Good morning, everyone. Thank you for joining Packaging Corporation of America's First Quarter 2025 Earnings Results Conference Call. Your host today will be Mark Kowlzan, Chairman and Chief Executive Officer of PCA. I would now like to turn the conference call over to Mr. Kowlzan. Please proceed when you're ready.

Thank you, Jamie. Good morning, everyone, and thank you all for participating in Packaging Corporation of America's first quarter 2025 earnings release conference call. Again, I'm Mark Kowlzan, Chairman and CEO of PCA. And with me on the call today is Tom Hassfurther, President of PCA; and Bob Mundy, our Chief Financial Officer. I'll begin the call, as usual, with an overview of the first quarter results, and then I'm going to turn the call over to Tom and Bob, who will provide further details. After that, I'll wrap things up, and then we'll be glad to take questions. Yesterday, we reported first quarter net income of $204 million or $2.26 per share. Excluding special items, first quarter 2025 net income was $208 million or $2.31 per share compared to the first quarter of 2024 net income of $155 million or $1.72 per share. First quarter net sales were $2.1 billion in 2025 and $2 billion in 2024. Total company EBITDA for the first quarter, excluding special items, was $421 million in 2025 compared to $333 million in 2024. First quarter net income included special items expenses of $0.05 per share, primarily for the closure costs related to corrugated products facilities. Details of special items for both the first quarter of 2025 and 2024 were included in the schedules that accompanied the earnings press release. Excluding the special items, the $0.59 per share increase in first quarter 2025 earnings compared to the first quarter of 2024 was driven primarily by higher prices and mix of $0.78 per share and volume $0.27 per share in the Packaging segment. Higher prices and mix in the Paper segment contributed $0.01; lower freight and logistics expenses provided another $0.01; and lower scheduled outage costs contributed yet another $0.01. Partially offsetting these improvements, operating costs came in about where we expected at $0.37 above last year's level. Although we did see lower fiber prices during the quarter, we continue to experience inflation across most of our cost structure. Our focus on operational efficiency, cost reduction initiatives, and capital project execution have helped minimize the negative impact of the persistent inflation. Additionally, Paper segment volume was lower by $0.02, depreciation and other expenses were higher by $0.03 per share. Our tax rate was higher by $0.04 per share, and we had higher interest expense of $0.03 per share. The results were $0.10 above the first quarter guidance of $2.21 per share, primarily due to higher prices and mix in the Packaging segment. Looking at the Packaging business, EBITDA, excluding special items in the first quarter of 2025 was $409 million with sales of $2 billion resulting in a margin of 21% versus last year's EBITDA of $326 million and sales of $1.8 billion or an 18% margin. Excellent margin improvement for the quarter was driven by sound execution in our price increase implementation, solid box shipment volume, record containerboard production, and outstanding operational performance at our mills and box plants. We are also able to end the quarter at targeted inventory levels, which puts us in a great position compared to last year's historically low inventories. Our employees continued to deliver on numerous cost reduction initiatives, efficiency improvements, integration and optimization enhancements, and capital project benefits to minimize the negative impact from the persistent inflation we currently see across most of our cost structure, but also to capitalize on our longer-term strategic goals. I'll now turn it over to Tom, who's going to provide further details on containerboard sales and the corrugated business.

Thanks, Mark. The disciplined implementation of the price increases for liner, medium, and boxes according to our announcements was a significant contributor to this year's first quarter results. Domestic containerboard and corrugated products prices and mix were $0.72 per share above the first quarter of 2024 and up $0.41 per share compared to the fourth quarter of 2024. Export containerboard prices were up $0.06 per share versus last year's first quarter and down $0.01 per share compared to the fourth quarter of 2024. Although we began to see some pullback in the middle of the quarter related to the uncertainty created by trade tensions around the world, box demand was solid and exceeded a very strong comparative period in last year's first quarter. Total volume and shipments per day in our corrugated products plants were up 2.5% versus last year's first quarter when per day shipments were up 11% over the previous year. Also, in addition to supplying record containerboard production volume to meet the integrated needs of our box plants, outside sales volume of containerboard was 30,000 tons above the first quarter of 2024 and 6,000 tons above the fourth quarter of 2024. As we look ahead to the second quarter, we expect the economic uncertainty to continue weighing on demand. However, we still believe box shipments will be higher than the first quarter and above last year's tough comp, which was up 9.2% over the previous year. Regarding the strategic capital plan for our converting plants, I'd like to mention that in March, we had a successful start-up of our new state-of-the-art high-efficiency full-line box plant in Glendale, Arizona. The 365,000 square foot plant was started up ahead of schedule, significantly below budget, and all equipment was operational during the first week of production. Previously, we were limited in our ability to serve and grow with our customers in this key marketplace due to the plant's limited capability and aging equipment that required us to pull from several different locations, some of which were quite far away geographically. Our new plant will increase box capacity by almost 2 billion square feet, significantly increase productivity on a unit labor hour basis, reduce costs, and allows us to optimize our service capabilities, not only in the Phoenix area, but also in the growing markets in Las Vegas and portions of California. I'll now turn it back to Mark.

Thanks, Tom. Looking at the Paper segment, EBITDA, excluding special items in the first quarter was $40 million with sales of $154 million or a 26% margin compared to the first quarter of 2024 EBITDA of $41 million and sales of $164 million or a 25% margin. The employees of our Paper business continued to deliver excellent customer service and remain focused on efficient and cost-effective operations to deliver outstanding margins for the quarter. Similar to the industry, sales volume was 7% below a particularly strong first quarter of 2024, along with current economic uncertainty. Volume was 2% above the seasonally weaker fourth quarter of 2024. Paper prices and mix were 2% above the first quarter of 2024 and flat versus the fourth quarter of 2024. Our previously announced price increase began to be implemented during the quarter for all office printing and converting grades. Prices have begun to move up according to the terms of our customers, and we expect to begin seeing higher prices in the second quarter results. I'll now turn it over to Bob.

Thanks, Mark. Cash provided by operations set a first quarter record totaling $339 million, and free cash flow was also a first quarter record at $191 million. The primary payments of cash during the quarter included capital expenditures of $148 million and dividend payments of $112 million. Our quarter-end cash balance, including marketable securities was $914 million with liquidity of just over $1.2 billion. As mentioned in our earnings release last night to help manage the current economic uncertainty and its impact on our demand, we have adjusted our planned maintenance outage schedule and pulled up into the second quarter an outage that was scheduled for later in the year. This will result in a $0.16 per share increase in planned outage expenses for the second quarter versus the first quarter. The revised total company estimated cost impact for the year is now $1.22 per share versus $1.18 per share previously. The actual impact in the first quarter was $0.23 per share, and the revised estimated impact by quarter for the remainder of the year is now $0.39 per share in the second quarter, $0.16 in the third, and $0.44 per share in the fourth quarter. I'll now turn it back over to Mark.

Thank you, Bob. Looking ahead, as we move from the first and into the second quarter, as always, our attention will remain on what we can control. Our North American focus, together with our balance sheet strength, well-capitalized mills and plants, our commitment to strategic goals, and our proven ability to respond quickly and effectively to external factors will serve us well during a period of economic uncertainty. We anticipate continued ambiguity relative to domestic and foreign tariff actions and their effect on global trade and our demand trends. Therefore, we've made certain assumptions in our guidance to recognize potential negative impacts to volume and costs from the uncertainty. In the Packaging segment, we expect domestic prices to improve with continued implementation of our price increases along with fairly flat export prices. Although we see box shipments improving, operating costs will be negatively impacted due to lower containerboard volume as we run our operations to match demand assumptions. Also, as Bob mentioned, adjustments to our planned maintenance outage schedule will result in a $0.16 per share increase in outage costs compared to the first quarter. In the Paper segment, implementation of a higher published price index prices from the first quarter will continue, although volume will be lower with the planned maintenance outage at our International Falls, Minnesota mill. Rail contract rate increases at six of our mills during the first and second quarters will result in higher freight and logistics expenses, and depreciation expense is assumed to be higher as well. Considering these items, we expect the second quarter earnings of $2.41 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. The statements were based on current estimates, expectations, and projections of the company and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our Annual Report on Form 10-K on file with the SEC. The actual results could differ materially from those expressed in the forward-looking statements. And with that, Jamie, I'd like to open the call to questions, please.

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

Hi everyone. Good morning. Thanks for the details. Good morning, Tom. You mentioned ambiguity, obviously, in the macro environment, and you mentioned that you had made some change in how you're looking at your guidance and forecast. You laid out a couple of things. Were there some other points that you wanted to delve into in terms of how you're adjusting how you're looking at forecast and guiding for the year? And relatedly, what are the early bookings and billings for 2Q?

Everything we just discussed and our view of the quarter is influenced by the caution being shown by our customers. Many of them are analyzing their businesses carefully and taking a very prudent approach. As a result, the flow of orders is marked by this cautiousness in how they are presenting themselves in the marketplace. Overall, our business remains strong, but I have to emphasize that the atmosphere is cautious. Tom, do you want to address the specifics?

Yes, George. Our bookings and billings are up 4.1% starting out the quarter. So we are starting out well at about what we expected. I think the caution relates to a number of different things. You've got, obviously, the tariffs and these sorts of things. And you can listen to all the experts and talk about it, but there is no real expert in this arena right now because they're attempting to do things that haven't been done for a long, long time. So I think there is some caution related around that. And also, this is happening at the same time we are fully implementing a price increase. And in addition, the mix is changing somewhat in corrugated in total because e-commerce continues to be a growth engine for corrugated, and that's really related to the second half of the year more so than the first half. So a lot of moving parts, and that's what we're reflecting.

Bob, do you want to share your thoughts?

Yes, George. I would like to add that we exceeded our guidance due to improved price realization in our Packaging segment. The amount by which we surpassed our internal guidance was greater than the $0.10 beat we achieved in the first quarter. In other words, this was something we expected to see more likely in the second quarter. You should take this into account when comparing our second and first quarters.

I see. I see. I appreciate that, and that adds some good color. Relatedly, so you said that inventories are where you'd like them to be. You're seeing an increase in box volumes. Yet we're seeing containerboard production, I think you're implying, coming lower in 2Q versus 2Q. Help me understand if there are any missing parts in what I've just relayed. And if not, why you're reducing production if your inventories are in good shape as your box volumes are going up. I recognize things are pretty cautious out there overall, which you mentioned. And then lastly, you mentioned in fourth quarter reporting that you were anticipating a richer mix for 1Q. From our numbers, profit per ton produced was up a couple of bucks, which is fine from 4Q. Is that where you expected it? Was it up or down versus expectations? Thank you guys. Good luck in the quarter.

Let me address the first part of your question. Based on our observations in the marketplace, we are aligning our operations with the expected demand across the board, reflecting what we are seeing from our customers in North America. Due to the ongoing trade tariff discussions, we have reduced a very small amount of exports specifically to China. Again, this reduction is minimal. However, we are committed to meeting our customer demand. Looking ahead, we expect that in May, we may have two of our smaller machines out of operation for the month unless there are significant changes. This decision is part of how we are managing our inventory and relates to some of the cost impacts of these outages. We are also planning our mills' annual maintenance outages. The outage we previously mentioned for Filer City, Michigan, which was scheduled for the fall, has been rescheduled to May. This change will likely keep one of the smaller machines down for additional weeks as we monitor inventory and demand fluctuations. We are being cautious in our approach to the market, but we can adapt quickly if necessary. Could you remind me of the second part of your question?

Mix.

I don't recall discussing a richer mix in the first quarter since it tends to be quite stable. Additionally, we typically don't see a significant amount of graphics during that time. However, there were a few factors that affected us in the first quarter, which we haven't really addressed. We experienced more weather-related closures than usual for winter, which had an impact. Also, in Southern Texas, the weather negatively affected the agricultural business significantly. When we mention the mill outages being scheduled earlier, it's because we expect demand in the second half to be considerably higher than in the first half, presenting an opportunity for us to take action. It makes sense for us to prepare to operate at full capacity in the latter half of the year.

Thank you, Tom. Made sense, I’ll turn over.

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

Hi, thank you for taking my questions. Congratulations on the strong results in a challenging operating environment. Regarding the $0.10 beat, you mentioned that it was attributed to higher prices and changes in packaging. Could you elaborate on your operations? Was there a specific approach in running your mills? Did the contracts allow for quicker price adjustments? I'm curious how you managed to exceed your expectations by $0.10 in the first quarter.

Well, as I called out on my portion of the script, we operated exceptionally well, but we also moved our price increase through very, very effectively. Tom, do you want to comment?

The only comment I would make is that we implemented the price increase exactly as we announced. I think that's very important. A significant part of the price increase was related to our external sales of liner and medium, along with the noncontract box price increase. The remainder of the contractual box price increase will continue to be applied in the second quarter and will be completed by July, following the usual 90-day cycle we typically experience.

Got it. I appreciate the color there, Tom. And then just following up on your comments on e-commerce. You gained some share in e-commerce, I believe. Obviously, it is continuing to flow through ops and some of it, obviously, is maybe more traditional brown box type products as well. Can you just give us a sense of some of those business wins that you had in e-commerce, where they stand with respect to EBITDA margin and return on invested capital relative to your underlying business? Is that the business that you picked up from an e-commerce vantage point, your 20% type EBITDA margins, call it, mid-upper teens return on invested capital type business?

Our volume growth mainly comes from our existing customers, and we did add some new customers as well. We don't focus on any specific segment; instead, we look for long-term customers we've partnered with for many years. E-commerce is the fastest-growing area in corrugated materials, and since we work with e-commerce providers, it has become a significant segment for us. While some might question whether margins are better or worse, we approach business with the mindset that margins are stable and do not pursue volume for its own sake. We need to operate our business effectively, and our customers also seek good returns. We've made adjustments in our mills to tailor our products for various industries. Discussions about price stability in certain industries or changes in our product mix reflect market trends. As e-commerce expands, traditional big box retail may decline, resulting in a shift away from graphics and displays, which affects the richer mix of our products. We are merely adjusting to the prevailing market dynamics, as we've outlined in our second-quarter updates.

Got it. Thank you very much.

Thank you. Next question.

Our next question comes from Gabe Hajde from Wells Fargo Securities. Please go ahead with your question.

Tom, Bob, good morning. Tom, I want to challenge maybe a little bit of what you said. I mean, two of the other competitors in the marketplace are talking about value over volume and trying to extract more from customers. Maybe I don't know if they are talking about retail-ready packaging or figuring out ways to upsell customers, maybe wow them when they get that package on their porch and when the opening experience and things like that. I'm just curious if you all are seeing that as you talk to your sales force across the different channels, those types of opportunities or if you've seen any change in behavior or if there is anything that you're seeing when you're going out for RFPs, things like that?

I believe some of that is a bit excessive, if you ask me. However, we lead in this area and are committed to providing our customers with the best value and options for how they can use the box. What makes our product unique is its ability to advertise, protect, and serve various purposes, making it one of the greatest products in terms of sustainability and recyclability. Our customers are very attuned to these factors and expect us to bring them innovative ideas, which we consistently do. I don't want you to misunderstand my statement; PCA is not moving solely towards a brown product line, as that is far from the truth. At the same time, we acknowledge the current realities in the marketplace.

Okay. In the press release, you mentioned some rail increases. I know those are typically timed around April 1, the day before Liberation Day. I'm just curious, it sounds like there were some increases that from a contractual standpoint that were put through if you are willing to comment that they're more or less than what you were anticipating. And then if I could slip one other one in. I think you talked about CapEx at $148 million. The guide, I want to say from memory, was $840 million to $870 million, tracking a little bit below if we were to annualize it. I know things are lumpy. Just curious if that $840 million to $870 million number is still what you're tracking towards. Thank you.

Yes. Regarding capital expenditures, we are still on track with our spending at the $800 million level. We began construction on the new plant in Ohio back in February, and that project is progressing well. In addition, we have several significant projects in progress, including one major project at one of our mills and various reconfigurations at several box plants on the East Coast. There is a lot of positive activity happening in terms of our capital investments.

Yes. And on the rail increases Gabe, we had, I think, three in the first quarter. So you'll get a full quarter's worth of those in the second quarter. They happened around midway or a couple in March. And then we have three additional that will take place in the second quarter. So that was what drove our comment around freight.

Thank you, good luck.

Thank you, next question please.

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

Thank you. Good morning. A few follow-ups. First off, on the sequential pricing, which, as you know, was very strong. Can you share kind of roughly speaking, how much of your box business is non-contract and/or has that share increased meaningfully over time?

Our non-contract is about 30% and 70% on contract, and that's been pretty consistent for years.

Can you elaborate on how you achieved such strong results in the first quarter? You mentioned it surpassed your expectations. I'm trying to understand if this was due to recovering from inflation in addition to the price increases during your negotiations. Any additional details you could provide would be helpful.

Let's just put it this way. We announced whether the publications picked it up or not, we made an announcement on linerboard and medium as to what we were going to do in terms of raising price, which we did. That's one. Another factor is what we've done in the noncontractual area, and we got that through in very quick fashion. So that part from a timing standpoint, that was better. And although we've expressed some disappointment in terms of the amount of the contractual side that's tied to the publications, that's rolling through in its normal cycle over a 90-day period, like I said. So the majority of that will be recouped in the second quarter and then some into even the month of July.

Okay. Thank you. And then second, you mentioned you expected volumes to be significantly higher in the second half than the first half. Maybe a bit more color there. Are there customer wins that are part of that equation? Or is that largely a macro view? What was sort of behind that comment?

That's more of a macro view. But furthermore, in addition, I mean, we know what's coming on. As I mentioned we don't build these facilities like the Glendale, Arizona facility. We don't build these things and then hope the customers will come. I mean we've got them lined up, and we built it because they have the demand for it. And of course, that plant will be ramping up and will be – it is doing incredibly well starting out. And I got to call out all of our engineering and technical staff as well as our plant staff and leadership teams. They've just done an unbelievable job. And I'm very proud of the fact that we can start up a plant literally with no hiccups and just ahead of schedule, below cost and be fully operational like that. But we'll build into that plant as an example. And furthermore, just on a macro basis, the mix continues to be a little more second half loaded than steady year-round, which is not unusual for our mix, by the way. But it's just as we've gotten bigger, I mean, it becomes a little more impactful.

Got you. In the previous quarter's call, you mentioned significant cost increases in the first and fourth quarters. You suggested that you might recover around half of that in the second quarter. I understand there are various additional factors to consider, but is it still true in general that you would recoup about half of the costs from the first and fourth quarters in the second quarter?

Yes, Mark, I'd say that is correct. But as you also mentioned, the other things that we talked about relative to running our mills according to demand and pulling the outage, an outage into the second quarter and those types of things obviously overshadowed that improvement you would have seen otherwise.

Understood. Lastly, you mentioned changes in the marketplace, with e-commerce becoming a larger part of the market. What implications does that have for your views on lightweighting? How crucial is it to enhance that capability as this segment of the market expands more rapidly?

Well, Mark, as I’ve mentioned before, we have a competitive advantage through the investments we've made in our mills and box plants, as well as our approach in the marketplace. We are specifically tailoring our products to meet our customers' needs and demands. So, to put it briefly, yes, a significant amount of lightweighting has occurred, not just at PCA but across the industry. That's why I’ve previously stated that if you use tons as a measurement without adjusting for lightweighting, you may misjudge your expectations. Lightweighting can't be done for its own sake, and continuing to produce heavyweight board won’t meet customer demands. Everything we do is very much driven by our customers, and we've been at the forefront of this trend for quite a while now, which makes us very pleased with our current position. We assess our sales in terms of MSF, which is crucial for understanding changes in the marketplace and accurately gauging our margins.

One thing I was thinking about with the new Jackson #3 machine running, that one machine, and we'll have to calculate, but probably that one machine now is making more square feet of board than if you went back 15 years ago, then Counce and Valdosta used to run combined with the machines that they had. And so it's just a testament that, again, we've gone significantly into taking advantage of the marketplace and the lightweights have been very beneficial for us. But machines also like Jackson have enabled us to do that.

I believe it's important to emphasize that we need to achieve strong performance. The technology unique to PCA has allowed us to create a lightweight product while delivering impressive performance from our board. We invested significantly to make this possible.

I appreciate all the color. And Bob, I'm not sure if you're planning to be on next quarter's call. If not, thank you for all your help. If you are, chat next time around.

Thanks Mark, appreciate it. Next question please.

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

Hi, good morning. Mark, you talked about cost inflation. And I'm just wondering, is there any tariff impact on any cost categories, whether it's steel or equipment from Europe or China? And then maybe following up on Gabe's question on just these box plant projects. I guess you kind of reiterated the full year CapEx guide. But is the sort of timeline for these projects maybe at all impacted by some of the cost inflation that you're seeing?

Nothing in particular right now. We've had some small items, anecdotal results of steel in particular, with a few of the equipment purchases that we've been involved in. And so we've got our eyes wide open and our purchasing team is really working with the supplier base and understanding what the implications are in a real-time fashion. And that's something that, again, it's been all hands on deck trying to understand. If you're ordering a piece of equipment that's coming from Germany or coming from Finland or France or Japan, they're probably sourcing the steel, and it's various types of steel, the different alloys, where is that coming from. And so there's a lot of moving parts here on the complexity of what's been happening with the tariff discussions out of the marketplace. But we've been watching that. We haven't had anything substantially that we've had to change. We are making sure that we understand what the implications are. Bob, you got anything?

No, that pretty much sums it up.

Okay. That's very helpful. And then I'm wondering, you gave that a very helpful example on Jackson and just kind of the productivity that you've been able to drive maybe at the mill level. I'm curious with Glendale, how you'd compare it versus maybe sort of average box plant in your system with whatever metric you'd think about, whether it's throughput or cost or just if you could help us kind of understand sort of the capabilities and how it compares versus sort of a 'average box plant'.

The simple answer, Anthony, is that Glendale will provide you with twice the output at a lower labor cost. However, this requires a significant investment. We need to recover that capital investment and similar costs. In summary, that is probably the straightforward answer.

And don't forget, if you go back over the last eight years, we have significantly recapitalized the majority of our converting operations. I don't throw a number, probably 80% of our converting operations have been modernized and recapitalized to provide the type of efficiencies that a Glendale provides only in a smaller footprint. And so we've taken advantage of our technical capability to put the needs of what these plants are required to service the customers. So we're in a very strong position nationwide. Even though you might look at our operations and go, well, those plants are 50 years old. If you walked in the door, you'd realize that they're 50-year-old plants, but they've been capitalized. So they are modern infrastructure and they perform in that manner.

We have consolidated many facilities over the years, which means we are no longer operating any inefficient, small-scale operations that we previously had. All of those have been streamlined through consolidation.

I think if you went back over the last 15 years, we made 24 acquisitions, and we've built a number of new plants, but we probably closed what, 20 plants or so, Tom?

A little more than 20, yes.

Yes. So people tend to forget that, that we've closed and shut down a number of plants and really rationalized the business. So the PCA footprint today is unrecognizable to anybody that was looking at it 20 years ago.

Okay, that’s super helpful. I’ll turn it over.

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

Bob, congrats, and thanks for all the help over the years. I guess first question, Tom, it sounded like you are pretty confident in back half demand is going to be better than the first half with perhaps some of the wins from the investments you made. So let's say that demand outlook does play out as you anticipate. Will you need to be drawing down production in the back half? Part of the reason the 2Q outlook is a little more muted, pull forward of maintenance and then running containerboard production with demand. So if demand is better like you expect, will you need to kind of draw down production in the back half?

In the second half, we are working to align our mill production with our expected demand, which is why we have moved an outage from the second half to the second quarter. It’s important to remember that our focus is always on meeting demand. We aim to do this as efficiently as possible and are not focused on quarterly results. Our priority is to manage the business in a way that best serves our customers and optimizes our facilities' efficiency.

Well, Tom, I guess, asked differently. So in the second half, you would expect your containerboard production to closely match box shipments, right? In the second quarter, there's a mismatch affecting your profitability. So the second half should align.

Yes. And if an example export picks up in the second half, obviously that we'll be exporting more in the second half than we will in the first half. We'll just have to see how all these things settle out. We're in a kind of a questionable mode right now, and I think that will clear up here in the next 90 days pretty significantly.

Okay. From your comments, it seems that in April, booking billing remains fairly robust, up by 4%. However, it sounds like customer order patterns are somewhat varied. Is the situation primarily due to destocking at the end? My main question is whether you have an estimate of how much inventory is currently in the channel, both at the end customer level and more broadly among customers. How long do you anticipate it will take to manage that destock, and how much inventory is likely present in the channel?

I think our customers have been operating pretty lean with their inventories. This is what they are telling us because they're also concerned about what's happening globally and what's happening with tariffs and those sorts of things. So they're buying materials. They're doing all sorts of other things. And I think they are operating cautiously. So we have to be able to react quickly to changes in demand, which I think will occur once this thing really clears up. I expect that our customers will operate with pretty lean inventories over the next 60 or 90 days. And again, I think that will play a role in the second half of the year when they restock a lot of those inventories.

Okay. Super. And then a question for you, Mark. You guys are, as you kind of pointed out in your press release, well capitalized, strong balance sheet, you are going to be generating a decent amount of cash flow. The stock is down quite a bit. Is there an appetite to kind of step up your buybacks with your share price here?

Yes. I think you just termed it well as an opportunity. We'll let you know what we do.

Okay, guys. Thank you guys. Good luck.

Thank you, Phil, next question please.

Our next question comes from Charlie Muir-Sands from BNP Paribas. Please go ahead with your question.

Yeah. Thanks very much. Apologies acknowledging your comment about not running the business for quarterly reports. I just wanted to understand though the pattern of what you're seeing at the moment. I think you previously called out bookings up about 8% in the first month of Q1. You were then up 2.5% for the quarter overall. You're now saying that what you're seeing is up 4% in the first few weeks of Q2. I just wondered how much of that slowdown do you think that sort of implied there was temporary or were there calendar effects in that? And were there any particular customer segments that you'd call out that took more significant action? And secondly, you've obviously said directionally that you expect volumes to be up year-on-year and quarter-on-quarter in the second quarter. But just to sort of triangulate a bit, can you clarify whether your second quarter guidance is predicated on the 4% growth that you are seeing in the current run rate or you're aiming off a little bit on that? Thank you.

Charlie, I'll try to address a few of these points. We did begin the first quarter with very strong bookings. The first quarter is often the least predictive in terms of what will actually happen during that period. The main factors affecting our volume in the first quarter, in my view, were primarily weather disruptions, as I mentioned. Additionally, as tariffs started to be implemented, our customers became much more cautious about their future actions. Consequently, they reduced their inventories, which significantly altered the demand curve. Moving into the second quarter, I want to reinforce that we are seeing an increase in volume compared to the previous quarter in 2024, specifically a rise of about 9.2%. We are currently ahead of perhaps even our forecasts. With the strong growth we’ve experienced, we are optimistic despite the challenges in the environment. I also commented on the anticipated performance in the second half of the year, and we will monitor how that evolves.

Thank you. Any other questions, Jamie? Anybody trying to get back into the queue?

We do have a follow-up question from George Staphos from Bank of America Securities. Please go ahead with your follow-up.

I appreciate the follow-up. Mark, you've mentioned this periodically on these calls. How do you assess your paper supply situation in containerboard for the upcoming quarters? Despite the volume risks in the market, you're performing well compared to industry trends. When we look at your production relative to your capacity, there seems to be limited headroom. How do you perceive your ability to meet demand? Are there any risks in your view regarding your supply capability?

George, over the last 15 years, we've consistently anticipated future needs. There are several options available to meet Tom's requirements for the box plant side. We are also handling a small amount of export globally, which could be redirected to the domestic market if necessary. Year after year, we've been enhancing productivity in our mills, and we're always exploring opportunities in the marketplace, whether that involves acquiring a mill or reconfiguring a paper machine. We have multiple strategies in place to support the needs of the box plants. In the short term, I feel confident about the next few years. However, if you ask about our position a decade from now, I would say that if we continue to grow at our current rate, we may face the challenge of needing a significant amount of containerboard to keep up with the expected growth trend. These are positive challenges we are ready to tackle.

No, clearly. Looking at the basis weights, it seems that in the second half of last year, as you mentioned, there was a lighter basis weight compared to the first half of 2024. It doesn't appear that there was much of a difference between 2024 and 2023 based on the data. Are there mix factors at play such that while the actual basis weight of your boxes may be declining, this isn't reflected in the overall data? Additionally, how would you describe the year-on-year or sequential changes in basis weights for 2025 so far? Thanks and good luck in the quarter.

George, basis weights are continuing to decrease and I expect them to drop again in 2025 compared to 2024. The extent of this change really depends on the mix at any given time, but the overall trend is downward. As I mentioned, we have proprietary boards specifically designed for our customer mix, and they are built to ensure optimal performance. It’s not just about reducing weight for the sake of it; this involves advanced paper technology. We anticipate ongoing opportunities in this area, and we plan to leverage them moving forward.

A good way to look at that is to consider the last six years and what we've accomplished at the Jackson mill. When we first converted the Jackson #3 machine to produce linerboard, we were unable to achieve high-performance grades due to a lack of reconfiguration. However, completing Phase 2 of the reconfiguration last year provided a significant boost. The Jackson mill has become a game changer, greatly increasing our production of high-performance grades. In fact, there is only one other machine in North America that can compare to what the Jackson machine accomplishes. While this has been transformative for PCA, we've also updated and enhanced all our other linerboard machines to produce these high-performance grades.

Yes. The beauty of Jackson is we're able to replicate a lot of what we're doing in Jackson and the other mills. And that's a great opportunity we have going forward.

Thanks George. Jamie, any other questions?

At this time, I'm not showing any additional questions. Do you have any closing comments?

Yes. Thank you, everybody, for joining us, and I appreciate your time today, and I look forward to talking with you in late July. Have a good day. Thank you.

Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.