PCA(PKG) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides the unaudited consolidated financial information for Packaging Corporation of America Item 1. Financial Statements This section presents PCA's unaudited consolidated financial statements, including income, balance sheets, cash flows, and equity changes, with detailed notes Consolidated Statements of Income and Comprehensive Income This section presents the company's consolidated income and comprehensive income statements, detailing financial performance metrics Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Net sales | 2,171.3 | 2,075.3 | 96.0 | 4.6% | | Gross profit | 483.0 | 437.7 | 45.3 | 10.4% | | Income from operations | 333.7 | 276.0 | 57.7 | 20.9% | | Net income | 241.5 | 198.9 | 42.6 | 21.4% | | Basic EPS | 2.68 | 2.22 | 0.46 | 20.7% | | Diluted EPS | 2.67 | 2.21 | 0.46 | 20.8% | | Dividends declared per common share | 1.25 | 1.25 | 0.00 | 0.0% | Consolidated Statements of Income (Six Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Net sales | 4,312.3 | 4,054.8 | 257.5 | 6.4% | | Gross profit | 937.8 | 808.1 | 129.7 | 16.1% | | Income from operations | 614.0 | 472.0 | 142.0 | 30.1% | | Net income | 445.3 | 345.9 | 99.4 | 28.7% | | Basic EPS | 4.95 | 3.86 | 1.09 | 28.2% | | Diluted EPS | 4.93 | 3.84 | 1.09 | 28.4% | | Dividends declared per common share | 2.50 | 2.50 | 0.00 | 0.0% | Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates Consolidated Balance Sheet (As of June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :------------------------- | :--------------------------- | :---------- | :--------- | | Total current assets | 3,336.6 | 3,233.0 | 103.6 | 3.2% | | Total assets | 9,041.2 | 8,833.2 | 208.0 | 2.4% | | Total current liabilities | 943.0 | 1,001.6 | (58.6) | -5.8% | | Total long-term liabilities | 3,466.1 | 3,427.6 | 38.5 | 1.1% | | Total stockholders' equity | 4,632.1 | 4,404.0 | 228.1 | 5.2% | | Total liabilities and stockholders' equity | 9,041.2 | 8,833.2 | 208.0 | 2.4% | Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :---------------- | :---------------- | :---------- | :--------- | | Net cash provided by operating activities | 638.7 | 538.7 | 100.0 | 18.6% | | Net cash used for investing activities | (287.0) | (323.8) | 36.8 | -11.4% | | Net cash used for financing activities | (248.8) | (249.3) | 0.5 | -0.2% | | Net increase (decrease) in cash and cash equivalents | 102.9 | (34.4) | 137.3 | -399.1% | | Cash and cash equivalents, end of period | 787.9 | 613.6 | 174.3 | 28.4% | Consolidated Statements of Changes in Stockholders' Equity This section details the changes in the company's equity accounts, including common stock, retained earnings, and comprehensive income Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Metric | Common Stock (Shares) | Common Stock (Amount $) | Additional Paid in Capital ($) | Retained Earnings ($) | Accumulated Other Comprehensive Loss ($) | Total Stockholders' Equity ($) | | :-------------------------------- | :-------------------- | :---------------------- | :----------------------------- | :-------------------- | :--------------------------------------- | :----------------------------- | | Balance at January 1, 2025 | 89,802 | 0.9 | 669.8 | 3,776.7 | (43.4) | 4,404.0 | | Common stock withheld and retired to cover taxes on vested stock awards | (116) | — | (1.2) | (21.9) | — | (23.1) | | Common stock dividends declared | — | — | — | (226.6) | — | (226.6) | | Share-based compensation and other | 294 | — | 30.5 | — | — | 30.5 | | Comprehensive income | — | — | — | 445.3 | 2.0 | 447.3 | | Balance at June 30, 2025 | 89,980 | 0.9 | 699.1 | 3,973.5 | (41.4) | 4,632.1 | Condensed Notes to Unaudited Quarterly Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited quarterly consolidated financial statements 1. Nature of Operations and Basis of Presentation This note describes PCA's business activities, segments, and the foundational principles used in preparing financial statements - Packaging Corporation of America (PCA) is a large diverse manufacturer of packaging and paper products, operating primarily in the United States. It reports business in three segments: Packaging, Paper, and Corporate and Other[23][24] - On July 1, 2025, PCA announced an agreement to acquire Greif, Inc.'s containerboard business for $1.8 billion in cash, expected to close by the end of Q3. This acquisition includes two containerboard mills (800,000 tons capacity) and eight sheet feeder/corrugated plants across the U.S[25] 2. New and Recently Adopted Accounting Standards This note outlines the impact of recently adopted and upcoming accounting standards on the company's financial reporting - Effective January 1, 2024, PCA adopted ASU 2023-07, Segment Reporting, which improved reportable segment disclosure requirements, with no significant impact on the Company's disclosures[28] - New accounting standards not yet adopted include ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Income Tax Disclosures), both of which the Company is currently assessing for impact[29][30] 3. Revenue This note details the company's revenue recognition policies and disaggregates revenue by product line Revenue Disaggregated by Product Line (Millions $) | Product Line | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Packaging | 2,005.9 | 1,908.3 | 3,976.3 | 3,706.5 | | Paper | 145.8 | 150.1 | 300.0 | 313.9 | | Corporate and Other | 19.6 | 16.9 | 36.0 | 34.4 | | Total revenue | 2,171.3 | 2,075.3 | 4,312.3 | 4,054.8 | - Revenue is recognized when control of goods or services is transferred to customers. For packaging and paper products, this occurs at the point of shipment from the mill or manufacturing facility[32][34][37] - Corporate and Other revenue primarily relates to Louisiana Timber Procurement Company, L.L.C. (LTP), a variable-interest entity consolidated by PCA[38] 4. Earnings Per Share This note provides the calculation of basic and diluted earnings per common share for the reporting periods Earnings Per Common Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Net income attributable to common shareholders (Millions $) | 442.3 | 343.4 | | Weighted average basic common shares outstanding (Millions) | 89.3 | 89.1 | | Weighted average diluted common shares outstanding (Millions) | 89.7 | 89.5 | | Basic income per common share ($) | 4.95 | 3.86 | | Diluted income per common share ($) | 4.93 | 3.84 | 5. Other Income (Expense), Net This note details various non-operating income and expense items, including facilities closure costs and litigation impacts Other Income (Expense), Net (Millions $) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Facilities closure and other income (costs) | 25.3 | (0.1) | 23.0 | — | | Asset disposals and write-offs | (10.5) | (8.0) | (18.8) | (15.5) | | Acquisition and integration-related costs | (1.6) | — | (1.6) | — | | DeRidder litigation | — | (2.0) | — | (125.7) | | DeRidder litigation insurance recovery | — | 2.0 | — | 125.7 | | Jackson mill conversion-related activities | — | 0.6 | — | (7.6) | | Other | (9.3) | (4.7) | (11.8) | (11.7) | | Total | 3.9 | (12.2) | (9.2) | (34.8) | - For the three months ended June 30, 2025, total other income (expense), net, was $3.9 million, a significant improvement from a $(12.2) million expense in the prior year, primarily due to income from facilities closure and other income[43] - For the six months ended June 30, 2025, total other income (expense), net, was $(9.2) million, an improvement from $(34.8) million in the prior year, largely due to the absence of DeRidder litigation expenses and recoveries[43] 6. Income Taxes This note provides information on income tax expense, effective tax rates, and the impact of new tax legislation Income Tax Expense and Effective Tax Rate | Period | Income Tax Expense (Millions $) | Effective Tax Rate | | :-------------------------------- | :------------------------------ | :----------------- | | Three Months Ended June 30, 2025 | 79.1 | 24.7% | | Three Months Ended June 30, 2024 | 67.8 | 25.4% | | Six Months Ended June 30, 2025 | 142.7 | 24.3% | | Six Months Ended June 30, 2024 | 108.4 | 23.9% | - The decrease in the effective tax rate for the three months ended June 30, 2025, was primarily due to higher excess tax benefits from employee restricted stock and performance unit vests[44] - The increase in the effective tax rate for the six months ended June 30, 2025, was primarily due to lower excess tax benefits from employee restricted stock and performance unit vests[45] - Cash paid for taxes, net of refunds, increased to $140.5 million for the six months ended June 30, 2025, from $110.3 million in 2024, mainly due to higher forecasted taxable income[47] - The recently signed One Big Beautiful Bill Act (OBBBA) includes significant tax law changes, such as full expensing of certain depreciable property and R&D expenditures, which the Company is currently evaluating for impact[49] 7. Inventories This note details the composition of the company's inventories, including raw materials, work in process, and finished goods Inventories (Millions $) | Component | June 30, 2025 | December 31, 2024 | | :------------------ | :-------------- | :---------------- | | Raw materials | 356.4 | 356.6 | | Work in process | 17.4 | 15.5 | | Finished goods | 233.2 | 234.0 | | Supplies and materials | 537.7 | 518.8 | | Total Inventories | 1,144.7 | 1,124.9 | 8. Property, Plant, and Equipment This note provides a breakdown of the company's property, plant, and equipment, net of accumulated depreciation Property, Plant, and Equipment, Net (Millions $) | Component | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Land and land improvements | 216.4 | 203.4 | | Buildings | 1,234.3 | 1,140.0 | | Machinery and equipment | 7,547.0 | 7,368.8 | | Construction in progress | 350.9 | 397.2 | | Other | 200.2 | 195.8 | | Property, plant and equipment, at cost | 9,548.8 | 9,305.2 | | Less accumulated depreciation | (5,432.9) | (5,266.2) | | Property, plant, and equipment, net | 4,115.9 | 4,039.0 | - Depreciation expense for the three months ended June 30, 2025, was $130.8 million, up from $118.7 million in 2024. For the six months, it was $258.9 million in 2025, up from $236.8 million in 2024[51] 9. Goodwill and Intangible Assets This note details the company's goodwill and other intangible assets, including customer relationships and trademarks - Goodwill remained constant at $922.4 million as of June 30, 2025, and December 31, 2024, entirely within the Packaging segment[53] Intangible Assets (Excluding Goodwill) (Millions $) | Component | June 30, 2025 Gross Carrying Amount | June 30, 2025 Accumulated Amortization | December 31, 2024 Gross Carrying Amount | December 31, 2024 Accumulated Amortization | | :-------------------------- | :---------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------- | | Customer relationships | 546.0 | 380.2 | 546.0 | 362.4 | | Trademarks and trade names | 41.3 | 34.0 | 41.3 | 33.0 | | Other | 4.4 | 4.4 | 4.4 | 4.4 | | Total intangible assets | 591.7 | 418.6 | 591.7 | 399.8 | - Amortization expense for intangible assets was $18.8 million for the six months ended June 30, 2025, compared to $18.9 million in the prior year[54] 10. Accrued Liabilities This note provides a breakdown of various accrued liabilities, including compensation, taxes, and litigation settlements Accrued Liabilities (Millions $) | Component | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Compensation and benefits | 134.3 | 168.5 | | Medical insurance and workers' compensation | 30.3 | 29.1 | | Franchise, property, sales and use taxes | 29.1 | 18.7 | | Customer rebates and other credits | 26.4 | 33.9 | | Severance, retention, and relocation | 4.4 | 3.4 | | Environmental liabilities and asset retirement obligations | 2.0 | 3.2 | | DeRidder litigation and other litigation | — | 96.2 | | Other | 11.7 | 9.9 | | Total | 238.2 | 362.9 | - Total accrued liabilities decreased significantly from $362.9 million at December 31, 2024, to $238.2 million at June 30, 2025, primarily due to the payment of DeRidder litigation and other litigation settlements[55] 11. Debt This note details the company's outstanding debt, including fixed-rate senior notes and interest payment information - Cash payments for interest decreased to $46.7 million for the six months ended June 30, 2025, from $53.9 million in 2024[56] - As of June 30, 2025, PCA had $2,492.4 million of fixed-rate senior notes outstanding, with a fair value estimated at $2,128.7 million[58] 12. Cash, Cash Equivalents, and Marketable Debt Securities This note provides details on the company's cash, cash equivalents, and available-for-sale marketable debt securities Cash, Cash Equivalents, and AFS Debt Securities (Millions $) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------------- | :----------------------- | :------------------------- | | Cash and cash equivalents | 784.7 | 684.8 | | Short-term marketable debt securities | 92.4 | 102.0 | | Long-term marketable debt securities | 75.6 | 65.2 | | Total | 955.9 | 852.2 | - The Company invests in highly rated, investment-grade securities with maturities generally ranging from one to two years for long-term marketable debt securities, aiming to minimize principal loss[63] - As of June 30, 2025, and December 31, 2024, no impairments related to marketable debt securities were considered credit losses, and all unrealized gains and losses were recorded in other comprehensive income (OCI)[65] 13. Employee Benefit Plans and Other Postretirement Benefits This note outlines the net periodic benefit costs for the company's pension plans and related contributions Net Periodic Benefit Cost for Pension Plans (Millions $) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | 2.6 | 3.1 | 5.2 | 6.3 | | Interest cost | 14.3 | 13.9 | 28.6 | 27.7 | | Expected return on plan assets | (15.6) | (16.5) | (31.2) | (32.9) | | Net amortization of unrecognized amounts | 1.4 | 1.6 | 2.8 | 3.1 | | Net periodic benefit cost | 2.7 | 2.1 | 5.4 | 4.2 | - PCA makes pension plan contributions sufficient to fund actuarially determined costs, generally the minimum required by ERISA. No contributions were made to qualified pension plans during the three and six months ended June 30, 2025 and 2024[67] 14. Share-Based Compensation This note details the company's share-based compensation expense and available shares for future equity grants - As of June 30, 2025, 2.5 million shares were available for future grants under the long-term equity incentive plan, which was amended in February 2024 to extend its term to May 8, 2034, and increase authorized shares by 2.4 million[70][71] Share-Based Compensation Expense (Millions $) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restricted stock | 6.1 | 6.0 | 20.0 | 19.9 | | Performance units | 4.2 | 3.9 | 8.1 | 9.3 | | Total share-based compensation expense | 10.3 | 9.9 | 28.1 | 29.2 | | Income tax benefit | (2.6) | (2.5) | (7.0) | (7.3) | | Net of tax benefit | 7.7 | 7.4 | 21.1 | 21.9 | - Unrecognized compensation expense for all share-based awards totaled $74.0 million at June 30, 2025, with a remaining weighted average recognition period of 2.7 years[74] 15. Stockholders' Equity This note provides information on dividends paid, stock repurchases, and changes in accumulated other comprehensive income - PCA paid $224.7 million in dividends during the six months ended June 30, 2025. A quarterly cash dividend of $1.25 per share was declared on May 7, 2025, totaling $112.5 million[75] - No common stock repurchases were made during the three months ended June 30, 2025. $436.0 million remained available under the $1 billion repurchase authorization as of June 30, 2025[77] Changes in Accumulated Other Comprehensive Income (Loss) (AOCI) (Millions $) | Component | Balance at January 1, 2025 | Other comprehensive loss before reclassifications, net of tax | Amounts reclassified from AOCI, net of tax | Balance at June 30, 2025 | | :-------------------------------- | :------------------------- | :---------------------------------------------------------- | :----------------------------------------- | :----------------------- | | Unrealized Loss On Foreign Exchange Contracts | (0.1) | — | — | (0.1) | | Unrealized Loss on Marketable Debt Securities | 0.2 | 0.1 | — | 0.3 | | Unfunded Employee Benefit Obligations | (43.5) | — | 1.9 | (41.6) | | Total | (43.4) | 0.1 | 1.9 | (41.4) | 16. Transactions With Related Parties This note describes transactions with related parties, including the consolidated Louisiana Timber Procurement Company - Louisiana Timber Procurement Company, L.L.C. (LTP), 50% owned by PCA and 50% by Boise Cascade, is consolidated by PCA as the primary beneficiary. LTP procures wood and fiber for both companies in Louisiana[79] - LTP sales to Boise Cascade were $32.8 million for the six months ended June 30, 2025, down from $41.1 million in 2024. Fiber purchases from related parties were $4.0 million in 2025, down from $5.7 million in 2024[79][80] 17. Segment Information This note provides disaggregated financial information for the company's Packaging, Paper, and Corporate and Other segments - PCA operates in three reportable segments: Packaging, Paper, and Corporate and Other, each managed separately due to distinct products, services, and operating/marketing strategies[81] Segment Sales to External Customers (Millions $) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Packaging | 2,005.9 | 1,902.0 | 3,976.3 | 3,695.4 | | Paper | 145.8 | 150.1 | 300.0 | 313.9 | | Corporate and Other | 19.6 | 23.2 | 36.0 | 45.5 | | Total | 2,171.3 | 2,075.3 | 4,312.3 | 4,054.8 | Segment Income (Loss) from Operations (Millions $) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Packaging | 346.3 | 279.8 | 624.4 | 483.6 | | Paper | 25.8 | 26.7 | 61.4 | 56.4 | | Corporate and Other | (38.4) | (30.5) | (71.8) | (68.0) | | Total | 333.7 | 276.0 | 614.0 | 472.0 | 18. Commitments, Guarantees, Indemnifications and Legal Proceedings This note details the company's legal proceedings, including the DeRidder mill lawsuit and a new class action alleging price fixing - As of June 30, 2025, the settlement amount for the DeRidder mill lawsuit has been paid, and no amounts remain outstanding. Previously, a $59.2 million liability and corresponding receivable were recorded[92] - PCA was named as a defendant in a purported class action lawsuit on July 29, 2025, alleging conspiracy to raise containerboard prices and restrict capacity from November 1, 2020, to present. PCA believes the allegations are without merit and will vigorously defend the lawsuit[93] - The Company believes it is not reasonably possible that any other legal actions will have a material adverse effect on its financial condition, results of operations, or cash flows[94] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on PCA's financial performance, condition, and future outlook Overview This section provides a general description of PCA's business, its market position, and primary product offerings - PCA is the third largest producer of containerboard products and a leading producer of UFS paper in North America, operating eight mills and 85 corrugated products manufacturing plants[97] - The company's products include linerboard and corrugating medium for corrugated products, a wide variety of corrugated packaging, retail merchandise displays, honeycomb protective packaging, and communication-based papers[97] Executive Summary This section highlights key financial results and strategic developments, including the Greif acquisition, for the reporting period Key Financial Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change ($M) | Change (%) | | :-------------------------------- | :------------------- | :------------------- | :---------- | :--------- | | Net sales | 2,170 | 2,080 | 90 | 4.3% | | Net income | 242 | 199 | 43 | 21.6% | | Diluted EPS | 2.67 | 2.21 | 0.46 | 20.8% | | Net income (excl. special items) | 224 | 199 | 25 | 12.6% | | Diluted EPS (excl. special items) | 2.48 | 2.20 | 0.28 | 12.7% | - The increase in net income was primarily driven by higher prices and mix in the Packaging segment, lower fiber costs, higher prices and mix in the Paper segment, and a lower tax rate[99] - Packaging segment operating income increased to $346 million in Q2 2025 from $280 million in Q2 2024, with corrugated plant shipments up 1.7% per day[99] - Paper segment operating income slightly decreased to $26 million in Q2 2025 from $27 million in Q2 2024, mainly due to higher operating costs and lower volumes, partially offset by higher prices[100] - PCA announced the acquisition of Greif's containerboard business for $1.8 billion, expected to close by Q3, which will add 800,000 tons of production capacity and eight plants[104] Industry and Business Conditions This section discusses trends in North American corrugated products and UFS paper markets, including shipment volumes and pricing - North American industry-wide corrugated products shipments were down 2.6% in total and 1.0% per workday in Q2 2025 YoY. Industry containerboard production decreased 5.2%[105] - Containerboard export shipments were down 16.2% in Q2 2025 YoY. Reported index prices for linerboard and corrugating medium increased $40 per ton in February 2025[105] - North American UFS paper shipments were down 8.5% in the first six months of 2025 YoY. Average prices for cut size office papers increased by $47 per ton (3.2%) in Q2 2025 YoY[106] Outlook This section provides the company's expectations for future performance, including corrugated shipments, pricing, and operating costs - For Q3, PCA expects higher corrugated shipments and containerboard production, but lower export containerboard sales due to the global trade environment[107] - Packaging segment prices and mix are expected to be relatively flat with Q2 levels. Paper segment pricing is also expected to be flat, with production and sales increasing due to the completed International Falls mill outage and seasonal back-to-school orders[107] - Maintenance outage expense is expected to be lower in Q3, with no scheduled outages. Freight costs will be higher due to rail rate increases, while operating costs are expected to be near Q2 levels and fiber costs slightly lower[107] - Overall, PCA expects Q3 earnings to be higher than Q2 earnings, excluding special items, with this outlook not including any impact from the pending Greif acquisition[107] Results of Operations This section provides a detailed comparative analysis of the company's financial performance for the current and prior periods Three Months Ended June 30, 2025, compared to Three Months Ended June 30, 2024 This section analyzes the company's financial performance for the second quarter of 2025 compared to the same period in 2024 Q2 2025 vs. Q2 2024 Financial Performance (Millions $) | Metric | Q2 2025 | Q2 2024 | Change ($M) | Change (%) | | :-------------------------------- | :------ | :------ | :---------- | :--------- | | Net sales | 2,171.3 | 2,075.3 | 96.0 | 4.6% | | Income from operations | 333.7 | 276.0 | 57.7 | 20.9% | | Net income | 241.5 | 198.9 | 42.6 | 21.4% | | Net income excluding special items | 224.2 | 198.6 | 25.6 | 12.9% | | Consolidated EBITDA | 474.4 | 404.5 | 69.9 | 17.3% | | Packaging EBITDA excluding special items | 452.9 | 400.0 | 52.9 | 13.2% | | Paper EBITDA excluding special items | 30.3 | 30.6 | (0.3) | -1.0% | - Packaging net sales increased $98 million (5.1%) due to higher containerboard and corrugated products prices and mix ($107 million), partially offset by lower volume ($9 million). Domestic containerboard prices were 10.8% higher, and export prices were 10.4% higher[111] - Paper net sales decreased $4 million (2.9%) due to lower volume ($8 million), partially offset by higher prices and mix ($4 million)[112] - Gross profit increased $45 million, driven by higher prices/mix in Packaging and Paper, and lower fiber costs, partially offset by higher operating costs, maintenance outage expense, and lower volumes[113] - SG&A expenses increased $4 million, primarily due to higher employee-related expenses and insurance[114] - Packaging segment operating income increased $66 million, mainly from higher prices/mix ($119 million) and lower fiber costs ($18 million), despite higher operating/converting costs, maintenance outage expenses, and lower volumes[117] - Paper segment operating income decreased $1 million, primarily due to higher operating costs and lower volumes, partially offset by higher prices/mix[118] - Interest expense, net, increased $3 million due to higher interest expense from the November 2023 debt refinancing[120] Six Months Ended June 30, 2025, compared to Six Months Ended June 30, 2024 This section analyzes the company's financial performance for the first half of 2025 compared to the same period in 2024 H1 2025 vs. H1 2024 Financial Performance (Millions $) | Metric | H1 2025 | H1 2024 | Change ($M) | Change (%) | | :-------------------------------- | :------ | :------ | :---------- | :--------- | | Net sales | 4,312.3 | 4,054.8 | 257.5 | 6.4% | | Income from operations | 614.0 | 472.0 | 142.0 | 30.1% | | Net income | 445.3 | 345.9 | 99.4 | 28.7% | | Net income excluding special items | 432.4 | 353.2 | 79.2 | 22.4% | | Consolidated EBITDA | 892.6 | 728.9 | 163.7 | 22.5% | | Packaging EBITDA excluding special items | 862.1 | 726.2 | 135.9 | 18.7% | | Paper EBITDA excluding special items | 70.5 | 71.2 | (0.7) | -1.0% | - Packaging net sales increased $270 million (7.3%) due to higher prices/mix ($202 million) and higher volume ($68 million). Domestic containerboard prices were 7.1% higher, and export prices were 11.7% higher[125] - Paper net sales decreased $14 million (4.4%) due to lower volume ($20 million), partially offset by higher prices/mix ($6 million)[126] - Gross profit increased $130 million, driven by higher prices/mix and sales volumes in Packaging, lower fiber costs, and higher prices/mix in Paper, partially offset by higher operating costs and maintenance outage expense[127] - SG&A expenses increased $13 million, primarily due to higher employee-related expenses, insurance, and bad debt expense[128] - Packaging segment operating income increased $141 million, mainly from higher prices/mix ($210 million), lower fiber costs ($27 million), and higher sales/production volumes ($16 million), despite increased operating costs and maintenance outage expenses[131] - Paper segment operating income increased $5 million, benefiting from no special items in 2025 (vs. $6 million expense in 2024), higher prices/mix, and lower fixed/freight expenses, partially offset by lower volumes and higher operating/maintenance costs[132] - Interest expense, net, increased $6 million due to higher interest expense from the November 2023 debt refinancing and lower interest income[134] Liquidity and Capital Resources This section discusses the company's sources and uses of cash, borrowing capacity, and capital investment plans - Primary liquidity sources are net cash from operating activities and available borrowing capacity under the revolving credit facility. As of June 30, 2025, PCA had $788 million in cash, $168 million in marketable debt securities, and $323 million in unused borrowing capacity[136] Summary of Cash Flows (Six Months Ended June 30, Millions $) | Activity | 2025 | 2024 | Change ($M) | | :-------------------------------- | :----- | :----- | :---------- | | Operating activities | 638.7 | 538.7 | 100.0 | | Investing activities | (287.0) | (323.8) | 36.8 | | Financing activities | (248.8) | (249.3) | 0.5 | | Net increase (decrease) in cash and cash equivalents | 102.9 | (34.4) | 137.3 | - Net cash provided by operating activities increased by $100 million to $639 million in H1 2025, primarily due to higher income from operations and favorable changes in prepaid expenses and accounts receivable[139][141] - Cash used for investing activities decreased to $287 million in H1 2025 from $324 million in H1 2024. Capital investments were $318 million in H1 2025[140] - Expected capital investments for 2025 are in the range of $840 million to $870 million, including approximately $24 million for environmental compliance[142] - Net cash used for financing activities remained stable at $249 million in H1 2025. Dividends paid were $225 million, and $23 million was withheld for employee restricted stock taxes[143] Non-GAAP Financial Measures This section provides reconciliations and explanations for non-GAAP financial measures used to evaluate company performance - PCA uses non-GAAP financial measures such as earnings per diluted share excluding special items, net income excluding special items, EBITDA, and segment EBITDA to evaluate performance and provide meaningful comparisons, as these are used by management and investors[146] Earnings Per Diluted Share Reconciliation (Non-GAAP, $) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | As reported in accordance with GAAP | 2.67 | 2.21 | 4.93 | 3.84 | | Total special items | (0.19) | — | (0.14) | 0.08 | | Excluding special items | 2.48 | 2.20 | 4.79 | 3.92 | Net Income Reconciliation (Non-GAAP, Millions $) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | As reported in accordance with GAAP | 241.5 | 198.9 | 445.3 | 345.9 | | Total special items | (17.3) | (0.3) | (12.9) | 7.3 | | Excluding special items | 224.2 | 198.6 | 432.4 | 353.2 | EBITDA Reconciliation (Non-GAAP, Millions $) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | 241.5 | 198.9 | 445.3 | 345.9 | | Non-operating pension income | — | (1.1) | — | (2.2) | | Interest expense, net | 13.1 | 10.4 | 26.0 | 19.9 | | Income tax provision | 79.1 | 67.8 | 142.7 | 108.4 | | Depreciation, amortization, and depletion | 140.7 | 128.5 | 278.6 | 256.9 | | EBITDA | 474.4 | 404.5 | 892.6 | 728.9 | | Total special items | (23.6) | (0.5) | (20.8) | 8.3 | | EBITDA excluding special items | 450.8 | 404.0 | 871.8 | 737.2 | Market Risk and Risk Management Policies This section outlines the company's exposure to market risks, including commodity prices and interest rates, and its mitigation strategies - PCA is exposed to commodity price changes, interest rate changes, and market value fluctuations of financial instruments. It may use derivatives, such as physical natural gas supply contracts, which qualify for the normal purchase normal sale exception[152] - As of June 30, 2025, 100% of PCA's outstanding debt has fixed interest rates[153] Off-Balance-Sheet Activities This section confirms the absence of any off-balance sheet arrangements as of the reporting date - The Company does not have any off-balance sheet arrangements as of June 30, 2025[154] Environmental Matters This section refers to the environmental matters disclosure from the previous annual report, noting no material changes - There have been no material changes to the environmental matters disclosure from the 2024 Annual Report on Form 10-K[155] Critical Accounting Policies and Estimates This section highlights the significant accounting policies and estimates requiring management judgment in financial reporting - PCA's financial statements require estimates and judgments related to business combinations, pensions, goodwill, intangible assets, long-lived asset impairment, environmental liabilities, and income taxes[156] - No changes to critical accounting estimates occurred during the first six months of 2025[157] New and Recently Adopted Accounting Standards This section directs readers to Note 2 for details on new and recently adopted accounting standards - For details on new and recently adopted accounting standards, refer to Note 2 of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements[158] Forward-Looking Statements This section cautions that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements regarding future liquidity, earnings, expenditures, and financial condition, which are subject to numerous risks and uncertainties[159] - Key factors that could cause actual results to differ materially include general economic conditions, impacts of acquired businesses, industry conditions (competition, demand, pricing, input costs), fluctuations in fiber and energy costs, unplanned outages, and governmental actions[161] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the market risk disclosures detailed in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - For a discussion of market risks related to PCA, refer to the 'Market Risk and Risk Management Policies' section within Item 2 of this Quarterly Report on Form 10-Q[162] Item 4. Controls and Procedures This section confirms the effectiveness of PCA's disclosure controls and procedures and reports no material changes in internal control over financial reporting - PCA's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of June 30, 2025[164] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[165] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings and equity security details Item 1. Legal Proceedings This section incorporates legal proceedings disclosures from Note 18, detailing the DeRidder Mill incident and a new class action lawsuit - The disclosure on legal proceedings is incorporated from Note 18, Commitments, Guarantees, Indemnifications and Legal Proceedings, in Part I, Item 1 of this Form 10-Q[168] Item 1A. Risk Factors This section confirms no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K have occurred[169] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock repurchases and shares withheld for taxes on equity awards during the three months ended June 30, 2025 Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased (a) | Average Price Paid Per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (Millions $) | | :---------------- | :--------------------------------- | :------------------------------- | :----------------------------------------------------------------- | :--------------------------------------------------------------------------------- | | April 1-30, 2025 | 39,303 | 183.48 | — | 436.0 | | May 1-31, 2025 | 43 | 188.71 | — | 436.0 | | June 1-30, 2025 | 2,189 | 186.46 | — | 436.0 | | Total | 41,535 | 183.65 | — | 436.0 | - All shares purchased were withheld from employees to cover income and payroll taxes on vested equity awards[170] Item 3. Defaults Upon Senior Securities This section confirms that no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities[171] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the Company[172] Item 5. Other Information This section confirms no Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[173] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents List of Exhibits | Exhibit Number | Description | | :------------- | :---------- | | 31.1 | Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. † | | 31.2 | Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. † | | 32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. † | | 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. † | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document. † | | 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). † |