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~~November 2, 2018 the Registrant had outstanding ~~94,350,499~~94,497,298 shares of common stock, par value $0.01 per share.

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

	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Statements of Income:
Net sales	$	1,640.1		$	1,484.0		$	4,760.6		$	4,302.4		$	1,809.9		$	1,640.1		$	5,268.1		$	4,760.6
Cost of sales		(1,242.8	)		(1,154.5	)		(3,660.1	)		(3,353.8	)		(1,366.7	)		(1,243.1	)		(4,048.2	)		(3,661.2	)
Gross profit		397.3			329.5			1,100.5			948.6			443.2			397.0			1,219.9			1,099.4
Selling, general, and administrative expenses		(130.2	)		(116.9	)		(388.9	)		(346.0	)
Selling, general and administrative expenses														(134.2	)		(129.6	)		(406.7	)		(386.9	)
Other expense, net		(24.8	)		(6.2	)		(32.4	)		(15.2	)		(10.5	)		(24.8	)		(32.2	)		(32.4	)
Income from operations		242.3			206.4			679.2			587.4			298.5			242.6			781.0			680.1
Interest expense, net		(25.4	)		(23.4	)		(74.6	)		(67.5	)
Interest expense, net and other														(24.4	)		(25.7	)		(75.0	)		(75.5	)
Income before taxes		216.9			183.0			604.6			519.9			274.1			216.9			706.0			604.6
Provision for income taxes		(77.8	)		(63.7	)		(204.9	)		(181.0	)		(67.4	)		(77.8	)		(172.6	)		(204.9	)
Net income	$	139.1		$	119.3		$	399.7		$	338.9		$	206.7		$	139.1		$	533.4		$	399.7

Net income per common share:
Basic	$	1.47		$	1.27		$	4.24		$	3.59		$	2.19		$	1.47		$	5.65		$	4.24
Diluted	$	1.47		$	1.26		$	4.23		$	3.58		$	2.18		$	1.47		$	5.64		$	4.23
Dividends declared per common share	$	0.63		$	0.63		$	1.89		$	1.73		$	0.79		$	0.63		$	2.21		$	1.89

Statements of Comprehensive Income:
Net Income	$	139.1		$	119.3		$	399.7		$	338.9
Net income													$	206.7		$	139.1		$	533.4		$	399.7
Other comprehensive income, net of tax:
Foreign currency translation adjustment		0.1			—			(0.2	)		—			—			0.1			(0.1	)		(0.2	)
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.5 million, $0.5 million, $1.6 million, and $1.6 million		0.9			0.9			2.6			2.6
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $1.2 million, $1.0 million, $3.7 million, and $3.1 million		1.9			1.8			6.2			5.0
Changes in unfunded employee benefit obligation net of tax of $2.0 million		—			—			—			3.1
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.3 million, $0.5 million, $1.0 million, and $1.6 million														1.0			0.9			3.0			2.6
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $1.0 million, $1.2 million, $3.0 million, and $3.7 million														3.0			1.9			8.9			6.2
Other comprehensive income		2.9			2.7			8.6			10.7			4.0			2.9			11.8			8.6
Comprehensive income	$	142.0		$	122.0		$	408.3		$	349.6		$	210.7		$	142.0		$	545.2		$	408.3

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

	September 30,			December 31,			September 30,			December 31,
	2017			2016			2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	370.5		$	239.3		$	293.8		$	216.9
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
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $14.0 million and $12.6 million as of September 30, 2018, and December 31, 2017, respectively								986.2			830.7
Inventories		736.6			723.6			780.6			762.5
Prepaid expenses and other current assets		43.4			30.3			49.0			35.5
Federal and state income taxes receivable		20.0			13.9			5.1			69.5
Total current assets		2,001.8			1,696.3			2,114.7			1,915.1
Property, plant, and equipment, net		2,881.6			2,895.7			3,065.1			2,924.9
Goodwill		732.1			737.9			888.7			883.2
Intangible assets, net		347.8			367.1
Other intangible assets, net								373.9			410.0
Other long-term assets		63.9			80.0			57.6			64.3
Total assets	$	6,027.2		$	5,777.0		$	6,500.0		$	6,197.5
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	156.5		$	25.8		$	—		$	150.0
Capital lease obligations		1.3			1.3			1.4			1.3
Accounts payable		379.5			323.8			438.9			402.9
Dividends payable		60.3			59.9			75.8			60.5
Accrued liabilities		207.8			201.2			223.4			203.2
Accrued interest		18.9			13.4			27.0			14.8
Total current liabilities		824.3			625.4			766.5			832.7
Long-term liabilities:
Long-term debt		2,456.3			2,620.0			2,482.9			2,480.4
Capital lease obligations		19.3			20.3			17.9			19.0
Deferred income taxes		342.1			334.7			279.3			239.5
Compensation and benefits		322.8			357.2			360.2			372.5
Other long-term liabilities		68.2			59.6			63.0			70.8
Total long-term liabilities		3,208.7			3,391.8			3,203.3			3,182.2
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.4 million and 94.2 million shares issued as of September 30, 2017, and December 31, 2016, respectively		0.9			0.9
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.5 million and 94.3 million shares issued as of September 30, 2018, and December 31, 2017, respectively								0.9			0.9
Additional paid in capital		466.1			451.4			488.9			471.2
Retained earnings		1,658.2			1,447.1			2,185.5			1,867.4
Accumulated other comprehensive loss		(131.0	)		(139.6	)		(145.1	)		(156.9	)
Total stockholders' equity		1,994.2			1,759.8			2,530.2			2,182.6
Total liabilities and stockholders' equity	$	6,027.2		$	5,777.0		$	6,500.0		$	6,197.5

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2018			2017
Cash Flows from Operating Activities:
Net income	$	399.7		$	338.9		$	533.4		$	399.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization of intangibles		283.7			264.3			313.6			283.7
Amortization of deferred financing costs		6.0			5.8			6.5			6.0
Share-based compensation expense		15.4			15.0			17.4			15.4
Deferred income tax provision		1.6			6.5			34.9			1.6
Net loss on impairment of assets		13.5			—			—			13.5
Pension and post retirement benefits expense, net of contributions		(25.3	)		(33.5	)
Pension and post-retirement benefits expense, net of contributions								(2.7	)		(25.3	)
Other, net		12.0			3.7			8.2			12.0
Changes in operating assets and liabilities:
(Increase) decrease in assets —
Increase in assets —
Accounts receivable		(142.2	)		(36.0	)		(148.9	)		(142.2	)
Inventories		(13.0	)		4.1			(22.6	)		(13.0	)
Prepaid expenses and other current assets		(10.3	)		(11.2	)		(13.2	)		(10.3	)
Increase (decrease) in liabilities —
Accounts payable		37.7			13.6			19.6			37.7
Accrued liabilities		9.6			10.8			23.7			9.6
Federal and state income taxes payable / receivable		(5.1	)		11.5			64.6			(5.1	)
Net cash provided by operating activities		583.3			593.5			834.5			583.3
Cash Flows from Investing Activities:
Additions to property, plant, and equipment		(226.2	)		(188.1	)		(404.3	)		(226.2	)
Acquisition of business, net of cash acquired		—			(385.6	)
Additions to other long term assets		(6.9	)		(9.4	)		(4.1	)		(6.9	)
Proceeds from disposals		4.4			—			0.5			4.4
Other, net		1.1			0.4			2.6			1.1
Net cash used for investing activities		(227.6	)		(582.7	)		(405.3	)		(227.6	)
Cash Flows from Financing Activities:
Repayments of debt and capital lease obligations		(35.6	)		(30.7	)		(151.0	)		(35.6	)
Proceeds from issuance of debt		—			385.0
Financing costs paid		—			(2.1	)
Common stock dividends paid		(178.2	)		(156.7	)		(193.4	)		(178.2	)
Repurchases of common stock		—			(100.3	)
Shares withheld to cover employee restricted stock taxes		(10.7	)		(10.2	)		(7.9	)		(10.7	)
Other, net		—			(0.2	)
Net cash (used for) provided by financing activities		(224.5	)		84.8
Net cash used for financing activities								(352.3	)		(224.5	)
Net increase in cash and cash equivalents		131.2			95.6			76.9			131.2
Cash and cash equivalents, beginning of period		239.3			184.2			216.9			239.3
Cash and cash equivalents, end of period	$	370.5		$	279.8		$	293.8		$	370.5

See accompanying condensed notes to unaudited quarterly consolidated financial ~~statements.~~statements.

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

We report our business in three reportable segments: Packaging, Paper, and Corporate and Other. Our Packaging segment produces a wide variety of corrugated packaging products. The Paper segment manufactures and sells a range of ~~white papers, including uncoated free sheet and coated one-side grades.~~communication-based papers. During the ~~third~~second quarter of ~~2017,~~2018, the Company ~~announced that it will discontinue~~discontinued 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~~and converted the No. 3 machine to a ~~400,000 ton-per-year~~ virgin kraft linerboard machine. Subsequent to the date of conversion in May 2018, operating results for the Wallula mill are primarily included in the Packaging segment. Corporate and ~~Other~~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~~2018 and for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 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 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~~2018 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2018. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

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

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

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

During the first quarter of 2017, we received $1.1 million from the seller related to a working capital adjustment. We recorded the adjustment as a decrease to goodwill which lowered the purchase price to $384.5 million.

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

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

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

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):

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

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

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

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

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

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

For the three months ended September 30, 2017 and 2016 we recorded $77.8 million and $63.7 million of income tax expense and had an effective tax rate of 35.9% 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%, respectively. The decrease in our effective tax rate for the nine months ended September 30, 2017 compared with the same period in 2016, was primarily due to the ~~adoption of ASU 2016-09 (Topic 718):~~ ~~Improvements to Employee Share-Based Payment Accounting~~, which requires all excess tax benefits and deficiencies from employee share-based payment awards to be recognized in the income statement as opposed to additional paid in capital. This was partially offset by the tax expense from the internal legal entity consolidation.

Our effective tax rate may differ from the federal statutory income tax rate of 35.0%, 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 there were no significant changes to our uncertain tax positions. For more information, see Note 6, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our 2016 Annual Report on Form 10-K.

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

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

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

Depreciation expense for the three months ended September 30, 2017 and 2016 was $87.0 million and $79.9 million, respectively. During the nine 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, we recognized $2.6 million incremental depreciation expense from shortening the useful lives of certain assets related to the Wallula mill restructuring.

~~At September 30, 2017 and December 31, 2016 purchases of property, plant, and equipment included in accounts payable were $30.4 million and $12.8 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 and December 31, 2016 we had $676.9 million and $682.7 million of goodwill recorded in our Packaging segment, respectively. At both September 30, 2017 and December 31, 2016 we had $55.2 million of goodwill recorded in our Paper segment.

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

~~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):~~

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

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

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

Included in interest expense, net, are amortization of treasury lock settlements and amortization of financing costs. For both the three months ended September 30, 2017 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, 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.

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

For more information on our long-term debt and interest rates on that debt, see Note 9, Debt, 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.

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

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

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

The Company has a long-term equity incentive plan, which allows for grants of restricted stock, performance awards, stock appreciation rights, and stock options to directors, officers, and employees, as well as others who engage in services for PCA. The plan, as amended, terminates May 1, 2023 and authorizes 10.6 million shares of common stock for grant over the life of the plan. As of September 30, 2017, 1.0 million shares were available for future issuance under the plan. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date.

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

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

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

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

During the nine months ended September 30, 2017, we paid $178.2 million of dividends to shareholders. On August 25, 2017 PCA's Board of Directors announced a regular quarterly cash dividend of $0.63 per share of common stock, which was paid on October 13, 2017 to shareholders of record as of September 15, 2017. The July 2017 dividend payment was $59.4 million.

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

~~The Company did not repurchase any shares of its common stock during the three and nine months ended September 30, 2017.~~

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

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

Amounts Reclassified from AOCI

Three Months Ended September 30,

Nine Months Ended September 30,

Details about AOCI Components

2017

2016

2017

2016

Unrealized loss on treasury locks, net

$
(1.4
)

$
(1.4
)

$
(4.2
)

$
(4.2
)

See (a) below

0.5

0.5

1.6

1.6

Tax benefit

$
(0.9
)

$
(0.9
)

$
(2.6
)

$
(2.6
)

Net of tax

Unfunded employee benefit obligations

Amortization of prior service costs

$
(1.3
)

$
(1.3
)

$
(4.3
)

$
(4.2
)

See (b) below
Amortization of actuarial losses

(1.8
)

(1.5
)

(5.6
)

(3.9
)

See (b) below

(3.1
)

(2.8
)

(9.9
)

(8.1
)

Total before tax

1.2

1.0

3.7

3.1

Tax benefit

$
(1.9
)

$
(1.8
)

$
(6.2
)

$
(5.0
)

Net of tax

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

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

Louisiana Timber Procurement Company, L.L.C. (LTP) is a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company (Boise Cascade). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of PCA and Boise Cascade in Louisiana. PCA is the primary beneficiary of LTP, and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements in our Corporate and Other segment. The carrying amounts of LTP's assets and liabilities (which relate primarily to noninventory working capital items) on our Consolidated Balance Sheets were $4.6 million at September 30, 2017 and $5.0 million at December 31, 2016. During the three months ended September 30, 2017 and 2016, we recorded $20.8 million and $15.5 million, respectively, and during the nine months ended September 30, 2017 and 2016 we recorded $66.0 million and $54.8 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 and 2016, fiber purchases from related parties were $4.0 million and $3.9 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.

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, and income taxes. For many of these allocated expenses, the related assets and liabilities remain in the Corporate and Other segment.

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

Effective January 1, 2018, the ~~Financial~~Company adopted Accounting Standards ~~Board ("FASB"~~Update (“ASU”) ~~issued ASU~~ 2014-09 (Topic 606): Revenue from Contracts with ~~Customers.~~Customers. This ASU ~~amends~~supersedes the ~~guidance for~~ revenue recognition requirements in Topic 605 Revenue Recognition (Topic 605) and requires entities to ~~replace numerous industry-specific requirements.~~recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 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~~additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, ~~with customers.~~

~~There are two permitted transition methods under the standard: full retrospective method,~~including significant judgments and estimates, and changes in ~~which case the cumulative effect of applying~~those estimates. The Company adopted the standard ~~would be recognized in the earliest period shown, or~~utilizing the modified retrospective method, in which case the cumulative effect ~~of applying the standard would be~~was recognized at the date of initial ~~application. The new standard becomes effective for us as of~~application on 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~~2018. The adoption 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, wedid not 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~~operations; however, the following adjustment and reclassification of certain costs were made for the three and nine months ended September 30, 2018:

a. The Company ships a ~~result~~portion of ~~adoption~~its products to customers under consignment agreements. These products do not have an alternative use, and, ~~we anticipate~~under the ~~primary impact~~new standard, revenue associated with these products is required to be ~~the additional required disclosures around~~recognized earlier than under prior revenue recognition standards. Utilizing the modified retrospective method, the cumulative impact of adopting the new standard resulted in an increase of approximately $1.6 million, net of tax, to opening retained earnings as of January 1, 2018.

b. The new revenue standard also provides additional clarity concerning contract fulfillment costs, which resulted in certain costs being classified as cost of sales rather than selling, general and administrative expenses beginning January 1, 2018. For the ~~notes to the consolidated financial statements.~~three and nine months ended September 30, 2018, this amount totaled $6.9 million and $20.0 million, respectively.

Effective January 1, ~~2017,~~2018, the Company adopted ASU ~~2016-09 (Topic 718):~~2017-07, ~~Improvements to Employee Share-Based Payment Accounting, which is intended to improve~~Compensation: Improving the ~~accounting for share-based payment transactions as part~~Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The guidance in this update requires that an employer disaggregate the ~~FASB’s simplification initiative. This ASU requires all excess tax benefits and deficiencies~~service cost component from ~~share-based payment awards (including tax benefits~~the other components of ~~dividends on share-based payment awards)~~net benefit cost. Non-service cost components of net periodic benefit cost are required to be ~~recognized~~presented in the income statement ~~when~~separately from the ~~awards vest or are settled. Excess tax benefits~~service cost component and ~~deficiencies were previously recognized in additional paid in capital in our consolidated balance sheet. Additionally,~~outside the ~~guidance requires these excess tax benefits and deficiencies~~subtotal of operating income. The update also allows only the service cost component to be ~~presented as an operating activity~~eligible for capitalization for internally developed capital projects. The amendments in this update are applied retrospectively for the income statement presentations and prospectively for the capitalization of ~~cash flows rather than as a financing activity. As a result~~service costs.

The adoption of this ~~adoption, the Company recorded~~ASU retrospectively resulted in a $0.3 million and ~~$6.6~~$0.9 million reclassification between cost of ~~excess tax benefits~~sales and selling, general and administrative expenses (both components of income from ~~share-based compensation as an~~operations) and interest expense, net and other (a component outside of income ~~tax benefit in the income statement~~from operations) 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,~~2018, 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 clarifies what changes to the terms or conditions of a share-based payment award require an entity to apply ~~modification~~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.

InEffective January ~~2017,~~1, 2018, the ~~FASB issued ASU 2017-04 (Topic 350):~~ ~~Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment~~Company adopted , 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,~~Effective January 1, 2018, the ~~FASB issued~~Company adopted 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. ItThe adoption of this guidance did not have a material impact on the Company's financial condition, results of operations, or cash flows.

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

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes or modifies certain disclosure requirements and adds additional requirements to improve the usefulness of the fair value measurement disclosure for financial statement users. The ASU is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. Certain amendments of ASU 2018-13 are required to be applied prospectively for the first interim period of the initial year of adoption. All other amendments need to be applied retrospectively. The Company is currently evaluating the impact of the new guidance.

In February 2018, the FASB issued ASU 2018-02 (Topic 220): Income Statement – Reporting Comprehensive Income – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for optional reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from the enactment of H.R.1 (P.L. 115-97), originally known as the “Tax Cuts and Jobs Act,” in December 2017. An entity that elects to reclassify these amounts must reclassify stranded tax effects related to the change in federal tax rate for all items accounted for in other comprehensive income (e.g., pension and postretirement benefits and cash flow hedges). Entities may also elect to reclassify other stranded tax effects that relate to the Act but do not directly relate to the change in the federal tax rate (e.g., state taxes). Upon adoption of ASU 2018-02, entities are required to disclose their policy for releasing the income tax effects from accumulated other comprehensive income. ASU 2018-02 is effective for annual periods beginning after December 15, ~~2017,~~2018, and interim periods within those ~~annual periods, with early~~fiscal years. Early adoption is permitted. The Company does not expect this ASU to have a material impact on the ~~Company's~~Company’s financial ~~condition,~~position, results of operations, or cash ~~flows.~~flow.

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~~Additionally, the guidance requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-10: Codification Improvements to Topic 842, Leases and ASU 2018-11: Leases (Topic 842): Targeted Improvements. These ASUs provide clarification to the lease standard and allow entities an optional transition method for implementing ASU 2016-02 and a lessor practical expedient for separating lease and non-lease components. The optional transition method allows companies the option to use the effective date as the date of initial application on transition. The Company plans to elect this transition method, and as a result, we will not adjust our comparative period financial information or make the new required lease disclosures for periods before the effective date.

ASU 2016-02 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~~We are in the process of implementing changes to ~~be adopted using~~our systems and processes in conjunction with our review of existing lease agreements, which primarily consist of equipment and real estate leases. In addition, we are currently working with a ~~modified retrospective approach.~~vendor to implement a technology tool to assist with the accounting and reporting requirements of the new standard. We ~~currently plan to~~will adopt ~~this ASU on~~Topic 842 effective January 1, 2019 and expect to ~~recognize a liability and corresponding asset associated with in-scope operating leases, but~~elect certain available transitional practical expedients. We are still in the process of determining the effects on our financial statements but do expect to recognize a liability and ~~the processes required to account for leasing activity on an ongoing basis.~~corresponding asset associated with in-scope operating leases.

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.

Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be entitled 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):

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

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

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

We manufacture and sell a range of communication-based papers. Communication papers consist of cut-size office papers, and printing and converting papers. Pressure sensitive papers, including release liners, are used for specialty applications such as consumer and commercial product labels.

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

Revenue in this segment primarily relates to Louisiana Timber Procurement Company, L.L.C. (LTP), a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company (Boise Cascade). PCA is the primary beneficiary of LTP and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements. See Note 17, Transactions With Related Parties, for more information related to LTP.

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

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

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

On October 2, 2017, PCA acquired substantially all of the assets of Sacramento Container Corporation, and 100% of the membership interests of Northern Sheets, LLC and Central California Sheets, LLC (collectively referred to as “Sacramento Container”) for a purchase price of $274 million, including working capital adjustments. Funding for the $274 million purchase price came from available cash on hand. Assets acquired include full-line corrugated products and sheet feeder operations in both McClellan, California and Kingsburg, California. Sacramento Container provides packaging solutions to customers serving portions of California’s strong agricultural market. Sacramento Container’s financial results are included in the Packaging segment from the date of acquisition.

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

During the second quarter ended June 30, 2018, we made a $5.5 million net adjustment based on the final valuation of the intangible assets. We recorded the adjustment as a decrease to other intangible assets with an offset to goodwill.

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 Sacramento Container’s commitment to continuous improvement and regional synergies, 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 9.6 years.

Property, plant, and equipment were assigned estimated useful lives ranging from one to 13 years.

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

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

On December 22, 2017, the President signed into law H.R.1 (P.L. 115-97), originally known as the “Tax Cuts and Jobs Act” (the “Tax Act”). The Tax Act significantly revises the U.S. tax code by, among other items, reducing the federal corporate tax rate from 35% to 21%, providing for the full expensing of certain depreciable property, eliminating the corporate alternative minimum tax, limiting the deductibility of interest expense, further limiting the deductibility of certain executive compensation, limiting the use of net operating loss carryforwards created in tax years beginning after December 31, 2017, and implementing a territorial tax system imposing a deemed repatriation transition tax (“Transition Tax”) on earnings of foreign subsidiaries.

The SEC staff issued Staff Accounting Bulletin (“SAB”) 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which provides guidance on accounting for the effects and includes a measurement period that ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting of the Tax Act, which cannot extend beyond one year. In accordance with SAB 118, the Company recorded provisional estimates of the income tax effects of the Tax Act in the 2017 Form 10-K.

During the three and nine months ended September 30, 2018, we have recorded an immaterial favorable adjustment for the Transition Tax originally recorded with the measurement period provisional estimates at December 31, 2017. We expect to record our final adjustment for the income tax effects of the Tax Act after the completion and filing of our 2017 federal and state income tax returns during the fourth quarter and before the SAB 118 measurement period ends. We estimate this final adjustment, primarily from favorable timing item differences, to also be immaterial.

For the three months ended September 30, 2018 and 2017, we recorded $67.4 million and $77.8 million of income tax expense and had an effective tax rate of 24.6% and 35.9%, respectively. For the nine months ended September 30, 2018 and 2017, we recorded $172.6 million and $204.9 million of income tax expense and had an effective tax rate of 24.4% and 33.9%, respectively. The decrease in our effective tax rate for both the three and nine months ended September 30, 2018 compared with the same periods in 2017 was primarily due to the Tax Act (P.L. 115-97), which included a reduction in the federal tax rate of 14.0% offset by the loss of the Domestic Production Activities Deduction benefit of about 3.2% and a reduction in the federal benefit of state tax deductions of about 0.8%, as well as an internal legal entity consolidation that took place in the third quarter of 2017, partially offset by lower excess tax benefits from employee share-based payment awards under ASU 2016-09 in 2018 compared to the same periods in 2017.

Our effective tax rate may differ from the federal statutory income tax rate of 21.0% due primarily to the effect of state and local income taxes. During the nine months ended September 30, 2018 and 2017, cash paid for taxes, net of refunds received, was $73.2 million and $208.3 million,

respectively. The decrease in cash tax payments between the periods is due to the lower statutory tax rate and a federal overpayment carryforward from the 2017 tax year into the 2018 tax year as a result of Tax Act related changes.

During the three and nine months ended September 30, 2018, there were no significant changes to our uncertain tax positions. For more information, see Note 6, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our 2017 Annual Report on Form 10-K.

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

Depreciation expense for the three months ended September 30, 2018 and 2017 was $89.0 million and $87.0 million, respectively. During the nine months ended September 30, 2018 and 2017, depreciation expense was $275.3 million and $253.0 million, respectively. We recognized $14.0 million of incremental depreciation expense during the nine months ended September 30, 2018 as a result of shortening the useful lives of certain assets related to the Wallula mill restructuring and a corporate administration facility.

At September 30, 2018 and December 31, 2017, purchases of property, plant, and equipment included in accounts payable were $46.2 million and $29.8 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, 2018 and December 31, 2017 we had $833.5 million and $828.0 million of goodwill recorded in our Packaging segment, respectively. At both September 30, 2018 and December 31, 2017, we had $55.2 million of goodwill recorded in our Paper segment.

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

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):

During the three months ended September 30, 2018 and 2017, amortization expense was $10.2 million and $8.4 million, respectively. During the nine months ended September 30, 2018 and 2017, amortization expense was $30.7 million and $25.3 million, respectively.

At September 30, 2018 and December 31, 2017, our long-term debt and interest rates on that debt were as follows (dollars in millions):

	September 30, 2018					December 31, 2017
	Amount		Interest Rate			Amount		Interest Rate
6.50% Senior Notes due March 2018	$	—		—	%	$	150.0		6.50	%
2.45% Senior Notes, net of discount of $0.4 million and $0.5 million as of September 30, 2018 and December 31, 2017, respectively, due December 2020		499.6		2.45	%		499.5		2.45	%
3.90% Senior Notes, net of discount of $0.1 million and $0.2 million as of September 30, 2018 and December 31, 2017, respectively, due June 2022		399.9		3.90	%		399.8		3.90	%
4.50% Senior Notes, net of discount of $1.1 million and $1.2 million as of September 30, 2018 and December 31, 2017, respectively, due November 2023		698.9		4.50	%		698.8		4.50	%
3.65% Senior Notes, net of discount of $0.7 million and $0.8 million as of September 30, 2018 and December 31, 2017, respectively, due September 2024		399.3		3.65	%		399.2		3.65	%
3.40% Senior Notes, net of discount of $1.5 million and $1.6 million as of September 30, 2018 and December 31, 2017, respectively, due December 2027		498.5		3.40	%		498.4		3.40	%
Total		2,496.2		3.64	%		2,645.7		3.80	%
Less current portion		—		—	%		150.0		6.50	%
Less unamortized debt issuance costs		13.3					15.3
Total long-term debt	$	2,482.9		3.64	%	$	2,480.4		3.64	%

During the nine months ended September 30, 2018, we used cash on hand to repay debt outstanding of $150.0 million under the 6.50% Senior Notes due March 2018. For the nine months ended September 30, 2018 and 2017, cash payments for interest were $58.6 million and $67.2 million, respectively.

Included in interest expense, net and other, are amortization of treasury lock settlements and amortization of financing costs. For the three months ended September 30, 2018 and 2017, amortization of treasury lock settlements was $1.3 million and $1.4 million, respectively, and for the nine months ended September 30, 2018 and 2017, amortization of treasury locks was $4.0 million and $4.2 million, respectively. For the three months ended September 30, 2018 and 2017, amortization of financing costs was $0.7 million and $0.5 million, respectively, and during the nine months ended September 30, 2018 and 2017, amortization of financing costs was $2.0 million and $1.5 million, respectively.

At September 30, 2018, we had $2,496.2 million of fixed-rate senior notes outstanding. The fair value of our fixed-rate debt was estimated to be $2,478.0 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 2017 Annual Report on Form 10-K.

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

PCA makes pension plan contributions that are sufficient to fund its actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act (ERISA). From time to time, PCA may make additional discretionary contributions based on the funded status of the plans, tax deductibility, income from operations, and other factors. During the three and nine months ended September 30, 2018 and 2017, payments to our nonqualified pension plans were insignificant. For the three and nine months ended September 30, 2018, we made contributions of $18.0 million and $21.2 million, respectively, to our qualified pension plans, which exceeded our 2018 minimum pension contributions of $4.6 million. We made contributions of $36.2 million and $42.1 million to our qualified plans during the three and nine months ended September 30, 2017, respectively.

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

The Company has a long-term equity incentive plan, which allows for grants of restricted stock, performance awards, stock appreciation rights, and stock options to directors, officers, and employees, as well as others who engage in services for PCA. The plan, as amended, terminates May 1, 2023 and authorizes 10.6 million shares of common stock for grant over the life of the plan. As of September 30, 2018, 0.7 million shares were available for future grants under the plan. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date.

The following table presents restricted stock and performance unit award activity for the nine months ended September 30, 2018:

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

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

Performance unit awards 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 2018, 50% used TSR as the

performance measure and 50% used ROIC as the performance measure. All units awarded before 2018 used ROIC as the performance measure. The ROIC component of performance unit awards are 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, 2018 was as follows (dollars in millions):

During the nine months ended September 30, 2018, we paid $193.4 million of dividends to shareholders. On May 15, 2018, PCA announced an increase of its quarterly cash dividend on its common stock from an annual payout of $2.52 per share to $3.16 per share. On August 30, 2018, PCA’s Board of Directors declared a regular quarterly cash dividend of $0.79 per share of common stock, which was paid on October 15, 2018 to shareholders of record as of September 14, 2018. The dividend payment was $74.7 million.

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

The Company did not repurchase any shares of its common stock under this authority during the three and nine months ended September 30, 2018. At September 30, 2018, $193.0 million of the authorized amount remained available for repurchase of the Company’s common stock.

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

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

	Amounts Reclassified from AOCI
	Three Months Ended September 30,						Nine Months Ended September 30,
Details about AOCI Components	2018			2017			2018			2017
Unrealized loss on treasury locks, net (a)	$	(1.3	)	$	(1.4	)	$	(4.0	)	$	(4.2	)	See (a) below
		0.3			0.5			1.0			1.6		Tax benefit
	$	(1.0	)	$	(0.9	)	$	(3.0	)	$	(2.6	)	Net of tax

Unfunded employee benefit obligations (b)
Amortization of prior service costs	$	(1.7	)	$	(1.3	)	$	(5.0	)	$	(4.3	)	See (b) below
Amortization of actuarial gains / (losses)		(2.3	)		(1.8	)		(6.9	)		(5.6	)	See (b) below
		(4.0	)		(3.1	)		(11.9	)		(9.9	)	Total before tax
		1.0			1.2			3.0			3.7		Tax benefit
	$	(3.0	)	$	(1.9	)	$	(8.9	)	$	(6.2	)	Net of tax

Our Paper segment has a long-standing commercial and contractual relationship with Office Depot, our largest customer in the paper business. This relationship exposes us to a significant concentration of business and financial risk. Our sales to Office Depot represent approximately 7% of our total Company sales revenue for both the nine month periods ended September 30, 2018 and 2017 and approximately 46% and 42% of our Paper segment sales revenue for both of those periods, respectively. At September 30, 2018 and December 31, 2017, we had $73.5 million and $33.3 million of accounts receivable due from Office Depot, which represents 7% and 4% of our total Company accounts receivable for both of those periods, respectively. The increase in accounts receivable corresponds to a negotiated extension of credit terms effective during the first quarter of 2018.

For full year 2017, sales to Office Depot represented 43% 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.

Louisiana Timber Procurement Company, L.L.C. (LTP) is a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company (Boise Cascade). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of PCA and Boise Cascade in Louisiana. PCA is the primary beneficiary of LTP and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements in our Corporate and Other segment. The carrying amounts of LTP's assets and liabilities (which relate primarily to non-inventory working capital items) on our Consolidated Balance Sheets were $3.5 million at September 30, 2018 and $3.0 million at December 31, 2017. During the three months ended September 30, 2018 and 2017, we recorded $22.4 million and $20.8 million, respectively, and during the nine months ended September 30, 2018 and 2017 we recorded $65.5 million and $66.0 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, 2018 and 2017, fiber purchases from related parties were $4.1 million and $4.0 million, respectively. Fiber purchases from related parties were $12.8 million and $13.6 million, respectively, during the nine months ended September 30, 2018 and 2017. 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.

During the second quarter of 2018, the Company discontinued the production of uncoated free sheet and coated one-side grades at the Wallula, Washington mill and converted the No. 3 machine to a virgin kraft linerboard machine. Subsequent to the date of conversion in May 2018, operating results for the Wallula mill are primarily included in the Packaging segment.

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

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

The components of our financial statements affected by the change in presentation of operating and non-operating pension expense as originally reported in 2017 and as adjusted for the requirements per the new standard are as follows (dollars in millions):

We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt, capital commitments, lease obligations, and purchase commitments for goods and services, and legal proceedings, all of which are discussed in Note 9, Debt, and Note 18, Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2016~~2017 Annual Report on Form 10-K.

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~~2018, 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.

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 aan aggregate $1.0 million ~~deductible; however, the~~deductible. The incident remains under investigation and ~~the~~all lawsuits are in the early stages. Accordingly, the Company is unable to estimate a range of reasonable possible losses at this time.

The Company has also incurred property damage and business interruption losses and has claimed these losses, subject to a $5.0 million deductible, under its property damage and business interruption insurance policy. ~~The~~As of December 31, 2017, the Company ~~expects to resolve~~finalized the claim with the insurance carrier ~~over~~and received $17.0 million in insurance proceeds during the ~~next several months.~~first quarter of 2018. The insurance proceeds are included in net cash provided by operating activities ($14.5 million) and in net cash used for investing activities ($2.5 million) based on the nature of the reimbursement.

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

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.

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.

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~~2017 Annual Report on Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission (SEC). We do not assume any obligation to update any forward-looking statement. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q. Please see “Forward Looking Statements” elsewhere in this Item 2.

PCA is the ~~fourth~~third largest producer of containerboard products and the third largest producer of uncoated freesheet paper in ~~the United States, based on production capacity.~~North America. We operate ~~five~~six containerboard mills, ~~three~~two paper mills, and 9495 corrugated products manufacturing plants. Our containerboard mills produce linerboard and corrugating medium, which are papers primarily used in the production of corrugated products. Our corrugated products manufacturing plants produce a wide variety of corrugated packaging products, including conventional shipping containers used to protect and transport manufactured goods, multi-color boxes and displays with strong visual appeal that help to merchandise the packaged product in retail locations, and honeycomb protective packaging. In addition, we are a large producer of packaging for meat, fresh fruit and vegetables, processed food, beverages, and other industrial and consumer products. We also manufacture and sell white papers, including both commodity and specialty papers, which may have custom or specialized features such as colors, coatings, high brightness, and recycled content. We are headquartered in Lake Forest, Illinois and operate primarily in the United States.

This Item 2 is intended to supplement, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2016~~2017 Annual Report on Form 10-K.

Third quarter net sales were $1.81 billion in 2018 and $1.64 billion in ~~2017 and $1.48 billion in 2016.~~2017. We reported ~~$139~~$207 million of net income, or ~~$1.47~~$2.18 per diluted share, during the third quarter of ~~2017,~~2018, compared to ~~$119~~$139 million, ~~of net income,~~ or ~~$1.26~~$1.47 per diluted share, during the same period in ~~2016. The third quarter of 2017~~2017. Net income included ~~$27~~$4 million of ~~pre-tax~~ expense for special items (discussed below) in the third quarter of 2018, compared to $5$20 million ~~of pre-tax expense for special items~~ in ~~2016.~~2017. Excluding special items, ~~we recorded $159 million of~~ net income was $211 million, or ~~$1.68~~$2.23 per diluted share, during the third quarter of ~~2017,~~2018, compared to ~~$123~~$159 million, ~~of net income,~~ or ~~$1.30~~$1.68 per diluted share, in the third quarter of ~~2016.~~2017. The increase was driven primarily by higher prices and mix and volumes in our Packaging segment, higher prices and mix in our Paper segment, lower wood and recycled fiber costs, and a favorable tax rate resulting primarily from changes resulting from the Tax Act. These items were partially offset by lower volumes in our Paper segment, higher operating and converting costs, higher freight and logistics expenses, higher annual outage costs, and higher depreciation and other costs. For additional detail on special items included in reported GAAP results, see “Item 2. Reconciliations of Non-GAAP Financial Measures to Reported Amounts.”

Packaging segment income from operations was $284 million in the third quarter of 2018, compared to $263 million in the third quarter of 2017. Packaging segment earnings before interest, taxes, depreciation, amortization, and depletion (EBITDA) excluding special items was $378 million in the third quarter of 2018 compared to $343 million in the third quarter of 2017. The increase in EBITDA excluding special items was due to higher containerboard and corrugated products prices and mix and sales and production volumes driven by strong demand, and lower wood and recycled fiber costs, partially offset by higher operating and converting costs, higher freight and logistics expenses, higher annual outage expenses, and other fixed costs.

Paper segment income from operations was $32 million in the third quarter of 2018, compared to a loss of $3 million in the third quarter of 2017. Paper segment EBITDA excluding special items was $44 million in the third quarter of 2018, compared to $38 million in the third quarter of 2017. The increase in EBITDA excluding special items was due to higher prices and mix and lower operating costs, partially offset by lower volume and higher freight and logistics expenses.

During the first nine months of 2018 we reported $533 million of net income, or $5.64 per diluted share, compared to $400 million of net income, or $4.23 per diluted share, during the same period in 2017. Net income included $22 million of expense for special items (discussed below), in 2018 and 2017. Excluding special items, net income was $555 million, or $5.87 per diluted share, during the first nine months of 2018, compared to $422 million of net income, or $4.47 per diluted share, in the first nine months of 2017. The increase was driven primarily by higher containerboard and corrugated products prices and mix and higher sales and production volumes, higher Paper segment prices and ~~a partial insurance recovery related to the DeRidder Mill incident,~~mix, lower wood and recycled fiber costs, and lower taxes, partially offset by ~~lower prices~~higher operating and ~~mix and sales and production volumes in our Paper segment, higher input and operating~~converting costs, higher freight and logistics expense, higher annual outage ~~expenses,~~expense, and higher depreciation and ~~interest expense.~~other costs.

Packaging segment income from operations was ~~$262~~$782 million in the ~~third quarter~~first nine months of ~~2017,~~2018, compared to ~~$180~~$682 million in the ~~third quarter of 2016.~~same period in 2017. Packaging segment earnings before interest, taxes, depreciation, amortization, and depletion (EBITDA) excluding special items was $341 million in the third quarter of 2017 and $256 million in the third quarter of 2016. The increase was driven primarily by higher containerboard and corrugated products prices and mix and sales and production volumes, and a partial insurance recovery related to the DeRidder Mill incident, partially offset by higher input costs, primarily recycled fiber, higher labor costs, and higher freight expense.

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

~~The decrease was due to lower paper prices and mix and lower sales 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,$1.05 billion in the first nine months of ~~2016~~. 2018, compared to $922 million in the first nine months of 2017. The increase in EBITDA excluding special items was driven primarily by higher containerboard and corrugated products prices and mix and sales and production volumes, and lower wood and recycled fiber costs, ~~for annual mill outages,~~ partially offset by ~~lower sales~~higher operating and ~~production volumes and prices and mix in our Paper segment, higher input and operating~~converting costs, higher freight and logistics expense, and higher ~~depreciation~~annual outages, and ~~interest expense. Earnings for the year to date were negatively impacted due to the DeRidder Mill incident described in Note 18 to the Financial Statements included in this report.~~other costs.

~~Packaging~~Paper segment income from operations was ~~$677~~$56 million in the first nine months of ~~2017,~~2018, compared to ~~$534 million in the same period of 2016. Packaging segment EBITDA excluding special items was $917~~$53 million in the first nine months of ~~2017, compared to $759~~2017. Paper segment EBITDA excluding special items was $113 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~~2018, compared to $121 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~~same period in ~~the first nine months of 2016. Paper segment~~2017. The decrease in 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~~volumes, higher freight and ~~production volumes and prices and mix,~~logistics expense, and higher ~~input~~wood and recycled fiber costs, partially offset by higher prices and mix, lower input and operating costs, and lower annual ~~mill~~ outage expense.

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

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

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 share, excluding special items, for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 are as follows:

	Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
	September 30,				September 30,					September 30,				September 30,
	2017		2016		2017			2016		2018		2017		2018		2017
Earnings per diluted share, as reported	$	1.47	$	1.26	$	4.23		$	3.58	$	2.18	$	1.47	$	5.64	$	4.23
Special items:
Wallula mill restructuring(a)		0.16		—		0.16			—		0.04		0.16		0.22		0.16
DeRidder mill incident		—		—		0.03			—
Facilities closure and other costs (b)(c)											0.01		0.01		0.01		0.01
Internal legal entity consolidation(d)		0.04		—		0.04			—		—		0.04		—		0.04
Facilities closure and other costs		0.01		0.02		0.01			0.05
DeRidder mill incident (e)											—		—		—		0.03
Acquisition and integration related costs(g)		—		0.02		0.01			0.02		—		—		—		0.01
Hexacomb working capital adjustment(h)		—		—		(0.01	)		—		—		—		—		(0.01	)
Total special items		0.21		0.04		0.24			0.07		0.05		0.21		0.23		0.24
Earnings per diluted share, excluding special items	$	1.68	$	1.30	$	4.47		$	3.65	$	2.23	$	1.68	$	5.87	$	4.47

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

Trade publications reported North American industry-wide corrugated products ~~total~~ shipments with one additional working day increased ~~1.0%~~1.4%, and shipments per day were flat, during the third quarter of ~~2017,~~2018 compared to the same quarter ~~in 2016.~~of 2017. Reported industry containerboard production increased ~~1.5%~~3.7% compared to the third quarter of ~~2016, and reported~~2017. Reported industry containerboard inventories at the end of the third quarter of ~~2017~~2018 were approximately ~~2.4~~2.6 million tons, ~~flat~~up 8.7% compared to the same period in ~~2016.~~2017 and weeks of supply was 3.9. Reported containerboard export shipments were ~~down 5.5%~~up 11.6% compared to the third quarter of ~~2016.~~2017. Trade publications reported ~~a $30 per ton~~no price ~~increase~~change on domestic linerboard and corrugating medium during the third quarter of ~~2017.~~2018.

The market for communication papers competes heavily with electronic data transmission and document storage alternatives. Increasing shifts to these alternatives have reduced usage of ~~and lowered demand for,~~ traditional print media and communication papers. Trade publications reported ~~that~~ North American uncoated freesheet paper shipments were down ~~1.4%~~8.2% in the third quarter of ~~2017,~~2018, compared to the same quarter ~~in 2016.~~of 2017. Average prices reported by a trade publication for cut size office papers were ~~lower~~higher by ~~$30~~$107 per ton, or ~~3.0%~~11.2%, in the third quarter of ~~2017,~~2018, compared to the third quarter of ~~2016.~~2017.

Looking ahead to the fourth quarter of ~~2017,~~2018, we expect Packaging segment demand to remain strong although ~~at seasonally lower volumes, which includes one~~there will be two less shipping ~~day, as well as~~days, and we expect a seasonally less rich mix in corrugated products, compared to the third 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~~will continue implementing ~~our recently announced~~ price increases that we recently communicated to customers, but expect a seasonally less rich mix. Although paper volumes will be seasonally lower, ~~volumes and a less rich sales mix. While recycled fiber prices should move lower,~~we expect demand to remain strong as we manage our already tight inventory levels. With seasonally ~~higher wood and energy costs along with higher prices for certain key chemicals and higher freight~~colder weather, fuel costs are ~~also expected. Annual mill outage costs are estimated~~expected to be higher ~~than~~across the ~~third quarter due to scheduled maintenance work at four~~company, and we expect continued inflation in most of our ~~mills.~~operating and converting costs, including incremental wage pressure with a tighter labor market. We will also have an extended outage at our Wallula Mill to complete the remaining work related to the conversion of the No. 3 machine from paper to linerboard. Considering these items, we expect fourth quarter earnings, excluding special items to be lower than third quarter ~~earnings.~~2018.

Three Months Ended September 30, ~~2017,~~2018, compared to Three Months Ended September 30, ~~2016~~2017

The historical results of operations of PCA for the three months ended September 30, ~~2017~~2018 and ~~2016~~2017 are set forth below (dollars in millions):

	Three Months Ended									Three Months Ended
	September 30,									September 30,
	2017			2016			Change			2018			2017				Change
Packaging	$	1,346.6		$	1,167.1		$	179.5		$	1,535.1		$	1,346.6			$	188.5
Paper		271.4			292.8			(21.4	)		254.3			271.4				(17.1	)
Corporate and Other		61.1			62.9			(1.8	)		59.6			61.1				(1.5	)
Intersegment eliminations		(39.0	)		(38.8	)		(0.2	)		(39.1	)		(39.0	)			(0.1	)
Net sales	$	1,640.1		$	1,484.0		$	156.1		$	1,809.9		$	1,640.1			$	169.8

Packaging	$	261.5		$	179.6		$	81.9		$	284.4		$	263.2		(b)	$	21.2
Paper		(0.7	)		44.5			(45.2	)		32.3			(2.6	)	(b)		34.9
Corporate and Other		(18.5	)		(17.7	)		(0.8	)		(18.2	)		(18.0	)	(b)		(0.2	)
Income from operations	$	242.3		$	206.4		$	35.9		$	298.5		$	242.6			$	55.9
Interest expense, net		(25.4	)		(23.4	)		(2.0	)
Interest expense, net and other											(24.4	)		(25.7	)	(b)		1.3
Income before taxes		216.9			183.0			33.9			274.1			216.9				57.2
Income tax provision		(77.8	)		(63.7	)		(14.1	)		(67.4	)		(77.8	)			10.4
Net income	$	139.1		$	119.3		$	19.8		$	206.7		$	139.1			$	67.6
Non-GAAP Measures (a)
Net income excluding special items	$	158.8		$	122.6		$	36.2		$	211.1		$	158.8			$	52.3
Consolidated EBITDA		339.8			294.4			45.4			400.0			340.1		(b)		59.9
Consolidated EBITDA excluding special items		363.9			298.9			65.0			405.8			364.2		(b)		41.6
Packaging EBITDA		340.2			251.6			88.6			373.0			341.9		(b)		31.1
Packaging EBITDA excluding special items		341.3			256.0			85.3			378.2			343.0		(b)		35.2
Paper EBITDA		16.4			59.2			(42.8	)		43.5			14.5		(b)		29.0
Paper EBITDA excluding special items		39.4			59.3			(19.9	)		44.1			37.5		(b)		6.6

Net sales increased ~~$156~~$170 million, or ~~10.5%~~10.4%, to ~~$1,640~~$1,810 million during the three months ended September 30, ~~2017,~~2018, compared to ~~$1,484~~$1,640 million during the same period in ~~2016.~~2017.

Packaging. Net sales increased ~~$180~~$188 million, or ~~15.4%~~14.0%, to ~~$1,347~~$1,535 million, compared to ~~$1,167~~$1,347 million in the third quarter of ~~2016,~~2017 due to increased containerboard and corrugated products volume ($129 million) and higher domestic and export containerboard and corrugated products prices and mix ($~~121 million) and increased containerboard and corrugated products volume ($~~59 million). ~~Our domestic containerboard prices in~~In the third quarter of ~~2017~~2018, our domestic containerboard prices increased ~~14.8%~~6.1%, and export prices increased ~~21.3%~~15.3%, compared to the same period in ~~2016.~~2017. In the third quarter of ~~2017, our~~2018, containerboard outside shipments increased ~~5.7%~~11.4%, and total corrugated products shipments were up ~~4.0%~~8.2%, compared to the third quarter of 2016. Containerboard mill production in the third quarter of 2017 was 996,000 tons compared to 950,000 in 2016. Prices for corrugating medium reported by trade publications increased by $30 per ton during the third quarter of 2017.

Paper. Net sales during the three months ended September 30, ~~2017~~2018 decreased ~~$21~~$17 million, or ~~7.3%~~6.3%, to ~~$271~~$254 million, compared to ~~$293~~$271 million in the third quarter of ~~2016,~~2017, due to ~~lower pulp~~decreased volume ($~~12 million) as a result of the 2016 shutdown of our market pulp operations at our Wallula Mill, lower white paper volume ($2~~36 million), ~~and unfavorable~~partially offset by favorable changes in prices and mix ($719 million).

Gross profit increased ~~$68~~$46 million during the three months ended September 30, ~~2017,~~2018, compared to the same period in ~~2016.~~2017. The increase was driven primarily by higher containerboard and corrugated products prices and mix and sales and production volumes and lower wood and recycled fiber costs, partially offset by lower volumes in our Paper segment ~~prices and mix and sales and production volumes,~~ and higher ~~input~~operating and ~~operating~~converting costs. In the three months ended September 30, 2018 and 2017, gross profit included special items of $0.3 million and $3 million, ~~related to the conversion~~respectively, 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.~~restructuring charges.

Selling, general, and administrative expenses (“SG&A”) increased ~~$13~~$5 million during the three months ended September 30, ~~2017,~~2018, compared to the same period in ~~2016.~~2017. The increase was primarily due to ~~higher~~employee salaries and fringes ($5 million), the Sacramento Container acquisition ($3 million), and various other administrative expenses individually insignificant ($3 million). These increases were partially offset by certain expenses

that were previously recorded in SG&A for the third quarter of 2017 which are now recorded in cost of sales for the third quarter 2018 ($6 million). Effective January 1, 2018, the Company adopted ASU 2014-09 (Topic 606): Revenue from Contracts with Customers using the modified retrospective method. The new standard provides additional clarity concerning contract fulfillment costs, ~~corresponding to the TimBar and Columbus Container acquisitions.~~which resulted in certain costs being classified as cost of sales rather than SG&A for 2018.

Other income (expense), net, ~~during~~for the three months ended September 30, 2018 and 2017 was $25 million of expense, compared to $6 million of expense during the three months ended September 30, 2016. The third quarter of 2017 included $23 million of charges related to the conversion of the No. 3 machine at the Wallula Mill, and $4 million for asset disposals and write-offs, partially offset by $3 million of property damage and business interruption insurance net recoveries related to the February 2017 incident at our DeRidder Mill. The third quarter of 2016 included $4 million of closure costs related to corrugated products facilities and integration costs related to the recent acquisitions, and $1 million of asset disposals and write-offs. are set forth below (dollars in millions):

We discuss these items in more detail in Note 4,6, 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 increased ~~$36~~$56 million, or ~~17.4%~~23.0%, during the three months ended September 30, ~~2017,~~2018, compared to the same period in ~~2016.~~2017. The third quarter of ~~2017~~2018 included ~~$27~~$6 million of expense for special items ~~compared~~primarily related to ~~$5 million in the same period in 2016. The~~Wallula Mill restructuring. Third quarter 2017 included expense from 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,~~Mill restructuring and $2 million ~~for facility~~of closure costs related to corrugated products facilities and a paper administration facility and integration costs related to ~~recent~~the TimBar Corporation and Columbus Container, Inc. acquisitions. ~~Third quarter 2016 special items of $5 million related to closing a corrugated manufacturing facility and a paper distribution center and integration related costs for recent acquisitions.~~

Packaging. Packaging segment income from operations increased ~~$82~~$21 million to ~~$262~~$284 million, compared to ~~$180~~$263 million during the three months ended September 30, ~~2016.~~2017. The increase ~~in the third quarter of 2017~~ related primarily to ~~favorable changes in~~higher containerboard and corrugated products prices and mix ($8856 million), higher containerboard and corrugated products sales and production volumes ($1751 million), and lower wood and recycled fiber costs ($57 million), partially offset by higher operating and converting costs ($60 million), higher freight expense ($7 million), higher annual outage expense ($7 million), higher depreciation expense ($6 million), a partial insurance recovery related to the DeRidder Mill incident in 2017 ($3 million), ~~partially offset by higher costs for recycled fiber ($15 million), labor ($6 million), chemicals~~fixed asset disposals ($2 million)~~, repairs~~ and other expenses ($2 ~~million), energy ($1 million), converting costs ($1 million), freight ($2 million), and higher depreciation expense ($3~~ million). Special items during the third quarter of 2018 included $6 million of Wallula Mill restructuring and corrugated facility closure charges. Special items for the third quarter 2017 included expense of $1 million related to closure costs for corrugated products facilities and integration costs ~~for the recent acquisitions. Special items for the third quarter 2016 included expense of $5 million~~ related to ~~integration costs~~the TimBar Corporation and ~~closing a corrugated manufacturing facility.~~Columbus Container, Inc. acquisitions.

Paper. Paper segment income from operations ~~decreased $45~~increased $35 million to $32 million, compared to a loss of ~~$1 million, compared to income of $45~~$3 million during the three months ended September 30, ~~2016.~~2017. The ~~decrease~~increase primarily related to ~~unfavorable changes in~~higher prices and mix ($719 million) and lower operating costs ($13 million), partially offset by lower sales and production volumes ($721 million)~~, higher energy ($2 million),~~ and higher ~~mill outage~~freight expense ($24 million) ~~and freight ($1 million) expense.~~. Special items during the third quarter of 2018 included $1 million of Wallula Mill restructuring charges. Special items for the third quarter 2017 included ~~expense~~$26 million 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.~~Mill restructuring charges and facilities closures.

Interest expense, net, ~~increased $2~~and other decreased $1 million during the three months ended September 30, ~~2017,~~2018, compared to the same period in ~~2016.~~2017. The ~~increase~~decrease in interest expense was primarily due to ~~higher~~no term loan interest ~~rates~~as these were repaid in December 2017 and no interest on ~~PCA’s variable rate debt~~the Company’s 6.50% Senior Notes as these were repaid in ~~the third quarter of 2017 due to increases in LIBOR and~~March 2018, partially offset by the interest ~~paid~~ on ~~term loan borrowings for~~ the ~~TimBar acquisition made in August 2016.~~new notes related to the December 2017 refinancing.

During the three months ended September 30, ~~2017,~~2018, we recorded ~~$78~~$67 million of income tax expense, compared to ~~$64~~$78 million of expense during the three months ended September 30, ~~2016.~~2017. The effective tax rate for the three months ended September 30, 2018 and 2017 was 24.6% and ~~2016 was~~ 35.9% ~~and 34.8%~~, respectively. The ~~increase~~decrease in our effective tax rate ~~for~~was primarily due to federal tax reform as a result of the Tax Act, which the President signed into law on December 22, 2017, as well as an internal legal entity consolidation that took place during the three months ended September 30, 2017 compared to the same period in 2016, was primarily due to an internal legal entity consolidation that will simplify future operating activities and resulted in $3 million of tax expense for the change in value of deferred taxes.2017.

Nine Months Ended September 30, ~~2017,~~2018, compared to Nine Months Ended September 30, ~~2016~~2017

The historical results of operations of PCA for the nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 are set forth below (dollars in millions):

	Nine Months Ended									Nine Months Ended
	September 30,									September 30,
	2017			2016			Change			2018			2017				Change
Packaging	$	3,915.0		$	3,387.9		$	527.1		$	4,434.2		$	3,915.0			$	519.2
Paper		784.3			840.1			(55.8	)		774.5			784.3				(9.8	)
Corporate and Other		171.2			185.6			(14.4	)		173.8			171.2				2.6
Intersegment eliminations		(109.9	)		(111.2	)		1.3			(114.4	)		(109.9	)			(4.5	)
Net sales	$	4,760.6		$	4,302.4		$	458.2		$	5,268.1		$	4,760.6			$	507.5

Packaging	$	676.8		$	533.5		$	143.3		$	782.3		$	681.7		(b)	$	100.6
Paper		58.1			105.0			(46.9	)		55.7			52.5		(b)		3.2
Corporate and Other		(55.7	)		(51.1	)		(4.6	)		(57.0	)		(54.1	)	(b)		(2.9	)
Income from operations	$	679.2		$	587.4		$	91.8		$	781.0		$	680.1			$	100.9
Interest expense, net		(74.6	)		(67.5	)		(7.1	)
Interest expense, net and other											(75.0	)		(75.5	)	(b)		0.5
Income before taxes		604.6			519.9			84.7			706.0			604.6				101.4
Income tax provision		(204.9	)		(181.0	)		(23.9	)		(172.6	)		(204.9	)			32.3
Net income	$	399.7		$	338.9		$	60.8		$	533.4		$	399.7			$	133.7
Non-GAAP Measures (a)
Net income excluding special items	$	422.0		$	345.9		$	76.1		$	555.0		$	422.0			$	133.0
Consolidated EBITDA		962.9			851.7			111.2			1,094.7			963.8		(b)		130.9
Consolidated EBITDA excluding special items		991.0			861.5			129.5			1,109.9			991.9		(b)		118.0
Packaging EBITDA		911.0			750.8			160.2			1,038.6			915.9		(b)		122.7
Packaging EBITDA excluding special items		916.8			759.4			157.4			1,049.0			921.7		(b)		127.3
Paper EBITDA		103.2			148.2			(45.0	)		108.2			97.6		(b)		10.6
Paper EBITDA excluding special items		126.2			149.1			(22.9	)		113.0			120.6		(b)		(7.6	)

Net sales increased ~~$458~~$507 million, or ~~10.6%~~10.7%, to ~~$4,761~~$5,268 million during the nine months ended September 30, ~~2017,~~2018, compared to ~~$4,302~~$4,761 million during the same period in ~~2016.~~2017.

~~Packaging.~~Packaging. Net sales increased ~~$527~~$519 million, or ~~15.6%~~13.3%, to ~~$3,915~~$4,434 million, compared to ~~$3,388~~$3,915 million in the nine months ended September 30, ~~2016,~~2017, due to ~~higher~~increased containerboard and corrugated products volume ($~~315~~324 million) and higher domestic and export containerboard and corrugated products prices and mix ($~~212~~195 million). Our domestic containerboard prices in the first nine months of ~~2017~~2018 increased ~~11.6% reflecting higher prices reported by trade publications. Additionally, our~~6.7%, and export ~~containerboard~~ prices increased ~~12.0%~~20.8%, compared to the same period in ~~2016.~~2017. In the first nine months of ~~2017, our~~2018, containerboard outside shipments increased ~~4.7%~~13.7%, and total corrugated products shipments were up ~~8.1%~~7.5%, compared to the ~~first nine months of 2016.~~same period in 2017. Prices reported by trade publications increased by $50 per ton for linerboard and corrugating medium during March 2018.

~~Paper.~~Paper. Net sales during the nine months ended September 30, ~~2017~~2018 decreased ~~$56~~$9 million, or ~~6.6%~~1.2%, to ~~$784~~$775 million, compared to ~~$840~~$784 million in the nine months ended September 30, ~~2016. Sales decreased~~2017, due to ~~lower pulp~~decreased volume ($~~38 million) as a result of the 2016 shutdown of our market pulp operations at our Wallula Mill, lower white paper volume ($16~~30 million), ~~and unfavorable changes in~~partially offset by higher prices and mix ($221 million).

Gross profit increased ~~$152~~$121 million ~~or 16.0%,~~ during the nine months ended September 30, ~~2017,~~2018, compared to the same period in ~~2016.~~2017. The increase was driven primarily ~~due to~~by higher containerboard and corrugated products prices and mix and sales and production volumes, ~~partially offset by lower~~higher Paper segment ~~sales and production volumes and~~ prices and mix, and lower costs for wood and recycled fiber, partially offset by higher ~~input~~operating costs and ~~operating costs.~~higher annual outage expense. In the ~~first~~ nine months ofended September 30, 2018 and 2017, gross profit included special items of $14 million and $3 million, respectively, 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.~~restructuring.

Selling, general, and administrative expenses (“SG&A”) 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 expense, net, during the nine months ended September 30, 2017 was $32 million, compared to $15~~$20 million during the nine months ended September 30, ~~2016.~~2018, compared to the same period in 2017. The increase was primarily due to employee salaries and fringes ($15 million), the Sacramento Container acquisition ($8 million), outside professional services ($6 million), and various other administrative expenses individually insignificant ($9 million). These increases were partially offset by certain expenses that were previously recorded in SG&A in 2017 which are now recorded in cost of sales for 2018 ($18 million). Effective January 1, 2018, the Company adopted ASU 2014-09 (Topic 606): Revenue from Contracts with Customers using the modified retrospective method. The new standard provides additional clarity concerning contract fulfillment costs, which resulted in certain costs being classified as cost of sales rather than SG&A for 2018.

Other income (expense), net, for the nine months ended September 30, 2018 and 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 operationsare set forth below (dollars 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. millions):

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

Income from operations increased ~~$92~~$101 million, or ~~15.6%~~14.8%, during the nine months ended September 30, ~~2017,~~2018, compared to the same period in ~~2016.~~2017. The first nine months of ~~2017~~2018 included ~~$31~~$29 million of ~~pre-tax~~ expense for special items, ~~compared~~primarily related to ~~$11 million of pre-tax expense for special items during~~ the ~~same period in 2016.~~Wallula Mill restructuring. 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;~~Mill restructuring; $5 million for the property damage and business interruption insurance deductible related to the DeRidder Mill incident; $3 million of charges consisting of closure costs related to corrugated products facilities and a paper administration facility, integration costs related to the ~~recent~~TimBar Corporation and Columbus Container Inc. 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~~

Packaging. Packaging segment income from operations increased $101 million to $782 million during the first nine months ~~ended September 30, 2016~~of 2018 compared to the same period last year. The increase related primarily to higher containerboard and corrugated products prices and mix ($176 million), higher containerboard and corrugated products sales and production volumes ($116 million), and lower wood and recycled fiber costs ($28 million), partially offset by higher operating and converting costs ($119 million), higher annual outage expense ($31 million), higher freight expense ($22 million), higher depreciation expense ($12 million), Wallula No. 3 paper machine conversion-related costs ($5 million), an insurance recovery received in 2017 related to the DeRidder incident ($3 million), and other expenses primarily related to the disposal and transfer of fixed assets ($8 million). Special items in the Packaging segment in the first nine months of 2018 included $7$9 million of ~~facility~~Wallula Mill restructuring charges and $2 million of 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.~~other costs. The ~~first~~ nine months of 2017 included higher containerboard and corrugated products prices and mix ($148 million), higher sales and production volumes ($63 million), a partial insurance recovery related to the DeRidder Mill incident ($7 million), and lower mill outage costs ($2 million), partially offset by higher costs for recycled fiber ($38 million), energy ($10 million), labor ($12 million), freight ($8 million), and higher depreciation expense ($9 million). Special items included $5 million ~~of expense~~ for the property damage and business interruption insurance deductible related to the DeRidder Mill incident; $3 million of charges consisting of closure costs related to corrugated products facilities, integration costs related to the ~~recent~~TimBar Corporation and Columbus Container Inc. 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.Mexico.

Paper.~~Paper.~~ Paper segment income from operations ~~decreased $47~~increased $3 million to ~~$58~~$56 million, compared to the nine months ended September 30, ~~2016.~~2017. The ~~decrease~~increase primarily ~~relates~~related to higher prices and mix ($21 million), lower ~~paper~~operating costs ($7 million) and lower annual outage expenses ($6 million), partially offset by lower sales and production volumes ($18 million), ~~lower paper prices and mix~~higher freight expense ($311 million), and higher ~~costs for energy ($11 million), partially offset by lower~~wood and recycled fiber costs ($~~8 million) and lower mill outage costs ($2~~10 million). Special items ~~during~~in the first nine months of ~~2017~~2018 included ~~expense of $25 million related to the conversion of the Wallula No. 3 machine to containerboard, compared to $2~~$18 million of ~~facility closure costs~~Wallula Mill restructuring charges. Special items for the same period in ~~2016. Excluding special items, income from operations decreased $23 million.~~

Interest expense, net, and other was $75 million during the nine months ended September 30, ~~2017,~~2018, compared to ~~$68~~$76 million during the nine months ended September 30, ~~2016.~~2017. The ~~increase~~decrease in interest expense was primarily due to no term loan interest as these were repaid in December

2017 and lower interest on ~~term loan borrowings for~~ the ~~TimBar acquisition made~~Company’s 6.50% Senior Notes as these were repaid in ~~August 2016 and higher~~March 2018, partially offset by interest ~~rates~~ on ~~PCA's variable rate debt due to increases in LIBOR during~~ the ~~nine months ended September 30, 2017 compared~~new notes related to the ~~same period in 2016.~~December 2017 refinancing.

During the nine months ended September 30, ~~2017,~~2018, we recorded ~~$205~~$173 million of income tax expense, compared to ~~$181~~$205 million of expense during the nine months ended September 30, ~~2016.~~2017. The effective tax rate for the nine months ended September 30, 2018 and 2017 was 24.4% and ~~2016 was~~ 33.9% ~~and 34.8%~~, respectively. The decrease in our effective tax rate ~~for~~was primarily due to the Tax Act as well as an internal legal entity consolidation that took place during 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~~partially offset by lower excess tax benefits ~~and deficiencies~~ from employee share-based payment awards ~~to be recognized~~under ASU 2016-09 in 2018 compared with the ~~income statement as opposed to additional paid~~same period in ~~capital. This was partially offset by the tax expense from the internal legal entity consolidation~~.2017.

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~~2018, we had ~~$371~~$294 million of cash and $327 million of unused borrowing capacity under the revolving credit facility, net of letters of credit. ~~We paid the $265 million cash purchase price for the Sacramento Container acquisition on October 2, 2017 from cash on hand.~~ Currently, our primary uses of cash are for operations, capital expenditures, acquisitions, debt service, ~~(including voluntary payments of debt),~~ repurchases of common stock, and declared common stock dividends. We believe that net cash generated from operating activities, cash on hand, available borrowings under our revolving credit facility, and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements, including payments of any declared common stock dividends, for the foreseeable future. As our debt or credit facilities become due, we will need to repay, extend, or replace such facilities. Our ability to do so will be subject to future economic conditions and financial, business, and other factors, many of which are beyond our control.

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

	Nine Months Ended									Nine Months Ended
	September 30,									September 30,
	2017			2016			Change			2018			2017			Change
Net cash provided by (used for):
Operating activities	$	583.3		$	593.5		$	(10.2	)	$	834.5		$	583.3		$	251.2
Investing activities		(227.6	)		(582.7	)		355.1			(405.3	)		(227.6	)		(177.7	)
Financing activities		(224.5	)		84.8			(309.3	)		(352.3	)		(224.5	)		(127.8	)
Net increase in cash and cash equivalents	$	131.2		$	95.6		$	35.6		$	76.9		$	131.2		$	(54.3	)

~~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 nine months ended September 30, 2018, net cash provided by operating activities was $835 million, compared to $583 million in the same period in 2017, an increase of $252 million. Cash from operations excluding changes in cash used for operating assets and liabilities increased $205 million, primarily due to higher income from operations as discussed above and lower pension contributions. Cash increased by $47 million due to changes in operating assets and liabilities. The increase was primarily due to the following: (a) a reduction in taxes paid in 2018 as a result of Federal Tax Reform, (b) an increase in accrued liabilities due to timing of interest payments associated with the new notes issued in December 2017, and (c) the receipt of the DeRidder insurance proceeds in the first quarter of 2018. These changes were partially offset by an increase in inventories in the Packaging segment in anticipation of the Wallula Mill extended outage in the fourth quarter of 2018 as well as additional inventory build due to the Sacramento Container acquisition.

~~Net cash~~We used $405 million for investing activities during the nine months ended September 30, ~~2017 decreased $355 million,~~2018 compared to $228 ~~million, compared to $583~~ 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 for a purchase price of $386 million, net of cash acquired.~~2017. We ~~also~~ spent ~~$226~~$404 million for internal capital investments, including the Wallula No. 3 paper machine conversion to kraft linerboard, during the nine months ended September 30, ~~2017,~~2018, compared to ~~$188~~$226 million during the same period in ~~2016.~~2017.

We expect capital investments in 2018 to be ~~approximately $370~~between $530 million ~~in 2017,~~and $550 million, not including $30 million for the Wallula mill paper machine conversion. On October 2, 2017, we acquired the assets of Sacramento Container Corporation and the membership interests of Northern Sheets, LLC and Central California Sheets, LLC for $265 million.acquisitions. 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$8 million in ~~2017.~~2018. 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. 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~~2017 Annual Report on Form 10-K.

During the nine months ended September 30, ~~2017,~~2018, net cash used byfor financing activities ~~changed by $309 million to a use of $225~~was $352 million, compared to ~~a source of $85~~$225 million during the same period in ~~2016.~~2017. The ~~decrease~~increase primarily relates to ~~2016 borrowings~~the $150 million repayment 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 paid out higher dividends in 2017.~~our 6.5% senior notes that were due March 2018. During the ~~nine months ended September 30, 2017 we did not repurchase any common stock, compared to $100 million in the same~~comparable period in ~~2016. In the first nine months of~~ 2017, we made $36 million of principal payments on long-term variable rate debt and capital leases, compared to $31 million during the same period in 2016. In the first nine months of 2017, we paid $178 million of dividends compared to $157 million of dividends paid during the first nine months of 2016.leases.

For more information about our debt, see Note 9, Debt, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2016~~2017 Annual Report on Form 10-K.

There have been no material changes to the contractual obligations table disclosed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2016~~2017 Annual Report on Form 10-K.

Income from operations excluding special items, net income excluding special items, EBITDA, and EBITDA excluding special items are non-GAAP financial measures. Management excludes special items, as it believes that these items are not necessarily reflective of the ongoing operations of our business. These measures are presented because they provide a means to evaluate the performance of our segments and our Company on an ongoing basis using the same measures that are used by our management, because these measures assist in providing a meaningful comparison between periods and because these measures are frequently used by investors and other interested parties in the evaluation of companies and the performance of their segments. Any analysis of non-GAAP financial measures should be done in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. Reconciliations of the non-GAAP measures to the most comparable measure reported in accordance with GAAP for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 follow (dollars in millions):

Three Months Ended September 30,

2017

2016

Income
before
Taxes

Income
Taxes

Net
Income

Income
before
Taxes

Income
Taxes

Net
Income

As reported in accordance with GAAP

$
216.9

$
(77.8
)

$
139.1

$
183.0

$
(63.7
)

$
119.3

Special items:

Wallula mill restructuring (a)

25.3

(9.8
)

15.5

—

—

—

Internal legal entity consolidation (b)

—

3.3

3.3

—

—

—

Facilities closure and other costs (a)(d)

0.9

(0.3
)

0.6

2.0

(0.6
)

1.4

Acquisition and integration related costs (a)(d)

0.5

(0.2
)

0.3

2.9

(1.0
)

1.9

Total special items

26.7

(7.0
)

19.7

4.9

(1.6
)

3.3

Excluding special items

$
243.6

$
(84.8
)

$
158.8

$
187.9

$
(65.3
)

$
122.6

	Nine Months Ended September 30,																Three Months Ended September 30,
	2017									2016							2018							2017
	Income before Taxes			Income Taxes			Net Income			Income before Taxes		Income Taxes			Net Income		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	$	274.1	$	(67.4	)	$	206.7	$	216.9	$	(77.8	)	$	139.1
Special items:
Wallula mill restructuring ~~(a)~~(b)		25.3			(9.7	)		15.6			—		—			—		4.0		(1.1	)		2.9		25.3		(9.8	)		15.5
DeRidder mill incident (c)		5.0			(1.9	)		3.1			—		—			—
Facilities closure and other costs (a)(b)																		1.3		(0.3	)		1.0		0.9		(0.3	)		0.6
Acquisition and integration related costs (a)(b)																		0.1		—			0.1		0.5		(0.2	)		0.3
Insurance deductible for property damage (a)																		0.5		(0.1	)		0.4		—		—			—
Internal legal entity consolidation (b)		—			3.3			3.3			—		—			—		—		—			—		—		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		5.9		(1.5	)		4.4		26.7		(7.0	)		19.7
Excluding special items	$	635.3		$	(213.3	)	$	422.0		$	530.5	$	(184.6	)	$	345.9	$	280.0	$	(68.9	)	$	211.1	$	243.6	$	(84.8	)	$	158.8

	Nine Months Ended September 30,
	2018							2017
	Income before Taxes		Income Taxes			Net Income		Income before Taxes			Income Taxes			Net Income
As reported in accordance with GAAP	$	706.0	$	(172.6	)	$	533.4	$	604.6		$	(204.9	)	$	399.7
Special items:
Wallula mill restructuring (a)(b)		26.4		(6.6	)		19.8		25.3			(9.7	)		15.6
Facilities closure and other costs (a)(b)		1.8		(0.5	)		1.3		1.9			(0.7	)		1.2
Acquisition and integration related costs (a)(b)		0.1		—			0.1		0.8			(0.3	)		0.5
Insurance deductible for property damage (a)		0.5		(0.1	)		0.4		—			—			—
DeRidder mill incident (c)		—		—			—		5.0			(1.9	)		3.1
Hexacomb working capital adjustment (c)		—		—			—		(2.3	)		0.9			(1.4	)
Internal legal entity consolidation (b)		—		—			—		—			3.3			3.3
Total special items		28.8		(7.2	)		21.6		30.7			(8.4	)		22.3
Excluding special items	$	734.8	$	(179.8	)	$	555.0	$	635.3		$	(213.3	)	$	422.0

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				Nine Months Ended
	September 30,				September 30,					September 30,				September 30,
	2017		2016		2017			2016		2018		2017		2018		2017
Net income	$	139.1	$	119.3	$	399.7		$	338.9	$	206.7	$	139.1	$	533.4	$	399.7
Interest expense, net		25.4		23.4		74.6			67.5
Interest expense, net and other											24.4		25.7		75.0		75.5
Income tax provision		77.8		63.7		204.9			181.0		67.4		77.8		172.6		204.9
Depreciation, amortization, and depletion		97.5		88.0		283.7			264.3		101.5		97.5		313.7		283.7
EBITDA	$	339.8	$	294.4	$	962.9		$	851.7	$	400.0	$	340.1	$	1,094.7	$	963.8

Special items:
Wallula mill restructuring		22.7		—		22.7			—		3.7		22.7		13.0		22.7
Facilities closure and other costs		0.9		1.6		1.9			6.6		1.5		0.9		1.6		1.9
Acquisition and integration related costs		0.5		2.9		0.8			3.2		0.1		0.5		0.1		0.8
Insurance deductible for property damage											0.5		—		0.5		—
DeRidder mill incident		—		—		5.0			—		—		—		—		5.0
Hexacomb working capital adjustment		—		—		(2.3	)		—		—		—		—		(2.3	)
Total special items		24.1		4.5		28.1			9.8		5.8		24.1		15.2		28.1
EBITDA excluding special items	$	363.9	$	298.9	$	991.0		$	861.5	$	405.8	$	364.2	$	1,109.9	$	991.9

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						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Packaging
Segment income	$	261.5		$	179.6		$	676.8		$	533.5		$	284.4		$	263.2		$	782.3		$	681.7
Depreciation, amortization, and depletion		78.7			72.0			234.2			217.3			88.6			78.7			256.3			234.2
EBITDA		340.2			251.6			911.0			750.8			373.0			341.9			1,038.6			915.9
Faclities closure and other costs		0.6			1.5			1.6			5.7
Facilities closure and other costs														1.5			0.6			1.6			1.6
Acquisition and integration related costs		0.5			2.9			0.8			2.9			0.1			0.5			0.1			0.8
Wallula mill restructuring														3.1			—			8.2			—
Property damage insurance deductible														0.5			—			0.5			—
DeRidder mill incident		—			—			5.0			—			—			—			—			5.0
Hexacomb working capital adjustment		—			—			(1.6	)		—			—			—			—			(1.6	)
EBITDA excluding special items	$	341.3		$	256.0		$	916.8		$	759.4		$	378.2		$	343.0		$	1,049.0		$	921.7

Paper
Segment income	$	(0.7	)	$	44.5		$	58.1		$	105.0		$	32.3		$	(2.6	)	$	55.7		$	52.5
Depreciation, amortization, and depletion		17.1			14.7			45.1			43.2			11.2			17.1			52.5			45.1
EBITDA		16.4			59.2			103.2			148.2			43.5			14.5			108.2			97.6
Wallula mill restructuring		22.7			—			22.7			—			0.6			22.7			4.8			22.7
Integration-related, facilities closure and other costs		0.3			0.1			0.3			0.9
Facilities closure and other costs														—			0.3			—			0.3
EBITDA excluding special items	$	39.4		$	59.3		$	126.2		$	149.1		$	44.1		$	37.5		$	113.0		$	120.6

Corporate and Other
Segment loss	$	(18.5	)	$	(17.7	)	$	(55.7	)	$	(51.1	)	$	(18.2	)	$	(18.0	)	$	(57.0	)	$	(54.1	)
Depreciation, amortization, and depletion		1.7			1.3			4.4			3.8			1.7			1.7			4.9			4.4
EBITDA		(16.8	)		(16.4	)		(51.3	)		(47.3	)		(16.5	)		(16.3	)		(52.1	)		(49.7	)
Hexacomb working capital adjustment		—			—			(0.7	)		—			—			—			—			(0.7	)
Acquisition and integration related costs		—			—			—			0.3
EBITDA excluding special items	$	(16.8	)	$	(16.4	)	$	(52.0	)	$	(47.0	)	$	(16.5	)	$	(16.3	)	$	(52.1	)	$	(50.4	)

EBITDA	$	339.8		$	294.4		$	962.9		$	851.7		$	400.0		$	340.1		$	1,094.7		$	963.8

EBITDA excluding special items	$	363.9		$	298.9		$	991.0		$	861.5		$	405.8		$	364.2		$	1,109.9		$	991.9

PCA is exposed to the impact of interest rate changes and changes in the market value of its financial instruments. We periodically enter into derivatives to minimize these risks, but not for trading purposes. We were not a party to any derivatives-based arrangements at September 30, ~~2017.~~2018. For a discussion of derivatives and hedging activities, 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~~2017 Annual Report on Form 10-K.

~~The~~At September 30, 2018 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.

The Company does not have any off-balance sheet arrangements as of September 30, ~~2017.~~2018.

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~~2017 Annual Report on Form 10-K.

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

PCA has included in its ~~2016~~2017 Annual Report on Form 10-K a discussion of its critical accounting policies and estimates which require management’s most difficult, subjective, or complex judgments used in the preparation of its consolidated financial statements. PCA has not had any changes to these critical accounting estimates during the first nine months of ~~2017.~~2018.

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.

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

Our actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, we can give no assurances that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on our results of operations or financial condition. Given these uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. We expressly disclaim any obligation to publicly revise any forward-looking statements that have been made to reflect the occurrence of events after the date hereof. For a discussion of other factors, risks and uncertainties that may affect our business, see Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

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

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

Prior to filing this report, PCA completed an evaluation under the supervision and with the participation of PCA’s management, including PCA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of PCA’s disclosure controls and

procedures as of September 30, ~~2017.~~2018. 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.~~2018.

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 were no other changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the most recent fiscal quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

There have been no material changes to the risk factors disclosed in "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

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:~~2018:

Issuer Purchases of Equity Securities	Issuer Purchases of Equity Securities									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)			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
July 1-31, 2018												1,101	$	112.37		—	$	193.0
August 1-31, 2018												400		110.56		—		193.0
September 1-30, 2018												—		—		—		193.0
Total			1,209	$	111.96		—	$	193.0			1,501	$	111.89		—	$	193.0

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.

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 Executive Offices)		(Zip Code)

Large accelerated filer	☒		Accelerated filer	☐

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

	PART I

Item 1.	Financial Statements	1

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1517

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2728

Item 4.	Controls and Procedures	2728

	PART II

Item 1.	Legal Proceedings	2830

Item 1A.	Risk Factors	2830

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2830

Item 3.	Defaults Upon Senior Securities	2830

Item 4.	Mine Safety Disclosures	2830

Item 5.	Other Information	2830

Item 6.	Exhibits	2931

	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

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

	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

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

	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

	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

	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	)

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

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

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

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

	12/31/2017 Allocation		Adjustments			Revised Allocation
Goodwill	$	151.1	$	5.5		$	156.6
Other intangible assets		72.6		(5.5	)		67.1
Property, plant and equipment		26.7		—			26.7
Other net assets		23.4		—			23.4
Net assets acquired	$	273.8	$	—		$	273.8

	Goodwill
Balance at January 1, 2018	$	883.2
Acquisitions (a)		5.5
Balance at September 30, 2018	$	888.7

	September 30, 2018
	Unrecognized Compensation Expense		Remaining Weighted Average Recognition Period (in years)
Restricted stock	$	36.5	2.5
Performance units		15.7		3.1
Total unrecognized share-based compensation expense	$	52.2		2.7

	Foreign Currency Translation Adjustments			Unrealized Loss On Treasury Locks, Net			Unrealized Loss on Foreign Exchange Contracts			Unfunded Employee Benefit Obligations			Total
Balance at January 1, 2018	$	(0.3	)	$	(14.2	)	$	(0.3	)	$	(142.1	)	$	(156.9	)
Amounts reclassified from AOCI, net of tax		(0.1	)		3.0			—			8.9			11.8
Balance at September 30, 2018	$	(0.4	)	$	(11.2	)	$	(0.3	)	$	(133.2	)	$	(145.1	)

	Sales, net
Three Months Ended September 30, 2018	Trade		Intersegment			Total			Operating Income (Loss) (a)
Packaging	$	1,528.3	$	6.8		$	1,535.1		$	284.4		(b)
Paper		254.3		—			254.3			32.3		(b)
Corporate and other		27.3		32.3			59.6			(18.2	)	(b)
Intersegment eliminations		—		(39.1	)		(39.1	)		—
	$	1,809.9	$	—		$	1,809.9			298.5
Interest expense, net and other										(24.4	)
Income before taxes									$	274.1

	Sales, net
Nine Months Ended September 30, 2018	Trade		Intersegment			Total			Operating Income (Loss) (a)
Packaging	$	4,414.7	$	19.5		$	4,434.2		$	782.3		(b)
Paper		774.5		—			774.5			55.7		(b)
Corporate and Other		78.9		94.9			173.8			(57.0	)	(b)
Intersegment eliminations		—		(114.4	)		(114.4	)		—
	$	5,268.1	$	—		$	5,268.1			781.0
Interest expense, net and other										(75.0	)
Income before taxes									$	706.0

Segment income (loss)	Three Months Ended September 30, 2017 As Reported			Non-Operating Pension Adjustment			Three Months Ended September 30, 2017 Adjusted
Packaging	$	261.5		$	1.7		$	263.2
Paper		(0.7	)		(1.9	)		(2.6	)
Corporate		(18.5	)		0.5			(18.0	)
Income from operations		242.3			0.3			242.6
Interest expense, net and other		(25.4	)		(0.3	)		(25.7	)
Income before taxes	$	216.9		$	—		$	216.9

Segment income (loss)	Nine Months Ended September 30, 2017 As Reported			Non-Operating Pension Adjustment			Nine Months Ended September 30, 2017 Adjusted
Packaging	$	676.8		$	4.9		$	681.7
Paper		58.1			(5.6	)		52.5
Corporate		(55.7	)		1.6			(54.1	)
Income from operations		679.2			0.9			680.1
Interest expense, net and other		(74.6	)		(0.9	)		(75.5	)
Income before taxes	$	604.6		$	—		$	604.6

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		The following financial information from Packaging Corporation of America’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2017,~~2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, (ii) Consolidated Balance Sheets at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, and (iv) the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements. †

		Packaging Corporation of America

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

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