Packaging Corporation of America

Good day, everyone. Thank you for joining Packaging Corporation of America's first quarter 2026 earnings results conference call. Your host for today will be Mark Colzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a Q&A session. Please also note today's event is being recorded. I would now like to turn the floor over to Mr. Colzan. Please proceed when you are ready.

Thanks, Jamie, and good morning, everyone. Thank you all for participating in Fact-Gene Corporation of America's first quarter, 2026 earnings release conference call. Again, I'm Mark Kolzan, Chairman and CEO of PCA, and with me on the call today is Tom Hasfer, President, and Kent Flutter, our Chief Financial Officer. As usual, I'll begin the call with an overview of the first quarter results, and then I'll be turning the call over to Tom and Kent, who will provide further details. And then I'll be wrapping things up, and then we'll be glad to take questions afterwards. Yesterday, we reported first quarter net income of $171 million or $1.91 per share. Excluding special items, first quarter 2026 net income was $215 million or $2.40 per share compared to the first quarter 2025 net income of $208 million or $2.31 per share. First quarter net sales were $2.4 billion in 2026 and $2.1 billion in 2025. Total company EBITDA for the first quarter excluding special items was $486 million in 2026 and $421 million in 2025. First quarter net income included special items expense of 49 cents per share primarily for the Lula Mill restructuring charges, as well as for costs relating to the acquisition and integration of the Greif Container Board business, and also costs related to the closure of corrugated products facilities. Details of the special items for the first quarter of 2026 and 2025 were included in the schedules that accompanied the earnings press release. Excluding special items, our earnings increased by $0.09 per share compared to the first quarter of 2025. This increase was driven primarily by higher prices and mix in the legacy packaging segment for 17 cents, lower fiber costs in the legacy packaging business, 11 cents, lower maintenance outage expenses of 9 cents, lower labor and operating costs in the legacy packaging business for 8 cents, higher prices and mix in the paper segment, 2 cents, favorable volume in the paper segment for 1 cent, lower tax rate, 1 cent, and lower share count, 1 cent. These items were partially offset by higher freight costs of 13 cents, lower production and sales volume in the legacy packaging business, 11 cents, higher depreciation expense in the legacy packaging business, 5 cents, higher labor and operating costs in the paper segment for 3 cents, higher corporate and other expenses, 3 cents, Also, the acquired gripe operations, including interest on acquisition indebtedness, generated a loss of six cents during the first quarter, but primarily as a result of lower volume and higher costs due to the January storm that affected the rural mill and the corrugated operations, as well as higher than forecast freight and recycled fiber costs and unfavorable mix. We exceeded our guidance of $2.20 on the strength of our operational and commercial performance during the quarter, including favorable volume and mix in the legacy packaging business and better than expected operating cost performance and lower labor and benefits costs. These were partially offset by higher freight costs and lower than expected earnings from the Greif business. Looking at the packaging business, EBITDA, excluding special items in the first quarter of 2026 of $482 million, with sales of $2.2 billion resulted in a margin of 22% versus last year's EBITDA of $409 million and sales of $2 billion, or a 20.8% margin. We ran at full capacity during the quarter and completed the outage on the COUNTS No. 1 machine during the quarter and completed the outages on the COUNTS No. 2 machine and at the Jackson Mill earlier in April. The Wallula Mill reconfiguration was successfully completed which immediately helped us reduce our costs of fiber, power, and labor. For the quarter, we produced 1,398,000 tons of container board during the quarter. The legacy mills produced 1,210,000 tons of container board, which was 25,000 tons less than the fourth quarter of 2025 and 40,000 tons less than the first quarter of 2025. System-wide, our inventories were down 39,000 tons from the end of the fourth quarter, and we meaningfully reduced the inventories carried by the acquired gripe plants. Operational performance during the quarter was exceptional, with improvement in corrugated demand heading into a very busy outage schedule in the second quarter and an increasingly tight liner board situation. We needed to run well, and our mills delivered. Jackson set new production and speed records. We safely completed the counts outages over the last month, and were able to bring both machines up earlier than scheduled and make up for some of the weather issues earlier in the quarter. While helping us keep up with corrugated demand, in February we saw Riverville produce at approximately 10% higher rate than what it was capable of doing when we completed the acquisitions. A board of directors approved the gas turbine projects for the Jackson, Alabama mill and Riverville, Virginia mills that we talked about on the last call, and we're scoping a third project for the Derrida, Louisiana mill, which we will be submitting in the period of May at the annual board meeting. I'll now turn it over to Tom, who will provide further details on the container board sales and our container board business in general.

Thank you, Mark. Our corrugated operations turned in a very strong quarter in all areas. Domestic container board and corrugated products prices and mix were 17 cents per share above the first quarter of 2025 and up 6 cents per share compared to the fourth quarter of 2025 and up approximately 12 cents, excluding the gripe operations. This is mix-related as mix improves in the legacy PCA business 4Q to 1Q, but declines in the gripe business during the first quarter. Export container board prices were flat with last year's first quarter and down one cent per share from the fourth quarter of 2025. Export sales volumes of container board was up 6,500 tons from the fourth quarter of 2025 and down 13,000 tons from the first quarter of 2025. In the legacy business, corrugated shipments per day were up 2.8% versus last year's first quarter, a new record on a per-day basis. With one fewer workday, total shipments were up 1.2%. We saw good growth across our entire book of business, with legacy shipments running consistently 2% to 3% ahead of last year from the middle of January through the rest of the quarter and very strong so far in April. Even with the situation playing out in the Middle East and higher fuel prices here in the States, we are seeing a resilient economy and continued strength in our customer ordering patterns across the board. We expect the second quarter to shape up similarly to the first in terms of demand and year-over-year growth. As Mark alluded to earlier, we are tight on container board, and we will need continued exceptional performance that we have come to expect from our mill operations to support our customers. Including the acquisition, shipments were up 22% per day and 20% in total compared to last year's first quarter. We began to see the seasonal pickup in the volume and improvement in mix from the acquired operations as the quarter progressed. We're off to a great start in April. We expect to see good sequential improvement in both volume and mix during Q2. We intend to complete systems integration by the end of the third quarter with all operations running on PCA's decentralized systems. As we progressed on our integration efforts, we focused on inventory reduction at the Greif plants and made great progress, reducing carried inventories by around 10,000 tons during the quarter. We have room for further improvement and will continue these efforts in the second and third quarters. We will be working to implement our price increases during the second quarter. Reported container board prices are up net $50 per ton from the beginning of the year. Due to the timing of how things played out, We did not get a meaningful benefit during the first quarter. We have had a lot of individual negotiations with our customers on how to implement this increase, and we are not going into any detail on that. What I can say is that, in general, we expect to start to see the benefit during May with the normal implementation period beginning in June. So we expect some benefit during Q2 with the majority coming during Q3. I'll now turn it back to Mark.