PKG 10-K & 10-Q changes, risk factors and insider trading

General Economic Conditions – A deterioration in general economic conditions may harm our business, results of operations, cash flows, and financial position. General global and domestic economic conditions directly affect the levels of demand and production of consumer goods, levels of employment, the availability and cost of credit, and ultimately, the demand for our products and the profitability of our business. The U.S. economy has experienced persistent inflation, and we have experienced, and continue to experience, cost inflation across our business. Inflation has resulted in, and may continue to result in, higher production and transportation costs, which we may not be able to recover through higher prices charged to our customers or otherwise. Although interest rates decreased during 2024,2025, rates still remain relatively high, which may result in lower consumer demand and higher borrowing costs, and may cause general economic conditions to deteriorate. The economic outlook for 20252026 remains uncertain. We operate substantially all of our business in the United States. If global or domestic economic conditions deteriorate, economiesthe U.S. economy could experience a recession, which may result in higher unemployment rates, lower disposable income, lower Company earnings and investment, and lower consumer spending. These factors may result in lower demand for our products and negatively affect our business, results of operations and cash flows.

Industry Cyclicality – Changes in the prices of our products could materially affect our financial condition, results of operations, and liquidity. Macroeconomic conditions and fluctuations in industry capacity can create changes in prices, sales volumes, and margins for most of our products, particularly commodity grades of packaging and paper products. Prices for all of our products are driven by many factors, including demand for our products, industry capacity and decisions made by other producers with respect to capacity and production, inflation and other general cost increases, and other competitive conditions in our industry. These factors are affected by general global and domestic economic conditions, customer purchasing decisions, and operating conditions involving our business and industry. We have little influence over the timing and extent of price changes of our products, which may be unpredictable and volatile. In addition, as many of our customer contracts include price adjustment provisions based upon published surveyed prices for containerboard or certain grades of UFS papers reported by trade publications, our selling prices are influenced by price levels determined and published by trade publications. Changes in how these surveyed price levels are determined or maintained may affect our sales prices. If supply exceeds demand, operating conditions involving our business and industry deteriorate, or other factors result in lower prices for our products, our earnings, and operating cash flows would be harmed.

The availability and cost of recycled fiber depends heavily on recycling rates and the domestic and global supply and demand for recycled products. We purchase recycled fiber for use at sixeight of our containerboard mills. In 2024,2025, we purchased approximately 1,040,0001,150,000 tons of recycled fiber at our containerboard mills, net of the recycled fiber generated by our corrugated box plants. The amount of recycled fiber purchased each year varies based upon production and the prices of both recycled fiber and wood fiber. Due to the Greif Acquisition and the restructuring of the Wallula mill, recycled fiber will be a higher proportion of our fiber mix in the future.

Periods of higher recycled fiber costs and unusual price volatility have occurred in the past, including during 2024.past. Prices for recycled fiber may continue to fluctuate significantly in the future, and a significant increase could result in higher costs and lower earnings. A $10 per ton price increase in recycled fiber for our containerboard mills would result in approximately $10$20 million of additional expense based on 20242026 estimated consumption.

Cost of Purchased Fuels and Chemicals – An increase in the cost of purchased fuels and chemicals could lead to higher manufacturing costs, resulting in reduced earnings. We have, at times, experienced significant cost inflation and volatility for key inputs such as fuels and chemicals. We have the ability to use various types of purchased fuels in our manufacturing operations, including natural gas, bark, and otherwood purchased fuels.waste. Fuel prices, in particular prices for oil and natural gas, have fluctuated in the past. New and more stringent environmental regulations may discourage, reduce the availability of, or make more expensive, the use of certain fuels, such as natural gas, which represents the majority of our purchased fuels. In addition, costs for key chemicals used in our manufacturing operations also fluctuate. These fluctuations impact our manufacturing costs and result in earnings volatility. If fuel and chemical prices rise, our production costs and transportation costs will increase and cause higher manufacturing costs and reduced earnings if we are unable to recover such increases through higher prices of our products or other means. A $0.10 per million MMBTU increase in natural gas prices would result in approximately $3 million of additional expense, based on 20242025 usage.

ODP Corporation (“ODP”), formerly Office Depot, Inc., along with its subsidiaries and affiliates, is our largest customer in the Paper segment. Effective JanuaryMarch 1, 2024,2025, we have amended the agreement with ODP in which we will continue to supply commodity and non-commodity office papers through December 31, 2025.2026. If the agreement is not renewed by the parties, ODP’s obligation to purchase paper would phase down over a two-year period beginning January 1, 2026.2027.

ESG – We may not achieve or make satisfactory progress on our goals and targets to reduce emissions and satisfy other ESG metrics. Investors, customers, governmental authorities, and other stakeholders have an interest in ESG matters, including with respect to climate change, greenhouse gas emissions, and sustainable business practices. AsThe aexpectations result,of wethese anticipatestakeholders acontinues continuedto interestevolve inand reportingthere oncan be no guarantee that our approach will align with the preferences of any particular stakeholder. Both mandatory and voluntary ESG metrics, more prescriptive reporting requirements withare respectalso toevolving and may not be uniform nor evenly interpreted, ESG metrics,information is often reliant on third-party information and expectations that companies establish goals and commitments regarding ESG metricsscoring andservice takeproviders actionsuse todiffering achievemethodologies thosewhich goalsmay andimpact commitments.how stakeholders perceive, justifiably or not, how we are performing.

Debt obligations – Our debt service obligations may reduce our operating flexibility. At December 31, 2024,2025, we had $2.5$4.0 billion of debt outstanding and a $323$573 million undrawn revolving credit facility, after deducting letters of credit. AllOur debtindebtedness isincludes comprised$1.0 ofbillion fixed-ratewith seniorfloating notes.interest rates. An increase in interest rates will increase the amount we must pay to service our indebtedness. We and our subsidiaries are not restricted from incurring, and may incur, additional indebtedness in the future.

PCA is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. We operate eightten mills and 8691 corrugated products manufacturing plants. Our containerboard mills produce linerboard and corrugating medium, which are papers primarily used in the production of corrugated products. Our corrugated products manufacturing plants produce a wide variety of corrugated packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-color boxes and displays with strong visual appeal that help to merchandise the packaged product in retail locations, and honeycomb protective packaging. In addition, we are a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. We also manufacture and sell UFS papers, including both commodity and specialty papers, which may have custom or specialized features such as colors, coatings, high brightness, and recycled content. We are headquartered in Lake Forest, Illinois and operate primarily in the United States.

Included in this Item 7 are various non-GAAP financial measures, including earnings per diluted share excluding special items, net income excluding special items, earnings before non-operating pension income (expense), income, interest, income taxes, and depreciation, amortization, and depletion (“EBITDA”), segment EBITDA, EBITDA excluding special items, and segment EBITDA excluding special items. We provide important disclosures regarding our presentation of non-GAAP financial measures and reconciliations of presented non-GAAP financial measures to the most comparable measures presented in accordance with GAAP later in this section under the caption “Non-GAAP Financial Measures.”

Net sales were $8.4$9.0 billion for the year ended December 31, 20242025 and $7.8$8.4 billion for 2023.2024. We reported $805$774 million of net income, or $8.58 per diluted share, in 2025, compared to $805 million, or $8.93 per diluted share, in 2024, compared to $765 million, or $8.48 per diluted share, in 2023.2024. Net income included $114 million of expense for special items in 2025, compared to $9 million of expense for special items in 2024, compared to $19 million of expense for special items in 2023.2024. Special items in both periods are described later in this section. Excluding special items, we recorded $814$888 million of net income, or $9.84 per diluted share, in 2025, compared to $814 million, or $9.04 per diluted share, in 2024, compared to $784 million, or $8.70 per diluted share, in 2023.12024.1 The increase was driven by improvement in legacy PCA’s earnings by $0.96 per share, partially offset by a loss of ($0.16) per share for the first four months of ownership of the Greif containerboard business. The results of the acquired business included approximately $44 million of depreciation and amortization expense, $28 million of additional interest expense, and maintenance expense for initial mill outages to make reliability and quality improvements. The increase in earnings of the legacy PCA business was driven primarily by higher volumes in our Packaging and Paper segments, and lower freight and logistic expenses, partially offset by lower prices and mix in our Packaging and Paper segments, and lower fiber costs, partially offset by higher operating and converting costscosts, drivenlower sales and production volumes in part by inflation across our cost base,Packaging and Paper segments, higher annual outage expense, higher fixed and other expense, higher freight and logistic expenses, and higher interest expense. PCA ended the year with $852$668 million of cash and marketable debt securities and, including borrowing availability under its revolving credit facility, $1,175$1,241 million in liquidity.

Paper segment operating income was $130 million in 2024,2025 compared to $119 millionand in 2023.2024. Paper segment EBITDA excluding special items was $148 million in 2025, compared to $154 million in 2024, compared to $151 million in 2023.12024.1 The increasedecrease was due primarily to higher paperoperating volumescosts and lower operatingpaper costs,volumes, partially offset by lowerhigher prices and mix. WePaper notifiedprices customersand ofmix areflected $60our per ton2025 price increase for all office, printing, and converting papers, effective January 13, 2025.papers.

Trade publications reported North American industry-wide corrugated products shipments were relativelydown flat(1.8%) in 2024,2025, compared to 2023.2024. Reported industry containerboard production increaseddecreased 4.7%(4.5%) compared to 2023,2024, and reported industry containerboard inventories at the end of 20242025 were approximately 2.8 million tons, up 5.7%1.3% compared to 2023.2024. Reported containerboard export shipments increaseddecreased 15.4%(11.4%) compared to 2023.2024. Index prices, inIn February 2024,2025, index prices increased $40 per ton for linerboard and $60 per ton for corrugating medium, followed by an additional increase in June 2024 of $40 per ton for linerboard and corrugating medium.

The market for communication papers competes heavily with electronic data transmission and document storage alternatives. Increasing shifts to these alternatives have reduced usage of traditional print media and communication papers. Trade publications reported North American uncoated freesheet paper shipments increaseddecreased slightly 0.5%(9.6%) in 2024,2025, compared to 2023.2024. Average prices reported by a trade publication for cut size office papers were lowerhigher by $36$47 per ton, or (2.4%),3.3%, in 20242025 compared to 2023.2024. ForReported index prices increased $30 per ton for cut size office papers,papers indexand pricesfor decreasedoffset $40printing per tonpapers in January,February followed2025 byand increases of $20$10 per ton in April and May 2024. For offset printing papers, index prices decreased $20 per ton in January, followed by increases of $20 per ton in April and May 2024.2025.

ForLooking ahead to the first quarter of 2025,2026, in our Packaging segment, we expect higher per-day volume in our legacy corrugated products plants toover increaselast year, reflecting improving demand, though shipment volume is seasonally slower than the fourth quarter and setwe newexperienced firstsome quarterdisruption records for totalin shipments andfrom shipments-per-day.weather Containerboardevents productionearlier in the quarter. We will beproduce lowerless containerboard than the fourth quarter with two lessfewer operating days andin the first quarter, a scheduled maintenance outagesoutage at our Counce, TN mill and Valdosta,lower GAproduction mills.at the reconfigured Wallula, WA mill. Domestic containerboard and corrugated products prices will be higher with an improved corrugated product mix throughout the quarter and we expect to benefit slightly from our previously announced containerboard price increases beginning in March. Export volume is expected to be slightly higher and prices are expected to be higher with an improved product mix together with our previously announced price increases. Export prices are assumedflat to beslightly stable.down. In ourthe Paper segment, we forecast slightly lower volume with two less mill operating days and prices and mix to be fairlyslightly flat.lower. With the exception of recycled fiber prices, we expect price inflation across most of our direct, indirect and fixed operating and converting costs along with a higher cost mix of mill operations.costs. In addition, wood, energy, and chemical costs will also increase due to thewinter unusually cold seasonal weatherconditions negatively affectingimpacting usages and yields for these items. Our cost structure will begin to benefit from the Wallula reconfiguration late in the first quarter. Labor and benefits costs will be higher due to timing-related items that occur at the beginning of a new year for annual increases, the restart of payroll taxes, and share-based compensation expenses. First quarter rail rate increases at three of our millsFreight will impactbe freightslightly and logistics expenseshigher and we expect higherslightly lower depreciation expense. Lastly, scheduledScheduled outage expenses shouldwill be slightly lower and we assume a lower corporate tax rate. Considering these items, we expect first quarter earnings to be lower than the fourth quarter of 2024.2025.

Paper. Net sales increaseddecreased $29$9 million, or 4.9%,(1.5%), to $625$615 million, compared to $595$625 million in 2023.2024. The increasedecrease was due to higherlower volume ($49$20 million), partially offset by lowerhigher prices and mix ($19$11 million).

Gross profit increased $84$107 million in 2024,2025, compared to 2023.2024. The increase was driven primarily by higher volumes,prices and mix in the Packaging and Paper segments, higher volumes in the Packaging segment, and lower freightfiber and logistic expenses,costs, partially offset by lower containerboard and corrugated products prices and mix, higher operating and converting costscosts, higher maintenance outage expense, higher fixed and other expense, higher annualfreight outageexpense, expense.and lower volume in the Paper Segment. In 2025, gross profit included $70 million of special items expense related to Wallula mill restructuring, the Greif Acquisition, and corrugated facility closures. In 2024, gross profit included $3 million of special items expense related to Jackson mill conversion-related activities and corrugated facility closure and other costs, compared to $15 million of special items expense related to Jackson mill conversion-related activities and corrugated facility closure and other costs in 2023.costs.

Selling, general, and administrative expenses (“SG&A”) increased $29$24 million in 20242025 compared to 2023.2024. The increase was primarily due to higher employee-related expenses and higher depreciation related to the newly acquired business, partially offset by lower bad debt expense.

Income from operations increased $26$6 million, or 2.4%,0.5%, for the year ended December 31, 2024,2025, compared to 2023.2024. Income from operations in 20242025 included $12$151 million of expense for special items compared to $25$12 million in 2023.2024. Special items in 2025 included $128 million of expense for Wallula mill restructuring, $33 million of expense related to the Greif Acquisition and $10 million of income related to corrugated facility closures. Special items in 2024 included $10 million for Jackson mill conversion-related activities and $2 million of expense related to corrugated facility closure and other costs. Special items in 2023 included $14 million of expense related to corrugated facility closure and other costs and $11 million for Jackson mill conversion-related activities.

Packaging. Segment operating income increased $28$24 million to $1,102$1,125 million, compared to $1,074$1,102 million in 2023.2024. The increase, excluding special items,increase related primarily to higher sales and production volumes ($377 million) and lower freight expense ($30 million), partially offset by lower containerboard and corrugated products prices and mix ($211$366 million), lower fiber costs ($59 million), and the impact of newly acquired Greif operations ($8 million), partially offset by higher operating and converting costs ($121$128 million), higher maintenance outage expenses ($40 million), lower legacy sales and production volumes ($39 million), higher depreciation expense ($22$33 million), higher annual outage expense ($13 million),fixed and other costs ($20$22 million), and higher freight expense ($16 million). Special items in 2025 included $128 million of expense for Wallula mill restructuring, $20 million of expense related to the Greif Acquisition and $10 million of income related to corrugated facility closures. Special items in 2024 included $4 million of expense for Jackson mill conversion-related activities and $2 million of expense for corrugated facility closure and other costs. Special items in 2023 included $14 million of expense for corrugated facility closure and other costs.

Paper. Segment operating income increased $11 million towas $130 million, compared to $119 million in 2023. The increase, excluding special items, primarily related to higher sales2025 and productionin volumes2024. Higher operating costs ($22$9 million), lower depreciationsale expensesand production volumes ($3$8 million), andhigher lower operatingfiber costs ($2 million), and higher maintenance outage expenses ($1 million), were partially offset by lower paperhigher prices and mix ($19$11 million), lower fixed and higherother costs ($2 million), and lower freight expense ($1 million). SpecialAdditional benefit was due to no significant special items in 20242025 includedcompared to $6 million of expense for Jackson mill conversion-related activities. Special itemsactivities in 2023 included $11 million of expense for Jackson mill conversion-related activities.2024.

Non-Operating Pension Income,Expense, Interest Expense, Net and Income Taxes

During 2024,2025, non-operating pension incomeexpense increased $12$5 million compared to 2023.2024. The increase in non-operating pension incomeexpense was related to favorableunfavorable 20232024 asset performance andpartially offset by favorable assumption changes.

Interest expense, net, during 20242025 decreasedincreased $12$38 million compared to 2023.2024. The decreaseincrease in interest expense, net in 2024 was primarily due to higher interest income due to higher rates on invested cash balances, partially offset by higher interest expense in 20242025 relatedas toa result of the Company’s financing for the Greif Acquisition and the November 2023 debt refinancing.refinancing and lower interest income as a result of lower interest rates on lower cash balances due to the Greif Acquisition.

During 2024,2025, we recorded $259$254 million of income tax expense, compared to $249$259 million of income tax expense during 2023.2024. The effective tax rate for 20242025 and 20232024 was 24.4%24.7% and 24.5%,24.4%, respectively. The lowerincrease in our effective tax rate for 2025 compared to 2024 was primarily due to highera lower federal research and development tax credit and lower excess tax benefits associated with employee restricted stock and performance unit vests partially offset by higher nondeductible employee remuneration paid to covered employees.vests.

Our primary sources of liquidity are net cash provided by operating activities and available borrowing capacity under our revolving credit facility. We ended the year with $685$529 million of cash and cash equivalents, $167$139 million of marketable debt securities, and $323$573 million of unused borrowing capacity under the revolving credit facility, net of letters of credit. On November 30, 2023, we issued $400 million of 5.70% senior notes due 2033 through a registered public offering and invested the net proceeds received from this issuance in time deposits, which are included in marketable debt securities at December 31, 2023. On September 15, 2024, the Company used the net proceeds from this issuance, together with a portion of cash on hand, to repay its outstanding 3.65% senior notes due 2024. See Note 10, Debt, of the Consolidated Financial Statements included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K as well as information provided below under “—Investing Activities” and “—Financing Activities” for further information.

During 2024,2025, net cash provided by operating activities was $1,191$1,558 million, compared to $1,315$1,191 million for 2023,2024, aan decreaseincrease of $124$367 million. Cash from operations excluding changes in cash used for operating assets and liabilities increased $80$211 million, primarily due to higher depreciation and higher deferred income fromtax operationsliabilities in 20242025 as discussed above. Cash decreasedincreased by $204$156 million due to changes in operating assets and liabilities, primarily due to the following:

a) a net unfavorablefavorable change in prepaid expenses and other current assets inprimarily 2024 comparedrelated to 2023the primarilyestablishment dueof toa an increase in accrued receivablesreceivable for the DeRidder trial and related insurance recoveries during 2024 and reduction of receivables against insurance carriers during 2025 related to pendingthe DeRidder settlement and settlement of other litigation in 2024;

We used $278$2,573 million for investing activities in 2024,2025, compared to $875$278 million in 2023.2024. In 2024, weWe spent $670$829 million for internal capital investments,investments during 2025, compared to $470$670 million induring 2023.2024. Additionally, inIn September 2024,2025, we receivedcompleted $400the millionGreif inAcquisition for a purchase price of $1,804 million, net proceeds from the maturity of ourcash investments in time deposits, which were used to repay our 3.65% senior notes that were due on September 15, 2024.acquired.

In 2024,2025, net cash usedprovided forby financing activities was $876$859 million, compared to $112$876 million of cash used for financing activities in 2023,2024, an increase of $764$1,735 million. We paid $449$450 million in dividends on our common stock in both2025 compared to $449 million in 2024 and 2023. We withheld shares to cover $26$24 million of employee restricted stock taxes in 20242025 compared to $16$26 million of employee restricted stock taxes withheld in 2023.2024. We didrepurchased notand repurchaseretired any0.8 million shares of the Company’s common stock in 2024, compared to repurchases of 0.3 million shares for $42$153 million in 2023.2025. We had no share repurchases in 2024.

We believe that we are currently in material compliance with these and all applicable environmental rules and regulations. Because environmental regulations are constantly evolving, the Company has incurred, and will continue to incur, costs to maintain compliance with these and other environmental laws. The Company works diligently to anticipate and budget for the impact of applicable environmental regulations and does not currently expect that future environmental compliance obligations will materially affect its business or financial condition. For the year ended December 31, 2025, 2024, and 2023, we spent $64 million, $60 million, and for both the years ended December 31, 2023 and 2022, we spent $50 million, respectively, to comply with the requirements of these and other environmental laws. Additionally, we had $19$27 million of environmental capital expenditures in 2025, $19 million in 2024, and $14 million in 2023, and $11 million in 2022.2023.

Under the CAA, EPA is required to conduct risk assessments for each source category subject to maximum achievable control technologies (MACT) to determine if additional standards are necessary to reduce residual risks from hazardous air pollutants (HAP) emissions. The national emissions standards for hazardous air pollutants (NESHAP) for Chemical Recovery Combustion Sources at pulp mills is due for residual risk and technology review (RTR). In November 2024, PCA was one of seven companies selected by EPA to respond to an extensivea questionnaire about operations and equipment to support EPA’s requirement to revise existing Pulp MACT standards. As part of the questionnaire, EPA is requiring companies, including PCA, to undertake extensive pollutant testing scheduled to begin Spring 2025.2026. PresidentFive Trump’sof ExecutivePCA’s Order to suspend all federal rulemaking has paused EPA’s review process. At this time, we cannot predict with certainty how this assessment reviewmills will impactparticipate ourin pulpthe millrisk MACT compliance efforts or whether we will incur additional costs to comply with any revised standards.assessment.

We are seeking to further improve our environmental impact and have voluntarily set goals to reduce our absolute Scope 1 and 2 (market-based) greenhouse gas emissions by 35% by 2030 from a 2021 baseline year and to reach net-zero carbon emissions within our own operations and our value chain by 2050. In addition, we and our industry support the American Forest & Paper Association’s goal of a 50% reduction in Scope 1 and Scope 2 greenhouse gas emissions intensity by 2030 from a 2005 baseline. We have a carbon neutrality team, consisting of a cross-functional group of key operational, engineering, environmental, legal and sustainability personnel to lead our efforts. Our strategy to achieve greenhouse gas emissions reductions is premised upon the carbon neutrality of the biogenic fuels used in our operations and we believe that meaningful reductions in greenhouse gas emissions can be achieved through investment in more efficient operations utilizing carbon-neutral fuels and in emerging and advancing technologies. We regularly work to identify and implement projects that will improve our efficiency. To what extent and when we embark upon major capital projects to reduce emissions will depend in part upon technology advancements, emerging regulatory and tax policies involving greenhouse gas emissionsemissions, assessment of risks and incentivesthe toeconomic investimpact of investing in projects that reduce emissions. We also regularly assess the use of alternative, non-emitting energy sources at our own facilities (such as solar) and opportunities to support additive carbon-free grid power via renewable energy certificates (RECs) and power purchase agreements (PPAs), where feasible to do so, and partnering with utilities to procure carbon-free power where opportunities exist. We annually report key data to our stakeholders regarding our greenhouse gas emissions, among other things, in our responsibility report. Our responsibility report is available on our website and is not intended to be incorporated by reference herein.

We recognize the funded status of our pension plans on our Consolidated Balance Sheet and recognize the actuarial and experienced gains and losses and the prior service costs and credits as a component of “Accumulated Other Comprehensive Loss” in our Consolidated Statement of Changes in Stockholders’ Equity. Actual results that differ from assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense in future periods. At December 31, 2024,2025, we had $43.5$41.8 million of actuarial losses and prior service costs, net of tax, recorded in “Accumulated other comprehensive loss” on our Consolidated Balance Sheet. Accumulated losses in excess of 10% of the greater of the projected benefit obligation or the market-related value of assets will be recognized on a straight-line basis over the average remaining service period of active employees in the PCA plans (which is between five and nineeight years) and over the average remaining lifetime of inactive participants ofin the Boise plan (which is approximately 22 years), to the extent that losses are not offset by gains in subsequent years. While we believe that the assumptions used to measure our pension obligations are reasonable, differences in actual experience or changes in assumptions may materially affect our pension obligations and future expense.

For 2024 and 2023,2024, includes $9.7 million and $11.1 million, respectively, of charges related to the announced discontinuation of production of uncoated freesheet paper grades on the No. 3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

PCA is the third largest producer of containerboard products and a leading producer of UFS paper in North America. We operate ten mills and 9190 corrugated products manufacturing plants. Our containerboard mills produce linerboard and corrugating medium, which are papers primarily used in the production of corrugated products. Our corrugated products manufacturing plants produce a wide variety of corrugated packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-color boxes and displays with strong visual appeal that help to merchandise the packaged product in retail locations, and honeycomb protective packaging. In addition, we are a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. We also manufacture and sell UFS papers, including both commodity and specialty papers, which may have custom or specialized features such as colors, coatings, high brightness, and recycled content. We are headquartered in Lake Forest, Illinois and operate primarily in the United States.

FirstSecond quarter net sales were $2.37$2.49 billion in 2026 and $2.14$2.17 billion in 2025. We reported $171$192 million of net income, or $1.91$2.15 per diluted share, during the firstsecond quarter of 2026, compared to $204$242 million, or $2.26$2.67 per diluted share, during the same period in 2025. Net income included $44$18 million of expense for special items in the firstsecond quarter of 2026, primarily related to facility closure costs, Wallula mill restructuring activities, and acquisition and integration-related costs, compared to $4$17 million of expenseincome for special items in 2025. Please see “Non-GAAP Financial Measures” elsewhere in this Item 2 for a description of special items. Excluding special items, net income was $215$210 million, or $2.40$2.35 per diluted share, during the firstsecond quarter of 2026, compared to $208$224 million, or $2.31$2.48 per diluted share, in the firstsecond quarter of 2025.1 The increasedecrease was driven by improvementlower earnings in the legacy PCA’sbusiness earningsof by $0.15($0.27) per share, partially offset by a loss of ($0.06)$0.14 per share forof earnings from the acquired Greif containerboard business. The results of the acquired business included approximately $34 million of depreciation and amortization expense and $19 million of additional interest expense, primarily from new borrowings to finance the acquisition. The increasedecrease in the earnings of the legacy PCA business was driven primarily by higher pricesfreight costs, higher corporate and other expenses due to higher deferred compensation benefit costs and stock compensation expenses, unfavorable price and mix in the Packaging segment, lower fiber costs, lower maintenance outage expense, lowerhigher labor and operating costs in the Packaging segment,costs, higher pricesdepreciation and mixamortization expense, higher fiber costs, higher tax rate, and volumehigher ininterest theexpense, Paperexcluding segment,Greif alongacquisition with a lower tax rate and lower share count.indebtedness. These items were partially offset by higher freight expense, lower production and sales volume in the Packaging segment, higherlower depreciationmaintenance outage expense, and higher laborproduction and operatingsales costsvolume and prices and mix in the Paper segment, and higher corporate and other expenses.segment. For additional detail on special items included in reported GAAP results and other non-GAAP measures, see “Item 2. Non-GAAP Financial Measures.”

PackagingPaper segment operating income was $260$34 million in the firstsecond quarter of 2026, compared to $278$26 million in the firstsecond quarter of 2025. PackagingPaper segment EBITDA excluding special items was $482$39 million in the firstsecond quarter of 20262026, compared to $409$30 million in the firstsecond quarter of 2025.1 The increase in EBITDA,EBITDA excluding special items,items was driven primarily bydue to lower maintenance outage expense in 2026 due to the timing of annual maintenance outages, higher sales and production volumevolume, with the addition of the acquired business,and higher prices and mix, lower fiber costs, and lower maintenance outage expense, partially offset by higher operating and converting costs, and higher freight and logisticsoperating expenses.costs, with freight rates rising significantly during the quarter.

We expect continued strong demand in the Packaging segment to remain strong and corrugated products volume to increase with one more shipping day in the third quarter of 2026 compared to the second quarter. We expect continued Packaging segment price and some seasonalmix improvement in the secondthird quarter comparedas towe the first quarter. Prices for containerboard and corrugated products will move higher withcomplete the implementation of ourthe previously announcedfirst price increasesincrease and improvedbegin to implement the second price increase to corrugated mix.products customers. Packaging mill production will be slightly higher with one more operating day and production improvements at some of the mills more than offsetting thelower impact ofto production from maintenance outages atwith five Packagingfewer mills duringhaving theannual secondoutages quarter.as well as expected improved operating performance in our containerboard mill system. Mill maintenance outage expenses will be higherlower within moretotal Packaging mills taking outages thanand in the firstPackaging segment and higher in the Paper segment with our single Paper segment mill having its maintenance outage in the third quarter. We expect flatlower volume and higher prices in the Paper segment as wea continueresult toof operatethe atmaintenance full capacityoutage and implementthe continued implementation of our previously announced paper price increases. CostsWe expect costs for freight, fiber and chemicals will be up duefreight to higherremain pricesat andor energy costs are expected to be seasonally lower with warmer weather inaround the secondelevated quarter. The sequential improvement in expenses for wages and benefits thatlevels we normallyexperienced experience from first quarter to second quarter will be less than in past years due to higher expected stock compensation expenses and benefits costs in the second quarter. Finally, our tax rate will be higherlater in the second quarter and higher on average for the third quarter. We expect prices for recycled fiber to continue to increase and higher mill production will drive increased usage and higher costs. Costs for chemicals and purchased electricity will be higher and will remain relatively flat for wood fiber and natural gas. We expect improvement in benefits costs due to thesecond tax-relatedquarter benefit of share-based compensation awardsunfavorability that vestedis not expected to repeat in the firstthird quarter. Considering these items, we expect secondthird quarter earnings to be lowerhigher than the firstsecond quarter of 2026, excluding special items.

Three Months Ended MarchJune 31,30, 2026, compared to Three Months Ended MarchJune 31,30, 2025

The historical results of operations of PCA for the three months ended MarchJune 31,30, 2026 and 2025 are set forth below (dollars in millions):

Net sales increased $227$319 million, or 10.6%,14.7%, to $2,368$2,490 million during the three months ended MarchJune 31,30, 2026, compared to $2,141$2,171 million during the same period in 2025.

Packaging. Net sales increased $218$305 million, or 11.1%,15.2%, to $2,189$2,311 million, compared to $1,970$2,006 million in the firstsecond quarter of 2025 due to higher volume related to the acquired business ($224$258 million) and higher legacy volume ($58 million), partially offset by lower containerboard and corrugated products prices and mix ($18 million), partially offset by lower legacy volume ($24$11 million). In the firstsecond quarter of 2026, export and domestic containerboard outside shipments decreased (15.8%19.0%) compared to the firstsecond quarter of 2025.2025, with more containerboard being integrated into PCA’s corrugated products system. Our total corrugated products shipments were up 24.3% per day and in total, compared to the same period in 2025. Shipments from the legacy PCA business were up 2.8%4.1% per day and up 1.2% overall, compared to the same period in 2025. Including the acquired business, shipments were up 21.8% per day and 19.9% in total. In the firstsecond quarter of 2026, our domestic containerboard prices were 2.6%3.2% higher, while export prices were flat1.8% higher compared to the same period in 2025.

Paper. Net sales increased $6$11 million, or 3.7%,7.9%, to $160$157 million, compared to $154$146 million in the firstsecond quarter of 2025, due to higher volumes ($4$9 million) and higher prices and mix ($2 million).

Gross profit decreasedincreased $2$30 million during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. The decreaseincrease was driven primarily by higher operatingvolumes costs,in the Packaging and higherPaper freightsegments, lower maintenance outage expense, largely offset by higher volumes and higher prices and mix in the PackagingPaper segment, partially offset by higher freight expense, lower prices and Papermix segments,in lowerthe fiberPackaging segment, higher operating costs, and lowerhigher maintenancefixed outageand expense.other costs. In the three months ended MarchJune 31,30, 2026, gross profit included $51 million of special items expense related to Wallula mill restructuring. In the three months ended March 31, 2025, gross profit included $4$5 million of special items expense related to corrugated products facility closureclosures, andcompared otherto costs.$1 million in the three months ended June 30, 2025 related to corrugated products facility closures.

Selling, general, and administrative expenses (“SG&A”) increased $19$26 million during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. The increase was primarily due to higher employee-related expenses, higher depreciation related to the acquired business, and higher employee-related expenses, information technology expenses, and insuranceoutside costs.service expenses.

Other income (expense), net, for the three months ended MarchJune 31,30, 2026 and 2025 are set forth below (dollars in millions):

Income from operations decreased $29$43 million, or (10.3%12.7%), during the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The firstsecond quarter of 2026 included $60 million of special items expense related to Wallula mill restructuring, recent acquisitions and corrugated facility closures, compared to $6$24 million of special items expense related to corrugated facility closures, Wallula mill restructuring, and recent acquisitions, compared to $23 million of special items income related to gains on sales of corrugated products facilitiesfacilities, partially offset by corrugated products facility closure costs and costs related to the Greif acquisition in the firstsecond quarter of 2025.

Packaging. Packaging segment operating income decreased $18$33 million to $260$313 million, compared to $278$346 million during the three months ended MarchJune 31,30, 2025. The decrease related primarily to $56$15 million of special itemitems expense related to the Wallula mill restructuring and corrugated facility closures, compared to $6$25 million of special items expenseincome primarily related to gains on sales of corrugated products facilities, partially offset by corrugated products facility closure costs in the firstsecond quarter of 2025. Excluding special items, operating income increased $33$6 million compared to the same period last year. The increase was driven primarily by higher containerboard and corrugated products prices and mix ($21 million), lower fiber costs ($13 million), the impact of newly acquired Greif operations ($12$36 million), lower maintenance outage expenses ($10 million), lower labor and operatinghigher costs ($7 million),sales and lowerproduction other expensesvolume ($3$31 million), partially offset by higher freight expenses ($14$28 million), lower salescontainerboard and productioncorrugated volumesproducts prices and mix ($13$14 million), higher fixed and other expenses ($8 million), higher maintenance outage expenses ($5 million), higher depreciation expense ($6$2 million), higher fiber costs ($2 million), and higher labor and operating costs ($1 million).

Paper. Paper segment operating income decreasedincreased $3$8 million to $33$34 million, compared to $36$26 million during the three months ended MarchJune 31,30, 2025. The decreaseincrease primarily related to lower maintenance outage expenses ($9 million), higher operatingsales costsand production volume ($4$3 million), and higher freight expenses ($1 million), partially offset by higher prices and mix ($2 million), partially offset by higher freight expenses ($3 million), and higher salesoperating and production volumescosts ($1$2 million). There were no significant special items in the firstsecond quarter of 2026 or 2025.

Non-operating pension income increased $1 million during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. The increase in non-operating pension income was related to favorable 2025 asset performance and favorable assumption changes.

Interest expense, net for the three months ended MarchJune 31,30, 2026 increased $20 million when compared to the same period in 2025. The increase in interest expense, net was primarily due to higher interest expense in 2026 as a result of the Company’s financing for the Greif Acquisition and lower interest income as a result of lower interest rates on lower cash balances.

During the three months ended MarchJune 31,30, 2026, we recorded $49$67 million of income tax expense, compared to $64$79 million of expense during the three months ended MarchJune 31,30, 2025. The effective tax rate for the three months ended MarchJune 31,30, 2026 and 2025 was 22.2%25.8% and 23.8%,24.7%, respectively. The decreaseincrease in our effective tax rate for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025 was primarily due to higherlower excess tax benefits associated with employee restricted stock and performance unit vests partially offset byand higher nondeductiblenon-deductible employee remuneration paid to covered employees.employees partially offset by favorable state law changes.

Our primary sources of liquidity are net cash provided by operating activities and available borrowing capacity under our revolving credit facility. At MarchJune 31,30, 2026, we had $397$443 million of cash and cash equivalents, $218$224 million of marketable debt securities and other, and $573 million of unused borrowing capacity under the revolving credit facility, net of letters of credit.

During the threesix months ended MarchJune 31,30, 2026, net cash provided by operating activities was $329$705 million, compared to $339$639 million in the same period in 2025, aan decreaseincrease of $10$66 million. Cash from operations excluding changes in cash used for operating assets and liabilities increased $58$96 million primarily due to thehigher Greifnet Acquisition.income adjusted for depreciation, depletion and amortization of intangibles and losses on asset disposals in 2026, and higher deferred income tax liabilities in 2026. Cash from operations decreased by $68$30 million when comparing the first threesix months of 2026 to the same period in 2025 due to changes in operating assets and liabilities primarily due to the following:

a) a net unfavorable change in accounts receivable due to a larger increase in Packaging segment accounts receivable levels during the first six months of 2026 compared to the same period in 2025 primarily relateddue to higher sales volumes in 2026 when compared to 20252025, and a largeran increase in Corporatedays accountssales receivableoutstanding levelsarising out of the ordinary course of business; and b) a net unfavorable change in prepaid expenses and other current assets during the first six months of 2026 compared to the same period in 2025; primarily related to the reduction of receivables against insurance carriers during 2025 related to the settlement of litigation.

dc) a net favorable change in accrued liabilities primarily related to the reduction of accrued liabilities in 2025 due to the settlement of litigation and an increase in compensation and benefits liabilities during the first quartersix months of 2026 compared to the same period in 2025 primarily due to the settlement of litigation and a decrease in accrued liabilities related to Wallula mill restructuring activities during the first six months of 2026; and ed) a net favorable change in accounts payable primarily related to a largeran increase in accounts payablepayables levels during the first quartersix months of 2026 compared to the firstsame quarterperiod ofin 2025, partially offset by an unfavorable change related to the timing of payments.

We used $261$478 million for investing activities during the threesix months ended MarchJune 31,30, 2026 compared to $144$287 million during the same period in 2025. We spent $165$371 million for internal capital investments during the threesix months ended MarchJune 31,30, 2026, compared to $148$318 million during the same period in 2025. We completed an acquisitionacquisitions in the Packaging segment during the first quartersix ofmonths ended June 30, 2026 for $15$21 million, including working capital adjustments. In March 2026, we used $50 million of cash on hand to invest in a time deposit.

During the threesix months ended MarchJune 31,30, 2026, net cash used for financing activities was $200$314 million, compared to $128$249 million of net cash used for financing activities during the same period in 2025. We paid $112$223 million of dividends during the first threesix months of both2026, 2026compared andto $225 million of dividends paid during the comparable period in 2025. In addition, we withheld shares to cover $29$30 million of employee restricted stock taxes during the first threesix months of 2026 compared to $15$23 million of employee restricted stock taxes withheld during the same period in 2025. We repurchased and retired 0.3 million shares of the Company’s common stock for $59 million during the first threesix months of 2026. We did not have any repurchases and retirements of the Company’s common stock during the same period in 2025.

The following table reconciles earnings per diluted share to earnings per diluted share excluding special items for the periods indicated (dollars in millions):

For the three and six months ended MarchJune 31,30, 2026 and March 31, 2025,2026, includes $2.9$3.3 million and $5.9$6.7 million, respectively, of charges consistingfor ofacquisition closureand integration costs related to corrugatedrecent productsacquisitions. facilities.For the three and six months ended June 30, 2025, includes $1.6 million of charges related to the Greif Acquisition.