PKG
#Well, I think two things.
Boise was attractive to us because we absolutely needed the containerboard tons.
We were at that point in 2012.
And as we were buying outside tons ---+ as a matter of fact, we are buying a couple hundred thousand tons of outside containerboard to support our growth.
And so the key to Boise was truly the DeRidder mill and then, obviously, the legacy brown side of the business.
That being said, we have been very successful And yet, the paper business ---+ and we called this out early ---+ we felt compelled that we could improve that paper business and continue to wring costs out of it and enhance the capability.
But, that being said, we are and will remain a corrugated products, containerboard business.
Basically, that is our concentration.
That is what we do, and that is what we will continue to focus on.
As we grow our integration, which is currently at about an 87% level, we will look at how we support <UNK>'s need for containerboard tons, and that would play into other opportunities.
Mexico is a good market, but we have never had the reach in terms of operating offshore.
Once you start operating offshore, you have got a lot of legal and financial matters that you have to deal with.
And we are not good at that.
We operate here in the United States, and we just don't have the desire to start getting into that complexity.
We have got plenty to do here.
Go ahead, <UNK>.
Well, I would say, <UNK>, one of the ---+ certainly, one of the things that I probably ---+ is a little unique to the box business today versus what it was, if you just compared it to even three years ago or five years ago.
Of course, you know, the e-commerce side of the business has picked up dramatically.
And that is a growth engine for us.
So I think that has been an area that has probably presented some opportunities for the industry in total to help get our numbers up a little bit over what the comparable periods were.
That hasn't changed.
As we have said many times, we continue to support a number of our legacy customers that have bought containerboard from us for the better part of a few decades.
We do supply into about 35 different countries, so we have no one big customer that we are tied to.
And, if you recall from our comments, last year and this year, because the first quarter starts heavy annual shutdown season, we tend to sell less on the export side of the equation and retain those tons for our own internal consumption.
But the number on a percentage basis has ranged from 8%, 10% or 12%, and we are still within that range in total.
As a matter of fact, that really didn't change from last year where we are right now year to date.
Well, I think, we don't consider them in the rearview mirror.
Freight continues to be something of concern to us.
What we have been able to take advantage of is ---+ a good example is the fact that with DeRidder fully optimized and capable of producing liner and medium and all of the key grades, we have a lot of flexibility with how we move product from our containerboard mills into our box plants.
And so we have developed some really good capabilities with the carriers on how to move those tons through the various lanes in a very efficient manner.
Now, also, with the fact that the economy did slow down a little bit, there has been some slight improvement in carrier availability to us ---+ trucks, that is.
But that doesn't mean that pricing has necessarily improved there.
It is just that we have developed a very good efficiency and capability within that side of the business in terms of how we move product.
Well, the goal is always to continue to improve.
We feel pretty good about where we are because what we saw of the last three months wasn't just something that happened.
It was a culmination of work that has been going on in the white paper business for the last couple of years.
And then, on the brown side, quite frankly, this has been going on for 20 years.
And then, DeRidder, obviously, has been a key focus.
So every day we will continue to enhance the capability.
But we are at a very high efficiency.
We work every day to maintain that high efficiency.
And so that is the goal and that is what we build our basis on.
<UNK>, why don't you go ahead and put some color on that one.
Yes, <UNK>.
Yes, demand did grow as the quarter went on.
That is pretty typical for our first quarter.
Second quarter starting out for the first 11 days, we are up about 1% over tough comps from the previous year.
So we are pleased with where we are at this point.
$50.49, the average price.
We always will view share buybacks from an opportunistic perspective.
And so that is truly the key word right there: opportunistic.
And I have said this on the last few calls as far as acquisition opportunities, we will reserve the right to use cash, to apply it to great growth, acquisition opportunities.
And so, again, if you are spending ---+ using your cash for dividends, share buyback, debt reduction, acquisitions, CapEx of some sort, and so we are very mindful of that.
But, again, we are in that position right now that, with the stock is up, obviously, over that low average $50.49 acquisition of the 2 million shares that we did.
So then, you look at your hand and, again ---+ so we are not going to provide any detail other than that.
<UNK>, that is a tough number.
I mean, again, all we can do is tell you that ---+ and history provides the answer here.
We will continue to go ahead and make improvements in efficiencies and working on costs.
Ultimately, I don't know what that means.
You have got inflationary factors with energy, wood, hard raw materials.
But with the factors that we can control, we will continue to work on these things.
I think one factor that is important ---+ we are at a point with the white paper mills, we are not faced with any one enormous amount of capital requirements in these white mills.
They are in very good condition.
Well-capitalized.
So what we do is we look at the small opportunities.
But if you do 100 small things, the result can be worth an enormous amount to you.
And so I am very encouraged that, all things being equal, we can continue to generate a good return for what we have invested in this white business.
And it generates a lot of cash, as we have said before, and we will continue to apply improvements to it.
I really can't quantify going forward what that means.
Again, we are going to maintain our focus on the containerboard, corrugated product side of our business.
That is where ---+ in terms of what we are really good at, what we are focused on, that is our business.
That is our core business.
And we are going to remain heavily involved in that.
Again, the paper business, it hasn't hurt us, per se, in terms of valuation.
And we are not in a position where we have to do one thing or another with that business.
It is a great business for us right now as it stands, and we will just continue to operate it and generate a lot of cash with it.
Thanks.
Regarding the first part on the quarter-to-quarter, the $0.08, the bulk of that was the DeRidder outage.
It was a massive outage last year.
And not just the fact that we had the delayed number 1 work that went on and the heavy lifting on number 3, but that was a massive outage.
You look total mill-wide work going on.
And, as you look at this past first quarter, we had an annual outage at DeRidder.
Addressed all of the things that we would normally address.
And so it wasn't nearly as impactful.
And so, again, the bulk of that $0.08 would come from the fact that it was just a second shutdown we would have experienced and we were putting a lot of corrective action to the mill.
So yes, that was the total.
Other than that, next question, please.
<UNK>, why don't you go ahead and answer this.
Yes, when we gave the guidance, we were talking about fourth quarter to first quarter.
And, actually, labor actually was the ---+ that negative those timing items that hit you at the beginning of the year.
That actually occurred, as we expected.
But year over year, it was maybe not as severe as it was the previous year-over-year comparison.
And some of that has to do with some of the things <UNK> has done on the hourly side of optimizing some of the things with the workforce and in the mills and somewhat in the box plants as well.
So that certainly helped us year over year.
Let me answer that, <UNK>.
This is <UNK>.
We are anticipating for the second quarter ---+ we will probably see on the containerboard sales, probably half a cent on the export containerboard, half a cent on domestic containerboard and probably about $0.01 in our corrugated products.
So about $0.02 in total on <UNK>'s side of the business.
No.
We were fortunate because of the truly mild winter weather that we saw all the way from the International Falls/Canadian border to the Gulf Coast, East Coast, West Coast.
We certainly did not have anything near that would have been a typical winter weather that would have put pressure on the wood baskets.
We had a little bit of that rain issue about a month and a half ago in Louisiana, but DeRidder mill was spared.
Most of that rain went to the north and much further west of the DeRidder basin.
So, wood basket has been spared this year in terms of any unusual issues nationwide.
Again, going into the second quarter, everything is pretty flat with where we left the first quarter.
But that being said, if we get into a hurricane season in the Gulf coast and we start putting some ---+ more widespread rain throughout the Gulf Coastal region, that could change the fiber cost makeup.
But, right now, everything starts in line with how we came out of first quarter.
.
I forgot to mention OCC.
Obviously, you see it was mentioned in the publications, but keeping in mind we still are the lowest consumer user in OCC in the industry.
And so on a dollar-to-dollar basis will be least impacted.
<UNK>, why don't you go ahead and put some color on that.
<UNK>, I would say to that, that we certainly ---+ it's certainly an impact if pulp and paper continues to rationalize the two together.
But we see recycled liner board and kraft liner board as being two very different products, especially when it comes to performance.
And the majority of our customer base is very performance oriented.
So from the standpoint of actually directly competing with this, it is not much ---+ it is not that much of an impact.
But, certainly, what pulp and paper does could impact.
I can't comment on that, <UNK>.
All I can say is that the two products in our opinion are very different.
Regarding that, I mean, truly, all of our export pricing activities has been primarily related to currency fluctuations.
And so that being said, it is pure speculation of what is going to happen this week, the next week regarding dollar versus currencies.
So that is truly the impact.
We did see some slight decrease from 4Q into 1Q, as we called out.
But, other than that, I don't want to speculate.
What was the rest of your question.
We didn't quite hear.
Tied to Europe.
About probably less than half total offshore containerboard sales.
Again, I don't want to speculate any more than one quarter at a time and where we are right now.
But, all I want to say about that, truly, if the GDP and the economy starts improving in any significant manner, you're going to see, theoretically, box demand grow with it.
And so it is truly a GDP economic growth relationship here.
That is all I want to say about that.
Yes.
I will answer it this way.
We talked about this in January.
We have got 15,000-plus customers.
And we are highly integrated.
And there are various trigger points that flow through to a box.
And so it is very complex and there is no one-size-fits-all there.
And so that $15 and $20 change in containerboard.
We are feeling that we understand what the implication is, and we have called that out.
But, again, it is all I really want to say about that.
<UNK>, why don't you go ahead and get into this.
Well, <UNK>, this is a complex subject, obviously, when you start talking about substitution.
I would contend that our objective is to give our customers what they need to perform.
And not more, not less, tailored to what they need in their performance.
And I think that is pretty much the direction of the industry.
I think it has been stated in the past that there has been this case for over-packaging and all these other sorts of things.
But I think that the statistics now support the fact that we pick up very much performance-based industry and certainly we have at the PCA.
So that is what we sell and that is what, quite frankly, what our customers expect.
So they don't typically get into demanding substitutions or demanding this or that or that sort of thing.
And it is up to us to provide the right solutions for them.
So, those that are heavily in that recycled arena, they are selling one product, primarily.
And so it is a different animal, to some extent.
So hopefully that kind of explains where we are.
<UNK>, why don't you go ahead .
Well, I am not sure I completely ---+ you might restate that just a little bit more for me, <UNK>, so I can really understand exactly what it is you are asking.
It was kind of a broad question, so if you wouldn't mind I appreciate it.
Yes.
I get it now.
That is very hard to predict.
I mean, of course, we do just run to demand.
That is what we do.
Our excess ---+ extra capacity that we have will be utilized as we grow the business.
That is pure and simple.
If we make a sizable acquisition or something, that is obviously going to suck up a lot of it as opposed to organic growth.
But we will continue to grow in those segments that we have always tried to grow in before.
If you think about it, we are at 87% integration.
And so if you did have any capacity, you would be back to where we were in 2012 as net buyers of outside containerboard tons .
And so, again, we are at a pretty good balance right now running our system and being able to flex with what <UNK> needs.
When we had the January call, obviously, we just had probably 11 days of consumption on <UNK>'s side of the business at that point.
And we were feeling okay.
But as the quarter went on, we did see demand pick up.
Again, we are not economists, so I can't fully explain.
But I think we were pleased with what we saw, especially coming off last year's big numbers.
We had tough comps to run against last year.
So in that regard, I think we are pleased.
<UNK>, why do you add something to that.
Yes, <UNK>.
I would just say that one of the things that had taken place, if you recall, late last year, midway through the third quarter and certainly in the fourth quarter, that, as we alluded to on our calls, we had exited some business that we had gotten in the Boise acquisition.
That was all part of our synergies.
And I think that obviously is ---+ can help on our margin side.
But we were coming out of that.
And so it was a little tough for us to forecast what that impact would be, continuing to go into this year.
We felt like we had it all behind us; it turns out we did.
And how quickly we could turn it ---+ get back into that growth mode was important to us and, quite frankly, a little difficult to predict.
With that, operator, I believe we are out of time.
And so thank you, everybody, for joining us.
And look forward to talking with you all in July.
Have a good day.
