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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

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 1-15399

 

img3306624_0.jpg 

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

36-4277050

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

 

 

1 North Field Court, Lake Forest, Illinois

 

60045

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant's telephone number, including area code

(847) 482-3000

 

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

 

Large accelerated filer

Accelerated filer

Emerging growth company

 

 

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

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 April 29, 2022 the Registrant had outstanding 93,701,172 shares of common stock, par value $0.01 per share.

 

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

Common Stock, par value $0.01 per share

PKG

New York Stock Exchange

 

 


Table of Contents

 

 

 

PART I

 

 

 

 

 

Item 1.

 

Financial Statements

1

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

24

 

 

 

 

Item 4.

 

Controls and Procedures

24

 

 

 

 

 

 

PART II

 

 

 

 

 

Item 1.

 

Legal Proceedings

25

 

 

 

 

Item 1A.

 

Risk Factors

25

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

25

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

25

 

 

 

 

Item 4.

 

Mine Safety Disclosures

25

 

 

 

 

Item 5.

 

Other Information

25

 

 

 

 

Item 6.

 

Exhibits

26

 

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)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Statements of Income:

 

 

 

 

 

 

Net sales

 

$

2,136.4

 

 

$

1,807.2

 

Cost of sales

 

 

(1,603.2

)

 

 

(1,403.5

)

Gross profit

 

 

533.2

 

 

 

403.7

 

Selling, general and administrative expenses

 

 

(161.1

)

 

 

(145.0

)

Other expense, net

 

 

(15.6

)

 

 

(20.4

)

Income from operations

 

 

356.5

 

 

 

238.3

 

Non-operating pension income

 

 

3.6

 

 

 

4.8

 

Interest expense, net

 

 

(19.8

)

 

 

(23.5

)

Income before taxes

 

 

340.3

 

 

 

219.6

 

Provision for income taxes

 

 

(86.1

)

 

 

(53.1

)

Net income

 

$

254.2

 

 

$

166.5

 

Net income per common share:

 

 

 

 

 

 

Basic

 

$

2.71

 

 

$

1.75

 

Diluted

 

$

2.70

 

 

$

1.75

 

Dividends declared per common share

 

$

1.00

 

 

$

1.00

 

Statements of Comprehensive Income:

 

 

 

 

 

 

Net income

 

$

254.2

 

 

$

166.5

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

Changes in unrealized losses on marketable debt securities,
   net of tax of $
0.4 million and $0.0 million for 2022 and 2021,
   respectively

 

 

(1.2

)

 

 

(0.1

)

Amortization of pension and postretirement plans actuarial loss and
   prior service cost, net of tax of ($
0.3) million and ($0.8) million for
   2022 and 2021, respectively

 

 

1.2

 

 

 

2.5

 

Other comprehensive income

 

 

 

 

 

2.4

 

Comprehensive income

 

$

254.2

 

 

$

168.9

 

 

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)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

628.6

 

 

$

618.7

 

Short-term marketable debt securities

 

 

81.3

 

 

 

86.1

 

Accounts receivable, net of allowance for credit losses and customer deductions
   of $
20.0 million and $14.3 million as of March 31, 2022 and December 31, 2021,
   respectively

 

 

1,140.7

 

 

 

1,071.0

 

Inventories

 

 

941.2

 

 

 

902.5

 

Prepaid expenses and other current assets

 

 

77.6

 

 

 

47.0

 

Federal and state income taxes receivable

 

 

 

 

 

7.4

 

Total current assets

 

 

2,869.4

 

 

 

2,732.7

 

Property, plant, and equipment, net

 

 

3,670.7

 

 

 

3,529.0

 

Goodwill

 

 

923.1

 

 

 

923.5

 

Other intangible assets, net

 

 

298.2

 

 

 

308.4

 

Operating lease right-of-use assets

 

 

264.4

 

 

 

238.3

 

Long-term marketable debt securities

 

 

68.5

 

 

 

60.0

 

Other long-term assets

 

 

43.5

 

 

 

44.9

 

Total assets

 

$

8,137.8

 

 

$

7,836.8

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Operating lease obligations

 

$

69.7

 

 

$

67.1

 

Finance lease obligations

 

 

1.8

 

 

 

1.7

 

Accounts payable

 

 

546.7

 

 

 

452.4

 

Dividends payable

 

 

96.9

 

 

 

96.3

 

Accrued liabilities

 

 

188.6

 

 

 

255.0

 

Accrued interest

 

 

26.0

 

 

 

12.3

 

Federal and state income taxes payable

 

 

38.2

 

 

 

 

Total current liabilities

 

 

967.9

 

 

 

884.8

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt

 

 

2,472.0

 

 

 

2,471.5

 

Operating lease obligations

 

 

202.6

 

 

 

179.3

 

Finance lease obligations

 

 

12.2

 

 

 

12.7

 

Deferred income taxes

 

 

488.8

 

 

 

465.9

 

Compensation and benefits

 

 

157.0

 

 

 

157.4

 

Other long-term liabilities

 

 

58.0

 

 

 

58.0

 

Total long-term liabilities

 

 

3,390.6

 

 

 

3,344.8

 

Commitments and contingent liabilities (Note 20)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, par value $0.01 per share, 300.0 million shares authorized, 93.7 million
   and
93.5 million shares issued as of March 31, 2022 and December 31, 2021,
   respectively

 

 

0.9

 

 

 

0.9

 

Additional paid in capital

 

 

591.7

 

 

 

579.4

 

Retained earnings

 

 

3,261.9

 

 

 

3,102.1

 

Accumulated other comprehensive loss

 

 

(75.2

)

 

 

(75.2

)

Total stockholders' equity

 

 

3,779.3

 

 

 

3,607.2

 

Total liabilities and stockholders' equity

 

$

8,137.8

 

 

$

7,836.8

 

 

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

2


Packaging Corporation of America

Consolidated Statements of Cash Flows

(unaudited, dollars in millions)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

254.2

 

 

$

166.5

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation, depletion, and amortization of intangibles

 

 

109.7

 

 

 

100.8

 

Amortization of deferred financing costs

 

 

0.5

 

 

 

0.7

 

Share-based compensation expense

 

 

12.3

 

 

 

11.6

 

Deferred income tax provision

 

 

22.9

 

 

 

12.0

 

Loss on asset disposals

 

 

2.8

 

 

 

3.7

 

Pension and post-retirement benefits expense, net of contributions

 

 

0.8

 

 

 

(0.2

)

Other, net

 

 

3.8

 

 

 

3.7

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Increase in assets —

 

 

 

 

 

 

Accounts receivable

 

 

(69.6

)

 

 

(76.2

)

Inventories

 

 

(38.8

)

 

 

(11.7

)

Prepaid expenses and other current assets

 

 

(30.1

)

 

 

(19.0

)

Increase (decrease) in liabilities —

 

 

 

 

 

 

Accounts payable

 

 

63.6

 

 

 

(12.3

)

Accrued liabilities

 

 

(52.4

)

 

 

(15.8

)

Federal and state income taxes payable / receivable

 

 

45.6

 

 

 

27.8

 

Net cash provided by operating activities

 

 

325.3

 

 

 

191.6

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Additions to property, plant, and equipment

 

 

(213.2

)

 

 

(85.1

)

Additions to other long-term assets

 

 

(2.4

)

 

 

(1.3

)

Proceeds from asset disposals

 

 

0.2

 

 

 

0.7

 

Purchases of marketable debt securities

 

 

(36.4

)

 

 

(31.4

)

Proceeds from sales of marketable debt securities

 

 

7.8

 

 

 

11.4

 

Proceeds from maturities of marketable debt securities

 

 

22.8

 

 

 

18.2

 

Net cash used for investing activities

 

 

(221.2

)

 

 

(87.5

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Repayments of debt and finance lease obligations

 

 

(0.4

)

 

 

(0.4

)

Common stock dividends paid

 

 

(93.6

)

 

 

(94.8

)

Shares withheld to cover employee restricted stock taxes

 

 

(0.2

)

 

 

(0.1

)

Net cash used for financing activities

 

 

(94.2

)

 

 

(95.3

)

Net increase in cash and cash equivalents

 

 

9.9

 

 

 

8.8

 

Cash and cash equivalents, beginning of period

 

 

618.7

 

 

 

974.6

 

Cash and cash equivalents, end of period

 

$

628.6

 

 

$

983.4

 

 

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)

 

 

 

Common Stock

 

 

Additional
Paid in

 

 

Retained

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at January 1, 2022

 

 

93,539

 

 

$

0.9

 

 

$

579.4

 

 

$

3,102.1

 

 

$

(75.2

)

 

$

3,607.2

 

Common stock withheld and retired
   to cover taxes on vested stock awards

 

 

(1

)

 

 

 

 

 

 

 

 

(0.2

)

 

 

 

 

 

(0.2

)

Common stock dividends declared

 

 

 

 

 

 

 

 

 

 

 

(94.2

)

 

 

 

 

 

(94.2

)

Share-based compensation and other

 

 

166

 

 

 

 

 

 

12.3

 

 

 

 

 

 

 

 

 

12.3

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

254.2

 

 

 

 

 

 

254.2

 

Balance at March 31, 2022

 

 

93,704

 

 

$

0.9

 

 

$

591.7

 

 

$

3,261.9

 

 

$

(75.2

)

 

$

3,779.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid in

 

 

Retained

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at January 1, 2021

 

 

94,830

 

 

$

0.9

 

 

$

554.4

 

 

$

2,835.5

 

 

$

(144.5

)

 

$

3,246.3

 

Common stock withheld and retired to
   cover taxes on vested stock awards

 

 

(1

)

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

 

 

(0.1

)

Common stock dividends declared

 

 

 

 

 

 

 

 

 

 

 

(95.5

)

 

 

 

 

 

(95.5

)

Share-based compensation and other

 

 

165

 

 

 

0.1

 

 

 

11.6

 

 

 

(0.1

)

 

 

 

 

 

11.6

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

166.5

 

 

 

2.4

 

 

 

168.9

 

Balance at March 31, 2021

 

 

94,994

 

 

$

1.0

 

 

$

566.0

 

 

$

2,906.3

 

 

$

(142.1

)

 

$

3,331.2

 

 

 

 

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 January 25, 1999. In April 1999, PCA acquired the containerboard and corrugated packaging products business of Pactiv Corporation ("Pactiv"), formerly known as Tenneco Packaging, Inc. We are a large diverse manufacturer of both packaging and paper products. We are headquartered in Lake Forest, Illinois and we operate primarily in the United States.

We report our business in three reportable segments: Packaging, Paper, and Corporate and Other. Our Packaging segment produces a wide variety of containerboard and corrugated packaging products. The Paper segment manufactures and sells a range of communication-based papers. Corporate and Other includes support staff services and related assets and liabilities, transportation assets, and activity related to other ancillary support operations. For more information about our segments, see Note 19, Segment Information.

Our Jackson, Alabama mill had historically operated as an uncoated freesheet ("UFS") paper mill, with its results of operations reported in our Paper segment. During the fourth quarter of 2020, in order to meet strong packaging demand and maintain appropriate inventory levels, we temporarily began producing linerboard on the No. 3 machine at our Jackson, Alabama mill. In the first quarter of 2021, we announced the discontinuation of production of UFS paper grades on the machine and the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities. In the third quarter of 2021, we began producing corrugating medium on the No. 1 machine at the Jackson mill (which had produced UFS paper in the past) to help satisfy our demand for containerboard, build necessary inventories, and evaluate the capability of the machine to produce containerboard on a cost-effective basis. For the periods presented in this Form 10-Q, operating results for the Jackson mill are included in both the Packaging and Paper segments, as appropriate.

In these consolidated financial statements, certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with the current period presentation.

The consolidated financial statements of PCA as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 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 months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021.

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 October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Under current business combination guidance in ASC 805, Business Combinations, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date, whereas the new guidance requires the acquirer to recognize such assets and liabilities as if it had originated the contracts. The ASU is effective for annual periods beginning after December 15, 2022, and interim periods within those annual periods, with early adoption permitted. The amended guidance should be applied on a prospective basis to any business combinations that occur on or after the adoption date. The Company is currently evaluating the impact of this guidance, but does not expect the guidance to have a significant impact on the Company's financial position, results of operations, or cash flow.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The amendments in this Update are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01, which extends some of the optional expedients under Topic 848 to include derivative contracts impacted by discounting transition. Companies can apply the ASU immediately. The ASU can be adopted on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to any new modification from any date within an interim period that includes or is subsequent to the date of the issuance of a final Update, up to the date that financial statements are available to be issued. The optional guidance will only be available until December 31, 2022. While the Company’s fixed-rate outstanding debt will not be impacted by the reference rate reform, the Company is still evaluating the impact of this guidance on its revolving credit facility, as the interest rate associated with any future borrowings against the revolving credit facility is based on LIBOR. Overall, the Company does not expect the guidance to have a significant impact on its financial position or related disclosures.

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.

5


 

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):

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Packaging

 

$

1,964.5

 

 

$

1,623.6

 

Paper

 

 

153.5

 

 

 

164.6

 

Corporate and Other

 

 

18.4

 

 

 

19.0

 

Total revenue

 

$

2,136.4

 

 

$

1,807.2

 

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 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 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.

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 50% owned by PCA and 50% owned by Boise Cascade Company ("Boise Cascade"). PCA is the primary beneficiary of LTP and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements. See Note 18, Transactions With Related Parties, for more information related to LTP.

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.

 

6


4. Acquisitions

Advance Packaging Acquisition

On December 11, 2021, PCA acquired the assets of Advance Packaging Corporation ("Advance Packaging"), an independent corrugated products producer, for $194.9 million, including working capital adjustments. Assets acquired include full-line corrugated products operations in Grand Rapids, Michigan. Advance Packaging is a full-service producer of corrugated packaging products, including graphics, retail displays, sustainable shipping containers, and protective packaging. Advance Packaging's financial results are included in the Packaging segment from the date of acquisition.

The Company accounted for the Advance Packaging acquisition using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The total purchase price has been preliminarily allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values, as follows (dollars in millions):

 

 

 

12/31/2021 Allocation

 

 

Adjustments

 

 

Revised Allocation

 

Goodwill

 

$

60.0

 

 

$

(0.4

)

 

$

59.6

 

Other intangible assets

 

 

50.2

 

 

 

 

 

 

50.2

 

Property, plant and equipment

 

 

66.7

 

 

 

0.4

 

 

 

67.1

 

Other net assets

 

 

18.0

 

 

 

 

 

 

18.0

 

Net assets acquired

 

$

194.9

 

 

$

 

 

$

194.9

 

The purchase price allocation above is preliminary and is subject to finalization of various valuations and assessments, primarily related to intangible assets. Our current estimates and assumptions may change as more information becomes available. We expect to finalize the valuation within the 12-month period following the acquisition date.

Goodwill is calculated as the excess of the purchase price over the fair value of the net assets acquired. Among the factors that contributed to the recognition of goodwill were Advance Packaging's commitment to continuous improvement and synergies, as well as the expected increases in PCA's containerboard integration levels. Goodwill is deductible for tax purposes.

Other intangible assets, primarily customer relationships, were assigned an estimated weighted average useful life of 9.7 years.

Property, plant, and equipment were assigned estimated useful lives ranging from one to 20 years.

 

5. 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):

 

 

 

Three Months Ended

 

 

 

March 31,

 

Numerator:

 

2022

 

 

2021

 

Net income

 

$

254.2

 

 

$

166.5

 

Less: Distributed and undistributed earnings allocated to participating
   securities

 

 

(2.0

)

 

 

(1.3

)

Net income attributable to common shareholders

 

$

252.2

 

 

$

165.2

 

Denominator:

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

 

92.9

 

 

 

94.2

 

Effect of dilutive securities

 

 

0.4

 

 

 

0.4

 

Weighted average diluted common shares outstanding

 

 

93.3

 

 

 

94.6

 

Basic income per common share

 

$

2.71

 

 

$

1.75

 

Diluted income per common share

 

$

2.70

 

 

$

1.75

 

 

7


6. Other Expense, Net

The components of other income (expense), net, were as follows (dollars in millions):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Asset disposals and write-offs

 

$

(12.7

)

 

$

(10.4

)

Jackson mill conversion-related activities (a)

 

 

(0.4

)

 

 

(0.5

)

Acquisition-related, facilities closure and other costs (b)

 

 

(0.4

)

 

 

(2.1

)

Other

 

 

(2.1

)

 

 

(7.4

)

Total

 

$

(15.6

)

 

$

(20.4

)

 

(a)
Includes charges related to the announced discontinuation of production of uncoated freesheet paper grades on the No. 3 machine at the Jackson, Alabama mill in the first quarter of 2021 associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

 

(b)
For 2022, includes charges consisting of closure costs related to corrugated products facilities and acquisition and integration costs related to the December 2021 Advance Packaging Corporation acquisition. For 2021, includes charges consisting of closure costs related to corrugated products facilities.

7. Income Taxes

For the three months ended March 31, 2022 and 2021, we recorded $86.1 million and $53.1 million of income tax expense and had an effective tax rate of