Packaging Corp of America PKG
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/17/2013

Operator: Thank you for joining Packaging Corporation of America's Second Quarter 2013 Results Earnings Conference Call. Your host today will be Mark Kowlzan, Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a Q&A session.

I will now turn the conference over to Mr. Kowlzan and please proceed, when you are ready.

Mark W. Kowlzan - CEO: Good morning, and welcome to Packaging Corporation of America's second quarter earnings release conference call. I am Mark Kowlzan, CEO of PCA, and with me on the call today is Paul Stecko, Executive Chairman of PCA; Tom Hassfurther, who runs our Corrugated business; and Rick West, PCA's Chief Financial Officer. Thanks for participating in this morning's call. After the presentation, we'll be glad to take any questions.

Yesterday, we reported second quarter net income of $64 million or $0.66 per share which included one-time after-tax non-cash charge of $5 million, or $0.05 per share, for pension plan changes. Excluding this charge, earnings were record $69 million, or $0.71 per share. This compares second quarter 2012 net income, excluding special items of $48 million or $0.49 per share.

Net sales were a record $800 million, up 12% from the second quarter of 2012 net sales of $712 million. The $0.22 per share increase in net income, excluding special items were driven by higher containerboard and corrugated products prices and mix of $0.27, higher corrugated product sales volume $0.05. These items were partially offset by higher cost for energy of $0.04, labor and fringe benefits $0.03 and the timing of annual mill maintenance outages $0.03.

Excluding special items, net income for the first six months of 2013 was $130 million or $1.33 per share compared to net income for the first six months of 2012 of $88 million or $0.91 per share. Year-to-date net sales were $1.56 billion, up 12% or $1.38 billion in the first half of 2012.

We had an outstanding quarter in all aspects of our operations with record earnings driven by higher prices for containerboard and corrugated products and higher corrugated product volume. The annual outages at three of our mills went extremely well with very efficient start-ups and the mill set a new quarter record for tons produced for operating day. Earnings were higher than our second quarter guidance driven by better than forecasted containerboard and corrugated products volume and price and lower than forecasted costs.

Moving to the details of the operations, corrugated product shipments per workday were up 5.2% and total shipments were up 6.8% with one more work day in this year's second quarter. With our last box plant acquisition made in the first quarter of 2012 this is the first quarter where there was no volume contribution from new acquisitions.

Demand for both domestic and export containerboard demand remained strong however. With higher containerboard consumption of our box plants and with three mills being down during the quarter for their annual maintenance outages, we reduced our outside containerboard shipments by 9,000 tons compared to last year's second quarter.

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