Packaging Corp of America (PKG) Q1 2019 Earnings Call Transcript

Now I'll spend it sustain ought Mark.

Mark Kowlzan -- Chief Executive Officer

Thanks, Tom. Looking can the prose segment. We had a first zone record EBITDA, excluding exceptional items, of $55 million with sales of $240 million or an all-time record 22.9% rim compared ought the first zone 2018 EBITDA of $31 million and sales of $269 million or an 11.6% margin.

Market conditions remained favorable during the quarter, and we began implementing our announced charge increases. Our pricing/mix and sales volume were improve than anticipated, and we were able ought improve our ware and logistics costs because a originate of managing our inventories sustain ought a good even can the aim of 2018 hind running most of final year above allocation.

Our mill system is running extremely healthy with an increased concentrate above our most advantageous products. The lower revenues compared ought final year are a originate of the exit from the white papers substance can our Wallula Mill. because we said a attach of years ago, we felt that we could improve our profitability and margins can the prose portion by exiting this substance can Wallula fairly than continuing ought isolate nation and chief wealth ought it. And that's exactly what we're starting ought see.

I'll now spend it can ought Bob.

Robert Mundy -- Chief econmic Officer

Thanks, Mark. We had record first zone coin generation, with coin provided by operations of $236 million and free coin brook of $157 million. The chief uses of coin during the zone included chief expenditures of $79 million, general stock dividends totaled $75 million, $14 million because federal and condition revenue impose payments, net advantage payments of $6 million and pension contributions of $1 million. We ended the zone with $442 million of coin above hand.

I'll spend it sustain can ought Mark.

Questions and Answers:

Operator

(Operator Instructions) Your first riddle comes from the queue of Chip Dillon with perpendicular investigation Partners.

Chip Dillon -- Vertical investigation Partners -- Analyst

I expect ought ask a attach of questions almost of complete things, the white prose business, which I deem had the best zone we've ever seen because you bought Boise. because we emerge can the second zone and then the second half, can you confer us an concept of friendly of how much of a defeat or repel can the second zone we used to growl on versus the first due ought I Falls? And I don't understand how much of the charge amplify you feel comfortable asking us ought assume. And then how -- used to the operations responsible bounce sustain ought where they were can the first zone by the third zone can that segment?

Mark Kowlzan -- Chief Executive Officer

I will allow Bob confer you the outage shock costs because the I Falls.

Robert Mundy -- Chief econmic Officer

Yes, Chip. can the second quarter, there's -- from the first, there's almost $0.06 related ought the I Falls outage. And there will exist some extra labor and some other fixed costs that will exist up relative ought the first quarter. besides because we said, pricing -- we'll digest ought installation the announced charge increases because well.

Mark Kowlzan -- Chief Executive Officer

And then can admire ought volume, we expectation volume ought -- because you used to emerge can the seasonal impact, the seasonal shock ought exist moving up because the summer comes above here. Back-to-school will begin can the June period. And consequently volume ought exist up because we'd expect. Also, we're able ought found our inventory, consequently we'll exist able ought sell out of our inventories. consequently can condition of volume, the outage can I Falls won't shock above our capacity ought meet the passenger demand.

Chip Dillon -- Vertical investigation Partners -- Analyst

So if I hear you and we decide ought suppose you acquire a fate of this pricing, you could truly eat sequentially even or flat up revenue can that segment?

Robert Mundy -- Chief econmic Officer

We'll see. It ought exist naturally a good quarter, though, Chip, relative ought our history because sure.

Mark Kowlzan -- Chief Executive Officer

And then you'd eat ought expect, Chip, with the outage hind us can the second quarter, 3Q, without an outage and again, continuing back-to-school-type sales volume, 3Q ought -- you used to expectation used to exist another good zone can condition of our EBITDA generation.

Chip Dillon -- Vertical investigation Partners -- Analyst

Terrific. And then one other riddle I had impartial above that portion is we've seen some -- if you could impartial update us above where we lie can condition of tariffs, et cetera. I understand that some of the ask friendly of faltered if we emerge can some of the information can the final attach of months. And cabin I understand that can the past, there eat been some trade, I guess, some tariffs situation above due ought a dumping by other countries. I deem there were 5 involved. And could you impartial update us above where that stands? Are those tariffs cabin can situation and because a manner ought shock the U.S. market?

Mark Kowlzan -- Chief Executive Officer

Chip, because complete intents and purposes, the tariffs are cabin can place. And because you used to eat expected with the industry announcements earlier can the first zone with the capacity coming out, customers, pretty frankly, had ought confide above the imports or the export impartial from the station of the soil supplying some of their needs, consequently they didn't proceed and explore some of the import capacity ought meet their demand. pretty frankly, the domestic capacity could no can that point can time provide the needs. consequently we're seeing somewhat of a rebalancing of how the industry supplies itself can condition of the passenger base. consequently it's no surprising that imports eat picked up. That's a normal reaction.

Chip Dillon -- Vertical investigation Partners -- Analyst

And then final question. Mark, because you know, a little weeks ago or final week or so, a chief producer down can Brazil announced that they were going ought found containerboard capacity using eucalyptus. though I appearance ought deem that they are making a same lightweight grade, perform you eat any thoughts almost -- we've never indeed seen a hardwood-based containerboard, that I've seen can least, that's been widely usable. And I didn't understand if you had any thoughts almost that.

Mark Kowlzan -- Chief Executive Officer

Well, I deem you impartial summarized it. It's short fiber. Traditionally, short fiber does no meet the regulation requirements of a traditional high-performance ask container. pretty frankly, eucalyptus or mixed hardwoods autumn into the organize of being able ought manufacture a container that's akin ought a folding carton category of packaging material. consequently it used to exist can the lightweight, super-lightweight container, which ought my knowledge is a same -- the ask is small, the volumes are little worldwide, consequently it'll certainly, can my mind, exist a actual niche product.

Operator

Your next riddle comes from the queue of signal Connelly with Stephens.

Mark Connelly -- Stephens -- Analyst

Mark, there was a fate of chatter early can the zone almost PCA losing a big customer, and you clearly aren't showing a fate of signs of auguish from that. can you recolect us what your passenger foundation looks though and how you deem almost quality passenger gains and losses?

Mark Kowlzan -- Chief Executive Officer

Yes. I deem above the January call, we talked almost that. besides primarily, that was some substance from our Sacramento Container acquisition, and we talked almost that can condition of a foe had purchased the piece feeder bit of that business. And consequently that's some of the substance we've been having ought compose up for. besides other than that, that was the big component. Tom, perform you expect ought add some color ought that?

Thomas Hassfurther -- Senior Key Executive

Mark, I deem you're possibly referring ought the rumor that was going almost that it amounted ought something though 10% of our volume or something though that. I'm going ought recolect you, because we've said many times, the makeup of our passenger foundation is 10,000 strong and lots of different industries, lots of different markets. And our largest accounts are, above a relative basis, are a little percent of our total. consequently it's same healthy scatter out, consequently we don't eat anybody flat can that category. What signal was referring ought earlier, I think, was we discussed the loss of a attach of big piece accounts that we had out can Sacramento, and those were purchased by somebody. consequently because you know, one of those events that you can't help. besides it was impactful ought Sacramento, besides I mean, obviously, can the big plan of things, you don't growl on that big shock because us.

Mark Connelly -- Stephens -- Analyst

That's helpful. And impartial one more question. can you report a little piece more almost the further with your new box plant? And you've talked can the final attach of calls almost a important amount of box mill optimization projects. can you talk us how that's going ought influence your overall system and what it's doing ought your integration levels?

Mark Kowlzan -- Chief Executive Officer

First isolate of your question, with admire ought the new mill out can Richland, we had a little piece of a climate delay starting breaking ground, because you used to expect. The Pacific Northwest had some of the worst climate they've seen can the final 100 years. besides complete can all, we're cabin above list because the end-of-the-year start-up above the box plant. Everything looks good. we're same pleased with the compose we situation down. consequently -- and then because the same first time again, we eat a new oversight can condition of we teamed up the mill plot management team with the corrugated packaging operational and plot team. consequently we've got pretty a formidable gang putting this plan together. Tom, perform you expect ought add ought that?

Thomas Hassfurther -- Senior Key Executive

Yes. I used to impartial too add that cause can worry that when we bought Wallula, the box mill there was indeed stretched because an capacity ought add any capacity. We did what we could can a short era of time. And consequently we're -- this is complete customer-driven. I intend we shortage more capacity out there ought meet our customers' needs. We're no -- I've said it ago it. We're no a "build it and desire they will come" category of company. I mean, we're doing this ought meet actual demand. And any of the other optimization projects that we eat are driven by customers or driven by labor markets, where it's a very, same tight labor impartial and we shortage ought proceed a little more automation.

Operator

Your next riddle comes from the queue of signal Weintraub with pier Global.

Mark Weintraub -- Seaport Global -- Analyst

One riddle is a piece of a follow-up. Could you provide the outage expenses by zone this year? I understand you've mentioned I Falls being 6% more 2Q than 1Q.

Robert Mundy -- Chief econmic Officer

Yes, Mark. They're no different than what we gave above the final call. They are 18 -- we expectation $0.18 can the second quarter, $0.08 can the third and $0.14 can the fourth. They were almost $0.19 can the first zone this year.

Mark Weintraub -- Seaport Global -- Analyst

Okay. And Wallula, can you confer us a feeling because ought if or no you are now can friendly of entire profitability manner above the -- with the second leg of that conversion having been completed or if there's cabin upside because we further along the year?

Mark Kowlzan -- Chief Executive Officer

No. We talked almost this can January almost above a flow worthy basis, we've got capacity because the next attach of years ought provide the system off of Wallula capability, and consequently we're no can the entire flow rate. That machine was modified ought manufacture 400,000 tons a year. And consequently we are no running ought the 400,000 ton a year capacity. That's isolate of within our statement, we talked almost running ought demand. We're running ought provide our needs, besides the extra capacity requirements into the future next attach of years will grow from the final provide off Wallula.

Mark Weintraub -- Seaport Global -- Analyst

Great. And then lastly, could you confer us a feeling of box shipments April ought date?

Thomas Hassfurther -- Senior Key Executive

Yes, Mark. along 15 days -- we're up 0.5% along 15 days. consequently we're -- again, remember, these are some -- we got some sturdy comps from a year ago, specially given the Sacramento status that I talked about. And too ask was good final year because well. consequently we're off ought a little what we'd believe ought exist a little piece of a slow begin can April, besides we growl on the second half being a little piece better.

Mark Weintraub -- Seaport Global -- Analyst

Okay. Had you seen the slowing can March that showed up can the statistics?

Thomas Hassfurther -- Senior Key Executive

Yes. Yes. I deem a amount of factors were baked into March. One is, if you emerge sustain a year ago, I deem if I recall, I deem the March amount was up though 6.5%. consequently it was an incredibly sturdy comp given the fact that the year didn't spend out ought exist almost can anywhere near 6.5%. You had a fate of weather-related issues. We naturally suffered a fate of shutdowns can a fate of our box plants, if it had ought perform with snowstorms, polar vortex, flooding, you appoint it from East bank ought West Coast. I intend it seemed though there was an incident going above each week during the month of -- well, really, I intend February and March besides naturally during March because well.

Operator

Your next riddle comes from the queue of George Staphos with bank of America.

George Staphos -- Bank of America -- Analyst

I wanted ought piggyback above the discussion above growth can box shipments that we've been seeing and recognizing that April has perhaps started off a little piece more slowly. What we've seen can the final attach of lodging because you and because others is friendly of a good begin ought the first month of a zone and then a deceleration the zone has progressed. used to you approve with that? And used to you talk that, that is impartial a obligation of inventory patterns from your customers, perhaps a little piece less -- a little piece more advise can condition of holding inventory consequently nation ratchet things down because a zone comes ought a close? Any thoughts above that used to exist helpful.

Mark Kowlzan -- Chief Executive Officer

Yes, George. I deem given the fact that -- and of course, most of our customers and our big customers are global companies. They're reading the same information we're reading. One day, things emerge good. Another day, globally you hear negative news. consequently I deem there's a fate of a little more knee-jerk reaction, I think, that's going above exact now, specially relative ought inventories. And we're seeing that same list you're talking about, where it starts off -- the zone begin off a little stronger, and then they friendly of tail off. And consequently it's -- and we're talking ought our customers. Our customers are no talking can condition of negative growth or anything though that. They're cabin planning ought become their business, and they cabin feel bullish almost their business. besides they are managing their inventories very, same closely.

George Staphos -- Bank of America -- Analyst

Okay. Second riddle I had is impartial above foundation weights, and the riddle comes up periodically above the calls. And Mark, you were talking almost earlier can condition of the Codine announcement. Are you seeing any different worthy of alter above the foundation weights being used and the influence or no ought lightweights can the U.S. based above some views above trying ought accept content out of the package, trying ought utilize less fiber, the influence ought perhaps optimize packaging can the e-tail level. What are you seeing can condition of trends there? Is anything discernibly different than what you've seen can the final attach of quarter? And how perform you deem this is going ought materialize the next attach of years?

Mark Kowlzan -- Chief Executive Officer

Tom, why don't you proceed ahead and add some color?

Thomas Hassfurther -- Senior Key Executive

George, I'll talk you, the tendency is the performance. That's where the tendency is. And that tendency bodes same healthy because us being a virgin-based containerboard system. because we've got improve capacity with, because everybody knows, the expect fibers, the formation of the fibers, et cetera. We eat a much improve capacity ought confront regulation levels with the exact quantity of fiber. And that's indeed where things are headed. We've talked almost recycled can comparison, where you eat ought heave a fate more fiber can it, chemicals, et cetera. I deem we're can a very, same good situation because where the trends are expect vocabulary exact now and expect vocabulary because the box business.

George Staphos -- Bank of America -- Analyst

Okay. My final question, and you energy eat mentioned. if you had, I'd missed it. How expect perform you deem it will accept because timber costs can the south, can particular, ought normalize relative ought what we've been seeing here due ought the weather? perform you deem by the time we're done with 2Q, we're sustain ought a normal period? Obviously, it will exist dependent above the weather, which we can't predict. besides any thoughts above that used to exist helpful.

Mark Kowlzan -- Chief Executive Officer

George, you answered your hold question. We've got hurricane season starting here can a month. consequently complete bets are off if we aim up with some of the severe southeastern hurricanes and bay of Mexico-type hurricane with tropical climate activity.

George Staphos -- Bank of America -- Analyst

All right. consequently then I'll accept another one. Wisconsin box mill doing OK consequently distant coming up the curve?

Thomas Hassfurther -- Senior Key Executive

Yes.

Yes. We're same pleased with that.

Operator

Your next riddle comes from the queue of Scott Gaffner with Barclays.

Scott Gaffner -- Barclays -- Analyst

Tom, you gave us the April numbers. You talked a little piece almost what happened truly can 1Q, the polar vortex. And I deem you mentioned some of the flooding can the Midwest. besides can you confer us a cadence of how box shipments because you category of broke out during the zone can the aim of the engagement by month?

Thomas Hassfurther -- Senior Key Executive

I intend we were handsome stable throughout the zone with the exception of March. I intend we started out can handsome good shape, and then -- and felt handsome good almost March truly starting out. besides -- and then it friendly of went into that tailspin, and it was same much weather-related. And of course, I'm going ought recolect everybody, when we're down, our customers are down also. And when they're down, I mean, those order