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

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

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

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

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

As of ~~October 31, 2017~~April 28, 2023, the Registrant had outstanding ~~94,350,499~~89,932,185 shares of common stock, par value $0.01 per share.

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

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

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

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

Packaging Corporation of America ("we," "us," "our," PCA," or the "Company") was incorporated on January 25, ~~1999.~~1999. In April 1999, PCA acquired the containerboard and corrugated packaging products business of Pactiv Corporation ~~(Pactiv)~~("Pactiv"), formerly known as Tenneco Packaging, ~~Inc., a wholly owned subsidiary of Tenneco~~ Inc. We are a large diverse manufacturer of both packaging and paper products. We are headquartered in Lake Forest, Illinois and we operate primarily in the United States.

We report our business in three reportable segments: Packaging, Paper, and Corporate and Other. Our Packaging segment produces a wide variety of containerboard and corrugated packaging products. The Paper segment manufactures and sells a range of white papers, including uncoated free sheet and coated one-side grades. During the third quarter of 2017, the Company announced that it will discontinue the production of uncoated free sheet and coated one-side grades at the Wallula, Washington mill in the second quarter of 2018 to begin the conversion of the No. 3 machine to a 400,000 ton-per-year virgin kraft linerboard machine.communication-based papers. Corporate and Other includes support staff services and related assets and liabilities, transportation assets, and activity related to other ancillary support operations. For more information about our segments, see Note 1618, Segment Information.

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

The consolidated financial statements of PCA as of ~~September 30, 2017~~March 31, 2023 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 are unaudited but include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of such financial statements. The preparation of the consolidated financial statements involves the use of estimates and accruals. Actual results may vary from those estimates. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and ~~footnotes~~notes required by accounting principles generally accepted in the United States for complete audited financial statements. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2023. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

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

2. New and Recently Adopted Accounting Standards

2.	~~Acquisitions~~

~~TimBar Acquisition~~Recently Adopted Accounting Standards

~~On August 29, 2016, PCA~~Effective January 1, 2023, we adopted Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires contract assets and contract liabilities acquired ~~substantially all~~in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Under prior business combination guidance in ASC 805, Business Combinations, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date, whereas the new guidance requires the acquirer to recognize such assets and liabilities as if it had originated the contracts. The Company will apply the amended guidance on a prospective basis to any future business combinations.

New Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the ~~assets~~Effects of ~~TimBar Corporation (“TimBar”), a large independent corrugated products producer with six corrugated products production facilities,~~Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a ~~purchase price~~limited period of ~~$385.6 million, net~~time to ease the potential burden in accounting for, or recognizing the effects of, ~~cash acquired. We financed~~reference rate reform on financial reporting. The amendments in this Update are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the ~~acquisition~~FASB issued ASU 2021-01, which extends some of the optional expedients under Topic 848 to include derivative contracts impacted by discounting transition. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which further extends the relief offered in this series of ASUs through December 31, 2024. Companies can apply these ASUs immediately. The ASUs can be adopted on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to any new modification from any date within an interim period that includes or is subsequent to the date of the issuance of a final Update, up to the date that financial statements are available to be issued. The Company's fixed-rate outstanding debt will not be impacted by the reference rate reform. In April 2023, we amended our Senior Unsecured Credit Agreement to formally replace the LIBOR benchmark rate with the Term SOFR rate. The amendment of this agreement and the reference rate reform will not have a ~~new $385.0 million five-year term loan facility. TimBar provides solutions~~significant impact on the Company's financial position or related disclosures.

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

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 ~~higher margin~~consideration expected to be received in exchange for those goods or services. Sales, value added, and other taxes collected concurrently with revenue-producing activities are excluded from revenue.

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


	Three Months Ended March 31,
	2023		2022
Packaging	$	1,808.6	$	1,964.5
Paper		150.9		153.5
Corporate and Other		16.8		18.4
Total revenue	$	1,976.3	$	2,136.4

Packaging Revenue

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

The Company recognizes revenue for its packaging ~~and display and fulfillment markets~~products when performance obligations under the terms of a contract with a ~~focus~~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 ~~multi-color graphics~~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 ~~technical innovation. TimBar’s financial results~~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 ~~Packaging segment~~accounts receivable financial statement caption.

Paper Revenue

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

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

Corporate and Other Revenue

Revenue in this segment primarily relates to Louisiana Timber Procurement Company, L.L.C. ("LTP"), a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company ("Boise Cascade"). PCA is the primary beneficiary of ~~acquisition.~~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 ~~accounted for~~recognizes revenue within this segment when performance obligations under the ~~TimBar acquisition using~~terms of a contract with a customer are satisfied. This occurs with the ~~acquisition method~~transfer of ~~accounting~~control of our products at a specific point in ~~accordance with ASC 805,~~ ~~Business Combinations. The total purchase price has been allocated to tangible~~time.

Practical Expedients and ~~intangible assets acquired~~Exemption

Shipping and ~~liabilities assumed based on respective fair values, as follows (dollars in millions):~~

12/31/16 Allocation

Adjustments

Revised Allocation

Goodwill

$
157.3

$
(1.1
)

$
156.2

Other intangible assets

94.4

-

94.4

Property, plant and equipment

95.3

-

95.3

Other net assets

38.6

-

38.6

Net assets acquired

$
385.6

$
(1.1
)

$
384.5

~~During the first quarter of 2017, we received $1.1 million from the seller related~~handling fees billed to a ~~working capital adjustment. We~~customer are recorded on a gross basis in "Net sales" with the ~~adjustment as a decrease to goodwill which lowered~~corresponding shipping and handling costs included in "Cost of sales" in the ~~purchase price to $384.5 million.~~

~~Goodwill is calculated~~concurrent period as the ~~excess of~~revenue is recorded. We expense sales commissions when incurred because the ~~purchase price over~~amortization period is one year or less. Sales commissions are recorded in "Selling, general, and administrative expenses".

We do not disclose the ~~fair~~ value of ~~the net assets acquired. Among the factors that contributed to the recognition~~unsatisfied performance obligations for contracts with an original expected duration of goodwill were TimBar's commitment to continuous improvement and innovation in their operations, as well as the expected increases in PCA's containerboard integration levels. Goodwill is deductible for tax purposes.one year or less.

~~Other intangible assets, primarily customer relationships, were assigned an estimated weighted average useful life of 14.2 years.~~6

~~Property, plant and equipment were assigned estimated useful lives ranging from two to 24 years.~~4. Earnings Per Share

~~Columbus Container Acquisition~~

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

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

12/31/16 Allocation

Adjustments

Revised Allocation

Goodwill

$
36.6

$
(4.7
)

$
31.9

Other intangible assets

26.3

6.0

32.3

Property, plant and equipment

27.2

1.0

28.2

Other net assets

9.6

(0.1)

9.5

Net assets acquired

$
99.7

$
2.2

$
101.9

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

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

~~Other intangible assets, primarily customer relationships, were assigned an estimated weighted average useful life of 14.1 years.~~

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

3.	~~Earnings Per Share~~

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


	Three Months Ended
	March 31,
Numerator:	2023			2022
Net income	$	190.1		$	254.2
Less: Distributed and undistributed earnings allocated to participating securities		(1.6	)		(2.0	)
Net income attributable to common shareholders	$	188.5		$	252.2
Denominator:
Weighted average basic common shares outstanding		89.0			92.9
Effect of dilutive securities		0.4			0.4
Weighted average diluted common shares outstanding		89.4			93.3
Basic income per common share	$	2.12		$	2.71
Diluted income per common share	$	2.11		$	2.70

Three Months Ended

Nine Months Ended

September 30,

September 30,

Numerator:

2017

2016

2017

2016

Net income

$
139.1

$
119.3

$
399.7

$
338.9

Less: distributed and undistributed earnings allocated to
participating securities

(1.1
)

(1.1
)

(3.4
)

(3.4
)
Net income attributable to common shareholders

$
138.0

$
118.2

$
396.3

$
335.5

Denominator:

Weighted average basic common shares outstanding

93.6

93.4

93.5

93.6

Effect of dilutive securities

0.2

0.2

0.2

0.1

Weighted average diluted common shares outstanding

93.8

93.6

93.7

93.7

Basic income per common share

$
1.47

$
1.27

$
4.24

$
3.59

Diluted income per common share

$
1.47

$
1.26

$
4.23

$
3.58

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

~~(b)~~

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

For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022, we recorded ~~$77.8~~$63.2 million and ~~$63.7~~$86.1 million of income tax expense and had an effective tax rate of ~~35.9%~~24.9% and 34.8%, respectively. The increase in our effective tax rate for the three months ended September 30, 2017 compared with the same period in 2016, was primarily due to an internal legal entity consolidation that will simplify future operating activities and resulted in $3.3 million of tax expense for the change in value of deferred taxes.

~~For the nine months ended September 30, 2017 and 2016, we recorded $204.9 million and $181.0 million of income tax expense and had an effective tax rate of 33.9% and 34.8%~~25.3%, respectively. The decrease in our effective tax rate for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 compared ~~with~~to the same period in ~~2016,~~2022 was primarily due to ~~the~~ ~~adoption of ASU 2016-09 (Topic 718):~~ ~~Improvements to Employee Share-Based Payment Accounting, which requires all~~favorable employee performance unit vests with higher excess tax benefits ~~and deficiencies from employee share-based payment awards to be recognized in the income statement as opposed to additional paid in capital. This was~~ partially offset by ~~the tax expense from the internal legal entity consolidation~~.higher nondeductible employee remuneration paid to covered employees.

Our current effective tax rate ~~may differ from~~is higher than the federal statutory income tax rate of ~~35.0%,~~21.0% due primarily to the effect of ~~employee share-based payment awards, the domestic manufacturing deduction, and~~ state and local income taxes.

During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and 2022, cash paid for taxes, net of refunds received, was $6.9 million and $17.6 million, respectively. The decrease in cash tax payments between the periods is primarily due to lower 2023 forecasted taxable income.

During the three months ended March 31, 2023, there were no significant changes to our uncertain tax positions. For more information, see Note 6,8, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2016~~2022 Annual Report on Form 10-K.

7. Inventories

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

6.	~~Inventories~~

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

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


	March 31,		December 31,
	2023		2022
Raw materials	$	358.8	$	341.2
Work in process		15.8		16.0
Finished goods		201.1		198.4
Supplies and materials		427.7		421.7
Inventories	$	1,003.4	$	977.3

September 30,

December 31,

2017

2016

Raw materials

$
263.7

$
271.9

Work in process

13.0

12.9

Finished goods

214.5

206.5

Supplies and materials

245.4

232.3

Inventories

$
736.6

$
723.6

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

Depreciation expense for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was ~~$87.0~~$118.8 million and ~~$79.9~~$98.5 million, respectively. During the ~~nine~~three months ended ~~September 30, 2017 and 2016, depreciation expense was $253.0 million and $240.5 million, respectively. During the nine months ended September 30, 2017,~~March 31, 2023, we recognized ~~$2.6~~$6.3 million of incremental depreciation expense ~~from shortening~~as a result of corrugated products facilities and design center closures, and Jackson mill conversion-related activities. We recognized $1.1 million of incremental depreciation expense during the ~~useful lives~~three months ended March 31, 2022 as a result of ~~certain assets related to the Wallula~~Jackson mill ~~restructuring.~~conversion-related activities.

At ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022, purchases of property, plant, and equipment included in accounts payable were ~~$30.4~~$48.8 million and ~~$12.8~~$43.7 million, respectively.

Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At ~~September 30, 2017~~both March 31, 2023 and December 31, ~~2016~~2022, we had ~~$676.9 million and $682.7~~$922.4 million of goodwill recorded in our Packaging segment, ~~respectively. At both September 30, 2017 and December 31, 2016 we had $55.2 million of~~which represents the entire goodwill ~~recorded in~~balance reported on our ~~Paper segment.~~Consolidated Balance Sheets.

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

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

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


	March 31, 2023						December 31, 2022
	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		8.0	$	546.0	$	299.9		8.2	$	546.0	$	290.9
Trademarks and trade names		7.0		41.3		29.1		7.2		41.3		28.6
Other		3.3		4.4		4.4		3.4		4.4		4.3
Total intangible assets (excluding goodwill)		7.9	$	591.7	$	333.4		8.1	$	591.7	$	323.8

During the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, amortization expense was ~~$8.4~~$9.6 million and ~~$6.3~~$10.2 million, respectively. ~~During the nine months ended September 30, 2017 and 2016, amortization expense was $25.3 million and $17.5 million, respectively~~.

10. Accrued Liabilities

9.	~~Accrued Liabilities~~

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


	March 31,		December 31,
	2023		2022
Compensation and benefits	$	84.9	$	159.7
Customer rebates and other credits		34.0		43.8
Medical insurance and workers’ compensation		25.6		26.1
Franchise, property, sales and use taxes		21.1		17.4
Severance, retention, and relocation		4.9		1.8
Environmental liabilities and asset retirement obligations		4.3		4.1
Other		9.9		10.8
Total	$	184.7	$	263.7

September 30,

December 31,

2017

2016

Compensation and benefits

$
119.3

$
120.4

Medical insurance and workers’ compensation

28.8

28.8

Franchise, property, sales and use taxes

22.8

16.7

Customer volume discounts and rebates

21.0

18.9

Environmental liabilities and asset retirement obligations

4.2

6.4

Severance, retention, and relocation

4.2

3.0

Other

7.5

7.0

Total

$
207.8

$
201.2

~~During~~For both the ~~nine~~three months ended ~~September 30, 2017, we made principal payments of $29.8 million~~March 31, 2023 and ~~$4.9 million on our five-year term loan due August 2021 and our seven-year term loan due October 2020, respectively. For the nine months ended September 30, 2017 and 2016,~~2022, cash payments for interest were ~~$67.2 million and $59.5 million, respectively.~~$7.5 million.

Included in interest expense, net ~~are amortization of treasury lock settlements and~~is the amortization of financing costs. For both the three months ended ~~September 30, 2017~~March 31, 2023 and 2016, amortization of treasury lock settlements was $1.4 million, and for both the nine months ended September 30, 2017 and 2016, amortization of treasury locks was $4.2 million. For both the three months ended September 30, 2017 and 2016,2022, amortization of financing costs was ~~$0.5 million and during the nine months ended September 30, 2017 and 2016, amortization of financing costs was $1.5 million and $1.4 million, respectively.~~ $0.4 million.

At ~~September 30, 2017~~March 31, 2023, we had ~~$1,647.7~~$2,491.6 millionof fixed-rate senior notes ~~and $977.6 million of variable-rate term loans~~ outstanding. ~~At September 30, 2017 the~~The fair value of our fixed-rate debt was estimated to be ~~$1,739.2~~$2,127.6 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 ~~2016~~2022 Annual Report on Form 10-K. ~~The fair value of~~

On April 27, 2023, we amended our ~~variable-rate term debt approximates~~Senior Unsecured Credit Agreement to formally replace the ~~carrying amount as our cost of borrowing is variable and approximates current market rates.~~LIBOR benchmark rate with the Term SOFR rate.

For more information on our long-term debt and interest rates on that debt, see Note 9,11, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2016~~2022 Annual Report on Form 10-K.

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 March 31, 2023 and December 31, 2022 (in millions):


	March 31, 2023
	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	$	366.7	$	—	$	—		$	366.7	$	366.7	$	—	$	—
Level 1 (a):
U.S. Treasury securities		24.0		—		(0.3	)		23.7		—		14.7		9.0
Money market funds		1.0		—		—			1.0		1.0		—		—
Subtotal		25.0		—		(0.3	)		24.7		1.0		14.7		9.0
Level 2 (b):
Corporate debt securities		116.5		—		(1.6	)		114.9		—		73.9		41.0
U.S. government agency securities		12.4		—		—			12.4		—		5.5		6.9
Certificates of deposit		1.5		—		—			1.5		—		1.5		—
Subtotal		130.4		—		(1.6	)		128.8		—		80.9		47.9
Total	$	522.1	$	—	$	(1.9	)	$	520.2	$	367.7	$	95.6	$	56.9


	December 31, 2022
	Adjusted Cost Basis		Unrealized Gain		Unrealized Loss			Fair Value		Cash and Cash Equivalents		Short-Term Marketable Debt Securities		Long-Term Marketable Debt Securities
Cash and cash equivalents	$	318.3	$	—	$	—		$	318.3	$	318.3	$	—	$	—
Level 1 (a):
U.S. Treasury securities		24.3		—		(0.4	)		23.9		—		16.7		7.2
Money market funds		0.1		—		—			0.1		0.1		—		—
Subtotal		24.4		—		(0.4	)		24.0		0.1		16.7		7.2
Level 2 (b):
Corporate debt securities		123.9		—		(2.1	)		121.8		1.6		65.7		54.5
U.S. government agency securities		4.5		—		(0.1	)		4.4		—		1.2		3.2
Certificates of deposit		1.6		—		—			1.6		—		1.6		—
Subtotal		130.0		—		(2.2	)		127.8		1.6		68.5		57.7
Total	$	472.7	$	—	$	(2.6	)	$	470.1	$	320.0	$	85.2	$	64.9

(a)

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

~~11.~~

~~Employee Benefit Plans and Other Postretirement Benefits~~

(b)

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

For both the three months ended March 31, 2023 and 2022, net realized gains and losses on the sales and maturities of certain marketable debt securities were insignificant.

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

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

As of March 31, 2023 and December 31, 2022, we do not consider any of the impairments related to our marketable debt securities to be the result of credit losses. Therefore, we have not recorded an allowance for credit losses related to our marketable debt securities. All unrealized gains and losses were recorded in other comprehensive income (OCI).

The following tables provide information about the Company’s marketable debt securities that have been in a continuous loss position as of March 31, 2023 and December 31, 2022 (in millions, except number of marketable debt securities in a loss position):


	March 31, 2023
	Fair Value of Marketable Debt Securities in a Loss Position < 12 Months		Number of Marketable Debt Securities in a Loss Position < 12 Months		Unrealized Losses < 12 Months		Fair Value of Marketable Debt Securities in a Loss Position ≥ 12 Months		Number of Marketable Debt Securities in a Loss Position ≥ 12 Months		Unrealized Losses ≥ 12 Months
Corporate debt securities	$	50.3		72	$	0.4	$	45.1		60	$	1.2
U.S. government agency securities		6.3		10		—		1.5		3		—
U.S. Treasury securities		5.7		8		0.1		9.9		14		0.3
Certificates of deposit		0.8		1		—		—		—		—
	$	63.1		91	$	0.5	$	56.5		77	$	1.5


	December 31, 2022
	Fair Value of Marketable Debt Securities in a Loss Position < 12 Months		Number of Marketable Debt Securities in a Loss Position < 12 Months		Unrealized Losses < 12 Months		Fair Value of Marketable Debt Securities in a Loss Position ≥ 12 Months		Number of Marketable Debt Securities in a Loss Position ≥ 12 Months		Unrealized Losses ≥ 12 Months
Corporate debt securities	$	77.0		113	$	1.0	$	37.9		50	$	1.1
U.S. Treasury securities		14.5		14		0.2		9.3		13		0.3
U.S. government agency securities		3.2		5		—		1.3		3		—
	$	94.7		132	$	1.2	$	48.5		66	$	1.4

13. Employee Benefit Plans and Other Postretirement Benefits

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


	Pension Plans												Pension Plans
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2023			2022
Service cost	$	5.8		$	6.2		$	18.0		$	18.4		$	3.6		$	4.9
Interest cost		10.4			10.2			31.1			30.6			14.0			8.7
Expected return on plan assets		(13.5	)		(12.3	)		(40.5	)		(37.1	)		(14.3	)		(13.9	)
Net amortization of unrecognized amounts
Prior service cost		1.4			1.4			4.4			4.3			1.3			0.9
Actuarial loss		1.9			1.5			5.7			4.3			1.1			0.8
Net periodic benefit cost	$	6.0		$	7.0		$	18.7		$	20.5		$	5.7		$	1.4

PCA makes pension plan contributions that are sufficient to fund its actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act (ERISA). From time to time, PCA may make additional discretionary contributions based on the funded status of the plans, tax deductibility, income from operations, and other factors. During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022, payments to our nonqualified pension plans were insignificant. ~~For~~During both the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2023 and 2022, we ~~made~~did not make any contributions ~~of $36.2 million and $42.1 million, respectively,~~ to our qualified pension ~~plans, which exceeded our 2017~~plans. We do not have a required minimum ~~pension~~contribution amount for 2023, but we expect to make discretionary contributions of ~~$8.0. We made contributions of $49.7 million and $53.4 million~~ to our ~~qualified plans during~~plans.

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

~~The components of~~March 31, 2023 and 2022, the net periodic benefit cost for our postretirement plans ~~were as follows (dollars in millions):~~was insignificant.

14. Share-Based Compensation

Postretirement Plans

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Service cost

$
0.1

$
0.1

$
0.2

$
0.5

Interest cost

0.2

0.1

0.5

0.5

Net amortization of unrecognized amounts

Prior service cost

(0.1
)

(0.1
)

(0.1
)

(0.1
)
Actuarial income

(0.1
)

—

(0.1
)

(0.4
)
Net periodic benefit cost

$
0.1

$
0.1

$
0.5

$
0.5

~~12.~~

~~Share-Based Compensation~~

The Company has a long-term equity incentive plan, which allows for grants of restricted stock, performance awards, stock appreciation rights, and stock options to directors, officers, and employees, as well as others who engage in services for PCA. On February 25, 2020, our board of directors approved, and, on May 5, 2020, our stockholders approved, the amendment and restatement of the plan. The ~~plan, as amended, terminates~~ amendment extended the plan’s term to May ~~1, 2023~~5, 2030 and ~~authorizes 10.6 million~~increased the number of shares of common stock available for ~~grant over~~issuance under the ~~life~~plan by 1.4 million shares. The total number of ~~the plan.~~ shares authorized for past and future awards is 12.0 million shares.

As of ~~September 30, 2017, 1.0~~March 31, 2023, assuming performance units are paid out at the target level of performance, 0.7 million shares were available for future ~~issuance~~grants under the ~~plan.~~current plan. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date.

The following table presents restricted stock and performance unit award activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2023:


	Restricted Stock					Performance Units
	Shares			Weighted Average Grant- Date Fair Value		Shares			Weighted Average Grant- Date Fair Value
Outstanding at January 1, 2023		655,914		$	117.14		358,449		$	109.89
Granted		191,097			134.72		146,331			140.09
Vested (a)		(3,077	)		109.71		(76,130	)		132.96
Forfeitures		(1,337	)		120.13		—			—
Outstanding at March 31, 2023		842,597		$	121.15		428,650		$	116.10

Restricted Stock

Performance Units

Shares

Weighted Average Grant- Date Fair Value

Shares

Weighted Average Grant- Date Fair Value

Outstanding at January 1, 2017

786,079

$
63.44

232,088

$
62.68

Granted

173,199

107.57

61,861

108.19

Vested

(212,172
)

51.54

(67,391
)

56.08

Forfeitures

(4,714
)

68.85

—

—

Outstanding at September 30, 2017

742,392

$
77.11

226,558

$
77.07

(a)

Upon payout of the performance unit awards that vested during the period, PCA issued 83,769 shares, which included 7,639 shares for dividends accrued during the performance period.

Compensation Expense

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2023			2022
Restricted stock	$	3.8		$	3.5		$	11.3		$	12.2		$	11.9		$	9.2
Performance units		1.4			1.3			4.1			2.8			3.4			3.1
Total share-based compensation expense		5.2			4.8			15.4			15.0			15.3			12.3
Income tax benefit		(2.0	)		(1.8	)		(5.9	)		(5.8	)		(3.8	)		(3.1	)
Share-based compensation expense, net of tax benefit	$	3.2		$	3.0		$	9.5		$	9.2		$	11.5		$	9.2

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

Performance unit awards granted to certain key employees are earned based on the achievement of defined performance rankings of Return on Invested Capital (ROIC) or Total Shareholder Return (TSR) compared to ROIC and TSR for peer companies. For performance unit awards made in 2023 and 2022, in terms of grant date value, 50% used TSR as the performance measure and 50% used ROIC as the performance measure. The ROIC component of performance unit awards is valued based on the closing price of the stock on the grant date. As the ROIC component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of performance unit awards is valued using a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, a risk-free interest rate, expected dividends, and expected volatility of the Company’s common stock and the common stock of the peer companies. Compensation expense is recorded ratably over the expected term of the award.

The unrecognized compensation expense for all share-based awards at ~~September 30, 2017~~March 31, 2023 was as follows (dollars in millions):


	March 31, 2023
	Unrecognized Compensation Expense		Remaining Weighted Average Recognition Period (in years)
Restricted stock	$	41.1		2.9
Performance units		33.7		2.7
Total unrecognized share-based compensation expense	$	74.8		2.8

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, we paid ~~$178.2~~$112.1 million of dividends to shareholders. On ~~August 25, 2017 PCA's~~February 22, 2023, PCA’s Board of Directors ~~announced~~declared a regular quarterly cash dividend of ~~$0.63~~$1.25 per share of common stock, which was paid on ~~October 13, 2017~~April 14, 2023 to shareholders of record as of ~~September~~March 15, ~~2017.~~2023. The ~~July 2017~~ dividend payment was ~~$59.4~~$112.4 million.

On ~~February 25, 2016,~~January 26, 2022, PCA announced that its Board of Directors authorized the repurchase of an additional ~~$200.0 million~~$1 billion of the Company’s outstanding common stock. Repurchases may be made from time to time in open market or privately negotiated transactions in accordance with applicable securities regulations. The timing and amount of repurchases will be determined by the Company in its discretion based on factors such as PCA’s stock price and market and business conditions.

The Company did ~~not~~not repurchase any shares of its common stock under this authority during the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2023. At March 31, 2023, $477.5 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:


	Unrealized Loss On Foreign Exchange Contracts			Unrealized Loss on Marketable Debt Securities			Unfunded Employee Benefit Obligations			Total
Balance at January 1, 2023	$	(0.2	)	$	(1.9	)	$	(100.3	)	$	(102.4	)
Other comprehensive income before reclassifications, net of tax		—			0.5			—			0.5
Amounts reclassified from AOCI, net of tax		—			—			1.6			1.6
Balance at March 31, 2023	$	(0.2	)	$	(1.4	)	$	(98.7	)	$	(100.3	)

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

16. Concentrations of Risk

~~(a)~~

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

~~(b)~~

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

~~14.~~

~~Concentrations of Risk~~

ODP Corporation ("ODP"), formerly Office Depot Inc., along with its subsidiaries and affiliates, is our largest customer in the Paper segment. Our Paper segment has had a long-standing commercial and contractual relationship with ~~Office Depot, our largest customer in the paper business.~~ODP. This relationship exposes us to a significant concentration of business and financial risk. Our sales to ~~Office Depot represent~~ODP represented approximately 7%5% and 8% 4%of our total Company sales ~~revenue~~ for the ~~nine months~~three month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively, and approximately ~~42%~~64% and ~~41%~~58% of our Paper segment sales revenue for ~~both of~~ those periods, respectively. At ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022, we had ~~$31.2~~$58.8 million and ~~$31.8~~$52.4 million of accounts receivable due from ~~Office Depot,~~ODP, respectively, which represents 4%approximately 6% and 5%5% of our total Company ~~accounts receivable for both of those periods,~~receivables, respectively.

17. Transactions With Related Parties

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

~~15.~~

~~Transactions With Related Parties~~

Louisiana Timber Procurement Company, L.L.C. ~~(LTP)~~("LTP") is a variable-interest entity that is ~~50%~~50% owned by PCA and ~~50%~~50% owned by Boise Cascade Company ~~(Boise Cascade)~~("Boise Cascade"). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of PCA and Boise Cascade in Louisiana. PCA is the primary beneficiary of LTP and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements in our Corporate and Other segment. The carrying amounts of LTP's assets and liabilities (which relate primarily to ~~noninventory~~non-inventory working capital items) on our Consolidated Balance Sheets were ~~$4.6~~$3.3 million at ~~September 30, 2017~~March 31, 2023 and ~~$5.0~~$2.2 million at December 31, ~~2016.~~2022. During the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, we recorded ~~$20.8~~$20.1 million and ~~$15.5 million, respectively, and during the nine months ended September 30, 2017 and 2016 we recorded $66.0 million and $54.8~~$20.8 million, respectively, of LTP sales to Boise Cascade in "Net Sales" in the Consolidated Statements of Income and approximately the same amount of expenses in "Cost of Sales".

During the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, fiber purchases from related parties were ~~$4.0~~$2.9 million and ~~$3.9~~$3.8 million, respectively. ~~Fiber purchases from related parties were $13.6 million and $13.2 million, respectively, during the nine months ended September 30, 2017 and 2016.~~ Most of these purchases related to chip and log purchases by LTP from Boise Cascade's wood products business. These purchases are recorded in "Cost of Sales" in the Consolidated Statements of Income.

~~16.~~

~~Segment Information~~

We report our business in three 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 ~~many of these~~certain allocated expenses, the related assets and liabilities remain in the Corporate and Other segment.

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

	Sales, net
Three Months Ended September 30, 2017	Trade		Inter-segment			Total			Operating Income (Loss)
													Sales, net
Three Months Ended March 31, 2023													Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	1,340.6	$	6.0		$	1,346.6		$	261.5		(a)	$	1,803.5	$	5.1		$	1,808.6		$	268.0		(a)
Paper		271.4		—			271.4			(0.7	)	(a)		150.9		—			150.9			34.1		(a)
Corporate and Other		28.1		33.0			61.1			(18.5	)			21.9		38.6			60.5			(31.4	)
Intersegment eliminations		—		(39.0	)		(39.0	)		—				—		(43.7	)		(43.7	)		—
	$	1,640.1		—		$	1,640.1			242.3			$	1,976.3	$	—		$	1,976.3			270.7
Non-operating pension expense																						(2.0	)
Interest expense, net										(25.4	)											(15.4	)
Income before taxes									$	216.9											$	253.3

Sales, net

Three Months Ended September 30, 2016

Trade

Inter-segment

Total

Operating
Income (Loss)

Packaging

$
1,165.0

$
2.1

$
1,167.1

$
179.6

(c)
Paper

292.8

—

292.8

44.5

(c)
Corporate and Other

26.2

36.7

62.9

(17.7
)

Intersegment eliminations

—

(38.8
)

(38.8
)

—

$
1,484.0

$
—

$
1,484.0

206.4

Interest expense, net

(23.4
)

Income before taxes

$
183.0


	Sales, net
Three Months Ended March 31, 2022	Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	1,960.0	$	4.5		$	1,964.5		$	362.2		(b)
Paper		153.5		—			153.5			22.4		(b)
Corporate and Other		22.9		35.4			58.3			(28.1	)
Intersegment eliminations		—		(39.9	)		(39.9	)		—
	$	2,136.4	$	—		$	2,136.4			356.5
Non-operating pension income										3.6
Interest expense, net										(19.8	)
Income before taxes									$	340.3

Sales, net

Nine Months Ended September 30, 2017

Trade

Inter-segment

Total

Operating Income (Loss)

Packaging

$
3,897.4

$
17.6

$
3,915.0

$
676.8

(a)(b)
Paper

784.3

—

784.3

58.1

(a)
Corporate and Other

78.9

92.3

171.2

(55.7
)
(a)(b)
Intersegment eliminations

—

(109.9
)

(109.9
)

—

$
4,760.6

—

$
4,760.6

679.2

Interest expense, net

(74.6
)

Income before taxes

$
604.6

Sales, net

Nine Months Ended September 30, 2016

Trade

Inter-segment

Total

Operating Income (Loss)

Packaging

$
3,382.4

$
5.5

$
3,387.9

$
533.5

(c)
Paper

840.1

—

840.1

105.0

(c)
Corporate and Other

79.9

105.7

185.6

(51.1
)
(c)
Intersegment eliminations

—

(111.2
)

(111.2
)

—

$
4,302.4

$
—

$
4,302.4

587.4

Interest expense, net

(67.5
)

Income before taxes

$
519.9


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

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

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

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

~~(b)~~

~~The nine months ended September 30, 2017~~March 31, 2023 include the following:

$~~5.0~~9.7 million ~~of costs for the property damage and business interruption insurance deductible corresponding to the February 2017 explosion at our DeRidder, LA mill.~~

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

~~(c)~~

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

~~$2.0 million and $7.4 million, respectively,~~ of charges consisting of closure costs related to corrugated products facilities and ~~a paper products facility and costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities.~~design centers.

	2.	$~~2.9~~1.2 million ~~and $3.2 million, respectively,~~ of charges related to the announced discontinuation of production of UFS paper grades on the No. 3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

(b)	The three months ended March 31, 2022 include the following:
	1.	$1.5 million of charges related to the announced discontinuation of production of UFS paper grades on the No. 3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.
	2.	$0.6 million of charges consisting of closure costs related to corrugated products facilities and acquisition and integration ~~of TimBar Corporation.~~costs related to the December 2021 Advance Packaging acquisition.

~~17.~~

~~New and Recently Adopted Accounting Standards~~

19. Commitments, Guarantees, Indemnifications and Legal Proceedings

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

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

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

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

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

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

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

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

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

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

~~In August 2016, the FASB issued ASU 2016-15 (Topic 230),~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments~~. This ASU adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. It is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption permitted. The Company does not expect this ASU to have a material impact on the Company's financial condition, results of operations, or cash flows.

~~In February 2016, the FASB issued ASU 2016-02 (Topic 842):~~ ~~Leases~~. This ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. This ASU is required to be adopted using a modified retrospective approach. We currently plan to adopt this ASU on January 1, 2019 and expect to recognize a liability and corresponding asset associated with in-scope operating leases, but are still in the process of determining the effects on our financial statements and the processes required to account for leasing activity on an ongoing basis.

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

~~18.~~

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

We have financial commitments and obligations that arise in the ordinary course of our business. These include lease obligations, long-term debt, capital ~~commitments, lease obligations, and~~additions, purchase commitments for goods and services, and legal proceedings, all of which are discussed in Note ~~9, Debt,~~3, Leases; Note 11, Debt; and Note ~~18,~~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 ~~2016~~2022 Annual Report on Form 10-K.

Guarantees and Indemnifications

We provide guarantees, indemnifications, and other assurances to third parties in the normal course of our business. These include tort indemnifications, product guarantees, environmental assurances, and representations and warranties in commercial agreements. At ~~September 30, 2017~~March 31, 2023, we are not aware of any material liabilities arising from any guarantee, indemnification, or financial assurance we have provided. If we determined such a liability was probable and subject to reasonable determination, we would accrue for it at that time.

DeRidder Mill Incident

On February 8, 2017, a tank located in the pulp mill at the Company's DeRidder, Louisiana facility exploded, resulting in three contractor fatalities and other injuries. The Company has been served with multiple lawsuits involving the decedents and isother allegedly injured parties, alleging negligence on ~~notice~~the part of ~~additional claims.~~the Company and claiming compensatory and punitive damages. The Company ~~maintains~~is vigorously defending these lawsuits. The Company believes that these suits are covered by its liability insurance policies, subject to an aggregate $1.0 million deductible, which has been satisfied in full as a ~~$1.0 million deductible; however,~~result of settlement of various lawsuits and fees and expenses incurred by the ~~incident~~Company. Cases involving nine plaintiffs are pending in the U.S. District Court for the Middle District of Louisiana and one case remains ~~under investigation~~pending in state court in Alabama. One case previously dismissed by the federal district court for the Western District of Louisiana was appealed by the plaintiff to the United States Court of Appeals for the Fifth Circuit, which affirmed such dismissal. The remaining lawsuits pending in federal district court and ~~the lawsuits~~state court are in the early stages. Accordingly, the Company is unable to estimate a range of reasonable possible losses at this time.

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

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

In May 2017, the EPA conducted an on-site inspection of the facility to assess compliance with the Clean Air Act, Risk Management Program ("RMP"). The Company provided additional information to the ~~incident.~~EPA promptly after the inspection to address certain areas of concern ("AOCs") observed during the inspection. 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. In January 2021, the EPA and U.S. Department of Justice ("DOJ") initiated civil judicial enforcement discussions with PCA. During the third quarter of 2022, we reached a settlement with the agencies, resulting in an agreed civil penalty of $2.5 million. The Company did not admit liability for violation of the Clean Air Act in connection with the settlement. The settlement was approved by the federal district court for the Western District of Louisiana in December 2022, and the agreed civil penalty was paid out in January 2023.

Legal Proceedings

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

~~19.~~

~~Subsequent Event~~

On October 2, 2017, we completed the acquisition of the assets of Sacramento Container Corporation and 100% membership interests of Northern Sheets, LLC and Central California Sheets, LLC in a cash-free, debt-free transaction. Funding for the $265 million purchase price came from available cash on hand. The acquired companies operate two full-line corrugated product operations and sheet feeders in McClellan, California and Kingsburg, California. The operating results of Sacramento Container Corporation will be included in PCA’s fourth quarter 2017 results.15

~~Item 2.~~

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

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

This management’s discussion and analysis includes statements regarding our expectations with respect to our future performance, expected business conditions, liquidity, and capital resources. Such statements, along with any other statements that are not historical in nature, are forward-looking. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in our ~~2016~~2022 Annual Report on Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission ~~(SEC)~~("SEC"). We do not assume any obligation to update any forward-looking statement. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q. Please see “Forward Looking Statements” elsewhere in this Item 2.

Overview

PCA is the ~~fourth~~third largest producer of containerboard products and ~~the third largest~~a leading producer of ~~uncoated freesheet~~UFS paper in ~~the United States, based on production capacity.~~North America. We operate ~~five containerboard mills, three paper~~eight mills and 9487 corrugated products manufacturing plants. Our containerboard mills produce linerboard and corrugating medium, which are papers primarily used in the production of corrugated products. Our corrugated products manufacturing plants produce a wide variety of corrugated packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-color boxes and displays with strong visual appeal that help to merchandise the packaged product in retail locations, and honeycomb protective packaging. In addition, we are a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. We also manufacture and sell ~~white~~UFS papers, including both commodity and specialty papers, which may have custom or specialized features such as colors, coatings, high brightness, and recycled content. We are headquartered in Lake Forest, Illinois and operate primarily in the United States.

This Item 2 is intended to supplement, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2016~~2022 Annual Report on Form 10-K.

Executive Summary

~~Third~~First quarter net sales were ~~$1.64~~$1.98 billion in ~~2017~~2023 and ~~$1.48~~$2.14 billion in ~~2016.~~2022. We reported ~~$139~~$190 million of net income, or ~~$1.47~~$2.11 per diluted share, during the ~~third~~first quarter of ~~2017,~~2023, compared to ~~$119~~$254 million, ~~of net income,~~ or ~~$1.26~~$2.70 per diluted share, during the same period in ~~2016. The third quarter of 2017~~2022. Net income included ~~$27~~$8 million of ~~pre-tax expense for special items (discussed below) compared to $5 million of pre-tax~~ expense for special items in ~~2016.~~the first quarter of 2023, compared to $2 million of expense for special items in 2022 (discussed below). Excluding special items, ~~we recorded $159 million of~~ net income was $198 million, or ~~$1.68~~$2.20 per diluted share, during the ~~third~~first quarter of ~~2017,~~2023, compared to ~~$123~~$256 million, ~~of net income,~~ or ~~$1.30~~$2.72 per diluted share, in the ~~third~~first quarter of ~~2016.~~2022. The ~~increase~~decrease in net income was driven primarily by lower volumes in our Packaging and Paper segments and higher ~~containerboard~~operating costs, depreciation expense, freight and ~~corrugated products~~logistics expenses, converting costs, and non-operating pension expense. These items were partially offset by higher prices and mix ~~and sales and production volumes, and a partial insurance recovery related to the DeRidder Mill incident, partially offset by lower prices and mix and sales and production volumes~~ in our Packaging and Paper ~~segment, higher input and operating costs, higher freight and annual~~segments, lower scheduled maintenance outage expenses, a lower tax rate, and ~~higher~~lower interest and other expenses. For additional detail on special items included in reported GAAP results, as well as segment income (loss) excluding special items, earnings before non-operating pension income (expense), interest, income taxes, and depreciation, amortization, and ~~interest expense.~~depletion ("EBITDA"), and EBITDA excluding special items, see “Item 2. Reconciliations of Non-GAAP Financial Measures to Reported Amounts.”

Packaging segment income from operations was ~~$262~~$268 million in the ~~third~~first quarter of ~~2017,~~2023, compared to ~~$180~~$362 million in the ~~third~~first quarter of ~~2016.~~2022. Packaging segment ~~earnings before interest, taxes, depreciation, amortization, and depletion (EBITDA)~~EBITDA excluding special items was ~~$341~~$392 million in the ~~third~~first quarter of ~~2017 and $256~~2023 compared to $464 million in the ~~third~~first quarter of ~~2016. The increase was driven primarily by higher containerboard and corrugated products~~2022. Higher prices and mix ~~and~~were offset by lower sales and production volumes, higher operating and ~~a partial insurance recovery related to the DeRidder Mill incident, partially offset by higher input costs, primarily recycled fiber, higher labor~~converting costs, and higher freight ~~expense.~~and logistics expenses. Lower sales and production volumes were driven by lower demand, as economic conditions present during the second half of 2022 continued into the first quarter of 2023. We believe that demand was further affected by lower consumer spending resulting from higher interest rates and persistent inflation, along with consumer preferences shifting towards services rather than goods. Published containerboard prices declined in January and February, and our product prices were lower than in the fourth quarter of 2022. We continued to lower our containerboard production to levels appropriate for our demand, and we achieved our targeted weeks-of-inventory supply at the end of the quarter. We continue to focus on management of our operating costs in an effort to mitigate these unfavorable market conditions.

Paper segment income from operations was ~~a loss of $1~~$34 million in the ~~third~~first quarter of ~~2017, which includes $25 million of charges related~~2023, compared to ~~the Wallula mill restructuring as discussed below. This compares to income of $45~~$22 million in the ~~third~~first quarter of ~~2016.~~2022. Paper segment EBITDA excluding special items was ~~$39~~$41 million in the ~~third~~first quarter of ~~2017,~~2023, compared to ~~$59~~$29 million in the ~~third~~first quarter of ~~2016.~~

2022. The ~~decrease~~increase was due to ~~lower paper~~higher prices and mix and lower ~~sales~~freight and ~~production volumes, higher costs for energy, and higher annual mill outage and freight expense.~~

During the first nine months of 2017, we reported $400 million of net income, or $4.23 per diluted share, compared to $339 million of net income, or $3.58 per diluted share, during the same period in 2016. The nine months ended September 30, 2017 included $31 million of pre-tax expense for special items (discussed below), compared to $11 million of pre-tax expense for special items during the same period in 2016. Excluding special items, we recorded $422 million of net income, or $4.47 per diluted share, during the first nine months of 2017, compared to $346 million of net income, or $3.65 per diluted share, in the first nine months of 2016. ~~The increase was driven primarily~~logistic expenses, partially offset by higher ~~containerboard~~operating costs and ~~corrugated products prices and mix and sales and production volumes, and lower costs for annual mill outages, partially offset by~~ lower sales and production volumes. Paper prices increased throughout 2022, and sales volumes ~~and prices and mix in our Paper segment, higher input and operating costs, higher freight expense, and higher depreciation and interest expense. Earnings for the year to date~~ were ~~negatively impacted~~lower primarily due to sales of products from the ~~DeRidder Mill incident described in Note 18 to the Financial Statements included in this report.~~

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

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

~~During the third quarter, the Company announced that it will discontinue production of uncoated freesheet and coated one-side grades at its Wallula, Washington~~Jackson mill in the second quarter of 2018 to begin the conversion of the No. 3 paper machine to a 400,000 ton-per-year virgin kraft linerboard machine. The Company incurred charges in the Paper segment relating to these activities during the third quarter as described below under “Special Items and Earnings per Diluted Share, Excluding Special Items,” and will incur future charges. The total capital cost of the conversion is expected to be approximately $150 million.2022.

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

Special Items and Earnings per Diluted Share, Excluding Special Items

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

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

A reconciliation of reported earnings per diluted share to earnings per diluted share, excluding special items, for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 are as follows:


	Three Months Ended
	March 31,
	2023		2022
Earnings per diluted share, as reported	$	2.11	$	2.70
Special items:
Facilities closure and other costs (a)		0.08		0.01
Jackson mill conversion-related activities (b)		0.01		0.01
Total special items		0.09		0.02
Earnings per diluted share, excluding special items	$	2.20	$	2.72

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Earnings per diluted share, as reported

$
1.47

$
1.26

$
4.23

$
3.58

Special items:

Wallula mill restructuring

0.16

—

0.16

—

DeRidder mill incident

—

—

0.03

—

Internal legal entity consolidation

0.04

—

0.04

—

Facilities closure and other costs

0.01

0.02

0.01

0.05

Acquisition and integration related costs

—

0.02

0.01

0.02

Hexacomb working capital adjustment

—

—

(0.01
)

—

Total special items

0.21

0.04

0.24

0.07

Earnings per diluted share, excluding special items

$
1.68

$
1.30

$
4.47

$
3.65

(a)

For the three months ended March 31, 2023, includes $9.7 million of closure costs related to corrugated products facilities and design centers. For the three months ended March 31, 2022, includes $0.6 million of closure costs related to corrugated products facilities and acquisition and integration costs related to the December 2021 Advance Packaging Corporation acquisition.

(b)

For the three months ended March 31, 2023 and 2022, includes $1.2 million and $1.5 million, respectively, of charges related to the announced discontinuation of production of UFS paper grades on the No. 3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

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

Industry and Business Conditions

Trade publications reported North American industry-wide corrugated products shipments in total ~~shipments increased 1.0%~~and per work day were down 8.5% during the ~~third~~first quarter of ~~2017,~~2023 compared to the same quarter ~~in 2016.~~of 2022. Reported industry containerboard production ~~increased 1.5%~~decreased 10.0% compared to the ~~third~~first quarter of ~~2016, and reported~~2022. Reported industry containerboard inventories at the end of the ~~third~~first quarter of ~~2017~~2023 were approximately ~~2.4~~2.7 million tons, ~~flat~~ down 1.1%compared to the same period in ~~2016.~~2022. Reported containerboard export shipments weredown ~~5.5%~~23.5% compared to the ~~third~~first quarter of ~~2016. Trade publications reported a~~2022. In January 2023, prices decreased $10 per ton for linerboard and $30 per ton ~~price increase on~~for corrugating medium, ~~during the third quarter~~followed by an additional decrease in February of ~~2017.~~$20 per ton, each.

The market for communication papers competes heavily with electronic data transmission and document storage alternatives. Increasing shifts to these alternatives have reduced usage of ~~and lowered demand for,~~ traditional print media and communication papers. Trade publications reported ~~that~~ North American ~~uncoated freesheet~~UFS paper shipments were down ~~1.4%~~8.4% in the ~~third~~first quarter of ~~2017,~~2023 compared to the same quarter ~~in 2016.~~of 2022. Average prices reported by a trade publication for cut size office papers were ~~lower by $30 per ton, or 3.0%,~~flat in the ~~third~~first quarter of ~~2017,~~2023, compared ~~to the third quarter of 2016.~~

~~Outlook~~

~~Looking ahead~~ to the fourth quarter of ~~2017,~~2022, and higher by $195 per ton, or 15.0%, compared to the first quarter of 2022.

Outlook

Looking ahead to the second quarter, we expect improved volume in our Packaging segment, ~~demand to remain strong although at seasonally lower volumes, which includes~~despite having one less shipping ~~day,~~day. However, prices will be lower as a result of the previously published domestic containerboard price decreases along with lower export prices. In the Paper segment, sales volume as well as ~~a seasonally less rich~~prices and mix are expected to be slightly lower based on lower demand. Although we anticipate most operating costs to trend lower, our converting costs, scheduled maintenance outage expense and depreciation expense will be higher. Primarily due to increases in ~~corrugated products,~~contract rail rates at most of our mills, we expect higher freight and logistics expenses compared to the ~~third~~first quarter. We will also have the addition of our newly acquired Sacramento Container operations in the fourth quarter. In our Paper segment, we have started implementing our recently announced price increases, but expect seasonally lower volumes and a less rich sales mix. While recycled fiber prices should move lower, seasonally higher wood and energy costs along with higher prices for certain key chemicals and higher freight costs are also expected. Annual mill outage costs are estimated to be higher than the third quarter due to scheduled maintenance work at four of our mills. Considering these items, we expect ~~fourth~~second quarter earnings ~~excluding special items,~~ to be lower than ~~third quarter earnings.~~the first quarter.

Results of Operations

Three Months Ended ~~September 30, 2017,~~March 31, 2023, compared to Three Months Ended ~~September 30, 2016~~March 31, 2022

The historical results of operations of PCA for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 are set forth below (dollars in millions):


	Three Months Ended
	March 31,
	2023			2022			Change
Packaging	$	1,808.6		$	1,964.5		$	(155.9	)
Paper		150.9			153.5			(2.6	)
Corporate and Other		60.5			58.3			2.2
Intersegment eliminations		(43.7	)		(39.9	)		(3.8	)
Net sales	$	1,976.3		$	2,136.4		$	(160.1	)

Packaging	$	268.0		$	362.2		$	(94.2	)
Paper		34.1			22.4			11.7
Corporate and Other		(31.4	)		(28.1	)		(3.3	)
Income from operations	$	270.7		$	356.5		$	(85.8	)
Non-operating pension (expense) income		(2.0	)		3.6			(5.6	)
Interest expense, net		(15.4	)		(19.8	)		4.4
Income before taxes		253.3			340.3			(87.0	)
Income tax provision		(63.2	)		(86.1	)		22.9
Net income	$	190.1		$	254.2		$	(64.1	)
Non-GAAP Measures (a)
Net income excluding special items	$	198.3		$	255.7		$	(57.4	)
Consolidated EBITDA		400.3			466.2			(65.9	)
Consolidated EBITDA excluding special items		404.9			467.2			(62.3	)
Packaging EBITDA		387.0			463.1			(76.1	)
Packaging EBITDA excluding special items		391.6			463.9			(72.3	)
Paper EBITDA		41.0			28.8			12.2
Paper EBITDA excluding special items		41.0			29.0			12.0

Three Months Ended

September 30,

2017

2016

Change

Packaging

$
1,346.6

$
1,167.1

$
179.5

Paper

271.4

292.8

(21.4
)
Corporate and Other

61.1

62.9

(1.8
)
Intersegment eliminations

(39.0
)

(38.8
)

(0.2
)
Net sales

$
1,640.1

$
1,484.0

$
156.1

Packaging

$
261.5

$
179.6

$
81.9

Paper

(0.7
)

44.5

(45.2
)
Corporate and Other

(18.5
)

(17.7
)

(0.8
)
Income from operations

$
242.3

$
206.4

$
35.9

Interest expense, net

(25.4
)

(23.4
)

(2.0
)
Income before taxes

216.9

183.0

33.9

Income tax provision

(77.8
)

(63.7
)

(14.1
)
Net income

$
139.1

$
119.3

$
19.8

Non-GAAP Measures (a)

Net income excluding special items

$
158.8

$
122.6

$
36.2

Consolidated EBITDA

339.8

294.4

45.4

Consolidated EBITDA excluding special items

363.9

298.9

65.0

Packaging EBITDA

340.2

251.6

88.6

Packaging EBITDA excluding special items

341.3

256.0

85.3

Paper EBITDA

16.4

59.2

(42.8
)
Paper EBITDA excluding special items

39.4

59.3

(19.9
)
(a)

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

~~(a)~~

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

Net Sales

Net sales ~~increased $156~~decreased $160 million, or ~~10.5%~~7.5%, to ~~$1,640~~$1,976 million during the three months ended ~~September 30, 2017,~~March 31, 2023, compared to ~~$1,484~~$2,136 million during the same period in ~~2016.~~2022.

Packaging. Net sales ~~increased $180~~decreased $156 million, or ~~15.4%~~7.9%, to ~~$1,347~~$1,809 million, compared to ~~$1,167~~$1,965 million in the ~~third~~first quarter of ~~2016,~~2022 due to ~~higher domestic and export containerboard and corrugated products prices and mix ($121 million) and increased~~lower containerboard and corrugated products volume ($59229 million), partially offset by higher prices and mix ($73 million). ~~Our~~In the first quarter of 2023, export and domestic containerboard ~~prices in~~outside shipments decreased 27.5% compared to the ~~third~~first quarter of ~~2017 increased 14.8%,~~2022. Our total corrugated products shipments were down 12.7% in total and ~~export prices increased 21.3%,~~per workday, compared to the same period in ~~2016.~~2022. Packaging prices and mix were favorable due to higher corrugated products prices, partially offset by lower outside containerboard prices. In the ~~third~~first quarter of ~~2017,~~2023, our domestic containerboard ~~outside shipments increased 5.7%, and total corrugated products shipments~~prices were ~~up 4.0%, compared to~~2.9% lower, while export prices were 15.4% lower, than the ~~third quarter of 2016. Containerboard mill production~~same period in ~~the third quarter of 2017 was 996,000 tons compared to 950,000 in 2016. Prices for corrugating medium reported by trade publications increased by $30 per ton during the third quarter of 2017.~~2022.

Paper.Net sales ~~during the three months ended September 30, 2017~~ decreased ~~$21~~$3 million, or ~~7.3%~~1.7%, to ~~$271~~$151 million, compared to ~~$293~~$154 million in the ~~third~~first quarter of ~~2016,~~2022, due to lower ~~pulp~~ volume ($~~12 million) as a result of the 2016 shutdown of our market pulp operations at our Wallula Mill, lower white paper volume ($2~~25 million), ~~and unfavorable changes in~~partially offset by higher prices and mix ($722 million).

Gross Profit

Gross profit ~~increased $68~~decreased $102 million during the three months ended ~~September 30, 2017,~~March 31, 2023, compared to the same period in ~~2016.~~2022. The ~~increase~~decrease was driven primarily by lower volumes in our Packaging and Paper segments, higher ~~containerboard~~operating costs, higher depreciation expense, higher freight and ~~corrugated products~~logistics expenses, and higher converting costs, partially offset by higher prices and mix in our Packaging and ~~sales~~Paper segments, lower scheduled maintenance outage expenses, and ~~production volumes, partially offset by lower Paper segment prices and mix and sales and production volumes, and higher input and operating costs.~~other expenses. In the three months ended ~~September 30, 2017,~~March 31, 2023, gross profit included special items of $3 million related to the conversion of the No. 3 machine at the Wallula Mill, compared to $1 million in the same period last year for acquisition related costs and facility closure costs.

~~Selling, General, and Administrative Expenses~~

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

~~Other Income (Expense), Net~~

~~Other income (expense), net, during the three months ended September 30, 2017 was $25 million of expense, compared to~~ $6 million of ~~expense during the three months ended September 30, 2016. The third quarter of 2017 included $23 million of charges~~special items primarily related to the conversion of the No. 3 machine at the Wallula Mill, and $4 million for asset disposals and write-offs, partially offset by $3 million of property damage and business interruption insurance net recoveries related to the February 2017 incident at our DeRidder Mill. The third quarter of 2016 included $4 million of closure costs related to corrugated products facilities and ~~integration costs related to~~Jackson mill conversion-related activities. In the ~~recent acquisitions, and~~three months ended March 31, 2022, gross profit included $1 million of ~~asset disposals~~special items for charges related to Jackson mill conversion-related activities.

Selling, General, and ~~write-offs.~~ Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) decreased $13 million during the three months ended March 31, 2023, compared to the same period in 2022. The decrease was primarily due to lower bad debt expense, fringe benefits, and outside services.

Other Expense, Net

Other income (expense), net, for the three months ended March 31, 2023 and 2022 are set forth below (dollars in millions):


	Three Months Ended
	March 31,
	2023			2022
Asset disposals and write-offs	$	(6.6	)	$	(12.7	)
Facilities closure and other costs		(4.7	)		(0.4	)
Jackson mill conversion-related activities		0.3			(0.4	)
Other		(1.5	)		(2.1	)
Total	$	(12.5	)	$	(15.6	)

We discuss these items in more detail in Note 4,5, Other ~~Income (Expense),~~Expense, Net, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, ~~Item1.~~Item 1. Financial Statements” of this Form 10-Q.

Income from Operations

Income from operations ~~increased $36~~decreased $86 million, or ~~17.4%~~24.1%, during the three months ended ~~September 30, 2017,~~March 31, 2023, compared to the same period in ~~2016.~~2022. The ~~third~~first quarter of ~~2017~~2023 included ~~$27~~$11 million of ~~expense for~~ special items ~~compared to $5 million in the same period in 2016. The special items in the third quarter of 2017 consist of $25 million of charges~~expense primarily related to ~~the previously announced conversion of the Wallula No. 3 paper machine to a virgin kraft linerboard machine, and $2 million for facility~~ closure costs related to corrugated products facilities and ~~a paper administration facility, and integration~~Jackson mill conversion-related activities, compared to $2 million of special items expense primarily related to costs from Jackson mill conversion-related activities, closure costs related to ~~recent acquisitions. Third quarter 2016 special items of $5 million~~corrugated products facilities, and expenses related to ~~closing a corrugated manufacturing facility and a paper distribution center and integration related costs for recent acquisitions.~~the acquisition of Advance Packaging Corporation in the first quarter of 2022.

Packaging.Packaging segment income from operations ~~increased $82~~decreased $94 million to ~~$262~~$268 million, compared to ~~$180~~$362 million during the three months ended ~~September 30, 2016.~~March 31, 2022. The ~~increase in the third quarter of 2017~~decrease related primarily to ~~favorable changes in~~lower sales and production volumes ($119 million), higher operating and converting costs ($25 million), higher freight expenses ($9 million), and higher depreciation expense ($13 million), partially offset by higher containerboard and corrugated products prices and mix ($~~88 million), higher containerboard and corrugated products sales and production volumes ($17~~73 million), lower ~~wood costs~~annual outage expenses ($51 million), and ~~a partial insurance recovery~~other costs ($7 million). Special items during the first quarter of 2023 included $9 million of expense primarily related to closure costs related to corrugated products facilities, compared to $1 million of expense for corrugated facility closures and acquisition and integration-related costs in the ~~DeRidder Mill incident~~first quarter of 2022.

Paper. Paper segment income from operations increased $12 million to $34 million, compared to $22 million during the three months ended March 31, 2022. The increase primarily related to higher prices and mix ($323 million) and lower freight expenses ($5 million), partially offset by higher ~~costs for recycled fiber ($15 million), labor ($6 million), chemicals ($2 million), repairs ($2 million), energy ($1 million), converting~~operating costs ($~~1 million), freight ($2~~11 million), and ~~higher depreciation expense~~lower sales and production volumes ($35 million). Special items during the ~~third~~first quarter of ~~2017~~2023 and 2022 included ~~expense of~~ $1 million ~~related to closure costs~~of expense for ~~corrugated products facilities~~Jackson mill conversion-related activities.

Non-Operating Pension Expense, Interest Expense, Net and ~~integration costs for the recent acquisitions. Special items for the third quarter 2016 included~~Income Taxes

Non-operating pension expense ~~of $5 million related to integration costs and closing a corrugated manufacturing facility.~~

~~Paper.~~ ~~Paper segment income from operations decreased $45 million to a loss of $1 million, compared to income of $45~~increased $6 million during the three months ended September 30, 2016. The decrease primarily related to unfavorable changes in prices and mix ($7 million), lower sales and production volumes ($7 million), higher energy ($2 million), and higher mill outage ($2 million) and freight ($1 million) expense. Special items during the third quarter of 2017 included expense of $25 million related to the conversion of the Wallula No. 3 machine to a virgin kraft linerboard machine. There were no special items in the same period of 2016. Excluding special items, income from operations decreased $20 million.

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

~~Interest expense, net, increased $2 million, during the three months ended September 30, 2017,~~March 31, 2023, compared to the same period in ~~2016.~~2022. The increase in non-operating pension expense was primarily related to unfavorable 2022 asset performance, partially offset by assumption changes.

Interest expense, net for the three months ended March 31, 2023 decreased $4 million when compared to the same period in 2022. The decrease in interest expense, net was primarily due to higher interest income due to higher rates on ~~PCA’s variable rate debt~~invested cash balances compared to the same period in ~~the third quarter of 2017 due to increases in LIBOR and the interest paid on term loan borrowings for the TimBar acquisition made in August 2016.~~2022.

During the three months ended ~~September 30, 2017,~~March 31, 2023, we recorded ~~$78~~$63 million of income tax expense, compared to ~~$64~~$86 million of expense during the three months ended ~~September 30, 2016.~~March 31, 2022. The effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was ~~35.9%~~24.9% and ~~34.8%~~25.3%, respectively. The ~~increase~~decrease in our effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2023 compared to the same period in ~~2016,~~2022 was primarily due to ~~an internal legal entity consolidation that will simplify future operating activities and resulted in $3 million of~~favorable employee performance unit vests with higher excess tax ~~expense for the change in value of deferred taxes.~~

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

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

Nine Months Ended

September 30,

2017

2016

Change

Packaging

$
3,915.0

$
3,387.9

$
527.1

Paper

784.3

840.1

(55.8
)
Corporate and Other

171.2

185.6

(14.4
)
Intersegment eliminations

(109.9
)

(111.2
)

1.3

Net sales

$
4,760.6

$
4,302.4

$
458.2

Packaging

$
676.8

$
533.5

$
143.3

Paper

58.1

105.0

(46.9
)
Corporate and Other

(55.7
)

(51.1
)

(4.6
)
Income from operations

$
679.2

$
587.4

$
91.8

Interest expense, net

(74.6
)

(67.5
)

(7.1
)
Income before taxes

604.6

519.9

84.7

Income tax provision

(204.9
)

(181.0
)

(23.9
)
Net income

$
399.7

$
338.9

$
60.8

Non-GAAP Measures (a)

Net income excluding special items

$
422.0

$
345.9

$
76.1

Consolidated EBITDA

962.9

851.7

111.2

Consolidated EBITDA excluding special items

991.0

861.5

129.5

Packaging EBITDA

911.0

750.8

160.2

Packaging EBITDA excluding special items

916.8

759.4

157.4

Paper EBITDA

103.2

148.2

(45.0
)
Paper EBITDA excluding special items

126.2

149.1

(22.9
)

~~_____________________~~

~~(a)~~

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

~~Net Sales~~

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

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

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

~~Gross Profit~~

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

~~Selling, General, and Administrative Expenses~~

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

~~Other Income (Expense), Net~~

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

~~Income from Operations~~

Income from operations increased $92 million, or 15.6%, during the nine months ended September 30, 2017, compared to the same period in 2016. The first nine months of 2017 included $31 million of pre-tax expense for special items, compared to $11 million of pre-tax expense for special items during the same period in 2016. The nine months ended September 30, 2017 included $25 million of charges related to the previously announced conversion of the Wallula No. 3 paper machine to a virgin kraft linerboard machine; $5 million for the property damage and business interruption insurance deductible related to the DeRidder Mill incident; $3 million of closure costs related to corrugated products facilities and a paper administration facility, integration costs related to the recent acquisitions, and costs related to a lump sum settlement payment for a multiemployer pension plan withdrawal liability; and $2 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico. The nine months ended September 30, 2016 included $7 million of facility closure costs related to corrugated products facilities and a paper distribution facility and $4 million of acquisition-related costs for the TimBar Corporation, and costs related to our withdrawal from a multiemployer pension plan.

~~Packaging.~~ Packaging segment income from operations increased $143 million to $677 million, during the first nine months of 2017 compared to the same period last year. The first nine months of 2017 included higher containerboard and corrugated products prices and mix ($148 million), higher sales and production volumes ($63 million), a partial insurance recovery related to the DeRidder Mill incident ($7 million), and lower mill outage costs ($2 million),benefits partially offset by higher costs for recycled fiber ($38 million), energy ($10 million), labor ($12 million), freight ($8 million), and higher depreciation expense ($9 million). Special items included $5 million of expense for the property damage and business interruption insurance deductible relatednondeductible employee remuneration paid to the DeRidder Mill incident; $3 million of charges consisting of closure costs related to corrugated products facilities, integration costs related to the recent acquisitions, and costs related to a lump sum settlement payment for a multiemployer pension plan withdrawal liability; and $2 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico in the first nine months of 2017. The nine months ended September 30, 2016 included $6 million of charges consisting of closure costs related to corrugated products facilities and our withdrawal from a multiemployer pension plan and $3 million of TimBar acquisition-related costs. Excluding special items, income from operations increased $140 million.covered employees.

~~Paper.~~ Paper segment income from operations decreased $47 million to $58 million, compared to the nine months ended September 30, 2016. The decrease primarily relates to lower paper sales and production volumes ($18 million), lower paper prices and mix ($3 million), and higher costs for energy ($11 million), partially offset by lower fiber costs ($8 million) and lower mill outage costs ($2 million). Special items during the first nine months of 2017 included expense of $25 million related to the conversion of the Wallula No. 3 machine to containerboard, compared to $2 million of facility closure costs for the same period in 2016. Excluding special items, income from operations decreased $23 million.

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

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

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

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

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of liquidity are net cash provided by operating activities and available borrowing capacity under our revolving credit facility. At ~~September 30, 2017~~March 31, 2023, we had ~~$371~~$368 million of cash and ~~$327~~cash equivalents, $152 million of marketable debt securities, and $321 millionof unused borrowing capacity under the revolving credit facility, net of letters of credit. ~~We paid the $265 million cash purchase price for the Sacramento Container acquisition on October 2, 2017 from cash on hand.~~ Currently, our primary uses of cash are for operations, capital expenditures, acquisitions, debt service, ~~(including voluntary payments of debt),~~common stock dividends, and repurchases of common ~~stock, and declared common stock dividends.~~stock. We believe that net cash generated from operating activities, cash on hand, available borrowings under our revolving credit facility, and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements, including payments of any declared common stock dividends, for the foreseeable future. As our debt or credit facilities become due, we will need to repay, extend, or replace such facilities. Our ability to do so will be subject to future economic conditions and financial, business, and other factors, many of which are beyond our control.

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


	Nine Months Ended
	September 30,									March 31,
	2017			2016			Change			2023			2022			Change
Net cash provided by (used for):
Operating activities	$	583.3		$	593.5		$	(10.2	)	$	280.4		$	325.3		$	(44.9	)
Investing activities		(227.6	)		(582.7	)		355.1			(115.4	)		(221.2	)		105.8
Financing activities		(224.5	)		84.8			(309.3	)		(117.3	)		(94.2	)		(23.1	)
Net increase in cash and cash equivalents	$	131.2		$	95.6		$	35.6		$	47.7		$	9.9		$	37.8

Operating Activities

~~During the nine months ended September 30, 2017, net~~Our operating cash ~~provided~~flow is primarily driven by ~~operating activities was $583 million, compared to $593 million in the same period in 2016, a decrease of $10 million. Cash from operations excluding~~our earnings and changes in ~~cash used for~~ operating assets and liabilities, ~~increased $106 million, primarily due to higher income from operations~~such as ~~discussed above. The increase was offset by $116 million of cash used for operating assets and liabilities primarily due to the following: (a) an increase in~~ accounts receivable, ~~in the first nine months of 2017, primarily related to higher sales volumes~~inventories, accounts payable and ~~prices in the Packaging segment, and (b) an increase in inventories in both the Packaging and Paper segments in anticipation of the four mill outages in the fourth quarter of 2017~~other accrued liabilities, as well as additional inventory build in Packaging segment as we begin the integration of the Sacramento Container acquisition that we purchased in early October 2017. This was partially offset by an increase in accounts payable, primarily related to timing of payments in the third quarter of 2017.factors described below. Cash requirements for operating activities are subject to PCA’s operating needs and the timing of collection of receivables and payments of payables and expenses.

During the three months ended March 31, 2023, net cash provided by operating activities was$280 million, compared to $325 million in the same period in 2022, a decrease of $45 million. Cash from operations excluding changes in cash used for operating assets and liabilities decreased $55 million primarily due to lower income from operations in 2023 as discussed above. Cash from operations increased by $10 million due to changes in operating assets and liabilities,primarily due to a favorable change in accounts receivable levels in the first quarter of 2023 compared to the same period in 2022 primarily due to lower sales volumes in the Packaging and Paper segments, partially offset by higher pricing in the Packaging and Paper segments in the first quarter of 2023. This favorable change was partially offset by an unfavorable change in accounts payable in the first quarter of 2023 compared to the same period in 2022 primarily due to lower production and sales volumes, which resulted in lower purchasing and manufacturing activities.

Investing Activities

~~Net cash~~We used $115 million for investing activities during the ~~nine~~three months ended ~~September 30, 2017 decreased $355 million, to $228 million,~~March 31, 2023 compared to ~~$583~~$221 million during the same period in ~~2016, primarily due to an acquisition we made in the prior year. During the third quarter of 2016 we acquired TimBar~~2022. We spent $112 million for ~~a purchase price of $386 million, net of cash acquired. We also spent $226 million for~~internal capital investments during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, compared to ~~$188~~$213 million during the same period in ~~2016.~~2022.

We expect capital investments in 2023 to be approximately $370 million in 2017, including $30 million for the Wallula mill paper machine conversion. On October 2, 2017, we acquired the assets of Sacramento Container Corporation and the membership interests of Northern Sheets, LLC and Central California Sheets, LLC for $265$475 million.These expenditures could increase or decrease as a result of a number of factors, including our financial results, strategic opportunities, future economic conditions, and our regulatory compliance requirements. We currently estimate capital expenditures to comply with ~~Boiler MACT~~environmental regulations ~~in 2017 of up to $1 million, and we expect other environmental capital expenditures of~~will be about $7$20 million in ~~2017.~~2023. Our estimated environmental expenditures could vary significantly depending upon the enactment of new environmental laws and ~~regulations, including those related to greenhouse gas emissions and industrial boilers.~~regulations. For additional information, see “Environmental Matters” in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2016~~2022 Annual Report on Form 10-K.

Financing Activities

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, net cash used byfor financing activities ~~changed by $309 million to a use of $225~~was $117 million, compared to ~~a source~~$94 million of ~~$85 million~~net cash used for financing activities during the same period in 2016. The decrease primarily relates to 2016 borrowings of $385 million to finance the TimBar acquisition in August 2016. Additionally, we have not repurchased common stock in 2017, have increased debt

~~repayments in 2017 and have~~2022. We paid out higher dividends in 2017. During the nine months ended September 30, 2017 we did not repurchase any common stock, compared to $100 million in the same period in 2016. In the first nine months of 2017, we made $36 million of principal payments on long-term debt and capital leases, compared to $31 million during the same period in 2016. In the first nine months of 2017, we paid $178$112 million of dividends during the first three months of 2023, compared to ~~$157~~$94 million of dividends paid during the ~~first nine months~~comparable period in 2022.

In addition to the items discussed in Note 11, Debt, of ~~2016.~~

~~For more information about our debt,~~the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Form 10-Q, see Note 9,11, Debt, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2016~~2022 Annual Report on Form ~~10-K.~~10-K for more information.

Contractual Obligations

There have been no material changes to the contractual obligations ~~table~~ disclosed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2016~~2022 Annual Report on Form 10-K.

Reconciliations of Non-GAAP Financial Measures to Reported Amounts

Income from operations excluding special items, net income excluding special items, EBITDA, and EBITDA excluding special items are non-GAAP financial measures. Management excludes special items, as it believes that these items are not necessarily reflective of the ongoing operations of our business. These measures are presented because they provide a means to evaluate the performance of our segments and our Company on an ongoing basis using the same measures that are used by our management, because these measures assist in providing a meaningful comparison between periods and because these measures are frequently used by investors and other interested parties in the evaluation of companies and the performance of their segments. Any analysis of non-GAAP financial measures should be done in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. Reconciliations of the non-GAAP measures to the most comparable measure reported in accordance with GAAP for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 follow (dollars in millions):


	Three Months Ended March 31,
	2023							2022
	Income before Taxes		Income Taxes			Net Income		Income before Taxes		Income Taxes			Net Income
As reported in accordance with GAAP	$	253.3	$	(63.2	)	$	190.1	$	340.3	$	(86.1	)	$	254.2
Special items:
Facilities closure and other costs (a)		9.7		(2.4	)		7.3		0.6		(0.2	)		0.4
Jackson mill conversion-related activities (b)		1.2		(0.3	)		0.9		1.5		(0.4	)		1.1
Total special items		10.9		(2.7	)		8.2		2.1		(0.6	)		1.5
Excluding special items	$	264.2	$	(65.9	)	$	198.3	$	342.4	$	(86.7	)	$	255.7

Three Months Ended September 30,

2017

2016

Income
before
Taxes

Income
Taxes

Net
Income

Income
before
Taxes

Income
Taxes

Net
Income

As reported in accordance with GAAP

$
216.9

$
(77.8
)

$
139.1

$
183.0

$
(63.7
)

$
119.3

Special items:

Wallula mill restructuring (a)

25.3

(9.8
)

15.5

—

—

—

Internal legal entity consolidation (b)

—

3.3

3.3

—

—

—

Facilities closure and other costs (a)(d)

0.9

(0.3
)

0.6

2.0

(0.6
)

1.4

Acquisition and integration related costs (a)(d)

0.5

(0.2
)

0.3

2.9

(1.0
)

1.9

Total special items

26.7

(7.0
)

19.7

4.9

(1.6
)

3.3

Excluding special items

$
243.6

$
(84.8
)

$
158.8

$
187.9

$
(65.3
)

$
122.6

(a)

For 2023, includes charges consisting of closure costs related to corrugated products facilities and design centers. For 2022, includes charges consisting of closure costs related to corrugated products facilities and acquisition and integration costs related to the December 2021 Advance Packaging acquisition.

(b)

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

Nine Months Ended September 30,

2017

2016

Income
before
Taxes

Income
Taxes

Net
Income

Income
before
Taxes

Income
Taxes

Net
Income

As reported in accordance with GAAP

$
604.6

$
(204.9
)

$
399.7

$
519.9

$
(181.0
)

$
338.9

Special items:

Wallula mill restructuring (a)

25.3

(9.7
)

15.6

—

—

—

DeRidder mill incident (c)

5.0

(1.9
)

3.1

—

—

—

Internal legal entity consolidation (b)

—

3.3

3.3

—

—

—

Facilities closure and other costs (a)(d)

1.9

(0.7
)

1.2

7.4

(2.5
)

4.9

Acquistion and integration related costs (a)(d)

0.8

(0.3
)

0.5

3.2

(1.1
)

2.1

Hexacomb working capital adjustment (c)

(2.3
)

0.9

(1.4
)

—

—

—

Total special items

30.7

(8.4
)

22.3

10.6

(3.6
)

7.0

Excluding special items

$
635.3

$
(213.3
)

$
422.0

$
530.5

$
(184.6
)

$
345.9

~~____________~~

~~(a)~~

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

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

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

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

~~(b)~~

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

~~(c)~~

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

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

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

~~(d)~~

~~The three and nine months ended September 30, 2016 include the following:~~

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

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

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


	Three Months Ended				Nine Months Ended					Three Months Ended
	September 30,				September 30,					March 31,
	2017		2016		2017			2016		2023			2022
Net income	$	139.1	$	119.3	$	399.7		$	338.9	$	190.1		$	254.2
Non-operating pension expense (income)											2.0			(3.6	)
Interest expense, net		25.4		23.4		74.6			67.5		15.4			19.8
Income tax provision		77.8		63.7		204.9			181.0		63.2			86.1
Depreciation, amortization, and depletion		97.5		88.0		283.7			264.3		129.6			109.7
EBITDA	$	339.8	$	294.4	$	962.9		$	851.7	$	400.3		$	466.2

Special items:
Wallula mill restructuring		22.7		—		22.7			—
Facilities closure and other costs		0.9		1.6		1.9			6.6		4.9			0.6
Acquisition and integration related costs		0.5		2.9		0.8			3.2
DeRidder mill incident		—		—		5.0			—
Hexacomb working capital adjustment		—		—		(2.3	)		—
Jackson mill conversion-related activities											(0.3	)		0.4
Total special items		24.1		4.5		28.1			9.8		4.6			1.0
EBITDA excluding special items	$	363.9	$	298.9	$	991.0		$	861.5	$	404.9		$	467.2

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


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2023			2022
Packaging
Segment income	$	261.5		$	179.6		$	676.8		$	533.5		$	268.0		$	362.2
Depreciation, amortization, and depletion		78.7			72.0			234.2			217.3			119.0			100.9
EBITDA		340.2			251.6			911.0			750.8			387.0			463.1
Faclities closure and other costs		0.6			1.5			1.6			5.7
Acquisition and integration related costs		0.5			2.9			0.8			2.9
DeRidder mill incident		—			—			5.0			—
Hexacomb working capital adjustment		—			—			(1.6	)		—
Facilities closure and other costs														4.9			0.6
Jackson mill conversion-related activities														(0.3	)		0.2
EBITDA excluding special items	$	341.3		$	256.0		$	916.8		$	759.4		$	391.6		$	463.9

Paper
Segment income	$	(0.7	)	$	44.5		$	58.1		$	105.0		$	34.1		$	22.4
Depreciation, amortization, and depletion		17.1			14.7			45.1			43.2			6.9			6.4
EBITDA		16.4			59.2			103.2			148.2			41.0			28.8
Wallula mill restructuring		22.7			—			22.7			—
Integration-related, facilities closure and other costs		0.3			0.1			0.3			0.9
Jackson mill conversion-related activities														—			0.2
EBITDA excluding special items	$	39.4		$	59.3		$	126.2		$	149.1		$	41.0		$	29.0

Corporate and Other
Segment loss	$	(18.5	)	$	(17.7	)	$	(55.7	)	$	(51.1	)	$	(31.4	)	$	(28.1	)
Depreciation, amortization, and depletion		1.7			1.3			4.4			3.8			3.7			2.4
EBITDA		(16.8	)		(16.4	)		(51.3	)		(47.3	)		(27.7	)		(25.7	)
Hexacomb working capital adjustment		—			—			(0.7	)		—
Acquisition and integration related costs		—			—			—			0.3
EBITDA excluding special items	$	(16.8	)	$	(16.4	)	$	(52.0	)	$	(47.0	)	$	(27.7	)	$	(25.7	)

EBITDA	$	339.8		$	294.4		$	962.9		$	851.7		$	400.3		$	466.2

EBITDA excluding special items	$	363.9		$	298.9		$	991.0		$	861.5		$	404.9		$	467.2

Market Risk and Risk Management Policies

PCA is exposed to the impact of commodity price changes, interest rate changes, and changes in the market value of its financial instruments. ~~We periodically~~To manage these risks, we may from time to time enter into ~~derivatives~~transactions, including certain physical commodity transactions, that are determined to ~~minimize these risks, but not for trading purposes. We were not a~~be derivatives. As of March 31, 2023, we are party to ~~any derivatives-based arrangements at September 30, 2017.~~certain physical commodity transactions related to natural gas supply contracts. These contracts qualify for the normal purchase normal sale ("NPNS") exception, and we have elected that exception. For a discussion of derivatives and hedging activities, see Note ~~13, Derivative Instruments and Hedging Activities,~~2, Summary of Significant Account Policies, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2016~~2022 Annual Report on Form 10-K.

~~The~~At March 31, 2023, interest rates on ~~approximately 63%~~ 100%of PCA’s outstanding debt are fixed. A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense and a corresponding decrease in income before taxes of approximately $10 million annually.

Off-Balance-Sheet Activities

The Company does not have any off-balance sheet arrangements as of ~~September 30, 2017.~~March 31, 2023.

Environmental Matters

There have been no material changes to the disclosure set forth in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Environmental Matters” filed with our ~~2016~~2022 Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

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

PCA has included in its ~~2016~~2022 Annual Report on Form 10-Ka discussion of its critical accounting policies and estimates which require management’s most difficult, subjective, or complex judgments used in the preparation of its consolidated financial statements. PCA has not had any changes to these critical accounting estimates during the first ~~nine~~three months of ~~2017.~~2023.

New and Recently Adopted Accounting Standards

For a listing of our new and recently adopted accounting standards, see Note ~~17,~~2, New and Recently Adopted Accounting Standards, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this Form 10-Q.

Forward-Looking Statements

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

•

the impact of general economic conditions;

•

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

•

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

•

fluctuations in wood fiber and recycled fiber costs;

•

fluctuations in purchased energy costs;

•

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

and

•

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

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

Our actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, we can give no assurances that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on our results of operations or financial condition. Given these uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. We expressly disclaim any obligation to publicly revise any forward-looking statements that have been made to reflect the occurrence of events after the date hereof. For a discussion of other factors, risks and uncertainties that may affect our business, see Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

~~Item 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

~~Item 4.~~

~~CONTROLS AND PROCEDURES~~

Item 4. CONTROLS AND PROCEDURES

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

Prior to filing this report, PCA completed an evaluation under the supervision and with the participation of PCA’s management, including PCA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of PCA’s disclosure controls and procedures as of ~~September 30, 2017.~~March 31, 2023. The evaluation of PCA’s disclosure controls and procedures included a review of the controls’ objectives and design, PCA’s implementation of the controls, and the effect of the controls on the information generated for use in this report. Based on this evaluation, PCA’s Chief Executive Officer and Chief Financial Officer concluded that PCA’s disclosure controls and procedures were effective at the reasonable assurance level as of ~~September 30, 2017.~~March 31, 2023.

Changes in Internal Control over Financial Reporting

On November 30, 2016, PCA acquired Columbus Container, Inc. (“Columbus Container”). We are currently in the process of evaluating and integrating Columbus Container’s controls over financial reporting which may result in changes or additions to PCA’s internal control over financial reporting. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. Except as may relate to the integration of the Columbus Container acquisition, there wereThere have been no ~~other~~ changes in our internal control over financial reporting (as defined in ~~Rule 13a-15(f)~~Rule13a-15(f) under the Exchange Act) that occurred during the most recent fiscal quarter ended ~~September 30, 2017~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~PART~~ II

PART II

OTHER INFORMATION

~~Item 1.~~

~~LEGAL PROCEEDINGS~~

Item 1. LEGAL PROCEEDINGS

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

~~Item 1A.~~

~~RISK FACTORS~~

Item 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in ~~"Part~~“Part I, Item ~~1A.~~IA. Risk ~~Factors"~~Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

~~Item 2.~~

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

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

The following table presents information related to our repurchases of common stock made under repurchase plans authorized by PCA's Board of Directors, and shares withheld to cover taxes on vesting of equity awards, during the three months ended ~~September 30, 2017:~~March 31, 2023:


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased (a)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)
January 1-31, 2023		—	$	—		—	$	477.5
February 1-28, 2023		245		142.99		—		477.5
March 1-31, 2023		35,495		133.08		—		477.5
Total		35,740	$	133.14		—	$	477.5

Issuer Purchases of Equity Securities

Period

Total
Number
of Shares
Purchased (a)

Average
Price Paid Per
Share

Total Number
of Shares
Purchased
as Part of Publicly
Announced Plans
or Programs

Approximate
Dollar Value
of Shares
That May Yet
Be Purchased
Under the Plans
or Programs
(in millions)

July 1-31, 2017

1,136

$
112.11

—

$
193.0

August 1-31, 2017

73

109.62

—

193.0

September 1-30, 2017

—

—

—

193.0

Total

1,209

$
111.96

—

$
193.0

(a)

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

~~(a)~~

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

Item 3.DEFAULTS UPON SENIOR SECURITIES

None.

~~DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~

~~Item 4.~~

~~MINE SAFETY DISCLOSURES~~

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

~~Item 5.~~

~~OTHER INFORMATION~~

~~None.~~Item 5.OTHER INFORMATION

None.

Item 6. EXHIBITS

~~Item 6.~~Exhibit

Number

~~EXHIBITS~~

~~Exhibit~~ ~~Number~~		Description

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

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

32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †

~~101~~101.INS		~~The following financial information from Packaging Corporation of America’s Quarterly Report on Form 10-Q for~~Inline XBRL Instance Document – the ~~quarter ended September 30, 2017, formatted~~instance document does not appear in the Interactive Data File because its XBRL ~~(eXtensible Business Reporting Language): (i) Consolidated Statements of Income~~tags are embedded within the Inline XBRL document.†

101.SCH		Inline XBRL Taxonomy Extension Schema Document. †

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

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

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

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

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

†	~~Filed herewith.~~

~~SIGNATURES~~

† Filed herewith.

SIGNATURES

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


		Packaging Corporation of America

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

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

Date: ~~November~~May 3, ~~2017~~2023


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

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


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

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


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


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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2724

Item 4.	Controls and Procedures	2724

	PART II

Item 1.	Legal Proceedings	2825

Item 1A.	Risk Factors	2825

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

Item 3.	Defaults Upon Senior Securities	2825

Item 4.	Mine Safety Disclosures	2825

Item 5.	Other Information	2825

Item 6.	Exhibits	2926


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	370.5		$	239.3		$	367.7		$	320.0
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $11.3 million and $10.1 million as of September 30, 2017, and December 31, 2016, respectively		831.3			689.2
Short-term marketable debt securities								95.6			85.2
Accounts receivable, net of allowance for credit losses and customer deductions of $13.8 million and $19.6 million as of March 31, 2023 and December 31, 2022, respectively								1,031.4			1,031.8
Inventories		736.6			723.6			1,003.4			977.3
Prepaid expenses and other current assets		43.4			30.3			87.3			58.3
Federal and state income taxes receivable		20.0			13.9			—			35.7
Total current assets		2,001.8			1,696.3			2,585.4			2,508.3
Property, plant, and equipment, net		2,881.6			2,895.7			3,896.6			3,900.0
Goodwill		732.1			737.9			922.4			922.4
Intangible assets, net		347.8			367.1
Other intangible assets, net								258.3			267.9
Operating lease right-of-use assets								288.6			298.3
Long-term marketable debt securities								56.9			64.9
Other long-term assets		63.9			80.0			40.8			42.0
Total assets	$	6,027.2		$	5,777.0		$	8,049.0		$	8,003.8
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	156.5		$	25.8
Capital lease obligations		1.3			1.3
Operating lease obligations							$	72.7		$	72.2
Finance lease obligations								1.9			1.9
Accounts payable		379.5			323.8			410.5			410.4
Dividends payable		60.3			59.9			115.7			115.5
Accrued liabilities		207.8			201.2			184.7			263.7
Accrued interest		18.9			13.4			25.5			11.8
Federal and state income taxes payable								17.9			—
Total current liabilities		824.3			625.4			828.9			875.5
Long-term liabilities:
Long-term debt		2,456.3			2,620.0			2,474.1			2,473.6
Capital lease obligations		19.3			20.3
Operating lease obligations								225.1			234.6
Finance lease obligations								10.3			10.8
Deferred income taxes		342.1			334.7			546.2			543.0
Compensation and benefits		322.8			357.2			148.5			141.8
Other long-term liabilities		68.2			59.6			58.2			57.4
Total long-term liabilities		3,208.7			3,391.8			3,462.4			3,461.2
Commitments and contingent liabilities
Commitments and contingent liabilities (Note 19)
Stockholders' equity:
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.4 million and 94.2 million shares issued as of September 30, 2017, and December 31, 2016, respectively		0.9			0.9
Common stock, par value $0.01 per share, 300.0 million shares authorized, 89.9 million and 89.7 million shares issued as of March 31, 2023 and December 31, 2022, respectively								0.9			0.9
Additional paid in capital		466.1			451.4			597.8			581.8
Retained earnings		1,658.2			1,447.1			3,259.3			3,186.8
Accumulated other comprehensive loss		(131.0	)		(139.6	)		(100.3	)		(102.4	)
Total stockholders' equity		1,994.2			1,759.8			3,757.7			3,667.1
Total liabilities and stockholders' equity	$	6,027.2		$	5,777.0		$	8,049.0		$	8,003.8


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


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


	Common Stock					Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital			Earnings			Loss			Equity
Balance at January 1, 2023		89,695		$	0.9	$	581.8		$	3,186.8		$	(102.4	)	$	3,667.1
Common stock withheld and retired to cover taxes on vested stock awards		(36	)		—		(0.3	)		(4.4	)		—			(4.7	)
Common stock dividends declared		—			—		—			(113.2	)		—			(113.2	)
Share-based compensation and other		273			—		16.3			—			—			16.3
Comprehensive income		—			—		—			190.1			2.1			192.2
Balance at March 31, 2023		89,932		$	0.9	$	597.8		$	3,259.3		$	(100.3	)	$	3,757.7


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

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

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

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

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

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

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


	Amounts Reclassified from AOCI
	Three Months Ended March 31,
Details about AOCI Components	2023			2022
Unfunded employee benefit obligations (a)
Amortization of prior service costs	$	(1.2	)	$	(0.8	)	See (a) below
Amortization of actuarial losses		(1.0	)		(0.7	)	See (a) below
		(2.2	)		(1.5	)	Total before tax
		0.6			0.3		Tax benefit
	$	(1.6	)	$	(1.2	)	Net of tax


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2023			2022
Land and land improvements	$	156.1		$	149.7		$	196.6		$	192.4
Buildings		731.2			717.1			1,043.6			1,023.6
Machinery and equipment		5,066.2			4,951.4			6,825.8			6,709.3
Construction in progress		177.6			125.4			378.4			440.2
Other		66.5			66.7			149.3			146.9
Property, plant and equipment, at cost		6,197.6			6,010.3			8,593.7			8,512.4
Less accumulated depreciation		(3,316.0	)		(3,114.6	)		(4,697.1	)		(4,612.4	)
Property, plant, and equipment, net	$	2,881.6		$	2,895.7		$	3,896.6		$	3,900.0

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

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

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