Packaging Corporation of America

Good morning. Thank you for joining Packaging Corporation of America's second quarter 2024 earnings results conference call. Your host today will be Mark Colson, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a Q&A session. I will now turn the conference over to Mr. Colson. Please proceed when you are ready.

Good morning, everyone, and thank you for participating in Packaging Corporation of America's second quarter 2024 earnings Earnings Release Conference Call. Again, I'm Mark Coles and Chairman and CEO of Packaging Corporation of America. 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. I'll begin the call with an overview of the second quarter results, and then I'll be turning the call over to Tom and Bob who provide further details. And then I'll wrap things up and we'll be glad to take questions. Yesterday, we reported second quarter net income of $199 million or $2.21 per share. Excluding special items, second quarter 2024 net income was $199 million or $2.20 per share compared to the second quarter 2023 net income of $209 million or $2.31 per share. Second quarter net sales were $2.1 billion in 2024 and $2 billion in 2023. Total company EBITDA for the second quarter, excluding special items, was $404 million in 2024 and $418 million in 2023. The details of special items for both the second quarter of 2024 and 2023 were included in the schedules that accompanied the earnings press release. Excluding special items, the 11 cents per share decrease in second quarter 2024 earnings compared to the second quarter of 2023 was driven primarily by lower prices in mix in our packaging segment for 87 cents and paper segment 7 cents. Even with our constant focus on minimizing inflationary cost increases, operating costs were higher by 31 cents per share. This was particularly in the areas of recycled fiber and inflation-driven increases on labor and benefits, outside service expenses, repair and operating material costs, rents, property taxes, and insurance. We also had higher depreciation expense of 3 cents and a higher tax rate of 3 cents. These items were partially offset by higher volume in the packaging segment for $0.94 and paper segment $0.07, lower other converting costs $0.07, lower freight and logistics expenses $0.06, and lower interest expense $0.06. Looking at the packaging business, EBITDA, excluding special items in the second quarter of 2024 of $400 million, with sales of $1.9 billion resulted in a margin of 21% versus last year's EBITDA of $405 million and sales of $1.8 billion, or a 23% margin. The strong market conditions in our packaging segment continued in the second quarter. This drove a new all-time container board production record that was necessary in order to service the corrugated products and container board demand. Also, packaging segment prices and mix moved higher from the first quarter levels as we continued to implement our announced price increases. Although still below target levels, we were able to build some inventory ahead of what we expect to be a very busy second half of the year. In our mills and corrugated products facilities, employees remain focused on the efficient and cost-effective operations from thousands of initiatives, as well as implementing the benefits and improvements from our capital spending strategy. I'll now turn it over to Tom, who will provide further details on the container board sales and corrugated business in general.

Thanks, Mark. Along with the record-setting container board production that Mark mentioned, corrugated products demand strengthened throughout the quarter and ended with a new shipments per day record for the month of June. In fact, we were just one-tenth of a percent away from our all-time second quarter total shipments record. Shipments per day were up 9.2 percent over last year's second quarter, and total shipments with one additional shipping day were up 10.9%. Outside sales volume of container board was 42,000 tons above last year's second quarter and 35,000 tons above the first quarter of 2024. Segment prices and mix moved higher as we continued to implement our price increases from February, which was negatively impacted by the late fourth quarter 2023 decrease reported by the RISI publication, along with the more recent increase in June. Domestic container board and corrugated products prices and mixed together were up 9 cents per share compared to the first quarter of 2024. However, they were 84 cents per share below the second quarter of 2023. Export container board prices were up 3 cents per share versus the first quarter and down 3 cents per share compared to the second quarter of 2023. Finally, some of you may have seen news about an investment we made in the Phoenix, Arizona area. In order to serve a growing market, and to grow with our existing customers, we are in the process of replacing our current Phoenix Corrugated Products plant with a modern state-of-the-art facility. Like many of our strategic projects, the Phoenix project improves the capacity, technology, and equipment in the plant, gets us aligned properly in the right marketplaces, addresses the needs of our customers so that we both grow profitably, and improves the efficiencies and costs within our system. I'll now turn it back to Mark.