Packaging Corporation of America History

Address:

1900 West Field Court
Lake Forest, Illinois 60045
U.S.A.

Telephone: (847) 482-3000
Toll Free: 800-456-4725
Fax: (847) 482-4738

Public Company
Incorporated: 1959
Employees: 7,900
Sales: $1.7 billion (2001)
Stock Exchanges: New York
Ticker Symbol: PKG
NAIC: 322211 Corrugated and Solid Fiber Box Manufacturing

Company Perspectives:

For over 100 years, we have earned our reputation as an industry leader with a commitment to service that is second to none. Creating the right packaging solution starts with a dynamic, customer-focused operating principal united with a wealth of resources, quality products, and outstanding people. At Packaging Corporation of America, that's precisely what we offer you. We build long-term relationships by doing what's right for our customers instead of what's easy for us. Our approach focuses on strategies that add value and support growth in your business. We maintain your trust by keeping the promises we make. Our commitment to service is supported by a wide range of quality products, a nationwide network of vertically-integrated resources and most importantly, employees who are dedicated to customers.

Key Dates:

1959:: PCA is formed from the merger of Central Fiber Products Company, American Box Board Company, and Ohio Boxboard Company.
1961:: The company lists on the New York Stock Exchange.
1965:: Tennessee Gas Transmission Corporation--whose name is later changed to Tenneco Inc.--acquires PCA.
1970:: PCA gains full ownership of Tennessee River Pulp & Paper Co.
1976:: The firm is found guilty of violating antitrust laws by a federal grand jury.
1984:: Ekco Products Inc. is purchased.
1991:: PCA acquires certain holdings of the Georgia-Pacific firm.
1995:: The company changes its name to Tenneco Packaging.
1999:: Tenneco Packaging sells its containerboard and corrugated packaging business to Madison Dearborn Partners Inc.; the new firm adopts the name Packaging Corporation of America.
2000:: PCA goes public.

Company History:

Packaging Corporation of America (PCA), once a subsidiary of Tenneco Inc., operates as the sixth largest manufacturer of containerboard and corrugated packing products in the United States. During 2001, PCA produced 2.1 million tons of containerboard and shipped 26.1 billion square feet of corrugated products. The firm has 65 facilities that produce corrugated products, including shipping containers, multicolored boxes and displays used in retail merchandising, and custom boxes used in both the food and agricultural industries. The company converts more than 80 percent of its containerboard into finished corrugated containers for its customers. PCA operated as Tenneco Packaging from 1995 to 1999. During 1999, the containerboard and corrugated packaging business was sold to Madison Dearborn Partners Inc. under the PCA name. During 2000, PCA went public on the New York Stock Exchange.

The Formation of PCA: 1959

PCA was formed in 1959 through the merger of three established packaging companies. Each of those companies, Central Fiber Products Company, American Box Board Company, and Ohio Boxboard Company, was already a major entity in the packaging industry by the time of the merger. Both Ohio Boxboard Company, of Rittman, Ohio, and American Box Board Company (originally called American Paper Box Company), located in Grand Rapids, Michigan, were founded in 1903. Each had enjoyed half a century of steady growth prior to the merger. Central Fiber Products Company, based in Quincy, Illinois, had itself been assembled through the consolidation of several smaller packaging firms. It was formed in 1931 upon the merger of North Star Mill, North Star Egg Case Company, Carey Straw Mill, H.T. Cherry Company, and Indiana Board and Filler Company.

By forming PCA, the merger instantly created a major force in the paperboard and packaging industry. The combined company brought together under one corporate umbrella a network of more than 50 plants and 7,000 employees, with facilities sprawling from the East Coast out to the Rockies. Within the first few years of PCA's existence, it was the sixth largest paperboard producer, the fourth largest maker of cartons or folding boxes, and the tenth largest manufacturer of corrugated containerboard in the United States. One of its facilities, a plant located in Rittman, Ohio, was the largest integrated carton factory in the world.

In the first years after the merger, PCA took steps to cut costs by eliminating redundant operations. Corporate airplanes and other unnecessary assets were sold off, and production was reallocated to take advantage of the company's most efficient facilities. Operations were organized into four divisions: Paperboard, Carton, Container, and Molded Pulp. For 1960 PCA had sales of $138 million. The following year, the company made a move toward self-reliance by purchasing a 52 percent interest in Tennessee River Pulp & Paper Co. Thereafter, Tennessee River provided PCA with most of the kraft linerboard it would need to supply its corrugated container plants. Also in 1961 PCA was listed on the New York Stock Exchange.

Throughout the early 1960s, PCA struggled to improve its profitability as sales remained flat and profits became more elusive, in large part due to depressed prices and stiff competition among container companies. The company was also impaired by a lengthy strike at its Rittman plant. Nevertheless, the company pressed forward with its expansion plans, and in 1962 PCA acquired container plants in Baltimore, San Antonio, and the Dallas-Fort Worth area. In 1963 PCA president U.S. Goodspeed was elected vice-chairman of the company's board of directors. He was replaced as president by J.N. Andrews, who had joined Ohio Boxboard as a salesman in 1936. At the same time, W.D.P. Carey, PCA's chairman and its first president, was named chief executive officer.

Paperboard prices stabilized somewhat in 1964, and PCA was able to gain ground, posting its best earnings in nearly a decade. By this time, the company accounted for about 3 percent of all the paperboard produced in the United States. Of its $145 million in sales that year, 45 percent came from corrugated and solid fiber containers, 24 percent from folding cartons, 22 percent from paperboard mill products, and the rest from molded pulp and molded plastic products. Nearly three-fourths of PCA's paperboard output was converted into containers. The rest was sold to other companies for use in their manufacturing operations.

Becoming a Subsidiary of Tenneco: 1965

In 1965 PCA was acquired in a stock deal by Tennessee Gas Transmission Corporation, now known as Tenneco Inc. As a subsidiary of Tenneco, PCA continued to expand throughout the 1960s. By 1970 the company was operating 55 U.S. facilities. That year, PCA gained full ownership of Tennessee River Pulp & Paper by buying out the interest formerly held by partners Bell Fibre Products, St. Regis Paper Co., and Tennessee River's former president, G.W.E. Nicholson. The purchase gave PCA full access to Tennessee River's cutting rights on 300,000 acres of timberland in Tennessee, Alabama, and Mississippi. PCA also opened its 34th corrugated container plant, located in Burlington, Wisconsin, that year.

By 1972 PCA had annual revenues of $286 million, which represented about 9 percent of Tenneco's total. In early 1973, the company announced that it would begin a $40 million expansion program to boost capacity at its existing paperboard and container plant facilities. The bulk of the spending was to take place at Tennessee River's Counce mill in Counce, Tennessee. Later that year, S.F. Allison, PCA's president and chief executive officer, announced a reorganization of both the company's product line divisions and its management structure. The number of divisions within the company was reduced from four to the following three: the containerboard products division, including the container plants and the company's Filer City, Michigan, containerboard mill; the paperboard products division, including its carton plants and five paperboard mills; and the general products division, newly formed to include the company's plastics and molded products operations as well as facilities involved in the production of storage units. Each division was led by a senior vice-president reporting to Allison.

The entire boxboard container industry was rocked in 1976 when a federal grand jury indicted 23 companies and 50 of their executives for price-fixing between 1960 and 1974. PCA was one of the companies found to be in violation of antitrust laws. George V. Bayly, senior vice-president of PCA's general products division, and J.A. Neuman, one of the company's plant managers, were among the group of executives to plead no contest and receive short jail terms and fines. Most of the corporations involved, including PCA, also received fines in the case, which was one of the largest of its kind at that time.

Expansion Through Acquisition: 1983 Through the Mid-1990s

From 1983 into the mid-1990s PCA made sizable acquisitions each year, transforming itself into a true powerhouse in the container industry. In 1983 PCA acquired much of Diamond International Corporation's molded fiber products operation. The purchase included both domestic and foreign properties, including plants in Red Bluff, California, and Plattsburgh, New York; a Portland, Maine research and development facility; an idle Ohio factory; Omni-Pac of West Germany; and Hartmann Fibre, a British firm.

The following year, PCA bought Ekco Products Inc., a manufacturer of aluminum and plastic products, many of them for kitchen use. Based in Wheeling, Illinois, Ekco had facilities in New Jersey, California, England, Denmark, Belgium, and Japan. The Ekco purchase, according to PCA president and CEO Monte R. Haymon, enabled the company to fill out its product line with a greater number of specialized items. In 1985 PCA purchased A&E Plastics, a major producer of rigid plastic containers for use in the foodservice industry. The following year PCA formed a new division, the PCA Disposable Packaging Group, as an umbrella for the newly added Ekco and A&E operations.

PCA continued to make the kitchen its favorite room over the next few years. In 1986 the company acquired EZPor Corporation, a company specializing in convenience cookware and disposable baking pans for the retail market. In 1987 PCA acquired Kaiser Packaging, the foodservice foil and foil container operation of Kaiser Aluminum & Chemical Corporation. That acquisition brought with it a manufacturing plant in Wanatah, Indiana; equipment and other assets from a plant in Permanente, California; and a specialty operation in Bensenville, Illinois. More aluminum operations were brought into the fold in 1988. That year, PCA acquired the Ekco Group, Inc.'s Canadian aluminum foil and plastic foodservice container unit, and subsequently renamed it PCA Canada, Inc. The company also bought Revere Foil Containers, Inc., a manufacturer of aluminum foil containers and clear plastic domes. Middleton Packaging also was purchased that year. Middleton's specialty was molded fiber filler flats for egg packaging. With the addition of these operations, PCA's annual revenue reached $1.3 billion for the year.

In 1989 PCA acquired Carenes, SA, a Spanish molded fiber operation, and Dahlonega Equipment and Supply Company, an East Coast supplier of egg, produce, and seafood packaging. Carenes was renamed Omni-Pac Embalajes, SA, and Dahlonega's name was shortened to Dahlonega Packaging. Among the company's 1990 additions were Polbeth Packaging Limited, a Scottish foodservice thermoformed container firm, and Alupak, A.G., a Swiss company whose products included sterilizable smoothwall aluminum containers. PCA also purchased two important U.S. companies: Pressware International, which was the largest manufacturer of pressed paperboard food containers in the United States, and Dixie Container Corporation, which was the biggest independent corrugated company in the Southeast, producing recycled corrugating medium.

In 1991 PCA made its largest acquisition to date, assuming the operation of 19 corrugated container plants and two containerboard mills and acquiring the cutting rights to about 650,000 acres of timberland from Georgia-Pacific. Some of these properties were purchased outright, and others were operated through lease arrangements. Another 1991 acquisition, the Ellington Recycling Center, supplied secondary fiber to PCA's Counce linerboard mill. In 1992 the company launched a joint venture in partnership with a Hungarian state-owned packaging company. The newly created firm, PCA-Budafok Paperboard Ltd., was formed to operate a recycled paperboard mill and a folding carton plant outside Budapest.

During 1993 PCA focused on improving productivity rather than continuing to expand, returning a profit of $139 million despite a slight drop in revenues. Over the course of the year, 32 new products were introduced by PCA's Domestic Aluminum and Plastics Packaging Group; at the same time, the company's Molded Fibre unit was merged into this group to form a new division called Specialty Packaging.

In 1994 PCA continued to expand both internally and through international development under President Paul Stecko. Plans were announced late in the year for a $73 million project to upgrade the company's Counce, Tennessee, linerboard mill. The project would enable the mill to produce grades of linerboard that were lighter but stronger than had previously been possible. In Europe, the company increased its ownership in the Budapest mill from 30 to 100 percent. The company also began construction of a folding carton plant in Bucharest. That facility, a 50-50 joint venture with a Romanian company, was to operate using paperboard supplied by the Hungarian plant. Negotiations also were under way during 1994 for a joint venture in China.

A Period of Change: Mid-1990s and Beyond

The mid- to late 1990s proved to be a period of change for PCA. The company adopted the name Tenneco Packaging Inc. in 1995 and continued with its expansion efforts under its new name. During the year, the firm acquired Lux Packaging, DeLine Box & Display, the United Group, and a Menasha Corp. facility. Each purchase offered Tenneco a foothold in the graphics segment of the corrugated packaging products market. The company also acquired three corrugated packaging sheet plant operations.

Tenneco Packaging spent the next several years restructuring internally. It launched its "cost of quality" program that cut $80 million in costs related to its mill operations as well as $30 million in converting costs from 1997 to 1999. Meanwhile, parent company Tenneco Inc. had launched similar efforts designed to reposition both its automotive and packaging holdings. During 1999, Tenneco Inc. announced that it would sell its containerboard business to private equity firm Madison Dearborn Partners Inc. (MDP). Meanwhile, Tenneco Packaging's other paperboard businesses were spun off into a new company called Pactiv Corporation. According to an April 1999 Pulp & Paper article, the $2.2 billion deal "surprised and captivated various U.S. board industry executives" who believed Georgia-Pacific would gain control of the containerboard business.

Nevertheless, Tenneco Inc. chose MDP as its buyout partner. The purchase was completed in 1999 and included the operations of Tenneco Packaging's four containerboard mills and 67 converting plants. The deal also marked the rebirth of the PCA name, which was adopted for the new company, and the return of Paul Stecko, who was named PCA's chairman and CEO. Stecko had been named chief operating officer of Tenneco Inc. in 1997, and then president the following year. After the MDP deal, he left his post at Tenneco to take over PCA operations. PCA entered the public arena in January 2000 when it listed on the New York Stock Exchange. The following year it acquired Sunbelt Packaging Services Inc. in a deal that strengthened the firm's reach in both Arizona and along the Mexican border.

While PCA entered the new millennium on solid ground, the paper industry as a whole began to suffer. According to the company, industry corrugated shipments in the United States fell by 5.8 percent during 2001--the largest year-over-year decline since 1975. The drop was due in part to the weakening U.S. economy and the strong dollar, which caused demand to fall for U.S. corrugated products. During this time, however, the containerboard segment of the industry remained a lucrative niche. With 96 percent of sales stemming from this product line, PCA benefited from this trend. Both sales and net income fell during 2001 as a result of industry conditions, but management felt that PCA was positioned better than its competitors, whose earnings fell from 28 to 80 percent during the year. The company's focus for the future continued to revolve around securing positive earnings, maintaining strong cash flow, outperforming the industry, and creating overall shareholder value.

Principal Divisions: Containerboard; Shipping Containers; Retail Packaging and Displays; Heavy Duty Packaging; Produce Packaging; Printing Capabilities; Special Packaging; National Account Sales; Graphic Sales; PCA Supply Services; Design Services; Technical Services; Value Improvement; E-Business.

Principal Competitors: Georgia-Pacific Corporation; Smurfit-Stone Container Corporation; Temple-Inland Inc.

Packaging Corporation of America History

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