PACKAGING CORP OF AMERICA (PKG)

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis includes statements regarding our expectations with respect to our future performance, expected business conditions, liquidity, and capital resources. Such statements, along with any other statements that are not historical in nature, are forward-looking. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in our 2025 Annual Report on Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission (“SEC”). We do not assume any obligation to update any forward-looking statement. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q. Please see “Forward Looking Statements” elsewhere in this Item 2.

Overview

PCA is the third largest producer of containerboard products and a leading producer of UFS paper in North America. We operate ten mills and 90 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 in the United States.

On September 2, 2025, we completed the acquisition of the containerboard business of Greif, Inc. (“Greif”) for $1.8 billion in cash (the “Greif Acquisition”). 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. The operating results of the Greif Acquisition are included in PCA’s results in the Packaging segment after the date of acquisition.

Included in this Item 2 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, 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.”

This Item 2 is intended to supplement, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Annual Report on Form 10-K.

Executive Summary

Second quarter net sales were $2.49 billion in 2026 and $2.17 billion in 2025. We reported $192 million of net income, or $2.15 per diluted share, during the second quarter of 2026, compared to $242 million, or $2.67 per diluted share, during the same period in 2025. Net income included $18 million of expense for special items in the second quarter of 2026, primarily related to facility closure costs, Wallula mill restructuring activities, and acquisition and integration-related costs, compared to $17 million of income 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 $210 million, or $2.35 per diluted share, during the second quarter of 2026, compared to $224 million, or $2.48 per diluted share, in the second quarter of 2025.1 The decrease was driven by lower earnings in the legacy business of ($0.27) per share, partially offset by $0.14 per share of earnings from the acquired Greif containerboard business. The decrease in the earnings of the legacy PCA business was driven primarily by higher freight 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, higher labor and operating costs, higher depreciation and amortization expense, higher fiber costs, higher tax rate, and higher interest expense, excluding Greif acquisition indebtedness. These items were partially offset by higher production and sales volume in the Packaging segment, lower maintenance outage expense, and higher production and sales volume and prices and mix in the Paper segment. For additional detail on special items included in reported GAAP results and other non-GAAP measures, see “Item 2. Non-GAAP Financial Measures.”

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Packaging segment operating income was $313 million in the second quarter of 2026, compared to $346 million in the second quarter of 2025. Packaging segment EBITDA excluding special items was $489 million in the second quarter of 2026 compared to $453 million in the second quarter of 2025.1 The increase in EBITDA excluding special items was driven by contribution from the acquired business and higher sales and production volume in the legacy business, partially offset by higher freight and logistics expenses, lower price and mix, higher fixed and other expenses, higher maintenance outage expense, and higher operating and converting costs. Prices and mix began to improve in the second quarter and are expected to further improve in the third and fourth quarters due to two containerboard and corrugated products price increases that we notified to customers during the first half of the year and the increase in reported containerboard prices described below under “Industry and Business Conditions.” PCA’s agreements with corrugated products customers generally include price change provisions based upon the change in reported containerboard prices at negotiated amounts and times. PCA expects to realize the majority of the price and mix improvement from the first price increase during the third quarter and expects that the price and mix improvement from the second price increase will be divided between the third and fourth quarters. Freight rates increased significantly during the second quarter primarily as a result of higher diesel fuel prices and recycled fiber prices have increased throughout the first half of the year.

Corrugated product shipments were up 24.3% per day and in total compared to the second quarter of 2025. Shipments from the legacy PCA business were up 4.1% per day and in total compared to the second quarter of 2025. Containerboard production in the second quarter of 2026 was approximately 1,415,000 tons, and containerboard inventory was down (5.3%) compared to the first quarter, and up 9.9% compared to the second quarter of 2025, primarily due to the acquisition.

Paper segment operating income was $34 million in the second quarter of 2026, compared to $26 million in the second quarter of 2025. Paper segment EBITDA excluding special items was $39 million in the second quarter of 2026, compared to $30 million in the second quarter of 2025.1 The increase in EBITDA excluding special items was primarily due to lower maintenance outage expense in 2026 due to the timing of annual maintenance outages, higher sales and production volume, and higher prices and mix, partially offset by higher freight and operating costs, with freight rates rising significantly during the quarter.

Packaging segment operating income was $574 million in the first six months of 2026, compared to $624 million in the same period in 2025. Packaging segment EBITDA excluding special items was $970 million in the first six months of 2026 compared to $862 million in the first six months of 2025.1 The increase in EBITDA excluding special items was driven by contribution from the acquired business and higher sales and production volume in the legacy business, lower fiber costs, higher prices and mix, and lower maintenance outage expense, partially offset by higher freight and logistics expense, higher fixed and other costs, and higher operating and converting costs with the addition of the acquired business.

Paper segment operating income was $67 million in the first six months of 2026, compared to $61 million in the first six months of 2025. Paper segment EBITDA excluding special items was $77 million in the first six months of 2026, compared to $71 million in the first six months of 2025.1 The increase in EBITDA excluding special items was due to lower maintenance outage expense, higher sales and production volume, and higher prices and mix, partially offset by higher operating costs and higher freight and logistics expense.

Industry and Business Conditions

Trade publications reported North American industry-wide corrugated products shipments were up 0.9% in total and per workday during the second quarter of 2026 compared to the same quarter of 2025. Reported industry containerboard production decreased (2.3%) compared to the second quarter of 2025. Reported industry containerboard inventories at the end of the second quarter of 2026 were approximately 2.40 million tons, down (12.5%) compared to the same period in 2025. Reported containerboard export shipments were down (27.3%) compared to the second quarter of 2025. Reported containerboard prices increased a net $20 per ton for linerboard and for corrugating medium during the first quarter of 2026, an additional $30 per ton in April 2026 and an additional $50 per ton in June 2026.

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 UFS paper shipments were down (9.1%) in the first six months of 2026, compared to the same period of 2025. Average prices reported by a trade publication for cut size office papers were higher by $87 per ton, or 5.8%, in the second quarter of 2026, compared to the first quarter of 2026, and higher by $107 per ton, or 7.2%, compared to the second quarter of 2025. Reported index prices increased $60 per ton in March 2026, $40 per ton in April 2026 and $20 per ton in June 2026 for cut size office papers and for offset printing papers.

1 Net income excluding special items, earnings per diluted share excluding special items, and segment EBITDA excluding special items are non-GAAP financial measures. See “Non-GAAP Financial Measures” later in this Item 2.

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Outlook

We expect continued strong demand in the Packaging segment 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 mix improvement in the third quarter as we complete the implementation of the first price increase and begin to implement the second price increase to corrugated products customers. Packaging mill production will be higher with one more operating day and lower impact to production from maintenance outages with fewer mills having annual outages as well as expected improved operating performance in our containerboard mill system. Mill maintenance outage expenses will be lower in total and in the Packaging segment and higher in the P

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of historical results of operations and financial condition should be read in conjunction with the audited financial statements and the notes thereto which appear elsewhere in this Form 10-K. This discussion includes forward-looking statements regarding our expectations with respect to our future performance, liquidity, ESG goals, and capital resources. Such statements, along with any other non-historical statements in the discussion, are forward-looking. See our discussion regarding forward-looking statements included under “Part I, Item 1A. Risk Factors” of this Form 10-K. For our discussion and analysis of our results of operations, financial condition and cash flows for the year ended December 31, 2023, the earliest of the years presented in the accompanying audited financial statements included in Item 8 herein, please refer to our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 27, 2025. Such information is presented in Item 7 of such report under the subcaptions “Results of Operations —Year Ended December 31, 2024, Compared with Year Ended December 31, 2023” and “Liquidity and Capital Resources” and is incorporated by reference herein.

Overview

PCA is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. We operate ten mills and 91 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.

On September 2, 2025, we 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. The operating results of the Greif Acquisition are included in PCA’s results in the Packaging segment after the date of acquisition.

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 (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.”

Executive Summary

Net sales were $9.0 billion for the year ended December 31, 2025 and $8.4 billion for 2024. We reported $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. Net income included $114 million of expense for special items in 2025, compared to $9 million of expense for special items in 2024. Special items in both periods are described later in this section. Excluding special items, we recorded $888 million of net income, or $9.84 per diluted share, in 2025, compared to $814 million, or $9.04 per diluted share, in 2024.1 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 prices and mix in our Packaging and Paper segments, and lower fiber costs, partially offset by higher operating and converting costs, lower sales and production volumes in our 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 $668 million of cash and marketable debt securities and, including borrowing availability under its revolving credit facility, $1,241 million in liquidity.

1 Net income excluding special items, earnings per diluted share excluding special items, and segment EBITDA excluding special items are non-GAAP financial measures. See “Non-GAAP Financial Measures” later in this item 7.

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Packaging segment operating income was $1,125 million in 2025, compared to $1,102 million for 2024. Packaging segment EBITDA excluding special items was $1,830 million in 2025, compared to $1,598 million in 2024.1 The increase was driven primarily by higher containerboard and corrugated products prices and mix, higher volumes as a result of the Greif containerboard business, and lower fiber costs, partially offset by higher operating and converting costs, higher annual outage expense, higher fixed and other expense, and higher freight and logistic expenses. The lower increase in operating income as compared to Packaging segment EBITDA excluding special items was primarily due to higher depreciation and amortization expenses recorded in 2025.

Packaging prices and mix reflected our 2025 price increases for containerboard and corrugated products. Corrugated product shipments were up 6.3% per workday and in total throughout 2025, compared with 2024, with the addition of the acquired Greif business. Legacy corrugated product shipments were flat compared with 2024. Our containerboard production was approximately 305 BSF, and containerboard inventory weeks-of-supply at the end of 2025 was flat compared to year end 2024. For more information on our containerboard production and corrugated products shipments, refer to the table presented under the caption “Production and Shipments” in “Part I, Item 1. Business” of this Form 10-K. We notified customers of a $70 per ton price increase for linerboard and medium effective March 1, 2026.

Paper segment operating income was $130 million in 2025 and in 2024. Paper segment EBITDA excluding special items was $148 million in 2025, compared to $154 million in 2024.1 The decrease was due primarily to higher operating costs and lower paper volumes, partially offset by higher prices and mix. Paper prices and mix reflected our 2025 price increase for office, printing, and converting papers.

Industry and Business Conditions

Trade publications reported North American industry-wide corrugated products shipments were down (1.8%) in 2025, compared to 2024. Reported industry containerboard production decreased (4.5%) compared to 2024, and reported industry containerboard inventories at the end of 2025 were approximately 2.8 million tons, up 1.3% compared to 2024. Reported containerboard export shipments decreased (11.4%) compared to 2024. In February 2025, index prices increased $40 per ton for linerboard and for 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 decreased (9.6%) in 2025, compared to 2024. Average prices reported by a trade publication for cut size office papers were higher by $47 per ton, or 3.3%, in 2025 compared to 2024. Reported index prices increased $30 per ton for cut size office papers and for offset printing papers in February 2025 and $10 per ton in April 2025.

Outlook

Looking ahead to the first quarter of 2026, in our Packaging segment, we expect higher per-day volume in our legacy corrugated products plants over last year, reflecting improving demand, though shipment volume is seasonally slower than the fourth quarter and we experienced some disruption in shipments from weather events earlier in the quarter. We will produce less containerboard than the fourth quarter with two fewer operating days in the first quarter, a scheduled maintenance outage at our Counce, TN mill and lower production 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 flat to slightly down. In the Paper segment, we forecast slightly lower volume with two less mill operating days and prices and mix to be slightly lower. With the exception of fiber prices, we expect price inflation across most of our direct, indirect and fixed operating and converting costs. In addition, wood, energy, and chemical costs will also increase due to winter conditions negatively impacting 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. Freight will be slightly higher and we expect slightly lower depreciation expense. Scheduled outage expenses will be 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 2025.

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Results of Operations

Year Ended December 31, 2025 Compared with Year Ended December 31, 2024

The historical results of operations of PCA for the years ended December 31, 2025 and 2024 are set forth below (dollars in millions):

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