Packaging Corporation of America (NYSE:PKG) Q2 2020 Earnings Conference Call - Final Transcript
Jul 29, 2020 • 09:00 am ET
Thank you for joining Packaging Corporation of America's Second Quarter 2020 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, and please proceed when you are ready.
Mark W. Kowlzan
Good morning, and thank you for participating in Packaging Corporation of America's Second Quarter 2020 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 second quarter results, and then I'll turn the call over to Tom and Bob, who'll provide more details. After which, I'll wrap things up, and then we'll be glad to take any questions. Yesterday, we reported second quarter net income of $57 million or $0.59 per share. Excluding the special items, second quarter 2020 net income of $132 million or $1.38 per share compared to the second quarter of 2019, net income of $194 million or $2.04 per share. Second quarter net income was $1.54 billion in 2020 and $1.76 billion in 2019.
Total company EBITDA for the second quarter, excluding special items, was $299 million in 2020 and $376 million in 2019. Second quarter net income included special items expenses of $0.79 per share related primarily to the impairment of goodwill associated with our paper segment. Bob will discuss that in more detail in a few minutes. Special items expenses also included the previously reported closure of our corrugated products facility in San Lorenzo, California and costs and expenses associated with the COVID-19 pandemic. Details of all special items for the second quarter of 2020 were included in the schedules that accompanied our earnings press release. Excluding the special items that we mentioned, the $0.66 per share decrease in second quarter 2020 earnings compared to the second quarter of 2019 was driven primarily by lower prices and mix in our packaging segment of $0.66 and paper segment $0.05, lower volumes in our paper segment, $0.40 and higher depreciation expense, $0.04.
These items were partially offset by lower operating costs of $0.33, primarily in the areas of labor and fringes, repairs, materials and supplies and several fixed cost areas. We also had lower annual outage expenses of $0.10, lower converting costs, $0.03, lower freight expenses, $0.02 and other costs, $0.01. Looking at our packaging business. EBITDA, excluding special items in the second quarter of 2020 of $313 million with sales of $1.4 billion resulted in a margin of 22% versus last year's EBITDA of $349 million and sales of $1.5 billion or 23% margin. We ran our containerboard mills to demand, built some much-needed inventory from the historically low levels at the end of the first quarter and maintained the industry-leading integration rate by supplying our box plants with the necessary containerboard