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Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-05-08 · 189 added, 103 removed, 178 unchanged (62% of the section changed)

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We also manufacture and sell UFS papers, including both commodity and specialty papers, which may have custom or specialized features such as colors, coatings, high brightness, and recycled content.

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

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

On September 2, 2025, we completed the acquisition of the containerboard business of Greif, Inc.

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Executive Summary

First quarter net sales were $2.37 billion in 2026 and $2.14 billion in 2025.

We reported $171 million of net income, or $1.91 per diluted share, during the first quarter of 2026, compared to $204 million, or $2.26 per diluted share, during the same period in 2025.

Net income included $44 million of expense for special items in the first quarter of 2026, primarily related to Wallula mill restructuring activities, compared to $4 million of expense for special items in 2025.

Second quarter net sales were $2.49 billion in 2026 and $2.17 billion in 2025.

We reported $192 million of net income, or $2.15 per diluted share, during the second quarter of 2026, compared to $242 million, or $2.67 per diluted share, during the same period in 2025.

Net income included $18 million of expense for special items in the second quarter of 2026, primarily related to facility closure costs, Wallula mill restructuring activities, and acquisition and integration-related costs, compared to $17 million of income for special items in 2025.

Please see “Non-GAAP Financial Measures” elsewhere in this Item 2 for a description of special items.

Excluding special items, net income was $215 million, or $2.40 per diluted share, during the first quarter of 2026, compared to $208 million, or $2.31 per diluted share, in the first quarter of 2025.

1 The increase was driven by improvement in legacy PCA’s earnings by $0.15 per share, partially offset by a loss of ($0.06) per share for the acquired Greif containerboard business.

The results of the acquired business included approximately $34 million of depreciation and amortization expense and $19 million of additional interest expense, primarily from new borrowings to finance the acquisition.

The increase in the earnings of the legacy PCA business was driven primarily by higher prices and mix in the Packaging segment, lower fiber costs, lower maintenance outage expense, lower labor and operating costs in the Packaging segment, higher prices and mix and volume in the Paper segment, along with a lower tax rate and lower share count.

These items were partially offset by higher freight expense, lower production and sales volume in the Packaging segment, higher depreciation expense, higher labor and operating costs in the Paper segment, and higher corporate and other expenses.

Excluding special items, net income was $210 million, or $2.35 per diluted share, during the second quarter of 2026, compared to $224 million, or $2.48 per diluted share, in the second quarter of 2025.

1 The decrease was driven by lower earnings in the legacy business of ($0.27) per share, partially offset by $0.14 per share of earnings from the acquired Greif containerboard business.

The decrease in the earnings of the legacy PCA business was driven primarily by higher freight costs, higher corporate and other expenses due to higher deferred compensation benefit costs and stock compensation expenses, unfavorable price and mix in the Packaging segment, higher labor and operating costs, higher depreciation and amortization expense, higher fiber costs, higher tax rate, and higher interest expense, excluding Greif acquisition indebtedness.

These items were partially offset by higher production and sales volume in the Packaging segment, lower maintenance outage expense, and higher production and sales volume and prices and mix in the Paper segment.

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 $260 million in the first quarter of 2026, compared to $278 million in the first quarter of 2025.

Packaging segment EBITDA excluding special items was $482 million in the first quarter of 2026 compared to $409 million in the first quarter of 2025.

1 The increase in EBITDA, excluding special items, was driven primarily by higher sales and production volume with the addition of the acquired business, higher prices and mix, lower fiber costs, and lower maintenance outage expense, partially offset by higher operating and converting costs, and higher freight and logistics expenses.

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.

Corrugated product shipments were up 21.8% per day and up 19.9% in total compared to the first quarter of 2025.

Shipments from the legacy PCA business were up 2.8% per day and up 1.2% in total compared to the first quarter of 2025.

Containerboard production in the first quarter of 2026 was approximately 1,398,000 tons, and containerboard inventory was down (7.8%) compared to the fourth quarter, and up 11.4% compared to the first quarter of 2025, primarily due to the acquisition.

Paper segment operating income was $33 million in the first quarter of 2026, compared to $36 million in the first quarter of 2025.

Paper segment EBITDA excluding special items was $38 million in the first quarter of 2026, compared to $40 million in the first quarter of 2025.

1 The decrease in EBITDA excluding special items was primarily due to higher operating costs, and higher freight and logistic expenses, partially offset by higher prices and mix, and higher sales volumes.

Packaging segment operating income was $313 million in the second quarter of 2026, compared to $346 million in the second quarter of 2025.

Packaging segment EBITDA excluding special items was $489 million in the second quarter of 2026 compared to $453 million in the second quarter of 2025.

1 The increase in EBITDA excluding special items was driven by contribution from the acquired business and higher sales and production volume in the legacy business, partially offset by higher freight and logistics expenses, lower price and mix, higher fixed and other expenses, higher maintenance outage expense, and higher operating and converting costs.

Prices and mix began to improve in the second quarter and are expected to further improve in the third and fourth quarters due to two containerboard and corrugated products price increases that we notified to customers during the first half of the year and the increase in reported containerboard prices described below under “Industry and Business Conditions.” PCA’s agreements with corrugated products customers generally include price change provisions based upon the change in reported containerboard prices at negotiated amounts and times.

PCA expects to realize the majority of the price and mix improvement from the first price increase during the third quarter and expects that the price and mix improvement from the second price increase will be divided between the third and fourth quarters.

Freight rates increased significantly during the second quarter primarily as a result of higher diesel fuel prices and recycled fiber prices have increased throughout the first half of the year.

Corrugated product shipments were up 24.3% per day and in total compared to the second quarter of 2025.

Shipments from the legacy PCA business were up 4.1% per day and in total compared to the second quarter of 2025.

Containerboard production in the second quarter of 2026 was approximately 1,415,000 tons, and containerboard inventory was down (5.3%) compared to the first quarter, and up 9.9% compared to the second quarter of 2025, primarily due to the acquisition.

Paper segment operating income was $34 million in the second quarter of 2026, compared to $26 million in the second quarter of 2025.

Paper segment EBITDA excluding special items was $39 million in the second quarter of 2026, compared to $30 million in the second quarter of 2025.

1 The increase in EBITDA excluding special items was primarily due to lower maintenance outage expense in 2026 due to the timing of annual maintenance outages, higher sales and production volume, and higher prices and mix, partially offset by higher freight and operating costs, with freight rates rising significantly during the quarter.

Packaging segment operating income was $574 million in the first six months of 2026, compared to $624 million in the same period in 2025.

Packaging segment EBITDA excluding special items was $970 million in the first six months of 2026 compared to $862 million in the first six months of 2025.

1 The increase in EBITDA excluding special items was driven by contribution from the acquired business and higher sales and production volume in the legacy business, lower fiber costs, higher prices and mix, and lower maintenance outage expense, partially offset by higher freight and logistics expense, higher fixed and other costs, and higher operating and converting costs with the addition of the acquired business.

Paper segment operating income was $67 million in the first six months of 2026, compared to $61 million in the first six months of 2025.

Paper segment EBITDA excluding special items was $77 million in the first six months of 2026, compared to $71 million in the first six months of 2025.

1 The increase in EBITDA excluding special items was due to lower maintenance outage expense, higher sales and production volume, and higher prices and mix, partially offset by higher operating costs and higher freight and logistics expense.

Industry and Business Conditions

Trade publications reported North American industry-wide corrugated products shipments were down (1.9%) in total and (0.3%) per workday during the first quarter of 2026 compared to the same quarter of 2025.

Reported industry containerboard production decreased (8.3%) compared to the first quarter of 2025.

Reported industry containerboard inventories at the end of the first quarter of 2026 were approximately 2.62 million tons, down (5.5%) compared to the same period in 2025.

Reported containerboard export shipments were down (28.2%) compared to the first quarter of 2025.

Reported index prices increased a net $20 per ton for linerboard and for corrugating medium during the first quarter of 2026 and an additional $30 per ton in April 2026.

Trade publications reported North American industry-wide corrugated products shipments were up 0.9% in total and per workday during the second quarter of 2026 compared to the same quarter of 2025.

Reported industry containerboard production decreased (2.3%) compared to the second quarter of 2025.

Reported industry containerboard inventories at the end of the second quarter of 2026 were approximately 2.40 million tons, down (12.5%) compared to the same period in 2025.

Reported containerboard export shipments were down (27.3%) compared to the second quarter of 2025.

Reported containerboard prices increased a net $20 per ton for linerboard and for corrugating medium during the first quarter of 2026, an additional $30 per ton in April 2026 and an additional $50 per ton in June 2026.

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 down (8.8%) in the first quarter of 2026, compared to the same period of 2025.

Average prices reported by a trade publication for cut size office papers were higher by $20 per ton, or 1.3%, in the first quarter of 2026, compared to the fourth quarter of 2025, and higher by $40 per ton, or 2.7%, compared to the first quarter of 2025.

Reported index prices increased $60 per ton for cut size office papers and for offset printing papers in March 2026.

We expect demand in the Packaging segment to remain strong and corrugated volume to increase with one more shipping day and some seasonal improvement in the second quarter compared to the first quarter.

Prices for containerboard and corrugated products will move higher with the implementation of our previously announced price increases and improved corrugated mix.

Packaging mill production will be slightly higher with one more operating day and production improvements at some of the mills more than offsetting the impact of maintenance outages at five Packaging mills during the second quarter.

Mill maintenance outage expenses will be higher with more Packaging mills taking outages than in the first quarter.

We expect flat volume and higher prices in the Paper segment as we continue to operate at full capacity and implement our previously announced paper price increases.

Costs for freight, fiber and chemicals will be up due to higher prices and energy costs are expected to be seasonally lower with warmer weather in the second quarter.

The sequential improvement in expenses for wages and benefits that we normally experience from first quarter to second quarter will be less than in past years due to higher expected stock compensation expenses and benefits costs in the second quarter.

Finally, our tax rate will be higher in the second quarter due to the tax-related benefit of share-based compensation awards that vested in the first quarter.

Considering these items, we expect second quarter earnings to be lower than the first quarter of 2026, excluding special items.

Trade publications reported North American UFS paper shipments were down (9.1%) in the first six months of 2026, compared to the same period of 2025.

Average prices reported by a trade publication for cut size office papers were higher by $87 per ton, or 5.8%, in the second quarter of 2026, compared to the first quarter of 2026, and higher by $107 per ton, or 7.2%, compared to the second quarter of 2025.

Reported index prices increased $60 per ton in March 2026, $40 per ton in April 2026 and $20 per ton in June 2026 for cut size office papers and for offset printing papers.

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.

We expect continued strong demand in the Packaging segment and corrugated products volume to increase with one more shipping day in the third quarter of 2026 compared to the second quarter.

We expect continued Packaging segment price and mix improvement in the third quarter as we complete the implementation of the first price increase and begin to implement the second price increase to corrugated products customers.

Packaging mill production will be higher with one more operating day and lower impact to production from maintenance outages with fewer mills having annual outages as well as expected improved operating performance in our containerboard mill system.

Mill maintenance outage expenses will be lower in total and in the Packaging segment and higher in the Paper segment with our single Paper segment mill having its maintenance outage in the third quarter.

We expect lower volume and higher prices in the Paper segment as a result of the maintenance outage and the continued implementation of our previously announced paper price increases.

We expect costs for freight to remain at or around the elevated levels we experienced later in the second quarter and higher on average for the third quarter.

We expect prices for recycled fiber to continue to increase and higher mill production will drive increased usage and higher costs.

Costs for chemicals and purchased electricity will be higher and will remain relatively flat for wood fiber and natural gas.

We expect improvement in benefits costs due to second quarter unfavorability that is not expected to repeat in the third quarter.

Considering these items, we expect third quarter earnings to be higher than the second quarter of 2026, excluding special items.

Results of Operations

Three Months Ended March 31, 2026, compared to Three Months Ended March 31, 2025

The historical results of operations of PCA for the three months ended March 31, 2026 and 2025 are set forth below (dollars in millions):

Three Months Ended June 30, 2026, compared to Three Months Ended June 30, 2025

The historical results of operations of PCA for the three months ended June 30, 2026 and 2025 are set forth below (dollars in millions):

Three Months Ended

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(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 $227 million, or 10.6%, to $2,368 million during the three months ended March 31, 2026, compared to $2,141 million during the same period in 2025.

Net sales increased $218 million, or 11.1%, to $2,189 million, compared to $1,970 million in the first quarter of 2025 due to higher volume related to the acquired business ($224 million) and higher containerboard and corrugated products prices and mix ($18 million), partially offset by lower legacy volume ($24 million).

In the first quarter of 2026, export and domestic containerboard outside shipments decreased (15.8%) compared to the first quarter of 2025.

Our total corrugated products shipments from the legacy PCA business were up 2.8% per day and up 1.2% overall, compared to the same period in 2025.

Including the acquired business, shipments were up 21.8% per day and 19.9% in total.

In the first quarter of 2026, our domestic containerboard prices were 2.6% higher, while export prices were flat compared to the same period in 2025.

Net sales increased $6 million, or 3.7%, to $160 million, compared to $154 million in the first quarter of 2025, due to higher volumes ($4 million) and higher prices and mix ($2 million).

Gross profit decreased $2 million during the three months ended March 31, 2026, compared to the same period in 2025.

The decrease was driven primarily by higher operating costs, and higher freight expense, largely offset by higher volumes and higher prices and mix in the Packaging and Paper segments, lower fiber costs, and lower maintenance outage expense.

In the three months ended March 31, 2026, gross profit included $51 million of special items expense related to Wallula mill restructuring.

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.

Net sales increased $319 million, or 14.7%, to $2,490 million during the three months ended June 30, 2026, compared to $2,171 million during the same period in 2025.

Net sales increased $305 million, or 15.2%, to $2,311 million, compared to $2,006 million in the second quarter of 2025 due to higher volume related to the acquired business ($258 million) and higher legacy volume ($58 million), partially offset by lower containerboard and corrugated products prices and mix ($11 million).

In the second quarter of 2026, export and domestic containerboard outside shipments decreased (19.0%) compared to the second quarter of 2025, with more containerboard being integrated into PCA’s corrugated products system.

Our total corrugated products shipments were up 24.3% per day and in total, compared to the same period in 2025.

Shipments from the legacy PCA business were up 4.1% per day and in total.

In the second quarter of 2026, our domestic containerboard prices were 3.2% higher, while export prices were 1.8% higher compared to the same period in 2025.

Net sales increased $11 million, or 7.9%, to $157 million, compared to $146 million in the second quarter of 2025, due to higher volumes ($9 million) and higher prices and mix ($2 million).

Gross profit increased $30 million during the three months ended June 30, 2026, compared to the same period in 2025.

The increase was driven primarily by higher volumes in the Packaging and Paper segments, lower maintenance outage expense, and higher prices and mix in the Paper segment, partially offset by higher freight expense, lower prices and mix in the Packaging segment, higher operating costs, and higher fixed and other costs.

In the three months ended June 30, 2026, gross profit included $5 million of special items expense related to corrugated products facility closures, compared to $1 million in the three months ended June 30, 2025 related to corrugated products facility closures.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased $19 million during the three months ended March 31, 2026, compared to the same period in 2025.

The increase was primarily due to higher depreciation related to the acquired business, higher employee-related expenses, information technology expenses, and insurance costs.

Selling, general, and administrative expenses (“SG&A”) increased $26 million during the three months ended June 30, 2026, compared to the same period in 2025.

The increase was primarily due to higher employee-related expenses, higher depreciation related to the acquired business, and higher information technology and outside service expenses.

Other Income (Expense), Net

Other income (expense), net, for the three months ended March 31, 2026 and 2025 are set forth below (dollars in millions):

Other income (expense), net, for the three months ended June 30, 2026 and 2025 are set forth below (dollars in millions):

Three Months Ended

Asset disposals and write-offs

Facilities closure and other costs

Facilities closure and other (costs) income

Acquisition and integration-related costs

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Income from Operations

Income from operations decreased $29 million, or (10.3%), during the three months ended March 31, 2026 compared to the same period in 2025.

The first quarter of 2026 included $60 million of special items expense related to Wallula mill restructuring, recent acquisitions and corrugated facility closures, compared to $6 million of special items expense related to corrugated products facilities closure costs in the first quarter of 2025.

Packaging segment operating income decreased $18 million to $260 million, compared to $278 million during the three months ended March 31, 2025.

The decrease related primarily to $56 million of special item expense related to the Wallula mill restructuring and corrugated facility closures, compared to $6 million of special items expense related to corrugated products facility costs in the first quarter of 2025.

Income from operations decreased $43 million, or (12.7%), during the three months ended June 30, 2026 compared to the same period in 2025.

The second quarter of 2026 included $24 million of special items expense related to corrugated facility closures, Wallula mill restructuring, and recent acquisitions, compared to $23 million of special items income related to gains on sales of corrugated products facilities, partially offset by corrugated products facility closure costs and costs related to the Greif acquisition in the second quarter of 2025.

Packaging segment operating income decreased $33 million to $313 million, compared to $346 million during the three months ended June 30, 2025.

The decrease related primarily to $15 million of special items expense related to the Wallula mill restructuring and corrugated facility closures, compared to $25 million of special items income primarily related to gains on sales of corrugated products facilities, partially offset by corrugated products facility closure costs in the second quarter of 2025.

Excluding special items, operating income increased $6 million compared to the same period last year.

The increase was driven primarily by higher containerboard and corrugated products prices and mix ($21 million), lower fiber costs ($13 million), the impact of newly acquired Greif operations ($12 million), lower maintenance outage expenses ($10 million), lower labor and operating costs ($7 million), and lower other expenses ($3 million), partially offset by higher freight expenses ($14 million), lower sales and production volumes ($13 million), higher depreciation expense ($6 million).

Paper segment operating income decreased $3 million to $33 million, compared to $36 million during the three months ended March 31, 2025.

The decrease primarily related to higher operating costs ($4 million), and higher freight expenses ($1 million), partially offset by higher prices and mix ($2 million) and higher sales and production volumes ($1 million).

There were no significant special items in the first quarter of 2026 or 2025.

The increase was driven primarily by the impact of newly acquired Greif operations ($36 million) and higher sales and production volume ($31 million), partially offset by higher freight expenses ($28 million), lower containerboard and corrugated products prices and mix ($14 million), higher fixed and other expenses ($8 million), higher maintenance outage expenses ($5 million), higher depreciation expense ($2 million), higher fiber costs ($2 million), and higher labor and operating costs ($1 million).

Paper segment operating income increased $8 million to $34 million, compared to $26 million during the three months ended June 30, 2025.

The increase primarily related to lower maintenance outage expenses ($9 million), higher sales and production volume ($3 million), and higher prices and mix ($2 million), partially offset by higher freight expenses ($3 million), and higher operating costs ($2 million).

There were no significant special items in the second quarter of 2026 or 2025.

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

Non-operating pension income increased $1 million during the three months ended March 31, 2026, compared to the same period in 2025.

Non-operating pension income increased $1 million during the three months ended June 30, 2026, compared to the same period in 2025.

The increase in non-operating pension income was related to favorable 2025 asset performance and favorable assumption changes.

Interest expense, net for the three months ended March 31, 2026 increased $20 million when compared to the same period in 2025.

Interest expense, net for the three months ended June 30, 2026 increased $20 million when compared to the same period in 2025.

The increase in interest expense, net was primarily due to higher interest expense in 2026 as a result of the Company’s financing for the Greif Acquisition and lower interest income as a result of lower interest rates on lower cash balances.

During the three months ended March 31, 2026, we recorded $49 million of income tax expense, compared to $64 million of expense during the three months ended March 31, 2025.

The effective tax rate for the three months ended March 31, 2026 and 2025 was 22.2% and 23.8%, respectively.

The decrease in our effective tax rate for the three months ended March 31, 2026 compared to the same period in 2025 was primarily due to higher excess tax benefits associated with employee restricted stock and performance unit vests partially offset by higher nondeductible employee remuneration paid to covered employees.

During the three months ended June 30, 2026, we recorded $67 million of income tax expense, compared to $79 million of expense during the three months ended June 30, 2025.

The effective tax rate for the three months ended June 30, 2026 and 2025 was 25.8% and 24.7%, respectively.

The increase in our effective tax rate for the three months ended June 30, 2026 compared to the same period in 2025 was primarily due to lower excess tax benefits associated with employee restricted stock and performance unit vests and higher non-deductible employee remuneration paid to covered employees partially offset by favorable state law changes.

Six Months Ended June 30, 2026, compared to Six Months Ended June 30, 2025

The historical results of operations of PCA for the six months ended June 30, 2026 and 2025 are set forth below (dollars in millions):

Six Months Ended

Corporate and Other

Intersegment eliminations

Corporate and Other

Income from operations

Non-operating pension income

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 $546 million, or 12.7%, to $4,858 million during the six months ended June 30, 2026, compared to $4,312 million during the same period in 2025.

Net sales increased $524 million, or 13.2%, to $4,500 million, compared to $3,976 million in the six months ended June 30, 2025, due to higher volume related to the acquired business ($483 million), higher legacy volumes ($34 million), and higher containerboard and corrugated products prices and mix ($7 million).

In the first six months of 2026, export and domestic containerboard outside shipments decreased (17.3%) compared to the first six months of 2025, with more containerboard being integrated into PCA’s corrugated products system.

Our total corrugated products shipments were up 23.1% per day and 22.1% in total, compared to the same period in 2025.

Shipments from the legacy PCA business were up 3.5% per day and up 2.7% in total.

In the first six months of 2026, our domestic containerboard prices were 3.0% higher, while export prices were 0.5% higher compared to the same period in 2025.

Net sales during the six months ended June 30, 2026 increased $17 million, or 5.7%, to $317 million, compared to $300 million in the six months ended June 30, 2025, due to higher volume ($13 million) and higher prices and mix ($4 million).

Gross profit increased $28 million during the six months ended June 30, 2026, compared to the same period in 2025.

The increase was driven primarily by higher volumes and higher prices and mix in the Packaging and Paper segments, lower maintenance outage expense and lower fiber costs, partially offset by higher freight expense, higher operating costs, and higher fixed and other costs.

In the six months ended June 30, 2026, gross

profit included $56 million of special items expense related to Wallula mill restructuring and corrugated products facility closures.

In the six months ended June 30, 2025, gross profit included $4 million of special items expense related to corrugated products facility closures.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased $45 million during the six months ended June 30, 2026, compared to the same period in 2025.

The increase was primarily due to higher depreciation related to the acquired business and higher employee-related expenses.

Other Income (Expense), Net

Other income (expense), net, for the six months ended June 30, 2026 and 2025 are set forth below (dollars in millions):

Six Months Ended

Asset disposals and write-offs

Facilities closure and other (costs) income

Acquisition and integration-related costs

Wallula mill restructuring

We discuss these items in more detail in Note 6, 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 $72 million, or (11.6%), during the six months ended June 30, 2026 compared to the same period in 2025.

The first six months of 2026 included $83 million of special items expense related to Wallula mill restructuring, corrugated products facility closures, and recent acquisitions, compared to $17 million of special items income primarily related to gains on sales of corrugated products facilities, partially offset by corrugated products facility closure costs and costs related to the Greif acquisition in the same period in 2025.

Packaging segment operating income decreased $51 million to $574 million during the six months ended June 30, 2026, compared to the same period in 2025.

The decrease related primarily to $71 million of special items expense related to the Wallula mill restructuring and corrugated products facility closures, compared to $19 million of special items income primarily related to gains on sales of corrugated products facilities, partially offset by corrugated products facility closure costs in the same period in 2025.

Excluding special items, operating income increased $39 million compared to the same period last year.

The increase was driven primarily by the impact of newly acquired Greif operations ($48 million), higher containerboard and corrugated products prices and mix ($18 million), lower fiber costs ($11 million), lower labor and operating costs ($8 million), higher sales and production volume ($7 million), and lower maintenance outage expenses ($5 million), partially offset by higher freight expenses ($42 million), higher depreciation expense ($8 million) and higher fixed and other expenses ($7 million).

Paper segment operating income increased $6 million to $67 million during the six months ended June 30, 2026, compared to the same period in 2025.

The increase primarily related to lower maintenance outage expenses ($9 million), higher prices and mix ($4 million) and higher sales and production volume ($4 million), partially offset by higher operating costs ($6 million) and higher freight expenses ($4 million).

There were no significant special items in the first six months of 2026 or 2025.

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

Non-operating pension income increased $2 million during the six months ended June 30, 2026, compared to the same period in 2025.

The increase in non-operating pension income was related to favorable 2025 asset performance and favorable assumption changes.

Interest expense, net for the six months ended June 30, 2026 increased $40 million when compared to the same period in 2025.

During the six months ended June 30, 2026, we recorded $116 million of income tax expense, compared to $143 million of expense during the six months ended June 30, 2025.

The effective tax rate for the six months ended June 30, 2026 and 2025 was 24.2% and 24.3%, respectively.

The decrease in our effective tax rate for the six months ended June 30, 2026 compared to the same period in 2025 was primarily due to higher excess tax benefits associated with employee restricted stock and performance unit vests and favorable state law changes partially offset by higher non-deductible employee remuneration paid to covered employees.

Liquidity and Capital Resources

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

At March 31, 2026, we had $397 million of cash and cash equivalents, $218 million of marketable debt securities and other, and $573 million of unused borrowing capacity under the revolving credit facility, net of letters of credit.

At June 30, 2026, we had $443 million of cash and cash equivalents, $224 million of marketable debt securities and other, and $573 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.

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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):

Three Months Ended

Six Months Ended

Net cash provided by (used for):

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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 three months ended March 31, 2026, net cash provided by operating activities was $329 million, compared to $339 million in the same period in 2025, a decrease of $10 million.

Cash from operations excluding changes in cash used for operating assets and liabilities increased $58 million primarily due to the Greif Acquisition.

Cash from operations decreased by $68 million when comparing the first three months of 2026 to the same period in 2025 due to changes in operating assets and liabilities primarily due to the following:

a) a net unfavorable change in accounts receivable due to a larger increase in Packaging segment accounts receivable levels during 2026 primarily related to higher sales volumes in 2026 when compared to 2025 and a larger increase in Corporate accounts receivable levels in 2026 compared to 2025;

b) a net unfavorable change in prepaid expenses and other current assets primarily related to the reduction of receivables against insurance carriers during 2025 related to the settlement of litigation, partially offset by a favorable change in prepaid expenses related to the timing and magnitude of the annual mill shutdowns during the first quarter of 2026 compared to the same period in 2025;

c) a net unfavorable change in income taxes resulting from a smaller decrease in income tax receivable amounts in the first quarter of 2026 compared to the first quarter of 2025.

During the six months ended June 30, 2026, net cash provided by operating activities was $705 million, compared to $639 million in the same period in 2025, an increase of $66 million.

Cash from operations excluding changes in cash used for operating assets and liabilities increased $96 million due to higher net income adjusted for depreciation, depletion and amortization of intangibles and losses on asset disposals in 2026, and higher deferred income tax liabilities in 2026.

Cash from operations decreased by $30 million when comparing the first six months of 2026 to the same period in 2025 due to changes in operating assets and liabilities primarily due to the following:

a) a net unfavorable change in accounts receivable due to a larger increase in accounts receivable levels during the first six months of 2026 compared to the same period in 2025 primarily due to higher sales volumes in 2026 when compared to 2025, and an increase in days sales outstanding arising out of the ordinary course of business;

b) a net unfavorable change in prepaid expenses and other current assets during the first six months of 2026 compared to the same period in 2025 primarily related to the reduction of receivables against insurance carriers during 2025 related to the settlement of litigation.

These unfavorable changes were partially offset by the following:

d) a net favorable change in accrued liabilities primarily related to the reduction of accrued liabilities in 2025 due to the settlement of litigation and an increase in compensation and benefits liabilities during the first quarter of 2026 compared to the same period in 2025;

e) a net favorable change in accounts payable primarily related to a larger increase in accounts payable levels during the first quarter of 2026 compared to the first quarter of 2025, partially offset by an unfavorable change related to the timing of payments.

c) a net favorable change in accrued liabilities during the first six months of 2026 compared to the same period in 2025 primarily due to the settlement of litigation and a decrease in accrued liabilities related to Wallula mill restructuring activities during the first six months of 2026;

d) a net favorable change in accounts payable primarily related to an increase in accounts payables levels during the first six months of 2026 compared to the same period in 2025, partially offset by an unfavorable change related to the timing of payments.

Investing Activities

We used $261 million for investing activities during the three months ended March 31, 2026 compared to $144 million during the same period in 2025.

We spent $165 million for internal capital investments during the three months ended March 31, 2026, compared to $148 million during the same period in 2025.

We completed an acquisition in the Packaging segment during the first quarter of 2026 for $15 million, including working capital adjustments.

We used $478 million for investing activities during the six months ended June 30, 2026 compared to $287 million during the same period in 2025.

We spent $371 million for internal capital investments during the six months ended June 30, 2026, compared to $318 million during the same period in 2025.

We completed acquisitions in the Packaging segment during the first six months ended June 30, 2026 for $21 million, including working capital adjustments.

In March 2026, we used $50 million of cash on hand to invest in a time deposit.

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Financing Activities

During the three months ended March 31, 2026, net cash used for financing activities was $200 million, compared to $128 million of net cash used for financing activities during the same period in 2025.

We paid $112 million of dividends during the first three months of both 2026 and 2025.

In addition, we withheld shares to cover $29 million of employee restricted stock taxes during the first three months of 2026 compared to $15 million of employee restricted stock taxes withheld during the same period in 2025.

We repurchased and retired 0.3 million shares of the Company’s common stock for $59 million during the first three months of 2026.

During the six months ended June 30, 2026, net cash used for financing activities was $314 million, compared to $249 million during the same period in 2025.

We paid $223 million of dividends during the first six months of 2026, compared to $225 million of dividends paid during the comparable period in 2025.

In addition, we withheld shares to cover $30 million of employee restricted stock taxes during the first six months of 2026 compared to $23 million of employee restricted stock taxes withheld during the same period in 2025.

We repurchased and retired 0.3 million shares of the Company’s common stock for $59 million during the first six months of 2026.

We did not have any repurchases and retirements of the Company’s common stock during the same period in 2025.

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Reconciliations of the non-GAAP measures to the most comparable measure reported in accordance with GAAP are detailed below.

The following table reconciles earnings per diluted share to earnings per diluted share excluding special items for the periods indicated (dollars in millions):

The following table reconciles earnings per diluted share to earnings per diluted share excluding special items for the periods indicated:

Three Months Ended

Six Months Ended

Earnings per diluted share, as reported in accordance with GAAP

Special items:

Facilities closure and other costs (a)

Wallula mill restructuring (b)

Acquisition and integration-related costs (c)

Facilities closure and other costs (income) (a)

Acquisition and integration-related costs (b)

Wallula mill restructuring (c)

Total special items

Earnings per diluted share, excluding special items

(a) For the three months ended March 31, 2026 and March 31, 2025, includes $2.9 million and $5.9 million, respectively, of charges consisting of closure costs related to corrugated products facilities.

(b) Includes $53.3 million of charges related to the announced discontinuation of the No.

(a) For the three and six months ended June 30, 2026, includes $14.1 million and $17.0 million, respectively, of charges consisting of closure costs related to corrugated products facilities and the write-off of expenditures related to sustainability and renewable energy projects.

The write-off of expenditures related to sustainability and renewable energy projects was recorded following the Company’s decision to defer a specific carbon capture initiative at this time.

For the three and six months ended June 30, 2025, includes $24.6 million and $18.8 million, respectively, of income related to gains on sales of corrugated products facilities, partially offset by closure costs related to corrugated products facilities.

(b) For the three and six months ended June 30, 2026, includes $3.3 million and $6.7 million, respectively, of charges for acquisition and integration costs related to recent acquisitions.

For the three and six months ended June 30, 2025, includes $1.6 million of charges related to the Greif Acquisition.

(c) For the three and six months ended June 30, 2026, includes $6.3 million and $59.7 million, respectively, of charges related to the announced discontinuation of the No.

2 machine and kraft pulping facilities at the Wallula, Washington mill.

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

Three Months Ended March 31,

Three Months Ended June 30,

As reported in accordance with GAAP

Special items:

Facilities closure and other costs (d)

Wallula mill restructuring (e)

Acquisition and integration-related costs (f)

Facilities closure and other costs (income) (d)

Acquisition and integration-related costs (e)

Wallula mill restructuring (f)

Total special items

Excluding special items

(d) Includes charges consisting of closure costs related to corrugated products facilities.

(e) Includes charges related to the announced discontinuation of the No.

Six Months Ended June 30,

As reported in accordance with GAAP

Special items:

Facilities closure and other costs (income) (d)

Acquisition and integration-related costs (e)

Wallula mill restructuring (f)

Total special items

Excluding special items

(d) For the three and six months ended June 30, 2026, includes charges consisting of closure costs related to corrugated products facilities and the write-off of expenditures related to sustainability and renewable energy projects.

The write-off of expenditures related to sustainability and renewable energy projects was recorded following the Company’s decision to defer a specific carbon capture initiative at this time.

For the three and six months ended June 30, 2025, includes income related to gains on sales of corrugated products facilities, partially offset by closure costs related to corrugated products facilities.

(e) For the three and six months ended June 30, 2026, includes acquisition and integration costs related to recent acquisitions.

For the three and six months ended June 30, 2025, includes charges related to the Greif Acquisition.

(f) For the three and six months ended June 30, 2026, includes charges related to the announced discontinuation of the No.

2 machine and kraft pulping facilities at the Wallula, Washington mill.

(f) Includes acquisition and integration costs related to recent acquisitions.

The following table reconciles net income to EBITDA and EBITDA excluding special items for the periods indicated (dollars in millions):

Three Months Ended

Six Months Ended

Non-operating pension income

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Special items:

Facilities closure and other costs

Facilities closure and other costs (income)

Acquisition and integration-related costs

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Three Months Ended

Six Months Ended

Segment operating income

Depreciation, amortization, and depletion

Facilities closure and other costs

Facilities closure and other costs (income)

Wallula mill restructuring

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Depreciation, amortization, and depletion

Facilities closure and other costs

Acquisition and integration-related costs

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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 March 31, 2026, we are party to certain physical commodity transactions related to natural gas supply contracts.

As of June 30, 2026, 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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Off-Balance-Sheet Activities

The Company does not have any off-balance sheet arrangements as of March 31, 2026.

The Company does not have any off-balance sheet arrangements as of June 30, 2026.

Environmental Matters

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PCA has included in its 2025 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 three months of 2026.

PCA has not had any changes to these critical accounting estimates during the first six months of 2026.

New and Recently Adopted Accounting Standards

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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