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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 91 added, 191 removed, 173 unchanged (62% of the section changed)

13 unchanged sentences

We are headquartered in Lake Forest, Illinois and operate primarily in the United States.

Included in this Item 2 are various non-GAAP financial measures, including earnings per diluted share excluding special items, net income excluding special items, earnings before non-operating pension income (expense), interest, income taxes, and depreciation, amortization, and depletion (“EBITDA”), segment EBITDA, EBITDA excluding special items, and segment EBITDA excluding special items.

Included in this Item 2 are various non-GAAP financial measures, including earnings per diluted share excluding special items, net income excluding special items, earnings before non-operating pension income, interest, income taxes, and depreciation, amortization, and depletion (“EBITDA”), segment EBITDA, EBITDA excluding special items, and segment EBITDA excluding special items.

We provide important disclosures regarding our presentation of non-GAAP financial measures and reconciliations of presented non-GAAP financial measures to the most comparable measures presented in accordance with GAAP later in this section under the caption “Non-GAAP Financial Measures.”

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Executive Summary

Third quarter net sales were $2.18 billion in 2024 and $1.94 billion in 2023.

We reported $238 million of net income, or $2.64 per diluted share, during the third quarter of 2024, compared to $183 million, or $2.03 per diluted share, during the same period in 2023.

Net income included $1 million of expense for special items in the third quarter of 2024, compared to $2 million of expense for special items in 2023 (discussed below).

Excluding special items, net income was $239 million, or $2.65 per diluted share, during the third quarter of 2024, compared to $185 million, or $2.05 per diluted share, in the third quarter of 2023.

1 The increase in net income was driven primarily by higher volume and prices and mix in the Packaging segment, higher volume in the Paper segment, lower freight and logistics expenses, lower scheduled outage expenses, and lower interest expense.

These items were partially offset by lower prices and mix in the Paper segment, higher operating and converting costs, higher depreciation expense, and other expenses.

First quarter net sales were $2.14 billion in 2025 and $1.98 billion in 2024.

We reported $204 million of net income, or $2.26 per diluted share, during the first quarter of 2025, compared to $147 million, or $1.63 per diluted share, during the same period in 2024.

Net income included $4 million of expense for special items in the first quarter of 2025, compared to $8 million of expense for special items in 2024 (discussed below).

Excluding special items, net income was $208 million, or $2.31 per diluted share, during the first quarter of 2025, compared to $155 million, or $1.72 per diluted share, in the first quarter of 2024.

1 The increase in net income was driven primarily by higher prices and mix and volume in the Packaging segment, higher prices and mix in the Paper segment, lower freight and logistics expenses, and lower scheduled outage costs.

These items were partially offset by higher operating costs, lower volume in the Paper segment, higher depreciation and other expenses, higher tax rate, and higher interest expense.

For additional detail on special items included in reported GAAP results and other non-GAAP measures, see “Item 2.

Non-GAAP Financial Measures.”

Packaging segment operating income was $321 million in the third quarter of 2024, compared to $257 million in the third quarter of 2023.

Packaging segment EBITDA excluding special items was $446 million in the third quarter of 2024 compared to $374 million in the third quarter of 2023.

1 The increase was due to higher sales and production volumes and prices and mix, lower freight and logistics expense, and lower scheduled mill outage expenses, partially offset by higher operating and converting costs.

Strong demand drove a new all-time containerboard production record of 1.3 million tons.

Corrugated plants also had record breaking performance with shipments per day up 11.1% compared to the third quarter of 2023.

Prices and mix moved higher as we implemented previously announced price increases for containerboard and corrugated products.

Paper segment operating income was $39 million in the third quarter of 2024, compared to $28 million in the third quarter of 2023.

Paper segment EBITDA excluding special items was $43 million in the third quarter of 2024, compared to $35 million in the third quarter of 2023.

1 The increase was due to higher sales and production volumes, lower scheduled mill outage expenses, and lower operating costs, partially offset by lower prices and mix and higher freight and logistic expense.

Packaging segment operating income was $804 million in the first nine months of 2024, compared to $811 million in the same period in 2023.

Packaging segment EBITDA excluding special items was $1,172 million in the first nine months of 2024 compared to $1,171 million in the first nine months of 2023.

1 The slight increase in EBITDA excluding special items was due primarily to higher sales and production volumes, and lower freight and logistics expense, partially offset by lower prices and mix, higher operating and converting costs, higher expenses related to corrugated plant capital projects and other costs, and higher scheduled mill outage expenses.

Packaging segment operating income was $278 million in the first quarter of 2025, compared to $204 million in the first quarter of 2024.

Packaging segment EBITDA excluding special items was $409 million in the first quarter of 2025 compared to $326 million in the first quarter of 2024.

1 The increase was due to higher prices and mix and sales and production volumes, lower freight and logistics expense, and lower scheduled mill outage expenses, partially offset by higher operating and converting costs.

Prices and mix moved higher, reflecting our price increases for containerboard and corrugated products announced to customers in 2024 and earlier in 2025.

Solid demand drove a record 72.5 billion square feet of containerboard production, and corrugated plant shipments were up 2.5% compared to the first quarter of 2024.

Demand slowed down during the latter part of the quarter, which we believe was due to cautious ordering patterns by customers in response to uncertain macroeconomic conditions.

Paper segment operating income was $36 million in the first quarter of 2025, compared to $30 million in the first quarter of 2024.

Paper segment EBITDA excluding special items was $40 million in the first quarter of 2025, compared to $41 million in the first quarter of 2024.

1 The slight decrease in EBITDA excluding special items was due to lower sales and production volumes, partially offset by higher prices and mix.

Industry and Business Conditions

Trade publications reported North American industry-wide corrugated products shipments were down (2.1%) in total and per workday during the first quarter of 2025 compared to the same quarter of 2024.

Reported industry containerboard production decreased (0.4%) compared to the first quarter of 2024.

Reported industry containerboard inventories at the end of the first quarter of 2025 were approximately 2.8 million tons, up 0.7% compared to the same period in 2024.

Reported containerboard export shipments were down (7.7%) compared to the first quarter of 2024.

In February 2025, reported index prices increased $40 per ton for linerboard and for corrugating medium.

1 Net income excluding special items, earnings per diluted share excluding special items, and segment EBITDA excluding special items are non-GAAP financial measures.

See “Non-GAAP Financial Measures” later in this Item 2.

Paper segment operating income was $95 million in the first nine months of 2024, compared to $91 million in the first nine months of 2023.

Paper segment EBITDA excluding special items was $114 million in the first nine months of 2024, compared to $115 million in the same period in 2023.

1 The slight decrease in EBITDA excluding special items was due to lower prices and mix and higher scheduled mill outage expenses, partially offset by higher sales and production volumes, and lower operating costs.

Industry and Business Conditions

Trade publications reported North American industry-wide corrugated products shipments were up 0.6% in total and down (1.0%) per workday with one additional shipping day during the third quarter of 2024 compared to the same quarter of 2023.

Reported industry containerboard production increased 3.1% compared to the third quarter of 2023.

Reported industry containerboard inventories at the end of the third quarter of 2024 were approximately 2.6 million tons, up 1.9% compared to the same period in 2023.

Reported containerboard export shipments were up 2.2% compared to the third quarter of 2023.

In February 2024, reported index prices increased $40 per ton for linerboard and $60 per ton for corrugating medium, followed by an additional increase in June 2024 of $40 per ton for linerboard and corrugating medium.

The market for communication papers competes heavily with electronic data transmission and document storage alternatives.

Increasing shifts to these alternatives have reduced usage of traditional print media and communication papers.

Trade publications reported North American UFS paper shipments were up 2.7% in the third quarter of 2024 compared to the same quarter of 2023.

Average prices reported by a trade publication for cut size office papers were higher by $7 per ton, or 0.5% in the third quarter of 2024, compared to the second quarter of 2024, and lower by $20 per ton, or (1.4%), compared to the third quarter of 2023.

In January 2024, reported index prices declined $40 per ton for cut size office papers and $20 per ton for offset printing papers, followed by $20 per ton price increases in April and May 2024 for both cut size office papers and offset printing papers.

We expect demand in our Packaging segment to remain strong with corrugated shipments-per-day continuing to strengthen and slightly higher containerboard volume.

However, total corrugated products shipments will be impacted by two less shipping days than the third quarter and recent hurricane damage to the strawberry crops in Florida affecting our customers.

With current containerboard inventory below target levels, we will also attempt to build inventory prior to year-end.

We expect continued realization from our previously announced price increases and higher export prices, although with a seasonally less rich mix compared to the third quarter.

In our Paper segment, shipments are expected to be lower versus the seasonally stronger third quarter while prices and mix should be fairly flat.

Operating and converting costs are expected to increase, driven by higher seasonal energy costs and chemical costs.

Scheduled mill maintenance outage costs are estimated to be higher than the third quarter, and depreciation expense should be slightly higher.

Considering these items, we expect fourth quarter earnings to be lower than third quarter earnings.

Trade publications reported North American UFS paper shipments were down (8.3%) in the first quarter of 2025 compared to the same quarter of 2024.

Average prices reported by a trade publication for cut size office papers were higher by $20 per ton, or 1.4% in the first quarter of 2025, compared to the fourth quarter of 2024, and higher by $60 per ton, or 4.3%, compared to the first quarter of 2024.

In February 2025, reported index prices increased $30 per ton for cut size office papers and for offset printing papers.

In the Packaging segment, we expect domestic prices to improve with continued implementation of our price increases.

We anticipate continued uncertainty relative to foreign and domestic tariff actions, which may affect demand and negatively impact volume and costs.

Corrugated product shipments are expected to increase from first quarter levels, but operating costs will be negatively impacted due to lower containerboard production volume as we run our operations to match demand assumptions and achieve targeted inventory levels.

We have also adjusted our planned maintenance outage schedule and moved an outage that was scheduled for later in the year into the second quarter, which will also increase our costs.

In the Paper segment, we expect higher prices, although volume will be lower with the planned maintenance outage at our International Falls, MN mill.

Rail contract rate increases at six of our mills during the first and second quarters will result in higher freight and logistics expenses, and depreciation expense is assumed to be higher as well.

Considering these items, we expect second quarter earnings to be higher than first quarter earnings.

Results of Operations

Three Months Ended September 30, 2024, compared to Three Months Ended September 30, 2023

The historical results of operations of PCA for the three months ended September 30, 2024 and 2023 are set forth below (dollars in millions):

Three Months Ended March 31, 2025, compared to Three Months Ended March 31, 2024

The historical results of operations of PCA for the three months ended March 31, 2025 and 2024 are set forth below (dollars in millions):

Three Months Ended

September 30,

Corporate and Other

2 unchanged sentences

Income from operations

Non-operating pension income (expense)

Non-operating pension income

Interest expense, net

9 unchanged sentences

(a) See “Non-GAAP Financial Measures” included in this Item 2 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.

Net sales increased $246 million, or 12.7%, to $2,182 million during the three months ended September 30, 2024, compared to $1,936 million during the same period in 2023.

Net sales increased $249 million, or 14.1%, to $2,009 million, compared to $1,760 million in the third quarter of 2023 due to higher volume ($241 million) and higher containerboard and corrugated products prices and mix ($8 million).

In the third quarter of 2024, export and domestic containerboard outside shipments increased 25.8% compared to the third quarter of 2023.

Our total corrugated products shipments were up 12.9% in total and up 11.1% per workday, with one additional shipping day compared to the same period in 2023.

In the third quarter of 2024, our domestic containerboard prices were 8.5% higher, while export prices were 9.4% higher, than the same period in 2023.

Net sales increased $1 million, or 0.9%, to $159 million, compared to $158 million in the third quarter of 2023, due to higher volume ($4 million), partially offset by lower prices and mix ($3 million).

Gross profit increased $93 million during the three months ended September 30, 2024, compared to the same period in 2023.

The increase was driven primarily by higher volume and prices and mix in the Packaging segment, higher volume in the Paper segment, lower freight and logistics expenses, and lower scheduled outage expenses.

These items were partially offset by lower prices and mix in the Paper segment, higher operating and converting costs, and other expenses.

In the three months ended September 30, 2024, gross profit included no significant special items.

In the three months ended September 30, 2023, gross profit included $3 million of special items expense related to Jackson mill conversion-related activities.

Net sales increased $162 million, or 8.2%, to $2,141 million during the three months ended March 31, 2025, compared to $1,979 million during the same period in 2024.

Net sales increased $172 million, or 9.6%, to $1,970 million, compared to $1,798 million in the first quarter of 2024 due to higher containerboard and corrugated products prices and mix ($95 million) and higher volume ($77 million).

In the first quarter of 2025, export and domestic containerboard outside shipments increased 13.4% compared to the first quarter of 2024.

Our total corrugated products shipments were up 2.5% in total and per workday, compared to the same period in 2024.

In the first quarter of 2025, our domestic containerboard prices were 3.5% higher, while export prices were 13.7% higher, than the same period in 2024.

Net sales decreased $10 million, or (5.9%), to $154 million, compared to $164 million in the first quarter of 2024, due to lower volume ($12 million), partially offset by higher prices and mix ($2 million).

Gross profit increased $84 million during the three months ended March 31, 2025, compared to the same period in 2024.

The increase was driven primarily by higher prices and mix and volume in the Packaging segment, higher prices and mix in the Paper segment, lower freight and logistics expenses, and lower scheduled outage costs, partially offset by higher operating costs, and lower volume in the Paper segment.

In the three months ended March 31, 2025, gross profit included $4 million of special items expense related to corrugated facility closure and other costs.

In the three months ended March 31, 2024, gross profit included $2 million of special items expense related to Jackson mill conversion-related activities.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased $18 million during the three months ended September 30, 2024, compared to the same period in 2023.

Selling, general, and administrative expenses (“SG&A”) increased $10 million during the three months ended March 31, 2025, compared to the same period in 2024.

The increase was primarily due to higher employee-related expenses and bad debt expense.

Other Income (Expense), Net

Other income (expense), net, for the three months ended September 30, 2024 and 2023 are set forth below (dollars in millions):

Other income (expense), net, for the three months ended March 31, 2025 and 2024 are set forth below (dollars in millions):

Three Months Ended

September 30,

Asset disposals and write-offs

6 unchanged sentences

Income from Operations

Income from operations increased $69 million, or 26.5%, during the three months ended September 30, 2024, compared to the same period in 2023.

The third quarter of 2024 included $1 million of special items related to corrugated products facility closure costs, compared to $2 million of special items expense primarily related to Jackson mill conversion-related activities and corrugated products facilities closure costs in the third quarter of 2023.

Packaging segment operating income increased $64 million to $321 million, compared to $257 million during the three months ended September 30, 2023.

The increase related primarily to higher sales and production volumes ($113 million), lower freight expenses ($11 million), higher containerboard and corrugated products prices and mix ($4 million), and lower annual outage expenses ($1 million), partially offset by higher operating and converting costs ($58 million), and higher depreciation expense ($6 million).

Operating costs were higher primarily because we operated the Wallula, Washington containerboard mill for the entire third quarter of 2024 while the mill was temporarily idled during the third quarter of 2023.

The third quarter of 2024 included $1 million of special items related to corrugated products facility closure costs, compared to no special items in the third quarter of 2023.

Paper segment operating income increased $11 million to $39 million, compared to $28 million during the three months ended September 30, 2023.

The increase primarily related to lower annual outage expenses ($6 million), higher sales and production volumes ($4 million), lower depreciation expense ($1 million), and lower operating costs ($1 million), partially offset by lower prices and mix ($3 million), and higher freight expenses ($1 million).

There were no special items in the Paper segment during the third quarter of 2024, compared to $3 million of expense for Jackson mill conversion-related activities in the third quarter of 2023.

Income from operations increased $84 million, or 43.0%, during the three months ended March 31, 2025, compared to the same period in 2024.

The first quarter of 2025 included $6 million of special items related to corrugated products facility closure costs, compared to $10 million of special items expense primarily related to Jackson mill conversion-related activities in the first quarter of 2024.

Packaging segment operating income increased $74 million to $278 million, compared to $204 million during the three months ended March 31, 2024.

The increase related primarily to higher containerboard and corrugated products prices and mix ($91 million), higher sales and production volumes ($31 million), lower freight expenses ($2 million), and lower annual outage expenses ($1 million), partially offset by higher operating and converting costs ($42 million), and higher depreciation expense ($7 million).

The first quarter of 2025 included $6 million of special items related to corrugated products facility closure costs, compared to $4 million of special items expense primarily related to Jackson mill conversion-related activities in the first quarter of 2024.

Paper segment operating income increased $6 million to $36 million, compared to $30 million during the three months ended March 31, 2024.

The increase primarily related to no special items in the Paper segment during the first quarter of 2025, compared to $6 million of expense for Jackson mill conversion-related activities in the first quarter of 2024, along with higher prices and mix ($2 million) and lower other costs ($1 million), partially offset by lower sales and production volumes ($3 million).

Non-Operating Pension Income, Interest Expense, Net and Income Taxes

Non-operating pension income increased $3 million during the three months ended September 30, 2024, compared to the same period in 2023.

The increase in non-operating pension income was related to favorable 2023 asset performance and favorable assumption changes.

Interest expense, net for the three months ended September 30, 2024 decreased $3 million when compared to the same period in 2023.

The decrease in interest expense, net was primarily due to higher interest income on invested cash in 2024 due to higher rates and higher cash balances.

During the three months ended September 30, 2024, we recorded $81 million of income tax expense, compared to $61 million of expense during the three months ended September 30, 2023.

The effective tax rate for the three months ended September 30, 2024 and 2023 was 25.3% and 25.1%, respectively.

The increase in our effective tax rate for the three months ended September 30, 2024 compared to the same period in 2023 was primarily due to higher nondeductible employee remuneration paid to covered employees.

Nine Months Ended September 30, 2024, compared to Nine Months Ended September 30, 2023

The historical results of operations of PCA for the nine months ended September 30, 2024 and 2023 are set forth below (dollars in millions):

Nine Months Ended

September 30,

Corporate and Other

Intersegment eliminations

Corporate and Other

Income from operations

Non-operating pension income (expense)

Interest expense, net

Income before taxes

Income tax provision

Non-GAAP Measures (a)

Net income excluding special items

Consolidated EBITDA

Consolidated EBITDA excluding special items

Packaging EBITDA

Packaging EBITDA excluding special items

Paper EBITDA excluding special items

(a) See “Non-GAAP Financial Measures” included in this Item 2 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.

Net sales increased $373 million, or 6.4%, to $6,237 million during the nine months ended September 30, 2024, compared to $5,865 million during the same period in 2023.

Net sales increased $357 million, or 6.7%, to $5,715 million, compared to $5,359 million in the nine months ended September 30, 2023, due to higher containerboard and corrugated products volume ($598 million), partially offset by lower containerboard and corrugated products prices and mix ($241 million).

In the first nine months of 2024, export and domestic containerboard outside shipments increased 22.7% compared to the first nine months of 2023.

Total corrugated products shipments were up 11.0% in total and up 10.4% per workday compared to the same period in

In the first nine months of 2024, our domestic containerboard prices were 2.3% higher, while export prices were (7.7%) lower, than the same period in 2023.

Net sales during the nine months ended September 30, 2024 increased $22 million, or 4.8%, to $473 million, compared to $452 million in the nine months ended September 30, 2023, due to higher volume ($43 million), partially offset by lower prices and mix ($21 million).

Gross profit increased $25 million during the nine months ended September 30, 2024, compared to the same period in 2023.

The increase was driven primarily by higher volumes in the Packaging and Paper segments, and lower freight and logistic expenses, partially offset by lower prices and mix in the Packaging and Paper segments, higher operating and converting costs, and higher annual outage expense.

In the nine months ended September 30, 2024, gross profit included $2 million of special items expense primarily related to Jackson mill conversion-related activities.

In the nine months ended September 30, 2023, gross profit included $12 million of special items expense primarily related to closure costs related to corrugated products facilities and Jackson mill conversion-related activities.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased $25 million during the nine months ended September 30, 2024, compared to the same period in 2023.

The increase was primarily due to employee-related expenses and higher bad debt expense.

Other Income (Expense), Net

Other income (expense), net, for the nine months ended September 30, 2024 and 2023 are set forth below (dollars in millions):

Nine Months Ended

September 30,

Asset disposals and write-offs

Jackson mill conversion-related activities

Facilities closure and other costs

DeRidder litigation

DeRidder litigation insurance recovery

We discuss these items in more detail in Note 5, Other Income (Expense), Net, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, Item 1.

Financial Statements” of this Form 10-Q.

Income from Operations

Income from operations decreased $15 million, or (1.8%), during the nine months ended September 30, 2024, compared to the same period in 2023.

The first nine months of 2024 and 2023 included special items expense of $11 million and $22 million, respectively, related to Jackson mill conversion-related costs and corrugated facility closure costs.

Packaging segment operating income decreased $6 million to $804 million during the first nine months of 2024, compared to the same period last year.

The decrease related primarily to lower containerboard and corrugated products prices and mix ($257 million), higher operating and converting costs ($70 million), higher depreciation expense ($15 million), higher expenses related to corrugated plant capital projects and other costs ($7 million), and higher annual outage expenses ($1 million), partially offset by higher sales and production volumes ($314 million), and lower freight expenses ($22 million).

Special items during the first nine months of 2024 included $5 million of expense related to Jackson mill conversion-related activities and corrugated facility closure costs, compared to $13 million of expense related to corrugated facility closure costs in the same period in 2023.

Paper segment operating income increased $4 million to $95 million, compared to the nine months ended September 30, 2023.

The increase primarily related to higher sales and production volumes ($18 million), lower operating costs ($6 million), and lower depreciation ($2 million), partially offset by lower prices and mix ($22 million), and higher annual outage expenses ($3 million).

Special items during the first nine months of 2024 and 2023 included $6 million and $9 million, respectively, of expense related to Jackson mill conversion-related activities.

Non-Operating Pension Income, Interest Expense, and Income Taxes

Non-operating pension income increased $9 million during the nine months ended September 30, 2024, compared to the same period in 2023.

The increase in non-operating pension income was related to favorable 2023 asset performance and favorable assumption changes.

Interest expense, net decreased $13 million during the nine months ended September 30, 2024, compared to the same period in 2023.

The decrease in interest expense, net was primarily due to higher interest income on invested cash in 2024 due to higher rates and higher cash balances.

During the nine months ended September 30, 2024, we recorded $189 million of income tax expense, compared to $190 million of expense during the nine months ended September 30, 2023.

The effective tax rate for the nine months ended September 30, 2024 and 2023 was 24.4% and 24.8%, respectively.

The decrease in our effective tax rate for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to higher excess tax benefits associated with employee restricted stock and performance unit vests.

Non-operating pension income decreased $1 million during the three months ended March 31, 2025, compared to the same period in 2024.

The decrease in non-operating pension income was related to unfavorable 2024 asset performance partially offset by favorable assumption changes.

Interest expense, net for the three months ended March 31, 2025 increased $3 million when compared to the same period in 2024.

The increase in interest expense, net was primarily due to lower interest income on invested cash balances in 2025 due to lower interest rates and lower invested balances.

During the three months ended March 31, 2025, we recorded $64 million of income tax expense, compared to $41 million of expense during the three months ended March 31, 2024.

The effective tax rate for the three months ended March 31, 2025 and 2024 was 23.8% and 21.6%, respectively.

The increase in our effective tax rate for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to lower excess tax benefits associated with employee restricted stock and performance unit vests.

Liquidity and Capital Resources

1 unchanged sentence

Our primary sources of liquidity are net cash provided by operating activities and available borrowing capacity under our revolving credit facility.

At September 30, 2024, we had $677 million of cash and cash equivalents, $165 million of marketable debt securities, and $323 million of unused borrowing capacity under the revolving credit facility, net of letters of credit.

At March 31, 2025, we had $752 million of cash and cash equivalents, $162 million of marketable debt securities, and $323 million of unused borrowing capacity under the revolving credit facility, net of letters of credit.

Currently, our primary uses of cash are for operations, capital expenditures, acquisitions, debt service, common stock dividends, and repurchases of common stock.

3 unchanged sentences

Below is a summary table of our cash flows, followed by a discussion of our sources and uses of cash through operating activities, investing activities, and financing activities (dollars in millions):

Nine Months Ended

September 30,

Three Months Ended

Net cash provided by (used for):

6 unchanged sentences

Cash requirements for operating activities are subject to PCA’s operating needs and the timing of collection of receivables and payments of payables and expenses.

During the nine months ended September 30, 2024, net cash provided by operating activities was $866 million, compared to $980 million in the same period in 2023, a decrease of $114 million.

Cash from operations excluding changes in cash used for operating assets and liabilities increased $43 million primarily due to lower pension contributions made during the first nine months in 2024 compared to the same period in 2023, higher accruals for workers’ compensation made during the first nine months in 2024 compared to the same period in 2023, and higher net income in 2024.

Cash from operations decreased by $157 million due to changes in operating assets and liabilities primarily due to the following:

a) a net unfavorable change in accounts receivable during the first nine months of 2024 compared to the same period in 2023 primarily due to an increase in accounts receivable levels for the Packaging segment in 2024 due to higher prices and sales volumes and an increase in accounts receivable levels for the Paper segment in 2024 due to higher sales volumes;

b) a net unfavorable change in prepaid expenses and other current assets during the first nine months of 2024 compared to the same period in 2023 primarily due to the accrued receivable for the insurance recovery related to the DeRidder litigation;

c) a net unfavorable change in inventories during the first nine months of 2024 compared to the same period in 2023 primarily due to an increase in Packaging segment inventory balances related to higher volume, partially offset by a favorable change in Paper segment inventory balances primarily due to a 2023 increase in Paper segment inventory balances;

d) a net unfavorable change in income taxes due to a smaller increase in income tax payables during the first nine months of 2024 compared to the same period in 2023.

These unfavorable changes were partially offset by the following:

e) a net favorable change in accrued liabilities during the first nine months of 2024 compared to the same period in 2023 primarily related to the accrued liability for the DeRidder trial compensatory damages and interest recorded during the first nine months of 2024;

f) a net favorable change in accounts payable during the first nine months of 2024 compared to the same period in 2023 primarily related to a larger increase in accounts payable levels during the first nine months of 2024 due to higher volumes.

During the three months ended March 31, 2025, net cash provided by operating activities was $339 million, compared to $260 million in the same period in 2024, an increase of $79 million.

Cash from operations excluding changes in cash used for operating assets and liabilities increased $55 million primarily due to higher income from operations in 2025 as discussed above.

Cash from operations increased by $24 million when comparing the first three months of 2025 to the same period in 2024 due to changes in operating assets and liabilities primarily due to the following:

a) a net favorable change in prepaid expenses and other current assets primarily related to the establishment of a receivable for the DeRidder trial and related insurance recoveries in the first quarter of 2024 and reduction of receivables against insurance carriers in the first quarter of 2025 related to the settlement of other litigation;

b) a net favorable change in accounts payable primarily related to timing of payments, partially offset by an unfavorable change in accounts payable during 2025 due to a smaller increase in accounts payable levels during the first quarter of 2025 compared to the first quarter of 2024;

c) a net favorable change in income taxes resulting from a larger change in the difference between the year-end tax receivable amounts and first quarter-end tax payable amounts in 2025 compared to 2024.

These favorable changes were partially offset by the following:

d) a net unfavorable change in accounts receivable mainly due to a decrease in Packaging accounts receivable levels during the first quarter of 2024;

e) a net unfavorable change in inventories primarily due to a decrease in Packaging inventory balances for raw materials as well as a decrease in Paper inventory balances for finished goods during the first quarter of 2024;

f) a net unfavorable change in accrued liabilities predominantly related to the establishment of an accrued liability for the DeRidder trial in the first quarter of 2024 and reduction of accrued liabilities in the first quarter of 2025 related to the settlement of other litigation.

Investing Activities

We used $75 million for investing activities during the nine months ended September 30, 2024 compared to $331 million during the same period in 2023.

We spent $468 million for internal capital investments during the nine months ended September 30, 2024, compared to $329 million during the same period in 2023.

Additionally, in September 2024, we received $400 million in net proceeds from the maturity of our investments in time deposits, which were used to repay our 3.65% senior notes that were due on September 15, 2024.

We used $144 million for investing activities during the three months ended March 31, 2025 compared to $81 million during the same period in 2024.

We spent $148 million for internal capital investments during the three months ended March 31, 2025, compared to $77 million during the same period in 2024.

We expect capital investments in 2025 to be within a range of $840 million to $870 million.

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Financing Activities

During the nine months ended September 30, 2024, net cash used for financing activities was $763 million, compared to $396 million of net cash used for financing activities during the same period in 2023.

We paid $337 million of dividends during the first nine months of both 2024 and 2023.

In addition, we withheld shares to cover $25 million of employee restricted stock taxes during the first nine months of 2024 compared to $16 million of employee restricted stock taxes withheld during the same period in 2023.

We did not have any repurchases and retirements of the Company’s common stock during the first nine months of 2024, compared to repurchases and retirements of 0.3 million shares of the Company's common stock for $42 million during the same period in 2023.

On September 15, 2024, we used the net proceeds received from the November 2023 offering of the 5.70% senior notes due 2033 and cash on hand to repay our outstanding 3.65% senior notes due 2024.

The repayment of the old 3.65% notes was $400 million excluding accrued interest.

During the three months ended March 31, 2025, net cash used for financing activities was $128 million, compared to $135 million of net cash used for financing activities during the same period in 2024.

We paid $112 million of dividends during the first three months of both 2025 and 2024.

In addition, we withheld shares to cover $15 million of employee restricted stock taxes during the first three months of 2025 compared to $23 million of employee restricted stock taxes withheld during the same period in 2024.

We did not have any repurchases and retirements of the Company’s common stock during both the three months ended March 31, 2025 and 2024.

In addition to the items discussed in Note 11, Debt, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Part I, Item 1.

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Three Months Ended

Nine Months Ended

September 30,

Earnings per diluted share, as reported in accordance with GAAP

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Earnings per diluted share, excluding special items

(a) For the three and nine months ended September 30, 2024, includes $0.9 million and $1.0 million of charges, respectively, consisting of closure costs related to corrugated products facilities.

For the nine months ended September 30, 2024, these charges were partially offset by income primarily related to a favorable lease buyout for a closed corrugated products facility during the first quarter of 2024.

For the three and nine

months ended September 30, 2023, includes $0.1 million of income and $13.5 million of charges, respectively, related to the closure of corrugated products facilities and design centers.

Included therein are closure costs as well as the gain on sale of a corrugated products facility.

(b) For the nine months ended September 30, 2024, includes $9.7 million of charges related to the announced discontinuation of production of UFS paper grades on the No.

(a) For the three months ended March 31, 2025, includes $5.9 million of charges consisting of closure costs related to corrugated products facilities.

For the three months ended March 31, 2024, includes $0.1 million of income primarily related to a favorable lease buyout for a closed corrugated products facility, partially offset by closure costs related to corrugated products facilities and design centers.

(b) For the three months ended March 31, 2024, includes $10.4 million of charges related to the announced discontinuation of production of UFS paper grades on the No.

3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

For the three and nine months ended September 30, 2023, these amounts were $2.6 million and $8.2 million, respectively.

The following tables reconcile net income to net income excluding special items for the periods indicated (dollars in millions):

Three Months Ended September 30,

Three Months Ended March 31,

As reported in accordance with GAAP

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Excluding special items

Nine Months Ended September 30,

As reported in accordance with GAAP

Special items:

Jackson mill conversion-related activities (d)

Facilities closure and other costs (c)

Total special items

Excluding special items

(c) For the three and nine months ended September 30, 2024, includes charges consisting of closure costs related to corrugated products facilities.

For 2023, includes charges consisting of closure costs related to the closure of corrugated products facilities and design centers.

Included therein are closure costs as well as the gain on sale of a corrugated products facility.

For 2024, includes income primarily related to a favorable lease buyout for a closed corrugated products facility, partially offset by closure costs related to corrugated products facilities and design centers.

(d) Includes items related to the announced discontinuation of production of UFS paper grades on the No.

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Three Months Ended

Nine Months Ended

September 30,

Non-operating pension (income) expense

Non-operating pension income

Interest expense, net

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Three Months Ended

Nine Months Ended

September 30,

Segment operating income

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To manage these risks, we may from time to time enter into transactions, including certain physical commodity transactions, that are determined to be derivatives.

As of September 30, 2024, we are party to certain physical commodity transactions related to natural gas supply contracts.

As of March 31, 2025, we are party to certain physical commodity transactions related to natural gas supply contracts.

These contracts qualify for the normal purchase normal sale ("NPNS") exception, and we have elected that exception.

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Financial Statements and Supplementary Data” of our 2024 Annual Report on Form 10-K.

At September 30, 2024, interest rates on 100% of PCA’s outstanding debt are fixed.

At March 31, 2025, interest rates on 100% of PCA’s outstanding debt are fixed.

Off-Balance-Sheet Activities

The Company does not have any off-balance sheet arrangements as of September 30, 2024.

The Company does not have any off-balance sheet arrangements as of March 31, 2025.

Environmental Matters

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PCA has included in its 2024 Annual Report on Form 10-K a discussion of its critical accounting policies and estimates which require management’s most difficult, subjective, or complex judgments used in the preparation of its consolidated financial statements.

PCA has not had any changes to these critical accounting estimates during the first nine months of 2024.

PCA has not had any changes to these critical accounting estimates during the first three months of 2025.

New and Recently Adopted Accounting Standards

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• the possibility of unplanned outages or interruptions at our principal facilities;

• legislative or regulatory actions or requirements, particularly concerning environmental or tax matters.

• governmental, legislative or regulatory actions or requirements, particularly concerning environmental or tax matters or trade policy.

Our actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, we can give no assurances that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on our results of operations or financial condition.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis