Packaging Corporation of America (NYSE: PKG) today reported first quarter 2022 net income of $254 million, or $2.70 per share, and net income of $256 million, or $2.72 per share, excluding special items. First quarter net sales were $2.1 billion in 2022 and $1.8 billion in 2021.

Reported earnings in the first quarter of 2022 include special items primarily for certain costs at the Jackson, AL mill for paper-to-containerboard conversion related activities.

Excluding special items, the $.95 per share increase in first quarter 2022 earnings compared to the first quarter of 2021 was driven primarily by higher prices and mix $1.83 and volume $.23 in the Packaging segment, higher prices and mix in the Paper segment $.15, a lower share count resulting from share repurchases $.03, and lower interest expense $.02. These items were partially offset by higher operating costs ($.71), higher freight and logistics expenses ($.27), higher converting costs ($.11), higher depreciation expense ($.07), lower volume in the Paper segment ($.06), higher scheduled outage expenses ($.05), a higher tax rate ($.03), and other costs ($.01).

Results were $.22 above first quarter guidance of $2.50 per share primarily due to higher prices and mix and higher volumes in both the Packaging and Paper segments, operating cost improvements from efficiency and usage initiatives, and favorable weather conditions.

Financial information by segment is summarized below and in the schedules with this release.

In the Packaging segment, total corrugated products shipments with one additional workday were up 2.9% and shipments per day were up 1.3% over last year’s first quarter. Containerboard production was 1,233,000 tons, and containerboard inventory was down 4,000 tons from the fourth quarter of 2021 and up 23,000 tons compared to the first quarter of 2021. In the Paper segment, sales volume was up 2,000 tons from the fourth quarter of 2021 and down 32,000 tons compared to the first quarter of 2021.

Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “Packaging segment demand remained very strong in the first quarter as we set a new all-time record for total box shipments and new first quarter records for box shipments per day and for containerboard volume. We also had excellent execution of implementing previously announced price increases in both our Packaging and Paper segments. The scheduled maintenance outages in our mills went well, and both machines at our Jackson, Alabama mill produced containerboard the entire quarter. However, with strong internal and external demand, we ended the quarter once again with containerboard inventory below our targeted and historical levels. Although we still face unprecedented inflationary headwinds, our incessant focus on operational efficiency, cost reduction initiatives, and capital project execution contributes greatly to minimize this impact and maximize our operating margins.”

“Looking ahead as we move from the first and into the second quarter,” Mr. Kowlzan added, “we expect demand in our Packaging segment to remain very strong, and we will continue implementing the previously announced price increases in both our Packaging and Paper segments. Scheduled outage costs, which include an outage at our International Falls mill that will result in lower Paper segment sales volume, will be higher compared to the first quarter. We also anticipate continued inflation with freight and logistics expenses as well as most of our operating costs, although recycled fiber prices should be slightly lower. Considering these items, we expect second quarter earnings of $2.83 per share.”

We present various non-GAAP financial measures in this press release, including diluted EPS excluding special items, segment income excluding special items and EBITDA excluding special items. We provide information regarding our use of non-GAAP financial measures and reconciliations of historical non-GAAP financial measures presented in this press release to the most comparable measure reported in accordance with GAAP in the schedules to this press release. We present our earnings expectation for the upcoming quarter excluding special items as special items are difficult to predict and quantify and may reflect the effect of future events. We currently anticipate special items in the second quarter of 2022 to include accounting charges, fees, and expenses for paper-to-containerboard conversion related activities at the Jackson, AL mill. We do not currently expect any additional significant special items during the second quarter; however, additional special items may arise due to second quarter events.

PCA is the third largest producer of containerboard products and a leading producer of uncoated freesheet paper in North America. PCA operates eight mills and 90 corrugated products plants and related facilities.

Some of the statements in this press release are forward-looking statements. Forward-looking statements include statements about our future earnings and financial condition, the impact of the COVID-19 pandemic on our business, expected benefits from acquisitions and restructuring activities, our industry and our business strategy. Statements that contain words such as “will”, “should”, “anticipate”, “believe”, “expect”, “intend”, “estimate”, “hope” or similar expressions, are forward-looking statements. These forward-looking statements are based on the current expectations of PCA. Because forward-looking statements involve inherent risks and uncertainties, the plans, actions and actual results of PCA could differ materially. Among the factors that could cause plans, actions and results to differ materially from PCA’s current expectations include the following: the impact of the COVID-19 pandemic on the health of our employees and on the employees of our suppliers and customers, on our ability to operate our business, and on economic conditions affecting our business and demand for our products; the impact of general economic conditions; conditions in the paper and packaging industries, including competition, product demand and product pricing; fluctuations in wood fiber and recycled fiber costs; fluctuations in purchased energy costs; the possibility of unplanned outages or interruptions at our principal facilities; and legislative or regulatory requirements, particularly concerning environmental matters, as well as those identified under Item 1A. Risk Factors in PCA’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission and available at the SEC’s website at “www.sec.gov”.

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