Thank you for joining Packaging Corporation of America’s first quarter 2009 earnings conference call. Your host today will be Paul Stecko, Chairman and CEO. Upon conclusion of the narrative there will be a Q&A session. I will now turn the conference call over to Mr. Stecko. Please go ahead sir.

Thank you and good morning and welcome to our earnings release call. With me on the call today is Rick West our CFO and Mark Kowlzan who runs our mill operations and the operator just said once I complete the prepared remarks I’ll be more than happy to entertain your questions. Yesterday we reported first quarter earnings of $26 million or $0.25 a share compared to 2008 earnings of $32 million or $0.31 a share. Net sales for the first quarter were $512 million compared to $577 million for the first quarter of 2008. Our lower first quarter earnings were driven by the severe downturn in the economy which significantly lowered our containerboard and corrugated products volume and increased down time which reduced earnings by about $0.20 per share. In addition, higher costs for labor and benefits reduced earnings by about $0.03 a share and higher chemical costs reduced earnings by about $0.02 a share. These items were partially offset by higher pricing for containerboard and corrugated products which increased earnings by about $0.13 a share, and lower costs for recycled fiber and transportation which also increased earnings by $0.05 a share and $0.02 a share respectively. Our earnings were $0.05 a share higher than the guidance we gave at the beginning of the quarter. This was a direct result of our mills and box plants doing an exceptional job in managing and controlling costs while adapting to and running at significantly lower than normal operating rates. Our costs turned out to be between $0.01 and $0.02 per share lower than originally forecasted in seven different areas, namely transportation, chemicals, energy, wood, labor, repairs, and fixed costs. Published prices for containerboard fell more than we anticipated during the quarter, but this decline had a much smaller effect on first quarter…

Certainly. (Operator Instructions) Your first question comes from Mark Weintraub - Buckingham Research.

Paul, I wanted to spend a little bit of time on the significant improvement in demand you’ve seen in April, the first part of April. Just a clarification, on the bookings and the billing, how many days would you have of each of those where you said they were up 15%?

Yes, we have 10 days in April, which is basically half of the month. And I would amplify just a little bit. When this thing picked up it just picked up very quickly, and it actually started in the first week in April. And actually that also included the first week in April is on a Wednesday, that Monday and Tuesday were also very strong. So that whole week was the pickup. So this pickup has been really 12 days, 12 box plant days in duration. The last two days in March and then the next 12 days in April. So 10 days in April, but 10 days in April is the short answer to your question.

I think you said that bookings were up 15% and billings were, it was a number less than that. Does the billings usually become equal to the bookings?

Yes. A very high correlation. By the end of the month, the billings usually catch up with bookings. You know, basically how it works you book an order, you may ship it that day, you may ship it within two or three days or it may be as long as 10 days. And what the average is probably a five or six day lag from the time you book an order to the time you ship it. And usually there is a flop over. The last few days in March carry over into April billings, and the last few days in April carry into May billings. But the lag is a couple of days by the end of the month.

And is this improvement you’re seeing, is it broad based or are you seeing some specific areas in particularly strong?

No, it’s – I mean it’s like somebody turned the light switch on, Mark. You know, we’ve been booking in the let’s say mid-90s and 90 million feet a day, 95 million feet a day. We’d have some 80s on a bad day, maybe 105 on a good day. We’ve had some days into the 120 million foot range. So it’s been a big, big change and there’s nothing we can see except its pretty broad based.

I know you’re not an economist, Paul, but do you have a sense as to the sustainability of this? Or what are you hearing from customers? Is it kind of just a little restocking going on or do you think that it’s a real inflection point?

You said it best when you said I’m not an economist. We really don’t know except that the only other visibility that I have is that I do get data on cut up. In other words, I don’t have the actual sales beyond the first 10 days but I do have data on how much roll stock has been cut up in the box plants. And so I’ve probably got three, four, five more days’ data on that. That has remained strong. So at least for the next five days that’s going to translate into good shipments. But in terms of feedback from customers, no, it’s way too early. No, this thing’s going into its third week in terms of a pickup and I really don’t have – I wish I could amplify on why, is it sustainable? We’re just going to have to wait and hope this is the beginning of the pickup. But only time will tell.

When you gave your earnings guidance, have you made any assumptions as to how sustainable this demand pickup is?

Yes, we baked a little bit in there. Obviously you have to take a guess, but you are a – you know, you’re a little cautious with only three weeks worth of data is the best way I could put it.

Your next question comes from George Staphos - BAS-ML.

I just want to segue way then off of Marks’ question. If we think about the $0.15 guidance for 2Q relative to 1Q, could you roughly bridge or apportion the variance across some of the major categories, whether it be pricing or volume as you see it right now, realizing it’s not a guarantee.

Yes, I would say there are two big negatives on the earnings that are going to take away from earnings. One is, you know, pulp and paper – the trade publications have brought the price down $60 on liner and $70 on medium. And you can do the math to figure out, you know, that is very, very significant. The other significant item is that due to the accounting changes with three shutdowns down we’re going to take a $0.03 hit more than normal on these maintenance outages. And the reason for that is you used to accrue the cost of them over the entire year. Now what you do is you can’t accrue anything until you take them, and then you accrue it the rest of the year. So we can only divide by 9 instead of 12 as they say, and we’ve got 3 of them this quarter. So that’s a $0.03 hit and that and price are the two biggest items that contribute to this decline. You know, we’ve got our shipments going up a little. We think our costs will continue to come down, so you can do the math and figure out yourself how big the price decline is going to do to get to the forecast that we have arrived at. Price is the biggest variable and that’s the swing variable.

At this juncture, the sequential improvement in cost would be a few pennies would you say?

You’re in the right ballpark.

Now when we look at the first quarter and try to get at the $0.13 a share pickup in pricing that you got, you know if I just use the benchmarks realizing it’s not going to capture mix, I’d wind up more around $0.07 not $0.13. Can you give us some rough parameters around how you calculated that $0.13?

George, that’s a long discussion that’s really – I don’t want to get that technical on this call. So if you call me back later we might be able to give you some updates on that, but, you know, there’s a lot of numbers that go into that. As you said spread, mix, things of that nature. So $0.13’s the number and I can give you some amplification later.

Understand. Two last –

I have a call. Last question. I’m trying to limit it so we get as many people on as possible.

Maybe then on the demand question again, if you’re not sure whether it’s restocking or truly your customers thinking there’s a pickup in consumption, do you think that you’re doing any differently from what you can see, which maybe you might not have 100% visibility on, relative to your peers? In other words, are you gaining share or are your customers gaining share? Or do you know at this juncture?

Well, our volume was down 1% in the first quarter compared to the industry. So in terms of that, you know, that’s a very small loss in share compared to the industry. I personally think, you know, I don’t know if [de-stocking’s] involved, but it’s been five months now, six months since this thing turned down. I think people are still cautious and I think they’re ordering to meet their demand. And so I would think it’s a pickup in demand as opposed to some restocking. But I don’t know that.

Your next question comes from Chip Dillon - Credit Suisse.

Hey, I’m just doing a little math. I just want to confirm, you’re sort of signaling that your maintenance down time might be in the ballpark of 50 thousand tons this quarter?

I’m not signaling – I like that word, signaling. I’m stating we’re going to have 50 thousand tons of maintenance down time this quarter.

Now obviously, you know, that this burst of activity you can’t extrapolate as you mentioned, but is there any chance that you would have to cut back you think if this level of demand continued say through May at this rate?

Well, I don’t think so because our outside shipments will be down this quarter in terms of both export and domestic and we’ve already completed one of the shutdowns, which is the Counce shutdown. That’s the big one. And Tomahawk’s already down. And so one of the things that we did is we were careful enough to build about 9 thousand tons of inventory going into these shutdowns just in case things pick up a little. And they did pick up. Now they picked up more than we thought, but I think we’ll be okay and if things stay the same or hopefully even get stronger, then the need for any market related down time will diminish later in the quarter. We’ve got enough paper to get through this.

And you mentioned your outside shipments will be down. Is that year-to-year or versus the first quarter?

Versus the first quarter.

You mentioned you thought – your gut feeling is that most of this pick up is actually underlying demand versus say your customers rebuilding inventories. What makes you think that?

Well, they’ve ordered at a steady pattern for about six months, and that would indicate that they have reached a steady state. You know, it fell; they lowered their inventories; and then demand has just bounced on the bottom now. You know, December, January, February and March. And so to me that signals [bounce] steady state. They have synchronized supply and demand in their business, and the only thing that I can think of where they’d make a precipitous increase would be the fact that their demand had picked up. The other time you’d get this is that when people think there’s going to be a price increase they order like crazy. That isn’t the case. So that’s how I arrive at – that’s my theory anyway, Chip. I might be right, I might be wrong, but I think we’ve been at steady state and that’s how I arrive at what I’m guessing at if you will.

More to the point, the fact that you were in front of a pulp and paper decline and they’re ordering like this.

Yes. I mean – or things are tighter out there than pulp and paper would lead you to believe.

Your next question comes from Richard Skidmore - Goldman Sachs.

Just to clarify on the volume pick up comment that you made, how much normally would you see March to April from a seasonal standpoint? And then secondly, have you won any new business that would be reflected in that volume pick up in April?

The first question, very little pick up normally. I went back a matter of fact and looked at that a couple of days ago when these numbers were going crazy how much did it go up. And since 2000, that’s as far as I went back, our volume picks up about 2% to 2.5% between March and April. So not very much compared to the magnitude of the numbers that we’re seeing. And in terms of new business, you know, we gain business, we lose business, but not a big change. As a matter of fact for the first quarter our volume was 1% less than the industry’s. So it’s not – I think it’s related more to the market than our performance and I think when other people report we’ll know the answer to that question.

One separate topic if I might, just import export. Do you think that there’s a long term change in the export markets for your business? And separately, are you seeing any inflow of imports coming in from potentially Europe on the end of the open market?

No, export markets have been hurt by the worldwide recession also. And the problem with exports is customers overseas need less paper than they did six months ago, and that’s affecting export business all over the world. I’d say export businesses, you know, it stayed the same which is weak for about the last four months. And I think it will pick up when the general world economy picks up.

And imports? Are you seeing much in the way of imports coming in?

No. The numbers last month there was 2 thousand tons of imported paper coming into this country. That’s down 50% from February when only 4 thousand tons came in. So basically despite what people may indicate, I always like to go with the numbers and the numbers said only 2 thousand tons came in last month. That’s not very much paper.

Your next question comes from Mark Wilde - Deutsche Bank Alex. Brown.

First, you know, one of your biggest competitors is in Chapter 11 right now. Any thoughts on sort of what impact that’s had on the business to this point if any?

Yes. Sure. No, I really don’t have any thoughts. I really don’t want to comment about somebody in bankruptcy, what it could mean or not mean. Our business has been pretty stable. As I said earlier where our volume was off 1% compared to the industry, you know, we’re not out beating the bushes for new business. In terms of that is where we’re going to make our money when demand is way off. We focused on costs. So when your focus is as strong on costs, we really have not seen anything that would give us cause for alarm in that regard. And I think what we need – the two things that give us cause for alarm is when’s this economy going to pick up and when’s this price going to stop falling. And those two things are what we’ve got – they’re going to help us more than anybody in or out of bankruptcy.

Second question and this just on Packaging Corp., if we take a couple of steps back when you came public about nine years ago, lots of people talked about you being a consolidatee not a consolidator, and in the time that’s passed the industry’s consolidated. Looks like it’s going to continue to consolidate. But you’ve got this high margin niche strategy which seems kind of a tough fit for the bigger players. So if we take consolidation off the table, what’s the strategy that we’re likely to see Packaging Corp. pursue over the next five years? Are you going to continue to just focus on cash flow off of the existing business? Or are there some moves that could help the company accelerate its’ own growth?

Well, we were formed in 1999, we really only had one objective. And that was to create shareholder value in whatever manner it was the best. And we concluded that the best way to do that is not by growing, not by doing this or that, but by having high profitability. And that’s what we focused on. So going forward we’re going to maintain our strategy, high profitability business and we think that’s the best vehicle to create shareholder value. And one of the reasons, you know, we’ve made some acquisitions primarily on the box plant side, which have contributed nicely to our margins and profitability. And, you know, we will continue in that vein. And if something bigger and better came along, it’s got to pass just one test. Does it add to or take away from our profitability? And we are not consumed with any need to grow or not grow. We’re consumed with the need to increase our profitability, and that’s as simply put as I can put it.

Is there much more business out there, kind of high margin business, that would kind of fit with your existing portfolio?

The short answer to that is yes, but it’s when you say out there the reason that our margins tend to be higher than some others is that we have a strategy that provides value to our customers. And if we can continue increase the value we provide to them, we sell them more than just a plain brown box be it features, be it service requirements, be it capabilities, etc., etc. If you can create value that your customers appreciate and count on, you can get compensated for that value. So it’s just not that there’s people, pieces of business out there that are higher value than others. You have an opportunity to create value for your existing customers. And I think as Bill Sweeney said many times on these calls, our biggest growth vehicle is with existing customers as opposed to new customers in terms of instead of having half their business we have it all because we’ve demonstrated to them we can create value for them. So you can make this kind of business; it just takes a lot of time and perseverance to get there. But there’s enough room for us to grow.

Your next question comes from Claudia Shenk Hueston - J.P. Morgan.

Maybe just building off of Mark’s question, can you maybe just comment a little bit on your priorities for cash, how you’re thinking about buybacks and acquisitions and [inaudible] cash on hand at this point?

Well, we think cash is king. I have to admit I feel a little better than I did two or three weeks ago before things look like they may be picking up. But you know we did reduce our dividend to $0.60. Our strategy going forward is to maintain the maximum financial and strategic flexibility we can, to be able to take advantage of whatever faces us ahead. So in the short term, until we see a clear direction of where this economy is going, we will continue to accumulate cash. When we think we know where this economy is going, we’ll begin to make some decisions as to what is the best use of that cash, be it reinstate or increase dividend, share buyback, strategic acquisitions that may provide very, very good profitability to us. But as they say we’ll cross that bridge when we come to it.

And then just your CapEx in the quarter was a little bit higher than what I was expecting, but obviously you had that big project at Valdosta. Are you still comfortable with sort of $90 million or so for the year?

Yes we are. And one of the reasons, you’ll see high CapEx this quarter also is that we front loaded this year all four of our annual outages. And so when you’re down that’s the time to do those projects, under the cover of annual mill maintenance down time. So that’s one of the reasons that we’ll be skewed a little more to the front of the year than the back. The other reason is you get a return on these projects, so if you do them up front you’ll get more of a return during the year. So this year our first two quarters will be higher than normal just for those reasons.

Your next question comes from Mark Connelly - Stern Agee.

Coming back to your customers, you talked a lot about your side and the [inaudible] but can you talk about what your customers are experiencing out there? You know, in the past you’ve always reminded us that your customers aren’t immune to the economic trends, but your average customer does tend to be smaller. Are they seeing a different trend in your mind than larger customers are in this market? Is the quality of your accounts receivable book any different? And then my second question is you know you spent the last several years benefiting substantially from all the investments you made in advance in energy flexibility, and I’m wondering sort of what’s next on your plate for positioning yourself for the next five years.

Yes. With regard to the customers, I think in general it depends on the industry they’re in. I think in the food and food service packaging those customers have been hurt the least by the recession. Then if you get into customers that are more in automotive or building products that we sell to, our shipments to them have been down 40, 50% opposed to maybe 5, 6% in food service. So it’s a function of what industry they’re in. I don’t think it’s near a function of whether they’re a big company or a small company, because we also sell to some very, very big companies. We just don’t have a big position with those companies. But even big companies could constitute 1 or 1.5% of our sales. So I think it’s more industry specific than size of company specific. You know, in regard to energy we’re about done doing what we can do in terms of we had a portfolio of very high return projects and basically we’re through with the first phase in that – with this Counce boiler rebuild on the bark boiler this past quarter, we’re down to as low a fossil fuel level as is possible in our system. What’s next for us is we’d like to increase over the next five years our ability to generate more electricity. We generated about half ourself. We purchased the other half. I’d like to maybe get that number up to say 50 to 75% and we have some projects that we’re looking at. We may over the next five years add another recovery boiler to the system, take out maybe two or we have an opportunity at Valdosta to shut down two boilers and replace them with one. That’s something we’ll look at over the next five years. That additional incremental steam would then, you know, we’d get about a 40% efficiency improvement in steam generation from the same amount of liquor, which would then translate into more electricity production. And one thing that I did mention on the call was that although our energy costs were down, electricity was up 15% year-over-year. And we think with what’s going on in the world, you know, you cannot get a coal fired utility plant permitted these days as they’re backed up because of the changes in some of the environmental laws and the carbon dioxide and carbon credits, etc. And so we think it’s the time to be prepared to try to get ahead of the curve on electricity like we got a little bit ahead of the curve on some of these other things.

And just the question on accounts receivable quality, has that deteriorated?

No, surprisingly not and I’m knocking on wood because that is something that you would suspect that could be the next shoe to drop, not only in our business but across industry. But it’s held up – it’s better than we thought it would. We had some reserves. We have reserves for those things. But so far so good.

I’m sure Rick deserves all the credit for that.

More than me, I’ll tell you that.

Your next question comes from Joshua Zaret - Longbow Research.

Paul, you’ve talked about the trade publications bringing down their index prices for containerboard and that started since December. What – if we look at this on a monthly basis, what for you is the typical lag time for that to work itself into boxes?

Well, it varies all over. We’re only about 30% national account business, and the other 70% is local business and a lot of that is not on contract. It’s on purchase order. And these are negotiable items, so it’s months not weeks. Let’s put it that way. And that probably is as detailed an answer as I’m going to give on that.

Your next question comes from Steve Chercover - D.A. Davidson & Co. Steve Chercover - D.A. Davidson & Co.: I have two quick questions. First of all, can you point to any specific segments of the economy that account for that 15% uptick in April?

Yes, food and food service packaging because it’s 50% of our business and if that wasn’t up then the rest of it couldn’t bring it along. Other than that, no, I don’t have any more specifics to give. Steve Chercover - D.A. Davidson & Co.: And my second question I guess is a bit like Josh’s. The relationship with Pulp and Paper Week just seems absurd. You’ve got – presumably you guys don’t give them a lot of data, the buyers certainly are happy to gain the system and drive pricing down. When is that linkage going to end? Is there anything you can do about it?

Well, they do surveys and what do you mean by linkage? Steve Chercover - D.A. Davidson & Co.: The linkage insofar as it doesn’t sound like your customers were giving you great pressure to reduce prices, but as soon as it’s published in Pulp and Paper Week the tail’s wagging the dog and you’ve got to lower prices contractually.

Yes. About the only comment I will make in that regard is when you read what they say, most of the data they use comes from the East Coast and we have provided them information that we think it would be more accurate if the survey involved more customers as opposed to the same ones that are concentrated in the East Coast that rely on a lot of recycled paper that may not be typical of what we think are market conditions. And that’s about all we can do is request that they do broader surveys to get more accurate information. And I’d like to leave it at that.

Your next question comes from Peggy Bohn - Gusmer Enterprise.

You had said that your caustic soda pricing last year was below market price, but that unfortunately your contract for this year is at market price. Is that due to not as good negotiating or what can you say about that?

Well, I guess you could call it that. No, they expire. We had contracts that expired that were long term and when they expired and caustic soda had tripled in price, it’s a little harder for my purchasing guy to negotiate, but I’ll pass your comment on to him. But that’s basically it. We had very, very favorable contracts that unfortunately expired.

And sir I’m showing no further questions.

Thank you. Melissa and I thank everybody for participating on the call and hopefully when we talk in three months the pick up we’ve seen so far has sustained itself, but time will tell. Thank you much.

And ladies and gentlemen this does conclude today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.