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Text: I'm Mark Kowlzan, Chairman and CEO of PCA and with me on the call today is Tom Hassfurther, Executive Vice President, who runs the Packaging business and Bob Mundy, our Chief Financial Officer.
I'll then wrap things up and then would be glad to take questions.
Yesterday, we reported second quarter net income of $207 million or $2.17 per share.
Excluding special items, second quarter 2021 net income was also $207 million or $2.17 per share compared to the second quarter of 2020 net income of $132 million or $1.38 per share.
Second quarter net sales were $1.9 billion in 2021 and $1.5 billion in 2020.
Total company EBITDA for the second quarter excluding special items was $397 million in 2021 and $299 million in 2020.
Reported earnings in the second quarter of 2021 included special items expense and income rounding to a negligible impact while last year's 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.
Excluding special items, the $0.79 per share increase in second quarter 2021 earnings compared to the second quarter of 2020 was driven primarily by higher prices and mix of $1.01 and volume $0.74 in our Packaging segment, higher volume in our Paper segment of $0.03, and lower non-operating pension expense of $0.03.
These items were partially offset by higher operating costs of $0.57 primarily due to inflation related increases in the areas of labor and fringes, repairs, materials and supplies, recycled fiber cost as well as other indirect and fixed cost areas.
We also had inflation related increases in our converting costs, which were higher by $0.05 per share while annual outage expenses were up $0.19 per share compared to last year.
Freight and logistics expenses were higher by $0.19 per share driven by historically high load to truck ratios, driver shortages, increases in fuel costs, and a higher mix of spot pricing to keep pace with the box demand.
Lastly, depreciation expense was higher by $0.01 per share and Paper segment prices and mix were lower by $0.01 per share.
Looking at our Packaging business, EBITDA excluding special items in the second quarter of 2021 of $409 million with sales of $1.7 billion resulted in a margin of 24% versus last year's EBITDA of $313 million and sales of $1.4 billion or a 22% margin.
Our mills and plants continued to do an outstanding job of meeting our customer needs while managing through certain material and chemical availability issues, a tight labor market, various freight and logistics challenges as well as the planned maintenance outages at four of our mills during the second quarter.
The mills executed the planned outages extremely well and with the help of the No.
3 machine at our Jackson, Alabama mill provided our plants the necessary containerboard to achieve an all-time record for total box shipments.
Although we were able to build some much-needed inventory, due to very high demand, we ended the second quarter below our targeted levels and at a new low for weeks of inventory supply for this time of year and ahead of expected very busy third and fourth quarters.
In the second half of the year, we still anticipate a planned outage at our Jackson, Alabama mill later in the third quarter as well as a significant planned outage at our DeRidder mill in the fourth quarter.
Implementation of the previously announced price increases continues to be executed extremely well by our sales organization while our engineering and technology organization and the employees at all of our mills and corrugated products plants continues to successfully implement numerous initiatives and projects to reduce cost through efficiency, productivity, and optimization improvements.
With inflation driven cost increases across most all areas of our company coupled with truck, rail, and barge challenges for both incoming and outgoing products and materials at our facilities, these efforts are absolutely critical to our success.
In addition, being a primarily virgin fiber based producer of containerboard minimizes the impact of significant increases in recycled fiber costs over the last several quarters.
As Mark indicated, containerboard and corrugated products demand remains very strong across most of all of our end markets.
Our plants achieved a new all-time quarterly record for total box shipments as well as a second quarter record for shipments per day, both of which were up 9.6% compared to last year's second quarter.
Through the first half of 2021, our box shipment volume is up 9% on a per day basis versus the industry being up 6.8%.
Driven by higher domestic demand, outside sales volume of containerboard was about 43,000 tons above the second quarter of 2020, but was down slightly versus the first quarter of this year due to lower export shipments, supplying the record requirements of our box plants and the need to position inventory levels ahead of what appears to be a strong second half of the year.
We are getting good realization from the implementation of our previously announced price increases across all product lines.
Domestic containerboard and corrugated products prices and mix together were $0.92 per share above the second quarter of 2020 and up $0.51 per share compared to the first quarter of 2021.
Export containerboard prices were up $0.09 per share versus last year's second quarter and up $0.04 compared to the first quarter of 2021.
Finally, I'd like to reemphasize some of what Mark was pointing out regarding the many things we do to help offset inflation and improve our margins beyond just price increases.
The benefits from our capital spending strategy in the box plants that we've spoken about over the last few years have been extremely successful and put us in position to serve our customers better than ever before.
Our strategy of improving the technology and equipment in our plants and optimizing our footprint through the construction of new facilities as well as closing certain plants to consolidate business with other locations is based upon our customer's needs and demands and improving our capabilities to grow with them.
We're seeing this in our volume growth with new and existing customers, operating efficiencies and savings, and cost reductions in several conversion areas throughout our plants.
Looking at the Paper segment, EBITDA excluding special items in the second quarter was $12 million with sales of $142 million or an 8% margin compared to second quarter 2020 EBITDA of $5 million and sales of $3 million or a 4% margin.
Although about 1% below second quarter 2020 levels, prices and mix moved higher for the first and into the second quarter of 2021 as we continued to implement our announced price increases.
Volume was 17% above last year when pandemic issues caused us to take both machines at the Jackson, Alabama mill down for two months during the second quarter while this year, we ran the No.
1 machine at Jackson on paper and the No.
3 machine ran linerboard.
Now that we have our finished goods inventory at a new optimal level, sales volume in the second quarter is fairly reflective of what our production capability is as a three machine paper system.
We'll continue to assess our outlook for paper demand and will run our paper system accordingly.
Cash provided by operations for the second quarter was $228 million with free cash flow of $97 million.
The primary uses of cash during the quarter included capital expenditures of $131 million, common stock dividends of $95 million, cash taxes of $87 million, and net interest payments of $40 [Phonetic] million.
We ended the quarter with $972 million of cash on hand or $1.1 billion including marketable securities.
Our liquidity at June 30th was just under $1.5 billion.
As we move from the second to the third quarter in our Packaging segment, we expect continued strong demand for containerboard and corrugated products with one additional day for box shipments.
Paper segment volume should be relatively flat primarily due to the scheduled maintenance outage at the Jackson mill.
We will also continue to implement our previously announced price increases in both our Packaging and Paper segments.
Our annual outage costs will be lower with one outage in the third quarter versus four mill outages in the second quarter.
Inflation associated with most of the operating costs as well as freight and logistics expenses is expected to continue.
Energy costs will also be impacted due to higher seasonal usage and wood costs in our southern mills will be higher due to wet weather, low inventory, and high demand.
Considering these items, we expect third quarter earnings of $2.37 per share.
The statements were based on current estimates, expectations, and projections of the company and 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 on file with the SEC.

user
packaging corp of america sees q3 earnings per share of $2.37.
sees q3 earnings per share $2.37.
q2 earnings per share $2.17 excluding items.
q2 sales $1.9 billion versus refinitiv ibes estimate of $1.78 billion.
do not currently expect special items to have a significant effect on q3 earnings.

assistant