Packaging Corporation of America

Thank you for joining Packaging Corporation of America's second quarter of 2025 Earnings Results Conference Call. Your host today will be Mark Kolzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question and answer session. I'll now turn the conference call over to Mr. Kolzan. Please proceed when you're ready.

Thank you, Joe. Good morning, everyone, and thank you all for participating. participating in Packaging Corporation of America's second quarter 2025 earnings release conference call today. I'm Mark Holzan, Chairman and CEO of PCA, and with me on the call today is Tom Hasfurther, President, and Kent Flutterer, our Chief Financial Officer. I'll begin the call with an overview of our second quarter results, and then I'm going to be turning the call over to Tom and Kent, who will provide further details. I'll be then wrapping things up, and then we'll be glad to take questions. Yesterday, we reported second quarter net income of $242 million or $2.67 per share. Excluding the special items, second quarter 2025 net income was $224 million or $2.48 per share compared to the second quarter of 2024 net income of $199 million or $2.20 per share. Second quarter net sales were $2.2 billion in 2025 and $2.1 billion in 2024. Total company EBITDA for the second quarter, excluding the special items, was $451 million in 2025 and $404 million in 2024. Second quarter net income included special items income of 19 cents per share primarily for gains on the sale of real estate for corrugated products facilities that were previously closed, which were partially offset by costs relating to the pending acquisition of Greif Container Board business. Details of the special items for both the second quarter of 2025 and 2024 were included in the schedules that accompanied our earnings press release. Excluding the special items, the $0.28 per share increase in second quarter 2025 earnings compared to the second quarter of 2024, was driven primarily by higher prices and mix in the packaging segment for 98 cents, lower fiber costs, 13 cents, higher prices and mix in the paper segment, 4 cents, and a lower tax rate for 2 cents. Partially offsetting these improvements were higher operating costs of 30 cents and higher annual outage expenses, with the change in the timing of the Filer City outage from later in the year, which we moved up to the second quarter. Other offsetting factors included lower production and export sales volume in the packaging segment for $0.13, higher depreciation expense $0.10, higher fixed and other expense $0.09, lower paper segment volume $0.02, higher freight expense $0.02, and higher interest expense $0.02. The results were $0.07 above the second quarter guidance of $2.41 per share, primarily due to lower operating costs and lower fiber costs. Looking at the packaging business, EBITDA excluding special items in the second quarter of 2025 of $453 million with sales of $2 billion resulted in a margin of 22.6% versus last year's EBITDA of $400 million and sales of $1.9 billion or Corrugated products price and volume were generally consistent with our expectations, and as expected, export container board sales were lower. We ran to demand during the quarter, producing 85,000 fewer tons of container board than the second quarter of 2024 and 55,000 tons fewer tons of container board than the first quarter of 2025. We drew down 17,000 tons of container board inventory from the end of the first quarter, putting us in excellent shape for the rest of the year. We operated exceptionally well during the quarter in all aspects of our business to control our operating costs, helping offset the effects of continued inflationary pressures across our cost structure, as well as the negative effects of lower container board production. Our employees continued to perform at the highest level, delivering cost and efficiency improvements, outstanding sales performance, and capital project execution to deliver best-in-class results. On a strategic front, we're very pleased to have announced our agreement to acquire the Greif Container Board business and look forward to working with our new colleagues and serving our new customers at the highest level. It is a well-capitalized business that complements us nicely and will provide us with a very good growth platform for both container board and corrugated products. We're targeting completion of the transaction by the end of the third quarter, subject, obviously, to customary conditions, including regulatory approval. I'll now turn the call over to Tom, who will provide further details on container board sales and corrugated business in general. Thanks, Mark.

The performance of the packaging business was largely as we expected, and it was a very strong quarter. We fully realized our earlier announced price increases and domestic container board and corrugated products prices and mix were were $0.95 per share above the second quarter of 2024 and up $0.41 per share compared to the first quarter of 2025. Export container board prices were up $0.03 per share versus last year's second quarter and up $0.01 per share compared to the first quarter of 2025. While customer ordering patterns remain somewhat cautious, corrugated demand remains solid and steady throughout the quarter. Shipments per day in our corrugated products plants were up 1.7% versus last year's very strong second quarter when per day shipments were up more than 9% over the previous year. So it was a pretty tough comparable. Shipments also exceeded the first quarter of 2025. Total shipments were flat with 2024, which had one more workday. Our continued sales growth and full realization of our price increases helped drive higher margin performance in the packaging segment. As expected, Outside sales volume of Container Board was down 30,000 tons from the first quarter of 2025 and down 24,000 tons from the second quarter of 2024. While domestic sales have been on plan, even with relatively low exposure to China and Europe, we've seen noticeably lower export sales with the global trade tensions overhanging the market. I'd like to echo Mark's commentary on the pending Greif acquisition. We see tremendous strategic opportunities with the acquired business. and a corrugated network that would be great potential to expand in areas where we would have needed to deploy considerable additional capital to grow and where Greif has well-capitalized facilities. The business provides a complementary product offering and longstanding customers with deep relationships who we look forward to serving. Perhaps most importantly, this will be a great cultural fit with PCA, particularly with our shared dedication to serving the needs of our customers. And I'll turn it back to Mark.