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.

Thank you, Tom. Looking at the paper segment, EBITDA excluding special items in the second quarter was $39 million with sales of $157 million or a 24.9% margin compared to the second quarter of 2025's EBITDA of $30 million and sales of $146 million or a 20.8% margin. Note that the international falls outage was in the second quarter of last year and will be in the third quarter this year. Sales volume was approximately 3% below the first quarter of 2026 and approximately 6% above the second quarter of 2025. Prices and mix were up 2% from both the first quarter of 2026 and the second quarter of 2025. So another solid quarter from the paper business with strong margins. We're continuing to implement our previously announced price increases and expect to benefit in Q3. I'll now turn it over to Kent. Thanks, Mark.

Cash provided by operations was 376 million, and after 206 million at CapEx, free cash flow was 170 million. In addition to CapEx, the primary payments of cash during the quarter included dividend payments of 111 million, cash tax payments of 78 million, and net interest payments of 54 million. We did not repurchase shares during the quarter. Excluding special items, our effective tax rate during the second quarter was 25.7%. We expect the third quarter rate to be approximately 26%. We continue to forecast 840 to 870 million of CapEx and excluding special items, around 710 million of DDNA for the year. Our special items expense for the year through the end of 2Q included $56 million in depreciation expense associated primarily with the Wallula Mill restructuring. I'd now like to give you an update on the annual outage schedule and earnings impact for the year. Our outage expense was $0.34 during the second quarter. Our back half estimates are now $0.30 for the third quarter and $0.63 for the fourth quarter, totaling $1.41 for the year. As we indicated, International Falls, our only white paper mill, will have the outage in the third quarter. In the packaging segment, only the Riverville mill is scheduled for a third quarter maintenance outage. I'll now turn it back over to Mark.

Thanks, Kent. Looking ahead as we move from the second quarter into the third quarter, we expect continued strong demand in the packaging segment and corrugated products volume to increase with one more shipping day. Prices for container board and corrugated products will be higher as we complete implementation of our first announced increase and begin to realize our second announced price increase. We'll have one more day of mill operation as well as lower impact to production from maintenance outages. We also expect better operating performance across our container board mill system with continued improved capabilities from our Jackson mill as well as the acquired Greif mills. Mill maintenance outage expenses will be lower in total in the packaging segment and higher in the paper segment. We expect lower volume and higher prices in the paper segment as a result of the maintenance outage and continued implementation of our previously announced paper price increases. Costs for freight across the business will remain at or around the elevated levels we experienced in May and June. Recycled fiber prices are continuing to increase and higher mill production will drive higher usage. We expect higher prices for chemicals and purchased electricity with wood fiber and natural gas remaining relatively flat. We expect some improvement in employee benefits costs due to second quarter unfavorability that is not expected to repeat in the third quarter. Thank you for joining us. on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. And with that, Jamie, I'd like to go ahead and open the call for Q&A. Thank you.

And at this time, we'll begin that question and answer session. If you would like to ask a question, please press star and then 1 using a touch-tone telephone. To withdraw your questions, you may press star and 2. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the numbers to ensure the best sound quality. Once again, that is star and then 1 to ask a question. Our first question today comes from George Staffos from Bank of America Securities. Please go ahead with your question.

Hi everyone. Good morning. I hope you're doing well. Thanks for the details. How are you? So I guess maybe to start, as always, can you give us a rundown on what you're seeing in terms of bookings and billings to start the third quarter? Anything sort of unique or notable in the trends that you're seeing? And add a couple of follow-ons.

Hey, George, this is Tom. Yeah, billings are up 1.5% so far, and we're expecting for the quarter, this is in the legacy business, and up about 2%. So, you know, that's pretty much in track with what we thought. And, of course, it's against a pretty tough comp. And, you know, as you may know, prime days were moved up a quarter. So, you know, it's going to change the numbers a little bit in the third quarter. But, you know, all in all, you know, we're happy with that. We're happy with that growth. And we're being pretty disciplined and selective in terms of our growth as well.

Okay. Thanks, Tom. Within the 2Q volume to 3Q volume comparison, and you mentioned one consideration, is there anything else that's decelerated or is that the only thing from what you can see that's worth noting? And relatedly, this is neither here nor there, it's our model, not yours, but mix was a little bit less than we're expecting in terms of revenue per ton. Was that related to any sort of customer factors or anything else in the mix? And then my last question, bigger picture, Mark, for years, the company has talked rightly about its fiber flexibility, frankly, the weighting more towards virgin versus recycled, which gave you a little bit more predictability on your costs. How do you see that evolving now that you've become maybe almost as much recycled as virgin relative to the pure set? Thanks, guys, and good luck in the quarter.

Let me start that question up first, George. We're probably currently around 30% recycled to 70% on any given day. It flexes up and down 35% at times. As we're pushing the system now, we're probably up closer to the 35% level. But nevertheless, we've gone through an unusual time. Thank you for joining us. Thank you very much.

which translated into price as well. And then of course we had the $20 reduction that was announced in RISI which impacted price as well. But the good news is all segments of the business were very strong and were up and we plan to see that going forward as well. And the 3Q price obviously is going to change dramatically. as we roll through the price increase, as I mentioned in my commentary.

Thank you very much. I'll turn it over.

Thanks, George. Next question, please.

Our next question comes from Mike Roxland from Truist. Please go ahead with your question.

Thank you, Mark, Tom, Kent, for taking my questions. You mentioned Greif beat by 10 cents. I think you were expecting maybe... A four cent contribution positively, you end up with 14 cents. So when you think about the beat, it seems relative to the street for the quarter, it seems like it was done, most of it came from, if not all of it came from Greif rather than your legacy business. So just any color you can provide on the myths in your legacy business relative to expectations, is that largely due to cost, mainly freight, just any color you can have in terms of the puts and takes in the quarter relative to... between legacy and the Greif assets?

So Mike, I'll start with this, it's Kent, and then Tom will add some color. So Greif was a 14 cent earnings contribution that exceeded expectations, the headline number by, call it nine or 10 cents. Four cents of that was the depreciation benefit that we called out in the earnings release, okay? So if you're looking sort of apples to apples, five cents from expectations, that was driven by largely higher volumes than we expected and very good operational performance. But also we're running Greif now as a much more integrated system. It's much less separate from PCA legacy than when we made the acquisition, obviously by design. So there's some puts and takes. We're moving business between trying to get efficiencies maximized, and Tom can comment on this a little bit further.

There's really not a ton to add. It's just that we're running the business to the greatest efficiency we can, and we're trying to utilize all of our assets in the best possible way. So we now view this business as being totally integrated, and we're operating as one unit.

Got it. In that regard, Tom, I think you had a transition service agreement with Greif that may have expired. Can you talk about it? Is there any way to quantify what you get back from the expiration of that agreement?

I'll let Kent handle that.

So the transition services agreement is running through the end of the year as we bring the last few corrugated plants and one facet of the mills onto PCA systems. So we got three more plants coming up in 3Q and the last couple coming up in 4Q. The TSA is, you know, number one, we're reporting the costs and special items as part of acquisition integration charges. But really the efficiencies we're seeing is just having better visibility to the business, you know, being able to take advantage really of just optimizing the supply position between PCA mills on one hand and great facilities on the other hand. So that's

really where it's coming from, Mike.

I'll add, Mike, that we look very much forward to having them all on our system, I can tell you that.

Got it. And that sounds like it'll be done by year-end. You'll be done completely with the TSOs. Perfect. One last one, I'll turn it over. In terms of tariffs, obviously there are 50% tariffs potentially being proposed to be applied to Canadian imports of container board, maybe boxes. Any thoughts around those tariffs and what it means for the domestic industry?

Right now, our initial read is little to no impact on PCA. It should have really nothing on the packaging business. and as you parse through it, it's not 100% clear at this point in terms of what it really applies to. So we'll take a little more of a wait and see approach, but right now we don't view it as a significant driver either way.

Thank you. Our next question comes from Mark Weintraub from Seaport Research Partners. Please go ahead with your question.

Thank you. So you mentioned that you started to see the March-April increase in June. Can you give us a sense as to how much of it then of the 50 would have shown up in your box prices in the second quarter? Presumably the balance of that, is it fair to say, would be in the third quarter? And then can you share? I think you used the term you expect to kind of split The June increase between 3Q and 4Q, is that evenly or was that just sort of some of it's going to show up in 3Q and some is going to show up in 4Q? And to the extent that you're comfortable quantifying rough percentages, that would be helpful.

Yeah. Hey, Mark, it's Kent. I'll start and then Tom will finish here. Okay. On the first increase, the vast majority of that's coming in Q3. Okay. calibrate it maybe 70-75% of its Q3 in July there. The second increase, the majority will come in in 4Q, but not quite as pronounced as the 2Q-3Q split on the first increase.

Tom? Yeah, that's exactly the way we see it, and I think a lot of times people forget that We were impacted by the $20 down that was announced that trailed into 2Q. And also the mix had some impact in 2Q from the price standpoint. All of that then comes back in 3Q and 4Q with these increases as they roll through, as Kent mentioned. Great.

And then just as a follow-up, in some environments in the past, You've been able to get more than full pass-through. And clearly, we've got a very high-cost environment right now. Are we in that type of an environment? What would sort of be recognizing there's always going to be competitive pressures as well at work? How should we be thinking about the ability to get full and or possibly even more than full pass-throughs?

Well, Mark, I'm not going to quantify that for you, but I can tell you that you did observe that that is our mission and that is what we always tried to do. And you also mentioned, and I think very importantly, that we are in a very high inflationary environment right now. And we're having a lot of discussions around that. I'll leave it at that. Thank you.

Next question, please.

Our next question comes from Gabe Heide from Wells Fargo Securities. Please go ahead with your question.

Mark, Kent, Tom, good morning. Good morning, Gabe. You talked about being able to build a little bit of inventory early in the quarter, maybe in and around July 4th holiday. And then, Tom, I think you also mentioned 1.5% billings. I know we can't extrapolate that out, but I think you referenced maybe 1.5%, 2% was sort of what you were thinking for the quarter on a year-over-year basis. If I got my comparisons correctly or correct here, I think down 1.1 for corrugated shippings in Q3-25. So just assuming I've got that level set, how would you describe kind of the feel in the market right now from a supply-demand standpoint? And I'm sort of asking because You guys obviously delayed some sales of exports into the third quarter to kind of shore up your own inventories, and then there's been some supply disruptions in the market. So just if you've got customers coming to you asking for help or anything like that, thank you.

I'm going to give you one word, Gabe, that I would use to describe the environment, and that's tight.

Okay, got it. And then we did hear some comments about maintenance outages, maybe some folks coming out a little bit slower than what was expected. Just curious if you guys had experienced any of that, or maybe it was, Mark, related to the grid volatility that you mentioned in your prepared remarks.

As far as, you know, we went through our annual outages at five of the mills during the second quarter and we executed incredibly well and in most cases ahead of schedule and started up the mills very successfully. But we had at least five distinct utility power outage situations at a number of the mills. I'm going to give you an example. One mill, they shut us down for the better part of a full day just with their own hardware issues, and then had continuing problems for a few more days trying to get their own grid structure stabilized. Another location, basically a year in forest fire season, we had the utility shut down the entire regional system without notifying anybody. It took down the mill instantaneously out in Wallula and impacted us for a period of time. We're having these types of situations where voltage droops and surges through the systems. I think it speaks in many cases to what's happening with the nationwide integrity of the system. We overcame those issues. As I said in my comments, it speaks to the and the ability of our individuals to rally and get through these things and stabilize the mills. But it also speaks to the importance of the three gas turbine projects that we'll be bringing online over the next two years and how critical they're going to be to these three particular mills.

All right. Thank you. I know I'm going to be maybe a little aggressive here or at least, you know, give a mouse a cookie or milk a mouse for a cookie. I think you said 70% realization, Kent, on the second price increase in sort of split Q3, Q4. $35 a ton, maybe 1.4 million tons, directionally $45, $50 million benefit that we're thinking about on a sequential basis. And then I know maintenance costs are up, I think, 33 cents directionally. So maybe $40 million offset. And then I think there's one less shipping day. Is there anything else that we should be thinking about? I think higher energy consumption per colder weather conditions, things like that in Q4. Anything else that we should be mindful of thinking about for Q4?

For Q4, maintenance primarily higher, normal seasonal mix. A little bit higher depreciation run rate, as I kind of called out, as I alluded to in my prepared remarks. But, you know, seasonally strong volumes. So those are your primary factors. And at least, you know, right now trying to put a crystal ball around some of the, you know, some of the freight and energy-based costs, it's pretty premature to do that.

Absolutely. Good luck, gentlemen. Okay, thanks. Next question, please.

Our next question comes from Anoja Shah from UBS. Please go ahead with your question.

Hi, good morning, everyone. Sorry if I missed it. Morning. Sorry if I missed it, but did you give a sense of what you expect from the Greif assets in third quarter in your guidance?

Yeah, the way I would look at it, Anoja, is you'll have the benefits of You know, continued strong volume, you know, consistent with or even maybe a little above second quarter levels. You'll have the benefits of price coming in, but then that will be probably overcome by the fact that you have Riverville down in the third quarter, so you'll have outage expenses. So the way I'm looking at it from an earnings contribution, and again, I'm taking this against a 10 cent contribution without the depreciation benefit we got in 2Q. You're probably going to be a penny or two down 3Q to 2Q in terms of the Greif contribution.

And again, you know, I'll reemphasize this.

3Q will be the last time we call Greif out as an individual, you know, contributor. It's really part of PCA from this point on.

Okay, great. And then I don't think we've talked about this recently, but any update you can give us on the Greif synergies? I think we had about 30 million penciled in for this year, and now we're at the halfway point. Can you just give us an update there? Thank you.

So between the mill production improvements that we called out last quarter, We're on track or even a little bit ahead of that. We're running in the 5% to 10% improved reliability, which we're seeing in better production. But the integration benefits now are starting to come into the numbers as well. And from an integration standpoint, adding that in, we're on track probably to exceed the $30 million run rate by the end of the year. So very comfortable with where we're at there, Anosha.

Okay, great. Thanks very much. I'll turn it over.

Thanks, Anosha. Next question, please.

Our next question comes from Anthony Pettinari from Citi. Please go ahead with your question.

Good morning. Good morning. The 2Q corrugated demand was a bit stronger than we expected. I was wondering, do you think there's any element of pre-buy there with, you know, two price hikes in the market? And then, you know, World Cup, America 250, I don't know if those really had an impact to you, but I'm just curious if there's anything you'd call out there.

Anthony, this is Tom. The second quarter demand was very strong. I mentioned some of the e-com driven Prime Day from Amazon and some of those related e-com customers that we have certainly drove some of that business. Pre-buy, our capacity is so tight that it's impossible to get a pre-buy in right now. So that's not the case. And and World Cup. I'm not sure where that discussion even started, but I think that had very little impact in my opinion.

Okay, okay. And then just switching gears, Mark, you referenced the three energy projects over the next couple of years. I don't know if there's any finer point you could put on the cadence there or when those would go in and then just the CapEx guide for 840 to 870 reiterated. You know, directionally as we went to 27, is there a way to think about CapEx?

Yeah, regarding the three gas turbines, we're in construction phase at the Jackson Mill as we speak. We're waiting on some word on deliveries of some of the electrical switchgear components that will be needed to tie in and utilize the gas turbine into the existing system at the mill. The goal would be to have that gas turbine at Jackson up online next year in coordination with their Jackson's annual outage next year in the early part of the year. And then the Riverville, Virginia, and then the Derrida, Louisiana units, we're having to go through environmental permitting there. So it's kind of like, go figure, we want to put in gas turbines, but it's taking us longer to get gas. State and federal permits than it does to put in a data center. So we should have called them data centers. But I'm thinking it's going to be for the Ritter and the Riverville units is probably going to be more like the first part of 2028 to, you know, the mid part of 2028 to get those two units up and running based on the timing for the permits from the state's

Got it, got it.

And any kind of directional views on CapEx in 27 versus 26? I think with the opportunity, you know, we're just starting that discussion right now. And, you know, as always, I reserve the right to take advantage of any of the great ideas that we have. But it could be in line with where we've been last year and this year. We've got, you know, the gas turbine projects will consume a good portion. And then, you know, We always have good opportunities on the converting side and then the mill side will continue to take advantage of any high return projects that we identify, which we've got a number of them on the table that we're looking at right now. I would assume that the CapEx is going to stay in this range that we've been at, but these are well-executed high return opportunities. Tom, you got anything to add?

Well, I would just say that, Anthony, one thing to keep in mind relative to CapEx, this is a very capital-intensive business we're running here. We need to recapitalize, but just like everything else, cost of capital keeps going up as well. It's incumbent on us to make sure that we hit those hurdle rates and and then we're able to reinvest in the business and we're working hard at it but you don't have to look very far in this business to see what's going on and certainly we're feeling that pinch that's happening in the business in terms of tight board and tight box plant capacity and things like that. So we're going to need that going forward. Anything else, Anthony?

No, that's very helpful. I'll turn it over.

Good deal. Next question, please.

Our next question comes from Phil Ong from Jefferies. Please go ahead with your question.

Hey, guys. Just given how tight the market is. Good morning. And, Tom, I appreciate your brevity. Tight was the operative word here. But just given how tight the market is, can you just give us an update in terms of some of the capacity unlock you guys were planning from accounts, Jackson, I think some of the Greif assets? and then Mark, I think you kind of hinted potentially there's other things you guys are circling in terms of unlocking perhaps more capacity on the mill side. Give us a little more color in terms of how that's coming along and potentially some more opportunities going forward.

The Jackson Mill project that we've talked about for the last year, it's the new winder project that's coming on later this year. We've done a number of things at Jackson so We'll see the incremental tons that we had talked about coming online. But even more important than that, the Massalon Mill and the Riverville Mill have delivered as I had hoped they would deliver with the efforts that we put in over the last few quarters. So the incremental tons will continue to flow out of the acquired mills. And then Jackson Project is going to bring on the tons that we committed to We've got a few capital projects that we've identified that we're looking at for next year as an example that would bring on some incremental tons, which is pretty much what we do every year. But it's the 25,000, 50,000 tons of annual incremental opportunity with some capital spending. But that's kind of where we are. No one big project, just a number of little things.

Phil? I would... Phil, I would add this, Tom, I would add that, you know, when I said tight, you know, I was referring to not only our ability to source domestically, but also our ability to source globally. So it, you know, again, this comes back to the commentary that, you know, we're going to have to manage our own and figure out ways to do so. But it's, you know, it's a unique situation.

Perfect segue, Tom, to my next question. When I think about your margins return, they've remained quite good even with the demand and inflation shock we've seen the last two years. Your EBITDA margins kind of bottomed out like 19-ish years ago, but just looking over a very long duration, your margins have been very tight, call it in the low 20-ish range. Supply-demand certainly feels pretty tight right now, the tightest it's been since the pandemic. and demand, frankly, hasn't even really recovered in a big way yet on the box side. So it feels like you've got a great runway for margins and returns to improve next year. But I think my question really here is bigger picture, guys. Is PKG, PCA and the broader industry in a position to kind of rebase that return margin profile structure a little higher? You know, what's different this time around? And certainly you guys are spending a lot of capital for these projects to kind of enhance your return profile going forward. But give us kind of a little more color in how you think about this long term.

Let me start this out and then Tom can take it. But again, just re-reminding everybody that over the last, say, eight or nine years, if you think about year to date, 2026, we've spent about $6 billion on the box plants and mills to recapitalize, build new plants, you know, basically... and many more.

That's what it comes back to and you have to be incredibly disciplined about it and we're very fortunate that we embarked on this approximately 15 years ago to recapitalize our business because I'd hate to be in a position right now where suddenly with the cost of capital you got today to have to do that all over again. But, you know, we do have good plans and a good runway to continue to do what we need to do to take care of our customers. But when I said, when I used the term selective and disciplined relative to customer growth, that revolves around some of the things that we're talking about relative to capital and our ability to serve those customers and get paid appropriately for it. So that's... That's our mission. It doesn't change, but it's a challenging situation, as I mentioned, not only domestically, but globally right now. There has not been some of the same type of investments made that we've made, and that's my observation.

Just to continue on with what Tom's talking about, if you go back over the 15 or 17-year period, the Total capital spend on the mills and box plants and all of these efforts. We probably spent $10 billion to enhance PCA's capability. And you've also heard us talk about we expect an appropriate return for that investment. And we're not ashamed to say that.

That sounds great, guys. It makes total sense given all the investments you're making. Thank you so much.

Thanks. Next question, please.

Our next question comes from Hillary Cacanato from Deutsche Bank Securities. Please go ahead with your question.

Hi. Hi. Thanks for taking my question. So obviously, you know, significant pricing strength this year, but, you know, with input costs still being high, do you think there will need to be additional price increases later this year, just overall as an industry? I'm not saying, you know, you specifically, but just as an industry?

Hilary, we don't comment on price going forward, so we'll leave it at that. You can come to your own conclusions.

Okay, got it. Okay, so last quarter, I think you said Riverville and Massillon facilities are operating at about 10% above pre-acquisition levels. Could you talk about where those facilities are operating today in terms of percentage above pre-acquisition level, and are there still meaningful productivity opportunities remaining?

If you went back historically and looked at the Boise acquisitions, the reconfigurations we've done, everything in my career, I've always looked at ultimately about a 30% improvement in productivity. In some cases, we've seen 40%. It depends on how much capital you need to spend and are willing to spend to get the incremental capability out of a mill. There comes a point in time where you have a diminishing return for every dollar spent. We're very prudent in how we do that analysis and how we step forward through these opportunities, but it's always about what do we need to do to supply the converting side of the business and do it in a prudent manner. Just reminding everybody that we're really nine months into the acquisition here. We'll be lapping a full year come September, but we're feeling pretty bullish on the and the productivity coming out of both Massillon and Riverville and not just the productivity but the cost to produce those tons has come down significantly and we're looking forward to continuing to ramp up the productivity of both those mills. So stay tuned. I'm not going to give you a number. I'm just going to say that historically we've always done significantly more than we've already done.

Got it. Thank you very much.

Thank you. Any further questions?

We have an additional question. This is from George Stathos from Bank of America Securities. Please go with your follow-up.

Hi, George. How are you? Just wanted to come back to some of the cost factors in the second quarter to try to get at the earnings power. It's really more of a grab bag, if you will, Mark. So the outages that you were not expecting because of utilities, what do you think that cost you? If you can talk about the corporate cost, where it shook out relative to what you're expecting, what was that variance? And also, I think if I did my math correctly, maintenance this year now is looking to be maybe a nickel dime more than I think the first quarter guidance. Correct me if I'm wrong, I just want to run down those things. Thanks so much and good luck in the quarter again.

Okay, George, it's Kent. You asked for a fair amount. So the corporate variance, that was largely a benefits obligation that, you know, higher than forecast. It was a mark-to-market obligation on compensation and benefits. And that was about a nickel variance from 1Q to 2Q, and that showed up in the corporate segment. And I'm sorry, George, I'm taking these out of order. What was the first...

All the utility outages that were unplanned, what did that cost you if you had to recognize there's always stuff that goes wrong in a quarter but that you can't plan for?

I think that probably hit us for about 10,000 tons of production all in.

Okay. And then lastly, maintenance expense this year for the year relative to the prior guide. I want to say it's a nickel-dime higher, but correct me if I'm wrong, and if you could just affirm what the number is and the variance, that'd be great.

Okay. George, on full year maintenance for full company, I thought we brought it down a few cents from where we were from $141 for the year, including 4Q. And I thought we brought it down maybe two or three cents from where we were at the end of 1Q. I can clean that up after the call. I'll go double check that. But I thought we were maybe a penny or two better than we were coming in. Okay.

No worries, probably my miscalculation, but I appreciate the color. Thanks, guys.

Thank you. Any other questions, please?

Once again, if you would like to ask a question, please press star and one. And, sir, in showing no further questions at this time, I'd like to turn the floor back over for closing remarks.

Thanks, Jamie, and thank you everyone for joining us on the call today and appreciate everybody's time. We look forward to speaking with you in October and giving you the details and wrap up for 3Q. Take care. Have a good day. Bye-bye.

And with that, ladies and gentlemen, we thank you for joining today's presentation. You may now disconnect your lines.