Q4 2019 Earnings Call

There will be acuity session.

I'll now turn the conference call over to Mr. calls and and please proceed if when you already.

Thank you good morning, and thank you all for participating in packaging Corporation of America's fourth quarter and full year 2019 earnings release Conference call.

Hi, Mark colder and chairman and CEO PCAM and with me on the call today as Tom Hassfurther Executive Vice President of runs or packaging business.

And Bob Monday, our Chief Financial Officer.

Begin the call with an overview, our fourth quarter and full year results and then I'm going to turn it over to Tom and Bob will provide further details.

And then I'll wrap things up and that would be glad to take questions.

Yesterday, we reported fourth quarter 2019, net income of $136 million.

Or $1.43 cents per share fourth quarter net income included special items of $26 million.

Primarily for certain costs associated with the company's November 2019 debt refinancing, which included redemption premiums.

Financing fees and write off shore unamortized debt issuance costs and Treasury lock balances.

Excluding the special items fourth quarter 2019, net income was $163 million or one dollar and 71 cents per share.

Compared to the fourth quarter 2018, net income of $205 million or $2.17 per share fourth quarter net sales were 1.7 billion in both 2019 and 2018.

Total company EBITDA for the fourth quarter, excluding special items was $335 million in 2019 in $387 million in 2018.

We also reported full year 2019 earnings excluding special items of $726 million or $7, a 65 cents per share compared to 2018 earnings excluding special items.

Oh $760 million or $8.03 per share.

Net sales were $7 billion in both 2019 and 2018.

Excluding the special items total company EBITDA in 2019 was $1.450 billion compared to $1.500 billion in 2018.

Details of the special items for both the fourth quarter and full year 2019, and 2018 were included in the schedules that accompanied the earnings press release.

Excluding the special items, the 46 cents per share decrease in fourth quarter 2019 earnings compared to the fourth quarter of 2018.

Was driven primarily by lower prices and mix in our packaging business segment of 57 cents.

And paper segment two cents.

Higher operating costs five cents.

Merely due to inflation related increases with chemicals labor and benefits expenses.

Repair material costs and other outside service costs.

We also had higher non operating pension expense of two cents.

Higher depreciation expense of one cents and other costs, including startup related costs at our new Richland, Washington plant of three cents.

These items were partially offset by higher volumes in our packaging segment of 16 cents and paper segment once said.

Lower annual outage expenses, four cents and lower freight and logistics expenses of three cents.

Looking at our packaging business EBITDA, excluding special items in the fourth quarter 2019 of $303 million.

Sales of 1.5 billion resulted in a margin of 21% versus last year's EBITDA of $352 million and sales of one of the half billion or a 23% margin.

We continue to run our containerboard system to demand in a very cost effective manner. Our mill production supplied the necessary containerboard to achieve a new all time quarterly record for box shipments per day.

And they knew fourth quarter record for total box shipments, allowing us to maintain our industry leading integration rate.

Our new box plant in Richland, Washington had an excellent start up during the quarter and we're now beginning to take full advantage of the benefits from our machine conversion at the will Lula mill.

With us flexibility to produce a from the heavier weight high performance linerboard grades all the way down to the lighter weight high performance upgrades.

This gives us the capability to further optimize the mix in the inventory levels of the entire containerboard system and provide the type in the quality aboard needs for our customers on the west coast and in the Pacific Northwest.

And reduced our system wide freight and logistics costs, which in the fourth quarter alone provided over $2 million a benefit.

For the full year 2019 packaging segment EBITDA, excluding special items was $1.3 billion with sales of 5.3 billion.

Or a 22.1% margin compared to full year 2018, EBITDA of $1.4 billion with sales of $5.9 billion or 23.6% margin.

I'm not going to turn it over to Tom Who'll provide more details on containerboard sales in the Corrugating business.

Thanks, Mark as Mark indicated in corrugated products, we had an all time record quarterly box shipments per day, which were up 0.7% compared to last year's fourth quarter as well as a record fourth quarter total shipments, which were up 2.3% over last year.

Outside sales volume of containerboard was 6.2% below last year's fourth quarter, while up 3.7 per cent compared to the third quarter of 2019 due to higher export volume.

For the full year 2019, we established new annual records for total box shipments and box shipments per day, both up 0.9% versus 2018.

Domestic containerboard and corrugated products prices and mix together were 43 cents per share lower than the fourth quarter 2018, and down 14 cents per share versus the third quarter of 2019 due to a less rich mix.

Export containerboard prices were 14 cents per share below fourth quarter, 2018 levels and down two cents per share compared to the third quarter 2019.

I'll now turn it back tomorrow. Thanks, Tom looking at the paper segment EBITDA, excluding special items in the fourth quarter was $53 million with sales of $244 million or 22% margin compared to the fourth quarter of 2018 EBITDA of $52 million.

Sales of $227 million or 23% margin.

We did a good job managing our inventories during the quarter as we ran the system to demand and reduced our office paper inventories by almost 10% versus the third quarter 2019.

Volumes during the quarter or volume during the quarter was better than anticipated.

At levels above last year as well as the third quarter 2019, and prices and mix were lower as expected, although slightly better than anticipated as well.

Throughout the quarter, the mills maintained excellent control over input costs and freight and logistics expenses.

For the full year 2019 paper segment EBITDA, excluding special items was to $213 million and sales were $964 million or 22% margin compared to full year 2000, EBITDA of 165 million with sales of 1 billion or.

16% margin. These results are the best we've ever achieved and reflect the hard work and dedication by all employees in or paper business as well is the strategic decision.

To exit the white paper in pressure sensitive business at the will Lula mill back in 2017.

I'm now going to turn it over to Bob.

Thanks Mark.

We had very good cash generation in fourth quarter with cash provided by operations of $329 million and free cash flow of 194 million.

The primary uses of cash during the quarter included capital expenditures of 136 million common stock dividends totaled $75 million.

31 million for redemption premiums and fees associated with our debt refinancing.

$34 million for federal and state income tax payments.

Pension payments, a 4 million a net interest payments of $35 million.

In addition in order to generate higher interest income for a portion of our cash.

$146 million moved from cash to marketable securities on our balance sheet during the quarter.

We ended the quarter with $679 million of cash on hand, or 825. If you include the marketable securities.

During the quarter, we refinance $900 million of our existing 2.4 or 5% notes maturing in 2020, and 3.9% notes maturing in 2022.

With new 10, and 30 year notes.

This resulted in only a marginal increase in the company's average cash interest rate of just over a 10th of a percent.

And extended the company's overall debt maturity from 4.1 years to 10.3 years.

Gross debt remained unchanged at 2.5 billion.

For the full year 2019 cash from operations was a record 1.2 billion.

Capital spending was $399 million and free cash flow was a record $808 million.

Our final effective tax rate for 2019 was 24% and.

And our final cash tax rate was 19%.

Regarding full year estimates of certain key items for the upcoming year.

We expect total capital expenditures to be between 400 million to $425 million.

DNA is expected to be approximately 400 million.

Pension and post retirement benefit expense of 22 million.

And we expect to make cash pension and postretirement benefit plan contributions of $85 million.

Our full year interest expense in 2020 is expected to be approximately 81 million and net cash interest payments should be about $84 million.

The estimate for 2020 combined for federal and state cash tax rate is approximately 19% and far for our book effective tax rate approximately 25%.

As we mentioned during last last quarters earnings call. We have a heavy volume of scheduled mill outages in 2020.

In total we are planning for nine outages this year versus six and 29 team.

For the scheduled outages at three of our containerboard Mills and one of our paper Mills, our plan for the first quarter versus only two outages and last year's first quarter.

This will have a negative impact on earnings per share of approximately 9% nine cents.

Moving from the fourth quarter of 19 to the first quarter of 2020.

And six cents per share versus the first quarter of 2019.

The total earnings impact of these outages, including lost volume direct costs and amortize repair cost is expected to be 81 cents per share compared to 60 cents per share for 29 chain.

The current estimated impact by quarter end 2020 is a 24 cents per share in the first quarter.

17 cents in the second.

13 cents in the third quarter.

And 27 cents per share in fourth quarter.

I'll now turn it back tomorrow.

Thank you Bob.

Looking ahead as we move into the first quarter 2020 in our packaging segment, we expect lower prices as the remaining impact of published domestic containerboard prices.

Price decreases from last year work through the system as well as the negative impact from the recent January decreases in the published prices for linerboard medium.

We also expect lower export prices containerboard volumes will be lower due to scheduled outages at our three largest mills during the quarter.

Well, we do expect higher corrugated product shipments and our paper segment volumes will be lower due to the better than expected levels in the fourth quarter as well as the scheduled outage, we have at our Jackson, Alabama Mill.

As Bob mentioned earlier scheduled outage cost will be significantly higher than.

With the four scheduled in the first quarter versus just one in the fourth quarter of 2019.

Great cost will be higher due to rail rate increases in certain areas and scheduled outage related increases.

Labor and benefit costs will be higher with annual wage increases and other timing related expenses, there will be inflation with purchased electricity and most or all of our chemical and repair materials costs, well seasonally colder weather will increase energy and wood costs. We also expect our tax rate and depreciation expense to be slightly higher concern.

During these items, we expect first quarter earnings of $1.20 per share.

With that would be happy to entertain any questions, but I must remind you that some of the statements. We've made on the call constitute forward looking statements.

Statements were based on current estimates expectations and projections of the company and involve inherent risks and uncertainties.

Including the direction of the economy in those identified as risk factors in our annual report on Form 10-K on file with the FCC.

Actual results could differ materially from those expressed in the forward looking statements and with that Mariama I'd like to open the call for questions. Thank you.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or Husky. Please standby, while we compile the kewaunee roster.

Your first question comes from Chip Dillon with vertical research. Your line is and so the integration continues we'll continue to aid.

Our margins.

Anthony Thanks, maybe I'll comment a little but on the consumer integration elements that you touched on it.

Just the way we look at this is it SBS, we have about 40% of our volume that is.

There are some specialty markets, such as tobacco commercial print and liquid packaging and in those situations were really specified down to the young user and and.

Sell them.

Your next question comes from George Staphos with Bank of America. Your line is open.

Hi, everyone. Good morning.

Thanks for all the details.

I know pricing discussion.

We need to avoid.

Too much for forward looking guidance I don't want to go beyond what you normally are comfortable with but when we look at the bridge fourth quarter versus fourth quarter relative third quarter versus third quarter. There was a bit of an increased amount or a larger negative on on on price mix and packaging and I think third quarter was around 36.

Since then it was more like 50 cents plus this quarter was that purely the rollover, where the continued effect of prior pricing rolling through the contracts was there any other effect that maybe we should be mindful of other mix or what have you and while I wouldn't expect it was that figure deal.

Is any of this related to the recycled liner index, that's gone in and add a couple of follow ons. Thank you.

Hey, George This is Tom I'll, just tell you how good morning.

It was the the price variance.

Was primarily related to the rollover of the the price decreases that have taken place through the year, but also as we mentioned that we it was mix related as well both fourth quarter over fourth quarter and third quarter compared to the fourth quarter. So that's that's pretty much yet on the pricing side the recycled.

Liner what impacted that have I mean, it's virtually not impactful to us in our businesses.

And before Okay, I wouldn't expect cutting.

I know you might not want to go too much into detail if at all here, but what was maybe a little bit less good for you and mix. This quarter was it just export being up sequentially or was there anything else there and could you give us a quick update on on E. Commerce and then my last question I'll turn over you mentioned paid.

For volumes were better than expected why was that the case relative to what was going on in the market. What do you think I was going well few from a commercial standpoint. Thank you guys.

Okay, Georgia, I'd say you know your your question regarding regarding mix I mean, we don't really talk about our mix much.

It's obvious that export was up and that that had a dramatic impact and that was as far as mix is concerned that was the biggest part of the impact.

E Commerce ecommerce remains strong.

It.

Thank as we've talked about before it's maturing somewhat as a market. So I think as an industry. We've got a much better handle on it and.

Those sales were up earlier in the quarter than than the emergency stuff that we typically would see right at the ended the quarter.

Regarding paper volumes I'll turn it back to Mark real quick yeah.

The third quarter sales were a lower than we had expected, but also compare year over year.

We're on allocation most of 2018 and then we came into 2019 and we're getting back in balance, but again third quarter was lower and we had a number of key customers.

Pick up their volumes significantly during the fourth quarter.

So.

We can.

Provide a lot of details on that except said that obviously, we're pleased with the with the volume that developed.

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

Okay next question please.

Our apologies for the Quirk. Your next question comes from the lineup Chip Dillon from vertical research. Your line is open.

Hi, Good morning, hopefully you guys can hear me okay.

Yes, Yes go ahead, okay. Thanks, very much at good morning.

My first question has to do with.

When we think about the downtime you guys, you're taking quite a bit from maintenance. This year and my guess is there's a lot that I think a lot of we don't maybe fully understand how much preparation goes into that and so my question is you know as you look at the world from say 18 months ago when the industry was so tight.

And now it's a bit looser is is that effecting the timing of some of this maintenance and in other words did you have an incentive to kind of push it out a little bit say two years ago year, and a half ago and now this is a better time to be pursuing some of this work.

No chip is.

The where shutdowns fall some of the the mills now run an 18 month rotation and so there are some years that we actually end up with a skip year on some of the mills.

And then just the way the boiler work in turbine generator work falls in.

You end up with first quarter, such as what we're describing so it has nothing to do with.

Meeting demand or old managing inventories, it's just basically it hearing to our maintenance policies in our requirements to take care of the mill assets.

Okay. That's helpful. And then just a quick follow up.

If you could update us a little bit on the project to add recycling capability to were Lula and are you buying recycled board for certain box customers right now and will that mean, you won't be buying recycle board at least in the western United States says that project ramps up.

The first part of the question, we expect to have the FCC plant up and running by the end of year I will so that's that's well on schedule and then Tom you want to address the chip we don't we don't buy recycled on the outside market.

As we've said many many times.

Our customers require a performance based containerboard, which is primarily all Virgin.

Now even the recycled project that will Lula is designed to just be able to add some recycling to the furnish it does not change the fact that it'll be a Virgin board.

Okay Super very helpful. Thank you.

Okay next question please.

Your next question comes from Mark Wilde with BMO capital markets. Your line is open.

Hi, this Jesse Brown on for Mark.

Just our first question you guys are sitting on quite a bit of cash keep kind of talked about what are your capital allocations looking like for 2020.

Kind of your plans for all that cash.

The the plans haven't changed and we called out the capital down on the lower 400 million level 400 425.

We still remain.

In terms of our cash uses.

We will be opportunistic and they could be share buyback.

Acquisitions.

And then just capital opportunities in general, but we're quite content with where we are and what the cash is doing and again as I said on a few prior calls very cash dollar cash we're not spending we're certainly not wasting it so.

It will provide good value at the right time.

And then just one follow up for me you guys sensing any impact on the export markets from finish pulp and paper strike.

Thanks, I'll turn it over.

I haven't seen anything Tom do you know, we haven't seen anything today no.

Next question please.

Your next question comes from Mark Connelly with Stephens, Inc. Your line is open.

Thanks Mark.

We're accustomed to seeing you build inventories ahead of big maintenance outages and now you've got a really big maintenance outage and you've actually let inventories go down. So can you talk about your inventory levels and whether you've sort of.

Our inventory is higher than I think or or you just from just running better in your content with less inventory.

Well there are two factors there when we came through the month of September and we were looking at or plans for for Q.

Lastly, we had to anticipate the startup of the new Richland box plant and that obviously impacts the will Lula mill production. So the fact that the Richland box plant was on schedule and started up.

Yeah and started running extremely well we had to supply that also our demand across the board for.

Corrugated products for containerboard outside.

Some extra export sales.

Required that we had to start running the system to full capacity during the last couple of weeks of September and that full capacity running mode continued right through the entire fourth quarter.

No.

Part of the equation also is that during the last year. We've also worked diligently across the linerboard system to develop our own.

We will call special grade mix of high performance.

Virgin Kraft linerboard for our own usage and so it's.

Moving the system into a lighter weight high performance capability and so.

We sold some extra tons and then tons that.

Would have shown up because you were running an older grade mix would have been heavier basis. We grade mix that also was part of the equation, but net net.

Business was was.

Obviously, good and we continue to supply we also with the ability of the will lose a mill we can supply the entire system now in the West coast and I mentioned that on the the commentary that that.

In terms of the total system inventory requirements.

And how we look at that need we also have to consider the fact that you sell boxes on a square foot basis, and so when we looked at our inventories now we start to think in terms of square feet of containerboard in our inventory system, not just pure tons because of the mix.

Dealing with so it's it's complicated but.

Bottom line, we ran full out and though we're having to run full now into this part of the year.

Obviously with the outages that we're facing.

We come out of these outages as we've always done we're going to have to run very well to continue supply the demand on the packaging side of the business.

That's a long answer to a short question.

It's a it's a good problem to have too you mentioned re optimizing the whole system.

The impact of rich how long will it take for Richland to fill up with the right kind of business and then how long will that reoptimization around the system take.

We actually started the plant up in November and as of the first part of January we're running right on plan now plan, obviously has a ramp up with our customer base, but we're extremely pleased the plant as you could imagine is a a high volume.

Highly.

Automated plant high capacity.

A lot of flexibility in the plant book.

Tom is gonna be filling that that order book out Tom you want to comment again, we're just good start up and we're really happy with.

Mark I would just say that were.

We're slightly ahead of plan right now and I think we'll be well ahead of plan you know as the year rolls out and that's about that's about the extent of what I'm going to comment on that's fair enough. Thank you.

Okay next question please.

Your next question comes from Brian Maguire with Goldman Sachs. Your line is open.

Hi, good morning, guys.

I wanted to come back to earlier questions around the mix.

You know wondered why.

There there was an increase in exports in the quarter. Given obviously those are lower prices in answer to negative what what drove the sort of shift towards the export markets and maybe you could just remind us.

The board you sell externally, yes, how many times is roughly going into the domestic market in the export market now.

Well again as the fourth quarter.

Rolled through we ended up with a lot of the legacy customers again, we move tons, probably in the 35 different countries around the world small volumes, but these are the like legacy customers.

That you've heard us refer to through many years and we ended up with what we believed was adequate volume in our own domestic system and we were able to satisfy some of these requirements from our legacy customers off shore and.

Tom you want to add to that yes. In addition, I just say that.

We typically we typically have higher exports in the fourth quarter I think in this particular case, we had customers who were holding off they were operating out very very low inventories and became necessary to to pick up the pace in the fourth quarter.

And then the overall integration level still in a sort of low ninetys and yeah, I guess within that.

Remaining if it's eight nine or 10% kind of that merchandise it roughly split between domestic and export or mostly export.

If you look at at the full year is were as we're starting to look at things. We ended 2019 with obviously the Richland box plant coming on as planned.

And so when you balance all of that supply and demand.

Where we are.

Quickly approaching that 94, 95% level, which as we said a few years ago at 94, 95% level, that's what we consider full integration and so.

Last year through the first three quarters, we were down in those low 90.

Percent range integration, but we've moved up and so we're we're gonna have to run full this year in order to supplier anticipated.

Order book.

So we're in a good place.

Okay. That's great. Good luck in here. Thanks.

Next question.

Your next question comes from Anthony Pettinari with Citi. Your line is open.

Good morning, guys. This is actually Randy tole sitting in for Anthony.

Morning, the relief.

You mentioned running to demand again, and I think in the past that was a direct referenced we will not running to design capacity.

My first question is that still what that is referencing and the second question is with rich one coming up the startup curve.

You can start running full out in Q2 Q, how do you think about that thank you.

Yeah, you know what using that term running to demand in.

Terms of where we are right now that means running full out.

Because we have the demand.

You know across our system.

We will lula, specifically in where the Richland plant in the West coast footprint is.

We're running were Lula.

Two capacity as we speak we've been running little hard throughout the fourth quarter and we'll have some opportunity to fine tune the operations over the next year or two at spoken about that in the past.

You are too that as we've always seen on a conversion project like what we've completed out there over the following subsequent a year or two you find ways to stretch the machine out some of it will be some capital spending but.

For the for the short term period right now, we'll lose running hard and running full to capacity to meet demand.

Demand internally.

Okay understood.

With Capex flat to slightly up.

Is there any large scale box plant project that we should know about somewhere to Richland.

In 2020.

Just how should we think about them.

We have numerous projects going on across the system optimization projects.

We've we've got one one big Corrugator project going on over in the West Coast in the Pacific Northwest region, but we have a lot of projects throughout the the 95 box plants system that are the the small half million $1 million projects, just de bottlenecking and taking advantage of the fact that.

Again, we've got.

You know a good opportunity to supply the customer basin, and we're taking advantage of that.

So there's no one big New plant project like we just finished at rich from the for this year. It's just a host of smaller opportunities, which which is actually good. It means we don't have a lot of risk on the table.

Okay understood. Thank you I'll turn it over Okay next question. Please.

Your next question comes from Mark Weintraub with Seaport. Your line is open.

Thank you a couple follow up first just wanted to clarify I think he indicated that the maintenance outages was going to 81 cents. This year with did you say that was again 60 cents last year.

Yes, okay.

And now.

That does or doesn't include the impact of the reduced containerboard production.

Yeah, Yeah, that's part of it I think I've said in the in the prepared remarks, Mark that included the the tons that are involved with those outages.

Okay.

I guess.

People trying to figure out that the that.

Drivers is two to the extent of the decline in the though one Q guide versus at least where the consensus numbers had been and and so kind of one of the questions is.

What besides so theres something related there's some number here relates to the outages, which is timing related is there anything else in it but you might call out as being more timing related than normal that would be depressing. The one Q number relative to where.

Profitability would typically.

The trajectory typically would be over the course of the year.

Yeah, Mark there or you know as usual.

You know going from the fourth to the to the first quarter.

If you sort of look at the buckets that are that are.

That nature, you're describing certainly wages and benefits US you know certain lot of timing things there is everything resets for new year.

The seasonal usage with the with weather related impacts on wood and energy and chemicals to an extent.

We also this year, we have a going from Fourq to your once you we have a stock based comp item of about three cents that just because of the granting of these.

Of this these these options I mean, these restricted stock units and what have you.

Historically had occurred in the second quarter now it's in the first quarter. So you'll see a negative there, but you'll obviously that turns back the other way as you move into the second quarter.

And obviously outages based on the guidance I gave you know that will improve going into the second quarter.

Paper volumes as we expect that to normalize as we as we move out of the from Q1 to Q2 and freight.

Some of that freight was outage related.

Less able to optimize our system.

So when you you add you add all those things together you know you could be useful.

Pick up 15, 20 cents kind of thing.

As you move from Q1 to Q2.

Okay. That's very helpful and then lastly I.

I was the cash balance went down in the fourth quarter.

And given the type of cash from operations I'd have expected you to be generating I guess I would've thought it would have gone up.

And it looked like gross debt, even with all the refinancing stayed the same so can you maybe fill in a fill in the blank there.

Well the cash like I said, the we moved the 146 million out of.

What's considered cash on the balance sheet to marketable securities. So really need if you count that and then you'll think you'll your numbers of workout God I am sorry, I missed that okay. Thanks very much.

Okay next question.

Your next question comes from.

With Wells Fargo Securities. Your line is open.

Good morning, Thanks for taking the question and I apologize if you touched on this earlier jumped on a little bit late but capex I think you're guiding to 400 to for 25 and I'm assuming embedded within there.

Our some return oriented projects hydro pulp or over and we'll lose.

Did you speak at all in terms of any capacity creep or additions that you might be making or are these all centered on on cost reduction I'm, assuming but.

It's primarily the you know if you think about big projects that were involved in right now we've got the.

New boiler up at Filer City Mill, that's being completed this this spring and summer.

That's that's one bigger.

Piece of Capex, it's again and that's.

A total project cost in that $50 million neighborhood, but for this year. The new projects that were looking at as I called out without mentioning specifics as a new corrugator at one of our up specific northwest operations and then just a host of.

A lot of the smaller opportunities throughout the converting side of the equation to satisfy what we see is good box demand growth and then the the project that will lulin, though with the new LCC plant.

But again, there's there's a lot of.

Business opportunity capital spending and then cost.

Reductions capital spending.

Thank you.

Okay next question.

Your next question comes from Adam Josephson with Keybanc capital markets. Your line is open.

Thanks, Good morning, everyone, Bob just one more clarification morning Mark.

Bob just one clarification on Mark's wine Trups question about the bridge. The 15 to 20 cents that you mentioned is that inclusive of the outage costs being seven cents lower sequentially, one could it to Q.

Yes, Okay, perfect and Tom Forgive me if I Miss It can you talk at all about January demand trends, you're saying just relative to perhaps what you saw in the fourth quarter.

Yes, Adam right now our January trend is and we were pretty much through the month were up 1.5%.

Hi blended.

Blended I forget if theres a shipping day.

Different no that's on a per day, that's on a per day basis <unk> percent per day.

Thanks, Tom.

Uh huh.

Okay next question.

Your next question comes from Mark Wilde with Bank of Montreal. Your line is open.

Good morning.

Morning.

Tom just.

Following on that last question that up 1.5% in January how much would that have been helped by the ritual and start up.

It's slightly helped by the Richland start up Mark I don't have the exact break down, but I mean, it's going to be it's going to be relatively small.

In this January number and you know, but as the quarter rolls on it will become more important to us.

Okay, Alright, and then Mark I wondered if we can just come back to Wallula and that she sees system, you're putting out it seems like when after up and running you're gonna be long a lot of fiber at that mill I know you know one of the plans might be to just kind of creep the volume on the paper machines overtime, but can can you just under should help us understand how you plan to.

Optimize between the existing Virgin pulp mill and all this additional recycled fiber.

Keep in mind that Lula facility is our highest cost fiber basket in the.

Lower 48 states and so the ULCC.

And some of the de Okay. We currently use really will give us the.

Oh intimate fiber flexibility to.

Take advantage of the marketplace.

On the entire fiber basket in that Pacific Northwest region and so.

It truly will give us an opportunity to.

Really satisfied the mill requirements and also keep in mind we.

I do anticipate over the future years.

Of ramping up the will Lula number three capability.

We have some opportunity that does require some capital, but we're quite satisfied with where we are right now and the machine productivity and so it's a matter of just finishing up this project at the Oh Cc plant is again, it's a thousand ton a day design system.

But it will give us truly some great opportunities too.

Optimize the fiber cost at that location.

Okay. Just we just one other little more on that so if you if you pivot more toward recycled fiber. There do you also have to spend some more capital just putting in more boiler capacity to kind of complement that LCC system.

No no we've got plenty of boiler capacity at the mill, Okay, all right I'll turn it over.

Okay next question.

As a reminder to ask a question you will need to press star one on your telephone.

There are no further questions at this time.

I'll turn the call back over to the presenters for any closing remarks.

[noise] Mariama. Thank you very much and we appreciate everybody attending the call today, we look forward to talking to and aprils regarding the first quarter results. Thank you have good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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