Packaging Corporation of America (PKG) Q3 2022 Earnings Call Transcript

Packaging Corporation of America (NYSE:PKG) Q3, 2022, Earnings Call October 25, 2022 9:00 AM ET

Company Participants

Mark Kowlzan - Chairman and Chief Executive Officer

Tom Hassfurther - Executive Vice President, Corrugated Products

Bob Mundy - Executive Vice President and Chief Financial Officer

Conference Call Participants

Mark Weintraub - Seaport Research Partners

Adam Josephson - KeyBanc Capital Markets

Anthony Pettinari - Citi

Operator

Thank you for joining the Packaging Corporation of America’s Third Quarter 2022 Earnings Results Conference Call. Your host today will be Mark Kowlzan, Chairman and Chief Executive Officer of PCA. [Operator Instructions]

I would now turn the conference over to Mr. Kowlzan. Please proceed when you are ready.

Mark Kowlzan

Thank you, Matt. Good morning and thank you all for participating in Packaging Corporation of America’s third quarter 2022 earnings release conference call. I’m Mark Kowlzan, Chairman and CEO of PCA and with me on the call today is Tom Hassfurther, the Executive Vice President, who runs our Packaging Business and Bob Mundy, our Chief Financial Officer. I’ll begin the call with an overview of our third quarter results and then turn the call over to Tom and Bob, who will provide more details. I’ll then wrap things up and then we’d be glad to take questions.

Yesterday, we reported third quarter net income of $262 million, or $2.80 per share, excluding special items third quarter 2022 net income was $266 million, or $2.83 per share, compared to the third quarter of 2021 net income of $257 million or $2.69 per share. The third quarter net sales were $2.1 billion in 2022 and $2.0 billion in 2021. Total company EBITDA for the third quarter excluding the special items was $477 million in 2022 and $464 million in 2021. Third quarter net income included the special items expenses of $0.03 per share primarily for certain costs at the Jackson, Alabama mill for the paper to containerboard conversion related activities, details of all special items that for the third quarter of 2022 and 2021 were included in the schedules that accompanied the earnings press release. Excluding the special items, the $0.14 per share increase in third quarter 2022 earnings compared to the third quarter of 2021 was driven primarily by higher prices in mix in our packaging segment of $1.60 and pay per segment $0.23 cents.

Lower interest expense, $0.04, a lower share count resulting from share repurchases, $0.04, and the lower tax rate, $0.02. These items were partially offset by operating costs which were $0.70 per share higher primarily due to inflation related increases in the areas of energy, repairs, materials and supplies, chemicals, labor and benefits expenses, as well as several other indirect and fixed cost areas. We also had inflation related increases in our converting costs which were $0.04 per share higher. The negative impact of lower volume was $0.52 per share in our packaging segment, and $0.05 cents in our paper segment. Freight and logistics expenses were $0.20 above last year, and scheduled outage expenses were $0.10 higher. We also had higher depreciation expense of $0.07, and other expenses of $0.04.