UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
(Exact Name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant's telephone number, including area code
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Emerging growth company |
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Non-accelerated filer |
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Smaller reporting company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 2, 2024, the Registrant had outstanding
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Table of Contents
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PART I |
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Item 1. |
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1 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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26 |
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Item 4. |
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26 |
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PART II |
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Item 1. |
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27 |
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Item 1A. |
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27 |
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Item 2. |
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27 |
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Item 3. |
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27 |
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Item 4. |
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27 |
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Item 5. |
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27 |
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Item 6. |
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28 |
All reports we file with the Securities and Exchange Commission (SEC) are available free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC website at www.sec.gov. We also provide copies of our SEC filings at no charge upon request and make electronic copies of our reports available through our website at www.packagingcorp.com as soon as reasonably practicable after filing such material with the SEC.
i
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Packaging Corporation of America
Consolidated Statements of Income and Comprehensive Income
(unaudited, dollars in millions, except per-share data)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Statements of Income: |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Other expense, net |
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Income from operations |
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Non-operating pension income (expense) |
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Interest expense, net |
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Income before taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Net income per common share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Dividends declared per common share |
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$ |
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$ |
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$ |
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$ |
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Statements of Comprehensive Income: |
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Net income |
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Other comprehensive income, net of tax: |
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Changes in unrealized losses on marketable debt securities, net of |
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Amortization of pension and postretirement plans actuarial loss |
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Other comprehensive income |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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See accompanying condensed notes to unaudited quarterly consolidated financial statements.
1
Packaging Corporation of America
Consolidated Balance Sheets
(unaudited, dollars and shares in millions, except per-share data)
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June 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term marketable debt securities ($ |
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Accounts receivable, net of allowance for credit losses and customer deductions |
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Inventories |
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Prepaid expenses and other current assets |
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Federal and state income taxes receivable |
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Total current assets |
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Property, plant, and equipment, net |
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Goodwill |
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Other intangible assets, net |
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Operating lease right-of-use assets |
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Long-term marketable debt securities |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current maturities of long-term debt |
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$ |
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$ |
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Operating lease obligations |
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Finance lease obligations |
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Accounts payable |
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Dividends payable |
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Accrued liabilities |
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Accrued interest |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt |
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Operating lease obligations |
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Finance lease obligations |
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Deferred income taxes |
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Compensation and benefits |
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Other long-term liabilities |
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Total long-term liabilities |
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Stockholders' equity: |
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Common stock, par value $ |
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Additional paid in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying condensed notes to unaudited quarterly consolidated financial statements.
2
Packaging Corporation of America
Consolidated Statements of Cash Flows
(unaudited, dollars in millions)
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Six Months Ended |
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June 30, |
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2024 |
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2023 |
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Cash Flows from Operating Activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation, depletion, and amortization of intangibles |
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Amortization of deferred financing costs |
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Share-based compensation expense |
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Deferred income tax benefit |
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( |
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Net loss on asset disposals |
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Pension and post-retirement benefits expense, net of contributions |
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Other, net |
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Changes in operating assets and liabilities: |
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(Increase) decrease in assets — |
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Accounts receivable |
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Inventories |
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( |
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Prepaid expenses and other current assets |
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Increase (decrease) in liabilities — |
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Accounts payable |
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Accrued liabilities |
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Federal and state income taxes payable/receivable |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities: |
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Additions to property, plant, and equipment |
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Additions to other long-term assets |
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Proceeds from asset disposals |
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Purchases of available-for-sale debt securities |
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Proceeds from sales of available-for-sale debt securities |
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Proceeds from maturities of available-for-sale debt securities |
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Net cash used for investing activities |
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( |
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Cash Flows from Financing Activities: |
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Repayments of debt and finance lease obligations |
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( |
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( |
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Common stock dividends paid |
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( |
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( |
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Shares withheld to cover employee restricted stock taxes |
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( |
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( |
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Net cash used for financing activities |
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( |
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( |
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Net (decrease) increase in cash and cash equivalents |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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See accompanying condensed notes to unaudited quarterly consolidated financial statements.
3
Packaging Corporation of America
Consolidated Statements of Changes in Stockholders’ Equity
(unaudited, dollars in millions and shares in thousands)
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Common Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Equity |
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Balance at April 1, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common stock withheld and retired |
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( |
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— |
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( |
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( |
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— |
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( |
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Common stock dividends declared |
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— |
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— |
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— |
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( |
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— |
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( |
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Share-based compensation and other |
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— |
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— |
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— |
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Comprehensive income |
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— |
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— |
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— |
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Balance at June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Common Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Equity |
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Balance at April 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common stock withheld and retired to |
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( |
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— |
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( |
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( |
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— |
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( |
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Common stock dividends declared |
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— |
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— |
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— |
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( |
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— |
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( |
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Share-based compensation and other |
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— |
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— |
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— |
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Comprehensive income |
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— |
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— |
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— |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Equity |
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Balance at January 1, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common stock withheld and retired to |
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( |
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— |
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( |
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( |
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— |
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( |
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Common stock dividends declared |
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— |
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— |
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— |
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( |
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— |
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( |
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Share-based compensation and other |
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— |
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— |
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— |
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Comprehensive income |
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— |
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— |
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— |
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Balance at June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Additional |
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Retained |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Equity |
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Balance at January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common stock withheld and retired to |
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( |
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— |
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( |
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( |
) |
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— |
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( |
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Common stock dividends declared |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Share-based compensation and other |
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— |
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— |
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— |
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Comprehensive income |
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— |
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— |
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— |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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See accompanying condensed notes to unaudited quarterly consolidated financial statements.
4
Condensed Notes to Unaudited Quarterly Consolidated Financial Statements
1. Nature of Operations and Basis of Presentation
Packaging Corporation of America ("we," "us," "our," PCA," or the "Company") was incorporated on
We report our business in
The consolidated financial statements of PCA as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 are unaudited but include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of such financial statements. The preparation of the consolidated financial statements involves the use of estimates and accruals. Actual results may vary from those estimates. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete audited financial statements. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023.
The consolidated financial statements include the accounts of PCA and its majority-owned subsidiaries after elimination of intercompany balances and transactions.
2. New Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU provides for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU is effective for fiscal years beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods starting within fiscal years beginning after December 15, 2024 on a retrospective basis. Early adoption is permitted. The Company is currently assessing the impact of the disclosure requirements on its consolidated financial statements.
There were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.
3. Revenue
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. Sales, value added, and other taxes collected concurrently with revenue-producing activities are excluded from revenue.
The following table presents our revenues disaggregated by product line (dollars in millions):
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Packaging |
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$ |
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$ |
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$ |
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$ |
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Paper |
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Corporate and Other |
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Total revenue |
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$ |
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$ |
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$ |
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$ |
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Packaging Revenue
Our containerboard mills produce linerboard and corrugating medium which are papers primarily used in the production of corrugated products. The majority of our containerboard production is used internally by our corrugated products manufacturing facilities. The remaining containerboard is sold to outside domestic and export customers. Our corrugated products manufacturing plants produce a wide variety of corrugated
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packaging products and retail merchandise displays. We sell corrugated products to national, regional and local accounts, which are broadly diversified across industries and geographic locations.
The Company recognizes revenue for its packaging products when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time. Based on our express terms and conditions of the sale of products to our customers, as well as terms included in contractual arrangements with our customers, we do not have an enforceable right of payment that includes a reasonable profit throughout the duration of the contract for products that do not have an alternative use. Revenue is recognized when the product is shipped from the mill or from our manufacturing facility to our customer. Certain customers may receive volume-based incentives, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized.
Certain customers receive a portion of their packaging products as consigned inventory with billing triggered once the customer uses or consumes the designated product. Prior to invoicing, these amounts are handled as unbilled receivables. Total unbilled receivables, which are immaterial in amount, are included in the accounts receivable financial statement caption.
Paper Revenue
We manufacture and sell a range of communication-based papers. Communication papers consist of cut-size office papers, and printing and converting papers.
The Company recognizes revenue for its paper products when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time. Revenue is recognized when the product is shipped from the mill or from our manufacturing facility or distribution center to our customer. Certain customers may receive incentives, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized.
Corporate and Other Revenue
Revenue in this segment primarily relates to Louisiana Timber Procurement Company, L.L.C. ("LTP"), a variable-interest entity that is
The Company recognizes revenue within this segment when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time.
Practical Expedients and Exemption
Shipping and handling fees billed to a customer are recorded on a gross basis in "Net sales" with the corresponding shipping and handling costs included in "Cost of sales" in the concurrent period as the revenue is recorded. We expense sales commissions when incurred because the amortization period is one year or less. Sales commissions are recorded in "Selling, general, and administrative expenses".
We do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.
4. Earnings Per Share
The following table sets forth the computation of basic and diluted income per common share for the periods presented (dollars and shares in millions, except per share data):
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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Numerator: |
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2024 |
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2023 |
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2024 |
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2023 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Less: Distributed and undistributed earnings allocated to participating |
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( |
) |
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( |
) |
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( |
) |
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( |
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Net income attributable to common shareholders |
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$ |
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$ |
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$ |
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$ |
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Denominator: |
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Weighted average basic common shares outstanding |
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Effect of dilutive securities |
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Weighted average diluted common shares outstanding |
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Basic income per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted income per common share |
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$ |
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$ |
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$ |
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$ |
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5. Other Income (Expense), Net
The components of other expense, net, were as follows (dollars in millions):
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Asset disposals and write-offs |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Jackson mill conversion-related activities (a) |
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( |
) |
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( |
) |
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( |
) |
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Facilities closure and other costs (b) |
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( |
) |
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( |
) |
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( |
) |
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DeRidder litigation (c) |
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( |
) |
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( |
) |
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DeRidder litigation insurance recovery (c) |
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Other |
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( |
) |
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( |
) |
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( |
) |
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( |
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Total |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
6. Income Taxes
For the three months ended June 30, 2024 and 2023, we recorded $
For the six months ended June 30, 2024 and 2023, we recorded $
Our current effective tax rate is higher than the federal statutory income tax rate of
During the three and six months ended June 30, 2024 and 2023, there were no significant changes to our uncertain tax positions. For more information, see Note 7, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our 2023 Annual Report on Form 10-K.
7. Inventories
We value our raw materials, work in process, and finished goods inventories using lower of cost, as determined by the average cost method, or net realizable value. Supplies and materials are valued at the first-in, first-out (FIFO) or average cost method.
The components of inventories were as follows (dollars in millions):
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June 30, |
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December 31, |
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2024 |
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2023 |
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Raw materials |
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$ |
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$ |
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Work in process |
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Finished goods |
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Supplies and materials |
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Inventories |
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$ |
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$ |
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8. Property, Plant, and Equipment
The components of property, plant, and equipment were as follows (dollars in millions):
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June 30, |
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December 31, |
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2024 |
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2023 |
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Land and land improvements |
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$ |
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$ |
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Buildings |
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Machinery and equipment |
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Construction in progress |
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Other |
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Property, plant and equipment, at cost |
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Less accumulated depreciation |
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( |
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( |
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Property, plant, and equipment, net |
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$ |
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$ |
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Depreciation expense for the three months ended June 30, 2024 and 2023 was $
At June 30, 2024 and December 31, 2023, purchases of property, plant, and equipment included in accounts payable were $
9. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At both June 30, 2024 and December 31, 2023, we had $
Intangible Assets
Intangible assets are primarily comprised of customer relationships and trademarks and trade names.
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June 30, 2024 |
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December 31, 2023 |
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Weighted |
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Gross |
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Accumulated |
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Weighted |
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Gross |
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Accumulated |
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Customer relationships |
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$ |
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$ |
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$ |
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$ |
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Trademarks and trade names |
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