Packaging Corp of America (PKG) 2001 Q4 法說會逐字稿

Good afternoon. I would like to welcome you to Packaging Corporation of America (Company: Packaging Corporation of America; Ticker: PKG; URL: http://www.packagingcorp.com/) Corporation of America fourth quarter earnings release conference call. Hosting the call for Packaging Corporation of America this afternoon is Paul Stecko, Chairman and CEO.

At the conclusion of Mr. Stecko's comments, he will be taking questions. Specific directions for asking questions will be given at the conclusion of Mr. Stecko's comments.

At this time I will turn the call over to Mr. Stecko.

Thank you and good afternoon. And welcome to PCA's fourth quarter earnings release conference call. With me today on the call is Rick West, our Chief Financial Officer, who also will be available to answer questions. And I would like to thank you for participating. And when we do complete the presentation, as usual, leave plenty of time for questions.

So let me start right in - in which we're reporting today fourth quarter net income of $19 million or 18 cents a share. This compares to fourth quarter 2000 earnings of 38 million or 35 cents a share.

The results for the fourth quarter of both 2001 and 2000 exclude extraordinary non-cash deferred financing charges due to the early extinguishment of debt and in the year 2000 a non-recurring gain on our timberland sale.

Including the extraordinary non-cash charges for the early extinguishment of debt and the gains on the timberland sale, net income for the fourth quarter 2001 was 18 million or 17 cents a share, compared to net income of 63 million or 58 cents a share, end of fourth quarter of 2000.

As a result of the accelerated debt reduction, an extraordinary after-tax non-cash charge of $609,000 was recorded in the fourth quarter of 2001 to write off deferred financing charges. Our net sales for the fourth quarter were 413,000 million. And that's down about 11 percent compared to last year's fourth quarter of $466 million.

For the year, net income was $108 million or 99 cents per share compared to 134 million or $1.25 a share in 2000, or a 20 percent reduction in net income in what was a very difficult and challenging year not only for the industry but for the economy also. And while I'll tell you I'm not pleased with any decline in earnings, I think it's fair to point out that our relative performance compared with the rest of the industry is quite good. And some of the earlier earning announcements have been off 40, 50, 60, 70 percent. So 20 percent, while not great, should lead the industry.

Full year results for both years exclude extraordinary non-cash deferred financing charges also due to the, again, early extinguishment of debt. And in 2001 the gain on the timberland sales. Net income for 2001 for the full year also excludes a non-cash after-tax charge of $495,000 for the adoption of FAS-133, which is related to the accounting for derivatives.

Net income for 2000, also full year, also excludes a first quarter non-recurring charge of 16 million related to the early redemption of the company's 12-and-three-eighths pick preferred stock. Including all of these items net income for 2001 was 106 million or 98 cents a share compared to net income of 143 million or $1.33 per share in 2000.

EBITDA for the fourth quarter of this year was $85 million versus 121 million in the fourth quarter a year ago. That excluding the timberland sale gain, of course. Full year 2001 EBITDA was $391 million versus million last year excluding the timberland sale gain. I should point out that our EBITDA margin remained quite good for the fourth quarter of 2001 at 20.6 percent. And this margin for the full year was 21.8 percent.

Lower earnings compared to the fourth quarter a year a go as well as the full year comparisons were driven primarily by lower prices for containerboard and corrugated products, lower containerboard production, and slightly lower corrugated products volume. And these were partially offset by lower mill manufacturing costs as well as lower interest expense resulting from our large reduction in debt.

Now I'd like to get into a few details starting with operations.

PCA's corrugated product volume in the fourth quarter was down three percent compared to the fourth quarter a year ago. As I think most of you probably realize our volume for the first three quarters has held up reasonably well compared to last year. We were only down one percent after three quarters.

October was a bad month for us, and a bad month for the industry, as we first felt a dramatic slowing of the economy caused by the September 11th terrorist attacks. PCA's volume was down 5.6 percent in October and the industry was down 8.2 percent. PCA's volume began to improve in November - down only 3.4 percent. And PCA's December volume was actually flat compared to last December, which is a fairly positive trend.

For the whole quarter, though, corrugated volume was down three percent. And, as a result, we took about 20,000 tons of mill down time all in the last half of December. Lower corrugated volume and mill down time together lowered fourth quarter earnings by about four cents a share. We will enter 2002 with our containerboard inventories at the levels they need to be before we take annual maintenance outages at our two large board mills in January and in February.

For the year, our corrugated volume was down one-and-a-half percent - that's one-and-a-half percent versus the industry volume being down 5.7 percent through November. Now the industry data for December and the full year is not usually available until around the first of February, so I can't give you that number at this point.

As you know, this has been a tough year economy-wise for not only the forest products industry but many others. And I'd like to point out that this year's decline in containerboard volume - corrugated products volume - excuse me - will be the worst year since 1975. So it's been a difficult year volume-wise.

The single biggest item negatively impacting both fourth quarter and full year earnings compared to a year ago was price. According to "Pulp and Paper Week," liner board prices dropped about $50 a ton and medium prices dropped about 60 a ton compared to the fourth quarter 2000 average. The year over year price change, according to "Pulp and Paper Week," for liner board was about $25 a ton lower for medium, about $40 a ton lower than last year. Partially offsetting lower pricing and volume for us was lower mill manufacturing costs and lower interest expense.

I have to admit that I am pretty pleased with our mill costs going down. Despite producing 40,000 tons less in 2000 than the previous year, our mill manufacturing costs were down about four and a half percent compared to the previous year due primarily to lower virgin and recycled fiber costs. But a lot of our other cost elements were also down.

You may also remember from previous calls we were not impacted by higher energy costs during 2001. In fact, our purchase fuel costs were flat with 2000. So energy also helped in our cost reduction and being able to hold energy flat.

The Pfizer coal conversion project was completed on time and within budget this past September. And we're now in a position where about 70 percent of PCA's mill purchase fuel needs can be supplied with lower priced coal and purchase bark as opposed to natural gas.

Our interest expense in 2001 was $74 million compared to 118 million in 2000 - a $44 million reduction as a result of reduced debt levels. Capital expenditures in 2000 were basically on target at 131 million. Our target was 130 so we came pretty close.

We expect that cap ex number to drop to around 105 million or so in 2002. And I should point out that as part of our capital spending we spent $25 million to install state-of-the-art corrugators this year at our plant in Los Angeles, Omaha, Nebraska and Ashland, Ohio and this will position us well for substantial corrugated products growth in each of these important markets.

After deducting capital expenditures, our free cash flow generated from operations during 2001 was $182 million. During the fourth quarter we paid down 21 million of debt and for the year we paid down 74 million in debt. And as of December 31st our cash on hand was 82 million - a $74 million increase compared to December 31st, 2000.

Net debt at December 31st, 2001 was 713 million - a $1.156 billion reduction since becoming a standalone company in April 1999. Probably more important is that this debt reduction has allowed us to reduce interest expense by $100 million a year.

Our net debt to total capital is now 48 percent. Our other credit measures are also very good with net debt to EBITDA at 1.8 times and EBITDA to interest coverage at 5.6 times. And these numbers are among the very best in the industry.

In addition to debt free payments and increasing our cash on hand in 2001 we also repurchased $38 million of our common stock at an average price of 16.50 per share as part of our $100 million common stock repurchase program that we began the end of May 2001.

If I move ahead a little bit and look at the first quarter - for the first 11 shipping days in January - that's what I have dated for - our corrugated products orders are up five percent compared to last year's first 11 shipping days. This improvement along with the improvement we saw as the fourth quarter progressed is somewhat encouraging. But I have to tell you that it's really much too soon to say how the first quarter or even the full year 2000 as a whole will turn out from a corrugated products volume standpoint. But I'll tell you that I'm happy obviously to be off to a good start volume-wise rather than vice versa.

PCA's earnings are generally strongest in the second and third quarters with earnings lowest in the first quarter. And the primary reason for the lower earnings in the first quarter is the same as last year is the fact that we take our annual maintenance outages at our two large liner board mills - and - in the first quarter. This allows us to synchronize annual maintenance down time with a normally slowest quarter for corrugated products demand.

Taking downtime in the first quarter also reduces fiber and energy consumption during the traditionally highest cost quarter of the year for these two items. It's more difficult to log and cold weather increases your energy costs.

Another anomaly in 2002 is that Easter comes pretty early and we will have only 62 corrugated products shipping days the first quarter this year versus 64 days last year. And so that moves some earnings from the first quarter into the second quarter when we pick up some shipping days.

Our planned annual maintenance outages and other machine down time in the first quarter will reduce mill production by an additional 30,000 tons compared to the fourth quarter - or basically 50,000 tons total. We took 20,000 down time in the fourth quarter.

With the lower mill production, shutdown associated operating costs, which we'll have behind us after the quarter's over, and lower pricing compared to the fourth quarter, we would see first quarter earnings ranging anywhere from five to 10 cents a share with the higher end of the range more likely if our corrugated products volume continues to improve like we've seen in the last three months.

The single biggest factor impacting PCA's 2002 full year earnings compared to 2001 will be the realization of the full year impact of the 2001 containerboard price reductions, which occurred through the year including the last $10 that was announced near the end of December.

Using "Pulp and Paper Week" published containerboard prices, and assuming that the price doesn't change in 2002, which may or may not happen, the effect of the year over year decline in price is about $25 a ton. And PCA has about 2.2 million tons of capacity, and if no price changes occur up or down this price change could impact PCA by about $55 million pre-tax for the full year.

Of course, I think we all realize that the economy is going to have a lot to do with how both volume and price fare in 2002. And, like many others, I'm hopeful that the economy will start to move forward again. But, of course, that remains to be seen.

With that, we'd be happy to begin to entertain any questions. But I'm obliged to remind you that some of the statements we've made on this call constitute forward-looking statements. These statements were based on current expectations of the company and involve inherent risks, uncertainties including those identified as risk factors in our S-1 and S-4 registration statements, all on file with the SEC. Actual results could differ materially from those expressed in these forward-looking statements.

And with that out of the way, I would like to turn it to the operator and we will begin taking your questions.

Thank you, Mr. Stecko. And, ladies and gentlemen, at this time if you have a question please press the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue please press the pound key.

Once again, if you have a question please press the number one key.

Our first questions is from Mark Connelly of Credit Suisse First Boston (Company: Credit Suisse Group; Ticker: CSGKY; URL: http://www.credit-suisse.com/).

Paul, two things. And I know I keep asking you this and you keep telling me - giving me the same answer.

Well, good - I'm consistent. I'm glad to hear that.

That's right. When you look across your business mix - we're always looking for changes to see where things are picking up or down. As you look through this very preliminary data is the mix of business still looking the same? Does your - does your more high value added business still look the same? Is your small national account presence changing in any way in terms of customer mix?

Well, I would say the one thing that we're a little different than a lot of people - we were not really, really big players in the high tech segment of the business. Our biggest single concentration's in food and food service packaging. And that's remained the same.

The high tech portion of our business along with our competitors has been hit pretty hard. We've seen a little uptick there. I would say it's way too early to say that high tech's picking up but at least in some of our business the volume's picked up just a touch there.

Other than that we have so many accounts. I really don't have a correlation that says one segment is doing a lot better than the other.

I will tell you that food services held up this year better than some of the more technically oriented segments. And that's one of the reasons that our volume's down only a percent-and-a-half for the year as opposed to the industry average. But I really - you've never been happy with answer but that's all. I've giving you the best I'm capable of giving you.

But you're consistent again, so that's OK.

If I could ask you one more question. There seems to be some debate about your participation in production discipline and downtime. And I wonder if you could just reiterate your attitude towards downtime - when you take it, when you don't - and, of course, your attitude towards inventories.

OK - well, there's no debate in my mind. We run to demand and when we don't have demand then we take downtime in our mill system. And we've always behaved that way.

We don't say we're going to take 15 percent downtime in a particular year no matter what demand is. If we have a need for paper to make boxes we're going to make the paper to make those boxes. We're not going to shut down our mill and buy paper from someone else. That in no way shape or form benefits our shareholders.

I think we're also acknowledged as having a rich mix - a very diversified account - so we're not participants to a large extent in what I like to refer to as the high volume - low margin end of the business, which means we're price leaders. So my way of thinking and my philosophy is, is that you run to your own demand, you run to the orders that you have and you don't try to create demand with price because that's a losing proposition.

The other thing that I do have to point out again why we have taken less downtime than others. And I think one of the major reasons is that we don't have a big export business, and export is off more than anything else. And since we're not in that segment of the market we don't have to take downtime because we haven't taken a huge hit.

But we have taken over 100,000 tons of downtime this year. So what we've taken has been appropriate and we'll continue to do that.

One last question, Paul. When you look across your mill system obviously is a gem and is a great facility, and now you've got some improvements with the changes you've made at . Are there any significant opportunities that you still see out there to spend some money to bring your cost structure even lower at this point? Are we going to see another project like we saw at ?

No, I don't think you're going to see another project that's . We're not done at . We've had a couple of opportunities at that are non-capital related having to do with a potential co-generation project where we could be the host. It has some exciting possibilities. It's premature to talk about it because nothing is definite.

One of the things that people don't realize about - if you look at its capacity - now we have one machine - it's the fourth biggest media mill in the United States, which means in terms of scale is second and is fourth.

We have two of the five of our - two of the five biggest media mills in the country and is one of the five biggest mills in the country. So we have a lot of scale.

But in terms of investment - no - I think that's a plus for us actually. Our costs are down in a very good neighborhood and we don't have a need for a lot of capital to sustain that.

Terrific. Thank you, Paul.

Thank you.

Thank you. Our next question is from Mark Weintraub of Goldman Sachs (Company: The Goldman Sachs Group Inc.; Ticker: GS; URL: http://www.gs.com/).

Thank you. Paul, further on the issue of cash flow priorities, can you update us on your appetite for acquisitions of additional box plants?

Yes, that's still one of the three uses of cash - making the right box plant acquisitions. The other two, of course - some debt pay down and then continue with our $100 million share repurchase program. Most of the cash was aimed at that area, a fair amount of cash at box plant acquisitions and then a lesser amount to debt pay down.

But I will tell you in a very uncertain economy it's - when people are looking at - some of the people at box plant earnings that they think are in the bottom, I think a lot of potential sellers want to wait a few months to see if things pick up and might get a little better value for their box plant. I would like to buy earlier because obviously conditions are tough. But timing is an issue.

But I would just reiterate what I've said earlier. We'd like to put probably 20 percent of our cash towards debt repayment, probably 40 towards share buy back and as much as 40 towards additional box plants if an only if we find the kind of prices that we think make good use of the shareholder money.

OK. And maybe in helping us figure out how much that free cash flow might be - do you have an estimate of your cash tax rate will be roughly this year?

Yes - I'll let Rick handle that one.

Well, of course, Mark, it depends primarily on earnings but I would say it's still going to be below the 10 percent range in cash taxes.

So let's call it 10 percent to round it off would probably be a good order of magnitude guess.

OK - great.

So - but that's a good point. Not only has - our earnings have been good, our tax rate's been low and that results in cash we get to keep.

OK. And, lastly, you framed first quarter in the range of five cents or more like in the upper end of 10 cents. I take it a portion of that is the seasonal impact? And the downtime at - the maintenance downtime at and - I don't know if you'd care to give us a sense of how much that seasonal impact is?

Well, what we've chosen to do is, as I like to say, take our lumps in the first quarter and get ready for the rest of the year like we did last year.

Demand is usually the slowest. We take a little bit of downtime but not as much in the second quarter. And our costs are the lowest and it positions you for the rest of the year. As you said, there's a seasonal impact, there's a - there's a cost impact and that's why we do it.

But if you look at the first quarter we see rough numbers - order of magnitude, if you will - the downtime costing us about six cents a share and the price change about four cents a share...

OK - great. Thank you.

STECKO : ... because pulp and paper kept coming down and we had that last $10 that hits in December.

And, of course, the upside we see from our internal numbers is volume. And we're off to a half decent start but it is incredibly too early to make a projection there - that's why I'm not.

Great. Thank you, Paul.

Thank you. Our next question is from Chip Dillon of Salomon Smith Barney.

Yes - good afternoon.

Hi, Chip.

Hey, Paul. The - certainly not a surprise to see the downtime in the fourth quarter given how the economy's been.

Now I wanted to ask you about a couple of things. You mentioned that the first quarter downtime would cost you six cents. I would assume that's incremental to the fourth quarter?

Well, the fourth quarter - yes - that's incremental.

So really you're talking about downtime in the fourth quarter I think you mentioned and the volume together was four cents. So you're up to 10 cents there. And then the price change is four if you were to compare - if you were to look at it that way.

But switching gears - if we just say - OK - six cents incremental, price change is four cents. That's a dime. That would get you to about I guess eight or nine cents - eight cents I guess that would be. And therefore, what you're really saying is - is that that's the base number to use. And then if we get improvement in volume like you think you might get given what's happened in the first 11 days we could be up from there?

Yes - what I said was five to 10 cents. And we're near the top of the range if volume continues to be good.

OK. And then in terms of the full year - I appreciate that clarification on the $25 a ton. Given that you did 99 cents that would I guess work out to be about 31 cents. So if you just looked at the price change and you held it there you're looking at about a 68 cent 2002.

However, we - I'm sure you would caution us to keep in mind that you will have that free cash flow even at that level that you would be using to reduce debt, get interest expense down and also possibly get some benefits from more share repurchase and acquisitions to box plant.

And I would add that I really hope - and I think a lot of people feel - that the volume is going to be better than last year.

Yes.

So that was just price alone. There's no upside in there for the volume getting any better. And, like I said on the call, 2001 was the worst year since 1975. So I'm hopeful we're not going to have another year as bad as the worst year since 1975.

And can you review again when you take the downtime in the media mills? I know you mentioned that...

Yes. We got going down in April. And in May we're going to take down. But they're shorter. For example, is very minor in nature. We even skipped a full-blown downtime schedule last year. We'd just taken a machine down. But the two biggies are our two mills.

And the reason we're able to do it the first quarter is you worry about a freeze up of a mill. And, of course, well enough south that we thought we could take it. We pulled it up from February last year into January this year, which really helps us balance inventory. And with the weather reporting these days you know if there's a coming from the Arctic and you can predict that. We couldn't do that 25 years ago.

Yes.

Fifty degrees in Chicago today so I'm feeling pretty good about that shutdown in . We took it down yesterday.

Yes - I think you're pretty safe if that's the case. Now the downtime - if we look beyond the first quarter where it's 50,000 tons - you obviously would see that fall off quite a bit with the two media mills down. Can you give us an idea of what the progression would be in the second and then third assuming no market related downtime?

Yes. We've got - in the second quarter we'll probably take about 25,000 - let me - let me get it, Chip. What have we got for down - Chip, we're going to have to pull the number.

About 20,000 - about 20,000.

Yes - we'll take about 20,000 tons of downtime in the second quarter. And we would then expect to run full the rest of the year...

OK.

... unless we run into a situation like we did this year - heaven forbid - where - and then we take some downtime around Christmas.

Now this year is the same as last year. We told you that after we were done with our downtime we expected to run full the rest of the year. And we ran full our mills seven of the last eight months. And what happened with the World Trade Center we were forced to take downtime in December.

So, again, we like to get it out of the way early when our costs are the lowest. We run our inventories down pretty low. And as demand picks up we hope to run full the rest of the year. And if we're lucky enough to get a price increase near that end of that year we get to take advantage of that price increase with a full order book because our downtime's out of the way. Now who knows if it will happen that way but that's what we'd like to see happen anyway.

OK. And then just to clarify - you said your cap ex last year was 131?

One three one.

OK. And this year it will be 105 to 110?

Yes - 105's the target. It could go two - three either way. We usually hit that thing pretty close.

And what was the depreciation amortization both years?

Rick will give you that.

One forty for 2001. And it's going to go up to 145 in 2002.

And then the book tax rate you expect to have in '02?

It should be about the same. It's going to be about - I'd say in the 39 percent to 40 percent range for 2002. Of course, Chip, that will depend on certain things with how the year turns out.

OK. All right - great. Thank you very much.

Thank you, Chip.

Thank you. And our next question is from Matt Berler of Morgan Stanley (Company: Morgan Stanley Dean Witter & Company ; Ticker: MWD ; URL: http://www.msdw.com/).

Hi - good afternoon.

Good afternoon, Matt.

Hey - Paul, I just wanted to get your thoughts on the following calculation and that is if I take the $7 million pre-tax hit that you took in the fourth quarter from the downtime and divide that by the tons, which I think it was - you said it was around 20,000 tons - that's about a $350 a ton hit you took?

No. Right. Now here's your mistake - or not mistake - here's what you did wrong. I'm kidding you.

That four cents a share is both mill downtime and corrugated products volume loss together. There are two items. That's not mill downtime. That's mill downtime plus corrugated volume loss.

OK.

STECKO : OK? And there are the two numbers. And the mill downtime is a little under five million and I would say corrugated volume's a little over two. So if you do the calculations with that I think you'll come closer to the number you're looking for.

OK. So it would be a smaller per ton number?

Yes.

But that really gets me to the second part of my question, which is that number's going to be one heck of a lot bigger in the - in the first quarter. And - close to $500 a ton.

Can you - can you walk us through...

Well, we're taking - don't forget we only took 20,000 tons of downtime. We're going to take 50,000 tons of downtime.

Right.

And the number's about the same. It doesn't change.

The other thing that you don't have in there is that we're taking mill shutdowns. And there's inefficiencies of completely taking a mill down and starting it up.

At - let me give you a good example. We took downtime at but we didn't shut the mill down. We took a machine down and then we took - we took one machine down and kept it down. But the mill wasn't shut down cold. Now a cold shutdown, you incur costs on shutting it down and starting it up. And you get a lot of inefficiencies around your annual outages. So you have to throw that cost in, too.

And are you spreading any of this throughout the year?

Only the - only the repair portion is amortized. The inefficiencies from running and what you would have with chemicals, fiber, labor that doesn't go home, et cetera - that is taken in the quarter which it - which it incurred. But the repair expense related to the shutdown is amortized over the course of the year.

OK. Paul, I wanted just a clarification on your average prices. Was there a reset on your average box price or on a substantial part of your volume on January 1st in your box line?

What happens is on a portion of our business - it's tied to "Pulp and Paper Week." And some of it goes into effect immediately, some on a given month, most of them at the beginning of a quarter, some of them at the beginning of a year or beginning of a half year. So - yes - some of our box pricing will index down as a result of the pulp and paper changes. And more of that happens on January 1st probably than any other date.

Right. So the average change in your prices is probably a little greater perhaps going into the first quarter than the headline change in the containerboard price? Is that fair?

Yes - I'd say not dramatically but a little bit - yes.

OK. And just to recast the numbers because I think I'm looking at them a little bit differently than prior questions. Would it be fair to say the impact of volume and loss deficiencies from the downtime in the first quarter will be about $15 million pre-tax? And that the change in total EBIT according to your guidance if you use the mid point of your - of your guidance is about 20 million?

So 4Q versus - 1Q versus 4Q - so the difference would be the price of about five million?

I don't know. Rick's running some numbers.

Well, I think you've got to factor in a couple of other items besides that. You're going to have normal inflation going from year to the next with merit increases, salary increases, et cetera.

Plus in the first quarter you're going to have a normal seasonal change in fiber costing you more when you're operating because it's more difficult to log during the winter than it is in other months.

Energy's also going to be a little bit up from what we see. Of course, it's not going to be that much because natural gas prices are so low. So I don't know...

The consumption will be up.

The consumption will be up - that's correct - the usage. So I don't know if you can put everything in there to price.

Yes.

I think you've got to take those other prices and factor them in there.

Yes. And that's precisely why we try to take and have been able to take our downtime in the first quarter because it's the most expensive quarter of the year to operate in. And so you try not to operate then.

So then of the $20 million in EBIT 1Q versus 4Q something over $15 million would be all of those factors that you mentioned - most of which would come back in the second quarter.

Well, the volume - the volume will come back except we'll have - we'll have 50,000 tons of downtime in the first quarter. That will drop to 20,000 in the second quarter and hopefully no other downtime the rest of the year. So we pick it up not only in the second quarter but also in the third and fourth.

Right. I understand. I'm just focusing on the 1Q - 4Q change, which is 20 million. So that part - almost all of that does come back. And then you get the additional $7 million type rebound 3Q versus 2Q.

That's right.

OK - great. Thank you.

Thank you.

Thank you. Or next question is from Mark Wilde of Deutsche Bank.

Good afternoon, Paul.

Good afternoon, Mark.

Could you talk with us about where you stand in the that you do export? Have you backed off on that over the past year at all?

Yes - our - our exports are off. We're looking up the numbers. We were never big players - about five percent of our production goes into export. Most of these are longer term customers.

We focus on some grades that it would be a stretch to call them specialty but super heavyweights - things of that nature. And Rick's looking up that number right now.

Yes - tons compared to 2,000.

Yes - we went from about 120,000 tons to about 100,000 tons.

That's for the full year then?

Yes - for the full year. Down about 20,000 tons in export. And so we've been effected but, as I said on an earlier call, not nearly as much as the big export players.

And how - can you give us any idea of how profitable - if at all - export volume really is right now given currency and weaker prices offshore?

It's the least profitable. And I would say it's not - it's not very profitable business. That's about all I would say.

Would you likely exit any more of that business, do you think?

No, I don't think so. Again, we only have about five percent of our business and the most are long term customers. And taking 100,000 tons or so downtime last year. Maybe we'll get away with 70,000 tons this year. So I've got capacity.

So - no - we're not spot players in that market. We're not in and out. We basically deal with people we've been selling to for a long time. And we'll continue to supply them unless the price makes the business unprofitable. And then we would obviously take a look at it. But I don't see very much of a change. When you're as small as we are in export - a small number times a small number is an even smaller number. So it's not a major thing when you look at PCA.

OK. Switching gears - can you talk with us a little about how much stock you repurchased in the fourth quarter? It looked like maybe a half a million shares - something in that range?

Yes - Rick's got the numbers. Hold on. I don't have those.

We purchased 511,000 shares, Mark - about $8 million.

All right. And fair to say your strategy going forward here is to continue to be opportunistic about that, Paul?

Well, semi-opportunistic. I hate to say I'm not 100 percent opportunistic. But what we have told people in the past is, "Look, we view the $100 million buy back program is something we want to do continually. We're not going to wait and every four months decide there's a terrific opportunity. We're steady buyers."

Now that doesn't mean within a month that somebody sells and it creates an opportunity that we don't take advantage of it and get in and buy more than we normally buy. But our long term plan is to try to buy at a steady rate - six, seven, eight million a month. And maybe some months we only buy four but, hey - we like to make up for the next month if there's a buying opportunity.

So we want to be both. We want to be steady and we want to be opportunistic and try to balance the two.

OK. And, finally, Paul, can you give us a couple of thoughts on the idle capacity you've had up there at Fyler and what kind of circumstances you'd have to see to bring that back into the market?

Well, I would say it would be a happy day for the industry if we that machine back because we would be in a boom - maybe the mother of all booms. And - so said another way - very unlikely that machine will come back for a few years. But I'd like to see it come back because the whole industry would be in very good shape at that point.

That's not something which has become more likely to come back now that the power situation up there has improved?

No. That has nothing to do with it.

OK - sounds good. That's it for me.

Thank you. Our next question is from Joe Stivaletti of Goldman Sachs.

Yes - hi. Most of my questions were answered. I just was wondering though - what was your actual containerboard production in the fourth quarter in tons?

Yes - hold on. We'll pull that number up for you. It's - actual containerboard production, Joe, was 543,000 tons.

OK. And then in terms of - just in terms of liquidity what is that total at this point in unused liquidity other than your cash balance?

Well, we've got a 150 million revolver that's undrawn and 82 million in the bank.

OK.

Just to further add to that, as of December 31st our term loans had been paid down to only 119 million outstanding and our receivables were 126. So really all we have is the 119 in term loans and the notes we have at 550. So we've got full revolver of 150 plus 82 million in the back.

And we've never had to dip into that revolver.

Great. That's all for me. Thanks a lot.

Thank you.

Thank you. Our next question is from Bruce Klein of Credit Suisse First Boston.

Hi, guys. Also my questions were pretty much answered, but just two quick ones - OCC prices? And, secondly, would you consider - I know you're focused more on the box side but would you consider looking at a mill or no?

We're looking up the OCC.

OCC for the year averaged - and it's still there - it's been about the same - $40 per ton. About $60 per ton delivered. And that's less than last year. But it's been pretty stable. It's been down a little bit over the - in December bit it's a pretty stable amount for the last six months.

And your second question - we're about 85 percent vertically integrated. Our goal is to take that number to a little over 100 percent. So by definition would have absolutely no interest in bill assets.

OK - thanks, guys.

Thank you. Our next question is from Bill Hoffmann of UBS Warburg.

Yes - good afternoon.

Good afternoon, Bill.

A quick follow-up. You talked about the first quarter showed some improvement in volume. And I just wondered, Paul, if you could expand on that a little bit - just give us an idea of whether geographically you're seeing any pull or whether you think it's customers building a little inventory for the year or what else?

Yes - I have no idea. We only have - we have 11 days worth of data. We've had continual improvement since the 9/11 incident. And December actually turned out - pretty good month for us - flat year over year. January is particularly strong.

I said on an earlier call, we see a little bit of an uptick in some of the - in some of the higher tech stuff but it's small at this point to be able to call that a trend. And you have to understand - the volume is quite volatile. Normally our volume might go anywhere from 80 to 120 million feet a day. So you see a lot of volatility.

Except for January it's been real stable - a number over 100. So it's encouraging but you never know. And so I really can't give you any more data than that because we really haven't had a chance to study it yet.

Have you heard anything from the companies on the displays business and whether that's going to be down?

Well, the displays are usually slow. You peak in the fall.

Right.

And then December - January are slow in the display business. Now it will pick up early this year because Easter's early and so - but it's still even a little early for that. But displays will start to pick up.

HOFFMANN : Have you started getting some guidance though from customers on displays now looking forward?

Well, we start to get orders - not guidance. We get orders. But it's a little early for that. And that will start to pick up starting around the first of February.

Thanks very much.

Thank you. Our final question is from Alan Fournier of Pennant Capital Management.

My question was answered. Thank you.

thank you. And I thank everyone for participating in the call and looking forward to talking to you next quarter. And hopefully some of the good trends that might continue will continue. Take care.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and you may disconnect at this time. Have a pleasant day.