PACKAGING CORP OF AMERICA

Year Ended December 31, 2025 Compared with Year Ended December 31, 2024

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

(a)

See “Non-GAAP Financial Measures” included in this Item 7 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.

Net Sales

Net sales increased $606 million, or 7.2%, to $8,989 million in 2025, compared to $8,383 million in 2024.

Packaging. Net sales increased $603 million, or 7.8%, to $8,294 million, compared to $7,691 million in 2024, due to higher volume related to the acquired business ($338 million), higher containerboard and corrugated products prices and mix ($332 million) partially offset by lower legacy volume ($67 million). In 2025, export and domestic containerboard outside shipments decreased (7.8%) compared to 2024. Corrugated products shipments from the legacy PCA business were flat per day and in total, compared to 2024. Including the acquired business, shipments were up 6.3% per day and in total. In 2025, our domestic containerboard prices were 5.3% higher, while export prices were 6.2% higher than 2024.

Paper. Net sales decreased $9 million, or (1.5%), to $615 million, compared to $625 million in 2024. The decrease was due to lower volume ($20 million), partially offset by higher prices and mix ($11 million).

Gross Profit

Gross profit increased $107 million in 2025, compared to 2024. The increase was driven primarily by higher prices and mix in the Packaging and Paper segments, higher volumes in the Packaging segment, and lower fiber costs, partially offset by higher operating and converting costs, higher maintenance outage expense, higher fixed and other expense, higher freight expense, and lower volume in the Paper Segment. In 2025, gross profit included $70 million of special items expense related to Wallula mill restructuring, the Greif Acquisition, and corrugated facility closures. In 2024, gross profit included $3 million of special items expense related to Jackson mill conversion-related activities and corrugated facility closure and other costs.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased $24 million in 2025 compared to 2024. The increase was primarily due to higher employee-related expenses and higher depreciation related to the newly acquired business, partially offset by lower bad debt expense.

Other Expense, Net

Other expense, net for the years ended December 31, 2025 and 2024 are set forth below (dollars in millions):

We discuss these items in more detail in Note 7, Other Expense, Net of the Condensed Notes to the Consolidated Financial Statements in “Part II, Item 8. Financial Statements” of this Form 10-K.

Income from Operations

Income from operations increased $6 million, or 0.5%, for the year ended December 31, 2025, compared to 2024. Income from operations in 2025 included $151 million of expense for special items compared to $12 million in 2024. Special items in 2025 included $128 million of expense for Wallula mill restructuring, $33 million of expense related to the Greif Acquisition and $10 million of income related to corrugated facility closures. Special items in 2024 included $10 million for Jackson mill conversion-related activities and $2 million of expense related to corrugated facility closure and other costs.

Packaging. Segment operating income increased $24 million to $1,125 million, compared to $1,102 million in 2024. The increase related primarily to higher containerboard and corrugated products prices and mix ($366 million), lower fiber costs ($59 million), and the impact of newly acquired Greif operations ($8 million), partially offset by higher operating and converting costs ($128 million), higher maintenance outage expenses ($40 million), lower legacy sales and production volumes ($39 million), higher depreciation expense ($33 million), higher fixed and other costs ($22 million), and higher freight expense ($16 million). Special items in 2025 included $128 million of expense for Wallula mill restructuring, $20 million of expense related to the Greif Acquisition and $10 million of income related to corrugated facility closures. Special items in 2024 included $4 million of expense for Jackson mill conversion-related activities and $2 million of expense for corrugated facility closure and other costs.

Paper. Segment operating income was $130 million in 2025 and in 2024. Higher operating costs ($9 million), lower sale sand production volumes ($8 million) higher fiber costs ($2 million), and higher maintenance outage expenses ($1 million), were partially offset by higher prices and mix ($11 million), lower fixed and other costs ($2 million), and lower freight expense ($1 million). Additional benefit was due to no significant special items in 2025 compared to $6 million of expense for Jackson mill conversion-related activities in 2024.

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

During 2025, non-operating pension expense increased $5 million compared to 2024. The increase in non-operating pension expense was related to unfavorable 2024 asset performance partially offset by favorable assumption changes.

Interest expense, net, during 2025 increased $38 million compared to 2024. The increase in interest expense, net was primarily due to higher interest expense in 2025 as a result of the Company’s financing for the Greif Acquisition and the November 2023 debt refinancing and lower interest income as a result of lower interest rates on lower cash balances due to the Greif Acquisition.

During 2025, we recorded $254 million of income tax expense, compared to $259 million of income tax expense during 2024. The effective tax rate for 2025 and 2024 was 24.7% and 24.4%, respectively. The increase in our effective tax rate for 2025 compared to 2024 was primarily due to a lower federal research and development tax credit and lower excess tax benefits associated with employee restricted stock and performance unit vests.

On July 4, 2025, the President signed into law H.R.1, the One Big Beautiful Bill Act (“OBBBA”). For additional information regarding the impact of the OBBBA, see Note 8, Income Taxes, of the Consolidated Financial Statements included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K.