Packaging Corporation of America

Thank you for joining Packaging Corporation of America's first quarter 2023 earnings results conference call. Your host today will be Mark Colzan, 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 event is being recorded. At this time, I'd like to turn the conference call over to Mr. Colzan. Please proceed when you are ready.

Thank you, Jamie. Thank you.

Good morning, and thank you for participating in Packaging Corporation of America's first quarter 2023 earnings release conference call. Again, I'm Mark Kolzan, Chairman and CEO of PCA, and with me on the call today is Tom Hasfurther, Executive Vice President who runs the packaging business, and Bob Munday, our Chief Financial Officer. As usual, I'll begin the call with an overview of our first quarter results, and then I'll turn the call over to Tom and Bob who will provide further details. And then I'll wrap things up and we'd be glad to take questions. Yesterday we reported first quarter net income of $190 million or $2.11 per share. Excluding special items, first quarter 2023 net income was $198 million or $2.20 per share compared to the first quarter of 2022 net income of $256 million or $2.72 per share. First quarter net sales were $2 billion in 2023 and $2.1 billion in 2022. Total company EBITDA for the first quarter, excluding special items, was $405 million in 2023 and $467 million in 2022. First quarter net income included special items expenses of nine cents per share, primarily for the closure costs related to corrugated products facilities and design centers. Details of special items for both the first quarter of 2023 and 2022 were included in the schedules that accompanied our earnings press release. Excluding the special items, the 52 cents per share decrease in first quarter 2023 earnings compared to the first quarter of 2022, was driven primarily by lower volumes in our packaging segment for 95 cents and paper segment, 4 cents. Although recycled fiber costs were lower than last year, overall operating costs were 27 cents higher, primarily due to inflation on chemicals, labor and benefits, supplies, repair materials, and services. Energy costs, although trending down, were also higher versus the first quarter of 2022. In addition, we had higher depreciation expense of 11 cents, freight and logistics expenses, 4 cents, non-operating pension expenses, 4 cents, and higher converting costs, 2 cents. These items were partially offset by higher prices in mix in the packaging segment for $0.58 and paper segment $0.18. A lower share count resulting from share repurchases we made in the second quarter of 2022 for $0.11, lower interest expense $0.03, lower other expenses for $0.03, lower scheduled maintenance outage expenses for $0.01, and lower tax rate $0.01. The results were $0.03 below the first quarter guidance of $2.23 per share, primarily due to the lower volume and lower prices and mix in the packaging segment. Looking at our packaging segment, EBITDA excluding special items in the first quarter, 2023, of $392 million with sales of $1.81 billion resulted in a margin of 21.7% versus last year's EBITDA, of $464 million and sales of $1.96 billion, or a 23.6% margin. Demand in the packaging segment was well below our expectations for the quarter. Tom will discuss this further in a moment. The mills and corrugated products plants responded to the lower demand by remaining highly focused on efficient and cost-effective operations as we balanced our supply accordingly. our employees continued to deliver on numerous cost reduction initiatives, efficiency improvements, integration and optimization enhancements, and capital project benefits to not only minimize the negative demand impacts on the short term, but also to remain in position to capitalize on our longer-term strategic goals. The accomplishments were achieved while building less inventory than we had planned, and staying committed to ending the quarter at our targeted weeks of supply inventory. I'll now turn it over to Tom, who will provide further details on container board sales and the corrugated business.