Packaging Corporation of America

Good day, everyone. Thank you for joining Packaging Corporation of America's first quarter 2026 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 Q&A session. Please also note today's event is being recorded. I would now like to turn the floor over to Mr. Colzan. Please proceed when you are ready.

Thanks, Jamie, and good morning, everyone. Thank you all for participating in Fact-Gene Corporation of America's first quarter, 2026 earnings release conference call. Again, I'm Mark Kolzan, Chairman and CEO of PCA, and with me on the call today is Tom Hasfer, President, and Kent Flutter, our Chief Financial Officer. As usual, I'll begin the call with an overview of the first quarter results, and then I'll be turning the call over to Tom and Kent, who will provide further details. And then I'll be wrapping things up, and then we'll be glad to take questions afterwards. Yesterday, we reported first quarter net income of $171 million or $1.91 per share. Excluding special items, first quarter 2026 net income was $215 million or $2.40 per share compared to the first quarter 2025 net income of $208 million or $2.31 per share. First quarter net sales were $2.4 billion in 2026 and $2.1 billion in 2025. Total company EBITDA for the first quarter excluding special items was $486 million in 2026 and $421 million in 2025. First quarter net income included special items expense of 49 cents per share primarily for the Lula Mill restructuring charges, as well as for costs relating to the acquisition and integration of the Greif Container Board business, and also costs related to the closure of corrugated products facilities. Details of the special items for the first quarter of 2026 and 2025 were included in the schedules that accompanied the earnings press release. Excluding special items, our earnings increased by $0.09 per share compared to the first quarter of 2025. This increase was driven primarily by higher prices and mix in the legacy packaging segment for 17 cents, lower fiber costs in the legacy packaging business, 11 cents, lower maintenance outage expenses of 9 cents, lower labor and operating costs in the legacy packaging business for 8 cents, higher prices and mix in the paper segment, 2 cents, favorable volume in the paper segment for 1 cent, lower tax rate, 1 cent, and lower share count, 1 cent. These items were partially offset by higher freight costs of 13 cents, lower production and sales volume in the legacy packaging business, 11 cents, higher depreciation expense in the legacy packaging business, 5 cents, higher labor and operating costs in the paper segment for 3 cents, higher corporate and other expenses, 3 cents, Also, the acquired gripe operations, including interest on acquisition indebtedness, generated a loss of six cents during the first quarter, but primarily as a result of lower volume and higher costs due to the January storm that affected the rural mill and the corrugated operations, as well as higher than forecast freight and recycled fiber costs and unfavorable mix. We exceeded our guidance of $2.20 on the strength of our operational and commercial performance during the quarter, including favorable volume and mix in the legacy packaging business and better than expected operating cost performance and lower labor and benefits costs. These were partially offset by higher freight costs and lower than expected earnings from the Greif business. Looking at the packaging business, EBITDA, excluding special items in the first quarter of 2026 of $482 million, with sales of $2.2 billion resulted in a margin of 22% versus last year's EBITDA of $409 million and sales of $2 billion, or a 20.8% margin. We ran at full capacity during the quarter and completed the outage on the COUNTS No. 1 machine during the quarter and completed the outages on the COUNTS No. 2 machine and at the Jackson Mill earlier in April. The Wallula Mill reconfiguration was successfully completed which immediately helped us reduce our costs of fiber, power, and labor. For the quarter, we produced 1,398,000 tons of container board during the quarter. The legacy mills produced 1,210,000 tons of container board, which was 25,000 tons less than the fourth quarter of 2025 and 40,000 tons less than the first quarter of 2025. System-wide, our inventories were down 39,000 tons from the end of the fourth quarter, and we meaningfully reduced the inventories carried by the acquired gripe plants. Operational performance during the quarter was exceptional, with improvement in corrugated demand heading into a very busy outage schedule in the second quarter and an increasingly tight liner board situation. We needed to run well, and our mills delivered. Jackson set new production and speed records. We safely completed the counts outages over the last month, and were able to bring both machines up earlier than scheduled and make up for some of the weather issues earlier in the quarter. While helping us keep up with corrugated demand, in February we saw Riverville produce at approximately 10% higher rate than what it was capable of doing when we completed the acquisitions. A board of directors approved the gas turbine projects for the Jackson, Alabama mill and Riverville, Virginia mills that we talked about on the last call, and we're scoping a third project for the Derrida, Louisiana mill, which we will be submitting in the period of May at the annual board meeting. I'll now turn it over to Tom, who will provide further details on the container board sales and our container board business in general.

Thank you, Mark. Our corrugated operations turned in a very strong quarter in all areas. Domestic container board and corrugated products prices and mix were 17 cents per share above the first quarter of 2025 and up 6 cents per share compared to the fourth quarter of 2025 and up approximately 12 cents, excluding the gripe operations. This is mix-related as mix improves in the legacy PCA business 4Q to 1Q, but declines in the gripe business during the first quarter. Export container board prices were flat with last year's first quarter and down one cent per share from the fourth quarter of 2025. Export sales volumes of container board was up 6,500 tons from the fourth quarter of 2025 and down 13,000 tons from the first quarter of 2025. In the legacy business, corrugated shipments per day were up 2.8% versus last year's first quarter, a new record on a per-day basis. With one fewer workday, total shipments were up 1.2%. We saw good growth across our entire book of business, with legacy shipments running consistently 2% to 3% ahead of last year from the middle of January through the rest of the quarter and very strong so far in April. Even with the situation playing out in the Middle East and higher fuel prices here in the States, we are seeing a resilient economy and continued strength in our customer ordering patterns across the board. We expect the second quarter to shape up similarly to the first in terms of demand and year-over-year growth. As Mark alluded to earlier, we are tight on container board, and we will need continued exceptional performance that we have come to expect from our mill operations to support our customers. Including the acquisition, shipments were up 22% per day and 20% in total compared to last year's first quarter. We began to see the seasonal pickup in the volume and improvement in mix from the acquired operations as the quarter progressed. We're off to a great start in April. We expect to see good sequential improvement in both volume and mix during Q2. We intend to complete systems integration by the end of the third quarter with all operations running on PCA's decentralized systems. As we progressed on our integration efforts, we focused on inventory reduction at the Greif plants and made great progress, reducing carried inventories by around 10,000 tons during the quarter. We have room for further improvement and will continue these efforts in the second and third quarters. We will be working to implement our price increases during the second quarter. Reported container board prices are up net $50 per ton from the beginning of the year. Due to the timing of how things played out, We did not get a meaningful benefit during the first quarter. We have had a lot of individual negotiations with our customers on how to implement this increase, and we are not going into any detail on that. What I can say is that, in general, we expect to start to see the benefit during May with the normal implementation period beginning in June. So we expect some benefit during Q2 with the majority coming during Q3. I'll now turn it back to Mark.

Thanks, Tom. Looking at the paper segment, EBITDA excluding special items in the first quarter was $38 million with sales of $160 million for a 23.6% margin compared to the first quarter of 2025's EBITDA of $40 million and sales of $154 million or a 26.1% margin. Sales volume was approximately 3% above the first quarter of 2025's and approximately 4% above the fourth quarter of 2025. Prices in mix were up 1% from the first quarter of 2025 and flat with the fourth quarter of 2025. We remain very pleased with the performance of the paper business, which continues to generate high margins, driven by strong commercial and operational performance. We are working to implement the previously announced price increases and expect to benefit in Q2. I'll now turn it over to Kent. Thanks, Mark.

Cash provided by operations was $329 million, and after $165 million at CapEx, free cash flow was $164 million. In addition to CapEx, the primary payments of cash during the quarter included dividend payments of $112 million, share repurchases of $59 million, cash tax payments of $18 million, and net interest payments of $11 million. We expect higher cash payments for taxes and interest in the second quarter. We repurchased 266,000 shares during the first quarter at an average price of $228.78. We have approximately $224 million of remaining repurchase authority. Excluding special items, our effective tax rate during the first quarter was just under 23%. This is lower than our forecasted 2026 full-year book effective rate of 25% due to favorability from the vesting of employee equity awards during the first quarter. We expect our second quarter to be approximately 26%. We continue to forecast 840 to 870 million of CapEx and 700 million of DDNA for the year. I'd now like to give you an update on the annual outage schedule and the earnings impact for the year. Our outage expense was $0.14 during the first quarter. We now expect $0.36 in the second, $0.31 in the third, and $0.64 in the fourth, totaling $1.44 for the year. In the packaging segment, accounts and Jackson outages were completed earlier this month, and outages are scheduled at Tomahawk, Filer City, and Wallula later in the second quarter. In the paper segment, the International Falls mill outage is scheduled for the third quarter. Finally, before Mark provides commentary on our second quarter forecast, I want to give you a little bit of detail on some of the sequential differences in costs for 1Q to 2Q. I just mentioned that we will incur approximately 22 cents of additional outage costs in Q2 with maintenance outages at five of the packaging mills. We are also expecting less sequential benefit from 1Q to 2Q in the reversal of cost increase for labor and benefits than we would normally expect. Our employee stock compensation expense will be approximately $17 million higher for 2026 than for 2025 due to a change in timing of the recognition of expenses beginning with the awards we made earlier in the year. This will be evenly split between the second, third, and fourth quarters and this higher expense will time out over the next two to three years as old awards vest. In addition, we were favorable in the first quarter on benefits costs, which we believe was timing related and do not expect to repeat in the second quarter. As for operating costs, we normally benefit from lower fuel costs and better fiber and chemical yields as we move out of winter. This year, fiber and chemical usage benefits will be more than offset by higher input prices across the board on chemicals as well as recycled fiber and, to a lesser degree, wood fiber. Our overall costs in these areas will be higher in the second quarter than in the first. Natural gas prices have remained fairly stable, and we expect to see normal seasonal energy cost improvement on fuel costs and slightly higher purchased electricity costs. And obviously, we will have higher freight costs with higher diesel fuel prices expected to continue into the second quarter. And with that, I'll turn it back over to Mark.

Thank you, Kent. As we move from the first quarter into the second quarter, we expect demand in the packaging segment to remain strong and corrugated volume to increase with one more shipping day and some seasonal improvement, particularly in the acquired gripe operations. Prices for container board and corrugated products will move higher later in the quarter with the implementation of our previously announced price increases and improved corrugated mix. Packaging mill production will be slightly higher with one more operating day and improvements at some of the mills more than offsetting the production impact of maintenance outages across the system. Mill maintenance outage expense will be higher. We expect flat volume and higher prices in the paper segment As we continue to operate at full capacity and implement our previously announced paper price increases, costs for freight, fiber, and chemicals will be up due to higher prices and energy costs are expected to be seasonally lower. The sequential improvement in expenses for wages and benefits that we normally experience from the first quarter to the second quarter will be less than in the past years due to the higher stock compensation expenses and benefits costs in the second quarter that Kent called out earlier. Finally, our tax rate will be higher due to the tax-related benefit of share-based compensation awards as vested in the first quarter. Considering all these items, we expect second quarter earnings of $2.33 per share, excluding special items. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constitute forward-looking statements. Statements were based on current estimates, expectations, and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in the annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. And with that, Jamie, I'd like to open up the call for questions, please.

And at this time, we will begin that question and answer period. If you would like to ask a question, please press star and then 1 using a touch-tone telephone. To withdraw your questions, you may press star and 2. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then 1 to join the question queue. Our first question today comes from George Staffos from Bank of America. Please go ahead with your questions.

Thanks. Hi, everyone. Good morning. Appreciate the details. I guess the first question maybe to start, as always, can you talk a bit about bookings and billings into April, any granularity that you're seeing that you can allay in terms of growth or declines in the quarter so far, and any sense of pre-buy that you're seeing, Mark, just because the price increases have been discussed since January.

Hey, George. This is Tom. Good morning.

Hey, Tom.

Good morning. Now, I'm going to give you the legacy bookings numbers are up at 4.5%. Bookings and billings are up 4.5%. But I want you to keep in mind that, you know, with the Greif assets, we are moving some business back, you know, around within the system. and primarily more from the legacy to the Greif assets as opposed to the other way around. So, you know, we view the business environment as being very good right now. Regarding pre-buy, we see no pre-buy at all right now. In fact, you know, this has been muddy waters, as you might say, you know, regarding the price increases and that sort of stuff at the moment. So we see no pre-buy at this point in time. our customers continue to operate with very lean inventories, and I think they'll continue to do so.

Okay. Thanks for that, Tom. Next question. Can you talk a bit about why Rife was a loss of $0.06 in the quarter? I think that was down – it was a little bit worse than the fourth quarter figure, which I think was $0.05. And how is the business performing as the company typically relays? You're doing better on production. The mills are looking better, yet we've still had some losses there. What's happening there? How's performance? When does that improve? I had one last follow-on.

Hey, George, as we called out on the January call, the January storm impacts were very significant, and quite frankly, the Riverville mill was the most impacted mill in the system. For the better part of a week, we didn't move any production out of there. We called out at your meeting down in Fort Lauderdale. We were probably around a nickel of impact as a result of the storm. Kent, why don't you add a little more color to that?

Yeah, that's right, George. So we had weather impacts. They had not just Riverville, but corrugated operations were disrupted as well, and they don't come back on the sheet feeder side as well as able to make up in the corrugated side. Greif is, and Tom can elaborate on this a little more, Greif is a seasonal business. Mix was a little lower than we'd forecast in January and February, but we turned nicely in March. You know, so all that in, throw in higher recycled and freight costs, and we came in with the number that we reported. Now, on the positive side, rice operations in February were about as good as we've seen them. You know, the productivity at the mills was, you know, as Mark called out in the script, about 10% higher than we'd seen prior to acquisition. And, you know, it was so good, we actually dialed it back a little bit in March in order to bring the inventory levels in where we brought them in. So, Tom, you have any further on that?

I'll just add that, you know, just add a little color to it. You know, we We did not expect, and we're not aware of the seasonality, especially related to the box business side of Greif, in terms of the first quarter. So the first quarter is by far their weakest quarter in terms of volume, and then it accelerates after that all the way through the year. So, you know, that was a bit of a surprise to us, but yeah, The good news is it's returned in the second quarter quite nicely and exactly, you know, as they had forecast. So that's the good news. And then this also is allowing us some flexibility in the system to really move some business around to be more efficient in terms of our operations. And also don't forget that there was a lot of activity and a lot of work still going on in the mill system of Greif during that first quarter.

Understood. Last one, and I'll turn it over if possible. Is there a way to provide some further quantification or at least direction on the sequential changes? So, we know what the outage hit will be, 2Q versus 1Q. You talked about the stock comp expense being up, I think, $17 million. But what does that mean in terms of the 1Q to 2Q variance? And is there a way to, if not precisely, maybe ballpark a bit for us, freight, energy, other costs, what that inflation looks like, 1Q to 2Q. Tax, I think, is like a, you know, call it 6, 7, 8 cent effect, 1Q to 2Q. Thank you so much. Have a good quarter.

Okay, George, I'll tackle that one. So on the stock comp expense, we called out we'd be $17 million higher. So that means 2Q is going to look much more like 1Q than it has historically in the past where you were beneficial 1Q to 2Q, okay? So we'll be running maybe $6 million higher in 2Q than we were in 25. On some of the others, so freight, fiber chemicals, you know, estimate maybe 15 cents higher, one Q to two Q. Normally, you know, we're flat to slightly beneficial in those areas. Okay, so that's a, you know, that's a little bit of a drag there. And George, I'm sorry, I think I'm missing one of the other sub parts of your question.

Yeah, tax I think is, we can do our own calculations, but that's probably a nickel dime. Yep. Thanks very much.

Thanks, George. Next question, please.

Our next question comes from Michael Roxland from Truist Securities. Please go ahead with your question.

Hi, guys. This is Nico Pacino from Mike. Thanks for taking my questions. Just first off, kind of to piggyback off the cost question, what do you have at your disposal outside of price to cost of this cost, recognizing that you know, in 2Q, it seems like you might have some uncovered costs with the price impact really hitting later in the quarter.

As far as levers to deal with cost, I mean, obviously, the only thing you can do is run incredibly well, very efficiently, and just execute at the top of your game, which we generally do that, but... That's what we're facing with the headwinds on some of the price escalation.

I think the other thing that we're doing is we are optimizing the mill system now, now that we have Massillon and Riverville running, you know, much better and much more reliably. So we're moving that mix around to the mills that are best suited to run that mix and from a freight standpoint are better off. Then we also are doing that in-the-box business as well within the Greif system. As I mentioned, we are moving quite a bit of business around to optimize that system and to optimize our freight opportunities. Outside of that, you know, as Mark said, we have to operate incredibly well. And that's the gist of what we've got in our arsenal to offset some of these cost increases.

Got it. Understood. I appreciate that. Just quickly on Greif, you know, having owned, I guess, the business for eight months now maybe, putting quite a bit of work into the mills, do you have any sense of upside to the original $60 million synergy target now that you've kind of progressed through integration and getting the mills on the system?

So without upside, but I think I should give you at least an update of what we're looking at right now. Based on what we saw, what Riverville and Massillon could do in February, we're You know, we're going to be at a run rate of about $15 to $20 million of just productivity improvements from those mills. We will then start layering in over the next few quarters freight optimization, and actually, I mean, that's ongoing right now. That's not a future thing. That's ongoing right now. But freight optimization and then, you know, integration opportunities from, you know, additional tonnage from PCA into the Greif system as well as from Greif into the PCA system. So that work is ongoing, but at least I wanted to give you an update of kind of where we were at from a run rate standpoint right now. We're well on target to be at that 30 million run rate by the end of the year. Mark and Tom, anything further to add there?

No, just work continues on a daily basis to take advantage of all these opportunities.

Got it. Understood. Thank you very much. I'll turn it over.

Next question, please.

Our next question comes from Mark Adam Weintraub from Seaport Research Partners. Please go ahead with your question.

Maybe just first starting a little bit more on Grife, trying to square. So if we look at the last six months based on kind of the EPS number, I mean, it seems to me it's probably a little less than $100 million in EBITDA from the business. And I believe kind of coming in, the base was close to 240, and then we were going to get synergies on top. And I realize maybe synergies show up in the legacy business as well, so maybe this is kind of complicating the analysis. But I'm really sort of just trying to gauge the magnitude of upside from things like seasonality, et cetera, et cetera, of how much additional firepower is there relative to what we've seen in Grife over the last six months when you think about the contribution the business can be providing on a kind of full-year basis as the synergies, et cetera, are fully layered in and the mix and seasonality issues come to bear more favorably?

Okay, Mark, it's Kent. I will start, and then Tom will add some color on this, okay? Okay. Going from 1Q into 2Q, we believe now we're going to get the full performance out of this business. You know, with the mills running consistently at higher productivity rates and entering a seasonally stronger business and starting to pull some more integration through, you know, we're forecasting sequentially improvement of, you know, conservatively about 10 cents 1Q to 2Q. So we expect to be accretive in the second quarter and going forward. most of that improvement is from mix improvement and productivity improvement, and then, you know, a little bit of price increase layered on top of that. We expect then to continue to improve, you know, 3Q just as the business and the seasonality even improves more. Tom?

Well, I would just remind you, Mark, that, you know, when we – When we finalized the acquisition and we got involved in, you know, taking a good hard look at the assets, primarily the mills, we knew there was some difficulty, you know, and some hard work to do. And it turned out that we were right, okay. And so it's, you know, we get off to a start that says, you know, we're going to have to shut some time down at the mills and get some work done. and make a big investment and do all those other sorts of things associated with it. And now we're coming on the other side of that, and things are significantly, you know, better, and they're performing very, very well. So, you know, this will accelerate as we go forward. And as I mentioned earlier, I think this is really, you know, vital to our system because we need some extra capacity on the box side as well, and they're providing that, and that's going to be some significant upsides.

Okay, great. And I'm not going to try and drag you through kind of all the delta drivers, but I guess as I think about what seems to be embedded on the upside, because you told us some of the downsides going from 1Q to 2Q, it doesn't seem like there's a huge amount of upside being given for some variables, which I, you know, in particular pricing, in that the two quarter numbers. Is it fair to say that that you would at this juncture, assuming things continue along the path they are, that you're going to see the real big change is going to be 2Q to 3Q. That's where the earnings are going to really, and to the extent that you're comfortable providing any color on that, that would be helpful. I realize you don't give guidance more than one quarter ahead, but it does seem in this particular instance, the good stuff is really showing up in 3Q in a big way.

Mark, you're exactly right. We'll start seeing some benefit later in the second quarter with some price movement, but the big benefit comes into the third quarter. That's right. That's exactly correct. Okay. Thank you. Thank you. Next question, please.

Our next question comes from Anoja Shai from UBS. Please go ahead with your question.

Hi. Good morning, everyone. Morning, everyone. Morning. I had a question on DNA. It was actually much higher than I expected in Q1, but you maintain 700 million guidance. So how come it's not straight-lined, first of all, for the quarter? And second, what's embedded in Q2Q in that $2.33 guide?

Hey, Anoja, our – Our depreciation reported for the first quarter includes a chunk that's attributable to basically completion of the WALUA restructuring, okay? So I think that explains the, you know, the large reported number increase that you're referring to. So on the excluding special items basis, we're looking at about a three-cent increase, one Q to two Q, in DD&A.

Okay. Thank you for that. And then going back to demand in April, you talked about you're seeing very strong demand. Any particular end market showing strength or weakness? And what I'm really trying to get to is if you're seeing any early signs yet on GLP impact. And I realize you might not see it as much as some other types of packagers, but just are you hearing anything on this from your customers?

This is Tom. That's a very good question. I'll take the second half first. Our food and beverage customers continue to perform quite well, and, of course, that's the largest segment in corrugated. And so I think there's a lot of sensitivity around that, especially GLPs. But, you know, they adapt quickly. And, you know, we're seeing a lot of products come out with protein in them and all these other sorts of things that are, you know, that didn't have such in the past, and they're performing very well. So there's a lot of things going on in that segment that I think are very positive as our customers have adjusted quickly to varying demands, and it's still performing very well for us. In addition, I think that I've called out building products, you know, probably for the last few years that has been down, but it's starting to show some resurgence as well, which is an important segment for us. Those are probably the biggest movers I can talk about.

Great. Thank you very much. I'll turn it over.

Thanks, Anarja. Next question, please.

Our next question comes from Anthony Petnari from Citi. Please go ahead with your question.

Good morning. Morning. Hey, just following up on the timing of the price hike, I guess Pulp and Paper Week had prices down in February and then up in March and up in April again. And, you know, as you implement the price hike, is this sort of a, I don't know, like a negotiation around the net price? Or could you have some instances where prices actually go down before they go up? I know it's kind of a strange question, but I just can't remember exactly. a time where Pulp and Paper Week had three consecutive months where it was down before it was up and then up again.

Well, it's hard for me to remember, too, Anthony, and I've been in this business a long time. But all I can tell you is that we're not really going to comment much on it at all about, you know, what we're doing relative to our customers and our negotiations. I'll just call it muddy. How about that? And that's about all I can tell you.

Okay.

Okay. Sounds good.

And then just, Kent, on the 1Q to 2Q bridge, you outlined some, I guess, sequential headwinds that we typically don't see around the share-based comp and then the tax rate lower in 1Q. Should we think about these as sort of like one-time things just for 2026? Or if we think about seasonality going forward or seasonality next year, is that share-based comp going to have a similar impact?

kind of profile or... Okay, so share-based comp is going to run at a higher level this year. It'll run at a higher level next year, but step down a little bit as one tranche of the old awards vests. And then it'll do similarly in 28. So you're going to be a little bit higher, but it's going to time out through 28, basically. On the other items, you know, the cost... It's just going to kind of depend on the market, basically. And, you know, we're expecting at least to be elevated during second quarter, and, you know, we'll continue to manage through it.

Okay. That's helpful. Maybe just one last one, if I could. Like, you obviously increased your exposure to recycled board with Greif. You had a large competitor that just bought a recycled mill out west. I'm just wondering, if you think about, you know, PCAs, you know, half, you know, for the next three to five years, and you obviously are going to need more board. Do you think the incremental opportunity is in recycled? I mean, it's obviously probably lower capital costs, just from like what your customers are asking of you. You know, you have a historically had a great, you know, virgin craft liner offering, but is recycled kind of the direction going forward in terms of you, you know, where to put in an incremental ton or from a capacity perspective?

You know, you take advantage of the opportunity that comes along, whether it's a recycled opportunity or a virgin craft opportunity. And so, you know, really, the decision will be made when you look at the various options you have. But we're certainly not, you know, we can take advantage of recycled as we've done for decades, and also we know how to run integrated operations extremely well also.

Yeah, Anthony, I'll just add that, you know, directionally we want to be able to optimize whatever properties fit our customers' demands. But I want to remind you that, I mean, we are still primarily, you know, virgin craft, and we're not going to change that because one of the things that it does for us, as I've mentioned in the past, is, we can optimize performance a lot better with virgin craft than we can with recycled.

Got it. Got it. That's very helpful. I'll turn it over.

Thank you.

Next question.

Our next question comes from Phil Ong from Jefferies. Please go ahead with your question.

Hey, guys. A question for Ken. Appreciate the color that you gave in terms of some of the step-up in cost, whether it's freight or chemicals sequentially. When we think about that for the back half, is the 2Q run rate, like on the year-to-year basis, like a good way to think about the rest of the year, or does that potentially step up just based on timing of how these contracts were potentially on freight or chemical costs and stuff of that nature?

Hey, Phil, I think the best you can do right now is take 2Q and apply that for the rest of the year. And we'll do the best we can. We'll do the best we can to manage through it through freight optimization activities and, you know, running our operations as efficiently as possible. But, you know, in terms of how the market is on what we're buying, again, I would look at 2Q right now. That's the best you can do.

Okay. All right. That's helpful. That's a good front right. And then I guess a question for Tom. I know you used the word muddy a few times in terms of implementing things. uh, this box price increase. And that's, that feels like it's just more timing. It was some of the noise, but you know, when we think about the net 50, yeah, you've been in this business for a long time. Is your expectation, the implementation of the box side all said and done, how does that feel? Does this feel more challenge just because the macro is tougher or kind of business as usual?

No, it's more business as usual. I mean, there's not, you know, it's not, you know, none of these are, none of these are easy, but, uh, You know, we were obviously very disappointed with the downturn, you know, the announced downturn at the beginning. We didn't see it, but, you know, hey, it is what it is, and we're dealing with it. But, you know, our expectation is to implement this, you know, in the same time frames that we typically always implement, both our non-contract and our contract business.

Okay, that's helpful.

And Phil, I'll add one thing that I think is really important is that the consumer has been very resilient in these times. And our customer base feels very good about their business going forward. And there's a big factor coming in also that we haven't even talked about, and that is the tax refunds that are coming to the consumers. And that will show up in the economy as well. So I think that's another positive for us that's going to help us in the second half.

That's great color, guys. When I bring those two pieces together, I know there's a timing dynamic in 2Q. Should we expect price-cost to be neutral, positive? How do we think about it? I know there's definitely noise in 2Q, but as we look at the back half, can you help us think through that?

Well, like we said, you know, I mean, the price will impact at the end of Q2 and then we'll, you know, really roll in in Q3. That's when you'll see the big difference.

Okay. And just one last one for me. You guys are running hard. Bills are running tight. I know you guys are bringing on capacity in time with Jackson and Count. How is that ramping up? And then anything that we should be mindful in terms of, noise to the P&L, whether to step up the startup cost, DNA. And then, Greif, you guys are working that inventory down, which makes that you want to be more efficient. But if you're that tight, why don't you just use that inventory to kind of meet some of that demand?

Let me talk about your first part of the question. You know, we just executed the two big outages at Jackson and Counts and executed them very well. And A lot of that work was to gear up Jackson as an example to hit the next productivity opportunities with the speed on the machine. And so where we want to be, that was done well. Counts, we just executed the first phase of a rebuild on number two paper machine. That machine had been rebuilt 35 years ago. And so we executed that and finished that work four days ahead of schedule and started up running very well. So We continue to bring on this capability to deliver more quality product as we need it. And also just, you know, the grife system. We fully have, you know, recognized the opportunities that we saw when we did the due diligence. We're running, you know, basically the last couple of months we've been in that 97% plus, you know, performance as far as uptime efficiency on the machines.

of the massalon and riverville system and we continue to work through opportunities there so so that will continue to uh to see benefits so tom yeah one of the reasons that we reduce the inventory and we're working down the inventory quickly is because we want those sheet feeders and box plants to be running the correct grades uh that run for the front for the pca system so they can optimize we can optimize the fiber in terms of performance for the customer. They're not just stuck with running whatever one of their two mills might run, you know. So that's really important to us from a cost standpoint going forward, as I mentioned earlier, is to optimize those assets. And so, therefore, that's why we're doing what we're doing. But But you make a good observation. I mean, it is tight. And, you know, especially in the liner board. So, you know, we're cognizant of that. And that's why we, that's as an example also why we moved the counts outage up into the first quarter to make sure that we're going to be in good shape going forward from a liner board point of view.

That makes a lot of sense. Thank you, Tom.

Next question, please.

Our next question comes from Hilary Casanato from Deutsche Bank Securities. Please go ahead with your question.

Hi. Thanks for taking my question. So you mentioned a third gas turbine project in Louisiana. Could you just provide more details on that project, you know, in terms of additional topics and timeline and any update on the gas turbine projects in Gadsden and Riverville facilities? Thank you.

Yeah, you know, we did get the board approval on the gas turbine projects at Riverville Mill and Jackson Mill at the last board meeting, and then we're planning on seeking approval for this third same duplicate unit that will be going in those two mills for the future Derrida project. The capital, it's in the same ballpark. I don't want to give you numbers right now until after we've reviewed this with the board, but Same capital allocation and the same type of return metrics that we're looking at. Very, very good opportunities to – which would give us Jackson, Riverville, and DeRidder would be electricity independent off the grid in the same manner that Valdosta is. So we'd have four of our 10 mils that are electricity independent, which would be a huge benefit to us. So – That's really all I want to say about that.

Got it. Great. Thank you. And then just on the high level, you know, what needs to change to bring, you know, to bring the cost down? I mean, do you think if the war, hypothetically, if the war is, you know, war ends tomorrow, hypothetically, like, does that change anything for you in terms of, you know, cost outlook or because it takes time for supply chain to adjust, like, if that really wouldn't change anything?

Well, again, I think what the conflict has done in the Middle East is Raw materials such as various chemicals that depend on petroleum, we've seen chemical costs increasing. So the question is, does that ramp down over a period of time if the supply-demand balance for petroleum products comes into balance again? We'll have to wait and see. Natural gas, we've been fortunate here in the United States. We have plenty of supply, so we're not impacted by that. Transportation fuels have been the big increase on diesel, up over 50% in the last few months. So that definitely, for all intents and purposes, should normalize over a period of time if the conflict winds down. And so I would expect what we would see would be the transportation costs in terms of diesel impacts.

Got it. Great. Thank you so much.

Thank you. Jamie, are there any other questions? I don't see anybody else on the queue. Anybody want to follow up?

If anyone would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. We do have an additional question. This question comes from Pawan Natal from Barclays. Please go ahead with your question.

Hi. Thanks for taking my question. Just one for me. So at the start of the year, you had said you expect the total investor demand to be up in 2026. So just wanted to follow up on that. I mean, four months almost done. Anything that you can add on that or quantify in terms of industry demand for 2026?

Let me end up. I think I understood your question regarding demand. And demand, you know, yes, we think demand is up. And, you know, we're – and I gave you the number, at least for legacy, you know, is running at about 4.5% right now. And, you know, that's a very good number, and I think that will continue through the quarter. And we'll continue to, you know, and we've got some positive things going on in some of our key segments as well. So, yes, we see demand improving.

My question was more on the industry demand for the year. Any comments on that? Clearly, I think you are gaining share in terms of industry demand for 2026.

I'm not sure we understand what you're asking.

Hello. I'm just going to ask anything in terms of overall industry demand for 2020, like 1%, 2% for the year?

Now, you know, we don't get into forward discussions about demand expectations. Other than our own. Other than this quarter and, you know, for what we're looking at for this quarter.

Okay. Thank you.

Okay. Thank you. Jamie, I think that pretty well wraps it up. Anything else?

We do have a follow-up from Mark Adam Weintraub from Seaport Research Partners.

All right. We've got time. Go ahead, Mark. Sure. Super. Thank you. So my phone cut out. I think you might have addressed this a little bit, but did you buy back stock? I think you were saying something again. My phone cut out. I just wanted to confirm that you did buy back some stock during the quarter, and what prompted that?

No, Mark, we did. We bought back stock. 266,000 shares, roughly. Really, the prompt was we'd award it earlier in the quarter just to take out the dilution from the awards.

Fair enough. Thank you. Thanks, Mark.

And in showing no additional questions, Mr. Colvin, would you like to make any final closing comments?

I'd like to thank everybody for taking the time to be with us today and look forward to speaking with you at the end of July regarding the second quarter results. Have a good day, everybody. Thank you.

And with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.