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PACKAGING CORP OF AMERICA

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Business Summary

Packaging Corporation of America operates in the containerboard, corrugated products, and uncoated freesheet paper industries in North America. The company is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America, according to industry sources and the company's own estimates. The company operates ten mills and 91 corrugated products plants and related facilities, all located in the United States. The industry is characterized by cyclicality, with prices driven by demand, industry capacity decisions, and competitive conditions. The corrugated packaging industry is sensitive to economic conditions, while the UFS paper market faces structural decline from electronic alternatives.

As of December 31, 2025, the company was the third largest producer of containerboard products in North America. Primary competitors named in the filing include International Paper, Smurfit WestRock, Georgia-Pacific LLC, and Pratt Industries for packaging, and Domtar Corporation and Sylvamo Corporation for paper. The company's strategic focus on regional and local accounts differentiates it from competitors with national account presence. Competitive advantages include quality, service, price, product design, and innovation, with corrugated producers generally selling within a 150-mile radius of their plants.

The company generates revenue through three reportable segments: Packaging, Paper, and Corporate and Other. Revenue is primarily transactional, derived from the sale of containerboard and corrugated packaging products in the Packaging segment and uncoated freesheet papers in the Paper segment. The company sells to approximately 12,000 customers in approximately 27,000 locations. About 70% of corrugated products sales are to regional and local accounts, broadly diversified across industries and geographic locations, with the remaining 30% consisting of national accounts. No single customer exceeds 10% of segment sales in the Packaging segment.

The Packaging segment produces containerboard (linerboard and corrugating medium) at ten mills and corrugated packaging products at 91 facilities. Total annual containerboard capacity was approximately 5.8 million tons (358 BSF) as of December 31, 2025 . During the year ended December 31, 2025, the Packaging segment produced 5.2 million tons (305 billion square feet) of containerboard and sold 71 BSF of corrugated products . The segment's net sales were $8,293.9 million in 2025, compared to $7,690.9 million in 2024. Segment operating income was $1,125.3 million in 2025, compared to $1,101.5 million in 2024. Packaging segment EBITDA excluding special items was $1,830 million in 2025, compared to $1,598 million in 2024. The segment produces packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. Of the 91 manufacturing facilities, 56 are combining operations (corrugated plants), 28 are sheet plants, and seven are corrugated sheet-only manufacturers.

The Paper segment manufactures and sells uncoated freesheet papers, including both commodity and specialty papers with custom features such as colors, coatings, high brightness, and recycled content. The segment operates one paper mill in International Falls, Minnesota with capacity to produce approximately 500,000 tons annually . In 2025, UFS production was 484 thousand tons . Paper segment net sales were $615.4 million in 2025, compared to $624.7 million in 2024. Segment operating income was $129.6 million in 2025 and $129.7 million in 2024. Paper segment EBITDA excluding special items was $148.1 million in 2025, compared to $153.5 million in 2024. The segment has about 50 customers in approximately 180 locations, including office products distributors, retailers, paper merchants, and converters. ODP Corporation is the largest customer in the Paper segment, representing 58% of Paper segment sales revenue and 4% of consolidated sales revenue in 2025 .

On September 2, 2025, the company completed the acquisition of the containerboard business of Greif, Inc. for $1.8 billion in cash . The Greif containerboard business includes two containerboard mills with approximately 800,000 tons of production capacity and eight sheet feeder and corrugated plants located across the United States. During the fourth quarter of 2025, the company announced it will permanently shut down the No. 2 paper machine and kraft pulping facilities at the Wallula mill, with activities completed during the first quarter of 2026. The company repurchased and retired 0.8 million shares of common stock for $153.0 million in 2025. At December 31, 2025, $283.1 million of the authorized share repurchase amount remained available. The company paid $450 million in dividends on common stock in 2025. On July 31, 2025, the company entered into two credit agreements: a $500 million three-year unsecured term loan facility and a $600 million unsecured revolving credit facility under the Commercial Credit Agreement, and a $500 million seven-year unsecured term loan facility under the Farm Credit Agreement. On August 11, 2025, the company issued $500 million of 5.20% senior notes due 2035 through a registered public offering.

Net sales were $8,989.3 million for the year ended December 31, 2025, compared to $8,383.3 million for 2024, an increase of $606.0 million or 7.2%. Net income was $774.1 million in 2025, compared to $805.1 million in 2024. Diluted EPS was $8.58 in 2025, compared to $8.93 in 2024. Excluding special items, net income was $888.0 million and diluted EPS was $9.84 in 2025, compared to $814.5 million and $9.04 in 2024. The increase in earnings excluding special items 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. EBITDA was $1,759.8 million in 2025, compared to $1,626.9 million in 2024. EBITDA excluding special items was $1,861.6 million in 2025, compared to $1,637.1 million in 2024. Net cash provided by operating activities was $1,557.5 million in 2025, compared to $1,191.2 million in 2024.

Business Outlook

Looking ahead to the first quarter of 2026, in the Packaging segment, the company expects higher per-day volume in legacy corrugated products plants over the prior year, reflecting improving demand, though shipment volume is seasonally slower than the fourth quarter with some disruption from weather events. Domestic containerboard and corrugated products prices will be higher with an improved corrugated product mix throughout the quarter, and the company expects to benefit slightly from previously announced containerboard price increases beginning in March. Export volume is expected to be slightly higher and prices are expected to be flat to slightly down. In the Paper segment, the company forecasts slightly lower volume with two less mill operating days and prices and mix to be slightly lower. The company expects first quarter earnings to be lower than the fourth quarter of 2025.

The company notified customers of a $70 per ton price increase for linerboard and medium effective March 1, 2026 . The Greif Acquisition added approximately 800,000 tons of production capacity and eight sheet feeder and corrugated plants. The company expects recycled fiber to be a higher proportion of its fiber mix in the future due to the Greif Acquisition and the restructuring of the Wallula mill. The company has voluntarily set goals to reduce 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 its own operations and its value chain by 2050 . The company and its 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 .

With the exception of fiber prices, the company expects price inflation across most of its direct, indirect, and fixed operating and converting costs. Wood, energy, and chemical costs will also increase due to winter conditions negatively impacting usages and yields. The cost structure will begin to benefit from the Wallula reconfiguration late in the first quarter of 2026. Labor and benefits costs will be higher due to timing-related items at the beginning of a new year for annual increases, the restart of payroll taxes, and share-based compensation expenses. Freight will be slightly higher and the company expects slightly lower depreciation expense. Scheduled outage expenses will be lower and the company assumes a lower corporate tax rate.

The company expects capital investments in 2026 to be between $800 million and $870 million . The company currently estimates capital expenditures to comply with environmental regulations will be about $21 million in 2026 . The company expects recycled fiber to be a higher proportion of its fiber mix in the future. The company is relying on the seller to provide transition services for key functions of the acquired business, including accounting, information technology systems and support, purchasing and other services, and will be required to implement its own systems at the acquired business during the next year.

The company expects capital investments in 2026 to be between $800 million and $870 million . At December 31, 2025, $283.1 million of the authorized share repurchase amount remained available for repurchase of the company's common stock. The company paid dividends of $5.00 per common share in each of 2025, 2024, and 2023.

The company faces structural headwinds including the secular decline in demand for UFS paper products due to increasing shifts to electronic data transmission and document storage alternatives. Trade publications reported North American uncoated freesheet paper shipments decreased 9.6% in 2025 compared to 2024 . The U.S. economy has experienced persistent inflation, and the company has experienced cost inflation across its business. Although interest rates decreased during 2025, rates still remain relatively high, which may result in lower consumer demand and higher borrowing costs. The economic outlook for 2026 remains uncertain. Changes in U.S. trade policy, including renegotiating or potentially terminating existing bilateral or multilateral agreements as well as the imposition of tariffs or retaliatory tariffs from other nations, could impact global markets and demand.

Risk Factors

The company faces significant risks from industry cyclicality, as changes in prices for its products could materially affect financial condition, with prices driven by demand, industry capacity decisions, and competitive conditions. A $10 per ton price increase in recycled fiber for containerboard mills would result in approximately $20 million of additional expense based on 2026 estimated consumption . Customer concentration is a material risk, as ODP Corporation represented 58% of Paper segment sales revenue and 4% of consolidated sales revenue in 2025 , and if the agreement is not renewed, ODP's obligation to purchase paper would phase down over a two-year period beginning January 1, 2027. The company has $4.0 billion of debt outstanding at December 31, 2025, including $1.0 billion with floating interest rates , and a one percent increase in interest rates on variable-rate debt would increase interest expense by approximately $10 million annually . The Greif Acquisition integration presents risks, as the company is in early stages of integration and relying on the seller for transition services, with approximately $44 million of depreciation and amortization expense and $28 million of additional interest expense from the acquired business. Environmental liabilities are a risk, with an environmental reserve of $30.9 million as of December 31, 2025, and the potential for new regulations to require additional significant capital expenditures.

Management Priorities

Management's tone in the executive summary is cautiously optimistic, highlighting improvement in legacy PCA earnings by $0.96 per share while acknowledging a loss of ($0.16) per share from the first four months of the Greif containerboard business. The key strategic priorities emphasized are the integration of the Greif Acquisition, the restructuring of the Wallula mill to improve cost structure, and the implementation of previously announced containerboard price increases. Management noted that the increase in earnings of the legacy PCA business was driven primarily by higher prices and mix in the Packaging and Paper segments and lower fiber costs, partially offset by higher operating and converting costs, lower sales and production volumes, higher annual outage expense, higher fixed and other expense, higher freight and logistic expenses, and higher interest expense. Looking ahead to the first quarter of 2026, management expects first quarter earnings to be lower than the fourth quarter of 2025, with higher per-day volume in legacy corrugated products plants over the prior year reflecting improving demand, but seasonally slower shipment volume than the fourth quarter.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Packaging
  2. [2] Item 1, Business — Production and Shipments
  3. [3] Item 1, Business — Production and Shipments
  4. [4] Item 7, MD&A — Results of Operations
  5. [5] Item 7, MD&A — Results of Operations
  6. [6] Item 7, MD&A — Results of Operations
  7. [7] Item 7, MD&A — Results of Operations
  8. [8] Item 7, MD&A — Non-GAAP Financial Measures
  9. [9] Item 7, MD&A — Non-GAAP Financial Measures
  10. [10] Item 1, Business — Paper
  11. [11] Item 1, Business — Production and Shipments
  12. [12] Item 7, MD&A — Results of Operations
  13. [13] Item 7, MD&A — Results of Operations
  14. [14] Item 7, MD&A — Results of Operations
  15. [15] Item 7, MD&A — Results of Operations
  16. [16] Item 7, MD&A — Non-GAAP Financial Measures
  17. [17] Item 7, MD&A — Non-GAAP Financial Measures
  18. [18] Item 1, Business — Paper
  19. [19] Item 1, Business — Overview
  20. [20] Item 1, Business — Overview
  21. [21] Item 5, Market for Registrant's Common Equity
  22. [22] Item 5, Market for Registrant's Common Equity
  23. [23] Item 7, MD&A — Financing Activities
  24. [24] Item 7, MD&A — Liquidity and Capital Resources
  25. [25] Item 7, MD&A — Liquidity and Capital Resources
  26. [26] Item 7, MD&A — Liquidity and Capital Resources
  27. [27] Item 7, MD&A — Liquidity and Capital Resources
  28. [28] Item 7, MD&A — Executive Summary
  29. [29] Item 7, MD&A — Executive Summary
  30. [30] Item 7, MD&A — Results of Operations
  31. [31] Item 7, MD&A — Executive Summary
  32. [32] Item 7, MD&A — Executive Summary
  33. [33] Item 7, MD&A — Executive Summary
  34. [34] Item 7, MD&A — Executive Summary
  35. [35] Item 7, MD&A — Executive Summary
  36. [36] Item 7, MD&A — Executive Summary
  37. [37] Item 7, MD&A — Executive Summary
  38. [38] Item 7, MD&A — Executive Summary
  39. [39] Item 7, MD&A — Executive Summary
  40. [40] Item 7, MD&A — Executive Summary
  41. [41] Item 7, MD&A — Non-GAAP Financial Measures
  42. [42] Item 7, MD&A — Non-GAAP Financial Measures
  43. [43] Item 7, MD&A — Non-GAAP Financial Measures
  44. [44] Item 7, MD&A — Non-GAAP Financial Measures
  45. [45] Item 7, MD&A — Liquidity and Capital Resources
  46. [46] Item 7, MD&A — Liquidity and Capital Resources
  47. [47] Item 7, MD&A — Executive Summary
  48. [48] Item 1, Business — Overview
  49. [49] Item 7, MD&A — Regulatory and Environmental Matters
  50. [50] Item 7, MD&A — Regulatory and Environmental Matters
  51. [51] Item 7, MD&A — Regulatory and Environmental Matters
  52. [52] Item 7, MD&A — Investing Activities
  53. [53] Item 7, MD&A — Investing Activities
  54. [54] Item 7, MD&A — Investing Activities
  55. [55] Item 5, Market for Registrant's Common Equity
  56. [56] Item 8, Consolidated Statements of Income
  57. [57] Item 7, MD&A — Industry and Business Conditions
  58. [58] Item 1A, Risk Factors — Cost of Fiber
  59. [59] Item 1, Business — Paper
  60. [60] Item 1A, Risk Factors — Debt obligations
  61. [61] Item 1A, Risk Factors — Debt obligations
  62. [62] Item 7A, Quantitative and Qualitative Disclosures About Market Risk
  63. [63] Item 7, MD&A — Executive Summary
  64. [64] Item 7, MD&A — Executive Summary
  65. [65] Item 7, MD&A — Regulatory and Environmental Matters
  66. [66] Item 7, MD&A — Executive Summary
  67. [67] Item 7, MD&A — Executive Summary
  68. [68] Item 8, Consolidated Statements of Income
  69. [69] Item 8, Consolidated Statements of Income
  70. [70] Item 8, Consolidated Statements of Income
  71. [71] Item 8, Consolidated Statements of Income
  72. [72] Item 8, Consolidated Statements of Income
  73. [73] Item 8, Consolidated Statements of Income
  74. [74] Item 8, Consolidated Statements of Income
  75. [75] Item 8, Consolidated Statements of Income
  76. [76] Item 7, MD&A — Non-GAAP Financial Measures
  77. [77] Item 7, MD&A — Non-GAAP Financial Measures
  78. [78] Item 8, Consolidated Statements of Cash Flows
  79. [79] Item 8, Consolidated Statements of Cash Flows
  80. [80] Item 1A, Risk Factors — Debt obligations
  81. [81] Item 8, Consolidated Balance Sheets
  82. [82] Item 7, MD&A — Liquidity and Capital Resources
  83. [83] Item 7, MD&A — Liquidity and Capital Resources
  84. [84] Item 7, MD&A — Non-GAAP Financial Measures
  85. [85] Item 7, MD&A — Non-GAAP Financial Measures
  86. [86] Item 7, MD&A — Non-GAAP Financial Measures
  87. [87] Item 7, MD&A — Non-GAAP Financial Measures
  88. [88] Item 7, MD&A — Non-GAAP Financial Measures
  89. [89] Item 7, MD&A — Non-Operating Pension Expense, Interest Expense, Net and Income Taxes
  90. [90] Item 7, MD&A — Non-Operating Pension Expense, Interest Expense, Net and Income Taxes
  91. [91] Item 7, MD&A — Results of Operations
  92. [92] Item 7, MD&A — Results of Operations
  93. [93] Item 7, MD&A — Results of Operations
  94. [94] Item 7, MD&A — Results of Operations
  95. [95] Item 7, MD&A — Results of Operations
  96. [96] Item 7, MD&A — Results of Operations
  97. [97] Item 7, MD&A — Results of Operations
  98. [98] Item 7, MD&A — Results of Operations

Analysis on 6/8/2026