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Citigroup 11 th Annual Global Paper and Forest Products Conference December 7, 2006 PowerPoint PPT Presentation


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Packaging Corporation of America. Citigroup 11 th Annual Global Paper and Forest Products Conference December 7, 2006. Paul T. Stecko Chairman and CEO. Packaging Corporation of America.

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Citigroup 11 th Annual Global Paper and Forest Products Conference December 7, 2006

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Citigroup 11 th annual global paper and forest products conference december 7 2006

Packaging Corporation of America

Citigroup 11th Annual Global Paper and Forest Products Conference

December 7, 2006

Paul T. Stecko

Chairman and CEO


Citigroup 11 th annual global paper and forest products conference december 7 2006

Packaging Corporation of America

Certain statements in this presentation are forward-looking statements. Forward-looking statements include statements about our future financial condition, our industry and our business strategy. Statements that contain words such as “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 are those identified under the caption “Risk Factors” in PCA’s Form 10K filed with the Securities and Exchange Commission and available at the SEC’s website at “www.sec.gov”.


Citigroup 11 th annual global paper and forest products conference december 7 2006

95%

Smurfit-

International

Koch / GP

Stone

Paper

PCA

Temple-Inland

Weyerhaeuser

Note: Based on company press releases and PCA and analyst estimates

Pure Play in the Right Product

% of Revenues from Containerboard and Corrugated Products


Containerboard imports and exports as a percentage of production

Containerboard Imports and Exportsas a Percentage of Production

Source: AF & PA reports


Containerboard capacity growth u s only

Containerboard Capacity Growth (U.S. Only)

Source: AF & PA Capacity Survey. Includes permanent shutdowns announced after the survey and current indefinite shutdowns as of December 5, 2006.


Citigroup 11 th annual global paper and forest products conference december 7 2006

Recycled Mills -

Key Cost and Investment Drivers

Key Cost Data

’05 – ‘06 %

1992 Avg. Increase

% of Total Cash Cost (4)

U.S. Natural Gas (1)(2)$1.74$7.09307%

(per thousand cubic ft.)

OPEC Crude Oil (1)(3)$17.81$56.37217%

(per barrel)

Electricity (1)$48.30$58.7422%

(per MKWH)

Recycled Fiber(1)$27.00$75.08178%

(per ton)

  • 1. Source of pricing data: U.S. Government Energy Information Administration for U.S. natural gas, OPEC crude oil and electricity prices available as of December 4, 2006, and industry publications for recycled fiber prices which excludes delivery costs of about $20.00 per ton.

  • 2. Wellhead price of natural gas, excluding $1.00 to $1.50 in delivery and transportation costs.

  • Landed cost to U.S.

  • PCA estimate based on Industry publications and cost studies.


Citigroup 11 th annual global paper and forest products conference december 7 2006

Industry Corrugated Products DemandPer Workday(2)

Year-over-Year

% Change (1)

2005 2006

  • Year-over-year change 2005 vs 2004 by month, and January - October 2006

  • Source: Fiber Box Association


Citigroup 11 th annual global paper and forest products conference december 7 2006

Industry Containerboard Inventory & Pricing

000 Tons

Price Per Ton

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Sources: Industry Inventory, Fiber Box Association and American Forest & Paper Association; Linerboard Prices, Industry Publications


Mill system

* Tomahawk

* Filer City

* Counce

Valdosta

*

Mill System

  • Low Cost

  • Primarily Virgin Fiber

  • Fiber and Energy Flexibility

  • Low Natural Gas Usage

  • Lightweight Capability

  • High Integration Level

% ofProduction

2005 Production

(000 tons)

Mill

Linerboard

Counce, TN96641%

Valdosta, GA 47520%

Total Linerboard1,44161%

Corrugating Medium

Tomahawk, WI53123%

Filer City, MI 37516%

Total Medium90639%

Total System2,347100%


Limited exposure to potential increases in wastepaper prices

Solvay Norampac Temple-Inland Koch / GP International Paper

Visy Weyerhaeuser Smurfit-Stone PCA

Source: Industry publications and PCA estimates

Limited Exposure to Potential IncreasesIn Wastepaper Prices

Wastepaper Utilization


Citigroup 11 th annual global paper and forest products conference december 7 2006

Natural Gas

Oil

Natural

Gas

Bark

Bark

Coal

Oil

Coal

2000

4Q ’05 Actual

Mill Purchased Fuel Mix


Citigroup 11 th annual global paper and forest products conference december 7 2006

Corrugated Products

Differentiated Operating Strategy

  • Stand-alone profit centers

  • Value-added products

  • Two-thirds local accounts

  • Over 8,300 customers

  • Top 30 accounts represent

  • only about 30% of sales


Corrugated products system

Lancaster

Corrugated Products System

Watertown

Chelmsford

Colby

Minneapolis

Syracuse

Edmore

Golden Valley

Northampton

Milwaukee

Buffalo

Franklin

Grandville

Plymouth

Burlington

Allentown

Trexlertown

Conrad

Acorn

Akron

Hanover

Marshalltown

Ashland

Omaha

Pittsburgh

Salt Lake City

Gas City

Windsor

Newark

Middletown

Baltimore

Northglenn

Fairfield

Denver

Harrisonburg

Vincennes

Richmond

Roanoke

High Point

Oxnard

Knoxville

Salisbury

Morganton

Los Angeles

Goldsboro

Muskogee

Rutherfordton

Jackson

South Gate

Honea Path

Phoenix

Newberry

Olive

Branch

Atlanta

Plano

Arlington

Garland

Opelika

El Paso

Jackson

Waco

Jacksonville

Winter

Haven

Corrugated plants

Miami

Donna

Sheet/specialty plants


Citigroup 11 th annual global paper and forest products conference december 7 2006

PCA Industry

Corrugated Products Growth (1)

33%

Cumulative % Change

3%

1998 1999 2000 2001 2002 2003 2004 2005 Oct YTD ‘06

(1) Shipments per workday / FBA Data for Industry, and PCA actuals


Citigroup 11 th annual global paper and forest products conference december 7 2006

2005

2002

2004

2003

PCA Box Shipments2005, 2004, 2003 and 2002

MMSF

Per Workday


Citigroup 11 th annual global paper and forest products conference december 7 2006

E-Commerce Retail Sales

$ Billions

4th Quarter

1Q – 3Q Average

Source: U.S. Department of Commerce, except for 4Q ’06 estimated based on current published reports


Citigroup 11 th annual global paper and forest products conference december 7 2006

Interest Cost ($MM) (3)831167324

Interest Cost %1.4%2.5%2.2%4.2%2.0%

Pre-Tax Earnings ($MM)$ 87$ 94$ 58$ 92$ 78

Pre-Tax Earnings %15.3%7.5%7.7%5.3%6.2%

  • Company third quarter earnings press releases and SEC filings.

  • Adjustments were made to the following companies’ reported containerboard segment earnings before interest and taxes per their press releases or SEC filings to eliminate unusual or non-recurring items with adjustments to International Paper of ($13MM) and to Weyerhaeuser of $6MM.

  • Total reported company interest cost was pro-rated based on net sales by segment to reflect segment allocated interest cost.

  • For comparability to other companies for reported segment earnings, PCA results exclude corporate overhead, other expense, net, and solid wood loss from operations. PCA’s containerboard segment sales, EBIT and pre-tax earnings are calculated as follows:

    • PCA net sales$575PCA income from operations$77

    • Less: Solid Wood net sales(8)Add: Corporate overhead, other expense, net,

    • PCA Containerboard sales$567and Solid Wood loss from operations18

    • PCA Containerboard EBIT$95

    • Less: Interest expense, net(8)

    • PCA Containerboard pre-tax earnings$87

Industry Margins – 3Q 2006Containerboard Segment (1)

PCA(4) IP TIN SSCC WY

Sales ($MM)$ 567$ 1,250$ 746$ 1,733$ 1,245

EBIT ($MM) (2)9512574165102

EBIT %16.7%10.0%9.9%9.5%8.2%


Strong credit profile september 2006 data 1

PCA (3) 2.1

PCA (3) 10.4

PCA 50%

Strong Credit Profile September 2006 Data(1)

Debt / Adjusted EBITDA(2) / Debt /

Adjusted EBITDA(2) Adjusted Interest (2) Total Capital

Temple Inland 1.9

Weyerhaeuser 2.9

International Paper3.9

Smurfit Stone 7.0

Temple Inland 43%

Weyerhaeuser 49%

International Paper63%

Smurfit Stone68%

Temple Inland 6.9

Weyerhaeuser6.7

International Paper 4.5

Smurfit Stone1.5

  • Debt / Adjusted EBITDA, Adjusted EBITDA / Adjusted Interest, and Debt / Total Capital are ratios commonly used by the ratings agencies. Total capital is calculated as total debt plus minority interest plus shareholders’ equity. Adjusted EBITDA and adjusted interest are calculated for the twelve-month period ended September 30, 2006 and both exclude unusual or non-recurring items.

  • Adjustments ($ in millions) were made to the following companies’ reported income before interest and taxes per their SEC filings or press releases to eliminate unusual or non-recurring items.

  • International Paper384.0 Temple Inland(63.0)

  • Smurfit Stone 92.0 Weyerhaeuser1,508.0

  • Weyerhaeuser’s reported interest was adjusted to exclude the loss from early debt extinguishment of $15.0 million. No other adjustments were made to the other companies’ reported interest.

  • (3) PCA’s adjusted EBITDA is calculated as follows:

  • Income before interest and taxes, as reported for the period$ 165.1

  • Add: plant closure and severance costs1.3

  • Adjusted EBIT166.4

  • Add: Depreciation, depletion and amortization as reported the period156.4

  • Adjusted EBITDA$ 322.8

Source: Company SEC filings and press releases


Citigroup 11 th annual global paper and forest products conference december 7 2006

Dividend Yield (1)

  • Based on share prices as of December 1, 2006 and announced annual dividend rates


Strategy

Strategy

  • Single Business Focus - Operational Excellence

  • Grow Corrugated Products Volume

    • Internal Growth

    • Acquisitions

  • Enhance Shareholder Value Through Financial and Strategic Flexibility


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