Packaging Corporation of America

Good day and welcome to the Packaging Corporation of America third quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event has been recorded. I would now like to turn the conference over to Mr. Mark Colvin. Please go ahead.

Thank you, Alyssa. Good morning, everyone. Thank you for all of you for participating in Patching Corporation of America's Third quarter, 2025 earnings release conference call. Again, I'm Mark Coles, then 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, as usual, with an overview of our third quarter results. And then I'll turn the call over to Tom and Kent, who will provide further details. And then after that, I'll wrap things up, and we'd be glad to take any questions. Yesterday, we reported... third quarter net income of $227 million or $2.51 per share. Excluding the special items, third quarter 2025 net income was $247 million or $2.73 per share compared to the third quarter of 2024 net income of $239 million or $2.65 per share. Third quarter net sales were $2.3 billion in 2025 and $2.2 billion in 2024. Total company EBITDA for the third quarter, excluding special items, was $503 million in 2025 and $461 million in 2024. The third quarter net income included special items expense of 22 cents per share, The $0.22 were costs related to the acquisition of the Greif Container Board business, including step-up of the acquired inventory, integration-related expenses, and transaction expenses. Details of the special items for both the third quarter of 2025 and 2024 were included in the schedules that accompanied our earnings press release. We completed the acquisition of the Greif Container Board business on September 2nd. Our results included one month of the acquired operations from Greif, which impacted earnings per share by 11 cents after special items. These include depreciation and amortization after preliminary purchase accounting and additional interest on new borrowing to finance the acquisition. Excluding the special items and the impact of the acquisition, our earnings increased by 19 cents per share compared to the third quarter of 2024. This increase was driven primarily by higher prices in mix in the packaging segment for 73 cents, lower fiber costs of 16 cents, higher prices in mix in the paper segment, 2 cents, and a lower maintenance outage expense of 1 cent. Partially offsetting the improvements were higher operating costs, 33 cents, lower production and sales volume in the packaging segment, 16 cents, higher depreciation expense, seven cents, higher freight expense, seven cents, higher fixed and other expenses of seven cents, and higher interest expense excluding the Greif acquisition debt of two cents and lower production volume in the paper segment for one cent. Because of the uncertainties of the Greif closing date, our third quarter guidance did not forecast any impact from the acquisition. Excluding special items, and acquisition impact. The results were $0.04 above the third quarter guidance of $2.80 per share, primarily due to favorable price and mix in the packaging segment and lower freight costs. Looking at our packaging business and including the acquired business, EBITDA, excluding special items in the third quarter of 2025 of $492 million, with sales of $2.1 billion, resulted in a margin of 23.1%, versus last year's EBITDA of $446 million and sales of $2 billion or a 22.2% margin. Corrugated volume was largely on plan and continued to reflect the cautious ordering patterns we've seen most of the year. We ran to demand during the quarter and produced 38,000 fewer tons of container board than the third quarter of 2024, and 59,000 more tons of container board than the second quarter of 2025. Our container board inventory in the legacy system increased by 15,000 tons during the quarter in preparation for the fourth quarter deritter outage. From the operational standpoint, we ran very well the entire quarter and with strong performance in terms of cost and production efficiency across the entire mill and corrugated system. which is a testament, once again, to the successful investments across our business. We continue to look every day at opportunities to take out costs and optimize production capabilities with the support of our considerable in-house technical and capital execution expertise. The acquired mills produce 47,000 tons during the month. Having closed the acquisition on September 2nd, we used the initial month of ownership to our advantage. While our activities impacted the September results, they will improve long-term productivity and efficiency. Massalon had a scheduled annual maintenance outage, which we extended to five weeks and completed earlier in October. We did a comprehensive refurbishment of the mill, including reliability improvements on the paper machines, the OCC plant, and the power plant. All mill infrastructure and unit operations were cleaned and inspected. We took the two paper machines at the larger Riverville facility down for five days a piece to implement the first phase of our reliability improvements. We'll have additional work to do to implement our efforts and expect to have achieved the first phase by the end of the fourth quarter. We're already seeing the benefits of improved performance and quality with both mills running at higher performance. will continue to manage and invest in these facilities to achieve operating performance in line with the legacy PCA system. I'll now turn it over to Tom, who'll provide more details on the container board sales and corrugated business.

Thank you, Mark. The performance of the packaging business was largely as we expected, and it was another strong quarter. Domestic container board and corrugated products prices and mix were 72 cents per share above the third quarter of 2024, and down 2 cents per share compared to the second quarter of 2025, which was all attributable to container board mix. Export container board prices were up a penny per share versus last year's third quarter and flat with the second quarter of 2025. As Mark mentioned, while customer ordering patterns have continued to reflect market conditions that have persisted throughout most of the year, corrugated demand improved as the quarter progressed. In the legacy business, shipments per day in our corrugated products plants were down 2.7% versus last year's record third quarter when per day shipments were up more than 11% over 2023. We will continue to see tough comparisons going into the first quarter of 2026. Total shipments were down 1.1% in the third quarter of 2025 versus last year, reflecting one more workday this year. For a little context, on a per-workday basis, July shipments were about 6% down from last year, while August was less than 1% down and September was less than 2% down. Margin performance was very strong again, with packaging segment EBITDA margins improving to 23.1% versus 22.6% in the second quarter and 22.2% last year. Including the acquisition, shipments were up 3.7% over last year per day and 5.3% overall. The acquired plants had a strong September with volume growth and good price realization. We're working very hard to integrate the operations into the PCA corrugated system, and we like what we see so far. The culture is highly compatible with PCAs, and our new colleagues have gone beyond the call of duty to continue to develop strong customer relationships and serve those customers. Greif has historically carried relatively more inventory in its corrugated system than we do. With the acquired plants being part of a much larger integrated system, we can more efficiently and nimbly supply them now that they are part of PCA. We have the opportunity to bring inventory down to lower levels, and we'll manage our operations to do so over the next couple of quarters. As expected, export sales volume of Container Board was down 8,000 tons from the second quarter of 2025, and down 32,000 tons from the third quarter of 2024. I'll now turn it back to Mark. Thanks, Tom.