Thank you for joining Packaging Corporation of America’s First Quarter 2021 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 Q&A session. I will now turn the conference call over to Mr. Kowlzan. Please proceed when you are ready.

Thank you. Good morning, and again, I appreciate everybody participating today in Packaging Corporation of America's first quarter 2021 earnings release conference call. I'm Mark Kowlzan, Chairman and CEO of PCA. And with me on the call today is Tom Hassfurther, Executive Vice President, who runs our Packaging business; and Bob Mundy, our Chief Financial Officer. I'll begin the call with an overview of our first quarter results, and then turn the call over to Tom and Bob, who'll provide additional details. I'll then wrap things up and then we'd be glad to take questions.

Thank you, Mark. As Mark mentioned, corrugated products and containerboard demand were very strong during the quarter. Total volume in our corrugated products plants was up 6.6% versus last year and equaled the all-time record for total box shipments that we just set in the fourth quarter of 2020. Shipments per day were up 8.3% over last year, which set a new first quarter record for us. Strong domestic demand drove outside sales volume of containerboard 13% above last year's first quarter. Domestic containerboard and corrugated products prices and mix together were $0.26 per share above the first quarter of 2020 and up $0.52 per share compared to the fourth quarter of 2020 as we continued to implement our November 2020 announced price increases during the quarter and we began the implementation of our announced March increase. Export containerboard prices were up $0.05 per share versus last year's first quarter and up $0.04 per share compared to the fourth quarter of 2020. I'll now turn it back to Mark.

Thanks Tom. Looking at our Paper segment, EBITDA excluding special items in the first quarter was $16 million with sales of $165 million or a 10% margin compared to the first quarter of 2020’s EBITDA of $42 million and sales of $217 million or 19% margin. As expected sales volume was about 22% below last year, as we ran only one machine at the Jackson, Alabama mill this quarter versus both machines running in the first quarter of 2020. First quarter paper prices and mix were almost 3% below last year. However, prices began to move higher in the latter part of the quarter, resulting from the announced paper price increases and averaged 1% higher than fourth quarter 2020 average prices.

Thanks Mark. For the first quarter, we generated cash from operations of $192 million and free cash flow of $107 million. The primary uses of cash during the quarter included capital expenditures of $85 million and common stock dividends of $95 million. We ended the quarter with $983 million of cash on hand or $1.1 billion including marketable securities. Our liquidity at March 31 was $1.5 billion. I want to update you on our full year guidance for a couple of items that we provided on last quarter's call. Current plans and scope of work for the scheduled maintenance outages at our containerboard mills has changed and the new total company estimated cost impact for the year is $0.97 per share. The actual impact in the first quarter $0.10 per share and the revised estimated impact by quarter for the remainder of the year is now $0.30 per share in the second quarter, $0.16 in the third and $0.41 per share in the fourth quarter. Also our capital spending estimate for the year has changed to a range of $650 million to $675 million as we have now announced our plans for the conversion of the number three paper machine at our Jackson mill to linerboard. I'll now turn it back over to Mark.

Thanks Bob. Regarding the conversion of the number three machine at Jackson, Alabama our current plans are to continue running the machine on linerboard as demand warrants. In a manner similar as to how we ran in the first quarter until the scheduled first phase outage is taken in the second quarter of 2022. The converted machine is expected to operate at an initial production rate of approximately 75% of its new capacity. The second phase outage work is planned for mid-2023 with the machine reaching its run rate capacity of 2,000 tons per day by the end of 2023. This phased conversion over the next few years will provide much needed internal linerboard supply. This gives us a runway for maintaining an optimal integration level and enables us to further optimize and enhance our current mill capacity in box plant operations. We're committed to being fully integrated and we have a track record of ramping up production from machine conversions according to our customers demand requirements.

Your first question will come from the line of George Staphos with Bank of America.

Hi, everyone. Good morning. Thanks for the details and congratulations on the progress guys. I guess the first question that I had given that you're running really tight, at least in terms of your prepared remarks, in terms of managing your customer requests, the freight logistics issues domestically that we're seeing, I realize you have customers internationally and their long-term relationships, but why the increase in export sales in the quarter? Why not try to keep some of those tons domestically, if in fact that's where you need them? And then I have a couple of follow-ons.

Hey, George, this is Tom. I'll just answer that real quickly.

Good morning, Tom.

We had a number of export commitments that had to take place – that were running over from the previous year that we had to take care of in the first quarter to maintain our relationships, and so we just had to get that taken care of. And we knew full well that we'd also be able to supply our box plants, although with a very tight inventory.

Okay. I appreciate that. Second question I had, if you can just give us the normal rundown, Tom, perhaps that you would give us on bookings and billings early in the quarter. And are you seeing any signs at all of customers trying to conserve on corrugated given the market that you've seen? Or if anything given the growth that we've been saying, are you seeing new applications beyond e-commerce for corrugated? So kind of a couple part question there.

Good question, George. First of all, through 14 days, our bookings are up 16% versus a year ago. So obviously the volume remains very robust and we're obviously very pleased with those kinds of numbers and the trend that has just continued coming right out of the fourth quarter of last year and continued into this year. There's no way customers can, in essence, hoard or order ahead or anything like that with the demand we're having right now. And a lot of our customers report business conditions as good as what we're talking about. And they're just trying to keep their head above water. And we obviously are keeping them supplied with boxes.

Okay. I was really more getting at the point, if customers are trying to conserve, it sounds like right now they're just living hand to mouth and they'll worry about that or for that matter, the growth that look once they can kind of catch up. My last question, I know it's something you might not want to talk too much live mic on, but qualitatively, if we look at where our first quartile and a fourth quartile machine might be in containerboard, would it be unduly penalizing to estimate that maybe right now Jackson is costing you, I don't know, $10 million a quarter just because of where it is on the cost curve right now, relative to where it will be at some point? Thanks guys and good luck in the quarter.

Yes. I think everyone could understand that without the capital investment. We are running probably in that high third, low fourth quartile costs portion of a curve. The beauty of it is though, it's very productive, very efficient and providing us the critical tons we need to run the box system. We've also in the last four months, we've taken considerable cost out as we've learned more about the machine, but the machine has proven to be quite an extremely efficient machine, but someone might think about the capital spending that we are undertaking as we speak that we'll go through next year and the year after.

Thank you very much, Mark. I'll turn it over.

Okay. Next question, please.

Your next question comes from the line of Mark Wilde with Bank of Montreal.

Thanks. Good morning, Mark, and congratulations on a very good quarter.

Good morning, Mark. Thanks.

Mark, I wanted to – the mill volume was just incredible here in the first quarter. You did about 1.2 million tons and your listed capacity in the K is 4.3 million a year. So factoring in Jackson, I wonder if you can just help reconcile that. And is this a pace that's all sustainable over time?

No one asked us in January what we really produced in Jackson in the fourth quarter. But if you think about what we are producing and what we produced in the fourth quarter and what we produced in the first quarter, the Jackson No. 3 machine on a run rate and looking at its grade mix, it’s producing a little over 100,000 tons a quarter. It's in that range. And so on an annualized basis, it's providing an incremental 400,000-plus tons a year to the run rate. And part of the reason, again, if you think about the filings, we did not have the machine listed as a true linerboard machine. So we still consider it a paper machine providing us with so much needed linerboard right now. Fast forward, to help you with your math; if you assume the 4.3 million plus the 400,000 tons, you get pretty close to your number. The other factor that we’ll give you a little understanding on is the project I mentioned on the call just a few minutes ago, the Wallula OCC project. Not only was that going to be a fiber flexibility opportunity for the Wallula mill, but anybody that understands fiber physics, recycled fibers of any kind drain and dry much more easily than virgin fiber. And so by mixing now the OCC and with our virgin kraft fiber at the Wallula mill, we're seeing as we expected much higher speeds on the machines, and in particular, the No. 3 machine, the drainage pressing drawing is far superior than it was before. And so starting in February, when we started the OCC plant up, we've been averaging close to 100 tons a day more production on that machine. And so that's another piece of the incremental first quarter tons that was built in, and that you'll see for the rest of the year also. So that – go ahead.

Yes, that’s good. I was just going to say, I think when you first converted Wallula, you were talking about 400,000 tons there, but the potential to get it to 500,000 or 550,000, where would that machine be right now taking into account the OCC mix?

Well, the whole mill, because don't forget the No. 2 machine is sitting there making medium. We had talked all along that that mill had the opportunity to get close to that 600,000 ton annualized run rate for both machines and where they're essentially right now.

Okay. All right. That's helpful. And just secondly, Mark is there any way to help us think about the impact of this adverse weather in the first quarter? I would have expected that that would have caused issues perhaps down in DeRidder and maybe kind of across your converting business.

Let me – I'm going to say a few things, and then Tom and Bob can add to that. We were very fortunate that we were not as severely impacted as some competitors. The DeRidder mill was able to run through this. We had transportation, logistics problems trying to move raw materials in and finished goods out. We had the bigger impact in the Texas region, in the Dallas metroplex area with our box plants. We had some of the box plants, obviously down. Tom, do you want to add a little color to the two-week period when we had a lot of the severe weather?

Yes. Mark, we obviously lost a significant production time in those box plants. We made up for a lot of that in the subsequent month, but it was a very, very difficult month. The ag crop, obviously, down in down the Rio Grande Valley was dramatically impacted, which also impacted our volumes in that area. In addition, as you may be aware, the impact of the chemical plants to provide the chemicals that make up our glues and adhesives was definitely impacted, and we've been suffering shortages of that product across all the companies. And we've had to take some extraordinary measures to make sure that we can continue to run at much higher expense to do so.

Okay. All right. That's really helpful. I'll turn it over guys. Thank you.

Okay. Thanks, Mark. Next question, please.

Your next question comes from the line of Mark Connelly with Stephens.

Good morning, Mark. Hello?

Mark, you may be on mute. Okay. Our next question will come from the line of Mark Weintraub with Seaport Global.

Thank you. I believe you said that the impact from pricing in your domestic business was $0.52 from the fourth quarter to the first quarter, was that right? Did I hear that right?

Yes, Mark.

So if I translate that into kind of millions of dollars, it sounds like, like $60 million plus, which if you're making 1.2 million tons of containerboard on an integrated basis seems like $50 per ton. So is that – and if that's the case, have you already gotten the lion's share of that November increase, or is part of that mix, and there's still a decent amount to come?

Hey, Mark, this is Tom. We have gotten most of the increase from November in the first quarter. We do have some of that trails into the second quarter and even into the beginning of the third quarter, just based on contracts. But the lion's share has been accomplished in the first quarter.

Okay. Thank you.

Next question, please.

Our next question will come from the line of Adam Josephson with KeyBanc. Please go ahead.

Thanks. Good morning, everyone. Congrats on a really great quarter.

Good morning, Adam. Thanks.

Good morning, Mark. A couple of questions. On guidance, obviously, pre-pandemic, you gave quarterly guidance. You haven't resumed doing so since, even though you put up really good numbers of this quarter and the outlook seems pretty good. Has your philosophy changed about providing quarterly guidance? And – or if not, when do you intend to resume giving guidance?

I think the way we would answer that is that there's still so much uncertainty in the world around us. If you think about the number that Tom just gave you for the volume, if a year ago somebody told you that volume was going to be up 16% year-over-year and on a given month, no one would believe you. And so until the pandemic winds down and we come back to some at least sense of what we think the new world normality will be, we believe it's in our best interests, in the shareholder's best interest to not give guidance.

Yes, I completely understand. You stole my thunder. I was going to ask you, I mean, I think in 2019 your per day shipments were up about 1%. In the first quarter, they were up 8.3% and you're talking about bookings up 16%. So is there any way for you to separate the impact of the pandemic and all this stimulus, and talk about what you think normalized demand even is? Or is it just impossible to do?

Hey, Adam, this is Tom.

Hey, Tom.

It's virtually impossible to do. Let me tell you, because our customer base across the board with the exception of a few are up dramatically. And so it's not just e-commerce as an example, being the only segment that's really driving this, it's a lot of segments that are going on. And I think obviously the stimulus helps and has been a plus for us. But again, as Mark said, we've got to wait until things settle down to really be able to get our arms around what's really going on in the world.

And Tom, why – any explanation for April? I mean, it's just – it's so outsized, it's just mind-blowing. Is there any logical explanation that you can come up with?

Well, I think what we're seeing is we're seeing the exact same thing that we saw starting in the fourth quarter. Fourth quarter was up dramatically. It rolled right into the first quarter, and now it's rolling right into the second quarter. So to try to predict it would have been difficult to do and we expected just like a lot of other people expected that the fourth quarter, that things might slow down a little bit from the fourth quarter, but they just haven't. So it remains incredibly robust and I think we've got a lot of customers that are way behind on their shipments as well. So I think it will continue going forward for awhile.

Yes, thanks. I mean, Mark, one on uncoated freesheet. So just as part of your decision to convert No. 3, how are you thinking about demand trends and that business this year and longer term? Do you expect any rebound this year or thereafter? And relatedly, how did that affect your conversations with your large customers communicating this decision on your part? And did they express any concerns about supply as a consequence?

Regarding the first part of the question, until again, if you think about the biggest demand for cut size paper would be office activity in schools, business activity. Until, again, at such time as businesses resume more of a normal pattern of in-office activity, you won't see cup size demand pickup dramatically. As schools come back and go back to a more normalized, school day function, more cut size use will take place in schools. So I would expect starting in the fall semester for the new school year that more demand will take place. I can't quantify that for you. I would just say that it should move up positively. We do think ultimately there the pandemic has created a new opportunity for people that they'll work from home, they'll work part days. I mean, people that are in the business world are obviously trying to understand how we will all run our businesses in the future, and whether we'll have people in the office full-time, part-time, flex-time. And so paper demand will go along with that. We are anticipating that there will be some permanent demand destruction that comes out of the pandemic. We also understand that because of our demand for containerboard and the opportunity we had with Jackson, that as we've always looked at the paper business, that it was the right decision to make for all the reasons we've talked about over the last six months to utilize the asset and exit someone of this market. And regarding our customers, I'll answer that question by just saying we are running to the demand of our customers large and small, and I'll leave it at that.

Thanks so much, Mark.

Next question, please.

Your next question comes from the line of Mark Connelly with Stephens.

Thank you. Hopefully you can hear me this time.

Yes. Good morning, Mark.

Great, thanks. Sorry about that. So just a question about maintenance and the changes you made. Some competitors are telling us that it's gotten harder to estimate the cost of maintenance because of changes the way projects are being scheduled. Is that a factor or is this just a change in your plans?

The increase in cost is related. It goes back to – we actually added the DeRidder No. 3 machine to this second quarter’s outage plan that was not in the original plan. And so it's not an escalation or an inflationary matter. It's just that we absolutely added an additional outage into this year's plan that did not exist in January. And the DeRidder No. 3 machine work came about during the pandemic year, last year, a lot of work. We avoided some work. We pushed off some work, some work we thought we could get by not having to do even this year. But as January and February wore on, as an example, we observed some opportunity, shall we say, on the DeRidder No. 3 machine that we felt needed to be addressed, and we have the resources and the materials available. So we went ahead and took the machine down for the better part of a week, last week, as a matter of fact, and addressed the opportunities and the requirements on that machine and put it in good shape, and so that machine has gone through its outage. But that would be the qualifying difference in the number that Bob's going to talk to you about. Bob, you want to add a little color to the number? Okay. Anything else?

That's super. So just one question on the headwinds. Obviously, last quarter headwinds were more of an overall challenge than they were this quarter and yet you've got some headwinds that got worse. I was hoping you could put some of these headwinds in context for us and tell us, which are still getting worse and where you're getting some relief.

Yes, Mark, this is Bob. It's sort of, as I think we said in our prepared remarks, the headwinds continued pretty much as we look from first quarter, the second quarter, we expect them to continue in almost all cost areas except maybe energy as we said. And that's really because of improved usage, not so much from prices getting – going lower. But in recycled fiber, even certain chemicals, repairs, materials, outside services, I mean, you name it, they all have converting costs. They all have an inflationary component that we see continuing into the second quarter. That – and of course, freight. Freight is another one that is not that just for all the reasons that Mark had mentioned earlier, there are several things driving it, but that is not going to slow down at all as we go to the – from the first to the second. So it's pretty much across the board.

It's very helpful, unfortunately. Thanks.

Next question, please.

Your next question comes from the line of Gabe Hajde with Wells Fargo Securities.

Mark, Tom, Bob, good morning.

Good morning Gabe.

You mentioned the heavy maintenance quarter, this period and obviously ended the March quarter with pretty low inventories. I appreciate its volume dependent, but as it sits today, assuming I guess some persistence on the demand side, would you say it probably wouldn't be until the end of the third quarter before you can kind of get your inventory position sort of normalized? And I'm somewhat asking, I mean, the best analogy I can come up with is sort of an accordion of cars going down the freeway. And we haven't had stock-outs in the grocery aisles, but it sounds like somebody – maybe some of your industrial customers are behind on their inventory/delivery. So I'm kind of curious just as you replenish inventories across the system that it could take even longer than what maybe some folks are anticipating?

You could look at it that way. Again, I would hope that we get our inventories in a more comfortable position by – say the end of the third quarter. But don't forget we also have a big outage in the fourth quarter at DeRidder, which we called out last year that is DeRidder number one machine, which is a long outage we've got a boiler work, we've got a lot of recovery boiler work we're doing and then the machine itself and opportunities on the machine. And so that will take a significant amount of tons out in the fourth quarter, that's part of the maintenance cost for the maintenance for the year, but also it impacts how we end the year. Tom?

Gabe, we have a very, very intense and specific plan in place, understanding that our inventories are going to be extremely tight all the way through the year, given these outages that we have. If in fact the volume doesn't drop off dramatically. The volume drops off dramatically we've got a chance of catching up a little bit, but I think it's important to plan ahead and to plan for what you see as the realistic scenario. We're doing so, we have to do these outages, we have no choice, as you know the – not only ourselves, but some others in the industry avoided some outages last year. And we just have no choice, but doing them this year. And we'll manage through them and our customers understand, our box plants understand and we've got a great plan in place. So I'm very confident that we'll be able to manage through it, but it's going to be a while before we can catch up on those inventories.

All right, thank you guys for the detail. I guess the second question again, appreciate you guys don't dictate what the publication does. But to the extent you can comment, were you surprised at all in terms of the phase sort of recognition on benchmark prices, and then more importantly I suspect that realization kind of, as you see it flow through your system would be kind of similar to the November hike in that, maybe limited impact in Q2, mostly realized by Q3 and then fully by Q4, is that a fair way to think about it or anything different that you’d guide us towards?

Well, you know, Gabe we don't comment much on our pricing, other than to say we have a very disciplined approach to the – to our price increase. Across the customer base that's 15,000 plus. We have a variety of contracts, agreements, et cetera, which roll-in typically over about a 90-day period. So you can – you know – what occurred for pulp and paper, I mean, I understand where it's somewhat where they're coming from, it's now fully in place. So I think you can kind of take that and take what I told you about the 90-day period and kind of roll that out. And that'll give you an indication of when that gets – when that price increase gets fully implemented.

Thank you.

Next question please.

Your next question comes from the line of Phil Ng with Jefferies.

Hey guys congratulations on another strong quarter. You know box demand was obviously really strong this year and it's been pretty impressive. Any color on the makeup of the end markets and if that profile in the growth side have changed much since perhaps the back half of last year versus how things are kind of shaping up this year?

I didn't know here the second half of the question. Phil, can you repeat that again?

Yeah, I'm just trying to get a better feel for the end market profile growth that you're seeing versus second half of 2020 versus now. Is it more broad-based, were there any end markets that stood out this year versus let's say the second half of 2020?

Well, I think the number one market that probably stands out more so than any is e-com, but – it's an e-com is spread out along all sorts of product lines today and all sorts of different companies. So that's obviously one of the trends we talked about it last time that it's become apparent that the consumer preference for e-commerce has accelerated. We're seeing something that probably would have taken three to five years to take place. That's now compressed into six months or a year because of the pandemic, that's one of the drivers. But I got to tell you that, across the board, with this broad customer base of 15,000 plus customers with the exception of just a few small industries, it's incredibly busy and demand is very high. So it's – I'm very, very, very pleased with the trends we're seeing. And I think that's kind of an indicator of the potential going forward as well.

But Tom, are you starting to see like an uptick, let's say in some of these manufacturing end markets that weren't as obvious last year, I'm just trying to get a feel to mix. I know the e-com piece is going to be strong, is it little more broad-based? And I mean – I assume it has to be just given how strong the demand is?

No, it’s – yeah, you're absolutely right. It is broad-based no question about it. It's broad-based and in fact, we've got customers who could be even busier if they could get – if they could get supplied with some of their products. They've got very tight supplies on their product as well of either ingredients or parts that go into their products. And otherwise they'd be even busier. So there's even a good backlog building.

Got it. And then you mentioned earlier that inventory is going to be pretty tight throughout the year, is that going to be a governor in terms of your ability to kind of supply boxes to your customer or you have it in a pretty good spot in terms of being able to kind of supply that inventory?

No. When I talk about inventory is being tight, we won't have some of the comfort level that we might like to have, but we'll certainly have enough inventory to supply all of our customers with their needs.

Okay. That's helpful. And just one last quick one for me, appreciating Jackson is not fully ramped up and the capital's not in yet. Do you see from an operating cost standpoint, as you kind of continue to run this year, does that come down a little bit this year or is that going to be more of 2022 event once you have it fully ramping into that second phase?

As I said earlier, just in the last six months we've taken a significant amount of cost out and opportunities that were discovered on a daily basis and that will continue through the year. And I’d say we've learned a lot of things about the machine, but machine right from the get-go has been an extremely efficient, productive machine for us. And we've made hundreds and hundreds of changes in the process from the pulp mill and the liquor cycle, and wood yard, and on-and-on-and-on that have helped us take some costs out of the finished product. So we're very pleased with where we are today and we expect to continue that effort. And get the set up for the first major phase outage next year.

Okay, super. Thank you guys.

Thank you, next question.

Your next question comes from the line of Neel Kumar with Morgan Stanley.

Hi, good morning. Thanks for taking my question.

Good morning.

I know you touched on increases in recycled fiber prices earlier, but I was just curious whether you've seen any inflation in your virgin fiber baskets. Are there any large differences in terms of those virgin fiber prices by region across your network mills?

That's been fairly flat, you see the weather related phenomenon that impacts pulpwood, but in general, it's up slightly, but nothing significant like some of the other factors that we've talked about again, it's primarily weather related events, not demand absolutely demand related.

Great. That's helpful. And then in Paper, can you just discuss what you're seeing in terms of demand trends so far in April? And how should we generally think about the flow through of the price increases for uncoated freesheet. Is there a lag similar to what we've seen in corrugated about a quarter or so?

No, I think again the – what was reported in the index Friday night, it pretty well sums it up in terms of how much of the price increase has been picked up and we would agree with what the index is saying with where we are with our cut size pricing and uncoated freesheet pricing. And then as far as again demand is, we gave you our absolute volume and where we are, but the price is moving up accordingly. And I think it's reflected well in what the index is reporting.

Got it. And my question on the uncoated freesheet pricing is actually more of when it flows through from the index to your customer pricing, is there a lag somewhere to what you've seen in corrugated?

Yeah. I mean, there's always little bit of a lag that takes place from the time you announce it. And then the time that the index actually calls it out and picks it up and your deliveries and your invoicing, and billing, et cetera.

Right. Thank you.

But it's – you're talking about – you're talking about a couple of months of a lag type activity. Next question, please.

Your next question comes from the line of Anthony Pettinari with Citi.

Hi good morning.

Good morning.

Hey, regarding the increase in CapEx guidance for what you talked about in the previous quarter, is that all due to Jackson or are you pulling forward or accelerating any other kind of high return projects or any other areas that you'd call out? And then understanding you're not giving, poor guidance, but is there a way to think about what normalized CapEx for PCA would be when you get finished at Jackson?

The first part of your question is yes. Jackson is the primary mover. That's increasing the CapEx for the year. The second part of your question is, as far as what's normal in the new world, I can't answer that. We're always mindful of what opportunities we have. And we were very fortunate that a few years back we undertook a heavy reinvestment in the box plants and recapitalizing the opportunities in lot of our plants. And taking care of the mills in the manner that we do, so if you look at our capital effectiveness and the returns on our capital spending we're very pleased with the returns that we see. And so capital is a matter of affordability and opportunity, and obviously I don't ever see us not having opportunities and then it becomes a matter of affordability. And so I think that's the way you have to look at it. But we – for the most part, we always have a portfolio of opportunities identified in the box plants and the mills that we go after short-term and long-term, and that's what's giving us this opportunity to be able to take care of the volume growth that you are seeing.

Okay. Okay. That's very helpful. And then Tom, earlier you talked about raw material availability issues and I think you specifically called out adhesives and glue, understanding the cost headwinds are continuing into 2Q, in terms of outright shortages or just not being able to secure the raw materials. Has that gotten material materially better as some of these Gulf Coast plants have come back online or is that still a nagging issue and is it something that's, impacted sales or orders or any kind of – any kind of color you can give there?

Well, Anthony, I think we're fortunate. We got ahead of this early in the equation, we took some measures to make sure that we would not be caught assured as maybe perhaps some others. We're still hearing from suppliers, some are saying that things should be back to a more normalized rate by the third quarter. Some others are saying, no maybe not so much, the plants – the chemical plants are back up, but some of these – some of the chemicals that they make that go into the adhesives are what I'd say less important to those chemical plants than other chemicals. So we're planning to do what we need to do throughout the year to make sure that we're taking care of and – we don't have any customers that don't have boxes because of adhesive, we'll be able to satisfy all those needs. But it's going to be – it's more costly to do it, there's no question about it. And I think we'll continue to have that headwind probably through the year. At least that's what we're planning on, but again we've got the contingency plans in place to take care of that.

Okay. That's very helpful. I'll turn it over.

Thank you. Next question, please.

Your next question will come from the line of Kyle White with Deutsche Bank.

Hey, good morning. Thanks for taking the question. I know you talked about recycled fiber costs in general increasing from these current levels, but could you provide a specific near term outlook and assumption for OCC going forward?

Yeah, Kyle. Certainly expect them to move up in the second quarter and for the full year we usually don't go out that far, but they could be up – they could be up close to the 50% over last year's average something in that ballpark is what it seems like right now.

Got it. With the containerboard price increase in November, another recent one here in March and April, I assume it's expected to fully offset the increased inflation headwinds you're seeing or expect going forward. And do you think this new pricing level reflects how tight the market is?

Again, it's – I think the pricing is a reflection of the demand in the market for the product. And then obviously there are inflationary factors that weigh into a producer's position in how they have to operate, but demand is the overall driver of what's moving these two price increases.

And I'd also add that demand is up significantly worldwide, not this is just domestic this is around the world.

Got it. I'll turn it over and good luck in the year.

Thank you, next question.

Your next question comes from the line of Cleve Rueckert with UBS.

Great. Thanks very much for taking the questions and there's two quick ones for me. I'm wondering if you can give maybe just a little clarity, I know Q1 was pretty dynamic with the weather and everything, but how did volumes trend in corrugated shipments on a per day basis versus that 8.3% that they grew for the quarter? I'm just wondering how the quarter developed from a demand perspective.

Well, January was obviously up, February slowed down a little bit and it was all weather related. And then March, it was incredibly high again because we were catching it, not only the demand in March, but also we were catching up some of what we did get shipped in February.

Okay. So would you – I mean, would you say demand was kind of flat around that and low in February and catch up in March?

Demand was – obviously was up significantly during the quarter and it was pretty much steady January, February, March. It's just that as our numbers would have been significantly higher for March because of the weather related issues down in Texas, as an example where we have a large footprint, we didn't get all the volume out the door in the month and it attracted over into end of the March. So I'm just kind of giving you a little flavor. January very strong, February would appear to be not quite as strong, but it still was very strong it just looked like it wasn't quite as strong because we didn't get the shipments and then March jumped up dramatically. But that was driven primarily by some of the shipments we didn't have in. We didn't get done in February. So overall, when I look back, I say the demand was – as we said, coming out of the fourth quarter with incredibly high demand, it remained essentially very close to that going through the entire first quarter. And now you're seeing same indication starting into the second quarter.

That's very clear, thanks for that color. And I know you touched on it a bit earlier, but I just – I want to ask a little bit more directly, given the tightness in the corrugated market. I mean, are you seeing any customers or maybe box buyers more generally, not specifically your customers switching away from paper-based packaging because they simply can't get enough?

No, it's quite the opposite to tell you the truth. Because of our sustainability story that we have in our business, because of the way we operate this business, the 90% plus of the boxes to get recycled, et cetera, people want to be in paper. They don't want to be in plastic anymore. So as an example, we've got some customers that have been shipping in plastic pouches their e-commerce and plastic pouches, and they want to move back to boxes. So there's – I mean, that's a huge segment that's going out in a plastic pouch as an example. So I think there are great opportunities going forward for paper-based packaging.

That's it for me. Thank you very much for the questions. Appreciate it.

Thank you, next question.

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

Yes. Everyone, thank you for joining us and I look forward to talking with you in July for the second quarter earnings call. Everyone, stay safe and be well. Talk to you in July. Have a good day. Bye-bye.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.