PACKAGING CORP OF AMERICA

Sources and Uses of Cash

Our primary sources of liquidity are net cash provided by operating activities and available borrowing capacity under our revolving credit facility. We ended the year with $529 million of cash and cash equivalents, $139 million of marketable debt securities, and $573 million of unused borrowing capacity under the revolving credit facility, net of letters of credit.

On July 31, 2025, the Company entered into two credit agreements (the “Commercial Credit Agreement” and the “Farm Credit Agreement,” collectively, the “Credit Agreements”). The Commercial Credit Agreement includes a $500 million three-year unsecured term loan facility and a $600 million unsecured revolving credit facility. The Farm Credit Agreement includes a $500 million seven-year unsecured term loan facility. The Credit Agreements were fully drawn upon on September 2, 2025. Additionally, on August 11, 2025, we issued $500 million of 5.20% senior notes due 2035 through a registered public offering and used the net proceeds received from this issuance, together with the net proceeds from our term loan facilities and cash on hand, to finance the Greif Acquisition. For more information on the Greif Acquisition financing, see Note 11, Debt, of the Consolidated Financial Statements included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K as well as the information provided below under “—Financing Activities” for further information. For more information on the Greif Acquisition, see Note 5, Acquisitions of the Consolidated Financial Statements included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K as well as the information provided below under “—Investing Activities” for further information.

Currently, our primary uses of cash are for operations, capital expenditures, acquisitions, debt service, common stock dividends, and repurchases of common stock. We believe that net cash generated from operating activities, cash on hand, available borrowings under our revolving credit facility and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements, including payments of any declared common stock dividends, for the foreseeable future. As our debt or credit facilities become due, we will need to repay, extend or replace such facilities. Our ability to do so will be subject to future economic conditions and financial, business, and other factors, many of which are beyond our control.

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

Operating Activities

Our operating cash flow is primarily driven by our earnings and changes in operating assets and liabilities, such as accounts receivable, inventories, accounts payable and other accrued liabilities, as well as other factors described below. Cash requirements for operating activities are subject to PCA’s operating needs and the timing of collection of receivables and payments of payables and expenses.

During 2025, net cash provided by operating activities was $1,558 million, compared to $1,191 million for 2024, an increase of $367 million. Cash from operations excluding changes in cash used for operating assets and liabilities increased $211 million, primarily due to higher depreciation and higher deferred income tax liabilities in 2025 as discussed above. Cash increased by $156 million due to changes in operating assets and liabilities, primarily due to the following:

a)

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

b)

a net favorable change in inventories primarily resulting from a buildup in Packaging segment inventory levels during 2024 due to rising volume and certain customer inventory on hand requirements; and

c)

a net favorable change in accounts receivable due to a decrease in Packaging segment accounts receivable levels during 2024, which primarily related to higher sales volume and an increase in days sales outstanding in 2024 when compared to 2023. This favorable change was partially offset by an increase in Corporate accounts receivable levels in 2025 compared to 2024 and an increase in Paper segment accounts receivable levels during 2025 compared to 2024 primarily related to an increase in days sales outstanding in 2025 and lower customer accounts receivable balances at the end of 2024.

These favorable changes were partially offset by the following:

d)

a net unfavorable change in accrued liabilities predominantly related to the establishment of accrued liabilities for the DeRidder trial and other litigation in 2024 and reversal of these accrued liabilities during 2025 and the establishment of accruals related to the Wallula mill restructuring in 2025, partially offset by an increase in interest accruals in 2025 compared to 2024 due to the Greif Acquisition financing;

e)

a net unfavorable change in accounts payable primarily related to a decrease in accounts payable levels during 2025 compared to 2024, when accounts payable levels were elevated due to higher sales and slightly lower days payables outstanding when compared to 2023. These unfavorable changes were partially offset by the timing of payments in 2025; and

f)

a net unfavorable change in income taxes during 2025 compared to 2024 due to an increase in income tax receivables in 2025, as income tax payments exceeded income tax accruals.

Investing Activities

We used $2,573 million for investing activities in 2025, compared to $278 million in 2024. We spent $829 million for internal capital investments during 2025, compared to $670 million during 2024. In September 2025, we completed the Greif Acquisition for a purchase price of $1,804 million, net of cash acquired.

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

The details of capital expenditures for property and equipment by segment for the years ended December 31, 2025 and 2024 are included in the table below (dollars in millions).

We expect capital investments in 2026 to be between $800 million and $870 million. These expenditures could increase or decrease as a result of a number of factors, including our financial results, strategic opportunities, future economic conditions, and our regulatory compliance requirements. We currently estimate capital expenditures to comply with environmental regulations will be about $21 million in 2026. Our estimated environmental expenditures could vary significantly depending upon the enactment of new environmental laws and regulations. For additional information, see “Environmental Matters” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Financing Activities

In 2025, net cash provided by financing activities was $859 million, compared to $876 million of cash used for financing activities in 2024, an increase of $1,735 million. We paid $450 million in dividends on our common stock in 2025 compared to $449 million in 2024 and withheld shares to cover $24 million of employee restricted stock taxes in 2025 compared to $26 million in 2024. We repurchased and retired 0.8 million shares of the Company’s common stock for $153 million in 2025. We had no share repurchases in 2024.

On July 31, 2025, the Company entered into the Commercial Credit Agreement and the Farm Credit Agreement. The Commercial Credit Agreement includes a $500 million three-year unsecured term loan facility and a $600 million unsecured revolving credit facility. The Farm Credit Agreements includes a $500 million seven-year unsecured term loan facility. The Credit Agreements were fully drawn upon on September 2, 2025. Additionally, on August 11, 2025, we issued $500 million of 5.20% senior notes due 2035 through a registered public offering and used the net proceeds received from this issuance, together with the net proceeds from our term loan facilities and cash on hand, to finance the Greif Acquisition. The net proceeds received from these financing activities were $1,494 million.

We paid $7 million of issuance costs, excluding lender fees, related to the Greif Acquisition financing, which includes $3 million for the bridge loan, $2 million for the Credit Agreements, and $2 million for the 5.20% senior notes due 2035.

On September 15, 2024, we used the net proceeds received from the November 2023 offering of the 5.70% senior notes due 2033 and cash on hand to repay our outstanding 3.65% senior notes due 2024. The repayment of the old 3.65% notes was $400 million excluding accrued interest.

See Note 11, Debt, of the Consolidated Financial Statements included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K for more information on our debt.