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]

Financial Data and Key Metrics Changes - The company reported first quarter net income of $204 million or $2.26 per share, an increase from $155 million or $1.72 per share in the same quarter of 2024 [5][6] - First quarter net sales were $2.1 billion in 2025 compared to $2 billion in 2024, with total company EBITDA, excluding special items, at $421 million in 2025 versus $333 million in 2024 [5][6] - The increase in earnings per share was driven by higher prices and mix in the Packaging segment, contributing $0.78 per share, and volume contributing $0.27 per share [6][7] Business Line Data and Key Metrics Changes - In the Packaging segment, EBITDA, excluding special items, was $409 million with sales of $2 billion, resulting in a margin of 21%, up from an EBITDA of $326 million and sales of $1.8 billion with an 18% margin in the previous year [10] - The Paper segment reported EBITDA of $40 million with sales of $154 million, yielding a 26% margin, compared to $41 million and $164 million in sales with a 25% margin in the first quarter of 2024 [17][18] Market Data and Key Metrics Changes - Domestic containerboard and corrugated products prices and mix were $0.72 per share above the first quarter of 2024, while export containerboard prices were up $0.06 per share compared to the same period [12] - Total volume and shipments per day in corrugated products plants were up 2.5% versus last year, although the Paper segment volume was lower by 7% compared to a strong first quarter of 2024 [13][18] Company Strategy and Development Direction - The company is focused on operational efficiency, cost reduction initiatives, and capital project execution to mitigate the impact of inflation [7][11] - A new state-of-the-art high-efficiency box plant in Glendale, Arizona, has been successfully started up, increasing box capacity significantly and enhancing service capabilities in key markets [15][16] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued economic uncertainty affecting demand but expects box shipments to be higher than the first quarter and above last year's levels [14][24] - The company is cautious about customer ordering patterns due to macroeconomic factors and trade tensions, which may impact future guidance [31][32] Other Important Information - Cash provided by operations reached a record $339 million, with free cash flow also at a record $191 million [20] - The company adjusted its planned maintenance outage schedule to manage economic uncertainty, resulting in increased planned outage expenses for the second quarter [21][22] Q&A Session Summary Question: Adjustments in guidance and forecast - Management noted that customer caution is influencing ordering patterns, leading to a more prudent approach in business [31][32] Question: Inventory and production levels - Management explained that production is being adjusted based on expected demand, with some small machines down for maintenance in May [41][42] Question: Higher prices and mix in packaging - The company effectively implemented price increases, contributing to better-than-expected results [50][52] Question: E-commerce growth and margins - E-commerce is a growing segment, but margins remain consistent as the company focuses on long-term customer relationships [56][58] Question: Rail contract rate increases - Management confirmed multiple rail increases impacting freight costs, with additional increases expected in the second quarter [70][73] Question: Capital expenditures - The company is on track with its capital expenditure guidance, with significant projects underway [72] Question: Containerboard supply and production - Management expressed confidence in meeting demand through improved productivity and potential adjustments in export volumes [144] Question: Basis weights and lightweighting trends - The company noted a general trend of decreasing basis weights, driven by customer needs and technological advancements [148][149]

Core Insights - Packaging Corporation of America (PKG) reported adjusted earnings per share (EPS) of $2.31 for Q1 2025, exceeding the Zacks Consensus Estimate of $2.21 and reflecting a 34% year-over-year increase [1] - The company's sales rose 8.2% year over year to $2.141 billion, surpassing the Zacks Consensus Estimate of $2.140 billion [2] - The gross profit increased by 22.8% year over year to $455 million, with a gross margin of 21.2%, up from 18.7% in the prior year [2] Financial Performance - The cost of products sold increased by 4.8% year over year to $1.69 billion [2] - Selling, general and administrative expenses were $161 million, compared to $152 million in the prior year [3] - Adjusted operating income grew 38.7% year over year to $286 million [3] Segment Performance - In the Packaging segment, sales increased by 9.6% year over year to $1.97 billion, with total corrugated product shipments per day rising 2.5% [4] - The Paper segment's sales were $154 million, down 5.9% year over year, with a sales volume decline of 7% [6] - Adjusted operating profit for the Paper segment was $35.6 million, slightly down from $36.1 million in the prior year [6] Cash Flow and Outlook - The cash balance at the end of Q1 was $0.91 billion, down from $1.25 billion at the end of the prior year [7] - For Q2 2025, the company projects an EPS of $2.41, expecting improvements in domestic prices and box shipments, although operating costs may rise due to lower containerboard volume [8][9] Stock Performance - Over the past year, PKG shares have gained 9.8%, outperforming the industry growth of 0.8% [10]

Core Insights - Packaging Corporation of America (NYSE: PKG) experienced a strong performance in 2024 but has seen a steady decline in its share price throughout 2025 due to disappointing Q4 results and a broader market sell-off [1] Financial Performance - The company reported disappointing Q4 results, contributing to the decline in share price [1] Market Reaction - Following the Q4 results, shares of Packaging Corporation of America have only increased marginally, indicating a lack of investor confidence [1]

Core Insights - Packaging Corp. reported revenue of $2.14 billion for the quarter ended March 2025, reflecting an 8.2% increase year-over-year and matching the Zacks Consensus Estimate, with an EPS of $2.31 compared to $1.72 in the previous year [1] - The company achieved an EPS surprise of +4.52%, with the consensus EPS estimate being $2.21 [1] Financial Performance - Segment Sales for Packaging reached $1.97 billion, aligning with analyst estimates and showing a 9.6% increase from the year-ago quarter [4] - Segment Sales for Corporate and Other were reported at $16.50 million, below the estimated $19.04 million, representing a 5.2% decline year-over-year [4] - Segment Sales for Paper amounted to $154.20 million, falling short of the $161.38 million estimate, indicating a 5.9% decrease compared to the previous year [4] - Segment operating income for Packaging was $284 million, exceeding the estimated $275.21 million [4] - Segment operating loss for Corporate and Other was reported at -$33.40 million, slightly worse than the estimated -$33.32 million [4] - Segment operating income for Paper was $35.60 million, slightly above the estimated $35.20 million [4] Stock Performance - Over the past month, Packaging Corp. shares have returned -9.3%, compared to a -8.9% change in the Zacks S&P 500 composite [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]

Core Insights - Packaging Corp. reported quarterly earnings of $2.31 per share, exceeding the Zacks Consensus Estimate of $2.21 per share, and showing an increase from $1.72 per share a year ago [1] - The company achieved revenues of $2.14 billion for the quarter, surpassing the Zacks Consensus Estimate by 0.03% and up from $1.98 billion year-over-year [3] Earnings Performance - The earnings surprise for the quarter was 4.52%, with the company having surpassed consensus EPS estimates three times over the last four quarters [2] - In the previous quarter, the company reported earnings of $2.47 per share against an expectation of $2.51, resulting in a surprise of -1.59% [2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $2.71 on revenues of $2.24 billion, and for the current fiscal year, it is $10.52 on revenues of $8.92 billion [8] - The estimate revisions trend for Packaging Corp. is mixed, leading to a Zacks Rank 3 (Hold), indicating expected performance in line with the market [7] Industry Context - The Containers - Paper and Packaging industry is currently ranked in the bottom 19% of over 250 Zacks industries, suggesting potential challenges for stocks in this sector [9] - Another company in the same industry, Sonoco, is expected to report quarterly earnings of $1.41 per share, reflecting a year-over-year increase of 25.9% [10]

Financial Performance - Packaging Corporation of America reported first quarter 2025 net income of $204 million, or $2.26 per share, compared to $146.9 million, or $1.63 per share in the same period of 2024, representing a 38.8% increase in net income[1][16] - First quarter net sales increased to $2.1 billion in 2025 from $2.0 billion in 2024, marking a growth of 6.1%[1][16] - Diluted earnings per share excluding special items rose to $2.31, up from $1.72 in the first quarter of 2024, reflecting a 34.4% increase[1][3] - Total segment sales for Q1 2025 reached $2,141.0 million, a 8.2% increase from $1,979.5 million in Q1 2024[20] - Net income for Q1 2025 was reported at $203.8 million, a 38.7% increase from $146.9 million in Q1 2024[29] - Diluted EPS for Q1 2025 was $2.26, up from $1.63 in Q1 2024, representing a 38.6% increase[29] Segment Performance - Segment operating income for the Packaging segment was $278.1 million in Q1 2025, up from $203.8 million in Q1 2024, a growth of 36.4%[1][9] - Packaging segment operating income increased to $278.1 million, up 36.4% from $203.8 million year-over-year[20] - The Paper segment's sales volume decreased by 7% compared to the first quarter of 2024, although it showed a 2% increase compared to the fourth quarter of 2024[1][10] - Corporate and Other segment reported an operating loss of $(33.4) million, an improvement from $(37.5) million in Q1 2024[23] Cash and Capital Expenditure - The company ended the first quarter with cash, cash equivalents, and marketable debt securities totaling $914.4 million, down from $1,253.2 million in the previous year[1][16] - Capital spending for the first quarter of 2025 was $148.1 million, significantly higher than $76.7 million in the same quarter of 2024[1][16] Operational Efficiency - PCA's operational efficiency and cost reduction initiatives helped mitigate inflation impacts across its cost structure[1][11] - The company continues to focus on operational efficiency and cost management to enhance profitability in future quarters[20] Earnings Outlook - The company anticipates second quarter earnings of $2.41 per share, influenced by expected improvements in domestic prices and adjustments in maintenance outage schedules[1][11] Other Financial Metrics - Total corrugated products shipments increased by 2.5% compared to the first quarter of 2024, with containerboard production reaching 1,250,000 tons[1][10] - EBITDA excluding special items for Q1 2025 was $421.1 million, compared to $333.2 million in Q1 2024, reflecting a 26.4% growth[28] - Packaging segment EBITDA excluding special items was $409.3 million, compared to $326.2 million in the prior year, marking a 25.5% increase[32] - Interest expense for Q1 2025 was $12.9 million, compared to $9.6 million in Q1 2024, indicating an increase in financing costs[20] - The company incurred special items totaling $5.9 million in Q1 2025, impacting net income positively by $4.4 million[26]