Earnings Call Transcript - PKG Q2 2025

Operator, Operator

Thank you for joining Packaging Corporation of America's Second Quarter 2025 Earnings Results Conference Call. Your host today will be Mark Kowlzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question-and-answer session. I will now turn the conference call over to Mr. Kowlzan. Please proceed when you're ready.

Mark W. Kowlzan, CEO

Thank you, everyone, for joining Packaging Corporation of America's Second Quarter 2025 Earnings Release Conference Call. I am Mark Kowlzan, Chairman and CEO of PCA, and I am joined by Tom Hassfurther, President, and Kent Pflederer, our Chief Financial Officer. I will provide an overview of our second quarter results, after which Tom and Kent will share additional details. I will then conclude the call, and we will welcome your questions. Yesterday, we announced a second quarter net income of $242 million or $2.67 per share. When excluding special items, our net income for the second quarter 2025 was $224 million or $2.48 per share, compared to $199 million or $2.20 per share for the same period in 2024. Our net sales reached $2.2 billion in 2025, up from $2.1 billion in 2024. Total company EBITDA for the second quarter, excluding special items, was $451 million in 2025, compared to $404 million in 2024. The net income for the second quarter included special items income of $0.19 per share, which mainly came from gains on the sale of real estate for closed corrugated products facilities, partially offset by costs related to the acquisition of Greif's containerboard business. Detailed information on these special items is provided in the schedules with our earnings press release. The increase of $0.28 per share in second quarter 2025 earnings compared to the same quarter in 2024 was mainly driven by higher pricing and mix in the Packaging segment contributing $0.98, lower fiber costs adding $0.13, higher pricing and mix in the Paper segment contributing $0.04, and a lower tax rate adding $0.02. However, these gains were partially offset by higher operating costs of $0.30, an increase in annual outage expenses of $0.21 due to the rescheduling of the Filer City outage to the second quarter. Other mitigating factors included lower production and export sales volume in the Packaging segment, higher depreciation expense, increased fixed and other expenses, lower volume in the Paper segment, higher freight expense, and higher interest expense. Our results exceeded the second quarter guidance of $2.41 per share by $0.07, primarily due to lower operating costs and lower fiber costs. In our Packaging business, the EBITDA for the second quarter of 2025 was $453 million, with sales of $2 billion resulting in a margin of 22.6%, compared to last year’s EBITDA of $400 million and sales of $1.9 billion, or a margin of 21%. The pricing and volume for corrugated products were generally in line with our expectations, and as anticipated, export containerboard sales decreased. We curtailed production to meet demand during the quarter, producing 85,000 fewer tons of containerboard compared to the second quarter of 2024, and 55,000 tons less than in the first quarter of 2025. We also reduced containerboard inventory by 17,000 tons from the end of the first quarter, which places us in a strong position for the remainder of the year. Throughout the quarter, we successfully managed our operating costs amidst ongoing inflationary pressures and the impacts of reduced containerboard production. Our team has consistently delivered excellent performance in cost management, sales, and capital project execution, resulting in outstanding results. Strategically, we are excited to announce our agreement to acquire the Greif containerboard business and look forward to collaborating with our new team to serve our customers effectively. This acquisition represents a well-capitalized business that complements our own and provides a solid growth platform for both containerboard and corrugated products. We aim to finalize this transaction by the end of the third quarter, pending standard conditions, including regulatory approval.

Thomas A. Hassfurther, President

Thanks, Mark. The performance of the Packaging business was largely as we expected, and it was a very strong quarter. We fully realized our earlier announced price increases and domestic containerboard and corrugated products prices and mix were $0.95 per share above the second quarter of 2024 and up $0.41 per share compared to the first quarter of 2025. Export containerboard prices were up $0.03 per share versus last year's second quarter and up $0.01 per share compared to the first quarter of 2025. While customer ordering patterns remain somewhat cautious, corrugated demand remained solid and steady throughout the quarter. Shipments per day in our corrugated products plants were up 1.7% versus last year's very strong second quarter when per day shipments were up more than 9% over the previous year. So it was a pretty tough comparable. Shipments also exceeded the first quarter of 2025. Total shipments were flat with 2024, which had 1 more workday. Our continued sales growth and full realization of our price increases helped drive higher margin performance in the Packaging segment. As expected, outside sales volume of containerboard was down 30,000 tons from the first quarter of 2025 and down 24,000 tons from the second quarter of 2024. While domestic sales have been on plan, even with relatively low exposure to China and Europe, we've seen noticeably lower export sales with the global trade tensions overhanging the market. I'd like to echo Mark's commentary on the pending Greif acquisition. We see tremendous strategic opportunities with the acquired business. In a corrugated network, there will be great potential to expand in areas where we would have needed to deploy considerable additional capital to grow and where Greif has well-capitalized facilities. The business provides a complementary product offering and long-standing customers with deep relationships, who we look forward to serving. Perhaps most importantly, this will be a great cultural fit with PCA, particularly with our shared dedication to serving the needs of our customers.

Mark W. Kowlzan, CEO

Thanks, Tom. Looking at the Paper segment, EBITDA, excluding special items in the second quarter was $30 million with sales of $146 million or a 20.8% margin compared to the second quarter of 2024 as EBITDA of $31 million and sales of $150 million or a 20.4% margin. We successfully and safely completed our maintenance outage at the International Falls Mill in June, which affected our volumes. Sales volume was 5% below the second quarter of 2024 and 7% below the first quarter of 2025. We have completed the implementation of our price increases during the quarter with paper prices and mix up 3% from the second quarter of 2024 and 1% from the first quarter of 2025. I'll now turn it over to Kent.

Kent A. Pflederer, CFO

Thanks, Mark. Cash provided by operations was $300 million in the quarter, and free cash flow was $130 million. The primary payments of cash during the quarter included capital expenditures of $170 million, dividends of $112 million, and federal income tax payments of $109 million. Our quarter-end cash balance, including marketable securities, was $956 million with taking into account revolver availability liquidity of approximately $1.3 billion. I'll now turn it back over to Mark.

Mark W. Kowlzan, CEO

Thank you, Kent. For our third quarter, profitable volume is going to be the key driver as it will affect our mill production and cost absorption. While we saw corrugated customers remain cautious in June into early July, over the last couple of weeks, we've seen steady improvement with our bookings and shipments as July has progressed, which we expect to continue for the remainder of the quarter. Therefore, we expect higher corrugated shipments, which will deliver higher containerboard production across our mill system. However, we will continue to see lower export containerboard sales driven by the global trade environment. We will build some more inventory ahead of the fourth quarter DeRidder maintenance outage as planned. We expect prices and mix in the Packaging segment to remain relatively flat. In the Paper segment, we expect flat pricing and higher production and sales volume with the completion of the International Falls outage in June, which impacted the second quarter as well as seasonal back-to-school orders. We have no scheduled maintenance outages during the third quarter and expect maintenance outage expense to be lower. Freight costs will be higher with the full effect of the rail rate increases at our mills. Operating costs will be near second quarter levels and fiber costs will be slightly lower. Considering these items, we expect third quarter earnings of $2.80 per share, excluding special items. Our guidance does not include any possible impact on the pending acquisition of the Greif containerboard business, which is subject to satisfaction of certain conditions, including regulatory approval. And 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 today constitute forward-looking statements. The statements are based on current estimates, expectations, and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K, which is on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. And with that, Joe, I'd like to have you go ahead and open up the call, and we'll take questions.

Operator, Operator

We will now take our first question from George Staphos with Bank of America.

George Leon Staphos, Analyst

A couple of questions for me, Mark. First of all, can you or Tom talk a little bit about traditionally, your comment on bookings and billings to start the new quarter? What are you seeing there? And you mentioned that you were better than expected on guidance in the second quarter on operations and fiber costs. And while that gives us some color if you can give us a little bit more detail in terms of what was behind the better performance? And then I have one quick follow-on.

Mark W. Kowlzan, CEO

I'll let Tom talk about where we are with cut up.

Thomas A. Hassfurther, President

Yes, George, bookings right now are trending at 2% over Q2 of 2024 which is a very good start considering the enormous increase we had in the third quarter of last year. So I remind everybody we've got some very, very tough comps. But interestingly enough, as the last quarter really kind of tailed off a little bit in volume, we're starting out this quarter sequentially. Booking about 10% above what we did in the last month of 2025. So I think things are looking pretty decent.

Mark W. Kowlzan, CEO

And George, regarding the second part of your question about operations, there were two key points. First, as expected, we operated with extremely high efficiencies, achieving approximately 99% uptime across the system. However, we did run to demand, which meant that a couple of smaller machines were down during the quarter, one in Filer and one in Wallula. This led to some uncertainty around operating costs. Nevertheless, the organization performed exceptionally well and managed to run the mills very efficiently despite having some operations down due to lower demand. We are very pleased with the outcome of the organization's efforts. That is what was happening.

George Leon Staphos, Analyst

Thank you, Mark. I have one more question. When we examine revenue per ton and EBITDA per ton, we see they have increased year-on-year. They are slightly above our forecasts, which may not be significant. Ideally, we should have had a higher forecast. Is this increase simply due to a change in mix, such as reduced external sales because of the downtime we had at Filer? Was the mix at Wallula more or less consistent across the box system, or did we actually experience an increase? Could you provide us with some insight into the reasons behind these figures?

Thomas A. Hassfurther, President

George, this is Tom. I'll address this. I wouldn’t say it’s just a matter of mix; it's influenced by several factors. Primarily, as we've mentioned multiple times, it has to do with price increases. When we enter price increase mode, we fully commit to it, and you're seeing that reflected not just in revenue per ton but also in EBITDA per ton, and we are maintaining our margins. Therefore, any decline in sales, particularly in exports, would have impacted our revenue and EBITDA. When those exports return and we resolve some global challenges, that will provide positive opportunities for us.

Operator, Operator

Our next question will come from Mike Roxland with Truist.

Michael Andrew Roxland, Analyst

First question, just wanted to follow-up. You said, it sounded like box shipments sort of stated in June. Wondering what's happened there? Is that a function of the consumers, increasing tariff concerns. I just want to understand how the trajectory of box shipments played out during the quarter. And Tom, you also sort of indicated, I want to make sure I heard this correctly, that bookings are up 10% versus the last month of Q2. If you could clarify that.

Thomas A. Hassfurther, President

Yes, they are up 10% compared to the last month of Q2, which indicates we are off to a good start. We are operating at record volume rates, so that's important to keep in mind. Regarding your question about the slight decline in the second quarter, you may have noticed some similar trends in the first quarter. There are still many uncertainties surrounding tariffs and global events, leading customers to hold off on long-term commitments. This has resulted in some customers managing their inventories very closely, leading to fluctuations in ordering patterns during the quarter. Additionally, various industries have been affected by the global economy, with certain sectors struggling more than others. For example, the automotive industry and building products have significantly declined due to a stagnant housing market. The food and beverage sector, particularly salty snacks and sugary drinks, has also faced challenges, which has been widely reported. Despite these ups and downs, we are still making progress and remain optimistic about our position.

Mark W. Kowlzan, CEO

One of the indicators that I always look at in that regard, too, is what's our cut-up look like on Friday going into a Saturday period in the last couple of weekends, we've seen a nice movement upward in the volume that's coming out of the plants on Fridays and Saturdays. So that's been again, compared to the month of May into June when things had declined, these last couple of weekends of the first Friday, Saturday periods, we've seen that are really looking really strong.

Michael Andrew Roxland, Analyst

Thank you, Mark, for that detail. I have a quick follow-up. Regarding the declines in the auto, building products, and food and beverages sectors, is this a trend specific to the second quarter? Has it been an ongoing issue throughout the year or perhaps even last year? I'm curious if these markets have deteriorated compared to recent times. Additionally, could you discuss the capital savings expected from the Greif acquisition and any initial expectations regarding foreign exchange for fiscal year 2026?

Thomas A. Hassfurther, President

I’ll take this question. Regarding automotive and building products, some segments have worsened while others have been stagnant for a while. Specifically, the building products industry has faced significant challenges for an extended period, largely due to high interest rates that haven't opened up markets. However, there is substantial potential for us once we get these tariffs resolved and see some movement in interest rates, which could greatly boost our prospects. All of our assets are focused on the U.S., and we believe we'll be the ultimate beneficiaries of this situation. This also ties into the Greif acquisition. I want to remind everyone that capital intensity in this business is very high. What used to cost around $100 million to set up a box plant has now risen to about $300 million. Additionally, a mill that was previously $300 million on the low end will now approach $1 billion. This shift has dramatically changed our capital requirements, highlighting the significance of capital avoidance with the Greif assets.

Mark W. Kowlzan, CEO

The one example is the Dallas Metroplex region. We're currently finishing out a project in Ohio that will start up next summer and then we'd already been looking at what we would be doing down in the Dallas region, which would have entailed more than likely building out a new very large plant down there, similar to what we just did in Arizona, what we're doing in Ohio. And yet with the acquisition with Greif, we've got the platform already sitting there that we can build out with just some converting equipment going into the new plant that Greif has down in Dallas. So that's another example of where we'll avoid some big capital.

Thomas A. Hassfurther, President

And also, I'd say the Greif integration level is very good. And although it will give us some additional tons, which we will need we can manage that quite elegantly, I think, going forward.

Operator, Operator

Our next question will come from Gabe Hajde with Wells Fargo.

Gabrial Shane Hajde, Analyst

For the avoidance of doubt, I think you said bookings up 2% versus Q2 '24. I presume you meant Q3 '24 and same-day shipments were up 11.5% in that period?

Thomas A. Hassfurther, President

Yes, I did. I'm sorry, I misstated there. Thank you. Thank you, Gabe.

Gabrial Shane Hajde, Analyst

No, I wasn't trying to make any confusion. I just want to ensure we're clear, because an increase of 10% compared to what could have been a lower June number might be causing some misunderstanding for people. That's why I asked the question.

Thomas A. Hassfurther, President

Yes, I was trying to indicate that the trend is clearly improving compared to what we saw in Q2.

Gabrial Shane Hajde, Analyst

Understood. Anything specific on the Greif acquisition from a financial standpoint, cash tax specifically, that could be advantageous to you on the acquisition?

Mark W. Kowlzan, CEO

As far as CapEx?

Gabrial Shane Hajde, Analyst

No, no, cash taxes, Mark.

Thomas A. Hassfurther, President

I'm sorry, we couldn't hear you. You're not coming through clearly, Gabe. What was that?

Gabrial Shane Hajde, Analyst

I apologize. Cash tax.

Kent A. Pflederer, CFO

Yes, there are two key points. First, the acquisition will primarily be set up as an asset acquisition, which means we'll benefit from the depreciation shield. Second, we will have the chance to take advantage of bonus depreciation at a higher level than previously allowed.

Gabrial Shane Hajde, Analyst

Okay. And then I guess last one, back to the nuts and bolts of what you guys do on a day-to-day basis, making boxes and keeping customers happy. We read about a large e-commerce customer potentially moving suppliers. I'm just curious if you're seeing more instances of bidding out there given sort of what appears to be a little bit of a volatile environment.

Thomas A. Hassfurther, President

Gabe, I would say, no. I think it's just basically kind of business as usual from the customer's point of view. But I will remind everybody that with the recent announcements in the industry relative to mills and box plants I think that supply has become very much in line with demand as it exists today.

Operator, Operator

Our next question will come from Mark Weintraub with Seaport Research Partners.

Mark Adam Weintraub, Analyst

I wanted to just follow up a little bit on the Greif acquisition. I know the press release, etc., had talked about the run rate of that business having been $212 million during that May through April period and that you had outlined $60 million in synergy potential. Two points of clarification. One, you just raised the Dallas facility. I know that Greif had talked about that potentially making $30 million, but I don't think it was making much money in the time period which covered the $212 million. So I just wanted to clarify that and whether you think that's a reasonable type of number and whether that was included in your synergies or not? And then I guess that $212 million is sort of backward looking. Is it fair to say that given the price increases and some other variables that sort of the look forward run rate you would anticipate at this point to be higher than that? And if you kind of talk about what the key variables we should be focused on as we do that analysis, that'd be super helpful.

Thomas A. Hassfurther, President

Mark, this is Tom. First of all, regarding the $212 million, is there potential for growth? Yes. Did they experience some growth? Yes. We are moving into a better position there. Did we factor in the Dallas facility in our synergies? Yes, to some degree, quite conservatively, but we see significant potential with the Dallas facility, as Mark mentioned, because it can be greatly expanded beyond its current capacity with Greif. Does that address your question, Mark?

Mark Adam Weintraub, Analyst

It does. Regarding the last part, I think you've touched on it. We've implemented some price increases, and I'm not entirely clear when you mention that they are already making more. The benefits of those price increases are already evident, but I'm still a bit unclear.

Thomas A. Hassfurther, President

We know what the estimates are— that's all we know at this stage of the game. But the estimates were for greater than the 212. So obviously, they were still flowing through price increase after our agreement.

Mark Adam Weintraub, Analyst

That's helpful. And then just lastly, I mean, one thing is when I look at last year, there was like a 4% step up in your box shipments from the second quarter to the third quarter. And so you presumably have a pretty tough comp this quarter, even tougher than the second quarter as well. And so I think you had talked about still expecting to be up year-over-year in the third quarter. So that would actually seem to suggest continued sequential, pretty strong sequential improvement. And I just want to make sure I'm getting that right and the comment about improving to the third quarter wasn't just a sequential comment.

Thomas A. Hassfurther, President

The improvement in the third quarter was a sequential observation, but the third quarter of '25 compared to the third quarter of '24 will likely be relatively flat. It may increase slightly, but we currently estimate it will be quite stable. Additionally, as we've mentioned, our estimates are influenced by many uncertainties, including tariffs and global conditions, which could lead to significant changes by the end of the third quarter.

Mark Adam Weintraub, Analyst

And just in terms of change, risk to the upside or downside...

Thomas A. Hassfurther, President

To the upside, because I think as soon as we get some certainty, to some of these issues that exist out there. And this is—and I'm just telling you what our customers are telling us as well, is that they can try to get back to what we would consider more business as usual and have more predictability going forward. And all of that's to the upside. I think most are all operating on a very conservative nature right now.

Mark W. Kowlzan, CEO

And Mark, as I said a few minutes ago, the last few Friday, Saturday periods, we've had the best couple of Friday, Saturday periods that we've had in 4 months. You did have to go back to the March, April period. And so we've seen that significant movement just through the end-of-the-week cut-up.

Thomas A. Hassfurther, President

Yes. And what Mark's really talking about is having to work into Saturdays as opposed to just being off being straight 5 days a week. We're getting it to 6 days a week now.

Operator, Operator

Our next question will come from Anojja Shah with UBS.

Anojja Aditi Shah, Analyst

I wanted to clarify, you said that you expect prices in the Packaging segment to be flat in Q3 sequentially. I thought there was a little bit of the February price increase that was rolling into Q3. Is that right? And if so, are there puts and takes to that flat estimate, that flat guidance?

Thomas A. Hassfurther, President

We are currently expecting prices to remain flat because we have completed the pass-through. Generally, we implement changes more quickly than the rest of the industry. Therefore, we have the price increase in effect. There might be a slight upside, but that's about it.

Anojja Aditi Shah, Analyst

Okay. Great. Thanks for clarifying. And then just going back to the e-commerce question. Can you give a sense of what the growth in e-commerce has been like so far this year? And maybe if you can, your outlook for the rest of the year?

Thomas A. Hassfurther, President

I can't tell you exactly what the entire e-commerce industry has done. I can tell you that our customers continue to grow, and that's a good thing. So if you indicated off of our customers, they're still growing mid-single digits so far this year. So and it's going to be really e-commerce when you talk about this year, it's a little more difficult because e-commerce is more of a second half business. And that's really kind of driving our industry to be more of a second half industry, quite frankly. So that creates, again, perhaps a little more upside to where we are right now in terms of this questionable environment. But so I can answer the e-comm question a lot easier at the end of the year than I can midyear. But so far, it's still up. And obviously, it is a big part of the box business today given the way people shop.

Operator, Operator

Our next question will come from Anthony Pettinari with Citi.

Anthony James Pettinari, Analyst

I'm curious if you can provide insight into PCA's recycled mix before and after the Greif acquisition. Additionally, does Greif's recycled capabilities enable access to new customer segments, or were they already serving market areas where we faced challenges in competition? Any thoughts on this would be appreciated.

Mark W. Kowlzan, CEO

I'll comment and then Tom can add to that. We've historically been around that 20% level, depending on time of year and price of OCC might be as low as 15%. But with Greif we'll theoretically be moving up to around that 30% level.

Thomas A. Hassfurther, President

Yes, I would like to add that while we have not been restricted from entering certain markets, this will create better opportunities for us. Their 100% recycled mill in Massillon allows us to adjust between liner and medium as needed. We have many facilities located close by, which means we will benefit from both freight and fiber efficiency from that site.

Mark W. Kowlzan, CEO

What Tom's saying is that our big Ashland plant is like 44 miles away from Massillon and the new plant down in Newark is like 90 miles away. So we'll be in a position just to shuttle, PCA shuttle, roll stock, in and out. So again, considerable savings right there.

Anthony James Pettinari, Analyst

Okay. That's very helpful. And then just following up on Gabe's question. I mean, you have seen a number of closure announcements this year, some of them pretty large and not asking you to comment on your competitors' business, but I'm just wondering if any of these closures have allowed you to pick up some business or impacted you in other ways or if there's any maybe specific regions that are performing better than others? Just any follow-up out there.

Thomas A. Hassfurther, President

That's a challenging question to answer, but it's a good one. It's difficult to say definitively at this point. What you're observing is related to the very small, limited market for containerboard in the United States. If that's your focus, there’s limited potential for growth. Additionally, the export market and global conditions present significant challenges. These two factors, combined with current demand levels, likely influenced some decisions made. While this outlook is positive for us moving forward, that’s how we perceive the situation.

Operator, Operator

Our next question will come from Phil Ng with Jefferies.

Unidentified Analyst, Analyst

Mark, Tom and Kent, this is John on for Phil. Really appreciate all the details. I wanted to start off just kind of going back to the volumes on a year-over-year basis. I mean, you called out box shipments were going to be about flat year-over-year. But is the containerboard production expected to be down? I know you talked about a little bit of a ramp up sequentially ahead of DeRidder. But I'm just thinking about on a year-over-year basis with some of the economic downtime that you've been taking, is that something that's going to be down year-over-year?

Mark W. Kowlzan, CEO

Well, we're probably 25,000 to 30,000 tons down compared to last year. And that's primarily the export sales of containerboard that we again, under the current market situation with tariff, we choose not to participate in right now.

Unidentified Analyst, Analyst

Makes sense. Okay. And then from your perspective on the demand front, are your customers done destocking? Like do you have any insights on their inventory levels? And just thinking about as we maybe get some clarity on the tariff negotiations and maybe we see some pullback in rates if that could lead to a good amount of torque coming through maybe back after this year going into next year.

Thomas A. Hassfurther, President

Yes, our customers are through the destocking part. As I said, they're carrying incredibly lean inventories. And going forward, if we just get some certainty in the global economy and, of course, get any kind of interest rate movements here domestically, I think things are going to open up quite dramatically.

Operator, Operator

Our next question will come from Charlie Muir-Sands with BNP Paribas.

Charlie Muir-Sands, Analyst

Firstly, just on the Greif acquisition, I'm not too familiar with the assets. You've obviously disclosed the 800,000 tons of mill capacity alluded to the integration rate, but could you just clarify how much corrugated production or capacity or both the company has or what levels of integration that operation had? And then secondly, on that, obviously, it's a $1.8 billion acquisition funded from cash and borrowings. Can you just give any kind of steer on the marginal cost of that for our modeling? And then I have one follow-up question.

Kent A. Pflederer, CFO

Yes, Charlie, it's Kent. We are modeling about 5.5% interest rate on the new debt, so around $100 million incremental interest there.

Thomas A. Hassfurther, President

And regarding the Greif assets and the integration level, the integration level is probably in that 70%, 75% range. So as I said, there will be some available tons that we're going to need in this acquisition.

Charlie Muir-Sands, Analyst

Great. And given your comments about seeing a pickup in demand and therefore, sort of extra shifts coming on late on Fridays or into Saturdays. Can you just talk about how we should think about operational leverage or deleverage on that marginal growth if you do see a demand pickup with the leverage of the fixed cost mean that it's incrementally more profitable business? Or do you end up having to pay over time and therefore, it doesn't really sort of drop through a greater than your EBITDA margin? Just any color there.

Thomas A. Hassfurther, President

Well, Charlie, the only thing I'd tell you is that most of our costs are covered at some point. And so when you go beyond that point, I mean a lot of that falls directly to the bottom line because we've already covered those costs. So you might get a small incremental addition in overtime or something like that, but that's miniscule compared to all the other costs you've already absorbed.

Mark W. Kowlzan, CEO

Anything else, Charlie?

Charlie Muir-Sands, Analyst

That was it. Thank you very much.

Mark W. Kowlzan, CEO

Joe, any more questions?

Operator, Operator

Mr. Kowlzan, I see that there are no more questions. Do you have any closing comments?

Mark W. Kowlzan, CEO

For our third quarter. Have a nice day. Thank you very much.

Thomas A. Hassfurther, President

Thank you.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.