PKG: 10-K Risk Factor Changes

We are subject to both contractual, inflation, and other general cost increases. If we are unable to offset these cost increases by price increases, growth, and/or cost reductions in our operations, these inflation and other general cost increases could have a material adverse effect on our operating cash flows, profitability, and liquidity. We continuously seek opportunities to increase the efficiency of our mills and corrugated products facilities and make extensive capital investments to minimize the impact that inflation has on our cost structure. In 2025, our total company costs including cost of sales (COS) and selling, general, and administrative expenses (SG&A) was $7.7 billion, and excluding non-cash costs (depreciation, depletion and amortization, pension and postretirement expense, and share-based compensation expense) was $7.0 billion. A 1% increase in COS and SG&A costs would increase costs by $77 million and cash costs by $70 million. Certain items of product input costs have historically been subject to more cost volatility including fiber, purchased energy, and chemicals. 26 26 EnergyOur mills represent about 90% of our total purchased fuel costs. In 2025, our Packaging and Paper mills consumed about 101 million MMBTUs of fuel, including internally generated and externally purchased, to produce both steam and electricity. The following table for 2025 provides the total MMBTUs purchased externally by fuel type each quarter and the average cost per MMBTU by fuel type for the year. The cost per MMBTU includes the cost of the fuel plus our transportation and delivery costs. 2025 Fuel Purchased (millions of MMBTUs) 2025 Avg. Fuel Type FirstQuarter SecondQuarter ThirdQuarter FourthQuarter FullYear Cost /MMBTU Natural gas 8.1 6.5 6.2 7.7 28.5 $ 4.28 Purchased bark 1.6 1.9 2.1 2.3 7.9 2.46 Other purchased fuels 0.1 0.1 0.1 0.1 0.4 5.12 Total mills 9.8 8.5 8.4 10.1 36.8 $ 3.90 In addition, the mills purchased 23.97 million CkWh (hundred kilowatt-hours) of electricity in 2025. The purchases by quarter and the average cost per CkWh were as follows: 2025 Purchased Electricity (millions of CkWh) 2025 Avg. FirstQuarter SecondQuarter ThirdQuarter FourthQuarter FullYear Cost /CkWh Purchased electricity 5.6 5.6 6.1 6.7 24.0 $ 7.34 Regulatory and Environmental MattersOur operations are subject to compliance with the laws and regulations in the jurisdictions in which we operate, primarily in the United States. Of particular importance are laws and regulations relating to the environment and health and safety matters.Environmental compliance requirements are a significant factor affecting our business. We employ processes in the manufacture of containerboard, paper, and pulp, which result in various discharges, emissions and waste disposal. These processes are subject to numerous federal, state, local and foreign environmental laws and regulations. We operate and expect to continue to operate, under environmental permits and similar authorizations from various governmental authorities that regulate such discharges, emissions, and waste disposal. The most significant of these laws affecting the Company are:a)Resource Conservation and Recovery Act (RCRA); b)Clean Water Act (CWA); c)Clean Air Act (CAA); d)The Emergency Planning and Community Right-to-Know-Act (EPCRA); e)Toxic Substance Control Act (TSCA); and f)Safe Drinking Water Act (SDWA). We believe that we are currently in material compliance with these and all applicable environmental rules and regulations. Because environmental regulations are constantly evolving, the Company has incurred, and will continue to incur, costs to maintain compliance with these and other environmental laws. The Company works diligently to anticipate and budget for the impact of applicable environmental regulations and does not currently expect that future environmental compliance obligations will materially affect its business or financial condition. For the year ended December 31, 2025, 2024, and 2023, we spent $64 million, $60 million, and $50 million, respectively, to comply with the requirements of these and other environmental laws. Additionally, we had $27 million of environmental capital expenditures in 2025, $19 million in 2024, and $14 million in 2023.Under the CAA, EPA is required to conduct risk assessments for each source category subject to maximum achievable control technologies (MACT) to determine if additional standards are necessary to reduce residual risks from hazardous air pollutants (HAP) emissions. The national emissions standards for hazardous air pollutants (NESHAP) for Chemical Recovery Combustion Sources at pulp mills is due for residual risk and technology review (RTR). In November 2024, PCA was one of seven companies selected by EPA to respond to a questionnaire about operations and equipment to support EPA’s requirement to revise existing Pulp MACT standards. As part of the questionnaire, EPA is requiring companies, including PCA, to undertake pollutant testing scheduled to begin Spring 2026. Five of PCA’s mills will participate in the risk assessment. Energy Our mills represent about 90% of our total purchased fuel costs. In 2025, our Packaging and Paper mills consumed about 101 million MMBTUs of fuel, including internally generated and externally purchased, to produce both steam and electricity. The following table for 2025 provides the total MMBTUs purchased externally by fuel type each quarter and the average cost per MMBTU by fuel type for the year. The cost per MMBTU includes the cost of the fuel plus our transportation and delivery costs.