(unaudited, dollars in millions, except per-share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Statements of Income:
Net sales	$	1,640.1		$	1,484.0		$	4,760.6		$	4,302.4
Cost of sales		(1,242.8	)		(1,154.5	)		(3,660.1	)		(3,353.8	)
Gross profit		397.3			329.5			1,100.5			948.6
Selling, general, and administrative expenses		(130.2	)		(116.9	)		(388.9	)		(346.0	)
Other expense, net		(24.8	)		(6.2	)		(32.4	)		(15.2	)
Income from operations		242.3			206.4			679.2			587.4
Interest expense, net		(25.4	)		(23.4	)		(74.6	)		(67.5	)
Income before taxes		216.9			183.0			604.6			519.9
Provision for income taxes		(77.8	)		(63.7	)		(204.9	)		(181.0	)
Net income	$	139.1		$	119.3		$	399.7		$	338.9

Net income per common share:
Basic	$	1.47		$	1.27		$	4.24		$	3.59
Diluted	$	1.47		$	1.26		$	4.23		$	3.58
Dividends declared per common share	$	0.63		$	0.63		$	1.89		$	1.73

Statements of Comprehensive Income:
Net Income	$	139.1		$	119.3		$	399.7		$	338.9
Other comprehensive income, net of tax:
Foreign currency translation adjustment		0.1			—			(0.2	)		—
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.5 million, $0.5 million, $1.6 million, and $1.6 million		0.9			0.9			2.6			2.6
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $1.2 million, $1.0 million, $3.7 million, and $3.1 million		1.9			1.8			6.2			5.0
Changes in unfunded employee benefit obligation net of tax of $2.0 million		—			—			—			3.1
Other comprehensive income		2.9			2.7			8.6			10.7
Comprehensive income	$	142.0		$	122.0		$	408.3		$	349.6

Three Months Ended September 30 Nine Months Ended September 30
2016 2015 2016 2015
Statements of Income:
Net sales $ 1,484.0
$ 1,470.8
$ 4,302.4
$ 4,350.8
Cost of sales (1,154.5 ) (1,142.5 ) (3,353.8 ) (3,427.9 )
Gross profit 329.5
328.3
948.6
922.9
Selling, general, and administrative expenses (116.9 ) (112.7 ) (346.0 ) (345.9 )
Other income (expense), net (6.2 ) 3.8
(15.2 ) (2.9 )
Income from operations 206.4
219.4
587.4
574.1
Interest expense, net (23.4 ) (21.7 ) (67.5 ) (63.2 )
Income before taxes 183.0
197.7
519.9
510.9
Income tax provision (63.7 ) (69.9 ) (181.0 ) (178.3 )
Net income $ 119.3
$ 127.8
$ 338.9
$ 332.6
Less net income attributable to noncontrolling interests —
—
—
—
Net income attributable to Packaging Corporation of America $ 119.3
$ 127.8
$ 338.9
$ 332.6

Net income per common share attributable to Packaging Corporation of America common shareholders:
Basic $ 1.27
$ 1.31
$ 3.59
$ 3.39
Diluted $ 1.26
$ 1.31
$ 3.58
$ 3.39
Dividends declared per common share $ 0.63
$ 0.55
$ 1.73
$ 1.65

Statements of Comprehensive Income:
Net income $ 119.3
$ 127.8
$ 338.9
$ 332.6
Other comprehensive income, net of tax:
Foreign currency translation adjustment —
—
—
2.8
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.5 million, $0.5 million, $1.6 million, and $1.6 million 0.9
0.9
2.6
2.6
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $1.0 million, $1.4 million, $3.1 million, and $4.2 million 1.8
2.1
5.0
6.5
Changes in unfunded employee benefit obligations net of tax of $2.0 million —
—
3.1
—
Other comprehensive income 2.7
3.0
10.7
11.9
Less net income attributable to noncontrolling interests —
—
—
—
Comprehensive income attributable to Packaging Corporation of America $ 122.0
$ 130.8
$ 349.6
$ 344.5

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

Packaging Corporation of America

Consolidated Balance Sheets

(unaudited, dollars and shares in millions, except per-share data)

	September 30,			December 31,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	370.5		$	239.3
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $11.3 million and $10.1 million as of September 30, 2017, and December 31, 2016, respectively		831.3			689.2
Inventories		736.6			723.6
Prepaid expenses and other current assets		43.4			30.3
Federal and state income taxes receivable		20.0			13.9
Total current assets		2,001.8			1,696.3
Property, plant, and equipment, net		2,881.6			2,895.7
Goodwill		732.1			737.9
Intangible assets, net		347.8			367.1
Other long-term assets		63.9			80.0
Total assets	$	6,027.2		$	5,777.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	156.5		$	25.8
Capital lease obligations		1.3			1.3
Accounts payable		379.5			323.8
Dividends payable		60.3			59.9
Accrued liabilities		207.8			201.2
Accrued interest		18.9			13.4
Total current liabilities		824.3			625.4
Long-term liabilities:
Long-term debt		2,456.3			2,620.0
Capital lease obligations		19.3			20.3
Deferred income taxes		342.1			334.7
Compensation and benefits		322.8			357.2
Other long-term liabilities		68.2			59.6
Total long-term liabilities		3,208.7			3,391.8
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.4 million and 94.2 million shares issued as of September 30, 2017, and December 31, 2016, respectively		0.9			0.9
Additional paid in capital		466.1			451.4
Retained earnings		1,658.2			1,447.1
Accumulated other comprehensive loss		(131.0	)		(139.6	)
Total stockholders' equity		1,994.2			1,759.8
Total liabilities and stockholders' equity	$	6,027.2		$	5,777.0

September 30,
2016 December 31,
2015
ASSETS
Current assets: ��
Cash and cash equivalents $ 279.8
$ 184.2
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $9.4 million and $10.3 million as of September 30, 2016 and December 31, 2015, respectively 713.2
636.5
Inventories 690.6
676.8
Prepaid expenses and other current assets 45.1
28.8
Federal and state income taxes receivable 18.3
28.2
Total current assets 1,747.0
1,554.5
Property, plant, and equipment, net 2,878.7
2,832.1
Goodwill 692.1
544.0
Intangible assets, net 354.8
270.8
Other long-term assets 74.6
70.9
Total assets $ 5,747.2
$ 5,272.3
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt $ 25.8
$ 6.5
Capital lease obligations 1.2
1.2
Accounts payable 327.0
294.2
Dividends payable 59.8
53.4
Accrued interest 18.8
13.1
Accrued liabilities 204.9
193.5
Total current liabilities 637.5
561.9
Long-term liabilities:
Long-term debt 2,625.8
2,290.4
Capital lease obligations 20.7
21.6
Deferred income taxes 360.9
347.0
Compensation and benefits 312.2
358.6
Other long-term liabilities 60.1
59.5
Total long-term liabilities 3,379.7
3,077.1
Commitments and contingent liabilities

Stockholders' equity:
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.2 million and 96.1 million shares issued as of September 30, 2016 and December 31, 2015, respectively 0.9
1.0
Additional paid in capital 446.0
439.9
Retained earnings 1,396.9
1,317.3
Accumulated other comprehensive loss (114.2 ) (124.9 )
Total stockholders' equity 1,729.6
1,633.3
Noncontrolling interests $ 0.4
$ —
Total equity $ 1,730.0
$ 1,633.3
Total liabilities and equity $ 5,747.2
$ 5,272.3

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

Packaging Corporation of America

Consolidated Statements of Cash Flows

(unaudited, dollars in millions)

	Nine Months Ended
	September 30,
	2017			2016
Cash Flows from Operating Activities:
Net income	$	399.7		$	338.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization of intangibles		283.7			264.3
Amortization of deferred financing costs		6.0			5.8
Share-based compensation expense		15.4			15.0
Deferred income tax provision		1.6			6.5
Net loss on impairment of assets		13.5			—
Pension and post retirement benefits expense, net of contributions		(25.3	)		(33.5	)
Other, net		12.0			3.7
Changes in operating assets and liabilities:
(Increase) decrease in assets —
Accounts receivable		(142.2	)		(36.0	)
Inventories		(13.0	)		4.1
Prepaid expenses and other current assets		(10.3	)		(11.2	)
Increase (decrease) in liabilities —
Accounts payable		37.7			13.6
Accrued liabilities		9.6			10.8
Federal and state income taxes payable / receivable		(5.1	)		11.5
Net cash provided by operating activities		583.3			593.5
Cash Flows from Investing Activities:
Additions to property, plant, and equipment		(226.2	)		(188.1	)
Acquisition of business, net of cash acquired		—			(385.6	)
Additions to other long term assets		(6.9	)		(9.4	)
Proceeds from disposals		4.4			—
Other, net		1.1			0.4
Net cash used for investing activities		(227.6	)		(582.7	)
Cash Flows from Financing Activities:
Repayments of debt and capital lease obligations		(35.6	)		(30.7	)
Proceeds from issuance of debt		—			385.0
Financing costs paid		—			(2.1	)
Common stock dividends paid		(178.2	)		(156.7	)
Repurchases of common stock		—			(100.3	)
Shares withheld to cover employee restricted stock taxes		(10.7	)		(10.2	)
Other, net		—			(0.2	)
Net cash (used for) provided by financing activities		(224.5	)		84.8
Net increase in cash and cash equivalents		131.2			95.6
Cash and cash equivalents, beginning of period		239.3			184.2
Cash and cash equivalents, end of period	$	370.5		$	279.8

Nine Months Ended September 30
2016 2015
Cash Flows from Operating Activities:
Net income $ 338.9
$ 332.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization of intangibles 264.3
267.9
Amortization of deferred financing costs 5.8
5.8
Share-based compensation expense 15.0
13.7
Deferred income tax provision 6.5
1.2
Pension and postretirement benefits expense, net of contributions (33.5 ) 24.0
Other, net 3.7
(16.4 )
Changes in operating assets and liabilities, net of acquisitions:
Decrease (increase) in assets —
Accounts receivable (36.0 ) (37.5 )
Inventories 4.1
(31.0 )
Prepaid expenses and other current assets (11.2 ) (16.8 )
Increase (decrease) in liabilities —
Accounts payable 13.6
(14.1 )
Accrued liabilities 10.8
5.2
Federal and state income taxes payable / receivable 6.2
7.4
Net cash provided by operating activities 588.2
542.0
Cash Flows from Investing Activities:
Additions to property, plant, and equipment (188.1 ) (217.9 )
Proceeds from sale of a business —
23.0
Acquisition of business, net of cash acquired (385.6 ) —
Additions to other long-term assets (9.4 ) (9.2 )
Other, net 0.4
1.3
Net cash used for investing activities (582.7 ) (202.8 )
Cash Flows from Financing Activities:
Repayments of debt and capital lease obligations (30.7 ) (30.7 )
Proceeds from issuance of debt 385.0
—
Financing costs paid (2.1 ) —
Common stock dividends paid (156.7 ) (147.3 )
Repurchases of common stock (100.3 ) (98.1 )
Excess tax benefits from stock-based awards 5.3
5.6
Shares withheld to cover employee restricted stock taxes (10.2 ) (7.4 )
Other, net (0.2 ) 0.7
Net cash provided by (used for) financing activities 90.1
(277.2 )
Net increase in cash and cash equivalents 95.6
62.0
Cash and cash equivalents, beginning of period 184.2
124.9
Cash and cash equivalents, end of period $ 279.8
$ 186.9

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

Condensed Notes to Unaudited Quarterly Consolidated Financial Statements

1.	Nature of Operations and Basis of Presentation

~~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., a wholly owned subsidiary of Tenneco 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 corrugated packaging products. The Paper segment manufactures and sells a range of white papers, including ~~communication-based papers~~uncoated free sheet and ~~pressure sensitive papers, and market pulp. In October 2016, we~~coated one-side grades. During the third quarter of 2017, the Company announced that weit will ~~cease softwood market pulp operations~~discontinue the production of uncoated free sheet and coated one-side grades at ~~our~~the Wallula, Washington mill ~~and permanently shutdown~~in the second quarter of 2018 to begin the conversion of the No. 13 machine ~~with pulp capacity of approximately 100,000 tons, effective December 1, 2016.~~to a 400,000 ton-per-year virgin kraft linerboard machine. 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 16 Segment Information.

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 September 30, ~~2016~~2017 and for the three and nine months ended September 30, ~~2016~~2017 and ~~2015~~2016 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 ~~SEC~~ Regulation ~~S-X.~~S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete audited financial statements. Operating results for the three and nine months ended September 30, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016.~~2017. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~

2016.

The consolidated financial statements include the accounts of PCA and its majority-owned subsidiaries after elimination of intercompany balances and transactions.

2.	Acquisitions

~~2. Acquisitions~~

TimBar Acquisition

On August 29, 2016, PCA acquired substantially all of the assets of TimBar Corporation (“TimBar”), a large independent corrugated products producer with six corrugated products production facilities, for a purchase price of $385.6 million, net of cash acquired. ~~Funding for~~We financed the acquisition ~~came from~~with a new $385.0 million five-year term loan facility. TimBar provides solutions to customers in the higher margin retail, industrial packaging and display and fulfillment markets with a focus on a multi-color graphics and technical innovation. ~~With the August acquisition of TimBar, we acquired a 51% controlling interest in a wholesale distributor of polywoven plastic bags used in the transportation industry. TimBar~~TimBar’s financial results are included in the Packaging segment from the date of acquisition.

The Company accounted for the TimBar 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):

	12/31/16 Allocation		Adjustments			Revised Allocation
Goodwill	$	157.3	$	(1.1	)	$	156.2
Other intangible assets		94.4		-		94.4
Property, plant and equipment		95.3		-		95.3
Other net assets		38.6		-		38.6
Net assets acquired	$	385.6	$	(1.1	)	$	384.5

Goodwill $ 148.1
Other intangible assets 101.6
Property, plant and equipment 96.9
Other net assets 39.0
Net assets acquired $ 385.6

~~The~~

During the first quarter of 2017, we received $1.1 million from the seller related to a working capital adjustment. We recorded the adjustment as a decrease to goodwill which lowered the purchase price ~~allocation presented above is preliminary and is subject~~ to the finalization of various valuations and assessments, primarily related to property, plant, and equipment and intangible assets. Our current estimates and assumptions may change as more information becomes available. We expect to finalize the valuations within the 12-month period following the acquisition date.

$384.5 million.

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 TimBar's commitment to continuous improvement and innovation in their operations, as well as the expected increases in PCA's containerboard integration levels. Goodwill is ~~expected to be~~ deductible for tax purposes.

Other intangible assets, primarily customer relationships, were assigned an estimated weighted average useful life of ~~14.5~~14.2 years.

Property, plant and equipment were assigned estimated useful lives ranging from two to 24 years.

~~3. Earnings Per Share~~

Columbus Container Acquisition

On November 30, 2016, PCA acquired substantially all of the assets of Columbus Container, Inc., an independent corrugated products producer with one production facility and five warehousing facilities, for a purchase price of $99.7 million, net of cash acquired. We paid the purchase price with available cash on hand. Columbus Container, Inc. is a full-service provider of corrugated packaging products utilizing state-of-the-art technologies and design centers to provide customers a solution for nearly any packaging need. Columbus Container’s financial results are included in the Packaging segment from the date of acquisition.

The Company accounted for the Columbus Container 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):

	12/31/16 Allocation		Adjustments			Revised Allocation
Goodwill	$	36.6	$	(4.7	)	$	31.9
Other intangible assets		26.3		6.0			32.3
Property, plant and equipment		27.2		1.0			28.2
Other net assets		9.6		(0.1)			9.5
Net assets acquired	$	99.7	$	2.2		$	101.9

During the third quarter of 2017, we increased the purchase price by $2.2 million as a result of a working capital adjustment expected to be paid to the seller. We recorded the adjustment as a $2.2 million increase to goodwill. The purchase price allocation above is preliminary and is subject to the finalization of working capital adjustments. Our current estimates and assumptions may change as more information becomes available.

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 Columbus Container's commitment to continuous improvement and innovation in their operations, 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 14.1 years.

Property, plant and equipment were assigned estimated useful lives ranging from one to 32 years.

3.	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						Nine Months Ended
	September 30,						September 30,
Numerator:	2017			2016			2017			2016
Net income	$	139.1		$	119.3		$	399.7		$	338.9
Less: distributed and undistributed earnings allocated to participating securities		(1.1	)		(1.1	)		(3.4	)		(3.4	)
Net income attributable to common shareholders	$	138.0		$	118.2		$	396.3		$	335.5
Denominator:
Weighted average basic common shares outstanding		93.6			93.4			93.5			93.6
Effect of dilutive securities		0.2			0.2			0.2			0.1
Weighted average diluted common shares outstanding		93.8			93.6			93.7			93.7
Basic income per common share	$	1.47		$	1.27		$	4.24		$	3.59
Diluted income per common share	$	1.47		$	1.26		$	4.23		$	3.58

Three Months Ended September 30 Nine Months Ended September 30
2016 2015 2016 2015
Numerator:
Net income attributable to Packaging Corporation of America $ 119.3
$ 127.8
$ 338.9
$ 332.6
Less: distributed and undistributed earnings allocated to participating securities (1.1 ) (1.5 ) (3.4 ) (4.0 )
Net income attributable to common shareholders $ 118.2
$ 126.3
$ 335.5
$ 328.6
Denominator:
Weighted average basic common shares outstanding 93.4
96.5
93.6
96.8
Effect of dilutive securities 0.2
0.1
0.1
0.1
Weighted average diluted common shares outstanding 93.6
96.6
93.7
96.9
Basic income per common share $ 1.27
$ 1.31
$ 3.59
$ 3.39
Diluted income per common share $ 1.26
$ 1.31
$ 3.58
$ 3.39

4.	Other Income (Expense), Net

~~4. Other Income (Expense), Net~~

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Wallula mill restructuring (a)	$	(22.7	)	$	—		$	(22.7	)	$	—
DeRidder mill incident (b)		2.6			—			0.1			—
Facilities closure and other costs (c)(f)		(0.9	)		(1.6	)		(1.9	)		(5.9	)
Acquisition and integration related costs (d)(g)		(0.5	)		(2.0	)		(0.8	)		(2.3	)
Hexacomb working capital adjustment (e)		—			—			2.3			—
Asset disposals and write-offs		(3.9	)		(0.6	)		(8.6	)		(3.5	)
Other		0.6			(2.0	)		(0.8	)		(3.5	)
Total	$	(24.8	)	$	(6.2	)	$	(32.4	)	$	(15.2	)

Three Months Ended September 30 Nine Months Ended September 30
2016 2015 2016 2015
Facilities closure costs (a) $ (1.6 ) $ —
$ (5.0 ) $ —
Acquisition-related costs (b) (2.0 ) —
(2.3 ) —
Multiemployer pension withdrawal (c) —
—
(0.9 ) —
Asset disposals and write-offs (0.6 ) (5.0 ) (3.5 ) (9.7 )
Integration-related and other costs (d) —
(2.4 ) —
(9.0 )
Sale of St. Helens paper mill site (e) —
6.7
—
6.7
DeRidder restructuring (f) —
3.8
—
3.6
Refundable state tax credit (g) —
—
—
3.6
Other (2.0 ) 0.7
(3.5 ) 1.9
Total $ (6.2 ) $ 3.8
$ (15.2 ) $ (2.9 )

~~___________~~

(a)

The three and nine months ended September 30, 2017 include $22.7 million of charges related to the announced second quarter 2018 discontinuation of uncoated free sheet and coated one-side grades at the Wallula, Washington mill associated with the conversion of the No. 3 paper machine to a high-performance 100% virgin kraft linerboard machine.

~~(a)~~

(b)

The three and nine months ended September 30, 2017 include $2.6 million and $0.1 million of net recoveries, respectively, for the property damage and business interruption insurance recoveries and corresponding costs related to the February 2017 explosion at our DeRidder, LA mill.

(c)

The three and nine months ended September 30, 2017 include $0.9 million and $1.9 million, respectively, of charges consisting of closure costs related to corrugated products facilities, a paper administration facility and costs related to a lump sum settlement payment of a multiemployer pension plan withdrawal liability for one of our corrugated products facilities.

(d)	The three and nine months ended September 30, 2017 include $0.5 million and $0.8 million, respectively, of charges related to the Sacramento Container Corporation acquisition and integration costs related to other recent acquisitions.

(e)	The nine months ended September 30, 2017 include $2.3 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico.

(f)	The three and nine months ended September 30, 2016 include ~~facilities~~$1.6 million and $5.9 million, respectively, of charges consisting of closure costs related to corrugated products facilities and a paper products ~~facility.~~


~~(b)~~	~~The three~~facility and ~~nine months ended September 30, 2016 include acquisition-related costs for the TimBar Corporation acquisition.~~


~~(c)~~	~~The nine months ended September 30, 2016 include~~ costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities.

(g)
~~(d)~~	The three and nine months ended September 30, ~~2015~~2016 include ~~Boise acquisition integration-related~~$2.0 million and ~~other costs. These costs primarily relate to professional fees, severance, retention, relocation, travel, and other integration-related costs.~~


~~(e)~~	~~The three and nine months ended September 30, 2015 include a gain on the sale~~2.3 million, respectively, of ~~the paper mill site in St. Helens, Oregon, where we ceased paper production in December 2012.~~


~~(f)~~	~~The three and nine months ended September 30, 2015 include amounts from restructuring activities at our mill in DeRidder, Louisiana.~~


~~(g)~~	~~The nine months ended September 30, 2015 include a tax credit from the State of Louisiana~~charges related to ~~our capital investment~~the acquisition and ~~the jobs retained at the DeRidder, Louisiana mill.~~integration of TimBar Corporation.

5.	Income Taxes

~~5. Income Taxes~~

For the three months ended September 30, ~~2016~~2017 and ~~2015~~2016 we recorded ~~$63.7~~$77.8 million and ~~$69.9~~$63.7 million of income tax expense and had an effective tax rate of ~~34.8%~~35.9% and ~~35.4%~~34.8%, respectively. The increase in our effective tax rate for the three months ended September 30, 2017 compared with the same period in 2016, was primarily due to an internal legal entity consolidation that will simplify future operating activities and resulted in $3.3 million of tax expense for the change in value of deferred taxes.

For the nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, we recorded ~~$181.0~~$204.9 million and ~~$178.3~~$181.0 million of income tax expense and had an effective tax rate of ~~34.8%~~33.9% and ~~34.9%~~34.8%, respectively. The decrease in our effective tax rate for the ~~three and~~ nine months ended September 30, ~~2016~~2017 compared with the same ~~periods~~period in ~~2015,~~2016, was primarily due to the ~~2016 benefit~~adoption of ~~federal~~ASU 2016-09 (Topic 718): Improvements to Employee Share-Based Payment Accounting, which requires all excess tax benefits and deficiencies from employee share-based payment awards to be recognized in the income statement as opposed to additional paid in capital. This was partially offset by the tax ~~credits that were not available at September 30, 2015 due to~~expense from the ~~expiration and later reinstatement on December 18, 2015 as part of the Protecting Americans from Tax Hikes Act (PATH Act)~~internal legal entity consolidation.

Our effective tax rate may differ from the federal statutory income tax rate of 35.0%, due primarily to theeffect of employee share-based payment awards, the domestic manufacturing deduction, and state and local income taxes.

During the three and nine months ended September 30, ~~2016~~2017 there were no significant changes to our uncertain tax positions. For more information, see Note 6, Income Taxes, of the Notes to Consolidated Financial Statements in ~~"Part~~“Part II, Item 8. Financial Statements and Supplementary ~~Data"~~Data” of our ~~2015~~2016 Annual Report on Form 10-K.

During the nine months ended September 30, ~~2016~~2017 and ~~2015~~2016 cash paid for taxes, net of refunds received, was $208.3 million and $158.8 million, ~~and $163.7 million,~~ respectively.

6.	Inventories

~~6. Inventories~~

We value our raw materials, work in process, and finished goods inventories using lower of cost, as determined by the average cost method, or market. Supplies and materials are valued at the first-in, first-out (FIFO) or average cost methods.

The components of inventories were as follows (dollars in millions):

	September 30,		December 31,
	2017		2016
Raw materials	$	263.7	$	271.9
Work in process		13.0		12.9
Finished goods		214.5		206.5
Supplies and materials		245.4		232.3
Inventories	$	736.6	$	723.6

7.	Property, Plant, and Equipment

September 30,
2016 December 31,
2015
Raw materials $ 259.8
$ 260.6
Work in process 14.9
14.2
Finished goods 188.0
189.7
Supplies and materials 227.9
212.3
Inventories $ 690.6
$ 676.8

~~7. Property, Plant, and Equipment~~

The components of property, plant, and equipment were as follows (dollars in millions):

	September 30,			December 31,
	2017			2016
Land and land improvements	$	156.1		$	149.7
Buildings		731.2			717.1
Machinery and equipment		5,066.2			4,951.4
Construction in progress		177.6			125.4
Other		66.5			66.7
Property, plant and equipment, at cost		6,197.6			6,010.3
Less accumulated depreciation		(3,316.0	)		(3,114.6	)
Property, plant, and equipment, net	$	2,881.6		$	2,895.7

September 30,
2016 December 31,
2015
Land and land improvements $ 148.6
$ 146.4
Buildings 687.8
640.9
Machinery and equipment 4,902.2
4,747.1
Construction in progress 151.2
119.1
Other 62.6
61.3
Property, plant, and equipment, at cost 5,952.4
5,714.8
Less accumulated depreciation (3,073.7 ) (2,882.7 )
Property, plant, and equipment, net $ 2,878.7
$ 2,832.1

Depreciation expense for the three months ended September 30, 2017 and 2016 ~~and 2015~~ was ~~$79.9~~$87.0 million and ~~$79.6~~$79.9 million, respectively. During the nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, depreciation expense was ~~$240.5~~$253.0 million and ~~$243.5~~$240.5 million, respectively. During the nine months ended September 30, ~~2016 and 2015,~~2017, we recognized ~~$0.8~~$2.6 million ~~and $9.0 million, respectively, of~~ incremental depreciation expense from shortening the useful lives of certain assets related to ~~facilities closures in 2016 and restructuring activities at our DeRidder, Louisiana~~the Wallula mill ~~in 2015.~~

restructuring.

At September 30, ~~2016~~2017 and December 31, ~~2015~~2016 purchases of property, plant, and equipment included in accounts payable were ~~$20.1~~$30.4 million and ~~$15.0~~$12.8 million, respectively.

~~8. Goodwill and Intangible Assets~~

~~Goodwill~~

~~Changes in the carrying amount of our goodwill are as follows (dollars in millions):~~

Goodwill
Balance at December 31, 2015 $ 544.0
Acquisition (a) 148.1
Balance at September 30, 2016 $ 692.1

~~___________~~

8.
~~(a)~~	~~In connection with the August 2016 acquisition of TimBar Corporation (TimBar), the Company recorded $148.1 million of goodwill in the Packaging segment.~~ Goodwill and Intangible Assets

Goodwill

Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At September 30, ~~2016~~2017 and December 31, ~~2015~~2016 we had ~~$636.9~~$676.9 million and ~~$488.8~~$682.7 million of goodwill recorded in our Packaging segment, respectively. At both September 30, ~~2016~~2017 and December 31, ~~2015~~2016 we had $55.2 million of goodwill recorded in our Paper segment.

Changes in the carrying amount of our goodwill are as follows (dollars in millions):

	Goodwill
Balance at January 1, 2017	$	737.9
Acquisitions (a)(b)		(5.8	)
Balance at September 30, 2017	$	732.1

(a)	During the nine months ended September 30, 2017, the Company recorded a $4.7 million opening balance sheet adjustment to decrease the goodwill balance for the Company’s November 2016 acquisition of Columbus Container, Inc.

(b)	During the nine months ended September 30, 2017, the Company received $1.1 million from the seller related to a working capital adjustment. This adjustment was recorded as a decrease to the goodwill balance for the Company's August 2016 acquisition of TimBar Corporation.

Intangible Assets

Intangible assets are primarily comprised of customer relationships and trademarks and trade names.

The weighted average remaining useful life, gross carrying amount, and accumulated amortization of our intangible assets were as follows (dollars in millions):

	September 30, 2017					December 31, 2016
	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization
Customer relationships	12.5	$	429.4	$	100.9	13.1	$	424.5	$	79.8
Trademarks and trade names	10.7		28.8		11.8	10.5		27.7		8.1
Other	3.9		4.2		1.9	4.3		4.2		1.4
Total intangible assets (excluding goodwill)	12.3	$	462.4	$	114.6	12.9	$	456.4	$	89.3

September 30, 2016 December 31, 2015
Weighted Average Remaining Useful Life (in Years) Gross
Carrying
Amount Accumulated
Amortization Weighted Average Remaining Useful Life (in Years) Gross
Carrying
Amount Accumulated
Amortization
Customer relationships (b) 13.3 $ 408.0
$ 73.2
13.3 $ 311.5
$ 57.3
Trademarks and trade names (b) 11.7 25.6
6.9
13.6 21.8
5.2
Other (b) 2.9 1.5
0.2
1.2 0.2
0.2
Total intangible assets (excluding goodwill) 13.2 $ 435.1
$ 80.3
13.6 $ 333.5
$ 62.7

~~___________~~


~~(b)~~	In connection with the August 2016 acquisition of TimBar, the Company recorded intangible assets of $96.5 million for customer relationships, $3.8 million for trade names, and $1.3 million for other intangibles.

During the three months ended September 30, ~~2016~~2017 and ~~2015,~~2016, amortization expense was ~~$6.3~~$8.4 million and ~~$5.7~~$6.3 million, respectively. During the nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, amortization expense was $25.3 million and $17.5 million, ~~and $17.1 million, respectively.~~respectively.

9.	Accrued Liabilities

~~9. Accrued Liabilities~~

The components of accrued liabilities were as follows (dollars in millions):

	September 30,		December 31,
	2017		2016
Compensation and benefits	$	119.3	$	120.4
Medical insurance and workers’ compensation		28.8		28.8
Franchise, property, sales and use taxes		22.8		16.7
Customer volume discounts and rebates		21.0		18.9
Environmental liabilities and asset retirement obligations		4.2		6.4
Severance, retention, and relocation		4.2		3.0
Other		7.5		7.0
Total	$	207.8	$	201.2

10.

Debt

September 30,
2016 December 31,
2015
Compensation and benefits $ 114.7
$ 106.4
Medical insurance and workers’ compensation 32.0
31.1
Franchise, property, and sales and use taxes 19.4
16.0
Customer volume discounts and rebates 20.1
15.3
Environmental liabilities and asset retirement obligations 7.1
7.9
Severance, retention, and relocation 3.3
7.3
Other 8.3
9.5
Total $ 204.9
$ 193.5

~~10. Debt~~

~~At September 30, 2016 and December 31, 2015, our long-term debt and interest rates on that debt were as follows (dollars in millions):~~

September 30, 2016 December 31, 2015
Amount Interest Rate Amount Interest Rate
Revolving Credit Facility, due October 2018 $ —
— % $ —
— %
Revolving Credit Facility, due August 2021 —
—
—
—
Five-Year Term Loan, due October 2018 —
—
25.0
1.80
Five-Year Term Loan, due August 2021 385.0
1.77
—
—
Seven-Year Term Loan, due October 2020 632.1
2.15
637.0
2.05
6.50% Senior Notes due March 2018 150.0
6.50
150.0
6.50
3.90% Senior Notes, net of discounts of $0.2 million and $0.3 million as of September 30, 2016 and December 31, 2015, due June 2022 399.8
3.90
399.7
3.90
4.50% Senior Notes, net of discount of $1.4 million and $1.5 million as of September 30, 2016 and December 31, 2015, due November 2023 698.6
4.50
698.5
4.50
3.65% Senior Notes, net of discount of $0.9 million and $1.0 million as of September 30, 2016 and December 31, 2015, due September 2024 399.1
3.65
399.0
3.65
Total 2,664.6
3.44 % 2,309.2
3.67 %
Less current portion 25.8
6.5

Less unamortized debt issuance costs 13.0
12.3

Total long-term debt $ 2,625.8
$ 2,290.4

On August 29, 2016 (the "Amendment Date"), PCA amended and restated its five-year credit agreement dated October 18, 2013 (the "Credit Agreement"), to finance its acquisition of TimBar Corporation. The amended agreement includes: (i) a new $385.0 million unsecured five-year term loan facility (the “New Term Loan”), which PCA fully borrowed on the Amendment Date to finance its acquisition of TimBar Corporation; (ii) the existing $650.0 million unsecured seven-year term loan facility initially borrowed by PCA under the original Credit Agreement (the “Existing Term Loan”), which terminates in October 2020 and under which $633.7 million was outstanding as of the Amendment Date; and (iii) a $350.0 million unsecured revolving credit facility, which was extended through the fifth anniversary of the Amendment Date, and is available for borrowings for general corporate purposes. Except for $25.0 million of letters of credit, no amounts were outstanding under the revolving credit facility as of the Amendment Date.

~~Loans under the amended Credit Agreement bear interest at LIBOR plus an applicable margin. The applicable margin is determined based upon the public ratings of PCA’s senior long-term unsecured debt.~~

The amended Credit Agreement contains customary affirmative and negative covenants, including limitations on liens, mergers and consolidations, sales of assets and subsidiary indebtedness. The amended Credit Agreement has two financial covenants, a maximum ratio of debt to EBITDA and a minimum interest coverage ratio, each calculated on a consolidated basis.

~~PCA may prepay loans under the amended Credit Agreement at any time without premium or penalty.~~

During the nine months ended September 30, ~~2016,~~2017, we made principal payments of ~~$25.0~~$29.8 million and $4.9 million on our five-year term loan due ~~October 2018 (which is no longer outstanding)~~August 2021 and our seven-year term loan due October 2020, respectively. During the nine months ended September 30, 2015, we made principal payments of $25.0 million on our five-year term loan due October 2018, and $4.9 million on our seven-year term loan, due October 2020. For the nine months ended September 30, ~~2016~~2017 and ~~2015~~2016, cash payments for interest were $67.2 million and $59.5 million, ~~and $58.6 million,~~ respectively.

Included in interest expense, net, are amortization of treasury lock settlements and amortization of financing costs. For both the three months ended September 30, ~~2016~~2017 and ~~2015~~2016, amortization of treasury lock settlements was $1.4 million, and for both the nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, amortization of treasury ~~lock settlements~~locks was $4.2 million. For both the three months ended September 30, ~~2016~~2017 and ~~2015~~2016, amortization of financing costs was $0.5 million and during the nine months ended ~~for both~~ September 30, ~~2016~~2017 and ~~2015,~~2016, amortization of financing costs was $1.5 million and $1.4 million, ~~and $1.3 million,~~ respectively.

At September 30, ~~2016~~2017 we had ~~$1,647.5~~$1,647.7 million of fixed-rate senior notes and ~~$1,017.1~~$977.6 million of variable-rate term loans outstanding. At September 30, ~~2016~~2017 the fair value of our fixed-rate debt was estimated to be ~~$1,767.1~~$1,739.2 million. The difference between the book value and fair value is due to the difference between the period-end market interest rate and the stated rate of our fixed-rate debt. We estimated the fair value of our fixed-rate debt using quoted market prices (Level 2 inputs) within the fair value hierarchy, which is further defined in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2015~~2016 Annual Report on Form 10-K. The fair value of our variable-rate term debt approximates the carrying amount as our cost of borrowing is variable and approximates current market rates.

For more information on our long-term debt and interest rates on that debt, see Note ~~10,~~9, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2015~~2016 Annual Report on Form 10-K.

11.	Employee Benefit Plans and Other Postretirement Benefits

~~11. Employee Benefit Plans and Other Postretirement Benefits~~

The components of net periodic benefit cost for our pension plans were as follows (dollars in millions):

	Pension Plans
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Service cost	$	5.8		$	6.2		$	18.0		$	18.4
Interest cost		10.4			10.2			31.1			30.6
Expected return on plan assets		(13.5	)		(12.3	)		(40.5	)		(37.1	)
Net amortization of unrecognized amounts
Prior service cost		1.4			1.4			4.4			4.3
Actuarial loss		1.9			1.5			5.7			4.3
Net periodic benefit cost	$	6.0		$	7.0		$	18.7		$	20.5

Pension Plans
Three Months Ended September 30 Nine Months Ended September 30
2016 2015 2016 2015
Service cost $ 6.2
$ 6.1
$ 18.4
$ 17.9
Interest cost 10.2
11.6
30.6
34.6
Expected return on plan assets (12.3 ) (13.3 ) (37.1 ) (39.8 )
Net amortization of unrecognized amounts
Prior service cost 1.4
1.4
4.3
4.2
Actuarial loss 1.5
2.1
4.3
6.4
Net periodic benefit cost $ 7.0
$ 7.9
$ 20.5
$ 23.3

PCA makes pension plan contributions that are sufficient to fund its actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act (ERISA). From time to time, PCA may make additional discretionary contributions based on the funded status of the plans, tax deductibility, income from operations, and other factors. During the three and nine months ended September 30, 2017 and 2016 payments to our nonqualified pension plans were insignificant. For the three and nine months ended September 30, 2017, we made contributions of $36.2 million and $42.1 million, respectively, to our qualified pension plans, which exceeded our 2017 minimum pension contributions of $8.0. We made contributions of $49.7 million and ~~$53.0~~$53.4 million to our qualified plans during the three

and nine months ended September 30, 2016 ~~which exceeded our 2016 minimum pension contributions of $27.0 million. In 2015, we did not make any contributions to our qualified plans.~~

The components of net periodic benefit cost for our postretirement plans were as follows (dollars in millions):

	Postretirement Plans
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Service cost	$	0.1		$	0.1		$	0.2		$	0.5
Interest cost		0.2			0.1			0.5			0.5
Net amortization of unrecognized amounts
Prior service cost		(0.1	)		(0.1	)		(0.1	)		(0.1	)
Actuarial income		(0.1	)		—			(0.1	)		(0.4	)
Net periodic benefit cost	$	0.1		$	0.1		$	0.5		$	0.5

12.	Share-Based Compensation

Postretirement Plans
Three Months Ended September 30 Nine Months Ended September 30
2016 2015 2016 2015
Service cost $ 0.1
$ 0.4
$ 0.5
$ 1.3
Interest cost 0.1
0.3
0.5
0.9
Net amortization of unrecognized amounts
Prior service cost (0.1 ) —
(0.1 ) —
Actuarial (income) loss —
—
(0.4 ) 0.1
Net periodic benefit cost $ 0.1
$ 0.7
$ 0.5
$ 2.3

In April 2016, the Company provided notice to eligible participants that the Salaried Retiree Medical Plan would be frozen as of December 31, 2016. As a result of the freeze, eligible plan participants who do not retire and elect coverage before December 31, 2016 lose benefits attributable to service already rendered. In accordance with Accounting Standards Codification (ASC) 715, "Compensation--Retirement Benefits", the Company remeasured the Salaried Retiree Medical Plan benefit obligation using current assumptions, resulting in a decrease in the benefit obligation of $5.1 million with a corresponding increase in accumulated other comprehensive income of $3.1 million and deferred income taxes of $2.0 million.

~~12. Share-Based Compensation~~

The Company has a long-term equity incentive plan, which allows for grants of restricted stock, performance awards, stock appreciation rights, and stock options to directors, officers, and employees, as well as others who engage in services for PCA. The ~~Company has not granted option awards since 2007. The~~ plan, as amended, terminates May 1, 2023 and authorizes 10.6 millionshares of common stock for grant over the life of the plan. As of September 30, ~~2016, 1.2~~2017, 1.0 million shares were available for future issuance under the plan. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date.

The following table presents restricted stock and performance unit award activity for the nine months ended September 30, ~~2016:~~2017:

	Restricted Stock					Performance Units
	Shares			Weighted Average Grant- Date Fair Value		Shares			Weighted Average Grant- Date Fair Value
Outstanding at January 1, 2017		786,079		$	63.44		232,088		$	62.68
Granted		173,199			107.57		61,861			108.19
Vested		(212,172	)		51.54		(67,391	)		56.08
Forfeitures		(4,714	)		68.85		—			—
Outstanding at September 30, 2017		742,392		$	77.11		226,558		$	77.07

Restricted Stock Performance Units
Shares Weighted Average Grant- Date Fair Value Shares Weighted Average Grant- Date Fair Value
Outstanding at January 1, 2016 1,007,794
$ 49.47
175,675
$ 59.94
Granted 242,835
67.48
77,017
67.57
Vested (a) (417,544 ) 33.19
(20,604 ) 57.58
Forfeitures (18,233 ) 58.72
—
—
Outstanding at September 30, 2016 814,852
$ 62.98
232,088
$ 62.68

~~___________~~


~~(a)~~	~~Upon vesting of the performance unit awards, PCA issued 21,111 shares of its common stock, which included 507 shares for dividends accrued during the vesting period.~~

Compensation Expense

Our share-based compensation expense is recorded in "Selling, general, and administrative expenses". Compensation expense for share-based awards recognized in the Consolidated Statements of Income, net of forfeitures, was as follows (dollars in millions):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Restricted stock	$	3.8		$	3.5		$	11.3		$	12.2
Performance units		1.4			1.3			4.1			2.8
Total share-based compensation expense		5.2			4.8			15.4			15.0
Income tax benefit		(2.0	)		(1.8	)		(5.9	)		(5.8	)
Share-based compensation expense, net of tax benefit	$	3.2		$	3.0		$	9.5		$	9.2

Three Months Ended September 30 Nine Months Ended September 30
2016 2015 2016 2015
Restricted stock $ 3.5
$ 3.7
$ 12.2
$ 11.7
Performance units 1.3
0.9
2.8
2.0
Total share-based compensation expense 4.8
4.6
15.0
13.7
Income tax benefit (1.8 ) (1.8 ) (5.8 ) (5.3 )
Share-based compensation expense, net of tax benefit $ 3.0
$ 2.8
$ 9.2
$ 8.4

The fair value of restricted stock and performance units is determined based on the closing price of the Company’s common stock on the grant date. As PCA’s Board of Directors has the ability to accelerate vesting of share-based awards upon an employee’s retirement, the Company accelerates the recognition of compensation expense for certain employees approaching normal retirement age.

The unrecognized compensation expense for all share-based awards at September 30, ~~2016~~2017 was as follows (dollars in millions):

	September 30, 2017
	Unrecognized Compensation Expense		Remaining Weighted Average Recognition Period (in years)
Restricted stock	$	34.3	2.7
Performance units		10.9		3.0
Total unrecognized share-based compensation expense	$	45.2		2.8

13.	Stockholders' Equity

September 30, 2016
Unrecognized Compensation Expense Remaining Weighted Average Recognition Period (in years)
Restricted stock $ 30.7
2.9
Performance units 9.1
3.0
Total unrecognized share-based compensation expense $ 39.8
2.9

~~13. Stockholders' Equity~~

Dividends

During the nine months ended September 30, ~~2016,~~2017, we paid ~~$156.7~~$178.2 million of dividends to shareholders. On August ~~31, 2016 PCA announced an increase of its quarterly cash dividend on its common stock from an annual payout of $2.20 per share to $2.52 per share. Also, on August 31, 2016~~25, 2017 PCA's Board of Directors ~~declared~~announced a regular quarterly cash dividend of $0.63 per share of common stock, which was paid on October ~~14, 2016~~13, 2017 to shareholders of record as of September 15, ~~2016.~~2017. The ~~October 2016~~July 2017 dividend payment was $59.4 million.

Repurchases of Common Stock

On February 25, 2016, PCA announced that its Board of Directors authorized the repurchase of an additional $200.0 million of the Company’s outstanding common stock. Repurchases may be made from time to time in open market or privately negotiated transactions in accordance with applicable securities regulations. The timing and amount of repurchases will be determined by the Company in its discretion based on factors such as PCA’s stock price and market and business conditions.

~~During~~

The Company did not repurchase any shares of its common stock during the three and nine months ended September 30, ~~2016, we paid $100.3 million to repurchase 1,987,187 shares of common stock.~~

2017.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) (AOCI) by component were as ~~follows.~~follows (dollars in millions). Amounts in parentheses indicate ~~losses (dollars in millions):~~losses:

	Unrealized Loss On Treasury Locks, Net			Unrealized Loss on Foreign Exchange Contracts			Unfunded Employee Benefit Obligations			Total
Balance at January 1, 2017	$	(17.8	)	$	(0.4	)	$	(121.4	)	$	(139.6	)
Amounts reclassified from AOCI, net of tax		2.6			(0.2	)		6.2			8.6
Balance at September 30, 2017	$	(15.2	)	$	(0.6	)	$	(115.2	)	$	(131.0	)

Unrealized Loss On Treasury Locks, Net Unrealized Loss on Foreign Exchange Contracts Unfunded Employee Benefit Obligations Total
Balance at January 1, 2016 $ (21.2 ) $ (0.4 ) $ (103.3 ) $ (124.9 )
Other comprehensive income (loss) before reclassifications, net of tax —
—
3.1
3.1
Amounts reclassified from AOCI, net of tax 2.6
(a) —
5.0
(b) 7.6
Balance at September 30, 2016 $ (18.6 ) $ (0.4 ) $ (95.2 ) $ (114.2 )

Reclassifications out of AOCI were as ~~follows.~~follows (dollars in millions). Amounts in parentheses indicate expenses in the Consolidated Statements of ~~Income (dollars in millions):~~Income:

	Amounts Reclassified from AOCI
	Three Months Ended September 30,						Nine Months Ended September 30,
Details about AOCI Components	2017			2016			2017			2016
Unrealized loss on treasury locks, net	$	(1.4	)	$	(1.4	)	$	(4.2	)	$	(4.2	)	See (a) below
		0.5			0.5			1.6			1.6		Tax benefit
	$	(0.9	)	$	(0.9	)	$	(2.6	)	$	(2.6	)	Net of tax

Unfunded employee benefit obligations
Amortization of prior service costs	$	(1.3	)	$	(1.3	)	$	(4.3	)	$	(4.2	)	See (b) below
Amortization of actuarial losses		(1.8	)		(1.5	)		(5.6	)		(3.9	)	See (b) below
		(3.1	)		(2.8	)		(9.9	)		(8.1	)	Total before tax
		1.2			1.0			3.7			3.1		Tax benefit
	$	(1.9	)	$	(1.8	)	$	(6.2	)	$	(5.0	)	Net of tax

Amounts Reclassified from AOCI
Three Months Ended September 30 Nine Months Ended September 30 Affected Line Item in the Statement Where Net Income is Presented
Details about AOCI Components 2016 2015 2016 2015
Foreign currency translation adjustments $ —
$ —
$ —
$ (4.2 ) Other expense, net
—
—
—
—
Tax benefit
$ —
$ —
$ —
$ (4.2 ) Net of tax

Unrealized loss on treasury locks, net $ (1.4 ) $ (1.4 ) $ (4.2 ) $ (4.2 ) See (a) below
0.5
0.5
1.6
1.6
Tax benefit
$ (0.9 ) $ (0.9 ) $ (2.6 ) $ (2.6 ) Net of tax

Unfunded employee benefit obligations
Amortization of prior service costs $ (1.3 ) $ (1.4 ) $ (4.2 ) $ (4.2 ) See (b) below
Amortization of actuarial losses (1.5 ) (2.1 ) (3.9 ) (6.5 ) See (b) below
(2.8 ) (3.5 ) (8.1 ) (10.7 ) Total before tax
1.0
1.4
3.1
4.2
Tax benefit
$ (1.8 ) $ (2.1 ) $ (5.0 ) $ (6.5 ) Net of tax

~~____________~~

(a)

~~(a)~~

This AOCI component is included in interest expense, net. Amount relates to the amortization of the effective portion of treasury lock derivative instruments recorded in AOCI. The net amount of settlement gains or losses on derivative instruments included in AOCI to be amortized over the next 12 months is a net loss of ~~$5.7~~$5.4 million ($~~3.5~~3.3 million after tax). For a discussion of treasury lock derivative instrument activity, see Note ~~14,~~13, Derivative Instruments and Hedging Activities, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2015~~2016 Annual Report on Form 10-K.

(b)
~~(b)~~	These AOCI components are included in the computation of net pension and postretirement benefit costs. See Note 11, Employee Benefit Plans and Other Postretirement Benefits, for additional information.

14.	Concentrations of Risk

~~14. Concentrations of Risk~~

Our Paper segment has had a long-standing commercial and contractual relationship with Office Depot, our largest customer in the paper business. This relationship exposes us to a significant concentration of business and financial risk. Our sales to Office Depot represent approximately 8%7% and 9%8% of our total Company sales revenue for the nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and approximately ~~41%~~42% and ~~45%~~41% of our Paper segment sales revenue for both of those periods, respectively. At September 30, ~~2016~~2017 and December 31, ~~2015~~2016 we had ~~$31.6~~$31.2 million and ~~$39.5~~$31.8 million of accounts receivable due from Office Depot, which represents 4% and 6%5% of our total Company accounts receivable for both of those periods, respectively.

In ~~2015,~~2016, sales to Office Depot represented ~~45%~~42% of our Paper segment sales. If these sales are reduced, we would need to find new customers. We may not be able to fully replace any lost sales, and any new sales may be at lower prices or higher costs. Any significant deterioration in the financial condition of Office Depot affecting its ability to pay or any other change that affects its willingness to purchase our products will harm our business and results of operations.

15.	Transactions With Related Parties

During the second quarter of 2016, Office Depot and Staples terminated their merger agreement, and the acquisition of Office Depot by Staples was not completed. We continue to do business in the ordinary course with Office Depot.

~~15. Transactions With Related Parties~~

Louisiana Timber Procurement Company, L.L.C. (LTP) is a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company (Boise Cascade). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of PCA and Boise Cascade in Louisiana. 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 in our Corporate and Other segment. The carrying amounts of LTP's assets and liabilities (which relate primarily to noninventory working capital items) on our Consolidated Balance Sheets were ~~$5.1~~$4.6 million at September 30, ~~2016~~2017 and ~~$4.5~~$5.0 million at December 31, ~~2015.~~2016. During the three months ended September 30, ~~2016~~2017 and ~~2015,~~2016, we recorded ~~$15.5~~$20.8 million and ~~$25.2~~$15.5 million, respectively, and during the nine months ended September 30, ~~2016~~2017 and ~~2015~~2016 we recorded ~~$54.8~~$66.0 million and ~~$70.3~~$54.8 million, respectively, of LTP sales to Boise Cascade in "Net Sales" in the Consolidated Statements of Income and approximately the same amount of expenses in "Cost of Sales". ~~The sales were at prices designed to approximate market prices.~~

During the three months ended September 30, ~~2016~~2017 and ~~2015,~~2016, fiber purchases from related parties were ~~$3.9~~$4.0 million and ~~$5.0~~$3.9 million, respectively. Fiber purchases from related parties were $13.6 million and $13.2 million, ~~and $16.3 million~~respectively, during the nine months ended September 30, ~~2016~~2017 and ~~2015, respectively.~~2016. Most of these purchases related to chip and log purchases by LTP from Boise Cascade's wood products business. These purchases are recorded in "Cost of Sales" in the Consolidated Statements of Income.

16.	Segment Information

~~16. Segment Information~~

We report our business in three reportable segments: Packaging, Paper, and Corporate and Other. These segments represent distinct businesses that are managed separately because of differing products and services. Each of these businesses requires distinct operating and marketing strategies.

Each ~~segment's~~segment’s profits and losses are measured on operating profits before interest expense, net, and income taxes. For many of these allocated expenses, the related assets and liabilities remain in the Corporate and Other segment.

Selected financial information by reportable segment was as follows (dollars in millions):

	Sales, net
Three Months Ended September 30, 2017	Trade		Inter-segment			Total			Operating Income (Loss)
Packaging	$	1,340.6	$	6.0		$	1,346.6		$	261.5		(a)
Paper		271.4		—			271.4			(0.7	)	(a)
Corporate and Other		28.1		33.0			61.1			(18.5	)
Intersegment eliminations		—		(39.0	)		(39.0	)		—
	$	1,640.1		—		$	1,640.1			242.3
Interest expense, net										(25.4	)
Income before taxes									$	216.9

	Sales, net
Three Months Ended September 30, 2016	Trade		Inter-segment			Total			Operating Income (Loss)
Packaging	$	1,165.0	$	2.1		$	1,167.1		$	179.6		(c)
Paper		292.8		—			292.8			44.5		(c)
Corporate and Other		26.2		36.7			62.9			(17.7	)
Intersegment eliminations		—		(38.8	)		(38.8	)		—
	$	1,484.0	$	—		$	1,484.0			206.4
Interest expense, net										(23.4	)
Income before taxes									$	183.0

	Sales, net
Nine Months Ended September 30, 2017	Trade		Inter-segment			Total			Operating Income (Loss)
Packaging	$	3,897.4	$	17.6		$	3,915.0		$	676.8		(a)(b)
Paper		784.3		—			784.3			58.1		(a)
Corporate and Other		78.9		92.3			171.2			(55.7	)	(a)(b)
Intersegment eliminations		—		(109.9	)		(109.9	)		—
	$	4,760.6		—		$	4,760.6			679.2
Interest expense, net										(74.6	)
Income before taxes									$	604.6

	Sales, net
Nine Months Ended September 30, 2016	Trade		Inter-segment			Total			Operating Income (Loss)
Packaging	$	3,382.4	$	5.5		$	3,387.9		$	533.5		(c)
Paper		840.1		—			840.1			105.0		(c)
Corporate and Other		79.9		105.7			185.6			(51.1	)	(c)
Intersegment eliminations		—		(111.2	)		(111.2	)		—
	$	4,302.4	$	—		$	4,302.4			587.4
Interest expense, net										(67.5	)
Income before taxes									$	519.9

Sales, net Operating Income (Loss)
Three Months Ended September 30, 2016 Trade Inter-segment Total
Packaging $ 1,165.0
$ 2.1
$ 1,167.1
$ 179.6
(a)
Paper 292.8
—
292.8
44.5
(a)
Corporate and Other 26.2
36.7
62.9
(17.7 )
Intersegment eliminations —
(38.8 ) (38.8 ) —

$ 1,484.0
$ —
$ 1,484.0
206.4

Interest expense, net (23.4 )
Income before taxes $ 183.0

Sales, net Operating Income (Loss)
Three Months Ended September 30, 2015 Trade Inter-segment Total
Packaging $ 1,144.0
$ 0.4
$ 1,144.4
$ 198.2
(b)
Paper 291.9
—
291.9
39.5
(c)
Corporate and Other 34.9
36.3
71.2
(18.3 ) (d)
Intersegment eliminations —
(36.7 ) (36.7 ) —

$ 1,470.8
$ —
$ 1,470.8
219.4

Interest expense, net (21.7 )
Income before taxes $ 197.7

Sales, net Operating Income (Loss)
Nine Months Ended September 30, 2016 Trade Inter-segment Total
Packaging $ 3,382.4
$ 5.5
$ 3,387.9
$ 533.5
(a)
Paper 840.1
—
840.1
105.0
(a)
Corporate and Other 79.9
105.7
185.6
(51.1 ) (a)
Intersegment eliminations —
(111.2 ) (111.2 ) —

$ 4,302.4
$ —
$ 4,302.4
587.4

Interest expense (67.5 )
Income before taxes $ 519.9

Sales, net Operating Income (Loss)
Nine Months Ended September 30, 2015 Trade Inter-segment Total
Packaging $ 3,382.8
$ 3.1
$ 3,385.9
$ 533.9
(b)
Paper 870.3
—
870.3
98.6
(c)
Corporate and Other 97.7
101.0
198.7
(58.4 ) (d)
Intersegment eliminations —
(104.0 ) (104.0 ) —

$ 4,350.8
$ —
$ 4,350.8
574.1

Interest expense (63.2 )
Income before taxes $ 510.9

~~___________~~

(a)

The three and nine months ended September 30, 2017 include:

~~(a)~~

1. $0.9 million and $1.9 million, respectively, of charges consisting of closure costs related to corrugated products facilities, a paper administration facility, and a lump sum settlement of a multiemployer pension plan withdrawal liability for one of our corrugated products facilities.

2. $0.5 million and $0.8 million, respectively, of charges related to the Sacramento Container Corporation acquisition and integration costs related to other recent acquisitions.

3. $25.3 million of charges related to the announced second quarter 2018 discontinuation of uncoated free sheet and coated one-side grades at the Wallula, Washington mill associated with the conversion of the No. 3 paper machine to a high-performance 100% virgin kraft linerboard machine.

(b)

The nine months ended September 30, 2017 include the following:

$5.0 million of costs for the property damage and business interruption insurance deductible corresponding to the February 2017 explosion at our DeRidder, LA mill.

$2.3 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico.

(c)

The three and nine months ended September 30, 2016 ~~include $2.0~~include:

$2.0 million and ~~$6.5~~$7.4 million, respectively, of charges consisting of closure costs related to corrugated products facilities and a paper products ~~facility. The closure~~facility and costs ~~are recorded within "Other income (expense), net" and "Cost~~related to our withdrawal from a multiemployer pension plan for one of ~~sales", as appropriate.~~our corrugated products facilities.

~~The three and nine months ended September 30, 2016 include $2.9~~

$2.9 million and $3.2 ~~million of acquisition-related costs for the TimBar Corporation acquisition, which we recorded in "Other income (expense), net".~~

~~The nine months ended September 30, 2016 include $0.9 million of costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities.~~


~~(b)~~	The three and nine months ended September 30, 2015 include $3.8 million of income and $5.4 million of expense, respectively, related to restructuring charges at our mill in DeRidder, Louisiana, which were recorded in "Other income (expense), net" and "Cost of sales", as appropriate.

The nine months ended September 30, 2015 include $2.7 million of Boise acquisition integration-related and other costs, respectively. These costs primarily relate to professional fees, severance, retention, relocation, travel, and other integration-related costs, and are mostly recorded in "Other income (expense), net".


~~(c)~~	In September 2015, we sold the remaining land, buildings, and equipment at our paper mill site in St. Helens, Oregon, where we ceased paper production in December 2012. We recorded a $6.7 million gain on the sale, in "Other income (expense), net".


~~(d)~~	~~The three and nine months ended September 30, 2015 include $2.4 million and $6.9~~ million, respectively, of ~~Boise~~charges related to the acquisition ~~integration-related~~ and ~~other costs, mostly recorded in "Other income (expense), net".~~integration of TimBar Corporation.

17.	New and Recently Adopted Accounting Standards

~~17. New and Recently Adopted Accounting Standards~~

In ~~August 2016,~~May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09 (Topic 606): Revenue from Contracts with Customers. This ASU amends the guidance for revenue recognition to replace numerous industry-specific requirements. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers.

There are two permitted transition methods under the standard: full retrospective method, in which case the cumulative effect of applying the standard would be recognized in the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The new standard becomes effective for us as of January 1, 2018, at which time we expect to adopt it using the modified retrospective method.

We have established a transition team to analyze the impact of the standard on our revenue contracts by reviewing our current accounting policies and practices and identifying potential differences that would result from applying the requirements of the new standard. Specifically, we have identified significant revenue streams within each of our reportable segments and have reviewed representative contracts to identify corresponding purchase obligations, variable consideration, acquisition costs and fulfillment costs. In addition, we are in the process of identifying and assessing appropriate changes to our business processes, systems and controls to support revenue recognition and disclosures under the new standard. This team has reported, and will continue to report, its findings and progress of the project to management and the Audit Committee on a periodic basis.

During our assessment, the Company considered whether the adoption would require a transition from point-in-time revenue recognition to an over-time approach for products produced by the Company without an alternative use, which would result in acceleration of revenue. The Company has determined that based on the express terms included in the majority of its contracts, and the Company’s standard terms and conditions, an enforceable right of payment that includes a reasonable profit throughout the duration of the contract does not exist. Therefore, the Company would remain at a point-in-time approach and record revenue at the point control transfers to the customer.

While we continue to assess ASU 2014-09, we do not expect that there will be a material effect on the Company’s financial position or its results of operations as a result of adoption and we anticipate the primary impact to be the additional required disclosures around revenue recognition in the notes to the consolidated financial statements.

Effective January 1, 2017, the Company adopted ASU 2016-09 (Topic 718): Improvements to Employee Share-Based Payment Accounting ~~Standards Update ("ASU")~~, which is intended to improve the accounting for share-based payment transactions as part of the FASB’s simplification initiative. This ASU requires all excess tax benefits and deficiencies from share-based payment awards (including tax benefits of dividends on share-based payment awards) to be recognized in the income statement when the awards vest or are settled. Excess tax benefits and deficiencies were previously recognized in additional paid in capital in our consolidated balance sheet. Additionally, the guidance requires these excess tax benefits and deficiencies to be presented as an operating activity in the statement of cash flows rather than as a financing activity. As a result of this adoption, the Company recorded $0.3 million and $6.6 million of excess tax benefits from share-based compensation as an income tax benefit in the income statement for the three and nine months ended September 30, 2017, respectively. The Company also retrospectively reclassified excess tax benefits and deficiencies as an operating activity rather than as a financing activity on its consolidated statements of cash flows. The Company will continue to estimate forfeitures at the time of the grant. The Company had no unrecognized excess tax benefits from prior periods to record upon the adoption of this ASU, and all other adopted amendments did not have a material impact on the Company's financial position, results of operations and cash flow.

Effective January 1, 2017, the Company prospectively adopted ASU 2015-11 (Topic 330): Simplifying the Measurement of Inventory, as part of its simplification initiative. Under the ASU, inventory is measured at the "lower of cost and net realizable value" and other options that currently exist for market value will be eliminated. ASU 2015-11 defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. No other changes were made to the current guidance on inventory measurement. The adoption of this guidance did not have a material impact on the Company's financial position, results of operations and cash flow.

In May 2017, the FASB issued ASU 2017-09 Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modificat ion accounting in Topic 718. This ASU is effective for annual periods beginning after December 15, 2017. This ASU will be applied prospectively when changes to the terms or conditions of a share-based payment award occur.

In January 2017, the FASB issued ASU 2017-04 (Topic 350): Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment, eliminating the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under ASU 2017-04, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. This ASU is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This ASU will be applied prospectively to our future goodwill impairment tests beginning with our annual goodwill impairment test in the fourth quarter of 2017.

In January 2017, the FASB issued ASU 2017-01 (Topic 805), Clarifying the Definition of a Business, which amends the guidance in ASC 805, “Business Combinations”. The ASU changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. Under the new guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If it is not met, the entity then evaluates whether the set meets the requirements that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The ASU defines an output as “the result of inputs and processes applied to those inputs that provide goods or services to customers, investment income (such as dividends or interest), or other revenues.” The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods, and early adoption is permitted. The ASU will be applied prospectively to any transactions subsequent to adoption.

In August 2016, the FASB issued ASU 2016-15 ~~"Statement~~(Topic 230), Statement of Cash ~~Flows (Topic 230):~~ Flows: Classification of Certain Cash Receipts and Cash Payments. This ASU adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. It is

effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early

adoption permitted. The Company does not expect this ASU to have a material impact on the Company's financial condition,

results of operations, or cash flows.

~~In March 2016, the FASB issued ASU 2016-09 (Topic 718):~~ ~~Improvements to Employee Share-Based Payment Accounting~~. This ASU is intended to improve the accounting for share-based payment transactions as part of the FASB's simplification initiative. Under the ASU, all excess tax benefits and tax deficiencies will be recorded as an income tax benefit or expense in the income statement on a prospective basis. The excess tax benefits or deficiencies will be calculated as the difference between the amount of compensation expense for financial reporting purposes and the amount of compensation expense for tax purposes. We have no unrecognized excess tax benefits to record upon the adoption of this ASU. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those years for public business entities. We are continuing to evaluate the effect of the adoption of this ASU on our financial statements and will apply the ASU beginning January 1, 2017 for our first quarter ended March 31, 2017.

In February 2016, the FASB issued ASU 2016-02 (Topic 842): Leases~~Leases.~~ . This ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. This ASU ~~will be~~is effective for usfiscal years beginning ~~in our first quarter of 2019~~after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. This ASU is required to be adopted using a modified retrospective approach. We ~~are evaluating the timing and effects of the adoption of~~currently plan to adopt this ASU on ~~our financial statements.~~

~~Effective~~ January 1, ~~2016, the Company adopted ASU 2015-03 (Topic 835):~~ ~~Simplifying the Presentation of Debt Issuance Costs. This ASU conforms the presentation of debt issuance costs~~2019 and expect to recognize a liability and corresponding asset associated with ~~that required for debt discounts under U.S. Generally Accepted Accounting Principles (GAAP). Under the ASU, debt issuance costs~~in-scope operating leases, but are ~~presented~~still in the balance sheet as a direct deduction from the related liability rather than as an asset. We applied this guidance retrospectively, as required, and reclassified $12.3 million from "Other long-term assets" to "Long-term debt" on our December 31, 2015 Consolidated Balance Sheet to conform with current period presentation. At September 30, 2016 deferred financing costs were $13.0 million.

~~In July 2015, the FASB issued ASU 2015-11 (Topic 330):~~ ~~Simplifying the Measurement~~process of ~~Inventory. This ASU addresses only the measurement of inventory if its value declines or is impaired. The guidance on~~ determining the cost of inventory is not amended. We continue to apply average cost to determine the cost of inventory and will then compare that to the net realizable value to determine if an inventory write-down is necessary. The ASU is effective January 1, 2017, and we do not expect it to have a material effecteffects on our financial ~~position or results of operations.~~

~~In May 2014,~~statements and the ~~FASB issued ASU 2014-09 (Topic 606):~~ ~~Revenue from Contracts with Customers. This ASU amends the guidance~~processes required to account for revenue recognition to replace numerous, industry-specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focusesleasing activity on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with

~~customers. In March 2016, the FASB issued ASU 2016-08,~~ ~~Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting revenue gross versus net), which clarifies gross versus net revenue reporting when another party is involved in the transaction. In April 2016, the FASB issued ASU 2016-10,~~ ~~Revenue from Contracts with Customers-Identifying Performance Obligations and Licensing, which amends the revenue guidance on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12,~~ ~~Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients~~, which provides narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The standard will be effective for reporting periods beginning after December 15, 2017. We are still assessing the impact of ASU 2014-09, but we do not believe it will have a material effect on our financial position or results of operations.

an ongoing basis.

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.

18.	Commitments, Guarantees, Indemnifications and Legal Proceedings

~~18. Commitments, Guarantees, Indemnifications and Legal Proceedings~~

We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt, capital commitments, lease obligations, and purchase commitments for goods and services, and legal proceedings, all of which are discussed in Note ~~10,~~9, Debt, and Note ~~19,~~18, Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2015~~2016 Annual Report on Form 10-K.

Guarantees and Indemnifications

We provide guarantees, indemnifications, and other assurances to third parties in the normal course of our business. These include tort indemnifications, product guarantees, environmental assurances, and representations and warranties in commercial agreements. At September 30, ~~2016~~2017 we are not aware of any material liabilities arising from any guarantee, indemnification, or financial assurance we have provided. If we determined such a liability was probable and subject to reasonable determination, we would accrue for it at that time.

DeRidder Mill Incident

On February 8, 2017, a tank located in the pulp mill at the Company's DeRidder, Louisiana facility exploded, resulting in three contractor fatalities and other injuries. The Company has been served with multiple lawsuits and is on notice of additional claims. The Company maintains liability insurance subject to a $1.0 million deductible; however, the incident remains under investigation and the lawsuits are in the early stages. Accordingly, the Company is unable to estimate a range of reasonable possible losses at this time.

The Company has also incurred property damage and business interruption losses and has claimed these losses, subject to a $5.0 million deductible, under its property damage and business interruption insurance policy. The Company expects to resolve the claim with the insurance carrier over the next several months.

The Company is cooperating with investigations from the U.S. Occupational Health and Safety Administration, the U.S. Chemical Safety Board and the Environmental Protection Agency relating to the incident.

Legal Proceedings

We are party to other legal actions arising in the ordinary course of our business. These legal actions include commercial liability claims, premises liability claims, commercial disputes, and employment-related claims, among others. As of the date of this filing, we believe it is not reasonably possible that any of the legal actions against us will, either individually or in the aggregate, have a material adverse effect on our financial condition, results of operations, or cash flows.

19.	Subsequent Event

~~19.Subsequent Events~~

The Company has disclosed the following subsequent event in accordance with Accounting Standards Codification (ASC) 855, “Subsequent Events.” Subsequent events have been evaluated through the filing date of this Form 10-Q.

On October ~~11, 2016,~~2, 2017, we ~~entered into a definitive agreement to acquire substantially all~~completed the acquisition of the assets of ~~Columbus~~Sacramento Container ~~Inc.,~~Corporation and 100% membership interests of Northern Sheets, LLC and Central California Sheets, LLC in a cash-free, debt-free transaction. Funding for ~~a cash~~the $265 million purchase price of $100 million. Columbus Container, Inc. is a full-service provider of corrugated packaging products. Columbus Container's operations include a full-line corrugated products plant and five warehousing facilities and other related operations located in Indiana and Illinois. Closing is subject to certain customary conditions and is expected in the fourth quarter of 2016. PCA expects to finance the transaction withcame from available cash on hand. The acquired companies operate two full-line corrugated product operations and sheet feeders in McClellan, California and Kingsburg, California. The operating results of ~~Columbus~~Sacramento Container Corporation will be included in PCA’s ~~results upon closing of the transaction.~~

fourth quarter 2017 results.

In October 2016, we announced that we will cease softwood market pulp operations at our Wallula, Washington mill and permanently shutdown the No. 1 machine, with pulp capacity of approximately 100,000 tons, effective December 1, 2016.


Item 2.	~~MANAGEMENT'S~~ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This ~~management's~~management’s discussion and analysis includes statements regarding our expectations with respect to our future performance, expected business conditions, liquidity, and capital resources. Such statements, along with any other ~~nonhistorical~~ statements that are not historical in ~~the discussion,~~nature are forward-looking. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in our ~~2015~~2016 Annual Report on Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission (SEC). We do not assume any obligation to update any forward-looking statement. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q. Please see ~~"Forward~~“Forward Looking ~~Statements"~~Statements” elsewhere in this Item 2.

Overview

PCA is the fourth largest producer of containerboard ~~and corrugated packaging~~ products ~~in the United States~~ and the third largest producer of uncoated freesheet paper in ~~North America,~~the United States, based on production capacity. We operate five containerboard mills, three paper mills, and 9594 corrugated products manufacturing plants. Our containerboard mills produce linerboard and corrugating medium, which are papers primarily used in the production of corrugated products. Our corrugated products manufacturing plants produce a wide variety of corrugated packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-color boxes and displays with strong visual appeal that help to merchandise the packaged product in retail locations, and honeycomb protective packaging. In addition, we are a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. We also manufacture and sell white papers, including both commodity and specialty papers, which may have custom or specialized features such as colors, coatings, high brightness, and recycled content. We are headquartered in Lake Forest, Illinois and operate primarily in the United States.

This Item 2 is intended to supplement, and should be read in conjunction with, ~~"Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” included in our ~~2015~~2016 Annual Report on Form 10-K.

Executive Summary

Third quarter net sales were $1.64 billion in 2017 and $1.48 billion in ~~2016 and~~2016. We reported $139 million of net income, or $1.47 ~~billion in 2015. We reported~~per diluted share, during the third quarter of 2017, compared to $119 million of net income, or $1.26 per diluted share, during the ~~third quarter of 2016, compared with $128 million of net income, or $1.31 per diluted share, during the~~ same period in ~~2015.~~2016. The third quarter of ~~2016~~2017 included $5$27 million of pre-tax expense for special items (discussed below) compared to $8$5 million of pre-tax ~~income~~expense for special items in ~~2015.~~2016. Excluding special items, we recorded $159 million of net income, or $1.68 per diluted share, during the third quarter of 2017, compared to $123 million of net income, or $1.30 per diluted share, ~~during the third quarter of 2016, compared with $123 million of net income, or $1.26 per diluted share,~~ in the third quarter of ~~2015.~~2016. The increase was driven primarily by higher containerboard corrugated products, and white paper sales volumes, higher white paper prices and mix, and lower costs for energy, fiber, and freight, and a lower share count resulting from share repurchases. Gains were partially offset by lower domestic containerboard and corrugated products prices and mix ~~lower containerboard export prices, lower paper~~and sales and production ~~volume, and higher employee related costs.~~

During the first nine months of 2016 we reported $339 million of net income, or $3.58 per diluted share, compared with $333 million, or $3.39 per diluted share, during the same period in 2015. The nine months ended September 30, 2016 included $11 million of pre-tax expense for special items (discussed below), compared with $8 million of pre-tax expense for special items during the same period in 2015. Excluding special items, we recorded $346 million of net income, or $3.65 per diluted share, during the first nine months of 2016, compared with $338 million of net income, or $3.45 per diluted share, in the first nine months of 2015. The increase was driven primarily by higher volumes, and ~~lower maintenance costs in our packaging segment, lower energy, fiber and freight costs in both our packaging and paper segments, and~~ a ~~lower share count resulting from share repurchases. Gains were~~partial insurance recovery related to the DeRidder Mill incident, partially offset by lower prices and mix and sales and production volumes in ~~white paper, containerboard,~~our Paper segment, higher input and ~~corrugated products.~~

operating costs, higher freight and annual outage expenses, and higher depreciation and interest expense.

Packaging segment income from operations was $262 million in the third quarter of 2017, compared to $180 million in the third quarter of ~~2016, compared to $198 million in the third quarter of 2015.~~2016. Packaging segment earnings before interest, taxes, depreciation, amortization, and depletion (EBITDA) excluding special items was $341 million in the third quarter of 2017 and $256 million in the third quarter of ~~2016 and $268 million in the third quarter of 2015. Compared to the third quarter of 2015, corrugated products shipments were~~2016. The increase was driven primarily by higher ~~while containerboard and corrugated product prices and mix were down due to lower export prices and industry published price decreases.~~

Packaging segment income from operations was $534 million in both the first nine months of 2016 and 2015. Packaging segment EBITDA excluding special items was $759 million in the first nine months of 2016, compared to $757 million in the first nine months of 2015. Compared to the first nine months of 2015, both containerboard and corrugated

~~products shipments were higher with lower mill outage and energy costs, while~~ containerboard and corrugated products prices and mix ~~were down.~~

and sales and production volumes, and a partial insurance recovery related to the DeRidder Mill incident, partially offset by higher input costs, primarily recycled fiber, higher labor costs, and higher freight expense.

Paper segment income from operations was a loss of $1 million in the third quarter of 2017, which includes $25 million of charges related to the Wallula mill restructuring as discussed below. This compares to income of $45 million in the third quarter of ~~2016, compared to $40~~2016. Paper segment EBITDA excluding special items was $39 million in the third quarter of ~~2015. Paper segment EBITDA excluding special items increased~~2017, compared to $59 million in the third quarter of ~~2016, compared~~2016.

The decrease was due to ~~$46 million in the third quarter of 2015. White~~lower paper ~~shipments were higher and pulp shipments were lower, compared with last year’s third quarter. Paper segment~~ prices and mix ~~were favorable to last year’s third quarter from continued realization of the previously announced price increases.~~

~~Paper segment income from operations was $105 million in~~and lower sales and production volumes, higher costs for energy, and higher annual mill outage and freight expense.

During the first nine months of ~~2016,~~2017, we reported $400 million of net income, or $4.23 per diluted share, compared to ~~$99~~$339 million of net income, or $3.58 per diluted share, during the same period in ~~the first~~2016. The nine months of 2015. Paper segment EBITDA excluding special items was $149 million in the first nine months of 2016, compared to $133 million in the first nine months of 2015. Paper prices and mix were flat, while fiber and energy costs were lower, leading to increased margins. White paper shipments were up slightly and pulp shipments were lower, compared with the first nine months of last year.

~~Special Items and Earnings per Diluted Share, Excluding Special Items~~

~~The third quarter of 2016~~ended September 30, 2017 included $5$31 million of pre-tax expense for special items (discussed below), compared to $8 million of pre-tax income in the same period in 2015. The special items in the third quarter of 2016 included $3 million for TimBar acquisition-related costs and $2 million for facilities closure costs related to corrugated manufacturing facilities and a paper distribution center. The three months ended September 30, 2015 included a $7 million gain on the sale of our St. Helens paper mill site, $4 million of income for services and equipment received for vendor settlements at our DeRidder mill, and $3 million of Boise acquisition integration-related and other costs.

~~The nine months ended September 30, 2016 included~~ $11 ~~million of pre-tax expense for special items, compared with $8~~ million of pre-tax expense for special items during the same period in ~~2015.~~ 2016. Excluding special items, we recorded $422 million of net income, or $4.47 per diluted share, during the first nine months of 2017, compared to $346 million of net income, or $3.65 per diluted share, in the first nine months of 2016. The increase was driven primarily by higher containerboard and corrugated products prices and mix and sales and production volumes, and lower costs for annual mill outages, partially offset by lower sales and production volumes and prices and mix in our Paper segment, higher input and operating costs, higher freight expense, and higher depreciation and interest expense. Earnings for the year to date were negatively impacted due to the DeRidder Mill incident described in Note 18 to the Financial Statements included in this report.

Packaging segment income from operations was $677 million in the first nine months of 2017, compared to $534 million in the same period of 2016. Packaging segment EBITDA excluding special items was $917 million in the first nine months of 2017, compared to $759 million in the first nine months of 2016. The increase was driven primarily by higher containerboard and corrugated products prices and mix and sales and production volumes, and lower costs for annual mill outages, partially offset by higher input costs, primarily recycled fiber and energy, higher labor costs, and higher freight expense. The Packaging segment was negatively impacted by the DeRidder Mill incident losses described above.

Paper segment income from operations was $58 million in the first nine months of 2017, which includes $25 million of charges related to the Wallula mill restructuring as discussed below. This compares to $105 million in the first nine months of 2016. Paper segment EBITDA excluding special items was $126 million in the first nine months of 2017, compared to $149 million in the same period of 2016. The decrease was due primarily to lower paper sales and production volumes and prices and mix, and higher input costs, partially offset by lower operating costs and lower annual mill outage expense.

During the third quarter, the Company announced that it will discontinue production of uncoated freesheet and coated one-side grades at its Wallula, Washington mill in the second quarter of 2018 to begin the conversion of the No. 3 paper machine to a 400,000 ton-per-year virgin kraft linerboard machine. The Company incurred charges in the Paper segment relating to these activities during the third quarter as described below under “Special Items and Earnings per Diluted Share, Excluding Special Items,” and will incur future charges. The total capital cost of the conversion is expected to be approximately $150 million.

During the third quarter, the Company also agreed to acquire substantially all of the assets of Sacramento Container Corporation, and 100% of the membership interests of Northern Sheets, LLC and Central California Sheets, LLC, in a cash-free, debt-free transaction for $265 million. The Company completed the acquisition on October 2, 2017 and funded the purchase price with cash on hand. The acquired companies operate two full-line corrugated product operations and sheet feeders in McClellan, California and Kingsburg, California.

Special Items and Earnings per Diluted Share, Excluding Special Items

The third quarter of 2017 included $27 million of pre-tax expense for special items compared to $5 million of pre-tax expense in the same period in 2016. The special items in the third quarter of 2017 consist of $25 million of charges related to the previously announced conversion of the Wallula No. 3 paper machine to a virgin kraft linerboard machine, and $2 million for facility closure costs related to corrugated products facilities and a paper administration facility, and integration costs related to recent acquisitions. The $5 million of special items in the third quarter of 2016 related to closing a corrugated manufacturing facility and a paper distribution center and integration related costs for recent acquisitions.

The nine months ended September 30, 2017 included $31 million of pre-tax expense for special items, compared to $11 million of pre-tax expense for special items during the same period in 2016. The nine months ended September 30, 2017 included $25 million of charges related to the previously announced conversion of the Wallula No. 3 paper machine to a virgin kraft linerboard machine; $5 million for the property damage and business interruption insurance deductible related to the DeRidder Mill incident; $3 million of closure costs related to corrugated products facilities and a paper administration facility, integration costs related to the recent acquisitions, and costs related to a lump sum settlement payment for a multiemployer pension plan withdrawal liability; and $2 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico. The $11 million of special items in the nine months ended September 30, 2016 included $7 million ~~for facilities~~of facility closure costs related to corrugated ~~manufacturing~~products facilities and a paper distribution ~~center, $3~~facility and $4 million ~~for TimBar~~of acquisition-related costs for the TimBar Corporation, and ~~$1 million~~costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities. The nine months ended September 30, 2015 included $10 million of Boise acquisition integration-related and other costs, $5 million of expenses related to the DeRidder mill restructuring, and a $7 million gain on the sale of our St. Helens paper mill site.

plan.

A reconciliation of reported earnings per diluted share to earnings per share, excluding special items, for the three and nine months ended September 30, ~~2016~~2017 and ~~2015~~2016 are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017			2016
Earnings per diluted share, as reported	$	1.47	$	1.26	$	4.23		$	3.58
Special items:
Wallula mill restructuring		0.16		—		0.16			—
DeRidder mill incident		—		—		0.03			—
Internal legal entity consolidation		0.04		—		0.04			—
Facilities closure and other costs		0.01		0.02		0.01			0.05
Acquisition and integration related costs		—		0.02		0.01			0.02
Hexacomb working capital adjustment		—		—		(0.01	)		—
Total special items		0.21		0.04		0.24			0.07
Earnings per diluted share, excluding special items	$	1.68	$	1.30	$	4.47		$	3.65

Three Months Ended September 30 Nine Months Ended September 30
2016 2015 2016 2015
Earnings per diluted share, as reported $ 1.26
$ 1.31
$ 3.58
$ 3.39
Special items (a):
Facilities closure costs 0.02
—
0.04
—
Acquisition-related costs 0.02

—

0.02

—
Multiemployer pension plan withdrawal —
—
0.01
—
DeRidder restructuring —
(0.02 ) —
0.04
Integration-related and other costs —
0.02
—
0.06
Sale of St. Helens paper mill site —
(0.05 ) —
(0.04 )
Total special items 0.04
(0.05 ) 0.07
0.06
Earnings per diluted share, excluding special items $ 1.30
$ 1.26
$ 3.65
$ 3.45

~~____________~~


~~(a)~~	See "Reconciliations of Non-GAAP Financial Measures to Reported Amounts" in this Management's Discussion and Analysis of Financial Condition and Results of Operations for more information on the special items.

Included in this Item 2 are various non-GAAP financial measures, including diluted EPS excluding special items, segment income excluding special items and EBITDA excluding special items. Management excludes special items as it believes these items are not necessarily reflective of the ongoing results of operations of our business. We present these measures because they provide a means to evaluate the performance of our segments and our ~~company~~Company on an ongoing basis using the same measures that are used by our management, because these measures assist in providing a meaningful comparison between periods presented and because these measures are frequently used by investors and other interested parties in the evaluation of companies and the performance of their segments. A reconciliation of diluted EPS to diluted EPS excluding special items is included above and the reconciliations of other non-GAAP measures used in this ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations, to the most comparable measure reported in accordance with GAAP, are included in Item 2 under ~~"Reconciliations~~“Reconciliations of Non-GAAP Financial Measures to Reported Amounts."” Any analysis of non-GAAP financial measures should be done in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such.

Industry and Business Conditions

Trade publications reported ~~that~~North American industry-wide corrugated products total shipments increased ~~1.5%~~1.0% during the third quarter of ~~2016,~~2017, compared ~~with~~to the same quarter in ~~2015.~~2016. Reported industry containerboard production increased ~~2.0%~~1.5% compared ~~with~~to the third quarter of ~~2015,~~2016, and reported industry containerboard inventories at the end of the third quarter of ~~2016~~2017 were approximately 2.4 million tons, ~~down 10.2%~~flat compared to the same period in ~~2015.~~2016. Reported containerboard export shipments were ~~up 13.8%~~down 5.5% compared to the third quarter of ~~2015. Published containerboard prices did not change~~2016. Trade publications reported a $30 per ton price increase on corrugating medium during the third quarter ~~but increased by $40 per ton in October 2016.~~

of 2017.

The market for communication papers competes heavily with electronic data transmission and document storage alternatives. Increasing shifts to these alternatives have reduced usage of, and lowered demand for, traditional print media and communication papers. Trade publications reported that North American uncoated freesheet paper shipments weredown ~~4.7%~~1.4% in the third quarter of ~~2016,~~2017, compared ~~with~~to the same quarter in ~~2015.~~2016. Average prices reported by a trade publication for cut size office papers were lower by ~~$10~~$30 per ton, or ~~1.0%~~3.0%, in the third quarter of ~~2016,~~2017, compared ~~with~~to the third quarter of ~~2015.~~

2016.

Outlook

Looking ahead to the fourth quarter ~~2016,~~of 2017, we expect Packaging segment demand to remain strong although at seasonally lower volumes, ~~for containerboard and corrugated products,~~ which includes ~~four~~one less shipping ~~days,~~day, as well as a seasonally less rich mix in corrugated products, compared to the third quarter. ~~However, we~~We will also have ~~three months~~the addition of ~~TimBar activity~~our newly acquired Sacramento Container operations in the fourth ~~quarter versus only one month in the third~~ quarter. In ~~addition,~~our Paper segment, we ~~did communicate a~~have started implementing our recently announced price ~~increase of $50 per ton effective October 1 to all containerboard customers as well as a price increase to our corrugated products customers. We~~increases, but expect seasonally lower volumes and a less rich ~~mix in white papers and, with colder weather,~~sales mix. While recycled fiber prices should move lower, seasonally higher wood and ~~fuel~~energy costs along with higher prices for certain key chemicals and higher freight costs are ~~expected~~also expected. Annual mill outage costs are estimated to be ~~seasonally~~ higher ~~along with some price inflation on recycled fiber. Our annual outage costs also will be higher with~~than the third quarter due to scheduled maintenance work at four of our ~~Filer City, Michigan containerboard mill.~~mills. Considering these items, we expect fourth quarter earnings, excluding special items, to be lower than third quarter earnings. ~~In addition, as previously announced, we are on track to close the acquisition of Columbus Container during the fourth quarter of 2016.~~

Results of Operations

Three Months Ended September 30, 2017, compared to Three Months Ended September 30, 2016 ~~compared with Three Months Ended September 30, 2015~~

The historical results of operations of PCA for the three months ended September 30, ~~2016~~2017 and ~~2015~~2016 are set forth below (dollars in millions):

	Three Months Ended
	September 30,
	2017			2016			Change
Packaging	$	1,346.6		$	1,167.1		$	179.5
Paper		271.4			292.8			(21.4	)
Corporate and Other		61.1			62.9			(1.8	)
Intersegment eliminations		(39.0	)		(38.8	)		(0.2	)
Net sales	$	1,640.1		$	1,484.0		$	156.1

Packaging	$	261.5		$	179.6		$	81.9
Paper		(0.7	)		44.5			(45.2	)
Corporate and Other		(18.5	)		(17.7	)		(0.8	)
Income from operations	$	242.3		$	206.4		$	35.9
Interest expense, net		(25.4	)		(23.4	)		(2.0	)
Income before taxes		216.9			183.0			33.9
Income tax provision		(77.8	)		(63.7	)		(14.1	)
Net income	$	139.1		$	119.3		$	19.8
Non-GAAP Measures (a)
Net income excluding special items	$	158.8		$	122.6		$	36.2
Consolidated EBITDA		339.8			294.4			45.4
Consolidated EBITDA excluding special items		363.9			298.9			65.0
Packaging EBITDA		340.2			251.6			88.6
Packaging EBITDA excluding special items		341.3			256.0			85.3
Paper EBITDA		16.4			59.2			(42.8	)
Paper EBITDA excluding special items		39.4			59.3			(19.9	)

Three Months Ended September 30
2016 2015 Change
Packaging $ 1,167
$ 1,144
$ 23
Paper 293
292
1
Corporate and Other 63
72
(9 )
Intersegment eliminations (39 ) (37 ) (2 )
Net sales $ 1,484
$ 1,471
$ 13

Packaging $ 180
$ 198
$ (18 )
Paper 45
40
5
Corporate and Other (19 ) (19 ) —
Income from operations $ 206
$ 219
$ (13 )
Interest expense, net (23 ) (21 ) (2 )
Income before taxes 183
198
(15 )
Income tax provision (64 ) (70 ) 6
Net income $ 119
$ 128
$ (9 )
Non-GAAP Measures (a)
Net income excluding special items $ 123
$ 123
$ —
Consolidated EBITDA 294
307
(13 )
Consolidated EBITDA excluding special items 299
299
—
Packaging EBITDA 252
272
(20 )
Packaging EBITDA excluding special items 256
268
(12 )
Paper EBITDA 59
53
6
Paper EBITDA excluding special items 59
46
13

~~____________~~

(a)
~~(a)~~	See ~~"Reconciliations~~“Reconciliations of Non-GAAP Financial Measures to Reported ~~Amounts"~~Amounts” included in this Item 2 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.

Net Sales

Net sales increased ~~$13~~$156 million, or ~~0.9%~~10.5%, to ~~$1,484~~$1,640 million during the three months ended September 30, ~~2016,~~2017, compared ~~with $1,471~~to $1,484 million during the same period in ~~2015.~~

2016.

Packaging. Net sales increased ~~$23~~$180 million, or ~~2.0%~~15.4%, to ~~$1,167~~$1,347 million, compared ~~with $1,144~~to $1,167 million in the third quarter of ~~2015, primarily~~2016, due to ~~the addition of TimBar~~higher domestic and export containerboard and corrugated products prices and mix ($34121 million) and increased containerboard and corrugated products volume ($~~15 million), partially offset by lower export and domestic containerboard and corrugated products price and mix ($26~~59 million). Our domestic containerboard prices in the third quarter of ~~2016 decreased 4.4% due to published price decreases. Additionally our~~2017 increased 14.8%, and export ~~containerboard~~ prices ~~decreased 6.5%~~increased 21.3%, compared ~~with~~to the same period in ~~2015.~~2016. In the third quarter of ~~2016,~~2017, our containerboard outside shipments increased ~~10.8%~~5.7%, and total corrugated products shipments were up ~~4.9%~~4.0%, compared ~~with~~to the third quarter of ~~2015.~~2016. Containerboard mill production in the third quarter of 2017 was 996,000 tons compared to 950,000 in 2016. Prices for corrugating medium reported by trade publications increased by $30 per ton during the third quarter of 2017.

Paper. Net sales during the three months ended September 30, ~~2016 remained relatively flat, increasing $1~~2017 decreased $21 million, or 7.3%, to ~~$293~~$271 million, compared ~~with $292~~to $293 million in the third quarter of ~~2015. Sales increased primarily~~2016, due to ~~changes in price and mix ($4 million) and increased white paper sales~~lower pulp volume ($12 million)~~, offset by~~ as a ~~decrease in~~result of the 2016 shutdown of our market pulp operations at our Wallula Mill, lower white paper volume ($152 million).

~~Paper~~, and unfavorable changes in prices and mix in the third quarter of 2016 increased 1.5% compared with the same period last year. During the third quarter of 2016, white paper shipments increased 13,000 tons compared to the third quarter of 2015.

($7 million).

Gross Profit

Gross profit ~~was relatively flat, increasing $1~~increased $68 million during the three months ended September 30, ~~2016,~~2017, compared ~~with~~to the same period in ~~2015.~~2016. The increase was driven primarily ~~due to~~by higher containerboard and corrugated products prices and ~~white paper~~mix and sales ~~volumes,~~ and ~~lower fiber, energy, and freight costs,~~production volumes, partially offset by lower Paper segment prices and mix ~~in containerboard~~ and ~~corrugated products.~~sales and production volumes, and higher input and operating costs. In the ~~third quarter of 2016,~~three months ended September 30, 2017, gross profit included special items of $3 million related to the conversion of the No. 3 machine at the Wallula Mill, compared to $1 million in the same period last year for ~~facilities closure and~~ acquisition related costs and facility closure costs. ~~There were no special items that affected gross profit in the third quarter of 2015.~~

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased $4$13 million during the three months ended September 30, ~~2016,~~2017, compared ~~with~~to the same period in ~~2015.~~2016. The increase was primarily due to higher administrative costs corresponding to the TimBar ~~acquisition.~~

and Columbus Container acquisitions.

Other Income (Expense), Net

Other income (expense), net, during the three months ended September 30, ~~2016~~2017 was $25 million of expense, compared to $6 million of expense ~~compared with $4 million of income~~ during the three months ended September 30, ~~2015.~~2016. The third quarter of 2017 included $23 million of charges related to the conversion of the No. 3 machine at the Wallula Mill, and $4 million for asset disposals and write-offs, partially offset by $3 million of property damage and business interruption insurance net recoveries related to the February 2017 incident at our DeRidder Mill. The third quarter of 2016 included $4 million of closure costs related to corrugated products facilities and integration costs related to the recent acquisitions, and $1 million of asset disposals and write-offs. We discuss these items in more detail in Note 4, Other Income (Expense), Net of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, Item1. Financial Statements” of this Form 10-Q.

Income from Operations

Income from operations increased $36 million, or 17.4%, during the three months ended September 30, 2017, compared to the same period in 2016. The third quarter of 2017 included $27 million of expense for special items compared to $5 million in the same period in 2016. The special items in the third quarter of 2017 consist of $25 million of charges related to the previously announced conversion of the Wallula No. 3 paper machine to a virgin kraft linerboard machine, and $2 million for facility closure costs related to corrugated products facilities and a paper administration facility, and integration costs related to recent acquisitions. Third quarter 2016 special items of $5 million related to closing a corrugated manufacturing facility and a paper distribution center and integration related costs for recent acquisitions.

Packaging. Packaging segment income from operations increased $82 million to $262 million, compared to $180 million during the three months ended September 30, 2016. The increase in the third quarter of 2017 related primarily to favorable changes in containerboard and corrugated products prices and mix ($88 million), higher containerboard and corrugated products sales and production volumes ($17 million), lower wood costs ($5 million), and a partial insurance recovery related to the DeRidder Mill incident ($3 million), partially offset by higher costs for recycled fiber ($15 million), labor ($6 million), chemicals ($2 million), repairs ($2 million), energy ($1 million), converting costs ($1 million), freight ($2 million), and higher depreciation expense ($3 million). Special items during the third quarter of 2017 included expense of $1 million related to closure costs for corrugated products facilities and integration costs for the recent acquisitions. Special items for the third quarter 2016 included expense of $5 million related to integration costs and closing a corrugated manufacturing facility.

Paper. Paper segment income from operations decreased $45 million to a loss of $1 million, compared to income of $45 million during the three months ended September 30, 2016. The decrease primarily related to unfavorable changes in prices and mix ($7 million), lower sales and production volumes ($7 million), higher energy ($2 million), and higher mill outage ($2 million) and freight ($1 million) expense. Special items during the third quarter of 2017 included expense of $25 million related to the conversion of the Wallula No. 3 machine to a virgin kraft linerboard machine. There were no special items in the same period of 2016. Excluding special items, income from operations decreased $20 million.

Interest Expense, Net, and Income Taxes

Interest expense, net, increased $2 million, during the three months ended September 30, 2017, compared to the same period in 2016. The increase in interest expense was primarily due to higher interest rates on PCA’s variable rate debt in the third quarter of 2017 due to increases in LIBOR and the interest paid on term loan borrowings for the TimBar acquisition made in August 2016.

During the three months ended September 30, 2017, we recorded $78 million of income tax expense, compared to $64 million of expense during the three months ended September 30, 2016. The effective tax rate for the three months ended September 30, 2017 and 2016 was 35.9% and 34.8%, respectively. The increase in our effective tax rate for the three months ended September 30, 2017 compared to the same period in 2016, was primarily due to an internal legal entity consolidation that will simplify future operating activities and resulted in $3 million of tax expense for the change in value of deferred taxes.

Nine Months Ended September 30, 2017, compared to Nine Months Ended September 30, 2016

The historical results of operations of PCA for the nine months ended September 30, 2017 and 2016 are set forth below (dollars in millions):

	Nine Months Ended
	September 30,
	2017			2016			Change
Packaging	$	3,915.0		$	3,387.9		$	527.1
Paper		784.3			840.1			(55.8	)
Corporate and Other		171.2			185.6			(14.4	)
Intersegment eliminations		(109.9	)		(111.2	)		1.3
Net sales	$	4,760.6		$	4,302.4		$	458.2

Packaging	$	676.8		$	533.5		$	143.3
Paper		58.1			105.0			(46.9	)
Corporate and Other		(55.7	)		(51.1	)		(4.6	)
Income from operations	$	679.2		$	587.4		$	91.8
Interest expense, net		(74.6	)		(67.5	)		(7.1	)
Income before taxes		604.6			519.9			84.7
Income tax provision		(204.9	)		(181.0	)		(23.9	)
Net income	$	399.7		$	338.9		$	60.8
Non-GAAP Measures (a)
Net income excluding special items	$	422.0		$	345.9		$	76.1
Consolidated EBITDA		962.9			851.7			111.2
Consolidated EBITDA excluding special items		991.0			861.5			129.5
Packaging EBITDA		911.0			750.8			160.2
Packaging EBITDA excluding special items		916.8			759.4			157.4
Paper EBITDA		103.2			148.2			(45.0	)
Paper EBITDA excluding special items		126.2			149.1			(22.9	)

_____________________

(a)	See “Reconciliations of Non-GAAP Financial Measures to Reported Amounts” included in this Item 2 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.

Net Sales

Net sales increased $458 million, or 10.6%, to $4,761 million during the nine months ended September 30, 2017, compared to $4,302 million during the same period in 2016.

Packaging. Net sales increased $527 million, or 15.6%, to $3,915 million, compared to $3,388 million in the nine months ended September 30, 2016, due to higher containerboard and corrugated products volume ($315 million) and higher domestic and export containerboard and corrugated products prices and mix ($212 million). Our domestic containerboard prices in the first nine months of 2017 increased 11.6% reflecting higher prices reported by trade publications. Additionally, our export containerboard prices increased 12.0%, compared to the same period in 2016. In the first nine months of 2017, our containerboard outside shipments increased 4.7%, and corrugated products shipments were up 8.1% compared to the first nine months of 2016.

Paper. Net sales during the nine months ended September 30, 2017 decreased $56 million, or 6.6%, to $784 million, compared to $840 million in the nine months ended September 30, 2016. Sales decreased due to lower pulp volume ($38 million) as a result of the 2016 shutdown of our market pulp operations at our Wallula Mill, lower white paper volume ($16 million), and unfavorable changes in prices and mix ($2 million).

Gross Profit

Gross profit increased $152 million, or 16.0%, during the nine months ended September 30, 2017, compared to the same period in 2016. The increase was primarily due to higher containerboard and corrugated products prices and mix and sales and production volumes, partially offset by lower Paper segment sales and production volumes and prices and mix, and higher input and operating costs. In the first nine months of 2017, gross profit included special items of $3 million related to the conversion of the No. 3 machine at the Wallula Mill, compared to $2 million in the same period last year for acquisition related costs and facility closure costs.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased $43 million, or 12.4% during the nine months ended September 30, 2017, compared to the same period in 2016. The increase was primarily due to higher administrative costs corresponding to the TimBar and Columbus Container acquisitions.

Other Income (Expense), Net

Other expense, net, during the nine months ended September 30, 2017 was $32 million, compared to $15 million during the nine months ended September 30, 2016. The nine months ended September 30, 2017 included charges of $23 million for charges related to the conversion of the No. 3 machine at the Wallula Mill; $9 million for asset disposals and write-offs; $3 million of charges consisting of closure costs related to corrugated products facilities, integration costs related to the recent acquisitions, and costs related to lump sum settlement payments for multiemployer pension plan withdrawal liability; and $2 million of ~~facilities~~income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico. The nine months ended September 30, 2016 included $6 million of charges consisting of closure costs related to corrugated products facilities and a paper distribution facility and costs related to our withdrawal from a multiemployer pension plan, $2 million of acquisition-related costs for ~~our acquisition of~~the TimBar Corporation, and $1$4 million of asset disposal ~~costs,~~ and other miscellaneous income and expense items. The third quarter of 2015 included a $7 million gain on sale of our St. Helens paper mill site, $4 million of income for services and equipment received for vendor settlements related to the DeRidder mill restructuring, offset partially by $5 million of asset disposal costs and $2 million of integration-related and other costs.write-offs. We discuss these items in more detail in Note 4, Other Income (Expense), Net of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Part I, Item1. Financial Statements" of this Form 10-Q.

Income from Operations

Income from operations ~~decreased $13~~increased $92 million, or 6.0%, during the three months ended September 30, 2016, compared with the same period in 2015. The third quarter of 2016 included $5 million of expense from special items compared to $8 million of income during the same period of 2015. The special items in the third quarter of 2016 included $2 million of facilities closure costs related to corrugated manufacturing facilities and a paper distribution center and $3 million of TimBar acquisition-related costs. The three months ended September 30, 2015 included a $7 million gain on the sale of our St. Helens paper mill site, $4 million of income for insurance proceeds received related to the DeRidder mill restructuring, and $2 million of expense related to the Boise integration and other costs. Excluding special items of $13 million discussed above, income from operations remained flat during the three months ended September 30, 2016, compared with the same period in 2015.

~~Packaging.~~ Packaging segment income from operations decreased $18 million to $180 million, compared with $198 million during the three months ended September 30, 2015. The decrease in the third quarter of 2016 related primarily to lower domestic containerboard and corrugated products prices and mix ($18 million), lower containerboard export prices ($3 million), higher costs for labor and fringes ($5 million), partially offset by higher containerboard and corrugated products sales volume ($5 million), lower freight ($5 million), and energy ($3 million), and outage ($2 million) costs. Special items included $3 million of TimBar acquisition-related costs and $2 million of facilities closure costs in the third quarter of 2016 and $4 million of income from insurance proceeds received related to the DeRidder mill restructuring for the same period in 2015.

~~Paper.~~ Paper segment income from operations increased $5 million to $45 million, compared with $40 million during the three months ended September 30, 2015. Excluding special items, which included a $7 million gain on the sale of the St. Helens mill site in 2015, segment income increased $12 million. The increase primarily related to higher price and mix ($4 million), higher white paper sales volumes ($2 million), and lower fiber costs ($11 million), partially offset by lower paper production volume ($4 million).

~~Interest Expense, Net, and Income Taxes~~

Interest expense, net, increased $2 million, during the three months ended September 30, 2016, compared with the same period in 2015. The increase in interest expense was primarily due to higher term loan borrowings for the TimBar

~~acquisition and higher interest rates on PCA's variable rate debt ($1 million) and other costs that were individually insignificant in the third quarter of 2016, compared to the same period in 2015.~~

During the three months ended September 30, 2016, we recorded $64 million of income tax expense, compared with $70 million of expense during the three months ended September 30, 2015. The effective tax rate for the three months ended September 30, 2016 and 2015 was 34.8% and 35.4%, respectively.

~~Nine Months Ended September 30, 2016, compared with Nine Months Ended September 30, 2015~~

Nine Months Ended September 30
2016 2015 Change
Packaging $ 3,388
$ 3,386
$ 2
Paper 840
870
(30 )
Corporate and Other 185
199
(14 )
Intersegment eliminations (111 ) (104 ) (7 )
Net sales $ 4,302
$ 4,351
$ (49 )

Packaging $ 534
$ 534
$ —
Paper 105
99
6
Corporate and Other (52 ) (59 ) 7
Income from operations $ 587
$ 574
$ 13
Interest expense, net (67 ) (63 ) (4 )
Income before taxes 520
511
9
Income tax provision (181 ) (178 ) (3 )
Net income $ 339
$ 333
$ 6
Non-GAAP Measures (a)
Net income excluding special items $ 346
$ 338
$ 8
Consolidated EBITDA 852
842
10
Consolidated EBITDA excluding special items 862
841
21
Packaging EBITDA 751
758
(7 )
Packaging EBITDA excluding special items 759
757
2
Paper EBITDA 148
139
9
Paper EBITDA excluding special items 149
133
16

~~____________~~


~~(a)~~	~~See "Reconciliations of Non-GAAP Financial Measures to Reported Amounts" included in this Item 2 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.~~

~~Net Sales~~

~~Net sales decreased $49 million, or 1.1%, to $4,302 million during the nine months ended September 30, 2016, compared with $4,351 million during the same period in 2015.~~

~~Packaging.~~ Net sales remained relatively flat, increasing $2 million to $3,388 million, compared with $3,386 million in the nine months ended September 30, 2015, primarily due to the addition of TimBar ($34 million) and higher containerboard and corrugated products volumes ($45 million), partially offset by lower containerboard and corrugated products price and mix ($66 million) and sales lost due to the divestiture of our Hexacomb operations in Mexico and Europe in 2015 ($11 million). Our domestic containerboard prices in the first nine months of 2016 decreased 4.5% due to published price decreases. Additionally, our export containerboard prices decreased 7.5%, compared with the same period in 2015. In the first nine months of 2016, our

~~containerboard outside shipments remained flat, and corrugated products shipments were up 3.5%, compared with the first nine months of 2015.~~

~~Paper.~~ Net sales during the nine months ended September 30, 2016 decreased $30 million, or 3.4%, to $840 million, compared with $870 million in the nine months ended September 30, 2015. Sales decreased due to changes in price and mix ($2 million) and lower volume ($28 million). White paper prices and mix in the first nine months of 2016 decreased 2.3% compared with the same period last year. In the first nine months of 2016, our office paper shipments increased (19,000 tons) and pulp shipments decreased (43,000 tons) compared with the same period last year.

~~Gross Profit~~

~~Gross profit increased $26 million, or 2.8%~~15.6%, during the nine months ended September 30, ~~2016,~~2017, compared ~~with~~to the same period in ~~2015.~~2016. The increase was primarily due to higher corrugated products volumes and lower fiber, energy, freight and maintenance costs, partially offset by lower white paper, containerboard and corrugated products prices and mix, and lower pulp volume. In the first nine months of ~~2016, gross profit~~2017 included $31 million of pre-tax expense for special items, ~~of $2 million for facilities closure and acquisition-related costs,~~ compared to $9$11 million ~~in the same period last year~~of pre-tax expense for ~~DeRidder mill restructuring charges, most of which related to incremental depreciation expense associated with changing the estimated useful lives of mill assets.~~

~~Selling, General, and Administrative Expenses~~

~~Selling, general, and administrative expenses were flat at $346 million~~special items during ~~the nine months ended September 30, 2016, compared with~~ the same period in 2015. Higher administrative costs corresponding to the TimBar acquisition were offset by lower administrative employee and other costs for the nine months ended September 30, 2016, compared with the same period in 2015.

~~Other Income (Expense), Net~~

~~Other expense, net, during the nine months ended September 30, 2016 was $15 million, compared with $3 million during the nine months ended September 30, 2015.~~2016. The nine months ended September 30, ~~2016~~2017 included $25 million of charges related to the previously announced conversion of the Wallula No. 3 paper machine to a virgin kraft linerboard machine; $5 million ~~of facilities closure costs, $4~~for the property damage and business interruption insurance deductible related to the DeRidder Mill incident; $3 million of ~~asset disposal costs, $2 million of acquisition-related costs and $1 million of~~closure costs related to ~~our withdrawal from~~corrugated products facilities and a paper administration facility, integration costs related to the recent acquisitions, and costs related to a lump sum settlement payment for a multiemployer pension plan ~~for one of our corrugated products facilities. The nine months ended September 30, 2015 included $10 million of asset disposal costs~~withdrawal liability; and ~~$9 million of integration-related and other costs relating to the Boise acquisition, partially offset by a $7 million gain on the sale of our St. Helens paper mill site, $4~~$2 million of income related to a working capital adjustment from the ~~DeRidder restructuring,~~April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and $4 million of income from a refundable state tax credit received related to our investments and the jobs retained at our DeRidder mill, among other miscellaneous income and expense items. We discuss these items in more detail in Note 4, Other Income (Expense), Net of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Part I, Item1. Financial Statements" of this Form 10-Q.

~~Income from Operations~~

~~Income from operations increased $13 million, or 2.3%, during the nine months ended September 30, 2016, compared with the same period in 2015.~~Mexico. The ~~first nine months of 2016 included $11 million of expense from special items, compared with $8 million of expense from special items in the first nine months of 2015. Special items for the~~ nine months ended September 30, 2016 included $7 million of ~~facilities~~facility closure costs related to corrugated ~~manufacturing~~products facilities and a paper distribution ~~center, $3~~facility and $4 million of ~~TimBar~~ acquisition-related costs for the TimBar Corporation, and ~~$1 million~~costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities. The nine months ended September 30, 2015 included $5 million of charges related to restructuring the DeRidder mill and $10 million of Boise acquisition integration-related and other costs, partially offset by $7 million gain on the sale of our St. Helens paper mill site. In addition to the net difference resulting from special items of $3 million discussed above, income from operations increased $16 million during the nine months ended September 30, 2016, compared with the same period in 2015. The increase was primarily due to increased corrugated products volumes and lower operating costs, partially offset by lower prices and mix in white paper, containerboard and corrugated products.

plan.

Packaging. Packaging segment income from operations ~~remained flat at $534~~increased $143 million to $677 million, during the first nine months of ~~2016 and 2015.~~2017 compared to the same period last year. The first nine months of ~~2016~~2017 included higher ~~volume ($10 million), lower freight ($17 million), mill outage ($13 million), energy ($13 million), and fiber ($5 million) costs, offset by lower~~ containerboard and corrugated products prices and mix ($41148 million), higher sales and production volumes ($63 million), a partial insurance recovery related to the DeRidder Mill incident ($7 million), and lower mill outage costs ($2 million), partially offset by higher costs for recycled fiber ($38 million), energy ($10 million), labor ~~costs~~($12 million), freight ($8 million), and higher depreciation expense ($~~3 million), and a 2015 state tax credit related to investments and jobs retained at our DeRidder mill ($4~~9 million). Special items included $5 million of ~~facilities closure costs,~~expense for the property damage and business interruption insurance deductible related to the DeRidder Mill incident; $3 million of ~~TimBar acquisition-related~~charges consisting of closure costs ~~and $1 million~~ related to ~~our withdrawal from a multiemployer~~

~~pension plan for one of our~~ corrugated products facilities, integration costs related to the recent acquisitions, and costs related to a lump sum settlement payment for a multiemployer pension plan withdrawal liability; and $2 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico in the first nine months of 2017. The nine months ended September 30, 2016 ~~and $5~~included $6 million of ~~DeRidder restructuring~~ charges consisting of closure costs related to corrugated products facilities and our withdrawal from a multiemployer pension plan and $3 million of ~~integration-related and other costs relating to the Boise acquisition for the same period in 2015.~~

TimBar acquisition-related costs. Excluding special items, income from operations increased $140 million.

Paper. Paper segment income from operations ~~increased $6~~decreased $47 million to ~~$105~~$58 million, compared to the nine months ended September 30, ~~2015. Excluding special~~2016. The decrease primarily relates to lower paper sales and production volumes ($18 million), lower paper prices and mix ($3 million), and higher costs for energy ($11 million), partially offset by lower fiber costs ($8 million) and lower mill outage costs ($2 million). Special items ~~which~~during the first nine months of 2017 included expense of $25 million related to the conversion of the Wallula No. 3 machine to containerboard, compared to $2 million of facility closure costs ~~in 2016 and a $7 million gain on the sale of the St. Helens mill site in 2015, segment income increased $15 million. The increase primarily relates to lower costs~~ for ~~fiber ($22 million) and energy ($9 million) in the nine months ended September 30, 2016 compared to~~ the same period in 2015, partially offset by lower pulp volumes ($6 million), lower paper production volumes ($4 million), higher depreciation expense ($2 million), increases in chemical ($2 million) and mill outage costs ($2 million).

2016. Excluding special items, income from operations decreased $23 million.

Interest Expense, Net, and Income Taxes

Interest expense, net, was ~~$67~~$75 million during the nine months ended September 30, ~~2016,~~2017, compared ~~with $63~~to $68 million during the nine months ended September 30, ~~2015.~~2016. The increase in interest expense was primarily due to ~~lower~~ interest ~~rebate income related to one of our term loans ($3 million), higher~~on term loan borrowings for the TimBar acquisition made in August 2016 and higher interest rates on PCA's variable rate debt ~~($1 million)~~due to increases in LIBOR during the nine months ended September 30, ~~2016~~2017 compared to the same period in ~~2015.~~

2016.

During the nine months ended September 30, ~~2016,~~2017, we recorded ~~$181~~$205 million of income tax expense, compared ~~with $178~~to $181 million of expense during the nine months ended September 30, ~~2015.~~2016. The effective tax rate for the nine months ended September 30, 2017 and 2016 was 33.9% and ~~2015 was~~ 34.8% ~~and 34.9%~~, respectively.

The decrease in our effective tax rate for the nine months ended September 30, 2017 compared to the

same period in 2016, was primarily due to the adoption of ASU 2016-09 (Topic 718): Improvements to Employee Share-Based Payment Accounting, which requires all excess tax benefits and deficiencies from employee share-based payment awards to be recognized in the income statement as opposed to additional paid in capital. This was partially offset by the tax expense from the internal legal entity consolidation.

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of liquidity are net cash provided by operating activities and available borrowing capacity under our revolving credit facility. At September 30, ~~2016~~2017 we had ~~$280~~$371 million of cash and ~~$325~~$327 millionof unused borrowing capacity under the revolving credit facility, net of letters of credit. We paid the $265 million cash purchase price for the Sacramento Container acquisition on October 2, 2017 from cash on hand. Currently, our primary uses of cash are for operations, capital expenditures, acquisitions, debt service (including voluntary payments of debt), repurchases of common stock, and declared common stock dividends. We believe that net cash generated from operating activities, cash on hand, available borrowings under our revolving credit facility, and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements, including payments of any declared common stock dividends, for the foreseeable future. As our debt or credit facilities become due, we will need to repay, extend, or replace such facilities. Our ability to do so will be subject to future economic conditions and financial, business, and other factors, many of which are beyond our control.

Below is a summary table of our cash flows, followed by a discussion of our sources and uses of cash through operating activities, investing activities, and financing activities (dollars in millions):

	Nine Months Ended
	September 30,
	2017			2016			Change
Net cash provided by (used for):
Operating activities	$	583.3		$	593.5		$	(10.2	)
Investing activities		(227.6	)		(582.7	)		355.1
Financing activities		(224.5	)		84.8			(309.3	)
Net increase in cash and cash equivalents	$	131.2		$	95.6		$	35.6

Nine Months Ended September 30
2016 2015 Change
Net cash provided by (used for):
Operating activities $ 588
$ 542
$ 46
Investing activities (582 ) (203 ) (379 )
Financing activities 90
(277 ) 367
Net increase in cash and cash equivalents $ 96
$ 62
$ 34

Operating Activities

During the nine months ended September 30, ~~2016,~~2017, net cash provided by operating activities was ~~$588~~$583 million, compared ~~with $542~~to $593 million in the same period in ~~2015, an increase~~2016, a decrease of ~~$46~~$10 million. Cash from operations excluding changes in cash used for operating assets and liabilities ~~decreased $28~~increased $106 million, primarily due to ~~higher cash pension plan contributions, partially offset by~~ higher income from operations as discussed above. The ~~remaining $74~~increase was offset by $116 million ~~increase from changes in~~of cash used for operating assets and liabilities ~~was~~ primarily due to the following: (a) ~~a decrease~~an increase in ~~our inventories, primarily in the~~

~~Paper segment, related to strong sales~~accounts receivable in the first nine months of ~~2016~~2017, primarily related to higher sales volumes and ~~less inventory build due to changes~~prices in ~~timing of Paper~~the Packaging segment, ~~mill outages compared to 2015~~ and (b) an increase in inventories in both the Packaging and Paper segments in anticipation of the four mill outages in the fourth quarter of 2017 as well as additional inventory build in Packaging segment as we begin the integration of the Sacramento Container acquisition that we purchased in early October 2017. This was partially offset by an increase in accounts payable, primarily related to timing of payments in the ~~first nine months~~third quarter of ~~2016 compared to the same period in 2015.~~2017. Cash requirements for operating activities are subject to PCA’s operating needs and the timing of collection of receivables and payments of payables and expenses.

Investing Activities

Net cash used for investing activities during the nine months ended September 30, ~~2016 increased $379~~2017 decreased $355 million, to ~~$582~~$228 million, compared ~~with $203~~to $583 million during the same period in ~~2015. We spent $188 millionfor capital investments during~~2016, primarily due to an acquisition we made in the ~~nine months ended September 30, 2016, compared with $218 million during~~prior year. During the ~~same period in 2015. In August~~third quarter of 2016 we acquired TimBar for a purchase price of $386 million, net of cash acquired. ~~In April of 2015, we received $23~~We also spent $226 million ~~of cash proceeds~~ for capital investments during the ~~sale of our Hexacomb corrugated manufacturing operations~~nine months ended September 30, 2017, compared to $188 million during the same period in ~~Mexico and Europe.~~

2016.

We expect capital investments to be ~~between $250 million and $285~~approximately $370 million in ~~2016, excluding any acquisitions or other strategic activities.~~2017, including $30 million for the Wallula mill paper machine conversion. On October 2, 2017, we acquired the assets of Sacramento Container Corporation and the membership interests of Northern Sheets, LLC and Central California Sheets, LLC for $265 million. These expenditures could increase or decrease as a result of a number of factors, including our financial results, future economic conditions, and our regulatory compliance requirements. We currently estimate capital expenditures to comply with Boiler MACT regulations in ~~2016~~2017 of up to $3$1 million, and we expect other environmental capital expenditures of about $5$7 million in ~~2016.~~2017. Our estimated environmental expenditures could vary significantly depending upon the enactment of new environmental laws and regulations, including those related to greenhouse gas emissions and industrial boilers. In July 2016, the U.S. Court of Appeals for the District of Columbia Circuit issued a ruling on the consolidated cases challenging Boiler MACT. The court vacated key portions of the rule, including emission limits for certain subcategories of solid fuel boilers, and remanded other issues to the EPA for further rulemaking. At this time we cannot predict with certainty how the recent decision will impact our expected costs to comply with any revised Boiler MACT standards. For additional information, see ~~"Environmental Matters"~~“Environmental Matters” in ~~"Part~~“Part II, Item 7. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” of our ~~2015~~2016 Annual Report on Form 10-K.

Financing Activities

During the nine months ended September 30, ~~2016,~~2017, net cash used by financing activities changed by ~~$367~~$309 million to a use of $225 million, compared to a source of ~~$90 million, compared with a use of $277~~$85 million during the same period in ~~2015.~~2016. The ~~change~~decrease primarily ~~related~~relates to ~~proceeds from the issuance~~2016 borrowings of ~~a new~~ $385 million ~~unsecured five-year term loan facility, which PCA fully borrowed~~ to finance ~~its~~the TimBar acquisition ~~of TimBar Corporation, partially offset by a~~in August 2016. Additionally, we have not repurchased common stock in 2017, have increased debt

repayments in 2017 and have paid out higher ~~dividend payment~~dividends in 2017. During the nine months ended September 30, 2017 we did not repurchase any common stock, compared ~~with~~to $100 million in the same period in ~~2015.~~2016. In the first nine months of ~~2016,~~2017, we made $36 million of principal payments on long-term debt and capital leases, compared to $31 million during the same period in 2016. In the first nine months of 2017, we paid ~~$157~~$178 million of dividends compared ~~with $147~~to $157 million of dividends paid during the first nine months of 2015. On August 31, 2016 PCA's Board of Directors increased the regular quarterly cash dividend to $0.63 per share from the previous $0.55 per share dividend, beginning with the dividend paid on October 14, 2016. During the nine months ended September 30, 2016, we paid $100 million to repurchase 1,987,187 shares of common stock, compared with $98 million of share repurchases in the same period in 2015. We also withheld shares from vesting equity awards to cover employee tax liabilities of $10 million in the first nine months of 2016, compared with $7 million in the same period of 2015.

As PCA completed share repurchases under its prior authorization, on February 25, 2016 PCA announced that its Board of Directors authorized the repurchase of an additional $200 million of the Company’s outstanding common stock. Repurchases may be made from time to time in open market or privately negotiated transactions in accordance with applicable securities regulations. The timing and amount of repurchases will be determined by the Company in its discretion based on factors such as PCA’s stock price and market and business conditions.

For more information about our debt, see Note ~~10,~~9, Debt, of the Notes to Consolidated Financial Statements in ~~"Part~~“Part II, Item 8. Financial Statements and Supplementary ~~Data"~~Data” of our ~~2015~~2016 Annual Report on Form 10-K.

Contractual Obligations

On August 29, 2016, PCA acquired substantially all of the assets of TimBar Corporation (TimBar), a large independent corrugated products producer, for a cash purchase price of $386 million. Funding for the acquisition came from a new $385 million five-year term loan facility.

On October 11, 2016, we entered into a definitive agreement to acquire substantially all the assets of Columbus Container, Inc., for a cash purchase price of $100 million. Closing is subject to certain customary conditions and is expected in the fourth quarter of 2016.

There have been no ~~other~~ material changes to the contractual obligations table disclosed in Item 7. ~~"Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” of our ~~2015~~2016 Annual Report on Form 10-K.

Reconciliations of Non-GAAP Financial Measures to Reported Amounts

Income from operations excluding special items, net income excluding special items, EBITDA, and EBITDA excluding special items are non-GAAP financial measures. Management excludes special items as it believes that these items are not necessarily reflective of the ongoing operations of our business. These measures are presented because they provide a means to evaluate the performance of our segments and our Company on an ongoing basis using the same measures that are used by our management, because these measures assist in providing a meaningful comparison between periods and because these measures are frequently used by investors and other interested parties in the evaluation of companies and the performance of their segments. Any analysis of non-GAAP financial measures should be done in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. Reconciliations of the non-GAAP measures to the most comparable measure reported in accordance with GAAP for the three and nine months ended September 30, ~~2016~~2017 and ~~2015~~2016 follow (dollars in millions):

	Three Months Ended September 30,
	2017							2016
	Income before Taxes		Income Taxes			Net Income		Income before Taxes		Income Taxes			Net Income
As reported in accordance with GAAP	$	216.9	$	(77.8	)	$	139.1	$	183.0	$	(63.7	)	$	119.3
Special items:
Wallula mill restructuring (a)		25.3		(9.8	)		15.5		—		—			—
Internal legal entity consolidation (b)		—		3.3			3.3		—		—			—
Facilities closure and other costs (a)(d)		0.9		(0.3	)		0.6		2.0		(0.6	)		1.4
Acquisition and integration related costs (a)(d)		0.5		(0.2	)		0.3		2.9		(1.0	)		1.9
Total special items		26.7		(7.0	)		19.7		4.9		(1.6	)		3.3
Excluding special items	$	243.6	$	(84.8	)	$	158.8	$	187.9	$	(65.3	)	$	122.6

	Nine Months Ended September 30,
	2017									2016
	Income before Taxes			Income Taxes			Net Income			Income before Taxes		Income Taxes			Net Income
As reported in accordance with GAAP	$	604.6		$	(204.9	)	$	399.7		$	519.9	$	(181.0	)	$	338.9
Special items:
Wallula mill restructuring (a)		25.3			(9.7	)		15.6			—		—			—
DeRidder mill incident (c)		5.0			(1.9	)		3.1			—		—			—
Internal legal entity consolidation (b)		—			3.3			3.3			—		—			—
Facilities closure and other costs (a)(d)		1.9			(0.7	)		1.2			7.4		(2.5	)		4.9
Acquistion and integration related costs (a)(d)		0.8			(0.3	)		0.5			3.2		(1.1	)		2.1
Hexacomb working capital adjustment (c)		(2.3	)		0.9			(1.4	)		—		—			—
Total special items		30.7			(8.4	)		22.3			10.6		(3.6	)		7.0
Excluding special items	$	635.3		$	(213.3	)	$	422.0		$	530.5	$	(184.6	)	$	345.9

____________

(a)	The three and nine months ended September 30, 2017 include the following:

Three Months Ended September 30
2016 2015
Income before Taxes Income Taxes
Net
Income

Income
before Taxes
Income Taxes
Net
Income
As reported in accordance with GAAP $ 183.0
$ (63.7 ) $ 119.3
$ 197.7
$ (69.9 ) $ 127.8
Special items:
Facilities closure costs (a) 2.0
(0.6 ) 1.4
—
—
—
Acquisition-related costs (b) 2.9
(1.0 ) 1.9
—
—
—
DeRidder restructuring (d) —
—
—
(3.8 ) 1.5
(2.3 )
Integration-related and other costs (e) —
—
—
2.4
(0.7 ) 1.7
Sale of St. Helens paper mill site (f) —
—
—
(6.7 ) 2.3
(4.4 )
Total special items 4.9
(1.6 ) 3.3
(8.1 ) 3.1
(5.0 )
Excluding special items $ 187.9
$ (65.3 ) $ 122.6
$ 189.6
$ (66.8 ) $ 122.8

$0.9 million and $1.9 million, respectively, of charges consisting of closure costs related to corrugated products facilities, a paper administration facility, and a lump sum settlement of a multiemployer pension plan withdrawal liability for one of our corrugated products facilities, which were recorded in “Other expense, net”.

Nine Months Ended September 30
2016 2015
Income before Taxes Income Taxes
Net
Income

Income
before Taxes
Income Taxes
Net
Income
As reported in accordance with GAAP $ 519.9
$ (181.0 ) $ 338.9
$ 510.9
$ (178.3 ) $ 332.6
Special items:
Facilities closure costs (a) 6.5
(2.2 ) 4.3
—
—
—
Acquisition-related costs (b) 3.2
(1.1 ) 2.1
—
—
—
Multiemployer pension plan withdrawal (c) 0.9
(0.3 ) 0.6
—
—
—
DeRidder restructuring (d) —
—
—
5.4
(1.8 ) 3.6
Integration-related and other costs (e) —
—
—
9.6
(3.3 ) 6.3
Sale of St. Helens paper mill site (f) —
—
—
(6.7 ) 2.3
(4.4 )
Total special items 10.6
(3.6 ) 7.0
8.3
(2.8 ) 5.5
Excluding special items $ 530.5
$ (184.6 ) $ 345.9
$ 519.2
$ (181.1 ) $ 338.1

~~______~~

$0.5 million and $0.8 million, respectively, of charges related to the Sacramento Container Corporation acquisition and integration costs related to other recent acquisitions, which were recorded in “Other expense, net”.

~~(a)~~

$25.3 million of charges related to the announced second quarter 2018 discontinuation of uncoated free sheet and coated one-side grades at the Wallula, Washington mill in preparation for the conversion of the No. 3 paper machine to a high-performance 100% virgin kraft linerboard machine. The costs were recorded within “Other expense, net” and “Cost of sales”, as appropriate.

(b)	The three and nine months ended September 30, 2017 include $3.3 million of tax expense for the change in value of deferred taxes as a result of an internal legal entity consolidation that will simplify future operating activities.

(c)	The nine months ended September 30, 2017 include the following:

$5.0 million of costs for the property damage and business interruption insurance deductible corresponding to the February 2017 explosion at our DeRidder, LA mill.

$2.3 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico.

(d)	The three and nine months ended September 30, 2016 include the following:

$2.0 million and $7.4 million, respectively, of closure costs related to corrugated products facilities and a paper products ~~facility. The closure costs are recorded within "Other expense, net"~~facility and ~~"Cost of sales", as appropriate.~~


~~(b)~~	The three and nine months ended September 30, 2016 include acquisition-related costs for the TimBar Corporation acquisition, which we recorded in "Other expense, net" and "Cost of sales", as appropriate.


~~(c)~~	~~The nine months ended September 30, 2016 include~~ costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities. The costs ~~are~~were recorded within "Other expense, net" and "Cost of sales", as appropriate.

$2.9 million and $3.2 million, respectively, of charges related to the acquisition and integration of TimBar Corporation, which we recorded in ~~"Other~~“Other expense, ~~net".~~net” and “Cost of sales”, as appropriate.


~~(d)~~	The three and nine months ended September 30, 2015 include restructuring charges at our mill in DeRidder, Louisiana. The restructuring charges primarily related to accelerated depreciation and were mostly recorded in "Cost of sales".


~~(e)~~	The three and nine months ended September 30, 2015 include Boise acquisition integration-related and other costs, mostly recorded in "Other income (expense), net". These costs primarily relate to professional fees, severance, retention, relocation, travel, and other integration-related costs.


~~(f)~~	In September 2015, we sold the remaining land, buildings, and equipment at our paper mill site in St. Helens, Oregon, where we ceased paper production in December 2012. We recorded the gain on the sale in "Other income (expense), net".

The following table reconciles net income to EBITDA and EBITDA excluding special items for the periods indicated (dollars in millions):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017			2016
Net income	$	139.1	$	119.3	$	399.7		$	338.9
Interest expense, net		25.4		23.4		74.6			67.5
Income tax provision		77.8		63.7		204.9			181.0
Depreciation, amortization, and depletion		97.5		88.0		283.7			264.3
EBITDA	$	339.8	$	294.4	$	962.9		$	851.7
Special items:
Wallula mill restructuring		22.7		—		22.7			—
Facilities closure and other costs		0.9		1.6		1.9			6.6
Acquisition and integration related costs		0.5		2.9		0.8			3.2
DeRidder mill incident		—		—		5.0			—
Hexacomb working capital adjustment		—		—		(2.3	)		—
Total special items		24.1		4.5		28.1			9.8
EBITDA excluding special items	$	363.9	$	298.9	$	991.0		$	861.5

Three Months Ended September 30 Nine Months Ended
September 30
2016 2015 2016 2015
Net income $ 119.3
$ 127.8
$ 338.9
$ 332.6
Interest expense, net 23.4
21.7
67.5
63.2
Income tax provision 63.7
69.9
181.0
178.3
Depreciation, amortization, and depletion 88.0
87.7
264.3
267.9
EBITDA $ 294.4
$ 307.1
$ 851.7
$ 842.0
Special items:
Facilities closure costs 1.6
—
5.7
—
Acquisition-related costs 2.9
—
3.2
—
Multiemployer pension plan withdrawal —
—
0.9
—
DeRidder restructuring —
(3.8 ) —
(3.6 )
Integration-related and other costs —
2.4
—
9.6
Sale of St. Helens paper mill site —
(6.7 ) —
(6.7 )
EBITDA excluding special items $ 298.9
$ 299.0
$ 861.5
$ 841.3

The following table reconciles segment income (loss) to EBITDA and EBITDA excluding special items for the periods indicated (dollars in millions):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Packaging
Segment income	$	261.5		$	179.6		$	676.8		$	533.5
Depreciation, amortization, and depletion		78.7			72.0			234.2			217.3
EBITDA		340.2			251.6			911.0			750.8
Faclities closure and other costs		0.6			1.5			1.6			5.7
Acquisition and integration related costs		0.5			2.9			0.8			2.9
DeRidder mill incident		—			—			5.0			—
Hexacomb working capital adjustment		—			—			(1.6	)		—
EBITDA excluding special items	$	341.3		$	256.0		$	916.8		$	759.4

Paper
Segment income	$	(0.7	)	$	44.5		$	58.1		$	105.0
Depreciation, amortization, and depletion		17.1			14.7			45.1			43.2
EBITDA		16.4			59.2			103.2			148.2
Wallula mill restructuring		22.7			—			22.7			—
Integration-related, facilities closure and other costs		0.3			0.1			0.3			0.9
EBITDA excluding special items	$	39.4		$	59.3		$	126.2		$	149.1

Corporate and Other
Segment loss	$	(18.5	)	$	(17.7	)	$	(55.7	)	$	(51.1	)
Depreciation, amortization, and depletion		1.7			1.3			4.4			3.8
EBITDA		(16.8	)		(16.4	)		(51.3	)		(47.3	)
Hexacomb working capital adjustment		—			—			(0.7	)		—
Acquisition and integration related costs		—			—			—			0.3
EBITDA excluding special items	$	(16.8	)	$	(16.4	)	$	(52.0	)	$	(47.0	)

EBITDA	$	339.8		$	294.4		$	962.9		$	851.7

EBITDA excluding special items	$	363.9		$	298.9		$	991.0		$	861.5

Three Months Ended September 30 Nine Months Ended
September 30
2016 2015 2016 2015
Packaging
Segment income $ 179.6
$ 198.2
$ 533.5
$ 533.9
Depreciation, amortization, and depletion 72.0
73.5
217.3
224.2
EBITDA 251.6
271.7
750.8
758.1
Facilities closure costs 1.5
—
4.8
—
Acquisition-related costs 2.9
—
2.9
—
Multiemployer pension plan withdrawal —
—
0.9
—
DeRidder restructuring —
(3.8 ) —
(3.6 )
Integration-related and other costs —
—
—
2.7
EBITDA excluding special items $ 256.0
$ 267.9
$ 759.4
$ 757.2

Paper
Segment income $ 44.5
$ 39.5
$ 105.0
$ 98.6
Depreciation, amortization, and depletion 14.7
13.3
43.2
40.6
EBITDA 59.2
52.8
148.2
139.2
Facilities closure costs 0.1
—
0.9
—
Sale of St. Helens paper mill site —
(6.7 ) —
(6.7 )
EBITDA excluding special items $ 59.3
$ 46.1
$ 149.1
$ 132.5

Corporate and Other
Segment loss $ (17.7 ) $ (18.3 ) $ (51.1 ) $ (58.4 )
Depreciation, amortization, and depletion 1.3
0.9
3.8
3.1
EBITDA (16.4 ) (17.4 ) (47.3 ) (55.3 )
Acquisition-related costs —
—
0.3
—
Integration-related and other costs —
2.4
—
6.9
EBITDA excluding special items $ (16.4 ) $ (15.0 ) $ (47.0 ) $ (48.4 )

EBITDA excluding special items $ 298.9
$ 299.0
$ 861.5
$ 841.3

Market Risk and Risk Management Policies

PCA is exposed to the impact of interest rate changes and changes in the market value of its financial instruments. We periodically enter into derivatives to minimize these risks, but not for trading purposes. AtWe were not a party to any derivatives-based arrangements at September 30, ~~2016 we had no derivative instruments outstanding.~~2017. For a discussion of derivatives and hedging activities, see Note ~~14,~~13, Derivative Instruments and Hedging Activities, of the Notes to Consolidated Financial Statements in ~~"Part~~“Part II, Item 8. Financial Statements and Supplementary ~~Data"~~Data” of our ~~2015~~2016 Annual Report on Form 10-K.

The interest rates on approximately ~~62%~~63% of PCA’s debt are fixed. A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense and a corresponding decrease in income before taxes of approximately $10 million annually.

Off-Balance-Sheet Activities

The Company does not have any off-balance sheet arrangements as of September 30, ~~2016~~.

2017.

Environmental Matters

~~Except as described below, there~~

There have been no material changes to the disclosure set forth in Item 7. ~~"Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Environmental ~~Matters"~~Matters” filed with our ~~2015~~2016 Annual Report on Form 10-K. In July 2016, the U.S. Court of Appeals for the District of Columbia Circuit issued a ruling on the consolidated cases challenging Boiler MACT. The court vacated key portions of the rule, including emission limits for certain subcategories of solid fuel boilers, and remanded other issues to the EPA for further rulemaking. At this time, we cannot predict with certainty how the recent decision will impact our expected costs to comply with any revised Boiler MACT standards.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, PCA evaluates its estimates, including those related to business combinations, pensions and other postretirement benefits, goodwill and intangible assets, long-lived asset impairment, environmental liabilities and income taxes, among others. PCA bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

PCA has included in its ~~2015~~2016 Annual Report on Form 10-Ka discussion of its critical accounting policies and estimates which require ~~management's~~management’s most difficult, subjective, or complex judgments used in the preparation of its consolidated financial statements. PCA has not had any changes to these critical accounting estimates during the first nine months of ~~2016~~.

2017.

New and Recently Adopted Accounting Standards

For a listing of our new and recently adopted accounting standards, see Note 17, New and Recently Adopted Accounting Standards, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in ~~"Part~~“Part I, Item 1. Financial ~~Statements"~~Statements” of this Form 10-Q.

Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q, and in particular, statements found in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our expectations regarding our future liquidity, earnings, expenditures, and financial condition. These statements are often identified by the words ~~"will," "should," "anticipate," "believe," "expect," "intend," "estimate," "hope,"~~“will,” “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope,” or similar expressions. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties. There are important factors that could cause actual results to differ materially from those in forward-looking statements, many of which are beyond our control. These factors, risks and uncertainties include the following:

the impact of general economic conditions;

the impact of acquired businesses and risks and uncertainties regarding operation, expected benefits and integration of such businesses;

containerboard, corrugated products, and white paper general industry conditions, including competition, product demand, product pricing, and input costs;

fluctuations in wood fiber and recycled fiber costs;

fluctuations in purchased energy costs;

the possibility of unplanned outages or interruptions at our principal facilities;

the timing and amount of insurance recoveries relating to the DeRidder incident; and

legislative or regulatory actions or requirements, particularly concerning environmental or tax matters.

Our actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, we can give no assurances that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on our results of operations or

financial condition. Given these uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. We expressly disclaim any obligation to publicly revise any forward-looking statements that have been made to reflect the occurrence of events after the date hereof. For a discussion of other factors, risks and uncertainties that may affect our business, see Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016..


Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of market risks related to PCA, see Part I, Item 2, ~~"Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risk and Risk Management ~~Policies"~~Policies” in this Quarterly Report on Form 10-Q.


Item 4.	CONTROLS AND PROCEDURES

PCA maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be disclosed in PCA’s filings under the Securities Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to PCA’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Prior to filing this report, PCA completed an evaluation under the supervision and with the participation of PCA’s management, including PCA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of PCA’s disclosure controls and procedures as of September 30, ~~2016~~.2017. The evaluation of PCA’s disclosure controls and procedures included a review of the controls’ objectives and design, PCA’s implementation of the controls, and the effect of the controls on the information generated for use in this report. Based on this evaluation, PCA’s Chief Executive Officer and Chief Financial Officer concluded that PCA’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, ~~2016~~.

2017.

Changes in Internal Control over Financial Reporting

On ~~August 29,~~November 30, 2016, PCA acquired ~~TimBar Corporation ("Timbar"~~Columbus Container, Inc. (“Columbus Container”). We are currently in the process of evaluating and integrating ~~Timbar’s~~Columbus Container’s controls over financial reporting which may result in changes or additions to PCA’s internal control over financial reporting. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. ~~We expect to exclude TimBar from the assessment of internal control over financial reporting at December 31, 2016.~~ Except as may relate to the ~~TimBar~~integration of the Columbus Container acquisition, there were no other changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the most recent fiscal quarter ended September 30, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~As of and for the quarter ended September 30, 2016, TimBar accounted for approximately 6% of the Company's consolidated total assets and 2% of consolidated sales.~~

PART II

OTHER INFORMATION


Item 1.	LEGAL PROCEEDINGS

The disclosure set forth under the caption "Legal Proceedings" in Note 18, Commitments, Guarantees, Indemnifications and Legal Proceedings, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Form 10-Q is incorporated herein by reference.


Item 1A.	RISK FACTORS

There have been no material changes to the risk factors disclosed in "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~.

2016.


Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents information related to our repurchases of common stock made under ~~share~~ repurchase ~~authorizations approved~~plans authorized by ~~our board~~PCA's Board of ~~directors on February 25, 2016~~Directors, and shares withheld to cover taxes on vesting of equity awards, during the three months ended September 30, ~~2016:~~2017:

Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased (a)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)
July 1-31, 2017		1,136	$	112.11		—	$	193.0
August 1-31, 2017		73		109.62		—		193.0
September 1-30, 2017		—		—		—		193.0
Total		1,209	$	111.96		—	$	193.0

Issuer Purchases of Equity Securities
Period Total
Number
of Shares
Purchased (a) Average Price Paid Per Share Total Number
of Shares
Purchased
as Part of Publicly
Announced Plans
or Programs
Approximate
Dollar Value
of Shares
That May Yet
Be Purchased
Under the Plans
or Programs
(in millions)

July 1-31, 2016 1,102
$ 67.13
—
$ 193.0

August 1-31, 2016 1,747
67.72
—
193.0

September 1-30, 2016 —
—
—
193.0

Total 2,849
$ 67.49
—
$ 193.0

~~____________~~

(a)
~~(a)~~	All shares were withheld from employees to cover income and payroll taxes on equity awards that vested during the period.


Item 3.	DEFAULTS UPON SENIOR SECURITIES

None.

~~None.~~


Item 4.	MINE SAFETY DISCLOSURES

Not applicable.


Item 5.	OTHER INFORMATION

None.

~~None.~~

Item 6.

EXHIBITS

Exhibit

Number

Description

~~Item 6.~~

~~EXHIBITS~~


31.1
~~Exhibit~~ ~~Number~~		~~Description~~
~~10.1~~		Amended and Restated Credit Agreement, dated as of August 29, 2016, by and among PCA and the lenders and agents named therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the registrant on September 1, 2016).
~~31.1~~		Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
~~31.2~~
31.2		Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
32
32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †
~~101~~
101		The following financial information from Packaging Corporation of America’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2016,~~2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, (ii) Consolidated Balance Sheets at September 30, ~~2016~~2017 and December 31, ~~2015,~~2016, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2016~~2017 and ~~2015,~~2016, and (iv) the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements. †

~~____________~~

†
†	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Packaging Corporation of America

		/s/ MARK W. KOWLZAN
		Mark W. Kowlzan
		Chairman and Chief Executive Officer

		/s/ ROBERT P. MUNDY
		Robert P. Mundy
		Senior Vice President and Chief Financial Officer

Date: November ~~4, 2016~~

3, 2017


☐
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
~~For the transition period from ____________ to ____________~~

Delaware		36-4277050

~~Delaware~~		~~36-4277050~~
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1955 West Field Court, Lake Forest, Illinois		60045
(Address of Prinicpal Executive Offices)		(Zip Code)



Large accelerated filer	x ☒		Accelerated filer	¨ ☐

Non-accelerated filer	¨ ☐	(Do not check if a smaller reporting company)	Smaller reporting company	¨ ☐
Emerging growth company	☐


☒
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
~~For the quarterly period ended September 30, 2016~~

		PART I

	~~PART I~~

Item 1.		Financial Statements	1

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	18 15

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	31 27

Item 4.		Controls and Procedures	31 27

		PART II

Item 1.		Legal Proceedings	32 28

Item 1A.		Risk Factors	32 28

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	32 28

Item 3.		Defaults Upon Senior Securities	32 28

Item 4.		Mine Safety Disclosures	32 28

Item 5.		Other Information	32 28

Item 6.		Exhibits	33
		29



	Three Months Ended September 30						Nine Months Ended September 30
	2016			2015			2016			2015
Statements of Income:
Net sales	$	1,484.0		$	1,470.8		$	4,302.4		$	4,350.8
Cost of sales	(1,154.5		)	(1,142.5		)	(3,353.8		)	(3,427.9		)
Gross profit	329.5			328.3			948.6			922.9
Selling, general, and administrative expenses	(116.9		)	(112.7		)	(346.0		)	(345.9		)
Other income (expense), net	(6.2		)	3.8			(15.2		)	(2.9		)
Income from operations	206.4			219.4			587.4			574.1
Interest expense, net	(23.4		)	(21.7		)	(67.5		)	(63.2		)
Income before taxes	183.0			197.7			519.9			510.9
Income tax provision	(63.7		)	(69.9		)	(181.0		)	(178.3		)
Net income	$	119.3		$	127.8		$	338.9		$	332.6
Less net income attributable to noncontrolling interests	—			—			—			—
Net income attributable to Packaging Corporation of America	$	119.3		$	127.8		$	338.9		$	332.6

Net income per common share attributable to Packaging Corporation of America common shareholders:
Basic	$	1.27		$	1.31		$	3.59		$	3.39
Diluted	$	1.26		$	1.31		$	3.58		$	3.39
Dividends declared per common share	$	0.63		$	0.55		$	1.73		$	1.65

Statements of Comprehensive Income:
Net income	$	119.3		$	127.8		$	338.9		$	332.6
Other comprehensive income, net of tax:
Foreign currency translation adjustment	—			—			—			2.8
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.5 million, $0.5 million, $1.6 million, and $1.6 million	0.9			0.9			2.6			2.6
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $1.0 million, $1.4 million, $3.1 million, and $4.2 million	1.8			2.1			5.0			6.5
Changes in unfunded employee benefit obligations net of tax of $2.0 million	—			—			3.1			—
Other comprehensive income	2.7			3.0			10.7			11.9
Less net income attributable to noncontrolling interests	—			—			—			—
Comprehensive income attributable to Packaging Corporation of America	$	122.0		$	130.8		$	349.6		$	344.5



	September 30, 2016				December 31, 2015
ASSETS
Current assets:				��
Cash and cash equivalents	$	279.8			$	184.2
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $9.4 million and $10.3 million as of September 30, 2016 and December 31, 2015, respectively	713.2				636.5
Inventories	690.6				676.8
Prepaid expenses and other current assets	45.1				28.8
Federal and state income taxes receivable	18.3				28.2
Total current assets	1,747.0				1,554.5
Property, plant, and equipment, net	2,878.7				2,832.1
Goodwill	692.1				544.0
Intangible assets, net	354.8				270.8
Other long-term assets	74.6				70.9
Total assets	$	5,747.2			$	5,272.3
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	25.8			$	6.5
Capital lease obligations	1.2				1.2
Accounts payable	327.0				294.2
Dividends payable	59.8				53.4
Accrued interest	18.8				13.1
Accrued liabilities	204.9				193.5
Total current liabilities	637.5				561.9
Long-term liabilities:
Long-term debt	2,625.8				2,290.4
Capital lease obligations	20.7				21.6
Deferred income taxes	360.9				347.0
Compensation and benefits	312.2				358.6
Other long-term liabilities	60.1				59.5
Total long-term liabilities	3,379.7				3,077.1
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.2 million and 96.1 million shares issued as of September 30, 2016 and December 31, 2015, respectively	0.9				1.0
Additional paid in capital	446.0				439.9
Retained earnings	1,396.9				1,317.3
Accumulated other comprehensive loss	(114.2		)		(124.9		)
Total stockholders' equity	1,729.6				1,633.3
Noncontrolling interests	$	0.4			$	—
Total equity	$	1,730.0			$	1,633.3
Total liabilities and equity	$	5,747.2			$	5,272.3



Goodwill	$	148.1
Other intangible assets	101.6
Property, plant and equipment	96.9
Other net assets	39.0
Net assets acquired	$	385.6



	Goodwill
Balance at December 31, 2015	$	544.0
Acquisition (a)	148.1
Balance at September 30, 2016	$	692.1



	September 30, 2016					December 31, 2015
	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization
Customer relationships (b)	13.3	$	408.0	$	73.2	13.3	$	311.5	$	57.3
Trademarks and trade names (b)	11.7	25.6		6.9		13.6	21.8		5.2
Other (b)	2.9	1.5		0.2		1.2	0.2		0.2
Total intangible assets (excluding goodwill)	13.2	$	435.1	$	80.3	13.6	$	333.5	$	62.7



	September 30, 2016				December 31, 2015
	Amount		Interest Rate		Amount		Interest Rate
Revolving Credit Facility, due October 2018	$	—	—	%	$	—	—	%
Revolving Credit Facility, due August 2021	—		—		—		—
Five-Year Term Loan, due October 2018	—		—		25.0		1.80
Five-Year Term Loan, due August 2021	385.0		1.77		—		—
Seven-Year Term Loan, due October 2020	632.1		2.15		637.0		2.05
6.50% Senior Notes due March 2018	150.0		6.50		150.0		6.50
3.90% Senior Notes, net of discounts of $0.2 million and $0.3 million as of September 30, 2016 and December 31, 2015, due June 2022	399.8		3.90		399.7		3.90
4.50% Senior Notes, net of discount of $1.4 million and $1.5 million as of September 30, 2016 and December 31, 2015, due November 2023	698.6		4.50		698.5		4.50
3.65% Senior Notes, net of discount of $0.9 million and $1.0 million as of September 30, 2016 and December 31, 2015, due September 2024	399.1		3.65		399.0		3.65
Total	2,664.6		3.44	%	2,309.2		3.67	%
Less current portion	25.8				6.5
Less unamortized debt issuance costs	13.0				12.3
Total long-term debt	$	2,625.8			$	2,290.4



	Sales, net								Operating Income (Loss)
Three Months Ended September 30, 2015	Trade		Inter-segment			Total			Operating Income (Loss)
Packaging	$	1,144.0	$	0.4		$	1,144.4		$	198.2		(b)
Paper	291.9		—			291.9			39.5			(c)
Corporate and Other	34.9		36.3			71.2			(18.3		)	(d)
Intersegment eliminations	—		(36.7		)	(36.7		)	—
	$	1,470.8	$	—		$	1,470.8		219.4
Interest expense, net									(21.7		)
Income before taxes									$	197.7



	Sales, net								Operating Income (Loss)
Nine Months Ended September 30, 2015	Trade		Inter-segment			Total			Operating Income (Loss)
Packaging	$	3,382.8	$	3.1		$	3,385.9		$	533.9		(b)
Paper	870.3		—			870.3			98.6			(c)
Corporate and Other	97.7		101.0			198.7			(58.4		)	(d)
Intersegment eliminations	—		(104.0		)	(104.0		)	—
	$	4,350.8	$	—		$	4,350.8		574.1
Interest expense									(63.2		)
Income before taxes									$	510.9