Group 1 - Packaging Corp. reported $2.17 billion in revenue for the quarter ended June 2025, a year-over-year increase of 4.6% [1] - The EPS for the same period was $2.48, compared to $2.20 a year ago, indicating a positive growth [1] - The reported revenue exceeded the Zacks Consensus Estimate of $2.16 billion, resulting in a surprise of +0.49% [1] Group 2 - Key metrics indicate that Packaging Corp. shares have returned +8.4% over the past month, outperforming the Zacks S&P 500 composite's +5.9% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3] Group 3 - Segment Sales for Packaging reached $2.01 billion, surpassing the estimated $1.98 billion, reflecting a +5.1% change year-over-year [4] - Segment Sales for Corporate and Other amounted to $19.6 million, exceeding the estimated $18.72 million, with a +16% change compared to the previous year [4] - Segment Sales for Paper were $145.8 million, below the estimated $151.03 million, showing a -2.9% change year-over-year [4] Group 4 - Segment operating income for Packaging was $321.7 million, higher than the estimated $301.92 million [4] - Segment operating loss for Corporate and Other was $-36.8 million, worse than the estimated $-33.18 million [4] - Segment operating income for Paper was $25.8 million, below the estimated $37.99 million [4]

Executive Summary & Highlights [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) PCA reported strong Q2 2025 results, achieving $242 million net income, $2.67 diluted EPS, and $2.2 billion net sales Q2 2025 vs Q2 2024 Key Financials | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------------- | :------ | :------ | :----- | | Net Income (Reported) | $242M | $198.9M | +$43.1M | | Net Income (Excl. Special Items) | $224M | $198.6M | +$25.4M | | Diluted EPS (Reported) | $2.67 | $2.21 | +$0.46 | | Diluted EPS (Excl. Special Items) | $2.48 | $2.20 | +$0.28 | | Net Sales | $2.2B | $2.1B | +$0.1B | [Earnings Drivers and Special Items](index=1&type=section&id=Earnings%20Drivers%20and%20Special%20Items) Q2 2025 earnings (excl. special items) increased by $0.28 per share, driven by higher prices and lower fiber costs, despite increased operating and maintenance expenses - Q2 2025 EPS (excl. special items) was **$0.07 above guidance of $2.41**, mainly due to lower operating and fiber costs[6](index=6&type=chunk) - Key drivers for the **$0.28 EPS increase** (excl. special items) YoY: * **Positive Drivers:** Higher prices and mix (Packaging: **$0.98**, Paper: **$0.04**), lower fiber costs (**$0.13**), lower tax rate (**$0.02**)[5](index=5&type=chunk) * **Offsetting Factors:** Higher operating costs (**$0.30**), higher maintenance outage expense (**$0.21**), lower production and export sales volume (Packaging: **$0.13**), higher depreciation (**$0.10**), higher fixed and other expense (**$0.09**), lower volume (Paper: **$0.02**), higher freight (**$0.02**), higher interest expense (**$0.02**)[5](index=5&type=chunk) - Special items in Q2 2025 primarily included gains from real estate sales from closed corrugated products facilities, partially offset by costs related to the pending Greif containerboard business acquisition[4](index=4&type=chunk) [Segment Performance Overview](index=2&type=section&id=Segment%20Performance%20Overview) Packaging segment achieved significant operating income and EBITDA growth, with Paper maintaining profitability despite a sales volume decrease Segment Operating Income (Excl. Special Items) (Millions USD) | Segment | Q2 2025 | Q2 2024 | YoY Change | | :-------- | :------ | :------ | :--------- | | Packaging | $321.7 | $279.9 | +$41.8 | | Paper | $25.8 | $26.1 | -$0.3 | | Corporate | $(36.8) | $(30.5) | -$6.3 | Segment EBITDA (Excl. Special Items) (Millions USD) | Segment | Q2 2025 | Q2 2024 | YoY Change | | :-------- | :------ | :------ | :--------- | | Packaging | $452.9 | $400.0 | +$52.9 | | Paper | $30.3 | $30.6 | -$0.3 | | Corporate | $(32.4) | $(26.6) | -$5.8 | - Packaging segment corrugated products shipments were up **1.7% per day** and flat overall compared to Q2 2024, with containerboard production at **1,195,000 tons**[8](index=8&type=chunk) - Paper segment sales volume was down **5%** from Q2 2024 and **7%** compared to Q1 2025[8](index=8&type=chunk) [Management Commentary & Outlook](index=2&type=section&id=Management%20Commentary%20%26%20Outlook) CEO highlighted strong Q2 operational performance, with Q3 guidance of $2.80 per share anticipating higher corrugated shipments and stable pricing - Q2 performance included strong earnings and cash flows, higher margins in Packaging, consistent pricing, and solid corrugated products volume[9](index=9&type=chunk) - Q3 2025 earnings guidance is **$2.80 per share**, excluding special items[9](index=9&type=chunk) - Q3 expectations include: * Higher corrugated shipments driving increased containerboard production[9](index=9&type=chunk) * Lower export containerboard sales due to global trade environment[9](index=9&type=chunk) * Relatively flat prices and mix in Packaging and Paper segments[9](index=9&type=chunk) * Increased Paper segment production and sales due to completed mill outage and seasonal back-to-school orders[9](index=9&type=chunk) * Lower maintenance outage expense (no scheduled outages)[9](index=9&type=chunk) * Higher freight costs due to rail rate increases[9](index=9&type=chunk) * Operating costs near Q2 levels, slightly lower fiber costs[9](index=9&type=chunk) * Guidance excludes impact from pending Greif acquisition[9](index=9&type=chunk) Company Overview & Forward-Looking Statements [Company Description](index=4&type=section&id=Company%20Description) PCA is a leading North American producer of containerboard products and uncoated freesheet paper, operating eight mills and 85 plants - PCA is the **third largest producer of containerboard products** and a leading producer of uncoated freesheet paper in North America[10](index=10&type=chunk) - Operates **eight mills** and **85 corrugated products plants** and related facilities[10](index=10&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) Forward-looking statements on future financial performance and strategic initiatives are subject to inherent risks and uncertainties - Forward-looking statements relate to future earnings, financial condition, acquisition benefits, industry, and business strategy[11](index=11&type=chunk) - Key risk factors include general economic conditions, paper and packaging industry conditions (competition, demand, pricing), fluctuations in wood fiber, recycled fiber, and energy costs, unplanned outages, and legislative/regulatory requirements[11](index=11&type=chunk) Investor Information [Contact & Conference Call Details](index=5&type=section&id=Contact%20%26%20Conference%20Call%20Details) Investor relations contact and Q2 2025 earnings conference call details, including access and webcast information, are provided - Investor Relations contact: Barbara Sessions, **(877) 454-2509**[12](index=12&type=chunk) Q2 2025 Earnings Conference Call Details | Item | Detail | | :---------------- | :---------------------------------------------------------------- | | What | Packaging Corporation of America's 2nd Quarter 2025 Earnings Conference Call | | When | Thursday, July 24, 2025 at 9:00am Eastern Time | | Pre-registration | https://dpregister.com/sreg/10195048/fe1ab3f0a8 | | Call-in Number | (833) 816-1102 (U.S.); (866) 605-3852 (Canada); (412) 317-0684 (International) | | Webcast Info | www.packagingcorp.com | | Rebroadcast Dates | July 24, 2025 through August 7, 2025 | Detailed Financial Statements [Consolidated Earnings Results (Unaudited)](index=6&type=section&id=Consolidated%20Earnings%20Results%20(Unaudited)) Q2 2025 consolidated results show increased net sales, net income, and diluted EPS compared to Q2 2024 Consolidated Earnings Results (Three Months Ended June 30) (Millions USD) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :-------- | :-------- | | Net sales | $2,171.3 | $2,075.3 | | Gross profit | $483.0 | $437.7 | | Income from operations | $333.7 | $276.0 | | Income before taxes | $320.6 | $266.7 | | Net income | $241.5 | $198.9 | | Diluted EPS | $2.67 | $2.21 | | Capital spending | $169.7 | $245.0 | | Cash, cash equivalents, and marketable debt securities | $955.9 | $1,172.8 | Consolidated Earnings Results (Six Months Ended June 30) (Millions USD) | Metric | H1 2025 | H1 2024 | | :-------------------------------- | :-------- | :-------- | | Net sales | $4,312.3 | $4,054.8 | | Gross profit | $937.8 | $808.1 | | Income from operations | $614.0 | $472.0 | | Income before taxes | $588.0 | $454.3 | | Net income | $445.3 | $345.9 | | Diluted EPS | $4.93 | $3.84 | | Capital spending | $317.8 | $321.7 | | Cash, cash equivalents, and marketable debt securities | $955.9 | $1,172.8 | - Q2 2025 special items include **$24.6 million income** from gains on sales of corrugated products facilities and **$1.6 million charges** related to the Greif acquisition[14](index=14&type=chunk) [Segment Information (Unaudited)](index=7&type=section&id=Segment%20Information%20(Unaudited)) Packaging segment reported increased sales and operating income in Q2 2025, while Paper segment saw slight decreases year-over-year Segment Sales (Three Months Ended June 30) (Millions USD) | Segment | Q2 2025 | Q2 2024 | | :-------- | :-------- | :-------- | | Packaging | $2,005.9 | $1,908.3 | | Paper | $145.8 | $150.1 | | Corporate | $19.6 | $16.9 | | Total | $2,171.3 | $2,075.3 | Segment Operating Income (Three Months Ended June 30) (Millions USD) | Segment | Q2 2025 | Q2 2024 | | :-------- | :-------- | :-------- | | Packaging | $346.3 | $279.8 | | Paper | $25.8 | $26.7 | | Corporate | $(38.4) | $(30.5) | | Total | $333.7 | $276.0 | Segment Operating Income Excluding Special Items (Three Months Ended June 30) (Millions USD) | Segment | Q2 2025 | Q2 2024 | | :-------- | :-------- | :-------- | | Packaging | $321.7 | $279.9 | | Paper | $25.8 | $26.1 | | Corporate | $(36.8) | $(30.5) | | Total | $310.7 | $275.5 | Non-GAAP Financial Measures Reconciliation [Reconciliation of Segment Operating Income (Unaudited)](index=8&type=section&id=Reconciliation%20of%20Segment%20Operating%20Income%20(Unaudited)) GAAP segment operating income is reconciled to non-GAAP measures by adjusting for special items, providing a clearer view of underlying segment performance Reconciliation of Segment Operating Income (Three Months Ended June 30) (Millions USD) | Segment | GAAP Operating Income (Q2 2025) | Special Items (Q2 2025) | Excl. Special Items (Q2 2025) | GAAP Operating Income (Q2 2024) | Special Items (Q2 2024) | Excl. Special Items (Q2 2024) | | :-------------------- | :------------------------------ | :---------------------- | :------------------------------ | :------------------------------ | :---------------------- | :------------------------------ | | Packaging | $346.3 | $(24.6) | $321.7 | $279.8 | $0.1 | $279.9 | | Paper | $25.8 | $0.0 | $25.8 | $26.7 | $(0.6) | $26.1 | | Corporate and Other | $(38.4) | $1.6 | $(36.8) | $(30.5) | $0.0 | $(30.5) | | Total Operations | $333.7 | $(23.0) | $310.7 | $276.0 | $(0.5) | $275.5 | [Reconciliation of Net Income and EPS Excluding Special Items (Unaudited)](index=9&type=section&id=Reconciliation%20of%20Net%20Income%20and%20EPS%20Excluding%20Special%20Items%20(Unaudited)) GAAP net income and diluted EPS are reconciled to non-GAAP measures by adjusting for special items, offering a normalized view of profitability Reconciliation of Net Income and Diluted EPS (Three Months Ended June 30) (Millions USD, except EPS) | Metric | GAAP (Q2 2025) | Special Items (Q2 2025) | Excl. Special Items (Q2 2025) | GAAP (Q2 2024) | Special Items (Q2 2024) | Excl. Special Items (Q2 2024) | | :-------------------- | :------------- | :---------------------- | :------------------------------ | :------------- | :---------------------- | :------------------------------ | | Net Income | $241.5 | $(17.3) | $224.2 | $198.9 | $(0.3) | $198.6 | | Diluted EPS | $2.67 | $(0.19) | $2.48 | $2.21 | $0.00 | $2.20 | Reconciliation of Net Income and Diluted EPS (Six Months Ended June 30) (Millions USD, except EPS) | Metric | GAAP (H1 2025) | Special Items (H1 2025) | Excl. Special Items (H1 2025) | GAAP (H1 2024) | Special Items (H1 2024) | Excl. Special Items (H1 2024) | | :-------------------- | :------------- | :---------------------- | :------------------------------ | :------------- | :---------------------- | :------------------------------ | | Net Income | $445.3 | $(12.9) | $432.4 | $345.9 | $7.3 | $353.2 | | Diluted EPS | $4.93 | $(0.14) | $4.79 | $3.84 | $0.08 | $3.92 | [Reconciliation of EBITDA and EBITDA Excluding Special Items (Unaudited)](index=10&type=section&id=Reconciliation%20of%20EBITDA%20and%20EBITDA%20Excluding%20Special%20Items%20(Unaudited)) GAAP net income is reconciled to EBITDA and then to EBITDA excluding special items, providing a comprehensive view of operational performance Reconciliation of EBITDA and EBITDA Excluding Special Items (Three Months Ended June 30) (Millions USD) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :-------- | :-------- | | Net income | $241.5 | $198.9 | | EBITDA | $474.4 | $404.5 | | Special items | $(25.2) (Facilities closure) + $1.6 (Acquisition costs) | $0.1 (Facilities closure) - $0.6 (Jackson mill conversion) | | EBITDA excluding special items | $450.8 | $404.0 | Reconciliation of EBITDA and EBITDA Excluding Special Items (Six Months Ended June 30) (Millions USD) | Metric | H1 2025 | H1 2024 | | :-------------------------------- | :-------- | :-------- | | Net income | $445.3 | $345.9 | | EBITDA | $892.6 | $728.9 | | Special items | $(22.4) (Facilities closure) + $1.6 (Acquisition costs) | $8.3 (Jackson mill conversion) | | EBITDA excluding special items | $871.8 | $737.2 | [Reconciliation of Segment EBITDA and Segment EBITDA Excluding Special Items (Unaudited)](index=11&type=section&id=Reconciliation%20of%20Segment%20EBITDA%20and%20Segment%20EBITDA%20Excluding%20Special%20Items%20(Unaudited)) Segment operating income is reconciled to segment EBITDA and then to segment EBITDA excluding special items, offering a segment-specific view of profitability Reconciliation of Segment EBITDA and Segment EBITDA Excluding Special Items (Three Months Ended June 30) (Millions USD) | Segment | GAAP Operating Income (Q2 2025) | EBITDA (Q2 2025) | Special Items (Q2 2025) | EBITDA Excl. Special Items (Q2 2025) | | :-------------------- | :------------------------------ | :--------------- | :---------------------- | :------------------------------------- | | Packaging | $346.3 | $478.1 | $(25.2) | $452.9 | | Paper | $25.8 | $30.3 | $0.0 | $30.3 | | Corporate and Other | $(38.4) | $(34.0) | $1.6 | $(32.4) | | Total | $333.7 | $474.4 | $(23.6) | $450.8 | Reconciliation of Segment EBITDA and Segment EBITDA Excluding Special Items (Six Months Ended June 30) (Millions USD) | Segment | GAAP Operating Income (H1 2025) | EBITDA (H1 2025) | Special Items (H1 2025) | EBITDA Excl. Special Items (H1 2025) | | :-------------------- | :------------------------------ | :--------------- | :---------------------- | :------------------------------------- | | Packaging | $624.4 | $884.5 | $(22.4) | $862.1 | | Paper | $61.4 | $70.5 | $0.0 | $70.5 | | Corporate and Other | $(71.8) | $(62.4) | $1.6 | $(60.8) | | Total | $614.0 | $892.6 | $(20.8) | $871.8 |

Core Insights - Packaging Corporation of America (PKG) is expected to report second-quarter 2025 results on July 23, with projected revenues of $2.16 billion, reflecting a 4.1% year-over-year growth [1] - The consensus estimate for earnings per share (EPS) is $2.44, indicating a 10.9% increase from the previous year [2] Revenue and Earnings Estimates - The Zacks Consensus Estimate for PKG's second-quarter revenues is $2.16 billion, showing a 4.1% growth compared to the same quarter last year [1] - The earnings estimate has increased by 0.4% over the past 60 days, with the current EPS estimate at $2.44 [2] - The Packaging segment is expected to generate revenues of $1.99 billion, representing a 4.2% increase year-over-year [7] Performance Metrics - PKG's earnings surprise history shows that the company has beaten the Zacks Consensus Estimates in three of the last four quarters, with an average surprise of 3.4% [3][4] - The company is projected to see a 2.7% increase in packaging volume, while the Paper segment is expected to experience a 6.9% decline in revenues [6][8] Segment Analysis - The Paper segment is anticipated to report revenues of $140 million, down 6.9% year-over-year, but with a significant 75% increase in operating income to $46 million due to better pricing and mix [8] - The Packaging segment's operating income is estimated to be $291 million, reflecting a 4% growth from the prior year [7] Stock Performance - Over the past year, PKG shares have increased by 7.7%, outperforming the industry average decline of 7.1% [9]

Core Viewpoint - Investors are seeking growth stocks that can deliver above-average growth and exceptional returns, but identifying such stocks is challenging due to their inherent risks and volatility [1] Group 1: Company Overview - Packaging Corp. (PKG) is identified as a cutting-edge growth stock with a favorable Growth Score and a top Zacks Rank [2] - The company is a maker of containerboard and corrugated packaging products [3] Group 2: Earnings Growth - Historical EPS growth rate for Packaging Corp. is 8%, but projected EPS growth for this year is 13.2%, significantly higher than the industry average of 2.9% [5] Group 3: Asset Utilization - Packaging Corp. has an asset utilization ratio (sales-to-total-assets ratio) of 0.96, indicating it generates $0.96 in sales for every dollar in assets, outperforming the industry average of 0.81 [7] - The company's sales are expected to grow by 5.1% this year, compared to the industry average of 3.1% [7] Group 4: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for Packaging Corp., with the Zacks Consensus Estimate for the current year increasing by 0.2% over the past month [8] Group 5: Investment Potential - Packaging Corp. has earned a Growth Score of A and carries a Zacks Rank 2 due to positive earnings estimate revisions, indicating it is a potential outperformer and a solid choice for growth investors [10]

Company Overview - Packaging Corp. (PKG) is expected to report a year-over-year increase in earnings, with a projected EPS of $2.44, reflecting a +10.9% change, and revenues of $2.16 billion, up 4.1% from the previous year [3][12]. Earnings Expectations - The earnings report is anticipated to be released on July 23, and the stock may rise if the results exceed expectations, while a miss could lead to a decline [2][12]. - The consensus EPS estimate has been revised 0.59% higher in the last 30 days, indicating a positive reassessment by analysts [4]. Earnings Surprise Prediction - The Most Accurate Estimate for Packaging Corp. is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +0.77%, suggesting a strong likelihood of beating the consensus EPS estimate [12]. - The company currently holds a Zacks Rank of 2 (Buy), which enhances the predictive power of the Earnings ESP [12][10]. Historical Performance - In the last reported quarter, Packaging Corp. exceeded the expected EPS of $2.21 by delivering $2.31, resulting in a surprise of +4.52% [13]. - Over the past four quarters, the company has beaten consensus EPS estimates three times [14]. Industry Context - Another player in the Containers - Paper and Packaging industry, Avery Dennison (AVY), is expected to report earnings of $2.38 per share, indicating a year-over-year decline of -1.7% [18]. - Avery Dennison's revenues are projected to be $2.23 billion, down 0.2% from the previous year, with a negative Earnings ESP of -0.42% [19][20].

Company Overview - Packaging Corporation of America is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America, operating eight mills and 86 corrugated products manufacturing plants [12]. Investment Insights - Packaging Corporation of America (PKG) holds a Zacks Rank of 3 (Hold) and has a VGM Score of A, indicating a solid overall performance [12]. - The Momentum Style Score for PKG is B, with shares increasing by 4.5% over the past four weeks, suggesting positive momentum [13]. - For fiscal 2025, one analyst has revised their earnings estimate upwards in the last 60 days, with the Zacks Consensus Estimate increasing by $0.08 to $10.35 per share [13]. - PKG has an average earnings surprise of 3.4%, indicating a history of exceeding earnings expectations [13].

Core Insights - Greif, Inc. has entered into a definitive agreement with Packaging Corporation of America to divest its Containerboard business, which includes its CorrChoice sheet feeder network, aimed at debt reduction and unlocking value-creation opportunities [1][3][7] Group 1: Business Overview - Greif's containerboard business consists of two mills with a production capacity of 800,000 tons and includes eight sheet feeder and corrugated plants across the U.S. [2][7] - The containerboard business generated revenues of $1.2 billion and EBITDA of $212 million for the fiscal year ending April 30, 2025 [2][7] Group 2: Strategic Implications - The divestiture aligns with Greif's Build to Last strategy, enhancing portfolio optimization, capital efficiency, and growth acceleration [3][7] - The transaction is expected to close by the end of fiscal 2025, pending regulatory approvals, with Packaging Corp paying Greif $1.8 billion in cash [4][7] Group 3: Financial Performance - In Q2 of fiscal 2025, Greif reported adjusted earnings per share of $1.19, surpassing the Zacks Consensus Estimate of $1.08, reflecting a year-over-year improvement of 43.4% [5] - Revenues for the same quarter increased by 1.1% year over year to $1.39 billion, although it fell short of the Zacks Consensus Estimate of $1.43 billion [5] Group 4: Stock Performance - Greif's stock has appreciated by 26.4% over the past year, contrasting with a 3.2% decline in the industry [6]

Group 1 - Greif (GEF) has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while Packaging Corp. (PKG) has a Zacks Rank of 4 (Sell) [3] - The Zacks Rank system favors stocks with strong earnings estimate revisions, which is a key factor for value investors [2][3] - GEF has a forward P/E ratio of 16.16, compared to PKG's forward P/E of 18.56, suggesting GEF may be undervalued [5] Group 2 - GEF's PEG ratio is 1.64, indicating a better valuation relative to its expected earnings growth compared to PKG's PEG ratio of 2.51 [5] - GEF has a P/B ratio of 1.39, significantly lower than PKG's P/B of 3.77, further supporting GEF's valuation advantage [6] - Based on various valuation metrics, GEF holds a Value grade of A, while PKG has a Value grade of C, indicating GEF is the superior value option [6]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and notes for Q1 2025 and 2024 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Packaging Corporation of America for the three months ended March 31, 2025, and 2024, including statements of income, balance sheets, cash flows, and changes in stockholders' equity, along with condensed notes detailing operations, accounting standards, revenue, and other financial components [Consolidated Statements of Income and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The consolidated statements of income and comprehensive income show a significant increase in net sales, gross profit, and net income for the three months ended March 31, 2025, compared to the same period in 2024 | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Net sales | $2,141.0 | $1,979.5 | $161.5 | 8.2% | | Gross profit | $454.7 | $370.4 | $84.3 | 22.8% | | Income from operations | $280.3 | $196.0 | $84.3 | 43.0% | | Net income | $203.8 | $146.9 | $56.9 | 38.7% | | Basic EPS | $2.27 | $1.64 | $0.63 | 38.4% | | Diluted EPS | $2.26 | $1.63 | $0.63 | 38.7% | | Dividends declared per common share | $1.25 | $1.25 | $0.00 | 0.0% | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets indicate an increase in total assets and stockholders' equity as of March 31, 2025, compared to December 31, 2024, reflecting growth in current assets and property, plant, and equipment | Metric | March 31, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :------------------------ | :------------------------- | :---------------- | :------- | | Total current assets | $3,302.5 | $3,233.0 | $69.5 | 2.1% | | Property, plant, and equipment, net | $4,079.5 | $4,039.0 | $40.5 | 1.0% | | Total assets | $8,969.8 | $8,833.2 | $136.6 | 1.5% | | Total current liabilities | $1,007.7 | $1,001.6 | $6.1 | 0.6% | | Total long-term liabilities | $3,462.9 | $3,427.6 | $35.3 | 1.0% | | Total stockholders' equity | $4,499.2 | $4,404.0 | $95.2 | 2.2% | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows show a substantial increase in net cash provided by operating activities for the three months ended March 31, 2025, while net cash used for investing activities also increased significantly | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Net cash provided by operating activities | $339.1 | $260.4 | $78.7 | 30.2% | | Net cash used for investing activities | $(144.2) | $(81.0) | $(63.2) | 78.0% | | Net cash used for financing activities | $(128.2) | $(135.0) | $6.8 | -5.0% | | Net increase in cash and cash equivalents | $66.7 | $44.4 | $22.3 | 50.2% | | Cash and cash equivalents, end of period | $751.7 | $692.4 | $59.3 | 8.6% | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) The consolidated statements of changes in stockholders' equity highlight increases primarily from comprehensive income and share-based compensation, partially offset by common stock dividends declared, for the three months ended March 31, 2025, and 2024 | Metric | March 31, 2025 (millions) | March 31, 2024 (millions) | | :-------------------------------- | :------------------------ | :------------------------ | | Balance at January 1 | $4,404.0 | $3,997.3 | | Common stock withheld and retired to cover taxes | $(15.4) | $(22.5) | | Common stock dividends declared | $(113.0) | $(113.1) | | Share-based compensation and other | $18.7 | $21.5 | | Comprehensive income | $204.9 | $147.8 | | Balance at March 31 | $4,499.2 | $4,031.0 | [Condensed Notes to Unaudited Quarterly Consolidated Financial Statements](index=7&type=section&id=Condensed%20Notes%20to%20Unaudited%20Quarterly%20Consolidated%20Financial%20Statements) These notes provide essential details and explanations for the unaudited quarterly consolidated financial statements, covering the company's operations, accounting policies, revenue recognition, segment information, and specific financial line items [1. Nature of Operations and Basis of Presentation](index=7&type=section&id=1.%20Nature%20of%20Operations%20and%20Basis%20of%20Presentation) Packaging Corporation of America (PCA) is a large manufacturer of packaging and paper products, operating primarily in the United States across three reportable segments: Packaging, Paper, and Corporate and Other. The financial statements are unaudited and prepared in accordance with GAAP for interim reporting - PCA operates in three reportable segments: Packaging (containerboard and corrugated products), Paper (communication-based papers), and Corporate and Other (support services)[24](index=24&type=chunk) - The financial statements are unaudited and include normal recurring adjustments, prepared in accordance with GAAP for interim financial information[25](index=25&type=chunk) [2. New and Recently Adopted Accounting Standards](index=7&type=section&id=2.%20New%20and%20Recently%20Adopted%20Accounting%20Standards) PCA adopted ASU 2023-07 on Segment Reporting effective January 1, 2024, with no significant impact. The company is currently assessing the impact of new accounting standards, ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures), which are not yet adopted - Effective January 1, 2024, PCA adopted ASU 2023-07, Segment Reporting, which did not significantly impact disclosures[27](index=27&type=chunk) - PCA is assessing the impact of ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures), effective for fiscal years beginning after December 15, 2026, and December 15, 2024, respectively[28](index=28&type=chunk)[29](index=29&type=chunk) [3. Revenue](index=8&type=section&id=3.%20Revenue) Revenue is recognized when control of goods or services is transferred to customers, typically upon shipment. For the three months ended March 31, 2025, total revenue increased, driven by a rise in Packaging segment revenue, while Paper segment revenue decreased - Revenue is recognized when control of promised goods or services is transferred to customers, typically at the point of shipment from the mill or manufacturing facility[31](index=31&type=chunk)[34](index=34&type=chunk)[37](index=37&type=chunk) | Product Line | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :---------------- | :-------------- | :-------------- | :---------------- | :------- | | Packaging | $1,970.3 | $1,798.3 | $172.0 | 9.6% | | Paper | $154.2 | $163.8 | $(9.6) | -5.9% | | Corporate and Other | $16.5 | $17.4 | $(0.9) | -5.2% | | Total revenue | $2,141.0 | $1,979.5 | $161.5 | 8.2% | [4. Earnings Per Share](index=10&type=section&id=4.%20Earnings%20Per%20Share) The company reported an increase in both basic and diluted earnings per common share for the three months ended March 31, 2025, compared to the same period in 2024 | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net income attributable to common shareholders (millions) | $202.4 | $145.9 | | Weighted average basic common shares outstanding (millions) | 89.2 | 89.0 | | Weighted average diluted common shares outstanding (millions) | 89.6 | 89.4 | | Basic income per common share | $2.27 | $1.64 | | Diluted income per common share | $2.26 | $1.63 | [5. Other Income (Expense), Net](index=10&type=section&id=5.%20Other%20Income%20(Expense)%2C%20Net) Other expense, net, decreased from $22.5 million in Q1 2024 to $13.0 million in Q1 2025, primarily due to the absence of significant DeRidder litigation expenses and related insurance recovery in the current period | Component | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Asset disposals and write-offs | $(8.2) | $(7.4) | | Facilities closure and other (costs) income | $(2.3) | $0.1 | | DeRidder litigation | — | $(123.7) | | DeRidder litigation insurance recovery | — | $123.7 | | Jackson mill conversion-related activities | — | $(8.3) | | Other | $(2.5) | $(6.9) | | Total | $(13.0) | $(22.5) | - The decrease in total other expense, net, was largely due to the absence of the DeRidder litigation and its corresponding insurance recovery in Q1 2025, which had a net zero impact in Q1 2024 but significantly impacted the gross figures[43](index=43&type=chunk) [6. Income Taxes](index=10&type=section&id=6.%20Income%20Taxes) Income tax expense and the effective tax rate increased for the three months ended March 31, 2025, compared to the prior year, primarily due to lower excess tax benefits from employee restricted stock and performance unit vests, and higher forecasted taxable income | Metric | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Income tax expense | $63.6 | $40.6 | | Effective tax rate | 23.8% | 21.6% | | Cash paid for taxes, net of refunds | $15.2 | $10.3 | - The increase in the effective tax rate was primarily due to lower excess tax benefits associated with employee restricted stock and performance unit vests[44](index=44&type=chunk) [7. Inventories](index=12&type=section&id=7.%20Inventories) Inventories, valued at the lower of cost (average cost method) or net realizable value, showed a slight increase in total from December 31, 2024, to March 31, 2025, with raw materials and supplies contributing to the rise | Component | March 31, 2025 (millions) | December 31, 2024 (millions) | | :---------------- | :------------------------ | :------------------------- | | Raw materials | $368.9 | $356.6 | | Work in process | $15.6 | $15.5 | | Finished goods | $229.9 | $234.0 | | Supplies and materials | $526.2 | $518.8 | | Total Inventories | $1,140.6 | $1,124.9 | [8. Property, Plant, and Equipment](index=12&type=section&id=8.%20Property%2C%20Plant%2C%20and%20Equipment) Net property, plant, and equipment increased from December 31, 2024, to March 31, 2025. Depreciation expense also rose, partly due to incremental depreciation from corrugated products facility closure costs | Component | March 31, 2025 (millions) | December 31, 2024 (millions) | | :-------------------------------- | :------------------------ | :------------------------- | | Property, plant and equipment, at cost | $9,442.2 | $9,305.2 | | Less accumulated depreciation | $(5,362.7) | $(5,266.2) | | Property, plant, and equipment, net | $4,079.5 | $4,039.0 | - Depreciation expense increased to **$128.1 million** in Q1 2025 from $118.1 million in Q1 2024, including **$3.1 million** of incremental depreciation from corrugated products facility closure costs[50](index=50&type=chunk) [9. Goodwill and Intangible Assets](index=12&type=section&id=9.%20Goodwill%20and%20Intangible%20Assets) Goodwill remained constant at $922.4 million, entirely within the Packaging segment. Intangible assets, primarily customer relationships and trademarks, saw a slight decrease in amortization expense for Q1 2025 - Goodwill remained at **$922.4 million** for both periods, fully allocated to the Packaging segment[52](index=52&type=chunk) | Asset Type | Weighted Average Remaining Useful Life (Years) | Gross Carrying Amount (millions) | Accumulated Amortization (millions) | | :------------------------ | :------------------------------------------- | :------------------------------- | :---------------------------------- | | Customer relationships | 6.4 | $546.0 | $371.3 | | Trademarks and trade names | 5.9 | $41.3 | $33.5 | | Other | 1.7 | $4.4 | $4.4 | | Total | 6.4 | $591.7 | $409.2 | - Amortization expense for intangible assets was **$9.4 million** in Q1 2025, slightly down from $9.5 million in Q1 2024[54](index=54&type=chunk) [10. Accrued Liabilities](index=14&type=section&id=10.%20Accrued%20Liabilities) Accrued liabilities decreased from $362.9 million at December 31, 2024, to $262.5 million at March 31, 2025, primarily due to reductions in compensation and benefits and DeRidder litigation liabilities | Component | March 31, 2025 (millions) | December 31, 2024 (millions) | | :-------------------------------- | :------------------------ | :------------------------- | | Compensation and benefits | $101.2 | $168.5 | | DeRidder litigation and other litigation | $59.2 | $96.2 | | Customer rebates and other credits | $31.3 | $33.9 | | Medical insurance and workers' compensation | $29.6 | $29.1 | | Franchise, property, sales and use taxes | $23.8 | $18.7 | | Severance, retention, and relocation | $4.6 | $3.4 | | Environmental liabilities and asset retirement obligations | $3.1 | $3.2 | | Other | $9.7 | $9.9 | | Total | $262.5 | $362.9 | - The decrease in DeRidder litigation liability from **$96.2 million** to **$59.2 million** reflects the settlement amount, with the remaining balance from December 31, 2024, related to other insured settlements paid in Q1 2025[55](index=55&type=chunk) [11. Debt](index=14&type=section&id=11.%20Debt) At March 31, 2025, PCA had $2,492.3 million in fixed-rate senior notes outstanding, with a fair value of $2,115.7 million. Cash payments for interest significantly decreased in Q1 2025 compared to Q1 2024 - At March 31, 2025, PCA had **$2,492.3 million** of fixed-rate senior notes outstanding, with a fair value of **$2,115.7 million**[58](index=58&type=chunk) - Cash payments for interest decreased from **$7.3 million** in Q1 2024 to **$0.3 million** in Q1 2025[56](index=56&type=chunk) [12. Cash, Cash Equivalents, and Marketable Debt Securities](index=15&type=section&id=12.%20Cash%2C%20Cash%20Equivalents%2C%20and%20Marketable%20Debt%20Securities) The company's cash, cash equivalents, and available-for-sale debt securities increased in total fair value from December 31, 2024, to March 31, 2025. Investments are primarily in highly rated, investment-grade securities, with no credit loss impairments recorded | Category | Cash and Cash Equivalents (millions) | Short-Term Marketable Debt Securities (millions) | Long-Term Marketable Debt Securities (millions) | Total Fair Value (millions) | | :-------------------------------- | :----------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------- | | Cash and cash equivalents | $745.0 | — | — | $745.0 | | Level 1 (U.S. Treasury, Money market) | $5.2 | $20.0 | $12.1 | $37.3 | | Level 2 (Corporate debt, U.S. gov agency, CDs) | $1.5 | $71.4 | $59.2 | $132.1 | | Total | $751.7 | $91.4 | $71.3 | $914.4 | - The company invests in highly rated, investment-grade securities with maturities generally ranging from one to two years for long-term marketable debt securities, aiming to minimize principal loss risk[64](index=64&type=chunk) - As of March 31, 2025, and December 31, 2024, no impairments related to marketable debt securities were considered credit losses, and all unrealized gains and losses were recorded in other comprehensive income (OCI)[66](index=66&type=chunk) [13. Employee Benefit Plans and Other Postretirement Benefits](index=17&type=section&id=13.%20Employee%20Benefit%20Plans%20and%20Other%20Postretirement%20Benefits) The net periodic benefit cost for pension plans increased slightly in Q1 2025. PCA makes sufficient contributions to fund actuarially determined costs, with no required minimum contribution for 2025, and did not make contributions to qualified pension plans in Q1 2025 or Q1 2024 | Component | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Service cost | $2.6 | $3.1 | | Interest cost | $14.3 | $13.9 | | Expected return on plan assets | $(15.6) | $(16.5) | | Net amortization of unrecognized amounts | $1.4 | $1.6 | | Net periodic benefit cost | $2.7 | $2.1 | - PCA did not make any contributions to its qualified pension plans during Q1 2025 or Q1 2024 and has no required minimum contribution amount for 2025[68](index=68&type=chunk) [14. Share-Based Compensation](index=17&type=section&id=14.%20Share-Based%20Compensation) The company's long-term equity incentive plan was amended in 2024 to extend its term and increase available shares. Share-based compensation expense decreased in Q1 2025, with a significant amount of unrecognized compensation expense remaining - The long-term equity incentive plan was amended in February 2024, extending its term to May 8, 2034, and increasing authorized shares by **2.4 million**, totaling **14.3 million** shares[70](index=70&type=chunk) | Component | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Restricted stock | $13.9 | $14.0 | | Performance units | $3.9 | $5.4 | | Total share-based compensation expense | $17.8 | $19.4 | | Income tax benefit | $(4.4) | $(4.8) | | Net of tax benefit | $13.4 | $14.6 | | Award Type | Unrecognized Compensation Expense (millions) | Remaining Weighted Average Recognition Period (years) | | :-------------------------------- | :------------------------------------------- | :---------------------------------------------------- | | Restricted stock | $45.6 | 3.0 | | Performance units | $38.1 | 2.7 | | Total | $83.7 | 2.9 | [15. Stockholders' Equity](index=19&type=section&id=15.%20Stockholders%27%20Equity) Dividends paid remained consistent in Q1 2025, with no shares repurchased under the authorized program. Accumulated other comprehensive income (loss) improved slightly, primarily due to reclassifications from unfunded employee benefit obligations - PCA paid **$112.3 million** in dividends in Q1 2025, consistent with Q1 2024, and declared a quarterly cash dividend of **$1.25** per share[13](index=13&type=chunk)[76](index=76&type=chunk) - No shares were repurchased under the **$1 billion** authorization during Q1 2025, leaving **$436.0 million** available for future repurchases[78](index=78&type=chunk) | Component | Balance at Jan 1, 2025 | Other comprehensive loss before reclassifications, net of tax | Amounts reclassified from AOCI, net of tax | Balance at Mar 31, 2025 | | :-------------------------------- | :--------------------- | :---------------------------------------------------------- | :---------------------------------------- | :---------------------- | | Unrealized Loss On Foreign Exchange Contracts | $(0.1) | — | — | $(0.1) | | Unrealized Loss on Marketable Debt Securities | $0.2 | $0.1 | — | $0.3 | | Unfunded Employee Benefit Obligations | $(43.5) | — | $1.0 | $(42.5) | | Total | $(43.4) | $0.1 | $1.0 | $(42.3) | [16. Concentrations of Risk](index=21&type=section&id=16.%20Concentrations%20of%20Risk) PCA faces significant business and financial risk concentration with ODP Corporation, its largest customer in the Paper segment, accounting for approximately 58% of Paper segment sales and a notable portion of total company sales and receivables - ODP Corporation is PCA's largest customer in the Paper segment, representing approximately **58%** of Paper segment sales for both Q1 2025 and Q1 2024[80](index=80&type=chunk) - Sales to ODP represented approximately **4%** of total Company sales in Q1 2025 and **5%** in Q1 2024[80](index=80&type=chunk) - Accounts receivable due from ODP were **$41.7 million** at March 31, 2025, representing approximately **4%** of total Company receivables[81](index=81&type=chunk) [17. Transactions With Related Parties](index=22&type=section&id=17.%20Transactions%20With%20Related%20Parties) PCA consolidates Louisiana Timber Procurement Company, L.L.C. (LTP), a 50% owned variable-interest entity, as PCA is its primary beneficiary. LTP's sales to Boise Cascade and fiber purchases from related parties are recorded in the financial statements - PCA consolidates **100%** of LTP, a **50%** owned variable-interest entity, as PCA is the primary beneficiary[82](index=82&type=chunk) | Metric | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | LTP sales to Boise Cascade (in "Net Sales") | $14.8 | $19.8 | | Fiber purchases from related parties (in "Cost of Sales") | $1.6 | $2.6 | [18. Segment Information](index=22&type=section&id=18.%20Segment%20Information) The segment information provides a detailed analysis of PCA's operations across its Packaging, Paper, and Corporate and Other segments. The Packaging segment showed significant growth in trade sales and operating income, while the Paper segment experienced a decrease in sales - PCA's Chief Executive Officer is identified as the Chief Operating Decision Maker (CODM), responsible for assessing segment performance and allocating resources[86](index=86&type=chunk) | Segment | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :---------------- | :-------------- | :-------------- | :---------------- | :------- | | Packaging | $1,970.3 | $1,793.5 | $176.8 | 9.9% | | Paper | $154.2 | $163.8 | $(9.6) | -5.9% | | Corporate and Other | $16.5 | $22.2 | $(5.7) | -25.7% | | Total Trade Sales | $2,141.0 | $1,979.5 | $161.5 | 8.2% | | Segment | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :---------------- | :-------------- | :-------------- | :---------------- | :------- | | Packaging | $278.1 | $203.8 | $74.3 | 36.5% | | Paper | $35.6 | $29.7 | $5.9 | 19.9% | | Corporate and Other | $(33.4) | $(37.5) | $4.1 | -10.9% | | Total Income from Operations | $280.3 | $196.0 | $84.3 | 43.0% | [19. Commitments, Guarantees, Indemnifications, and Legal Proceedings](index=24&type=section&id=19.%20Commitments%2C%20Guarantees%2C%20Indemnifications%2C%20and%20Legal%20Proceedings) PCA has recorded a $59.2 million liability and corresponding receivable for the DeRidder mill lawsuit settlement. The company provides guarantees and indemnifications in the normal course of business and believes other ongoing legal actions will not materially affect its financial position - A **$59.2 million** liability for the DeRidder mill lawsuit settlement is recorded in "Accrued Liabilities," with a corresponding receivable in "Prepaids and Other Assets"[95](index=95&type=chunk) - PCA provides guarantees and indemnifications in the normal course of business but is not aware of any material liabilities arising from them as of March 31, 2025[93](index=93&type=chunk) - The company believes that other ongoing legal actions will not have a material adverse effect on its financial condition, results of operations, or cash flows[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on PCA's financial condition and results of operations, highlighting strong Q1 2025 performance driven by the Packaging segment, industry trends, future outlook, liquidity, and the use of non-GAAP financial measures [Overview](index=26&type=section&id=Overview) PCA is a leading North American producer of containerboard and UFS paper, operating eight mills and 85 corrugated products manufacturing plants. This section also notes the inclusion of non-GAAP financial measures for performance evaluation - PCA is the third-largest producer of containerboard products and a leading producer of UFS paper in North America, operating eight mills and **85** corrugated products manufacturing plants[99](index=99&type=chunk) - The company produces a wide variety of corrugated packaging products and UFS papers, including commodity and specialty papers[99](index=99&type=chunk) [Executive Summary](index=26&type=section&id=Executive%20Summary) PCA reported strong Q1 2025 financial results with increased net sales and net income, primarily driven by higher prices, mix, and volume in the Packaging segment, along with lower freight and outage costs, partially offset by higher operating costs | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Net sales | $2,141 | $1,980 | $161 | 8.1% | | Net income | $204 | $147 | $57 | 38.8% | | Diluted EPS | $2.26 | $1.63 | $0.63 | 38.7% | | Net income excluding special items | $208 | $155 | $53 | 34.2% | | Diluted EPS excluding special items | $2.31 | $1.72 | $0.59 | 34.3% | - The increase in net income was primarily driven by higher prices and mix and volume in the Packaging segment, higher prices and mix in the Paper segment, lower freight and logistics expenses, and lower scheduled outage costs[101](index=101&type=chunk) - Packaging segment operating income increased to **$278 million** (Q1 2025) from **$204 million** (Q1 2024), with record containerboard production of **72.5 billion square feet** and a **2.5%** increase in corrugated plant shipments[101](index=101&type=chunk) [Industry and Business Conditions](index=26&type=section&id=Industry%20and%20Business%20Conditions) North American corrugated products shipments and containerboard production decreased in Q1 2025, while containerboard index prices increased. The UFS paper market also saw decreased shipments but higher average prices - North American industry-wide corrugated products shipments were down (**2.1%**) in Q1 2025 compared to Q1 2024, and containerboard production decreased (**0.4%**)[103](index=103&type=chunk) - Reported containerboard index prices increased **$40 per ton** for linerboard and corrugating medium in February 2025[103](index=103&type=chunk) - North American UFS paper shipments were down (**8.3%**) in Q1 2025, but average prices for cut size office papers were up **4.3%** compared to Q1 2024[105](index=105&type=chunk) [Outlook](index=28&type=section&id=Outlook) PCA anticipates improved domestic prices in the Packaging segment but expects negative impacts from lower containerboard production volume and increased costs due to a shifted maintenance outage. The Paper segment projects higher prices but lower volume due to a planned outage. Overall, Q2 earnings are expected to be higher than Q1 - Packaging segment expects improved domestic prices but anticipates negative impacts from lower containerboard production volume to match demand and achieve targeted inventory levels[106](index=106&type=chunk) - A planned maintenance outage in the Paper segment at the International Falls, MN mill will lead to lower volume, despite expected higher prices[106](index=106&type=chunk) - Overall, the company expects second-quarter earnings to be higher than first-quarter earnings, despite higher freight and logistics expenses and depreciation[106](index=106&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) A detailed comparison of Q1 2025 versus Q1 2024 financial results shows significant increases in net sales, operating income, and net income, with specific breakdowns by segment and contributing factors | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Net sales | $2,141.0 | $1,979.5 | $161.5 | 8.2% | | Income from operations | $280.3 | $196.0 | $84.3 | 43.0% | | Net income | $203.8 | $146.9 | $56.9 | 38.7% | | Net income excluding special items | $208.2 | $154.6 | $53.6 | 34.7% | | Consolidated EBITDA | $418.3 | $324.4 | $93.9 | 29.0% | | Consolidated EBITDA excluding special items | $421.1 | $333.2 | $87.9 | 26.4% | [Net Sales](index=28&type=section&id=Net%20Sales) Net sales increased by $162 million (8.2%) to $2,141 million in Q1 2025, primarily driven by a 9.6% increase in Packaging segment sales due to higher prices, mix, and volume, while Paper segment sales decreased by 5.9% due to lower volume - Total net sales increased by **$162 million**, or **8.2%**, to **$2,141 million** in Q1 2025[108](index=108&type=chunk) - Packaging net sales increased by **$172 million** (**9.6%**) due to higher containerboard and corrugated products prices and mix (**$95 million**) and higher volume (**$77 million**)[109](index=109&type=chunk) - Paper net sales decreased by **$10 million** (**5.9%**) due to lower volume (**$12 million**), partially offset by higher prices and mix (**$2 million**)[110](index=110&type=chunk) [Gross Profit](index=30&type=section&id=Gross%20Profit) Gross profit increased by $84 million in Q1 2025, primarily due to higher prices, mix, and volume in the Packaging segment, higher prices and mix in the Paper segment, and lower freight and scheduled outage costs, partially offset by higher operating costs - Gross profit increased by **$84 million** in Q1 2025, driven by favorable pricing and mix, higher Packaging volume, and lower freight and outage costs[111](index=111&type=chunk) - Gross profit included **$4 million** of special items expense in Q1 2025 (corrugated facility closure costs) compared to **$2 million** in Q1 2024 (Jackson mill conversion-related activities)[111](index=111&type=chunk) [Selling, General, and Administrative Expenses](index=30&type=section&id=Selling%2C%20General%2C%20and%20Administrative%20Expenses) Selling, general, and administrative expenses increased by $10 million in Q1 2025, mainly due to higher employee-related expenses and bad debt expense - SG&A expenses increased by **$10 million** in Q1 2025, primarily due to higher employee-related expenses and bad debt expense[112](index=112&type=chunk) [Other Income (Expense), Net](index=30&type=section&id=Other%20Income%20(Expense)%2C%20Net) Other expense, net, decreased from $22.5 million in Q1 2024 to $13.0 million in Q1 2025, largely due to the absence of the DeRidder litigation and related insurance recovery in the current period | Component | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Asset disposals and write-offs | $(8.2) | $(7.4) | | Facilities closure and other (costs) income | $(2.3) | $0.1 | | DeRidder litigation | — | $(123.7) | | DeRidder litigation insurance recovery | — | $123.7 | | Jackson mill conversion-related activities | — | $(8.3) | | Other | $(2.5) | $(6.9) | | Total | $(13.0) | $(22.5) | [Income from Operations](index=30&type=section&id=Income%20from%20Operations) Income from operations increased by $84 million (43.0%) in Q1 2025. The Packaging segment saw a $74 million increase due to higher prices, volume, and lower freight/outage costs, while the Paper segment increased by $6 million due to no special items and higher prices - Total income from operations increased by **$84 million**, or **43.0%**, in Q1 2025[114](index=114&type=chunk) - Packaging segment operating income increased by **$74 million**, driven by higher prices and mix (**$91 million**), higher sales and production volumes (**$31 million**), and lower freight/outage expenses, partially offset by higher operating costs (**$42 million**)[115](index=115&type=chunk) - Paper segment operating income increased by **$6 million**, primarily due to no special items in Q1 2025 (compared to **$6 million** expense in Q1 2024) and higher prices and mix[116](index=116&type=chunk) [Non-Operating Pension Income, Interest Expense, Net and Income Taxes](index=30&type=section&id=Non-Operating%20Pension%20Income%2C%20Interest%20Expense%2C%20Net%20and%20Income%20Taxes) Non-operating pension income decreased, interest expense, net, increased due to lower interest income, and income tax expense rose due to a higher effective tax rate, primarily from lower excess tax benefits - Non-operating pension income decreased by **$1 million** in Q1 2025 due to unfavorable 2024 asset performance, partially offset by favorable assumption changes[117](index=117&type=chunk) - Interest expense, net, increased by **$3 million** in Q1 2025, primarily due to lower interest income on invested cash balances[118](index=118&type=chunk) - Income tax expense increased to **$64 million** in Q1 2025 (**23.8%** effective rate) from **$41 million** in Q1 2024 (**21.6%** effective rate), mainly due to lower excess tax benefits from employee restricted stock and performance unit vests[119](index=119&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) PCA's liquidity is primarily driven by operating cash flow and its revolving credit facility. The company believes it has adequate liquidity to meet its capital requirements for the foreseeable future, with cash used for operations, capital expenditures, debt service, and dividends - Primary liquidity sources are net cash from operating activities and available borrowing capacity under the revolving credit facility[120](index=120&type=chunk) - As of March 31, 2025, PCA had **$752 million** in cash and cash equivalents, **$162 million** in marketable debt securities, and **$323 million** in unused borrowing capacity[120](index=120&type=chunk) - The company believes current liquidity sources will be adequate to meet its capital requirements for the foreseeable future[120](index=120&type=chunk) [Sources and Uses of Cash](index=32&type=section&id=Sources%20and%20Uses%20of%20Cash) A summary of cash flows shows a net increase in cash and cash equivalents of $66.7 million in Q1 2025, primarily driven by operating activities | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------- | :-------------- | :---------------- | | Net cash provided by operating activities | $339.1 | $260.4 | $78.7 | | Net cash used for investing activities | $(144.2) | $(81.0) | $(63.2) | | Net cash used for financing activities | $(128.2) | $(135.0) | $6.8 | | Net increase in cash and cash equivalents | $66.7 | $44.4 | $22.3 | [Operating Activities](index=32&type=section&id=Operating%20Activities) Net cash provided by operating activities increased by $79 million to $339 million in Q1 2025, primarily due to higher income from operations and favorable changes in operating assets and liabilities, including prepaid expenses and income taxes - Net cash provided by operating activities increased by **$79 million** to **$339 million** in Q1 2025[123](index=123&type=chunk) - The increase was driven by higher income from operations (**$55 million**) and a **$24 million** increase from changes in operating assets and liabilities, including favorable changes in prepaid expenses, accounts payable, and income taxes[123](index=123&type=chunk)[125](index=125&type=chunk) [Investing Activities](index=32&type=section&id=Investing%20Activities) Net cash used for investing activities increased significantly to $144 million in Q1 2025, primarily due to higher capital investments in property, plant, and equipment. Capital investments for 2025 are projected to be $840 million to $870 million - Net cash used for investing activities increased to **$144 million** in Q1 2025 from **$81 million** in Q1 2024[124](index=124&type=chunk) - Capital investments in property, plant, and equipment were **$148 million** in Q1 2025, up from **$77 million** in Q1 2024[124](index=124&type=chunk) - Expected capital investments for 2025 are projected to be in the range of **$840 million** to **$870 million**, with approximately **$24 million** for environmental regulations[126](index=126&type=chunk) [Financing Activities](index=33&type=section&id=Financing%20Activities) Net cash used for financing activities decreased slightly to $128 million in Q1 2025, with consistent dividend payments and lower shares withheld for employee restricted stock taxes - Net cash used for financing activities was **$128 million** in Q1 2025, down from **$135 million** in Q1 2024[127](index=127&type=chunk) - Dividends paid remained consistent at **$112 million** in both periods[127](index=127&type=chunk) - Shares withheld to cover employee restricted stock taxes decreased from **$23 million** in Q1 2024 to **$15 million** in Q1 2025[127](index=127&type=chunk) [Contractual Obligations](index=33&type=section&id=Contractual%20Obligations) There have been no material changes to the contractual obligations previously disclosed in the 2024 Annual Report on Form 10-K - No material changes to contractual obligations were reported since the 2024 Annual Report on Form 10-K[129](index=129&type=chunk) [Non-GAAP Financial Measures](index=33&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the use of non-GAAP financial measures, such as earnings per diluted share excluding special items, net income excluding special items, and EBITDA, which management uses to evaluate ongoing business performance and provide meaningful comparisons. Reconciliations to GAAP measures are provided - Non-GAAP measures are used to evaluate ongoing business performance and provide meaningful comparisons, excluding special items not reflective of core operations[130](index=130&type=chunk) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | As reported in accordance with GAAP | $2.26 | $1.63 | | Special items | $0.05 | $0.09 | | Excluding special items | $2.31 | $1.72 | | Metric | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Net income | $203.8 | $146.9 | | Non-operating pension income | — | $(1.1) | | Interest expense, net | $12.9 | $9.6 | | Income tax provision | $63.6 | $40.6 | | Depreciation, amortization, and depletion | $138.0 | $128.4 | | EBITDA | $418.3 | $324.4 | | Special items | $2.8 | $8.8 | | EBITDA excluding special items | $421.1 | $333.2 | | Segment | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Packaging EBITDA excluding special items | $409.3 | $326.2 | | Paper EBITDA excluding special items | $40.2 | $40.6 | | Corporate and Other EBITDA excluding special items | $(28.4) | $(33.6) | [Market Risk and Risk Management Policies](index=35&type=section&id=Market%20Risk%20and%20Risk%20Management%20Policies) PCA is exposed to commodity price, interest rate, and financial instrument market value changes. The company may use derivatives, such as physical commodity transactions for natural gas, which qualify for the normal purchase normal sale exception. All outstanding debt has fixed interest rates - PCA is exposed to commodity price changes, interest rate changes, and changes in the market value of financial instruments[137](index=137&type=chunk) - The company may use derivatives, including physical commodity transactions for natural gas, which qualify for the normal purchase normal sale exception[137](index=137&type=chunk) - As of March 31, 2025, **100%** of PCA's outstanding debt has fixed interest rates[138](index=138&type=chunk) [Off-Balance-Sheet Activities](index=35&type=section&id=Off-Balance-Sheet%20Activities) The company reported no off-balance-sheet arrangements as of March 31, 2025 - PCA had no off-balance-sheet arrangements as of March 31, 2025[139](index=139&type=chunk) [Environmental Matters](index=35&type=section&id=Environmental%20Matters) There have been no material changes to the environmental matters disclosure since the 2024 Annual Report on Form 10-K - No material changes to environmental matters disclosure since the 2024 Annual Report on Form 10-K[140](index=140&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management's discussion relies on estimates and judgments for financial statements, including those related to business combinations, pensions, goodwill, and income taxes. No changes to critical accounting estimates were reported in Q1 2025 - The preparation of financial statements involves estimates and judgments related to business combinations, pensions, goodwill, long-lived asset impairment, environmental liabilities, and income taxes[141](index=141&type=chunk) - No changes to critical accounting estimates were reported during the first three months of 2025[142](index=142&type=chunk) [New and Recently Adopted Accounting Standards](index=36&type=section&id=New%20and%20Recently%20Adopted%20Accounting%20Standards) This section refers to Note 2 of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements for a listing of new and recently adopted accounting standards - For details on new and recently adopted accounting standards, refer to Note 2 of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements[143](index=143&type=chunk) [Forward-Looking Statements](index=36&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements regarding future performance, liquidity, and financial condition, which are subject to various risks and uncertainties, and the company disclaims any obligation to update them - The report contains forward-looking statements about future liquidity, earnings, expenditures, and financial condition, identified by words like "will," "should," "anticipate," "believe," "expect," "intend," "estimate," "hope"[144](index=144&type=chunk) - These statements are subject to numerous risks and uncertainties, including general economic conditions, industry competition, product demand, pricing, input costs, unplanned outages, and regulatory actions[145](index=145&type=chunk)[146](index=146&type=chunk) - The company disclaims any obligation to publicly revise any forward-looking statements[145](index=145&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the "Market Risk and Risk Management Policies" section within Item 2 for disclosures on market risks - Market risk disclosures are provided in "Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk and Risk Management Policies"[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) PCA maintains disclosure controls and procedures designed to ensure timely and accurate financial reporting. The Chief Executive Officer and Chief Financial Officer concluded that these controls were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - PCA maintains disclosure controls and procedures designed to provide reasonable assurance that information required for SEC filings is recorded, processed, summarized, and reported timely[148](index=148&type=chunk) - As of March 31, 2025, PCA's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective at the reasonable assurance level[149](index=149&type=chunk) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[150](index=150&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the legal proceedings disclosure from Note 19 of the financial statements, detailing commitments, guarantees, indemnifications, and legal matters - Legal proceedings disclosure is incorporated by reference from Note 19, Commitments, Guarantees, Indemnifications and Legal Proceedings, in Part I, Item 1[153](index=153&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - No material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K[154](index=154&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details shares withheld from employees to cover taxes on vested equity awards during Q1 2025. No shares were repurchased under publicly announced plans during this period, with $436.0 million remaining available for repurchase | Period | Total Number of Shares Purchased (a) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions) | | :---------------- | :----------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------------------- | | January 1-31, 2025 | — | $— | — | $436.0 | | February 1-28, 2025 | 74,104 | $207.19 | — | $436.0 | | March 1-31, 2025 | 455 | $213.25 | — | $436.0 | | Total | 74,559 | $207.22 | — | $436.0 | - All shares purchased were withheld from employees to cover income and payroll taxes on vested equity awards[155](index=155&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - No defaults upon senior securities[156](index=156&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[157](index=157&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended March 31, 2025 - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025[158](index=158&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and Inline XBRL documents - The report includes certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32) and Inline XBRL documents (Exhibits 101.INS, 101.SCH, 104)[159](index=159&type=chunk) [SIGNATURES](index=40&type=section&id=SIGNATURES) The report is signed on behalf of Packaging Corporation of America by Kent A. Pflederer, Executive Vice President and Chief Financial Officer - The report is signed by Kent A. Pflederer, Executive Vice President and Chief Financial Officer, on May 8, 2025[163](index=163&type=chunk)

Group 1 - The article emphasizes the importance of strong foundational companies in the technology, industrial, and conglomerate sectors for long-term success [1] - It highlights the dual approach of analyzing financial data while narrating the stories and strategies of businesses to provide insights into market performance [1] - The focus on both quantitative analysis and qualitative storytelling reflects a commitment to understanding and explaining the financial landscape [1]