that curious this? kind something allocation for there for this we of the at at That's Thank the the or around that's you. is is disclosure this you acquiring thank question, less updated I'm helpful. converting currently read multiples bolt-on all for if just capital Okay. from that specifically. my looking we something specifically second

Mark W. Kowlzan

of at not opportunities will along Debbie. themselves present demand take No, Tom customer or of acquisition and terms the all, in mentioned, of we come certain advantage growth of In advantage within If with and plants. taking regions, that. within fully that the meantime, fully advantage taking opportunities, the we're as

both And so, we're sides going equation. of to take that of advantage

Debbie A. Jones

Okay. it Thank over. turn you. I'll

Mark W. Kowlzan

please. question, Next

Operator

Weintraub Your Mark go of is with Buckingham ahead. the Research. line next question from Please

Mark Weintraub

Thank you.

feel on I believe, in which being that to degree was had characterize the Was increase does or it mentioned you terms there's is color pace can you be put an to into First, just better pricing you're that of you way also any normal, juncture? through. boxes this of just going get, get observation side, as and the might more than provide increase if the the full on you at price is able the that of put not being than or pass-through corrugated the to pass-through whether through forward

Mark W. Kowlzan

truly is we're timing you that. to And of related what great on little factor want the executing add the understand, with group have more able up question Tom's that? been Mark, strong. do obviously a on has to Tom, very first picked a was a Yeah. to pricing, that, job index that did to part your demand execute and you

Thomas A. Hassfurther

Yeah.

of I think, to probably the one be best this regards would in examples timing.

can you price March, a in the announced capture if until this basis go quarter. have up you represented third in So, April. and that RISI Last was in second you a the in year, quarter. wasn't on Therefore, we increase March, catch-up in year increase have contracts that price as that did quarterly

price So, see earnings. the at we'll of best example as that's talk example about in you just future that to you'll the timing probably – relative have increase, rest to that of a And that the date, Mark. an our have,

Mark Weintraub

the the had quarter, is end that's was in the recognized quarter, reference a you the I Okay. that fair? But, price mentioned majority assume average quarter as opposed by to during that when to

Thomas A. Hassfurther

fair. That's

Mark Weintraub

data, trying just very industry in but even I'm – been – you strong is months guess, referenced to to the to and side, GDP going I'd the bit is – say, understand Any very the be might just volume couple has as I coming be performance, as data of industry very your not months, the lastly, last the likely while a then, XX little your in And strong. what happening? softer last thoughts

Mark W. Kowlzan

mean, graphics other talk a are mean, there, things little that just on some most in that inventories you the softness see swings lot I in agriculture, terms in and some other see about XX and customers I can on I a And or demand. period. strength more things. our tell reporting XX-day other you'll to is business. for part, If seasonal and doing where the It areas. areas talk we can see We lot depends look of XX,XXX We you some depends business and I of almost like some reducing a a customers, create they're seasonal. the over swings strong across of that,

So, tend months sometimes if in anyway year. you mean, just softer given look in be the last they few the months, any to I

Mark Weintraub

you. Thank Okay.

Mark W. Kowlzan

right. All

Next question, please.

Operator

Please from Josephson Adam the with ahead. go is KeyBanc. of question line next Your

Adam Jesse Josephson

Bob, and good Mark morning.

Mark W. Kowlzan

Adam. morning, Good

Robert P. Mundy

morning. Good

Adam Jesse Josephson

Just back issue one second. the CapEx two one questions, for to

or could and sounds on sense to normalized is in we some asked versus as harp of XXXX earlier, be conversion, million idea of what a which it a you about the CapEx this the that's XXXX number have to some will drop maintenance degree versus $XXX think is but to think some likely Sorry to that this, is such Wallula number like obviously, you us give you off XXXX? up XXXX, CapEx but your I someone

Mark W. Kowlzan

the one-off and are in regional of normalize big very Well, you profit type up about you of terms building Wallula we're Wisconsin, ratios projects then, opportunities, some the the that had in plant the and the had you of will had buckets you spend, capital, project the converting reconfiguration maintenance the opportunities. again, of go big about if you big discrete we new then, some opportunities. as spend, talking DeRidder capital projects, of side, think discrete to And enhancing forward, then

remain maintenance us apply got will that. in will to And being, so, capital this demand, the normal the of time the for while profit of want to improvement to this the store. somewhere CapEx term, But range Bob, long add we the growth to and do to allow take the do we opportunity, at you ratio continue over same advantage should that?

Robert P. Mundy

Yeah. business say, spending from Wallula will side around would saw question ballpark. I'll say, XXXX/XXXX of investments XXXX, side and on delta mill mentioned the XXXX this say, and box year, now of the what the plant down the between because the a you to XXXX the Adam, with right I'd I'd delta for for the XXXX good and coming you DeRidder be of XXXX your be about half

Adam Jesse Josephson

the Perfect. do much white that. how just in paper of realize then, have you box and you XQ much in and you or housekeeping, price increases And just for Thank how half? second remaining did a QX

Mark W. Kowlzan

of contractual We're the July to is kicks then, of customers. up of up lion's of the so. quarter. terms quarter in X, later not the on ends in on as picked going in a few that. details And type We've that in specific of then quarter. the the get We'll into and that going we some the it on X. that kicked Paper, odds on the share few We've that as to bulk And have second got that some of the a and wrapping got into in obviously speak, a contractual was July little thing. the others that. and we got activities some We same in I'm got get kicked just But not rolling in in and

Adam Jesse Josephson

Mark. Thanks,

Mark W. Kowlzan

All right.

please. question, Next

Operator

Scott line is Gaffner question go from of next with Please Your the Barclays. ahead.

Scott L. Gaffner

morning. Good Thanks.

Mark W. Kowlzan

Scott. morning, Good

Scott L. Gaffner

Mark. Hey,

increased on seeing sort seeing still Can inflationary on around Are you are a rates fiber? then quick you XQ. of a costs. detailed you little couple inflationary recycled of it pressure what talk of fiber, about And input Just that? year more you fiber? questions going percent fiber mentioned into is I XQ versus also, virgin bit higher couple or mean, virgin virgin on

Mark W. Kowlzan

Yeah.

that. components two fiber, recycled of Regarding

strong we the some If then in office ledger the office recycled mill have seen (XX:XX) sorted on stayed regions, up, up we you the ledger, sorted of has – some type of paper, and demand, sorted to in high OCC and regions the waste containerboard white of of white moved that moved in OCC about up, within and paper the the side side. Bob? have DLK a that and use product white business, LCC few sorted that grades moved think we continues side up where so use be very there's

Robert P. Mundy

to Yeah. company for of we'd Scott, as and project, the on the it fiber that then that as about I capacity than say, that we is country relative just talk would on in is higher Wallula announced average. when bring more we part of and

that would that the becomes as we So, move to supply what the seen purchase you've things up more fiber on – of relative more to virgin Wallula, side average past. that the in of

Mark W. Kowlzan

Within the and of within Again, change. haven't we typically is pretty quarter-to-quarter, right seen regions side much flat the everything the year-over-year legacy it's business, weather-related phenomena now.

Scott L. Gaffner

half at this investing of obviously, if second they're some recycled some mills on ability down fiber total that to the spending, in you're or at even costs your up of look as production some, in in to process? the And CapEx Okay. recycled the to back you looking take your up the year input go coming potentially waste going you of part are this mixed or paper of capacity when

Mark W. Kowlzan

currently. Not

Scott L. Gaffner

me. Okay. One last for one

like location is Just from to because inventory, view perspective in facilities back bring a these better line, pulling around increases the inventories I there up on you in around some a you'll situation cost? down as Wallula, be mean, new freight

Mark W. Kowlzan

we and daily, do monitor of on freight see so issues the But, year. on Well, to end want we the at where that's the doing what and Wallula full theoretically, logistics, comes weekly, capability capable a monthly to want to to will continue of that's we're as what basis be. you'd theoretically,

Scott L. Gaffner

Okay.

Robert P. Mundy

if a different that's and the I'd who same. – why not difference just on, and primarily that thing, you are we one not virgin-based all That's are coming other because it's recycled using and big all about a is recycled to capacity versus sell serves your it we to, say our Scott, look and it's big question it's customers sell at because virgin, and about we mills capacity our the when fiber products fibers the products equal. difference

You can't it mill start is lower. price just running through because the your system

from you where servicing be the up end to want don't You customers.

Scott L. Gaffner

Thanks, Thanks, Understood. Bob. Mark.

Mark W. Kowlzan

question, please. Next

Operator

the line Please with is Chercover D.A. Steve of from Davidson. question Your next go ahead.

Steven Pierre Chercover

morning, everyone. Good

Mark W. Kowlzan

morning. Good

Steven Pierre Chercover

bottleneck, tack simply levels. take inventory is make thing cost? and I reduce increasingly want inventory to your the of the that to opposite If perhaps on of hold it at does kind freight expensive sense some more to a box of plants that

Mark W. Kowlzan

on it's quarterly sense how of whether the do and a or mill we to will take makes real-time view, capability monthly, do weekly, needs. again, of whatever understand basis Well, the a we plant from advantage box or production point

we'll weekly, But, are again, capability regional fact we on the requirements again, daily, on work. we availability us you how and something monthly cost. helps that better have how works Wallula Everything fill U.S. on and out. have lot now (XX:XX) our plants. of supply on transportation a it's that depends transportation monitoring, that have much to out so, really a box And coming these But

Mark W. Kowlzan

please. question, Next

Operator

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

Brian Maguire

morning, guys. for Good question. taking the Thanks Hi.

Mark W. Kowlzan

morning. Good

Brian Maguire

of wanted Paper stronger just bit seems expecting the quarter. It we in side on little the were I a to the than business. ask

comment if on got the expect moment, thoughts to the on quarter of being the you pull – ahead And of of kind at stand on forward wanted you it price you in of increases XQ. any much or also increases. the hoping get few where in those a allocation. how kind could mentioned just of volumes I just You and announced price some

Mark W. Kowlzan

grades, question, offset of robust, the grades. for that and cut-size printing market first very envelop-type the your see been tight all a forward. on Just and we pull didn't part just It's it's year any converting

living market. through running out. We're very we're So, full a robust

in And do that we and the remaining pricing, captured we're obligations anything? add that to already And to you are simple. Bob, regarding terms anymore want on quarter going to then third in comment pricing so, quarter. few contractual a not what the than it's rolling the we have second of

Robert P. Mundy

No.

I think that covers it.

Brian Maguire

want cadences I And you'd that realizing in we assume follow to CapEx, what million just expect? the investment would to return $XXX of – that be incremental should just and targeting XX% back what something or kind around reasonable a on be up to that it of year on

Mark W. Kowlzan

qualify going return ambitious historical more Well, to are line projects to again, with not that XX%, are our right that expectations. the than generally I'm except so that identified we've say we and in

it answer way. And that so, we'll

Brian Maguire

much. very Thanks Okay.

Mark W. Kowlzan

right. All

please. Next question,

Operator

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

Gail Glazerman

you. I issues the to your bit thoughts wanted the all of business trade adjust you couple concerns or little speak have Good might to are further. any that they that you a When for customers, last demand their Thank morning. hearing just months? dig any into roiling given been

Thomas A. Hassfurther

bit. little extent, concerned Gail. obviously, some of point mean, We in time. impacted demand but to it Hi, Tom. they're This hear is as this hasn't I a

Gail Glazerman

when Okay. sense seem wondering, might to at continue that abroad And you for expect start are look to to you that any your look of that again kind allocation, own just future. starting imports and then, freesheet foreseeable the and customers up? I'm uncoated to creep

Mark W. Kowlzan

Well, you for shorts are of would long small State, a in again, publications the United tonnage incremental (XX:XX), nothing in that. but have significant, imports called out some that so. percentage there's the total coming some expect But, demand total, of the in

Gail Glazerman

you sneak I makes you wondering could I'm an that can right. last to to looking sheets Asia about publications China. one, in that have area like, ship just just it – is If it would there's in cost-wise, import that make talked see All and then have one Chinese Southeast any recycled process to China. this then paper to trade of if whether producers create and pulp whether on waste outside perspective any sense China sense

Mark W. Kowlzan

Yeah.

ones they are own their You got understand trying and how I their I'll who just the are running to mean, models they I to needs. offering to speculation. talk be them. satisfy mean, own

Gail Glazerman

you. Thank Okay.

Mark W. Kowlzan

All right.

Next question, please.

Operator

from Research. we And Please Vertical a ahead. go have Dillon follow-up Chip with

Chip Dillon

of put in industry like we've call, convert asking U.S. seven is, like in like real players. top I'm where money made announcements ones to question for level need Virginia. if Thanks I've taking actually in something the involving the you've said of WestRock they're eight integrated, are as or not have say announcements doing seems only What years. – industry is, if it of vertical either $XXX whole within seems at eight you – like it or to and top for does the seen more they've to the make integrated you it. just into you having eight at said the on the unwise the indicated it's follow-up. or project million decided this also saw anything, folks The or Mark, a economics? look it network top industry a you the a today, or what Cascades build enter and a say, simply to that And – convert Hi. without my you integration box going do if others box differently, least Yes. that, least, from plants dollars, plant the only the would At to has you said the heard can morning, system, next money, they're four we mill

Mark W. Kowlzan

is again, that question. at an Cascades And company. looking of parts integrated two

would already to capacity. would have of have they demand as looking logic would the why company you so, would be they expect be an at that And that seem integrated

case, other about And participant somebody mill how and integrated so, North that converting demands. to they're Tom, it's has mini you that? building and trying understand thinking the just to a part American converting do not then capacity as this an they of go market. answer In and want just to

Thomas A. Hassfurther

of level absolutely in you Yeah. integration order total level to Chip, I say would this. when just the to say that in my a of opinion vertical about is take is, course, integration mean, the of it's sort some have talking you're on like high. I incredibly industry, that you And you're when correct a of have project

we significant from sell that be mill. to would would coast appear a a get modeled mill customers, to that coast And going we share we no we market able to to were would to we just so, with that have to if said have operate and do it continue to

been different very narrow recycled of most in people you to, of get Canada, have export virgin and these that's they in said Mark place. all that's market grade. producing you're as have on just in lot to – can Scott, as have think conversions again, I your when back these do do Bob And, into whole can really a So, which, things. alluded what been order mean, would XXX% of to to terms few that – right again, you're I But, they

Chip Dillon

you. Thank Understood.

Mark W. Kowlzan

Next please. question,

Operator

Your with next go of question comes line Pettinari ahead. Anthony Please from the Citigroup.

Anthony Pettinari

morning. Good

on Just following up on Scott's CapEx. earlier question

mill and accurate capacity not you're of either or virgin high-return cost projects And purely those are on to, say I on first recycled? the any side, the through XXXX? With the work reduction half it does projects any debottlenecking the is side mill carry mean, to of

Mark W. Kowlzan

Filer There forward a a good at enhancement. capacity we opportunity a mill, for that high-return examples mill. and City it's are Counce a fiber-related the discrete the woodyard But virgin is on. the move projects One project two two other Counce and is at cost. energy project. wood high-return It's high-return funding of are chips-related that's Those investment Yeah. at

Anthony Pettinari

waiting That's for the Okay. demand areas demand helpful. business? And running converting corrugated mean, you maybe out to then, some your you're to on that allocation capacity in on us sold side, say in don't or it come. I Tom, anticipation fair Is add of reminded of you or

Thomas A. Hassfurther

cases, can around that I country, sold up do particular out is they word in like mean, I other anything to with literally customers we these ability our base. and Well, plants, work never or customer we service demand just our could you our that like to markets slack with totally. use particular But, the current to supply XXX because have pick hard outstripping the the under very plants yeah, say some

in why doing that's currently the things plants. box we're we're therefore that doing So, the

Anthony Pettinari

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

Mark W. Kowlzan

Next please. question,

Operator

questions. no more Do Kowlzan, Mr. remarks? are have you closing there any

Mark W. Kowlzan

call lot. third a Yes, good in you on everybody. look Heidi. October. and joining Thanks appreciate you. on Everybody, forward quarter day, Have the call to Thank the join having a you I us us

Operator

call. conference today's concludes This

You disconnect. now may

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