Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 31, 2017~~April 29, 2022 the Registrant had outstanding ~~94,350,499~~93,701,172 shares of common stock, par value $0.01 per share.

~~Table~~Securities registered pursuant to Section 12(b) of ~~Contents~~the Exchange Act:

All reports we file with the Securities and Exchange Commission (SEC) are available free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC website at www.sec.gov. We also provide copies of our SEC filings at no charge upon request and make electronic copies of our reports available through our website at www.packagingcorp.com as soon as reasonably practicable after filing such material with the SEC.

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

1.	~~Nature of Operations and Basis of Presentation~~

Packaging Corporation of America ("we," "us," "our," PCA," or the "Company") was incorporated on January 25, ~~1999.~~1999. In April 1999, PCA acquired the containerboard and corrugated packaging products business of Pactiv Corporation ~~(Pactiv)~~("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~~3 reportable segments: Packaging, Paper, and Corporate and Other. Our Packaging segment produces a wide variety of containerboard and corrugated packaging products. The Paper segment manufactures and sells a range of white papers, including uncoated free sheet and coated one-side grades. During the third quarter of 2017, the Company announced that it will discontinue the production of uncoated free sheet and coated one-side grades at the Wallula, Washington mill in the second quarter of 2018 to begin the conversion of the No. 3 machine to a 400,000 ton-per-year virgin kraft linerboard machine.communication-based papers. Corporate and Other includes support staff services and related assets and liabilities, transportation assets, and activity related to other ancillary support operations. For more information about our segments, see Note 1619, Segment Information.

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

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

The consolidated financial statements of PCA as of ~~September 30, 2017~~March 31, 2022 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 are unaudited but include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of such financial statements. The preparation of the consolidated financial statements involves the use of estimates and accruals. Actual results may vary from those estimates. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and ~~footnotes~~notes 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, 2017~~March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2022. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

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

2. New Accounting Standards

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

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

There were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.

2.	~~Acquisitions~~

3. Revenue

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. Sales, value added, and other taxes collected concurrently with revenue-producing activities are excluded from revenue.

The following table presents our revenues disaggregated by product line (dollars in millions):


	Three Months Ended March 31,
	2022		2021
Packaging	$	1,964.5	$	1,623.6
Paper		153.5		164.6
Corporate and Other		18.4		19.0
Total revenue	$	2,136.4	$	1,807.2

~~TimBar~~Packaging Revenue

Our containerboard mills produce linerboard and corrugating medium which are papers primarily used in the production of corrugated products. The majority of our containerboard production is used internally by our corrugated products manufacturing facilities. The remaining containerboard is sold to outside domestic and export customers. Our corrugated products manufacturing plants produce a wide variety of corrugated packaging products and retail merchandise displays. We sell corrugated products to national, regional and local accounts, which are broadly diversified across industries and geographic locations.

The Company recognizes revenue for its packaging products when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time. Based on our express terms and conditions of the sale of products to our customers, as well as terms included in contractual arrangements with our customers, we do not have an enforceable right of payment that includes a reasonable profit throughout the duration of the contract for products that do not have an alternative use. Revenue is recognized when the product is shipped from the mill or from our manufacturing facility to our customer. Certain customers may receive volume-based incentives, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized.

Certain customers receive a portion of their packaging products as consigned inventory with billing triggered once the customer uses or consumes the designated product. Prior to invoicing, these amounts are handled as unbilled receivables. Total unbilled receivables, which are immaterial in amount, are included in the accounts receivable financial statement caption.

Paper Revenue

We manufacture and sell a range of communication-based papers. Communication papers consist of cut-size office papers, and printing and converting papers.

The Company recognizes revenue for its paper products when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time. Revenue is recognized when the product is shipped from the mill or from our manufacturing facility or distribution center to our customer. Certain customers may receive volume-based incentives, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized.

Corporate and Other Revenue

Revenue in this segment primarily relates to Louisiana Timber Procurement Company, L.L.C. ("LTP"), a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company ("Boise Cascade"). PCA is the primary beneficiary of LTP and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements. See Note 18, Transactions With Related Parties, for more information related to LTP.

The Company recognizes revenue within this segment when performance obligations under the terms of a contract with a customer are satisfied. This occurs with the transfer of control of our products at a specific point in time.

Practical Expedients and Exemption

Shipping and handling fees billed to a customer are recorded on a gross basis in "Net sales" with the corresponding shipping and handling costs included in "Cost of sales" in the concurrent period as the revenue is recorded. We expense sales commissions when incurred because the amortization period is one year or less. Sales commissions are recorded in "Selling, general, and administrative expenses".

We do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

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~~.

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):

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

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


	Three Months Ended
	March 31,
	2022			2021
Asset disposals and write-offs	$	(12.7	)	$	(10.4	)
Jackson mill conversion-related activities (a)		(0.4	)		(0.5	)
Acquisition-related, facilities closure and other costs (b)		(0.4	)		(2.1	)
Other		(2.1	)		(7.4	)
Total	$	(15.6	)	$	(20.4	)

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
)
(a)

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

~~(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.

(b)

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

~~(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.

For the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021, we recorded ~~$77.8~~$86.1 million and ~~$63.7~~$53.1 million of income tax expense and had an effective tax rate of ~~35.9%~~25.3% and ~~34.8%~~24.2%, respectively. The increase in our effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2022 compared ~~with~~to the same period in ~~2016,~~2021 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~~a favorable state law change during the ~~change in value of deferred taxes.~~

~~For the nine~~three months ended September 30, 2017 and 2016, we recorded $204.9 million and $181.0 million of income tax expense and had an effective tax rate of 33.9% and 34.8%, respectively. The decrease in our effective tax rate forMarch 31, 2021 with no corresponding favorable state law change during the ~~nine~~three months ended ~~September 30, 2017 compared with 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.March 31, 2022.

Our current effective tax rate may differ from the federal statutory income tax rate of ~~35.0%,~~21.0% due primarily to the effect 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, 2017~~March 31, 2022 and 2021, cash paid for taxes, net of refunds received, was $17.6 million and $13.3 million, respectively. The increase in cash tax payments between the periods is primarily due to higher 2022 forecasted taxable income.

During the three months ended March 31, 2022, there were no significant changes to our uncertain tax positions. For more information, see Note 6,8, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2016~~2021 Annual Report on Form 10-K.

~~During the nine months ended September 30, 2017 and 2016 cash paid for taxes, net of refunds received, was $208.3 million and $158.8 million, respectively.~~8. 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.~~net realizable value. 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):


	March 31,		December 31,
	2022		2021
Raw materials	$	354.1	$	324.2
Work in process		16.7		16.2
Finished goods		201.1		201.0
Supplies and materials		369.3		361.1
Inventories	$	941.2	$	902.5

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~~

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

Depreciation expense for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~$87.0~~$98.5 million and ~~$79.9~~$90.0 million, respectively. ~~During the nine months ended September 30, 2017 and 2016, depreciation expense was $253.0~~We recognized $1.1 million and ~~$240.5~~$0.5 million ~~respectively. During the nine months ended September 30, 2017, we recognized $2.6 million~~of incremental depreciation expense ~~from shortening~~during the ~~useful lives~~three months ended March 31, 2022 and 2021, respectively, as a result of ~~certain assets related to~~ the ~~Wallula~~Jackson mill ~~restructuring.~~conversion-related activities.

At ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021, purchases of property, plant, and equipment included in accounts payable were ~~$30.4~~$103.1 million and ~~$12.8~~$73.6 million, respectively.

8.	~~Goodwill and Intangible Assets~~

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, 2017~~March 31, 2022 and December 31, ~~2016~~2021 we had ~~$676.9~~$923.1 million and ~~$682.7~~$923.5 million of goodwill recorded in our Packaging segment ~~respectively. At both September 30, 2017 and December 31, 2016 we had $55.2 million of~~respectively, which represents the entire goodwill ~~recorded in~~balance reported on our ~~Paper segment.~~Consolidated Balance Sheets.

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


	Goodwill
Balance at January 1, 2022	$	923.5
Acquisitions (a)		(0.4	)
Balance at March 31, 2022	$	923.1

Goodwill

Balance at January 1, 2017

$
737.9

Acquisitions (a)(b)

(5.8
)
Balance at September 30, 2017

$
732.1

(a)

During the three months ended March 31, 2022, the Company recorded a $0.4 million adjustment to decrease the goodwill balance for the Company's December 2021 acquisition of Advanced Packaging.

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					March 31, 2022						December 31, 2021
	Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Weighted Average Remaining Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		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		8.3	$	551.1	$	264.5		8.5	$	551.1	$	254.9
Trademarks and trade names	10.7		28.8		11.8	10.5		27.7		8.1		8.3		37.6		26.1		8.4		37.6		25.5
Other	3.9		4.2		1.9	4.3		4.2		1.4		2.2		4.4		4.3		2.2		4.4		4.3
Total intangible assets (excluding goodwill)	12.3	$	462.4	$	114.6	12.9	$	456.4	$	89.3		8.3	$	593.1	$	294.9		8.5	$	593.1	$	284.7

During the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, amortization expense was ~~$8.4~~$10.2 million and ~~$6.3~~$9.6 million, respectively. ~~During the nine months ended September 30, 2017 and 2016, amortization expense was $25.3 million and $17.5 million, respectively~~.

11. Accrued Liabilities

9.	~~Accrued Liabilities~~

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


	September 30,		December 31,		March 31,		December 31,
	2017		2016		2022		2021
Compensation and benefits	$	119.3	$	120.4	$	87.9	$	157.1
Customer rebates and other credits						33.7		36.9
Medical insurance and workers’ compensation		28.8		28.8		25.7		26.9
Franchise, property, sales and use taxes		22.8		16.7		22.9		17.6
Customer volume discounts and rebates		21.0		18.9
Environmental liabilities and asset retirement obligations		4.2		6.4		4.3		4.0
Severance, retention, and relocation		4.2		3.0		2.6		2.7
Other		7.5		7.0		11.5		9.8
Total	$	207.8	$	201.2	$	188.6	$	255.0

During the nine months ended September 30, 2017, we made principal payments of $29.8 million and $4.9 million on our five-year term loan due August 2021 and our seven-year term loan due October 2020, respectively. For the nine months ended September 30, 2017 and 2016, cash payments for interest were $67.2 million and $59.5 million, respectively.

~~Included in interest expense, net, are amortization of treasury lock settlements and amortization of financing costs.~~ 9

12. Debt

For both the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, cash payments for interest were $7.5 million.

Included in interest expense, net is the amortization of ~~treasury lock settlements was $1.4 million, and for both the nine months ended September 30, 2017 and 2016, amortization of treasury locks was $4.2 million.~~financing costs. For ~~both~~ the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, amortization of financing costs was ~~$0.5~~$0.4 million and ~~during the nine months ended September 30, 2017 and 2016, amortization of financing costs was $1.5~~$0.5 million, ~~and $1.4 million,~~ respectively.

At ~~September 30, 2017~~March 31, 2022, we had ~~$1,647.7~~$2,491.1 million of fixed-rate senior notes ~~and $977.6 million of variable-rate term loans~~ outstanding. ~~At September 30, 2017 the~~The fair value of our fixed-rate debt was estimated to be ~~$1,739.2~~$2,395.3 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 ~~2016~~2021 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 9,11, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2016~~2021 Annual Report on Form 10-K.

13. Cash, Cash Equivalents, and Marketable Debt Securities

The following table shows the Company’s cash and available-for-sale ("AFS") debt securities by major asset category at March 31, 2022 and December 31, 2021 (in millions):


	March 31, 2022
	Adjusted Cost Basis		Unrealized Gain		Unrealized Loss			Fair Value		Cash and Cash Equivalents		Short-Term Marketable Debt Securities		Long-Term Marketable Debt Securities
Cash and cash equivalents	$	627.4	$	0	$	0		$	627.4	$	627.4	$	0	$	0
Level 1 (a):
U.S. Treasury securities		22.9		0		(0.3	)		22.6		0		12.7		9.9
Money market funds		1.2		0		0			1.2		1.2		0		0
Subtotal		24.1		0		(0.3	)		23.8		1.2		12.7		9.9
Level 2 (b):
Corporate debt securities		122.3		0		(1.6	)		120.7		0		63.6		57.1
U.S. government agency securities		5.6		0		(0.1	)		5.5		0		4.0		1.5
Certificates of deposit		1.0		0		0			1.0		0		1.0		0
Subtotal		128.9		0		(1.7	)		127.2		0		68.6		58.6
Total	$	780.4	$	0	$	(2.0	)	$	778.4	$	628.6	$	81.3	$	68.5


	December 31, 2021
	Adjusted Cost Basis		Unrealized Gain		Unrealized Loss			Fair Value		Cash and Cash Equivalents		Short-Term Marketable Debt Securities		Long-Term Marketable Debt Securities
Cash and cash equivalents	$	612.3	$	0	$	0		$	612.3	$	612.3	$	0	$	0
Level 1 (a):
U.S. Treasury securities		26.4		0		(0.1	)		26.3		2.0		14.7		9.6
Money market funds		0.9		0		0			0.9		0.9		0		0
Subtotal		27.3		0		(0.1	)		27.2		2.9		14.7		9.6
Level 2 (b):
Corporate debt securities		118.9		0		(0.3	)		118.6		3.5		66.0		49.1
U.S. government agency securities		4.8		0		0			4.8		0		3.5		1.3
Certificates of deposit		1.9		0		0			1.9		0		1.9		0
Subtotal		125.6		0		(0.3	)		125.3		3.5		71.4		50.4
Total	$	765.2	$	0	$	(0.4	)	$	764.8	$	618.7	$	86.1	$	60.0

(a)

Valuations based on quoted prices for identical assets or liabilities in active markets.

~~11.~~

~~Employee Benefit Plans and Other Postretirement Benefits~~

(b)

Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

For both the three months ended March 31, 2022 and 2021, net realized gains and losses on the sales and maturities of certain marketable debt securities were insignificant.

The Company invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy requires securities to be investment grade and limits the amount of credit exposure to any one issuer. The maturities of the Company’s long-term marketable debt securities generally range from one to two years.

Fair values were determined for each individual marketable debt security in the investment portfolio. When evaluating a marketable debt security for impairment, PCA reviews factors such as the duration and extent to which the fair value of the marketable debt security is less than its cost, the financial condition of the issuer and any changes thereto, the general market condition in which the issuer operates, and PCA’s intent to sell, or whether it will be more likely than not be required to sell, the marketable debt security before recovery of its amortized cost basis.

As of March 31, 2022 and December 31, 2021, we do 0t consider any of the impairments related to our marketable debt securities to be the result of credit losses. Therefore, we have not recorded an allowance for credit losses related to our marketable debt securities. All unrealized gains and losses were recorded in other comprehensive income (OCI).

The following table provides information about the Company’s marketable debt securities that have been in a continuous loss position as of March 31, 2022 and December 31, 2021 (in millions, except number of marketable debt securities in a loss position):


	March 31, 2022						December 31, 2021
	Fair Value of Marketable Debt Securities		Number of Marketable Debt Securities in a Loss Position		Unrealized Losses		Fair Value of Marketable Debt Securities		Number of Marketable Debt Securities in a Loss Position		Unrealized Losses
Corporate debt securities (c)	$	113.7		160	$	1.6	$	106.9		153	$	0.3
U.S. Treasury securities		22.6		25		0.1		22.4		27		0.1
U.S. government agency securities		5.5		7		0.3		4.8		6		0
Certificates of deposit		1.0		2		0		0.5		1		0
	$	142.8		194	$	2.0	$	134.6		187	$	0.4

(c)

For 2022, includes one marketable debt security in a continuous loss position greater than 12 months with a fair value of $0.3 million and an insignificant amount of unrealized loss.

14. 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												Pension Plans
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2022			2021
Service cost	$	5.8		$	6.2		$	18.0		$	18.4		$	4.9		$	5.4
Interest cost		10.4			10.2			31.1			30.6			8.7			7.4
Expected return on plan assets		(13.5	)		(12.3	)		(40.5	)		(37.1	)		(13.9	)		(15.8	)
Net amortization of unrecognized amounts
Prior service cost		1.4			1.4			4.4			4.3			0.9			1.0
Actuarial loss		1.9			1.5			5.7			4.3			0.8			2.5
Net periodic benefit cost	$	6.0		$	7.0		$	18.7		$	20.5		$	1.4		$	0.5

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~~March 31, 2022 and ~~2016~~2021, payments to our nonqualified pension plans were insignificant. ~~For~~During both the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022 and 2021, we ~~made~~did 0t make any contributions ~~of $36.2 million and $42.1 million, respectively,~~ to our qualified pension ~~plans, which exceeded our 2017~~plans. We do not have a required minimum ~~pension~~contribution amount for 2022, but we expect to make discretionary contributions of ~~$8.0. We made contributions of $49.7 million and $53.4 million~~ to our ~~qualified plans during~~plans.

For both the three ~~and nine~~ months ended ~~September 30, 2016 .~~

~~The components of~~March 31, 2022 and 2021, the net periodic benefit cost for our postretirement plans ~~were as follows (dollars in millions):~~was insignificant.

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

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. On February 25, 2020, our board of directors approved and, on May 5, 2020, our stockholders approved, the amendment and restatement of the plan. The ~~plan, as amended, terminates~~ amendment extended the plan’s term to May ~~1, 2023~~5, 2030 and ~~authorizes 10.6 million~~increased the number of shares of common stock available for ~~grant over~~issuance under the ~~life~~plan by 1.4 million shares. The total number of ~~the plan.~~ shares authorized for past and future awards is 12.0 million shares.

As of ~~September 30, 2017, 1.0~~March 31, 2022, assuming performance units are paid out at the target level of performance, 1.1 million shares were available for future ~~issuance~~grants under the ~~plan.~~current 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~~three months ended ~~September 30, 2017:~~March 31, 2022:

	Restricted Stock					Performance Units
	Shares			Weighted Average Grant- Date Fair Value		Shares			Weighted Average Grant- Date Fair Value		Restricted Stock					Performance Units
Outstanding at January 1, 2017		786,079		$	63.44		232,088		$	62.68
											Shares			Weighted Average Grant- Date Fair Value		Shares		Weighted Average Grant- Date Fair Value
Outstanding at January 1, 2022												651,448		$	109.16		358,092	$	105.38
Granted		173,199			107.57		61,861			108.19		170,232			145.26		96,309		154.21
Vested		(212,172	)		51.54		(67,391	)		56.08		(4,113	)		106.50		—		—
Forfeitures		(4,714	)		68.85		—			—		(3,926	)		107.95		—		—
Outstanding at September 30, 2017		742,392		$	77.11		226,558		$	77.07
Outstanding at March 31, 2022												813,641		$	116.73		454,401	$	115.73

Our share-based compensation expense is primarily recorded in "Selling, general, and administrative ~~expenses".~~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,						Three Months Ended March 31,
	2017			2016			2017			2016			2022			2021
Restricted stock	$	3.8		$	3.5		$	11.3		$	12.2		$	9.2		$	8.6
Performance units		1.4			1.3			4.1			2.8			3.1			3.0
Total share-based compensation expense		5.2			4.8			15.4			15.0			12.3			11.6
Income tax benefit		(2.0	)		(1.8	)		(5.9	)		(5.8	)		(3.1	)		(2.9	)
Share-based compensation expense, net of tax benefit	$	3.2		$	3.0		$	9.5		$	9.2		$	9.2		$	8.7

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. Compensation expense, net of estimated forfeitures, is recorded over the requisite service period. As PCA’s Board of Directors has the ability to accelerate the vesting of ~~share-based~~these awards upon an employee’s retirement, the Company accelerates the recognition of compensation expense for certain employees approaching normal retirement age.

Performance unit awards granted to certain key employees are earned based on the achievement of defined performance rankings of Return on Invested Capital (ROIC) or Total Shareholder Return (TSR) compared to ROIC and TSR for peer companies. For performance unit awards made in 2022 and 2021, in terms of grant date value, 50% used TSR as the performance measure and 50% used ROIC as the performance measure. The ROIC component of performance unit awards is valued based on the closing price of the stock on the grant date. As the ROIC component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of performance unit awards is valued using a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, a risk-free interest rate, expected dividends, and expected volatility of the Company’s common stock and the common stock of the peer companies. Compensation expense is recorded ratably over the expected term of the award.

The unrecognized compensation expense for all share-based awards at ~~September 30, 2017~~March 31, 2022 was as follows (dollars in millions):


	September 30, 2017				March 31, 2022
	Unrecognized Compensation Expense		Remaining Weighted Average Recognition Period (in years)		Unrecognized Compensation Expense		Remaining Weighted Average Recognition Period (in years)
Restricted stock	$	34.3	2.7		$	41.2		2.9
Performance units		10.9		3.0		29.7		2.7
Total unrecognized share-based compensation expense	$	45.2		2.8	$	70.9		2.8

16. Stockholders' Equity

Dividends

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, we paid ~~$178.2~~ $93.6million of dividends to shareholders. On ~~August 25, 2017 PCA's~~February 23, 2022, PCA’s Board of Directors ~~announced~~declared a regular quarterly cash dividend of ~~$0.63~~$1.00 per share of common stock, which was paid on ~~October 13, 2017~~April 15, 2022 to shareholders of record as of ~~September~~March 15, ~~2017.~~2022. The ~~July 2017~~ dividend payment was ~~$59.4~~$93.7 million.

Repurchases of Common Stock

On ~~February 25, 2016,~~January 26, 2022, PCA announced that its Board of Directors authorized the repurchase of an additional ~~$200.0 million~~$1 billion 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.

The Company did ~~not~~0t repurchase any shares of its common stock under this authority during the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2022. At March 31, 2022, $1 billion of the authorized amount remained available for repurchase of the Company’s common stock.

Accumulated Other Comprehensive Income (Loss)

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


	Unrealized Loss On Foreign Exchange Contracts			Unrealized Loss on Marketable Debt Securities			Unfunded Employee Benefit Obligations			Total
Balance at January 1, 2022	$	(0.2	)	$	(0.2	)	$	(74.8	)	$	(75.2	)
Other comprehensive income before reclassifications, net of tax		0			(1.2	)		0			(1.2	)
Amounts reclassified from AOCI, net of tax		0			0			1.2			1.2
Balance at March 31, 2022	$	(0.2	)	$	(1.4	)	$	(73.6	)	$	(75.2	)

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
)

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


	Amounts Reclassified from AOCI
	Three Months Ended March 31,
Details about AOCI Components	2022			2021
Unfunded employee benefit obligations (a)
Amortization of prior service costs	$	(0.8	)	$	(0.8	)	See (a) below
Amortization of actuarial losses		(0.7	)		(2.5	)	See (a) below
		(1.5	)		(3.3	)	Total before tax
		0.3			0.8		Tax benefit
	$	(1.2	)	$	(2.5	)	Net of tax

(a)

These AOCI components are included in the computation of net pension and postretirement benefit costs. See Note 14, Employee Benefit Plans and Other Postretirement Benefits, for additional information.

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

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 ~~7% and 8%~~4% of our total Company sales revenue for both the ~~nine months~~three month periods ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively,~~2021 and approximately ~~42%~~58% and ~~41%~~45% of our Paper segment sales revenue for both of those periods, respectively. For the full year 2021, sales to Office Depot represented 51% of our Paper segment sales. At ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021, we had ~~$31.2~~$54.8 million and ~~$31.8~~$49.8 million of accounts receivable due from Office Depot, respectively, which represents 4%approximately 5% and 5%4% of our total Company accounts receivable, ~~for both of those periods,~~ respectively.

In 2016, sales to Office Depot represented 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.13

~~15.~~

~~Transactions With Related Parties~~

Louisiana Timber Procurement Company, L.L.C. ~~(LTP)~~("LTP") is a variable-interest entity that is ~~50%~~50% owned by PCA and ~~50%~~50% owned by Boise Cascade Company ~~(Boise Cascade)~~("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~~non-inventory working capital items) on our Consolidated Balance Sheets were ~~$4.6~~$3.0 million at ~~September 30, 2017~~March 31, 2022 and ~~$5.0~~$3.5 million at December 31, ~~2016.~~2021. During the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, we recorded ~~$20.8~~$20.8 million and ~~$15.5 million, respectively, and during the nine months ended September 30, 2017 and 2016 we recorded $66.0 million and $54.8~~$20.3 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".

During the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, fiber purchases from related parties were ~~$4.0~~$3.8 million and ~~$3.9~~$3.3 million, respectively. ~~Fiber purchases from related parties were $13.6 million and $13.2 million, respectively, during the nine months ended September 30, 2017 and 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~~

We report our business in ~~three~~3 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.

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

Each segment’s profits and losses are measured on operating profits before interest expense, net, non-operating pension income, and income taxes. For ~~many of these~~certain 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)
													Sales, net
Three Months Ended March 31, 2022													Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	1,340.6	$	6.0		$	1,346.6		$	261.5		(a)	$	1,960.0	$	4.5		$	1,964.5		$	362.2		(a)
Paper		271.4		—			271.4			(0.7	)	(a)		153.5		—			153.5			22.4		(a)
Corporate and Other		28.1		33.0			61.1			(18.5	)			22.9		35.4			58.3			(28.1	)
Intersegment eliminations		—		(39.0	)		(39.0	)		—				—		(39.9	)		(39.9	)		—
	$	1,640.1		—		$	1,640.1			242.3			$	2,136.4	$	—		$	2,136.4			356.5
Non-operating pension income																						3.6
Interest expense, net										(25.4	)											(19.8	)
Income before taxes									$	216.9											$	340.3

	Sales, net
Three Months Ended September 30, 2016	Trade		Inter-segment			Total			Operating Income (Loss)
													Sales, net
Three Months Ended March 31, 2021													Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	1,165.0	$	2.1		$	1,167.1		$	179.6		(c)	$	1,619.8	$	3.8		$	1,623.6		$	257.9		(b)
Paper		292.8		—			292.8			44.5		(c)		164.4		0.2			164.6			8.7		(b)
Corporate and Other		26.2		36.7			62.9			(17.7	)			23.0		32.4			55.4			(28.3	)
Intersegment eliminations		—		(38.8	)		(38.8	)		—				—		(36.4	)		(36.4	)		—
	$	1,484.0	$	—		$	1,484.0			206.4			$	1,807.2	$	—		$	1,807.2			238.3
Non-operating pension income																						4.8
Interest expense, net										(23.4	)											(23.5	)
Income before taxes									$	183.0											$	219.6

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


(a)	~~(a)~~The three months ended March 31, 2022 include the following:
	~~The three and nine months ended September 30, 2017 include:~~

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~~$1.5 million of charges related to the announced ~~second quarter 2018~~ discontinuation of ~~uncoated free sheet and coated one-side~~production of UFS paper grades on the No. 3

machine at the ~~Wallula, Washington~~Jackson, Alabama mill associated with the permanent conversion of the ~~No. 3 paper~~ machine to ~~a high-performance 100% virgin kraft~~produce linerboard ~~machine.~~and other

paper-to-containerboard conversion related activities.

~~(b)~~2.

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

$~~5.0~~0.6 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:~~

	1.	~~$2.0 million and $7.4 million, respectively,~~ of charges consisting of closure costs related to corrugated products facilities and ~~a paper products facility~~acquisition and integration costs related to the December 2021 Advance Packaging Corporation acquisition.

(b)	The three months ended March 31, 2021 include the following:
	1.	$2.1 million of charges consisting of closure costs related to ~~our withdrawal from a multiemployer pension plan for one of our~~ corrugated products facilities.

$~~2.9~~1.1 million ~~and $3.2 million, respectively,~~ of charges related to the ~~acquisition~~announced discontinuation of UFS paper grades on the No. 3 machine at the Jackson, Alabama mill in the first quarter of 2021 associated with the permanent conversion of the machine to produce linerboard and ~~integration of TimBar Corporation.~~other paper-to-containerboard conversion related activities.

~~17.~~

~~New and Recently Adopted Accounting Standards~~

In 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 risk20. Commitments, Guarantees, Indemnifications 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~~, 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.Legal Proceedings

~~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 modification 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 (Topic 230),~~ ~~Statement of Cash 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 February 2016, the FASB issued ASU 2016-02 (Topic 842):~~ ~~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 is effective for fiscal years beginning 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 currently plan to adopt this ASU on January 1, 2019 and expect to recognize a liability and corresponding asset associated with in-scope operating leases, but are still in the process of determining the effects on our financial statements and the processes required to account for leasing activity on 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~~

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 9,11, Debt, and Note ~~18,~~21, 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 ~~2016~~2021 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, 2017~~March 31, 2022, 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 involving the decedents and isother allegedly injured parties, alleging negligence on ~~notice~~the part of ~~additional claims.~~the Company and claiming compensatory and punitive damages. The Company ~~maintains~~is vigorously defending these lawsuits. The Company believes that these suits are covered by its liability insurance policies, subject to an aggregate $1.0 million deductible, which has been satisfied in full as a ~~$1.0 million deductible; however,~~result of settlement of various lawsuits and fees and expenses incurred by the ~~incident~~Company. Cases involving nine plaintiffs are pending in the U.S. District Court for the Middle District of Louisiana and one case remains ~~under investigation~~pending in state court in Alabama. One case previously dismissed by the federal district court for the Western District of Louisiana has been appealed by the plaintiff to the United States Court of Appeals for the Fifth Circuit. The remaining lawsuits pending in federal district court and ~~the lawsuits~~state court are in the early stages. Accordingly, the Company is unable to estimate a range of reasonable possible losses at this time.

TheCompany 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~~cooperated with investigations from the U.S. Occupational Health and Safety Administration ("OSHA"), the U.S. Chemical Safety Board ("CSB") and the U.S. Environmental Protection Agency ~~relating~~("EPA"). The U.S. Chemical Safety Board completed its investigation and issued its report during the second quarter of 2018. The Company settled with OSHA during the second quarter of 2018 and paid approximately $40,000 in penalties for citations.

The EPA investigation is ongoing. In May 2017, the EPA conducted an on-site inspection of the facility to assess compliance with the Clean Air Act, Risk Management Program ("RMP"). The Company provided additional information to the ~~incident.~~EPA promptly after the inspection to address certain areas of concern ("AOCs") observed during the inspection. In January 2021, the EPA and U.S. Department of Justice ("DOJ") initiated civil judicial enforcement discussions with PCA. These discussions are ongoing. As of the date of filing of this report, no complaint has been filed. PCA continues to cooperate with the agencies. Since the inspection in 2017, PCA performed several voluntary activities to address the AOCs presented in the EPA’s inspection report and has removed the RMP covered process from the facility.

Legal Proceedings

We are also a party to ~~other~~various 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~~

On October 2, 2017, we completed the acquisition of the assets of Sacramento Container Corporation and 100% membership interests of Northern Sheets, LLC and Central California Sheets, LLC in a cash-free, debt-free transaction. Funding for the $265 million purchase price came 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 Sacramento Container Corporation will be included in PCA’s fourth quarter 2017 results.15

~~Item 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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

This 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 statements that are not historical in 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 ~~2016~~2021 Annual Report on Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission ~~(SEC)~~("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 Looking Statements” elsewhere in this Item 2.

Overview

PCA is the ~~fourth~~third largest producer of containerboard products and ~~the third largest~~a leading producer of ~~uncoated freesheet~~UFS paper in ~~the United States, based on production capacity.~~North America. We operate ~~five containerboard mills, three paper~~eight mills and 9490 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~~UFS 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 Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2016~~2021 Annual Report on Form 10-K.

Executive Summary

~~Third~~First quarter net sales were ~~$1.64~~$2.14 billion in ~~2017~~2022 and ~~$1.48~~$1.81 billion in ~~2016.~~2021. We reported ~~$139~~$254 million of net income, or ~~$1.47~~$2.70 per diluted share, during the ~~third~~first quarter of ~~2017,~~2022, compared to ~~$119~~$167 million, ~~of net income,~~ or ~~$1.26~~$1.75 per diluted share, during the same period in ~~2016. The third quarter of 2017~~2021. Net income included ~~$27~~$2 million of ~~pre-tax expense for special items (discussed below) compared to $5 million of pre-tax~~ expense for special items in ~~2016.~~both first quarters of 2022 and 2021 (discussed below). Excluding special items, ~~we recorded $159 million of~~ net income was $256 million, or ~~$1.68~~$2.72 per diluted share, during the ~~third~~first quarter of ~~2017,~~2022, compared to ~~$123~~$169 million, ~~of net income,~~ or ~~$1.30~~$1.77 per diluted share, in the ~~third~~first quarter of ~~2016.~~2021. The increase in net income was driven primarily by higher ~~containerboard and corrugated products~~ prices and mix and ~~sales~~volume in the Packaging segment, higher prices and ~~production volumes,~~mix in the Paper segment, a lower share count resulting from share repurchases completed during the fourth quarter of 2021, and ~~a partial insurance recovery related to the DeRidder Mill incident,~~lower interest expense. These items were partially offset by ~~lower prices~~inflation-related operating cost increases primarily in energy, fiber, chemicals, operating labor, repair labor, and ~~mix and sales and production volumes in our Paper segment, higher input and operating costs,~~materials; higher freight and ~~annual outage expenses,~~logistics expenses; higher converting costs driven by labor and materials expenses; higher depreciation expense; lower volume in the Paper segment; higher scheduled outage expenses; a higher tax rate; and other costs. For additional detail on special items included in reported GAAP results, as well as segment income (loss) excluding special items, earnings before non-operating pension income (expense), interest, ~~expense.~~income taxes, and depreciation, amortization, and depletion ("EBITDA"), and EBITDA excluding special items, see “Item 2. Reconciliations of Non-GAAP Financial Measures to Reported Amounts.”

Packaging segment income from operations was ~~$262~~$362 million in the ~~third~~first quarter of ~~2017,~~2022, compared to ~~$180~~$258 million in the ~~third~~first quarter of ~~2016.~~2021. Packaging segment ~~earnings before interest, taxes, depreciation, amortization, and depletion (EBITDA)~~EBITDA excluding special items was ~~$341~~$464 million in the ~~third~~first quarter of ~~2017 and $256~~2022 compared to $352 million in the ~~third~~first quarter of ~~2016.~~2021. The increase was ~~driven~~due primarily byto higher ~~containerboard and corrugated products~~ prices and mix and higher sales and production volumes, ~~and a partial insurance recovery related to the DeRidder Mill incident,~~ partially offset by higher ~~input~~operating and converting costs, ~~primarily recycled fiber,~~ higher ~~labor costs,~~annual outage expense, and higher freight ~~expense.~~and logistic expenses. Demand in the Packaging segment remained strong, as we set a quarterly record in corrugated products shipments. Although we still face significant inflation in our manufacturing costs as well as freight and logistic expenses, our facilities continued to deliver on numerous cost reduction initiatives, efficiency improvements, integration and optimization enhancements, and capital project benefits to maximize our returns and margins. Labor availability in our corrugated products plants improved as we experienced fewer COVID-related absences as the quarter progressed.

Paper segment income from operations was ~~a loss of $1~~$22 million in the ~~third~~first quarter of ~~2017, which includes $25 million of charges related~~2022, compared to ~~the Wallula mill restructuring as discussed below. This compares to income of $45~~$9 million in the ~~third~~first quarter of ~~2016.~~2021. Paper segment EBITDA excluding special items was ~~$39~~$29 million in the ~~third~~first quarter of ~~2017,~~2022, compared to ~~$59~~$16 million in the ~~third~~first quarter of ~~2016.~~

2021. The ~~decrease~~increase was due to ~~lower paper~~higher prices and mix and lower ~~sales and production volumes, higher~~operating costs, ~~for energy, and higher annual mill outage and freight expense.~~

During the first nine months of 2017, we reported $400 million of net income, or $4.23 per diluted share, compared to $339 million of net income, or $3.58 per diluted share, during the same period in 2016. The nine months ended September 30, 2017 included $31 million of pre-tax expense for special items (discussed below), compared to $11 million of pre-tax expense for special items during the same period in 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~~logistic expenses.

During the fourth quarter of 2020, in order to meet strong packaging demand 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~~maintain appropriate inventory levels in the ~~first nine months of 2017, compared to $534 million in~~packaging segment, we temporarily began producing linerboard on the ~~same period of 2016. Packaging segment EBITDA excluding special items was $917 million in~~No. 3 machine at the Jackson mill, and we have produced linerboard on the machine since that time. In the first ~~nine months~~quarter of ~~2017, compared to $759 million in~~2021, we announced the ~~first nine months~~discontinuation 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~~UFS paper grades on the machine and ~~coated one-side grades at its Wallula, Washington mill in~~ the ~~second quarter of 2018 to begin the~~permanent conversion of the ~~No. 3 paper~~ machine to ~~a 400,000 ton-per-year virgin kraft~~produce linerboard ~~machine. The Company incurred charges~~and other paper-to-containerboard conversion related activities. Sales and production in the Paper segment ~~relating to these activities during~~will remain below pre-pandemic levels as we will no longer be producing paper products on the machine. In the third quarter ~~as described below under “Special Items~~of 2021, we began producing corrugating medium on the No. 1 machine at the Jackson mill (which had produced UFS paper in the past) to help satisfy our demand for containerboard, build necessary inventories, and ~~Earnings per Diluted Share, Excluding Special Items,” and will incur future charges. The total capital cost~~evaluate the capability of the ~~conversion is expected~~machine to ~~be approximately $150 million.~~produce containerboard on a cost-effective basis. We expect to continue producing corrugating medium on the machine for the foreseeable future. For the periods presented, operating results for the Jackson mill are included in both the Packaging and Paper segments, as appropriate.

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 of facility closure costs related to corrugated products facilities and a paper distribution facility and $4 million of acquisition-related costs for the TimBar Corporation, and costs related to our withdrawal from a multiemployer pension plan.

A reconciliation of reported earnings per diluted share to earnings per diluted share, excluding special items, for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 are as follows:


	Three Months Ended
	March 31,
	2022		2021
Earnings per diluted share, as reported	$	2.70	$	1.75
Special items:
Jackson mill conversion-related activities (a)		0.01		0.01
Acquisition-related, facilities closure and other costs (b)		0.01		0.01
Total special items		0.02		0.02
Earnings per diluted share, excluding special items	$	2.72	$	1.77

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

(a)

For the three months ended March 31, 2022 and 2021, includes $1.5 million and $1.1 million, respectively, of charges related to the announced discontinuation of production of UFS paper grades on the No. 3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

(b)

For the three months ended March 31, 2022, includes $0.6 million of closure costs related to corrugated products facilities and acquisition and integration costs related to the December 2021 Advance Packaging Corporation acquisition. For the three months ended March 31, 2021, includes $2.1 million of charges consisting of closure costs related to corrugated products facilities.

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 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 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 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 North American industry-wide corrugated products ~~total~~ shipments ~~increased 1.0%~~per work day were down 1.8% during the ~~third~~first quarter of ~~2017,~~2022 compared to the same quarter ~~in 2016.~~of 2021. Reported industry containerboard production increased ~~1.5%~~2.0% compared to the ~~third~~first quarter of ~~2016, and reported~~2021. Reported industry containerboard inventories at the end of the ~~third~~first quarter of ~~2017~~2022 were approximately ~~2.4~~2.7 million tons, ~~flat~~up 17.5% compared to the same period in ~~2016.~~2021. Reported containerboard export shipments were ~~down 5.5%~~up 9.1% compared to the ~~third~~first quarter of ~~2016.~~ 2021. Prices reported by trade publications increased by $60 per ton for linerboard and $70 per ton for corrugating medium in March 2022.

Trade publications reported ~~a $30 per ton price increase on corrugating medium during the third quarter 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~~UFS paper shipments were down ~~1.4%~~1% in the ~~third~~first quarter of ~~2017,~~2022, compared to the same quarter ~~in 2016.~~of 2021. Average prices reported by a trade publication for cut size office papers were ~~lower~~higher by ~~$30~~$67 per ton, or ~~3.0%~~5.4%, in the ~~third~~first quarter of ~~2017,~~2022, compared ~~to the third quarter of 2016.~~

~~Outlook~~

~~Looking ahead~~ to the fourth quarter of ~~2017, we~~2021, and higher by $233 per ton, or 21.8%, compared to the first quarter of 2021.

Outlook

We expect demand in our Packaging segment ~~demand~~ to remain strong ~~although~~in the second quarter of 2022, and we expect higher prices in both our Packaging and Paper segments as we implement price increases previously communicated to customers. Scheduled mill outage costs will be higher compared to the first quarter, and the planned outage at ~~seasonally~~the International Falls mill will result in lower ~~volumes, which includes one less shipping day,~~Paper segment sales volume. We also anticipate continued inflation with freight and logistics expenses as well as ~~a seasonally less rich mix in corrugated products, compared to the third quarter. We will also have the addition~~most of our ~~newly acquired Sacramento Container operations in the fourth quarter. In our Paper segment,~~operating costs, although we ~~have started implementing our recently announced price increases, but~~ expect ~~seasonally lower volumes and a less rich sales mix. While~~ recycled fiber prices ~~should move~~to be slightly lower ~~seasonally higher wood~~than the first quarter. Considering these items, and ~~energy costs along with higher prices for certain key chemicals and higher freight costs are also expected. Annual mill outage costs are estimated~~excluding the effect of any special items, we expect second quarter earnings to be higher than our earnings for the ~~third quarter due to scheduled maintenance work at four of our mills. Considering these items, we expect fourth quarter earnings, excluding special items, to be lower than third quarter earnings.~~first quarter.

Results of Operations

Three Months Ended ~~September 30, 2017,~~March 31, 2022, compared to Three Months Ended ~~September 30, 2016~~March 31, 2021

The historical results of operations of PCA for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 are set forth below (dollars in millions):


	Three Months Ended
	March 31,
	2022			2021			Change
Packaging	$	1,964.5		$	1,623.6		$	340.9
Paper		153.5			164.6			(11.1	)
Corporate and Other		58.3			55.4			2.9
Intersegment eliminations		(39.9	)		(36.4	)		(3.5	)
Net sales	$	2,136.4		$	1,807.2		$	329.2

Packaging	$	362.2		$	257.9		$	104.3
Paper		22.4			8.7			13.7
Corporate and Other		(28.1	)		(28.3	)		0.2
Income from operations	$	356.5		$	238.3		$	118.2
Non-operating pension income		3.6			4.8			(1.2	)
Interest expense, net		(19.8	)		(23.5	)		3.7
Income before taxes		340.3			219.6			120.7
Income tax provision		(86.1	)		(53.1	)		(33.0	)
Net income	$	254.2		$	166.5		$	87.7
Non-GAAP Measures (a)
Net income excluding special items	$	255.7		$	168.9		$	86.8
Consolidated EBITDA		466.2			339.1			127.1
Consolidated EBITDA excluding special items		467.2			341.8			125.4
Packaging EBITDA		463.1			350.0			113.1
Packaging EBITDA excluding special items		463.9			352.1			111.8
Paper EBITDA		28.8			15.2			13.6
Paper EBITDA excluding special items		29.0			15.8			13.2

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
)
(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.

~~(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 ~~$156~~$329 million, or ~~10.5%~~18.2%, to ~~$1,640~~$2,136 million during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$1,484~~$1,807 million during the same period in ~~2016.~~2021.

Packaging. Net sales increased ~~$180~~$341 million, or ~~15.4%~~21.0%, to ~~$1,347~~$1,965 million, compared to ~~$1,167~~$1,624 million in the ~~third~~first quarter of ~~2016,~~2021 due to higher ~~domestic and export containerboard and corrugated products~~ prices and mix ($~~121~~268 million) and ~~increased~~higher containerboard and corrugated products volume ($5973 million). ~~Our~~In the first quarter of 2022, our domestic containerboard prices were 20.2% higher, while export prices were 42.5% higher, than the same period in 2021. In the ~~third~~first quarter of ~~2017~~2022, export and domestic containerboard outside shipments increased ~~14.8%,~~26.0% compared to the first quarter of 2021. Our total corrugated products shipments were up 2.9% with one additional workday and ~~export prices increased 21.3%~~shipments per day were up 1.3%, compared to the same period in 2016. In the third quarter of 2017, our containerboard outside shipments increased 5.7%, and total corrugated products shipments were up 4.0%, compared to the third quarter of 2016. Containerboard mill production in the third quarter of 2017 was 996,000 tons compared to 950,000 in 2016. Prices for corrugating medium reported2021, driven by ~~trade publications increased by $30 per ton during the third quarter of 2017.~~continued strong demand.

Paper.Net sales ~~during the three months ended September 30, 2017~~ decreased ~~$21~~$11 million, or ~~7.3%~~6.7%, to ~~$271~~$154 million, compared to ~~$293~~$165 million in the ~~third~~first quarter of ~~2016,~~2021, due to lower ~~pulp~~ volume ($~~12 million) as a result of the 2016 shutdown of our market pulp operations at our Wallula Mill, lower white paper volume ($2~~30 million), ~~and unfavorable changes in~~partially offset by higher prices and mix ($719 million).

Gross Profit

Gross profit increased ~~$68~~$130 million during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to the same period in ~~2016.~~2021. The increase was driven primarily by higher ~~containerboard and corrugated products~~ prices and mix and ~~sales~~volume in the Packaging segment, higher prices and ~~production volumes,~~mix in the Paper segment, partially offset by higher operating and converting costs, higher freight and logistics expenses, higher depreciation expense, lower volume in the Paper segment, ~~prices and mix and sales and production volumes,~~ and higher ~~input and operating costs.~~scheduled outage expenses. In the three months ended ~~September 30, 2017,~~March 31, 2022, gross profit included $1 million of special items ~~of $3 million~~for charges related to the ~~conversion~~Jackson mill conversion. In the three months ended March 31, 2021, gross profit included $0.5 million of special items for charges related to the ~~No. 3 machine at the Wallula Mill, compared to $1 million in the same period last year for acquisition related costs and facility closure costs.~~Jackson mill conversion.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased ~~$13~~$16 million during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to the same period in ~~2016.~~2021. The increase was primarily due to higher ~~administrative costs corresponding~~employee fringes and incentives, commissions, travel, and an increase to ~~the TimBar and Columbus Container acquisitions.~~bad debt expense.

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

Other income (expense), net, ~~during~~for the three months ended September 30, 2017 was $25 million of expense, compared to $6 million of expense during the three months ended September 30, 2016. The third quarter of 2017 included $23 million of charges related to the conversion of the No. 3 machine at the Wallula Mill,March 31, 2022 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. 2021 are set forth below (dollars in millions):


	Three Months Ended
	March 31,
	2022			2021
Asset disposals and write-offs	$	(12.7	)	$	(10.4	)
Jackson mill conversion-related activities		(0.4	)		(0.5	)
Acquisition-related, facilities closure and other costs		(0.4	)		(2.1	)
Other		(2.1	)		(7.4	)
Total	$	(15.6	)	$	(20.4	)

We discuss these items in more detail in Note 4,6, Other ~~Income (Expense),~~Expense, Net, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, ~~Item1.~~Item 1. Financial Statements” of this Form 10-Q.

Income from Operations

Income from operations increased ~~$36~~$118 million, or ~~17.4%~~49.6%, during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to the same period in ~~2016.~~2021. The ~~third~~first quarter of ~~2017~~2022 included ~~$27~~$2 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~~expense primarily related to the ~~previously announced~~Jackson mill conversion activities, corrugated facility closures, and expenses related to the acquisition of ~~the Wallula No. 3 paper machine~~Advanced Packaging, compared to ~~a virgin kraft linerboard machine, and $2~~$3 million ~~for~~of special items expense related to corrugated facility closure costs ~~related to corrugated products facilities~~ and ~~a paper administration facility, and integration costs related to recent acquisitions. Third~~Jackson mill conversion-related activities in the first 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.~~2021.

Packaging.Packaging segment income from operations increased ~~$82~~$104 million to ~~$262~~$362 million, compared to ~~$180~~$258 million during the three months ended ~~September 30, 2016.~~March 31, 2021. The increase ~~in the third quarter of 2017~~ related primarily to ~~favorable changes in~~higher containerboard and corrugated products prices and mix ($88233 million), higher ~~containerboard and corrugated products~~ sales and production volumes ($~~17 million), lower wood costs ($5 million), and a partial insurance recovery related to the DeRidder Mill incident ($3~~30 million), partially offset by higher operating and converting costs ~~for recycled fiber~~ ($15114 million), ~~labor~~higher freight expenses ($28 million), higher depreciation expense ($9 million), higher annual outage expenses ($6 million), ~~chemicals ($2 million), repairs ($2 million), energy ($1 million), converting~~and other costs ~~($1 million), freight ($2 million), and higher depreciation expense~~ ($3 million). Special items during the ~~third~~first quarter of ~~2017~~2022 included ~~expense of~~ $1 million of expense for corrugated facility closures and Advanced Packaging acquisition costs, compared to $2 million of special items expense related to corrugated facility closure costs ~~for corrugated products facilities and integration costs for~~in the ~~recent acquisitions. Special items for the third~~first quarter ~~2016 included expense~~ of ~~$5 million related to integration costs and closing a corrugated manufacturing facility.~~2021.

Paper. Paper segment income from operations ~~decreased $45~~increased $13 million to ~~a loss of $1~~$22 million, compared to ~~income of $45~~$9 million during the three months ended ~~September 30, 2016.~~March 31, 2021. The ~~decrease~~increase primarily related to ~~unfavorable changes in~~higher prices and mix ($719 million), lower operating costs ($9 million), and lower annual outage expenses ($1 million), partially offset by lower sales and production volumes ($79 million)~~, higher energy ($2 million),~~ and higher ~~mill outage~~freight expenses ($28 million) ~~and freight ($1 million) expense.~~. Special items during both the ~~third~~first quarter of ~~2017~~2022 and the first quarter of 2021 each included $1 million of 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. for Jackson mill conversion-related activities.

Non-Operating Pension Income, Interest Expense, Net and Income Taxes

~~Interest expense, net, increased $2~~Non-operating pension income decreased $1 million during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to the same period in ~~2016.~~2021. The ~~increase~~decrease in non-operating pension income was primarily related to assumption changes, partially offset by favorable 2021 asset performance.

Interest expense, net for the three months ended March 31, 2022 decreased $4 million when compared to the same period in 2021. The decrease in interest expense, net was primarily due to ~~higher~~lower interest rates on ~~PCA’s variable rate~~the Company's fixed-rate debt as a result of the Company's debt refinancing completed 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.~~October 2021.

During the three months ended ~~September 30, 2017,~~March 31, 2022, we recorded ~~$78~~$86 million of income tax expense, compared to ~~$64~~$53 million of expense during the three months ended ~~September 30, 2016.~~March 31, 2021. The effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~35.9%~~25.3% and ~~34.8%~~24.2%, respectively. The increase in our effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2022 compared to the same period in ~~2016,~~2021 was primarily due to ~~an internal legal entity consolidation that will simplify future operating activities and resulted in $3 million of tax expense for~~a favorable state law change during 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~~three 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~~March 31, 2021 with no corresponding favorable state law change during the ~~nine~~three months ended ~~September 30, 2017, compared to $4,302 million during the same period in 2016.~~March 31, 2022.

~~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 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 the TimBar Corporation, and $4 million of asset disposal 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 $92 million, or 15.6%, during the nine months ended September 30, 2017, compared to the same period in 2016. The first nine months of 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 nine months ended September 30, 2016 included $7 million of facility closure costs related to corrugated products facilities and a paper distribution facility and $4 million of acquisition-related costs for the TimBar Corporation, and costs related to our withdrawal from a multiemployer pension plan.

~~Packaging.~~ Packaging segment income from operations increased $143 million to $677 million, during the first nine months of 2017 compared to the same period last year. The first nine months of 2017 included higher containerboard and corrugated products prices and mix ($148 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 ($12 million), freight ($8 million), and higher depreciation expense ($9 million). Special items included $5 million of expense for the property damage and business interruption insurance deductible related to the DeRidder Mill incident; $3 million of charges consisting of closure costs related to 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 included $6 million of charges consisting of closure costs related to corrugated products facilities and our withdrawal from a multiemployer pension plan and $3 million of TimBar acquisition-related costs. Excluding special items, income from operations increased $140 million.

~~Paper.~~ Paper segment income from operations decreased $47 million to $58 million, compared to the nine months ended September 30, 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 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 for the same period in 2016. Excluding special items, income from operations decreased $23 million.

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

Interest expense, net, was $75 million during the nine months ended September 30, 2017, compared to $68 million during the nine months ended September 30, 2016. The increase in interest expense was primarily due to interest on term loan borrowings for the TimBar acquisition made in August 2016 and higher interest rates on PCA's variable rate debt due to increases in LIBOR during the nine months ended September 30, 2017 compared to the same period in 2016.

During the nine months ended September 30, 2017, we recorded $205 million of income tax expense, compared to $181 million of expense during the nine months ended September 30, 2016. The effective tax rate for the nine months ended September 30, 2017 and 2016 was 33.9% and 34.8%, 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, 2017~~March 31, 2022, we had ~~$371~~$629 million of cash and ~~$327~~cash equivalents, $150 million of marketable debt securities, and$321 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),~~common stock dividends, and repurchases of common ~~stock, and declared common stock dividends.~~stock. 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,									March 31,
	2017			2016			Change			2022			2021			Change
Net cash provided by (used for):
Operating activities	$	583.3		$	593.5		$	(10.2	)	$	325.3		$	191.6		$	133.7
Investing activities		(227.6	)		(582.7	)		355.1			(221.2	)		(87.5	)		(133.7	)
Financing activities		(224.5	)		84.8			(309.3	)		(94.2	)		(95.3	)		1.1
Net increase in cash and cash equivalents	$	131.2		$	95.6		$	35.6		$	9.9		$	8.8		$	1.1

Operating Activities

~~During the nine months ended September 30, 2017, net~~Our operating cash ~~provided~~flow is primarily driven by ~~operating activities was $583 million, compared to $593 million in the same period in 2016, a decrease of $10 million. Cash from operations excluding~~our earnings and changes in ~~cash used for~~ operating assets and liabilities, ~~increased $106 million, primarily due to higher income from operations~~such as ~~discussed above. The increase was offset by $116 million of cash used for operating assets and liabilities primarily due to the following: (a) an increase in~~ accounts receivable, ~~in the first nine months of 2017, primarily related to higher sales volumes~~inventories, accounts payable and ~~prices in the Packaging segment, 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~~other accrued liabilities, 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 third quarter of 2017.factors described below. 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.

During the three months ended March 31, 2022, net cash provided by operating activities was$325 million, compared to $192 million in the same period in 2021, an increase of $133 million. Cash from operations excluding changes in cash used for operating assets and liabilitiesincreased$108 million primarily due to higher income from operations in 2022 as discussed above. Cash from operations increased by $26 million due to changes in operating assets and liabilities, primarily due to an increase in accounts payable in the first quarter of 2022 primarily due to the timing of payments. This increase was partially offset by the following:

a larger decrease in accrued liabilities primarily in compensation and benefits liabilities in the first quarter of 2022 compared to the corresponding period in 2021; and

a larger increase in inventory in the first quarter of 2022 as compared to 2021, primarily in the Paper segment in finished goods, raw materials as well as supplies and materials.

Investing Activities

~~Net cash~~We used $221 million for investing activities during the ~~nine~~three months ended ~~September 30, 2017 decreased $355 million, to $228 million,~~March 31, 2022 compared to ~~$583~~$88 million during the same period in ~~2016, primarily due to an acquisition we made in the prior year. During the third quarter of 2016 we acquired TimBar~~2021. We spent$213 million for ~~a purchase price of $386 million, net of cash acquired. We also spent $226 million for~~internal capital investments during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$188~~$85 million during the same period in ~~2016.~~2021.

We expect capital investments in 2022 to be approximately ~~$370~~$800 million, ~~in 2017,~~ including ~~$30 million for~~capital spending related to the ~~Wallula mill~~conversion of the No. 3 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.~~to containerboard at our Jackson mill. These expenditures could increase or decrease as a result of a number of factors, including our financial results, strategic opportunities, future economic conditions, and our regulatory compliance requirements. We currently estimate capital expenditures to comply with ~~Boiler MACT~~environmental regulations ~~in 2017 of up to $1 million, and we expect other environmental capital expenditures of~~will be about $7$17 million in ~~2017.~~2022. 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.~~regulations. For additional information, see “Environmental Matters” in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2016~~2021 Annual Report on Form 10-K.

Financing Activities

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, net cash used byfor financing activities ~~changed by $309 million to a use of $225~~was $94 million, compared to ~~a source~~$95 million of ~~$85 million~~net cash used for financing activities during the same period in 2016. The decrease primarily relates to 2016 borrowings of $385 million to finance the TimBar acquisition in August 2016. Additionally, we have not repurchased common stock in 2017, have increased debt

~~repayments in 2017 and have~~2021. We paid out higher dividends in 2017. During the nine months ended September 30, 2017 we did not repurchase any common stock, compared to $100 million in the same period in 2016. In the first nine months of 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 $178$94 million of dividends during the first three months of 2022, compared to ~~$157~~$95 million of dividends paid during the ~~first nine months~~comparable period in 2021.

In addition to the items discussed in Note 12, Debt, of ~~2016.~~

~~For more information about our debt,~~the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Form 10-Q, see Note 9,11, Debt, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2016~~2021 Annual Report on Form ~~10-K.~~10-K for more information.

Contractual Obligations

There have been no material changes to the contractual obligations ~~table~~ disclosed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2016~~2021 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, 2017~~March 31, 2022 and ~~2016~~2021 follow (dollars in millions):


	Three Months Ended March 31,
	2022							2021
	Income before Taxes		Income Taxes			Net Income		Income before Taxes		Income Taxes			Net Income
As reported in accordance with GAAP	$	340.3	$	(86.1	)	$	254.2	$	219.6	$	(53.1	)	$	166.5
Special items:
Jackson mill conversion-related activities (a)		1.5		(0.4	)		1.1		1.1		(0.3	)		0.8
Acquisition-related, facilities closure and other costs (b)		0.6		(0.2	)		0.4		2.1		(0.5	)		1.6
Total special items		2.1		(0.6	)		1.5		3.2		(0.8	)		2.4
Excluding special items	$	342.4	$	(86.7	)	$	255.7	$	222.8	$	(53.9	)	$	168.9

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

(a)

Includes charges related to the announced discontinuation of production of UFS paper grades on the No. 3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

(b)

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:~~

$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”.

$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”.

$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 and costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities. The costs 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 expense, net” and “Cost of sales”, as appropriate.

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					Three Months Ended
	September 30,				September 30,					March 31,
	2017		2016		2017			2016		2022			2021
Net income	$	139.1	$	119.3	$	399.7		$	338.9	$	254.2		$	166.5
Non-operating pension income											(3.6	)		(4.8	)
Interest expense, net		25.4		23.4		74.6			67.5		19.8			23.5
Income tax provision		77.8		63.7		204.9			181.0		86.1			53.1
Depreciation, amortization, and depletion		97.5		88.0		283.7			264.3		109.7			100.8
EBITDA	$	339.8	$	294.4	$	962.9		$	851.7	$	466.2		$	339.1

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	)		—
Acquisition-related, facilities closure and other costs											0.6			2.1
Jackson mill conversion-related activities											0.4			0.6
Total special items		24.1		4.5		28.1			9.8		1.0			2.7
EBITDA excluding special items	$	363.9	$	298.9	$	991.0		$	861.5	$	467.2		$	341.8

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						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2022			2021
Packaging
Segment income	$	261.5		$	179.6		$	676.8		$	533.5		$	362.2		$	257.9
Depreciation, amortization, and depletion		78.7			72.0			234.2			217.3			100.9			92.1
EBITDA		340.2			251.6			911.0			750.8			463.1			350.0
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	)		—
Acquisition-related, facilities closure and other costs														0.6			2.1
Jackson mill conversion-related activities														0.2			—
EBITDA excluding special items	$	341.3		$	256.0		$	916.8		$	759.4		$	463.9		$	352.1

Paper
Segment income	$	(0.7	)	$	44.5		$	58.1		$	105.0		$	22.4		$	8.7
Depreciation, amortization, and depletion		17.1			14.7			45.1			43.2			6.4			6.5
EBITDA		16.4			59.2			103.2			148.2			28.8			15.2
Wallula mill restructuring		22.7			—			22.7			—
Integration-related, facilities closure and other costs		0.3			0.1			0.3			0.9
Jackson mill conversion-related activities														0.2			0.6
EBITDA excluding special items	$	39.4		$	59.3		$	126.2		$	149.1		$	29.0		$	15.8

Corporate and Other
Segment loss	$	(18.5	)	$	(17.7	)	$	(55.7	)	$	(51.1	)	$	(28.1	)	$	(28.3	)
Depreciation, amortization, and depletion		1.7			1.3			4.4			3.8			2.4			2.2
EBITDA		(16.8	)		(16.4	)		(51.3	)		(47.3	)		(25.7	)		(26.1	)
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	)	$	(25.7	)	$	(26.1	)

EBITDA	$	339.8		$	294.4		$	962.9		$	851.7		$	466.2		$	339.1

EBITDA excluding special items	$	363.9		$	298.9		$	991.0		$	861.5		$	467.2		$	341.8

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. We were not a party to any derivatives-based arrangements at ~~September 30, 2017.~~March 31, 2022. For a discussion of derivatives and hedging activities, see Note ~~13,~~16, Derivative Instruments and Hedging Activities, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2016~~2021 Annual Report on Form 10-K.

~~The~~At March 31, 2022, interest rates on ~~approximately 63%~~ 100%of PCA’s outstanding 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, 2017.~~March 31, 2022.

Environmental Matters

There have been no material changes to the disclosure set forth in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Environmental Matters” filed with our ~~2016~~2021 Annual Report on Form 10-K.

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 ~~2016~~2021 Annual Report on Form 10-Ka discussion of its critical accounting policies and estimates which require 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~~three months of ~~2017.~~2022.

New and Recently Adopted Accounting Standards

For a listing of our new and recently adopted accounting standards, see Note ~~17,~~2, New and Recently Adopted Accounting Standards, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, Item 1. Financial 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,” 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 the COVID-19 pandemic on the health of our employees, on our vendors and customers and on economic conditions affecting our business;

•

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, ~~2016.~~2021.

~~Item 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

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 Discussion and Analysis of Financial Condition and Results of Operations - Market Risk and Risk Management Policies” in this Quarterly Report on Form 10-Q.

~~Item 4.~~

~~CONTROLS AND PROCEDURES~~

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, 2017.~~March 31, 2022. 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, 2017.~~March 31, 2022.

Changes in Internal Control over Financial Reporting

On ~~November 30, 2016,~~December 11, 2021, PCA acquired ~~Columbus Container, Inc. (“Columbus Container”~~Advance Packaging Corporation ("Advance Packaging"). We are currently in the process of evaluating and integrating ~~Columbus Container’s~~Advance Packaging's controls over financial reporting which may result in changes or additions to ~~PCA’s~~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 excluded Advance Packaging from the assessment of internal control over financial reporting at March 31, 2022. Except as may relate to the integration of the ~~Columbus Container~~Advance Packaging 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, 2017~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~PART~~ II As of and for the quarter ended March 31, 2022, Advance Packaging accounted for approximately 2% of both the Company's consolidated total assets and consolidated net sales.

PART II

OTHER INFORMATION

~~Item 1.~~

~~LEGAL PROCEEDINGS~~

Item 1. LEGAL PROCEEDINGS

The disclosure set forth under the caption "Legal Proceedings" in Note ~~18,~~20, 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~~

Item 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in ~~"Part~~“Part I, Item ~~1A.~~IA. Risk ~~Factors"~~Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

~~Item 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

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 repurchase plans authorized by PCA's Board of Directors, and shares withheld to cover taxes on vesting of equity awards, during the three months ended ~~September 30, 2017:~~March 31, 2022:


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)
January 1-31, 2022		275	$	150.63		—	$	1,000.0
February 1-28, 2022		1,020		146.76		—		1,000.0
March 1-31, 2022		—		—		—		1,000.0
Total		1,295	$	147.58		—	$	1,000.0

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, 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

(a)

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

~~(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.

~~DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~

~~Item 4.~~

~~MINE SAFETY DISCLOSURES~~

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

~~Item 5.~~

~~OTHER INFORMATION~~

~~None.~~Item 5.OTHER INFORMATION

None.

Item 6. EXHIBITS

~~Item 6.~~Exhibit

Number

~~EXHIBITS~~

~~Exhibit~~ ~~Number~~		Description

31.1		Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. † †

31.2		Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †

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.INS		~~The following financial information from Packaging Corporation of America’s Quarterly Report on Form 10-Q for~~Inline XBRL Instance Document – the ~~quarter ended September 30, 2017, formatted~~instance document does not appear in the Interactive Data File because its XBRL ~~(eXtensible Business Reporting Language): (i) Consolidated Statements of Income~~tags are embedded within the Inline XBRL document.†

101.SCH		Inline XBRL Taxonomy Extension Schema Document. †

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document. †

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document. †

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document. †

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document. †

104		Cover Page Interactive Data File (formatted as inline XBRL and Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, (ii) Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, and (iv) the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements.contained in Exhibit 101). †

†	~~Filed herewith.~~

~~SIGNATURES~~

† 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/ M~~ARK~~ ~~W. KOWLZAN~~PAMELA A. BARNES
		~~Mark W. Kowlzan~~Pamela A. Barnes Senior Vice President, Finance and Controller
		~~Chairman and Chief Executive Officer~~

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

Date: ~~November 3, 2017~~May 5, 2022


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

~~1955 West~~1 North Field Court, Lake Forest, Illinois		60045
(Address of ~~Prinicpal~~Principal Executive Offices)		(Zip Code)


Large accelerated filer	☒	Accelerated filer	~~Accelerated filer~~☐	Emerging growth company	☐

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


Title of each class	Trading Symbol(s)	~~PART I~~	Name of each exchange on which registered
Common Stock, par value $0.01 per share	PKG	New York Stock Exchange


	PART I
~~Item 1.~~	~~Financial Statements~~	1
Item 1.	Financial Statements	1
~~Item 2.~~
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1516

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2724

Item 4.	Controls and Procedures	2724

	PART II

Item 1.	Legal Proceedings	2825

Item 1A.	Risk Factors	2825

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2825

Item 3.	Defaults Upon Senior Securities	2825

Item 4.	Mine Safety Disclosures	2825

Item 5.	Other Information	2825

Item 6.	Exhibits	2926


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	370.5		$	239.3		$	628.6		$	618.7
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
Short-term marketable debt securities								81.3			86.1
Accounts receivable, net of allowance for credit losses and customer deductions of $20.0 million and $14.3 million as of March 31, 2022 and December 31, 2021, respectively								1,140.7			1,071.0
Inventories		736.6			723.6			941.2			902.5
Prepaid expenses and other current assets		43.4			30.3			77.6			47.0
Federal and state income taxes receivable		20.0			13.9			—			7.4
Total current assets		2,001.8			1,696.3			2,869.4			2,732.7
Property, plant, and equipment, net		2,881.6			2,895.7			3,670.7			3,529.0
Goodwill		732.1			737.9			923.1			923.5
Intangible assets, net		347.8			367.1
Other intangible assets, net								298.2			308.4
Operating lease right-of-use assets								264.4			238.3
Long-term marketable debt securities								68.5			60.0
Other long-term assets		63.9			80.0			43.5			44.9
Total assets	$	6,027.2		$	5,777.0		$	8,137.8		$	7,836.8
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	156.5		$	25.8
Capital lease obligations		1.3			1.3
Operating lease obligations							$	69.7		$	67.1
Finance lease obligations								1.8			1.7
Accounts payable		379.5			323.8			546.7			452.4
Dividends payable		60.3			59.9			96.9			96.3
Accrued liabilities		207.8			201.2			188.6			255.0
Accrued interest		18.9			13.4			26.0			12.3
Federal and state income taxes payable								38.2			—
Total current liabilities		824.3			625.4			967.9			884.8
Long-term liabilities:
Long-term debt		2,456.3			2,620.0			2,472.0			2,471.5
Capital lease obligations		19.3			20.3
Operating lease obligations								202.6			179.3
Finance lease obligations								12.2			12.7
Deferred income taxes		342.1			334.7			488.8			465.9
Compensation and benefits		322.8			357.2			157.0			157.4
Other long-term liabilities		68.2			59.6			58.0			58.0
Total long-term liabilities		3,208.7			3,391.8			3,390.6			3,344.8
Commitments and contingent liabilities
Commitments and contingent liabilities (Note 20)
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
Common stock, par value $0.01 per share, 300.0 million shares authorized, 93.7 million and 93.5 million shares issued as of March 31, 2022 and December 31, 2021, respectively								0.9			0.9
Additional paid in capital		466.1			451.4			591.7			579.4
Retained earnings		1,658.2			1,447.1			3,261.9			3,102.1
Accumulated other comprehensive loss		(131.0	)		(139.6	)		(75.2	)		(75.2	)
Total stockholders' equity		1,994.2			1,759.8			3,779.3			3,607.2
Total liabilities and stockholders' equity	$	6,027.2		$	5,777.0		$	8,137.8		$	7,836.8


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


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


	Common Stock					Additional Paid in		Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital		Earnings			Loss			Equity
Balance at January 1, 2022		93,539		$	0.9	$	579.4	$	3,102.1		$	(75.2	)	$	3,607.2
Common stock withheld and retired to cover taxes on vested stock awards		(1	)		0		0		(0.2	)		0			(0.2	)
Common stock dividends declared		—			0		0		(94.2	)		0			(94.2	)
Share-based compensation and other		166			0		12.3		0			0			12.3
Comprehensive income		—			0		0		254.2			0			254.2
Balance at March 31, 2022		93,704		$	0.9	$	591.7	$	3,261.9		$	(75.2	)	$	3,779.3


	Common Stock					Additional Paid in		Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital		Earnings			Loss			Equity
Balance at January 1, 2021		94,830		$	0.9	$	554.4	$	2,835.5		$	(144.5	)	$	3,246.3
Common stock withheld and retired to cover taxes on vested stock awards		(1	)		—		—		(0.1	)		—			(0.1	)
Common stock dividends declared		—			—		—		(95.5	)		—			(95.5	)
Share-based compensation and other		165			0.1		11.6		(0.1	)		—			11.6
Comprehensive income		—			0		0		166.5			2.4			168.9
Balance at March 31, 2021		94,994		$	1.0	$	566.0	$	2,906.3		$	(142.1	)	$	3,331.2

	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


	12/31/2021 Allocation		Adjustments			Revised Allocation
Goodwill	$	60.0	$	(0.4	)	$	59.6
Other intangible assets		50.2		0			50.2
Property, plant and equipment		66.7		0.4			67.1
Other net assets		18.0		0			18.0
Net assets acquired	$	194.9	$	0		$	194.9


	Three Months Ended
	March 31,
Numerator:	2022			2021
Net income	$	254.2		$	166.5
Less: Distributed and undistributed earnings allocated to participating securities		(2.0	)		(1.3	)
Net income attributable to common shareholders	$	252.2		$	165.2
Denominator:
Weighted average basic common shares outstanding		92.9			94.2
Effect of dilutive securities		0.4			0.4
Weighted average diluted common shares outstanding		93.3			94.6
Basic income per common share	$	2.71		$	1.75
Diluted income per common share	$	2.70		$	1.75

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

	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

	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	)

	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