PCA(PKG) - 2024 Q4 - Annual Report

Production and Sales Performance - In 2024, the Packaging segment produced 294 billion square feet (BSF) of containerboard, an increase from 265.4 BSF in 2023, representing a growth of approximately 10.8%[19]. - Corrugated products shipments reached 66.9 BSF in 2024, up from 60.5 BSF in 2023, indicating a year-over-year increase of about 10.6%[17]. - UFS production for 2024 totaled 499 thousand tons, compared to 472 thousand tons in 2023, reflecting a growth of approximately 5.7%[17]. - The total annual containerboard capacity was approximately 301 BSF as of December 31, 2024[20]. - Total corrugated products shipments increased by 10.5% for the year, with containerboard production at approximately 294 billion square feet (BSF)[132]. - Containerboard export shipments increased by 15.4% compared to 2023, indicating strong demand in international markets[136]. Financial Performance - Net sales for the year ended December 31, 2024, were $8.4 billion, up from$ 7.8 billion in 2023, representing a 7.7% increase[130]. - Net income for 2024 was $805 million, or$ 8.93 per diluted share, compared to $765 million, or$ 8.48 per diluted share, in 2023, reflecting a 5.2% increase in earnings per share[130]. - Packaging segment operating income increased to $1,102 million in 2024 from$ 1,074 million in 2023, with segment EBITDA excluding special items rising to $1,598 million from$ 1,556 million[131]. - Paper segment operating income rose to $130 million in 2024 from$ 119 million in 2023, with segment EBITDA excluding special items increasing to $154 million from$ 151 million[135]. - Income from operations increased by $26 million, or 2.4%, to$ 1,101 million in 2024, including $12 million of special items compared to$ 25 million in 2023[147]. - Gross profit increased by $84 million in 2024, primarily due to higher volumes and lower freight expenses, despite challenges from lower prices and higher operating costs[144]. - EBITDA for 2024 was$ 1,626.9 million, up from $1,592.8 million in 2023, indicating improved operational performance[192]. - Comprehensive income for 2024 was$ 832.6 million, compared to $796.7 million in 2023, showing an increase of 4.5%[211]. Cost Management and Expenses - In 2024, the total company costs, including cost of sales (COS) and selling, general, and administrative expenses (SG&A), amounted to$ 7.2 billion, with cash costs at $6.6 billion[99]. - A 1% increase in COS and SG&A costs would result in an additional$ 72 million in total costs and $66 million in cash costs[99]. - A$ 10 per ton price increase in recycled fiber would lead to approximately $10 million in additional expenses based on 2024 consumption[81]. - A$ 0.10 per million MMBTU increase in natural gas prices would result in approximately $3 million of additional expense based on 2024 usage[82]. - The company spent$ 60 million on environmental compliance in 2024, up from $50 million in both 2023 and 2022[174]. Sustainability and Environmental Practices - In 2024, 21% of containerboard production utilized recycled fiber, highlighting the company's commitment to sustainable practices[27]. - The company aims to reduce absolute Scope 1 and 2 greenhouse gas emissions by 35% by 2030 from a 2021 baseline and achieve net-zero carbon emissions by 2050[179]. - The company maintained an environmental reserve of$ 25.8 million for ongoing and anticipated remedial projects as of December 31, 2024[177]. Labor and Workforce Management - As of December 31, 2024, the company had approximately 15,400 employees, including 4,300 salaried and 11,100 hourly employees, with about 60% of hourly employees working under collective bargaining agreements[57]. - The company experienced no work stoppages in 2024 and believes it has satisfactory labor relations with its employees[57]. - The company has faced labor shortages and higher employee turnover but managed to maintain adequate workforce availability and supply of raw materials[54]. - The company is expanding recruiting, training, and development programs to attract and retain a talented workforce[55]. - Labor market conditions remain tight, leading to potential challenges in attracting and retaining qualified personnel[93]. Debt and Financial Obligations - At December 31, 2024, the company had $2.5 billion of debt outstanding and a$ 323 million undrawn revolving credit facility[100]. - The company issued $400 million of 5.70% senior notes due 2033 in November 2023, with$ 4 million in debt issuance costs[163]. - The estimated pension benefit obligation totaled $1,119 million as of December 31, 2024, with sensitivity to changes in the discount rate assumption[206]. Market and Competitive Landscape - Major competitors in the containerboard market include International Paper, Smurfit WestRock, and Georgia-Pacific LLC, with competition primarily based on quality, service, and price[39]. - The primary end-use markets for corrugated products include food, beverages, and agricultural products (43%), and retail and wholesale trade (29%)[37]. - The economic outlook for 2025 remains uncertain, with persistent inflation affecting production and transportation costs[73]. - The company operates substantially all of its business in the United States, making it vulnerable to changes in domestic economic conditions[73]. Shareholder Returns and Dividends - The company declared dividends of$ 5.00 per common share for both 2024 and 2023, maintaining a consistent dividend policy[211]. - The company did not repurchase any shares in 2024, compared to repurchases of 0.3 million shares for $42 million in 2023[162].