Packaging Corporation of America

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

Thanks, Jamie. Good morning, everyone, and thank you all for participating in Packaging Corporation of America's second quarter 2026 earnings release conference call. Again, I'm Mark Kowlzan, Chairman and CEO of Packaging Corporation of America, and with me on the call today is Tom Hassfurther, President, and Kent Pflederer, our Chief Financial Officer. I'll begin the call, as usual, with an overview of our second quarter results, and then I'll be turning the call over to Tom and Kent, who will provide further details. I'll then wrap things up, and then we'll be glad to take questions. Yesterday, we reported second quarter net income of $192 million or $2.15 per share. Excluding special items, the second quarter 2026 net income was $210 million or $2.35 per share compared to the second quarter of 2025's net income of $224 million or $2.48 per share. Second quarter net sales were $2.5 billion in 2026 and $2.2 billion in 2025. Total company EBITDA for the second quarter excluding special items was $486 million in 2026 and $451 million in 2025. Second quarter net income included special items expense of 20 cents per share primarily for costs and write-offs related to facilities closures, the Wallula Mill restructuring charges and costs related to the acquisition and integration of the Greif Container Board business. Details of the special items for the second quarter of 2026 and 2025 were included in the schedules that accompanied the press release. Excluding the special items, our earnings decreased by 13 cents per share Thank you for joining us. Higher labor and operating costs, $0.05. Higher depreciation and amortization expenses, $0.03. Higher fiber costs, $0.02. Higher tax rates, $0.02. And higher interest expense, excluding the growth acquisition indebtedness for $0.01. These items were partially offset by higher production and sales volume in the packaging business for $0.26. Lower maintenance outage expense, $0.04. higher production and sales volume in the paper business for three cents and higher price and mix in the paper business two cents. Greif's earnings were driven by strong volumes in the corrugated business and improved operating performance in the mills and included a four cent benefit to depreciation expense due to measurement period adjustments to the valuation of fixed assets on the opening balance sheet of the business. We exceeded our guidance of $2.33 on the strength of our corrugated volumes, which helped drive cost favorability in areas that we could control and offset higher than forecast costs for freight, recycled fiber, and employee benefits. Grice earnings contribution also exceeded our expectations. Looking at our packaging business, EBITDA excluding special items in the second quarter of 2026 of $489 million with sales of $2.3 billion resulted in a margin of 21.1% versus last year's EBITDA of $453 million and sales of $2 billion or a 22.6% margin. We produced 1,415,000 tons of container board during the quarter. The Legacy Mills produced 1,209,000 tons of container board about even with the first quarter of 2026 and 14,000 tons more than the second quarter of 2025. The acquired mills produced 206,000 tons during the quarter, significantly exceeding their production in any quarter since the acquisition. System-wide, our inventories were down 25,000 tons from the end of the first quarter. While we ended the quarter at a low number, we've been able to build some inventory early in July with many plants down for the holiday weekend to help get us near our target levels of inventory. With not as much outage impact in the third quarter, we'll be in a much stronger position to serve our customers in very tight conditions that we're operating under. Operational performance was a mixed bag during the quarter as we were hit with some production interruptions resulting from utility power outages across the mill system. This further emphasizes our need to execute and realize the benefits of the gas turbine projects, which will reduce, if not eliminate, our reliance on the grid at three key facilities. It is also a testament to the organization that we are able to work through and minimize the effects of these issues to achieve the production we achieved, given that we had completed outages at five of the packaging mills during the quarter. We managed costs very well in the areas we could control, particularly in the box plant system. to help offset the headwinds we faced from elevated freight and increased recycled fiber costs. I'll now turn it over to Tom, who will provide further details on container board sales and the corrugated business in general.

Thank you, Mark. Our corrugated operations turned in yet another very strong quarter in all areas. Domestic container board and corrugated products prices and mix were 11 cents per share below the second quarter of 2025, and up 4 cents per share compared to the first quarter of 2026 and in line with our forecast. Corrugated prices were slightly below first quarter levels until we began to realize the first increase in June. We are seeing the majority of the first increase rolling in during July and we'll see the beginning of the second increase in August with realization split between Q3 and Q4. Export container board prices were one cent above last year's second quarter and two cents above the first quarter of 2026. Export sales volume of container board was 30,000 tons lower than the first quarter of 2026 and 22,000 tons lower than the second quarter of 2025. We decided mid-quarter to lower export sales to build inventory so we can supply our corrugated plants to efficiently serve our customers. As Mark alluded to earlier, we were able to meaningfully increase our inventories during the first week of July, which puts us in a good supply position for the back half of the year with our mills running full out. Demand was very strong throughout the quarter across our entire customer base. Shipments were up over 24% in total and per day versus last year, with the legacy business up 4.1%, achieving an all-time record for total quarterly shipments. The acquired corrugated business had an excellent quarter driven by strong volumes in both the sheet feeder and bulk businesses which drove its earnings contribution above our expectations. We saw meaningful improvement of the integration level of container board produced by the acquired mills into the combined box plant system as well as from legacy PCA mills into the acquired corrugated operations. Given the volume the box plants across the whole system had to step up and perform to satisfy our customers while costs were increasing and they did just that. Our corrugated operations were favorable to forecast in almost all cost areas, which helped mitigate the freight hit we took during the quarter. We also optimized our production and ran the right orders in the right plants to maximize efficiency and margins. Our people demonstrated their unwavering commitment to our customers to deliver this outstanding performance. Finally, I'm pleased to report that we successfully started up the new Ohio plant earlier this month ahead of schedule. The state-of-the-art 550,000 square foot facility will further enhance our capabilities to serve and grow with our customer base in a very strategic area for us while improving our operational efficiency over the long term. I'll now turn it back to Mark.