Core Viewpoint - Packaging Corporation of America (NYSE: PKG) is scheduled to hold a conference call on October 23, 2025, to discuss its third quarter 2025 results [1] Group 1 - The conference call will be led by Mark Kowlzan [1] - Third quarter earnings results will be released after the market closes on October 22, 2025 [1] - Pre-registration for the conference call is available through a provided link [1]

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial information for Packaging Corporation of America [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) This section presents PCA's unaudited consolidated financial statements, including income, balance sheets, cash flows, and equity changes, with detailed notes [Consolidated Statements of Income and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section presents the company's consolidated income and comprehensive income statements, detailing financial performance metrics Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Net sales | 2,171.3 | 2,075.3 | 96.0 | 4.6% | | Gross profit | 483.0 | 437.7 | 45.3 | 10.4% | | Income from operations | 333.7 | 276.0 | 57.7 | 20.9% | | Net income | 241.5 | 198.9 | 42.6 | 21.4% | | Basic EPS | 2.68 | 2.22 | 0.46 | 20.7% | | Diluted EPS | 2.67 | 2.21 | 0.46 | 20.8% | | Dividends declared per common share | 1.25 | 1.25 | 0.00 | 0.0% | Consolidated Statements of Income (Six Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Net sales | 4,312.3 | 4,054.8 | 257.5 | 6.4% | | Gross profit | 937.8 | 808.1 | 129.7 | 16.1% | | Income from operations | 614.0 | 472.0 | 142.0 | 30.1% | | Net income | 445.3 | 345.9 | 99.4 | 28.7% | | Basic EPS | 4.95 | 3.86 | 1.09 | 28.2% | | Diluted EPS | 4.93 | 3.84 | 1.09 | 28.4% | | Dividends declared per common share | 2.50 | 2.50 | 0.00 | 0.0% | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates Consolidated Balance Sheet (As of June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :------------------------- | :--------------------------- | :---------- | :--------- | | Total current assets | 3,336.6 | 3,233.0 | 103.6 | 3.2% | | Total assets | 9,041.2 | 8,833.2 | 208.0 | 2.4% | | Total current liabilities | 943.0 | 1,001.6 | (58.6) | -5.8% | | Total long-term liabilities | 3,466.1 | 3,427.6 | 38.5 | 1.1% | | Total stockholders' equity | 4,632.1 | 4,404.0 | 228.1 | 5.2% | | Total liabilities and stockholders' equity | 9,041.2 | 8,833.2 | 208.0 | 2.4% | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Net cash provided by operating activities | 638.7 | 538.7 | 100.0 | 18.6% | | Net cash used for investing activities | (287.0) | (323.8) | 36.8 | -11.4% | | Net cash used for financing activities | (248.8) | (249.3) | 0.5 | -0.2% | | Net increase (decrease) in cash and cash equivalents | 102.9 | (34.4) | 137.3 | -399.1% | | Cash and cash equivalents, end of period | 787.9 | 613.6 | 174.3 | 28.4% | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section details the changes in the company's equity accounts, including common stock, retained earnings, and comprehensive income Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Metric | Common Stock (Shares) | Common Stock (Amount $) | Additional Paid in Capital ($) | Retained Earnings ($) | Accumulated Other Comprehensive Loss ($) | Total Stockholders' Equity ($) | | :-------------------------------- | :-------------------- | :---------------------- | :----------------------------- | :-------------------- | :--------------------------------------- | :----------------------------- | | Balance at January 1, 2025 | 89,802 | 0.9 | 669.8 | 3,776.7 | (43.4) | 4,404.0 | | Common stock withheld and retired to cover taxes on vested stock awards | (116) | — | (1.2) | (21.9) | — | (23.1) | | Common stock dividends declared | — | — | — | (226.6) | — | (226.6) | | Share-based compensation and other | 294 | — | 30.5 | — | — | 30.5 | | Comprehensive income | — | — | — | 445.3 | 2.0 | 447.3 | | Balance at June 30, 2025 | 89,980 | 0.9 | 699.1 | 3,973.5 | (41.4) | 4,632.1 | [Condensed Notes to Unaudited Quarterly Consolidated Financial Statements](index=7&type=section&id=Condensed%20Notes%20to%20Unaudited%20Quarterly%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited quarterly consolidated financial statements [1. Nature of Operations and Basis of Presentation](index=7&type=section&id=1.%20Nature%20of%20Operations%20and%20Basis%20of%20Presentation) This note describes PCA's business activities, segments, and the foundational principles used in preparing financial statements - Packaging Corporation of America (PCA) is a large diverse manufacturer of packaging and paper products, operating primarily in the United States. It reports business in **three segments**: Packaging, Paper, and Corporate and Other[23](index=23&type=chunk)[24](index=24&type=chunk) - On July 1, 2025, PCA announced an agreement to acquire Greif, Inc.'s containerboard business for **$1.8 billion in cash**, expected to close by the end of Q3. This acquisition includes **two containerboard mills (800,000 tons capacity)** and **eight sheet feeder/corrugated plants** across the U.S[25](index=25&type=chunk) [2. New and Recently Adopted Accounting Standards](index=7&type=section&id=2.%20New%20and%20Recently%20Adopted%20Accounting%20Standards) This note outlines the impact of recently adopted and upcoming accounting standards on the company's financial reporting - Effective **January 1, 2024**, PCA adopted ASU 2023-07, Segment Reporting, which improved reportable segment disclosure requirements, with no significant impact on the Company's disclosures[28](index=28&type=chunk) - New accounting standards not yet adopted include ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures), both of which the Company is currently assessing for impact[29](index=29&type=chunk)[30](index=30&type=chunk) [3. Revenue](index=8&type=section&id=3.%20Revenue) This note details the company's revenue recognition policies and disaggregates revenue by product line Revenue Disaggregated by Product Line (Millions $) | Product Line | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Packaging | 2,005.9 | 1,908.3 | 3,976.3 | 3,706.5 | | Paper | 145.8 | 150.1 | 300.0 | 313.9 | | Corporate and Other | 19.6 | 16.9 | 36.0 | 34.4 | | **Total revenue** | **2,171.3** | **2,075.3** | **4,312.3** | **4,054.8** | - Revenue is recognized when control of goods or services is transferred to customers. For packaging and paper products, this occurs at the point of shipment from the mill or manufacturing facility[32](index=32&type=chunk)[34](index=34&type=chunk)[37](index=37&type=chunk) - Corporate and Other revenue primarily relates to Louisiana Timber Procurement Company, L.L.C. (LTP), a variable-interest entity consolidated by PCA[38](index=38&type=chunk) [4. Earnings Per Share](index=10&type=section&id=4.%20Earnings%20Per%20Share) This note provides the calculation of basic and diluted earnings per common share for the reporting periods Earnings Per Common Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Net income attributable to common shareholders (Millions $) | 442.3 | 343.4 | | Weighted average basic common shares outstanding (Millions) | 89.3 | 89.1 | | Weighted average diluted common shares outstanding (Millions) | 89.7 | 89.5 | | Basic income per common share ($) | 4.95 | 3.86 | | Diluted income per common share ($) | 4.93 | 3.84 | [5. Other Income (Expense), Net](index=10&type=section&id=5.%20Other%20Income%20(Expense),%20Net) This note details various non-operating income and expense items, including facilities closure costs and litigation impacts Other Income (Expense), Net (Millions $) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Facilities closure and other income (costs) | 25.3 | (0.1) | 23.0 | — | | Asset disposals and write-offs | (10.5) | (8.0) | (18.8) | (15.5) | | Acquisition and integration-related costs | (1.6) | — | (1.6) | — | | DeRidder litigation | — | (2.0) | — | (125.7) | | DeRidder litigation insurance recovery | — | 2.0 | — | 125.7 | | Jackson mill conversion-related activities | — | 0.6 | — | (7.6) | | Other | (9.3) | (4.7) | (11.8) | (11.7) | | **Total** | **3.9** | **(12.2)** | **(9.2)** | **(34.8)** | - For the three months ended June 30, 2025, total other income (expense), net, was **$3.9 million**, a significant improvement from a **$(12.2) million expense** in the prior year, primarily due to income from facilities closure and other income[43](index=43&type=chunk) - For the six months ended June 30, 2025, total other income (expense), net, was **$(9.2) million**, an improvement from **$(34.8) million** in the prior year, largely due to the absence of DeRidder litigation expenses and recoveries[43](index=43&type=chunk) [6. Income Taxes](index=10&type=section&id=6.%20Income%20Taxes) This note provides information on income tax expense, effective tax rates, and the impact of new tax legislation Income Tax Expense and Effective Tax Rate | Period | Income Tax Expense (Millions $) | Effective Tax Rate | | :-------------------------------- | :------------------------------ | :----------------- | | Three Months Ended June 30, 2025 | 79.1 | 24.7% | | Three Months Ended June 30, 2024 | 67.8 | 25.4% | | Six Months Ended June 30, 2025 | 142.7 | 24.3% | | Six Months Ended June 30, 2024 | 108.4 | 23.9% | - The decrease in the effective tax rate for the three months ended June 30, 2025, was primarily due to higher excess tax benefits from employee restricted stock and performance unit vests[44](index=44&type=chunk) - The increase in the effective tax rate for the six months ended June 30, 2025, was primarily due to lower excess tax benefits from employee restricted stock and performance unit vests[45](index=45&type=chunk) - Cash paid for taxes, net of refunds, increased to **$140.5 million** for the six months ended June 30, 2025, from **$110.3 million** in 2024, mainly due to higher forecasted taxable income[47](index=47&type=chunk) - The recently signed One Big Beautiful Bill Act (OBBBA) includes significant tax law changes, such as full expensing of certain depreciable property and R&D expenditures, which the Company is currently evaluating for impact[49](index=49&type=chunk) [7. Inventories](index=12&type=section&id=7.%20Inventories) This note details the composition of the company's inventories, including raw materials, work in process, and finished goods Inventories (Millions $) | Component | June 30, 2025 | December 31, 2024 | | :------------------ | :-------------- | :---------------- | | Raw materials | 356.4 | 356.6 | | Work in process | 17.4 | 15.5 | | Finished goods | 233.2 | 234.0 | | Supplies and materials | 537.7 | 518.8 | | **Total Inventories** | **1,144.7** | **1,124.9** | [8. Property, Plant, and Equipment](index=12&type=section&id=8.%20Property,%20Plant,%20and%20Equipment) This note provides a breakdown of the company's property, plant, and equipment, net of accumulated depreciation Property, Plant, and Equipment, Net (Millions $) | Component | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Land and land improvements | 216.4 | 203.4 | | Buildings | 1,234.3 | 1,140.0 | | Machinery and equipment | 7,547.0 | 7,368.8 | | Construction in progress | 350.9 | 397.2 | | Other | 200.2 | 195.8 | | Property, plant and equipment, at cost | 9,548.8 | 9,305.2 | | Less accumulated depreciation | (5,432.9) | (5,266.2) | | **Property, plant, and equipment, net** | **4,115.9** | **4,039.0** | - Depreciation expense for the three months ended June 30, 2025, was **$130.8 million**, up from **$118.7 million** in 2024. For the six months, it was **$258.9 million** in 2025, up from **$236.8 million** in 2024[51](index=51&type=chunk) [9. Goodwill and Intangible Assets](index=13&type=section&id=9.%20Goodwill%20and%20Intangible%20Assets) This note details the company's goodwill and other intangible assets, including customer relationships and trademarks - Goodwill remained constant at **$922.4 million** as of June 30, 2025, and December 31, 2024, entirely within the Packaging segment[53](index=53&type=chunk) Intangible Assets (Excluding Goodwill) (Millions $) | Component | June 30, 2025 Gross Carrying Amount | June 30, 2025 Accumulated Amortization | December 31, 2024 Gross Carrying Amount | December 31, 2024 Accumulated Amortization | | :-------------------------- | :---------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------- | | Customer relationships | 546.0 | 380.2 | 546.0 | 362.4 | | Trademarks and trade names | 41.3 | 34.0 | 41.3 | 33.0 | | Other | 4.4 | 4.4 | 4.4 | 4.4 | | **Total intangible assets** | **591.7** | **418.6** | **591.7** | **399.8** | - Amortization expense for intangible assets was **$18.8 million** for the six months ended June 30, 2025, compared to **$18.9 million** in the prior year[54](index=54&type=chunk) [10. Accrued Liabilities](index=13&type=section&id=10.%20Accrued%20Liabilities) This note provides a breakdown of various accrued liabilities, including compensation, taxes, and litigation settlements Accrued Liabilities (Millions $) | Component | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Compensation and benefits | 134.3 | 168.5 | | Medical insurance and workers' compensation | 30.3 | 29.1 | | Franchise, property, sales and use taxes | 29.1 | 18.7 | | Customer rebates and other credits | 26.4 | 33.9 | | Severance, retention, and relocation | 4.4 | 3.4 | | Environmental liabilities and asset retirement obligations | 2.0 | 3.2 | | DeRidder litigation and other litigation | — | 96.2 | | Other | 11.7 | 9.9 | | **Total** | **238.2** | **362.9** | - Total accrued liabilities decreased significantly from **$362.9 million** at December 31, 2024, to **$238.2 million** at June 30, 2025, primarily due to the payment of DeRidder litigation and other litigation settlements[55](index=55&type=chunk) [11. Debt](index=13&type=section&id=11.%20Debt) This note details the company's outstanding debt, including fixed-rate senior notes and interest payment information - Cash payments for interest decreased to **$46.7 million** for the six months ended June 30, 2025, from **$53.9 million** in 2024[56](index=56&type=chunk) - As of June 30, 2025, PCA had **$2,492.4 million** of fixed-rate senior notes outstanding, with a fair value estimated at **$2,128.7 million**[58](index=58&type=chunk) [12. Cash, Cash Equivalents, and Marketable Debt Securities](index=15&type=section&id=12.%20Cash,%20Cash%20Equivalents,%20and%20Marketable%20Debt%20Securities) This note provides details on the company's cash, cash equivalents, and available-for-sale marketable debt securities Cash, Cash Equivalents, and AFS Debt Securities (Millions $) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------------- | :----------------------- | :------------------------- | | Cash and cash equivalents | 784.7 | 684.8 | | Short-term marketable debt securities | 92.4 | 102.0 | | Long-term marketable debt securities | 75.6 | 65.2 | | **Total** | **955.9** | **852.2** | - 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[63](index=63&type=chunk) - As of June 30, 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)[65](index=65&type=chunk) [13. Employee Benefit Plans and Other Postretirement Benefits](index=17&type=section&id=13.%20Employee%20Benefit%20Plans%20and%20Other%20Postretirement%20Benefits) This note outlines the net periodic benefit costs for the company's pension plans and related contributions Net Periodic Benefit Cost for Pension Plans (Millions $) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | 2.6 | 3.1 | 5.2 | 6.3 | | Interest cost | 14.3 | 13.9 | 28.6 | 27.7 | | Expected return on plan assets | (15.6) | (16.5) | (31.2) | (32.9) | | Net amortization of unrecognized amounts | 1.4 | 1.6 | 2.8 | 3.1 | | **Net periodic benefit cost** | **2.7** | **2.1** | **5.4** | **4.2** | - PCA makes pension plan contributions sufficient to fund actuarially determined costs, generally the minimum required by ERISA. **No contributions** were made to qualified pension plans during the three and six months ended June 30, 2025 and 2024[67](index=67&type=chunk) [14. Share-Based Compensation](index=17&type=section&id=14.%20Share-Based%20Compensation) This note details the company's share-based compensation expense and available shares for future equity grants - As of June 30, 2025, **2.5 million shares** were available for future grants under the long-term equity incentive plan, which was amended in February 2024 to extend its term to May 8, 2034, and increase authorized shares by **2.4 million**[70](index=70&type=chunk)[71](index=71&type=chunk) Share-Based Compensation Expense (Millions $) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restricted stock | 6.1 | 6.0 | 20.0 | 19.9 | | Performance units | 4.2 | 3.9 | 8.1 | 9.3 | | **Total share-based compensation expense** | **10.3** | **9.9** | **28.1** | **29.2** | | Income tax benefit | (2.6) | (2.5) | (7.0) | (7.3) | | **Net of tax benefit** | **7.7** | **7.4** | **21.1** | **21.9** | - Unrecognized compensation expense for all share-based awards totaled **$74.0 million** at June 30, 2025, with a remaining weighted average recognition period of **2.7 years**[74](index=74&type=chunk) [15. Stockholders' Equity](index=20&type=section&id=15.%20Stockholders'%20Equity) This note provides information on dividends paid, stock repurchases, and changes in accumulated other comprehensive income - PCA paid **$224.7 million in dividends** during the six months ended June 30, 2025. A quarterly cash dividend of **$1.25 per share** was declared on May 7, 2025, totaling **$112.5 million**[75](index=75&type=chunk) - **No common stock repurchases** were made during the three months ended June 30, 2025. **$436.0 million** remained available under the **$1 billion repurchase authorization** as of June 30, 2025[77](index=77&type=chunk) Changes in Accumulated Other Comprehensive Income (Loss) (AOCI) (Millions $) | Component | Balance at January 1, 2025 | Other comprehensive loss before reclassifications, net of tax | Amounts reclassified from AOCI, net of tax | Balance at June 30, 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) | — | 1.9 | (41.6) | | **Total** | **(43.4)** | **0.1** | **1.9** | **(41.4)** | [16. Transactions With Related Parties](index=20&type=section&id=16.%20Transactions%20With%20Related%20Parties) This note describes transactions with related parties, including the consolidated Louisiana Timber Procurement Company - Louisiana Timber Procurement Company, L.L.C. (LTP), **50% owned by PCA** and **50% by Boise Cascade**, is consolidated by PCA as the primary beneficiary. LTP procures wood and fiber for both companies in Louisiana[79](index=79&type=chunk) - LTP sales to Boise Cascade were **$32.8 million** for the six months ended June 30, 2025, down from **$41.1 million** in 2024. Fiber purchases from related parties were **$4.0 million** in 2025, down from **$5.7 million** in 2024[79](index=79&type=chunk)[80](index=80&type=chunk) [17. Segment Information](index=22&type=section&id=17.%20Segment%20Information) This note provides disaggregated financial information for the company's Packaging, Paper, and Corporate and Other segments - PCA operates in **three reportable segments**: Packaging, Paper, and Corporate and Other, each managed separately due to distinct products, services, and operating/marketing strategies[81](index=81&type=chunk) Segment Sales to External Customers (Millions $) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Packaging | 2,005.9 | 1,902.0 | 3,976.3 | 3,695.4 | | Paper | 145.8 | 150.1 | 300.0 | 313.9 | | Corporate and Other | 19.6 | 23.2 | 36.0 | 45.5 | | **Total** | **2,171.3** | **2,075.3** | **4,312.3** | **4,054.8** | Segment Income (Loss) from Operations (Millions $) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Packaging | 346.3 | 279.8 | 624.4 | 483.6 | | Paper | 25.8 | 26.7 | 61.4 | 56.4 | | Corporate and Other | (38.4) | (30.5) | (71.8) | (68.0) | | **Total** | **333.7** | **276.0** | **614.0** | **472.0** | [18. Commitments, Guarantees, Indemnifications and Legal Proceedings](index=24&type=section&id=18.%20Commitments%2C%20Guarantees%2C%20Indemnifications%20and%20Legal%20Proceedings) This note details the company's legal proceedings, including the DeRidder mill lawsuit and a new class action alleging price fixing - As of June 30, 2025, the settlement amount for the DeRidder mill lawsuit has been paid, and **no amounts remain outstanding**. Previously, a **$59.2 million liability** and corresponding receivable were recorded[92](index=92&type=chunk) - PCA was named as a defendant in a purported class action lawsuit on **July 29, 2025**, alleging conspiracy to raise containerboard prices and restrict capacity from **November 1, 2020**, to present. PCA believes the allegations are without merit and will vigorously defend the lawsuit[93](index=93&type=chunk) - The Company believes it is not reasonably possible that any other legal actions will have a material adverse effect on its financial condition, results of operations, or cash flows[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on PCA's financial performance, condition, and future outlook [Overview](index=26&type=section&id=Overview) This section provides a general description of PCA's business, its market position, and primary product offerings - 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[97](index=97&type=chunk) - The company's products include linerboard and corrugating medium for corrugated products, a wide variety of corrugated packaging, retail merchandise displays, honeycomb protective packaging, and communication-based papers[97](index=97&type=chunk) [Executive Summary](index=26&type=section&id=Executive%20Summary) This section highlights key financial results and strategic developments, including the Greif acquisition, for the reporting period Key Financial Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :------------------- | :------------------- | :---------- | :--------- | | Net sales | 2,170 | 2,080 | 90 | 4.3% | | Net income | 242 | 199 | 43 | 21.6% | | Diluted EPS | 2.67 | 2.21 | 0.46 | 20.8% | | Net income (excl. special items) | 224 | 199 | 25 | 12.6% | | Diluted EPS (excl. special items) | 2.48 | 2.20 | 0.28 | 12.7% | - The increase in net income was primarily driven by higher prices and mix in the Packaging segment, lower fiber costs, higher prices and mix in the Paper segment, and a lower tax rate[99](index=99&type=chunk) - Packaging segment operating income increased to **$346 million** in Q2 2025 from **$280 million** in Q2 2024, with corrugated plant shipments up **1.7%** per day[99](index=99&type=chunk) - Paper segment operating income slightly decreased to **$26 million** in Q2 2025 from **$27 million** in Q2 2024, mainly due to higher operating costs and lower volumes, partially offset by higher prices[100](index=100&type=chunk) - PCA announced the acquisition of Greif's containerboard business for **$1.8 billion**, expected to close by Q3, which will add **800,000 tons** of production capacity and **eight plants**[104](index=104&type=chunk) [Industry and Business Conditions](index=28&type=section&id=Industry%20and%20Business%20Conditions) This section discusses trends in North American corrugated products and UFS paper markets, including shipment volumes and pricing - North American industry-wide corrugated products shipments were down **2.6%** in total and **1.0%** per workday in Q2 2025 YoY. Industry containerboard production decreased **5.2%**[105](index=105&type=chunk) - Containerboard export shipments were down **16.2%** in Q2 2025 YoY. Reported index prices for linerboard and corrugating medium increased **$40 per ton** in February 2025[105](index=105&type=chunk) - North American UFS paper shipments were down **8.5%** in the first six months of 2025 YoY. Average prices for cut size office papers increased by **$47 per ton (3.2%)** in Q2 2025 YoY[106](index=106&type=chunk) [Outlook](index=28&type=section&id=Outlook) This section provides the company's expectations for future performance, including corrugated shipments, pricing, and operating costs - For Q3, PCA expects higher corrugated shipments and containerboard production, but lower export containerboard sales due to the global trade environment[107](index=107&type=chunk) - Packaging segment prices and mix are expected to be relatively flat with Q2 levels. Paper segment pricing is also expected to be flat, with production and sales increasing due to the completed International Falls mill outage and seasonal back-to-school orders[107](index=107&type=chunk) - Maintenance outage expense is expected to be lower in Q3, with **no scheduled outages**. Freight costs will be higher due to rail rate increases, while operating costs are expected to be near Q2 levels and fiber costs slightly lower[107](index=107&type=chunk) - Overall, PCA expects Q3 earnings to be higher than Q2 earnings, excluding special items, with this outlook not including any impact from the pending Greif acquisition[107](index=107&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance for the current and prior periods [Three Months Ended June 30, 2025, compared to Three Months Ended June 30, 2024](index=29&type=section&id=Three%20Months%20Ended%20June%2030,%202025,%20compared%20to%20Three%20Months%20Ended%20June%2030,%202024) This section analyzes the company's financial performance for the second quarter of 2025 compared to the same period in 2024 Q2 2025 vs. Q2 2024 Financial Performance (Millions $) | Metric | Q2 2025 | Q2 2024 | Change ($M) | Change (%) | | :-------------------------------- | :------ | :------ | :---------- | :--------- | | Net sales | 2,171.3 | 2,075.3 | 96.0 | 4.6% | | Income from operations | 333.7 | 276.0 | 57.7 | 20.9% | | Net income | 241.5 | 198.9 | 42.6 | 21.4% | | Net income excluding special items | 224.2 | 198.6 | 25.6 | 12.9% | | Consolidated EBITDA | 474.4 | 404.5 | 69.9 | 17.3% | | Packaging EBITDA excluding special items | 452.9 | 400.0 | 52.9 | 13.2% | | Paper EBITDA excluding special items | 30.3 | 30.6 | (0.3) | -1.0% | - Packaging net sales increased **$98 million (5.1%)** due to higher containerboard and corrugated products prices and mix (**$107 million**), partially offset by lower volume (**$9 million**). Domestic containerboard prices were **10.8% higher**, and export prices were **10.4% higher**[111](index=111&type=chunk) - Paper net sales decreased **$4 million (2.9%)** due to lower volume (**$8 million**), partially offset by higher prices and mix (**$4 million**)[112](index=112&type=chunk) - Gross profit increased **$45 million**, driven by higher prices/mix in Packaging and Paper, and lower fiber costs, partially offset by higher operating costs, maintenance outage expense, and lower volumes[113](index=113&type=chunk) - SG&A expenses increased **$4 million**, primarily due to higher employee-related expenses and insurance[114](index=114&type=chunk) - Packaging segment operating income increased **$66 million**, mainly from higher prices/mix (**$119 million**) and lower fiber costs (**$18 million**), despite higher operating/converting costs, maintenance outage expenses, and lower volumes[117](index=117&type=chunk) - Paper segment operating income decreased **$1 million**, primarily due to higher operating costs and lower volumes, partially offset by higher prices/mix[118](index=118&type=chunk) - Interest expense, net, increased **$3 million** due to higher interest expense from the November 2023 debt refinancing[120](index=120&type=chunk) [Six Months Ended June 30, 2025, compared to Six Months Ended June 30, 2024](index=31&type=section&id=Six%20Months%20Ended%20June%2030,%202025,%20compared%20to%20Six%20Months%20Ended%20June%2030,%202024) This section analyzes the company's financial performance for the first half of 2025 compared to the same period in 2024 H1 2025 vs. H1 2024 Financial Performance (Millions $) | Metric | H1 2025 | H1 2024 | Change ($M) | Change (%) | | :-------------------------------- | :------ | :------ | :---------- | :--------- | | Net sales | 4,312.3 | 4,054.8 | 257.5 | 6.4% | | Income from operations | 614.0 | 472.0 | 142.0 | 30.1% | | Net income | 445.3 | 345.9 | 99.4 | 28.7% | | Net income excluding special items | 432.4 | 353.2 | 79.2 | 22.4% | | Consolidated EBITDA | 892.6 | 728.9 | 163.7 | 22.5% | | Packaging EBITDA excluding special items | 862.1 | 726.2 | 135.9 | 18.7% | | Paper EBITDA excluding special items | 70.5 | 71.2 | (0.7) | -1.0% | - Packaging net sales increased **$270 million (7.3%)** due to higher prices/mix (**$202 million**) and higher volume (**$68 million**). Domestic containerboard prices were **7.1% higher**, and export prices were **11.7% higher**[125](index=125&type=chunk) - Paper net sales decreased **$14 million (4.4%)** due to lower volume (**$20 million**), partially offset by higher prices/mix (**$6 million**)[126](index=126&type=chunk) - Gross profit increased **$130 million**, driven by higher prices/mix and sales volumes in Packaging, lower fiber costs, and higher prices/mix in Paper, partially offset by higher operating costs and maintenance outage expense[127](index=127&type=chunk) - SG&A expenses increased **$13 million**, primarily due to higher employee-related expenses, insurance, and bad debt expense[128](index=128&type=chunk) - Packaging segment operating income increased **$141 million**, mainly from higher prices/mix (**$210 million**), lower fiber costs (**$27 million**), and higher sales/production volumes (**$16 million**), despite increased operating costs and maintenance outage expenses[131](index=131&type=chunk) - Paper segment operating income increased **$5 million**, benefiting from **no special items in 2025** (vs. **$6 million expense** in 2024), higher prices/mix, and lower fixed/freight expenses, partially offset by lower volumes and higher operating/maintenance costs[132](index=132&type=chunk) - Interest expense, net, increased **$6 million** due to higher interest expense from the November 2023 debt refinancing and lower interest income[134](index=134&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources and uses of cash, borrowing capacity, and capital investment plans - Primary liquidity sources are net cash from operating activities and available borrowing capacity under the revolving credit facility. As of June 30, 2025, PCA had **$788 million in cash**, **$168 million in marketable debt securities**, and **$323 million in unused borrowing capacity**[136](index=136&type=chunk) Summary of Cash Flows (Six Months Ended June 30, Millions $) | Activity | 2025 | 2024 | Change ($M) | | :-------------------------------- | :----- | :----- | :---------- | | Operating activities | 638.7 | 538.7 | 100.0 | | Investing activities | (287.0) | (323.8) | 36.8 | | Financing activities | (248.8) | (249.3) | 0.5 | | **Net increase (decrease) in cash and cash equivalents** | **102.9** | **(34.4)** | **137.3** | - Net cash provided by operating activities increased by **$100 million** to **$639 million** in H1 2025, primarily due to higher income from operations and favorable changes in prepaid expenses and accounts receivable[139](index=139&type=chunk)[141](index=141&type=chunk) - Cash used for investing activities decreased to **$287 million** in H1 2025 from **$324 million** in H1 2024. Capital investments were **$318 million** in H1 2025[140](index=140&type=chunk) - Expected capital investments for 2025 are in the range of **$840 million to $870 million**, including approximately **$24 million** for environmental compliance[142](index=142&type=chunk) - Net cash used for financing activities remained stable at **$249 million** in H1 2025. Dividends paid were **$225 million**, and **$23 million** was withheld for employee restricted stock taxes[143](index=143&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations and explanations for non-GAAP financial measures used to evaluate company performance - PCA uses non-GAAP financial measures such as earnings per diluted share excluding special items, net income excluding special items, EBITDA, and segment EBITDA to evaluate performance and provide meaningful comparisons, as these are used by management and investors[146](index=146&type=chunk) Earnings Per Diluted Share Reconciliation (Non-GAAP, $) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | As reported in accordance with GAAP | 2.67 | 2.21 | 4.93 | 3.84 | | Total special items | (0.19) | — | (0.14) | 0.08 | | **Excluding special items** | **2.48** | **2.20** | **4.79** | **3.92** | Net Income Reconciliation (Non-GAAP, Millions $) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | As reported in accordance with GAAP | 241.5 | 198.9 | 445.3 | 345.9 | | Total special items | (17.3) | (0.3) | (12.9) | 7.3 | | **Excluding special items** | **224.2** | **198.6** | **432.4** | **353.2** | EBITDA Reconciliation (Non-GAAP, Millions $) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | 241.5 | 198.9 | 445.3 | 345.9 | | Non-operating pension income | — | (1.1) | — | (2.2) | | Interest expense, net | 13.1 | 10.4 | 26.0 | 19.9 | | Income tax provision | 79.1 | 67.8 | 142.7 | 108.4 | | Depreciation, amortization, and depletion | 140.7 | 128.5 | 278.6 | 256.9 | | **EBITDA** | **474.4** | **404.5** | **892.6** | **728.9** | | Total special items | (23.6) | (0.5) | (20.8) | 8.3 | | **EBITDA excluding special items** | **450.8** | **404.0** | **871.8** | **737.2** | [Market Risk and Risk Management Policies](index=38&type=section&id=Market%20Risk%20and%20Risk%20Management%20Policies) This section outlines the company's exposure to market risks, including commodity prices and interest rates, and its mitigation strategies - PCA is exposed to commodity price changes, interest rate changes, and market value fluctuations of financial instruments. It may use derivatives, such as physical natural gas supply contracts, which qualify for the normal purchase normal sale exception[152](index=152&type=chunk) - As of June 30, 2025, **100%** of PCA's outstanding debt has fixed interest rates[153](index=153&type=chunk) [Off-Balance-Sheet Activities](index=38&type=section&id=Off-Balance-Sheet%20Activities) This section confirms the absence of any off-balance sheet arrangements as of the reporting date - The Company does not have any off-balance sheet arrangements as of June 30, 2025[154](index=154&type=chunk) [Environmental Matters](index=38&type=section&id=Environmental%20Matters) This section refers to the environmental matters disclosure from the previous annual report, noting no material changes - There have been **no material changes** to the environmental matters disclosure from the 2024 Annual Report on Form 10-K[155](index=155&type=chunk) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the significant accounting policies and estimates requiring management judgment in financial reporting - PCA's financial statements require estimates and judgments related to business combinations, pensions, goodwill, intangible assets, long-lived asset impairment, environmental liabilities, and income taxes[156](index=156&type=chunk) - **No changes** to critical accounting estimates occurred during the first six months of 2025[157](index=157&type=chunk) [New and Recently Adopted Accounting Standards](index=39&type=section&id=New%20and%20Recently%20Adopted%20Accounting%20Standards) This section directs readers to Note 2 for details on 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[158](index=158&type=chunk) [Forward-Looking Statements](index=39&type=section&id=Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements regarding future liquidity, earnings, expenditures, and financial condition, which are subject to numerous risks and uncertainties[159](index=159&type=chunk) - Key factors that could cause actual results to differ materially include general economic conditions, impacts of acquired businesses, industry conditions (competition, demand, pricing, input costs), fluctuations in fiber and energy costs, unplanned outages, and governmental actions[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the market risk disclosures detailed in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - For a discussion of market risks related to PCA, refer to the 'Market Risk and Risk Management Policies' section within Item 2 of this Quarterly Report on Form 10-Q[162](index=162&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of PCA's disclosure controls and procedures and reports no material changes in internal control over financial reporting - PCA's disclosure controls and procedures were evaluated and deemed **effective** at the reasonable assurance level as of June 30, 2025[164](index=164&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2025[165](index=165&type=chunk) [PART II OTHER INFORMATION](index=41&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings and equity security details [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal proceedings disclosures from Note 18, detailing the DeRidder Mill incident and a new class action lawsuit - The disclosure on legal proceedings is incorporated from Note 18, Commitments, Guarantees, Indemnifications and Legal Proceedings, in Part I, Item 1 of this Form 10-Q[168](index=168&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section confirms no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - **No material changes** to the risk factors disclosed in the 2024 Annual Report on Form 10-K have occurred[169](index=169&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details common stock repurchases and shares withheld for taxes on equity awards during the three months ended June 30, 2025 Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | 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 (Millions $) | | :---------------- | :--------------------------------- | :------------------------------- | :----------------------------------------------------------------- | :--------------------------------------------------------------------------------- | | April 1-30, 2025 | 39,303 | 183.48 | — | 436.0 | | May 1-31, 2025 | 43 | 188.71 | — | 436.0 | | June 1-30, 2025 | 2,189 | 186.46 | — | 436.0 | | **Total** | **41,535** | **183.65** | **—** | **436.0** | - All shares purchased were withheld from employees to cover income and payroll taxes on vested equity awards[170](index=170&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that no defaults upon senior securities occurred during the reporting period - **No defaults** upon senior securities[171](index=171&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are **not applicable** to the Company[172](index=172&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) This section confirms no Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter - **No directors or officers** adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[173](index=173&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents List of Exhibits | Exhibit Number | Description | | :------------- | :---------- | | 31.1 | Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. † | | 31.2 | Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. † | | 32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. † | | 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. † | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document. † | | 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). † |

Core Insights - Packaging Corporation of America (PKG) reported adjusted earnings per share (EPS) of $2.48 for Q2 2025, surpassing the Zacks Consensus Estimate of $2.44 and the company's guidance of $2.41, reflecting a 13% year-over-year increase driven by higher prices and mix across segments [1][10]. Financial Performance - Total sales for Q2 2025 increased by 4.6% year-over-year to $2.17 billion, exceeding the Zacks Consensus Estimate of $2.16 billion [3][10]. - Cost of products sold rose by 3.1% year-over-year to $1.69 billion, while gross profit increased by 10.3% year-over-year to $483 million, resulting in a gross margin of 22.2%, up from 21.1% a year ago [3][10]. - Selling, general and administrative expenses were $153 million, slightly higher than the prior year's $149.5 million, with adjusted operating income rising by 12.8% year-over-year to $311 million [4]. Segment Performance - In the Packaging segment, sales grew by 5.1% year-over-year to $2.01 billion, surpassing estimates, although total corrugated product shipments remained flat [5]. - The Paper segment reported revenues of $146 million, down 2.9% year-over-year, but still beating estimates, with an operating profit of $25.8 million compared to $26.7 million in the prior year [6]. Cash Flow and Outlook - The company had a cash balance of $0.96 billion at the end of Q2, down from $1.17 billion at the end of the previous year [8]. - For Q3 2025, PKG projects an EPS of $2.80, expecting flat prices and mix in the Packaging segment, while production and sales in the Paper segment are anticipated to increase following the completion of the International Falls mill outage [9]. Stock Performance - PKG's shares have appreciated by 8.9% over the past year, contrasting with a 2.2% decline in the industry [11].

Financial Data and Key Metrics Changes - The company reported second quarter net income of $242 million or $2.67 per share, an increase from $199 million or $2.20 per share in 2024 [4] - Excluding special items, net income was $224 million or $2.48 per share compared to $199 million or $2.20 per share in 2024, reflecting a $0.28 per share increase driven by higher prices and lower fiber costs [4][5] - Second quarter net sales were $2.2 billion in 2025, up from $2.1 billion in 2024 [4] - Total company EBITDA for the second quarter, excluding special items, was $451 million in 2025 compared to $400 million in 2024 [4] Business Line Data and Key Metrics Changes - In the Packaging segment, EBITDA excluding special items was $453 million with sales of $2 billion, resulting in a margin of 22.6%, compared to last year's EBITDA of $400 million and sales of $1.9 billion with a margin of 21% [5][6] - The Paper segment reported EBITDA excluding special items of $30 million with sales of $146 million, yielding a margin of 20.8%, compared to $31 million and $150 million in sales in 2024 [12] Market Data and Key Metrics Changes - Domestic containerboard and corrugated products prices and mix were $0.95 per share above 2024, with export containerboard prices up $0.03 per share versus last year's second quarter [8] - Export containerboard sales were lower, with a production of 85,000 fewer tons than in 2024 [6] Company Strategy and Development Direction - The company announced an agreement to acquire the Greif containerboard business, which is expected to provide a strong growth platform for both containerboard and corrugated products [7][10] - The acquisition is anticipated to be completed by the end of the third quarter, subject to regulatory approval [7] Management's Comments on Operating Environment and Future Outlook - Management noted that while corrugated customers remained cautious, there was steady improvement in bookings and shipments as July progressed [15] - The company expects higher corrugated shipments and containerboard production in the third quarter, despite lower export containerboard sales due to the global trade environment [15][16] - Management expressed optimism about potential upside if global trade issues and tariffs are resolved [70] Other Important Information - Cash provided by operations was $300 million in the quarter, with free cash flow of $130 million [13] - The company has a quarter-end cash balance, including marketable securities, of $956 million, with liquidity of approximately $1.3 billion [14] Q&A Session Summary Question: Can you talk about bookings and billings to start the new quarter? - Bookings are trending at 2% over Q2 2024, with a good start compared to last year's strong performance [23] Question: What was behind the better performance in operations? - The company operated at approximately 99% uptime performance, executing efficiently despite some downtime due to demand [25] Question: Can you clarify the impact of export sales on revenue and EBITDA? - The increase in revenue and EBITDA per ton is primarily due to price increases rather than mix changes [29] Question: What is the outlook for e-commerce growth? - Customers in the e-commerce sector are still growing mid-single digits, with more growth expected in the second half of the year [79] Question: How will the Greif acquisition impact recycled mix and customer sets? - The recycled mix is expected to increase from around 20% to approximately 30% post-acquisition, providing better opportunities in the market [86] Question: What is the expected marginal cost of the new debt from the Greif acquisition? - The company is modeling about a 5.5% interest rate on the new debt, resulting in around $100 million incremental interest [100]

Financial Data and Key Metrics Changes - The company reported a second quarter net income of $242 million or $2.67 per share, an increase from $199 million or $2.20 per share in 2024 [3] - Excluding special items, net income was $224 million or $2.48 per share compared to $199 million or $2.20 per share in 2024, reflecting a year-over-year increase [3][4] - Second quarter net sales were $2.2 billion in 2025, up from $2.1 billion in 2024 [3] - Total company EBITDA for the second quarter, excluding special items, was $451 million in 2025 compared to $400 million in 2024 [3][4] Business Line Data and Key Metrics Changes - In the Packaging segment, EBITDA excluding special items was $453 million with sales of $2 billion, resulting in a margin of 22.6%, compared to last year's EBITDA of $400 million and sales of $1.9 billion or 21% [4] - The Paper segment reported EBITDA excluding special items of $30 million with sales of $146 million, yielding a margin of 20.8%, compared to $31 million and $150 million in sales in 2024 [11] Market Data and Key Metrics Changes - Domestic containerboard and corrugated products prices and mix were $0.95 per share above 2024, with export containerboard prices up $0.03 per share versus last year's second quarter [7] - Shipments per day in corrugated products plants were up 1.7% compared to last year's strong second quarter [7] Company Strategy and Development Direction - The company announced an agreement to acquire the Greif containerboard business, which is expected to provide a strong growth platform for both containerboard and corrugated products [6] - The acquisition is targeted for completion by the end of the third quarter, subject to regulatory approval [6] Management's Comments on Operating Environment and Future Outlook - Management noted that while corrugated customers remained cautious, there has been steady improvement in bookings and shipments as July progressed [14] - The company expects higher corrugated shipments and containerboard production in the third quarter, despite lower export containerboard sales due to the global trade environment [14][15] - Management anticipates third quarter earnings of $2.80 per share excluding special items, with operating costs near second quarter levels and slightly lower fiber costs [15] Other Important Information - Cash provided by operations was $300 million in the quarter, with free cash flow of $130 million [13] - The company has a quarter-end cash balance, including marketable securities, of $956 million, with liquidity of approximately $1.3 billion [13] Q&A Session Summary Question: Can you discuss bookings and billings to start the new quarter? - Bookings are trending at 2% over Q2 2024, with a good start compared to the previous year [21] Question: What was behind the better performance in operations? - The company operated at approximately 99% uptime performance, executing efficiently despite some smaller machines being down [22][23] Question: Can you clarify the revenue per ton and EBITDA per ton increases? - The increases were primarily due to price increases rather than mix, with export sales contributing to revenue and EBITDA [25][26] Question: What is the outlook for box shipments and containerboard production? - Box shipments are expected to be flat year-over-year, with containerboard production down by 25,000 to 30,000 tons compared to last year [92] Question: How will the Greif acquisition impact capital expenditures? - The acquisition will avoid significant capital expenditures, as the company can utilize existing facilities instead of building new ones [39] Question: What is the expected recycled mix before and after the Greif acquisition? - The recycled mix is expected to increase from around 20% to approximately 30% post-acquisition [82] Question: How has the company been impacted by recent industry closures? - The company has not seen significant changes in business due to closures, as the market for containerboard remains limited [86]

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].