Packaging Corporation of America (PKG) 28 Jan 212020 Q4 Earnings call transcript

Company Profile

Participants

Mark Kowlzan	Chairman and Chief Executive Officer
Tom Hassfurther	Executive Vice President-Packaging
Bob Mundy	Chief Financial Officer
George Staphos	Bank of America Securities
Mark Wilde	Bank of Montreal
Mark Connelly	Stephens
Mark Weintraub	Seaport Global
Adam Josephson	KeyBanc
Gabe Hajde	Wells Fargo Securities
Neel Kumar	Morgan Stanley
Anthony Pettinari	Citi
Kyle White	Deutsche Bank
Philip Ng	Jefferies

Call transcript

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Operator

Thank you for joining Packaging Corporation of America’s Fourth Quarter and Full Year 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 question-and-answer session. I will now turn the conference over to Mr. Kowlzan, and please proceed when you are ready.

Mark Kowlzan

good and and joining you Holly today. us you, morning, thank everyone for Thank Chairman of is and America Kowlzan, our the Mark I’m CEO Bob and me Vice who Mundy, the Packaging Executive business; and Financial Packaging on call Hassfurther, today Officer. Tom Chief President, runs with of Corporation results. with call the our begin overview of fourth quarter I’ll an and full year details. over And Tom and more the provide call to turn then who’ll Bob I’ll things take and questions. be we’d to then glad wrap up net income share. XXXX $XXX Yesterday, million per we quarter reported $X.XX of or fourth

in EBITDA per Excluding $XXX net the of special income per were was items, both of compared billion quarter fourth or million quarter of $XXX fourth items XXXX the million for to Fourth XXXX. or share income million, XXXX sales share. XXXX. quarter quarter, fourth the XXXX $X.XX $XXX company XXXX’s items and net $XXX net facilities was $X.XX and quarter costs. $X.X million Total special $X special Fourth included and in in million restructuring primarily closure income, excluding net for

Net million billion items $X.XX also billion excluding In special earnings, special excluding XXXX’s $X.XX $XXX of XXXX. compared million year in or items XXXX $XXX XXXX and we reported per share. earnings, $X.X full per share addition, sales in of were to or $X

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

the shortages our our $X.XX. segment quarter demand driver lower Paper maintenance inventories, in rail fourth costs higher prices fourth of freight and trucks expenses outage of And of decrease partially our driven rate of rate was scheduled along drove for due High repeated with XXXX tax and in low quarter, to in and share, offset costs some benefits lower Packaging the increases $X.XX of lower to mix were the the costs quarter compared segment volumes other resulted Paper management had $X.XX to $X.XX, higher These per by in $X.XX, not higher special of $X.XX by of in per of was segment items, Excluding share earnings lower due in per excellent items and share $X.XX of XXXX. the were our per volumes which $X.XX segment $X.XX. XXXX Packaging we operating XXXX during $X.XX and in higher primarily of costs share. that

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

$X.X records. segment time sales XXXX with full XXXX mills all $X.X volumes of special year $X.X sales EBITDA, XX% very the Packaging corrugated EBITDA in For the items Packaging containerboard billion sales compared to or remained of our as strong the plants billion products full billion billion year was excluding $X.X Demand with in and XX% of margin. segment or both margin set

than mill period Although with a we week’s low a stronger postponing at and levels new some by planned of outage than from the the we able production, at discretionary due the DeRidder much utilizing demand. ended the during were a again and replenish inventory expected standpoint, large quarter Jackson mill additional supply to inventory to for lower containable

from to plant continued the quarter’s three fourth last our call, strong help lightweight, high-performance the for at did to year and producing end. and that box expectations machines virgin during the on excellent we The quarter of high-performance demand for the the we our to begin customers, prior machine grades number capabilities quality, months linerboard also needed inventory much Alabama on As December. quarter build November some mentioned the Jackson, meet producing

We’ll tons Although, future to in our and accurately as an of process assumptions cost phased us these we studies approach previously capital to cost. changes runway in In Board We at box been address necessary of analysis able we’ve further Tom, to the downstream to plant previous our supply meeting. this details integrated reviewed the I’ll now business. and capable then Corrugated quality. were to strategic more by on and required a produce the are to said will utilize containerboard and mill more in grow investment this turn our demand, estimate currently the Directors to other a fully order be options of for sales needs the with containerboard who’ll provide providing high to over you. refine discuss along at potential optimal able the February it order very with evaluating our containerboard be

Tom Hassfurther

Thanks Mark.

plants although the products up quarterly total Set time records fourth shipments year’s shipments exceeded shipments new for quarter there compared last established days quarter, box total As well to less this the third third last shipping quarter, fourth as were quarter by our another way, day three X.X% Mark our XX.X% up to quarter all compared year. X.X%. compared corrugated to as mentioned, per

more primarily per and share fourth to XXXX were needs business, quarter fourth containerboard X.X% both the last shipment as with than annual record due sales Outside ran third down up system prices well quarter For the were versus $X.XX below the mix supply total plants. lower was share and XXXX, of and well XXXX. to the XX,XXX of the containerboard as Domestic respectively, tons as mix and Pacific the we as compared the products day off were fourth Northwest point per display our as less as share our the purchase per quarter the corrugated period. box containerboard a full corrugated this containerboard XXXX, prices rich day per of set together quarter, of $X.XX produce year’s in of records to well, a of during one tails both shipping Export volume X.X% business as XXXX. of in and third year $X.XX above quarter and graphics

the expected forward initial Packaging specifics; began increases the our back the to quarter in to we on realize we while I’ll benefit first As XXXX. don’t of see turn comment majority price announced would now Mark. expect segment recently of late we quarter, pricing vast the it increases, the to during of

Mark Kowlzan

Tom. Thanks,

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

spread XXXX, of full or EBITDA of million full special conditions be segment $XXX an million excluding levels, sales sales of was items the compared control XX% million Market XXXX in XXXX. to EBITDA the as with to third the quarter fourth Paper was margin year sales or and to a below volume expected segment year the responses over with $XXX the due For XX% challenged nationwide below the the help Paper quarter to $XX XX% of of pandemic, $XXX million continued margin. stronger seasonally

fourth and our We’ll the was International produced restarted As scheduled mill the X% for X% quarter. assess previously, XXXX, our Falls Bob. paper and October white continue containerboard Jackson the during with turn mix the run in levels, system paper in both on XXXX. to of the our optimal to I’ll paper over mill, now paper fourth outlook approximately and at accordingly. outage and below prices paper it Average were mentioned quarter inventory we’ll third of quarter below demand and

Bob Mundy

Mark. Thanks,

securities. cash uses generated flow we quarter, from payments stock $XXX and $XX totaled year tax and The million. cash dividends and with fourth We ended just of state cash quarter over million on million; $XX $X.X the interest capital primary hand, expenditures for of the during million, million of $XX net free included cash $XXX For million $XXX operations including million. federal billion $XXX or of of income common payments, the of marketable

Our liquidity December at billion. under just was XX $X.X

from million. spending cash million. full billion. capital of $X.XX was had operations We XXXX, cash the For $XXX $XXX was Free flow year

XX%. final And at our rate Our final cash report effective tax XXXX recurring was rate tax for XX%. was

capital benefit earlier. Mark indicated to of a excludes of DD&A approximately capital post-retirement $XXX full as million net that million, since performance year due is XXXX. is items million certain being almost estimates expect upcoming potential expense for our the $X still $XXX in of spending expected which to benefit and related conversion, $XX to to which million. between to is of $XXX pension asset year, be primarily pension total Pension approximately non-operating expenditures we evaluated, Jackson Regarding million, any key the be

expect Based We $XX cash also on expect to of contributions we of dividend $XXX year post-retirement million. to for and the benefit our the plan pension million. recent payments XX% increase make dividend,

outages, about and XXXX. about is $X.XX the for amortized in share per our book production impact second, net quarter, XXXX $X.XX per in per interest million expense containerboard in XX.X%, share maintenance $X.XX quarter including the rate Currently, to estimate per million. in to our The to approximately $X.XX The $XX now cash is approximately for were loss The it these fourth. tax state first is should we cash interest payments estimated compared and in XXXX a to tax the annual year turn in had repair share effective expected volume, earnings XX%. full current federal mills combined $XX direct Our tons back in and planned quarter, be is XXXX of rate costs expected at Mark. XX,XXX in in of and $X.XX be to over outages impact I’ll share compared be of third the approximately annual less and resulted XXXX. the $X.XX XXXX by costs

Mark Kowlzan

Bob. Thank you,

demonstrated the Without during office throughout of tremendous throughout constant and their unique and and significant during our to this year; question and lost As their experienced was manufacturing deliver to our which least we work never running difficulties adversity, pandemic, have change our challenges of both the lives, they locations personal to company. resolve distraction. these employees in safely Not employees the accomplishments succeed. however, times overcome done resiliency

continue during to the as impact in and period by this hurricanes. our pandemic, on and paper as of our business business our through successfully well manage adapt market challenges multiple the customers to packaging of manufacturing the Our working the of also unprecedented needs brought in sales demand organizations effectively

stayed innovative and and has that as the over have we partnerships necessary built of all our a well or administrative our and conditions suppliers are very projects necessary am our the public organization working plants company. we solutions with required for strong technology years. perform our corporate as with as improvements the continue staff groups company capital for and the key mills. process box And track on to for manage ensure engineering our remote effectively, to Our found proud are I activities and of employees accomplishments many customers

Looking us first last Packaging maintain servicing strong, This paper and paper our we into move those customers. an fourth from ahead of in quarter, year’s the as with quarter. inventory to to amount should Mill will shipments record require first remain the to appropriate demand of levels our producing Jackson white addition the optimal continue containerboard at segment for exceeding

we and recently quarter, first As segment average Tom announced the to packaging the prices mentioned, our price expect of higher majority export realize we as well. expect to move increases during

prices as and energy costs also will the However, and Seasonally costs, costs labor wage weather Year. recycled increase New higher higher inflation benefits fringes we start continue, higher and increases and are and to expect timing-related wood with fiber. will expected freight to colder annual for be we

suppliers. a Finally, quarter assumptions be of administration availability and upcoming are continues the operation products for the services constantly and paper that much for in and we increases our is expected changing to our be inflation-related and rely significantly will and to from numerous the and scheduled on continue and packaging and expect the our true across that actions events to guidelines country, operating that in both place expectations not although costs supplies facilities, conditions of needs repair new expenses customers offset Shelter-in-place our evolve. lockdown only of impact should we segments. There with our our are benefit. This with could requirements federal and for of outage also the but lower

on guidance you actual must But our we’ve call some be As quarter. XX-K made up inherent a and please. constituted expectations appropriately involve in on that, With And any the annual remind factors of filed the the on company uncertainties, The Holly, statements and from reports Form to with current the entertain statements the like identified differ of The I’d to we’d result, are risks we questions. the expressed first forward-looking forward-looking based those call quantify not able of that that, and economy SEC. statements. to with including could I open estimates, as direction in to the the on happy projections and those were for report our the statements. materially risk questions,

Operator

Thank our first Staphos George is Securities. of you. line to of [Operator Instructions] question America the from And with going come Bank

George Staphos

Good terms kind qualitative detail quantitative you it’s of additional at effect morning. I produced Jackson doing cover first Mill Hope that of in I in be question. might little if or in Thanks taking additional able of the wondering was had for there? the fourth containerboard question regarding could us give I you you’re the sensitive, well. to bit my know, be costs? but quarter, and least additional the on I the you commentary any guess quarter thought a

Mark Kowlzan

exact it going as very to cost production. the called out, We high not give We’re costs.

imagine, that would drawing pulpy you As normally on the various that you help on the and machine capability. capital spend could example, mill an paper the conversion features you yield with as without to on improve would the a spending

in limited productivity and again, You’re fiber also yield.

highest be In we us inappropriate systems, the effort quarter fully DeRidder demand And was to box way, we Again, the The build consider the tons productivity. nevertheless, containerboard. what in and inventory. we to needed during our exceeded would we were of try but extremely our of of in the plant box costs mill a our same also that pleased system to at approach little and obviously believed much the are enabled its Wallula the quarter. conversion extremely phased needed we’re what supplying expectations for pleased, mill. understand they and So a the machine mill to looked the the accomplished to continue machine providing terms the

outstanding very discussion and February the approach But as quite the And be we’ll Bob, that a paper the different of that. machine Board well. machine our I to great So how a on in forward called with October, go to an you anything? just with opportunity on add in forward. out we’re Directors want going to Again, of machine also performed has want and itself has alternatives options we pleased. is lot mill

Bob Mundy

forth. out in probably what difference say, I’d the No. relative I segment. have from impact of people and night – But Jackson guess the George that cost just that last that from to fourth bringing that come that some noticing the quarter was side so write-ups packaging were drove the on the

George Staphos

makes That sense. Right.

to any some you year-on-year give quarter? you’re direction first Next question, freight could costs, of have I energy So again as fourth the sight the could want and should versus guidance. little items a costs other what we question on, on is look to extent in but directional talk the kind last you change, and the what on then you have would to seeing be year-on-year my quarter, can well, will perhaps us hit you of the to, volume we And the on, line that if bit on of be on compare on additional we outages, quarter maintenance when fourth at quarter. it and in say, impact that early

So Thank That number two, And you early great. shipments you, Tom, that’s can be talk question number bookings. about would one. and guys. your if question

Bob Mundy

on – costs, moving labor will will that into up. a look fiber the move OCC we those materials outages headwind as our of fringes actually that, from well lot any made, rates, increases as we the move maintenance are and and say we as be the as of wage up prices a new we as an well. we And on that the our from quarter. costs, But the first impact as the I’d favorable fourth first a point, year, just to nature, in your outages as and And George, to that Mark a also to similar to Certainly, supplies reset benefits costs, as to be more. well stay Yes, first. moving recycled services things as expect bit comments then as move high fourth freight outside

will course, a – the got we Tom expect that first mentioned, the benefits on realization small majority fourth, vast in be but the we’ve the as in piece of quarter. Of price to that the the come

Tom Hassfurther

And bookings of north this are George, is through I’ll on volumes. Tom, the incredibly our XX just that. comment billings XX% and It days, strong our remains over up slightly well are

very and robust. between things that costs up as just each plants obviously also and cover for our in like well, on add freight. with volumes and this in remains the So area business other drives increase business having dramatic cost shuffling I’ll especially that, plants side

George Staphos

Understood. it turn I’ll Thank you, over. guys.

Mark Kowlzan

you. Thank

question, Next please.

Operator

you. Thank

question is Mark next of Bank to Our with Montreal. Wilde going from the line of come

Mark Wilde

Morning, just Good questions. Bob. two I Mark, morning, Good morning, Tom. Mark. Good wondered, on Jackson,

First, can you out some do versus what did Jackson? you be of Jackson you what then other Wallula? at maybe between what there might give sense options us beyond DeRidder And some have sense and at you of to differences for might

Mark Kowlzan

Yes.

capabilities versus refining, with capital, cap that stock various on additional raise lightweight you in capabilities, mass the no fiber. you stock typically containable refining As they’re you throughput like on depending at approach, could and go any with defiberizing, a to willing years just capabilities back address to anything to conversion. you all years, paper said be mill would the can have on much that and mill What the that you That DeRidder is, a with at things to different. their mill, unique. you’re for mill pulp have let’s you weaknesses to capital pumping if and and look make said, itself being They we’ve spend how hot imagine, Jackson’s machine Wallula, looking running allow strengths like would convert

then at looking the drying, of So and winder and drainage and then handling. roll and former, terms dynamics formation head you’re pressing then in box modifications

it’s checklist items a be a are talking hundreds a But that those Jackson at. scope. your in do a of project are that the minimum the millions would nevertheless, of have, go to really convert So dollars have conversion. about But capability the our doing through and And to in mill type PCA the would so a it you there’s of it helped but look and you’re project. understanding would those now comprehensive we’ve the that’s refine of us do things that expected analysis, limitations, way a good good you the at

have alternatives, And don’t so looking I other we to into those. obviously, want we’re at. get

You mill can in imagine, assets they at everything looking further include opportunities. investments to from existing mills other and

So years changed that now. hasn’t for

discussion So again, the that a February. in we will discussion be board have with

Mark Wilde

Mark. Okay,

a could white them, newer Wallula wrong. DeRidder machine moving do to Just option or top, something like uncheck different be direction. if also, has, an not I think don’t And at produce that actually if I in top. to then seems there either little market that’s than The be you white make Jackson, would I’m a any

Mark Kowlzan

what we asset. and potential had at we than as vintage of what great differs, it modern it’s its can XXXX it’s period that extremely The Wallula a taking do that. what time, as it, It understand machine. machine, at high-speed. big is during in much that we had last DeRidder you machines of approximately really quality we wide, being the machine of better would imagine, capability. machine of machine a an built said, And do XXX-inch terms care has to The We was the one

work premier production. right our the opportunity. also us depending And and in become does go with choose of future provide to cost a the the of machines addressing forward of the so on long-term now we it scope to Again, one

DeRidder have Wallula as to at containerboard provide box and that and we capital as So we’ve spend then the needed. necessary system into our opportunity done plant

Mark Wilde

annual from you of Okay. that we And us, stuff now net exclude we are market just just your the own transfer your out if can buying then with you as purchase open how what’s All right on OCC we basis? Mark finally, going kind If Wallula, factor the right. OCC OCC plants, of OCC? up, – box much in of you stuff an on remind from

Mark Kowlzan

into can’t after probably you get have I to give back mean, fiber net-net our call, I right we’re the to the base total around our mills. of that XX% but now. We’ll

Mark Wilde

Okay. All off. it I’ll right. turn That’s helpful.

Tom Hassfurther

at I we with tonnage when you to exact we’ll number do that want throw get a you and number later. talk purchase

furnish somewhere – We’re furnish. total of around fiber XX%

Operator

Thank you.

next Our question line Mark of Connelly the with come from will Stephens.

Mark Connelly

of range logistics industry Thanks. I’m your especially and companies time more started full this in challenging, transportation those customer about comments the happen running base if in that yet Mark, we’re mid-November. that delivering seeing hearing from in really most on from you’re of are operating of problems, making curious a not to Midwest. outside

really so And more the XQ I whole thing. if wonder is impact

Mark Kowlzan

as COVID all plants, Well, was containerboard period holiday at various and December positivity time regions. during spiking the the of throughout box the to demand was the pandemic the November that mills And rate to customers. in the box records from

a that or You same is, rail positive, thing of demand in a with few example carrier can that unprecedented of those quarantining our or either carrier, challenged months, and plans. had mill only trucking this pandemic. upwards system we at you’re people then you have out the now with a is workforce XXX your that direct given imagine were along this that being whether time A during in and a carrier, box any when it’s

were chain and was dealing workforce capability. a with we’re how with it challenge the we carriers this, saw their and this So customers how our that on our logistics and through dealing own

as And was of in one plant plants meet moving with said, so factor rolling say, were cases, were from and trucks many in And and human the demand. order goods, we to the it plant the rail the to cooperating Tom product in terms another. factor unprecedented to like move and stock

very regard. a in that challenging time was it So

Mark Connelly

the plant you debottlenecking move pace resources meaningful amount your you’ve there in of one has curious Okay. past in part or capacity? shifting either that a e-commerce whether shifted to or you’re of might on And to your that time. said box whether other sort effort any going the base, whether shifted dozen of closer Mark, in and the way have priorities as I’m plant or some change approaching you’ve you’re box other at customer many it’s projects been as a

Mark Kowlzan

that. Tom, I’ll about you talk let go ahead and

Tom Hassfurther

to most time projects give No. providing a suppliers for schedule, at And times we’ve continue on got our a do level. engineering the us that executing part, so very need. fact and on group talked many, Mark. do We’ve We’ve our technology can customers we many great the we’re and our we that obviously, to about their high we’ll build our continue around business and demands, what

Mark Connelly

Thank you.

Mark Kowlzan

Next please. question,

Operator

Our the Global. with next Mark Weintraub line question will come Seaport of from

Mark Weintraub

color fully? Thank are recent more get hoping more on what how also you. economy category is we’d And get I drivers, then strengthened seeing and you happens to reopened when as them. it or by was love your by the thoughts eventually the the on demand to demand, to sustainable

Tom Hassfurther

I’ll Mark, Tom. this that. handle is

more. going purchasing by And or the years changed clearly very habits demand same. I is of Obviously, strength accelerated forward. with in growth board no the faster remain all across which all segments e-commerce also, than other of but at I segments, rate which those is basically think service. demand surprise mode, this strong Our and exception they’re a it to food that those are contend a across would signals expected great, is five is that lot sustainable the have probably growing

going cities, then away which into moving you with there’s seeing homes from positive homes, obviously lot in trends things addition, boxes. those also buy homes, associated a very that is into from plastics you’ve are that away the And corrugated when also got products, We’re paper-related this buying big go trend moving of forward. people

I’d strength, sustainable? So is say it absolutely, yes. demand the

Mark Weintraub

And much maybe seeing as… sense for Great. e-commerce you a define instance as and to how how give can in us growth you’re

Tom Hassfurther

course, to States significant service share Well, and are growing, other segment, But open. is and – segments higher food obviously been as it’s again, those expect our the of to already than typically numbers we to well come I beginning and segments. back said, it’s per as but all we it’s as began don’t

Mark Weintraub

Great. what was – more even across did everything. in specified was from already we’ve certain And months, up. couple the it of it stepped that seems broadly was new seen to like we just And step-up Or again, evenly areas? last a

Tom Hassfurther

No, we’re our their one have replenish is that the on any and inventory low. a their across hearing They strong side. are I’d to every customers, not say board very been keep inventories in again, that result from the able mind as also demand of of

Mark Weintraub

one, think that step-up still And this replenishing of you with one those not represent even seeing or we’re might at plus growth point? replenishing last they’re some inventories, do this do you XX% of demand, latest in think type demand this that part

Tom Hassfurther

this desperate Some we’re try stage. they’re still hearing may customers, at you from any to all represent replenishing, but our to replenish inventory. That’s I tell can

Mark Weintraub

Super. Thank you.

Mark Kowlzan

please. Next question,

Operator

Adam Josephson question line with from come KeyBanc. the of will next Our

Adam Josephson

to everyone. for to the this will second, had months, for your what year? paper imagine. year the of a are – a expectations large And Jackson back Obviously, conversion Thanks. Good machine what relatedly, for customers? ability size continue just question would would demand likely several huge and I your to service impact next do on last the One your a morning to cut pandemic there

thought what outlook affecting So that’s about year? I’m process into paper specifically just wondering is well? your how as demand cut go Jackson we and your And for as just demand this size

Mark Kowlzan

up saw new the better that that their the to norm. way from point been working how to some imagine, Demand the recovers will much semblance to at there opening new all number down have of we across will expect next that quarter. what This than first believe As do would of I really business. at quarter as year. do is have workplaces higher and is people you a come fully don’t the up know a what they pick economy throughout has normalcy to to normal the in education, I year. new finally could levels destruction the that be. a up some home, schools over starting fourth I learned some last still not demand saw now country and we the have demand you permanent

Jackson paper at the machine difficult only currently justify to advantage our quality And portion make opportunity have of assume grows box a would time, so the for orders the short-term, demand cost, certain a able to future affords it a good destruction level, a to in be its remains high again, having will years. of very is asset large and you our us take the that at time to fill demand that But very the same and that containerboard.

at looking as And an filled need are the to long-term outside market. to a even that to rather than the it outside always no we’re we tons there we have as strong purchased. out we very now the internally market, if to opportunity want that needs done, we’ve So And go containerboard. those go be for have

side we next Jackson will just of will believe play the over so couple in business that the that timing thinking be far I’m a ultimately sure. the is, containerboard not out. better years of And What the I’m asset ultimately. timing

Adam Josephson

permanent anything for I you you’re thinking much lower base. you think, there’s not hopefully, difficult and about know demand do cut we’ve do hold just paper a a reason established forecasts or we it’s that Or Yes. make this next rebound a destruction that. size – And than of again, in new there’s really go year lower full Sure. the business space the we’re days, but expect And year? been these to think some as think longer to you term,

Mark Kowlzan

efficiency businesses see play – to post just just learning and new lower my And continue us, be I pandemic, even have know. with. are will personal I believe demand function some don’t observations from what and individuals to around I own will schools that and that that there out. Again, we would to

So could we the we’re nothing it’s that giving numbers. position a assets. optionality optionality a on. base in we you to, that I for have we’re And to going on play out. start Again, just how me There’s utilize hard them

Adam Josephson

and and limited, you you and ocean just understand. export driving inflation And how just expectation being OCC near-term of availability presumably of I And sequentially? sure. continued on that think impact outlook, just the you’re your Sure, context an inflation? of fully expecting asking that’ll having sustainable are inflation OCC, exceptional much the sequentially How container magnitude your volumes, I’m wondering, And OCC in expecting? what’s on the be I’m

Bob Mundy

probably $X.XX into see it’s as or quarter, going. the sequential move on first where sorry, prices we based I’m we $X.XX

Adam Josephson

of And just given terms in of that, the just drivers of containers? lack of the availability

Bob Mundy

It’s demand. just Tom? absolute

Tom Hassfurther

add. I’ll Yes,

a see, dramatically shipped up you OCC and fiber. as things And add there, well shipped of being the China’s linerboard is talked pulp fiber time for the took an over need long a of digest around being exclusion over about world. as as me to and example. for while couple And China a moving directly there it to other Adam. We’ve as Let to

So, found the OCC OCC. they’re just so. other some know it form, world. has gaining markets their will global than then very fiber elsewhere be and to in outlook is around other continue The strong we

up move forward and So on as for based expect we said, we as and demand. just as moved – from that dramatically point going found up it’ll supply it strictly it’s well bottom, its

Adam Josephson

Got it. lot a Tom. Thanks

Mark Kowlzan

please. Next question

Operator

Gabe with from line And of our will Securities. Fargo question Wells Hajde next the come

Gabe Hajde

Bob, morning, Good Tom. Mark,

Mark Kowlzan

Good morning, Gabe.

Gabe Hajde

operations. two there that converting or And if more projects or us. then there’s think that out either recognize was I little pushed I there projects you CapEx that to preparation what at some kind curious for maybe down I out. relative to probably to was had in on I’m the was just guys containerboard I would Jackson a higher. And But kind figure you thinking of of any discrete DeRidder is least producing bit like there work grades. at were swinging that call between expecting project the continue ongoing the

call there’s for that’d be us, can if it helpful. you anything So

Mark Kowlzan

significance gotten that anything that and in We’ve we’ve now, of and unique terms we’re working the in address cost got on of plants. in projects great There’s the will that right nothing dozens addressing besides box dozens we’re efficiencies. mills projects

plant dozens dozens of we the converting opportunities that just – equipment the a working big, building And our mill that’s like one Again, plant that bulk on. have. system taking is cases, of box address category many capitals, numerous will equipment new installations, the – not and an some projects installations But it’s so it’s of Richland up modifications. entire group host no new and it’s box projects in in

which good type we’re – addressing. low the it’s is opportunities things These that So we’re return, news. Again, that – we’re quick at are good risk, return high doing.

Gabe Hajde

Mark. you, Thank

in clear, So conversion? Jackson there nothing to there’s potential a be for

Mark Kowlzan

this time. at Not

Gabe Hajde

or capacity trying maybe Tom, about threat like to And in. new a then speak into customers end we don’t guess. you terms I’m to Mark’s maybe world positioned, what where add the capabilities grades coming hey, Okay. you to converting I read outside I competitive you maybe are the and capabilities. particular in know difficult But where necessarily are it’s Are here there markets what terms just talking we’d it sometimes and of saying, best of competitive landscape. on some have to new understand guys because that plays that’s in given of

Tom Hassfurther

a kind me little here, Gabe. at the start let Well, beginning of bit

what why You might doing the you we’re any start Jackson we with might And I earlier, buy is alluded question ask, as fact in tons market. the again, the and Jackson? to open can’t of, at

volume We great have a demand.

We customers our have have are industry. supply, need, if that we as anything, an concerned enough even great

the to great gave to going incredibly the high were we quality. the convert alluded it, was us going, us growth us to satisfy ability great Mark and trend. customers asset in gave a it to able kept at this it’s because integral as consequently, our It rate to continue and but business. produce ability yes, ability grow, our able to to its cost, that’s we the be fortunate And to of normal this not have of at white destruction demand to So were

got good Now there. some we’ve when we other some white trade shape in where it other comes agreements, arrangements to things, have we’re and

And are additional really time the those see, a some intend going that But – and on tons. we short somebody’s of the our projects about one-offs, there we out anyway, and might So have I of would continually that it’s any you be again, think same least in are we’re But for out only not would to what’s that own others what know going marketplace concerned because base. difficult where very at can to – downstream no inability I they point to ourselves. do. tons, to it’s observe only for bought the the Again, don’t cut-up what that. customer our speak mill put that note get we period to buy a fully integrated these assume important think supply in that important with to mentioned I I and way.

We’re ourselves. going supply to

the open We’re not in buyers market.

we did, not now take guess have off. care ever these that to of very And few ourselves, I – I’m name see one-offs it’s and come you point. one the So that’s of can shutdown. I

So I’m really that. concerned about not

We our have we have out ourselves take and supply. care to of own figure to

Gabe Hajde

appreciated. Very much

Bob Mundy

gives that you that answer Hopefully you digest. can an

Gabe Hajde

It does. Thanks.

Mark Kowlzan

you. Thank right. All

Next question, please.

Operator

come Kumar, question Stanley. next Our Morgan will line from the Neel of

Neel Kumar

morning. Good Hi.

freight, In elevated. headwind you it you that of you stain pretty terms $X.XX for of mentioned And your year-over-year. expectation made

then can your remind you sense double between in seeing trucking the how magnitude the freight is in it if rail. level? Just, you rates us of And just give low versus digit year-over-year? split you’re a Is us inflation expenses freight percent

Mark Kowlzan

– XXXX I look digit, rail, versus I are into sort percent, the products not the box far the least higher at think not year-over-year high. say trucks certainly it’s out truck, plants cost, their what rail. single XXXX is that’s use It’s breakdown double we of and digits to XX% that right we deliver – see mills right now. Yes, truck, of but increase But in roughly using so And our the XX% costs, rail now, the it’s wouldn’t as Neel, I’d a our split cost. but versus don’t the typically XX% obviously, as as as

Tom Hassfurther

interested rail going a going when taken in, and which to out about time one that administration’s new shortage oil this shipping all are a the – piping went back as boxcars rail the up, of the also pipeline Tom. when Hey, Neel, in we forward of cars less had that oil. we rail at it’s add result I’d little to lead costs could industry being bit concerned the

Mark Kowlzan

yes. congestion, Land

Neel Kumar

variables there conversion questions a bolt-ons balance of optionality. offers be sheet would doing And that? That’s too something you in helpful. just the in containerboard, of conversions, mills would consider you then And open your to just couple for had largely Or opportunities unknown to Great. do you the I just paper scope opportunities lot track you or of box on pursuing you consider a of your record that is very given a Are opportunity? cut-off? would And in M&A plants, you size specific given paper small interested larger? see acquire many

Mark Kowlzan

dollars and all as As as always the a if to would being asset were opportunities, you from investment. talking far buy it acquisition, are well at the done, far as bolt-on opposed what’s just to look as any that always considered in And opportunities small you ultimate M&A looked to we’ve consider other differential the about activity, convert larger always total have as x as we asset, to Again, at somebody. specifics depends opportunities. current as spending able mill on

So always that’s consideration. a

the the evaluate are So and of on above consider. always table say that all I would to

Neel Kumar

right. you. Thank All

Mark Kowlzan

you. Thank

question. Next

Operator

with of Pettinari question next our come will from line Anthony And Citi. the

Anthony Pettinari

paper the in you and Good morning. Falls. decline obviously conversion outage had at the the at white shipments, I with Jackson In sequential XX%

and referenced maybe weaker market you lower paper how you those up as just I’m quarter? wondering Or think going unexpected into sort well. versus I did of was market volumes, weakness? versus how maybe much of hold sort expected planned expected volumes demand the white what of

Mark Kowlzan

it’s better to getting in now, in we’re our business Rounding where saw massive we as quarter we was through off, demand what And XX% manner. down further, even that’s XX% first look year year. It’s the terms the declining it of at a say, but going December not March-April significant destruction not And in when pandemic started that the saw XX% of probably any the ago. period, the decline, the we from in we’re period. on average when

Bob Mundy

a $X.XX packaging quarter. I’ll like actually results negative hit results it one the the big – they quarter, the that believe. there’s slight keep Paper costs were we as add far quarter. had was the But that we paper in about that as year-over-year outage where in in the Anthony, the positive, was to Yes. thought relative would to in impact not One segment, impacted paper I fourth for just our our on paper, be. volumes But was of things mind a the thing

Anthony Pettinari

of to Bob, Okay. Year New to point put what you of last relative see inflation and That’s it basis wage that sort a up maybe either on the step on possible And a or is of quantify in fringes benefits the helpful. then level increases or saw for very finer percentage timing year? you

Mark Kowlzan

to quarter, coming it’s to what think as I we’re Tom, that the that’s in costs And X% is actually hard. X% just the volume pay really to, converting out get costs lot running especially plants, overtime We fourth labor we alluded in box a Well, to – our of of had range so now run and off of seeing. were and really, to right our forth.

been like they’d and have the the year wages pretty in been And what quarter were the meet most so, demand. in – you and high, fourth of much our the the they’ve to high that

those labor I’m that has to high off had a very cost you So begin percentages are year with. giving

Anthony Pettinari

one could. one, I just final if then And helpful. very That’s Okay.

export your in small. the is participation very I think market

export Now wondering off. could if to Gulf Just valve? potentially assuming is exports Jackson? on road larger that kind pursue is of not something you that Coast the this and needed to with of understanding as conversion Is far down safety a Or a mill possible? you close potentially enough that’s Jackson, you the out that

Mark Kowlzan

conversion we way. own our Let would a were be export A me be Jackson, conversion. that supply invest to Jackson to how And this fully I at I would considering an answer savings If is opportunity in calculus. the not to convert look it needs. would at

shore, it capacity build We off to our capacity, have move own then system. move through and desire to own have our plant box we’ll no we’ll

Anthony Pettinari

makes sense. Understood. turn That over. I’ll it

Mark Kowlzan

Okay.

question, Next please.

Operator

White from the will Kyle come with Bank. Deutsche line question of Our next

Kyle White

quarter? outages morning. of back for which the in terms Hey, curious Most anticipate playing this kind you And you allows should read we QX into year. Do to for this good out well. just the everyone’s demand anticipate how to of of outage the to Hope quarter a levels, of weighted you if questions. Thanks all doing getting year. of have at are fourth normalized kind higher this those the taking

Mark Kowlzan

the we I’ll but that finish the outage to if annual that originally originally moved the let have be we the postponed this of of we’ve and work of then XXXX. off. work the this that that be mill planned considered plus now we – spring We of factors year. fall going at year this it fourth big in because to Bob you demand, But had was up, the because Yes. executed into quarter one DeRidder pushed the in

done that machine. number will boiler the will done the be that normal recovery be at the be on work have work So annual DeRidder has along we the the opportunity one to that with discretionary work

want one you the quarter some to so why number factor color just fourth higher. to add is Bob, why And – that’s that’s that? in

Bob Mundy

No, just perfect.

Mark Kowlzan

Okay.

Kyle White

my need and it. up visibility an confidence terms of have the right But kind curious demand visibility underlying of now this for are backlogs But customers there their restore sustainable. at from some seeing to standpoint, you this what kind follow-up on backdrop inventories we’re do of is demand kind point. year? and your to up Obviously confidence that what was have be this of on wasn’t I’m Got just on and in that That of I DeRidder, that following curious. going you demand

Tom Hassfurther

any segments, the mill I’m going hearing the various than but I very to throughout it will than predict. sure is not and be And fourth our incredibly But from entire in Kyle, of being get first than our can’t, the they XXXX indicators demand back predict for all year. strong be we’re out say this just that is outage we’re year. based all the very it’s less quarter to and to half were to going starting would strong waiting hard be higher on I year everything suppose it’s demand the what hard customers levels quarter. the It’s we in and the

Kyle White

luck. All Thank you. Good right. Perfect.

Tom Hassfurther

Thank you.

Mark Kowlzan

questions? other any Holly, Kyle. Thanks,

Operator

We from line do. Philip with of [Operator Instructions] And our next Ng question the is going Jefferies. to come

Philip Ng

good Hey, everyone. morning,

bit. little Sorry. I off a cut got

very, this do I’m in to first how point? all in advance. backlogs So if your extended And very sequentially repeating just strong, at inventory your to being you of I expect obviously improve Demand quarter. question, apologize able service curious better the and customers this are

Tom Hassfurther

to orders backlogs. going very those moment. we short at don’t not get to – meet into Most the a of on we’re and able our We’re time lead demands

to to as very We’re We’ve respond been confident. before, and investments throughout consistent it said very demand. to remain allowed some I we that I very years. significant feel And doing going accordingly made and strong fortunate it’s because the us this

to customers. meet going requirements We’re able the our to of all be

Philip Ng

is vaccination and you That’s you helpful on opportunity process do have guys an color. And as ramps up, the any that exposure for front? that

Mark Kowlzan

box it Is or… In what supply terms?

Philip Ng

that is vaccines there assume of country, being be… might the would I through lot transported there if

Tom Hassfurther

Yes.

So we’re these in do packaging side and that It’s that vaccines. to distributing those this be very out of part vaccines so. proud participating and – get important the get we proud to a of

Philip Ng

pretty part you just the envision being growth do of And ongoing story? that a contributor? Or meaningful

Tom Hassfurther

But able to it’s of in end part just contribute and to pandemic. eventually. then a going start areas of an to the ongoing, Not the we where take the being hopefully part and pride end it’s it’s putting one those of great to an ongoing, this have

Philip Ng

Got it. That’s helpful.

question. last one Just

would Any merging in could Is really paper a competitor. there in change customer color the of provision largest control supply Your be be agreement? your helpful. with

Mark Kowlzan

through runs the But you. a on doubt in back know get know there contract year, regard. I end that I would and so we’re next can of with year. change I clause. the and good We next control that check is details don’t of through the

Philip Ng

And helpful. and share That’s color. to one, if Okay. just able one you’re last any

that, and more good the Jackson’s process, be that Thanks cost profile up to mentioned help the quarter. could probably able to a and if produce phased lot continue luck you ramp on board would your you approach. that a Mark year? do And with You throughout of

Mark Kowlzan

home we all Again, right have of now, with in what system. we’re our these for own a producing, tons

the to also Now, a XX asset, only major off say the not the bigger additional the but months incremental address cost would investment the next opportunity be from reduction at productivity with asset. capital over Jackson

dictated paper. could demand, we to not make in demand run needed containerboard for regard, will So if and paper we continue to being, was was time that that needed the

that So for the making capability machine outweighs just time. on at containerboard far overwhelming of paper. we It’s the the eliminated the haven’t opportunities paper demand for this

Philip Ng

Super it. helpful, you. Got Thank guys.

Mark Kowlzan