Packaging Corporation of America (PKG) 26 Jan 232022 Q4 Earnings call transcript

Company Profile

Participants

Mark Kowlzan	Chairman & CEO
Thomas Hassfurther	EVP, Corrugated Products
Robert Mundy	EVP & CFO
George Staphos	Bank of America Merrill Lynch
Michael Roxland	Truist Securities
Mark Weintraub	Seaport Research Partners
Cleveland Rueckert	UBS
Kyle White	Deutsche Bank
Gabrial Hajde	Wells Fargo Securities
Adam Josephson	KeyBanc Capital Markets
Philip Ng	Jefferies
Anthony Pettinari	Citigroup

Call transcript

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Operator

Good day, everyone. Thank you for joining Packaging Corporation of America's Fourth Quarter and Full Year 2022 Earnings Results Conference Call.

Your host will be Mark Kowlzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question-and-answer session. Please also note today's conference call is being recorded.

like the I'd Mr. over time, this to call turn to At Kowlzan. proceed ready. you Please are when

Mark Kowlzan

our Jamie. and morning, Quarter Hassfurther, is you, I'm And Packaging runs XXXX Thank with Good who Release Executive Mark Corporation Bob participating all Earnings packaging Chief the CEO our of Vice in Kowlzan, for me Chairman Financial President, America's of Call. on Officer. Tom Fourth Conference and Mundy, and Year and Full business; Again, thank PCA. you today call

call begin be fourth And the details. Bob, I'll to glad to then overview quarter and and with further we'd turning the an I'm then take questions. of I'll full call be and Tom provide our over wrap to year things results, who'll and going up,

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

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

Fourth -- fourth XXXX. sales XXXX million and for in million net quarter special was net billion the $XXX in $X.XX in EBITDA company $XXX items, Total in income quarter, were XXXX excluding billion and $X.XX fourth XXXX. quarter

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

$X.X in was EBITDA total billion to special Excluding company in XXXX $X.X compared items, billion XXXX.

containerboard Details all XXXX XXXX for in Jackson, that mill primarily certain and items the the for were and activities. the the Alabama full press items of included year to paper XXXX costs earnings Fourth release. income net accompanied special year special included quarter schedules the for at conversion-related

volumes XXXX $X.XX to $X.XX. primarily and Paper lower earnings Excluding decrease segment special fourth fourth XXXX of driven the share the by our compared was Packaging in quarter $X.XX quarter in per items, segment

energy, of chemicals, supplies, costs services inflation indirect $X.XX, materials labor and other operating primarily on and benefits, repair from costs. higher had also We and fixed and

were higher $X.XX segment, expense, logistics from with $X.XX. $X.XX $X.XX mix expenses of $X.XX higher outage Packaging $X.XX to Packaging rather of and resulting tax $X.XX $X.XX; logistics expenses, partially $X.XX, and expenses tax along $X.XX. and resulting in and and depreciation $X.XX. lower due Packaging segment repurchases prices primarily interest expense, per were lower count mix rate, -- higher of and share items the costs, a lower by freight Freight offset These Results unfavorable the share and share and Paper a segment prices a rate. repurchases higher scheduled higher lower fourth lower quarter share, of maintenance above lower count were the A in guidance and converting share segment from

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

billion $X.X Packaging or billion $X.X of full to excluding XX.X% XX.X% compared sales sales with the billion a billion EBITDA $X.X margin margin. XXXX was the $X.X year special year XXXX, a EBITDA, items, or of For with segment of full

for was demand lower the our us these Packaging in Demand levels. the segment expectations containerboard run to below system quarter, to causing

a after mill the down earlier conversion this being and our outage Jackson, restarted as maintenance result successfully completed was at offset XXX,XXX with downtime to quarter for tons. Alabama production their scheduled quarter, cost work and did these we optimization rates at the and mill Total employees approximately during Our lower fourth a job month efforts the was of negative economic-related The volume impact. lower the management fourth process demand. very good the

producing is The virgin very number three high-quality and a design capacity linerboard. machine achieved its first phase

XXXX. However, demand spring to the conversion year we based move work second in of to decided phase next from this on current containerboard levels, the

Tom, I'll now to turn over containerboard sales provide the and who it will further on corrugated business. details

Thomas Hassfurther

and $X.XX the quarter products of fourth Domestic per compared and quarter mix $X.XX of prices mix compared corrugated the XXXX. to Mark. per share the flat per the of together $X.XX fourth of Export down third above were containerboard and share you, XXXX to down compared containerboard were prices to XXXX. and quarter Thank quarter third XXXX and share

last XX.X% and quarter below per was total last containerboard X.X% tons to below X down XXXX. with fourth XXX,XXX Corrugated of workday fourth volume work day product tons year's quarter. quarter shipments XX,XXX compared of less in were third year's sales down and Outside the

spending in lower in at several have capabilities. both Packaging product boxes what been inventory items. the segment Inflationary we demand anticipated correction driven also more added customers' our by prolonged The consumers The pressures originally the and discretionary than our on by the has consumers reducing was problem the start. to

the In the box as COVID period, to economic global conditions, and housing of be exited experience U.S. rates a entertainment deterioration very continues towards tangible of in demand impacted quickly a more Containerboard cooler extreme addition, goods. in changed negatively and behavior we that market. preference rising and consumer travel, interest and resulting versus from

the these quarter many per to fourth as similar of first As shipments to the conditions into move fairly of continue. quarter, day estimate we rate from be expect we the we

first the shipping anticipate quarter will days However, on of XXXX XXXX. per of shipments to are spite higher continue by first a numerous in demand, the currently quarter to issues compared additional In be the shipments X we levels X% shipments first pre-COVID at quarter, so fourth basis. actual approximately to quarter perform impacting exceed and day when there our total above

turn to Mark. it back I'll Now

Mark Kowlzan

Tom. Thanks,

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

sales margin full the EBITDA to $XXX of year XX% a or sales EBITDA, segment Paper with year full special of million million $XXX excluding XXXX million XXXX, items, with of margin. compared XX.X% or was the $XXX million $XX For

to X% paper optimized from primarily quarter due of year's Sales since mill. quarter as sales below fourth higher away we XX% and to Mill's about time third which customer moved last Prices continue implement from last the well volume Jackson mix and last paper increases. product #X in fourth at having as machine, we year's results price the and were quarter, was transitioned mix announced Jackson that year's we XXXX as from XX% volume included from previously our -- we as up our

quarter over also done included the and the job product XXXX, that and inventory, this I'm mill. Jackson maintain last momentum can employees from for was that it quarters third confident remaining cost the of optimize several XXXX mix and seasonally in volume structure inventory The XXXX. expected, to all results management As tremendous down turn outstanding Paper I'll Bob. and XX% the approximately we order to a have the now through versus deliver our of business to of stronger the team over

Robert Mundy

provided payments interest totaled during of and $XXX payments Cash tax by million during of the of million. flow net million of cash capital $XXX million cash $XX with included fourth expenditures payments $XXX Mark. Thanks, dividend free quarter and the million, payments Other of $XXX $XX quarter cash operations million.

$XXX.XX our the average of spent just share. of to common over X stock per brings repurchase share. quarters, an of quarter million X.X We shares at $XXX.XX an price over also almost repurchases, price during total That X per million shares the million $XXX at last to our average

of payments net dividend returned during cash stock and made XXXX. represent outstanding Repurchases shareholders that of income our was of XX% past or year, operations to XX% in the from

For million. with cash $X.X Capital spending the of $XXX cash operations from full billion. year XXXX, $XXX flow was million, free was

effective XXXX cash rate was our final was recurring XX%. tax final in Our and tax rate XX.X%, reported

capital year Regarding full certain is $XXX million, year, expenditures DD&A of upcoming we the items to to approximately and for expected approximately key $XXX million. total be estimates be expect

plan of We $XX estimate and payments dividend pension and million $XXX benefit contributions post-retirement million. of cash

expense $XX interest million. cash XXXX should year in to net payments $XX approximately is be full expected interest about million Our and be

XXXX amortized our $X.XX costs, expected planned share per in maintenance lost $X.XX to tax estimate share including per total, The XX%. in be effective is at outages rate in repair XXXX. for XXXX, versus volume, it's book and costs our mills annual Currently, direct

by $X.XX in The second, quarter in $X.XX is now $X.XX the impact turn to in XXXX share current estimated quarter, share third the $X.XX per in it over and Mark. per quarter. in first I'll the back fourth the

Mark Kowlzan

between Thank along strong us and in PCA of our you, with results XXXX. delivered and relationships for our customers outstanding suppliers hard Bob. The work employees,

mills stock conversion repurchases. to achieved Wallula Jackson first process returned turbine This including machine completed our XX-megawatt shareholders our at were a containerboard from the Mills projects records successfully revenue, earnings Bob Jackson significant flexibility or phase improvement net our completed company just cost key mill. included reduction and for fiber many at share. the and was and projects as annual payments per income from steam initiatives. and dividend #X other and net of effort at the operations, to cash mentioned, and of XX% And income substantially We New

better the the growth future project We complete shareholders. that corrugated us enhancement made significant opportunities had for year also business customers products profitable completed allow capital personnel entire engineering, our PCA investments for to will numerous project high all plants and improvement conception, and optimize and mix efficiency return and start-up. and through projects high way to implementation our and from in we've The packaging detailed preliminary the our deliver during of involvement

tactical industry-leading while projects under initiatives just numerous These invested on achieved our improving and to capital benefits XX%. and strategic return

the well calls the of us years these strategic a several be we by customers down on times discussed cost-effective meet very of investments manner. we've in would many needs position very significant to capital that As winding XXXX, many our before, of future end

that also while results future. paper expect financial the of We to the us optimization into delivering we well finalized our excellent business sustain

we industry continue economies and with uncertainties, flexibility or deal the opportunities some react every which issues a to maintain numerous the individual strong to continue balance in most As to sheet is PCA, manner. world around provides situations negatively quickly being At future. impacted in to financial will the virtually

We approach our continue capital returns will allocation shareholders. towards also to profitability balanced and of to a commitment our order maximize our in

a expect similar we per into on mentioned, Looking although levels, total quarter and box our quarter recent prices shipping fourth of products the demand expect move fourth domestic we from to move as with first Packaging X will as segment, to we're export day ahead, days. Tom having a be Prices prices in the published basis we the well. as lower volume as corrugated and lower additional decreases assuming the in result higher plants containerboard

quarter. move increase operations indirect fourth certain containerboard were should and higher Labor costs idled will prices flat. volume mill costs fairly some slightly during Paper temporarily with sales as the

and expenses labor as higher anticipate soda. benefits costs we for new as timing-related year addition, at a the and occurred and beginning caustic particularly prices many In chemicals, of other that well starch higher

However, scheduled recycled we lower expect fiber and expenses. outage wood maintenance prices and prices, lower energy lower

Lastly, items, repurchases. Considering benefit pension expect higher quarter interest will tax from of recent see our we share expect per we but higher share. expenses and $X.XX nonoperating a and rate, earnings some these we first

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

open please. And questions, with the that, call like to Jamie, I'd for

Operator

Instructions]. [Operator

today question from Bank America first Securities. Staphos comes Our George of from

George Staphos

a are you normal, us challenging that the about the a rough estimation. details. our calculations Thanks for you can of had them, to to talk have in least say it performance very think very, to from Mark, was would average? sharply, first you good took my comment, you down Congratulations own at significant quarter, amount fairly needs, question, on to that? our seem like your below relative qualitatively you would from very Production downtime. your normal, but are How above if well would balanced your inventories inventories now extent

Mark Kowlzan

demand. our of more you fall to Well, And right back there, North picked what period take truck again, a per that what part level much in, inventory quite and looking comfortable on the XXXX, world stock then a place. if happened it availability at XXXX, the part go And at. of to low of look depends back we drivers that place that the settled in in Obviously, pandemic time, dynamic was found and as level. availability unsustainably an we XXXX period better And of pandemic into took inventory ourselves up living you're demand just and time it of now. on. demand at, that got America us going let's to a dramatically throughout taking were went was the frankly, in with pressures rolling transportation dilemma that and between the drive the We're

system. the XXXX inventory But part through levels comfortable did of what achieve to end early the the we of were supply XXXX, -- into our we of felt

demand was what we falloff inventory was a XXXX so supply us. able with outside we also What then decision certain and we believe the and anticipated. conditions falling fourth the higher saw the understanding running comfort different and that didn't marketplace to we a plant obviously, the year new lower had Jackson much were anticipated that quarter demand with the that was capacity end-of-year again faster quarter. should had own with prudent readjust we for needs level, As on, the system we annual by sales level we completed our year targets a off than improvements to and also, outages and the in our financial we rolled our happen, be third mill fourth into had box in which activities could But being through now

else, Anything George?

George Staphos

quarter-to-quarter did. you thing around. cost The thing mix would strong. realizations strong things it was quarter you things, same the of terms operations our if to in allows realizing And point things on the or you'd up you I'll be? that make you calculations quite one to out A some out couple X of there was and couple over more, that point X Is point out up a what were quick. put them can Then allowed there. What to you move given had one there put turn per fairly highlights the I'll or ton

Mark Kowlzan

talk I'll operations. let I about about Tom can the question mix then talk

Thomas Hassfurther

Yes. Well, our George. solid again, mix was

XX,XXX-plus strong don't with industries, -- relatively mix, go of pleased And ahead. we course, it -- I we lot was would spread a customers different Yes, that. Of with and just a across were

George Staphos

kind driver? that is than, execution what at that So of to getting one more Is Tom, there? opposed as you're any

Thomas Hassfurther

will the cost especially more we're And our the think Mark seeing side. plants from yes, But talk Yes, number that bit the big I think also benefits in I so. some a little years. of over investments past about all made, we've box

we And performed so cost from and a very well. good basis, were incredibly

Mark Kowlzan

labor probably George, capital facilities. going worked the small in unit we've plants with -- that big XX projects doing projects improving But in lines, and in the we productivity box of corrugating that XXXX, various to operations, sized we projects XXXX, and our with projects box capital and retooling, recapitalizing plants. converting on in for significantly put the these from these point, been new XXXX, in To mills on place all of organization

in we operations. the mills on decades, continue we've do Same that throughout day improving for the every and thing to the efficiencies worked

another And so that thing. was

to I understand pivot hours think to And and and our even what at it our latter a really efficiencies days with mills, during opportunities are. look just day, how were cumulative machines the the if continue on out the day-to-day you plants, the the we Tom mill, look part we that that benefit we box Again, we in we at of how perform able ongoing of we of a it's put because able these the efforts the X in year. projects in place the though week. -- took some we're business reflects organization and idled down Jackson how to XX where we operate wring said

Operator

comes question Securities. from our from next Roxland Truist And Mike

Michael Roxland

Jackson, going on plan Obviously, how Just operate you. is do to phase mill that behind first you forward? the

XXXX. to the You've phase second postponed now

markets? you've do still noted, as demand if challenging the have flexibility operate line? operate remains paper remains convert to line white given that manner on paper that Given challenging, strong the you it you And

Mark Kowlzan

is in mill, phase paper we was the achieved make work containerboard supposed all has operation. and will set first ever mill white intents the No, we truly just a terms of the everything the now not again. That any completed of that scope purposes, It's Jackson work to. out that for

box the Grade We very last but the cost that last see will are equation advantage our now now cost A so work us we this input energy it of running project's in fiber and on impacts, year efficiently, opportunities. very we started just effectively. before help the with of been about was we've be would talked yield, up converting last, producing done, to able the We ran week labor-type and and usage, we'll There's benefit week, those plants, we paper side take benefits. and the

ran through in much comfortable Now how in just average range. that last the equipment. and from it we it all also And years right XXXX, machine range up speak. a when of the We're the we're production machine. XXXX currently, producing on probably The we somewhere X.X see as depends with a now, for also the X,XXX-ton on were machine new day ramping we X,XXX big getting day we and converted tons that in

our significantly plant. rebuilt Essentially, hands we has here and have a mill paper new the OCC and new pulp on machine then been

to So opportunity at new we're look that in going lot the what there's but infrastructure to of running, mill the getting used a we're also is.

end dry place of machine The when choose section the enhance dryer is the we drawing. shoe at a do forset a second additional then high-pressure phase the timing the improve will take right, and press we new That the press to new XX to cans, pricing in involves the and when that work can tons. reel of need new paper

So to the that determined, deciding we have that. when be need but that's decide of we luxury to

been very of phase extremely pleased first has well. with the work We're But done we see. the what

we'll of from we'll what now years, wring have and take day advantage many benefits these out efficiencies we've And in day for as So we here. done place. these to

I'm The that run So machine have if will idle down. should what Jackson. It's smaller pretty we is available demand temporarily. the determines that. optimistic It we #X machine, be at on

starting annual so current system, DeRidder continue have we the times, entire demand. we Counce run And up will and think to I month also again, mill. coming with to outages The our next

we to we with do and be we to levels think have where our about supply need to plant inventory to So what have needs. box

regard, think Jackson there. a So place, in that in good a I is of lot but opportunity

Michael Roxland

change to for quickly, seems or environment? Jackson have the inputs have with discipline? with then account as started as and last And respect question behavior my obviously operating expectations, is exceeding just adjusted seen from elsewhere your just or any it to be competitors of your Just to coming in you downtime running meeting posture any you you noted, production off, demand

Mark Kowlzan

as extra Tennessee, not as -- biggest to these keeping outages plans us to running our were to next rest is I'm our system will go said it of talk as Counce, an we're inventory means, over mind and it. through couple the mills coming machine just needs outages, well to of to DeRidder I run low-cost, supply run run bit But for We'll demand. We appropriately. run our that a what so our to that containerboard could little to in also provide X need about big opportunity build have at to The Jackson we But the big demand. we we assume, ensure months just being annual Southeastern you into that competitors. the continue going region. we will our high-quality

Michael Roxland

turn of Good the Got it it. in luck the I'll balance over. year.

Operator

Weintraub comes next from Seaport our question from Research And Partners. Mark

Mark Weintraub

on George's extent. up question Following some to

helped You and had really talked particularly about operations. how the on the capital, capital projects the converting

been quarter. how your like good really X frankly, strong last for was in You've the the talked about really it's also price mix And years. fourth

your that projects local You've higher just to terms just like execution help focus customers? of extraordinary the value-added your you're packaging Or has providing capital in mix well, performance price/mix. been improve your more -- the also been doing How on kind extraordinarily of more smaller, your accounts.

Thomas Hassfurther

this that I mean, handle Mark, box they plants, said in mind especially customers do always our the capital is we've Tom. that drive and our drive investments. we keep in what that. I'll

to large. that So we to they and whatever we looking grow and are forward, or at, with need they're grow with what customers and align them, they're whether we ourselves try going going adapt to small

I puts present. the So but from together. advantage kind that are customers of satisfy our standpoint, And us market of in take all I to objectives a those only think, a position, not whatever think good opportunities and cost comes that of to

Mark Weintraub

to would so pricing? so of in the customer and getting -- Or been to And way -- has product that mix changed it's that really couple successful much? next years? you're sort has the higher so over the getting Or that sweetened of the you very the say selling you've last very, producing just it's

Thomas Hassfurther

Well, example. I'll give you an

are if Our customers marketplace. different the successful during customer having to it's lot they it things promote of And they X things stores example. looking my the in even are in than products an very for? And What that. to are change How an be as buying? get How market, ago. the what especially we a occurred, there? years What at big like as the back do retail do I COVID, example, box and look was inside you today continually

we So a make lot a assist in and of customers of lot those been changes are. and track changes, trends our keeping helping of what there's those

Mark Weintraub

at first various it drivers. the weakness Or been not correction me terms of any as And to in Okay. has customers how clarity demand getting it's we're then you of pointed are -- it sense a the minimum. out you to tough particular, from in astoundingly any say, you your where decreases? a least, to from at but couple And indications Do of have as sounds to are to full continue to the getting like And then enough customers quarter the magnitude is weak that any in Because visibility? impactful Great. obviously, lastly, of we in for question, you've in see been last the the quarters. kind expect year? what And be going process? might just inventory

Thomas Hassfurther

Okay.

tackle me time. of couple a Let a these at

all, we see get here amount if government which properly. ourselves coming pumped a of bubble calibrated stimulus tremendous in in which let's can of into first of my created, help quite market We're COVID terms opinion, out of now, a think, I a had demand.

If you the look back jumping level historically some things and during per digits you it look at X% COVID always a X% double sudden, range was to years. box And that now of up demand year. pretty all and historically, other we're at into

the what up, or of correlation So that's X% how compare we by errors above drew clearly, and of some that come I maybe now X% means. not to the slightly but compared being why -- to bubble, happened any all being XXXX XXXX in with out

inventory Yes, recently compare healthy And as the quite you in opinion, pre-COVID. chain was China X is as our for it still reopened. And of inventory extent, and a correction. to a a correction, just combination still the know, a continuing big that's issue supply to some my to it's there So relative when demand, you things. customers. Still, huge

big waiting be in and any quite still or backlog. sector. product for So shipped waiting of there just a to sector the parts an There's it's auto products is other whether enormous backlog consumer

what when about for the would I overall, relatively appears. first little are forecast sorts our mild sooner a taking we hopefully, soft may wait And happens. and I you overall, about are would hopefully the if it the really corrected correct. full in to and on I thought quarter off to backs when But all, for up because our just think, to interest landing, And can't have pretty than But still and year, to bit our have bit healthy pretty been increases. have little that's So it waiting those compare we what that's have to where a in position. we're customers Fed think important of it we're see things. a to say approach going Those why success rate still we'll conservative that the to pre-COVID, feel really predict we some good a I catch extent. a they 'XX, recession, we're a

Operator

next question from Markets. Adam from comes our And Josephson Capital KeyBanc

Adam Josephson

to, you well. conversion Mark, mentioned second on phase at why opposed Why year that you're you're one -- When arrive Hope by more you don't we'll opposed just to months, planning indefinitely months demand gets I as months, postponing decision, from a X year XX it know, did and to the do X now. it or and delay. the year. a we're do better, whenever as

Mark Kowlzan

to. project, if we spring it pull that picked that we we plug a we That's next we the all and up have. Adam, sudden, luxury month of could tons, wanted on and demand the needed the could do in the time if

hands equipment in the the at in warehouse the our all sitting have We mill.

the all engineering have We done.

tons, that we the the do have need there. we that's project, when will that and So we benefit

and decision driving our no there's of terms this in secret So There's except what's marketplace magic formula. no the customers.

capital no of currently there's perhaps a to spending, to demands, return need with not of that, we're place year. a minutes in as spend remaining And the grow capital opposed customers' this good ago, uses cash of project on portion another also use being mindful cash as that to earning do that Tom a that's but our our and few any we mentioned and our of

Thomas Hassfurther

is this Tom. Adam,

Let me this is Tom. Adam, --

is been and come. consistent has very think We're this Hope me not strategy, builds never something really this. company I here add our quick about because been a we've not they important, Let strategy. is real it very, will that our just and hope

and they customers what are our around built Our need. strategies see what they and

the we market, out So times, reality right There's that's there. and the markets the with go never these see open now there's a some we've duress not tons. an the huge And to world. as export going under said many to around are of change marketplace to place not immediate

we be that are. the we're to for of adapt so them, going we'll customers be fact and flexible our and curve. ahead will market And always and we're whatever And the the prepared, be there conditions to appreciate

Mark Kowlzan

determined said project Adam, what deal project go would at complexity if we've in phases. project, this what the this always plays entire we've multi just go do capacity this projects done done And typically to have had competitors and of Tom would and one years, decades, this got back We years back our done into had all you one we always our X of all ago; and big done, phases. in XX with. time

prudent and cash, Now there's effectiveness reasons then customers' there's risk with capital mitigation and cash also of management Besides and uses of needs. our for that. growing our

it historical so on how all behavior grow go into our and our we business. projects we about And how plays

Adam Josephson

just Yes. perfect makes the Tom, back demand box That sense, Mark. to issue.

you said -- levels running you're a day on 'XX -- XXXX X% per basis. XQ about your So above

it sounds for depressed demand like at particularly is So levels not you.

So those expecting shipments, that that's day Or if flattish is you there a there reasonably you drift? sequentially, that when in "normalized" to lot get you for my a demand you talk you think about of be see? destocking of level per can do

Thomas Hassfurther

there. That's the million-dollar question right

tell can't. you. perfectly. Obviously, I to like be I'd that able me Let to predict

know projections pretty don't a going destocking approach quarter to I As to because we're is conservative taking really when said in our this I said, first end. the that's we

are. midpoint and further, really the fact, point clearly as to tell that. think extent what my know comparing to was, just can't calibrated all can with to a you, still to that compared we're past But I we about XXXX I to it pretty conservative I XXXX, even goes that. approach, get us in but think it's this feel for I solid I where

Adam Josephson

whether you XX%, when XX% Right. And do going just a just to sense to not clear. they're they've don't done to you whatever of clear, of firm talk it's your destocking have customers, be or

Thomas Hassfurther

of think of to I kind when -- talk customers, mean, we some I Well, what we we get. is mixed specific get bag a

there different of have product destocked And environment, completely prepared and significant Some -- others side, their COVID warehouses issues. was on that and own of significant for they've we're inventories completely lot their it's a some a even environment. COVID, post got and sitting still a now in are have and

did that dealing I chain are lot And mention the their issues supply making So with. a well. they're of still adjustments them as

Adam Josephson

for appreciate what of that. issue. you're appreciate just seeing the in one you help regional. costs? sequentially wood on me I cost declines one with that me And Can it's last I Yes, wood magnitude

what transport issues But overall, weather experiencing? because it's seeing, How is Any any related, -- the transparent that if of just percentage how related? out by much for the most it us. is the varies So much mill. can you're decline you're flesh not you --

Robert Mundy

good. wood cost. cost into our months, What is sequentially this much not about release and typically, were in forth prepared we remarks wood Adam, is flat is in because go as and fairly your you necessarily Wood so we as aren't our the yields Bob. said talking prices, wood colder

some usage wood it is, But was The at it going So drier over the seeing the cooperated goes way. few weather -- other is far you pricing a as months. bit we're see the supply least that improvement normal. last as than

wood. price and the good we're with that So a our of in inventories place

there -- as the lot a there's everyone that frankly, you with quite demands industry, has so demand, been downtime And helps price. knows, and when

but and do jump and typically slightly wood should maybe be I -- does the a for basis fairly costs will think we year. overall price -- a think it's year, on So the down for flat full around it not be lot,

Operator

next from comes Our Wells from Gab question Fargo. Hajde

Gabrial Hajde

years reserve This the to $XXX know, "Hey, you be for one aggressive returns million spend a but CapEx also of sort shares. take side, we allocation. It a to warranted said, opportune you seemed of is approach. I of had think that then the look But allocation year's to return. give normalized. that us $XXX been things spend. capital and don't out on made the can't want comment of right of I and guys it in million. you've to And is $XXX But capital know just terms that. balanced about, And at you appropriate a I Mark, in you history like come your as when elevated on couple have CapEx of million Is nice I to buyers you help

a talk you how can versus share bit internally repurchases? -- about relates capital So returns just to little talk it as about projects you on think

Mark Kowlzan

take investment But efficiency had clear down of that we million -- last of coming spending million as particular, reset to opportunities. high off $XXX big probably at a would the then be care primarily X highs, starting year's big big we've and of year, these historically some conversion in normalized more statements, of my or this capital community the and and plant look we've retool spend. we're off to all, for of levels in X capital year, this off system made that box $XXX I down to First capital mill years, last coming our prepared so those our commented projects the

that's got some as the And so to area, the get be we're into the example. this years, some into. next think We're an couple year finish we finishing box plants. We've big of as the work in got million up going to $XXX for range We've opportunities. I

amount going comfortable good forward maintain in capital but to assets finish think Jackson, of able very be pieces with growth up to be It's very to of now it And a that then extraordinarily able take We'll will not continue when up. be of that capital, in But converting one of period piece. we large we're installations condition. equipment. opportunities customer we I time our care an on finish will will

our manner. have We growth in system mill a cost-effective in capacity to supply obviously that very, very the

with been, bodes to deploy is I it we trend we has So what forward the return lower and or significantly capital new which shareholders. than cash cash again, again our how the do think, well for provide to going

as investment, of in projects. we the internally at look hurdle terms terms then we rate highest in what probably in always on set the we've target returns for returns our acceptable And had how of industry of

these with with valuable, you're Now growing but some of you're obviously, customers, added growing projects, business. box profitable high

not some help return on hurdle for expect the return we in invested number. the the targets that but what assume, spent return. you $X in alone, on manufacturing it expectations the And sector But on we that we've only that you? capital I'm It's highest reflects our Does industry, set, ranks itself on not industrial always but that again, the can said we highest. give high very rates going amongst set and to this, you in

Gabrial Hajde

to January, to make And sure It so the you right. been a basis. far of to backlogs we into imply It maybe calibrated down out that it experience that absolutely or If assuming your extrapolate has I'm and then in math calculation, does. the comment thus on have X% I went it's in or the whatever XX kind does. of that and for have estimate square year-over-year fruit line X% quarter seems first feet low-hanging to. maybe the of just million made you what terms best fight guys

Thomas Hassfurther

Yes. Gabe. That's assumption, a fair

Operator

comes from question UBS. Our next from Rueckert Cleve

Cleveland Rueckert

optimizing Just existing I business? new the you're me. doing it all? from that wanted to product a just Or words, project? for of your about other couple at book more In follow-ups more wondering, are market work on that ask capability of offering at PCA's Jackson. and change is just does specifically I'm that opportunities there

Mark Kowlzan

care take of Tom let I'll Yes, that.

Thomas Hassfurther

some of would it. Cleve, our frankly. And what proprietary does is I quite we That's it need it capabilities. that, how put enhances

short-term the X in our customers. we big with then And being objective the ability about that's obviously, longer-term talked objective. that Phase grow to So

Cleveland Rueckert

them sense. in couple follow-ups, are you That where explicitly just talked would inventories, quick inventories of them I you relative to a about versus containerboard. And Okay. times. of a makes then just where like couple your plan like

Mark Kowlzan

just Again, get from Well, tons inventory the going to February insurance Louisiana quarter. at care for for mill we quarter of making here end to that inventory. fourth the Counce, take down plants. to sure the numbers. the dropped the absolute give thousand and January, It's of box extraordinary outages in It's third period of we a an build, DeRidder, cushion We're mill. the ready amount Tennessee the of again, we never some not XX-some-odd extra little bit

this But going ended good with, I in of forward the marketplace year a will need way. and the be now. say to XXXX we're I we're we think demand where seeing what range our it comfortable with we capabilities What now in

outages little outages. these big meets certainly inventory an Annual requirements. uncertainty. with build lower to current the bit this through a always us get But are So extra just

You and sure little some to do, customers. we never what extra make know taken insurance but are outside good at mitigation we happen. in box bit and with plants comes our Obviously, could what policy try risks an inventory the plan the on to of risk very mitigate of some to always we're well a care hand

Cleveland Rueckert

Right.

you Jackson I know clear. I Or in is more a any take other makes is then are that And that's temporarily. very machine sense. think really maintenance is that expecting at you of down #X said idled the first in downtime to quarter? I about lot QX? mean, the economic it And

Mark Kowlzan

let I'll did. in you know we April, what

Operator

from Anthony Our next from question Citi. comes Pettinari

Anthony Pettinari

any of on couple year that? a of capacity phase kind spring, a missed phase Mark I kind you postponing next follow-ups, number Just if with or this, Jackson you're that put of from second can beyond, that Tom, or or sorry that there is associate the would second conversion of until the point maybe you finer

Mark Kowlzan

X Western Hemisphere in get the terms lowest it in ultimate largest machines. paper, be the day appreciate of historically understand It could containerboard only of one X,XXX we efficiencies, machine. our last linerboard of would The on virgin at Western machines ton the Hemisphere, years. in in Well, a project not be productive what us productivity by I'll will you and go said Jackson and the would machines it the if of but one kraft one the be will most cost a largest,

like And I going the see just day we We're we'll -- we toy. right a ton missed with of now. math. process and that from we of machine And to help in us to the for it if the from the probably have. a on sure X,XXX have or having the ample correct tons month the a view. months us phase the ultimately, over we give then We're now haven't limitations do obviously XXX the right to paper X,XXX us anything, take what a to see last run anything let's work said week. of missed we two. tons We're the some ahead machine will over a are what of day new What the final -- rate push extra it so we next phase and started speed course up making point us. the we that last could will extra time drying us with just you gets But and day, machine say

Anthony Pettinari

Okay. helpful. quick just another then very And That's question.

now kraft from preference do maybe with two. do the And talked fiber I then bit spread up flex does a you've liner it related of terms done, and see capabilities put recycled liner, the recycled mean, price seems to historically, between the talked has kraft your for question. versa? ability to your dynamic -- to Or your between out? kind You of those and trend a And demand projects. what moved increased just you mix that that out like or benefits vice customers the kind fiber customer about maybe And bit. of moved any specific in move Are or is of Virgin or how look I like the a about playing flexibility where your think OCC? just

Mark Kowlzan

added but and and the fiber the Tom there. big a Jackson conjunction of And these at part pricing rates that. OCC our then is the the of capability finished in to woodyard of fiber flexibility some completely now if rebuild projects. chip we and out and high the with of then and mill. ultimate in project Wallula there yield the work up the screening at answer very period, big chip I'll biggest at let at We flexibility plant availability talked ones OCC has just we Wallula rest the push a handling, did the that, OCC improved Mill, over answer about woodyard The I'll part we X.X-year

and advantage of Counce, And pricing they make of so depending our OCC, medium, opportunities fiber DeRidder, can DLK though Jackson, Wallula into incredible flex that various furnish and opportunity to primarily the but the amount mills and on Jackson terms Wallula sources. have of linerboard, take DeRidder goes in linerboard even to

in our this can be now, think DLK around and have significantly what did -- And but I day. you still by I total math, in probably fiber. OCC, XX% makeup have now the -- improved what given we virgin But don't any we're Bob and I'm so use right if of not we would this, have total of mill, might

want you do to add? Tom,

Thomas Hassfurther

opportunity that Yes, yes. And being have to we add, of advantage our our do I'll one view, is thing what performance. Anthony, from customer They we that a want, more is point of just the lot and customers want? we hit want give a minimize particular the performance virgin that same numbers at primarily in we us advantages advantage can so all of can have, things other that that we basis take and distinct some this chemical process. also think weights I use fiber a and some flexibility that

those what and we from and have, proprietary performance-based, that we mentioned our output based is So mills our around all view how some products -- really performance. that's are I our

Operator

next Jefferies. question comes John from Our Dunigan from

Philip Ng

quick dynamic Does wood tough actually a in P&L. actually in seen off lately? how this for bid your backdrop. container kind prices normal the guess a good Phil. of -- higher we I on through Great fall, a that for timing a that my have cadence question accelerate and It's first results when side, question. is feel from environment, moving up perspective of put kind current you prices of I guess business flows more with have

Thomas Hassfurther

that that prices to is answer does The not fall. accelerate no, when

is play interested other customers they're long This a that. from in the probably In like not they anything term. that is fact, being anticipating been our And -- and -- not way aligned they're it it or they're feedback short-term not haven't around. our is

seen that uptick So we in any haven't either. or like bids anything

Philip Ng

about And you encouraging. unknown think really lot great guys mills. it's Tom, the take now. a your in approach running terms you right of disciplined there's see a talking I to That's such were macro,

that you of more importantly, then through a on how navigating playing industry? out in How see for amount that more of a capacity the do you backdrop. see decent months. position Let's There's say PCA backdrop? it's do coming in of -- XX let's And next the soft-landing kind assume kind of

Thomas Hassfurther

capacity that And to the on. adds the for have Well, one what really you impact back us. when is see historically think in of come been on that coming and I very past little have happened have adds look capacity there's number are

in anymore. Maine even I Jay, think when they kraft. Verso succeed. That mill virgin to did the mill a machine not converted not about That up is open

small is Midwest U.S. long the we've open that as time, in another the it's a -- very had Paper said long, was one market --

the with integrated most typically those we This to does look And the certain outside exist is that very the United that market, long-term outside very, going open for part. add, market or buyers. so market a to is relationships have our have States contracts, under like they're

-- little very that it's has in So opinion. my impact

demand to is is it produce and just for doesn't you when us producing it, additional is. the wish sake what demand So hear do basically And board it we're and of a like you running say to good. death any

for So we're a I hope you that coming gives where flavor little from.

Operator

next question from White Bank. comes Deutsche from Our Kyle

Kyle White

versus that are end other monitor Any impact bit go we the have really I here what And just working business. us this wondering really on to demand. and end in you give gone wanted you're seeing just weaker should a end to can markets that that by if more market a that bit at through destocking boxes markets already? back to details little still

Thomas Hassfurther

markets, come obviously, got Consumers big, durable these COVID anything some down I only durables some end thing the so about there years only much Well, and in big during of of they've dramatically. a could goods. need jump those anybody say

that, come quite therefore, that's down so significantly. And

is impacted with Florida has that has us out thing crops, had business, other example some X the difficulty. the a Pacific have mean, in wiped The is Northwest of an the seasonal I lot ag hurricanes.

got places. other You've in droughts some

but ag pretty and back that, this big business that shape. a the hit that and will good took should pretty bounce bounce definitely year, in So back

are and the segments all of kind sorts anyway. just place that's seasonal that, better sectors, normal there's activity and Other takes than puts all of that's some in and across others, our shape and takes -- than that of

Kyle White

be continue you past this those active And quarter. should weigh repurchases balance we XXXX, your Can share just active talk about and healthy thought expect you you then to decisions acquisitions? how versus any there? given just your to in process fairly it. potential sheet you're maybe And Got throughout

Mark Kowlzan

a whether along came at to we'll these be been and looking us. we've opportunities, sense always great it Again, acquisition opportunistic made as it's

our the and to be of thing Same cash. take will have front the dividends and of use we customer We look in also needs. share ability and continue keep care the do that us type at flexibility of provide of to with to we time, the repurchase something how for advantage best our return a shareholders position same be at in take and of

I my as in and a comments, as very balance flexibility our in forward, the said strong a prepared to great cash again, we uses sheet. position go maintain with maintain we're So of

changed. part our It's And norm of just so that's day. none of every

Okay.

time one think more question, might for I we have please.

Operator

from from Partners. Mark Our today Seaport final question will come Research Weintraub

Mark Weintraub

that think I the P&L. not about it faster of you suggested down cadence up. adjustments When price the And asked was through he the than on way it on way how flow is the

that kind the question. I begs So guess of

showing prices of if to here? So significant meaningful assume quarter? reflected been come from Or of already the up in the flat were to that we the in prices the first quarter box be in anticipated yet is that in second share $XX portion already of has is PPW that PPW, a just to by were a

Thomas Hassfurther

which I well increments, or Well, may in mechanisms. change All are I contracts contracts. these come, imagine, very and a come the rate timing has mean, would different different just the not has Mark, as mean, the you on may price hit can very at $XX based

us in things asked the taking some place hold they'll off what because -- I not is there's at to even reality. than cycle vice you that So it's that's why said just; say And go they're we've mean I down to versa. in who went uniquely, confident customers faster it these may up no moment as it cycle or it be just what of can't in, it's -- it's going got is. have

have of differently it say to on way up the just So said, because -- moves and meters incremental as little the in -- factors mean, a in just it we'll just that I'd small I than take place. I

Mark Weintraub

versus color can into proportion what you in slide us based the on the you now, show quarter you're can what would first with would seeing there Is second, change. situations might any terms recognizing of up think the help in

Thomas Hassfurther

I'll let Bob handle that.

Robert Mundy

Bob. it's Mark,

say what's sort indicating, see use so obviously of through would happened Tom But roughly the I far in however, so how different X/X -- flow things these mechanisms of you and as I'd showing up would forth. or was So based in and first the second so there's timing and quarter. on then

Mark Kowlzan

Jamie, concludes I that think questions. our

Operator

Sir, that does conclude comments? have today's closing Do any you session. Q&A

Mark Kowlzan

I'd Bye-bye. like you forward a Tom thank time Yes, everybody Have to taking the in for day. with and call. care. with to the good April look and Bob and I talking Take

Operator

call gentlemen, you Ladies we'll with and that, and do for We today's joining. presentation. thank conference conclude

may now lines. disconnect You your

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