NYSE:PKG Packaging Co. of America Q4 2023 Earnings Report $189.15 +4.46 (+2.41%) As of 03:59 PM Eastern Earnings HistoryForecast Packaging Co. of America EPS ResultsActual EPS$2.13Consensus EPS $1.83Beat/MissBeat by +$0.30One Year Ago EPS$2.35Packaging Co. of America Revenue ResultsActual Revenue$1.94 billionExpected Revenue$1.90 billionBeat/MissBeat by +$34.28 millionYoY Revenue Growth-2.00%Packaging Co. of America Announcement DetailsQuarterQ4 2023Date1/25/2024TimeAfter Market ClosesConference Call DateThursday, January 25, 2024Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by Packaging Co. of America Q4 2023 Earnings Call TranscriptProvided by QuartrJanuary 25, 2024 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Thank you for joining Packaging Corporation of America's 4th Quarter and Full Year 2023 Earnings Results Conference Call. Your host today will be Mark Colzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, will be a question and answer session. I'd now like to turn the floor over to Mr. Colzan. Operator00:00:21Please proceed when you're ready. Speaker 100:00:24Thank you, Jamie. Good morning, everyone, and thank you all for participating in the Packaging Corporation of America's 4th quarter and full year 20 23 Earnings Release Conference Call. Again, I'm Mark Kolzand, Chairman and CEO of PCA. And with me on the call today is Tom Hassfurther, Executive Vice President, who runs the Packaging Business and Bob Mundy, our Chief Financial Officer. As usual, I'll begin the call with an overview of the Q4 and full year results, and then I'll be turning the call over to Tom and Bob, who'll provide further details. Speaker 100:00:56After they're done, I'll wrap things up and then we'd be glad to take questions. Yesterday, we reported 4th quarter 2023 net income of $189,000,000 or $2.10 per share. Excluding special items, 4th quarter 2023 net income was $192,000,000 or $2.13 per share compared to the Q4 of 20 22s net income of $215,000,000 or $2.35 per share. 4th quarter net sales were $1,940,000,000 in 2023 $1,980,000,000 in 2022. Total company EBITDA for the 4th quarter excluding special items was $394,000,000 in 2023 and $409,000,000 in 2022. Speaker 100:01:55Excluding the special items, we also reported full year 2023 earnings $784,000,000 or $8.70 per share compared to the 2022 earnings of $1,040,000,000 or $11.14 per share. Net sales were 7,800,000,000 in 2023 $8,500,000,000 in 2022. Excluding special items, Total company EBITDA in 2023 was $1,600,000,000 compared to the $1,900,000,000 in 2022. 4th quarter and full year 2023 net income included special items primarily for certain costs at our Jackson, Alabama mill for the paper to containerboard conversion related activities and the closure and other costs related to corrugated products facilities and design center. Details of all special items for the year 20232022 were included in the schedules that accompanied our earnings press release. Speaker 100:03:03Excluding the special items, the $0.22 per share decrease in Q4 2023 earnings Compared to the Q4 of 2022 was driven primarily by lower prices and mix of $1.93 In the Packaging segment, lower prices and mix $0.04 and volume $0.03 in the Paper segment and higher depreciation expense $0.10 These items were partially offset by very good volume in the Packaging segment of $1.07 per share. We also had lower operating and converting costs of $0.51 driven by very good process efficiencies and control over other usages of fiber, chemicals, energy, materials and labor as well as lower energy and wood fiber prices. In addition, we have lower scheduled maintenance outage expenses of $0.19 lower freight and logistics expenses $0.03 lower other expenses $0.04 and a lower share count resulting from share repurchases $0.04 The results were $0.37 above the 4th quarter guidance of $1.76 per share, primarily due to higher volumes in our Packaging segment, lower operating and converting costs, lower freight and logistics expenses. Looking at the Packaging business, EBITDA excluding special items in Q4 of 2023 of $385,000,000 with sales of $1,800,000,000 resulted in a margin of 21.7% versus last year's EBITDA of $392,000,000 and sales of $1,800,000,000 and also a 21.7% margin. Speaker 100:04:53For the full year 2023, Packaging segment EBITDA excluding special items was $1,600,000,000 with sales of $7,100,000,000 or 21.8 percent margin compared to the full year 2022 EBITDA of $1,800,000,000 with sales of $7,800,000,000 or a 23.8% margin. Throughout the quarter, demand in the Packaging segment was stronger than our expectations. This higher volume along with the operational benefits of our spending program and continued emphasis on cost management and process efficiencies across the entire manufacturing and converting facility system drove operating and converting costs lower as well. We had an excellent restart of the Wallula Washington Mill and the number 3 machine during the latter part of October and ran exceptionally well during the November December period. And that helped us meet the stronger demand and build some needed inventory during the quarter to ensure the customers that our customers are supplied with their needs. Speaker 100:06:05We plan to restart the number 2 machine at the Wallula Mill in this first quarter to help manage our expectations in the first half of twenty twenty four for continued strong demand together with scheduled mill maintenance outages and the final phase of the containerboard conversion of the number 3 machine at our Jackson, Alabama mill. I'll now turn it over to Tom, who'll provide more details on containerboard sales and the corrugated business. Speaker 200:06:32Thank you, Mark. As Mark mentioned, Packaging segment volume for the quarter exceeded our guidance estimates. Corrugated product shipments per workday were up 5.1% and total shipments with 1 additional shipping day were up 6.9% compared to last year's Q4. Versus the Q3 of 2023, Shipments per day were up 5.2% and total shipments were up 3.4% even though there was one less shipping day. Outside sales volume of containerboard was 88,000 tons above last year's Q4 and 17,000 tons above the Q3 of 2023. Speaker 200:07:11Our order backlog and containerboard cut up remain incredibly strong throughout the quarter. Although demand continues to be challenged by persistent inflation, higher interest rates and factors. We expect our shipments to continue this positive momentum as we enter the first half of twenty twenty four. Relative to the published reductions in the industry benchmark grades that occurred in 2023, domestic containerboard and corrugated products prices and mixed together were $1.73 per share below the Q4 of 2022 and down $0.40 per share compared to the Q3 of 2023, which included a richer mix of graphics and point of purchase display business. Export containerboard prices and mix were down $0.20 per share compared to the Q4 of 2022 and down $0.01 per share compared to the Q3 of 2023. Speaker 200:08:03Beginning January 1, 2024, we began invoicing a $70 per ton price increase for linerboard $100 per ton increase for medium according to our recent price announcement. As you are probably aware, this past Friday, the RISI Pulp and Paper publication did not recognize any increase in the industry's benchmark prices for either linerboard or medium. 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. Speaker 100:08:33Thanks, Tom. Looking at the Paper segment, EBITDA excluding special items in the 4th quarter was $35,000,000 with sales of $144,000,000 or a 24.5 percent margin compared to the Q4 of 20 22's EBITDA of $39,000,000 and sales of $154,000,000 or 25.7 percent margin. For the full year 2023, Paper segment EBITDA excluding special items was $151,000,000 with sales of $595,000,000 or a record 25.3 percent margin compared to the full year 2022 EBITDA of $132,000,000 with sales of $622,000,000 or a 21.3% margin. Prices and mix were down 3% from last year's Q4 and from the Q3 of 2023 driven by the declines in the index prices that occurred during year. Although slightly better than our 4th quarter guidance, sales volume was 3% below last year's 4th quarter and down approximately percent versus the seasonally stronger Q3 of 2023. Speaker 100:09:45The management team and all the employees of our paper business have done a tremendous job over the last several quarters to optimize our inventory and product mix and remain focused on efficient and cost effective operations order to continue delivering outstanding results during 2023. I'll now turn it over to Bob. Thanks, Mark. Speaker 300:10:07Cash provided by operations during the quarter totaled $335,000,000 and free cash flow was $194,000,000 The primary payments of cash during the quarter included capital expenditures of $141,000,000 dividend payments of $112,000,000 cash tax payments of $59,000,000 and net interest payments of $26,000,000 For the full year 2023, cash from operations was $1,300,000,000 with capital spending of 4 $70,000,000 and free cash flow a record $845,000,000 Our final recurring effective tax rate for 2023 was 24.5%. During the Q4, we issued $400,000,000 of new 10 year notes. The proceeds from these notes will be used to redeem our $400,000,000 notes that mature in September of 2024. Our net debt is not affected by this transaction and the proceeds from this issuance will be invested in marketable securities at an interest rate exceeding that of the new notes. The new bonds raised our overall fixed interest rate by approximately 30 basis points and extended the overall average maturity of our debt portfolio from 14.1 years to 15.6 years. Speaker 300:11:31Excluding the proceeds from this transaction, our year end cash on hand balance including marketable securities was just over $800,000,000 with liquidity of $1,100,000,000 Regarding full year estimates of certain key items for the upcoming year, we expect total capital expenditures to be in the range of $470,000,000 to $490,000,000 and DD and A is expected to be approximately $530,000,000 We estimate dividend payments of $450,000,000 and cash pension and post retirement benefit plan contributions of 27,000,000 Our full year interest expense in 2024 is expected to be approximately $53,000,000 and net cash interest payments should be about $60,000,000 The estimate for our 2024 book effective tax rate is 25%. Currently, planned annual outages at our mills in 2024, including lost volume, direct costs and amortized repair costs is expected to total $0.96 per share. The current estimated impact by quarter in 2024 is 0.26 dollars per share in the Q1, dollars 0.16 in the 2nd, dollars 0.19 in the 3rd and $0.35 per share in the 4th quarter. These expenses include the volume and cost impact that will be incurred during the completion of the final phase of converting the number 3 machine at the Jackson Mill to containerboard during the 1st and second quarters. Speaker 300:13:11This will negatively impact our first quarter results by approximately $0.16 per share and our 2nd quarter results by $0.08 per share. I'll now turn it back over to Mark. Speaker 100:13:23Thank you, Bob. I'm very proud of the outstanding results PCA delivered in 2023 under very challenging demand conditions. We successfully completed numerous cost reduction and process improvement projects along with other key strategic initiatives at the containerboard mills and corrugated products plants. Our dedicated sales and customer service organizations continue to be their opportunities and their challenges. These combined efforts allowed us to enhance our entire packaging business and deliver profitable growth opportunities for our customers and shareholders now and into the future. Speaker 100:14:102023 also saw our paper business deliver record margins reflecting the capabilities of our employees to optimize our product mix, inventory, distribution channels and overhead structure along with running very efficient manufacturing operations. These accomplishments helped us to achieve a new all time annual record free cash flow. We ended the year with over $1,100,000,000 of liquidity and extended the overall average debt maturity to almost 16 years. We continued our commitment to a strong balance sheet and a balanced approach towards capital allocation. This allows us to profitably grow the company and to maximize returns for our shareholders while maintaining the financial flexibility to react quickly to situations and opportunities. Speaker 100:15:00None of these things would be possible without the hard work of the talented employees and strong partnerships we've built with our customers and suppliers over many, many years. Looking ahead as we move from the 4th and into the Q1, as Tom indicated in our Packaging segment, we expect continued positive momentum in demand along with 2 additional shipping days in the Q1 to drive higher total corrugated product shipments. Despite restarting the number 2 machine at the Wallula Mill, containerboard will be lower due to the downtime associated with the conversion of the number 3 machine at the Jackson Mill and a scheduled maintenance outage at the Counts Tennessee Mill. Prices and mix should be slightly higher with the implementation of our announced January price increases, partially offset by a decrease in the published benchmark prices that occurred late in 2023 with export prices fairly flat. In our Paper segment, we expect an improved mix to move prices slightly higher with flat sales volume. Speaker 100:16:04Recycled fiber and energy prices will be higher And unusually cold seasonal weather will negatively impact usages and yields for energy, wood and chemicals along with higher operating costs with the restart of the full operations at the Wallula Mill compared to the 4th quarter operations. Labor and benefits costs will have Seasonal timing related increases that occur at the beginning of a new year related to annual wage and benefit increases. The restart of payroll taxes and share based compensation expenses. And finally, as Bob mentioned, scheduled outage expenses will include the significant 1st quarter impact of the conversion outage at the Jackson Mill, which is estimated to be $0.16 per share. Considering these items, we expect 1st quarter earnings of $1.54 per share. Speaker 100:16:56And with that, Jamie, I'd like to open the call for questions And we can proceed as you call it out. Thanks, Jamie. Operator00:17:05Ladies and gentlemen, at this time, we'll begin the question and answer session. Our first question today comes from Mark Weintraub from Seaport Research Partners. Please go ahead with your question. Speaker 400:17:35Thank you. First, congrats on another really strong year in a challenging environment. The so you say in the press release That you are expecting a little slightly higher pricing despite the $20 decrease in November and obviously you're including some from The January increase, which as you mentioned, we're going to have questions undoubtedly. The is that fair to say that you're including a little bit more than $20 On average in the 1Q, how should we think about that? Speaker 200:18:10Yes. Mark, this is Tom. Yes, well, it's slightly above the $20 We've got the follow through on that published $20 down. And as I said, we put the linerboard at medium price increase into effect January 1st. And we're invoicing accordingly and getting paid accordingly. Speaker 200:18:34And I might also add that as a net buyer, We also have accepted the $70 increase on the buy side and have been paying invoices accordingly. Speaker 400:18:46Okay. And so just to clarify, so when you said net 2020, was that the increase minus the impact of the $20 or was that that you're effectively because of the way the lags work etcetera as you push it through into box prices that the impact of the $70 that's been announced is slightly more than $20 in the Q1. I apologize for the Question, but just clarify. Speaker 200:19:15Yes, you're pretty much right. And you got to also think about it is the $20 is factoring into the box business right now given contract triggers. Speaker 400:19:26Got it. Understood. And lastly, turnover, Could you just sense of how demand is shaping up in January so far for the business? Speaker 200:19:38Yes, demand remains very strong. We're currently booking and billing about 8% above a year ago. And It's and we see that trend continuing through the quarter. Speaker 400:19:53Okay. Thank you. Speaker 100:19:55Thank you, Mark. Next question? Operator00:19:59Our next question comes from Sandra Liang from of America Securities. Please go ahead with your question. Speaker 100:20:27Jamie, let's move to the next question. Operator00:20:30And our next question comes from Mike Roxlin from Truist. Please go ahead with your question. Speaker 500:20:36Yes. Thank you, Mark, Bob and Tom for taking my Congrats on a really good quarter. Thank you. Thank you. Thanks. Speaker 500:20:45Just wanted to get a sense from you regarding the mix In 4Q, box prices looked like they were notably down sequentially year over year. Now aside from lower price, were there any one mix issues as well. And I recall that on 3Q, you called out weaker building products, slower graphics from softer retail, UAW strike. I'm wondering if that had an impact in 4Q as well, whether you expect that to fade in 2024? Speaker 200:21:11Mike, Our 4th Q mix was about what we expected it to be. At the end of the Q3, we had a little more graphics business that came in, which was positive. But our mix in the Q4 followed pretty much true to form. And Going into this year, I think that with some of those headwinds that you talked about behind us, especially the destocking, which was very unpredictable that we incurred during 2023 will be it's kind of steady as she goes in 2024. Speaker 500:21:45Got it. Thank you, Tom. So would it be fair to say that within 4Q, some of those issues you mentioned in 3Q last time continued a little bit in 4Q? Yes, they Speaker 100:21:55did a little Speaker 200:21:56bit in the 4Q they did, but then they began to settle out towards the end of the year. Speaker 500:22:02Okay, got it. Thank you for that. And then just of the $1.93 in lower prices and mix, is there any way to parse how much was price versus mix? And then in terms of your $1.54 guide, what's embedded for price and mix separately? Speaker 200:22:21Well, I think it's mostly price obviously, but then it does get impacted by mix That kind of varies back and forth. So we try to do the best we can to forecast that. Speaker 500:22:36Got it. And this is Tom, if you first say you're expecting given destocking coming to an end, given some of these issues mentioned previously in my question, You expect a better quality or high quality mix in 2024 versus 2023? Speaker 200:22:50I think our mix will be traditional to what we typically have. Speaker 500:22:55Got it. And last question just before turning it over. Can you help us just think about what's next for PKG from a growth perspective, obviously, you're finishing up Jackson here and you still have the High Falls. Now realizing that High Falls is a great asset to modern, generates a lot of cash As you mentioned paper, would you expect that one eye fault as is? What's really the next leg of the growth trajectory for PKGA Active? Speaker 100:23:22Yes, Mike, obviously, you don't know what the future is going to hold, but we've got a lot of optionality in what we're doing. All of the capital spending that we continue to do in the box plants as an example continues to create incredible opportunity to grow with our customers. Just this year alone for 2024, we planned over 30 strategic projects at 26 of our box plants. And this is major, major converting equipment installations, corrugators, corrugator rebuilds and upgrades of significant magnitude. This past year, it was the same situation, number of evals, rotary die cutters, Corrugators, new plant in Pennsylvania, the start of a new plant out in Salt Lake City. Speaker 100:24:16And so we will continue to build in the internal organic capability to grow with the marketplace. Mills have the runway to continue providing that over the next few years. And then You have to assume as we have always done, we can grow the containerboard supply As we need to, whether it's adding capacity in an existing mill or if we had go out and buy a mill or build a mill, there's a lot of optionality in the future that we have the ability to proceed with. But that's never been an issue for us and I don't expect it to be an issue in the future. But right now, the key is that we have tremendous capability within the converting side of the packaging unit and the mill system to provide the containerboard to grow the next number of years. Speaker 100:25:14So I'm very, very encouraged by where we are. Speaker 500:25:19That's great, Mark, and very good color. Really appreciate it and best of luck in 2024. Speaker 100:25:23Thanks, Mike. Next question? Operator00:25:27Our next question comes from George Staphos from Bank of America Securities. Please go ahead with your question. Speaker 600:25:34Yes, hi, good morning. This is actually Kash and Keeler sitting in for George. He had an internal conflict this morning. Speaker 500:25:39So I Speaker 600:25:39guess just back to the pricing discussion, are you able to comment at all terms of what percent of your customer base are invoicing at those higher prices in both containerboard and boxes? Speaker 200:25:52Well, with regard to linerboard and medium, I'm talking about linerboard and medium here. It's 100% of our customers, outside customers on linerboard and medium and trade partners as well. That's where that stands. And I'd just like to add, I mean, we're having no customer dispute us on these price increases or anything. And obviously, we're disappointed that it didn't show up in the trade publication, as I mentioned earlier. Speaker 200:26:24And right now we have customers that are incredibly frustrated with the mechanism right now and feel that there's a disconnect between what they see going on in the market and what's being reported. Now maybe some of that is because the outside market has shrunk so severely that it's quite small now. And we don't want the tail wagging the dog here, but it's we've got customers now both on the liner and the box side that are asking us to look for alternatives. And we'll be exploring any and all alternatives going forward, including maybe not even using an index. But we'll kind of give you some color on that going forward as that progresses. Speaker 200:27:14I just wanted to make you aware of where our customer base is and how they feel about certain things at the moment. Speaker 600:27:24Okay. Appreciate that color. And then in terms of production, was the cost of production in 4Q where you had anticipated it in packaging? Know you commented that you had lower operating and converting costs year over year, but just interested if there were any items that were higher than you expected kind of in there. And as you look out for the rest of 1Q, any kind of cost items or lines that might give you pause? Speaker 600:27:47I know you commented to fiber and energy and but since shutdown those items? Speaker 300:27:54Yes, this is Bob. I would just say relative to 4Q, maybe OCC prices that was probably a little higher than what we had baked in. But maybe there were some what We call other fixed type costs around some services and equipment rentals, some outside things like that, maybe just a touch higher. But All in, it was certainly a very good quarter from a cost perspective relative to what we had guided As far as the first going to the Q1 from the 4th, there are some moving parts there. Some of them are just not what we normally see. Speaker 300:28:33Obviously, we pointed out the big significant change that we're being impacted by relative to the Jackson conversion, which is on a sequential basis is $0.16 per share. But outside of that, if you look at all of our other costs, there's probably 60% or so of those are what we call seasonal or percent of or so of those are what we call seasonal or timing type cost increases. Those would be weather related, which are actually a little More severe going 4Q to 1Q this year because of so much cold weather down in the southern mills and the box plants which typically We don't see much of a change relative to usages and things that get impacted by cold weather down there. And then the wages and benefits, The base that base gets larger every year. You never have deflation with your wages and benefits. Speaker 300:29:25So the annual increases that we experience Going from 4Q and to start a new year in 1Q, it just gets higher and higher, the dollar impact of that. Plus this year, our medical costs alone, They were up probably over from 12% to 15%. However, on a sequential basis, The weather related items should flip back the other way as we move from 1Q to 2Q and 2Q to 3, as should about half of Those wage related timing items, those start to flip back the other way on a sequential basis. So you have to sort of keep that in mind going forward. And I'd say the balance of well, I guess one other item is we talked about bringing Wallula on in the Q1 and taking Jackson down, so we're replacing low cost tons with very high cost tons. Speaker 300:30:17That's probably a $0.10 hit in and of itself right there exclusive of the outage impact that $0.16 And then the balance of that is just inflation related things that Don't get talked about a lot. For all these cost increases we incur, believe me, anyone who provides a part, a good, a product, a service to us, they're experiencing those same increases. So there's a lot of Outside services, equipment rentals, rents, property taxes even, you can go on and on and on. All that is it's a lot of money that we have to absorb, especially on up you see it mostly in a sequential in a sequential nature going from 4Q to 1Q. So, I hope that gives you a little color about what's in those numbers for our guidance. Speaker 500:31:12Great. Thanks for the details. Speaker 100:31:15Next question please. Operator00:31:17Our next question comes from Gabriel Hedi from Wells Fargo. Please go ahead with your question. Speaker 700:31:24Mark, Tom, Bob, good morning. Thanks for taking the question. Speaker 500:31:28Good morning, guys. Good morning. Speaker 700:31:30I wanted to ask a little bit on the demand side. Historically speaking, you guys have done a good job of kind of outperforming the industry or even exceeding that kind of a GDP type growth. But this quarter was Seemingly pretty pronounced relative to what we're reading, maybe in the Green Markets report or re seat. So I'm just curious, if there's anything that you can talk about, I mean, I know historically you guys haven't talked about like a vitality index or something like that, but just maybe new business wins that you all are excited about or change incentive structure for your sales folks to go out and win new business? Speaker 200:32:13Gabe, the majority of our increase in volume came from our existing customers. As we've said many, many times, I mean, that's our main growth engine. And we've tried to align with the right kind of customers who, over the long haul, will grow. And I think that's been a big who over the long haul will grow. And I think that's been a big plus for us. Speaker 200:32:34Are we winning any new business? Yes, we win new business, some other business goes the other way. It's in the over time, we do come out ahead. But as you mentioned, I mean, historically, we have outperformed the industry, and we plan to do so going forward. But we did lag as you probably know for a number of quarters. Speaker 200:32:59Over the last couple of years there were times when we did lag. And it's because of some of the segments that we were in. And I mentioned before as an example, I mean building products went crazy during COVID and then suddenly that came to a screeching halt. And so some of those segments that we're in did hold us back, but they're coming back now nicely and that's a big part of our growth. Speaker 700:33:25Okay. Thank you. And then, maybe two questions. On the Jackson conversion, it sounds like know sometimes that they're not always directly linked in terms of when the costs flow through and the guidance that you gave us, Bob, in terms of The $0.26 and the $0.16 But is that happening, is it straddling in March, April from a timing standpoint? And then I'll ask the question, I don't know if you guys will answer, but on a sequential basis, if the $70 100 ton is going through. Speaker 700:34:03And by our math that to your point, Mark, maybe $25 a ton is being reflected in Q1. And is it fair that the extra $50 a ton incremental should be on a sequential basis embedded into the 2nd quarter? Thank you. Speaker 100:34:45As far as the $20 Speaker 200:35:03Right. Well, we're in the midst of discussing all that with our customers, especially on the box side and what the roll through will be, etcetera. So as I mentioned we've got the increase in place for the linerboard and medium and we'll see where things roll through, but we expect it to be a traditional roll through. Speaker 700:35:22Thank you. Speaker 100:35:24Thank you. Next question please. Operator00:35:28Our next question comes from Anthony Pettinari from Citi. Please go ahead with your question. Speaker 800:35:34Good morning. Speaker 900:35:35Good morning, Anthony. Following up Speaker 800:35:38on your earlier comments, I'm wondering is there some percentage of your box contracts that are not on Pulp and Paper Week? And I guess looking at other paper grades, there were some boxboard producers who didn't feel like the index was really reflecting what was really happening in the market and they were able to move some customers off of Pulp and Paper Week. Is that something that you potentially could do or you think some customers might welcome? Just wondering if you to the extent that you can discuss, how you think about that? Speaker 200:36:08Well, Anthony, as I mentioned, I mean, we do have a high level of frustration both with Customers both on the liner and on the box side with pulp and paper and feel that there's a disconnect there to what they see in the market and what's being reported. As I've said for a number of years now, as this independent market continues to shrink and what we really consider to be a real open market gets into the mid single digits. And if that's all that's being reported on, that becomes quite a can cause that disconnect, in my opinion. So Our customers have asked us to look at a lot of different alternatives, which we are doing along with them. And we'll see where we end up. Speaker 200:36:56Have we moved some people off of that? We don't really like to get into those kind of details just because that's between us and our customers. So I'll leave that one aside because we're not going to really get into those discussions. Other than I just will tell you we are looking at any and all alternatives. Speaker 800:37:16Okay. That's very helpful. And then just switching gears on the CapEx guidance For 2024, I think you said $470,000,000 to $490,000,000 CapEx. Is it possible to break that down between maintenance, discretionary and then Jackson. And is there any kind of finer point in terms of the run rate capacity add from Jackson when that conversion is completed? Speaker 300:37:46Yes. As far as I would just say, Jackson will be $30,000,000 to $40,000,000 of that amount. The balance I would say 65% or so would be sort of that non discretionary must do type maintenance type capital spending. And Mark, you've talked about Speaker 100:38:05Yes. I mean, we're probably spending out probably close to $250,000,000 just in the box plants alone this year. Yes. Speaker 400:38:10And Speaker 100:38:12that's all of the 30 strategic projects we're working on the box plants and building the new plant out in Salt Lake City and finishing that up. And then The rest will be just in the smaller one off projects in the mills. And then obviously, we've got the maintenance type capital that goes on, but the bulk of it's frankly, the bulk of it's in the box plants and then finish up the Jackson conversion. Speaker 800:38:39Okay. And is there a final number on the Jackson capacity add in terms of how much how many tons that you would expect that to add when it's completed? Speaker 100:38:52The machine certainly ought to be able to add approximately 175,000 to 200,000 more incremental tons a year when we're done with this phase of work. I believe the number for 2023's production off that machine was somewhere 537,000 tons of production for 2023. So if you add 200,000 more tons for that year up in that 700,000 tons capability. But again, it all depends on our demand. Right. Speaker 100:39:23So we're going to run to demand as we always have, but that's the necessity of being able to build this runway that our customers can depend on and they know they can grow with us and we can supply them the product and the value they need. And so the Jackson machine is going to have that capability to ramp up and ramp down, provide all the grades we need at an incredibly attractive cost position. Speaker 800:39:58Got it. Got it. I'll turn it over. Speaker 100:40:01Okay. Next question please. Operator00:40:03Our next question comes from Phil Ng from Jefferies. Please go ahead with your question. Speaker 1000:40:07Hey guys, congrats on the really strong quarter. Your business is relatively a shorter cycle business, but certainly seem pretty confident on the demand outlook for the first half with capacity you're bringing back online. What are your customers telling? Are there any pockets And markets that kind of really stand out where you're seeing demand kind of bounce back in a bigger way? And are you seeing any restocking after years worth of destocking effectively? Speaker 200:40:34Phil, I think the demand outlook obviously remains good. It's pretty much across the board. There's no one industry that stands out more than the other, other than maybe e commerce, because you still see The brick and mortar stores continue to struggle a little bit, but that's more than offset by the e commerce side of the business. So that remains quite good. And I think Relative to restocking, I would say that the restocking has been quite conservative to date. Speaker 200:41:10Nobody jumped up and said, I'm going back to where I was during COVID or anything like that. They're trying to be reasonably conservative going forward. And but so I think we saw a little bit we probably saw a little bit of a jump as a result of that, but nothing like we saw on the destocking side. Speaker 1000:41:31Okay. That's helpful. And then I guess a question for Bob. If I look at your last two quarters, operational converting costs were down pretty sharply, which is impressive, especially with full little to come back on. Appreciating the first half of the year, you're going to have some outage expense of Jackson, but some of the gains you saw in the back half, is that pretty sticky and that's still to come? Speaker 1000:41:52And I know you guys talked about all these different projects you guys are working on the box side of things. So kind of help us think through that driver potentially good or bad this year? Speaker 300:42:04Sorry, what did you say was sticky, Phil? I didn't catch that part. Speaker 1000:42:08The operational and converting costs, that came down pretty nicely in the back half of twenty twenty 3? Right. I'm just trying to gauge, should we expect follow through in 2024, especially some of the investments you're making on the box plant, is that a good guide as well? Speaker 300:42:26No, absolutely. I mean, as we've said many times that never stops. It's not just capital projects. It's things that don't it's just changing a behavior, a technique, a process. It doesn't cost money comparing to others, new things, new technologies, new ideas and those 1000 of those things are going on every year and that is really what drives those reductions that we've talked about historically and that certainly will continue in Speaker 100:42:55the future. One good example of that, and we don't talk about it a lot, our transportation capability. Over the last decade, we've built an incredibly strong Transportation Logistics Group within the company and it's nationwide now. We've got a very, very large fleet of tractors and trailers running the country, taking care of not only containerboard, but a lot of our packaging to the customer. And so that capability of having our own trucking in house This provided enormous flexibility in cost management on the transportation side of the equation. Speaker 100:43:35So that's just one example of how we go about looking at our business and then executing. Speaker 1000:43:42Super. Just one last one for me. I think on the prepared remarks, you called about 1,100,000,000 liquidity. Mark, you highlighted being balanced in terms of capital deployment. Any opportunities perhaps to play a little offense in a market that's a little more distressed, especially some of the capacity that's come on. Speaker 1000:43:58Is that an opportunity? You guys are actually growing pretty nicely and generate a ton of free cash flow Speaker 100:44:05And I'll let you know when it happens. All right. That's the beauty of having that firepower. We can not only continue to look at share buyback and dividends, but if an opportunity comes up on a one off On the packaging side, buy an existing business, we can easily move into that. If something on the mill side came up that we found attractive, we can move into that and not worry about how we finance it or how it affects the balance sheet. Speaker 100:44:38And so the other thing I want to remind everybody, back when we called out the 2023's capital And we the 2022 capital up over $800,000,000 and we reminded everybody that the 2022 capital would be Going down into a much more manageable level, much more reasonable level in that $400,000,000 range, just keep in mind, We did that and we accomplished incredible amount of high return projects and impact projects that benefit our customers and our shareholders alike. But also this year, we continued that trend. The $400,000,000 range of high return, high impact projects, affords us again an incredible opportunity with the balance sheet because all That operating cash that we're generating goes into free cash and can be deployed appropriately. And so we're in a very good place. Over the last 10 years, we've done all the heavy lifting to get the mills and the box plants in very, very efficient condition. Speaker 100:45:46And so now it's much more manageable about how we go about with these projects. And so with the fact that we have the internal capability with the engineering and technology organization to manage the bulk of all this work, We're in a much better position than we've ever been and we'll continue that. But again, all optionality is open for us on how we look at the world. Speaker 1000:46:13Okay. Appreciate that. Speaker 100:46:16Thank you. Next question. Operator00:46:18Our next is a follow-up from Mark Weintraub from Seaport Research Partners. Please go ahead with your follow-up. Speaker 400:46:24Thank you. So Can you share with us the types of alternatives on pricing structures that might be contemplated? Would they be more cost tied? Would they be more macro or data tied? Would it be more just Going and negotiating with counterparties, some combination or any color as to kind of where the bias might be from your perspective? Speaker 200:46:53Mark, it's nice that you're thinking about it and I appreciate all your options that you just presented, but I'm not to get into that at all because as I told you before, that's between us and our customers. And we'll work those out as we go forward. So I'm sorry, I can't give you anything, but that's the way we do business. Speaker 400:47:14Totally understood. Is there anything that I may have been missing that would have been in the list recognizing there's going to be a whole bunch of things that you're going to be talking about with your customers as you go through the process. Speaker 200:47:24Nice try. Nice try, but I'm going ditto again, okay. Speaker 400:47:27Yes, I did try. And then Bob, you'd mentioned about 60% of the costs increase from 4Q to 1Q seasonal or timing. Could you sort of put a number on that? Would that be like $0.20 per share and if we were just to have that 6% come back in the Q2? Speaker 300:47:50No, Mark, that'd be closer to 35, maybe a little more per share. Speaker 400:47:57Great. Okay. Thanks so much. Speaker 300:48:00Okay. Operator00:48:18Our next question is also a follow-up from Gabriel Hadi from Wells Fargo. Please go ahead with your follow-up. Speaker 700:48:29Tom, Mark, I'm going to try one more time. So I apologize in advance, but it's more trying to understand the thought process. And I think the price discovery process that we've seen over the past 25 years, What we're hearing is maybe is not as bulletproof or as useful as it maybe once was. And so maybe really what we're hearing is and something I think is misunderstood in the industry is that you guys sell boxes that are made to a stack that service a customer's need as opposed to selling a customer a parent roll of paper. And so is it fair that maybe What's going on behind the scenes is the value that you're bringing to your customers is really what you're trying to understand and work with them to help them understand ultimately and move the pricing structure to something like that. Speaker 200:49:24Well, Gabe, you described it very well. I got to be honest with you. There is a linerboard and medium market, Then there's a box market and the box market is all custom made, lots of different things go into it and there's a value created accordingly. So you as I've said before, I'm not going to get into all the optionality and all those other sorts of things. Those things we'll discuss with our customers. Speaker 200:49:52But You do describe it accurately, I think, especially from our customers' point of view that what gets reported is quite different than what they see in the marketplace. So just as an example, I mean, even when the prices went down, over the past 18 months or so, There isn't a customer who said, I see that there's a need for that or that they saw that in the marketplace. So we've got what we're hearing from our customers is very different than what's getting published. And That disconnect, we've got to figure out how to solve that disconnect, I guess, is probably the best way to put it. Speaker 700:50:34Very much appreciated. Thank you and good luck. Speaker 100:50:37Thank you. Thank you. Any other questions, Jamie? Operator00:50:41Our next question comes from Charlie Maurer Sands from BNP Paribas. Please go ahead with your question. Speaker 900:50:49Good morning, gentlemen. Thank you very much for all the good answers so So given us a lot to think about. Just had one question on the Jackson Mill. You've obviously very helpfully quantified the temporary cost drag we should expect in Q1 and Q2. But can you just talk about the cost benefit that we should see from the mill once it fully ramps up and Perhaps contextualize how much more efficient this NLE is compared with the rest of your network? Speaker 100:51:17Yes. We talked about this for the last couple of years and that when we're done with all of this work because the work that's going on, it'll start next month and then finish up. It's about a 58 day outage at the mill, but it involves more than just the paper machine, which again in and of itself is a lot of work with dryer cans real, press section rebuild, but it's also power plant work. We're going to be reconfiguring a lot of the power plant steam flows, steam pressures. We'll be Ultimately, we'll be producing more megawatts off the power plant in the back end of the mill and providing more high pressure higher efficient steamed into the paper machine. Speaker 100:51:58And so net net, the mill when it's done We'll have the capability to produce linerboard and be at or amongst our lowest cost in the system. So if you think about Valdosta, DeRidder in Counts, Jackson should be as good or better quite frankly in DeRidder and probably give Valdosta a run for its money. And so the huge opportunity is and the cost savings as we go forward that will flow through in the future. Bob, you want to add to that? Speaker 300:52:34Yes, Charlie. And what Mark is describing, if you sort of quantify that we're looking somewhere between $35, $40 a ton once all that work is completed and that machine is fully operational. Speaker 900:52:50Many thanks. Speaker 100:52:51Thank you. Any other questions, please? Operator00:52:55And we have an additional question from Richard Foehrke from Bloomberg Intelligence. Please go ahead with your question. Speaker 500:53:02Thank you for taking the time to answer my question, gentlemen. I was just wondering with your announced price increase to be effective January 1, if you maybe saw some demand get pulled forward into the Q4 by customers attempting to get ahead of that price increase? Speaker 200:53:20No, we did not see that Richard. Speaker 500:53:22Okay. Thank you. Speaker 100:53:24Thank you. Any other follow-up questions, Jamie? Operator00:53:30And sir, at this time, I'm showing no additional questions. Speaker 100:53:34All right. Why don't we go ahead and conclude this? If there are no questions, I'd like to thank everybody for joining us on the call, and We look forward to talking with you in April. Thank you. Everybody have a good day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallPackaging Co. of America Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Annual report(10-K) Packaging Co. of America Earnings HeadlinesPackaging Co. of America (NYSE:PKG) Shares Gap Down After Analyst DowngradeApril 24 at 1:31 AM | americanbankingnews.comPackaging Corporation of America (PKG) Reports Strong Q1 2025 EarningsApril 23 at 3:19 PM | gurufocus.com[Action Required] Claim Your FREE IRS Loophole GuideThis shouldn't surprise anyone who's been paying attention, but... Pres. Trump may be about to unleash the biggest "dollar reset" since 1971.April 24, 2025 | Colonial Metals (Ad)Packaging Corporation of America (PKG) Q1 2025 Earnings Call TranscriptApril 23 at 3:09 PM | seekingalpha.comAnalysts Set Packaging Co. of America (NYSE:PKG) Price Target at $237.80April 23 at 1:47 AM | americanbankingnews.comPackaging Corporation of America: Guidance Points To Significant Weakness AheadApril 22 at 9:38 PM | seekingalpha.comSee More Packaging Co. of America Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Packaging Co. of America? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Packaging Co. of America and other key companies, straight to your email. Email Address About Packaging Co. of AmericaPackaging Co. of America (NYSE:PKG) engages in the production of container products. It operates through the following segments: Packaging, Paper, and Corporate and Other. The Packaging segment offers a variety of corrugated packaging products, such as conventional shipping containers. The Paper segment manufactures and sells a range of papers, including communication-based papers, and pressure sensitive papers. The Corporate and Other segment focuses on transportation assets, such as rail cars, and trucks. The company was founded in 1959 and is headquartered in Lake Forest, IL.View Packaging Co. of America ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InWhy It May Be Time to Buy CrowdStrike Stock Heading Into EarningsCan IBM’s Q1 Earnings Spark a Breakout for the Stock? 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There are 11 speakers on the call. Operator00:00:00Thank you for joining Packaging Corporation of America's 4th Quarter and Full Year 2023 Earnings Results Conference Call. Your host today will be Mark Colzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, will be a question and answer session. I'd now like to turn the floor over to Mr. Colzan. Operator00:00:21Please proceed when you're ready. Speaker 100:00:24Thank you, Jamie. Good morning, everyone, and thank you all for participating in the Packaging Corporation of America's 4th quarter and full year 20 23 Earnings Release Conference Call. Again, I'm Mark Kolzand, Chairman and CEO of PCA. And with me on the call today is Tom Hassfurther, Executive Vice President, who runs the Packaging Business and Bob Mundy, our Chief Financial Officer. As usual, I'll begin the call with an overview of the Q4 and full year results, and then I'll be turning the call over to Tom and Bob, who'll provide further details. Speaker 100:00:56After they're done, I'll wrap things up and then we'd be glad to take questions. Yesterday, we reported 4th quarter 2023 net income of $189,000,000 or $2.10 per share. Excluding special items, 4th quarter 2023 net income was $192,000,000 or $2.13 per share compared to the Q4 of 20 22s net income of $215,000,000 or $2.35 per share. 4th quarter net sales were $1,940,000,000 in 2023 $1,980,000,000 in 2022. Total company EBITDA for the 4th quarter excluding special items was $394,000,000 in 2023 and $409,000,000 in 2022. Speaker 100:01:55Excluding the special items, we also reported full year 2023 earnings $784,000,000 or $8.70 per share compared to the 2022 earnings of $1,040,000,000 or $11.14 per share. Net sales were 7,800,000,000 in 2023 $8,500,000,000 in 2022. Excluding special items, Total company EBITDA in 2023 was $1,600,000,000 compared to the $1,900,000,000 in 2022. 4th quarter and full year 2023 net income included special items primarily for certain costs at our Jackson, Alabama mill for the paper to containerboard conversion related activities and the closure and other costs related to corrugated products facilities and design center. Details of all special items for the year 20232022 were included in the schedules that accompanied our earnings press release. Speaker 100:03:03Excluding the special items, the $0.22 per share decrease in Q4 2023 earnings Compared to the Q4 of 2022 was driven primarily by lower prices and mix of $1.93 In the Packaging segment, lower prices and mix $0.04 and volume $0.03 in the Paper segment and higher depreciation expense $0.10 These items were partially offset by very good volume in the Packaging segment of $1.07 per share. We also had lower operating and converting costs of $0.51 driven by very good process efficiencies and control over other usages of fiber, chemicals, energy, materials and labor as well as lower energy and wood fiber prices. In addition, we have lower scheduled maintenance outage expenses of $0.19 lower freight and logistics expenses $0.03 lower other expenses $0.04 and a lower share count resulting from share repurchases $0.04 The results were $0.37 above the 4th quarter guidance of $1.76 per share, primarily due to higher volumes in our Packaging segment, lower operating and converting costs, lower freight and logistics expenses. Looking at the Packaging business, EBITDA excluding special items in Q4 of 2023 of $385,000,000 with sales of $1,800,000,000 resulted in a margin of 21.7% versus last year's EBITDA of $392,000,000 and sales of $1,800,000,000 and also a 21.7% margin. Speaker 100:04:53For the full year 2023, Packaging segment EBITDA excluding special items was $1,600,000,000 with sales of $7,100,000,000 or 21.8 percent margin compared to the full year 2022 EBITDA of $1,800,000,000 with sales of $7,800,000,000 or a 23.8% margin. Throughout the quarter, demand in the Packaging segment was stronger than our expectations. This higher volume along with the operational benefits of our spending program and continued emphasis on cost management and process efficiencies across the entire manufacturing and converting facility system drove operating and converting costs lower as well. We had an excellent restart of the Wallula Washington Mill and the number 3 machine during the latter part of October and ran exceptionally well during the November December period. And that helped us meet the stronger demand and build some needed inventory during the quarter to ensure the customers that our customers are supplied with their needs. Speaker 100:06:05We plan to restart the number 2 machine at the Wallula Mill in this first quarter to help manage our expectations in the first half of twenty twenty four for continued strong demand together with scheduled mill maintenance outages and the final phase of the containerboard conversion of the number 3 machine at our Jackson, Alabama mill. I'll now turn it over to Tom, who'll provide more details on containerboard sales and the corrugated business. Speaker 200:06:32Thank you, Mark. As Mark mentioned, Packaging segment volume for the quarter exceeded our guidance estimates. Corrugated product shipments per workday were up 5.1% and total shipments with 1 additional shipping day were up 6.9% compared to last year's Q4. Versus the Q3 of 2023, Shipments per day were up 5.2% and total shipments were up 3.4% even though there was one less shipping day. Outside sales volume of containerboard was 88,000 tons above last year's Q4 and 17,000 tons above the Q3 of 2023. Speaker 200:07:11Our order backlog and containerboard cut up remain incredibly strong throughout the quarter. Although demand continues to be challenged by persistent inflation, higher interest rates and factors. We expect our shipments to continue this positive momentum as we enter the first half of twenty twenty four. Relative to the published reductions in the industry benchmark grades that occurred in 2023, domestic containerboard and corrugated products prices and mixed together were $1.73 per share below the Q4 of 2022 and down $0.40 per share compared to the Q3 of 2023, which included a richer mix of graphics and point of purchase display business. Export containerboard prices and mix were down $0.20 per share compared to the Q4 of 2022 and down $0.01 per share compared to the Q3 of 2023. Speaker 200:08:03Beginning January 1, 2024, we began invoicing a $70 per ton price increase for linerboard $100 per ton increase for medium according to our recent price announcement. As you are probably aware, this past Friday, the RISI Pulp and Paper publication did not recognize any increase in the industry's benchmark prices for either linerboard or medium. 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. Speaker 100:08:33Thanks, Tom. Looking at the Paper segment, EBITDA excluding special items in the 4th quarter was $35,000,000 with sales of $144,000,000 or a 24.5 percent margin compared to the Q4 of 20 22's EBITDA of $39,000,000 and sales of $154,000,000 or 25.7 percent margin. For the full year 2023, Paper segment EBITDA excluding special items was $151,000,000 with sales of $595,000,000 or a record 25.3 percent margin compared to the full year 2022 EBITDA of $132,000,000 with sales of $622,000,000 or a 21.3% margin. Prices and mix were down 3% from last year's Q4 and from the Q3 of 2023 driven by the declines in the index prices that occurred during year. Although slightly better than our 4th quarter guidance, sales volume was 3% below last year's 4th quarter and down approximately percent versus the seasonally stronger Q3 of 2023. Speaker 100:09:45The management team and all the employees of our paper business have done a tremendous job over the last several quarters to optimize our inventory and product mix and remain focused on efficient and cost effective operations order to continue delivering outstanding results during 2023. I'll now turn it over to Bob. Thanks, Mark. Speaker 300:10:07Cash provided by operations during the quarter totaled $335,000,000 and free cash flow was $194,000,000 The primary payments of cash during the quarter included capital expenditures of $141,000,000 dividend payments of $112,000,000 cash tax payments of $59,000,000 and net interest payments of $26,000,000 For the full year 2023, cash from operations was $1,300,000,000 with capital spending of 4 $70,000,000 and free cash flow a record $845,000,000 Our final recurring effective tax rate for 2023 was 24.5%. During the Q4, we issued $400,000,000 of new 10 year notes. The proceeds from these notes will be used to redeem our $400,000,000 notes that mature in September of 2024. Our net debt is not affected by this transaction and the proceeds from this issuance will be invested in marketable securities at an interest rate exceeding that of the new notes. The new bonds raised our overall fixed interest rate by approximately 30 basis points and extended the overall average maturity of our debt portfolio from 14.1 years to 15.6 years. Speaker 300:11:31Excluding the proceeds from this transaction, our year end cash on hand balance including marketable securities was just over $800,000,000 with liquidity of $1,100,000,000 Regarding full year estimates of certain key items for the upcoming year, we expect total capital expenditures to be in the range of $470,000,000 to $490,000,000 and DD and A is expected to be approximately $530,000,000 We estimate dividend payments of $450,000,000 and cash pension and post retirement benefit plan contributions of 27,000,000 Our full year interest expense in 2024 is expected to be approximately $53,000,000 and net cash interest payments should be about $60,000,000 The estimate for our 2024 book effective tax rate is 25%. Currently, planned annual outages at our mills in 2024, including lost volume, direct costs and amortized repair costs is expected to total $0.96 per share. The current estimated impact by quarter in 2024 is 0.26 dollars per share in the Q1, dollars 0.16 in the 2nd, dollars 0.19 in the 3rd and $0.35 per share in the 4th quarter. These expenses include the volume and cost impact that will be incurred during the completion of the final phase of converting the number 3 machine at the Jackson Mill to containerboard during the 1st and second quarters. Speaker 300:13:11This will negatively impact our first quarter results by approximately $0.16 per share and our 2nd quarter results by $0.08 per share. I'll now turn it back over to Mark. Speaker 100:13:23Thank you, Bob. I'm very proud of the outstanding results PCA delivered in 2023 under very challenging demand conditions. We successfully completed numerous cost reduction and process improvement projects along with other key strategic initiatives at the containerboard mills and corrugated products plants. Our dedicated sales and customer service organizations continue to be their opportunities and their challenges. These combined efforts allowed us to enhance our entire packaging business and deliver profitable growth opportunities for our customers and shareholders now and into the future. Speaker 100:14:102023 also saw our paper business deliver record margins reflecting the capabilities of our employees to optimize our product mix, inventory, distribution channels and overhead structure along with running very efficient manufacturing operations. These accomplishments helped us to achieve a new all time annual record free cash flow. We ended the year with over $1,100,000,000 of liquidity and extended the overall average debt maturity to almost 16 years. We continued our commitment to a strong balance sheet and a balanced approach towards capital allocation. This allows us to profitably grow the company and to maximize returns for our shareholders while maintaining the financial flexibility to react quickly to situations and opportunities. Speaker 100:15:00None of these things would be possible without the hard work of the talented employees and strong partnerships we've built with our customers and suppliers over many, many years. Looking ahead as we move from the 4th and into the Q1, as Tom indicated in our Packaging segment, we expect continued positive momentum in demand along with 2 additional shipping days in the Q1 to drive higher total corrugated product shipments. Despite restarting the number 2 machine at the Wallula Mill, containerboard will be lower due to the downtime associated with the conversion of the number 3 machine at the Jackson Mill and a scheduled maintenance outage at the Counts Tennessee Mill. Prices and mix should be slightly higher with the implementation of our announced January price increases, partially offset by a decrease in the published benchmark prices that occurred late in 2023 with export prices fairly flat. In our Paper segment, we expect an improved mix to move prices slightly higher with flat sales volume. Speaker 100:16:04Recycled fiber and energy prices will be higher And unusually cold seasonal weather will negatively impact usages and yields for energy, wood and chemicals along with higher operating costs with the restart of the full operations at the Wallula Mill compared to the 4th quarter operations. Labor and benefits costs will have Seasonal timing related increases that occur at the beginning of a new year related to annual wage and benefit increases. The restart of payroll taxes and share based compensation expenses. And finally, as Bob mentioned, scheduled outage expenses will include the significant 1st quarter impact of the conversion outage at the Jackson Mill, which is estimated to be $0.16 per share. Considering these items, we expect 1st quarter earnings of $1.54 per share. Speaker 100:16:56And with that, Jamie, I'd like to open the call for questions And we can proceed as you call it out. Thanks, Jamie. Operator00:17:05Ladies and gentlemen, at this time, we'll begin the question and answer session. Our first question today comes from Mark Weintraub from Seaport Research Partners. Please go ahead with your question. Speaker 400:17:35Thank you. First, congrats on another really strong year in a challenging environment. The so you say in the press release That you are expecting a little slightly higher pricing despite the $20 decrease in November and obviously you're including some from The January increase, which as you mentioned, we're going to have questions undoubtedly. The is that fair to say that you're including a little bit more than $20 On average in the 1Q, how should we think about that? Speaker 200:18:10Yes. Mark, this is Tom. Yes, well, it's slightly above the $20 We've got the follow through on that published $20 down. And as I said, we put the linerboard at medium price increase into effect January 1st. And we're invoicing accordingly and getting paid accordingly. Speaker 200:18:34And I might also add that as a net buyer, We also have accepted the $70 increase on the buy side and have been paying invoices accordingly. Speaker 400:18:46Okay. And so just to clarify, so when you said net 2020, was that the increase minus the impact of the $20 or was that that you're effectively because of the way the lags work etcetera as you push it through into box prices that the impact of the $70 that's been announced is slightly more than $20 in the Q1. I apologize for the Question, but just clarify. Speaker 200:19:15Yes, you're pretty much right. And you got to also think about it is the $20 is factoring into the box business right now given contract triggers. Speaker 400:19:26Got it. Understood. And lastly, turnover, Could you just sense of how demand is shaping up in January so far for the business? Speaker 200:19:38Yes, demand remains very strong. We're currently booking and billing about 8% above a year ago. And It's and we see that trend continuing through the quarter. Speaker 400:19:53Okay. Thank you. Speaker 100:19:55Thank you, Mark. Next question? Operator00:19:59Our next question comes from Sandra Liang from of America Securities. Please go ahead with your question. Speaker 100:20:27Jamie, let's move to the next question. Operator00:20:30And our next question comes from Mike Roxlin from Truist. Please go ahead with your question. Speaker 500:20:36Yes. Thank you, Mark, Bob and Tom for taking my Congrats on a really good quarter. Thank you. Thank you. Thanks. Speaker 500:20:45Just wanted to get a sense from you regarding the mix In 4Q, box prices looked like they were notably down sequentially year over year. Now aside from lower price, were there any one mix issues as well. And I recall that on 3Q, you called out weaker building products, slower graphics from softer retail, UAW strike. I'm wondering if that had an impact in 4Q as well, whether you expect that to fade in 2024? Speaker 200:21:11Mike, Our 4th Q mix was about what we expected it to be. At the end of the Q3, we had a little more graphics business that came in, which was positive. But our mix in the Q4 followed pretty much true to form. And Going into this year, I think that with some of those headwinds that you talked about behind us, especially the destocking, which was very unpredictable that we incurred during 2023 will be it's kind of steady as she goes in 2024. Speaker 500:21:45Got it. Thank you, Tom. So would it be fair to say that within 4Q, some of those issues you mentioned in 3Q last time continued a little bit in 4Q? Yes, they Speaker 100:21:55did a little Speaker 200:21:56bit in the 4Q they did, but then they began to settle out towards the end of the year. Speaker 500:22:02Okay, got it. Thank you for that. And then just of the $1.93 in lower prices and mix, is there any way to parse how much was price versus mix? And then in terms of your $1.54 guide, what's embedded for price and mix separately? Speaker 200:22:21Well, I think it's mostly price obviously, but then it does get impacted by mix That kind of varies back and forth. So we try to do the best we can to forecast that. Speaker 500:22:36Got it. And this is Tom, if you first say you're expecting given destocking coming to an end, given some of these issues mentioned previously in my question, You expect a better quality or high quality mix in 2024 versus 2023? Speaker 200:22:50I think our mix will be traditional to what we typically have. Speaker 500:22:55Got it. And last question just before turning it over. Can you help us just think about what's next for PKG from a growth perspective, obviously, you're finishing up Jackson here and you still have the High Falls. Now realizing that High Falls is a great asset to modern, generates a lot of cash As you mentioned paper, would you expect that one eye fault as is? What's really the next leg of the growth trajectory for PKGA Active? Speaker 100:23:22Yes, Mike, obviously, you don't know what the future is going to hold, but we've got a lot of optionality in what we're doing. All of the capital spending that we continue to do in the box plants as an example continues to create incredible opportunity to grow with our customers. Just this year alone for 2024, we planned over 30 strategic projects at 26 of our box plants. And this is major, major converting equipment installations, corrugators, corrugator rebuilds and upgrades of significant magnitude. This past year, it was the same situation, number of evals, rotary die cutters, Corrugators, new plant in Pennsylvania, the start of a new plant out in Salt Lake City. Speaker 100:24:16And so we will continue to build in the internal organic capability to grow with the marketplace. Mills have the runway to continue providing that over the next few years. And then You have to assume as we have always done, we can grow the containerboard supply As we need to, whether it's adding capacity in an existing mill or if we had go out and buy a mill or build a mill, there's a lot of optionality in the future that we have the ability to proceed with. But that's never been an issue for us and I don't expect it to be an issue in the future. But right now, the key is that we have tremendous capability within the converting side of the packaging unit and the mill system to provide the containerboard to grow the next number of years. Speaker 100:25:14So I'm very, very encouraged by where we are. Speaker 500:25:19That's great, Mark, and very good color. Really appreciate it and best of luck in 2024. Speaker 100:25:23Thanks, Mike. Next question? Operator00:25:27Our next question comes from George Staphos from Bank of America Securities. Please go ahead with your question. Speaker 600:25:34Yes, hi, good morning. This is actually Kash and Keeler sitting in for George. He had an internal conflict this morning. Speaker 500:25:39So I Speaker 600:25:39guess just back to the pricing discussion, are you able to comment at all terms of what percent of your customer base are invoicing at those higher prices in both containerboard and boxes? Speaker 200:25:52Well, with regard to linerboard and medium, I'm talking about linerboard and medium here. It's 100% of our customers, outside customers on linerboard and medium and trade partners as well. That's where that stands. And I'd just like to add, I mean, we're having no customer dispute us on these price increases or anything. And obviously, we're disappointed that it didn't show up in the trade publication, as I mentioned earlier. Speaker 200:26:24And right now we have customers that are incredibly frustrated with the mechanism right now and feel that there's a disconnect between what they see going on in the market and what's being reported. Now maybe some of that is because the outside market has shrunk so severely that it's quite small now. And we don't want the tail wagging the dog here, but it's we've got customers now both on the liner and the box side that are asking us to look for alternatives. And we'll be exploring any and all alternatives going forward, including maybe not even using an index. But we'll kind of give you some color on that going forward as that progresses. Speaker 200:27:14I just wanted to make you aware of where our customer base is and how they feel about certain things at the moment. Speaker 600:27:24Okay. Appreciate that color. And then in terms of production, was the cost of production in 4Q where you had anticipated it in packaging? Know you commented that you had lower operating and converting costs year over year, but just interested if there were any items that were higher than you expected kind of in there. And as you look out for the rest of 1Q, any kind of cost items or lines that might give you pause? Speaker 600:27:47I know you commented to fiber and energy and but since shutdown those items? Speaker 300:27:54Yes, this is Bob. I would just say relative to 4Q, maybe OCC prices that was probably a little higher than what we had baked in. But maybe there were some what We call other fixed type costs around some services and equipment rentals, some outside things like that, maybe just a touch higher. But All in, it was certainly a very good quarter from a cost perspective relative to what we had guided As far as the first going to the Q1 from the 4th, there are some moving parts there. Some of them are just not what we normally see. Speaker 300:28:33Obviously, we pointed out the big significant change that we're being impacted by relative to the Jackson conversion, which is on a sequential basis is $0.16 per share. But outside of that, if you look at all of our other costs, there's probably 60% or so of those are what we call seasonal or percent of or so of those are what we call seasonal or timing type cost increases. Those would be weather related, which are actually a little More severe going 4Q to 1Q this year because of so much cold weather down in the southern mills and the box plants which typically We don't see much of a change relative to usages and things that get impacted by cold weather down there. And then the wages and benefits, The base that base gets larger every year. You never have deflation with your wages and benefits. Speaker 300:29:25So the annual increases that we experience Going from 4Q and to start a new year in 1Q, it just gets higher and higher, the dollar impact of that. Plus this year, our medical costs alone, They were up probably over from 12% to 15%. However, on a sequential basis, The weather related items should flip back the other way as we move from 1Q to 2Q and 2Q to 3, as should about half of Those wage related timing items, those start to flip back the other way on a sequential basis. So you have to sort of keep that in mind going forward. And I'd say the balance of well, I guess one other item is we talked about bringing Wallula on in the Q1 and taking Jackson down, so we're replacing low cost tons with very high cost tons. Speaker 300:30:17That's probably a $0.10 hit in and of itself right there exclusive of the outage impact that $0.16 And then the balance of that is just inflation related things that Don't get talked about a lot. For all these cost increases we incur, believe me, anyone who provides a part, a good, a product, a service to us, they're experiencing those same increases. So there's a lot of Outside services, equipment rentals, rents, property taxes even, you can go on and on and on. All that is it's a lot of money that we have to absorb, especially on up you see it mostly in a sequential in a sequential nature going from 4Q to 1Q. So, I hope that gives you a little color about what's in those numbers for our guidance. Speaker 500:31:12Great. Thanks for the details. Speaker 100:31:15Next question please. Operator00:31:17Our next question comes from Gabriel Hedi from Wells Fargo. Please go ahead with your question. Speaker 700:31:24Mark, Tom, Bob, good morning. Thanks for taking the question. Speaker 500:31:28Good morning, guys. Good morning. Speaker 700:31:30I wanted to ask a little bit on the demand side. Historically speaking, you guys have done a good job of kind of outperforming the industry or even exceeding that kind of a GDP type growth. But this quarter was Seemingly pretty pronounced relative to what we're reading, maybe in the Green Markets report or re seat. So I'm just curious, if there's anything that you can talk about, I mean, I know historically you guys haven't talked about like a vitality index or something like that, but just maybe new business wins that you all are excited about or change incentive structure for your sales folks to go out and win new business? Speaker 200:32:13Gabe, the majority of our increase in volume came from our existing customers. As we've said many, many times, I mean, that's our main growth engine. And we've tried to align with the right kind of customers who, over the long haul, will grow. And I think that's been a big who over the long haul will grow. And I think that's been a big plus for us. Speaker 200:32:34Are we winning any new business? Yes, we win new business, some other business goes the other way. It's in the over time, we do come out ahead. But as you mentioned, I mean, historically, we have outperformed the industry, and we plan to do so going forward. But we did lag as you probably know for a number of quarters. Speaker 200:32:59Over the last couple of years there were times when we did lag. And it's because of some of the segments that we were in. And I mentioned before as an example, I mean building products went crazy during COVID and then suddenly that came to a screeching halt. And so some of those segments that we're in did hold us back, but they're coming back now nicely and that's a big part of our growth. Speaker 700:33:25Okay. Thank you. And then, maybe two questions. On the Jackson conversion, it sounds like know sometimes that they're not always directly linked in terms of when the costs flow through and the guidance that you gave us, Bob, in terms of The $0.26 and the $0.16 But is that happening, is it straddling in March, April from a timing standpoint? And then I'll ask the question, I don't know if you guys will answer, but on a sequential basis, if the $70 100 ton is going through. Speaker 700:34:03And by our math that to your point, Mark, maybe $25 a ton is being reflected in Q1. And is it fair that the extra $50 a ton incremental should be on a sequential basis embedded into the 2nd quarter? Thank you. Speaker 100:34:45As far as the $20 Speaker 200:35:03Right. Well, we're in the midst of discussing all that with our customers, especially on the box side and what the roll through will be, etcetera. So as I mentioned we've got the increase in place for the linerboard and medium and we'll see where things roll through, but we expect it to be a traditional roll through. Speaker 700:35:22Thank you. Speaker 100:35:24Thank you. Next question please. Operator00:35:28Our next question comes from Anthony Pettinari from Citi. Please go ahead with your question. Speaker 800:35:34Good morning. Speaker 900:35:35Good morning, Anthony. Following up Speaker 800:35:38on your earlier comments, I'm wondering is there some percentage of your box contracts that are not on Pulp and Paper Week? And I guess looking at other paper grades, there were some boxboard producers who didn't feel like the index was really reflecting what was really happening in the market and they were able to move some customers off of Pulp and Paper Week. Is that something that you potentially could do or you think some customers might welcome? Just wondering if you to the extent that you can discuss, how you think about that? Speaker 200:36:08Well, Anthony, as I mentioned, I mean, we do have a high level of frustration both with Customers both on the liner and on the box side with pulp and paper and feel that there's a disconnect there to what they see in the market and what's being reported. As I've said for a number of years now, as this independent market continues to shrink and what we really consider to be a real open market gets into the mid single digits. And if that's all that's being reported on, that becomes quite a can cause that disconnect, in my opinion. So Our customers have asked us to look at a lot of different alternatives, which we are doing along with them. And we'll see where we end up. Speaker 200:36:56Have we moved some people off of that? We don't really like to get into those kind of details just because that's between us and our customers. So I'll leave that one aside because we're not going to really get into those discussions. Other than I just will tell you we are looking at any and all alternatives. Speaker 800:37:16Okay. That's very helpful. And then just switching gears on the CapEx guidance For 2024, I think you said $470,000,000 to $490,000,000 CapEx. Is it possible to break that down between maintenance, discretionary and then Jackson. And is there any kind of finer point in terms of the run rate capacity add from Jackson when that conversion is completed? Speaker 300:37:46Yes. As far as I would just say, Jackson will be $30,000,000 to $40,000,000 of that amount. The balance I would say 65% or so would be sort of that non discretionary must do type maintenance type capital spending. And Mark, you've talked about Speaker 100:38:05Yes. I mean, we're probably spending out probably close to $250,000,000 just in the box plants alone this year. Yes. Speaker 400:38:10And Speaker 100:38:12that's all of the 30 strategic projects we're working on the box plants and building the new plant out in Salt Lake City and finishing that up. And then The rest will be just in the smaller one off projects in the mills. And then obviously, we've got the maintenance type capital that goes on, but the bulk of it's frankly, the bulk of it's in the box plants and then finish up the Jackson conversion. Speaker 800:38:39Okay. And is there a final number on the Jackson capacity add in terms of how much how many tons that you would expect that to add when it's completed? Speaker 100:38:52The machine certainly ought to be able to add approximately 175,000 to 200,000 more incremental tons a year when we're done with this phase of work. I believe the number for 2023's production off that machine was somewhere 537,000 tons of production for 2023. So if you add 200,000 more tons for that year up in that 700,000 tons capability. But again, it all depends on our demand. Right. Speaker 100:39:23So we're going to run to demand as we always have, but that's the necessity of being able to build this runway that our customers can depend on and they know they can grow with us and we can supply them the product and the value they need. And so the Jackson machine is going to have that capability to ramp up and ramp down, provide all the grades we need at an incredibly attractive cost position. Speaker 800:39:58Got it. Got it. I'll turn it over. Speaker 100:40:01Okay. Next question please. Operator00:40:03Our next question comes from Phil Ng from Jefferies. Please go ahead with your question. Speaker 1000:40:07Hey guys, congrats on the really strong quarter. Your business is relatively a shorter cycle business, but certainly seem pretty confident on the demand outlook for the first half with capacity you're bringing back online. What are your customers telling? Are there any pockets And markets that kind of really stand out where you're seeing demand kind of bounce back in a bigger way? And are you seeing any restocking after years worth of destocking effectively? Speaker 200:40:34Phil, I think the demand outlook obviously remains good. It's pretty much across the board. There's no one industry that stands out more than the other, other than maybe e commerce, because you still see The brick and mortar stores continue to struggle a little bit, but that's more than offset by the e commerce side of the business. So that remains quite good. And I think Relative to restocking, I would say that the restocking has been quite conservative to date. Speaker 200:41:10Nobody jumped up and said, I'm going back to where I was during COVID or anything like that. They're trying to be reasonably conservative going forward. And but so I think we saw a little bit we probably saw a little bit of a jump as a result of that, but nothing like we saw on the destocking side. Speaker 1000:41:31Okay. That's helpful. And then I guess a question for Bob. If I look at your last two quarters, operational converting costs were down pretty sharply, which is impressive, especially with full little to come back on. Appreciating the first half of the year, you're going to have some outage expense of Jackson, but some of the gains you saw in the back half, is that pretty sticky and that's still to come? Speaker 1000:41:52And I know you guys talked about all these different projects you guys are working on the box side of things. So kind of help us think through that driver potentially good or bad this year? Speaker 300:42:04Sorry, what did you say was sticky, Phil? I didn't catch that part. Speaker 1000:42:08The operational and converting costs, that came down pretty nicely in the back half of twenty twenty 3? Right. I'm just trying to gauge, should we expect follow through in 2024, especially some of the investments you're making on the box plant, is that a good guide as well? Speaker 300:42:26No, absolutely. I mean, as we've said many times that never stops. It's not just capital projects. It's things that don't it's just changing a behavior, a technique, a process. It doesn't cost money comparing to others, new things, new technologies, new ideas and those 1000 of those things are going on every year and that is really what drives those reductions that we've talked about historically and that certainly will continue in Speaker 100:42:55the future. One good example of that, and we don't talk about it a lot, our transportation capability. Over the last decade, we've built an incredibly strong Transportation Logistics Group within the company and it's nationwide now. We've got a very, very large fleet of tractors and trailers running the country, taking care of not only containerboard, but a lot of our packaging to the customer. And so that capability of having our own trucking in house This provided enormous flexibility in cost management on the transportation side of the equation. Speaker 100:43:35So that's just one example of how we go about looking at our business and then executing. Speaker 1000:43:42Super. Just one last one for me. I think on the prepared remarks, you called about 1,100,000,000 liquidity. Mark, you highlighted being balanced in terms of capital deployment. Any opportunities perhaps to play a little offense in a market that's a little more distressed, especially some of the capacity that's come on. Speaker 1000:43:58Is that an opportunity? You guys are actually growing pretty nicely and generate a ton of free cash flow Speaker 100:44:05And I'll let you know when it happens. All right. That's the beauty of having that firepower. We can not only continue to look at share buyback and dividends, but if an opportunity comes up on a one off On the packaging side, buy an existing business, we can easily move into that. If something on the mill side came up that we found attractive, we can move into that and not worry about how we finance it or how it affects the balance sheet. Speaker 100:44:38And so the other thing I want to remind everybody, back when we called out the 2023's capital And we the 2022 capital up over $800,000,000 and we reminded everybody that the 2022 capital would be Going down into a much more manageable level, much more reasonable level in that $400,000,000 range, just keep in mind, We did that and we accomplished incredible amount of high return projects and impact projects that benefit our customers and our shareholders alike. But also this year, we continued that trend. The $400,000,000 range of high return, high impact projects, affords us again an incredible opportunity with the balance sheet because all That operating cash that we're generating goes into free cash and can be deployed appropriately. And so we're in a very good place. Over the last 10 years, we've done all the heavy lifting to get the mills and the box plants in very, very efficient condition. Speaker 100:45:46And so now it's much more manageable about how we go about with these projects. And so with the fact that we have the internal capability with the engineering and technology organization to manage the bulk of all this work, We're in a much better position than we've ever been and we'll continue that. But again, all optionality is open for us on how we look at the world. Speaker 1000:46:13Okay. Appreciate that. Speaker 100:46:16Thank you. Next question. Operator00:46:18Our next is a follow-up from Mark Weintraub from Seaport Research Partners. Please go ahead with your follow-up. Speaker 400:46:24Thank you. So Can you share with us the types of alternatives on pricing structures that might be contemplated? Would they be more cost tied? Would they be more macro or data tied? Would it be more just Going and negotiating with counterparties, some combination or any color as to kind of where the bias might be from your perspective? Speaker 200:46:53Mark, it's nice that you're thinking about it and I appreciate all your options that you just presented, but I'm not to get into that at all because as I told you before, that's between us and our customers. And we'll work those out as we go forward. So I'm sorry, I can't give you anything, but that's the way we do business. Speaker 400:47:14Totally understood. Is there anything that I may have been missing that would have been in the list recognizing there's going to be a whole bunch of things that you're going to be talking about with your customers as you go through the process. Speaker 200:47:24Nice try. Nice try, but I'm going ditto again, okay. Speaker 400:47:27Yes, I did try. And then Bob, you'd mentioned about 60% of the costs increase from 4Q to 1Q seasonal or timing. Could you sort of put a number on that? Would that be like $0.20 per share and if we were just to have that 6% come back in the Q2? Speaker 300:47:50No, Mark, that'd be closer to 35, maybe a little more per share. Speaker 400:47:57Great. Okay. Thanks so much. Speaker 300:48:00Okay. Operator00:48:18Our next question is also a follow-up from Gabriel Hadi from Wells Fargo. Please go ahead with your follow-up. Speaker 700:48:29Tom, Mark, I'm going to try one more time. So I apologize in advance, but it's more trying to understand the thought process. And I think the price discovery process that we've seen over the past 25 years, What we're hearing is maybe is not as bulletproof or as useful as it maybe once was. And so maybe really what we're hearing is and something I think is misunderstood in the industry is that you guys sell boxes that are made to a stack that service a customer's need as opposed to selling a customer a parent roll of paper. And so is it fair that maybe What's going on behind the scenes is the value that you're bringing to your customers is really what you're trying to understand and work with them to help them understand ultimately and move the pricing structure to something like that. Speaker 200:49:24Well, Gabe, you described it very well. I got to be honest with you. There is a linerboard and medium market, Then there's a box market and the box market is all custom made, lots of different things go into it and there's a value created accordingly. So you as I've said before, I'm not going to get into all the optionality and all those other sorts of things. Those things we'll discuss with our customers. Speaker 200:49:52But You do describe it accurately, I think, especially from our customers' point of view that what gets reported is quite different than what they see in the marketplace. So just as an example, I mean, even when the prices went down, over the past 18 months or so, There isn't a customer who said, I see that there's a need for that or that they saw that in the marketplace. So we've got what we're hearing from our customers is very different than what's getting published. And That disconnect, we've got to figure out how to solve that disconnect, I guess, is probably the best way to put it. Speaker 700:50:34Very much appreciated. Thank you and good luck. Speaker 100:50:37Thank you. Thank you. Any other questions, Jamie? Operator00:50:41Our next question comes from Charlie Maurer Sands from BNP Paribas. Please go ahead with your question. Speaker 900:50:49Good morning, gentlemen. Thank you very much for all the good answers so So given us a lot to think about. Just had one question on the Jackson Mill. You've obviously very helpfully quantified the temporary cost drag we should expect in Q1 and Q2. But can you just talk about the cost benefit that we should see from the mill once it fully ramps up and Perhaps contextualize how much more efficient this NLE is compared with the rest of your network? Speaker 100:51:17Yes. We talked about this for the last couple of years and that when we're done with all of this work because the work that's going on, it'll start next month and then finish up. It's about a 58 day outage at the mill, but it involves more than just the paper machine, which again in and of itself is a lot of work with dryer cans real, press section rebuild, but it's also power plant work. We're going to be reconfiguring a lot of the power plant steam flows, steam pressures. We'll be Ultimately, we'll be producing more megawatts off the power plant in the back end of the mill and providing more high pressure higher efficient steamed into the paper machine. Speaker 100:51:58And so net net, the mill when it's done We'll have the capability to produce linerboard and be at or amongst our lowest cost in the system. So if you think about Valdosta, DeRidder in Counts, Jackson should be as good or better quite frankly in DeRidder and probably give Valdosta a run for its money. And so the huge opportunity is and the cost savings as we go forward that will flow through in the future. Bob, you want to add to that? Speaker 300:52:34Yes, Charlie. And what Mark is describing, if you sort of quantify that we're looking somewhere between $35, $40 a ton once all that work is completed and that machine is fully operational. Speaker 900:52:50Many thanks. Speaker 100:52:51Thank you. Any other questions, please? Operator00:52:55And we have an additional question from Richard Foehrke from Bloomberg Intelligence. Please go ahead with your question. Speaker 500:53:02Thank you for taking the time to answer my question, gentlemen. I was just wondering with your announced price increase to be effective January 1, if you maybe saw some demand get pulled forward into the Q4 by customers attempting to get ahead of that price increase? Speaker 200:53:20No, we did not see that Richard. Speaker 500:53:22Okay. Thank you. Speaker 100:53:24Thank you. Any other follow-up questions, Jamie? Operator00:53:30And sir, at this time, I'm showing no additional questions. Speaker 100:53:34All right. Why don't we go ahead and conclude this? If there are no questions, I'd like to thank everybody for joining us on the call, and We look forward to talking with you in April. Thank you. Everybody have a good day.Read morePowered by