Packaging Corporation of America

Good morning, everyone. Thank you for joining Packaging Corporation of America's fourth quarter and full year 2024 earnings results conference call. Your host for 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, and at this time, I'd like to turn the conference call over to Mr. Colzan. Please proceed when you are ready.

Thanks for the introduction, Jamie, and good morning, everyone, and thank you for participating in Packaging Corporation of America's fourth quarter and full year 2024 earnings release conference call. Again, I'm Mark Colzan, 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 the fourth quarter and the full year results. And then I'll be turning the call over to Tom and Bob who'll provide further details. And then I'll wrap things up and we'd be glad to take questions. Yesterday, we reported fourth quarter 2024 net income of $221 million or $2.45 per share. Excluding special items, fourth quarter 2024 net income was $222 million or $2.47 per share compared to the fourth quarter of 2023 net income of $192 million or $2.13 per share. Net sales were fourth quarter record 2.1 billion in 2024 and 1.9 billion in 2023. Total company EBITDA for the fourth quarter excluding special items was $439 million in 2024 and $394 million in 2023. Excluding special items, we also reported full year 2024 earnings of $814 million or $9.04 per share compared to 2023's earnings of $784 million or $8.70 per share. Net sales were 8.4 billion in 2024 and $7.8 billion in 2023. Excluding special items, total company EBITDA in 2024 was $1.6 billion in both 2024 and 2023. Details of all the special items for the years 2024 and 2023 were included in the schedules that accompanied the earnings press release. Excluding special items, the $0.34 per share increase in fourth quarter earnings for 2024 compared to the fourth quarter of 2023 was was driven by higher prices in mix $0.52 and volume $0.40 in the packaging segment, higher prices in mix $0.02 and volumes $0.02 in the paper segment. Lower freight and logistics expenses benefited us $0.06. These items were partially offset by higher operating costs of $0.48 as inflation remains a significant issue across most of our cost structure. In addition, scheduled maintenance outage expenses were higher by $0.08, depreciation expense was also up $0.06, and other expenses were higher by $0.06. Results for the quarter were equal to our fourth quarter guidance. Looking at our packaging business, EBITDA excluding special items in the fourth quarter of 2024 of $426 million with fourth quarter record sales of almost $2 billion, resulted in a margin of 22% versus last year's EBITDA of $385 million and sales of $1.8 billion and also a 22% margin. For the full year 2024, packaging segment EBITDA excluding special items was $1.6 billion with sales of $7.7 billion or a 21% margin compared to the full year 2023 EBITDA of $1.6 billion with sales of $7.1 billion or a 22% margin. The operational benefits of our capital spending program and the continued great focus and execution by our sales, customer service, mill, and corrugated products plant employees continues to deliver impressive results while helping to minimize the inflationary impact across most of our cost structure. As we've seen throughout the year, demand in our packaging segment remained very strong during the quarter. Our corrugated products plants delivered record fourth quarter total shipments and an all-time record shipments per day. The plants also set new annual records for total shipments and shipments per day. Excellent operations throughout our mill container board system set new quarterly and annual production records as well. This allowed us to meet our customer service and quality demand needs in a timely manner, as well as build some very much needed inventory ahead of this year's annual mill outage schedule that will take place the first half of 2025. I'll now turn it over to Tom who will provide further details on the container board sales and corrugated business.

Thank you, Mark. As Mark mentioned, continuing strong demand during the fourth quarter resulted in record-breaking performance for our plants and mills. Total shipments... and shipments per day were up 9.1% over last year's fourth quarter. Versus the previous record-breaking third quarter of 2024, shipments per day were up 3.2%. Outside sales volume of container board was 9,000 tons above last year's fourth quarter and down 18,000 tons versus the third quarter of 2024, as we emphasized hitting our year-end inventory targets. For the full year, annual corrugated shipment records were set as well. both in total and per day, up 10.5% and 10.1%, respectively, with one more shipping day compared to 2023. Domestic container board and corrugated products prices and mixed together were up 46 cents per share versus the fourth quarter of 2023. Fourth quarter prices and mix, which were impacted by a less rich customer and product mix, compared to the third quarter, were up 5 cents per share versus the previous quarter. Export container board prices were up $0.06 per share compared to the fourth quarter of 2023 and flat versus the third quarter of 2024. As we've indicated, we have continued to see very strong demand and are continuing to experience inflation across most of our cost base. Beginning January 1st of 2025, we began invoicing a $70 per ton increase for liner board and a $90 per ton increase for medium, according to our recent price announcements. These prices have been accepted by our customers and for our market container board purchases, we are paying higher prices to container board suppliers that began invoicing us according to their recent announcement. We were very surprised when, as you are probably aware, a couple of weeks ago, the RISC-E pulp and paper week publication did not recognize any increase in the industry's benchmark prices for either liner board or medium. Industry sources, and the pulp and paper week publication itself have previously reported that at least 12 or around 90% of the top container board producers have issued January price increase announcements. The publication even noted that certain box makers have postponed purchases of liner board this month to avoid the price increase. Yet the publication left the reported prices unchanged. As the industry's open market has shrunk over the years, we believe that the RISI publication is gathering information from a very small sample of the container board market and using that to opine on market conditions for the entire industry. Additionally, the publication often references comments regarding box prices when the relevant product is container board. As you know, boxes are highly customized to customer needs and have different pricing attributes. This continues to be a source of frustration, not only for us, but for our customers who want predictability in their prices. As mentioned previously, we have been moving off of indexing our prices to the RISC-E publication as quickly as contracts allow. However, this will take some time to complete. I'm sure you will have some questions for us on this topic, and we'll be happy to discuss them with you shortly. I'll turn it back to Mark.