Q2 2026 Packaging Corp of America Earnings Call

July 23, 2026

Speaker #1: Thank you for joining Packaging Corporation of America's second quarter, 2026 earnings results conference call. Your host today will be Mark Kowlzan. Chairman and Chief Executive Officer of PCA.

Operator: Thank you for joining Packaging Corporation of America's Q2 2026 Earnings Results Conference Call. Your host today will be Mark Kowlzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a Q&A session. I would now like to turn the floor over to Mr. Kowlzan. Please proceed when you are ready.

Speaker #1: Upon conclusion of his narrative, there will be a Q&A session. I would now like to turn the floor over to Mr. Kowlzan. Please proceed when you are ready.

Speaker #2: Thank you, Jamie. And good morning, everyone, and thank you all for participating in Packaging Corporation of America's second quarter, 2026 earnings release conference call.

Mark W. Kowlzan: Thanks, Jamie. Good morning, everyone, and thank you all for participating in Packaging Corporation of America's Q2 2026 Earnings Release Conference Call. Again, I'm Mark Kowlzan, Chairman and CEO of Packaging Corporation of America. With me on the call today is Tom Hassfurther, President, and Kent Pflederer, our Chief Financial Officer. I'll begin the call as usual with an overview of our Q2 results. I'll be turning the call over to Tom and Kent, who'll provide further details. I'll then wrap things up. We'll be glad to take questions. Yesterday, we reported Q2 net income of $192 million, or $2.15 per share. Excluding special items, the Q2 2026 net income was $210 million, or $2.35 per share, compared to the Q2 2025's net income of $224 million, or $2.48 per share.

Mark Kowlzan: Thanks, Jamie. Good morning, everyone, and thank you all for participating in Packaging Corporation of America's Q2 2026 Earnings Release Conference Call. Again, I'm Mark Kowlzan, Chairman and CEO of Packaging Corporation of America. With me on the call today is Tom Hassfurther, President, and Kent Pflederer, our Chief Financial Officer. I'll begin the call as usual with an overview of our Q2 results. I'll be turning the call over to Tom and Kent, who'll provide further details. I'll then wrap things up. We'll be glad to take questions. Yesterday, we reported Q2 net income of $192 million, or $2.15 per share. Excluding special items, the Q2 2026 net income was $210 million, or $2.35 per share, compared to the Q2 2025's net income of $224 million, or $2.48 per share.

Speaker #2: Again, I'm Mark Kowlzan, Chairman and CEO of Packaging Corporation of America, and with me on the call today is Tom Hassfurther, President and Kent Pflederer, our Chief Financial Officer.

Speaker #2: I'll begin the call as usual with an overview of our second quarter results, and then I'll be turning the call over to Tom and Kent who will provide further details.

Speaker #2: I'll then wrap things up, and then we'll be glad to take questions. Yesterday, we reported second quarter net income of $192 million or $2.15 per share.

Speaker #2: Excluding special items, the second quarter 2026 net income was $210 million or $2.35 per share compared to the second quarter of 2025's net income of $224 million or $2.48 per share.

Speaker #2: Second quarter net sales were $2.5 billion in 2026 and $2.2 billion in 2025. Total company EBITDA for the second quarter, excluding special items, was $486 million in 2026 and $451 million in 2025.

Mark W. Kowlzan: Q2 net sales were $2.5 billion in 2026 and $2.2 billion in 2025. Total company EBITDA for the Q2, excluding special items, was $486 million in 2026 and $451 million in 2025. Q2 net income included special items expense of $0.20 per share, primarily for costs and write-offs related to facilities closures, the Wallula Mill restructuring charges, and costs related to the acquisition and integration of the Greif containerboard business. Details of the special items for the Q2 2026 and 2025 were included in the schedules that accompanied the press release. Excluding the special items, our earnings decreased by $0.13 per share compared to the Q2 2025, resulting from a $0.27 decrease in legacy business earnings, partially offset by $0.14 of earnings from the acquired Greif business.

Mark Kowlzan: Q2 net sales were $2.5 billion in 2026 and $2.2 billion in 2025. Total company EBITDA for the Q2, excluding special items, was $486 million in 2026 and $451 million in 2025. Q2 net income included special items expense of $0.20 per share, primarily for costs and write-offs related to facilities closures, the Wallula Mill restructuring charges, and costs related to the acquisition and integration of the Greif containerboard business. Details of the special items for the Q2 2026 and 2025 were included in the schedules that accompanied the press release. Excluding the special items, our earnings decreased by $0.13 per share compared to the Q2 2025, resulting from a $0.27 decrease in legacy business earnings, partially offset by $0.14 of earnings from the acquired Greif business.

Speaker #2: Second quarter net income, including special items expense, was $0.20 per share, primarily for costs and write-offs related to facilities closures, the Wilula Mill restructuring charges, and costs related to the acquisition and integration of the Greif containerboard business.

Speaker #2: Details of the special items for the second quarter of 2026 and 2025 were included in the schedules that accompanied the press release. Excluding the special items, our earnings decreased by $0.13 per share compared to the second quarter of 2025, resulting from a $0.27 decrease in legacy business earnings, partially offset by $0.14 of earnings from the acquired Greif business.

Speaker #2: The decrease in the legacy earnings was driven primarily by higher freight costs of $26, higher corporate and other expenses of $0.12, lower price in mix in the packaging business of $0.11, higher labor and operating costs of $0.05, higher depreciation and amortization expenses of $0.03, higher fiber costs of $0.02, higher tax rates of $0.02, and higher interest expense, excluding the Greif acquisition indebtedness for $0.01.

Mark W. Kowlzan: The decrease in the legacy earnings was driven primarily by higher freight costs of $0.26, higher corporate and other expenses, $0.12, lower price and mix in the packaging business, $0.11, higher labor and operating costs, $0.05, higher depreciation and amortization expenses, $0.03, higher fiber costs, $0.02, higher tax rates, $0.02, and higher interest expense, excluding the Greif acquisition indebtedness for $0.01. These items were partially offset by higher production and sales volume in the packaging business for $0.26, lower maintenance outage expense, $0.04, higher production and sales volume in the paper business for $0.03, and higher price and mix in the paper business, $0.02.

Mark Kowlzan: The decrease in the legacy earnings was driven primarily by higher freight costs of $0.26, higher corporate and other expenses, $0.12, lower price and mix in the packaging business, $0.11, higher labor and operating costs, $0.05, higher depreciation and amortization expenses, $0.03, higher fiber costs, $0.02, higher tax rates, $0.02, and higher interest expense, excluding the Greif acquisition indebtedness for $0.01. These items were partially offset by higher production and sales volume in the packaging business for $0.26, lower maintenance outage expense, $0.04, higher production and sales volume in the paper business for $0.03, and higher price and mix in the paper business, $0.02.

Speaker #2: These items were partially offset by higher production and sales volume in the packaging business for $0.26, lower maintenance outage expense of $0.04, higher production and sales volume in the paper business for $0.03, and higher price and mix in the paper business of $0.02.

Speaker #2: Greif's earnings were driven by strong volumes in the corrugated business and improved operating performance in the mills, and included a $0.04 benefit to depreciation expense due to measurement period adjustments to the valuation of fixed assets on the opening balance sheet of the business.

Mark W. Kowlzan: Greif's earnings were driven by strong volumes in the corrugated business and improved operating performance in the mills and included a $0.04 benefit to depreciation expense due to measurement period adjustments to the valuation of fixed assets on the opening balance sheet of the business. We exceeded our guidance of $2.33 on the strength of our corrugated volumes, which helped drive cost favorability in areas that we could control and offset higher than forecast costs for freight, recycled fiber, and employee benefits. Greif's earnings contribution also exceeded our expectations. Looking at our packaging business, EBITDA, excluding special items in Q2 2026 of $489 million with sales of $2.3 billion, resulted in a margin of 21.1% versus last year's EBITDA of $453 million and sales of $2 billion, or a 22.6% margin. We produced 1,415,000 tons of containerboard during the quarter.

Mark Kowlzan: Greif's earnings were driven by strong volumes in the corrugated business and improved operating performance in the mills and included a $0.04 benefit to depreciation expense due to measurement period adjustments to the valuation of fixed assets on the opening balance sheet of the business. We exceeded our guidance of $2.33 on the strength of our corrugated volumes, which helped drive cost favorability in areas that we could control and offset higher than forecast costs for freight, recycled fiber, and employee benefits. Greif's earnings contribution also exceeded our expectations. Looking at our packaging business, EBITDA, excluding special items in Q2 2026 of $489 million with sales of $2.3 billion, resulted in a margin of 21.1% versus last year's EBITDA of $453 million and sales of $2 billion, or a 22.6% margin. We produced 1,415,000 tons of containerboard during the quarter.

Speaker #2: We exceeded our guidance of $2.33 on the strength of our corrugated volumes, which helped drive cost favorability in areas that we could control, and offset higher than forecast costs for freight, recycled benefits.

Speaker #2: Greif's earnings contribution also exceeded our expectations. Looking at our packaging business, EBITDA excluding special items in the second quarter of 2026 of $489 million with sales of $2.3 billion resulted in a margin of 21.1% versus last year's EBITDA of $453 million and sales of $2 billion or a 22.6% margin.

Speaker #2: We produced 1,415,000 tons of container board during the quarter. The legacy mills produced 1,209,000 tons of container board about even with the first quarter of 2026, and 14,000 tons more than the second quarter of 2025.

Mark W. Kowlzan: The legacy mills produced 1,209,000 tons of containerboard, about even with Q1 2026, and 14,000 tons more than Q2 2025. The acquired mills produced 206,000 tons during the quarter, significantly exceeding their production in any quarter since the acquisition. System-wide, our inventories were down 25,000 tons from the end of Q1. While we ended the quarter at a low number, we've been able to build some inventory early in July with many plants down for the holiday weekend to help get us near our target levels of inventory. With not as much outage impact in Q3, we'll be in a much stronger position to serve our customers in the very tight conditions that we're operating under.

Mark Kowlzan: The legacy mills produced 1,209,000 tons of containerboard, about even with Q1 2026, and 14,000 tons more than Q2 2025. The acquired mills produced 206,000 tons during the quarter, significantly exceeding their production in any quarter since the acquisition. System-wide, our inventories were down 25,000 tons from the end of Q1. While we ended the quarter at a low number, we've been able to build some inventory early in July with many plants down for the holiday weekend to help get us near our target levels of inventory. With not as much outage impact in Q3, we'll be in a much stronger position to serve our customers in the very tight conditions that we're operating under.

Speaker #2: The acquired mills produced 206,000 tons during the quarter. Significantly exceeding their production in any quarter since the acquisition. System-wide, our inventories were down 25,000 tons from the end of the first quarter.

Speaker #2: While we ended the quarter at a low number, we've been able to build some inventory early in July with many plants down for the holiday weekend to help get us near our target levels of inventory.

Speaker #2: With not as much outage impact in the third quarter, we'll be in a much stronger position to serve our customers and the very tight conditions that we're operating under.

Speaker #2: Operational performance was a mixed bag during the quarter, as we were hit with some production interruptions resulting from utility power outages across the mill system.

Mark W. Kowlzan: Operational performance was a mixed bag during the quarter, as we were hit with some production interruptions resulting from utility power outages across the mill system. This further emphasizes our need to execute and realize the benefits of the gas turbine projects, which will reduce, if not eliminate, our reliance on the grid at three key facilities. It is also a testament to the organization that we are able to work through and minimize the effects of these issues to achieve the production we achieved, given that we had completed outages at five of the packaging mills during the quarter. We managed costs very well in the areas we could control, particularly in the box plant system, to help offset the headwinds we faced from elevated freight and increased recycled fiber costs.

Mark Kowlzan: Operational performance was a mixed bag during the quarter, as we were hit with some production interruptions resulting from utility power outages across the mill system. This further emphasizes our need to execute and realize the benefits of the gas turbine projects, which will reduce, if not eliminate, our reliance on the grid at three key facilities. It is also a testament to the organization that we are able to work through and minimize the effects of these issues to achieve the production we achieved, given that we had completed outages at five of the packaging mills during the quarter. We managed costs very well in the areas we could control, particularly in the box plant system, to help offset the headwinds we faced from elevated freight and increased recycled fiber costs.

Speaker #2: This further emphasizes our need to execute and realize the benefits of the gas turbine projects, which will reduce, if not eliminate, our reliance on the grid at three key facilities.

Speaker #2: It is also a testament to the organization that we are able to work through and minimize the effects of these issues to achieve the production we achieved given that we had completed outages at five of the packaging mills during the quarter.

Speaker #2: We manage costs very well in the areas we could control, particularly in the box plant system, to help offset the headwinds we faced from elevated freight and increased recycled fiber costs.

Speaker #2: I'll now turn it over to Tom, who will provide further details on containerboard sales and the corrugated business in general.

Mark W. Kowlzan: I'll now turn it over to Tom, who'll provide further details on containerboard sales and the corrugated business in general.

Mark Kowlzan: I'll now turn it over to Tom, who'll provide further details on containerboard sales and the corrugated business in general.

Speaker #3: Thank you, Mark. Our corrugated operations turned in yet another very strong quarter in all areas. Domestic container board and corrugated products prices and mix were $0.11 per share below the second quarter of 2025 and up $0.04 per share compared to the first quarter of 2026, and in line with our forecast.

Thomas A. Hassfurther: Thank you, Mark. Our corrugated operations turned in yet another very strong quarter in all areas. Domestic containerboard and corrugated products prices and mix were $0.11 per share below Q2 2025 and up $0.04 per share compared to Q1 2026 and in line with our forecast. Corrugated prices were slightly below first quarter levels until we began to realize the first increase in June. We are seeing the majority of the first increase rolling in during July, and we'll see the beginning of the second increase in August, with realization split between Q3 and Q4. Export containerboard prices were $0.01 above last year's Q2 and $0.02 above Q1 2026.

Tom Hassfurther: Thank you, Mark. Our corrugated operations turned in yet another very strong quarter in all areas. Domestic containerboard and corrugated products prices and mix were $0.11 per share below Q2 2025 and up $0.04 per share compared to Q1 2026 and in line with our forecast. Corrugated prices were slightly below first quarter levels until we began to realize the first increase in June. We are seeing the majority of the first increase rolling in during July, and we'll see the beginning of the second increase in August, with realization split between Q3 and Q4. Export containerboard prices were $0.01 above last year's Q2 and $0.02 above Q1 2026.

Speaker #3: Corrugated prices were slightly below first quarter levels until we began to realize the first increase in June. We are seeing the majority of the first increase rolling in during July, and we'll see the beginning of the second increase in August, with realization split between Q3 and Q4.

Speaker #3: Export container board prices were $0.01 above last year's second quarter and $0.02 above the first quarter of 2026. Export sales volume of container board was $30,000 tons lower than the first quarter of 2026 and $22,000 tons lower than the second quarter of 2025, we decided mid-quarter to lower export sales to build inventory so we can supply our corrugated plants to efficiently serve our customers.

Thomas A. Hassfurther: Export sales volume of containerboard was 30,000 tons lower than Q1 2026 and 22,000 tons lower than Q2 2025. We decided mid-quarter to lower export sales to build inventory so we can supply our corrugated plants to efficiently serve our customers. As Mark alluded to earlier, we were able to meaningfully increase our inventories during the first week of July, which puts us in a good supply position for H2 with our mills running full out. Demand was very strong throughout the quarter across our entire customer base. Shipments were up over 24% in total and per day versus last year, with the legacy business up 4.1%, achieving an all-time record for total quarterly shipments.

Tom Hassfurther: Export sales volume of containerboard was 30,000 tons lower than Q1 2026 and 22,000 tons lower than Q2 2025. We decided mid-quarter to lower export sales to build inventory so we can supply our corrugated plants to efficiently serve our customers. As Mark alluded to earlier, we were able to meaningfully increase our inventories during the first week of July, which puts us in a good supply position for H2 with our mills running full out. Demand was very strong throughout the quarter across our entire customer base. Shipments were up over 24% in total and per day versus last year, with the legacy business up 4.1%, achieving an all-time record for total quarterly shipments.

Speaker #3: As Mark alluded to earlier, we were able to meaningfully increase our inventories during the first week of July which puts us in a good supply position for the back half of the year with our mills running full out.

Speaker #3: Demand was very strong throughout the quarter across our entire customer base. Shipments were up over 24% in total and per day versus last year with the legacy business up total quarterly shipments.

Speaker #3: The acquired corrugated business had an excellent quarter, driven by strong volumes in both the sheet feeder and bulk businesses, which drove its earnings contribution above our expectations.

Thomas A. Hassfurther: The acquired corrugated business had an excellent quarter, driven by strong volumes in both the sheet feeder and bulk businesses, which drove its earnings contribution above our expectations. We saw meaningful improvement of the integration level of containerboard produced by the acquired mills into the combined box plant system as well as from legacy PCA mills into the acquired corrugated operations. Given the volume, the box plants across the whole system had to step up and perform to satisfy our customers while costs were increasing, and they did just that. Our corrugated operations were favorable to forecast in almost all cost areas, which helped mitigate the freight hit we took during the quarter. We also optimized our production and ran the right orders in the right plants to maximize efficiency and margins. Our people demonstrated their unwavering commitment to our customers to deliver this outstanding performance.

Tom Hassfurther: The acquired corrugated business had an excellent quarter, driven by strong volumes in both the sheet feeder and bulk businesses, which drove its earnings contribution above our expectations. We saw meaningful improvement of the integration level of containerboard produced by the acquired mills into the combined box plant system as well as from legacy PCA mills into the acquired corrugated operations. Given the volume, the box plants across the whole system had to step up and perform to satisfy our customers while costs were increasing, and they did just that. Our corrugated operations were favorable to forecast in almost all cost areas, which helped mitigate the freight hit we took during the quarter. We also optimized our production and ran the right orders in the right plants to maximize efficiency and margins. Our people demonstrated their unwavering commitment to our customers to deliver this outstanding performance.

Speaker #3: We saw meaningful improvement in the integration level of containerboard produced by the acquired mills into the combined box plant system, as well as from legacy PCA mills into the acquired corrugated operations.

Speaker #3: Given the volume, the box plants across the whole system had to step up and perform to satisfy our customers while costs were increasing and they did just that.

Speaker #3: Our corrugated operations were favorable to forecast in almost all cost areas which helped mitigate the freight hit we took during the quarter. We also optimized our production and ran the right orders in the right plants to maximize efficiency and margins.

Speaker #3: Our people demonstrated their unwavering commitment to our customers to deliver this outstanding performance. Finally, I'm pleased to report that we successfully started up the new Ohio plant earlier this month, ahead of schedule.

Thomas A. Hassfurther: Finally, I'm pleased to report that we successfully started up the new Ohio plant earlier this month ahead of schedule. The state-of-the-art 550,000 square foot facility will further enhance our capabilities to serve and grow with our customer base in a very strategic area for us while improving our operational efficiency over the long term. I'll now turn it back to Mark.

Tom Hassfurther: Finally, I'm pleased to report that we successfully started up the new Ohio plant earlier this month ahead of schedule. The state-of-the-art 550,000 square foot facility will further enhance our capabilities to serve and grow with our customer base in a very strategic area for us while improving our operational efficiency over the long term. I'll now turn it back to Mark.

Speaker #3: The state-of-the-art 550,000 square foot facility will further enhance our capabilities to serve and grow with our customer base in a very strategic area for us while improving our operational efficiency over the long term.

Speaker #3: I'll now turn it back to Mark.

Speaker #2: Thank you, Tom. Looking at the paper segment, EBITDA excluding special items in the second quarter was $39 million, with sales of $157 million, or a 24.9% margin, compared to the second quarter of 2025's EBITDA of $30 million and sales of $146 million, or a 20.8% margin.

Mark W. Kowlzan: Thank you, Tom. Looking at the paper segment, EBITDA, excluding special items in Q2, was $39 million, with sales of $157 million, or a 24.9% margin compared to Q2 2025's EBITDA of $30 million and sales of $146 million, or a 20.8% margin. Note that the International Falls outage was in Q2 last year and will be in Q3 this year. Sales volume was approximately 3% below Q1 2026 and approximately 6% above Q2 2025. Prices and mix were up 2% from both Q1 2026 and Q2 2025. Another solid quarter from the paper business with strong margins. We're continuing to implement our previously announced price increases and expect to benefit in Q3. I'll now turn it over to Kent.

Mark Kowlzan: Thank you, Tom. Looking at the paper segment, EBITDA, excluding special items in Q2, was $39 million, with sales of $157 million, or a 24.9% margin compared to Q2 2025's EBITDA of $30 million and sales of $146 million, or a 20.8% margin. Note that the International Falls outage was in Q2 last year and will be in Q3 this year. Sales volume was approximately 3% below Q1 2026 and approximately 6% above Q2 2025. Prices and mix were up 2% from both Q1 2026 and Q2 2025. Another solid quarter from the paper business with strong margins. We're continuing to implement our previously announced price increases and expect to benefit in Q3. I'll now turn it over to Kent.

Speaker #2: Note that the international falls outage was in the second quarter of last year and will be in the third quarter this year. Sales volume was approximately 3% below the first quarter of 2026 and approximately 6% above the second quarter of 2025.

Speaker #2: Prices and mix were up 2% from both the first quarter of 2026 and the second quarter of 2025. So, another solid quarter from the paper business with strong margins.

Speaker #2: We're continuing to implement our previously announced price increases and expect to benefit in Q3. I'll now turn it over to Kent.

Speaker #4: Thanks, Mark. Cash provided by operations was $376 million and after $206 million of capex, free cash flow was $170 million. In addition to capex, the primary payments of cash during the quarter included dividend payments of $111 million, cash tax payments of $78 million, and net interest payments of $54 million.

Kent A. Pflederer: Thanks, Mark. Cash provided by operations was $376 million, and after $206 million of CapEx, free cash flow was $170 million. In addition to CapEx, the primary payments of cash during the quarter included dividend payments of $111 million, cash tax payments of $78 million and net interest payments of $54 million. We did not repurchase shares during the quarter. Excluding special items, our effective tax rate during Q2 was 25.7%. We expect the Q3 rate to be approximately 26%. We continue to forecast $840 to $870 million of CapEx, and excluding special items, around $710 million of D&A for the year. Our special items expense for the year through the end of Q2 included $56 million of depreciation expense associated primarily with the Wallula Mill restructuring. I'd now like to give you an update on the annual outage schedule and earnings impact for the year.

Kent Pflederer: Thanks, Mark. Cash provided by operations was $376 million, and after $206 million of CapEx, free cash flow was $170 million. In addition to CapEx, the primary payments of cash during the quarter included dividend payments of $111 million, cash tax payments of $78 million and net interest payments of $54 million. We did not repurchase shares during the quarter. Excluding special items, our effective tax rate during Q2 was 25.7%. We expect the Q3 rate to be approximately 26%. We continue to forecast $840 to $870 million of CapEx, and excluding special items, around $710 million of D&A for the year. Our special items expense for the year through the end of Q2 included $56 million of depreciation expense associated primarily with the Wallula Mill restructuring. I'd now like to give you an update on the annual outage schedule and earnings impact for the year.

Speaker #4: We did not repurchase shares during the quarter. Excluding special items, our effective tax rate during the second quarter was 25.7%. We expect the third quarter rate to be approximately 26%.

Speaker #4: We continue to forecast $840 to $870 million of capex and excluding special items, around $710 million of DDNA. For the year. Our special items expense for the year through the end of Q2 included $56 million of depreciation expense, associated primarily with the Walulla Mill restructuring.

Speaker #4: I'd now like to give you an update on the annual outage schedule and earnings impact for the year. Our outage expense was $34 cents during the second quarter.

Kent A. Pflederer: Our outage expense was $0.34 during Q2. Our H2 estimates are now $0.30 for Q3 and $0.63 for Q4, totaling $1.41 for the year. As we indicated, International Falls, our only white paper mill, will have the outage in Q3. In the packaging segment, only the Riverville mill is scheduled for a Q3 maintenance outage. I'll now turn it back over to Mark.

Kent Pflederer: Our outage expense was $0.34 during Q2. Our H2 estimates are now $0.30 for Q3 and $0.63 for Q4, totaling $1.41 for the year. As we indicated, International Falls, our only white paper mill, will have the outage in Q3. In the packaging segment, only the Riverville mill is scheduled for a Q3 maintenance outage. I'll now turn it back over to Mark.

Speaker #4: Our back half estimates are now 30 cents for the third quarter, totaling $1.41 for the year. As we indicated, international falls are only white paper mill will have the outage in the third quarter.

Speaker #4: In the packaging segment, only the Riverville Mill is scheduled for a third quarter maintenance outage. I'll now turn it back over to Mark.

Speaker #2: Thanks, Kent. Looking ahead, as we move from the second quarter into the third quarter, we expect continued strong demand in the packaging segment and corrugated products volume to increase with one more shipping day.

Mark W. Kowlzan: Thanks, Kent. Looking ahead as we move from Q2 into Q3, we expect continued strong demand in the Packaging segment and corrugated products volume to increase with 1 more shipping day. Prices for containerboard and corrugated products will be higher as we complete implementation of our first announced increase and begin to realize our second announced price increase. We will have 1 more day of mill operation as well as lower impact to production from maintenance outages. We also expect better operating performance across our containerboard mill system, with continued improved capabilities from our Jackson mill as well as the acquired Greif mills. Mill maintenance outage expenses will be lower in total in the Packaging segment and higher in the Paper segment.

Mark Kowlzan: Thanks, Kent. Looking ahead as we move from Q2 into Q3, we expect continued strong demand in the Packaging segment and corrugated products volume to increase with 1 more shipping day. Prices for containerboard and corrugated products will be higher as we complete implementation of our first announced increase and begin to realize our second announced price increase. We will have 1 more day of mill operation as well as lower impact to production from maintenance outages. We also expect better operating performance across our containerboard mill system, with continued improved capabilities from our Jackson mill as well as the acquired Greif mills. Mill maintenance outage expenses will be lower in total in the Packaging segment and higher in the Paper segment.

Speaker #2: Prices for container board and corrugated products will be higher as we complete implementation of our first announced increase and begin to realize our second announced price increase.

Speaker #2: I will have one more day of mill operation, as well as lower impact to production from maintenance outages. We also expect better operating performance across our containerboard mill system, with continued improved capabilities from our Jackson Mill, as well as the acquired Greif Mills.

Speaker #2: Mill maintenance outage expenses will be lower in total in the packaging segment and in higher in the paper segment. We expect lower volume and higher prices in the paper segment as a result of the maintenance outage and continued implementation of our previously announced paper price increases.

Mark W. Kowlzan: We expect lower volume and higher prices in the Paper segment as a result of the maintenance outage and continued implementation of our previously announced paper price increases. Costs for freight across the business will remain at or around the elevated levels we experienced in May and June. Recycled fiber prices are continuing to increase, and higher mill production will drive higher usage. We expect higher prices for chemicals and purchased electricity, with wood fiber and natural gas remaining relatively flat. We expect some improvement in employee benefits costs due to Q2 unfavorability that is not expected to repeat in Q3. Considering these items, we expect Q3 earnings of $2.91 per share, excluding special items. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constituted forward-looking statements.

Mark Kowlzan: We expect lower volume and higher prices in the Paper segment as a result of the maintenance outage and continued implementation of our previously announced paper price increases. Costs for freight across the business will remain at or around the elevated levels we experienced in May and June. Recycled fiber prices are continuing to increase, and higher mill production will drive higher usage. We expect higher prices for chemicals and purchased electricity, with wood fiber and natural gas remaining relatively flat. We expect some improvement in employee benefits costs due to Q2 unfavorability that is not expected to repeat in Q3. Considering these items, we expect Q3 earnings of $2.91 per share, excluding special items. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constituted forward-looking statements.

Speaker #2: Costs for freight across the business will remain at or around the elevated levels we experienced in May and June. Recycled fiber prices are continuing to increase and higher mill production will drive usage higher usage.

Speaker #2: We expect higher prices for chemicals and purchased electricity with wood fiber and natural gas remaining relatively flat. We expect some improvement in employee benefits costs due to second quarter unfavorability that is not expected to repeat in the third quarter.

Speaker #2: Considering these items, we expect third quarter earnings of $2.91 per share, excluding special items. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constitute forward-looking statements.

Speaker #2: The statements were based on current estimates, expectations, and projections of the company, and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC.

Mark W. Kowlzan: The statements were based on current estimates, expectations, and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. With that, Jamie, I'd like to go ahead and open the call for Q&A. Thank you.

Mark Kowlzan: The statements were based on current estimates, expectations, and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. With that, Jamie, I'd like to go ahead and open the call for Q&A. Thank you.

Speaker #2: Actual results could differ materially from those expressed in the forward-looking statements. And with that, Jamie, I'd like to go ahead and open the call for Q&A.

Speaker #2: Thank you.

Speaker #5: And at this time, we'll begin that question and answer session. If you would like to ask a question, please press star and then one using a touchstone telephone.

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

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

Speaker #5: To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the numbers to ensure the best sound quality.

Speaker #5: Once again, that is star and then one to ask a question. Our first question today comes from George Staffos from Bank of America Securities.

Speaker #5: Please go ahead with your question.

Speaker #6: Hi everyone, good morning. Hope you're doing well. Thanks for the details. How are you? So, I guess maybe to start, as always, can you give us a rundown on what you're seeing in terms of bookings and billings to start the third quarter?

George Staphos: Hi, everyone. Good morning. Hope you're doing well. Thanks for the details.

Mark W. Kowlzan: Morning.

Mark Kowlzan: Morning.

George Staphos: How are you? I guess maybe to start, as always, can you give us a rundown on what you're seeing in terms of bookings and billings to start Q3? Anything sort of unique or notable in the trends that you're seeing? Add a couple of follow-ons.

Speaker #6: Anything sort of unique or notable in the trends that you're seeing? And that a couple of follow-ons.

Speaker #2: Hey George, it's Tom. Yeah, billings are up 1.5% so far and we're expecting for the quarter. This is in the legacy business and up about 2%.

Thomas A. Hassfurther: Hey, George. It's Tom. Yeah. Billings are up 1.5% so far, and we're expecting for Q3, this is in the legacy business, up about 2%. That's pretty much in track with what we thought. Of course, it's against a pretty tough comp. As you may know, Prime Day was moved up a quarter. It's going to change the numbers a little bit in Q3. All in all, we're happy with that growth, and we're being pretty disciplined and selective in terms of our growth as well.

Tom Hassfurther: Hey, George. It's Tom. Yeah. Billings are up 1.5% so far, and we're expecting for Q3, this is in the legacy business, up about 2%. That's pretty much in track with what we thought. Of course, it's against a pretty tough comp. As you may know, Prime Day was moved up a quarter. It's going to change the numbers a little bit in Q3. All in all, we're happy with that growth, and we're being pretty disciplined and selective in terms of our growth as well.

Speaker #2: So that's pretty much in track with what we thought. And of course, it's against a pretty tough comp. And as you may know, prime days were moved up a quarter.

Speaker #2: So, it's going to change the numbers a little bit in the third quarter. But all in all, we're happy with that. We're happy with that growth.

Speaker #2: And we're being pretty disciplined and selective in terms of our growth as well.

Speaker #6: Okay. Thanks for that, Tom. Within the two Q volume to three Q volume comparison, and you mentioned one consideration, is there anything else that's decelerated or is that the only thing that from what you can see that's worth noting?

George Staphos: Okay. Thanks for that, Tom. Within the Q2 volume to Q3 volume comparison, you mentioned one consideration, is there anything else that's decelerated, or is that the only thing that from what you can see that's worth noting? Relatedly, this is neither here nor there. It's our model, not yours, but mix was a little bit less than we're expecting in terms of revenue per ton. Was that related to any sort of customer factors or anything else in the mix? Then my last question, bigger picture. Mark, for years the company has talked rightly about its fiber flexibility, frankly, the weighting more towards virgin versus recycled, which gave you a little bit more predictability on your costs. How do you see that evolving now that you've become maybe almost as much recycled as virgin relative to the peer set?

Speaker #6: And relatedly, this is neither here nor there. It's our model, not yours, but mix was a little bit less than we're expecting in terms of revenue per ton.

Speaker #6: Was that related to any sort of customer factors or anything else in the mix? And then, my last question—bigger picture, Mark—for years, the company has talked, rightly, about its fiber flexibility; frankly, the weighting more towards virgin versus recycled, which gave you a little bit more predictability on your costs.

Speaker #6: How do you see that evolving now that you've become maybe almost as much recycled as virgin relative to the pure set? Thanks, guys, and good luck in the quarter.

George Staphos: Thanks, guys, and good luck in the quarter.

Speaker #2: Let me start that question up first, George. We're probably currently around 30% recycled to 70% on a given day. It flexes up and down to 35% at times.

Mark W. Kowlzan: Let me start that question up first, George. We're probably currently around 30% recycled to 70% on a given day. It flexes up and down to 35% at times. As we're pushing the system now, we're probably up closer to the 35% level. Nevertheless, we've gone through an unusual time since the beginning of the year. If you think about it, OCC DLK recycled fiber is up about 70%. That impact is felt directly. We're maximizing the virgin kraft system and taking advantage of the OCC DLK systems to fiber up the mills. That's pretty much where we are and where we expect to be. We're not planning on any big capital expenditures right now for either fiber. Tom?

Mark Kowlzan: Let me start that question up first, George. We're probably currently around 30% recycled to 70% on a given day. It flexes up and down to 35% at times. As we're pushing the system now, we're probably up closer to the 35% level. Nevertheless, we've gone through an unusual time since the beginning of the year. If you think about it, OCC DLK recycled fiber is up about 70%. That impact is felt directly. We're maximizing the virgin kraft system and taking advantage of the OCC DLK systems to fiber up the mills. That's pretty much where we are and where we expect to be. We're not planning on any big capital expenditures right now for either fiber. Tom?

Speaker #2: As we're pushing the system now, we're probably up closer to the 35% level. But nevertheless, we've gone through an unusual time since the beginning of the year.

Speaker #2: If you think about it, OCC, DLK recycled fibers up about 70%. And so that impact is felt directly. So we're maximizing the virgin craft system.

Speaker #2: And taking advantage of the OCC DLK systems to fiber up the mills. And that's pretty much where we are, and where we expect to be. We're not planning on any big capital expenditures right now for either.

Speaker #2: Fiber. Tom?

Speaker #3: George, relative to mix two Q going into three Q, as I mentioned, the prime days and the e-com was very strong in the quarter.

Thomas A. Hassfurther: George, relative to mix Q2 going into Q3, as I mentioned, the Prime Day in the e-com was very strong in the quarter, so in the Q2, they moved that up somewhat. That really impacted the general mix, which translated into price as well. Of course, we had the $20 reduction that was announced in RISI, which impacted price as well. The good news is all segments of the business were very strong and were up, and we plan to see that going forward as well. Yeah. The Q3 price obviously is going to change dramatically as we roll through the price increase that I mentioned in my commentary.

Tom Hassfurther: George, relative to mix Q2 going into Q3, as I mentioned, the Prime Day in the e-com was very strong in the quarter, so in the Q2, they moved that up somewhat. That really impacted the general mix, which translated into price as well. Of course, we had the $20 reduction that was announced in RISI, which impacted price as well. The good news is all segments of the business were very strong and were up, and we plan to see that going forward as well. Yeah. The Q3 price obviously is going to change dramatically as we roll through the price increase that I mentioned in my commentary.

Speaker #3: So, in the second quarter, they moved that up somewhat. So that really impacted the general mix, which translated into price as well.

Speaker #3: And then, of course, we had the $20 reduction that was announced in RISI, which impacted price as well. But the good news is all segments of the business were very strong and were up.

Speaker #3: And we plan to see that going forward as well. Yeah. And the three Q price, obviously, is going to change dramatically. As we roll through the price increase that we as I mentioned in my commentary.

Speaker #6: Okay. Thank you very much. I'll turn it over.

George Staphos: Okay. Thank you very much. I'll turn it over.

Speaker #2: Thanks, George. Next question, please.

Mark W. Kowlzan: Thanks, George. Next question, please.

Mark Kowlzan: Thanks, George. Next question, please.

Speaker #5: Our next question comes from Mike Roxland from Truist. Please go ahead with your question.

Operator 2: Our next question comes from Michael Roxland from Truist. Please go ahead with your question.

Operator: Our next question comes from Michael Roxland from Truist. Please go ahead with your question.

Speaker #4: Yeah, thank you, Mark. Tom Kent for taking my questions. You mentioned Greif beat by 10 cents. I think you were expecting maybe a 4-cent contribution positively.

Michael Roxland: Yeah. Thank you, Mark, Tom, Kent, for taking my questions. You mentioned Greif beat by $0.10. I think you were expecting maybe a $0.04 contribution positively. You ended up with $0.14. Excuse me. When you think about the beat, it seems relative to the Street for the quarter. It seems like most of it came from, if not all of it came from Greif rather than your legacy business. Just any color you can provide on the miss in your legacy business relative to expectations? Is that largely due to cost, mainly freight? Just any color you can have in terms of the puts and takes in the quarter relative between legacy and the Greif assets?

Speaker #4: You wind up with 14 cents. There's no one excuse me. So when you think about the beat, it seems relative to the street for the quarter, it seems like it was done it came most of it came from, if not all of it came from Greif rather than your legacy business.

Speaker #4: So just any color you can provide on the miss in your legacy business relative to expectations, is that largely due to cost, mainly freight?

Speaker #4: Just any color you could have in terms of the puts and takes in the quarter relative to between legacy and the Greif assets.

Speaker #3: So Mike, I'll start with this. It's Kent, and then Tom will add some color. So Greif was a $0.14 earnings contribution that exceeded expectations.

Kent A. Pflederer: Mike, I'll start with this. It's Kent, and then Tom will add some color. Greif was a $0.14 earnings contribution that exceeded expectations, the headline number by call it $0.09 or $0.10. $0.04 of that was the depreciation benefit that we called out in the earnings release. Okay? If you're looking sort of apples to apples, $0.05 from expectations, that was driven by largely higher volumes than we expected and very good operational performance. Also we're running Greif now as a much more integrated system. It's much less separate from PCA legacy than when we made the acquisition, obviously by design. There's some puts and takes. We're moving business between trying to get efficiencies maximized, and Tom can comment on this a little bit further.

Kent Pflederer: Mike, I'll start with this. It's Kent, and then Tom will add some color. Greif was a $0.14 earnings contribution that exceeded expectations, the headline number by call it $0.09 or $0.10. $0.04 of that was the depreciation benefit that we called out in the earnings release. Okay? If you're looking sort of apples to apples, $0.05 from expectations, that was driven by largely higher volumes than we expected and very good operational performance. Also we're running Greif now as a much more integrated system. It's much less separate from PCA legacy than when we made the acquisition, obviously by design. There's some puts and takes. We're moving business between trying to get efficiencies maximized, and Tom can comment on this a little bit further.

Speaker #3: The headline number by call it 9 or 10 cents. 4 cents of that was the depreciation benefit that we called out in the earnings sort of apples to apples 5 cents from expectations, that was driven by largely higher volume than we expected.

Speaker #3: And very good operational performance. But also we're running Greif now as a much more integrated system. It's much less separate from PCA legacy than when we made the acquisition.

Speaker #3: Obviously, by design. So there's some puts and takes. We're moving business between trying to get things trying to get efficiencies maximized. And Tom can comment on this a little bit further.

Mark W. Kowlzan: There's really not a ton to add.

Tom Hassfurther: There's really not a ton to add.

Speaker #2: There's really not a ton to add. It's just that we're running the business to the greatest efficiency we can. And we're trying to utilize all of our assets in the best possible way.

Thomas A. Hassfurther: Yeah.

Michael Roxland: Yeah.

Thomas A. Hassfurther: It's just that we're running the business to the greatest efficiency we can, and we're trying to utilize all of our assets in the best possible way. We now view this business as being totally integrated, and we're operating as one unit.

Tom Hassfurther: It's just that we're running the business to the greatest efficiency we can, and we're trying to utilize all of our assets in the best possible way. We now view this business as being totally integrated, and we're operating as one unit.

Speaker #2: So we now view this business as being totally integrated, and we're operating as one unit.

Speaker #4: Got it. In that regard, Tom, I think you had a transition service agreement with Greif that may have expired. Can you talk about is there any way to quantify what you get back from the expiration of that agreement?

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

Kent A. Pflederer: I'll let Kent handle that.

Tom Hassfurther: I'll let Kent handle that.

Speaker #2: I'll let Kent handle that.

Speaker #3: So the transition service is agreement is running through the end of the year as we bring the last few corrugated plants in one facet of the mills onto PCA system.

Kent A. Pflederer: The transition services agreement is running through the end of the year as we bring the last few corrugated plants and one facet of the mills onto PCA system. We got three more plants coming up in Q3 and the last couple coming up in Q4. The TSA is, number one, we're recording the cost and special items as part of acquisition integration charges. Really the efficiencies we're seeing is just having better visibility to the business, being able to take advantage really of just optimizing the supply position between PCA mills on one hand and Greif facilities on the other hand. That's really where it's coming from, Mike.

Kent Pflederer: The transition services agreement is running through the end of the year as we bring the last few corrugated plants and one facet of the mills onto PCA system. We got three more plants coming up in Q3 and the last couple coming up in Q4. The TSA is, number one, we're recording the cost and special items as part of acquisition integration charges. Really the efficiencies we're seeing is just having better visibility to the business, being able to take advantage really of just optimizing the supply position between PCA mills on one hand and Greif facilities on the other hand. That's really where it's coming from, Mike.

Speaker #3: So we got three more plants coming up in three Q and the last couple coming up in four Q. The TSA is number one, we're reporting the cost and special items as part of acquisition integration charges.

Speaker #3: But really, the efficiencies we're seeing is just having better visibility to the business. Being able to take advantage really of just optimizing the supply position between PCA mills on one hand and Greif facilities on the other hand.

Speaker #3: So that's really where it's coming from, Mike.

Thomas A. Hassfurther: I'll add, Mike, that we look.

Speaker #2: I'll add, Mike, that we look very we look very much forward to having them all on our system, I can tell you that.

Tom Hassfurther: I'll add, Mike, that we look.

Michael Roxland: Oh, go ahead.

Thomas A. Hassfurther: We look very much forward to having them all on our system, I can tell you that.

Tom Hassfurther: We look very much forward to having them all on our system, I can tell you that.

Speaker #4: Got it. And that sounds like it'll be done by year-end. That's putting it all together, right? You'll be done completely with the TSA?

Michael Roxland: Got it. That sounds like it'll be done by year-end. That's putting it all together, right? You'll be done completely with the TSA.

Speaker #2: Yes.

Kent A. Pflederer: Yes.

Tom Hassfurther: Yes.

Kent A. Pflederer: Okay. Perfect. One last one, I'll turn it over. Just in terms of tariffs, obviously there are 50% tariffs potentially being proposed to be applied to Canadian imports of containerboard, maybe boxes. Any thoughts around those tariffs and what it means for the domestic industry?

Kent Pflederer: Okay. Perfect. One last one, I'll turn it over. Just in terms of tariffs, obviously there are 50% tariffs potentially being proposed to be applied to Canadian imports of containerboard, maybe boxes. Any thoughts around those tariffs and what it means for the domestic industry?

Speaker #4: Okay. Perfect. One last one I'll turn it over. Just in terms of tariffs, obviously, they're 50% tariffs potentially being proposed to be applied to Canadian imports of container board, maybe boxes, any thoughts around those tariffs and what it means for the domestic industry?

Speaker #3: Right now, our initial read is little to no impact on PCA. It should have really nothing on the packaging business. And as you parse through it, it's not 100% clear at this point in terms of what it really applies to.

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

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

Speaker #3: So we'll take a little more of a wait and see approach. But right now, we don't view it as a significant driver either way.

Speaker #4: Thank you.

Michael Roxland: Thank you.

Speaker #5: Our next question comes from our next question comes from Mark Weintraub from Seaport Research Partners. Please go ahead with your question.

Operator 2: Our next question comes from

Operator: Our next question comes from.

Mark W. Kowlzan: Next question, please.

Mark Kowlzan: Next question, please.

Operator 2: Our next question comes from Mark Weintraub from Seaport Research Partners. Please go ahead with your question.

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

Speaker #7: Thank you. So you mentioned that you started to see the March, April increase in June. Can you give us a sense as to how much of it then of the 50 would have shown up in your box prices in the second quarter?

Mark Weintraub: Thank you. You mentioned that you started to see the March, April increase in June. Can you give us a sense as to how much of it then, of the $50, would have shown up in your box prices in Q2? Presumably the balance of that, is it fair to say, would be in Q3? Then can you share, I think you used the term you expect to kind of split the June increase between Q3 and Q4. Is that evenly, or was that just sort of some of it's going to show up in Q3 and some's going to show up in Q4? To the extent that you're comfortable quantifying rough percentages, that would be helpful.

Speaker #7: Presumably, the balance of that, is it fair to say, would be in the third quarter and then can you share I think you used the term you expect us kind of split the June increase between three Q and four Q.

Speaker #7: Is that evenly or was that just sort of some of it's going to show up in three Q and some is going to show up in four Q and to the extent that you're comfortable quantifying rough percentages that would be helpful?

Speaker #3: Yeah. Hey Mark, it's Kent. I'll start and then Tom will finish here, okay? On the first increase, the vast majority of that's coming in Q3.

Kent A. Pflederer: Yeah. Hey, Mark, it's Kent. I'll start and then Tom will finish here. Okay? On the first increase, the vast majority of that's coming in in Q3. Okay? Calibrated maybe 70% to 75% of it's Q3 in July there. The second increase, the majority will come in in Q4, but not quite as pronounced as the Q2, Q3 split on the first increase. Tom?

Kent Pflederer: Yeah. Hey, Mark, it's Kent. I'll start and then Tom will finish here. Okay? On the first increase, the vast majority of that's coming in in Q3. Okay? Calibrated maybe 70% to 75% of it's Q3 in July there. The second increase, the majority will come in in Q4, but not quite as pronounced as the Q2, Q3 split on the first increase. Tom?

Speaker #3: Okay? Calibrate it maybe 70, 75 percent of it's Q3 in July there. The second increase, the majority will come in in four Q, but not quite as pronounced as the two Q, three Q split.

Speaker #3: On the first increase, Tom?

Speaker #2: Yeah, that's I mean, that's exactly the way we see it. And I think a lot of times people forget that we were impacted by the $20 down that was announced at trailed into two Q.

Thomas A. Hassfurther: Yeah. That's exactly the way we see it. I think a lot of times people forget that we were impacted by the $20 down that was announced that trailed into Q2. Also the mix had some impact in Q2 from the price standpoint. All of that then comes back in Q3 and Q4 with these increases as they roll through, as Kent mentioned.

Tom Hassfurther: Yeah. That's exactly the way we see it. I think a lot of times people forget that we were impacted by the $20 down that was announced that trailed into Q2. Also the mix had some impact in Q2 from the price standpoint. All of that then comes back in Q3 and Q4 with these increases as they roll through, as Kent mentioned.

Speaker #2: And also, the mix, had some impact in two Q from the price standpoint. All of that then comes back in three Q and four Q with these increases.

Speaker #2: As they roll through, as Kent mentioned.

Speaker #7: Great. And then just as a follow-up, in some environments in the past, you've been able to get more than full pass-through. And clearly, we've got a very high-cost environment right now.

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

Speaker #7: Are we in that type of an environment? What would sort of be recognizing that there's always going to be competitive pressures as well at work?

Speaker #7: How should we be thinking about the ability to get full and/or possibly even more than full pass-through?

Speaker #2: Well, Mark, I'm not going to quantify that for you, but I can tell you that you did observe that that is our mission and that is what we always try to do.

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

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

Speaker #2: And you also mentioned, and I think very importantly, that we are in a very high inflationary environment right now. And we're having a it's we're having a lot of we're having a lot of discussions around that.

Speaker #2: I'll leave it at that.

Speaker #7: Great. Thank you.

Mark Weintraub: Thank you.

Speaker #4: Next question, please.

Mark W. Kowlzan: Next question, please.

Mark Kowlzan: Next question, please.

Speaker #5: Our next question comes from Gabe Heidi from Wells Fargo Securities. Please go ahead with your question.

Operator 2: Our next question comes from Gabe Hajde from Wells Fargo Securities. Please go ahead with your question.

Operator: Our next question comes from Gabe Hajde from Wells Fargo Securities. Please go ahead with your question.

Gabe Hajde: Mark, Kent, Tom, good morning.

Speaker #4: Mark, Kent, Tom, good morning. You talked about being able to build a little bit of inventory early in the quarter, maybe in and around the July 4th holiday.

Thomas A. Hassfurther: Morning, Gabe.

Tom Hassfurther: Morning, Gabe.

Gabe Hajde: You talked about being able to build a little bit of inventory early in the quarter, maybe in and around the July 4th holiday. Tom, I think you also mentioned 1.5% billings. I know we can't extrapolate that out, but I think you referenced maybe 1.5%, 2% was sort of what you were thinking for the quarter on a year-over-year basis. If I got my comparisons correctly or correct here, I think down 1.1 for corrugated shipments in Q3 2025. Assuming I've got that level set, how would you describe kind of the feel in the market right now from a supply-demand standpoint? I'm sort of asking because you guys obviously delayed some sales of exports into Q3 to kind of shore up your own inventories, and then there's been some supply disruptions in the market.

Speaker #4: And then, Tom, I think you also mentioned one and a half percent billings. I know we can't extrapolate that out, but I think you referenced maybe one and a half, two percent were sort of what you were thinking for the quarter on a year-over-year basis.

Speaker #4: If I got my comparisons correctly or correct here, I think down 1.1 for corrugated shippings in Q3 25. So just assuming I've got that level set, how would you describe kind of the feel in the market right now from a supply-demand standpoint?

Speaker #4: And I'm sort of asking because you guys obviously delayed some sales of exports into the third quarter to kind of shore up your own inventories.

Speaker #4: And then there have been some supply disruptions in the market. So, just curious if you've had customers coming to you, asking for help or anything like that.

Gabe Hajde: If you got customers coming to you asking for help or anything like that. Thank you.

Speaker #4: Thank you.

Speaker #2: I'm going to give you one word, Gabe, that I would use to describe the environment, and that's tight.

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

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

Speaker #4: Okay, got it. And then we did hear some comments about maintenance outages—maybe some folks coming out a little bit slower than what was expected?

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

Speaker #4: Just curious if you guys had experienced any of that or maybe it was Mark related to the grid volatility that you mentioned in your prepared remarks.

Mark W. Kowlzan: As far as we went through our annual outages at five of the mills during Q2, we executed incredibly well, in most cases ahead of schedule and started up the mills very successfully. We had at least five distinct utility power outage situations at a number of the mills. I am going to give you an example, though. One mill, they shut us down for the better part of a full day, just with their own hardware issues, then had continuing problems for a few more days trying to get their own grid structure stabilized. Another location, basically, you are in forest fire season. We had the utility shut down the entire

Mark Kowlzan: As far as we went through our annual outages at five of the mills during Q2, we executed incredibly well, in most cases ahead of schedule and started up the mills very successfully. We had at least five distinct utility power outage situations at a number of the mills. I am going to give you an example, though. One mill, they shut us down for the better part of a full day, just with their own hardware issues, then had continuing problems for a few more days trying to get their own grid structure stabilized. Another location, basically, you are in forest fire season. We had the utility shut down the entire regional system without notifying anybody. It took down the mill instantaneously out in Wallula and impacted us for a period of time.

Speaker #2: As far as we went through our annual outages at five of the mills during the second quarter, and we executed incredibly well and done most cases ahead of schedule and started up the mills very successfully.

Speaker #2: But we had at least five distinct utility power outage situations at a number of the mills. I mean, I'll give you an example: one mill, they shut us down for the better part of a full day just with their own hardware issues.

Speaker #2: And then had continuing problems for a few more days trying to get their own their own grid structure stabilized. Another location, basically a year in forest fire season, we had the utility shut down the entire regional system without notifying anybody.

Mark W. Kowlzan: regional system without notifying anybody. It took down the mill instantaneously out in Wallula and impacted us for a period of time. We are having these types of situations where voltage droops and surges through the systems. I think it speaks in many cases to what is happening with the nationwide integrity of the system. We overcame those issues, again, as I said on my comments, it speaks to the ability of our individuals to rally and get through these things and stabilize the mills. It also speaks to the importance of the three gas turbine projects that we are bringing online over the next two years and how critical they are going to be to these three particular mills.

Speaker #2: So it took down the mill instantaneously out in Walula. It impacted us for a period of time. So we're having these types of situations where voltage droops and surges through the systems.

Mark Kowlzan: We are having these types of situations where voltage droops and surges through the systems. I think it speaks in many cases to what is happening with the nationwide integrity of the system. We overcame those issues, again, as I said on my comments, it speaks to the ability of our individuals to rally and get through these things and stabilize the mills. It also speaks to the importance of the three gas turbine projects that we are bringing online over the next two years and how critical they are going to be to these three particular mills.

Speaker #2: I think it speaks in many cases to what's happening with the nationwide integrity of the system. And so but we overcame those issues and again, as I said on my comments, it speaks to the ability of our individuals to rally and get through these things and stabilize the mills.

Speaker #2: But it also speaks to the importance of the three gas turbine projects that we're bringing online over the next two years. And how critical they're going to be to these three particular mills.

Speaker #2: So.

Gabe Hajde: All right, thank you. I know I am going to be maybe a little aggressive here, or at least give a mouse a cookie or milk for a cookie. I think you said 70% realization, Kent, on the second price increase in sort of split Q3, Q4, $35 a ton, maybe 1.4 million tons, directionally $45 million, $50 million benefit that we are thinking about on a sequential basis. I know maintenance costs are up, I think $0.33 directionally, so maybe $40 million offset. I think there is one less shipping day. Is there anything else that we should be thinking about? I think a higher energy consumption per colder weather conditions, things like that in Q4. Anything else that we should be mindful of thinking about for Q4?

Speaker #4: All right. Thank you. I know I'm going to be maybe a little aggressive here or at least give a mouse cookie or milk glass or a cookie.

Speaker #4: I think you said 70% realization, Kent, on the second price increase in sort of split. Q3, Q4. $35 a ton, maybe 1.4 million tons directionally, 45, 50 million dollar benefit that we're thinking about on a sequential basis.

Speaker #4: And then I know maintenance costs are up, I think, $0.33 directionally. So maybe $40 million offset, and then I think there's one less shipping day.

Speaker #4: Is there anything else that we should be thinking about? I think a higher energy consumption per colder weather conditions, things like that in Q4.

Speaker #4: Anything else that we should be mindful of when thinking about Q4?

Speaker #2: For Q4, maintenance is primarily higher. There's a normal seasonal mix and a little bit higher depreciation run rate, as I kind of called out, as I alluded to in my prepared remarks.

Kent A. Pflederer: For Q4, maintenance primarily higher. Normal seasonal mix, a little bit higher depreciation run rate as I kind of called out, as I alluded to in my prepared remarks.

Kent Pflederer: For Q4, maintenance primarily higher. Normal seasonal mix, a little bit higher depreciation run rate as I kind of called out, as I alluded to in my prepared remarks.

Speaker #2: But yeah, seasonally strong volumes. So those are your primary factors. And at least right now, trying to put a crystal ball around some of the some of the freight and energy-based costs, it's pretty premature to do that.

Kent A. Pflederer: Okay.

Gabe Hajde: Okay.

Kent A. Pflederer: Yeah, seasonally strong volumes. Those are your primary factors.

Kent Pflederer: Yeah, seasonally strong volumes. Those are your primary factors.

Kent A. Pflederer: Thank you.

Gabe Hajde: Thank you.

Kent A. Pflederer: At least right now trying to put a crystal ball around some of the freight and energy base costs, it's pretty premature to do that.

Kent Pflederer: At least right now trying to put a crystal ball around some of the freight and energy base costs, it's pretty premature to do that.

Gabe Hajde: Absolutely. Good luck, gentlemen.

Speaker #4: Tom.

Speaker #1: Okay. Thanks. Next question, please.

Mark W. Kowlzan: Okay, thanks. Next question, please.

Mark Kowlzan: Okay, thanks. Next question, please.

Speaker #5: Our next question comes from Anoja Shah from UBS. Please go ahead with your question.

Operator 2: Our next question comes from Anojja Shah from UBS. Please go ahead with your question.

Operator: Our next question comes from Anojja Shah from UBS. Please go ahead with your question.

Speaker #6: Hi, good morning, everyone. Sorry if I missed it. Morning. Sorry if I missed it, but did you give a sense of what you expect from the Gryph assets in third quarter in your guidance?

Anojja Shah: Hi. Good morning, everyone.

Mark W. Kowlzan: Morning, Anuja.

Mark Kowlzan: Morning, Anuja.

Anojja Shah: Sorry if I missed it. Morning. Sorry if I missed it, did you give a sense of what you expect from the Greif assets in Q3 in your guidance?

Speaker #2: Yeah. The way I would look at it, Anoja, is you'll have the benefits of continued strong volume, consistent with or even maybe a little above second quarter levels.

Kent A. Pflederer: Yeah. The way I would look at it, Anuja, is you'll have the benefits of continued strong volume, consistent with or even maybe a little above Q2 levels. You'll have the benefits of price coming in, that will be probably overcome by the fact that you have Riverville down in Q3, you'll have outage expenses. The way I'm looking at it from an earnings contribution, and again, I'm taking this against a $0.10 contribution without the depreciation benefit we got in Q2, you're probably going to be $0.01 or $0.02 down Q3 to Q2 in terms of the Greif contribution. Again, I'll reemphasize this. Q3 will be the last time we call Greif out as an individual contributor. It's really part of PCA from this point on.

Kent Pflederer: Yeah. The way I would look at it, Anuja, is you'll have the benefits of continued strong volume, consistent with or even maybe a little above Q2 levels. You'll have the benefits of price coming in, that will be probably overcome by the fact that you have Riverville down in Q3, you'll have outage expenses. The way I'm looking at it from an earnings contribution, and again, I'm taking this against a $0.10 contribution without the depreciation benefit we got in Q2, you're probably going to be $0.01 or $0.02 down Q3 to Q2 in terms of the Greif contribution. Again, I'll reemphasize this. Q3 will be the last time we call Greif out as an individual contributor. It's really part of PCA from this point on.

Speaker #2: You'll have the benefits of price coming in, but then that will be probably overcome by the fact that you have Riverville down in the third quarter.

Speaker #2: So you'll have outage expenses. So the way I'm looking at it, from an earnings contribution, and again, I'm taking this against a 10-cent contribution without the depreciation benefit we got in 2Q, you're probably going to be a penny or two down 3Q to 2Q in terms of the Gryph contribution.

Speaker #2: And again, I'll reemphasize this: Q3 will be the last time we call Gryph out as an individual contributor. It's really part of PCA from this point on.

Speaker #6: Okay. Great. And then I don't think we've talked about this recently, but any update you can give us on the Gryph synergies? I think we had about 30 million penciled in for this year, and now we're at the halfway point.

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

Speaker #6: Can you just give us an update there? Thank you.

Speaker #2: So between the mill production improvements that we called out last quarter, we're on track or even a little bit ahead of that. We're running in the 5 to 10 percent improved reliability, which we're seeing in better production.

Kent A. Pflederer: Between the mill production improvements that we called out last quarter, we're on track or even a little bit ahead of that. We're running in the 5% to 10% improved reliability, which we're seeing in better production. The integration benefits now are starting to come into the numbers as well. From an integration standpoint, adding that in, we're on track probably to exceed the $30 million run rate by the end of the year. Very comfortable with where we're at there, Anojja.

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

Speaker #2: But the integration benefits now are starting to come into come into the numbers as well. And from an integration standpoint, adding that in, we're on track probably to exceed the 30 million dollar run rate by the end of the year.

Speaker #2: So, very comfortable with where we're at there, Anoja.

Speaker #6: Okay. Great. Thanks very much. I'll turn it over.

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

Speaker #1: Thanks, Anoja. Next question, please.

Mark W. Kowlzan: Thanks, Anojja. Next question please.

Mark Kowlzan: Thanks, Anojja. Next question please.

Speaker #5: Our next question comes from Anthony Pettinari from City. Please go ahead with your question.

Operator 2: Our next question comes from Anthony Pettinari from Citi. Please go ahead with your question.

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

Speaker #4: Hi, good morning. The 2Q, hey, the 2Q corrugated demand was a bit stronger than we expected. And I was wondering, do you think there's any element of pre-buy there with two price hikes in the market?

Anthony Pettinari: Good morning.

Thomas A. Hassfurther: Morning, Anthony.

Tom Hassfurther: Morning, Anthony.

Anthony Pettinari: Hey. The Q2 corrugated demand was a bit stronger than we expected, I was wondering, do you think there's any element of pre-buy there with two price hikes in the market? Then, World Cup, America 250, I don't know if those really had any impact to you, but I'm just curious if there's anything you'd call out there.

Speaker #4: And then World Cup, America 250, I don't know if those really had any impact to you, but I'm just curious if there's anything to call out there.

Speaker #2: Anthony, this is Tom. The yeah, the second quarter demand was very strong. I mentioned some of the ecom-driven prime day from Amazon and some of those related ecom customers that we have certainly drove some of that business.

Thomas A. Hassfurther: Anthony, this is Tom. Yeah, the Q2 demand was very strong. I mentioned some of the e-com driven Prime Day from Amazon and some of those related e-com customers that we have certainly drove some of that business. Pre-buy, our capacity is so tight that it's impossible to get a pre-buy in right now. So that's not the case. World Cup, I'm not sure where that discussion even started, but I think that had very little impact, in my opinion.

Tom Hassfurther: Anthony, this is Tom. Yeah, the Q2 demand was very strong. I mentioned some of the e-com driven Prime Day from Amazon and some of those related e-com customers that we have certainly drove some of that business. Pre-buy, our capacity is so tight that it's impossible to get a pre-buy in right now. So that's not the case. World Cup, I'm not sure where that discussion even started, but I think that had very little impact, in my opinion.

Speaker #2: Pre-buy, our capacity is so tight that it's impossible to get a pre-buy in right now, so that's not the case. And World Cup—I’m not sure where that discussion even started, but I think that had very little impact, in my opinion.

Speaker #4: Okay. Okay. And then just switching gears, Mark, you referenced the three energy projects over the next couple of years. I don't know if there's any finer point you could put on the cadence there or when those would go in.

Anthony Pettinari: Okay. Just switching gears, Mark, you referenced the three energy projects over the next couple of years. I don't know if there's any finer point you could put on the cadence there or when those would go in. Just the CapEx guide for $840 to 870 you reiterated, directionally as we-

Speaker #4: And then just the CapEx guide for $840 to $870 – you reiterated, directionally, as we look at '27. Is there a way to think about CapEx?

Mark W. Kowlzan: Yeah

Tom Hassfurther: Yeah.

Mark W. Kowlzan: look to 2027, is there a way to think about CapEx?

Anthony Pettinari: Look to 2027, is there a way to think about CapEx?

Speaker #1: Yeah. Regarding the three gas turbines, we're in the construction phase at the Jackson Mill as we speak. We're waiting on some word on deliveries of some of the electrical switchgear components that will be needed to tie in.

Mark W. Kowlzan: Yeah. Regarding the three gas turbines, we're in construction phase at the Jackson Mill as we speak. We're waiting on some word on deliveries of some of the electrical switchgear components that will be needed to tie in and utilize the gas turbine into the existing system at the mill. The goal would be to have that gas turbine at Jackson up online next year in coordination with their Jackson's annual outage next year, in the early part of the year. The Riverville, Virginia, and the DeRidder, Louisiana units, we're having to go through environmental permitting there. It's kind of like, go figure, we want to put in gas turbines, but it's taking us longer to get state and federal permits than it does to put in a data center. We should have called them data centers.

Mark Kowlzan: Yeah. Regarding the three gas turbines, we're in construction phase at the Jackson Mill as we speak. We're waiting on some word on deliveries of some of the electrical switchgear components that will be needed to tie in and utilize the gas turbine into the existing system at the mill. The goal would be to have that gas turbine at Jackson up online next year in coordination with their Jackson's annual outage next year, in the early part of the year. The Riverville, Virginia, and the DeRidder, Louisiana units, we're having to go through environmental permitting there. It's kind of like, go figure, we want to put in gas turbines, but it's taking us longer to get state and federal permits than it does to put in a data center. We should have called them data centers.

Speaker #1: And utilize the gas turbine into the existing system at the mill. The goal would be to have that gas turbine at Jackson up online next year in coordination with their Jackson's annual outage next year.

Speaker #1: In the early part of the year, and then the Riverville, Virginia, and then the DeRidder, Louisiana units were happening to go through environmental permitting there.

Speaker #1: So it's kind of like, go figure. We want to put in gas turbines, but it's taking us longer to get state and federal permits than it does to put in a data center.

Speaker #1: So, we should have called them data centers. But I'm thinking it's going to be—for the DeRidder and the Riverville units—it's probably going to be more like the first part of 2028 to the mid-part of 2028 to get those two units up and running, based on the timing for the permits from the states.

Mark W. Kowlzan: Got it.

Anthony Pettinari: Got it.

Mark W. Kowlzan: I'm thinking it's going to be for the DeRidder and the Riverville units, it's probably going to be more like the first part of 2028 to the mid part of 2028 to get those two units up and running based on the timing for the permits from the states.

Mark Kowlzan: I'm thinking it's going to be for the DeRidder and the Riverville units, it's probably going to be more like the first part of 2028 to the mid part of 2028 to get those two units up and running based on the timing for the permits from the states.

Speaker #4: Got it, got it. And any kind of directional views on CapEx in ’27 versus ’26?

Anthony Pettinari: Got it. Any kind of directional views on CapEx in 2027 versus 2026?

Speaker #1: I think with the opportunity, we're just starting that discussion right now. And as always, I reserve the right to take advantage of any of the great ideas that we have.

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

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

Speaker #1: But it could be in line with where we've been last year and this year. We've got the gas turbine projects, which will consume a good portion.

Speaker #1: And then we always have good opportunities on the converting side and then the mill side will continue to take advantage of any high-return projects that we identify, which we've got a number of them on the table that we're looking at right now.

Speaker #1: So I would assume that the CapEx is going to stay in this range that we've been at, but these are well-executed high-return opportunities.

Speaker #4: Tom, you got anything to add?

Speaker #2: Well, I would just say that Anthony, one thing to keep in mind relative to CapEx, I mean, this is a very capital-intensive business we're running here.

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

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

Speaker #2: And we need to recapitalize, but just like everything else, the cost of capital keeps going up as well. So it's incumbent on us to make sure that we hit those hurdle rates and that we're able to reinvest in the business.

Speaker #2: And we're working hard at it, but it's you don't have to look very far in this business to see what's going on. And certainly, we're feeling that pinch that's happening in the business in terms of tight board and tight box plant capacity and things like that.

Speaker #2: So we're going to need that going forward.

Speaker #4: Anything else, Anthony? No, that's very helpful. I'll turn it over.

Anthony Pettinari: Got it. No, that's very helpful. I'll turn it over.

Speaker #1: Good deal. Next question, please.

Mark W. Kowlzan: Good deal. Next question, please.

Tom Hassfurther: Good deal. Next question, please.

Speaker #5: Our next question comes from Phil Long from Jefferies. Please go ahead with your question.

Operator 2: Our next question comes from Phil Ng from Jefferies. Please go ahead with your question.

Operator: Our next question comes from Phil Ng from Jefferies. Please go ahead with your question.

Speaker #6: Hey, guys. Just given how tight the market is, hey, good morning. And Tom, I appreciate your brevity. Tight was the operative word here. But just given how tight the market is, can you just give us an update in terms of some of the capacity unlock you guys were planning from a counts, Jackson, I think some of the graph assets?

Phil Ng: Hey, guys. Just given how tight

Thomas A. Hassfurther: Morning, Phil.

Tom Hassfurther: Morning, Phil.

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

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

Speaker #6: And then Mark, I think you kind of hinted potentially there's other things you guys are circling. In terms of unlocking perhaps more capacity on the mill side, give us a little more color in terms of how that's coming along and potentially some more opportunities going forward.

Speaker #1: Yeah. Well, the Jackson Mill project that we've talked about for the last year—it's the new winder project—that's coming on later this year.

Mark W. Kowlzan: Yeah. Well, the Jackson Mill project that we've talked about for the last year, it's the new winder project. That's coming on later this year. We've done a number of things at Jackson, so we'll see the incremental tons that we had talked about coming online. Even more important than that, the Massillon mill and the Riverville mill have delivered as I had hoped they would deliver and with the efforts that we put in over the last few quarters. The incremental tons will continue to flow out of the acquired mills. Jackson project is going to bring on the tons that we committed to. We got a few capital projects that we've identified that we're looking at for next year as an example that would bring on some incremental tons, which is pretty much what we do every year.

Mark Kowlzan: Yeah. Well, the Jackson Mill project that we've talked about for the last year, it's the new winder project. That's coming on later this year. We've done a number of things at Jackson, so we'll see the incremental tons that we had talked about coming online. Even more important than that, the Massillon mill and the Riverville mill have delivered as I had hoped they would deliver and with the efforts that we put in over the last few quarters. The incremental tons will continue to flow out of the acquired mills. Jackson project is going to bring on the tons that we committed to. We got a few capital projects that we've identified that we're looking at for next year as an example that would bring on some incremental tons, which is pretty much what we do every year.

Speaker #1: So we've done a number of things at Jackson, so we'll see the incremental tons that we had talked about coming online. But even more important than that, the Massillon Mill and the Riverville Mill have delivered as I had hoped they would deliver.

Speaker #1: And with the efforts that we put in over the last few quarters, the incremental tons will continue to flow out of the acquired mills.

Speaker #1: And then the Jackson project is going to bring on the tons that we committed to. We've got a few capital projects that we've identified and are looking at for next year, as an example, that would bring on some incremental tons.

Speaker #1: So in which is pretty much what we do every year. But it's the 25,000, 50,000 tons of annual incremental opportunity with some capital spending but that's kind of where we are no one big project, just a number of little things.

Mark W. Kowlzan: It's the 25,000, 50,000 tons of annual incremental opportunity with some capital spending. That's kind of where we are. No one big project, just a number of little things.

Mark Kowlzan: It's the 25,000, 50,000 tons of annual incremental opportunity with some capital spending. That's kind of where we are. No one big project, just a number of little things.

Speaker #6: Okay. Phil, I would—Phil, I...

Thomas A. Hassfurther: Okay.

Phil Ng: Okay.

Thomas A. Hassfurther: Phil, I would add this, Tom. I would add that when I said tight, I was referring to not only our ability to source domestically, but also our ability to source globally. Again, this comes back to the commentary that we're going to have to manage our own and figure out ways to do so. It's a unique situation.

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

Speaker #2: would add this time, I would add that when I said tight, I was referring to not only our ability to source domestically, but also our ability to source globally.

Speaker #2: So again, this comes back to the commentary that we're going to have to we're going to have to manage our own. And figure out ways to do so.

Speaker #2: But it's a unique situation.

Speaker #6: Perfect segue, Tom. To my next question, when I think about your margins returned, they've remained quite good, even with the demand and inflation shock we've seen the last two years.

Phil Ng: Perfect segue, Tom, to my next question. When I think about your margins returns, they've remained quite good even with the demand and inflation shock we've seen the last two years. Your EBITDA margins kind of bottomed out like 19-ish a few years ago. Just looking over a very long duration, your margins have been very tight, call it in the low 20-ish range. Supply-demand certainly feels pretty tight right now, the tightest it's been since the pandemic. Demand, frankly, hasn't even really recovered in a big way yet on the box side. Feels like you got great runway for margins and returns to improve next year. I think my question really here is bigger picture, guys. Is PKG, PCA, and the broader industry in a position to kind of rebase that return margin profile structure a little higher? What's different this time around?

Speaker #6: Your margins, EBITDA margins, kind of bottomed out like 19-ish years ago, but just looking over a very long duration, your margins have been very tight, calling the low 20-ish range.

Speaker #6: Supply and demand certainly feels pretty tight right now—the tightest it's been since the pandemic. And demand, frankly, hasn't even really recovered in a big way yet on the box side.

Speaker #6: So, it feels like you've got great runway for margins and returns, and improvement next year. But I think my question here is really bigger picture, guys.

Speaker #6: Is PKG, PCA, and the broader industry in a position to kind of rebase that return margin profile structure a little higher? What's different this time around?

Speaker #6: And certainly, you guys are spending a lot of capital for these projects to kind of enhance your return profile going forward. But give us a little more color on how you're thinking about this long term.

Phil Ng: Certainly, you guys are spending a lot of capital for these projects to kind of enhance your return profile going forward. Give us kind of a little more color on how you think about this long term.

Speaker #1: Well, let me start this out. And then Tom can take it. But again, just re-reminding everybody that over the last, say, eight or nine years, if you think about year-to-date 2026, we've spent about $6 billion on the box plants and mills to recapitalize build new plants, basically recapitalize the converting footprint and then continue to optimize the mill system and build out the mill system.

Mark W. Kowlzan: Well, let me start this out, and then Tom can take it. Again, just re-reminding everybody that over the last, say, 8 or 9 years, if you think about year to date 2026, we've spent about $6 billion on the box plants and mills to recapitalize, build new plants. Basically, recapitalize the converting footprint and then continue to optimize the mill system and build out the mill system. That's what's enabled us to maintain the double digit, the 20-plus% type of margins we've been in. At the end of the day, we've said this all along, year after year, it doesn't matter how much capital you're willing and able to spend, at some point in time, you got to back that up with price also. Tom?

Mark Kowlzan: Well, let me start this out, and then Tom can take it. Again, just re-reminding everybody that over the last, say, 8 or 9 years, if you think about year to date 2026, we've spent about $6 billion on the box plants and mills to recapitalize, build new plants. Basically, recapitalize the converting footprint and then continue to optimize the mill system and build out the mill system. That's what's enabled us to maintain the double digit, the 20-plus% type of margins we've been in. At the end of the day, we've said this all along, year after year, it doesn't matter how much capital you're willing and able to spend, at some point in time, you got to back that up with price also. Tom?

Speaker #1: So that's what's enabled us to maintain the double-digit the 20-plus percent type of margins we've been in. But at the end of the day, we said this all along, year after year, it doesn't matter how much capital you're willing and able to spend, at some point in time, you got to back that up with price also.

Speaker #1: Tom?

Speaker #2: Yeah, it all comes back to earning your cost of capital.

Thomas A. Hassfurther: Yes. It all comes back to earning your cost of capital. That's what it comes back to. You have to be incredibly disciplined about it. We're very fortunate that we embarked on this approximately 15 years ago, to recapitalize our business, because I'd hate to be in a position right now where suddenly with the cost of capital you got today, to have to do that all over again. We do have good plans and a good runway to continue to do what we need to do to take care of our customers. When I used the term selective and disciplined relative to customer growth, that revolves around some of the things that we're talking about relative to capital and our ability to serve those customers and get paid appropriately for it. That's our mission.

Tom Hassfurther: Yes. It all comes back to earning your cost of capital. That's what it comes back to. You have to be incredibly disciplined about it. We're very fortunate that we embarked on this approximately 15 years ago, to recapitalize our business, because I'd hate to be in a position right now where suddenly with the cost of capital you got today, to have to do that all over again. We do have good plans and a good runway to continue to do what we need to do to take care of our customers. When I used the term selective and disciplined relative to customer growth, that revolves around some of the things that we're talking about relative to capital and our ability to serve those customers and get paid appropriately for it. That's our mission.

Speaker #1: That's what it comes back to. And you have to be very you have to be incredibly disciplined about it. And we're very fortunate that we embarked on this approximately 15 years ago to recapitalize our business because I'd hate to be in a position right now where suddenly at the with the cost of capital, you got today, to have to do that all over again.

Speaker #1: But we've got we do have we do have good plans and a good runway to continue to do what we need to do to take care of our customers.

Speaker #1: But when I said when I used the word term selective and disciplined relative to customer growth, that revolves around some of the things that we're talking about relative to capital and our ability to serve those customers and get paid appropriately for it.

Speaker #1: So that's our mission. It doesn't change, but it is it's a challenging situation as I mentioned, not only domestically, but globally right now. There has not been there has not been some of the same type of investments made that we've made.

Thomas A. Hassfurther: It doesn't change, it's a challenging situation, as I mentioned, not only domestically, globally right now. There has not been some of the same type of investments made that we've made. That's my observation.

Tom Hassfurther: It doesn't change, it's a challenging situation, as I mentioned, not only domestically, globally right now. There has not been some of the same type of investments made that we've made. That's my observation.

Speaker #1: And that's my observation.

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

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

Speaker #4: Just to continue on with what Tom's talking about, if you go back over the 15 or 17-year period, the total capital spend on the mills and box plants and all of these efforts, we've probably spent $10 billion to enhance PCA's capability.

Speaker #4: And you've also heard us talk about we expect an appropriate return for that investment. And we're not ashamed to say that.

Speaker #6: That sounds great, guys. Makes total sense given all the investments you're making. Thank you so much.

Phil Ng: That sounds great, guys. Makes total sense given all the investments you're making. Thank you so much.

Speaker #1: Thanks. Next question, please.

Thomas A. Hassfurther: Thanks. Next question, please.

Tom Hassfurther: Thanks. Next question, please.

Speaker #5: Our next question comes from Hillary Cassinotto from Deutsche Bank Securities. Please go ahead with your question.

Operator 2: Our next question comes from Hillary Cacanando from Deutsche Bank Securities. Please go ahead with your question.

Operator: Our next question comes from Hillary Cacanando from Deutsche Bank Securities. Please go ahead with your question.

Speaker #7: Hi. Hi. Thanks for taking my question. So, obviously, significant pricing strength this year, but with input costs still being high, do you think there will need to be additional price increases later this year?

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

Speaker #7: Just overall as an industry, I'm not saying you specifically, but just as an industry.

Speaker #2: Hillary, we don't comment on price going forward, so we'll leave it at that. You can come to your own conclusions.

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

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

Speaker #7: Okay. Got it. Okay. So last quarter, I think you said Riverville and Massalon facilities are operating at about 10% above pre-acquisition levels. Could you talk about where those facilities are operating today in terms of percentage about above pre-acquisition level?

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

Speaker #7: And are there still meaningful productivity opportunities remaining?

Speaker #1: Yeah. If you went back historically and looked at the Boise acquisitions, the reconfigurations we had done—everything in my career—I’ve always looked at, ultimately, about a 30% improvement in productivity in some cases.

Mark W. Kowlzan: Yeah. If you went back historically and looked at the Boise acquisitions, the reconfigurations we had done, everything in my career, I've always looked at ultimately, about a 30% improvement in productivity. In some cases, we've seen 40%. It depends on how much capital you need to spend and are willing to spend to get the incremental capability out of a mill. There comes a point in time where you have a diminishing return for every dollar spent. We're very prudent in how we do that analysis and how we step forward to these opportunities. It's always about, what do we need to do to supply the converting side of the business and do it in a prudent manner? Just reminding everybody that we're really nine months into the acquisition here. We'll be lapping a full year come September.

Mark Kowlzan: Yeah. If you went back historically and looked at the Boise acquisitions, the reconfigurations we had done, everything in my career, I've always looked at ultimately, about a 30% improvement in productivity. In some cases, we've seen 40%. It depends on how much capital you need to spend and are willing to spend to get the incremental capability out of a mill. There comes a point in time where you have a diminishing return for every dollar spent. We're very prudent in how we do that analysis and how we step forward to these opportunities. It's always about, what do we need to do to supply the converting side of the business and do it in a prudent manner? Just reminding everybody that we're really nine months into the acquisition here. We'll be lapping a full year come September.

Speaker #1: We've seen 40%. It depends on how much capital you need to spend and are willing to spend to get the incremental capability out of a mill.

Speaker #1: There comes a point in time where you have a diminishing return for every dollar spent. And so we're very prudent in how we do that analysis and how we step forward through these opportunities.

Speaker #1: But it's always about what do we need to do to supply the converting side of the business and do it in a prudent manner?

Speaker #1: But just reminding everybody that we're really nine months into the acquisition here. We'll be lapping a full year come September. But we're feeling pretty bullish on the productivity coming out of both Massalon and Riverville.

Mark W. Kowlzan: We're feeling pretty bullish on the productivity coming out of both Massillon and Riverville. Not just the productivity, but the cost to produce those tons has come down significantly. We're looking forward to continuing to ramp up the productivity at both those mills. Stay tuned. I'm not going to give you a number. I'm just going to say that historically, we've always done significantly more than we've already done.

Mark Kowlzan: We're feeling pretty bullish on the productivity coming out of both Massillon and Riverville. Not just the productivity, but the cost to produce those tons has come down significantly. We're looking forward to continuing to ramp up the productivity at both those mills. Stay tuned. I'm not going to give you a number. I'm just going to say that historically, we've always done significantly more than we've already done.

Speaker #1: And not just the productivity, but the cost to produce those tons has come down significantly. And we're looking forward to continuing to ramp up the productivity out of both those mills.

Speaker #1: So stay tuned. I'm not going to give you a number. I'm just going to say that historically, we've always done significantly more than we've already done.

Speaker #7: Got it. Thank you very much.

Hillary Cacanando: Got it. Thank you very much.

Speaker #1: Thank you. Any further questions?

Mark W. Kowlzan: Thank you. Any further questions?

Mark Kowlzan: Thank you. Any further questions?

Speaker #5: We have an additional question. This is from George Stafos from Bank of America Securities. Please go ahead with your follow-up.

Operator 2: We have an additional question. This is from George Staphos from Bank of America Securities. Please go with your follow-up.

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

Speaker #1: Go ahead, George.

Mark W. Kowlzan: Go ahead, George.

Mark Kowlzan: Go ahead, George.

George Staphos: Hi, George. How are you? Just wanted to come back to some of the cost factors in the Q2 to try to get at the earnings power, it's really more of a grab bag, if you will, Mark. The outages that you were not expecting because of utilities, what do you think that cost you? If you can talk about the corporate cost, where it shook out relative to what you were expecting, what was that variance? Also, I think if I did my math correctly, maintenance this year now is looking to be maybe a nickel dime more than, I think, the Q1 guidance. Correct me if I'm wrong there, just want to run down those things. Thanks so much, good luck on the quarter again.

Speaker #2: How are you? I just wanted to come back to some of the cost factors in the second quarter to try to get at the earnings power.

Speaker #2: And it's really more of a grab bag, if you will, Mark. So, the outages that you were not expecting because of utilities—what do you think that cost you?

Speaker #2: If you can talk about the corporate cost, where it shook out relative to what you're expecting, what was that variance? And also, I think if I did my math correctly, maintenance this year now is looking to be maybe a nickel-dime more than I think the first quarter got into.

Speaker #2: Correct me if I'm wrong. I just want to run down those things. Thanks so much, and good luck in the quarter again.

Kent A. Pflederer: Okay, George, it's Kent. You asked for a fair amount. The corporate variance, that was largely a benefits obligation that-

Kent Pflederer: Okay, George, it's Kent. You asked for a fair amount. The corporate variance, that was largely a benefits obligation that.

Speaker #5: Okay, George. It's Kent, yes, for a fair amount. So, the corporate variance—that was largely a benefits obligation that was higher than forecast. It was a mark-to-market obligation on compensation and benefits.

George Staphos: Yeah

George Staphos: Yeah.

Kent A. Pflederer: That was higher than forecast. It was a mark-to-market obligation on compensation and benefits. That was about a $0.05 variance from Q1 to Q2, and that showed up in the corporate segment. I'm sorry, George, I'm taking these out of order. What was the first question there?

Kent Pflederer: That was higher than forecast. It was a mark-to-market obligation on compensation and benefits. That was about a $0.05 variance from Q1 to Q2, and that showed up in the corporate segment. I'm sorry, George, I'm taking these out of order. What was the first question there?

Speaker #5: And that was about a nickel variance from Q1 to Q2, and that showed up in the Corporate segment. And I'm sorry, George.

Speaker #5: I'm taking these out of order. What was the first?

George Staphos: All the utility outages that were unplanned, what did that cost you?

Speaker #2: All the utility outages that were unplanned—what did that cost you, if you had to recognize there’s always stuff that goes wrong in a quarter that you can’t plan for?

Kent A. Pflederer: Yeah.

Kent Pflederer: Yeah.

George Staphos: If you had to recognize there's always stuff that goes wrong in a quarter, but-

George Staphos: If you had to recognize there's always stuff that goes wrong in a quarter, but.

Kent A. Pflederer: Yeah

Kent Pflederer: Yeah.

George Staphos: that you can't plan for.

Speaker #5: I think that probably hit us for about $10,000 tons of production, all in.

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

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

Speaker #2: Okay. And then lastly, maintenance expense this year for the year, relative to prior gut, I want to say it's a nickel-dime higher, but correct me if I'm wrong.

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

Speaker #2: And if you could just affirm what the number is and the variance, that'd be great.

Speaker #5: George, on full-year maintenance for full company, I thought we brought it down a few cents from where we were from 141 for the year including 4Q.

Kent A. Pflederer: George, on full-year maintenance for full company, I thought we brought it down a few cents from where we were. We're at $1.41 for the year, including Q4. I thought we brought it down maybe $0.02 or $0.03 from where we were at the end of Q1. After the call, I'll go double-check that.

Kent Pflederer: George, on full-year maintenance for full company, I thought we brought it down a few cents from where we were. We're at $1.41 for the year, including Q4. I thought we brought it down maybe $0.02 or $0.03 from where we were at the end of Q1. After the call, I'll go double-check that.

Speaker #5: And I thought we brought it down maybe two or three cents from where we were at the end of 1Q. I can clean that up in our after the call, I'll go double-check that.

Speaker #5: But I thought we were maybe a penny or two better than we were coming in to.

George Staphos: Okay.

Kent A. Pflederer: I thought we were maybe a penny or two better than we were coming in to.

Kent Pflederer: I thought we were maybe a penny or two better than we were coming in to.

Speaker #2: Okay. No worries. Probably my miscalculation, but I appreciate the color. Thanks, guys.

George Staphos: Okay. No worries. Probably my miscalculation, but I appreciate the color. Thanks, guys.

Speaker #1: Thank you. Any other questions, please?

Mark W. Kowlzan: Thank you. Any other questions, please?

Mark Kowlzan: Thank you. Any other questions, please?

Speaker #5: Once again, if you would like to ask a question, please press star and one. And sir, in showing no further questions at this time, I'd like to turn the floor back over for closing remarks.

Operator 2: Once again, if you would like to ask a question, please press star and one. Sir, in showing no further questions at this time, I'd like to turn the floor back over for closing remarks.

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

Speaker #1: Thanks, Jamie. And thank you, everyone, for joining us on the call today. And appreciate everybody's time. We look forward to speaking with you in October and giving you the details and wrap-up for 3Q.

Mark W. Kowlzan: Thanks, Jamie. Thank you, everyone, for joining us on the call today, and appreciate everybody's time. We look forward to speaking with you in October and giving you the details and wrap-up for Q3. Take care. Have a good day. Bye-bye.

Mark Kowlzan: Thanks, Jamie. Thank you, everyone, for joining us on the call today, and appreciate everybody's time. We look forward to speaking with you in October and giving you the details and wrap-up for Q3. Take care. Have a good day. Bye-bye.

Speaker #1: Take care. Have a good day. Bye-bye.

Operator 2: With that, ladies and gentlemen, we thank you for joining today's presentation. You may now disconnect your lines.

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

Q2 2026 Packaging Corp of America Earnings Call

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