Q3 2023 Packaging Corp of America Earnings Call

Speaker 1: Good morning everyone and thank you for joining packaging Corporation of America's third quarter 2023 earnings results conference call. Your hands.

Good morning, everyone and thank you for joining packaging Corporation of America's third quarter 2023 earnings results Conference call.

Your hosts today will be mark.

Speaker 1: Paul Zan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question and answer session. Please note that this call is being recorded. At this time, I'd like to turn that floor over to Mr. Kowzan. Please proceed when you are ready.

Housing Chairman and Chief Executive Officer piece yet.

Upon conclusion of his narrative there will be a question and answer session.

Please note that this call is being recorded.

Tom I'd like to turn that floor over to you. Mr. Kelvin. Please proceed when you're ready.

Speaker 2: Thank you, Jamie. Good morning, and thank you all for participating in Packaging Corporation of America's third quarter, 2023 Earnings Release Conference Call.

Thank you Jamie good morning, and thank you all for participating in packaging Corporation of America's third quarter 2023 earnings release Conference call.

Speaker 2: I'm Mark Holzen, Chairman and CEO of PCA, and with me on the call today is Tom Hasfer, the Executive Vice President, who runs our packaging business, and Bob Monday, our chief financial officer.

I'm, Mark Cola, Zhang Chairman and C. L PCA and with me on the call. Today is Tom has further executive Vice President who runs our packaging business.

And Bob Monday, our Chief Financial Officer.

Speaker 2: As usual, I'll begin the call with an overview of the third quarter results, and then I'll turn the call over to Tom and Bob, who'll provide further details. And then I'll wrap things up and then we'd...

As usual I'll begin the call with an overview of our third quarter results and then I'll turn the call over to Tom and Bob who will provide further details and then I'll wrap things up and then we'd be glad to take questions.

Speaker 2: Yesterday we reported third quarter net income of $183 million or $2.03 per share. Excluding special items, third quarter 2023 net income was $185 million or $2.05.

Yesterday, we reported third quarter net income of $183 million or $2 three per share excluding.

Special items third quarter, 2023, net income was $185 million or $2.05 per share.

Speaker 2: compared to the third quarter of 2022's net income of $266 million or $2.83 per share.

Impaired to the third quarter of 2020, twos net income of $266 million or $2 83 per share.

Speaker 2: Third quarter net sales were $1.9 billion in 2023 and $2.1 billion in 2022.

Third quarter net sales were $1.9 billion in 2023 and $2.1 billion in 2022.

Speaker 2: Total Company Evidda for the third quarter, excluding special items, was $388 million in 2023 and $477 million in 2022.

Total company EBITDA for the third quarter, excluding special items.

Was $388 million in 2023 and $477 million in 2022 third.

Speaker 2: Third quarter net income included special items expenses of two cents per share primarily for certain costs at the Jackson, Alabama mill for paper to contain a board conversion related activity.

Third quarter net income included special items expenses of <unk> per share primarily for certain costs at the Jackson, Alabama mill for paper to containerboard conversion related activities.

Speaker 2: Details involve special items for the third quarter of 2023 as well as 2022 were included in the schedules that accompanied earnings press release

Details of all special items for the third quarter of 2023 as well as 2022 were included in the schedules that accompanied our earnings press release.

Excluding the special items, the 78 cents per share decrease in third quarter 2023 earnings compared to the third quarter of 2022 was driven primarily by lower price and mix of $1 33, and volume nine cents in the packaging segments high.

Speaker 2: Excluding the special items, the 78 cents per share decrease in third quarter, 2023 earnings, compared to the third quarter of 2022, was driven primarily by lower price and mix of $1.33 and volume, 9 cents in the packaging segment.

Speaker 2: higher depreciation expense, 11 cents, lower volume in the paper segment, 4 cents, higher tax, 2 cents, and other expenses, 2 cents.

Higher depreciation expense 11 cents.

Lower volume in the paper segment four cents.

Tax two cents and other expenses to <unk>.

Speaker 2: These items were partially offset by lower operating costs of 58 cents, primarily resulting from lower recycle fiber and energy prices along with outstanding mill and plant operational execution. Other favorable items included a lower share count resulting from share repurchases in the second half of 2022 for 11 cents, higher prices and mix in the paper segment of lower converting costs for cents.

These items were partially offset by lower operating costs of 58 cents, primarily resulting from lower recycled fiber and energy prices along with outstanding mill in plant operational execution.

Other favorable items included a lower share count, resulting from share repurchases in the second half of 2022 or 11 cents.

Higher prices and mix in the paper segment four cents.

Well, we're converting costs four cents.

Lower scheduled maintenance outage expenses of four cents and lower freight and logistics expenses two cents.

Speaker 2: Lower schedule maintenance outage expenses of 4 cents, and lower freight and logistics expenses 2 cents.

Speaker 2: The results were 17 cents above our third quarter guidance of a dollar 88 per share, primarily due to higher volume in the packaging and paper segments, and lower operating and converting.

The results were <unk> 17 cents above our third quarter guidance of $1 88 per share primarily due to higher volume in the packaging and paper segments and lower operating and converting costs.

Speaker 2: Looking at our packaging segment, EBITDA, excluding special items in the third quarter of 2023 of $374 million with sales of 1.8 billion resulted in a margin of 21.3% versus last year's EBITDA of $467 million with sales of 1.9 billion dollars and a 24.1% margin.

Looking at our packaging segment EBITDA, excluding special items in the third quarter of 2023 of $374 million with sales of 1.8 billion resulted in a margin of 21.3% versus last year's EBITDA of $467 million with sales of <unk>.

$1.9 billion and a 24.1% margin.

Speaker 2: The operational benefits of our capital spending program and the continued great focus and execution of our Mills and corrugated product facilities on numerous process improvement initiatives once again delivered impressive results.

The operational benefits of our capital spending program and the continued great focus and execution of our mills and corrugated products facilities on numerous process improvement initiatives. Once again delivered impressive results.

Speaker 2: This included areas such as machine and equipment efficiencies, fiber, chemical and material usages, internal energy generation and usage and labor costs.

This included areas, such as machine and equipment deficiencies fiber chemical and material usages internal energy generation and usage and labor costs.

Speaker 2: Our approach to cost-effective management of container board supply with demand also delivered the benefits we are anticipating.

Our approach to cost effective management of containerboard supply with demand also delivered the benefits we were anticipating.

Speaker 2: This was primarily achieved by idling the Wollula mill for the entire quarter, which resulted in a market related downtime of approximately 174,000 tons.

This was primarily achieved by idling the well Lula mill.

For the entire quarter, which resulted in a market related downtime of approximately 174000 tons.

Speaker 2: However, with the stronger demand in our packaging segment, we ended the quarter with inventory levels lower than its antists.

However, with the stronger demand in our packaging segment, we ended the quarter with inventory levels lower than anticipated.

Speaker 2: based on our current outlook for improved demands, together with current plans for the first quarter of 2024 for the scheduled mill maintenance outages and completing the final phase of the container board conversion on the number three machine at our Jackson, Alabama mill. We are planning to restart the number three machine at the Wulu-Lulu, Washington mill during the fourth quarter in order to bring our inventories to desired levels.

Just on our current outlook for improved demand together with current plans for the first quarter of 2024 for the scheduled mill maintenance outages and completing the final phase of the containerboard conversion on the number three machine at our Jackson, Alabama Mill, we are planning to restart the number three machine at the wound Washington Mill.

During the fourth quarter in order to bring our inventories to desired levels.

Speaker 2: I'll now turn it over to Tom, who provide further details on container board sales and the corrugated business.

I'll now turn it over to Tom will provide further details on containerboard sales and our corrugated business.

Thank you Mark.

Speaker 3: Thank you, Mark. Packaging segment volume for the quarter exceeded our guidance.

Packaging segment volume for the quarter exceeded our guidance estimates corrugated product shipments per workday were up 1.9% and total shipments with two less shipping days were down 1.3% compared to last year's third quarter.

Speaker 3: Curiegated product shipments per workday were up 1.9% and total shipments with two less shipping days were down 1.3% compared to last year's third quarter.

Speaker 3: Versus the second quarter of 2023, shipments per day were up 3.9% and total shipments were up 2.3% Even though there was one less shipping.

Versus the second quarter of 2023 shipments per day were up 3.9% and total shipments were up 2.3%, even though there was one less shipping day outside sales volume of containerboard was 33000 tons above last year's third quarter and 5000 tons above the second quarter of 2023 day.

Speaker 3: Outside sales volume and container board was 33,000 tons above last year's third quarter and 5,000 tons above the second quarter of 2023

Speaker 3: The manned headwinds from a shift of consumer buying preferences towards more service oriented spending, persistent inflation and higher interest rates continue to negatively impact consumers purchases of both durable and non-derbal goods.

<unk> headwinds from a shift of consumer buying preferences towards more service oriented spending persistent inflation and higher interest rates continued to negatively impact consumer purchases of both durable and non durable goods.

Speaker 3: However, we mentioned last quarter that many customers were telling us the inventory destocking of boxes and their products was behind them, and we were hopeful that that would translate to improving volume throughout the second half of the year. We saw that occurring during the third quarter, and we expect that momentum to continue into the fourth quarter, although there is one less shipping day compared to the third quarter.

However, we mentioned last quarter that many customers were telling us the inventory destocking of boxes and their products was behind them and we were hopeful that that would translate to improving volume throughout the second half of the year, we saw that occurring during the third quarter and we expect that momentum to continue into the fourth quarter. Although there is one less shipping day compare.

To the third quarter.

Speaker 3: Relative to the published reductions in the industry benchmark grades that occurred late last year and earlier this year, domestic container board and corrugated products prices and mixed together were $1.12 per share below the third quarter of 2022 and down $0.45 per share compared to the second quarter of 2023.

Relative to the published reductions any industry benchmark grades that occurred late last year and earlier this year domestic containerboard and corrugated products prices and mix together were $1 12 per share below the third quarter of 2022 and down 45 cents per share compared to the second quarter of 2023.

Speaker 3: Export container board prices and mix were down 21 cents per share compared to the third quarter of 2022 and down 3 cents per share Compared to the second quarter of 2023 and I'll turn it back to Mark

Export containerboard prices and mix were down 21 cents per share compared to the third quarter of 2022 and down three cents per share compared to the second quarter of 2023, I'll now turn it back to Mark.

Speaker 2: Thank you, Tom. Looking at our paper segment, EBITDA, excluding special items in the third quarter, was $35 million with sales of $158 million, or a 22.4% margin compared to the third quarter of 2022's EBITDA of $33 million, and sales of $165 million, or a 19.7%.

Thank you Tom looking at our paper segment EBITDA, excluding special items in the third quarter was $35 million with sales of $158 million or 22.4% margin compared to the third quarter of 2020, twos EBITDA of $33 million and sales of 165.

Or a 19.7% margin.

Speaker 2: Seasonally stronger, cut size and printing and converting volumes were 13% higher than the second quarter levels and down almost 8% versus the third quarter of 22. With about 40% of the decline being driven by no paper sales from our Jacksonville in this year's third quarter. Prices and mix were up about 3.5% from last year's third quarter.

Seasonally stronger cut size and printing and converting volumes were 13% higher than the second quarter levels and down almost 8% versus the third quarter of 'twenty two.

With about 40% of the decline being driven by no paper sales from our Jackson mill.

In this year's third quarter.

Prices and mix were up about three 5% from last year's third quarter.

Speaker 2: And down 2% from the second quarter of 2023, due to the declines in the index prices that occurred earlier in the year. Our International Falls Mill managed their nine-day planned maintenance outage very well and similar to the packaging facilities. The mill remained focused on efficient and cost effective operations, delivering great results for the quarter. I'll now turn it over to the...

And down 2% from the second quarter of 2023 due to the declines in the index prices that occurred earlier in the year.

Our International Falls mill manage their 90 day planned maintenance outage, very well and similar to the packaging facilities. The mill remained focused on efficient and cost effective operations delivering great results for the quarter I'll now turn it over to Bob.

Speaker 4: Thanks Mark. Cash provided by operations during the quarter total $339 million with free cash flow of $250 million.

Thanks Mark.

<unk> provided by operations during the quarter totaled $339 million with free cash flow of $250 million.

Speaker 4: The more significant cash payments during the quarter include a capital expenditure of $90 million. Comments stock dividends totaled $100 million.

The more significant cash payments during the quarter included capital expenditures of $90 million common.

Common stock dividends totaled $112 million 60.

Speaker 4: $63 million for federal and state income tax payments, and $51 million for pension and other post-employment benefit contributions.

$63 million for federal and state income tax payments and $51 million for pension and other post employment benefit contributions.

Speaker 4: In addition, we repurchased just over 286,000 shares of our stock during the quarter at an average price of $144.81 per share for total of about $42 million.

In addition, we repurchased just over 286000 shares of our stock during the quarter.

At an average price of $144.81 per share for a total of about $42 million.

Speaker 4: We ended the quarter with $726 million of cash including marketable securities. And our liquidity on September 30 was approximately $1.1 billion.

We ended the quarter with $726 million of cash, including marketable securities and our liquidity on September 30th was approximately $1.1 billion.

Lastly, our planned annual maintenance, our maintenance outage outage expense for the third quarter was just over 22 cents per share.

Speaker 4: Lastly, our planned annual maintenance outage expense for the third quarter was just over 22 cents per share, and the fourth quarter is now expected to be about 19 cents.

In the fourth quarter is now expected to be about 19 cents.

Speaker 4: bringing the 2023 full year total to 72 cents per share.

Bringing the 2023 full year total to 72 cents per share.

Speaker 2: I'll now turn it back over to Mark. Thanks, Bob. Looking ahead as we move forward from the third into the fourth quarter, in our packaging segment, we expect less market-related downtime as we build our inventories back to appropriate levels, along with higher shipments per day in our corrugated products facilities, although our plans will have one less shipping day compared to the third quarter.

I'll now turn it back over to Mark Thanks, Bob Looking ahead as we move forward.

Into the from the third into the fourth quarter in our packaging segment, we expect less market related downtime as we build our inventories back to appropriate levels, along with higher shipments per day in our corrugated products facilities, although our plants will have one less shipping day compared to the third quarter. We also expect lower.

Mark Kowlzan: Good morning, everyone, and thank you for joining Packaging Corporation of America's third quarter of 2023 earnings results conference call. Your host today will be Mark Kowlzan, Chairman and Chief Executive Officer of PCA. On conclusion of his narrative, there will be a question in the answer session. Please note that this call is being recorded. At this time, I'd like to turn that floor over to Mr. Kowlzan. Please proceed when you are ready.

Speaker 2: We also expect lower average prices primarily due to the majority of the May decrease in the published benchmark index grades being realized throughout the third quarter as well as a seasonally less rich mix.

Ridge prices, primarily due to the majority of the May decrease in the published benchmark index grades being realized throughout the third quarter as well as a seasonally less rich mix in our paper segment volume will be lower compared to the seasonally stronger third quarter and prices and mix are assumed to trend lower with declines in the index.

Speaker 2: In our paper segment, volume will be lower compared to the seasonally stronger third quarter. And prices and mix are assumed to trend lower with declines in the index price.

Mrs.

Speaker 2: Operating and converting costs will increase driven by higher recycle fiber prices seasonal energy costs and the restart of the wool mill The appreciation expenses estimated to be slightly higher and scheduled maintenance outage expenses will be lower

Operating and converting costs will increase driven by higher recycled fiber prices seasonal energy costs and the restart of the Wooer mill depreciation expense is estimated to be slightly higher than scheduled maintenance outage expenses will be lower.

Mark Kowlzan: Thank you, Jamie. Good morning, and thank you all for participating in Packaging Corporation of America's third quarter 2023 earnings release conference call. I'm Mark Kowlzan, Chairman and CEO PCA, and with me on the call today is Tom Hassfurther, Executive Vice President, who runs our Packaging Business, and Bob Mundy, our Chief Financial Officer. As usual, I'll begin the call with an overview of the third quarter results, and then I'll turn the call over to Tom and Bob, who will provide further details, and then I'll wrap things up, and then we'd be glad to take questions.

Speaker 2: Considering all of these items, we expect the fourth quarter earnings of $1.76 per share. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we made on the call constituted forward-looking statements.

Considering all of these items, we expect the fourth quarter earnings of $1 76 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 constituted forward looking statements. These statements are based on current estimates expectations and projections of the company.

Speaker 2: These statements were based on current estimates, expectations and projections of the company.

Speaker 2: 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 and the subsequent quarterly reports on Form 10-Q filed with the SEC. Actual results could differ materially from those expressed in the forward-looking statement.

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, and our subsequent quarterly reports on Form 10-Q filed with the SEC Actual results could differ materially from those expressed in the forward looking statements.

Mark Kowlzan: Yesterday, we reported third quarter net income of $183 million, or $2.03 per share. Excluding special items, third quarter 2023 net income was $185 million, or $2.05 per share. Compared to the third quarter of 2022 net income of $266 million, or $2.83 per share. Third quarter net sales were $1.9 billion in 2023 and $2.1 billion in 2022. Total company EBITDA for the third quarter, excluding special items, was $388 million in 2023 and $477 million in 2022.

Speaker 2: And with that, Jamie, I'd like to go ahead and open up the call for questions, please.

And with that Jamie I'd like to go ahead and open up the call for questions. Please.

Speaker 1: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality.

Ladies and gentlemen at this time, we will begin the question and answer session.

To ask a question you May press Star and then one using a touchtone telephone to withdraw. Your question you May Press Star and two if you are using a speaker phone would you ask that you. Please pickup your handset prior depressing. The key is to ensure the best sound quality.

Speaker 1: Once again, that is star and then one to ask a question.

Once again that is star and then one day.

Ask a question.

Speaker 1: Our first question today comes from Cashin Keeler from Bank of America Securities. Please go ahead with your question.

Our first question today comes from Cashing Keeler from Bank of America Securities. Please go ahead with your question.

Mark Kowlzan: Third quarter net income included special items expenses of $0.02 per share, primarily for certain costs at the Jackson, Alabama Mill for paper to contain a board conversion related activities. Details of all special items for the third quarter of 2023, as well as 2022, were included in the schedules that accompanied earnings press release. Excluding special items, the $0.78 per share decrease in third quarter 2023 earnings, compared to the third quarter of 2022, was driven primarily by lower price and mix of $1.33 and volume 9 cents in the packaging segments.

Speaker 5: Hi, it's George Staphos. How are you, everybody? Congratulations on the quarter. Morning, George. How are you doing? Doing dueling conference calls today at this time.

Hi, George Staphos, how are you everybody congratulations on the quarter.

George I, just how are you doing doing dueling conference calls today at this time so.

Speaker 5: Again, congratulations on the performance. Can you talk to the, you enumerated a number of factors in terms of the lower operating and converting costs.

Again, congratulations on the performance can you talk to the Union rated a number of factors in terms of the lower operating and converting costs.

Speaker 5: I know markets always a number of projects, but were there any in particular that were sources of the improved performance? Yes, there's gonna be some pickup in the fourth quarter seasonally and you have OCC higher, but how much do you carry forward and what's the room for further improvement on both operating and converting costs as we look out to 24 from where we're at right now if you can talk a little bit to that.

I know mark its always a number of projects, but where there any in particular is that worst sources of the improved performance, yes, theres going be some pick up in the fourth quarter seasonally and you have OCC higher but how much do you carry forward and what's the the room for further improvement on both operating and converting costs.

Mark Kowlzan: Higher depreciation expense, 11 cents, lower volume and the paper segment, 4 cents, higher tax, 2 cents, and other expenses, 2 cents. These items were partially offset by lower operating costs of $0.58, primarily resulting from lower recycle fiber and energy prices, along with outstanding mill and plant operational execution. Other favorable items included a lower share count, resulting from share repurchases in the second half of 2022, for 11 cents, higher prices and mix in the paper segment, 4 cents, lower converting costs, 4 cents, lower scheduled maintenance outage expenses of 4 cents, and lower freight and logistics expenses, 2 cents.

As we look out to 'twenty four from where we're at right now if you can talk a little bit to that.

Speaker 2: You know, it's the benefit of the year after year continuous improvement that we've had in place.

You know this it's the benefit of the year after year continuous improvement that we've had in place and as we've said over the over the years, where we're constantly doing hundreds and hundreds of projects a year. Some are small some are large but nevertheless, it's an ongoing continuous process across the board and if you think.

Speaker 2: As we've said over the years, we're constantly doing hundreds and hundreds of projects a year. Some are small, some are large, but nevertheless, it's an ongoing, continuous process across the board. If you think about the box plants and the mills, there's a daily activity with the technology organization in concert with the local operational management.

About the box plants and the mills are Theres, a daily activity with the technology organization in concert with the local operational management.

Speaker 2: focused clearly on cost takeout and just operational excellence. And this has been going on for a number of years, and it will continue to go on. Tom, I think you've got great examples in the box plans that we just continue to excel.

Focused clearly on cost takeout and just operational excellence and this has been going on for a number of years and we'll continue to go on Tom I think you know you've got great. Examples in the box plants. We just continue to execute yes, I think Georgia. This is really a you know an effort to to really realize the deployment of the cap.

Mark Kowlzan: The results were 17 cents above our third quarter guidance of $1.88 per share, primarily due to higher volume in the packaging and paper segments and lower operating and converting costs. The operational benefits of our capital spending program and the continued great focus and execution of our mills and corrugated products facilities on numerous process improvement and issues once again delivered impressive results. This included areas such as machine and equipment efficiencies, fiber, chemical and material usages, internal energy generation and usage and labor costs.

Speaker 3: Yeah, I think, George, this is really an effort to really realize the deployment of the capital that we've done in all the box plants and to streamline those box plants and to really get those box plants right-sized for the growth we've got coming and what the existing volume is right now. So we're very pleased.

<unk> that we've done in the in all the box plants and to streamline those box plants and to really get those box plants are right sized for the for the for the growth, we've got coming and what the existing volume is right. Now. So we're very pleased we're very very pleased with the results you know.

Speaker 2: You know, George, as far as next year, you know, as you could expect, we're already and have been talking about, you know, what's on the horizon for next year. What are the opportunities? And so we got a very good solid plan in place on.

George as far as next year.

As you could expect we're already and have been talking about you know what's on the horizon for next year what are the opportunities.

And so we've got a very good solid plan in place on on where we're going. After these are you know cost Takeouts and continued operational improvements along with just being able to look at what the market requirements are going to beef in terms of customer needs and in addressing that.

Speaker 2: on uh... where we're going after these uh... you know cost takeouts and and continued operational uh... improvements along with just being able to uh... look at what the the uh... market requirements are going to be in terms of customer needs and in addressing that and uh... while we address that we're always looking at at how we're uh... deploying that capital and how that impacts the operation in terms of uh... labor cost and energy and uh... uh... input conversion cost so uh... we've got a good good plan for

While we address that we're always looking at and how we're deploying.

Mark Kowlzan: Our approach to cost effective management of container board supply with demand also delivered the benefits we are anticipating. This was primarily achieved by idling the Wollula mill for the entire quarter which resulted in a market-related downtime of approximately 174,000 tons. However, with the stronger demand in our packaging segment, we ended the quarter with inventory levels lower than anticipated.

Deploying that capital and how that impacts the operation in terms of the labor cost in energy and input conversion cost. So we've got a good plan for next year also.

Speaker 5: Um, sounds like it, uh, wouldn't be surprised by that, uh, Mark. So to, to will Lula. And again, I know it's hard to talk about some of this live Mike, but the restart for the fourth quarter, what does it mean about what your customers are saying for 24? I realize you need to rebuild inventories. And we know, uh, PM three, uh, Jackson's going to be down for the, for the, the last part of the conversion, but.

It sounds like it wouldn't be surprised by that Mark So, we'll lula and again I know, it's hard to talk about some of this like Mike, but the restart for the fourth quarter. What does it mean about what your customers are saying for 'twenty four I realize you need to rebuild inventories.

Mark Kowlzan: Based on our current outlook for improved demand, together with current plans for the first quarter of 2024 for the scheduled mill maintenance outages and completing the final phase of the container board conversion on the number three machine at our Jackson Alabama mill, we are planning to restart the number three machine at the Wollula Washington mill during the fourth quarter in order to bring our inventories to desired levels.

And we know it.

<unk> P M three.

Jackson is going to be down for the for the last part of the conversion but.

Speaker 5: You know, what does it mean in terms of your demand outlook, what your customers are saying? And, you know, hopefully this isn't the case, but if things wind up being from a macro standpoint a little bit softer, how quickly could you, you know, maybe pull back on Wallula if need be? And then my last question, I'll turn it over. Can you talk to us a bit about how your early fourth quarter bookings and billings are and how we should, again, think about how those map to actual volumes? Thanks, and good luck in the quarter, guys. Thanks, George.

You know what what does it mean in terms of your your demand outlook. What your customers are saying and you know hopefully this isn't the case, but if if things wind up being from a macro standpoint, a little bit soft or how quickly could you.

Thomas Hassfurther: I'll now turn it over to Tom who provide further details on container board sales in the corrugated business. Thank you, Mark. Packaging segment volume for the quarter exceeded our guidance estimates. Corrigated product shipments per workday were up 1.9% and total shipments with two less shipping days were down 1.3% compared to last year's third quarter. Versus the second quarter of 2023 shipments per day were up 3.9% and total shipments were up 2.3% even though there was one less shipping day.

And maybe pull back on if need be and then my last question I'll turn it over can you talk to us a bit about how your early fourth quarter bookings and billings are in and how we should again think about how those map to actual volumes. Thanks and good luck in the quarter guys. Thanks.

Thanks George.

Speaker 2: As far as Wallula, as we've always

As far as where Lula.

As we've always said, we're going to run to demand.

Speaker 2: And Wallula is just one of the opportunities we have to move the needle on our needs. And so by getting number three started up, you know, over the course of the next couple of weeks, it will fulfill our current needs, and we'll anticipate that through next year. If demand just holds on the trajectory that it is right now, we'll need Wallula running through the year. And so, you know, we will look at the opportunity to supply the marketplace.

And literally is just one of the opportunities we have to move the needle on our needs and so by getting number three started up.

Thomas Hassfurther: Outside sales volume of container board was 33,000 tons above last year's third quarter and 5,000 tons above the second quarter of 2023. Demand headwinds from a shift of consumer buying preferences towards more service oriented spending persistent inflation and higher interest rates continue to negatively impact consumers purchases of both durable and non durable goods. However, we mentioned last quarter that many customers were telling us the inventory destocking of boxes and their products was behind them and we were hopeful that that would translate to improving volume throughout the second half of the year.

Over the course of the next couple of weeks it will fulfill our current needs and we will anticipate that through next year. If demand just holds on the trajectory that it is right now we'll need a little running through the year and so.

You know, we we will look at the opportunity to supply the marketplace.

Speaker 2: We've got our own internal targets on what we want our inventories to be to minimize transportation and logistics issues.

We've got our own internal targets on what we want our inventories to be too.

Minimize transportation and logistics issues, but we can flex the system up and down and we'll as we always have we will always run to demand.

Speaker 2: But we can flex the system up and down and we'll, as we always have, we will always run to demand.

Thomas Hassfurther: We saw that occurring during the third quarter and we expect that momentum to continue into the fourth quarter, although there is one less shipping day compared to the third quarter. Relative to the published reductions in the industry benchmark grades that occurred late last year and earlier this year domestic container board and corrugated products prices and mixed together were $1.12 per share below the third quarter of 2022 and down 45 cents per share compared to the second quarter of 2023. Export container board prices and mixed were down 21 cents per share compared to the third quarter of 2022 and down 3 cents per share compared to the second quarter of 2023.

Speaker 3: That's how I answer that. And Tom, why don't you go into the current box cut up? Yeah, let me first just kind of tag along with what Mark just said relative to running to demand. You know, that is what we do. And if we didn't have the demand, we wouldn't be talking about restarting walu-la, pure and simple. Now, to calibrate that a little bit in your age, I think you need to really look at, our low point was the first quarter of 2023 in terms of demand.

So that's how I'll answer that and then Tom why don't you go into the current box cut up Yeah. Let me. Let me first just kind of tag along with what Mark just said relative to running to demand.

You know that is what we do and if we didn't have the demand we wouldn't be talking about restarting well Lula pure and simple now to calibrate that a little bit George I think you need to really look at our our low point was the first quarter of 2023 in terms of demand or demand currently as you know just in a couple of <unk>.

Speaker 3: Our demand currently is just in a couple of quarters is now 8% higher than that number and going higher, going forward. So that's the real reason why we need the cut up at Lula. It's really being driven on the box side of the business more so than anything else.

Quarters is now 8% higher than that number and going higher going forward. So you know that's that's the real reason why we need the the end of the cut up in at well Lula, It's really being driven on the box side of the business more so than anything else.

Mark Kowlzan: I'm now turning it back to Mark. Thank you, Tom. Looking at our paper segment, EBITDA, excluding special items in the third quarter was $35 million with sales of $158 million or a 22.4% margin compared to the third quarter of 2022. EBITDA of $33 million and sales of $165 million or a 19.7%. Margin.

Speaker 3: and relative to the bookings and the billings. Again.

And relative to the to the bookings and the billings again.

Speaker 3: You know, our bookings are up 14% for this at the beginning. And again, you got to take that number because we've had high numbers and then we come in a little lower, you know, we come in significantly lower for the actual quarter because a lot of these bookings are for quite a ways out. But I think the key here is that the backlog remains incredibly strong and are cut up demand.

Our bookings are up 14% for this you know at the beginning and again, that's you know you've got to take that number because we've had high numbers and then we come in a little lower you know we come in significantly lower for the actual quarter because a lot of these bookings are for for for quite a ways out but I think.

Mark Kowlzan: Seasonally stronger, cut size and printing and converting volumes were 13% higher than the second quarter levels, and down almost 8% versus the third quarter of 22, with about 40% of the decline being driven by no paper sales from our Jacksonville in this year's third quarter. Prices and mix were up about 3.5% from last year's third quarter, and down 2% from the second quarter of 2023 due to the declines in the index prices that occurred earlier in the year.

Key here is is that the backlog remains incredibly strong and our cut up demand is is also very strong. So we feel we feel very good about where we are in the fourth quarter and certainly entering into next year.

Speaker 3: is also very strong. So we feel very good about where we're on the fourth quarter and certainly entering into next year. Thank you.

Thank you very much.

Next question please.

Speaker 1: Our next question comes from Mark Weintraub from Seaport. Please go ahead with your question.

Mark Kowlzan: Our international falls mill managed their nine-day planned maintenance outage very well, and similar to the packaging facilities, the mill that remained focused on efficient and cost-effective operations delivering great results for the quarter.

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

Speaker 3: Thank you. Tom, just following up, you mentioned an 8% reference to your demand now versus I think first quarter. So is that sort of what you're expecting in the fourth quarter on an average A basis because I was sort of trying to do a little bit math and again, is that how to think what that number? Well, I mean our trend still remains positive. So we'll be up and again,

Thank you Tom just following up you mentioned, an 8% reference to your your demand now versus I think first quarter. So is that sort of what you're expecting in the fourth quarter on an average day basis, because that's sort of trying to do a little bit math and again is that how to think what that number.

Robert Mundy: I'll now turn it over to Bob. Thanks, Mark. Cash provided by operations during the quarter totaled $339 million with free cash flow of $250 million. The more significant cash payments during the quarter include a capital expenditure of $90 million. Common stock dividends totaled $112 million, $63 million for federal and state income tax payments, and $51 million for pension and other post-employment benefit contributions. In addition, we repurchased just over 286,000 shares of our stock during the quarter at an average price of $144.81 per share for total of about $42 million.

Well, Mark I mean, our trend our trend still remains remains positive. So you know we'll be up and you know again.

Speaker 3: I think it's really important to get calibrated kind of the correct way to some extent. And because when we look at the fourth quarter compared to the fourth quarter of 22, in 22 we had an extra day in there given the way the way the FBA holidays fell.

I think it's really important to get calibrated kind of the correct way to some extent and because when we look at the fourth quarter compared to the fourth quarter of 'twenty two in 'twenty. Two we had an extra day in there given the harlot the way the way the FBA holidays spell.

Speaker 3: So we were actually up a couple of percent in the fourth quarter of 22 over the third quarter of 22. And, but then of course, you know, in the first quarter of 23 is when we really hit what I call rock bottom in terms of demand.

So we were actually up a couple of percent in the fourth quarter of 'twenty two over the third quarter of 'twenty, two and but then of course you know in the first quarter of 'twenty. Three is when we really hit our what I call rock bottom in terms of demand.

Robert Mundy: We ended the quarter with $726 million of cash including marketable securities, and our liquidity on September 30 was approximately $1.1 billion. Lastly, our plan annual maintenance outage expense for the third quarter was just over 22 cents per share, and the fourth quarter is now expected to be about 19 cents bringing the 2023 full-year total to $72 cents per share.

Speaker 3: And as I said, so we're up just in a couple of quarters, eight percent and we look at that number going up again in the fourth quarter. Got it.

And and as I said, so we're up just in a couple of quarters, 8% and we and we look at that number going up again in the fourth quarter.

Got it okay. Thank you.

Speaker 6: And just on the Jackson project, could you just remind us what the end result?

And just on the Jackson project could you just remind us.

What the end result is.

Speaker 6: uh... is going to be a and is it happening in the fourth quarter and the first quarter uh... and okay

It's going to be is it happening in the fourth quarter and the first quarter and Oh, Okay, just color on that would be great.

Mark Kowlzan: I'll now turn it back over to Mark. Thanks, Bob. Looking ahead as we move forward from the third into the fourth quarter, in our packaging segment, we expect less market-related downtime as we build our inventories back to appropriate levels along with higher shipments per day in our corrugated products facilities, although our plans will have one less shipping day compared to the third quarter. We also expect lower average prices primarily due to the majority of the May decrease in the published benchmark index grades being realized throughout the third quarter, as well as a seasonally less rich mix.

Speaker 2: Just cover on that would be great. Yeah, no, you know, the work will be done next year, late first quarter into the second quarter.

No. We you know the work will be done.

Next year late first quarter into the second quarter, it's a longer outage, but it will be the final phase of completion work necessary to take care of the big machine, whether you're talking about 23 additional high pressure dryer cans.

Speaker 2: It's a longer outage, but it will be the final phase of the completion work necessary to take care of the big machine. But you're talking about, you know, 23 additional high pressure dryer cans modifying the press section. We're removing the fourth press and installing the new shoe press.

To find the press section, we were removing the fourth press and installing the new shoe press.

Speaker 2: You know, a number of modifications in that regard to enhance the speed, the drying capability. But it's that final phase that gets the productivity up, but also some of the work in the back end of the mill is related to the cost position of the mill. So when this work is done, depending on the demand coming out of that mill, that mill will be, you know, as far as

You know a number of modifications in that regard to enhance the speed the drawing.

Capability, but its that final phase that gets the productivity up but also some of the work in the back end of the mill. It is related to the cost position of the mill. So when this work is done.

Mark Kowlzan: In our paper segment, volume will be lower compared to the seasonally stronger third quarter, and prices and mix are assumed to trend lower with declines in the index prices. Operating and converting costs will increase driven by higher recycle fiber prices, seasonal energy costs, and the restart of the wool mill. The appreciation expenses estimated to be slightly higher and scheduled maintenance outage expenses will be lower. Considering all of these items, we expect the fourth quarter earnings of $1.76 per share.

Depending on the demand coming out of that mill that mill will be.

As far as cost competitive position will be right in there with deridder and and counts and Valdosta.

Speaker 2: cost competitive position, it will be right in there with the Ritter and in counts and Velda.

Speaker 6: great and and if you just write that i think it was like a two hundred sixty five thousand ton per year this this part or correct me what the that number was in and if there if there's a way for it to to calibrate the the amount of you know cost per ton or whatever the best way to look at it um... what you're expecting to achieve with this this last phase would be helpful to

And if you just remind I think it was like a 265000 ton per year. This this part or correct me what that number was and if there there's a wait for it to do to calibrate the amount of cost per ton or whatever that the best way to look at it what you're expecting to achieve with this last phase would be helpful too.

Mark Kowlzan: With that, we would be happy to entertain any questions, but a must remind you that some of the statements we made on the call constituted forward-looking statements. These statements were based on current estimates, expectations, and projections of the company, and do involve inherent risks in uncertainties, including the direction of the economy and those identified as risk factors in the annual report on Form 10K, and a subsequent quarterly reports on Form 10Q filed with the SEC.

Speaker 2: You know, I'm not going to answer that right now because I don't want to say the wrong thing. I'm going to let Bob, if he recalls, but at the end of the day, the machine, you know, think about where we've been running the machine on a daily basis.

You know it.

I'm not going to answer that right now because I don't want to say the wrong thing I'm going to let Bob if he recalls but at the end of the day the machine.

If you think about where we've been running the machine on a daily basis.

Speaker 2: The machine's been flexing anywhere from 1,200 tons a day to 1,800 tons a day, depending on what we needed. But when we're done with this project, the capability of that machine will be well over 2,000 tons a day. The target is 2,400 tons a day when we're done with this. So if you use a 352-day a year, you'll get your annual tons.

The machine has been flexing anywhere from 1200 tonnes, a day to 1800 tonnes a day, depending on on what we needed but when we're done with this project the.

Unknown Executive: Actual results could differ materially from those expressed in the forward-looking state, and with that Jamie, I'd like to go ahead and open up the call for questions please. Ladies and gentlemen, at this time we'll begin the question and answer session.

Caching Keeler: To ask a question, our first question today comes from Caching Keeler from Bank of America Securities. Please go ahead with your question.

The capability of that machine.

We'll be well over 2000 tonnes a day that you know the target is 2400 tons a day when we're done with this so if you use a 352 day year, you'll get your annual tons.

Speaker 4: Yeah, Mark, and the improvement from where we are today versus where we will be when we hit that run rate after the completion of the second phase, it's close to $40 a ton. That benefit coming from most of your direct variable type costs and you're getting all this additional volume with no increases in your obviously your indirect costs or any fixed costs. So you get a nice huge benefit while once this project is closed.

Yeah Mark.

The improvement from where we are today versus where we will be when we when we hit that run rate. After the completion of the second phase.

Close to $40 a ton.

Or is that benefit coming from most of your your direct variable type costs in and Youre getting all this additional volume with no increases in your obviously your indirect costs or any fixed costs. So you get them you get a nice nice huge benefit. Once this project is completed great and so we can just take the 2400 times 350 or whatever or three six.

George Staphos: Hi, George Staphos. How are you everybody?

Mark Kowlzan: Congratulations on the quarter. Morning George. I just how you doing doing dueling conference calls today at this time. So again, congratulations on the performance. Can you talk to the you numerated a number of factors in terms of the lower operating and converting costs. I know markets always a number of projects, but were there any in particular that were sources of the improved performance. Yes, there's going to be some pickup in the fourth quarter seasonally and you have OCC higher, but how much do you carry forward and what's the room for further improvement on both operating and converting costs?

Speaker 2: Great. And so we can just take the 2400 times 350 or whatever or 360. Right. You know, just for simple math, you can, you know, whether you use 2,000 or 2,200, but the ultimate goal between myself and some of the people around me, that machine will be at 2,400 ton of day machine someday when we're done fine tuning it. But it would be, to my knowledge, the most productive low cost.

You know just for for simple math, you can whether you use 2000 or 2200.

But the ultimate goal between myself and some of the people around me, it's that machine will be 2400 ton a day machine someday when we're done fine tuning it but it.

It might be to my knowledge it will be the most productive low cost.

Linerboard machine in the Western Hemisphere.

Speaker 6: Super. One last quick one. Curiously, was mix much of a factor in terms of the, you know, the 133, I guess is 112 domestic, but was mix much of a factor in the cargator or was that just mostly, you know, price?

Okay, one last quick one.

Curious what makes much of a factor.

Mark Kowlzan: As we look out to 24 from where we're at right now if you can talk a little bit to that. You know, it's the benefit of the year after year continuous improvement that we've had in place. And as we've said over the over the years, we're constantly doing hundreds and hundreds of projects a year. You know, some are small, some are large, but nevertheless it's an ongoing continuous process across the board.

In terms of the you know the 133 I guess it was 112 domestic but wasn't mix much of a factor in the corrugated or was that just mostly.

Price.

Speaker 3: No, mix is a big factor in there, both in end uses and in basis weights. So there's a heck of a lot that goes into what the final pricing is, and as I mentioned last time, and I'll just mention it again.

No mixes mix is a big factor in there.

Both in both in our you know.

And users and in basis weights. So you know, it's there's there's a heck of a lot that goes into.

Mark Kowlzan: And if you think about the box plans and the mills, there's a daily activity with the technology organization in concert with the local operational management focused clearly on cost takeout and just operational excellence. And this has been going on for a number of years and it will continue to go on. Tom, I think you know you've got great examples in the box plans that we just continued to execute. Yeah, I think George, this is really an effort to really realize the deployment of the capital that we've done in all the box plants and to streamline those box plants and to really get those box plants right sized for the growth we've got coming and what the existing volume is right now.

You know what the what the final pricing is and you know as I mentioned last time and I'll just mention it again.

Speaker 3: You know, building products, that's segment, which is a good segment for us, still remains underwater as housing starts, you know, have been affected by higher interest rates. The graphics mix, you know, and the effect of what's going on and the changes that are taking place in brick and mortar stores, that's been impacted. And of course, our automotive segment with the UAW strike is now really starting to get impacted.

Building products that still that that segment, which is a good segment for us still remains under water as.

Housing starts you know had been affected by higher interest rates.

The graphics mix, Oh, and the effect of what's going on in the changes that are taking place in brick and mortar stores, that's been impacted and of course, our automotive segment with the UAW strike is now really starting to get impacted.

Speaker 3: uh... now all of those all of those segments tend to be on the on the higher price side however uh... you know we've got we've got a lot of other segments that are doing quite well and uh... you know we're uh...

Now all of those all of those segments tend to be on the on the higher price side. However.

We've got we've got a lot of other segments that are doing quite well.

Mark Kowlzan: So we're very pleased, we're very pleased with the results. You know, George, as far as next year, you know, as you could expect, we're already and have been talking about, you know, what's on the horizon for next year is what are the opportunities. And so we've got a very good solid plan in place on on where we're going after these cost takeouts and continued operational improvements along with just being able to look at what the market requirements are going to be in terms of customer needs.

And.

Mark Kowlzan: And addressing that and while we address that, we're always looking at how we're deploying that capital and how that impacts the operation in terms of labor cost and energy and input conversion cost. So we've got a good plan for next year. So, it sounds like it wouldn't be surprised by that, Mark.

Speaker 3: And we haven't been impacted much at all other than what you've seen in the publications in terms of price.

And we've been we haven't been.

Impacted much at all other than what you've seen in the publications in terms of price.

Okay Super Thank you.

Thank you next question.

Speaker 1: Our next question comes from Mike Roxland from Truis. Please go ahead with your question.

Our next question comes from Mike Rock Flynn from <unk>. Please go ahead with your question.

Speaker 2: Thank you, Mark, Tom, and Bob for taking my questions. Congrats on another solid quarter. This has been a tough environment.

Thank you Mark.

Bob for taking my questions Congrats on another solid quarter.

Barbara.

Thanks, Mike.

Speaker 2: I want to be able to buy a little more college about the cadence of shipment during the quarter. There's just a little more color on we are elaborating the policy, I should say. Some of the different end markets, and you can get some good color before the prior question. I'm doing product in the automotive segment, but anything you could provide asked you maybe some side, the cadence during the quarter and what end markets really showed some significant growth on the quarter progress.

Just kind of a little more I wonder if you can provide a little more color just about the cadence of shipments during the quarter.

Just a little more color on our elaborating upon I should say.

Some of the different end markets that you had some good color before on the prior question on building products in the automotive segment put anything you could provide maybe some cadence during the quarter and what end markets really showed some significant growth and as the quarter progressed.

Mark Kowlzan: So, to Walulah, and again, I know it's hard to talk about some of this live, Mike, but the restart for the fourth quarter, what does it mean about what your customers are saying for 24? I realize you need to rebuild inventories and we know PM 3 at Jackson's going to be down for the left part of the conversion, but, you know, what does it mean in terms of your demand now? Look what your customers are saying.

And markets.

When things started picking up yeah, yeah, okay, well Mike.

Speaker 3: Okay, well Mike, I kinda, I think I got most of what you're asking here, but outside of those markets that I mentioned, one other market that I had mentioned prior was the Ag business, and told you that we had a lot of headwinds in Ag, especially weather related. Those have pretty much dissipitated, and we're looking for a very good Ag season coming up. So that's gonna be a lift.

I think I got most of what you're asking here, but you know.

Are those markets that I mentioned, Oh, one other market that I had mentioned prior was the AG business and told you that you know we had a lot of headwinds in AG, especially weather related those have pretty much dissipated and we're looking for a very good AG season coming up so.

Mark Kowlzan: And, you know, hopefully this isn't the case, but if things wind up being from a macro standpoint a little bit softer, how quickly could you, you know, maybe pull back on Walulah, if need be. And then my last question I'll turn over. Can you talk this a bit about how your early fourth quarter bookings and billings are and how we should again think about how those map to actual volumes. Thanks and good luck in the quarter guys.

So that's so that's going to be a that's going to be a lift of course E. Comm. As you know continues to kind of take a little bit of a larger share of the corrugated business and and that looks and that looks very good and you know all in general I mean, we're selling a lot of food and beverage and all sorts of other segments and those segments either remain.

Speaker 3: Of course, E-Com continues to take a little bit of a larger share of the corrugated business.

Speaker 3: And that looks very good. And in general, we're selling a lot of food and beverage and all sorts of other segments.

Speaker 3: And those segments either remain very steady or have, or have, you know, look good going forward. And I think the best news is, is it's becoming more predictable now, given the fact that we've gotten all of this inventory and destocking out of the way.

Very steady or or have a or have looked look good going forward and I think the best news is is it becoming more predictable now given the fact that we've gotten all of this inventory and destocking out of the way.

Mark Kowlzan: [inaudible] So, you know, just in a couple of quarters is now 8% higher than that number and going higher and going forward. So, you know, that's the real reason why we need the, you know, the cut up in at Lula. It's really being driven on the box side of the business more so than anything else and relative to the, to the bookings and the billings. Again, you know, our bookings are up 14% for this, you know, at the beginning.

Speaker 3: and our customers are operating quite lean at the moment. And so it's a lot easier to predict what's happening in a number of-

And our customers are are operating quite lean at the moment and so it's it's a lot. It's a lot easier to predict what's happening in a number of these segments.

Speaker 7: Hope that answers your question. You got us now, sorry, Alfa, thank you. And Doug, as you think about bringing back Will Will, can you talk about any headwinds that any of your other mills might face? I recall the last quarter you mentioned that because of Will Will being down, you were able to optimize production that you're remaining those, achieving a $15 per tonn benefit. So any headwinds that you could expect or participate in your other mills, once will will slowly up and running.

Hope that hope that answers your question.

No that's very helpful. Thank you.

And then as you think about where.

<unk> can you talk about any headwinds any of your other mills might face I recall that last quarter, you mentioned that.

Because of the little being down you are able to optimize production.

Your remaining mills.

$15 per ton benefit so any headwinds that you expect or anticipate are you on the nose.

Once it's fully up and running.

Speaker 2: Well, no, again, currently because of the inventory situation, we'll have to run the entire milk system to capacity. So the six mils that ran during the third quarter will have to continue running full out. And then we'll lose the number three. We'll have to come up and perform equally as efficient.

Well no again currently because of the inventory situation will have to run the leap.

The entire mill system capacity and so the six mills that ran during the third quarter. We will have to continue running full out and then we'll lula number three we will have to come up and perform equally as efficiently.

Speaker 7: Mark, can you help us think about how you're thinking of growing the business once you're past the phase, the conversion of number three at Jackson next year? Where does growth come from next? The current conversion of IFAWs, the resumption of M&A, how should we think about you growing the business, let's say, post-2025?

One final question as it gets.

Yes.

Mark can you help us think about how you're thinking of growing the business one.

Oh once you're past the peak.

Number three in Jackson.

Where does the growth come from Max is the conversion of eyeballs resumption of M&A, how should we think about growing the business, let's say post 2024.

Speaker 2: Well, you know, if you look at over the decades, we've always grown with our customers. And we still have the most diverse, broad book of business nationwide with local accounts.

Well you know if you look at over the decades, we've always grown with our customers and we still have the most diverse a broad book of business nationwide with local accounts and we'll continue to to grow with those accounts in and help enhance their business and so that's where a lot of the opportunity always.

Speaker 3: and uh... will continue to to grow with those accounts in and help enhance their business and so that's where uh... a lot of the opportunity always comes from time you want to elaborate on that well i think in addition i think you know that uh... as i mentioned the segments that are down those segments are going to come back so they're gonna show back up and uh... and will continue to uh... you know what we think is operate you know

It comes from Tom do you want to elaborate on that well I think in addition, I think you know that are as I mentioned these segments that are down those segments are going to come back so they're going to show back up and are and will continue to you know what we think is operate.

Mark Kowlzan: And again, that's, you know, you got to take that number because we've had high numbers and then we come in a little lower, you know, we come in significantly lower for the actual quarter because a lot of these bookings are for, you know, for far, you know, quite a ways out. But, I think the key here is that the backlog remains incredibly strong and our cut up demand is also very strong. So, we feel, we feel very good about where we're on the fourth quarter and certainly entering in the next year. Thank you very much.

<unk>.

Speaker 3: demonstrate the best value in the marketplace to an entire customer base and be able to grow our business accordingly as well. So, we are, you know, we're constantly looking outward to see what's possible and what those demands look like and working very closely with our customers. And we want to make sure we're well aligned. That's what's driving the whole Valula project at the moment. So, we...??...

Unknown Executive: Next question, please.

Demonstrate the best value in the marketplace to an entire customer base and be able to grow our business accordingly as well so.

We are you know we're constantly looking outward to see what see what's possible and what those demands look like and working very closely with our customers and we want to make sure we're well aligned.

Mark Weintraub: Our nice question comes from Mark Weintraub from Seaport. Please go ahead with your question. Thank you. Tom, just following up, you mentioned an 8% reference to your demand now versus I think first quarter. So is that sort of what you're expecting in the fourth quarter on an average A-Basis because I was sort of trying to do a little bit math. And again, is that how to think of what that number was mentioned? Mark, our trend still remains positive. So we'll be up. And again, I think it's really important to get calibrated kind of the correct way to some extent.

That's what's driving the the whole well Lula project at the moment.

Got it thank you very much.

Yeah.

Thank you next question please.

Speaker 1: Our next question comes from Gabe Hyde from Wells Fargo. Please go ahead with your question.

Our next question comes from Gabe <unk> from Wells Fargo. Please go ahead with your question.

Speaker 7: This is Alex on Pretty Good. Thanks for taking my question. So, just thank you, Matthew, at inventory level. Can we just kind of comment on what your targeted inventory looks like through your end or to what I'm thinking about the Jackson S.

This is Alex on for Ken.

Thanks for taking my question so.

Thank you.

Tori level can you maybe just talk.

What your targeted inventory mccluster.

Or she won.

One thinking about the Jackson outage.

Well you know, we never give absolute numbers, but I can tell you when we started out the third quarter we.

Speaker 2: You know, we never give absolute numbers, but I can tell you when we started out the third quarter, we...

Mark Weintraub: And because when we look at the fourth quarter, compared to the fourth quarter of 22, in 22 we had an extra day in there given the way the way the FBA holiday spell. So we were actually up a couple of percent in the fourth quarter of 22 over the third quarter of 22. And but then of course, you know, in the first quarter of 23 is when we really hit what I call rock bottom in terms of demand. And as I said, so we're up just in a couple of quarters, 8% and we look at that number going up again in the fourth quarter. Got it.

Speaker 2: The targets we had in mind, we far under, yes.

Targets, we had in mind, we are we far under.

Yes.

Speaker 2: We were dramatically lower than what our goals were for the ending inventory. And that's a positive situation to be in, especially when we have the opportunity to get we'll start it back up and satisfy that demand. But we have.

We are dramatically lower than what our goals were for the ending inventory and that's a positive situation to be in.

Especially when we have the opportunity to get started back up in and satisfy that demand but.

We have a number in mind.

Speaker 2: and what will influence that number, of course, is the shutdown schedule we have in plans for the Jackson conversion and then the other annual shutdowns that will take place in the first six months of the year in the rest of the container boards.

And what will influence that number of course is the shutdown schedule. We have in plans for the Jackson conversion and then the other annual shutdowns that will take place in the first six months of the year and the rest of the containerboard system.

Mark Kowlzan: Okay, thank you. And just on the Jackson project, could you just remind us what the end result is going to be? Is it happening in the fourth quarter and the first quarter? And okay, just cover on that would be great. Yeah, no, you know, the work will be done next year, late first quarter into the second quarter. It's a longer outage, but it will be the final phase of the completion work necessary to take care of the big machine.

Speaker 2: So, without giving an absolute number, we have some work to do to get our inventory up where it needs to be, to get us into the new year and then get us through the first six months of the year.

The without giving you an absolute number we have some work to do to get our get our inventory up where it needs to be to get us into the new year and get us through the first six months of the year.

Mark Kowlzan: But you're talking about, you know, 23 additional high pressure dryer cans modifying the press section. We're moving the fourth press and installing the new shoe press, you know, a number of modifications in that regard to enhance the speed, the drying capability. But if that final phase that gets the productivity up, but also some of the work in the back end of the mill is related to the cost position of the mill.

Okay, Thanks, and just thinking about Hulu.

Speaker 7: Just think about what we'll, is there anything, does anything change with the cross rupture that we see Michael have asked the no research, anything variable or effect?

Is there any.

I think it does anything change with the cost structure that was seen Michael.

The mill restarts in variable or fixed.

Speaker 2: You know, again, Walula, it's no surprise, is our higher cost mill because of the fiber basket and the energy situation in the Pacific Northwest. But it remains a critical mill to us because of the locale with our Pacific Northwest box plants. And so in that regard, the cost position won't change. You know, we're taking advantage of running the big machine.

Again, well Lula, it's no surprises or higher cost mill because of the the fiber basket in the energy energy situation in the Pacific Northwest, but it remains a critical mill to us because of the locale with our Pacific Northwest box plants and so in that regard the cost position will change.

Mark Kowlzan: So when this work is done, depending on the demand coming out of that mill, that mill will be, you know, as far as cost competitive position, it will be right in there with derettering in counts and Belvasta.

We're taking advantage of running the big machine.

Speaker 2: We don't currently need the number two machine running, but that could change.

We don't currently need the number two machine running but that could change. So again, we will run to demand.

Speaker 3: So again, we will run to demand, we will satisfy what we need. Tom, do you want to add? Yeah, I would just add that, you know, with the Willow Mill operating in a very large market for us.

We will satisfy what we need Tom you want to add yeah, I would just add that our you know with the Blue mill operating in a in a very large market for us.

Mark Kowlzan: Great. And if you just remind me, I think it was like a 265,000 ton per year, this part or correct me what that number was. And if there's a way for it to calibrate the amount of cost per ton or whatever, the best way to look at it, what you're expecting to achieve with this last phase would be helpful to. You know, I'm not going to answer that right now because I don't want to say the wrong thing.

Speaker 3: It certainly gives us a lot more flexibility in a box plant to react and respond quicker to the marketplace as that continues to rebound. And of course, that's heavy egg up there as well. So this will be, you know, this will give us...

It certainly gives us a lot more flexibility in our box plant to react and respond.

Quicker to the marketplace as that as that continues to rebound and of course, that's heavy AG up there as well. So this will be this this this will give us some some advantage in terms of flexibility in that marketplace.

Speaker 3: some advantage in terms of flexibility in that mark.

Mark Kowlzan: I'm going to let Bob, if he recalls, but at the end of the day, the machine, you know, if you think about where we've been running the machine on a daily basis, you know, the machine has been flexing anywhere from 1,200 tons a day to 1,800 tons a day depending on what we needed. But when we're done with this project, the capability of that machine, you know, it will be well over 2,000 tons a day.

Speaker 4: Yeah, Alex, I'll just add that when we bring Lula back on in the fourth quarter, again, we're doing our comparisons to the third. As Mark said, it is our highest cost mill. And as we get things ready so that we can restart the machine first of November , we have been incurring labor costs and other things, obviously with no production. But there are no significant.

Yeah, Alex and I'll, just add that when we bring our lula back on in the fourth quarter again, and our comparisons to the third as Mark said it is our highest cost mill in <unk>.

We are.

As we get things ready so that we can restart the machine first.

First of November we had been incurring labor costs and other things obviously with no production so but there are no significant.

Mark Kowlzan: The target is 2,400 tons a day when we're done with this. So if you use a 352 day a year, you'll get your annual tons. Mark, and the improvement from where we are today versus where we will be when we hit that run rate after the completion of the second phase. It's close to $40 a ton. That benefit coming from most of your direct variable type costs and you're getting all this additional volume with no increases in your obviously your indirect costs or any fixed costs, so you get a nice huge benefit once this project is completed.

Speaker 4: Cash costs to restart. There may be some non-cash, some raw material right off, ophthalic and type things, but nothing significant there. But if you're comparing to the third quarter, it accounts for as far as our cost increase, if you look at our operating costs, almost half of the increase is just coming from restarting the Lula and bringing those costs back on.

Cash cost to restart there may be some noncash some raw material write off type obsolescence type things, but nothing nothing significant there, but but it does if you're comparing to the third quarter. It accounts for.

As far as our cost increase if you look at our operating costs.

Almost half of the increase is just coming from restarting well lula and bringing those costs back online.

Speaker 7: Okay, that's it. And I guess my last question is just thinking about 2024, maybe can you just kind of be afraid of how you're thinking about 24 understand this, you know, so we still have another quarter game, which is for, you know, the high levels of percentages, higher than...

Alright, okay.

And I guess.

Mark Kowlzan: Great, and so we can just take the 2400 times 350 or whatever or 360. You know, just for a simple math, you can, you know, whether you use 2,000 or 2,200, but the ultimate goal between myself and some of the people around me, that machine will be at 2,400 ton a day machine someday when we're done fine tuning it.

My last question is just thinking about 'twenty 'twenty four and maybe can you can you just kind of explaining how you're thinking about 'twenty four I understand so we still have another quarter, but just for the.

The high levels of puts and takes.

I'll get back home before.

<unk>.

Speaker 2: Well, just on a macro level, we're going to continue to do what we do run to demand. But the other thing is, if I were an investor, which I am, but I would be looking at this on how we use our cash and where we're deploying cash. And we...

Well just on a macro level, we're going to continue to do what we do run to demand, but the other thing is.

Mark Kowlzan: But it might be, to my knowledge, it'll be the most productive low cost, land aboard machine in the Western hemisphere. One last quick one. It's interesting. What makes much of a factor in terms of the 133, I guess is 112 domestic, but what makes much of a factor in the car get it, or is that just mostly price? No, it mixes mixes a big factor in there, both in, you know, end uses and in basis weights.

If I were an investor, which I am but I would be looking at this on how we use our cash and where we're deploying cash.

And we.

Speaker 2: We talked about this a little bit at the July call for next year. And we would anticipate the capital spending discipline to continue in the trend that it's been. We'll be in that $400 million level this year. And plans call for next year to continue that pace of capital deployment, which if you.

We talked about this a little bit on the July call for next year, and we would anticipate the capital spending discipline to continue in the AR and the trend that its been where we'll be in that $400 million level. This year.

And plans call for next year to continue that pace of capital deployment, which if you then think about the excess cash being generated where that goes.

Speaker 2: then think about the excess cash being generated, where that goes.

Speaker 2: that there are other opportunities to take advantage of that and bring value to the shareholders.

You know there are other opportunities to take advantage of that and bring value to the shareholders.

Mark Kowlzan: So, you know, there's a heck of a lot that goes into, you know, what the, what the final pricing is, and you know, as I mentioned last time, and I'll just mention it again, you know, building products. That's still, that, that segment, which is a good segment for us still remains underwater as housing starts, you know, have been affected by higher interest rates. The graphics mix, you know, in the effect of what's going on and the changes that are taking place in brick and mortar stores, that's been impacted and of course our automotive segment with the UAW strike is now really starting to get impacted.

Speaker 2: And so we'll get again continue to take advantage of the benefits of all the capital spending that we've been bringing to bear, get Jackson completed and then continue to look at more opportunities and execute and work with our customer base and taking care of our customers.

And.

So we'll get again continue to take advantage of the benefits of all the capital spending that we've been bringing to bear get Jackson completed and then continue to look at more opportunities and execute in and work with our customer base and taking care of our customers.

Okay I'll turn it over thank you.

Next question.

Speaker 1: Our next question comes from Anthony Petinari from City. Please go ahead with your question. Good morning.

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

Hi, good morning.

Speaker 2: Um, you know, we've seen a large amount of new recycled capacity being added, you know, to the market this year. Uh, I guess some integrated, some non-integrated. And I just had two questions. I guess first, you know, could you talk about the impact on the market that you've seen or maybe haven't seen? And then second, you know, maybe for more of a big picture perspective.

Mark Kowlzan: Now, all of those segments tend to be on the on the higher price side. However, you know, we've got, we've got a lot of other segments that are doing quite well. And, you know, we're, and we've been, and we haven't been impacted much at all, other than what you've seen in the publications in terms of price.

Morning.

We've seen a large amount of new recycled capacity being added to the market. This year I guess, some integrated some non integrated and I just had two questions. I guess first could you talk about the impact on the market that you've seen or maybe haven't seen and then second maybe for more a big picture perspective, how should we think about <unk>.

Mark Kowlzan: Okay, super.

Unknown Executive: Thank you.

Speaker 8: How should we think about PCAs mix? Historically, have been a virgin board producer? Are there some opportunities to add recycled capacity? I guess we'll look in process for CC. Or do you still see Virgin playing this kind of...

Mike Rochland: Next question.

We see a mix you know historically, you've been a Virgin board producer or Theres, some opportunities to add recycled capacity I guess, what we will can process OCC or do you still see you know Virgin playing this kind of unique role in the U S market.

Mark Kowlzan: Our next question comes from Mike Rochland from Truis. Please go ahead with your question. Thank you Mark. And Bob, you're taking my questions. Congrats on another solid quarter. This is a tough environment. Thank you. Thanks Mike.

Speaker 8: unique role in the US market. How do you think about that maybe over the next second?

How do you how do you think about that maybe over the next decade.

Speaker 2: You know, we've always been primarily a virgin line-up board, you know, medium producer. We have capability of flexing a number of our mills. I think most people understand that we've invested heavily over the last decade and...

Mark Kowlzan: I'm just kind of a little more, I want to be able to buy a little more college is about the cadence of shipment during the quarter. There's just a little more color on, on my, on my, are labeling the positive say. Some of the different end markets. I mean, some good color before the prior question. I'm doing product in the automotive segments, but anything you could provide asked you, maybe some site.

We've always been primarily a virgin.

Your board medium producer, we have the capability of flexing number of our mills.

I think most people understand that we've invested heavily over the last decade and in in these conversion opportunities Deruiter woo.

Speaker 2: In these conversion opportunities, Deritter, Wulu, now the Jackson Mill counts. The Northern Mill's all have recycled capacity. But again, we're not going to put all our eggs in one basket and go all-

Mark Kowlzan: The cadence during the quarter and what end markets really showed some significant growth on the corner progress. End markets and then when, when things started picking up. Yeah, yeah. Okay. Well, Mike, I kind of, I think I got most of what you're asking here, but. You know, outside of those markets that I mentioned, you know, one other market that I'd mentioned prior was the ag business and, and told you that, you know, we had a lot of headwinds and ag, especially weather related.

Now the Jackson mill counts the northern Mills, all have recycled capacity, but again, we're not going to put all our eggs in one basket and go.

All into recycle.

Speaker 2: take advantage of it and it does give us some opportunity to flex the fiber cost and in a time of year and availability. But again, I think if you look at us 10 years from now we'll still look the same that we do today in terms of our fiber balance. Tom?

Take advantage of it and it does give us some opportunity to flex the fiber cost and and and.

Time of year and availability, but.

You know again I think if you look at US 10 years from now we'll still look the same.

Mark Kowlzan: Those have pretty much dissipitated and we're looking for a very good ag season coming up. So that's, so that's going to be a, that's going to be a lift. Of course, Ecom has, you know, continues to kind of take a little bit of a larger share of the corrugated business. And, and that looks, and that looks very good. And, you know, all in general, I mean, we're selling a lot of food and beverage and all sorts of other segments.

That we do today in terms of our fiber balance Tom.

Speaker 3: Anthony, the impact in the marketplace of the, let's say the one-offs, even having some integration in some of these mills.

Anthony the impact in the marketplace of the let's say the one offs.

Even having some integration and some of these mills.

Speaker 3: is bearing out exactly like I had told you it would with the very limited open market.

Is bearing out exactly like I had told you it would with the very limited open market.

Speaker 3: uh... we have seen virtually no impact at all from these mills uh... they're gonna have to find a home somewhere else now the ones that are integrated and you know will will be running to demand i'm sure uh... and and they're not even attempting to sell into the open market those that are the one-offs uh... might attempt to sell into the open market but again it's uh... we're finding that our domestic customers

Mark Kowlzan: And those segments either remain very steady or have, or have, you know, look, look good going forward. And I think the best news is is it's becoming more predictable now given the fact that we've gotten all of this inventory and destocking out of the way. And our customers are operating quite lean at the moment. And so it's, it's a lot, it's a lot easier to predict what's happening in a number of these segments. Thanks. I hope that answers your question. Thank you.

We have seen virtually no impact at all from these mills are they're gonna have to find a home somewhere else now the ones that are integrated and we'll we'll be running to demand I'm sure.

And they're not even attempting to sell into the open market those that are the one offs.

Might attempt to sell into the open market, but again it's.

We're finding that our domestic customers want to stick with P. C. A for the fact that we've got a great quality linerboard and medium.

Speaker 3: want to stick with PCA for the fact that we've got a great quality liner board and medium and we take care of our customers, our service is very good and they've shown absolutely zero interest in moving to any other supplier. And I think that's probably true across the board. So hopefully that answers that and just to tag on with what Mark was saying.

Mark Kowlzan: As you think about bringing back, can you talk about any headwinds that any of your other mills might face? I recall the last quarter you mentioned that because of a little being down, you were able to optimize production that you're meeting those achieving a 15-dollar return benefit. Any headwinds that you could expect or anticipate how your other mills once was lost fully up and running? Well, no, again, currently, because of the inventory situation, we'll have to run the entire mill system to capacity. And so the six mills that ran during the third quarter will have to continue running full out. And then we'll lose the number three. We'll have to come up and perform equally as efficiently.

And we've we take care of our customers. Our service is very good and and they've they've shown an absolute zero interest in and moving to any other any other supplier and I think that's probably true across the board. So you know that I hope hopefully that answers that and you know just to tag on with what Mark was.

Speaker 3: We value our fiber flexibility, and I can tell you that our mills, you know, you can go back in history and find PCA was a heavyweight mill system. And we've completely adapted to whatever the market is today. And we've got this ability to basically tailor our liners to whatever the needs of our customers are, and that's a huge competitive advantage.

Dan.

We we value our fiber flexibility and I can tell you that our mills are.

If you go back when you you know you can go back in history and find PCA was a heavy weight mill system and we've completely adapted to whatever the market is today and we've got this ability to basically tailor our liners to whatever the needs of our customers are and that's it and that's a huge competitive advantage. We have one on one of the factors if you.

Mark Kowlzan: One final question. I think it's excuse me here. Mark, can you help us think about how you're thinking of growing the business once, once you've passed the phase? No, you'll be the conversion of number three and Jackson next year. No, where does it go? Come from Max. The current conversion of iPhones, the resumption of M&A. How should we think about you growing the business? Yeah, let's say post 2024. Well, you know, if you look at over the decades, we've always grown with our customers and we still have the most diverse, broad book of business nationwide with local accounts and we'll continue to grow with those accounts and help enhance their business.

Speaker 2: One of the factors, if you think about recycle versus virgin fiber, virgin fiber prices and input cost, conversion cost have been very stable over the decades, relatively speed.

Think about recycled versus Virgin.

Fiber Virgin fiber prices and input cost conversion cost had been very stable over the decades relatively speaking.

Speaker 2: If you're solely dependent on OCC, DLK, the price and cost input swings have been wild, you know, high, low, high, low. And so trying to anticipate what your conversion cost is is not, you know, a good place to be if you're 100% recycle. So we like where we are. We will continue with this model.

If you're solely dependent on OCC D L K.

Price and cost inputs swings have been wild.

Hi, Lo high low and so trying to anticipate what your conversion cost is is not.

No.

Good.

To me, if you're a 100% recycle so we like where we are we will continue with this with this model.

Mark Kowlzan: And so that's where a lot of the opportunity always comes from. Tom, you want to elaborate on that? Well, I think in addition, I think, you know, that as I mentioned, these segments that are down, those segments are going to come back. So they're going to show back up and and we'll continue to, you know, what we think is operate, you know, demonstrate the best value in the marketplace to an entire customer base and and be able to grow our business accordingly as well.

Okay. Yeah, that's very helpful. Thank you.

Yes.

Speaker 1: And once again, if you would like to ask a question, please press star and then one using a touchtone telephone. Once again, to withdraw your questions, you may press star and two. Again, that is star and then one. Did you join the question?

Oh.

And once again, if you would like to ask a question. Please press star and then one using a touchtone telephone once again to withdraw. Your question you May Press Star and two again that is star and then one to join the question queue.

Mark Kowlzan: So, you know, we are, you know, we're constantly looking outward to see what's possible and what those demands look like and working very closely with our customers and we want to make sure we're well aligned. That's what's driving the whole Willula project at the moment.

Speaker 1: Our next question comes from Jeffries. Please go ahead with your question.

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

Speaker 9: morning mark bob tom John i don't know how to fill uh... i want to start off with the implied for cute guys box shippments uh... i mean i know uh... bookings are up fourteen percent but

Good morning, Mark Tom This is John good morning, I felt.

<unk>.

Unknown Executive: Thank you very much.

I wanted to start off with the implied for Q guide for box shipments I mean, I know you said so far.

Unknown Executive: Thank you.

Gabe Hyde: Next question, please. Our next question comes from Gabe Hyde from Wells Fargo. Please go ahead with your question.

Our bookings are up 14%, but bookings aren't what's actually build so if I'm just reading your press release being up on a per day basis in four Q quarter over quarter.

Speaker 9: If I'm just reading your press release being up on a per day basis in 4Q quarter over quarter, one last shipping day, it seems to imply that 4Q at least for the guide is up about 14.5 or so, 15%. Is that right way to think about it? Any kind of extra color you give on that?

Mark Kowlzan: This is a pretty good answer to my question. So just thinking about the inventory level, can we just kind of comment on what your targeted inventory looks like through your end or to what? I won't think about the Jackson average. Well, you know, we never give absolute numbers, but I can tell you when we started out the third quarter, we, the targets we had in mind, we, we, we far under, you know, we were dramatically lower than what our goals were for the ending inventory.

One less shipping day, it seems to imply that <unk> at least for the guide is up about.

$14 five or so 15%.

That is that the right way to think about it.

Any any kind of extra color you gave on that.

Speaker 4: No, that's not the right way to think about a film, but I'm gonna turn over to Bob and see if he can walk you through this Just a little bit maybe yeah, I'd get to calibrated. I'm not sure I can Tom That no feel that's I'm not sure Maybe we talk afterwards. I'm not sure how you're how you're arriving at that Certainly for me anything that we said or put out but that obviously be a tremendous thing if that worked to happen But I just don't see how you're how you're getting there and maybe we could just talk offline

No that's not the right way to think about it Phil but I'm going to turn it over to Bob and see if he can walk you through this just a little bit maybe yada yada calibrated all of them.

Not sure I can Tom.

No feel that's I'm not sure maybe.

Maybe we can talk afterwards by much it's not sure how you're how you're arriving at that certainly from anything that we've said or put out but that obviously would be a tremendous thing if that were to happen, but I just don't see how youre getting there maybe if you could just talk offline.

Mark Kowlzan: And that's a positive situation to be in, especially when we have the opportunity to get Willula started back up and and satisfy that demand, but, you know, We have a number in mind and what will influence that number of course is the shutdown schedule we have in plans for the Jackson conversion and then the other annual shutdowns that will take place in the first six months of the year in the rest of the container board system. And so without giving an absolute number we have some work to do to get our inventory up where it needs to be to get us into the new year and get us through the first six months of the year.

Speaker 9: And then just in terms of expectations going to 4-core out of these sounds like things are...

Sounds good.

And then just in terms of.

Expectations going into fourth quarter, obviously, it sounds like things are even if not mid teens theres still going pretty good and you have more visibility it seems a little bit in contrast to what <unk> said with.

Speaker 9: even if not mid teens are still going pretty good and get more visibility. Seems a little bit in contrast to what RECIO's said with.

Speaker 9: just generally expectations for a software holiday demand. And I know it's customer by customer and they're obviously not surveying the whole market, but...

Just generally expectations for a softer holiday demand and I know, it's customer by customer and Theyre, obviously, not serving the whole market.

Speaker 9: Are you seeing the holiday demand here in the fourth quarter actually coming through pretty good?

Are you seeing.

The holiday demand here in the fourth quarter actually coming through pretty good.

Yes, I would say the holiday demand is going to be is going to be strong yes.

Speaker 3: Yes, I would say the holiday demand is going to be strong. Yes.

Speaker 10: Great. And in just one last quick clarification, the 174,000 tons of economic downtime that you called out with that just for Lulu or the whole company is incorporating to that for the economic downtime. That was the Lulu downtime.

Great and just one last quick clarification, the 174000 tons of economic downtime.

Mark Kowlzan: Okay, thanks. And just think about Willula. Is there anything, does anything change with the cost rupture that we see Michael as the no research in bearable or fixed? You know, again, Willula, it's no surprise is our higher cost mill because of the fiber basket and the energy energy situation in the Pacific Northwest. But it remains a critical mill to us because of the locale with our Pacific Northwest box plants. And so in that regard, the cost position will change.

You called out was that just for a little over the whole company.

It is incorporated into that for the economic downtime.

That was the Lula downtime.

Okay.

Speaker 11: All right, appreciate it. I'll turn it over. Okay. Thank you next question.

Alright, I appreciate it I'll turn it over okay. Thank you next question.

Yeah.

[noise], Jamie anybody left on the queue.

Yeah.

Mark Kowlzan: You know, we're taking advantage of running the big machine. You know, we don't currently need the number two machine running, but that could change. So again, we will run to demand. We will satisfy what we need. Tom, you want to add? Yeah, I would just add that, you know, with the Willula Mill operating in a very large market for us. It certainly gives us a lot more flexibility in a box plant to react and respond quicker to the marketplace as that continues to rebound.

Okay.

Yeah.

Speaker 12: I guess we will conclude. I think we've lost our moderator on the call, but for those of you that joined us today, I want to thank you for taking the time and look forward to having you join us at the end of January for our full year and fourth quarter call. With that, have a good day. Take care.

I guess, we will conclude I think we've lost our moderator on the call but for those of you that joined US today I want to thank you for taking the time and look forward to having you join us at the end of January for our full year and fourth quarter call with that have a good day take care.

Mark Kowlzan: And of course, that's heavy egg up there as well. So this will be, you know, this will give us some advantage in terms of flexibility in that marketplace. Yeah, Alex, I'll just add that, you know, when we bring Willula back on in the fourth quarter, again, we're doing our comparisons to the third. You know, as Mark said, it is our highest cost mill and, you know, we are, as we get things ready so that we can, you know, restart the machine at first of November.

[noise].

Mark Kowlzan: You know, we have been incurring labor costs and other things, obviously, with no production. So, but there are no significant cash costs to restart. There may be some non-cash, some raw material right off, opselessence type things, but nothing significant there. But it does, you know, if you're comparing to the third quarter, it accounts for, as far as our cost increase, if you look at our operating costs, it's, you know, almost half of the increase is just coming from, you know, restarting Willula and bringing those costs back online.

Oh.

Okay.

Okay.

Robert Mundy: Okay, that's it. And I guess my last question is, just thinking about 2024, maybe, can you, can you just kind of be afraid of how you're thinking about 24 understand? You know, so we still have another quarter to go, but just for, you know, the high levels of percentage higher than 24. Well, just on a macro level, we're going to continue to do what we do, run to demand, but the other thing is, if I were an investor, which I am, but I would be looking at this on how we use our cash and where we're deploying cash.

Robert Mundy: And we We talked about this a little bit at the July call for next year and we would anticipate the capital spending discipline to continue in the trend that it's been. We'll be in that $400 million level this year and plans call for next year to continue that pace of capital deployment, which if you then think about the excess cash being generated, where that goes, there are other opportunities to take advantage of that and bring value to the shareholders and so we'll get again continue to take advantage of the benefits of all the capital spending that we've been bringing to bear, get Jackson completed and then continue to look at more opportunities and execute and work with our customer base and taking care of our customers.

Mark Kowlzan: Next question.

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

Mark Kowlzan: Good morning. We've seen a large amount of new recycled capacity being added to the market this year, I guess some integrated, some non-integrated, and I just had two questions. I guess first, could you talk about the impact on the market that you've seen or maybe haven't seen and then second, maybe for more a big picture perspective, how should we think about PCA's mix? Historically, you've been a virgin board producer. Are there some opportunities to add recycled capacity?

Mark Kowlzan: I guess we'll look in process as we see, or do you still see Virgin playing this kind of unique role in the US market? How do you think about that maybe over the next decade? We've always been primarily a virgin liner board, a medium producer. We have the capability of flexing a number of our mills. I think most people understand that we've invested heavily over the last decade and in these conversion opportunities, Deritter, Lulu, now the Jackson Mill counts.

Mark Kowlzan: The northern mills all have recycled capacity, but again, we're not going to put all our eggs in one basket and go all into recycle. We take advantage of it, and it does give us some opportunity to flex the fiber cost and time of year and availability. Again, I think if you look at us 10 years from now, we'll still look the same that we do today in terms of our fiber balance.

Mark Kowlzan: Anthony, the impact in the marketplace of the, let's say the one-offs, even having some integration in some of these mills, is bearing out exactly like I had told you it would with the very limited open market. We have seen virtually no impact at all from these mills. They're going to have to find a home somewhere else. Now, the ones that are integrated, and we'll be running to demand, I'm sure, and they're not even attempting to sell into the open market.

Mark Kowlzan: We've got a great quality linerboard and medium, and we take care of our customers. Our service is very good, and they've shown absolutely zero interest in moving to any other supplier. I think that's probably true across the board. Hopefully that answers that, and just to tag on with what Mark was saying.

Mark Kowlzan: Thank you. We value our fiber flexibility and I can tell you that our mills, you know, if you go back, you know, you can go back in history and find PCA was a heavy weight mill system and we've completely adapted to whatever the market is today and, you know, we've got this ability to basically tailor our liners to whatever the needs of our customers are and that's a huge competitive advantage we have.

Mark Kowlzan: One of the factors, if you think about recycle versus virgin fiber, virgin fiber prices and input cost, conversion cost have been very stable over the decades, relatively speaking. If you're solely dependent on OCC, DLK, the price and cost input swings have been wild, you know, high low, high low and so trying to anticipate what your conversion cost is is not a good place to be if you're a 100% recycle. So we like where we are, we will continue with this model.

Mark Kowlzan: Okay, that's very helpful. Thank you.

Unknown Executive: And once again, if you would like to ask a question, please press star and then one using a touch tone telephone. Once again, to withdraw your questions, you may press star and two. Again, that is star and then one. Did you join the question queue?

John: Our next question comes from from Jeffrey, please go ahead with your question. Good morning, Mark, Bob Tom. This is John. I want to start off with the implied four cube guides, box shipments. I mean, I know you said a bookings are up 14%, but bookings aren't actually built. So if I'm just reading your press release, being up on a per day basis in 4, Q quarter over quarter, one last shipping day, it seems to imply that 4, Q at least for the guide is up about 14, half or so, 15%.

John: Is that right way to think about it? You know, any kind of extra color you give on that? No, that's not the right way to think about a fill, but I'm going to turn over to Bob and see if he can walk you through this just a little bit, maybe. Yeah, I did calibrated. Well, I'm not sure I can, Tom. No, Phil, I'm not sure maybe we talk afterwards, but I'm not sure how you're arriving at that.

John: Certainly for me, anything that we said or put out, but that obviously would be a tremendous thing if that worked to happen, but just don't see how you're getting there. Maybe we could just talk offline. Sounds good. And then just in terms of expectations going to 4th quarter, obviously sounds like things are, you know, even if not mid teens, they're still going pretty good and get more visibility. It seems a little bit in contrast to what Reese is said with just generally expectations for softer holiday demand.

John: I know it's customer by customer and they're obviously not serving the whole market, but are you seeing the holiday demand here in the 4th quarter actually coming through pretty good? Yes, I would say the holiday demand is going to be strong. Great, and in just one last quick clarification, the 174,000 tons of economic downtime that you called out with that just for Lulu or the whole company is incorporated into that for the economic downtime? That was the Lulu downtime. All right, I appreciate it. I'll turn it over. Okay. Thank you. Next question. Jamie, anybody left on the queue?

Unknown Executive: I guess we will conclude. I think we've lost our moderator on the call, but for those of you that joined us today, I want to thank you for taking the time and look forward to having you join us at the end of January for our full year and fourth quarter call. With that, have a good day. Take care. Thank you.