filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
Packaging Corporation of America
Consolidated Statements of In****come and Comprehensive Income
(unaudited, dollars in millions, except per-share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Statements of Income: | ||||||||||||||||
| Net sales | $ | 2,171.3 | $ | 2,075.3 | $ | 4,312.3 | $ | 4,054.8 | ||||||||
| Cost of sales | (1,688.3 | ) | (1,637.6 | ) | (3,374.5 | ) | (3,246.7 | ) | ||||||||
| Gross profit | 483.0 | 437.7 | 937.8 | 808.1 | ||||||||||||
| Selling, general and administrative expenses | (153.2 | ) | (149.5 | ) | (314.6 | ) | (301.3 | ) | ||||||||
| Other income (expense), net | 3.9 | (12.2 | ) | (9.2 | ) | (34.8 | ) | |||||||||
| Income from operations | 333.7 | 276.0 | 614.0 | 472.0 | ||||||||||||
| Non-operating pension income | — | 1.1 | — | 2.2 | ||||||||||||
| Interest expense, net | (13.1 | ) | (10.4 | ) | (26.0 | ) | (19.9 | ) | ||||||||
| Income before taxes | 320.6 | 266.7 | 588.0 | 454.3 | ||||||||||||
| Provision for income taxes | (79.1 | ) | (67.8 | ) | (142.7 | ) | (108.4 | ) | ||||||||
| Net income | $ | 241.5 | $ | 198.9 | $ | 445.3 | $ | 345.9 | ||||||||
| Net income per common share: | ||||||||||||||||
| Basic | $ | 2.68 | $ | 2.22 | $ | 4.95 | $ | 3.86 | ||||||||
| Diluted | $ | 2.67 | $ | 2.21 | $ | 4.93 | $ | 3.84 | ||||||||
| Dividends declared per common share | $ | 1.25 | $ | 1.25 | $ | 2.50 | $ | 2.50 | ||||||||
| Statements of Comprehensive Income: | ||||||||||||||||
| Net income | $ | 241.5 | $ | 198.9 | $ | 445.3 | $ | 345.9 | ||||||||
| Other comprehensive income, net of tax: | ||||||||||||||||
| Changes in unrealized (losses) gains on marketable debt securities, net of tax $0.0 million for all periods presented in 2025 and 2024 | — | (0.1 | ) | 0.1 | (0.2 | ) | ||||||||||
| Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of ($0.3) million, ($0.3) million, ($0.6) million, and ($0.7) million, respectively | 0.9 | 1.1 | 1.9 | 2.1 | ||||||||||||
| Other comprehensive income | 0.9 | 1.0 | 2.0 | 1.9 | ||||||||||||
| Comprehensive income | $ | 242.4 | $ | 199.9 | $ | 447.3 | $ | 347.8 |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Packaging Corporation of America
Consolidated B****alance Sheets
(unaudited, dollars and shares in millions, except per-share data)
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 787.9 | $ | 685.0 | ||||
| Short-term marketable debt securities | 92.4 | 102.0 | ||||||
| Accounts receivable, net of allowance for credit losses and customer deductions of $15.6 million and $20.6 million as of June 30, 2025 and December 31, 2024, respectively | 1,195.1 | 1,144.0 | ||||||
| Inventories | 1,144.7 | 1,124.9 | ||||||
| Prepaid expenses and other current assets | 105.7 | 166.9 | ||||||
| Federal and state income taxes receivable | 10.8 | 10.2 | ||||||
| Total current assets | 3,336.6 | 3,233.0 | ||||||
| Property, plant, and equipment, net | 4,115.9 | 4,039.0 | ||||||
| Goodwill | 922.4 | 922.4 | ||||||
| Other intangible assets, net | 173.1 | 191.9 | ||||||
| Operating lease right-of-use assets | 314.4 | 276.9 | ||||||
| Long-term marketable debt securities | 75.6 | 65.2 | ||||||
| Other long-term assets | 103.2 | 104.8 | ||||||
| Total assets | $ | 9,041.2 | $ | 8,833.2 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Operating lease obligations | $ | 86.7 | $ | 80.5 | ||||
| Finance lease obligations | 2.2 | 2.1 | ||||||
| Accounts payable | 490.7 | 430.3 | ||||||
| Dividends payable | 115.8 | 116.3 | ||||||
| Accrued liabilities | 238.2 | 362.9 | ||||||
| Accrued interest | 9.4 | 9.5 | ||||||
| Total current liabilities | 943.0 | 1,001.6 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt | 2,475.2 | 2,474.2 | ||||||
| Operating lease obligations | 241.2 | 208.0 | ||||||
| Finance lease obligations | 5.5 | 6.7 | ||||||
| Deferred income taxes | 564.9 | 561.9 | ||||||
| Compensation and benefits | 98.1 | 95.9 | ||||||
| Other long-term liabilities | 81.2 | 80.9 | ||||||
| Total long-term liabilities | 3,466.1 | 3,427.6 | ||||||
| Commitments and contingent liabilities (Note 18) | ||||||||
| Stockholders' equity: | ||||||||
| Common stock, par value $0.01 per share, 300.0 million shares authorized,90.0 million and 89.8 million shares issued as of June 30, 2025 and December 31, 2024, respectively | 0.9 | 0.9 | ||||||
| Additional paid in capital | 699.1 | 669.8 | ||||||
| Retained earnings | 3,973.5 | 3,776.7 | ||||||
| Accumulated other comprehensive loss | (41.4 | ) | (43.4 | ) | ||||
| Total stockholders' equity | 4,632.1 | 4,404.0 | ||||||
| Total liabilities and stockholders' equity | $ | 9,041.2 | $ | 8,833.2 |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Packaging Corporation of America
Consolidated Statem****ents of Cash Flows
(unaudited, dollars in millions)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 445.3 | $ | 345.9 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation, depletion, and amortization of intangibles | 278.6 | 256.9 | ||||||
| Amortization of deferred financing costs | 1.0 | 1.2 | ||||||
| Share-based compensation expense | 28.1 | 29.2 | ||||||
| Deferred income tax provision (benefit) | 2.8 | (5.9 | ) | |||||
| Net (gain) loss on asset disposals | (19.7 | ) | 7.4 | |||||
| Pension and post-retirement benefits expense, net of contributions | 4.2 | 3.1 | ||||||
| Other, net | 3.5 | 22.2 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in assets — | ||||||||
| Accounts receivable | (51.1 | ) | (112.0 | ) | ||||
| Inventories | (19.7 | ) | (16.4 | ) | ||||
| Prepaid expenses and other current assets | 61.4 | (142.3 | ) | |||||
| Increase (decrease) in liabilities — | ||||||||
| Accounts payable | 29.4 | 53.1 | ||||||
| Accrued liabilities | (124.5 | ) | 92.3 | |||||
| Federal and state income taxes payable/receivable | (0.6 | ) | 4.0 | |||||
| Net cash provided by operating activities | 638.7 | 538.7 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Additions to property, plant, and equipment | (317.8 | ) | (321.7 | ) | ||||
| Additions to other long-term assets | (1.9 | ) | (1.7 | ) | ||||
| Proceeds from asset disposals | 33.0 | 0.6 | ||||||
| Purchases of available-for-sale debt securities | (72.0 | ) | (62.6 | ) | ||||
| Proceeds from sales of available-for-sale debt securities | 12.6 | 1.5 | ||||||
| Proceeds from maturities of available-for-sale debt securities | 59.1 | 60.1 | ||||||
| Net cash used for investing activities | (287.0 | ) | (323.8 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Repayments of debt and finance lease obligations | (1.0 | ) | (1.0 | ) | ||||
| Common stock dividends paid | (224.7 | ) | (224.2 | ) | ||||
| Shares withheld to cover employee restricted stock taxes | (23.1 | ) | (24.1 | ) | ||||
| Net cash used for financing activities | (248.8 | ) | (249.3 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 102.9 | (34.4 | ) | |||||
| Cash and cash equivalents, beginning of period | 685.0 | 648.0 | ||||||
| Cash and cash equivalents, end of period | $ | 787.9 | $ | 613.6 |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Packaging Corporation of America
Consolidated Statements of Cha****nges in Stockholders’ Equity
(unaudited, dollars in millions and shares in thousands)
| Common Stock | Additional Paid in | Retained | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance at April 1, 2025 | 89,928 | $ | 0.9 | $ | 687.8 | $ | 3,852.8 | $ | (42.3 | ) | $ | 4,499.2 | ||||||||||||
| Common stock withheld and retired to cover taxes on vested stock awards | (42 | ) | — | (0.4 | ) | (7.2 | ) | — | (7.6 | ) | ||||||||||||||
| Common stock dividends declared | — | — | — | (113.6 | ) | — | (113.6 | ) | ||||||||||||||||
| Share-based compensation and other | 94 | — | 11.7 | — | — | 11.7 | ||||||||||||||||||
| Comprehensive income | — | — | — | 241.5 | 0.9 | 242.4 | ||||||||||||||||||
| Balance at June 30, 2025 | 89,980 | $ | 0.9 | $ | 699.1 | $ | 3,973.5 | $ | (41.4 | ) | $ | 4,632.1 | ||||||||||||
| Common Stock | Additional Paid in | Retained | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance at April 1, 2024 | 89,804 | $ | 0.9 | $ | 640.5 | $ | 3,459.6 | $ | (70.0 | ) | $ | 4,031.0 | ||||||||||||
| Common stock withheld and retired to cover taxes on vested stock awards | (8 | ) | — | (0.1 | ) | (1.4 | ) | — | (1.5 | ) | ||||||||||||||
| Common stock dividends declared | — | — | — | (112.7 | ) | — | (112.7 | ) | ||||||||||||||||
| Share-based compensation and other | 19 | — | 9.9 | — | — | 9.9 | ||||||||||||||||||
| Comprehensive income | — | — | — | 198.9 | 1.0 | 199.9 | ||||||||||||||||||
| Balance at June 30, 2024 | 89,815 | $ | 0.9 | $ | 650.3 | $ | 3,544.4 | $ | (69.0 | ) | $ | 4,126.6 |
| Common Stock | Additional Paid in | Retained | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance at January 1, 2025 | 89,802 | $ | 0.9 | $ | 669.8 | $ | 3,776.7 | $ | (43.4 | ) | $ | 4,404.0 | ||||||||||||
| Common stock withheld and retired to cover taxes on vested stock awards | (116 | ) | — | (1.2 | ) | (21.9 | ) | — | (23.1 | ) | ||||||||||||||
| Common stock dividends declared | — | — | — | (226.6 | ) | — | (226.6 | ) | ||||||||||||||||
| Share-based compensation and other | 294 | — | 30.5 | — | — | 30.5 | ||||||||||||||||||
| Comprehensive income | — | — | — | 445.3 | 2.0 | 447.3 | ||||||||||||||||||
| Balance at June 30, 2025 | 89,980 | $ | 0.9 | $ | 699.1 | $ | 3,973.5 | $ | (41.4 | ) | $ | 4,632.1 | ||||||||||||
| Common Stock | Additional Paid in | Retained | Accumulated Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance at January 1, 2024 | 89,625 | $ | 0.9 | $ | 620.1 | $ | 3,447.2 | $ | (70.9 | ) | $ | 3,997.3 | ||||||||||||
| Common stock withheld and retired to cover taxes on vested stock awards | (135 | ) | — | (1.3 | ) | (22.8 | ) | — | (24.1 | ) | ||||||||||||||
| Common stock dividends declared | — | — | — | (225.9 | ) | — | (225.9 | ) | ||||||||||||||||
| Share-based compensation and other | 325 | — | 31.5 | — | — | 31.5 | ||||||||||||||||||
| Comprehensive income | — | — | — | 345.9 | 1.9 | 347.8 | ||||||||||||||||||
| Balance at June 30, 2024 | 89,815 | $ | 0.9 | $ | 650.3 | $ | 3,544.4 | $ | (69.0 | ) | $ | 4,126.6 |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Condensed Notes to Unaudited Quarterly Consolidated Financial Statements
1. Nature of Operations and Basis of Presentation
Packaging Corporation of America ("we," "us," "our," PCA," or the "Company") was incorporated on January 25, 1999. In April 1999, PCA acquired the containerboard and corrugated packaging products business of Pactiv Corporation ("Pactiv"), formerly known as Tenneco Packaging, Inc. We are a large diverse manufacturer of both packaging and paper products. We are headquartered in Lake Forest, Illinois and we operate primarily in the United States.
We report our business in three reportable segments: Packaging, Paper, and Corporate and Other. Our Packaging segment produces a wide variety of containerboard and corrugated packaging products. The Paper segment manufactures and sells a range of communication-based papers. Corporate and Other includes support staff services and related assets and liabilities, transportation assets, and activity related to other ancillary support operations. For more information about our segments, see Note 17, Segment Information.
On July 1, 2025, we announced our entry into a definitive agreement to purchase the containerboard business of Greif, Inc. (“Greif”) for $1.8 billion in cash (the “Greif Acquisition”). The transaction is expected to close by the end of the third quarter, subject to certain customary conditions, including regulatory approval. 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 will be included in PCA’s results upon closing of the transaction.
The consolidated financial statements of PCA as of June 30, 2025 and for the three and six months ended June 30, 2025 and 2024 are unaudited but include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of such financial statements. The preparation of the consolidated financial statements involves the use of estimates and accruals. Actual results may vary from those estimates. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete audited financial statements. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024.
The consolidated financial statements include the accounts of PCA and its majority-owned subsidiaries after elimination of intercompany balances and transactions.
2. New and Recently Adopted Accounting Standards
Recently Adopted Accounting Standards
Effective January 1, 2024, we adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The new guidance is required to be applied retrospectively. The adoption of this update did not have a significant impact on the Company’s related disclosure as reflected in Note 17, Segment Information, in this Quarterly Report on Form 10-Q.
New Accounting Standards Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU is intended to enhance transparency into the nature and function of expenses. The amendments require that on an annual and interim basis, entities disclose disaggregated operating expense information about specific categories, including purchases of inventory, employee compensation, depreciation, amortization, and depletion. The update is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, as clarified by ASU 2025-01 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, on a prospective basis or with the option for retrospective application. Early adoption is permitted. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to the Income Tax Disclosures. This ASU provides for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.
There were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.
3. Revenue
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. Sales, value added, and other taxes collected concurrently with revenue-producing activities are excluded from revenue.
The following table presents our revenues disaggregated by product line (dollars in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Packaging | $ | 2,005.9 | $ | 1,908.3 | $ | 3,976.3 | $ | 3,706.5 | ||||||||
| Paper | 145.8 | 150.1 | 300.0 | 313.9 | ||||||||||||
| Corporate and Other | 19.6 | 16.9 | 36.0 | 34.4 | ||||||||||||
| Total revenue | $ | 2,171.3 | $ | 2,075.3 | $ | 4,312.3 | $ | 4,054.8 |
Packaging Revenue
Our containerboard mills produce linerboard and corrugating medium which are papers primarily used in the production of corrugated products. The majority of our containerboard production is used internally by our corrugated products manufacturing facilities. The remaining containerboard is sold to outside domestic and export customers. Our corrugated products manufacturing plants produce a wide variety of corrugated packaging products and retail merchandise displays. We sell corrugated products to national, regional and local accounts, which are broadly diversified across industries and geographic locations.
The Company recognizes revenue for its packaging products when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time. Based on our express terms and conditions of the sale of products to our customers, as well as terms included in contractual arrangements with our customers, we do not have an enforceable right of payment that includes a reasonable profit throughout the duration of the contract for products that do not have an alternative use. Revenue is recognized when the product is shipped from the mill or from our manufacturing facility to our customer. Certain customers may receive volume-based incentives, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized.
Certain customers receive a portion of their packaging products as consigned inventory with billing triggered once the customer uses or consumes the designated product. Prior to invoicing, these amounts are handled as unbilled receivables. Total unbilled receivables, which are immaterial in amount, are included in the accounts receivable financial statement caption.
Paper Revenue
We manufacture and sell a range of communication-based papers. Communication papers consist of cut-size office papers, and printing and converting papers.
The Company recognizes revenue for its paper products when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time. Revenue is recognized when the product is shipped from the mill or from our manufacturing facility or distribution center to our customer. Certain customers may receive incentives, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized.
Corporate and Other Revenue
Revenue in this segment primarily relates to Louisiana Timber Procurement Company, L.L.C. ("LTP"), a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company ("Boise Cascade"). PCA is the primary beneficiary of LTP and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements. See Note 16, Transactions With Related Parties, for more information related to LTP.
The Company recognizes revenue within this segment when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time.
Practical Expedients and Exemption
Shipping and handling fees billed to a customer are recorded on a gross basis in "Net sales" with the corresponding shipping and handling costs included in "Cost of sales" in the concurrent period as the revenue is recorded. We expense sales commissions when incurred because the amortization period is one year or less. Sales commissions are recorded in "Selling, general, and administrative expenses".
We do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.
4. Earnings Per Share
The following table sets forth the computation of basic and diluted income per common share for the periods presented (dollars and shares in millions, except per share data):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| Numerator: | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Net income | $ | 241.5 | $ | 198.9 | $ | 445.3 | $ | 345.9 | ||||||||
| Less: Distributed and undistributed earnings allocated to participating securities | (1.6 | ) | (1.4 | ) | (3.0 | ) | (2.5 | ) | ||||||||
| Net income attributable to common shareholders | $ | 239.9 | $ | 197.5 | $ | 442.3 | $ | 343.4 | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average basic common shares outstanding | 89.3 | 89.1 | 89.3 | 89.1 | ||||||||||||
| Effect of dilutive securities | 0.4 | 0.4 | 0.4 | 0.4 | ||||||||||||
| Weighted average diluted common shares outstanding | 89.7 | 89.5 | 89.7 | 89.5 | ||||||||||||
| Basic income per common share | $ | 2.68 | $ | 2.22 | $ | 4.95 | $ | 3.86 | ||||||||
| Diluted income per common share | $ | 2.67 | $ | 2.21 | $ | 4.93 | $ | 3.84 |
5. Other Income (Expense), Net
The components of other expense, net, were as follows (dollars in millions):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Facilities closure and other income (costs) (a) | $ | 25.3 | $ | (0.1 | ) | $ | 23.0 | $ | — | |||||||
| Asset disposals and write-offs | (10.5 | ) | (8.0 | ) | (18.8 | ) | (15.5 | ) | ||||||||
| Acquisition and integration-related costs | (1.6 | ) | — | (1.6 | ) | — | ||||||||||
| DeRidder litigation (b) | — | (2.0 | ) | — | (125.7 | ) | ||||||||||
| DeRidder litigation insurance recovery (b) | — | 2.0 | — | 125.7 | ||||||||||||
| Jackson mill conversion-related activities (c) | — | 0.6 | — | (7.6 | ) | |||||||||||
| Other | (9.3 | ) | (4.7 | ) | (11.8 | ) | (11.7 | ) | ||||||||
| Total | $ | 3.9 | $ | (12.2 | ) | $ | (9.2 | ) | $ | (34.8 | ) |
(a)
For the three and six months ended June 30, 2025, includes income related to gains on sales of corrugated products facilities, partially offset by closure costs related to corrugated products facilities. For the three months ended June 30, 2024, includes charges consisting of closure costs related to corrugated products facilities. For the six months ended June 30, 2024, these charges were completely offset by income primarily related to a favorable lease buyout for a closed corrugated products facility during the first quarter of 2024.
(b)
On April 24, 2024, a jury for the remaining DeRidder mill lawsuit that was tried in the U.S. District Court for the Middle District of Louisiana awarded plaintiffs compensatory damages plus interest. For more information on the DeRidder mill lawsuit, see Note 19, Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our 2024 Annual Report on Form 10-K.
(c)
Includes items 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.
6. Income Taxes
For the three months ended June 30, 2025 and 2024, we recorded $79.1 million and $67.8 million of income tax expense and had an effective tax rate of 24.7% and 25.4%, respectively. The decrease in our effective tax rate for the three months ended June 30, 2025 compared to the same period in 2024 was primarily due to higher excess tax benefits associated with employee restricted stock and performance unit vests.
For the six months ended June 30, 2025 and 2024, we recorded $142.7 million and $108.4 million of income tax expense and had an effective tax rate of 24.3% and 23.9%, respectively. The increase in our effective tax rate for the six months ended June 30, 2025 compared to the same period in 2024 was primarily due to lower excess tax benefits associated with employee restricted stock and performance unit vests.
Our current effective tax rate is higher than the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes. During the six months ended June 30, 2025 and 2024, cash paid for taxes, net of refunds received, was $140.5 million and $110.3 million, respectively. The increase in cash tax payments between the periods is primarily due to higher 2025 forecasted taxable income.
During the three and six months ended June 30, 2025 and 2024, there were no significant changes to our uncertain tax positions. For more information, see Note 7, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our 2024 Annual Report on Form 10-K.
On July 4, 2025, the President signed into law H.R.1, the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes significant tax law changes such as providing for the full expensing of certain depreciable property as well as full expensing of domestic research and development expenditures. The provisions of the OBBBA have various effective dates, with certain provisions effective in 2025 and others through 2027. We are currently in the process of evaluating the impact of the OBBBA on our consolidated financial statements.
7. Inventories
We value our raw materials, work in process, and finished goods inventories using lower of cost, as determined by the average cost method, or net realizable value. Supplies and materials are valued at the first-in, first-out (FIFO) or average cost method.
The components of inventories were as follows (dollars in millions):
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Raw materials | $ | 356.4 | $ | 356.6 | ||||
| Work in process | 17.4 | 15.5 | ||||||
| Finished goods | 233.2 | 234.0 | ||||||
| Supplies and materials | 537.7 | 518.8 | ||||||
| Inventories | $ | 1,144.7 | $ | 1,124.9 |
8. Property, Plant, and Equipment
The components of property, plant, and equipment were as follows (dollars in millions):
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Land and land improvements | $ | 216.4 | $ | 203.4 | ||||
| Buildings | 1,234.3 | 1,140.0 | ||||||
| Machinery and equipment | 7,547.0 | 7,368.8 | ||||||
| Construction in progress | 350.9 | 397.2 | ||||||
| Other | 200.2 | 195.8 | ||||||
| Property, plant and equipment, at cost | 9,548.8 | 9,305.2 | ||||||
| Less accumulated depreciation | (5,432.9 | ) | (5,266.2 | ) | ||||
| Property, plant, and equipment, net | $ | 4,115.9 | $ | 4,039.0 |
Depreciation expense for the three months ended June 30, 2025 and 2024 was $130.8 million and $118.7 million, respectively. During the six months ended June 30, 2025 and 2024, depreciation expense was $258.9 million and $236.8 million, respectively. During the six months ended June 30, 2025, we recognized $3.6 million of incremental depreciation expense as a result of closure costs related to corrugated products facilities. We recognized $1.5 million of incremental depreciation expense during the six months ended June 30, 2024 as a result of Jackson mill conversion-related activities.
At June 30, 2025 and December 31, 2024, purchases of property, plant, and equipment included in accounts payable were $64.8 million and $33.8 million, respectively.
9. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At both June 30, 2025 and December 31, 2024, we had $922.4 million of goodwill recorded in our Packaging segment, which represents the entire goodwill balance reported on our Consolidated Balance Sheets.
Intangible Assets
Intangible assets are primarily comprised of customer relationships and trademarks and trade names. The weighted average remaining useful life, gross carrying amount, and accumulated amortization of our intangible assets were as follows (dollars in millions):
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||
| Weighted Average Remaining Useful Life (in Years) | Gross Carrying Amount | Accumulated Amortization | Weighted Average Remaining Useful Life (in Years) | Gross Carrying Amount | Accumulated Amortization | |||||||||||||||||||
| Customer relationships | 6.3 | $ | 546.0 | $ | 380.2 | 6.6 | $ | 546.0 | $ | 362.4 | ||||||||||||||
| Trademarks and trade names | 5.8 | 41.3 | 34.0 | 6.0 | 41.3 | 33.0 | ||||||||||||||||||
| Other | 1.4 | 4.4 | 4.4 | 1.9 | 4.4 | 4.4 | ||||||||||||||||||
| Total intangible assets (excluding goodwill) | 6.2 | $ | 591.7 | $ | 418.6 | 6.6 | $ | 591.7 | $ | 399.8 |
During the six months ended June 30, 2025 and 2024, amortization expense was $18.8 million and $18.9 million, respectively.
10. Accrued Liabilities
The components of accrued liabilities were as follows (dollars in millions):
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Compensation and benefits | $ | 134.3 | $ | 168.5 | ||||
| Medical insurance and workers’ compensation | 30.3 | 29.1 | ||||||
| Franchise, property, sales and use taxes | 29.1 | 18.7 | ||||||
| Customer rebates and other credits | 26.4 | 33.9 | ||||||
| Severance, retention, and relocation | 4.4 | 3.4 | ||||||
| Environmental liabilities and asset retirement obligations | 2.0 | 3.2 | ||||||
| DeRidder litigation and other litigation (a) | — | 96.2 | ||||||
| Other | 11.7 | 9.9 | ||||||
| Total | $ | 238.2 | $ | 362.9 |
(a)
Settlement amounts for the DeRidder and other litigation were included in the Consolidated Balance Sheet as of December 31, 2024 and were fully insured. As of June 30, 2025, these settlements have been paid. For more information on the DeRidder litigation, see Note 19, Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our 2024 Annual Report on Form 10-K.
11. Debt
For the six months ended June 30, 2025 and 2024, cash payments for interest were $46.7 million and $53.9 million, respectively.
Included in interest expense, net is the amortization of financing costs, which includes the amortization of debt issuance costs and amortization of bond discount. For the three months ended June 30, 2025 and 2024, amortization of debt issuance costs was $0.4 million and $0.5 million, respectively, and during the six months ended June 30, 2025 and 2024, amortization of debt issuance costs was $0.8 million and $1.0 million, respectively. For both the three and six month periods ended June 30, 2025 and 2024, the amortization of bond discount was insignificant.
At June 30, 2025, we had $2,492.4 million of fixed-rate senior notes outstanding. The fair value of our fixed-rate debt was estimated to be $2,128.7 million. The difference between the book value and fair value is due to the difference between the period-end market interest rate and the stated rate of our fixed-rate debt. We estimated the fair value of our fixed-rate debt using quoted market prices (Level 2 inputs) within the fair value hierarchy, which is further defined in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our 2024 Annual Report on Form 10-K.
For more information on our long-term debt and interest rates on that debt, see Note 10, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our 2024 Annual Report on Form 10-K.
12. Cash, Cash Equivalents, and Marketable Debt Securities
The following table shows the Company’s cash, cash equivalents, and available-for-sale ("AFS") debt securities by major asset category at June 30, 2025 and December 31, 2024 (in millions):
| June 30, 2025 | ||||||||||||||||||||||||||||
| Adjusted Cost Basis | Unrealized Gain | Unrealized Loss | Fair Value | Cash and Cash Equivalents | Short-Term Marketable Debt Securities | Long-Term Marketable Debt Securities | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 784.7 | $ | — | $ | — | $ | 784.7 | $ | 784.7 | $ | — | $ | — | ||||||||||||||
| Level 1 (a): | ||||||||||||||||||||||||||||
| U.S. Treasury securities | 39.7 | 0.1 | — | 39.8 | — | 19.3 | 20.5 | |||||||||||||||||||||
| Money market funds | 1.4 | — | — | 1.4 | 1.4 | — | — | |||||||||||||||||||||
| Subtotal | 41.1 | 0.1 | — | 41.2 | 1.4 | 19.3 | 20.5 | |||||||||||||||||||||
| Level 2 (b): | ||||||||||||||||||||||||||||
| Corporate debt securities | 122.8 | 0.3 | — | 123.1 | 0.9 | 69.1 | 53.1 | |||||||||||||||||||||
| Certificates of deposit | 4.1 | — | — | 4.1 | 0.9 | 3.2 | — | |||||||||||||||||||||
| U.S. government agency securities | 2.8 | — | — | 2.8 | — | 0.8 | 2.0 | |||||||||||||||||||||
| Subtotal | 129.7 | 0.3 | — | 130.0 | 1.8 | 73.1 | 55.1 | |||||||||||||||||||||
| Total | $ | 955.5 | $ | 0.4 | $ | — | $ | 955.9 | $ | 787.9 | $ | 92.4 | $ | 75.6 |
| December 31, 2024 | ||||||||||||||||||||||||||||
| Adjusted Cost Basis | Unrealized Gain | Unrealized Loss | Fair Value | Cash and Cash Equivalents | Short-Term Marketable Debt Securities | Long-Term Marketable Debt Securities | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 684.8 | $ | — | $ | — | $ | 684.8 | $ | 684.8 | $ | — | $ | — | ||||||||||||||
| Level 1 (a): | ||||||||||||||||||||||||||||
| U.S. Treasury securities | 30.8 | 0.1 | — | 30.9 | — | 23.0 | 7.9 | |||||||||||||||||||||
| Money market funds | 0.2 | — | — | 0.2 | 0.2 | — | — | |||||||||||||||||||||
| Subtotal | 31.0 | 0.1 | — | 31.1 | 0.2 | 23.0 | 7.9 | |||||||||||||||||||||
| Level 2 (b): | ||||||||||||||||||||||||||||
| Corporate debt securities | 131.2 | 0.3 | — | 131.5 | — | 75.8 | 55.7 | |||||||||||||||||||||
| Certificates of deposit | 2.4 | — | — | 2.4 | — | 2.4 | — | |||||||||||||||||||||
| U.S. government agency securities | 2.4 | — | — | 2.4 | — | 0.8 | 1.6 | |||||||||||||||||||||
| Subtotal | 136.0 | 0.3 | — | 136.3 | — | 79.0 | 57.3 | |||||||||||||||||||||
| Total | $ | 851.8 | $ | 0.4 | $ | — | $ | 852.2 | $ | 685.0 | $ | 102.0 | $ | 65.2 |
(a)
Valuations based on quoted prices for identical assets or liabilities in active markets.
(b)
Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
For both the three and six months ended June 30, 2025 and 2024, net realized gains and losses on the sales and maturities of certain marketable debt securities were insignificant.
The Company invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy requires securities to be investment grade and limits the amount of credit exposure to any one issuer. The maturities of the Company’s long-term marketable debt securities generally range from one to two years.
Fair values were determined for each individual marketable debt security in the investment portfolio. When evaluating a marketable debt security for impairment, PCA reviews factors such as the duration and extent to which the fair value of the marketable debt security is less than its cost, the financial condition of the issuer and any changes thereto, the general market condition in which the issuer operates, and PCA’s intent to sell, or whether it will be more likely than not be required to sell, the marketable debt security before recovery of its amortized cost basis.
As of June 30, 2025 and December 31, 2024, we do not consider any of the impairments related to our marketable debt securities to be the result of credit losses. Therefore, we have not recorded an allowance for credit losses related to our marketable debt securities. All unrealized gains and losses were recorded in other comprehensive income (OCI).
The following tables provide information about the Company’s marketable debt securities that have been in a continuous loss position as of June 30, 2025 and December 31, 2024 (in millions, except number of marketable debt securities in a loss position):
| June 30, 2025 | ||||||||||||||||||||||||
| Fair Value of Marketable Debt Securities in a Loss Position < 12 Months | Number of Marketable Debt Securities in a Loss Position < 12 Months | Unrealized Losses**<** 12 Months (c) | Fair Value of Marketable Debt Securities in a Loss Position ≥ 12 Months | Number of Marketable Debt Securities in a Loss Position ≥ 12 Months | Unrealized Losses ≥ 12 Months (c) | |||||||||||||||||||
| Corporate debt securities | $ | 13.3 | 18 | $ | — | $ | — | — | $ | — | ||||||||||||||
| U.S. Treasury securities | 5.2 | 4 | — | 1.2 | 1 | — | ||||||||||||||||||
| U.S. government agency securities | 1.8 | 2 | — | — | — | — | ||||||||||||||||||
| Certificates of deposit | 1.6 | 2 | — | — | — | — | ||||||||||||||||||
| $ | 21.9 | 26 | $ | — | $ | 1.2 | 1 | $ | — |
| December 31, 2024 | ||||||||||||||||||||||||
| Fair Value of Marketable Debt Securities in a Loss Position < 12 Months | Number of Marketable Debt Securities in a Loss Position < 12 Months | Unrealized Losses**<** 12 Months | Fair Value of Marketable Debt Securities in a Loss Position ≥ 12 Months | Number of Marketable Debt Securities in a Loss Position ≥ 12 Months | Unrealized Losses ≥ 12 Months (c) | |||||||||||||||||||
| Corporate debt securities | $ | 16.5 | 26 | $ | 0.1 | $ | 2.7 | 4 | $ | — | ||||||||||||||
| U.S. Treasury securities | 3.1 | 4 | — | 6.7 | 5 | — | ||||||||||||||||||
| U.S. government agency securities | 0.8 | 1 | — | — | — | — | ||||||||||||||||||
| $ | 20.4 | 31 | $ | 0.1 | $ | 9.4 | 9 | $ | — |
(c)
Unrealized losses were insignificant for the period presented.
13. Employee Benefit Plans and Other Postretirement Benefits
The components of net periodic benefit cost for our pension plans were as follows (dollars in millions):
| Pension Plans | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Service cost | $ | 2.6 | $ | 3.1 | $ | 5.2 | $ | 6.3 | ||||||||
| Interest cost | 14.3 | 13.9 | 28.6 | 27.7 | ||||||||||||
| Expected return on plan assets | (15.6 | ) | (16.5 | ) | (31.2 | ) | (32.9 | ) | ||||||||
| Net amortization of unrecognized amounts | ||||||||||||||||
| Prior service cost | 1.4 | 1.4 | 2.8 | 2.7 | ||||||||||||
| Actuarial loss | — | 0.2 | — | 0.4 | ||||||||||||
| Net periodic benefit cost | $ | 2.7 | $ | 2.1 | $ | 5.4 | $ | 4.2 |
PCA makes pension plan contributions that are sufficient to fund its actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act (ERISA). From time to time, PCA may make additional discretionary contributions based on the funded status of the plans, tax deductibility, income from operations, and other factors. During both the three and six months ended June 30, 2025 and 2024, payments to our nonqualified pension plans were insignificant. During both the three and six months ended June 30, 2025 and 2024, we did not make any contributions to our qualified pension plans. We do not have a required minimum contribution amount established for 2025.
For both the three and six months ended June 30, 2025 and 2024, the net periodic benefit cost for our postretirement plans was insignificant.
14. Share-Based Compensation
The Company has a long-term equity incentive plan, which allows for grants of restricted stock, performance awards, stock appreciation rights, and stock options to directors, officers, and employees, as well as others who engage in services for PCA. On February 28, 2024, our board of directors approved, and, on May 8, 2024, our stockholders approved, the amendment and restatement of the plan. The amendment extended the plan’s term to May 8, 2034 and increased the number of shares of common stock available for issuance under the plan by 2.4 million shares. The total number of shares authorized for past and future awards is 14.3 million shares.
As of June 30, 2025, assuming performance units are paid out at the target level of performance, 2.5 million shares were available for future grants under the current plan. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date.
The following table presents restricted stock and performance unit award activity for the six months ended June 30, 2025:
| Restricted Stock | Performance Units | |||||||||||||||
| Shares | Weighted Average Grant- Date Fair Value | Shares | Weighted Average Grant- Date Fair Value | |||||||||||||
| Outstanding at January 1, 2025 | 620,403 | $ | 148.63 | 358,466 | $ | 119.17 | ||||||||||
| Granted | 147,265 | 211.53 | 129,853 | 211.72 | ||||||||||||
| Vested (a) | (151,242 | ) | 136.36 | (139,443 | ) | 167.14 | ||||||||||
| Forfeitures | (5,157 | ) | 162.11 | — | — | |||||||||||
| Outstanding at June 30, 2025 | 611,269 | $ | 166.71 | 348,876 | $ | 171.68 |
(a)
Upon payout of the performance unit awards that vested during the period, PCA issued 151,895 shares, which included 12,452 shares for dividends accrued during the performance period.
Compensation Expense
Our share-based compensation expense is primarily recorded in "Selling, general, and administrative expenses." Compensation expense for share-based awards recognized in the Consolidated Statements of Income, net of forfeitures, was as follows (dollars in millions):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Restricted stock | $ | 6.1 | $ | 6.0 | $ | 20.0 | $ | 19.9 | ||||||||
| Performance units | 4.2 | 3.9 | 8.1 | 9.3 | ||||||||||||
| Total share-based compensation expense | 10.3 | 9.9 | 28.1 | 29.2 | ||||||||||||
| Income tax benefit | (2.6 | ) | (2.5 | ) | (7.0 | ) | (7.3 | ) | ||||||||
| Share-based compensation expense, net of tax benefit | $ | 7.7 | $ | 7.4 | $ | 21.1 | $ | 21.9 |
The fair value of restricted stock is determined based on the closing price of the Company’s stock on the grant date. Compensation expense, net of estimated forfeitures, is recorded over the requisite service period. As PCA’s Board of Directors has the ability to accelerate the vesting of these awards upon an employee’s retirement, the Company accelerates the recognition of compensation expense for certain employees approaching normal retirement age.
Performance unit awards granted to certain key employees are earned based on the achievement of defined performance rankings of Return on Invested Capital (ROIC) or Total Shareholder Return (TSR) compared to ROIC and TSR for peer companies. For performance unit awards made in 2025 and 2024, in terms of grant date value, 50% used TSR as the performance measure and 50% used ROIC as the performance measure. The ROIC component of performance unit awards is valued based on the closing price of the stock on the grant date. As the ROIC component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of performance unit awards is valued using a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, a risk-free interest rate, expected dividends, and expected volatility of the Company’s common stock and the common stock of the peer companies. Compensation expense is recorded ratably over the expected term of the award regardless of whether the market condition is satisfied.
The unrecognized compensation expense for all share-based awards at June 30, 2025 was as follows (dollars in millions):
| June 30, 2025 | ||||||||
| Unrecognized Compensation Expense | Remaining Weighted Average Recognition Period (in years) | |||||||
| Restricted stock | $ | 40.1 | 2.8 | |||||
| Performance units | 33.9 | 2.5 | ||||||
| Total unrecognized share-based compensation expense | $ | 74.0 | 2.7 |
15. Stockholders' Equity
Dividends
During the six months ended June 30, 2025, we paid $224.7 million of dividends to shareholders. On May 7, 2025, PCA’s Board of Directors declared a regular quarterly cash dividend of $1.25 per share of common stock, which was paid on July 15, 2025 to shareholders of record as of June 13, 2025. The dividend payment was $112.5 million.
Repurchases of Common Stock
On January 26, 2022, PCA announced that its Board of Directors authorized the repurchase of an additional $1 billion of the Company’s outstanding common stock. Repurchases may be made from time to time in open market or privately negotiated transactions in accordance with applicable securities regulations. The timing and amount of repurchases will be determined by the Company in its discretion based on factors such as PCA’s stock price and market and business conditions.
The Company did not repurchase any shares of its common stock under this authority during the three months ended June 30, 2025. At June 30, 2025, $436.0 million of the authorized amount remained available for repurchase of the Company’s common stock.
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) (AOCI) by component were as follows (dollars in millions). Amounts in parentheses indicate losses:
| Unrealized Loss On Foreign Exchange Contracts | Unrealized Loss on Marketable Debt Securities | Unfunded Employee Benefit Obligations | Total | |||||||||||||
| Balance at January 1, 2025 | $ | (0.1 | ) | $ | 0.2 | $ | (43.5 | ) | $ | (43.4 | ) | |||||
| Other comprehensive loss before reclassifications, net of tax | — | 0.1 | — | 0.1 | ||||||||||||
| Amounts reclassified from AOCI, net of tax | — | — | 1.9 | 1.9 | ||||||||||||
| Balance at June 30, 2025 | $ | (0.1 | ) | $ | 0.3 | $ | (41.6 | ) | $ | (41.4 | ) |
Reclassifications out of AOCI were as follows (dollars in millions). Amounts in parentheses indicate expenses in the Consolidated Statements of Income:
| Amounts Reclassified from AOCI | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| Details about AOCI Components | 2025 | 2024 | 2025 | 2024 | ||||||||||||||
| Unfunded employee benefit obligations (a) | ||||||||||||||||||
| Amortization of prior service costs | $ | (1.3 | ) | $ | (1.3 | ) | $ | (2.7 | ) | $ | (2.6 | ) | See (a) below | |||||
| Amortization of actuarial gains (losses) | 0.1 | (0.1 | ) | 0.2 | (0.2 | ) | See (a) below | |||||||||||
| (1.2 | ) | (1.4 | ) | (2.5 | ) | (2.8 | ) | Total before tax | ||||||||||
| 0.3 | 0.3 | 0.6 | 0.7 | Tax benefit | ||||||||||||||
| $ | (0.9 | ) | $ | (1.1 | ) | $ | (1.9 | ) | $ | (2.1 | ) | Net of tax |
(a)
These AOCI components are included in the computation of net pension and postretirement benefit costs. See Note 13, Employee Benefit Plans and Other Postretirement Benefits, for additional information.
16. Transactions With Related Parties
Louisiana Timber Procurement Company, L.L.C. ("LTP") is a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company ("Boise Cascade"). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of PCA and Boise Cascade in Louisiana. PCA is the primary beneficiary of LTP and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements in our Corporate and Other segment. The carrying amounts of LTP's assets and liabilities (which relate primarily to non-inventory working capital items) on our Consolidated Balance Sheets were $4.3 million at June 30, 2025 and $3.1 million at December 31, 2024. During the three months ended June 30, 2025 and 2024, we recorded $17.9 million and $21.3 million, respectively, and during the six months ended June 30, 2025 and 2024, we recorded $32.8 million and $41.1 million, respectively, of LTP sales to Boise Cascade in "Net Sales" in the Consolidated Statements of Income and approximately the same amount of expenses in "Cost of Sales".
During the three months ended June 30, 2025 and 2024, fiber purchases from related parties were $2.4 million and $3.1 million, respectively, and during the six months ended June 30, 2025 and 2024, fiber purchases from related parties were $4.0 million and $5.7 million, respectively. Most of these purchases related to chip and log purchases by LTP from Boise Cascade's wood products business. These purchases are recorded in "Cost of Sales" in the Consolidated Statements of Income.
17. Segment Information
We report our business in three reportable segments: Packaging, Paper, and Corporate and Other. These segments represent distinct businesses that are managed separately because of differing products and services. Each of these businesses requires distinct operating and marketing strategies.
Each segment’s profits and losses are measured on operating profits before non-operating pension income, interest expense, net, and income taxes. For many of these allocated expenses, the related assets and liabilities remain in the Corporate and Other segment.
Chief Operating Decision Maker
ASC 280-10-50-5 (Topic 280) defines the chief operating decision maker (“CODM”) as an individual or group of individuals responsible for assessing the performance of the operating segments of a public entity and determining the overall resource allocation to those operating segments. Based on these criteria, we deem our Chief Executive Officer as the CODM, as the Chief Executive Officer is responsible for evaluating our operating results and concluding on the overall resource allocation.
Analysis of Operations by Reportable Segment
An analysis of operations by reportable segment is as follows (dollars in millions):
| Three Months Ended June 30, 2025 | Packaging | Paper | Corporate and Other | Total | ||||||||||||
| Trade sales | $ | 2,005.9 | $ | 145.8 | $ | 19.6 | $ | 2,171.3 | ||||||||
| Intersegment sales | — | — | 38.8 | 38.8 | ||||||||||||
| 2,005.9 | 145.8 | 58.4 | 2,210.1 | |||||||||||||
| Elimination of intersegment sales | (38.8 | ) | ||||||||||||||
| Net sales | 2,171.3 | |||||||||||||||
| Less (a): | ||||||||||||||||
| Variable costs (b) | (960.1 | ) | (82.8 | ) | — | — | ||||||||||
| Fixed costs (c) | (445.2 | ) | (21.8 | ) | — | — | ||||||||||
| Freight | (198.4 | ) | (15.2 | ) | — | — | ||||||||||
| Other segment items (d) | (55.9 | ) | (0.2 | ) | (96.8 | ) | — | |||||||||
| Income (loss) from operations | 346.3 | 25.8 | (38.4 | ) | (e) | 333.7 | ||||||||||
| Non-operating pension expense | — | |||||||||||||||
| Interest expense, net | (13.1 | ) | ||||||||||||||
| Income before taxes | $ | 320.6 | ||||||||||||||
| Other segment disclosures: | ||||||||||||||||
| Segment sales to external customers | $ | 2,005.9 | $ | 145.8 | $ | 19.6 | (f) | $ | 2,171.3 | |||||||
| Depreciation, amortization, and depletion | 131.8 | 4.5 | 4.4 | 140.7 | ||||||||||||
| Capital expenditures (g) | 165.0 | 1.0 | 3.7 | 169.7 | ||||||||||||
| Assets | 7,418.6 | 405.3 | 1,217.3 | 9,041.2 |
| Three Months Ended June 30, 2024 | Packaging | Paper | Corporate and Other | Total | ||||||||||||
| Trade sales | $ | 1,902.0 | $ | 150.1 | $ | 23.2 | $ | 2,075.3 | ||||||||
| Intersegment sales | 6.3 | — | 38.8 | 45.1 | ||||||||||||
| 1,908.3 | 150.1 | 62.0 | 2,120.4 | |||||||||||||
| Elimination of intersegment sales | (45.1 | ) | ||||||||||||||
| Net sales | 2,075.3 | |||||||||||||||
| Less (a): | ||||||||||||||||
| Variable costs (b) | (937.1 | ) | (84.1 | ) | — | — | ||||||||||
| Fixed costs (c) | (412.9 | ) | (22.0 | ) | — | — | ||||||||||
| Freight | (201.0 | ) | (17.3 | ) | — | — | ||||||||||
| Other segment items (d) | (77.5 | ) | — | (92.5 | ) | — | ||||||||||
| Income (loss) from operations | 279.8 | 26.7 | (30.5 | ) | (e) | 276.0 | ||||||||||
| Non-operating pension income | 1.1 | |||||||||||||||
| Interest expense, net | (10.4 | ) | ||||||||||||||
| Income before taxes | $ | 266.7 | ||||||||||||||
| Other segment disclosures: | ||||||||||||||||
| Segment sales to external customers | $ | 1,902.0 | $ | 150.1 | $ | 23.2 | (f) | $ | 2,075.3 | |||||||
| Depreciation, amortization, and depletion | 120.1 | 4.5 | 3.9 | 128.5 | ||||||||||||
| Capital expenditures (g) | 231.9 | 2.6 | 10.5 | 245.0 | ||||||||||||
| Assets | 7,102.6 | 383.6 | 1,495.9 | 8,982.1 |
| Six Months Ended June 30, 2025 | Packaging | Paper | Corporate and Other | Total | ||||||||||||
| Trade sales | $ | 3,976.3 | $ | 300.0 | $ | 36.0 | $ | 4,312.3 | ||||||||
| Intersegment sales | — | — | 78.8 | 78.8 | ||||||||||||
| 3,976.3 | 300.0 | 114.8 | 4,391.1 | |||||||||||||
| Elimination of intersegment sales | (78.8 | ) | ||||||||||||||
| Net sales | 4,312.3 | |||||||||||||||
| Less (a): | ||||||||||||||||
| Variable costs (b) | (1,921.2 | ) | (165.7 | ) | — | — | ||||||||||
| Fixed costs (c) | (892.7 | ) | (40.6 | ) | — | — | ||||||||||
| Freight | (395.1 | ) | (32.0 | ) | — | — | ||||||||||
| Other segment items (d) | (142.9 | ) | (0.3 | ) | (186.6 | ) | — | |||||||||
| Income (loss) from operations | 624.4 | 61.4 | (71.8 | ) | (e) | 614.0 | ||||||||||
| Non-operating pension expense | — | |||||||||||||||
| Interest expense, net | (26.0 | ) | ||||||||||||||
| Income before taxes | $ | 588.0 | ||||||||||||||
| Other segment disclosures: | ||||||||||||||||
| Segment sales to external customers | $ | 3,976.3 | $ | 300.0 | $ | 36.0 | (f) | $ | 4,312.3 | |||||||
| Depreciation, amortization, and depletion | 260.1 | 9.1 | 9.4 | 278.6 | ||||||||||||
| Capital expenditures (g) | 296.1 | 1.8 | 19.9 | 317.8 | ||||||||||||
| Assets | 7,418.6 | 405.3 | 1,217.3 | 9,041.2 |
| Six Months Ended June 30, 2024 | Packaging | Paper | Corporate and Other | Total | ||||||||||||
| Trade sales | $ | 3,695.4 | $ | 313.9 | $ | 45.5 | $ | 4,054.8 | ||||||||
| Intersegment sales | 11.1 | — | 78.2 | 89.3 | ||||||||||||
| 3,706.5 | 313.9 | 123.7 | 4,144.1 | |||||||||||||
| Elimination of intersegment sales | (89.3 | ) | ||||||||||||||
| Net sales | 4,054.8 | |||||||||||||||
| Less (a): | ||||||||||||||||
| Variable costs (b) | (1,874.9 | ) | (173.5 | ) | — | — | ||||||||||
| Fixed costs (c) | (817.9 | ) | (43.5 | ) | — | — | ||||||||||
| Freight | (388.1 | ) | (35.3 | ) | — | — | ||||||||||
| Other segment items (d) | (142.0 | ) | (5.2 | ) | (191.7 | ) | — | |||||||||
| Income (loss) from operations | 483.6 | 56.4 | (68.0 | ) | (e) | 472.0 | ||||||||||
| Non-operating pension income | 2.2 | |||||||||||||||
| Interest expense, net | (19.9 | ) | ||||||||||||||
| Income before taxes | $ | 454.3 | ||||||||||||||
| Other segment disclosures: | ||||||||||||||||
| Segment sales to external customers | $ | 3,695.4 | $ | 313.9 | $ | 45.5 | (f) | $ | 4,054.8 | |||||||
| Depreciation, amortization, and depletion | 238.6 | 10.5 | 7.8 | 256.9 | ||||||||||||
| Capital expenditures (g) | 303.6 | 3.9 | 14.2 | 321.7 | ||||||||||||
| Assets | 7,102.6 | 383.6 | 1,495.9 | 8,982.1 |
(a)
The significant expense categories align with the segment-level information that is regularly provided to the CODM.
(b)
For the Packaging segment, primarily includes expense items for liner consumption, liner board discount, purchased sheets usage, medium consumption, raw materials, and hourly-employee related expenses and benefits. For the Paper segment, primarily includes expense items for chemicals, raw materials, finishing materials, and hourly-employee related expenses and benefits.
(c)
For the Packaging segment, primarily includes expense items for depreciation and salaried employee-related expenses and benefits. For the Paper segment, primarily includes expense items for depreciation, salaried employee-related expenses, and professional services.
(d)
Other segment items for each reportable segment primarily include:
Packaging: farmout purchases, certain divisional allocations, and other expense/income items.
Paper: other expense/income items.
Corporate and Other: unallocated corporate costs, transportation business activity, and activity related to LTP.
(e)
The significant expense categories reported for the Packaging and Paper segments are not used for Corporate and Other in the segment-level information that is regularly reviewed by the CODM. The CODM makes resource allocation decisions for Corporate and Other based on divisional income (loss) from operations.
(f)
The Corporate and Other segment sales to external customers is presented net of total company intersegment eliminations.
(g)
Includes “Additions to property, plant, and equipment” and excludes cash used for “Acquisition of business, net of cash acquired” as reported on our Consolidated Statements of Cash Flows.
18. Commitments, Guarantees, Indemnifications and Legal Proceedings
We have financial commitments and obligations that arise in the ordinary course of our business. These include lease obligations, long-term debt, capital additions, purchase commitments for goods and services, and legal proceedings, all of which are discussed in Note 3, Leases; Note 10, Debt; and Note 19, Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our 2024 Annual Report on Form 10-K.
Guarantees and Indemnifications
We provide guarantees, indemnifications, and other assurances to third parties in the normal course of our business. These include tort indemnifications, environmental assurances, and representations and warranties in commercial agreements. At June 30, 2025, we are not aware of any material liabilities arising from any guarantee, indemnification, or financial assurance we have provided. If we determined such a liability was probable and subject to reasonable determination, we would accrue for it at that time.
DeRidder Mill Incident
Details on the legal proceedings associated with the incident at the Company’s DeRidder, Louisiana mill can be found in Note 19, Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our 2024 Annual Report on Form 10-K. As of December 31, 2024, the Company had recorded a liability of $59.2 million in “Accrued Liabilities” and a receivable of $59.2 million in “Prepaids and Other Assets” in the Consolidated Balance Sheets for the settlement amount to be paid to the plaintiffs and related insurance recovery from the Company’s insurers. As of June 30, 2025, the settlement amount has been paid, and no amounts remain outstanding.
Legal Proceedings
On July 29, 2025, PCA and seven other U.S. and Canadian containerboard producers were named as defendants in a purported class action lawsuit, Artuso Pastry Foods Corp v. Packaging Corporation of America, et al, No. 1:25-cv-08856, filed in the United States District Court for the Northern District of Illinois, alleging violations of the Sherman Act and the Clayton Act. The complaint alleges that the defendants conspired to raise prices of containerboard and restrict containerboard capacity, and that the purpose and effect of the alleged conspiracy was to artificially increase prices of containerboard products during the period of November 1, 2020, to the present. The complaint was filed as a purported class action suit on behalf of all purchasers of containerboard products during such period. The complaint seeks treble damages and costs, including attorney’s fees. PCA believes the allegations are without merit and will defend this lawsuit vigorously.
We are also a party to various legal actions arising in the ordinary course of our business. These legal actions include commercial liability claims, premises liability claims, and employment-related claims, among others. As of the date of this filing, we believe it is not reasonably possible that any of the legal actions against us will, either individually or in the aggregate, have a material adverse effect on our financial condition, results of operations, or cash flows.
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