Packaging Corporation of America

Good morning, everyone. Thank you for joining Packaging Corporation of America's first quarter 2025 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 Q&A session. I would now like to turn the conference call over to Mr. Colzan. Please proceed when you are ready.

Thank you, Jamie. Thank you, Jamie. Good morning, everyone, and thank you all for participating in Packaging Corporation of America's first quarter 2025 earnings release conference call. Again, I'm Mark Colzan, Chairman and CEO of PCA, and with me on the call today is Tom Hasfurther, President of PCA, and Bob Munday, our Chief Financial Officer. I'll begin the call, as usual, with an overview of the first quarter results, and then I'm going to turn the call over to Tom and Bob, who will provide further details. After that, I'll wrap things up, and then we'll be glad to take questions. Yesterday, we reported first quarter net income of $204 million or $2.26 per share. Excluding special items, first quarter 2025 net income was $208 million or $2.31 per share compared to the first quarter of 2024 net income of $155 million or $1.72 per share. First quarter net sales were $2.1 billion in 2025 and 2 billion in 2024. Total company EBITDA for the first quarter excluding special items was $421 million in 2025 and $333 million in 2024. First quarter net income included special items expenses of 5 cents per share, primarily for the closure costs related to corrugated products facilities. Details of special items for both the first quarter of 2025 and 2024 were included in the schedules that accompanied the earnings press release. Excluding the special items, the 59 cents per share increase in first quarter 2025 earnings compared to the first quarter of 2024 was driven primarily by higher prices in mix of 78 cents per share and volume, $0.27 per share in the packaging segment. Higher prices and mix in the paper segment, $0.01, lower freight and logistics expenses, $0.01, and lower scheduled outage costs, $0.01. Partially offsetting these improvements, operating costs came in about where we expected at $0.37 above last year's levels. Although we did see lower fiber prices during the quarter, we continue to experience inflation across most of our cost structure. Our focus on operational efficiency, cost reduction initiatives, capital project execution have helped minimize the negative impact of the persistent inflation. In addition, paper segment volume was lower by two cents. Depreciation and other expenses were higher by three cents per share. Our tax rate was higher by 4 cents per share, and we had higher interest expense of 3 cents per share. The results were 10 cents above the first quarter guidance of $2.21 per share, primarily due to higher prices and mix in the packaging segment. Looking at the packaging business, EBITDA, excluding special items in the first quarter of 2025, of $409 million with sales of $2 billion resulted in a margin of 21% versus last year's EBITDA of $326 million and sales of $1.8 billion or an 18% margin. Excellent margin improvement for the quarter was driven by sound execution in our price increase implementation, solid box shipment volume, record container board production, and outstanding operational performance at our mills and box plants. We were also able to end the quarter at targeted inventory levels, which puts us in great position compared to last year's historically low inventories. 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 impact from the persistent inflation we currently see across most of our cost structure, but also to capitalize on our longer-term strategic goals. I'll now turn it over to Tom, who's going to provide further details on container board sales and the corrugated business.

Thanks, Mark. The disciplined implementation of the price increases for liner, medium, and boxes, according to our announcements, was a significant contributor to this year's first quarter results. Domestic container board and corrugated products prices and mix were 72 cents per share above the first quarter of 2024 and up 41 cents per share compared to the fourth quarter of 2024. Export container board prices were up 6 cents per share versus last year's first quarter and down 1 cent per share compared to the fourth quarter of 2024. Although we began to see some pullback in the middle of the quarter related to the uncertainty created by trade tensions around the world, box demand was solid and exceeded a very strong comparative period in last year's first quarter. Total volume and shipments per day in our corrugated products plants were up 2.5% versus last year's first quarter when per day shipments were up 11% over the previous year. Also, in addition to supplying record container board production volume to meet the integrated needs of our box plants, Outside sales volume of Container Board was 30,000 tons above the first quarter of 2024 and 6,000 tons above the fourth quarter of 2024. As we look ahead to the second quarter, we expect the economic uncertainty to continue weighing on demand. However, we still believe the box shipments will be higher than the first quarter and above last year's tough comp, which was up 9.2% over the previous year. Regarding the strategic capital plan for our converting plants, I'd like to mention that in March, we had a successful startup of our new state-of-the-art, high-efficiency, full-line box plant in Glendale, Arizona. The 365,000 square foot plant was started up ahead of schedule, significantly below budget, and all equipment was operational during the first week of production. Previously, we were limited in our ability to serve and grow with our customers in this key marketplace due to the plant's limited capability and aging equipment that required us to pull from several different locations, some of which were quite far away geographically. Our new plant will increase box capacity by almost 2 billion square feet, significantly increase productivity on a unit labor hour basis, reduce costs, and allows us to optimize our service capabilities not only in the Phoenix area, but also in the growing markets in Las Vegas and portions of California. I'll now turn it back to Mark.