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

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

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

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 July ~~31, 2020~~30, 2021 the Registrant had outstanding ~~94,835,022~~94,992,190 shares of common stock, par value $0.01 per share.

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.


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Statements of Income:
Net sales	$	1,541.6		$	1,759.9		$	3,250.3		$	3,493.6		$	1,879.9		$	1,541.6		$	3,687.0		$	3,250.3
Cost of sales		(1,215.8	)		(1,332.0	)		(2,559.6	)		(2,644.3	)		(1,431.1	)		(1,215.8	)		(2,834.5	)		(2,559.6	)
Gross profit		325.8			427.9			690.7			849.3			448.8			325.8			852.5			690.7
Selling, general and administrative expenses		(136.3	)		(143.7	)		(282.2	)		(283.7	)		(146.3	)		(136.3	)		(291.3	)		(282.2	)
Goodwill impairment		(55.2	)		—			(55.2	)		—			0			(55.2	)		0			(55.2	)
Other expense, net		(18.2	)		(3.8	)		(28.1	)		(9.8	)		(7.9	)		(18.2	)		(28.3	)		(28.1	)
Income from operations		116.1			280.4			325.2			555.8			294.6			116.1			532.9			325.2
Non-operating pension income (expense)		0.6			(2.0	)		1.1			(4.1	)
Non-operating pension income														5.0			0.6			9.8			1.1
Interest expense, net		(25.1	)		(22.4	)		(44.6	)		(46.4	)		(24.9	)		(25.1	)		(48.4	)		(44.6	)
Income before taxes		91.6			256.0			281.7			505.3			274.7			91.6			494.3			281.7
Provision for income taxes		(34.9	)		(62.4	)		(83.4	)		(124.9	)		(67.4	)		(34.9	)		(120.5	)		(83.4	)
Net income	$	56.7		$	193.6		$	198.3		$	380.4		$	207.3		$	56.7		$	373.8		$	198.3
Net income per common share:
Basic	$	0.60		$	2.05		$	2.09		$	4.03		$	2.18		$	0.60		$	3.94		$	2.09
Diluted	$	0.59		$	2.04		$	2.08		$	4.02		$	2.17		$	0.59		$	3.92		$	2.08
Dividends declared per common share	$	0.79		$	0.79		$	1.58		$	1.58		$	1.00		$	0.79		$	2.00		$	1.58
Statements of Comprehensive Income:
Net income	$	56.7		$	193.6		$	198.3		$	380.4		$	207.3		$	56.7		$	373.8		$	198.3
Other comprehensive income, net of tax:
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.0 million, $0.3 million, $0.0 million, and $0.7 million		—			1.0			—			1.9
Changes in unrealized gains on marketable debt securities, net of tax of $0.3 million, $0.0 million, $0.2 million, and $0.0 million		0.9			—			0.7			—
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $0.9 million, $0.8 million, $1.8 million, and $1.6 million		2.7			2.3			5.4			4.7
Changes in unrealized gains (losses) on marketable debt securities, net of tax of $0.0 million, $0.3 million, $0.1 million, and $0.2 million														(0.1	)		0.9			(0.2	)		0.7
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $0.8 million, $0.9 million, $1.7 million, and $1.8 million														2.5			2.7			5.0			5.4
Other comprehensive income		3.6			3.3			6.1			6.6			2.4			3.6			4.8			6.1
Comprehensive income	$	60.3		$	196.9		$	204.4		$	387.0		$	209.7		$	60.3		$	378.6		$	204.4

See accompanying condensed notes to unaudited quarterly consolidated financial statements.


	June 30,			December 31,			June 30,			December 31,
	2020			2019			2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	853.3		$	679.5		$	972.2		$	974.6
Short-term marketable debt securities		86.9			87.9			101.7			105.6
Accounts receivable, net of allowance for credit losses and customer deductions of $12.6 million as of both June 30, 2020, and December 31, 2019		817.3			845.6
Accounts receivable, net of allowance for credit losses and customer deductions of $13.7 million as of June 30, 2021 and $10.6 million December 31, 2020, respectively								981.4			832.4
Inventories		834.5			794.1			827.2			787.9
Prepaid expenses and other current assets		60.9			44.8			78.6			44.7
Federal and state income taxes receivable		6.1			26.5			0			5.1
Total current assets		2,659.0			2,478.4			2,961.1			2,750.3
Property, plant, and equipment, net		3,114.7			3,151.7			3,240.5			3,193.4
Goodwill		863.5			918.7			863.5			863.5
Other intangible assets, net		314.9			338.8			277.0			295.9
Operating lease right-of-use assets		229.7			234.3			233.0			234.2
Long-term marketable debt securities		36.3			58.1			49.9			42.7
Other long-term assets		53.9			55.8			48.6			53.2
Total assets	$	7,272.0		$	7,235.8		$	7,673.6		$	7,433.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Operating lease obligations	$	67.1		$	62.6		$	68.8		$	68.9
Finance lease obligations		1.6			1.5			1.7			1.6
Accounts payable		315.2			351.9			405.3			387.0
Dividends payable		76.5			76.6			97.4			97.0
Accrued liabilities		211.3			217.5			231.4			216.2
Accrued interest		11.9			13.7			11.6			11.9
Federal and state income taxes payable								0.6			0
Total current liabilities		683.6			723.8			816.8			782.6
Long-term liabilities:
Long-term debt		2,478.0			2,476.8			2,479.8			2,479.4
Operating lease obligations		171.5			177.6			172.3			173.6
Finance lease obligations		15.2			16.0			13.5			14.4
Deferred income taxes		361.1			340.1			395.7			379.4
Compensation and benefits		369.5			375.5			294.3			298.3
Other long-term liabilities		60.0			55.0			56.9			59.2
Total long-term liabilities		3,455.3			3,441.0			3,412.5			3,404.3
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.8 million and 94.7 million shares issued as of June 30, 2020 and December 31, 2019, respectively		0.9			0.9
Common stock, par value $0.01 per share, 300.0 million shares authorized, 95.0 million and 94.8 million shares issued as of June 30, 2021 and December 31, 2020, respectively								1.0			0.9
Additional paid in capital		542.7			524.8			574.5			554.4
Retained earnings		2,742.9			2,704.8			3,008.5			2,835.5
Accumulated other comprehensive loss		(153.4	)		(159.5	)		(139.7	)		(144.5	)
Total stockholders' equity		3,133.1			3,071.0			3,444.3			3,246.3
Total liabilities and stockholders' equity	$	7,272.0		$	7,235.8		$	7,673.6		$	7,433.2

See accompanying condensed notes to unaudited quarterly consolidated financial statements.


	Six Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2021			2020
Cash Flows from Operating Activities:
Net income	$	198.3		$	380.4		$	373.8		$	198.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization of intangibles		208.5			190.7			205.5			208.5
Amortization of deferred financing costs		1.3			4.3			1.3			1.3
Share-based compensation expense		17.8			18.6			20.1			17.8
Deferred income tax provision		19.2			26.9			14.3			19.2
Loss on asset disposals		2.3			1.9			5.4			2.3
Goodwill impairment		55.2			—			0			55.2
Pension and post-retirement benefits expense, net of contributions		(1.1	)		11.3			(0.3	)		(1.1	)
Other, net		14.1			8.7			4.2			14.1
Changes in operating assets and liabilities:
(Increase) decrease in assets —
Accounts receivable		28.3			(44.9	)		(149.0	)		28.3
Inventories		(40.4	)		(20.1	)		(39.4	)		(40.4	)
Prepaid expenses and other current assets		(14.9	)		(21.2	)		(34.7	)		(14.9	)
Increase (decrease) in liabilities —
Accounts payable		(37.8	)		(1.8	)		(2.7	)		(37.8	)
Accrued liabilities		(7.7	)		(22.3	)		15.4			(7.7	)
Federal and state income taxes payable / receivable		20.4			5.9			5.9			20.4
Net cash provided by operating activities		463.5			538.4			419.8			463.5
Cash Flows from Investing Activities:
Additions to property, plant, and equipment		(151.2	)		(170.9	)		(216.5	)		(151.2	)
Additions to other long term assets		(5.1	)		(1.8	)		(1.6	)		(5.1	)
Redemptions of marketable debt securities, net of purchases		23.2			—
Proceeds from disposals		4.3			1.2
Other, net		—			(1.3	)
Proceeds from asset disposals								2.4			4.3
Purchases of marketable debt securities								(65.7	)		(20.5	)
Proceeds from sales of marketable debt securities								12.9			12.3
Proceeds from maturities of marketable debt securities								48.3			31.4
Net cash used for investing activities		(128.8	)		(172.8	)		(220.2	)		(128.8	)
Cash Flows from Financing Activities:
Repayments of debt and finance lease obligations		(0.8	)		(0.7	)		(0.8	)		(0.8	)
Financing costs paid								(0.9	)		0
Common stock dividends paid		(149.7	)		(149.3	)		(189.8	)		(149.7	)
Shares withheld to cover employee restricted stock taxes		(10.4	)		(7.7	)		(10.5	)		(10.4	)
Net cash used for financing activities		(160.9	)		(157.7	)		(202.0	)		(160.9	)
Net increase in cash and cash equivalents		173.8			207.9
Net (decrease) increase in cash and cash equivalents								(2.4	)		173.8
Cash and cash equivalents, beginning of period		679.5			361.5			974.6			679.5
Cash and cash equivalents, end of period	$	853.3		$	569.4		$	972.2		$	853.3

See accompanying condensed notes to unaudited quarterly consolidated financial statements.


																		Common Stock						Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'
																		Shares			Amount			Capital			Earnings			Loss			Equity
Balance at April 1, 2021																			94,994		$	1.0		$	566.0		$	2,906.3		$	(142.1	)	$	3,331.2
Common stock withheld and retired to cover taxes on vested stock awards																			(76	)		(0.1	)		(0.6	)		(9.7	)		0			(10.4	)
Common stock dividends declared																			—			0			0			(95.4	)		0			(95.4	)
Share-based compensation																			61			0.1			9.1			0			0			9.2
Comprehensive income																			—			0			0			207.3			2.4			209.7
Balance at June 30, 2021																			94,979		$	1.0		$	574.5		$	3,008.5		$	(139.7	)	$	3,444.3


	Common Stock					Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'			Common Stock						Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital			Earnings			Loss			Equity			Shares			Amount			Capital			Earnings			Loss			Equity
Balance at April 1, 2020		94,848		$	0.9	$	534.9		$	2,771.1		$	(157.0	)	$	3,149.9			94,848		$	0.9		$	534.9		$	2,771.1		$	(157.0	)	$	3,149.9
Common stock withheld and retired to cover taxes on vested stock awards		(106	)		—		(0.8	)		(9.6	)		—			(10.4	)		(106	)		0			(0.8	)		(9.6	)		0			(10.4	)
Common stock dividends declared		—			—		—			(75.3	)		—			(75.3	)		—			0			0			(75.3	)		0			(75.3	)
Share-based compensation		93			—		8.6			—			—			8.6			93			0			8.6			0			0			8.6
Comprehensive income		—			—		—			56.7			3.6			60.3			—			0			0			56.7			3.6			60.3
Balance at June 30, 2020		94,835		$	0.9	$	542.7		$	2,742.9		$	(153.4	)	$	3,133.1			94,835		$	0.9		$	542.7		$	2,742.9		$	(153.4	)	$	3,133.1


	Common Stock					Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital			Earnings			Loss			Equity
Balance at April 1, 2019		94,494		$	0.9	$	501.4		$	2,427.8		$	(135.5	)	$	2,794.6
Common stock withheld and retired to cover taxes on vested stock awards		(83	)		—		(0.6	)		(7.1	)		—			(7.7	)
Common stock dividends declared		—			—		—			(74.9	)		—			(74.9	)
Share-based compensation		255			—		12.5			—			—			12.5
Other		—			—		—			(0.2	)		—			(0.2	)
Comprehensive income		—			—		—			193.6			3.3			196.9
Balance at June 30, 2019		94,666		$	0.9	$	513.3		$	2,539.2		$	(132.2	)	$	2,921.2


																		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																			(77	)		(0.1	)		(0.6	)		(9.8	)		0			(10.5	)
Common stock dividends declared																			—			0			0			(190.9	)		0			(190.9	)
Share-based compensation																			226			0.2			20.7			(0.1	)		0			20.8
Comprehensive income																			—			0			0			373.8			4.8			378.6
Balance at June 30, 2021																			94,979		$	1.0		$	574.5		$	3,008.5		$	(139.7	)	$	3,444.3


	Common Stock					Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'			Common Stock						Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital			Earnings			Loss			Equity			Shares			Amount			Capital			Earnings			Loss			Equity
Balance at January 1, 2020		94,655		$	0.9	$	524.8		$	2,704.8		$	(159.5	)	$	3,071.0			94,655		$	0.9		$	524.8		$	2,704.8		$	(159.5	)	$	3,071.0
Common stock withheld and retired to cover taxes on vested stock awards		(107	)		—		(0.8	)		(9.6	)		—			(10.4	)		(107	)		0			(0.8	)		(9.6	)		0			(10.4	)
Common stock dividends declared		—			—		—			(150.5	)		—			(150.5	)		—			0			0			(150.5	)		0			(150.5	)
Share-based compensation		287			—		18.7			—			—			18.7			287			0			18.7			0			0			18.7
Other		—			—		—			(0.1	)		—			(0.1	)		—			0			0			(0.1	)		0			(0.1	)
Comprehensive income		—			—		—			198.3			6.1			204.4			—			0			0			198.3			6.1			204.4
Balance at June 30, 2020		94,835		$	0.9	$	542.7		$	2,742.9		$	(153.4	)	$	3,133.1			94,835		$	0.9		$	542.7		$	2,742.9		$	(153.4	)	$	3,133.1


	Common Stock					Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital			Earnings			Loss			Equity
Balance at January 1, 2019		94,497		$	0.9	$	494.5		$	2,315.8		$	(138.8	)	$	2,672.4
Common stock withheld and retired to cover taxes on vested stock awards		(83	)		—		(0.6	)		(7.1	)		—			(7.7	)
Common stock dividends declared		—			—		—			(149.7	)		—			(149.7	)
Share-based compensation		252			—		19.4			—			—			19.4
Other		—			—		—			(0.2	)		—			(0.2	)
Comprehensive income		—			—		—			380.4			6.6			387.0
Balance at June 30, 2019		94,666		$	0.9	$	513.3		$	2,539.2		$	(132.2	)	$	2,921.2

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

1. Nature of Operations and Basis of Presentation

~~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), formerly known as Tenneco Packaging, Inc. We are a large diverse manufacturer of both packaging and paper products. We are headquartered in Lake Forest, Illinois and we operate primarily in the United States.

We report our business in 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 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 18, Segment Information.

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 uncoated freesheet paper grades on the machine and the permanent conversion of the machine to produce linerboard. Before October 2020, operating results for the Jackson mill were included in the Paper segment. Beginning in October 2020, operating results for the Jackson mill are included in both the Packaging and Paper segments.

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

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

~~Effective January 1, 2020,~~ ~~we adopted Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instruments – Credit Losses~~ ~~(Topic 326): Measurement of Credit Losses on Financial Instruments.~~ ASU 2016-13 introduces the Current Expected Credit Losses (“CECL”) framework for evaluating credit losses on financial instruments measured at amortized cost. ASU 2016-13 was applied using the modified retrospective method, and as a result, amounts recorded prior to January 1, 2020 have not been retrospectively restated. This new framework requires entities to incorporate forward-looking information into their estimate of current expected credit loss as of each reporting date. Although available-for-sale (“AFS”) debt securities are not within the scope of the new CECL framework, the ASU includes an amended impairment model for evaluating losses related to AFS debt securities. The guidance in this update also includes enhanced requirements for disclosures related to credit loss estimates.

Prior to adoption of the new standard, the Company already incorporated forward-looking information into its estimate of credit losses for trade receivables. Due to the short duration of the Company’s trade receivables, the adoption of ASU 2016-13 did not have a material impact on trade receivables. The adoption of ASU 2016-13 also did not have a material impact on the Company’s AFS marketable debt securities, as the Company only invests in highly-rated AFS marketable debt securities. Overall, the adoption of ASU 2016-13 did not have a material impact on the Company’s financial condition, results of operations or cash flow.

~~Effective January 1, 2020, the Company adopted ASU 2018-13,~~ ~~Fair Value Measurement~~ ~~(Topic 820):~~ ~~Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.~~ ASU 2018-13 removes or modifies certain disclosure requirements and adds additional requirements to improve the usefulness of the fair value measurement disclosure for financial statement users. Certain new requirements of ASU 2018-13 are required to be applied prospectively for the first interim period of the initial year of adoption. However, the modifications and removal of certain information needs to be applied retrospectively. The adoption of this Update did not have a significant impact on the Company’s related disclosures as reflected in this Quarterly Report on Form 10-Q.

2. New Accounting Standards ~~Not Yet Adopted~~

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. Companies can apply the ASU immediately, but the guidance will only be available until December 31, 2022. ~~The~~While the Company’s fixed-rate outstanding debt will not be impacted by the reference rate reform, the Company is ~~currently~~still evaluating the impact of this guidance ~~but~~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.

~~In August 2018, the~~ ~~FASB~~ ~~issued ASU 2018-14,~~ ~~Compensation – Retirement Benefits – Defined Benefit Plans – General~~ ~~(Subtopic 715-20):~~ ~~Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans~~. ASU 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The ASU is effective for annual periods beginning after December 31, 2020, with early adoption permitted. The amendments in ASU 2018-14 would need to be applied on a retrospective basis. The Company is currently evaluating the impact of this guidance, but does not expect the guidance will have a significant impact on its 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.

3. Revenue

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 June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Packaging	$	1,409.9	$	1,504.6	$	2,877.4	$	2,982.2	$	1,718.5	$	1,409.9	$	3,342.1	$	2,877.4
Paper		123.3		237.8		340.7		477.5		142.3		123.3		306.8		340.7
Corporate and Other		8.4		17.5		32.2		33.9		19.1		8.4		38.1		32.2
Total revenue	$	1,541.6	$	1,759.9	$	3,250.3	$	3,493.6	$	1,879.9	$	1,541.6	$	3,687.0	$	3,250.3

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 ~~customers,~~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.

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.

Revenue in this segment primarily relates to Louisiana Timber Procurement Company, L.L.C. (LTP), a variable-interest entity that is ~~50%~~50% owned by PCA and ~~50%~~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 17, 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.

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.

4. Earnings Per Share

4.	~~Earnings Per Share~~

The following table sets forth the computation of basic and diluted income per common share for the periods presented (dollars and shares in millions, except per share data):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
Numerator:	2021			2020			2021			2020
Net income	$	207.3		$	56.7		$	373.8		$	198.3
Less: Distributed and undistributed earnings allocated to participating securities		(1.8	)		(0.5	)		(3.1	)		(1.8	)
Net income attributable to common shareholders	$	205.5		$	56.2		$	370.7		$	196.5
Denominator:
Weighted average basic common shares outstanding		94.2			94.0			94.2			94.0
Effect of dilutive securities		0.4			0.4			0.4			0.4
Weighted average diluted common shares outstanding		94.6			94.4			94.6			94.4
Basic income per common share	$	2.18		$	0.60		$	3.94		$	2.09
Diluted income per common share	$	2.17		$	0.59		$	3.92		$	2.08

Three Months Ended

Six Months Ended

June 30,

June 30,

Numerator:

2020

2019

2020

2019

Net income

$
56.7

$
193.6

$
198.3

$
380.4

Less: Distributed and undistributed earnings allocated to participating
securities

(0.5
)

(1.5
)

(1.8
)

(2.9
)
Net income attributable to common shareholders

$
56.2

$
192.1

$
196.5

$
377.5

Denominator:

Weighted average basic common shares outstanding

94.0

93.8

94.0

93.8

Effect of dilutive securities

0.4

0.2

0.4

0.2

Weighted average diluted common shares outstanding

94.4

94.0

94.4

94.0

Basic income per common share

$
0.60

$
2.05

$
2.09

$
4.03

Diluted income per common share

$
0.59

$
2.04

$
2.08

$
4.02

5.	~~Other Expense, Net~~

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

~~________________~~6. Income Taxes

~~(a)~~

Includes charges consisting of closure costs related to corrugated products facilities, substantially all of which relates to the previously announced closure of the San Lorenzo, California facility during the second quarter of 2020, partially offset by income related to the sale of a corrugated products facility.

~~(b)~~

Includes charges related to the 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 produce virgin kraft linerboard.

6.	~~Income Taxes~~

For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recorded ~~$34.9~~$67.4 million and ~~$62.4~~$34.9 million of income tax expense and had an effective tax rate of ~~38.2%~~24.5% and ~~24.4%~~38.2%, respectively. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recorded ~~$83.4~~$120.5 millionand ~~$124.9~~$83.4 million of income tax expense and had an effective tax rate of ~~29.6%~~24.4% and ~~24.7%~~29.6%, respectively. The ~~increase~~decrease in our effective tax rate for both the three and six months ended June 30, ~~2020~~2021 compared ~~with~~to the same period in ~~2019~~2020 was primarily due to the nondeductible goodwill impairment charge associated with our Paper reporting unit ~~slightly offset by the favorable impact of employee restricted stock and performance unit vests with higher excess tax benefits (ASU 2016-09)~~recognized during the three and six months ended June 30, 2020 ~~compared to~~with 0 corresponding charge during the three and six months ended June 30, ~~2019.~~2021.

Our current effective tax rate may differ from the federal statutory income tax rate of ~~21.0%~~21.0% due primarily to the effect of state and local income ~~taxes and the nondeductible goodwill impairment recorded in the second quarter of 2020.~~taxes. During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, cash paid for taxes, net of refunds received, was ~~$43.7~~$100.4 million and ~~$92.1~~$43.7 million, respectively. The ~~decrease~~increase in cash tax payments between the periods is primarily due to ~~lower~~higher 2021 taxable income.

During the three and six months ended June 30, ~~2020,~~2021, there were no significant changes to our uncertain tax positions. For more information, see Note 8,7, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2019~~2020 Annual Report on Form 10-K.

7. Inventories

7.	~~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):


	June 30,		December 31,
	2021		2020
Raw materials	$	288.5	$	263.5
Work in process		15.2		11.6
Finished goods		180.8		183.6
Supplies and materials		342.7		329.2
Inventories	$	827.2	$	787.9

June 30,

December 31,

2020

2019

Raw materials

$
272.1

$
271.5

Work in process

13.1

11.0

Finished goods

231.7

207.7

Supplies and materials

317.6

303.9

Inventories

$
834.5

$
794.1

8.	~~Property, Plant, and Equipment~~

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

During the second quarter of 2020, with the exacerbated deterioration in uncoated freesheet market conditions arising from the COVID-19 pandemic and the estimated impact on our Paper segment and its projected future results of operations, we identified a triggering event indicating possible impairment of our long lived assets within our Paper segment, including property, plant, and equipment, and performed a recoverability test on the Paper reporting unit long lived assets as of May 31, 2020. The recoverability test was based on forecasts of undiscounted cash flows. The results of the recoverability test indicated that the long lived assets within our Paper segment, inclusive of property, plant, and equipment, were ~~100%~~100% recoverable.

Depreciation expense for the three months ended June 30, 2021 and 2020 ~~and 2019~~ was ~~$93.3~~$94.5 million and ~~$85.8~~$93.3 million, respectively. During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, depreciation expense was ~~$183.1~~$184.5 million and ~~$171.0~~$183.1 million, respectively. We recognized ~~$2.6~~$2.1 million of incremental depreciation expense during the six months ended June 30, 2021 as a result of the corrugated products facilities closures and the Jackson, Alabama mill conversion. We recognized $2.6 million of incremental depreciation expense during the six months ended June 30, 2020 as a result of the closure of the San Lorenzo, California corrugated products facility. ~~We recognized $0.2 millionof incremental depreciation expense during the six months ended June 30, 2019 as a result of shortening the useful lives of certain assets primarily related to the Wallula mill restructuring.~~

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, purchases of property, plant, and equipment included in accounts payable were ~~$27.9~~$41.4 million and ~~$26.8~~$20.4 million, respectively.

9. Goodwill and Intangible Assets

9.	~~Goodwill and Intangible Assets~~

Goodwill

Due to the triggering event identified above an interim quantitative impairment analysis was performed as of May 31, 2020 for the Paper reporting unit, which is the same as our Paper reportable segment. We estimated the fair value of the Paper reporting unit using a combination of the income approach and the market approach, as further described below. Based on the evaluation performed, we determined that the carrying value of the Paper reporting unit exceeded its fair value, which resulted in a goodwill impairment charge totaling ~~$55.2 million. The impairment charge is included~~$55.2 million in ~~“Goodwill impairment” on our unaudited Consolidated Statements~~the second quarter of ~~Income and Comprehensive Income for the three and six months ended June 30, 2020 and is not tax deductible.~~2020.

For purposes of our goodwill impairment analysis, we estimated the fair value of the Paper reporting unit using a combination of the income approach and the market approach applying an equal weighting. The income approach incorporated the estimated future cash flows and a terminal value discounted to their present value using an appropriate risk-adjusted discount rate. The estimated future cash flows and terminal value were based on internal forecasts and industry trends, including the long-term outlook for the paper industry. Our expected cash flows include assumptions about industry pricing, expected paper demand, and anticipated input and conversion costs. The discount rate utilized in the income approach was 9%9%, which was derived using a capital asset pricing model based on relevant industry data to estimate the cost of equity financing. The discount rate

is commensurate with the risks and uncertainties inherent in the business and the cash flow forecasts, updated for recent events. The market approach estimated the fair value of the Paper reporting unit by using valuation metrics of publicly traded companies or historically completed transactions of comparable businesses.

The valuation of our Paper reporting unit requires significant judgment in evaluating recent indicators of market activity and estimated future cash flows, discount rates, and other factors. Our impairment analysis contains inherent uncertainties due to uncontrollable events that could positively or negatively impact anticipated future economic and operating conditions. In making these estimates, the weighted-average cost of capital is utilized to calculate the present value of future cash flows and terminal value. Many variables go into estimating future cash flows, including estimates of our future revenue growth and operating results. When estimating our projected revenue growth and future operating results, we considered industry trends, economic data, and our competitive situation.

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 both June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$863.5~~$863.5 million of goodwill recorded in our Packaging ~~segment. At June 30, 2020 and December 31, 2019, we had $0 million and $55.2 million of~~segment, which represents the entire goodwill ~~recorded in~~balance reported on our ~~Paper segment, respectively.~~Consolidated Balance Sheets.

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

Goodwill

Balance at January 1, 2020

$
918.7

Impairment of Paper segment

(55.2
)
Balance at June 30, 2020

$
863.5

Intangible Assets

Intangible assets are primarily comprised of customer relationships and trademarks and trade names. As a result of the triggering event described above, we also performed a recoverability test on our long-lived assets within the Paper segment, including long lived intangible assets, as of May 31, 2020. The recoverability test was based on forecasts of undiscounted cash flows. The results of the recoverability test indicated that the long lived assets within our Paper segment, inclusive of the long lived intangible assets, were ~~100%~~100% recoverable.

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

	June 30, 2020						December 31, 2019
	Weighted Average Remaining Useful Life (in Years)		Gross Carrying Amount		Accumulated Amortization		Weighted Average Remaining Useful Life (in Years)		Gross Carrying Amount		Accumulated Amortization		June 30, 2021						December 31, 2020
Customer relationships (a)		9.4	$	503.8	$	202.7		10.0	$	503.8	$	180.2
													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														8.7	$	503.8	$	237.6		9.1	$	503.8	$	220.2
Trademarks and trade names		9.3		34.8		21.8		9.5		34.8		20.6		9.3		34.8		24.2		9.3		34.8		23.0
Other		1.6		4.3		3.5		2.1		4.3		3.3		0.9		4.3		4.1		1.2		4.3		3.8
Total intangible assets (excluding goodwill)		9.4	$	542.9	$	228.0		9.9	$	542.9	$	204.1		8.7	$	542.9	$	265.9		9.1	$	542.9	$	247.0

~~__________________~~

~~(a)~~

During the second quarter of 2020, the Company recorded a $4.5 million adjustment to decrease the remaining book value of the customer relationships intangible asset as a result of the closure of the San Lorenzo, California corrugated products facility.

During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, amortization expense was ~~$23.9~~$18.9 million and ~~$19.2~~$23.9 million, respectively. For the six months ended June 30, 2020, amortization expense includes a $4.5 million adjustment to decrease the remaining book value of the customer relationship intangible asset as a result of the closure of the San Lorenzo, California corrugated products facility.

10. Accrued Liabilities

~~10.~~

~~Accrued Liabilities~~

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


	June 30,		December 31,
	2021		2020
Compensation and benefits	$	131.8	$	126.5
Customer rebates and other credits		30.2		27.1
Medical insurance and workers’ compensation		25.7		25.5
Property, franchise, sales and use taxes		24.1		16.5
Environmental liabilities and asset retirement obligations		4.9		4.6
Severance, retention, and relocation		2.4		4.1
Other		12.3		11.9
Total	$	231.4	$	216.2

11. Debt

June 30,

December 31,

2020

2019

Compensation and benefits

$
108.5

$
124.5

Customer volume discounts and rebates

25.7

27.9

Medical insurance and workers’ compensation

25.0

26.3

Franchise, property, sales and use taxes

22.9

15.3

Severance, retention, and relocation

9.7

3.5

Environmental liabilities and asset retirement obligations

4.8

5.6

Other

14.7

14.4

Total

$
211.3

$
217.5

At June 30, 2021 and December 31, 2020, our long-term debt and interest rates on that debt were as follows (dollars in millions):


	June 30, 2021					December 31, 2020
	Amount		Interest Rate			Amount		Interest Rate
Revolving Credit Facility, due August 2021, terminated June 2021	$	0		0	%	$	0		0	%
Revolving Credit Facility, due June 2026		0		0	%		0		0	%
4.50% Senior Notes, net of discount of $0.5 million and $0.6 million as of June 30, 2021 and December 31, 2020, respectively, due November 2023		699.5		4.50	%		699.4		4.50	%
3.65% Senior Notes, net of discount of $0.4 million and $0.5 million as of June 30, 2021 and December 31, 2020, respectively, due September 2024		399.6		3.65	%		399.5		3.65	%
3.40% Senior Notes, net of discount of $1.1 million and $1.2 million as of June 30, 2021 and December 31, 2020, respectively, due December 2027		498.9		3.40	%		498.8		3.40	%
3.00% Senior Notes, net of discount of $0.6 million as of both June 30, 2021 and December 31, 2020, due December 2029		499.4		3.00	%		499.4		3.00	%
4.05% Senior Notes, net of discount of $3.4 million as of both June 30, 2021 and December 31, 2020, due December 2049		396.6		4.05	%		396.6		4.05	%
Total		2,494.0		3.77	%		2,493.7		3.77	%
Less unamortized debt issuance costs		14.2					14.3
Total long-term debt	$	2,479.8		3.77	%	$	2,479.4		3.77	%

On June 8, 2021, we entered into a revolving credit agreement with various financial institutions (the "New Revolving Credit Agreement"), which replaced the old Credit Agreement, dated August 29, 2016 (the "Old Credit Agreement"). The Old Credit Agreement was scheduled to terminate on August 29, 2021.

The New Revolving Credit Agreement is a $350 million unsecured revolving credit facility, which has a five-year term and is available for borrowings on a revolving basis for general corporate purposes. Except for approximately $23.5 million of letters of credit, no borrowings were outstanding under the Old Credit Agreement at the time of its replacement and no borrowings are outstanding under the New Revolving Credit Agreement. Borrowings under the New Revolving Credit Agreement are guaranteed by PCA's material subsidiaries.

Loans under the New Revolving Credit Agreement bear interest at LIBOR plus an applicable margin. The applicable margin is determined based upon the public ratings of PCA's senior long-term unsecured debt or PCA's gross leverage ratio. The New Revolving Credit Agreement contains customary LIBOR successor rate provisions.

The New Revolving Credit Agreement contains customary affirmative and negative covenants, including limitations on our ability to incur indebtedness at the subsidiary level and liens on our assets, and restrictions on our ability to engage in certain transactions involving mergers, consolidations, and sales of all or substantially all of our assets or the assets of a subsidiary guarantor. The New Revolving Credit Agreement has two financial covenants, a maximum leverage ratio and a minimum interest coverage ratio, each calculated on a consolidated basis. At June 30, 2021, we were in compliance with these covenants.

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

~~11.~~

~~Debt~~

For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, cash payments for interest were ~~$49.4~~$47.8 million and ~~$45.8~~$49.4 million, respectively.

Included in interest expense, net is the amortization of financing costs, and, for 2019 only, the amortization of treasury lock settlements. The remaining balances of the treasury lock settlements were written off in connection with the debt refinancing completed in December 2019.costs. For both the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, amortization of financing costs was ~~$0.5~~$0.5 million,~~and $0.7 million, respectively,~~ and during both the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, amortization of financing costs was ~~$1.0 million~~$1.0 million.~~and $1.4 million, respectively. For the three and six months ended June 30, 2019, amortization of treasury lock settlements was $1.3 million and $2.6 million, respectively.~~

At June 30, ~~2020,~~2021, we had ~~$2,493.4~~$2,494.0 million of fixed-rate senior notes outstanding. The fair value of our fixed-rate debt was estimated to be ~~$2,782.7~~$2,741.6 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 ~~2019~~2020 Annual Report on Form 10-K.

For more information on our long-term debt and interest rates on that debt, see Note ~~11,~~10, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2019~~2020 Annual Report on Form 10-K.

12. Cash, Cash Equivalents, and Marketable Debt Securities

~~12.~~

~~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 June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in millions):


	June 30, 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	$	969.2	$	0	$	0	$	969.2	$	969.2	$	0	$	0
Level 1 (a):
Money market funds		2.0		0		0		2.0		2.0		0		0
U.S. Treasury securities		28.6		0.1		0		28.7		0		19.7		9.0
Subtotal		30.6		0.1		0		30.7		2.0		19.7		9.0
Level 2 (b):
Certificates of deposit		9.0		0		0		9.0		0.5		8.5		0
U.S. government agency securities		7.9		0		0		7.9		0		4.2		3.7
Corporate debt securities		106.9		0.1		0		107.0		0.5		69.3		37.2
Subtotal		123.8		0.1		0		123.9		1.0		82.0		40.9
Total	$	1,123.6	$	0.2	$	0	$	1,123.8	$	972.2	$	101.7	$	49.9


	December 31, 2020
	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	$	970.5	$	0	$	0	$	970.5	$	970.5	$	0	$	0
Level 1 (a):
Money market funds		0.6		0		0		0.6		0.6		0		0
U.S. Treasury securities		28.1		0.2		0		28.3		0		18.9		9.4
Subtotal		28.7		0.2		0		28.9		0.6		18.9		9.4
Level 2 (b):
Certificates of deposit		5.9		0		0		5.9		1.1		4.8		0
Commercial paper		3.2		0		0		3.2		1.0		2.2		0
U.S. government agency securities		6.6		0		0		6.6		0		2.6		4.0
Corporate debt securities		107.5		0.3		0		107.8		1.4		77.1		29.3
Subtotal		123.2		0.3		0		123.5		3.5		86.7		33.3
Total	$	1,122.4	$	0.5	$	0	$	1,122.9	$	974.6	$	105.6	$	42.7

June 30, 2020

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

$
824.3

$
—

$
—

$
824.3

$
824.3

$
—

$
—

Level 1 ^(a):

Money market funds

29.0

—

—

29.0

29.0

—

—

U.S. Treasury securities

27.8

0.3

—

28.1

—

17.3

10.8

Subtotal

56.8

0.3

—

57.1

29.0

17.3

10.8

Level 2 ^(b):

Certificates of deposit

0.7

—

—

0.7

—

0.7

—

U.S. government agency securities

5.6

—

—

5.6

—

3.0

2.6

Corporate debt securities

88.1

0.7

—

88.8

—

65.9

22.9

Subtotal

94.4

0.7

—

95.1

—

69.6

25.5

Total

$
975.5

$
1.0

$
—

$
976.5

$
853.3

$
86.9

$
36.3

(a)

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

(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.

December 31, 2019

Adjusted
Cost Basis

Unrealized
Gain

Unrealized
Loss

Fair
Value (c)

Cash and
Cash Equivalents

Short-Term
Marketable
Debt Securities

Long-Term
Marketable
Debt Securities

Cash and cash equivalents

$
675.6

$
675.6

$
675.6

$
—

$
—

Level 1 ^(a):

Money market funds

0.1

—

—

0.1

0.1

—

—

U.S. Treasury securities

27.1

—

—

27.1

3.1

11.5

12.5

Subtotal

27.2

27.2

3.2

11.5

12.5

Level 2 ^(b):

Certificates of deposit

3.9

—

—

3.9

—

3.9

—

Commercial paper

5.6

—

—

5.6

0.7

4.9

—

U.S. government agency securities

7.0

—

—

7.0

—

3.0

4.0

Corporate debt securities

106.2

—

—

106.2

—

64.6

41.6

Subtotal

122.7

122.7

0.7

76.4

45.6

Total

$
825.5

$
—

$
—

$
825.5

$
679.5

$
87.9

$
58.1

For the three and six months ended June 30, 2021 and 2020, 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.~~years.

Fair values were determined for each individual marketable debt security in the investment portfolio. The Company evaluates each individual security to determine whether the security is impaired. An impairment exists when a security’s fair value is below its amortized cost basis. The Company reviews each impaired investment to determine if the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. If the impairment ofWhen evaluating a marketable debt security ~~(or a portion of the impairment) is due to credit factors of the issuer, the Company records an allowance~~ for ~~credit losses. Non-credit related impairments are recorded in Other Comprehensive Income (OCI).~~ 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 ~~ability of the issuer~~PCA’s intent to ~~make all~~sell, or whether it will be more likely than not be required ~~payments of~~to sell, the marketable debt ~~security. PCA utilizes various credit rating services to provide information on the impaired investment~~security before recovery of ~~a particular issuer.~~its amortized cost basis.

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we do ~~not~~0t consider any of the impairments related to our marketable debt securities to be ~~other-than-temporarily impaired. Any impairment existing at June 30, 2020 or December 31, 2019 is not related to~~the result of credit losses. Therefore, we have ~~not~~0t recorded an allowance for credit losses related to our marketable debt securities. All unrealized gains and losses were recorded in ~~OCI.~~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 June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in millions, except number of marketable debt securities in a loss position):


	June 30, 2021						December 31, 2020
	Fair Value of Marketable Debt Securities		Number of Marketable Debt Securities in a Loss Position		Unrealized Losses (c)		Fair Value of Marketable Debt Securities		Number of Marketable Debt Securities in a Loss Position		Unrealized Losses (c)
Corporate debt securities	$	35.0		47	$	0	$	42.9		56	$	0
U.S. Treasury securities		9.8		12		0		1.7		3		0
U.S. government agency securities		1.3		3		0		0		0		0
Certificates of deposit		0.3		1		0		1.3		2		0
Commercial paper		0		0		0		2.2		1		0
	$	46.4		63	$	0	$	48.1		62	$	0

(c)

Unrealized losses were insignificantfor the periods ended June 30, 2021 and December 31, 2020.

June 30, 2020

December 31, 2019

Fair Value of
Marketable
Debt Securities

Number of Marketable
Debt Securities
in a Loss Position

Unrealized
Losses (d)

Fair Value of
Marketable
Debt Securities

Number of Marketable
Debt Securities
in a Loss Position

Unrealized
Losses (d)

U.S. Treasury securities

$
—

—

$
—

$
14.0

9

$
—

U.S. government agency securities

—

—

—

0.8

1

—

Corporate debt securities

4.0

7

—

63.3

61

—

$
4.0

7

$
—

$
78.1

71

$
—

~~(d)~~

~~Unrealized losses were insignificant for the periods ended June 30, 2020 and December 31, 2019.~~

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

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 six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, payments to our nonqualified pension plans were insignificant. ~~For~~During the three and six months ended June 30, 2021, we did 0t make any contributions to our qualified pension plans, and for the three and six months ended June 30, 2020, we made contributions of ~~$7.2~~$7.2 million and ~~$11.1~~$11.1 million, respectively, to our qualified pension plans. We ~~made contributions of $3.9 million and $4.6 million to our qualified plans during the three and six months ended June 30, 2019, respectively. We~~do not have a required minimum contribution amount established for 2021, but we expect to ~~contribute at least the estimated required minimum~~make discretionary contributions to our ~~qualified plans of approximately $19.8 million in 2020.~~plans.

For the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the net periodic benefit cost for our postretirement plans was insignificant.

14. Share-Based Compensation

~~14.~~

~~Share-Based Compensation~~

The Company has a long-term equity incentive plan, which allows for grants of restricted stock, performance awards, stock appreciation rights, and stock options to directors, officers, and employees, as well as others who engage in services for PCA. 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 amendment extended the plan’s term to May 5, 2030 and increased the number of shares of common stock available for issuance under the plan by ~~1,400,000~~1.4 million shares. The total number of shares authorized for past and future awards is ~~11,950,000~~12.0 million shares.

As of June 30, ~~2020,~~2021, assuming performance units are ~~measured~~paid out at the target level of performance, ~~1.5~~1.2 million shares were available for future grants under the 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 six months ended June 30, ~~2020:~~2021:


	Restricted Stock					Performance Units
	Shares			Weighted Average Grant- Date Fair Value		Shares			Weighted Average Grant- Date Fair Value
Outstanding at January 1, 2021		669,102		$	102.55		357,417		$	103.63
Granted		173,970			134.10		95,236			140.47
Vested (a)		(161,741	)		108.80		(53,070	)		135.33
Forfeitures		(5,496	)		109.07		—			—
Outstanding at June 30, 2021		675,835		$	109.12		399,583		$	108.20

Restricted Stock

Performance Units

Shares

Weighted
Average Grant-
Date Fair Value

Shares

Weighted
Average Grant-
Date Fair Value

Outstanding at January 1, 2020

716,952

$
94.50

323,147

$
96.56

Granted

204,960

94.25

120,285

99.16

Vested

(241,714
)

71.82

(86,015
)

70.81

Forfeitures

(3,666
)

96.60

—

—

Outstanding at June 30, 2020

676,532

$
102.52

357,417

$
103.63

(a)

Upon vesting of the performance unit awards, PCA issued 58,083 shares, which includes 5,013 shares for dividends accrued during the vesting period.

Compensation Expense

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Restricted stock	$	5.6		$	10.8		$	13.6		$	15.7		$	5.9		$	5.6		$	14.5		$	13.6
Performance units		2.1			0.9			4.2			2.9			2.5			2.1			5.6			4.2
Total share-based compensation expense		7.7			11.7			17.8			18.6			8.4			7.7			20.1			17.8
Income tax benefit		(1.9	)		(3.0	)		(4.5	)		(4.7	)		(2.1	)		(1.9	)		(5.1	)		(4.5	)
Share-based compensation expense, net of tax benefit	$	5.8		$	8.7		$	13.3		$	13.9		$	6.3		$	5.8		$	15.0		$	13.3

The fair value of restricted stock is determined based on the closing price of the Company’s 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 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 ~~2020~~2021 and ~~2019,~~2020, in terms of grant date value, ~~50%~~50% used TSR as the performance measure and ~~50%~~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 June 30, ~~2020~~2021 was as follows (dollars in millions):


	June 30, 2021
	Unrecognized Compensation Expense		Remaining Weighted Average Recognition Period (in years)
Restricted stock	$	34.5		2.8
Performance units		24.5		2.5
Total unrecognized share-based compensation expense	$	59.0		2.7

June 30, 2020

Unrecognized
Compensation
Expense

Remaining
Weighted Average
Recognition
Period (in years)

Restricted stock

$
32.6

3.1

Performance units

22.9

2.6

Total unrecognized share-based compensation expense

$
55.5

2.9

During the six months ended June 30, ~~2020,~~2021, we paid ~~$149.7~~$189.8 million of dividends to shareholders. On May ~~5, 2020,~~4, 2021, PCA’s Board of Directors declared a regular quarterly cash dividend of ~~$0.79~~$1.00 per share of common stock, which was paid on July 15, ~~2020~~2021 to shareholders of record as of June 15, ~~2020.~~2021. The dividend payment was $95.0 million.~~$74.9 million.~~

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

The Company did 0t0t repurchase any shares of its common stock under this authority during the three and six months ended June 30, ~~2020.~~2021. At June 30, ~~2020, $193.0~~2021, $193.0 million of the authorized amount remained available for repurchase of the Company’s common stock.

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


	Foreign Currency Translation Adjustments			Unrealized Loss on Foreign Exchange Contracts			Unrealized Loss on Marketable Debt Securities			Unfunded Employee Benefit Obligations			Total
Balance at January 1, 2021	$	(0.4	)	$	(0.2	)	$	0.3		$	(144.2	)	$	(144.5	)
Other comprehensive income before reclassifications, net of tax		0			0			(0.2	)		0			(0.2	)
Amounts reclassified from AOCI, net of tax		0			0			0			5.0			5.0
Balance at June 30, 2021	$	(0.4	)	$	(0.2	)	$	0.1		$	(139.2	)	$	(139.7	)

Foreign
Currency
Translation
Adjustments

Unrealized Loss
on Foreign
Exchange
Contracts

Unrealized Loss
on Marketable
Debt Securities

Unfunded
Employee
Benefit
Obligations

Total

Balance at January 1, 2020

$
(0.4
)

$
(0.2
)

$
—

$
(158.9
)

$
(159.5
)
Other comprehensive income before reclassifications,
net of tax

—

0.7

—

0.7

Amounts reclassified from AOCI, net of tax

—

—

—

5.4

5.4

Balance at June 30, 2020

$
(0.4
)

$
(0.2
)

$
0.7

$
(153.5
)

$
(153.4
)

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 June 30,

Six Months Ended June 30,

Details about AOCI Components

2020

2019

2020

2019

Unrealized loss on treasury locks, net (a)

$
—

$
(1.3
)

$
—

$
(2.6
)

See (a) below

—

0.3

—

0.7

Tax benefit

$
—

$
(1.0
)

$
—

$
(1.9
)

Net of tax

Unfunded employee benefit obligations (b)

Amortization of prior service costs

$
(1.0
)

$
(1.5
)

$
(2.0
)

$
(3.0
)

See (b) below
Amortization of actuarial losses

(2.6
)

(1.6
)

(5.2
)

(3.3
)

See (b) below

(3.6
)

(3.1
)

(7.2
)

(6.3
)

Total before tax

0.9

0.8

1.8

1.6

Tax benefit

$
(2.7
)

$
(2.3
)

$
(5.4
)

$
(4.7
)

Net of tax

Our Paper segment has 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 5%4% and 7%5% of our total Company sales revenue for ~~both~~ the six month periods ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and approximately ~~44%~~47% and ~~51%~~44% of our Paper segment sales revenue for both of those periods, respectively. For full year ~~2019,~~2020, sales to Office Depot represented ~~50%~~45% of our Paper segment sales. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$34.0~~$37.9 million and ~~$76.2~~$39.6 million of accounts receivable due from Office Depot, respectively, which represents 4%approximately 4% and 9%5% of our total Company accounts receivable, respectively.

17. Transactions With Related Parties

~~17.~~

~~Transactions With Related Parties~~

Louisiana Timber Procurement Company, L.L.C. (LTP) is a variable-interest entity that is ~~50%~~50% owned by PCA and ~~50%~~50% owned by Boise Cascade Company (Boise Cascade). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of PCA and Boise Cascade in Louisiana. PCA is the primary beneficiary of LTP and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements in our Corporate and Other segment. The carrying amounts of LTP's assets and liabilities (which relate primarily to non-inventory working capital items) on our Consolidated Balance Sheets were ~~$5.0~~ $3.8million at June 30, ~~2020~~2021 and ~~$3.9~~$2.5 million at December 31, ~~2019.~~2020. During the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recorded ~~$13.8~~ $20.7million and ~~$21.4~~$13.8 million, respectively, and during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recorded ~~$36.4~~$41.0 million and ~~$41.4~~$36.4 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 June 30, ~~2020~~2021 and ~~2019,~~2020, fiber purchases from related parties were ~~$2.5~~$3.4 million and ~~$4.4~~$2.5 million, respectively. Fiber purchases from related parties were ~~$6.7~~$6.7 million ~~and $8.8 million, respectively, during~~for both the six months ended June 30, ~~2020~~2021 and ~~2019.~~2020. 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.

18. Segment Information

~~18.~~

~~Segment Information~~

We report our business in 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.

Each segment’s profits and losses are measured on operating profits before interest expense, net, non-operating pension ~~expense,~~income, and income taxes. For 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 June 30, 2020	Trade		Intersegment			Total			Operating Income (Loss)
													Sales, net
Three Months Ended June 30, 2021													Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	1,401.8	$	8.1		$	1,409.9		$	197.6		(a)	$	1,714.5	$	4.0		$	1,718.5		$	317.2		(a)
Paper		123.3		—			123.3			(61.4	)	(a)(b)		142.3		0			142.3			2.6		(a)
Corporate and Other		16.5		34.0			50.5			(20.1	)			23.1		32.0			55.1			(25.2	)	(a)
Intersegment eliminations		—		(42.1	)		(42.1	)		—				0		(36.0	)		(36.0	)		0
	$	1,541.6	$	—		$	1,541.6			116.1			$	1,879.9	$	—		$	1,879.9			294.6
Non-operating pension income										0.6												5.0
Interest expense, net										(25.1	)											(24.9	)
Income before taxes									$	91.6											$	274.7

	Sales, net
Three Months Ended June 30, 2019	Trade		Intersegment			Total			Operating Income (Loss)
												Sales, net
Three Months Ended June 30, 2020												Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	1,497.8	$	6.8		$	1,504.6		$	263.9		$	1,401.8	$	8.1		$	1,409.9		$	197.6		(b)
Paper		237.8		—			237.8			38.8			123.3		0			123.3			(61.4	)	(b)(c)
Corporate and Other		24.3		31.5			55.8			(22.3	)		16.5		34.0			50.5			(20.1	)
Intersegment eliminations		—		(38.3	)		(38.3	)		—			0		(42.1	)		(42.1	)		0
	$	1,759.9	$	—		$	1,759.9			280.4		$	1,541.6	$	—		$	1,541.6			116.1
Non-operating pension expense										(2.0	)
Non-operating pension income																					0.6
Interest expense, net										(22.4	)										(25.1	)
Income before taxes									$	256.0										$	91.6


	Sales, net
Six Months Ended June 30, 2021	Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	3,334.3	$	7.8		$	3,342.1		$	575.1		(a)
Paper		306.7		0.1			306.8			11.3		(a)
Corporate and Other		46.0		64.5			110.5			(53.5	)	(a)
Intersegment eliminations		0		(72.4	)		(72.4	)		0
	$	3,687.0	$	—		$	3,687.0			532.9
Non-operating pension income										9.8
Interest expense, net										(48.4	)
Income before taxes									$	494.3


	Sales, net
Six Months Ended June 30, 2020	Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	2,867.2	$	10.2		$	2,877.4		$	397.5		(b)
Paper		340.7		0			340.7			(29.0	)	(b)(c)
Corporate and Other		42.4		68.3			110.7			(43.3	)
Intersegment eliminations		0		(78.5	)		(78.5	)		0
	$	3,250.3	$	—		$	3,250.3			325.2
Non-operating pension income										1.1
Interest expense, net										(44.6	)
Income before taxes									$	281.7

Sales, net

Six Months Ended June 30, 2020

Trade

Intersegment

Total

Operating Income (Loss)

Packaging

$
2,867.2

$
10.2

$
2,877.4

$
397.5

(a)
Paper

340.7

—

340.7

(29.0
)
(a)(b)
Corporate and Other

42.4

68.3

110.7

(43.3
)

Intersegment eliminations

—

(78.5
)

(78.5
)

—

$
3,250.3

$
—

$
3,250.3

325.2

Non-operating pension income

1.1

Interest expense, net

(44.6
)

Income before taxes

$
281.7

Sales, net

Six Months Ended June 30, 2019

Trade

Intersegment

Total

Operating Income (Loss)

Packaging

$
2,968.6

$
13.6

$
2,982.2

$
513.4

(c)
Paper

477.5

—

477.5

84.4

(c)
Corporate and Other

47.5

65.0

112.5

(42.0
)

Intersegment eliminations

—

(78.6
)

(78.6
)

—

$
3,493.6

$
—

$
3,493.6

555.8

Non-operating pension expense

(4.1
)

Interest expense, net

(46.4
)

Income before taxes

$
505.3


(a)	The three and six months ended June 30, 2021 include the following:
	1.	$4.7 million and $2.6 million, respectively, of income primarily consisting of an adjustment of the required asset retirement obligation related to the 2020 closure of the San Lorenzo, California facility, a gain on sale of transportation assets, and insurance proceeds received for a natural disaster at one of the corrugated products facilities, partially offset by closure costs related to corrugated products facilities.
	2.	$3.8 million and $4.9 million, respectively, of 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.

(b)	The three and six months ended June 30, 2020 include the following:
	1. ~~$20.4~~	$20.4 million and ~~$20.8~~$20.8 million of charges, respectively, consisting of closure costs related to corrugated products facilities, substantially all of which relates to the ~~previously announced~~ closure of the San Lorenzo, California facility during the second quarter of 2020, partially offset by income related to the sale of a corrugated products facility.
	2. ~~$6.1~~	$6.1 million and ~~$6.9~~$6.9 million, respectively, of incremental, out-of-pocket costs related to COVID-19, including supplies, cleaning and sick pay. Beginning in July 2020, all corresponding COVID-19 related expenses were included in normalized costs.

~~(b)~~
(c)	During the second quarter of 2020, with the exacerbated deterioration in uncoated freesheet market conditions and the estimated impact on our Paper reporting unit arising from the COVID-19 pandemic, as well as projected future results of operations, we identified a triggering event indicating possible impairment of goodwill within our Paper reporting unit. The Company performed an interim quantitative impairment analysis as of May 31, 2020, and, based on the evaluation performed, we determined that goodwill was fully impaired for the Paper reporting unit and recognized a non-cash impairment charge of ~~$55.2~~$55.2 million. See Note 9, Goodwill and Intangible Assets, for additional information.

19. Commitments, Guarantees, Indemnifications and Legal Proceedings

~~(c)~~

The six months ended June 30, 2019 include $0.6 million of charges related to the 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 produce virgin kraft linerboard.

~~19.~~

~~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 ~~11,~~10, Debt, and Note ~~21,~~20, 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 ~~2019~~2020 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 June 30, ~~2020,~~2021, 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 other allegedly injured parties, alleging negligence on the part of the Company and claiming compensatory and punitive damages. The Company is vigorously defending these lawsuits. The Company believes that these suits are covered by its liability insurance policies, subject to an aggregate ~~$1.0~~$1.0 million deductible, which has been satisfied in full as a result of settlement of various lawsuits and fees and expenses incurred by the Company. ~~All~~Cases involving nine plaintiffs are pending in the U.S. District Court for the Middle District of Louisiana and one case remains pending in state court in Alabama. One case previously dismissed by the federal district court 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 state court are in the early stages. Accordingly, the Company is unable to estimate a range of reasonable possible losses at this time.

The Company has 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 (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~~$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 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.

Environmental Matters

On August 8, 2019, the EPA issued a notice of violation (NOV) alleging violations of the Clean Air Act, resulting from an inspection of our Wallula, Washington mill in September 2018. PCA denies the violations set forth in the NOV and has requested that the EPA’s Office of Air Quality Planning and Standards provide an applicability determination to clarify that the relevant operations of PCA have not violated the regulations at issue in the NOV. The EPA denied our request in 2020. We intend to vigorously defend any enforcement action and, on July 27, 2020, filed a petition with the EPA to reconsider its denial of our applicability determination and filed petitions in U.S. federal ~~district~~ court to review the agency’s denial of our applicability determination as well as the rule at issue. While we cannot predict with certainty the ultimate resolution of this matter, we believe that we have a meritorious position that our operations have not violated the Clean Air Act, that we have taken appropriate action to address the matters raised by the EPA in the NOV, and that this matter will not result in a material adverse effect on our financial condition, results of operations, or cash flows.

Legal Proceedings

We are also a party to various legal actions arising in the ordinary course of our business. These legal actions include commercial liability claims, premises liability claims, 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.

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 ~~2019~~2020 Annual Report on Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission (SEC). We do not assume any obligation to update any forward-looking statement. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q. Please see “Forward Looking Statements” elsewhere in this Item 2.

PCA is the third largest producer of containerboard products and ~~the third largest~~a leading producer of uncoated freesheet paper in North America. We operate ~~six containerboard mills, two paper~~eight mills and 9389 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 uncoated freesheet 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 ~~2019~~2020 Annual Report on Form 10-K.

Second quarter net sales were $1.88 billion in 2021 and $1.54 billion in ~~2020 and $1.76 billion in 2019.~~2020. We reported ~~$57~~$207 million of net income, or ~~$0.59~~$2.17 per diluted share, during the second quarter of ~~2020,~~2021, compared to ~~$194~~$57 million, or ~~$2.04~~$0.59 per diluted share, during the same period in ~~2019.~~2020. Net income included less than $1 million of income for special items in the second quarter of 2021, compared to $75 million of expense for special items in ~~the second quarter of~~ 2020 ~~compared to no income or expense for special items in 2019~~ (discussed below). Special items primarily included the non-cash goodwill impairment charge as described in Note 9, Goodwill and Intangible Assets, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this Form 10-Q, charges related to the closure of the San Lorenzo, California corrugated products facility, and incremental costs to address the COVID-19 pandemic. Excluding special items, net income was ~~$132~~$207 million, or ~~$1.38~~$2.17 per diluted share, during the second quarter of 2021, compared to $132 million, or $1.38 per diluted share, in the second quarter of 2020. The ~~decrease~~increase in net income was driven primarily by ~~lower~~higher prices and mix and volume in our Packaging ~~and Paper segments, lower volumes~~segment, higher volume in our Paper segment, and ~~higher depreciation~~lower non-operating pension expense. These items were partially offset by ~~lower~~higher operating costs, ~~lower~~higher annual outage expenses, ~~lower~~higher freight and logistics expenses, higher converting costs, and lower ~~freight expense,~~prices and ~~other costs. PCA’s facilities have been permitted to continue to operate as “essential operations” during the COVID-19 pandemic. PCA did not experience significant disruptions~~mix in ~~its operations as a result of the pandemic and has maintained adequate availability of its workforce and supply of raw materials and services.~~our Paper segment. 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 ~~expense,~~income (expense), interest, 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 $317 million in the second quarter of 2021, compared to $198 million in the second quarter of ~~2020, compared to $264 million in the second quarter of 2019.~~2020. Packaging segment EBITDA excluding special items was $409 million in the second quarter of 2021 compared to $313 million in the second quarter of ~~2020 compared to $349 million in the second quarter of 2019.~~2020. The ~~decrease~~increase in EBITDA excluding special items was due primarily to ~~lower~~higher prices and mix and higher sales and production volumes, partially offset by ~~lower~~higher operating and converting costs, ~~lower~~higher annual outage ~~expenses,~~expense, as we successfully executed planned maintenance outages at four of our mills, and ~~lower~~higher freight and logistic expenses.~~Demand for~~ We experienced strong demand throughout the quarter, driving record volumes in terms of box shipments, but we also experienced cost inflation across our ~~Packaging~~business. Our sales prices were higher as we implemented price increases on containerboard and corrugated products ~~remained strong~~that we previously communicated to our customers. We are managing through challenges brought on by limited availability of transportation resources, which has contributed to an increase in our freight and logistics costs. We continue to deploy capital to improve productivity and efficiencies at our facilities and believe that our success in doing so is helping us to manage cost inflation and better serve our customers.

Paper segment income from operations was $3 million in the second ~~quarter. We cannot predict the future impact~~quarter of ~~the pandemic on our packaging operations, economic and operating conditions affecting our packaging business or demand for our packaging products.~~

~~Paper segment~~2021, compared to a loss ~~from operations was~~of $61 million in the second quarter of ~~2020, compared to income of $39 million in the second quarter of 2019.~~2020. Paper segment EBITDA excluding special items was $12 million in the second quarter of 2021, compared to $5 million in the second quarter of 2020. The increase in EBITDA excluding special items was due to higher sales and production volumes, lower operating costs and lower annual outage costs, partially offset by lower prices and mix, and higher freight and logistic expenses.

Sales and production volumes in the Paper segment significantly declined after the first quarter of 2020 ~~compared~~as the COVID-19 pandemic caused lower demand for our paper products. During the second and third quarters of 2020, in response to ~~$48~~such lower demand, we temporary idled both machines at our Jackson Alabama mill. During the fourth quarter of 2020, in order to meet strong packaging demand and maintain appropriate inventory levels in the packaging segment, we temporarily began producing linerboard on the number 3 machine at the mill and we have produced linerboard on the machine since that time. In the first quarter of 2021, we announced the discontinuation of production of uncoated freesheet paper grades on the machine and our plans to permanently convert the machine to produce linerboard in a phased approach over the next three years. Demand for paper products has improved since the beginning of the pandemic, but our sales and production in the paper segment will remain below pre-pandemic levels as we will no longer be producing paper products on the machine. Before October 2020, operating results for the Jackson mill were included in the Paper segment. Beginning in October 2020, operating results for the Jackson mill are included in both the Packaging and Paper segments

Packaging segment income from operations was $575 million in the ~~second quarter~~first six months of ~~2019.~~2021, compared to $398 million in the same period in 2020. Packaging segment EBITDA excluding special items was $761 million in the first six months of 2021 compared to $602 million in the first six

months of 2020. The increase in EBITDA excluding special items was due primarily to higher prices and mix and higher sales and production volumes, partially offset by higher operating and converting costs, higher freight and logistic expenses, and higher annual outage expense.

Paper segment income from operations was $11 million in the first six months of 2021, compared to a loss of $29 million in the first six months of 2020. Paper segment EBITDA excluding special items was $27 million in the first six months of 2021, compared to $47 million in the same period in 2020. The decrease in EBITDA excluding special items was due to lower sales and production volumes, ~~and~~ lower prices and mix, and higher freight and logistic expenses, partially offset by lower operating costs and lower annual outage ~~expenses.~~expenseReported results in our Paper segment included the goodwill impairment charge described above. Sales were 48% lower than last year, as demand for our paper products has been affected by nationwide responses to address the COVID-19 pandemic, including school and office closures. Operations at our Jackson, Alabama paper mill were temporarily idled in late April and are expected to remain idled at least through the end of August.

Packaging segment income from operations was $398 million in the first six months of 2020, compared to $513 million in the same period in 2019. Packaging segment EBITDA excluding special items was $602 million in the first six months of 2020 compared to $682 million in the first six months of 2019. The decrease in EBITDA excluding special items was due primarily to lower prices and mix, partially offset by higher sales and production volumes, lower operating and converting costs, lower annual outage expense, and lower freight and logistic expenses.

Paper segment loss from operations was $29 million in the first six months of 2020, compared to income of $84 million in the first six months of 2019. Paper segment EBITDA excluding special items was $47 million in the first six months of 2020, compared to $103 million in the same

period in 2019. The decrease in EBITDA excluding special items was due to lower sales and production volumes and lower prices and mix, partially offset by lower operating costs and lower annual outage expenses..

A reconciliation of reported earnings per diluted share to earnings per diluted share, excluding special items, for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 are as follows:

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.

Trade publications reported North American industry-wide corrugated products shipments per work day were ~~down 1.4%~~up 8.2% during the second quarter of ~~2020~~2021 compared to the same quarter of ~~2019.~~2020. Reported industry containerboard production increased ~~3.0%~~8.3% compared to the second quarter of ~~2019.~~2020. Reported industry containerboard inventories at the end of the second quarter of ~~2020~~2021 were approximately 2.5 million tons, ~~flat~~down 2.3% compared to the same period in ~~2019.~~2020. Reported containerboard export shipments were ~~up 25.0%~~down 24.7% compared to the second quarter of ~~2019.~~2020. Prices reported by trade publications ~~decreased~~increased by ~~$10~~$20 per ton for linerboard and ~~$15~~$30 per ton for corrugating medium in ~~January 2020; there were no additional price changes reported~~March 2021 and a further $40 per ton for linerboard and corrugating medium in ~~the second quarter of 2020.~~April 2021.

Trade publications reported North American uncoated freesheet paper shipments were ~~down 32.3%~~up 19.1% in the second quarter of ~~2020,~~2021, compared to the same quarter of ~~2019.~~2020. Average prices reported by a trade publication for cut size office paperswere ~~lower~~higher by ~~$17~~$63 per ton, or ~~1.5%~~5.9%, in the second quarter of ~~2020~~2021, compared to the first quarter of ~~2020,~~2021, and ~~lower~~higher by ~~$65~~$52 per ton, or ~~5.7%~~4.8%, compared to the second quarter of ~~2019.~~2020. Average prices reported by a trade publication for cut size office papers increased $20 per ton in March, $40 per ton in April, and $30 per ton in June 2021.

Looking ahead to the third quarter, in our Packaging segment we expect continued strong demand for containerboard and corrugated products with one additional day for box shipments. Paper segment volume should be relatively flat, primarily due to the scheduled maintenance outage at the Jackson Mill. We will also continue to implement our previously announced price increases in both our Packaging and Paper segments. Our annual outage costs will be lower with one outage in the third quarter versus four mill outages in the second quarter. Inflation associated with most of our operating costs as well as freight and logistics expenses is expected to continue. Energy costs will also be impacted due to higher seasonal usage, and wood costs in our southern mills will be higher due to wet weather, low inventory and high demand for fiber. Considering these items, we expect third quarter earnings to be higher than second quarter earnings.

Three Months Ended June 30, ~~2020,~~2021, compared to Three Months Ended June 30, ~~2019~~2020

The historical results of operations of PCA for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 are set forth below (dollars in millions):

Three Months Ended

June 30,

2020

2019

Change

Packaging

$
1,409.9

$
1,504.6

$
(94.7
)
Paper

123.3

237.8

(114.5
)
Corporate and Other

50.5

55.8

(5.3
)
Intersegment eliminations

(42.1
)

(38.3
)

(3.8
)
Net sales

$
1,541.6

$
1,759.9

$
(218.3
)

Packaging

$
197.6

$
263.9

$
(66.3
)
Paper

(61.4
)

38.8

(100.2
)
Corporate and Other

(20.1
)

(22.3
)

2.2

Income from operations

$
116.1

$
280.4

$
(164.3
)
Non-operating pension income (expense)

0.6

(2.0
)

2.6

Interest expense, net

(25.1
)

(22.4
)

(2.7
)
Income before taxes

91.6

256.0

(164.4
)
Income tax provision

(34.9
)

(62.4
)

27.5

Net income

$
56.7

$
193.6

$
(136.9
)
Non-GAAP Measures (a)

Net income excluding special items

$
131.8

$
193.6

$
(61.8
)
Consolidated EBITDA

224.4

376.2

(151.8
)
Consolidated EBITDA excluding special items

299.0

376.2

(77.2
)
Packaging EBITDA

293.6

348.6

(55.0
)
Packaging EBITDA excluding special items

312.5

348.6

(36.1
)
Paper EBITDA

(51.0
)

48.2

(99.2
)
Paper EBITDA excluding special items

4.7

48.2

(43.5
)
(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 ~~decreased $218~~increased $338 million, or ~~12.4%~~21.9%, to ~~$1,542~~$1,880 million during the three months ended June 30, ~~2020,~~2021, compared to ~~$1,760~~$1,542 million during the same period in ~~2019.~~2020.

Packaging. Net sales ~~decreased $95~~increased $309 million, or ~~6.3%~~21.9%, to ~~$1,410~~$1,719 million, compared to ~~$1,505~~$1,410 million in the second quarter of ~~2019~~2020 due to ~~lower containerboard and corrugated products prices and mix ($97 million), partially offset by~~ higher containerboard and corrugated products volume ($2158 million) and higher prices and mix ($151 million). In the second quarter of ~~2020,~~2021, our domestic containerboard prices were ~~7.7% lower,~~14.6% higher, while export prices were ~~15.4% lower,~~29.1% higher, than the same period in ~~2019.~~2020. In the second quarter of ~~2020,~~2021, export and domestic containerboard outside shipments ~~decreased 7.1%~~increased 32.0% compared to the second quarter of ~~2019. Total~~2020. Our total and per day corrugated products shipments were up ~~1.2% with the same number of workdays~~9.6% compared to the same period in ~~2019.~~2020, driven by strong demand.

Paper. Net sales ~~during the three months ended June 30, 2020 decreased $115~~increased $19 million, or ~~48.1%~~15.4%, to ~~$123~~$142 million, compared to ~~$238~~$123 million in the second quarter of ~~2019,~~2020, due to ~~decreased~~increased volume ($~~109~~21 million) ~~and~~, partially offset by lower prices and mix ($62 million)~~, primarily related to~~. In the ~~COVID-19 pandemic.~~fourth quarter of 2020, the Jackson mill No. 3 machine began producing linerboard. The Jackson mill was idled for two months during the second quarter of 2020.

Gross profit ~~decreased $102~~increased $123 million during the three months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase was driven primarily by ~~lower~~higher prices and mix and volume in our Packaging segment, and ~~Paper segments, and lower volumes~~higher volume in our Paper segment. These items were partially offset by ~~lower~~higher operating costs, ~~lower~~higher annual outage expenses, ~~lower~~higher freight and logistics expenses, higher converting costs, and lower ~~freight expense,~~prices and ~~other~~mix in our Paper segment. In the three months ended June 30, 2021, gross profit included $2 million of special items for charges related to the Jackson mill conversion and facility closure costs. In the three months ended June 30, 2020, gross profit included $6 million of special items for incremental, out-of-pocket costs related to the COVID-19 pandemic ~~including supplies, cleaning and sick pay,~~ and $3 million of accelerated depreciation associated with the closure of our San Lorenzo, California facility. ~~There were no significant special items in the three months ended June 30, 2019.~~

Selling, general, and administrative expenses (“SG&A”) ~~decreased $7~~increased $10 million during the three months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase was primarily due to ~~lower travel~~higher employee salaries and ~~entertainment expenses~~fringes and ~~employee compensation and fringes.~~incentives.

During the three months ended June 30, 2020, with the exacerbated deterioration in uncoated freesheet market conditions and the estimated impact on our Paper reporting unit arising from the COVID-19 pandemic, as well as projected future results of operations, we identified a triggering event indicating possible impairment of goodwill within our Paper reporting unit. The Company performed an interim quantitative impairment analysis as of May 31, 2020, and, based on the evaluation performed, we determined that goodwill was fully impaired for the Paper reporting unit and recognized a non-cash impairment charge of $55 ~~million.~~million in the second quarter of 2020.

Other ~~expense,~~income (expense), net, for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 are set forth below (dollars in millions):

We discuss these items in more detail in Note 5, Other Expense, Net, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this Form 10-Q.

Income from operations ~~decreased $164~~increased $179 million, or ~~58.6%~~153.7%, during the three months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The second quarter of ~~2020~~2021 included $1 million of special items income primarily related to corrugated facility closures, net of costs from the Jackson mill conversion from uncoated freesheet paper to linerboard, compared to $82 million of special items expense for the Paper reporting unit goodwill impairment, facility closures (primarily relating to the closure of the San Lorenzo, California corrugated products facility), and incremental, out-of-pocket costs related to COVID-19 ~~compared to no special items~~ in the second quarter of ~~2019.~~ 2020.

Packaging.Packaging segment income from operations ~~decreased $66~~increased $120 million to ~~$198~~$317 million, compared to ~~$264~~$198 million during the three months ended June 30, ~~2019.~~2020. The ~~decrease~~increase related primarily to ~~lower~~higher containerboard and corrugated products prices and mix ($83128 million), higher sales and ~~higher depreciation expense~~production volumes ($497 million), partially offset by ~~lower~~higher operating and converting costs ($3586 million), ~~lower~~higher annual outage expenses ($26 million), higher freight expenses ($17 million), higher depreciation expense ($6 million), and ~~lower freight expenses ($5 million).~~other costs. Special items during the second quarter of ~~2020~~2021 included $3 million of income primarily related to corrugated facility closures, compared to $20 million of special items expense for facility closure costs and $6 million of incremental, out-of-pocket costs related to COVID-19 ~~compared to no special items in the Packaging segment~~ in the second quarter of ~~2019.~~2020.

Paper. Paper segment income from operations ~~decreased $100~~increased $64 million to $3 million, compared to a loss of $61 ~~million, compared to income of $39~~ million during the three months ended June 30, ~~2019.~~2020. The ~~decrease~~increase primarily related to ~~lower~~higher sales and production volumes ($504 million), lower ~~prices~~operating costs ($10 million), lower depreciation expense ($4 million), and ~~mix~~lower annual outage expenses ($62 million), partially offset by lower ~~operating costs~~prices and mix ($72 million)~~, lower annual outage~~ and higher freight expenses ($7 million). Special items during the second quarter of ~~2020~~2021 included $3 million of expense related to the Jackson mill conversion from uncoated freesheet paper to linerboard, compared to $55 million of expense related to the goodwill impairment and $1 million of incremental, out-of-pocket costs related to COVID-19 ~~compared to no special items in the Packaging segment~~ in the second quarter of ~~2019.~~2020.

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

Non-operating pension ~~expense decreased $3~~income increased $4 million during the three months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase in non-operating pension ~~expense~~income was primarily related to the favorable ~~2019~~2020 asset ~~performance, partially offset by assumption changes.~~performance.

Interest expense, net ~~increased $3 million during~~for the three months ended June 30, ~~2020,~~2021 was relatively flat when compared to the same period in ~~2019.~~2020. The slight increase in interest expense, net was primarily related to ~~higher earnings on deferred compensation balances in the second quarter of 2020,~~ lower interest income due to lower rates on invested cash balances in the second quarter of ~~2020, partially~~2021, almost completely offset by ~~no treasury lock amortization due to~~lower earnings on deferred compensation balances in the ~~write-off~~second quarter of ~~the remaining balances of treasury locks in connection with the Company’s debt refinancing completed in December 2019.~~2021.

During the three months ended June 30, ~~2020,~~2021, we recorded ~~$35~~$67 million of income tax expense, compared to ~~$62~~$35 million of expense during the three months ended June 30, ~~2019.~~2020. The effective tax rate for the three months ended June 30, 2021 and 2020 was 24.5% and ~~2019 was~~ 38.2% ~~and 24.4%~~, respectively. The ~~increase~~decrease in our effective tax rate was primarily due to the nondeductible goodwill impairment charge associated with our Paper reporting unit ~~slightly offset by the favorable impact of employee restricted stock and performance unit vests with higher excess tax benefits (ASU 2016-09)~~recognized during the three months ended June 30, 2020 ~~compared to~~with no corresponding charge during the three months ended June 30, ~~2019.~~2021.

Six Months Ended June 30, ~~2020,~~2021, compared to Six Months Ended June 30, ~~2019~~2020

The historical results of operations of PCA for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 are set forth below (dollars in millions):

Six Months Ended

June 30,

2020

2019

Change

Packaging

$
2,877.4

$
2,982.2

$
(104.8
)
Paper

340.7

477.5

(136.8
)
Corporate and Other

110.7

112.5

(1.8
)
Intersegment eliminations

(78.5
)

(78.6
)

0.1

Net sales

$
3,250.3

$
3,493.6

$
(243.3
)

Packaging

$
397.5

$
513.4

$
(115.9
)
Paper

(29.0
)

84.4

(113.4
)
Corporate and Other

(43.3
)

(42.0
)

(1.3
)
Income from operations

$
325.2

$
555.8

$
(230.6
)
Non-operating pension income (expense)

1.1

(4.1
)

5.2

Interest expense, net

(44.6
)

(46.4
)

1.8

Income before taxes

281.7

505.3

(223.6
)
Income tax provision

(83.4
)

(124.9
)

41.5

Net income

$
198.3

$
380.4

$
(182.1
)
Non-GAAP Measures (a)

Net income excluding special items

$
274.3

$
380.9

$
(106.6
)
Consolidated EBITDA

533.7

746.4

(212.7
)
Consolidated EBITDA excluding special items

609.5

746.8

(137.3
)
Packaging EBITDA

582.3

682.2

(99.9
)
Packaging EBITDA excluding special items

602.3

682.4

(80.1
)
Paper EBITDA

(9.1
)

102.9

(112.0
)
Paper EBITDA excluding special items

46.7

103.1

(56.4
)
(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 ~~decreased $243~~increased $437 million, or ~~7.0%~~13.4%, to ~~$3,250~~$3,687 million during the six months ended June 30, ~~2020,~~2021, compared to ~~$3,494~~$3,250 million during the same period in ~~2019.~~2020.

Packaging. Net sales ~~decreased $105~~increased $465 million, or ~~3.5%~~16.1%, to ~~$2,877~~$3,342 million, compared to ~~$2,982~~$2,877 million in the six months ended June 30, ~~2019,~~2020, due to ~~lower~~higher containerboard and corrugated products volume ($264 million) and higher containerboard and corrugated products prices and mix ($~~191 million), partially offset by higher containerboard and corrugated products volume ($86~~201 million). In the first six months of ~~2020,~~2021, our domestic containerboard prices were ~~7.8% lower,~~8.9% higher, while export prices were ~~20.5% lower,~~22.5% higher, than the same period in ~~2019.~~2020. In the first six months of ~~2020,~~2021, export and domestic containerboard outside shipments increased ~~2.7%~~21.7% compared to the first six months of ~~2019.~~2020. Total corrugated products shipments were up ~~3.4%~~8.1% with one ~~additional~~less workday, and up ~~2.6%~~9.0% per day compared to the same period in ~~2019.~~2020.

Paper. Net sales during the six months ended June 30, ~~2020~~2021 decreased ~~$137~~$34 million, or ~~28.6%~~10.0%, to ~~$341~~$307 million, compared to ~~$478~~$341 million in the six months ended June 30, ~~2019,~~2020, due to decreased volume ($~~126~~27 million) and lower prices and mix ($127 million), primarily related to the COVID-19 pandemic.

Gross profit ~~decreased $159~~increased $162 million during the six months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase was driven primarily by higher prices and mix and higher volumes in our Packaging segment, partially offset by lower volume and lower prices and mix in our ~~Packaging and Paper segments, lower volume in our~~ Paper segment, ~~partially offset by~~ higher ~~volumes in our Packaging segment, lower~~ operating and converting costs, ~~lower annual outage expense, and lower~~higher freight and logistic ~~expenses.~~expenses, and higher annual outage expense. In the six months

ended June 30, 2021, gross profit included $3 million of special items expense for the Jackson mill conversion and facility closure costs. In the six months ended June 30, 2020, gross profit included $7 millionof special items expense for incremental out-of-pocket costs related to the COVID-19 pandemic, including supplies, cleaning and sick pay, and $3 million of accelerated depreciation associated with the closure of our San Lorenzo, California facility. ~~There were no significant special items in the six months ended June 30, 2019.~~

Selling, general, and administrative expenses (“SG&A”) ~~decreased $2~~increased $9 million during the six months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase was primarily due to ~~lower~~higher employee compensation and ~~fringes and travel and entertainment expenses.~~fringes.

During the six months ended June 30, 2020, with the exacerbated deterioration in uncoated freesheet market conditions and the estimated impact on our Paper reporting unit arising from the COVID-19 pandemic, as well as projected future results of operations, we identified a triggering event indicating possible impairment of goodwill within our Paper reporting unit. The Company performed an interim quantitative impairment analysis as of May 31, 2020, and, based on the evaluation performed, we determined that goodwill was fully impaired for the Paper reporting unit and recognized a non-cash impairment charge of $55 ~~million.~~million in the second quarter of 2020.

Other ~~expense,~~income (expense), net, for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 are set forth below (dollars in millions):

Income from operations ~~decreased $231~~increased $208 million, or ~~41.5%~~63.9%, during the six months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The first six months of ~~2020~~2021 included $5 million of special items expense related to Jackson mill conversion costs, partially offset by $3 million of income related to facility closures, compared to $83 million of special items expense for Paper reporting unit goodwill impairment; incremental, out-of-pocket costs related to COVID-19; and facility closure costs ~~compared to less than $1 million of expense for special items related to Wallula Mill restructuring~~ in the same period in ~~2019.~~ 2020.

Packaging. Packaging segment income from operations ~~decreased $116~~increased $178 million to ~~$398~~$575 million during the first six months of ~~2020,~~2021, compared to the same period last year. The ~~decrease~~increase related primarily to ~~lower~~higher containerboard and corrugated products prices and mix ($~~164 million) and higher depreciation expense ($9 million), partially offset by lower operating and converting costs ($51~~170 million), higher sales and production volumes ($18154 million), ~~lower~~partially offset by higher operating and converting costs ($122 million), higher freight expenses ($26 million), higher annual outage expenses ($716 million), and ~~lower freight expenses~~higher depreciation expense ($79 million). Special items during the first six months of ~~2020~~2021 included $2 million of income related to facility closures and $1 million of costs related to the Jackson mill conversion, compared to $21 million of expense related to facility closure costs and $6 million of incremental, out-of-pocket costs related to COVID-19 ~~compared to an insignificant amount of special items in the Packaging segment~~ in the first six months of ~~2019.~~2020.

Paper. Paper segment income from operations ~~decreased $113~~increased $40 million to ~~a loss of $29~~$11 million, compared to the six months ended June 30, ~~2019.~~2020. The ~~decrease~~increase primarily related to lower operating costs ($29 million), lower annual outage expenses ($7 million), and lower depreciation expense ($8 million), partially offset by lower sales and production volumes ($5432 million), lower prices and mix ($126 million), and higher freight and other expenses ($~~5 million), partially offset by lower operating costs ($10 million) and lower annual outage expenses ($2~~17 million). Special items during the first six months of ~~2020~~2021 included $4 million of expense related to Jackson mill conversion costs, compared to $55 million of goodwill impairment and $1 million of incremental, out-of-pocket costs related to ~~COVID-19. There were an insignificant amount of special items in the Paper segment~~COVID-19 in the first six months of ~~2019.~~2020.

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

Non-operating pension ~~expense decreased $5~~income increased $9 million during the six months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase in non-operating pension ~~expense~~income was primarily related to the favorable ~~2019~~2020 asset ~~performance, partially offset by assumption changes.~~performance.

Interest expense, net ~~decreased $2~~increased $4 million during the six months ended June 30, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase in interest expense, net was primarily related to ~~no treasury lock amortization~~lower interest income due to ~~the write-off of the remaining~~lower rates on invested cash balances ~~of treasury locks~~ in ~~connection with the Company’s debt refinancing completed~~2021, partially offset by higher cash balances in ~~December 2019~~2021, and ~~lower~~higher earnings on deferred compensation balances in ~~2020, partially offset by higher interest rates on the notes issued in November 2019, net of interest on the notes redeemed in December 2019.~~2021.

During the six months ended June 30, ~~2020,~~2021, we recorded ~~$83~~$121 million of income tax expense, compared to ~~$125~~$83 million of expense during the six months ended June 30, ~~2019.~~2020. The effective tax rate for the six months ended June 30, 2021 and 2020 was 24.4% and ~~2019 was~~ 29.6% ~~and 24.7%~~, respectively.The ~~increase~~decrease in our effective tax rate was primarily due to the nondeductible goodwill impairment charge associated with our Paper reporting unit ~~slightly offset by the favorable impact of employee restricted stock and performance unit vests with higher excess tax benefits (ASU 2016-09)~~recognized during the six months ended June 30, 2020 ~~compared to~~with no corresponding charge during the six months ended June 30, ~~2019.~~2021.

Our primary sources of liquidity are net cash provided by operating activities, cash on hand, and available borrowing capacity under our revolving credit facility. At June 30, ~~2020,~~2021, we had ~~$853~~$972 million of cash and cash equivalents, ~~$123~~$152 millionof marketable debt securities, and $326 million ~~million~~of unused borrowing capacity under the revolving credit facility, net of letters of credit. Currently, our primary uses of cash are for operations, capital expenditures, ~~acquisitions,~~common stock dividends, debt service, ~~common stock dividends,~~acquisitions, and repurchases of common 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, refinance, extend, or replace such debt or credit 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):

Our operating cash flow is primarily driven by our earnings and changes in operating assets and liabilities, such as accounts receivable, inventories, accounts payable and other accrued liabilities, as well as 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 six months ended June 30, ~~2020,~~2021, net cash provided by operating activities was ~~$463~~$420 million, compared to ~~$538~~$464 million in the same period in ~~2019,~~ 2020,a decrease of ~~$75~~$44 million. Cash from operations excluding changes in cash used for operating assets and liabilities ~~decreased $127~~increased $109 million primarily due to ~~lower~~higher income from operations in 2021 as discussed above. Cash ~~increased~~decreased by ~~$52~~$152 million due to changes in operating assets and liabilities, primarily due to the following:

These ~~favorable changes~~items were partially offset by an increase in accounts payable for the ~~following:~~Paper segment primarily due to the impact of the curtailment of the Jackson mill in the second quarter of 2020.

We used ~~$129~~$220 million for investing activities during the six months ended June 30, ~~2020~~2021 compared to ~~$173~~$129 million during the same period in ~~2019.~~2020. We spent ~~$151~~$217 million for internal capital investments during the six months ended June 30, ~~2020,~~2021, compared to ~~$171~~$151 million during the same period in ~~2019. We also received~~2020. In the six months ended June 30, 2021, we used $5 million of cash-on-hand to purchase available-for-sale (AFS) marketable debt securities, net of redemptions, compared to $23 million ~~from~~in redemptions of marketable debt securities, net of purchases, ~~during~~in the ~~six months ended June 30,~~same period in 2020.

We expect capital investments in ~~2020~~2021 to be between ~~$400~~$650 million and ~~$425~~$675 million, ~~not~~ including ~~acquisitions.~~capital spending related to the conversion of the No. 3 paper machine 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 environmental regulations will be about ~~$10~~$20 million in ~~2020.~~2021. Our estimated environmental expenditures could vary significantly depending upon the enactment of new environmental laws and

emissions and industrial boilers. 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 ~~2019~~2020 Annual Report on Form 10-K.

During the six months ended June 30, ~~2020,~~2021, net cash used for financing activities was ~~$161~~$202 million, compared to ~~$158~~$161 million during the same period in ~~2019.~~2020. In the first six months of ~~2020~~2021, we paid ~~$150~~$190 million of dividends compared ~~with $149~~to $150 million of dividends paid during the first six months of ~~2019.~~2020. In addition, we paid $1 million of debt issuance costs related to the New Revolving Credit Agreement that was entered into on June 8, 2021.

~~For~~In addition to the items discussed in Note 11, Debt, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Form 10-Q, for more information about our debt, see Note ~~11,~~10, Debt, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2019~~2020 Annual Report on Form 10-K.

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 ~~2019~~2020 Annual Report on Form 10-K.

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 six months ended June 30, ~~2020~~2021 and ~~2019~~2020 follow (dollars in millions):

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


	Three Months Ended					Six Months Ended					Three Months Ended						Six Months Ended
	June 30,					June 30,					June 30,						June 30,
	2020			2019		2020			2019		2021			2020			2021			2020
Net income	$	56.7		$	193.6	$	198.3		$	380.4	$	207.3		$	56.7		$	373.8		$	198.3
Non-operating pension (income) expense		(0.6	)		2.0		(1.1	)		4.1
Non-operating pension income												(5.0	)		(0.6	)		(9.8	)		(1.1	)
Interest expense, net		25.1			22.4		44.6			46.4		24.9			25.1			48.4			44.6
Income tax provision		34.9			62.4		83.4			124.9		67.4			34.9			120.5			83.4
Depreciation, amortization, and depletion		108.3			95.8		208.5			190.6		104.7			108.3			205.5			208.5
EBITDA	$	224.4		$	376.2	$	533.7		$	746.4	$	399.3		$	224.4		$	738.4		$	533.7

Special items:
Facilities closure and other costs (income)												(5.0	)		13.3			(2.9	)		13.7
Jackson mill conversion												2.5			—			3.1			—
Goodwill impairment		55.2			—		55.2			—		—			55.2			—			55.2
Facilities closure and other costs		13.3			—		13.7			—
Incremental costs for COVID-19		6.1			—		6.9			—		—			6.1			—			6.9
Wallula mill restructuring		—			—		—			0.4
Total special items		74.6			—		75.8			0.4		(2.5	)		74.6			0.2			75.8
EBITDA excluding special items	$	299.0		$	376.2	$	609.5		$	746.8	$	396.8		$	299.0		$	738.6		$	609.5

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


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Packaging
Segment income	$	197.6		$	263.9		$	397.5		$	513.4		$	317.2		$	197.6		$	575.1		$	397.5
Depreciation, amortization, and depletion		96.0			84.7			184.8			168.8			94.9			96.0			187.0			184.8
EBITDA		293.6			348.6			582.3			682.2			412.1			293.6			762.1			582.3
Facilities closure and other costs		13.3			—			13.7			—
Facilities closure and other costs (income)														(4.2	)		13.3			(2.1	)		13.7
Jackson mill conversion														0.9			—			0.9			—
Incremental costs for COVID-19		5.6			—			6.3			—			—			5.6			—			6.3
Wallula mill restructuring		—			—			—			0.2
EBITDA excluding special items	$	312.5		$	348.6		$	602.3		$	682.4		$	408.8		$	312.5		$	760.9		$	602.3

Paper
Segment income	$	(61.4	)	$	38.8		$	(29.0	)	$	84.4
Segment income (loss)													$	2.6		$	(61.4	)	$	11.3		$	(29.0	)
Depreciation, amortization, and depletion		10.4			9.4			19.9			18.5			7.5			10.4			14.0			19.9
EBITDA		(51.0	)		48.2			(9.1	)		102.9			10.1			(51.0	)		25.3			(9.1	)
Jackson mill conversion														1.5			—			2.1			—
Goodwill impairment		55.2			—			55.2			—			—			55.2			—			55.2
Incremental costs for COVID-19		0.5			—			0.6			—			—			0.5			—			0.6
Wallula mill restructuring		—			—			—			0.2
EBITDA excluding special items	$	4.7		$	48.2		$	46.7		$	103.1		$	11.6		$	4.7		$	27.4		$	46.7

Corporate and Other
Segment loss	$	(20.1	)	$	(22.3	)	$	(43.3	)	$	(42.0	)	$	(25.2	)	$	(20.1	)	$	(53.5	)	$	(43.3	)
Depreciation, amortization, and depletion		1.9			1.7			3.8			3.3			2.3			1.9			4.5			3.8
EBITDA		(18.2	)		(20.6	)		(39.5	)		(38.7	)		(22.9	)		(18.2	)		(49.0	)		(39.5	)
Facilities closure and other income														(0.8	)		—			(0.8	)		—
Jackson mill conversion														0.1			—			0.1			—
EBITDA excluding special items	$	(18.2	)	$	(20.6	)	$	(39.5	)	$	(38.7	)	$	(23.6	)	$	(18.2	)	$	(49.7	)	$	(39.5	)

EBITDA	$	224.4		$	376.2		$	533.7		$	746.4		$	399.3		$	224.4		$	738.4		$	533.7

EBITDA excluding special items	$	299.0		$	376.2		$	609.5		$	746.8		$	396.8		$	299.0		$	738.6		$	609.5

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 June 30, ~~2020.~~2021. For a discussion of derivatives and hedging activities, see Note ~~16,~~15, Derivative Instruments and Hedging Activities, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2019~~2020 Annual Report on Form 10-K.

At June 30, ~~2020,~~2021, interest rates on 100% of PCA’s outstanding debt are fixed.

The Company does not have any off-balance sheet arrangements as of June 30, ~~2020.~~2021.

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 ~~2019~~2020 Annual Report on Form 10-K.

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 ~~2019~~2020 Annual Report on Form 10-K a 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 six months of ~~2020.~~2021.

For a listing of our new and recently adopted accounting standards, see Note 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.

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:

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, ~~2019, as supplemented by Part II, Item 1A. Risk Factors included in our Quarterly Report on Form 10-Q for the first quarter of~~ 2020.

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.

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 June 30, ~~2020.~~2021. 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 June 30, ~~2020.~~2021.

There have been no 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 June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The disclosure set forth under the caption "Legal Proceedings" in Note 19, 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.

~~Except as disclosed in “Part II,~~ Item ~~IA. Risk Factors” of our Quarterly Report on Form 10-Q for the first quarter of 2020, which disclosure is incorporated by reference herein, there~~1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in “Part I, Item IA. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

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 June 30, ~~2020:~~2021:


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

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


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


	June 30,			December 31,			June 30,			December 31,
	2020			2019			2021			2020
Land and land improvements	$	177.5		$	177.5		$	186.6		$	179.6
Buildings		845.1			837.4			896.8			858.5
Machinery and equipment		5,793.7			5,727.4			6,027.9			5,826.6
Construction in progress		214.5			174.0			269.5			360.0
Other		86.2			81.5			92.6			88.8
Property, plant and equipment, at cost		7,117.0			6,997.8			7,473.4			7,313.5
Less accumulated depreciation		(4,002.3	)		(3,846.1	)		(4,232.9	)		(4,120.1	)
Property, plant, and equipment, net	$	3,114.7		$	3,151.7		$	3,240.5		$	3,193.4


☒	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


Large accelerated filer	☒	Accelerated filer	☐	Emerging growth company	☐

Non-accelerated filer	☐	Smaller reporting company	☐


	PART I

Item 1.	Financial Statements	1

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

	PART II

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosures	30

Item 5.	Other Information	30

Item 6.	Exhibits	31


	Pension Plans												Pension Plans
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Service cost	$	5.9		$	6.2		$	11.9		$	12.3		$	5.4		$	5.9		$	10.7		$	11.9
Interest cost		10.0			11.7			19.9			23.5			7.4			10.0			14.9			19.9
Expected return on plan assets		(14.2	)		(13.0	)		(28.4	)		(26.0	)		(15.8	)		(14.2	)		(31.6	)		(28.4	)
Net amortization of unrecognized amounts
Prior service cost		1.1			1.6			2.2			3.1			1.0			1.1			1.9			2.2
Actuarial loss		2.7			1.7			5.3			3.5			2.5			2.7			5.0			5.3
Net periodic benefit cost	$	5.5		$	8.2		$	10.9		$	16.4		$	0.5		$	5.5		$	0.9		$	10.9


	Amounts Reclassified from AOCI
	Three Months Ended June 30,						Six Months Ended June 30,
Details about AOCI Components	2021			2020			2021			2020
Unfunded employee benefit obligations (a)
Amortization of prior service costs	$	(0.8	)	$	(1.0	)	$	(1.7	)	$	(2.0	)	See (a) below
Amortization of actuarial losses		(2.5	)		(2.6	)		(5.0	)		(5.2	)	See (a) below
		(3.3	)		(3.6	)		(6.7	)		(7.2	)	Total before tax
		0.8			0.9			1.7			1.8		Tax benefit
	$	(2.5	)	$	(2.7	)	$	(5.0	)	$	(5.4	)	Net of tax

	Sales, net
Six Months Ended June 30, 2019	Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	2,968.6	$	13.6		$	2,982.2		$	513.4		(c)
Paper		477.5		—			477.5			84.4		(c)
Corporate and Other		47.5		65.0			112.5			(42.0	)
Intersegment eliminations		—		(78.6	)		(78.6	)		—
	$	3,493.6	$	—		$	3,493.6			555.8
Non-operating pension expense										(4.1	)
Interest expense, net										(46.4	)
Income before taxes									$	505.3


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)
April 1-30, 2021		126	$	137.84		—	$	193.0
May 1-31, 2021		1,108		149.51		—		193.0
June 1-30, 2021		74,852		135.33		—		193.0
Total		76,086	$	135.54		—	$	193.0