UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-15399 (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of Incorporation or Organization) 1 North Field ...

Financial Data and Key Metrics Changes - Third quarter net income for 2022 was $262 million, or $2.80 per share, compared to $257 million, or $2.69 per share in Q3 2021, reflecting a year-over-year increase [3] - Net sales increased to $2.1 billion in Q3 2022 from $2.0 billion in Q3 2021 [3] - Total company EBITDA for Q3 2022 was $477 million, up from $464 million in Q3 2021 [3] Business Line Data and Key Metrics Changes - Packaging business EBITDA excluding special items was $467 million with sales of $1.9 billion, resulting in a margin of 24.1%, down from a margin of 25.5% in the previous year [5] - Paper segment EBITDA excluding special items was $33 million with sales of $165 million, achieving a margin of 20%, compared to $18 million and 12% margin in Q3 2021 [12] Market Data and Key Metrics Changes - Corrugated product shipments decreased by 6% compared to Q3 2021, with containerboard outside sales volume down 57,000 tons year-over-year [9] - Export containerboard prices increased by $0.06 per share compared to Q3 2021 and $1.00 per share compared to Q2 2022 [9] Company Strategy and Development Direction - The company is focused on implementing price increases across all product lines and optimizing process efficiencies to mitigate inflation impacts [5][7] - Scheduled maintenance outages and conversion work at the Jackson mill are expected to enhance operational efficiency and capacity [6][17] Management's Comments on Operating Environment and Future Outlook - Management noted that demand in the packaging segment was below expectations due to inventory corrections and inflation impacting consumer purchases [9][10] - The outlook for Q4 anticipates continued economic headwinds, including lower shipping days and a less favorable product mix [16][17] Other Important Information - Cash provided by operations reached a record $431 million, with free cash flows at $251 million [14] - The company repurchased 1,032,000 shares at an average price of $137.60 per share during the quarter [14] Q&A Session Summary Question: Early Q4 booking and billing trends - Bookings and billings are running about 5% below last year, with significant inventory destocking expected to take a couple of quarters to resolve [20][21] Question: Impact of inventory destocking on demand - Inventory destocking is a primary factor in the 6% decline in shipments, with some customers finally ready to order again after reducing excess inventory [23][24] Question: Guidance on sequential changes in earnings - The expected decline in earnings is attributed to volume issues, inflation, and increased maintenance costs, with specific impacts from energy and labor costs [30][31] Question: Internal inventory levels and economic downtime - The company is comfortable with its inventory levels and will adjust production based on demand [38][40] Question: Impact of COVID lockdowns in China on US economy - The US has seen a record increase in onshoring manufacturing, which is expected to benefit the box business despite ongoing supply chain issues [53]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-15399 (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of Incorporation or Organization) 1 North Field Cour ...

Packaging Corporation of America (NYSE:PKG) Q2 2022 Earnings Conference Call July 26, 2022 9:00 AM ET Company Participants Mark Kowlzan – Chairman and Chief Executive Officer Tom Hassfurther – Executive Vice President, Corrugated Products Bob Mundy – Chief Financial Officer Conference Call Participants George Staphos – Bank of America Securities Mike Roxland – Truist Mark Wilde – Bank of Montreal Mark Weintraub – Seaport Research Partners Adam Josephson – KeyBanc Capital Markets Phillip Ng – Jefferies Gabe ...

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The section presents unaudited consolidated financial statements for Q1 2022, including income, balance sheets, cash flows, and equity, with detailed accounting notes [Consolidated Statements of Income and Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Net Sales increased to $2,136.4 million in Q1 2022 from $1,807.2 million year-over-year, with Net Income rising significantly to $254.2 million Q1 2022 vs Q1 2021 Income Statement Highlights (in millions, except per-share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Net sales** | $2,136.4 | $1,807.2 | | **Gross profit** | $533.2 | $403.7 | | **Income from operations** | $356.5 | $238.3 | | **Net income** | $254.2 | $166.5 | | **Diluted EPS** | $2.70 | $1.75 | | **Dividends declared per share** | $1.00 | $1.00 | [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $8,137.8 million as of March 31, 2022, driven by growth in receivables, inventories, and property, plant, and equipment Balance Sheet Summary (in millions) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $2,869.4 | $2,732.7 | | **Property, plant, and equipment, net** | $3,670.7 | $3,529.0 | | **Total assets** | $8,137.8 | $7,836.8 | | **Total current liabilities** | $967.9 | $884.8 | | **Long-term debt** | $2,472.0 | $2,471.5 | | **Total liabilities** | $4,358.5 | $4,229.6 | | **Total stockholders' equity** | $3,779.3 | $3,607.2 | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly increased to $325.3 million in Q1 2022, while investing activities used $221.2 million, primarily for capital expenditures Q1 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $325.3 | $191.6 | | **Net cash used for investing activities** | ($221.2) | ($87.5) | | **Net cash used for financing activities** | ($94.2) | ($95.3) | | **Net increase in cash and cash equivalents** | $9.9 | $8.8 | [Condensed Notes to Unaudited Quarterly Consolidated Financial Statements](index=7&type=section&id=Condensed%20Notes%20to%20Unaudited%20Quarterly%20Consolidated%20Financial%20Statements) The notes detail operations across Packaging, Paper, and Corporate segments, including the Jackson mill conversion, revenue recognition, and legal proceedings - The company operates in three reportable segments: Packaging, Paper, and Corporate and Other[25](index=25&type=chunk) - The Jackson, Alabama mill is undergoing a permanent conversion from producing uncoated freesheet (UFS) paper to linerboard to meet strong packaging demand, with its results now split between the Packaging and Paper segments[26](index=26&type=chunk) Revenue by Product Line (in millions) | Product Line | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Packaging** | $1,964.5 | $1,623.6 | | **Paper** | $153.5 | $164.6 | | **Corporate and Other** | $18.4 | $19.0 | | **Total revenue** | $2,136.4 | $1,807.2 | Segment Operating Income (in millions) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Packaging** | $362.2 | $257.9 | | **Paper** | $22.4 | $8.7 | | **Corporate and Other** | ($28.1) | ($28.3) | | **Total Income from operations** | $356.5 | $238.3 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong Q1 2022 performance to higher prices, mix, and volume in Packaging, offsetting significant inflation, with Q2 anticipating continued demand but higher outage costs - Q1 2022 net income increased to **$254 million** (**$2.70/share**) from **$167 million** (**$1.75/share**) in Q1 2021, driven primarily by higher prices and mix in the Packaging and Paper segments[101](index=101&type=chunk) - Key challenges included inflation-related cost increases in energy, fiber, chemicals, labor, and freight[101](index=101&type=chunk) - The outlook for Q2 2022 anticipates strong demand and higher prices in both segments, but also higher scheduled mill outage costs and continued cost inflation[108](index=108&type=chunk) - Expected capital investments for 2022 are approximately **$800 million**, including spending on the Jackson mill conversion[130](index=130&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Net sales grew 18.2% to $2.14 billion in Q1 2022, with Packaging sales up 21.0% due to higher prices/mix and volume, while Paper sales declined 6.7% Change in Net Sales (Q1 2022 vs Q1 2021, in millions) | Segment | Q1 2022 Sales | Q1 2021 Sales | Change | | :--- | :--- | :--- | :--- | | **Packaging** | $1,964.5 | $1,623.6 | +$340.9 | | **Paper** | $153.5 | $164.6 | -$11.1 | | **Total Net Sales** | $2,136.4 | $1,807.2 | +$329.2 | Change in Income from Operations (Q1 2022 vs Q1 2021, in millions) | Segment | Q1 2022 Income | Q1 2021 Income | Change | | :--- | :--- | :--- | :--- | | **Packaging** | $362.2 | $257.9 | +$104.3 | | **Paper** | $22.4 | $8.7 | +$13.7 | | **Total Income from Operations** | $356.5 | $238.3 | +$118.2 | [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company maintained strong liquidity with $629 million in cash and $321 million in unused borrowing capacity, supported by increased operating cash flow - Primary liquidity sources are cash from operations and an available revolving credit facility, with total liquidity including **$629 million** in cash and **$321 million** in unused borrowing capacity at quarter-end[125](index=125&type=chunk) Cash Flow Comparison (Q1 2022 vs Q1 2021, in millions) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Operating** | $325.3 | $191.6 | | **Investing** | ($221.2) | ($87.5) | | **Financing** | ($94.2) | ($95.3) | [Reconciliations of Non-GAAP Financial Measures to Reported Amounts](index=23&type=section&id=Reconciliations%20of%20Non-GAAP%20Financial%20Measures%20to%20Reported%20Amounts) This section reconciles non-GAAP measures, showing Q1 2022 reported net income at $254.2 million and consolidated EBITDA at $466.2 million, with EBITDA excluding special items at $467.2 million EBITDA Reconciliation (in millions) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Net income** | $254.2 | $166.5 | | **EBITDA** | $466.2 | $339.1 | | **EBITDA excluding special items** | $467.2 | $341.8 | Segment EBITDA Excluding Special Items (in millions) | Segment | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Packaging** | $463.9 | $352.1 | | **Paper** | $29.0 | $15.8 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposure to interest rate changes is mitigated as 100% of its outstanding debt carried fixed interest rates as of March 31, 2022 - As of March 31, 2022, **100%** of PCA's outstanding debt is at fixed interest rates[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2022, while integrating controls for the recently acquired Advance Packaging Corporation - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022[151](index=151&type=chunk) - The company is in the process of integrating Advance Packaging's controls over financial reporting following its acquisition on December 11, 2021[152](index=152&type=chunk) [PART II OTHER INFORMATION](index=27&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in multiple lawsuits related to a 2017 explosion at its DeRidder, Louisiana facility, which are believed to be covered by liability insurance - The company faces multiple lawsuits alleging negligence from a 2017 explosion at its DeRidder, Louisiana mill, which are believed to be covered by insurance, subject to a met **$1.0 million** deductible[93](index=93&type=chunk) - An investigation by the U.S. Environmental Protection Agency (EPA) related to the DeRidder incident is ongoing, with civil judicial enforcement discussions with the EPA and DOJ in progress[95](index=95&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 were reported - No material changes to risk factors were reported for the quarter[156](index=156&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board authorized an additional $1 billion for share repurchases on January 26, 2022, with no shares repurchased during Q1 2022, leaving the full amount available - The company did not repurchase any shares of its common stock under its authorized plan during Q1 2022[81](index=81&type=chunk) - As of March 31, 2022, **$1 billion** remained available for repurchase under the company's stock repurchase program authorized in January 2022[81](index=81&type=chunk)[157](index=157&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications as required by the Sarbanes-Oxley Act of 2002 and Inline XBRL data files - Exhibits filed include CEO/CFO certifications (**31.1**, **31.2**, **32**) and Inline XBRL documents (**101** series)[162](index=162&type=chunk)

Financial Data and Key Metrics Changes - First quarter net income was $254 million or $2.70 per share, compared to $169 million or $1.77 per share in the first quarter of 2021, reflecting a significant increase [4][5] - First quarter net sales increased to $2.1 billion in 2022 from $1.8 billion in 2021 [5] - Total company EBITDA for the first quarter, excluding special items, was $467 million in 2022 compared to $342 million in 2021 [5][6] - The increase in earnings per share was primarily driven by higher prices and mix, contributing $1.83, and volume contributing $0.23 in the packaging segment [6][7] Business Line Data and Key Metrics Changes - In the packaging business, EBITDA excluding special items was $464 million with sales of $1,960 million, resulting in a 23.6% margin, up from last year's EBITDA of $352 million and sales of $1.62 billion with a 21.7% margin [9] - The paper segment reported EBITDA of $0.29 million with sales of $153 million, an 18.9% margin, compared to $0.16 million and $165 million for a 9.6% margin in the first quarter of 2021 [19] Market Data and Key Metrics Changes - Demand in the packaging segment remained strong, with total volume in corrugated products plants up 2.9% and shipments per day up 1.3% compared to the previous year [13] - Domestic containerboard and corrugated products prices contributed $1.60 per share above the first quarter of 2021 [15] Company Strategy and Development Direction - The company continues to implement previously announced price increases in both packaging and paper segments, anticipating strong demand in the packaging segment [26] - The focus remains on aligning with the right customers and supporting their growth, which has been a long-term strategy for the company [79] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing inflationary pressures, particularly in energy, fiber, and logistics, while also noting improvements in operational efficiencies [11][27] - The company expects second quarter earnings of $2.83 per share, despite anticipated lower volume in the paper segment due to scheduled outages [27] Other Important Information - Cash from operations for the first quarter was $339 million, with free cash flow of $113 million, and liquidity at $1.1 billion [23] - The company revised its estimated cost impact from scheduled mill maintenance outages for the year to $1.04 per share [24] Q&A Session Summary Question: Price increase implementation cadence - Management confirmed that the implementation is on track, with the majority of price increases expected in the second quarter [34] Question: Spot rates for trucking - Management noted slight improvements in the spot market but indicated that freight costs are still expected to rise by about 5% in the second quarter [36][37] Question: Inventory levels and customer needs during downtime - Management stated that necessary inventory has been preplanned for the upcoming maintenance shutdown, ensuring customer needs will be met [39] Question: Impact of new corrugating capacity on efficiency - Management indicated that new investments in corrugating capacity have not significantly impacted their efficiency [45] Question: Labor productivity and constraints - Management acknowledged ongoing challenges in the labor market but noted improvements in productivity due to capital investments [82] Question: Differentiating inflation levels at mill vs converting levels - Management confirmed that all areas are experiencing significant inflationary pressures, particularly in converting plants [87]

Part I [Business](index=3&type=section&id=Item%201.%20Business) Packaging Corporation of America (PCA) is a leading North American producer of containerboard and uncoated freesheet paper, operating eight mills and 90 corrugated products plants - PCA is the third largest producer of containerboard products and a leading producer of uncoated freesheet (UFS) paper in North America, operating eight mills and 90 corrugated products plants[12](index=12&type=chunk) - The company is organized into three reportable segments: Packaging, Paper, and Corporate and Other[13](index=13&type=chunk) Production and Shipments Overview (2019-2021) | Metric | Unit | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | | Containerboard Production | thousand tons | 4,887 | 4,341 | 4,249 | | Corrugated Products Shipments | billion sq. ft. | 65.7 | 62.8 | 59.4 | | UFS Production | thousand tons | 572 | 648 | 947 | [Packaging Segment](index=4&type=section&id=Packaging) PCA's largest segment, Packaging, produces containerboard and corrugated products, generating **$7.1 billion in net sales** in 2021, utilizing wood fiber and biogenic fuels Packaging Segment 2021 Performance | Metric | Value | | :--- | :--- | | Net Sales to Third Parties | $7.1 billion | | Containerboard Production | 4.9 million tons | | Corrugated Products Sales | 65.7 billion square feet (BSF) | - The Jackson, Alabama mill began converting to containerboard production in late 2020, with the No. 3 machine permanently converted in Q1 2021 and the No. 1 machine starting corrugating medium production in late 2021[23](index=23&type=chunk) - Fiber is the largest raw material cost, with recycled fiber usage at **18% of containerboard production** in 2021; **61% of 81 million MMBTUs** consumed for energy was from self-generated biogenic fuels[26](index=26&type=chunk)[30](index=30&type=chunk) - The segment's primary national competitors include International Paper, WestRock Company, Georgia-Pacific LLC, and Pratt Industries[38](index=38&type=chunk) [Paper Segment](index=7&type=section&id=Paper) The Paper segment, a leading North American producer of uncoated freesheet, operates two mills with **602,000 tons annual capacity** and faces declining demand due to electronic alternatives and competition - The segment has an annual production capacity of **602,000 tons** from two mills: International Falls, MN, and Jackson, AL[40](index=40&type=chunk) - Office Depot, Inc. is the largest customer, representing **51% of the Paper segment's sales revenue** and **4% of consolidated sales revenue in 2021**; the current supply agreement runs through December 31, 2022[48](index=48&type=chunk)[90](index=90&type=chunk) - The paper market is highly competitive, facing pressure from other producers (like Domtar and Sylvamo) and electronic alternatives, which are causing a decline in demand for UFS paper products[49](index=49&type=chunk)[50](index=50&type=chunk)[81](index=81&type=chunk) [Human Capital](index=8&type=section&id=Human%20Capital) As of December 31, 2021, PCA employed approximately **15,200 people**, with **63% of hourly employees unionized**, focusing on safety, recruitment, and diversity initiatives Employee Statistics (as of Dec 31, 2021) | Category | Number | | :--- | :--- | | Total Employees | ~15,200 | | Salaried Employees | 4,400 | | Hourly Employees | 10,800 | | Unionized Hourly Employees | ~63% | - The company has established a Diversity, Equity, and Inclusion Council and began publicly disclosing its EEO-1 report in 2021[55](index=55&type=chunk) - PCA experienced no work stoppages in 2021 and believes it has satisfactory labor relations[57](index=57&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces various risks including COVID-19 impacts, operational challenges, input cost volatility, customer concentration, and other external and internal factors - **COVID-19 Risks:** The pandemic poses uncertainty regarding future operational disruptions, workforce availability, and supply chain costs It has already caused significantly lower demand for UFS paper products[76](index=76&type=chunk)[78](index=78&type=chunk) - **Operational & Industry Risks:** The business is subject to industry price cyclicality, intense competition, and potential increases in the cost of fiber, fuel, and chemicals A **$10/ton increase in recycled fiber cost** would add **$8.6 million in expense**[79](index=79&type=chunk)[80](index=80&type=chunk)[85](index=85&type=chunk) - **Customer Concentration Risk:** The Paper segment relies heavily on Office Depot, which accounted for **51% of its sales in 2021** A reduction in sales to Office Depot could significantly harm the segment's results[89](index=89&type=chunk)[90](index=90&type=chunk) - **Financial & Economic Risks:** The business is exposed to adverse economic conditions, including high inflation A **1% increase in cash costs (COS & SG&A)** would amount to a **$60 million increase in expenses**[101](index=101&type=chunk)[103](index=103&type=chunk) [Properties](index=16&type=section&id=Item%202.%20Properties) PCA owns all eight of its mills and corporate headquarters, along with 53 of its 90 corrugated manufacturing facilities, with the remainder leased - The company owns all eight of its mills and its corporate headquarters[111](index=111&type=chunk)[112](index=112&type=chunk) - Of the 90 corrugated manufacturing operations, PCA owns **53 facilities** (including 45 corrugated plants) and leases **37 facilities** (including 14 corrugated plants)[111](index=111&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=17&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) PCA's common stock trades on the NYSE, with a new **$1 billion share repurchase program** authorized in January 2022, and its 5-year cumulative total shareholder return was **185.17%** - In January 2022, the Board of Directors authorized a new **$1 billion share repurchase program**[119](index=119&type=chunk) - In Q4 2021, PCA repurchased **1.4 million shares** of common stock for **$193.0 million**, completing its prior authorization, with no repurchases made in 2020 or 2019[120](index=120&type=chunk) 5-Year Cumulative Total Shareholder Return (2016-2021) | Entity | 2016 Investment | 2021 Value | Cumulative Return | | :--- | :--- | :--- | :--- | | Packaging Corporation of America | $100.00 | $185.17 | 85.17% | | S&P 500 | $100.00 | $233.41 | 133.41% | | S&P Midcap 400 | $100.00 | $184.96 | 84.96% | | Peer Group | $100.00 | $110.53 | 10.53% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) PCA's 2021 net sales increased to **$7.73 billion** and net income to **$841 million**, driven by Packaging segment growth and the Advance Packaging acquisition, despite cost inflation Financial Performance (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Sales | $7.73 billion | $6.66 billion | | Net Income | $841 million | $461 million | | Diluted EPS | $8.83 | $4.84 | | Net Income (Excluding Special Items) | $894 million | $550 million | | Diluted EPS (Excluding Special Items) | $9.39 | $5.78 | - Performance was driven by higher prices and mix in both segments and higher volumes in Packaging, partially offset by higher operating costs, converting costs, and freight expenses[130](index=130&type=chunk) - In December 2021, PCA acquired Advance Packaging Corporation for **$195 million** to further integrate its containerboard production[134](index=134&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) In 2021, net sales increased **16.1% to $7.73 billion**, driven by **19.1% growth in Packaging sales** to **$7.05 billion**, while Paper segment sales declined due to mill conversion Net Sales by Segment (2021 vs. 2020) | Segment | 2021 Net Sales (millions) | 2020 Net Sales (millions) | Change (%) | | :--- | :--- | :--- | :--- | | Packaging | $7,052.6 | $5,919.5 | +19.1% | | Paper | $599.7 | $674.8 | -11.1% | | **Total** | **$7,730.3** | **$6,658.2** | **+16.1%** | Income from Operations by Segment (2021 vs. 2020) | Segment | 2021 Income (millions) | 2020 Income (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Packaging | $1,306.0 | $829.5 | +$476.5 | | Paper | $39.1 | $(20.0) | +$59.1 | | **Total** | **$1,241.4** | **$723.9** | **+$517.5** | - In 2020, the company recognized a non-cash goodwill impairment charge of **$55 million** for the Paper reporting unit, with no such charge in 2021[149](index=149&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) PCA's 2021 liquidity was supported by **$1.09 billion in operating cash flow**, with **$794 million used in investing activities** (including **$605 million in capital expenditures** and **$195 million for acquisitions**), and **$656 million used in financing activities** including debt refinancing Cash Flow Summary (in millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,094.1 | $1,032.8 | | Net cash used for investing activities | $(794.4) | $(426.1) | | Net cash used for financing activities | $(655.6) | $(311.6) | - Capital expenditures were **$605 million in 2021** and are expected to be approximately **$800 million in 2022**, including spending on the Jackson mill conversion[163](index=163&type=chunk)[165](index=165&type=chunk) - In 2021, the company issued **$700 million of 3.05% Senior Notes due 2051** and used the proceeds and cash on hand to redeem **$700 million of 4.50% Senior Notes due 2023**[167](index=167&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment in areas such as pensions, goodwill impairment testing (including a **$55.2 million impairment** for the Paper segment in 2020), and long-lived asset impairment reviews - **Pensions:** Pension expense and liabilities are sensitive to assumptions; a **0.25% decrease in the discount rate** would have increased 2021 pension expense by **$2.2 million**, while a **0.25% decrease in the expected rate of return on assets** would have increased it by **$3.2 million**[189](index=189&type=chunk) - **Goodwill Impairment:** A triggering event in Q2 2020 related to the Paper segment resulted in a full impairment charge of **$55.2 million**, while the Q4 2021 annual test for the Packaging segment indicated no impairment[193](index=193&type=chunk)[194](index=194&type=chunk)[198](index=198&type=chunk) - **Long-Lived Asset Impairment:** A recoverability test on the Paper segment's long-lived assets in Q2 2020 indicated they were **100% recoverable**[201](index=201&type=chunk)[202](index=202&type=chunk) [Financial Statements and Supplementary Data](index=35&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents PCA's audited consolidated financial statements for 2021, including the independent auditor's unqualified opinion on financial statements and internal controls, with detailed notes on accounting policies, acquisitions, and debt - The independent auditor, KPMG LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[215](index=215&type=chunk) - The audit of internal control over financial reporting excluded Advance Packaging Corporation, acquired in December 2021, which represented approximately **3% of consolidated total assets**[216](index=216&type=chunk) - The auditor identified the evaluation of the value of the pension benefit obligation as a critical audit matter due to the specialized skills required and sensitivity to the discount rate assumption[224](index=224&type=chunk)[225](index=225&type=chunk) [Consolidated Financial Statements](index=38&type=section&id=Consolidated%20Financial%20Statements) PCA's 2021 consolidated financial statements show **$7,730.3 million in net sales**, **$841.1 million in net income**, **$7,836.8 million in total assets**, and **$1,094.1 million in operating cash flow** Key Financial Statement Data (2021) | Metric | Value (millions) | | :--- | :--- | | **Income Statement** | | | Net Sales | $7,730.3 | | Gross Profit | $1,873.0 | | Net Income | $841.1 | | **Balance Sheet (Year-End)** | | | Total Assets | $7,836.8 | | Total Liabilities | $4,229.6 | | Total Stockholders' Equity | $3,607.2 | | **Cash Flow Statement** | | | Net Cash from Operating Activities | $1,094.1 | [Notes to Consolidated Financial Statements](index=42&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes to the financial statements detail the **$194.9 million Advance Packaging acquisition**, **$700 million debt refinancing**, improved pension underfunded status to **$121.1 million**, and capital commitments of **$784.9 million** - On December 11, 2021, PCA acquired Advance Packaging for **$194.9 million**, allocating **$60.0 million to goodwill** and **$50.2 million to intangible assets**[323](index=323&type=chunk) - In 2021, the company refinanced debt by issuing **$700.0 million of 3.05% senior notes due 2051** and redeeming its **$700.0 million 4.50% notes due 2023**[349](index=349&type=chunk) - The pension plans' underfunded status improved from **$264.9 million in 2020 to $121.1 million in 2021**, primarily due to an increase in the discount rate assumption and asset returns[368](index=368&type=chunk) - The company has capital commitments of approximately **$784.9 million** as of December 31, 2021, for facility expansion and replacement[425](index=425&type=chunk) [Controls and Procedures](index=76&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that PCA's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, excluding the recently acquired Advance Packaging Corporation - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[438](index=438&type=chunk) - Management's assessment of internal control over financial reporting concluded that such controls were effective as of December 31, 2021[443](index=443&type=chunk) - The assessment of internal control over financial reporting excluded the newly acquired Advance Packaging Corporation, which accounted for approximately **3% of total assets**[439](index=439&type=chunk)[443](index=443&type=chunk) Part III [Directors, Executive Compensation, and Other Matters](index=78&type=section&id=Item%2010%2C%2011%2C%2013%2C%2014) This section incorporates by reference information from PCA's 2022 Proxy Statement regarding directors, executive officers, corporate governance, executive compensation, and related party transactions - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Certain Relationships and Related Transactions (Item 13), and Principal Accounting Fees and Services (Item 14) is incorporated by reference from the company's 2022 Proxy Statement[448](index=448&type=chunk)[451](index=451&type=chunk)[452](index=452&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=78&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference, with **1,317,879 securities** remaining available for future issuance under equity compensation plans as of December 31, 2021 Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Securities to Be Issued Upon Exercise (A) | Weighted-Average Exercise Price (B) | Securities Remaining for Future Issuance (C) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by securityholders | — | $ — | 1,317,879 | | Equity compensation plans not approved by securityholders | N/A | N/A | N/A | | **Total** | **—** | **$ —** | **1,317,879** | - The number of securities to be issued upon exercise excludes **1,009,540 shares** of unvested restricted stock and performance units[450](index=450&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=80&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists exhibits filed with the 10-K, including corporate documents, credit agreements, employee benefit plans, and required CEO/CFO certifications and auditor consents - Lists key agreements including the Credit Agreement dated June 8, 2021, and indentures for various senior notes with maturities ranging from 2024 to 2051[455](index=455&type=chunk) - Includes management compensatory plans such as the Amended and Restated 1999 Long-Term Equity Incentive Plan and the Executive Incentive Compensation Plan[455](index=455&type=chunk) - Contains required filings such as the Consent of KPMG LLP (auditor) and CEO/CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[457](index=457&type=chunk)

Packaging Corporation of America (NYSE:PKG) Q4 2021 Earnings Conference Call January 27, 2021 9:00 AM ET Company Participants Mark W. Kowlzan - Chairman and CEO Thomas A. Hassfurther - EVP, Corrugated Products Robert P. Mundy - EVP and CFO Conference Call Participants George Staphos - Bank of America Philip Ng - Jefferies Mark Wilde - Bank of Montreal Mark Weintraub - Seaport Research Partners Gabe Hajde - Wells Fargo Adam Josephson - KeyBanc Capital Michael Roxland - Truist Securities Anthony Pettinari - C ...

Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-15399 (Exact Name of Registrant as Specified in its Charter) (State or Other Jurisdiction of Incorporation or Organization) 1 North Field ...

Packaging Corporation of America (NYSE:PKG) Q3 2021 Earnings Conference Call October 26, 2021 9:00 AM ET Company Participants Mark Kowlzan - CEO Tom Hassfurther - EVP Bob Mundy - CFO Conference Call Participants John Babcock - Bank of America John Dunigan - Jefferies Alex Liscum - Truist Securities Mark Weintraub - Seaport Research Partners Adam Josephson - KeyBanc Capital Anthony Pettinari - Citi Cleve Rueckert - UBS Operator Thank you for joining Packaging Corporation of America's Third Quarter 2021 Earni ...