The speaker, Mark Kowlzan, is the Chairman and CEO of Packaging Corporation of America and is joined by other executives on the first quarter earnings results conference call. The company reported a net income of $147 million or $1.63 per share, with net sales of $2 billion. Excluding special items, net income was $155 million or $1.72 per share, and EBITDA was $333 million. The first quarter net income included special items expenses of $0.09 per share for paper to containerboard conversion-related activities at the Jackson, Alabama mill. Details of special items were included in the earnings press release.

In the first quarter of 2024, the company's earnings decreased by $0.48 per share compared to the same period in 2023, primarily due to lower prices and mix in the Packaging and Paper segments, higher scheduled mill outage expenses, and other expenses. However, this was partially offset by higher volumes, lower operating and converting costs, lower interest expenses, and a lower tax rate. The company's results were $0.18 above the first quarter guidance, driven by strong volume and cost management efforts. The Packaging segment had an EBITDA of $326 million and a margin of 18.1%, while demand for containerboard and corrugated products exceeded expectations.

The company had outstanding operational performance at their box plants and containerboard mills, and were able to service high demand by completing a conversion outage at their Jackson mill earlier than anticipated. This led to record-low weeks of inventory supply for the quarter. The Packaging segment volume exceeded their guidance estimates, with corrugated product shipments and outside sales volume of containerboard both increasing. The order backlog remained strong and the company expects to continue positive momentum in the second quarter. Prices and mix for domestic containerboard and corrugated products were slightly higher than the fourth quarter of 2023, but lower than the first quarter of 2023.

In the first quarter of 2023, the export containerboard prices and mix were down compared to the previous quarter and the same quarter the previous year. However, the company's capital spending and optimization strategy has been successful in increasing box shipments per plant and growing revenues with desired customers. In the Paper segment, sales volume exceeded expectations and demand remains strong, although there will be a scheduled maintenance outage in the second quarter. Cash provided by operations and free cash flow were both at record highs for the first quarter.

The company had significant cash payments during the quarter, including capital expenditures and dividend payments. The revised estimated cost impact for the year due to mill outages is now $0.89 per share. The Packaging segment is expected to have strong demand and higher prices, while the Paper segment will have lower volumes due to a scheduled maintenance outage. The company is implementing paper price increases, but average prices and mix may be slightly lower.

In the second quarter, operating and converting costs are expected to be slightly lower due to improved weather and timing of expenses. However, higher freight and logistics expenses and depreciation will offset these savings. The tax rate will also be higher due to tax-related benefits in the first quarter. The company expects earnings of $2.07 per share. The call ends with a reminder that some statements made may be forward-looking and subject to risk. The first question from George Staphos is about early trends in bookings and billings, to which Tom Hassfurther responds that bookings remain strong, up 8%, and they expect a strong second quarter and remainder of the year.

George Staphos asks about the vertical integration and business mix of the company in the first quarter compared to the previous quarter. Mark Kowlzan and Bob Mundy provide the integration percentages, while Tom Hassfurther mentions that the export was down slightly in the first quarter compared to the fourth quarter, but overall it was relatively flat. Staphos also asks about the lower EBITDA margin in the first quarter and where the loss came from.

The company's EBITDA margins were affected by a $20 downturn last year, which bled into the first quarter of this year due to contract triggers. The expected $70 price increase was delayed and only a $40 increase was published, leading to a slower and smaller roll through. Inflation remains high and is causing cost increases in various areas such as general services, recycled fiber, wood, electricity, and chemicals. These factors are contributing to the company's margin gap.

In the paragraph, the speaker discusses the various costs that make up their overall cost base, including direct costs and indirect costs such as maintenance services, repairs, and property taxes. They note that these costs are subject to inflation and are often passed on to them by their suppliers. The speaker also mentions that demand has improved across all sectors and that their ongoing efforts to recapitalize their box plants will continue to drive growth and provide value for their customers.

The speaker confirms that the Jackson project conversion is now fully completed and has exceeded their expectations. The project was completed two weeks ahead of schedule and the machine is now producing over 2,000 tons a day. They are now focused on getting everyone used to running at high production rates as they need every ton they can produce.

Mark Kowlzan discusses the success of the high-performance grade lightweight linerboard being produced at their Jackson facility. He mentions that the production potential is around 5 million tons annually, and their daily shipments have increased by 8%. He also notes that the demand is continuing to strengthen, but the second quarter is unpredictable due to seasonality.

The analyst is asking about the company's pricing strategy and if they are able to decouple from industry indices. He also mentions a discrepancy between the expected and actual price increase in the first quarter and wonders if this is proving to be a challenge for the company. He acknowledges that this is a new approach for the industry and asks for clarification.

Tom Hassfurther from PCA is responding to a question about future price increases. He mentions that they are still working on decoupling from RISI, but it will take time. He also discusses the frustration of customers with the current roller-coaster ride of prices and mentions that long-term contracts and negotiation timelines also play a role in the current situation. The recent increase announced by PCA was specifically for containerboard.

The company did not announce their price increases on boxes, but rather on the open-market of containerboard. They do not discuss future pricing, but there are inflationary pressures and costs that they are trying to minimize. The majority of their transport spend is on rail, and they do not have any comment on potential business opportunities resulting from their competitors' transatlantic combinations.

During a conference call, Mark Kowlzan and Gabe Hajde answered questions from analysts. Kowlzan discussed the impact of seasonal costs on the first quarter and how they were better than expected. He also addressed the possibility of passing through the cost of fiber in contracts, but Tom Hassfurther added that it is more complicated due to the variety of materials and types of containerboard.

The speaker emphasizes that there is a lot of variance in the materials used for paper production, making it difficult to implement a single pricing mechanism to account for inflation. They also mention that transportation costs have become a significant factor in overall costs. The company is exploring different options to address inflation with their customers.

The speaker talks about the investments the company has made on the box side, which has helped them outpace the market and take share from their peers. They mention that they don't invest without knowing there will be a return, and they have been aligning themselves with the right customers and markets.

Mark Kowlzan, the CEO of the company, discusses how their focus on building a better-quality product every day has led to increased productivity and cost efficiency in their converting facilities and full-line box plants. This has given them the flexibility to grow with customers and compete effectively. He also mentions that the company has been working on this for decades and has fine-tuned their approach. In terms of pricing, there is a discrepancy between the $40 to $70 increase in linerboard prices and the amount reflected in the index, and the company may issue rebates to customers due to logistics.

Mark Kowlzan, CEO of a paper and packaging company, discusses the progress of a box price increase and the impact of the merger of two of its competitors with European counterparts. He mentions frustration with the current market model and the need for alternative mechanisms. Kowlzan does not disclose specific details about the company's customers.

Mark Kowlzan and Tom Hassfurther of Packaging Corp discuss the company's growth in the domestic marketplace and their focus on executing their own strategies rather than worrying about competitors. They also mention their continued investment in productivity and efficiency, which they believe will continue to benefit the company's P&L in the future.

In paragraph 21, the speaker discusses the technology capabilities of the company and how they are continuously improving processes and efficiency. This has been a key factor in differentiating the company from others and will continue to provide benefits in the future. The speaker believes that the company will continue to outperform the industry in the first quarter of 2023.

Mark Kowlzan, Tom Hassfurther, and Bob Mundy are discussing the company's performance in the second quarter. They have outperformed the industry and attribute this to their focus on existing customers and the recovery of slow customers from the previous year. They anticipate continued improvement throughout the year. No further questions were asked and the call was concluded.

Mark Kowlzan thanks everyone for joining the conference call and mentions that they will provide second quarter results at the end of July. He looks forward to speaking with them then. The call concludes and the operator thanks everyone for participating.

This summary was generated with AI and may contain some inaccuracies.