PKG - Earnings call transcript Q1 2020 | Packaging Corporation of America

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Operator

Thank you for joining Packaging Corporation of America’s First Quarter 2020 Earnings Results Conference Call.

Your host today will be Mark Kowlzan, Chairman and 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. are you when proceed ready. Please

Mark Kowlzan

I’m Good Thank Hassfurther, and with for earnings me Chief and and Executive Again, you our on business; the is President, everyone, in you, release of Packaging Tom And call. XXXX Vice Shelby. Packaging participating quarter Corporation thank first who Bob Chairman the today morning, Mundy, of PCA. Kowlzan, Officer. Mark call Financial conference CEO America’s runs

quarter prepared about unpredictable Before these want relative in remarks performance, we we first make comments I the and take the few PCA. our hopefully that the will few a most begin times may be doubt, to encounter. to ever crisis unprecedented Without a a pandemic

health has economic such There is no with reference occurred manual public with as ramifications, crisis for what COVID-XX a managing pandemic. the severe through

routines, and personal of sure change activity forever Our as lives many other work social result are preferences, of our to habits, a and aspects this.

an element operations essential PCA’s or various as under state local orders. critical qualify shelter-in-place and the

constant is other of and state operations, leadership our team the safety, continuity communication management discussing business topics. critical Our in

well-being is employees our power at our ensure the to first more foremost, our customers everything assist It to well. we We for provide than as PCA and XX,XXX must families. and help our their that, do responsibility of in suppliers and

pandemic. employees help goods our at response essential manufacturing, the the and converting considered assisting keep across and we our country and all our We for have various to safeguards country’s services procedures implemented office locations healthy to and the with provide safe as

the these not measures. that assist significant or them at experienced have our our due To place date, also have resulted the with to to have chain We economic supply measures any in operations virus. interruptions we in ramifications response from put

gives locations. asset mills, ship of to and the to multiple products facilities throughout PCA manufacture flexibility network United located operations converting distribution strategically States and Our

protect to they provide customers proactive to developments, our and continue monitor closely our We with employees, the take measures will services products and require.

the of suppliers. responsiveness well by has as PCA I all could customers and truly employees, been sacrifices observation. displayed effort, and It more not proud as an inspiring be our

now to some with who’ll over call details. then the questions. Tom and of and be quarter wrap take the first we’ll I’ll results, provide going turn begin things I’m overview more then to glad up, and I’ll to an Bob,

Yesterday, income reported of $X.XX million share. net first quarter $XXX or per we

First $X.XX the expenses quarter costs net included related and with per primarily expenses of associated income pandemic. special to items share, COVID-XX

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

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

by decrease items, earnings the lower quarter segment was prices first first XXXX XXXX tax Paper and special per primarily expenses, to in mix compared of volumes $X.XX expenses, Packaging depreciation expense, of higher outage of segment $X.XX of share and higher $X.XX, driven $X.XX, the Excluding our $X.XX, and our annual in in Paper $X.XX, segment $X.XX, higher $X.XX. lower other quarter rate,

and operating volumes lower higher non-operating $X.XX, The expense, in converting lower costs, Packaging costs, $X.XX, of segment and interest our freight expense, of costs $X.XX, and $X.XX, items pension lower lower were partially offset $X.XX. by $X.XX, logistics

the operating higher segment our our the costs Packaging of $X.XX and in segment and from segment above due mills. Paper and Packaging in prices excellent results first volumes energy were The input per and $X.XX of $X.XX usage our resulting and mix quarter guidance lower fiber to prices higher $X.XX, lower of primarily the $X.XX share, of of $X.XX, in

and costs outage expected costs costs, by than lower and were share. annual $X.XX, other by converting as were than lower expectations per logistics $X.XX Freight expenses, each

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

quarter Our at containerboard outage mills four established scheduled annual of record, performing maintenance the even work a volume new first mills. while

industry-leading box XX% who our shipments, necessary plants, approximately by Our the day record first allowed integration a for an well as quarter rate supplying total per as our box shipments new us containerboard production to containerboard maintain to achieved of all-time record.

meet We changing as scheduled demand these proactive work well the maintenance were outstanding of execution outages, sequencing greater-than-anticipated this our as during through the management, to performed able of outages.

at as to component - costs, external our enhanced capabilities the mix, freight optimize and needs and the customer of levels inventory Wallula Our a were system of Mill well. conversion internal the logistics key customer provided to by and machine us containerboard

We ended packaging their at lowest Boise’s since in the of containerboard acquisition the with levels quarter XXXX. inventories business

details who’ll and it now provide to I’ll over the on corrugating sales turn business. containerboard more Tom,

Thomas Hassfurther

Thank strong you, the Mark. during Corrugated products quarter. and containerboard demand were very

well year’s our plants achieved quarter record a per were as shipments a day, up X.X% corrugated quarter. products new which first shipments, indicated, were all-time X.X% last last up to total over box Mark in new compared year record As for which as first

above volume sales well. demand year’s as containerboard higher quarter, attributable domestic primarily increased was XX% of demand export last Outside slightly first with to

XXXX. and flat prices first share year’s versus mix and and first the $X.XX quarter Export of the XXXX last compared quarter $X.XX together to were containerboard below prices down corrugated products XXXX. share per containerboard per quarter share were $X.XX compared fourth to the Domestic per down quarter about of and fourth of

to Mark. I’ll it turn back now

Mark Kowlzan

Tom. you, Thank

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

mix XXXX. prices of quarter the last however, compared and paper quarter expected, to were were as fourth year flat below First they

was about we than due volume expected, as primarily had Jackson, however, maintenance assumed. scheduled also outage higher Paper our lower at X% to the it Alabama mill, Our was

the than planned, the ended our months according manage inventory the announced for Although downtime for April on quarter we of mill to X, we quarter. and May Jackson, ensure our demand with slightly we Alabama to at supply second our June lower the outlook

Throughout fixed an mills usage control outstanding chemical over did maintained the expenses. indirect managing quarter, the tight fiber and job, and and

I’ll now turn Bob. it to over

Robert Mundy

million. cash of common $XX $XX quarter Thanks, cash with had dividends and first of of stock capital first million operations free during $XXX cash the We primary uses million and expenditures quarter Mark. record $XXX of of million. included by provided The quarter flow cash record generation

marketable We on $XXX we $XXX million, hand the including million with ended quarter cash moved of to the recently cash securities. or

March debt XXXX, fourth XX in the $X.X X.X we at liquidity our no quarter billion of next the the ever is have for the highest company. And of Our maturities over we completed refinancing years. with for

Regarding June, or of announcement estimated our of for Jackson, financial our second taking $X.XX down months our approximately impact May in mill and Alabama per this quarter the of million $XX share. is paper decision

call. we for our full you provided to last certain that items guidance update want on on quarter’s year I

as altering we first discussed There quarter partly As versus changes call. scheduled at outages mills. outages we the to containerboard our by machines last what the maintenance containerboard very are demand the in our sequencing the impacted a earlier, alluded Packaging white during at our as of through Mark strong scheduled quarter’s managed no well business, mills, paper to

third is mentioned The year for actual impact $X.XX full quarter. now in the we the in second $X.XX and previously. and per in share the The was by impact share, share remains share, remainder at per $X.XX quarter, the the of year in estimate quarter first per the $X.XX quarter the $X.XX estimated as fourth per

$XX is lower be versus interest million, income. interest $XX expense year be And now full estimated million. to net million million now cash primarily our due to $XX to interest expected expected Also, our is $XX versus

Our estimate and at partially our downtime XX%. mill, than is slightly lower to approximately of at tax the rate we due cash Jackson effective earlier our tax announced our XX%, rate estimate remains now

plans, nor not we outlook pension we the our are $XXX of After previously, $XXX between a range contributions are was full changing of year thorough capital which for million to we depreciation. spending or million, review our provided changing spending

it turn Mark. to over now back I’ll

Mark Kowlzan

you, to the made I yesterday’s comments I release. Thank earnings reiterate Bob. in want

earlier, encounter. Not be ever we I the a day As a way these thought of that times may most that realize will before. mentioned hopefully unpredictable something never we we of and impacted passes unprecedented in or imagined had being new

served allocation in sound and capital has years governance many well like financial certainly towards helpful and for consistent is this. many, us Our times approach prudent

strength. this uncertain financial crisis COVID-XX on and brought entered period the of from of position a sheet time by balance PCA

decisions and remain Our on focus strength a that we team. as through actions has management and preserving make will the been

has our our been As position future of has liquidity never nor confidence the in company’s success Bob mentioned, higher PCA.

through we shareholders. ahead, of the employees, suppliers lies are customers, needs of and We our expectations while to manage well whatever ensuring take positioned and care

not provide update time. forward-looking an However, certain normally at provided on that does has this the same to for guidance the short-term specifics we confidence degree or predictability items. you translate Bob estimates

of However, due recovery normalization, to the for second our quantify and the the we’re able quarter. of economic and duration global not guidance the properly pandemic to the and timing uncertain scope

XXXX. right us announced we now Paper will properly the being these business, position half the our of already actions we what believe in and taken We’ve actions second for anticipate for

certain, well. the also in a However, it surge quarter nothing and to that now, strong taken. has demand be Packaging experienced especially and business action first our as quarter, is know further require second the may quite we begun We in

the during producers. moving and producer prices levels, position a virgin the our first quarter, Packaging from supply as containerboard Boise. compared of its significantly lowest Our began at weeks while both total fiber since primarily fiber recycled And our is acquisition other minimizes to of inventory higher business the impact in in

been sense in markets normal may trends will However, it point, some successful return to whose in negatively. end markets demand that with versus stronger be logical makes business growth we’ve certain securing demand more only markets outlook at although new end more a at impacted demand

rely additional impossible impact products upon be dictated to not will measures taken us governments operation and we to health-related the Also, we it also and our where Such local only of from of the and facilities, could or be availability suppliers. by is or actions but state must our adversely the events predict services various operate. what

for said, our recovery efforts, and it That country. The and needs fact of continue. that the to renewable a well-being company our is sustainable the being will essential products provides the are cost-effective, response products our the also

of no recovers this from While virus’ crisis. more the on belief severity economy, it in be or that the will is this impact knows world my even the need longevity as one global demand

as economy made results on happy remind With expressed inherent forward-looking and call statements. you must and projections direction uncertainties, but from some current to on the expectations identified our Form the constituted of we’d we’ve on forward-looking I involve SEC. the risks based questions, report were and the statements. that, estimates, risk company, annual in be entertain statements statements that factors the XX-K of The and in of including Actual on the materially file with the differ could those those any

for And go like to open Shelby, ahead questions, please. that, I’d with call and up the

Operator

course. Of question Bank from America. Your of comes of Instructions] [Operator George first Staphos

George Staphos

Hi, morning. everyone. Good

Mark Kowlzan

Good morning.

George Staphos

was a going Thanks your on on on side quarter. COVID the could to operating guidance the guess give what color positive congratulations you’re into bit on doing more little the if for all quarter. and relative you I particularly

you mentioned fiber further could, follow-ons. a a you I fuel, would I and You if be to had the great. that think comment bit extent of but couple mentioned there, possible, -

Mark Kowlzan

well annual schedule four After Yeah. up mills, And there work the is a taking all flawlessly at were George, running outages. the was are in down starting when done, we unknowns of the lot up obviously, mills remarkably and started quarter of their there. we of for mills first the since. January, looking started the ahead

So that positive for big a us. was

And raw down, with then the the And again, coming fiber we take of - in that conversion and able just of energy flows energy lower utilization good also, would materials in advantage and efficient were doing of so, through. energy you understand utilization pricing. to mills. costs been other We’ve

the just want add box utilization of again, well to side. that? outages And business, side Bob, But the the the executed same of converting assets. you very the thing something seeing in to annual plant in and we’re

Robert Mundy

But prices to George, Yeah. referring commented well pricing just last end. project Counce, completed was the throughout summer earlier and the about primarily project, last the significant summer Counce of Mark parts from virgin fiber that what OCC add. we as year. country. this on on and woodyard though -late that we of what I’ll saw with around project us being usage was was of that rising Part talked a at we as part Even we were and quarter, other benefit big

Mark Kowlzan

George, has DLK. we’re OCC have And Counce. I a all mean, fiber with not virgin for it’s that, and capability pine. at been ton and Counce and running we recycled intents recycling using not all to emphasize essentially day purposes, X,XXX Counce, we’re

George Staphos

the so quarter? this no second which volume be we for I you two fairness, additional then, to portion turn Understood. had degree quarter? that What of second appreciate think and Recognize comment One, color. with are pickup it of Thank for I there can on you the you I’ll the what are in seeing sustained are first totally that. guess, about into they your additional over. questions customers saying any this, guarantees will the

it you’re if demand need rebuild place? uncomfortable in level side, guys. they’ve Thanks, to lowest do this since the would you recognizing but Or it’s inventories been first it low, the acquisition? fact And then with inventory to Boise over. you and that the in with you they’re where turn that I’ll great comfortable they’ve allow at, on the inventory, of are they’re gotten

Mark Kowlzan

start the me then the with and question, part. I’ll take you off inventory let Tom, let first

they As run to and obviously, inventories are had is duress, our wish run you under high-class is. when what as there’s also say, it better doing. as have over that decades it extra as mills some I and challenge. shall cushion, are far we but found It’s hard I a problem I a go, we when the efficient

one that There that supported some were in the could have last months their impressive you are shifted during to of quite needs it’s But inventories. couple our one sister the another we’ve to XX times no, extremely from plant we But plants running lean of as the inventory plants. expect, nationwide box another. support box box

year, the mill logistics that’s over whole tremendous operating again, Wallula and last the And us nationwide the having the this support to capability full flexibility of given capability footprint.

system have low the mill So allows having at ever, very that more inventory run new even levels. to than we efficiently the us

question the Tom, that ahead and first part why answer of don’t on - the in we and So go marketplace? where you are

Thomas Hassfurther

Yes.

a impact really so to Okay. Mark, add, some as decisions I’d us that the is this that, more that’s also may thing amazing. becomes that up if just But of open really one inventory of duress, side, on helped inventory as it’s availability economy transportation, our the begins and little under wise. Mark said,

We’re rate. run to able at inventory this

of demand, Obviously, it into in and, food course, was the business. a the relative little as place, and first you Let on to retail e-commerce bit going your beverage we going little quarter the comment synopsis, side a quarter. of quarter we see question, a second customers quick busy, and me of first the what’s going just on. the incredibly high what of primarily first I’m on just the bit by driven to saw George, kind give took what and

to second expect what to which we now. the quarter that seeing more is the return rates, to normalized fact We growth in we’re alluded right

of a there of the you demand. been So has more pattern, normalization if will,

into going the see expect open food in sector begins the quarter, as of arena. return up, particular However, some of that some we demand service to to

we’re in much in as more is that range. I to forward, growth just X.X% So for pattern, which normalized comment would track comments, alluded to we X% our going that on that

George Staphos

Thank you much. right. very All

Mark Kowlzan

Thank you.

Next question please?

Operator

course. Of

is Wilde Bank of Mark question next Your Montreal. of from

Mark Wilde

Mark. morning, Good morning, Bob, Good Tom.

Mark Kowlzan

Good morning.

Robert Mundy

Mark. Hey,

Mark Wilde

think XX% rate some in mentioned you’ve more base? other - I you those, wondered are up for maybe - don’t where what the at know just Wallula. options stand had capacity adding existing I opportunities about to I’m you your I on opportunities at mills? now. this mill some curious containerboard Mark, maybe integration with

Mark Kowlzan

integration. consider the January XX% that ago essentially We Yeah. at Mark, at ago. that full full integration as we two we talked in to about years were this three back call, years

still out a the amount, offshore going to export. small We’re open little in selling a market, very bit

continue do in room if dictates. time stretch So do pull with to investment. some that capital we over Wallula some to ability of the have that to We goes have some time on as

changed. hasn’t that so And

few But I and bigger now much, much we’ll business five it that will ago, be, containerboard a have of sense in prepare of our in a as the years story the the terms out to for think was how look back broader next to three we years supply.

market years time, ago and about as open that Shorter we have period of few on tons we prepare opportunities. a this the we we for talked future. the what do some do past. But in did We buy can

changed. leave with But right And good it in that. I’ll we’re feel really, a at now. just we that. really comfortable Nothing’s position And very so we’re

Mark Wilde

Okay. follow-ons mill taken you’ve felt Tom, any Tom place for some in And have quarter just can on I elsewhere outages a couple impact comment wondered of in if the Hassfurther. just whether quick from containerboard? the you that of

wondered also converting PCA then you And for in just runway of I growth if talk about business. the sort could

little a You’ve focused. niche always more been

a becoming runway You’re the bigger look industry. of bigger and the part does forward like? What

Thomas Hassfurther

outage to trade around were or just mean, There through Mark, that it, let’s we care that it we that in that I the take were mill of partners. impacted, managed impact, other some trades our system were through either mill place had put way.

incur So we transportation some did additional expenses.

that it we quarter again, circumstances for the But short to given we and given that’s in very of first the had remarkable how commentary the did meet. we the demand is times around goes had to kind part, most the and back well inventory, the lead

it’s great it just just performance. team So a mean, I was overall, -

about new our a to talked we’ll at demand building we’ve opportunities the growth we’ve continue those we Marshfield, runway, regions of guided capital and whether by country, customer continue see. a you Richland our and those in see or growth we’ll - plant to provide a be and as for as what investments The in it’s

they build We I’ve along, secure I out the invest business not and capital. the go it hope a and come. said all and will say, we’re then

- So to and that. continue do we’ll

being I customers by our positive. it as And our dictated So runway growth else. see as again, very will be as anything much

Mark Wilde

rest Okay, very good. Good luck year. of in the

Thomas Hassfurther

Thank you.

Mark Kowlzan

Mark. Thanks,

please? question Next

Operator

Your next from Mark Connelly Stephens. of question comes

Mark Connelly

quarter Mark, is again. sort stunning, of with with? how How surge they’re And to Thanks. much just is sustainable? and pretty of dealing had now last the performance much that inventory was deal your you down

Mark Kowlzan

first year look on the you going if to another. the stronger end of we outages. degree through through Well, well with inventory again, first for plans than to the the every the quarter, that lower we shutdown But because of our obviously, be or strong quarter at the through pushing envelope we demand period to were anticipated go quarter, and We annual knew of then one time. had in we really fourth demand that execute that

Now are running all behind mills the shutdowns are The us. well.

into Obviously, extra tons system have need don’t term, of able we’re error, well where margin now. of I’ll we lot we continue capacity. our lot to continue run place a for don’t the to a we So And to have to the mills to. have use

outage in be fall, next later have has in September the and We have We’ll Filer planned the but at Counce that down in this will our City year. the machine Tomahawk one then it. outage No. no mill,

through where place system. remainder we So tons build the within extra the summer into months some them September period need to to of up run May the well have we and the

Mark Connelly

going per supposed consistent performance, just see feel of catch-up I QX? you’re you didn’t your are that ton price question. January or that negative with the you the look then impact your in you much I do cut. view? - at see? did I that the impact Or see to When And any negative like to one Or a Okay. revenue we from what expecting was was sell more Is of I

Robert Mundy

but Mark, were what Yes. about Bob. we expecting, I’d say that, what expecting. some we component it’s certainly we mix some were saw was of to it

Mark Connelly

Okay.

good. you. Very looking sound, next. its Thank So at

Mark Kowlzan

thank you. Okay,

question Next please?

Operator

Brian Sachs. from Goldman of Maguire is question next Your

Brian Maguire

Hey. Good morning, everyone.

and you So release, just - upside was of about in price. mix $X.XX on the think a the better question guidance. to I talked One sources

that. wondering comment you kind a could on Just of little if bit

I Tom by sort mix end the about was wondering it, and to but that just think just within alluding volume trends of market. then

better, I volume think if supermarkets markets in as quarter any both wonder other see being pricing there’s little the you for weakness of a and so general you and talked dragged that to on, bit mix just about started some there? but e-commerce kind end

Mark Kowlzan

Tom, go don’t and you ahead it. handle why

Thomas Hassfurther

Yeah.

going on the quarter, volume side the first said, as obviously, the the trends about other so the at get travelling consumers those and back with side of course, the panic really, the to of robust. mix to quickly the changing then of first, and, talk some not of trends, regularly But in mean, very, to Let’s of of now retail some from restaurants food and being on we’ll that really and beverage of I business, being sorts other to side the the and was or e-commerce and things volume it. buying home any I things, very

restaurants, hotels, all The of service would down hand, the other quarter. was stadiums, dramatically and be service, food stayed areas which the business, the other all - and has the that on conventions, throughout of those airlines, down other food side

open as I up think hope obviously, signs economy rebound, to some. second going quarter seeing the they’re begins of of the into and some

course, On of also. business, the side the of a it’s ag mixed bag

support ag industries applying that those cases, You very produce support that In industries retail we’re under well, did the had ag food service. some those side, fields. the

I’m like things – And pork processing obviously the auto those on going talking duress. course, towards been The that on meat see plants, of That’s X-week at in specifically. Lot aftermarket, of about and some of some in plants. we protein quarter, side, COVID gone has related. been had some have began that, sector on the things shutdowns, end we of under the to some the then, the has primarily. weakness

So to back. expect and to begin that we come

has I side side. display to been point and been has and the that of mean, terms price, very But the by the we purchase expect the that and business, throughout brown beverage the e-com year. good, driven on remainder of display and better relatively mix mix hand, remain In weak food on volume that the weak, side, of again, of the the somewhat other yes,

Brian Maguire

expecting Okay. it’s That Demand to the a maybe March business. pretty of reason, on sense. big with And can just paper rebounded to whatever all a for if offices makes schools don’t seems there little you April drop the in all color. in we’re you’re the trends then shut. Thanks and that I seeing comment but switch side like for know bit there.

in release outage enough And come you you the of think, that expecting just what I be think the into said do that that needed? continue you’re the Jackson XQ, care volumes, will if Does things in take for of but extend outage, duration to to weaker.

Mark Kowlzan

I is indexes falloff of think pretty - percentage has is in the have indicating. been everything of we’re the to close demand public. been reported what the seeing what what The

level If work the would down to at starting North America were the to in imagine the Businesses home in that level. you sending to March, university shut shelter from from kindergarten down school started all home, everybody place. systems throughout

So immediate there in big that off demand paper. fall for was

stocking. part is now we’ve size, different changed, their that sourcing seen home, definitely were What March manner the from buying in that But somewhat happening we some a April was some were through outlets People’s were into little channels there saw into early habits and paper different bit reprographic that of still went supplies. operating the that example, falloff. people cut businesses were an a

with April. saying to the you are here demand. publications refer of Now, what would the just And I end again, is

back the said, imagine be reorder as will reordering. on. will be could economy the back United being talk with into come and you the come Businesses reopening goes that sectors Now to about various up systems of time if schools that school up paper fall, continuing States, in run

So where we manage a in we think and position down. put the ourselves inventory. good We we that are, up to can manage

that flexibility. have We

in comfortable And what of the business side doing to with demand. very how so in managing the paper and we’re the I’m

Brian Maguire

The is the to Okay. though, correct? at plan restart moment, Jackson,

Mark Kowlzan

Correct.

Brian Maguire

it Okay. Thanks I’ll much. very over. turn

Mark Kowlzan

you. thank Okay,

Next question?

Operator

of Pettinari question Anthony Your is from next Citi.

Randy Toth

Toth is in This Randy sitting actually morning, Good for Anthony. guys.

Mark Kowlzan

Good morning.

Randy Toth

good – the Over morning.

now Over economic about you’ve with at the billion quarters, within allocation? tone all? on and of anticipation the would thinking any war your of potential M&A nearly changed a couple pipeline of uncertainty chest $X are the how be built helpful. sizable If and you cash past has capital And conversations in of color hand there, uncertainty here,

Mark Kowlzan

I odd some - think we I some And a into quarter remember the million asked when we I was and of in third $XXX individuals probably of were and went second, a that cash, then thought the January, question that high year had there ago, number. the I was is when cash $XXX in said, we when high. didn’t the was I year, I I’d know call when July remember last building level, that up. was let somewhere year And I them that were too I someone high. million thought think and no, asked me, it And too

cash, I’ll say, to uncertain very it you about referred I live and still uncertain as well, times, as never especially how Here approaching gets. as last use enough have is and we billion, $X we year that in are, it this

the So have. cash very we comfortable with I’m

we also we and driven allocation in business with go We through driven, in are feel manner. continuing the we have on efficiency that are growth generating so and capital as plans that comfortable cash this. with place very capital very healthy The

And with an be look could also, to us as highly this forward, future. it that we quality go they opportunities opportunity does at and incredible in accretive come along acquisition fortress the sheet, balance give

just we forward the in a manner. go can comfortable that makes and anything about sense very future do in So

Randy Toth

April containerboard maybe seeing could then what you’re briefly talk demand And about Understood. versus just both for Understood. and March? paper, you in

Mark Kowlzan

want to you talk Tom, about containerboard, I’ll paper? about talk

Thomas Hassfurther

to we’re returning to I more trend. still earlier, I Yeah. mean as normalized The of growth demand alluded is a

X.X% both boxes. to running right demand is now on So in on paper category, and X% that

- not about the business. linerboard the side talking that’s I’m medium paper So of about here,

much that’s positives think, normalized the a where economy. But talked about. on. right as There’s that to see more growth so running improve quarter we But about it’s open opportunities, I’d I some do say goes this I pattern, as - some we’re we now. as up

Mark Kowlzan

going just to quarter to And now. downturn paper, second of be predictions again, you in for referring what the It seems then are to with refer publications their with to right primarily anticipating they’re the what to up regard demand. size, I’m and holding a cut

Randy Toth

it hand over. I’ll understood. Okay,

Mark Kowlzan

Next question please?

Operator

is question next from Your Mark Seaport Weintraub of Global.

Mark Weintraub

you. Thank

just box First, X% to demand April I’m sure opposed for that that’s as that’s clarifying, what containerboard March? X.X% year-over-year, right, v you meant? to and

Thomas Hassfurther

Yes, yes.

Mark Weintraub

you The comments are a little end as business, up could additive some trading securing to markets, provide positions in environment well Maybe business, following of little in of more if your some a the And thoughts you other if that et you is bit on positioned and color, just how business the of new up? provide bit cetera. this kind overall? about generally, it mix more you maybe could

had think? of the one play more How players, are nationally question with account out, this play type you’ve more you than exposure other does it And driven. that in which Or larger you out being, do environment? of historically, seeing local some are

Thomas Hassfurther

answer Mark, real quick. this I’ll just is that Tom.

have. And We in us business served the the very, the all well currently I that after haven’t we served or of changed our we stripes during of think go very It incredibly at first terms quarter. well. business type mix of us

win going And I account. a – to you’re coming to into of very way you’re example things. to, times, some sizable business, year, an lose mean, the going give we some going do national I’ll this operate. business, at you some We various happen lost other to we you’re

to to how us opportunities accounts, we XXX think allowed over is do. description about, when that best customer terms way and I niche what I forward so growth of also picked which an risk of that know, business somewhat that positions and all that’s us of to is been less us operate in base. And those we unique, within just it. players. And course, up. that’s of That’s do a don’t the larger hard for continue think, that’s And we the example about our larger It accounts more spread the much the replaced XX going lot I makes a with

Mark Weintraub

Great.

the to trying it’s be in seeing get that would incredibly are they - or and it of, and than Are great. difficult there’s better? see, for I’m successful a forward. national? Or the performing can you they strategy, Or you - - are them? been it what at will difference? understand if long-term all more I I local completely for the any going larger accounts sense your in you be differentiation Are So holding just expect you, current environment, and a differently is

Thomas Hassfurther

I you’re big would on very big which all right, if we’ve large say, Mark, mixed Obviously, it’s of growth, side, the going have and participated a bag. you’re e-comm in. to that more

of they’ve well. there, smaller the players Some done

haven’t Some done of well. them as

that negatively about in first maybe to talking Some that into things of business the second reopening that, impacted through COVID the the chose perhaps will was quarter. and quarter like coming I’m be close

But So lot think there’s a take and basis, - again, there’s I there. give it’s of a opportunity I there. on some think - it’s macro

Mark Weintraub

now? to also, Got of you see some food order going which it. And indirectly recovery is obviously hit into maybe of magnitude, your or service, would but starting much business hard, is was how directly say

Thomas Hassfurther

back, much that impacted, But go break It’s really while are. don’t going there. get was a of that come actual And be don’t but it’s to how there’s in used a going to little segments amount we to to out what slowly. think negatively consider back obviously. I we just have I to Well, the normal short and any does sizable food we mean going to service. do very to return come into it expect take And we those run. sales our

Mark Weintraub

Okay. Thank you.

Mark Kowlzan

you. Thank

please? question Next

Operator

Fargo Your from next Hajde Wells Securities. Gabe comes question of

Gabe Hajde

I for in the gentlemen, coming on And was better crisis. before as about question. you than if taking prepared talking bit mentioned your a and curious, curious my it Mark, demand can in release was the that it I’m Thank well as you back, elaborate even maybe press morning. Good little remarks you comment.

Mark Kowlzan

our American-based again, Well, using you And that, with Canada. containerboard particular, amount in PCA, sales We I and United of paper, the we’re in produce our sell offshore, products again, there. but primarily the into would takes bit get that expect little corrugated a and time qualify We we for do, don’t States, have to company. into operations. that to United small it a States again, have here, an the

it’s come world. the we a best nevertheless, will that strong and to in be do believe country, we still as place the back But

get the take place the And so in feel take to that. got going in there’s of to still just it’s right is products. caveat time I advantage And we’ve that the world there, to platform and right the we’re some good it’s but in very the

Gabe Hajde

guys can But Okay. Intuition versus food think And go markets there more end observed then think it? give that but maybe, the about channel, through in for to serve out through me a to you is and time the intensity come I that goes retail guess retail guys about you that you service? that in we’ve tried on the to to the beverage a intensive would way us different corrugated something corrugated tell couple way through a it’s of food that have business. ways

Mark Kowlzan

Tom?

Thomas Hassfurther

if side. two that the let some there’s not what that the side, retail unique through crack I me I’m our can And really exactly they customers But from how beverage what process distinctive what we’ve per there - then markets on end service and learned and even this. are. Gabe, and different see There’s retail of there’s food is this I’ve side after. - at take okay? a are you’re food sure se, there’s

side, and on It’s then I on two businesses almost on tissue and retail really like different the products. different tissue. the And there’s there’s side. mean tissue institutional they’re tissue the completely

beverage same to the true side. is food related food where and from that food one very business, ag and the business And especially accounts the of So the retail other. you primarily the the can’t to in swing serve got you’ve even agricultural just side

accounts got - side. food lines to you’ve lines. then they serve service from They’re just completely the they And the ag have don’t that and swing one different product supply other. And

big is one had that side store we that here, keep retail to that’s So tremendous QX, stocked. the that seen obviously, just shelfs we’ve of distinctions on demand we - in

decrease economy will and But a and - come will of second in open little quarter, food the service the up, Now effect will get bit. not we that will overall, third down side in up. slight an probably retail the the be a to demand. side That a demand, and increase increase, quarter net begins as we the go on into begin to back pick

Gabe Hajde

Okay, thanks.

Mark Kowlzan

Thank you.

question Next please?

Operator

Josephson Your next Adam question KeyBanc. of is from

Adam Josephson

well. I hope everyone. Morning, and you families your are

Mark Kowlzan

you. Thank Morning.

Robert Mundy

you. to Same

Adam Josephson

trends Thanks. Tom, a back for moment. one demand the box just on to

you’re So something that in if for haven’t May Jackson it a just normally trend, seeing? is perhaps your it so. - to opted plan I’m in because, this guidance. two case, Or provide normal obviously, Jackson you back and that of for thinking seen expressed April yet? for kind in not I taken why Paper, do to the is taking you’re case? And June quarter the current mill down guess may May that happen backlog provide my you you’ve something guidance you’ve months. mill is, in question not Is And

trying well understand trend decision to moment? your just kind seems holding I’m to of up demand box So the at not fact, be guidance what if, provide in to drove the pretty

Mark Kowlzan

on with news messaging, Anybody turns Adam, the out out there’s your guidance day-to-day business, of coming the providing live zero is Paper of state and local guess Internet still TV hour-to-hour, the and anybody’s what’s coming uncertainty that to in or the of from levels any day. watches because the we or demands. checks day the what’s Washington, us upside that

not worth until even finally in normalizing of trying a some terms time put to the on economy. number that it’s us we get So behind

day-to-day. it gets. you about There’s as And still Bob, that’s want to... so And as tremendous do simple uncertainty

Robert Mundy

and well, Yes, services be as what no we going with have there. - just with control Adam, suppliers over and on may whatnot, and

can’t the that things we feel happen, uncertainty and we a as we where lot can So be it confident good puts chain, out there. But supply are of now. in

Adam Josephson

really you’re term. demand, sheet longer of on the to things better get demand. it just Boise, now to you’ll do viewing cow, the other term, since as supply it managed on how side and And business? you’ve Sure. Mark, match got No, you with Do and hopefully, managing to are understood. and respect longer you free But successfully sheet this free that view you it Obviously, cash a business from continue quite

bigger right? it the is may look something that you in that? actually price Or get and is opportunity to if

Mark Kowlzan

a business what invest an a business the It’s seven it declining We’ve amount for that years flow. inordinate no cash a said - we’ve has really capital. provided be us business very it never is. over good good had It is made out to that in time. of Well, regard. to turned We is

I’ll in over assets. for, called of to do that. such The that expect advantage all it manner. remaining time time in normalized take somewhat. opportunities decline had And say to out continue a flattened would We that decline these numerous about have at That’s point we

Adam Josephson

much Thanks so Understood. Mark

Mark Kowlzan

Okay.

Next question please?

Operator

queue. America] [Operator the Instructions] of returned has to George Staphos [Bank

George Staphos

quarter us quarter. the of or any may be luck important, over seen the terms terms follow-on. could four over everyone. priority, and more Thanks the consumer given investments what that two? Thanks, now that what in last you’ve investments Mark, again, generally demand, of it of to And Hi, higher COVID you for and longer are six converting, patterns changed last ordering there you’ve Tom, taking what sort outline directions, weeks, like, good seen the maybe in given in the in for guys.

Mark Kowlzan

with why that? you ahead Tom, don’t go

Thomas Hassfurther

matter call reiterate Well, over and over investments and to Number we’re are on, our that this is one again, is, I’m what customer-driven. going that no

much more that not a So demand need we talk and we care capacity, to take too certain we it’s when or we tend box the whether when about of a capacity, to plant gets mill. at a point at that

there’s no we changed of And a dramatically patterns question, as have - COVID. the result

have we adapt to understand, going I it’s call to get back think the time accordingly. I’d what be before normal that patterns the patterns to used we’re a going to to long and will be the

single it things demand in we does we plant. in that And have - - different the the plant a one which does One do. far and of other less we we can resources region therefore, a cause some our even to is or have way, have tremendous could in it country demand utilize of

but we And sometimes of of care additional doing take result as incur a cost our we customers. that,

about place. the realistic That’s through So George. to you we’re take continue adapt and change there, best needs just to that. we’re at to to can look I do very prepared summarize And a whatever the to for prepared lens market

George Staphos

think something I wouldn’t I’d you recognizing a deeply living offended the Yes, that Understood. understand follow-on to be that’s longer-term Do two or for quarter than Or good be secular is it don’t degree, et about Again, a has, shopping from be into. in more the I what to I biased maybe you one-off know, outlook luck ultimately, to corrugated because been improved prior world more growth getting will think as say was last assisted, quarter. here. was going you COVID? long-term too a capacity, home get for this and if the to I and but you mean, the we’ve the through all process cetera? really we’re somewhat don’t larger want and you’re that of

Thomas Hassfurther

spent OCC for on me has trends on equation, obviously. George, say the OCC, it’s lot corrugated, collection, it’s okay? to talking I for OCC it’s And speculate certainly it of been that of the collection. that, we Well, but a Now for haven’t impacted negative side are most hard positive about time of the but would other a

food difficult, retail lot that service it I sector going to a the from or to is sector. for getting some more be And Getting going a the dealing we’re trend be consumer and that’s with the time. it think quite from

Mark Kowlzan

questions. more Thank Shelby, no you. are And there I believe do

Operator

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

Mark Kowlzan

be and us second to you. today, Have Yes. our stay with and day. joining you look forward good talking quarter in July Thank Thank everybody safe you for for a well, call.

Operator

today’s and call. participation, Thank you concludes This now your may for disconnect.+ conference you

Packaging Corporation of America (PKG) 28 Apr 202020 Q1 Earnings call transcript