Good morning, everyone, and thank you for joining Packaging Corporation of America's First Quarter 2024 Earnings Results Conference Call. Your host today will be Mark Kowlzan, Chairman, Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question-and-answer session. And please also note today's event is being recorded.

At this time, I'd like to turn the floor over to Mr. Kowlzan. Please proceed when you are ready..

Thank you, Jamie. Good morning, everyone, and thank you for participating in Packaging Corporation of America's first quarter 2024 earnings release conference call. Again, I'm Mark Kowlzan, Chairman and CEO of Packaging Corporation of America.

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. I'll begin the call with an overview of our first quarter results, and then I'll be turning it over to Tom and Bob, who will provide further details.

And then I'll wrap things up and we'd be glad to take questions. Yesterday, we reported first quarter net income of $147 million or $1.63 per share. Excluding special items, first quarter 2024 net income was $155 million or $1.72 per share compared to the first quarter of 2023's net income of $198 million or $2.20 per share.

Our first quarter net sales were $2 billion in 2024 and 2023. Total company EBITDA for the first quarter, excluding special items, was $333 million in 2024 and $405 million in 2023.

First quarter net income included special items expenses of $0.09 per share, primarily for certain costs at our Jackson, Alabama mill for the paper to containerboard conversion-related activities. Details of special items for both the first quarter of 2024 and 2023 were included in the schedules that accompanied our earnings press release.

Excluding the special items, the $0.48 per share decrease in first quarter 2024 earnings compared to the first quarter of 2023 was driven primarily by lower prices and mix in the Packaging segment for $1.33, and Paper segment $0.08, higher scheduled mill outage expense $0.10, higher depreciation $0.03, higher expenses related to corrugated plant capital projects of $0.02 and other expenses $0.04.

These items were partially offset by higher volumes in the Packaging segment for $0.71, and Paper segment $0.06. We also had lower operating and converting costs of $0.15 driven by very good process efficiencies and control over other usages of fiber, chemicals, energy, materials and labor.

Although energy prices were lower versus last year's first quarter, they were more than offset by higher recycled fiber prices. In addition, we had lower freight and logistics expenses for $0.04, lower interest expense $0.07 and lower tax rate $0.09.

The results were $0.18 above the first quarter guidance of $1.54 per share, primarily due to the strong volume in both the Packaging and Paper segments, along with the continued emphasis on cost management and process efficiencies across our manufacturing and converting facilities.

This drove operating and converting costs lower even with the persistent inflation we continue to experience across most of the cost structure.

Executing the conversion outage at our Jackson, Alabama mill better than planned resulted in lower scheduled mill maintenance outages, expenses and freight and logistics expenses were less than guidance as well.

Looking at the Packaging business, EBITDA, excluding special items in the first quarter of 2024 of $326 million with sales of $1.8 billion resulted in a margin of 18.1% versus last year's EBITDA of $392 million or sales of $1.8 billion or 21.7% margin. Throughout the quarter, containerboard and corrugated products demand exceeded our expectations.

In addition to outstanding operational performance at our box plants and containerboard mills, we were able to service the high demand from excellent execution of the convert -- of the conversion outage at our Jackson mill.

This enabled us to restart both machines earlier than anticipated and we completed our work prior to the quarter-end rather than in the month of April, which had been the original plan. Despite these efforts, with the higher demand, we ended the quarter at a record-low weeks of inventory supply for this time of year.

With just our Filer, Michigan mill having a scheduled maintenance outage in the second quarter, we do expect to build our inventories back to targeted levels by the end of this quarter. I'll now turn it over to Tom, who will provide further details on containerboard sales and the corrugated business in general..

Thanks, Mark. As Mark mentioned, Packaging segment volume for the quarter exceeded our guidance estimates. Corrugated product shipments per workday were up 11% and total shipments with one less shipping day were up 9.2% compared to last year's first quarter.

Compared to the pre-COVID period of the first quarter of 2019, shipments were up over 10.4% on a per day basis. Outside sales volume of containerboard was 40,000 tons above last year's first quarter and 15,000 tons below the fourth quarter of 2023.

Our order backlog remained incredibly strong throughout the quarter, and although demand continues to be challenged by constant inflation, higher interest rates and other factors, we expect to continue this positive momentum as we enter the second quarter.

Domestic containerboard and corrugated products prices and mix together moved slightly higher from the fourth quarter of 2023 levels by $0.01 per share, which was less than we anticipated due to our total announced increase not being recognized in the published benchmark prices.

Versus the first quarter of 2023, prices and mix were down $1.19 per share. Export containerboard prices and mix were down $0.01 per share compared to the fourth quarter of 2023 and down $0.14 per share compared to the first quarter of 2023.

I'd like to point out that the capital spending and optimization strategy within our box plant system that we have been continuously focused on over the last few years is providing incredible benefits.

This has allowed us to focus on the mix of customers we want to profitably grow our revenues with by providing them the product and service needs they desire and allows them to grow. Based on our current demand outlook for this year, this strategy has us on pace to set a new record for box shipments per plant. I'll now turn it back to Mark..

Thanks, Tom. Looking at the Paper segment, EBITDA excluding special items in the first quarter was $41 million with sales of $164 million or 25% margin compared to the first quarter of 2023's EBITDA of $41 million and sales of $151 million or 27% margin.

Sales volume, which exceeded our guidance estimates, was 14% above the fourth quarter of 2023 and 16% above the first quarter of 2023. Demand was very good both from our existing customers as well as incremental volume from some new customers as we acquire -- that we acquired towards the end of 2023.

Orders remain strong as we enter the second quarter, although volume will be impacted by the scheduled maintenance outage at our International Falls, Minnesota mill in June. An improved sales mix moved paper prices slightly above the fourth quarter of 2023, although prices and mix were down about 6% from last year's first quarter.

This past February, we announced $100 price increase across all of our paper grades and we began implementing these increases on April 1. I'll now turn it over to Bob..

Thanks, Mark. Cash provided by operations during the quarter totaled $260 million and free cash flow was a first quarter record $184 million. The primary payments of cash during the quarter included capital expenditures of $77 million and dividend payments of $112 million.

Excluding the invested cash proceeds from the bond transaction we mentioned on last quarter's call, our quarter-end cash balance, including marketable securities was approximately $900 million with liquidity of $1.2 billion.

Due to the excellent execution of the conversion outage at the Jackson mill that Mark spoke of and moving the International Falls mill outage from the third quarter and into the second quarter, we are revising the scheduled mill outage guidance we provided on last quarter's call.

The revised total company estimated cost impact for the year is now $0.89 per share versus $0.96 per share previously.

The actual impact in the first quarter was $0.24 per share and the revised estimated impact by quarter for the remainder of the year is now $0.18 per share in the second quarter, $0.14 in the third, and $0.33 per share in the fourth quarter. I'll now turn it back over to Mark..

Thanks, Bob. Looking ahead, as we move from the first and into the second quarter in our Packaging segment, we expect continued strong demand and higher corrugated products and containerboard shipments. Prices and mix will move higher due to our announced price increases and increase in published domestic index prices as well as higher export prices.

Orders in our Paper segment are expected to remain strong, however volumes will be lower due to the scheduled maintenance outage at the International Falls Minnesota mill during the quarter.

Although we're implementing our recently announced paper price increases, the average prices and mix are expected to be slightly lower due to the published decrease in index prices earlier this year and how that impacts contract triggers with certain customers.

Operating and converting costs should be slightly lower, primarily due to the sequential improvement in seasonal weather and wage and benefit timing expenses that we incurred in the first quarter and scheduled maintenance outage expenses will be lower.

Rail rate increases at six of our mills during the first and second quarters will result in higher freight and logistics expenses and depreciation expense will be higher. Finally, our tax rate will be sequentially higher due to the tax-related benefit of share-based compensation vests in the first quarter.

Considering these items, we expect the second quarter earnings of $2.07 per share. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constitute the forward-looking statements.

The statements were based on current estimates, expectations, and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in the Annual Report on Form 10-K on file with the SEC.

Actual results could differ materially from those expressed in the forward-looking statements. And with that, Jamie, I'd like to open up the call for questions, please..

[Operator Instructions] Our first question today comes from George Staphos from Bank of America Securities. Please go ahead with your question..

Hi, everyone. Good morning. Hope you're doing well. Thanks for the details. I guess the first question, maybe the standard one for all of us, can you talk to what the early trends are in terms of bookings and billings so far in 2Q? And then I had a couple of follow-ons..

George, this is Tom. Yeah, bookings remain very strong, as I indicated in the -- in the call earlier in the script, were up 8% as of now. And we can -- we expect a strong second quarter and the remainder of the year as well..

Thanks for that, Tom.

Can you talk a bit about what your vertical integration was in 1Q and also in 4Q? And if you don't want to provide -- and we understand an absolute level, can you talk about what the relative trend was? And similarly, can you talk about how the mix of your business was, third-party in export in 1Q and similarly relative to what you saw in 4Q?.

Bob?.

Yeah, yeah, I don't have the absolute -- yeah, the integration in the first quarter was around 90%, almost 93%, George. And slightly below that, I think it was in the fourth quarter..

Thanks, Bob..

Okay. I guess the last one, and I'll -- please go ahead..

Yeah, Tom, do you want to comment about mix and....

Right.

Are you asking about mix of export or you ask -- what exactly you're asking, George?.

Really, I was asking about how much was export tonnage 1Q either directionally versus 4Q in absolute terms in terms of percentage of tonnage, whatever sort of qualitative or quantitative data you could provide us 1Q and 4Q.

And really the last question related to it and I'll turn it over is, you know for all of the volume, kudos to you in terms of the shipments, the operating -- the EBITDA margin was less than we had been modeling for.

And I'm trying to figure out where that loss of margin, at least versus our model, maybe we're just too optimistic was whether it was a mix or something else in terms of the quarter. Thank you. I'll turn it over there..

Let me see if I can tie this together here real quick for you, George..

Thank you..

Number one is the export. The export in first quarter versus fourth quarter, as I indicated was down slightly. Fourth quarter is a big export time for us. And -- but on an overall basis, it was pretty flat.

Relative to the EBITDA margins, I think one of the things that probably you might be missing in the model was the fact that the $20 downturn that took place last year, some of that bled into the first of the year because of contract triggers.

And of course, we were counting on the $70 being published and the only $40 was published and it was slightly delayed. So the roll through in the price increase did not occur quite as quickly as we had hoped and not in the same amount because of the index. In addition to that, I just want to remind you that inflation remains very sticky.

And I think there is a lot of noise around inflation, the rate of inflation having slowed from that rapid rate during COVID, but it's still going up. And it's been going up, at the same time, the index has indicated prices going in the opposite direction until this $40 increase.

So I think that's -- I think that's where the -- where the margin gap is..

George, there's a lot of elements within the cost structure that people lose sight of. I mean, if you keep in mind, I mean things just like general services that a paper mill or box plant relies on, all these associated costs to run the business are up dramatically over the last few years and they're not easing up.

Bob, do you want to comment on this? Again, I think people are truly, truly missing that..

Yeah. Yeah, Mark. I mean the things and even as we go into the second quarter from the first, obviously, recycled fiber, wood may be a little bit higher from a price standpoint, electrical rate, even though gas is down, electrical rates are not.

Chemicals, whether it be lime, adhesives in the box plants, resins, alums, starch across the board, all moving higher.

And again, we typically talk about all the direct type of costs and which is only about 40% of our cost base, you have the other 60% which are, as Mark referenced, there are maintenance services, repairs, materials, operating material supplies, property taxes, rent, warehouse cost, insurance leases.

So it's -- there is constant inflation and all the people that supply those things, they have the same inflation going on in their business and they don't eat it. They pass it on to us. So a lot of that just gets overlooked, I think, George..

I appreciate all the color, guys. I'll turn it over. Thank you very much..

Thank you. Next question, please..

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

Thank you, Mark, Tom and Bob for taking my questions. This is Nicco Piccini on for Mike.

I guess just realizing that demand has improved across the board, are there any particular sectors or end-markets where you saw more notable improvement, and then anything lagging?.

I can tell you, the demand improved across the board, believe it or not. When we look at the various segments, whether it's e-com, ag, food, even in the heavier manufacturing area, we had significant improvement across the board..

Got it. Thank you. And then just following up, since roughly 2019, you spent like a deal of time and money recapitalizing your box plants.

Can you comment on maybe if there's anything left to do there realizing there's always some level of work to be done?.

We've got this momentum going right now that we started good five or six years ago. And quite frankly, as we've done on the mill side now, the opportunity to continue to capitalize on the box plant opportunity will continue infinitum for us. That's part of our growth strategy. That's how we'll continue to provide value for our customer base.

And so again, Tom, again just....

Well, I think I would add -- I think it's a good reminder always that our capital plants and the box plants are built around our customers. And our customers that we're aligned with are in growth mode and that's a big benefit to us. And we'll continue to invest around those customers..

Again, I think I commented on the January call in the last five years since 2019, we've installed 69 new converting machines. We've replaced or completely upgraded 25 of our corrugators. We built four new plants, Marshfield, Richland, Landisville and Salt Lake City specialty.

In Salt Lake City, we just started up in the last month, so that's our newest one. And so we continue to do this as Tom mentioned, it's all done to grow with the customer and take care of what the customer needs are. But we have this capability and it's -- again, we'll continue to capitalize on the strength..

Understood. Thank you very much for the commentary..

Next question, please..

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

Thank you.

First, are you now done with the Jackson project conversion? Is that now fully set?.

Yes, everything that we had sculped out four years ago is complete, and that project has turned out, as you can imagine, we're more pleased than we thought we were going to be at this time. The original phase of work that we just completed was originally a 58-day schedule.

We completed that two weeks ahead of time, started up the day before Easter, and have been running extremely well ever since. And as I've talked over the last year, I expected that machine to be producing over 2,000 tons a day and we've been doing that for the last week or two.

And so, getting that mill stretched out now, and getting everybody used to running at these high production rates, but the good news is we need every ton that we can produce. And this is all high-performance grade lightweight linerboard coming off that machine. And so it's doing everything that we expected it to do and more..

Congrats on that. So now with Jackson up and running for -- I think in the second quarter, you produced a little under 1.2 million tons.

Maybe on an annualized basis, what would your full production potential be assuming the demand is there for you to run for?.

If you include the seven mill system, would be a little bit over 5 million tons. If you round off 5 million tons system, a little over 5 million tons, 5.2 million or so..

Okay..

Depending on the grade mix that you're running as far as lightweights basis weight, 5 million, 5.2 million is a good number going forward on a run rate basis..

Excellent. And then lastly, just want to come back to the up 8% on at least in April, et cetera. If I look at where your first-quarter daily shipments were relative to your second-quarter '23 daily shipments, they were up about 8% as well. And I realize we're talking about different time periods when you're referencing April specifically.

But so the question is, I mean, are you still seeing momentum of demand getting stronger in the current environment? Or is it more that you had this uptick, you gained business and it's sort of stable at those higher levels?.

Mark, it's still going up, it's going up at a lesser rate, but still we're going up and -- but second quarter is always an interesting one for us versus the third and fourth, which are more predictable because we have -- we take -- seasonality is kind of a little more iffy in the second quarter.

But we still see that momentum going up and then we expect it to continue to go up again in the third and fourth quarters of the year..

Okay. And then one last quick one. So I -- and if I read it right, your cap spend was pretty low, I think like $72 million or something in the first quarter. What are you expecting full-year on CapEx and maybe depending on the number, if it's -- I thought you were going to be spending a fairly sizable amount still this year.

And maybe help us with Jackson now done, what these new monies are going to be spent on?.

Yeah, Mark, that was a timing issue as far as just how the invoicing is done against the projects. We called out that somewhere in that higher 400 level, and we'll give you some updates in July. We always reserve the right as an example, if new opportunities come along, we move forward with these opportunities.

And so right now, we're in that high $400 million area. But again, we'll give you some update. If there's any -- if there is any change, we'll update you in July..

Thank you. I'll get back in queue..

And our next question comes from Gabe Hajde from Wells Fargo. Please go ahead with your question..

Mark, Bob, Tom, good morning..

Good morning..

Thank you for all the detail. I wanted to ask and I guess revisit the price question, which I know is a little tricky sometimes. But going back to the Q4 call, you had made some comments, Mark, that you were going to try to -- these are my words, kind of decouple from RISI indices to the extent you're able to.

And then now we're reading on a sequential basis that we got the $40 a ton posted in February, we had expected $70. And so it feels like a headwind relative to what you were expecting or maybe we all were expecting going back to the kind of the price-cost squeeze that we all mismodeled in the first quarter.

So I'm curious if that is proving more challenging. And I'm just asking in the context of this is kind of blazing new trails relative to what we're used to when analyzing this industry. So that's part number one.

And then part number two, not asking about future price increases, but given what you've described and history of implementing price increases, is it fair to say that the January 1 price increase is now -- and again, I know it's RISI and what they do, but commercially speaking, if you deemed it appropriate going-forward that you would have to nominate something new.

Thank you..

Gabe, this is Tom. That's a great question you have, especially relative to the decoupling from RISI. As I indicated in our last call, this would not be an easy task and it's going to take some time. But we're still pressing forward with that, driven again by our customers' frustration over what is going on and what gets reported these days.

If you just work through at least from PCA's perspective, if you look through the -- walk through the math and you said, well, liner came down $110 after its peak and medium a little bit more, we would need to have a significant recovery to get back to those kind of levels. And as I also indicated, inflation continues to take place.

So there's a -- even customers have said to us that if things had just remained the same from the peak, they would have -- they'd almost prefer that just because they just don't like these roller-coaster rides, and they're trying to get off of that down and then up and then down and then up, and these sorts of things.

So -- and over a long period of time, we could have managed that in a much smoother fashion. So these are the kind of discussions we're having with our customers. Our customers are very open to alternatives and different methods. But you got to remember, a lot of these contracts are long-term contracts.

They have different trigger points, they have different times when we're negotiating them. And so we are where we are at this point in time. And the other thing that we talked about was that when we announced this increase, the increase was on containerboard. And it wasn't -- the announcement wasn't on boxes.

That's between us and our customers, but we announced it on the open-market of containerboard, and we implemented it. It didn't get reported quite that same way, but that's part of our frustration.

I think that relative to future pricing, we don't -- we don't really discuss future pricing and we don't make any indication of what we're going to do in the future, but you could probably -- you probably read through where we are and some of the inflationary pressures that are taking place.

And the last reminder is that it's -- there -- all increases aren't strictly on supply and demand. Sometimes they have to do just costs. And costs in general and some costs that we're trying to minimize as much as we possibly can, but in lots of cases, we can’t.

So hopefully that gives you the -- hopefully that gives you a good indication of where we are..

No, crystal clear. Thank you, Tom. Maybe just, I don't know, Bob, if you can quantify, I think kind of standard repricing for rail occurs in and around April 1. You called it out, I think roughly two-thirds or so of your parent rolls gets shipped around rail and then the majority of converted product is mostly trucked.

So just maybe can you frame up maybe what the increases were or what portion of your transport spend is rail specifically?.

I think in total spendm Gabe, it's like 65% or so is rail, I believe..

Okay. And one last one, very subjective, but given the fact that your two largest competitors right now are pursuing transatlantic combinations, do you see any opportunity, Mark, either organically or potentially if there's a required divestiture to pick up business along the way? Again, appreciating it. I know it's a sensitive topic. Thank you..

Yeah, I don't have any comment regarding that. That's at some place it's -- I won't go. But as you can imagine, we take advantage of opportunities as they come along..

Thank you..

Next question, please..

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

Hi, good morning..

Good morning..

On the last call, you talked about expectations for I think $0.35 sequential headwind in 1Q on seasonal costs that I think were mostly labor and benefits related, and maybe being able to get 60% of that coming back in 2Q.

If I got that right, I'm just wondering how given where you shook out in 1Q and the 2Q guidance, how that kind of played out versus expectations?.

Yeah, Anthony, I think it played -- we did a little bit better, I think on what the impact was in 1Q. But in our 2Q guidance, what I indicated, I think like you said, I think it was 60% of those seasonal or one-time items on the wage side of cost. We are seeing those in our guidance for the second quarter..

Got it. Got it. And then just following up on Gabe's earlier question on pricing mechanisms, a lot of packagers have contracts where they get kind of an automatic pass-through on their primary raw material, whether that's aluminum or polyethylene.

I'm just wondering kind of conceptually, big picture, would it be possible to structure contracts where fiber is just passed through automatically, whether that's OCC or virgin fiber or is there something about craft line or test line or boxes where maybe there's too many SKUs or there's too many customers or it's just it makes that kind of automatic pass-through more difficult..

I think it's a....

Yeah, Tom, go ahead....

Anthony, I think it's a fair question, but far more complicated than I think you have in a lot of other materials. And I'd also like to add that in containerboard, not every sheet is the same.

And you have a lot of variance between everything between 100% virgin and 100% recycled and a lot of technology in between there on performance liners, et cetera. So there's just a whole myriad of things that go into the process that would have to be taken into account.

And it's not as simple as just taking that raw fiber or something like that as your single material..

Yeah, I just wanted to emphasize that maybe once upon a time, when a decade ago, things were more stable in general with inflationary activity and fiber would move up and down and -- but now the last number of years, we're in a world where inflation is back on track at the way it was decades ago and you're seeing across-the-board all your input costs up dramatically.

And as Tom said, it would be too complex to try to tie that into some type of mechanism. But don't forget again just like 25 years ago, transportation was a very minimal cost factor in moving containerboard and paper products around the country.

Now transportation factor is in as a major -- very significant major element to the cost, just that one component..

Got it. Got it. I'm just wondering in kind of previous periods of very strong inflation or maybe going back to the '70s or was the paper industry using things like surcharges? I'm just trying to think about other kind of pricing mechanisms that have been used historically. Obviously, not talking about any kind of future actions.

But Bob listed out that you know those categories that are all seeing inflation.

I'm just wondering as you look at the history of the industry, were there sort of other ways that producers were able to pass those along?.

Anthony, this is Tom again. We're exploring all the potentials and we're doing it in detail with our customers. And so I think we'll just see where this unfolds over time. But -- and we're learning a little bit too on our side because we're getting it from all our suppliers and we're getting all of the above from all of our suppliers.

And that's part of the inflation problem and the cost problem that we're incurring. So we're taking everything into account and -- but this will be solved directly with our customers..

Yeah, suffice it to say, we'll be far better off going forward..

Understand. I appreciate it, and appreciate it's a difficult question to answer in this kind of format. But appreciate the color. Thank you..

Thank you. Next question, please..

Our next question comes from Philip Ng from Jefferies LLC. Please go ahead with your question..

Hey, guys. Your box shipments were obviously really strong during the quarter. It seems like you're outpacing the market handily. Tom, you kind of talked about some of the investments you've made on the box side in market, I think you talked about momentum kind of building there.

Has that been like a big area of differentiation that's kind of helped you take share a little faster and grow a little faster than your peers? Anything you want to call out in terms of these investments you've made that makes PCA even more competitive than years past?.

Well, I think, Phil, the -- yes, there's -- it's been a big plus for us. There's no question about it, otherwise we wouldn't have embarked on it. I've said many times, we don't build it and hope they will come. We do what our customers need us to do and invest where they need us to invest. And that's what we've been doing.

And it's coupled with making our system more efficient, getting ourselves aligned properly in the right marketplaces, getting ourselves aligned with the right customers. And that's -- I think that's a huge plus.

Now in addition to that, I think what helps us a lot is the fact that we're building a better-quality product every day, we're able to turn much faster and meet demands and work as a -- and work as a complete system.

Makes a huge difference for us and our customers definitely appreciate it, and I think that's showing up in the business that we're capitalizing on..

If you went back over the last five years, if you think about labor input cost and labor unit applied per square foot of product or ton of product, we've significantly improved the productivity and cost structure of every one of these converting facilities and full-line box plants.

We're producing -- we quadrupled in many cases, doubled the productivity on average out of a box plant. And so it's given us incredible flexibility on how we grow with these customers and the capability to service these customers and do it in a very efficient manner.

And that's where, again, we're able now to continue that momentum and we're not playing catch-up. We're in very good -- all of our box plants, our paper mills were in very good position as far as our cost structure and efficiencies to compete. And so we just lay in the new investments that, as Tom has said, we grow with the customer.

And so again, but we've been doing this for decades. There's nothing that we just came up with the idea five years ago, we're going to do this. We've been working at this for a couple of decades and we've been fine-tuning this and making it better.

And it's just in the last five years, we focused heavily within the box plant system with this organizational change we made in 2019..

Super. That's helpful. And I guess a question on the pricing side of things.

Since only $40 to the $70 linerboard increase got reflected in the index, just from a logistics standpoint, are you issuing rebates to your customers? And then I guess separately, the trade publication kind of reported maybe perhaps some of the independent box makers were a little reluctant to push price just given a more mixed demand backdrop for them.

How did the box price increase progress? And do you kind of expect it to kind of proceed like normal?.

Relative to the box price increase, it's going to flow through as normal over a 90-day period. We'll have a little bit of -- we'll have a little bit of lag into the midyear because we do have some contracts that have triggers in the midyear. But the lion's share of it as usual will roll in over 90-day period.

We are not -- I'm not going to discuss what we do individually with our customers or anything like that, but we did put the $70 price increase through and on containerboard, as I indicated last time, and that's been done for quite some time. And that's basically what we expect now.

Relative to an independent or whatever talking about supply-demand or whatever the case might be, I mean, that's part of the whole frustration of the model that exists right now because as I've indicated many times, the open market is incredibly small today.

And when I hear things about 70% of the surveyed -- of the survey says X or Y, that's 70% of what, 1% or something. I don't know what the -- how those percentages work out, and there's no indication of that. So that's why we've, as I indicated last time some of the need to have some consideration for perhaps some other mechanisms..

Okay. If I can sneak one more in, your two larger competitors in US are obviously merging with European counterparts. Historically, industry has had mixed track-record being international.

But Mark, Tom, team, I'm just curious, how do you kind of see that perhaps changing the competitive landscape and how you may compete and how you proceed with some of your customers going forward?.

I don't even think about it as a significant change here in the domestic marketplace. This is a -- they're doing it for their own reasons.

But again Tom, you want to comment on that?.

I don't have any comment at all, that relative to our competitors or what they're attempting to do or trying to do. We know what we need to do in our marketplace and that's what we go and focus on executing..

Just keep in mind for better part of 30 years, we concentrated in the lower 48 states and we've grown our business significantly over these last few decades here in the United States, and we'll continue to do so. And we've outgrown the rest of the industry by doing that and we'll continue to do that..

Okay. Appreciate the color. Thank you..

Next question..

Our next question is a follow-up from George Staphos from Bank of America Securities. Please go ahead with your follow-up..

Hi, thanks for taking the follow on. Recognizing that for years, Packaging Corp has hired its team of engineers and has focused on productivity both at the mill level and the box plant level. And you said, Mark, earlier that the projects and the programs will continue to add infinitum.

Is there any fade in terms of the net benefit we should expect to Packaging Corp's P&L over time from these programs? Recognize they're going to continue, you know, basically, has a lot of lower hanging fruit been consumed or do you think you can continue with -- I think you said last quarter, you're spending $150 million in the box plants this year.

Obviously, we'll get an update in June or July that you can continue to have that same rate of return on these programs and we can continue to see that benefit to the P&L as we've been seeing over the last couple of years. Thank you..

That will never end. If a company does not have the capability that we do, you will not be able to function efficiently going forward.

The technology capability that we bring to bear 24 hours a day, seven days a week, we take care of our operational matters in real-time, whether it's a box plant issue or a mill issue, we don't depend on vendors to take care of our needs.

And so this technology, the engineering group is not only working on capital investments, but they're working on process efficiency, process improvement on a real-time 24/7 basis, and that will never end. And that's been one of the benefits that has differentiated PCA for many years now, and we just continue to make it better and better.

And the opportunities that the organization, whether you take an individual box plant or a mill and you take the operating group and the technology engineering group together, they see new opportunities continuously.

And then you're able to identify new technology that can be applied and then we implement that new technology and again, how that rolls into the relationship with growing what our customer needs are..

So, Mark, recognizing you can't give us a schedule in terms of benefit this quarter, next quarter, next year, three years from now, in your mind's eye, you see as the efforts will continue, as you just said, the return and the benefit to the P&L should be roughly what we've been seeing in the last few years on a going-forward basis at PCA.

Would that be right?.

Absolutely. It's -- that's one of the differentiating factors that will continue to provide the type of benefits that you see at PCA..

Thanks, Mark..

Thanks, George.

Any further questions?.

And we do have an additional question from Ryan Fox from Bloomberg. Please go ahead with your question..

Good morning, gentlemen. In the fourth quarter of '23, we saw that you outperformed the broader industry by a very wide margin. Just curious if you felt like in the first quarter, we're going to see a similar performance..

Well, again, we just -- we just reported that in our second quarter. Tom had called out the fact that our trend continues into the second quarter. So, Bob, go ahead..

No, I mean, Tom, he's referring to the industry numbers. I think that will come out at the end of the week versus our performance..

Right. I think we'll outperform the industry, but I would think that the industry will be up as well..

And why do you think you've outperformed the industry by such a great margin in the last two quarters?.

Well, one reason is that we've been very, very focused on, as I said, our existing customers. Our CapEx has been around those existing customers.

And some of those customers, as I indicated in the past, coming out of COVID, we had a large customer base that had really gone through some very significant destocking of inventory and they were kind of slow to recover. And they have now recovered at a very rapid rate.

And so that's been very helpful to us because if you look at our -- it's no secret, I mean, we had a pretty easy comp you know a year ago. And we're -- so the number looks very, very good. But as you look at last year, second quarter, third quarter, fourth quarter of '23, all improved and kept improving.

And so in order to keep up this pace, we're going to have to keep improving throughout the year, which we seek happening. But, it's a whole myriad of things, but also we've got some real lift from a couple of significant customers that had really lagged coming out of COVID..

Brilliant. Thank you so much..

Thank you.

Any further questions?.

[Operator Instructions] And sir, at this time in showing no additional questions, I'd like to turn the floor back over to you, Mr. Kowlzan, for any closing comments..

I'd like to thank everybody for joining us today and look forward to talking with you later at the end of July to give you the second quarter results and spend some time with you then. Have a good day. Take care. Thank you..

Ladies and gentlemen, that does complete today's conference call and presentation. We thank you for joining. You may now disconnect your lines..