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

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

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

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

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

As of ~~July 26, 2019~~May 1, 2020 the Registrant had outstanding ~~94,662,821~~94,842,778 shares of common stock, par value $0.01 per share.

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Statements of Income:
Net sales	$	1,759.9		$	1,767.5		$	3,493.6		$	3,458.1		$	1,708.7		$	1,733.7
Cost of sales		(1,332.0	)		(1,346.9	)		(2,644.3	)		(2,681.4	)		(1,343.7	)		(1,312.3	)
Gross profit		427.9			420.6			849.3			776.7			365.0			421.4
Selling, general and administrative expenses		(143.7	)		(137.7	)		(283.7	)		(272.6	)		(145.9	)		(140.0	)
Other expense, net		(3.8	)		(13.3	)		(9.8	)		(21.6	)		(10.0	)		(6.0	)
Income from operations		280.4			269.6			555.8			482.5			209.1			275.4
Non-operating pension expense		(2.0	)		(0.5	)		(4.1	)		(1.1	)
Non-operating pension income (expense)														0.6			(2.0	)
Interest expense, net		(22.4	)		(23.8	)		(46.4	)		(49.6	)		(19.6	)		(24.1	)
Income before taxes		256.0			245.3			505.3			431.8			190.1			249.3
Provision for income taxes		(62.4	)		(58.7	)		(124.9	)		(105.1	)		(48.4	)		(62.5	)
Net income	$	193.6		$	186.6		$	380.4		$	326.7		$	141.7		$	186.8
Net income per common share:
Basic	$	2.05		$	1.98		$	4.03		$	3.46		$	1.50		$	1.98
Diluted	$	2.04		$	1.97		$	4.02		$	3.46		$	1.49		$	1.97
Dividends declared per common share	$	0.79		$	0.79		$	1.58		$	1.42		$	0.79		$	0.79
Statements of Comprehensive Income:
Net income	$	193.6		$	186.6		$	380.4		$	326.7		$	141.7		$	186.8
Other comprehensive income, net of tax:
Foreign currency translation adjustment		—			—			—			(0.1	)
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.3 million, $0.3 million, $0.7 million, and $0.7 million		1.0			1.0			1.9			2.0
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $0.8 million, $1.0 million, $1.6 million, and $1.9 million		2.3			3.0			4.7			6.0
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.0 million and $0.3 million														—			1.0
Changes in unrealized losses on marketable debt securities, net of tax of $0.1 million and $0.0 million														(0.2	)		—
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $0.9 million and $0.8 million														2.7			2.3
Other comprehensive income		3.3			4.0			6.6			7.9			2.5			3.3
Comprehensive income	$	196.9		$	190.6		$	387.0		$	334.6		$	144.2		$	190.1

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	569.4		$	361.5		$	764.0		$	679.5
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $12.8 million and $13.6 million as of June 30, 2019, and December 31, 2018, respectively		947.0			901.9
Short-term marketable debt securities								92.3			87.9
Accounts receivable, net of allowance for credit losses and customer deductions of $13.3 million and $12.6 million as of March 31, 2020, and December 31, 2019, respectively								879.5			845.6
Inventories		815.7			795.6			809.9			794.1
Prepaid expenses and other current assets		59.2			39.4			67.9			44.8
Federal and state income taxes receivable		11.4			16.7			—			26.5
Total current assets		2,402.7			2,115.1			2,613.6			2,478.4
Property, plant, and equipment, net		3,107.2			3,108.6			3,138.6			3,151.7
Operating lease right-of-use assets		238.0			—
Goodwill		918.7			917.3			918.7			918.7
Other intangible assets, net		358.2			378.2			329.2			338.8
Operating lease right-of-use assets								235.3			234.3
Long-term marketable debt securities								57.1			58.1
Other long-term assets		49.6			50.5			55.1			55.8
Total assets	$	7,074.4		$	6,569.7		$	7,347.6		$	7,235.8
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Operating lease obligations							$	64.3		$	62.6
Finance lease obligations	$	1.5		$	1.4			1.6			1.5
Operating lease obligations		59.9			—
Accounts payable		382.8			382.2			389.0			351.9
Dividends payable		75.9			76.1			77.0			76.6
Accrued liabilities		197.9			222.4			178.8			217.5
Accrued interest		11.6			11.5			30.2			13.7
Federal and state income taxes payable								3.7			—
Total current liabilities		729.6			693.6			744.6			723.8
Long-term liabilities:
Long-term debt		2,485.4			2,483.7			2,477.4			2,476.8
Operating lease obligations								177.2			177.6
Finance lease obligations		16.8			17.6			15.6			16.0
Operating lease obligations		183.4			—
Deferred income taxes		314.8			285.2			354.3			340.1
Compensation and benefits		364.9			357.5			372.3			375.5
Other long-term liabilities		58.3			59.7			56.3			55.0
Total long-term liabilities		3,423.6			3,203.7			3,453.1			3,441.0
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.7 and 94.5 million shares issued as of June 30, 2019, and December 31, 2018, respectively		0.9			0.9
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.8 million and 94.7 million shares issued as of March 31, 2020 and December 31, 2019, respectively								0.9			0.9
Additional paid in capital		513.3			494.5			534.9			524.8
Retained earnings		2,539.2			2,315.8			2,771.1			2,704.8
Accumulated other comprehensive loss		(132.2	)		(138.8	)		(157.0	)		(159.5	)
Total stockholders' equity		2,921.2			2,672.4			3,149.9			3,071.0
Total liabilities and stockholders' equity	$	7,074.4		$	6,569.7		$	7,347.6		$	7,235.8

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2019			2018			2020			2019
Cash Flows from Operating Activities:
Net income	$	380.4		$	326.7		$	141.7		$	186.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization of intangibles		190.7			212.2			100.3			94.8
Amortization of deferred financing costs		4.3			4.4			0.6			2.2
Share-based compensation expense		18.6			10.7			10.1			6.9
Deferred income tax provision		26.9			30.1			13.5			18.8
Loss on asset disposals		1.9			3.3
Pension and post-retirement benefits expense, net of contributions		11.3			9.0			1.0			7.3
Other, net		8.7			0.5			5.5			4.2
Changes in operating assets and liabilities:
Increase in assets —
Accounts receivable		(44.9	)		(82.7	)		(34.0	)		(28.4	)
Inventories		(20.1	)		(5.7	)		(15.7	)		(36.1	)
Prepaid expenses and other current assets		(21.2	)		(19.2	)		(23.0	)		(19.7	)
Increase (decrease) in liabilities —
Accounts payable		(1.8	)		11.0			28.5			13.2
Accrued liabilities		(22.3	)		(19.7	)		(22.0	)		(44.0	)
Federal and state income taxes payable / receivable		5.9			52.9			30.2			30.0
Net cash provided by operating activities		538.4			533.5			236.7			236.0
Cash Flows from Investing Activities:
Additions to property, plant, and equipment		(170.9	)		(273.9	)		(70.5	)		(78.8	)
Additions to other long term assets		(1.8	)		(2.7	)		(2.7	)		(1.3	)
Purchases of marketable debt securities, net of redemptions								(3.9	)		—
Proceeds from disposals		1.2			0.5			0.1			—
Other, net		(1.3	)		2.6
Net cash used for investing activities		(172.8	)		(273.5	)		(77.0	)		(80.1	)
Cash Flows from Financing Activities:
Repayments of debt and finance lease obligations		(0.7	)		(150.7	)		(0.4	)		(0.3	)
Common stock dividends paid		(149.3	)		(118.9	)		(74.8	)		(74.7	)
Shares withheld to cover employee restricted stock taxes		(7.7	)		(7.7	)
Net cash used for financing activities		(157.7	)		(277.3	)		(75.2	)		(75.0	)
Net increase (decrease) in cash and cash equivalents		207.9			(17.3	)
Net increase in cash and cash equivalents								84.5			80.9
Cash and cash equivalents, beginning of period		361.5			216.9			679.5			361.5
Cash and cash equivalents, end of period	$	569.4		$	199.6		$	764.0		$	442.4

See accompanying condensed notes to unaudited quarterly consolidated financial statements.

	Common Stock					Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'			Common Stock					Additional Paid in		Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital			Earnings			Loss			Equity			Shares			Amount		Capital		Earnings			Loss			Equity
Balance at April 1, 2019		94,494		$	0.9	$	501.4		$	2,427.8		$	(135.5	)	$	2,794.6
Balance at January 1, 2020																			94,655		$	0.9	$	524.8	$	2,704.8		$	(159.5	)	$	3,071.0
Common stock withheld and retired to cover taxes on vested stock awards		(83	)		—		(0.6	)		(7.1	)		—			(7.7	)		(1	)		—		—		—			—			—
Common stock dividends declared		—			—		—			(74.9	)		—			(74.9	)		—			—		—		(75.3	)		—			(75.3	)
Share-based compensation		255			—		12.5			—			—			12.5			194			—		10.1		—			—			10.1
Other		—			—		—			(0.2	)		—			(0.2	)		—			—		—		(0.1	)		—			(0.1	)
Comprehensive income		—			—		—			193.6			3.3			196.9			—			—		—		141.7			2.5			144.2
Balance at June 30, 2019		94,666		$	0.9	$	513.3		$	2,539.2		$	(132.2	)	$	2,921.2
Balance at March 31, 2020																			94,848		$	0.9	$	534.9	$	2,771.1		$	(157.0	)	$	3,149.9


	Common Stock					Additional Paid in			Retained			Accumulated Other Comprehensive			Total Stockholders'			Common Stock					Additional Paid in		Retained			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount		Capital			Earnings			Loss			Equity			Shares			Amount		Capital		Earnings			Loss			Equity
Balance at April 1, 2018		94,348		$	0.9	$	476.3		$	1,949.6		$	(153.0	)	$	2,273.8
Common stock withheld and retired to cover taxes on vested stock awards		(67	)		—		(0.4	)		(7.2	)		—			(7.6	)
Balance at January 1, 2019																			94,497		$	0.9	$	494.5	$	2,315.8		$	(138.8	)	$	2,672.4
Common stock dividends declared		—			—		—			(74.8	)		—			(74.8	)		—			—		—		(74.8	)		—			(74.8	)
Share-based compensation		219			—		6.0			—			—			6.0			(3	)		—		6.9		—			—			6.9
Other		—			—		0.2			(0.2	)		—			—
Comprehensive income		—			—		—			186.6			4.0			190.6			—			—		—		186.8			3.3			190.1
Balance at June 30, 2018		94,500		$	0.9	$	482.1		$	2,054.0		$	(149.0	)	$	2,388.0
Balance at March 31, 2019																			94,494		$	0.9	$	501.4	$	2,427.8		$	(135.5	)	$	2,794.6

Common Stock

Additional
Paid in

Retained

Accumulated
Other
Comprehensive

Total
Stockholders'

��

Shares

Amount

Capital

Earnings

Loss

Equity

Balance at January 1, 2019

94,497

$
0.9

$
494.5

$
2,315.8

$
(138.8
)

$
2,672.4

Common stock withheld and retired to
cover taxes on vested stock awards

(83
)

—

(0.6
)

(7.1
)

—

(7.7
)
Common stock dividends declared

—

—

—

(149.7
)

—

(149.7
)
Share-based compensation

252

—

19.4

—

—

19.4

Other

—

—

—

(0.2
)

—

(0.2
)
Comprehensive income

—

—

—

380.4

6.6

387.0

Balance at June 30, 2019

94,666

$
0.9

$
513.3

$
2,539.2

$
(132.2
)

$
2,921.2

Common Stock

Additional
Paid in

Retained

Accumulated
Other
Comprehensive

Total
Stockholders'

Shares

Amount

Capital

Earnings

Loss

Equity

Balance at January 1, 2018

94,350

$
0.9

$
471.2

$
1,867.4

$
(156.9
)

$
2,182.6

Common stock withheld and retired to
cover taxes on vested stock awards

(67
)

—

(0.4
)

(7.3
)

—

(7.7
)
Common stock dividends declared

—

—

—

(134.2
)

—

(134.2
)
Adoption of ASC 606

—

—

—

1.6

—

1.6

Share-based compensation

217

—

11.1

—

—

11.1

Other

—

—

0.2

(0.2
)

—

—

Comprehensive income

—

—

—

326.7

7.9

334.6

Balance at June 30, 2018

94,500

$
0.9

$
482.1

$
2,054.0

$
(149.0
)

$
2,388.0

See accompanying condensed notes to unaudited quarterly consolidated financial 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~~3 reportable segments: Packaging, Paper, and Corporate and Other. Our Packaging segment produces a wide variety of containerboard and corrugated packaging products. The Paper segment manufactures and sells a range of communication-based papers. Corporate and Other includes support staff services and related assets and liabilities, transportation assets, and activity related to other ancillary support operations. For more information about our segments, see Note ~~19,~~18, 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 ~~June 30, 2019~~of March 31, 2020 and for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ 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 notes required by accounting principles generally accepted in the United States for complete audited financial statements. Operating results for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

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

Effective January 1, ~~2019, the Company~~2020, we adopted ~~the Financial Accounting Standards Board (“FASB”)~~ Accounting Standards Update (“ASU”) 2016-13, ~~2016-02 (Topic 842)~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~Leases, which requires~~ ASU 2016-13 introduces the ~~recognition of lease assets and lease liabilities by lessees~~Current Expected Credit Losses (“CECL”) framework for ~~those leases classified as operating leases under previous guidance. The original guidance required application~~evaluating credit losses on afinancial instruments measured at amortized cost. ASU 2016-13 was applied using the modified retrospective ~~basis with the earliest period presented. In July 2018, the FASB issued ASU 2018-11,~~ ~~Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition~~method, and ~~elect to use the effective date of ASC 842,~~ ~~Leases~~, as ~~the date of initial application of transition, which we elected. As~~ a result, amounts recorded prior to January 1, 2020 have not been retrospectively restated. This new framework requires entities to incorporate forward-looking information into their estimate of current expected credit loss as of each reporting date. Although available-for-sale (“AFS”) debt securities are not within the scope of the new CECL framework, the ASU includes an amended impairment model for evaluating losses related to AFS debt securities. The guidance in this update also includes enhanced requirements for disclosures related to credit loss estimates.

Prior to adoption of the new standard, the Company already incorporated forward-looking information into its estimate of credit losses for trade receivables. Due to the short duration of the Company’s trade receivables, the adoption of ~~ASC 842~~ASU 2016-13 did not have a material impact on January 1, 2019, we recorded operating lease liabilities of $228 million, with corresponding right of use (“ROU”) assets of the same amount. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward the historical lease classification and not to reassess whether existing or expired contracts contain a lease. We also elected the short-term lease recognition exemption, which permits us to exclude short-term leases (i.e. leases with terms of 12 months or less) from the recognition requirements of this standard, and we elected to account for lease and non-lease components as a single lease component for all classes of underlying assets except for embedded leases.trade receivables. The adoption of ASC 842 had an immaterial impact on our consolidated net earnings, liquidity and debt covenants under our current agreements for the three- and six-month periods ended June 30, 2019. See Note 3, Leases, for more information.

~~Effective January 1, 2019, we adopted~~ 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 (“AOCI”) to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act in December 2017 (“Tax Act”). Stranded tax effects are the difference in deferred taxes between the amount initially recorded to other comprehensive income (“OCI”) at historical corporate income tax rates and the amount recorded using the newly-enacted corporate income tax rate. The cumulative tax rate adjustment to deferred taxes was required to be recorded through income tax expense from continuing operations in the period of enactment as opposed to OCI, resulting in the stranded tax effects in AOCI. The Company elected to not reclassify the stranded tax effects related to the Tax Act. As a result, the adoption2016-13 also did not have ana material impact on the ~~Company's~~Company’s AFS marketable debt securities, as the Company only invests in highly-rated AFS marketable debt securities. Overall, the adoption of ASU 2016-13 did not have a material impact on the Company’s financial ~~position,~~condition, results of operations or cash ~~flow.~~flow for the period ended March 31, 2020.

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

In ~~August 2018,~~March 2020, the FASB issued ASU ~~2018-15,~~2020-04, ~~Intangibles – Goodwill and Other – Internal Use Software~~Reference Rate Reform (~~Subtopic 350-40)~~Topic 848):~~Customer’s Accounting~~ Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for ~~Implementation Costs Incurred~~a limited period of time to ease the potential burden in ~~a Cloud Computing Arrangement That Is a Service Contract, which includes amendments to align the~~ accounting for, ~~costs incurred to implement a cloud computing arrangement that is a service contract with~~or recognizing the ~~guidance~~effects of, reference rate reform on ~~capitalizing costs associated with developing or obtaining internal-use software.~~financial reporting. The ~~accounting for the service component of a hosting arrangement that is a service contract is not affected by the~~ amendments in this ~~update. The~~Update are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Companies can apply the ASU ~~is effective for annual and interim periods beginning after~~immediately, but the guidance will only be available until December ~~15, 2019. Early adoption is permitted.~~31, 2022. The Company is currently evaluating the impact of this guidance, but does not expect the ~~new guidance.~~guidance to have a significant impact on its related disclosures.

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

~~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.~~

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.

We group our leases into two primary lease types, real estate and equipment, and into various asset classes within each type. Real estate leases primarily include manufacturing locations, office space, warehouses, and design centers, while equipment leases primarily include manufacturing equipment.

Leases with an initial term of 12 months or less and certain month-to-month leases are not recorded on the balance sheet. The lease expense for these types of leases is recognized on a straight-line basis over the lease term.

To determine the lease term, we include the non-cancellable period of the lease together with the following: all periods covered by an option to extend the lease if we are reasonably certain to exercise that option; any periods covered by an option to terminate the lease if we are reasonably certain not to exercise that option; and any periods covered by an option to extend or not to terminate the lease that are controlled by the lessor. The exercising of lease renewal options is based on whether future economic benefit is expected to be derived from the renewal. Most of our real estate leases contain at least one renewal option. Renewal options generally range from 1 to 5 years. Although equipment leases may also contain renewal options, we typically do not expect to extend and/or exercise these renewal options unless a compelling business reason is provided to management.

Our leases may contain fixed and variable costs. Fixed costs determine the right-of-use asset. Variable costs are those costs which will vary month to month and are excluded from the calculation of the right-of-use asset. Variable lease costs are recorded to lease expense in the period in which they are incurred.

Our leases do not provide an implicit borrowing rate of return. Therefore, we use our incremental borrowing rate to calculate the present value of lease payments at inception of the lease or when a lease is modified.

~~Supplemental balance sheet information related to our leases was as follows (dollars in millions):~~

~~Supplemental cash flow information related to leases was as follows (dollars in millions):~~

~~The maturities of lease liabilities for operating and finance leases at June 30, 2019 were as follows (dollars in millions):~~

~~The maturities of lease liabilities at December 31, 2018 under ASC 840 were as follows (dollars in millions):~~

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

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

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Packaging	$	1,504.6	$	1,496.2	$	2,982.2	$	2,899.1	$	1,467.5	$	1,477.6
Paper		237.8		250.8		477.5		520.2		217.4		239.7
Corporate and Other		17.5		20.5		33.9		38.8		23.8		16.4
Total revenue	$	1,759.9	$	1,767.5	$	3,493.6	$	3,458.1	$	1,708.7	$	1,733.7

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 customers, which are broadly diversified across industries and geographic locations.

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

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

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

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

Revenue in this segment primarily relates to Louisiana Timber Procurement Company, L.L.C. (LTP), a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company (Boise Cascade). PCA is the primary beneficiary of LTP and has the power to direct the

activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements. See Note ~~18,~~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 9, 2018, PCA acquired the assets of Englander dZignPak (“Englander”), a corrugated products manufacturer, for $56.3 million. The assets include two sheet plants located in Waco, Texas and Carrollton, Texas. Sales and total assets of the acquired company are not material to our overall sales and total assets. Operating results of the acquired assets subsequent to October 9, 2018 are included in our Packaging segment’s 2018 operating results. The total purchase price has been allocated to the assets acquired and liabilities assumed based on fair values at the date of acquisition, of which $28.6 million was allocated to goodwill (which is deductible for tax purposes) and $14.1 million to intangible assets (to be amortized over a weighted average life of approximately 9.7 years), primarily customer relationships, in the Packaging segment.

During the second quarter of 2019, we paid $1.4 million to the seller related to a final working capital adjustment. We recorded the adjustment as an increase to goodwill, which increased the purchase price to $57.7 million.

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
Numerator:	2019			2018			2019			2018			2020			2019
Net income	$	193.6		$	186.6		$	380.4		$	326.7		$	141.7		$	186.8
Less: distributed and undistributed earnings allocated to participating securities		(1.5	)		(1.4	)		(2.9	)		(2.5	)
Less: Distributed and undistributed earnings allocated to participating securities														(1.2	)		(1.4	)
Net income attributable to common shareholders	$	192.1		$	185.2		$	377.5		$	324.2		$	140.5		$	185.4
Denominator:
Weighted average basic common shares outstanding		93.8			93.6			93.8			93.6			93.9			93.7
Effect of dilutive securities		0.2			0.2			0.2			0.2			0.4			0.3
Weighted average diluted common shares outstanding		94.0			93.8			94.0			93.8			94.3			94.0
Basic income per common share	$	2.05		$	1.98		$	4.03		$	3.46		$	1.50		$	1.98
Diluted income per common share	$	2.04		$	1.97		$	4.02		$	3.46		$	1.49		$	1.97

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Asset disposals and write-offs	$	(4.5	)	$	(4.1	)	$	(8.8	)	$	(9.2	)	$	(6.0	)	$	(4.3	)
Wallula mill restructuring (a)		—			(7.2	)		(0.4	)		(7.9	)
Facilities closure and other costs (b)		—			—			—			(0.1	)
Facilities closure and other costs (a)														(0.4	)		—
Wallula mill restructuring (b)														—			(0.4	)
Other		0.7			(2.0	)		(0.6	)		(4.4	)		(3.6	)		(1.3	)
Total	$	(3.8	)	$	(13.3	)	$	(9.8	)	$	(21.6	)	$	(10.0	)	$	(6.0	)

For the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ we recorded ~~$62.4~~$48.4 million and ~~$58.7~~$62.5 million of income tax expense and had an effective tax rate of ~~24.4%~~25.5% and ~~23.9%, respectively. For the six months ended June 30, 2019 and 2018, we recorded $124.9 million and $105.1 million of income tax expense and had an effective tax rate of 24.7% and 24.3%~~25.1%, respectively. The increase in our effective tax rate for ~~both~~ the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 compared with the same period in ~~2018~~2019 was primarily due to ~~higher state and local income taxes net of the federal benefit and~~ higher employee compensation related impacts ~~from restricted stock vests with a lower excess tax benefit (ASU 2016-09) and~~ from the elimination of the performance based compensation exclusion in tax ~~reform.~~reform and reduced benefit associated with Foreign Derived Intangible Income.

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 ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ cash paid for taxes, net of refunds received, was ~~$92.1~~$4.7 million and ~~$22.2~~$13.7 million, respectively. The ~~increase~~decrease in cash tax payments between the periods is primarily due to ~~the 2018 use of a federal overpayment carryforward from the 2017 tax year resulting from tax reform related changes.~~lower taxable income.

During the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, there were no significant changes to our uncertain tax positions. For more information, see Note 7,8, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2018~~2019 Annual Report on Form 10-K.

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.

	June 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Raw materials	$	303.5	$	307.8	$	269.6	$	271.5
Work in process		14.3		13.9		12.9		11.0
Finished goods		213.9		199.0		220.2		207.7
Supplies and materials		284.0		274.9		307.2		303.9
Inventories	$	815.7	$	795.6	$	809.9	$	794.1

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

	June 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
Land and land improvements	$	167.7		$	161.9		$	177.8		$	177.5
Buildings		812.0			795.5			844.7			837.4
Machinery and equipment		5,603.6			5,481.6			5,742.6			5,727.4
Construction in progress		172.2			176.7			205.8			174.0
Other		78.1			75.4			84.0			81.5
Property, plant and equipment, at cost		6,833.6			6,691.1			7,054.9			6,997.8
Less accumulated depreciation		(3,726.4	)		(3,582.5	)		(3,916.3	)		(3,846.1	)
Property, plant, and equipment, net	$	3,107.2		$	3,108.6		$	3,138.6		$	3,151.7

Depreciation expense for the three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$85.8~~$89.8 million and ~~$91.6 million, respectively. During the six months ended June 30, 2019 and 2018, depreciation expense was $171.0 million and $186.2~~$85.2 million, respectively. We did 0t recognize any incremental depreciation expense during the three months ended March 31, 2020. We recognized $0.2 ~~million and $13.5~~ million of incremental depreciation expense during the ~~six~~three months ended ~~June 30,~~March 31, 2019 ~~and 2018, respectively,~~ as a result of shortening the useful lives of certain assets primarily related to the Wallula mill restructuring.

At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, purchases of property, plant, and equipment included in accounts payable were ~~$27.0~~$35.3 million and ~~$24.7~~$26.8 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 ~~June 30, 2019~~both March 31, 2020 and December 31, ~~2018,~~2019, we had $863.5 ~~millionand $862.1~~ million of goodwill recorded in our Packaging segment ~~respectively. At both June 30, 2019~~ and ~~December 31, 2018, 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 ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ amortization expense was ~~$19.2~~$9.6 million and ~~$20.5~~$9.5 million, respectively.

	June 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Compensation and benefits	$	106.1	$	136.7	$	85.0	$	124.5
Medical insurance and workers’ compensation		27.5		27.5		26.3		26.3
Customer volume discounts and rebates		22.1		25.2		24.0		27.9
Franchise, property, sales and use taxes		21.1		13.4		19.1		15.3
Environmental liabilities and asset retirement obligations		5.0		5.0		5.1		5.6
Severance, retention, and relocation		4.0		2.2		4.1		3.5
Other		12.1		12.4		15.2		14.4
Total	$	197.9	$	222.4	$	178.8	$	217.5

For both the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ cash payments for interest were ~~$45.8 millionand $51.1 million, respectively.~~$7.3 million.

Included in interest expense, net ~~are~~is the amortization of financing costs, and, for 2019 only, the amortization of treasury lock settlements. The remaining balances of the treasury lock settlements ~~and amortization of financing costs.~~were written off in connection with the debt refinancing completed in December 2019. For ~~both~~ the three months ended ~~June 30,~~March 31, 2020 and 2019, amortization of financing costs was $0.5 millionand ~~2018,~~$0.7 million, respectively. For the three months ended March 31, 2019, amortization of treasury lock settlements was $1.3 ~~million, and for the six months ended June 30, 2019 and 2018, amortization of treasury locks was $2.6 million~~and $2.7 million, respectively. For both the three months ended June 30, 2019 and 2018, amortization of financing costs was $0.7 million, and during the six months ended June 30, 2019 and 2018, amortization of financing costs was $1.4 million~~and $1.3 million, respectively.~~million.

At ~~June 30, 2019,~~March 31, 2020, we had ~~$2,496.7~~$2,493.2 million of fixed-rate senior notes outstanding. The fair value of our fixed-rate debt was estimated to be ~~$2,582.2~~$2,615.4 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 ~~2018~~2019 Annual Report on Form 10-K.

For more information on our long-term debt and interest rates on that debt, see Note ~~10,~~11, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2018~~2019 Annual Report on Form 10-K.

The following table shows the Company’s cash and available-for-sale (AFS) debt securities by major asset category at March 31, 2020 and December 31, 2019 (in millions):

	March 31, 2020
	Adjusted Cost Basis		Unrealized Gain		Unrealized Loss			Fair Value		Cash and Cash Equivalents		Short-Term Marketable Debt Securities		Long-Term Marketable Debt Securities
Cash and cash equivalents	$	763.2	$	—	$	—		$	763.2	$	763.2	$	—	$	—
Level 1 ^(a):
Money market funds		0.3		—		—			0.3		0.3		—		—
U.S. Treasury securities		30.7		0.4		—			31.1		0.5		13.8		16.8
Subtotal		31.0		0.4		—			31.4		0.8		13.8		16.8
Level 2 ^(b):
Certificates of deposit		3.9		—		—			3.9		—		3.9		—
Commercial paper		1.8		—		—			1.8		—		1.8		—
U.S. government agency securities		5.6		—		—			5.6		—		3.0		2.6
Corporate debt securities		108.2		0.1		(0.8	)		107.5		—		69.8		37.7
Subtotal		119.5		0.1		(0.8	)		118.8		—		78.5		40.3
Total	$	913.7	$	0.5	$	(0.8	)	$	913.4	$	764.0	$	92.3	$	57.1

	December 31, 2019
	Adjusted Cost Basis		Unrealized Gain		Unrealized Loss		Fair Value (c)		Cash and Cash Equivalents		Short-Term Marketable Debt Securities		Long-Term Marketable Debt Securities
Cash and cash equivalents	$	675.6					$	675.6	$	675.6	$	—	$	—
Level 1 ^(a):
Money market funds		0.1		—		—		0.1		0.1		—		—
U.S. Treasury securities		27.1		—		—		27.1		3.1		11.5		12.5
Subtotal		27.2						27.2		3.2		11.5		12.5
Level 2 ^(b):
Certificates of deposit		3.9		—		—		3.9		—		3.9		—
Commercial paper		5.6		—		—		5.6		0.7		4.9		—
U.S. government agency securities		7.0		—		—		7.0		—		3.0		4.0
Corporate debt securities		106.2		—		—		106.2		—		64.6		41.6
Subtotal		122.7						122.7		0.7		76.4		45.6
Total	$	825.5	$	—	$	—	$	825.5	$	679.5	$	87.9	$	58.1

For the three months ended March 31, 2020, net realized gains and losses on the sales and maturities of certain marketable debt securities were insignificant.

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

Fair values were determined for each individual marketable debt security in the investment portfolio. The Company evaluates each individual security to determine whether the security is impaired. An impairment exists when a security’s fair value is below its amortized cost basis. The Company reviews each impaired investment to determine if the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. If the impairment of a marketable debt security (or a portion of the impairment) is due to credit factors of the issuer, the Company records an allowance for credit losses. Non-credit related impairments are recorded in Other Comprehensive Income (OCI). PCA reviews factors such as the duration and extent to which the fair value of the marketable debt security is less than its cost, the financial condition of the issuer and any changes thereto, the general market condition in which the issuer operates, and ability of the issuer to make all required payments of the marketable debt security. PCA utilizes various credit rating services to provide information on the impaired investment of a particular issuer.

As of March 31, 2020 and December 31, 2019, we do not consider any of our marketable debt securities to be other-than-temporarily impaired. Any impairment existing at March 31, 2020 or December 31, 2019 is not related to credit losses. Therefore, we have not recorded an allowance for credit losses related to our marketable debt securities. All unrealized gains and losses were recorded in OCI.

The following table provides information about the Company’s marketable debt securities that have been in a continuous loss position as of March 31, 2020 and December 31, 2019 (in millions, except number of marketable debt securities in a loss position):

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

	Pension Plans												Pension Plans
	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Service cost	$	6.2		$	6.2		$	12.3		$	12.4		$	5.9		$	6.2
Interest cost		11.7			10.6			23.5			21.3			10.0			11.7
Expected return on plan assets		(13.0	)		(14.2	)		(26.0	)		(28.3	)		(14.2	)		(13.0	)
Net amortization of unrecognized amounts
Prior service cost		1.6			1.8			3.1			3.4			1.1			1.6
Actuarial loss		1.7			2.3			3.5			4.6			2.7			1.7
Net periodic benefit cost	$	8.2		$	6.7		$	16.4		$	13.4		$	5.5		$	8.2

PCA makes pension plan contributions that are sufficient to fund its actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act (ERISA). From time to time, PCA may make additional discretionary contributions based on the funded status of the plans, tax deductibility, income from operations, and other factors. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ payments to our nonqualified pension plans were insignificant. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, we made contributions of $3.9 million and ~~$4.6~~$0.7 million, respectively, to our qualified pension plans. ~~We made contributions of $1.0 million and $3.2 millionto our qualified plans during the three and six months ended June 30, 2018, respectively.~~ We expect to contribute at least the estimated required minimum contributions to our qualified ~~pension~~ plans of approximately ~~$15.8~~$19.8 million in ~~2019.~~2020.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the net periodic benefit cost for our postretirement plans was insignificant.

The Company has a long-term equity incentive plan, which allows for grants of restricted stock, performance awards, stock appreciation rights, and stock options to directors, officers, and employees, as well as others who engage in services for PCA. On February 25, 2020, our board of directors approved and, on May 5, 2020, our stockholders approved, the amendment and restatement of the plan. The ~~plan, as amended, terminates~~amendment extends the plan’s term to May ~~1, 2023~~5, 2030 and ~~authorizes 10.6 million~~increases the number of shares of common stock available for ~~grant over~~issuance under the ~~life~~plan by 1,400,000 shares. The total number of ~~the plan.~~ shares authorized for past and future awards will be 11,950,000 shares.

As of ~~June 30, 2019, 0.4~~March 31, 2020, 0.1 million shares were available for future grants under the current plan. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date.

The following table presents restricted stock and performance unit award activity for the ~~six~~three months ended ~~June 30, 2019:~~March 31, 2020:

	Restricted Stock					Performance Units					Restricted Stock					Performance Units
	Shares			Weighted Average Grant- Date Fair Value		Shares			Weighted Average Grant- Date Fair Value		Shares			Weighted Average Grant- Date Fair Value		Shares		Weighted Average Grant- Date Fair Value
Outstanding at January 1, 2019		743,591		$	86.90		266,704		$	90.01
Outstanding at January 1, 2020												716,952		$	94.50		323,147	$	96.56
Granted		199,185			95.45		115,608			96.98		197,470			94.28		108,415		96.63
Vested		(198,292	)		67.62		(59,165	)		67.84		(2,353	)		86.24		—		—
Forfeitures		(6,530	)		102.74		—			—		(3,092	)		96.12		—		—
Outstanding at June 30, 2019		737,954		$	94.25		323,147		$	96.56
Outstanding at March 31, 2020												908,977		$	94.47		431,562	$	96.58

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2019			2018			2019			2018			2020			2019
Restricted stock	$	10.8		$	5.0		$	15.7		$	8.9		$	8.0		$	4.9
Performance units		0.9			0.6			2.9			1.8			2.1			2.0
Total share-based compensation expense		11.7			5.6			18.6			10.7			10.1			6.9
Income tax benefit		(3.0	)		(1.4	)		(4.7	)		(2.7	)		(2.5	)		(1.7	)
Share-based compensation expense, net of tax benefit	$	8.7		$	4.2		$	13.9		$	8.0		$	7.6		$	5.2

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 ~~2019~~2020 and ~~2018,~~2019, in terms of grant date value, 50% used TSR as the performance measure and 50% used ROIC as the performance measure. The ROIC component of performance unit awards is valued based on the closing price of the stock on the grant date. As the ROIC component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of performance unit awards is valued using a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, a risk-free interest rate, expected dividends, and expected volatility of the Company’s common stock and the common stock of the peer companies. Compensation expense is recorded ratably over the expected term of the award.

The unrecognized compensation expense for all share-based awards at ~~June 30, 2019~~March 31, 2020 was as follows (dollars in millions):

	June 30, 2019				March 31, 2020
	Unrecognized Compensation Expense		Remaining Weighted Average Recognition Period (in years)		Unrecognized Compensation Expense		Remaining Weighted Average Recognition Period (in years)
Restricted stock	$	34.7	2.9		$	37.6		3.0
Performance units		21.6		2.8		25.6		2.7
Total unrecognized share-based compensation expense	$	56.3		2.9	$	63.2		2.9

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, we paid ~~$149.3~~$74.8 million of dividends to shareholders. On ~~May 7, 2019,~~February 25, 2020, PCA’s Board of Directors declared a regular quarterly cash dividend of $0.79 per share of common stock, which was paid on ~~July~~April 15, ~~2019~~2020 to shareholders of record as of ~~June 14, 2019.~~March 13, 2020. The dividend payment was $~~74.7~~74.9 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~~0t repurchase any shares of its common stock under this authority during the three ~~and six~~ months ended ~~June 30, 2019.~~March 31, 2020. At ~~June 30, 2019,~~March 31, 2020, $193.0 million of the authorized amount remained available for repurchase of the Company’s common stock.

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

Foreign
Currency
Translation
Adjustments

Unrealized
Loss On
Treasury
Locks, Net

Unrealized
Loss on
Foreign
Exchange
Contracts

Unfunded
Employee
Benefit
Obligations

Total

Balance at January 1, 2019

$
(0.4
)

$
(10.2
)

$
(0.3
)

$
(127.9
)

$
(138.8
)
Amounts reclassified from AOCI, net of tax

—

1.9

—

4.7

6.6

Balance at June 30, 2019

$
(0.4
)

$
(8.3
)

$
(0.3
)

$
(123.2
)

$
(132.2
)

	Foreign Currency Translation Adjustments			Unrealized Loss on Foreign Exchange Contracts			Unrealized Loss on Marketable Debt Securities			Unfunded Employee Benefit Obligations			Total
Balance at January 1, 2020	$	(0.4	)	$	(0.2	)	$	—		$	(158.9	)	$	(159.5	)
Other comprehensive income before reclassifications, net of tax					—			(0.2	)		—			(0.2	)
Amounts reclassified from AOCI, net of tax		—			—			—			2.7			2.7
Balance at March 31, 2020	$	(0.4	)	$	(0.2	)	$	(0.2	)	$	(156.2	)	$	(157.0	)

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

	Amounts Reclassified from AOCI													Amounts Reclassified from AOCI
	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
Details about AOCI Components	2019			2018			2019			2018				2020			2019
Unrealized loss on treasury locks, net (a)	$	(1.3	)	$	(1.3	)	$	(2.6	)	$	(2.7	)	See (a) below	$	—		$	(1.3	)	See (a) below
		0.3			0.3			0.7			0.7		Tax benefit		—			0.3		Tax benefit
	$	(1.0	)	$	(1.0	)	$	(1.9	)	$	(2.0	)	Net of tax	$	—		$	(1.0	)	Net of tax

Unfunded employee benefit obligations (b)
Amortization of prior service costs	$	(1.5	)	$	(1.7	)	$	(3.0	)	$	(3.3	)	See (b) below	$	(1.0	)	$	(1.5	)	See (b) below
Amortization of actuarial gains / (losses)		(1.6	)		(2.3	)		(3.3	)		(4.6	)	See (b) below
Amortization of actuarial losses															(2.6	)		(1.6	)	See (b) below
		(3.1	)		(4.0	)		(6.3	)		(7.9	)	Total before tax		(3.6	)		(3.1	)	Total before tax
		0.8			1.0			1.6			1.9		Tax benefit		0.9			0.8		Tax benefit
	$	(2.3	)	$	(3.0	)	$	(4.7	)	$	(6.0	)	Net of tax	$	(2.7	)	$	(2.3	)	Net of tax

Our Paper segment has a long-standing commercial and contractual relationship with Office Depot, our largest customer in the paper business. This relationship exposes us to a significant concentration of business and financial risk. Our sales to Office Depot represent approximately 5% and 7% of our total Company sales revenue for ~~both~~ the ~~six~~three month periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018~~respectively, and approximately ~~51%~~43% and ~~45%~~52% of our Paper segment sales revenue for both of those periods, respectively. For full year ~~2018,~~2019, sales to Office Depot represented ~~47%~~50% of our Paper segment sales. At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had ~~$83.7~~$56.8 million and ~~$66.7~~$76.2 million of accounts receivable due from Office Depot, respectively, which represents 9%6% and 7%9% of our total Company accounts receivable, respectively.

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 ~~$3.4~~$5.0 million at ~~June 30, 2019~~March 31, 2020 and ~~$2.7~~$3.9 million at December 31, ~~2018.~~2019. During the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ we recorded ~~$21.4~~$22.6 million and ~~$22.6 million, respectively, and during the six months ended June 30, 2019 and 2018, we recorded $41.4 million and $43.0~~$20.0 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 ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ fiber purchases from related parties were ~~$4.4~~$4.2 million and ~~$4.7~~$4.4 million, respectively. ~~Fiber purchases from related parties were $8.8 million and $8.7 million, respectively, during the six months ended June 30, 2019 and 2018.~~ 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~~3 reportable segments: Packaging, Paper, and Corporate and Other. These segments represent distinct businesses that are managed separately because of differing products and services. Each of these businesses requires distinct operating and marketing strategies.

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

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

	Sales, net											Sales, net
Three Months Ended June 30, 2019	Trade		Intersegment			Total			Operating Income (Loss)
Three Months Ended March 31, 2020												Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	1,497.8	$	6.8		$	1,504.6		$	263.9		$	1,465.4	$	2.1		$	1,467.5		$	199.8		(a)
Paper		237.8		—			237.8			38.8			217.4		—			217.4			32.5		(a)
Corporate and other		24.3		31.5			55.8			(22.3	)
Corporate and Other													25.9		34.3			60.2			(23.2	)
Intersegment eliminations		—		(38.3	)		(38.3	)		—			—		(36.4	)		(36.4	)		—
	$	1,759.9	$	—		$	1,759.9			280.4		$	1,708.7	$	—		$	1,708.7			209.1
Non-operating pension expense										(2.0	)
Non-operating pension income																					0.6
Interest expense, net										(22.4	)										(19.6	)
Income before taxes									$	256.0										$	190.1

	Sales, net												Sales, net
Three Months Ended June 30, 2018	Trade		Intersegment			Total			Operating Income (Loss)
Three Months Ended March 31, 2019													Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	1,489.6	$	6.6		$	1,496.2		$	273.2		(b)	$	1,470.8	$	6.8		$	1,477.6		$	249.6		(b)
Paper		250.8		—			250.8			16.2		(b)		239.7		—			239.7			45.6		(b)
Corporate and Other		27.1		33.5			60.6			(19.8	)	(b)		23.2		33.5			56.7			(19.8	)
Intersegment eliminations		—		(40.1	)		(40.1	)		—				—		(40.3	)		(40.3	)		—
	$	1,767.5	$	—		$	1,767.5			269.6			$	1,733.7	$	—		$	1,733.7			275.4
Non-operating pension expense										(0.5	)											(2.0	)
Interest expense, net										(23.8	)											(24.1	)
Income before taxes									$	245.3											$	249.3

Sales, net

Six Months Ended June 30, 2019

Trade

Intersegment

Total

Operating Income
(Loss)

Packaging

$
2,968.6

$
13.6

$
2,982.2

$
513.4

(a)
Paper

477.5

—

477.5

84.4

(a)
Corporate and Other

47.5

65.0

112.5

(42.0
)

Intersegment eliminations

—

(78.6
)

(78.6
)

—

$
3,493.6

$
—

$
3,493.6

555.8

Non-operating pension expense

(4.1
)

Interest expense, net

(46.4
)

Income before taxes

$
505.3

Sales, net

Six Months Ended June 30, 2018

Trade

Intersegment

Total

Operating Income
(Loss)

Packaging

$
2,886.3

$
12.8

$
2,899.1

$
497.9

(b)
Paper

520.2

—

520.2

23.5

(b)
Corporate and Other

51.6

62.6

114.2

(38.9
)
(b)
Intersegment eliminations

—

(75.4
)

(75.4
)

—

$
3,458.1

$
—

$
3,458.1

482.5

Non-operating pension expense

(1.1
)

Interest expense, net

(49.6
)

Income before taxes

$
431.8

We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt, capital commitments, lease obligations, and purchase commitments for goods and services, and legal proceedings, all of which are discussed in Note ~~10,~~11, Debt, and Note ~~19,~~21, Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our ~~2018~~2019 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 ~~June 30, 2019,~~ March 31, 2020,

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 other allegedly injured parties, alleging negligence on the part of the Company and claiming compensatory and punitive damages. The Company is vigorously defending these lawsuits. The Company believes that these suits are covered by its liability insurance policies, subject to an aggregate $1.0 million deductible. ~~The incident remains under investigation and all~~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. As of December 31, 2017, the Company finalized the claim with the insurance carrier and received $17.0 million in insurance proceeds during the 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 has cooperated with investigations from the U.S. Occupational Health and Safety Administration (OSHA), the U.S. Chemical Safety Board (CSB) and the U.S. Environmental Protection Agency (EPA). The U.S. Chemical Safety Board completed its investigation and issued its report during the second quarter of 2018. The Company settled with OSHA during the second quarter of 2018 and paid approximately $40,000 in penalties for citations. The EPA investigation is ongoing.

On August 8, 2019, the EPA issued a notice of violation (NOV) alleging violations of the Clean Air Act, resulting from an inspection of our Wallula, Washington mill in September 2018. PCA denies the violations set forth in the NOV and has requested that the EPA’s Office of Air Quality Planning and Standards provide an applicability determination to clarify that the relevant operations of PCA have not violated the regulations at issue in the NOV. While we cannot predict with certainty the ultimate resolution of this matter, we believe that we have a meritorious position that our operations have not violated the Clean Air Act, that we have taken appropriate action to address the matters raised by the EPA in the NOV, and that this matter will not result in a material adverse effect on our financial condition, results of operations, or cash flows.

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

On April 27, 2020, Packaging Corporation of America approved and announced to affected employees a plan for the closure of its corrugated products production facility located in San Lorenzo, California. The San Lorenzo facility was acquired as part of the Boise acquisition in 2013 and was part of the Tharco stock box business. The majority of the plant’s equipment will be transferred to other PCA facilities and approximately 20% of the San Lorenzo customer business will be absorbed into other PCA plants.

The last date of production at the plant is expected to be in June 2020. The closure is estimated to result in pre-tax: (1) total cash severance and other cash shutdown costs of approximately $14 to $18 million; and (2) total non-cash charges of approximately $9 to $13 million, which are primarily asset impairment and accelerated depreciation charges. PCA expects to record $21 to $25 million of charges in the second quarter of 2020.

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 ~~2018~~2019 Annual Report on Form 10-K, as well as those factors listed in other documents we file with the Securities and Exchange Commission (SEC). We do not assume any obligation to update any forward-looking statement. Our actual results may differ materially from those contained in or implied by any of the forward-looking statements in this Form 10-Q. Please see “Forward Looking Statements” elsewhere in this Item 2.

PCA is the third largest producer of containerboard products and the third largest producer of uncoated freesheet paper in North America. We operate six containerboard mills, two paper mills, and 94 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~~uncoated freesheet papers, including both commodity and specialty papers, which may have custom or specialized features such as colors, coatings, high brightness, and recycled content. We are headquartered in Lake Forest, Illinois and operate primarily in the United States.

This Item 2 is intended to supplement, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2018~~2019 Annual Report on Form 10-K.

~~Second~~First quarter net sales were ~~$1.76~~$1.71 billion in ~~2019~~2020 and ~~$1.77~~$1.73 billion in ~~2018.~~2019. We reported ~~$194~~$142 million of net income, or ~~$2.04~~$1.49 per diluted share, during the ~~second~~first quarter of ~~2019,~~2020, compared to $187 million, or $1.97 per diluted share, during the same period in ~~2018.~~2019. Net income included ~~no income or~~$1 million of expense for special items in the ~~second~~first quarter of ~~2019,~~2020, compared to ~~$10~~$0.5 million of expense in ~~2018~~2019 (discussed below). Excluding special items, net income was ~~$197~~$143 million, or ~~$2.08~~$1.50 per diluted share, during the ~~second~~first quarter of ~~2018.~~2020, compared to $187 million, or $1.98 per diluted share, in the first quarter of 2019. The decrease was driven primarily by ~~higher operating costs, higher converting costs,~~ lower prices and mix in our Packaging and Paper segments, lower volumes in our Paper segment, ~~volume,~~ higher annual outage expenses, higher depreciation and other expenses, and a higher tax rate. These items were partially offset by higher volumes in our Packaging segment, ~~volume~~lower operating and ~~prices~~converting costs, lower freight and ~~mix, higher Paper segment prices and mix, lower Wallula No. 3 paper machine conversion-related~~logistic costs, and lower ~~freight costs.~~interest expense and non-operating pension expense. PCA’s facilities have been permitted to continue to operate as “essential operations” during the COVID-19 pandemic. PCA did not experience significant disruptions in its operations as a result of the pandemic and has maintained adequate availability of its workforce and supply of raw materials and services. For additional detail on special items included in reported GAAP results, as well as segment income (loss) excluding special items, earnings before non-operating pension expense, interest, income taxes, and depreciation, amortization, and depletion (EBITDA), and EBITDA excluding special items, see “Item 2. Reconciliations of Non-GAAP Financial Measures to Reported Amounts.”

Packaging segment income from operations was ~~$264~~$200 million in the ~~second~~first quarter of ~~2019,~~2020, compared to ~~$273~~$250 million in the ~~second~~first quarter of ~~2018.~~2019. Packaging segment EBITDA excluding special items was ~~$349~~$290 million in the ~~second~~first quarter of ~~2019~~2020 compared to ~~$363~~$334 million ~~excluding special items,~~ in the ~~second~~first quarter of ~~2018.~~2019. The decrease in EBITDA excluding special items was due primarily to lower ~~export containerboard~~ prices and mix, partially offset by higher sales and production volumes, lower operating and converting costs, and other fixed costs, partially offset by higher domestic containerboard and corrugated products prices and mix and sales and production volumes, lower annual outage expenses, lower Wallula No. 3 paper machine conversion-related costs, and lower freight ~~costs.~~and logistic expenses. With the onset of the COVID-19 pandemic, PCA experienced higher than expected sales volume in the Packaging segment. We cannot predict the future impact of the pandemic on our packaging operations, economic and operating conditions affecting our packaging business or demand for our packaging products.

Paper segment income from operations was ~~$39~~$33 million in the ~~second~~first quarter of ~~2019,~~2020, compared to ~~$16~~$46 million in the ~~second~~first quarter of ~~2018.~~2019. Paper segment EBITDA excluding special items was ~~$48~~$42 million in the ~~second~~first quarter of ~~2019,~~2020, compared to ~~$38~~$55 million ~~excluding special items,~~ in the ~~second~~first quarter of ~~2018.~~2019. The ~~increase~~decrease in EBITDA excluding special items was due to ~~higher~~lower prices and mix, ~~lower operating costs, and lower freight costs, partially offset by~~ lower sales and production volumes, ~~primarily related to the exit from the paper business at the Wallula Mill,~~ and higher annual outage ~~expenses.~~

During the first six months of 2019, we reported $380 million of net income, or $4.02 per diluted share, compared to $327 million of net income, or $3.46 per diluted share, during the same period in 2018. Net income included $0.5 million of expense for special items (discussed below), compared to $17 million of expense for special items during the same period in 2018. Excluding special items, we recorded $381 million of net income, or $4.02 per diluted share, during the first six months of 2019, compared to $344 million of net income, or $3.64 per diluted share, in the first six months of 2018. The increase was driven primarily by higher domestic containerboard and corrugated products prices and mix and sales and production volumes, higher Paper segment prices and mix, lower recycled fiber costs, lower Wallula No. 3 paper machine conversion-related costs, and lower freight expense, partially offset by lower containerboard export prices, lower volumes in our Paper segment, primarily related to the exit from the paper business at the Wallula Mill, higher indirect and converting costs, higher direct material costs, higher fixed expenses, and higher annual outage expenses.

Packaging segment income from operations was $513 million in the first six months of 2019, compared to $498 million in the same period in 2018. Packaging segment EBITDA excluding special items was $682 million in the first six months of 2019, compared to $671 million in the first six months of 2018. The increase was driven primarily by higher domestic containerboard and corrugated products prices and mix and sales and production volumes, lower recycled fiber costs, lower Wallula No. 3 paper machine conversion-related costs, and lower annual outageother expenses, partially offset by lower ~~containerboard export prices, higher costs~~operating costs. Demand for ~~wood, labor, and other operating costs.~~

~~Paper segment income from operations~~our paper products was ~~$84 million~~slightly better than expected during the quarter. Due to the COVID-19 pandemic, we expect significantly lower demand in the ~~first six~~second quarter and will temporarily cease operations at our Jackson, Alabama paper mill during the months of ~~2019, compared~~May and June, which will reduce production by approximately 70,000 tons. Due to $24 million in the first six months of 2018. Paper segment EBITDA excluding special items was $103 million in the first six months of 2019, compared to $69 million in the same period in 2018. The increase was due primarily to higher prices and mix and lower operating costs, partially offset by lower sales and production, ~~volumes, primarily related~~we expect lower segment income for the quarter.

As more fully described in Note 20, Subsequent Events, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this Form 10-Q, on April 27, 2020, we announced the ~~exit from the paper business at the Wallula Mill, and higher annual outage costs.~~

~~During~~closure of our San Lorenzo, California corrugated products plant. We expect to incur $23 million to $31 million in total charges relating to this action, most of which will be taken in the second quarter of 2018, the Company discontinued production of uncoated freesheet and coated one-side grades at its Wallula, Washington mill and converted the No. 3 paper machine to a 400,000 ton-per-year virgin kraft linerboard machine. The Company took an extended outage on the machine to complete the conversion in the fourth quarter of 2018. The Company incurred charges in both the Packaging and Paper segments during the first quarter of 2019 and the first and second quarters of 2018 relating to these activities as described below under “Special Items and Earnings per Diluted Share, Excluding Special Items.” The Company does not expect to incur further related charges going forward.2020.

A reconciliation of reported earnings per diluted share to earnings per diluted share, excluding special items, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ are as follows:

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2019		2018		2019		2018		2020		2019
Earnings per diluted share, as reported	$	2.04	$	1.97	$	4.02	$	3.46	$	1.49	$	1.97
Special items:
Wallula mill restructuring (a)		—		0.11		—		0.18
Incremental costs for COVID-19 (a)										0.01		—
Wallula mill restructuring (b)										—		0.01
Total special items		—		0.11		—		0.18		0.01		0.01
Earnings per diluted share, excluding special items	$	2.04	$	2.08	$	4.02	$	3.64	$	1.50	$	1.98

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

Trade publications reported North American industry-wide corrugated products shipments per work day were ~~flat~~up 2.7% during the ~~second~~first quarter of ~~2019~~2020 compared to the same quarter of ~~2018.~~2019. Reported industry containerboard production ~~decreased 5.8%~~increased 7.6% compared to the ~~second~~first quarter of ~~2018.~~2019. Reported industry containerboard inventories at the end of the ~~second~~first quarter of ~~2019~~2020 were approximately 2.5 million tons, ~~up 4.4%~~down 7.9% compared to the same period in ~~2018.~~2019. Reported containerboard export shipments were ~~down 16.4%~~up 43.6% compared to ~~the second quarter of 2018. Trade publications reported prices were lower than prices reported during~~ the first quarter of ~~2019 with decreases of~~2019. Prices reported by trade publications decreased by $10 per ton for ~~both domestic~~ linerboard and $15 per ton for corrugating medium in ~~both May and June of 2019.~~January 2020.

Trade publications reported North American uncoated freesheet paper shipments were down ~~12.3%~~5.6% in the ~~second~~first quarter of ~~2019,~~2020, compared to the same quarter of ~~2018.~~2019. Average prices reported by a trade publication for cut size office paperswere ~~higher~~flat in the first quarter of 2020 compared to the fourth quarter of 2019. Average prices were lower by ~~$120~~$13 per ton, or ~~11.7%~~1.2%, in the ~~second~~first quarter of ~~2019,~~2020, compared to the ~~second~~first quarter of ~~2018.~~2019.

Looking ahead to the third quarter of 2019, in our Packaging segment, we expect seasonally higher containerboard and corrugated products shipments, with lower prices as a result of the published domestic containerboard price decreases, and lower export prices. In the Paper segment, volume should be seasonally stronger, but prices and mix are expected to move lower. Converting and other costs should be slightly higher, but operating costs and scheduled maintenance outage costs should be lower. Considering these items, we expect third quarter earnings to be lower than the second quarter.

Three Months Ended ~~June 30, 2019,~~March 31, 2020, compared to Three Months Ended ~~June 30, 2018~~March 31, 2019

The historical results of operations of PCA for the three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ are set forth below (dollars in millions):

	Three Months Ended									Three Months Ended
	June 30,									March 31,
	2019			2018			Change			2020			2019			Change
Packaging	$	1,504.6		$	1,496.2		$	8.4		$	1,467.5		$	1,477.6		$	(10.1	)
Paper		237.8			250.8			(13.0	)		217.4			239.7			(22.3	)
Corporate and Other		55.8			60.5			(4.7	)		60.2			56.7			3.5
Intersegment eliminations		(38.3	)		(40.0	)		1.7			(36.4	)		(40.3	)		3.9
Net sales	$	1,759.9		$	1,767.5		$	(7.6	)	$	1,708.7		$	1,733.7		$	(25.0	)

Packaging	$	263.9		$	273.2		$	(9.3	)	$	199.8		$	249.6		$	(49.8	)
Paper		38.8			16.2			22.6			32.5			45.6			(13.1	)
Corporate and Other		(22.3	)		(19.8	)		(2.5	)		(23.2	)		(19.8	)		(3.4	)
Income from operations	$	280.4		$	269.6		$	10.8		$	209.1		$	275.4		$	(66.3	)
Non-operating pension expense		(2.0	)		(0.5	)		(1.5	)
Non-operating pension income (expense)											0.6			(2.0	)		2.6
Interest expense, net		(22.4	)		(23.8	)		1.4			(19.6	)		(24.1	)		4.5
Income before taxes		256.0			245.3			10.7			190.1			249.3			(59.2	)
Income tax provision		(62.4	)		(58.7	)		(3.7	)		(48.4	)		(62.5	)		14.1
Net income	$	193.6		$	186.6		$	7.0		$	141.7		$	186.8		$	(45.1	)
Non-GAAP Measures (a)
Net income excluding special items	$	193.6		$	197.0		$	(3.4	)	$	142.6		$	187.3		$	(44.7	)
Consolidated EBITDA		376.2			373.7			2.5			309.4			370.2			(60.8	)
Consolidated EBITDA excluding special items		376.2			382.3			(6.1	)		310.6			370.6			(60.0	)
Packaging EBITDA		348.6			357.7			(9.1	)		288.8			333.6			(44.8	)
Packaging EBITDA excluding special items		348.6			362.8			(14.2	)		289.9			333.8			(43.9	)
Paper EBITDA		48.2			34.2			14.0			41.9			54.7			(12.8	)
Paper EBITDA excluding special items		48.2			37.7			10.5			42.0			54.9			(12.9	)

Net sales decreased $8$25 million, or ~~0.4%~~1.4%, to ~~$1,760~~$1,709 million during the three months ended ~~June 30, 2019,~~March 31, 2020, compared to ~~$1,768~~$1,734 million during the same period in ~~2018.~~2019.

Packaging. Net sales ~~increased $8~~decreased $10 million, or ~~0.6%~~0.7%, to ~~$1,504~~$1,468 million, compared to ~~$1,496~~$1,478 million in the ~~second~~first quarter of ~~2018~~2019 due to ~~higher~~lower containerboard and corrugated products prices and mix ($2794 million), partially offset by ~~lower domestic and export containerboard price and mix ($11 million) and decreased~~higher containerboard and corrugated products volume ($884 million). In the ~~second~~first quarter of ~~2019,~~2020, our domestic containerboard prices ~~decreased 3.4%,~~were 8.0% lower, while export prices ~~decreased 19.0%~~were 25.2% lower, than the same period in 2019. In the first quarter of 2020, export and domestic containerboard outside shipments increased 12.9%, compared to the first quarter of 2019. Total corrugated products shipments were up 5.6% with one additional workday, and up 3.9% per day compared to the same period in 2018. In the second quarter of 2019, export and domestic containerboard outside shipments decreased 10.1%, compared to the second quarter of 2018. Total corrugated products shipments were down 1.3%, as there was one less work day in the second quarter of 2019, compared to the same period in 2018. However, total corrugated products shipments were up 0.3% per work day in 2019 compared to the second quarter of 2018.2019.

Paper. Net sales during the three months ended ~~June 30, 2019~~March 31, 2020 decreased ~~$13~~$23 million, or ~~5.2%~~9.3%, to ~~$238~~$217 million, compared to ~~$251~~$240 million in the ~~second~~first quarter of ~~2018,~~2019, due to decreased volume ($3317 million)~~, primarily due to the exit from the paper business at Wallula, partially offset by favorable changes in~~ and lower prices and mix ($206 million).

Gross profit ~~increased $7~~decreased $56 million during the three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period in ~~2018.~~2019. The ~~increase~~decrease was driven primarily by ~~higher corrugated products prices and mix and sales and production volumes, higher~~lower prices and mix in our Packaging and Paper ~~segment, partially offset by~~segments, lower ~~containerboard prices and mix, lower volumes~~volume in our Paper segment, ~~and~~ higher annual outage expenses, partially offset by higher volumes in our Packaging segment, lower operating and converting costs, and lower freight and logistic costs.In the three months ended ~~June 30, 2019,~~March 31, 2020, gross profit ~~did not include any~~included $1 million of special items ~~compared~~for incremental out-of-pocket costs related to ~~$6 million of Wallula Mill restructuring charges~~the COVID-19 pandemic, including supplies, cleaning and sick pay. There were no significant special items in the ~~same period last year.~~three months ended March 31, 2019.

Selling, general, and administrative expenses (“SG&A”) increased $6 million during the three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period in ~~2018.~~2019. The increase was primarily due to higher employee salaries and fringes.

Other ~~income (expense),~~expense, net, for the three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ are set forth below (dollars in millions):

	Three Months Ended						Three Months Ended
	June 30,						March 31,
	2019			2018			2020			2019
Asset disposals and write-offs	$	(4.5	)	$	(4.1	)	$	(6.0	)	$	(4.3	)
Facilities closure and other costs								(0.4	)		—
Wallula mill restructuring		—			(7.2	)		—			(0.4	)
Other		0.7			(2.0	)		(3.6	)		(1.3	)
Total	$	(3.8	)	$	(13.3	)	$	(10.0	)	$	(6.0	)

We discuss these items in more detail in Note 7,5, Other ~~Income (Expense),~~Expense, Net, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in “Part I, ~~Item1.~~Item 1. Financial Statements” of this Form 10-Q.

Income from operations ~~increased $11~~decreased $66 million, or ~~4.0%~~24.0%, during the three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period in ~~2018.~~2019. The ~~second~~first quarter of ~~2019~~2020 included ~~no special items, compared to $14~~$1 million of special ~~item~~items expense for incremental, out-of-pocket costs related to COVID-19, compared to $1 million of expense primarily related to the Wallula Mill restructuring in the ~~second~~first quarter of ~~2018.~~2019.

Packaging. Packaging segment income from operations decreased $9$50 million to ~~$264~~$200 million, compared to ~~$273~~$250 million during the three months ended ~~June 30, 2018.~~March 31, 2019. The decrease related primarily to lower export containerboard prices ($10 million), higher operating and converting costs ($37 million) and other fixed costs ($6 million), partially offset by higher containerboard and corrugated products sales and production volumes ($11 million), higher domestic containerboard and corrugated products prices and mix ($2081 million), higher depreciation expense ($5 million), and other fixed costs ($2 million), partially offset by higher sales and production volumes ($18 million), lower ~~Wallula No. 3 paper machine conversion-related~~operating and converting costs ($~~6 million), lower annual outage expenses ($1~~18 million), and lower freight expenses ($12 million). ~~There were no special~~Special items during the ~~second~~first quarter of ~~2019. Special items for the second quarter of 2018~~2020 included $5$1 million of ~~Wallula Mill restructuring charges.~~incremental, out-of-pocket costs related to COVID-19, compared to an insignificant amount of special items in the Packaging segment in the first three months of 2019.

Paper. Paper segment income from operations ~~increased $23~~decreased $13 million to ~~$39~~$33 million, compared to ~~$16~~$46 million during the three months ended ~~June 30, 2018.~~March 31, 2019. The ~~increase~~decrease primarily related to ~~higher~~lower prices and mix ($206 million), lower sales and production volumes ($4 million), higher annual outage expenses ($5 million), and other fixed costs ($3 million), partially offset by lower operating costs ($5 million)~~, lower freight expenses ($2 million), and other costs ($2 million), partially offset by higher annual outage expenses ($9 million) and lower sales and production volumes ($6 million)~~. There were no material special items in the Paper segment in the ~~second~~first quarter of 2020 or 2019. ~~Special items for the second quarter 2018 included expense of $8 million related to the Wallula Mill restructuring.~~

Non-operating pension expense ~~increased $1.5~~decreased $3 million during the three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period in ~~2018.~~2019. The ~~increase~~decrease in non-operating pension expense was primarily related to the ~~2018~~favorable 2019 asset performance, ~~(i.e. lower asset balances resulted in lower than expected return) and the amortization of the 2018 losses.~~partially offset by assumption changes.

Interest expense, net decreased $1$5 million during the three months ended ~~June 30, 2019,~~March 31, 2020, compared to the same period in ~~2018.~~2019. The decrease in interest expense, net was primarily related to lower earnings on deferred compensation balances, no treasury lock amortization due to the write-off of the remaining balances of treasury locks in connection with the Company’s debt refinancing completed in December 2019, and higher interest income due to higher ~~interest income as a result of higher~~ cash balances induring the first quarter of 2020 compared to the first quarter of 2019.

During the three months ended ~~June 30, 2019,~~March 31, 2020, we recorded ~~$62~~$48 million of income tax expense, compared to ~~$59~~$63 million of expense during the three months ended ~~June 30, 2018.~~March 31, 2019. The effective tax rate for the three months ended ~~June 30,~~March 31, 2020 and 2019 was 25.5% and ~~2018 was 24.4% and 23.9%~~25.1%, respectively. The increase in our effective tax rate was primarily due to ~~higher state and local income taxes net of the federal benefit and~~ higher employee compensation related impacts ~~from restricted stock vests with a lower excess tax benefit (ASU 2016-09) and~~ from the elimination of the performance based exclusion in tax ~~reform.~~

~~The historical results of operations of PCA for the six months ended June 30, 2019~~reform and ~~2018 are set forth below (dollars in millions):~~

Six Months Ended

June 30,

2019

2018

Change

Packaging

$
2,982.2

$
2,899.1

$
83.1

Paper

477.5

520.2

(42.7
)
Corporate and Other

112.5

114.2

(1.7
)
Intersegment eliminations

(78.6
)

(75.4
)

(3.2
)
Net sales

$
3,493.6

$
3,458.1

$
35.5

Packaging

$
513.4

$
497.9

$
15.5

Paper

84.4

23.5

60.9

Corporate and Other

(42.0
)

(38.9
)

(3.1
)
Income from operations

$
555.8

$
482.5

$
73.3

Non-operating pension expense

(4.1
)

(1.1
)

(3.0
)
Interest expense, net

(46.4
)

(49.6
)

3.2

Income before taxes

505.3

431.8

73.5

Income tax provision

(124.9
)

(105.1
)

(19.8
)
Net income

$
380.4

$
326.7

$
53.7

Non-GAAP Measures (a)

Net income excluding special items

$
380.9

$
343.9

$
37.0

Consolidated EBITDA

746.4

694.7

51.7

Consolidated EBITDA excluding special items

746.8

704.1

42.7

Packaging EBITDA

682.2

665.6

16.6

Packaging EBITDA excluding special items

682.4

670.8

11.6

Paper EBITDA

102.9

64.8

38.1

Paper EBITDA excluding special items

103.1

69.0

34.1

~~Net sales increased $36 million, or 1.0%, to $3,494 million during the six months ended June 30, 2019, compared to $3,458 million during the same period in 2018.~~

~~Packaging~~. Net sales increased $83 million, or 2.9%, to $2,982 million, compared to $2,899 million in the six months ended June 30, 2018, due to higher corrugated products prices and mix ($92 million) and increased corrugated products volume ($12 million), partially offset by lower domestic and export containerboard price and mix ($12 million) and lower containerboard volume ($9 million). Our domestic containerboard prices in the first six months of 2019 were flat, and export prices decreased 11.7%, compared to the same period in 2018. In the first six months of 2019, containerboard outside shipments decreased 14.8% compared to the same period in 2018. Total corrugated products shipments were down 0.3%, as there was one less work day in the first six months of 2019, compared to the first six months of 2018. However, corrugated products shipments in total per work day were up 0.5% during the six months ended June 30, 2019, compared to the same period in 2018. Prices reported by trade publications decreased by $10 per ton for linerboard in March, May, and June, and corrugating medium decreased $20 in January and $10 in May and June 2019.

~~Paper~~. Net sales during the six months ended June 30, 2019 decreased $43 million, or 8.2%, to $477 million, compared to $520 million in the six months ended June 30, 2018, due to lower volume ($88 million), partially offset by higher prices and mix ($45 million).

Gross profit increased $73 million during the six months ended June 30, 2019, compared to the same period in 2018. The increase was driven primarily by higher corrugated products prices and mix and sales and production volumes, higher Paper segment prices and mix, partially offset by lower containerboard export prices, higher operating costs, and higher annual outage expense. In the six months ended June 30, 2019, gross profit included no significant special items, compared to $15 million of Wallula Mill restructuring charges in the same period last year.

Selling, general, and administrative expenses (“SG&A”) increased $11 million during the six months ended June 30, 2019, compared to the same period in 2018. The increase was primarily due to higher employee salaries and fringes.

~~Other income (expense), net, for the six months ended June 30, 2019 and 2018 are set forth below (dollars in millions):~~

We discuss these items in more detail in Note 7, 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 $73 million, or 15.2%, during the six months ended June 30, 2019, compared to the same period in 2018. The first six months of 2019 included less than $1 million of expense for special items, primarily related to Wallula Mill restructuring. The six months ended June 30, 2018 included $23 million of expense for special items, primarily related to Wallula Mill restructuring.

~~Packaging.~~ Packaging segment income from operations increased $16 million to $513 million during the first six months of 2019 compared to the same period last year. The increase related primarily to higher domestic containerboard and corrugated products prices and mix ($68 million), higher containerboard and corrugated products sales and production volumes ($45 million), lower recycled fiber costs ($14 million), lower Wallula No. 3 paper machine conversion-related costs ($6 million), and lower annual outage expense ($4 million), partially offset by lower containerboard export prices ($12 million), higher operating and converting costs ($74 million), higher wood costs ($23 million), higher depreciation ($4 million), and other expenses ($14 million). There were an insignificant amount of special items in the Packaging segment in the first six months of 2019. The first six months of 2018 included $5 million of Wallula Mill restructuring charges.

~~Paper.~~ Paper segment income from operations increased $61 million to $84 million, compared to the six months ended June 30, 2018. The increase primarily related to higher prices and mix ($46 million), lower input and operating costs ($16 million), lower freight expenses ($3 million), and lower depreciation and other expenses ($10 million), partially offset by lower sales and production volume ($22 million) and higher annual outage expense ($9 million). There were an insignificant amount of special items in the Paper segment in the first six months of 2019. The first six months of 2018 included $17 million of Wallula Mill restructuring charges.

Non-operating pension expense increased $3 million during the six months ended June 30, 2019, compared to the same period in 2018. The increase in non-operating pension expense was primarily related to the 2018 asset performance (i.e. lower asset balances resulted in lower than expected return) and the amortization of the 2018 losses.

Interest expense, net, was $46 million during the six months ended June 30, 2019, compared to $50 million during the six months ended June 30, 2018. The decrease in interest expense was primarily due to higher interest income as a result of higher cash balances in 2019 and lower interest, as the Company repaid $150 million of notes in March 2018.

During the six months ended June 30, 2019, we recorded $125 million of income tax expense, compared to $105 million of expense during the six months ended June 30, 2018. The effective tax rate for the six months ended June 30, 2019 and 2018 was 24.7% and 24.3%, respectively. The increase in our effective tax rate was due to higher state and local income taxes net of the federal benefit and higher employee compensation related impacts from restricted stock vests with a lower excess tax benefit (ASU 2016-09) and from the elimination of the performance based exclusion in tax reform.

Our primary sources of liquidity are net cash provided by operating activities and available borrowing capacity under our revolving credit facility. At ~~June 30, 2019,~~March 31, 2020, we had ~~$569~~$764 million of cash and ~~$328~~cash equivalents, $149 million of marketable debt securities, and $329 million of unused borrowing capacity under the revolving credit facility, net of letters of credit. Currently, our primary uses of cash are for operations, capital expenditures, acquisitions, debt service, common stock dividends, and repurchases of common stock. We believe that net cash generated from operating activities, cash on hand, available borrowings under our revolving credit facility, and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements, including payments of any declared common stock dividends, for the foreseeable future. As our debt or credit facilities become due, we will need to repay, refinance, extend, or replace such debt or credit facilities. Our ability to do so will be subject to future economic conditions and financial, business, and other factors, many of which are beyond our control.

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

	Six Months Ended								Three Months Ended
	June 30,								March 31,
	2019			2018			Change		2020			2019			Change
Net cash provided by (used for):
Operating activities	$	538.4		$	533.5		$	4.9	$	236.7		$	236.0		$	0.7
Investing activities		(172.8	)		(273.5	)		100.7		(77.0	)		(80.1	)		3.1
Financing activities		(157.7	)		(277.3	)		119.6		(75.2	)		(75.0	)		(0.2	)
Net increase (decrease) in cash and cash equivalents	$	207.9		$	(17.3	)	$	225.2
Net increase in cash and cash equivalents									$	84.5		$	80.9		$	3.6

Our operating cash flow is primarily driven by our earnings and changes in operating assets and liabilities, such as accounts receivable, inventories, accounts payable and other accrued liabilities, as well as factors described below. Cash requirements for operating activities are subject to PCA’s operating needs and the timing of collection of receivables and payments of payables and expenses.

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, net cash provided by operating activities was ~~$538~~$237 million, compared to ~~$533~~$236 million in the same period in ~~2018,~~2019, an increase of $5$1 million. Cash increased by $49 million due to changes in operating assets and liabilities, primarily due to the following:

Cash from operations excluding changes in cash used for operating assets and liabilities ~~increased $46~~decreased $48 million, primarily due to ~~higher~~lower income from operations as discussed above. Cash decreased by $41 million due to changes in operating assets and liabilities. The decrease was primarily due to the following: (a) lower taxes paid in 2018 compared to 2019 due to the 2018 use of a federal overpayment carryforward from the 2017 tax year resulting from Federal Tax Reform, (b) a smaller increase in inventory for 2018 compared to 2019 primarily related to higher sales in the Paper segment during the first six months in 2018 compared to 2019 resulting in favorable changes in finished goods, and (c) a decrease in accounts payable levels related to the timing of payments in the second quarter. These changes were partially offset by a smaller increase in accounts receivable in 2019 compared to 2018 related to timing of collections in the Packaging segment.

We used ~~$173~~$77 million for investing activities during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$274~~$80 million during the same period in ~~2018.~~2019. We spent ~~$171~~$71 million for internal capital investments during the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, compared to ~~$274~~$79 million during the same period in ~~2018.~~2019.

We expect capital investments in ~~2019~~2020 to be between ~~$390~~$400 million and ~~$410~~$425 million, not including 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 environmental regulations will be about $10 million in ~~2019.~~2020. 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 ~~2018~~2019 Annual Report on Form 10-K.

During ~~the six months~~both three month periods ended ~~June 30,~~March 31, 2020 and 2019, net cash used for financing activities was ~~$158~~$75 million, ~~compared to $277 million during the same period in 2018. The decrease~~ primarily relates to the $150 million repayment from cash on hand at maturity of our 6.5% senior notes that were due March 2018. In the first six months of 2019, we paid $149 million of dividends compared with $119 million offor dividends paid ~~during the first six months of 2018. On May 15, 2018, PCA's Board of Directors announced an increase~~ in ~~the regular quarterly cash dividend to $0.79 per share from the previous $0.63 per share dividend, beginning with the dividend paid on July 13, 2018.~~both periods.

For more information about our debt, see Note ~~10,~~11, Debt, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2018~~2019 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 ~~2018~~2019 Annual Report on Form 10-K.

Income from operations excluding special items, net income excluding special items, EBITDA, and EBITDA excluding special items are non-GAAP financial measures. Management excludes special items, as it believes that these items are not necessarily reflective of the ongoing operations of our business. These measures are presented because they provide a means to evaluate the performance of our segments and our Company on an ongoing basis using the same measures that are used by our management, because these measures assist in providing a meaningful comparison between periods and because these measures are frequently used by investors and other interested parties in the evaluation of companies and the performance of their segments. Any analysis of non-GAAP financial measures should be done in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. Reconciliations of the non-GAAP measures to the most comparable measure reported in accordance with GAAP for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ follow (dollars in millions):

	Three Months Ended June 30,														Three Months Ended March 31,
	2019							2018							2020							2019
	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	$	256.0	$	(62.4	)	$	193.6	$	245.3	$	(58.7	)	$	186.6	$	190.1	$	(48.4	)	$	141.7	$	249.3	$	(62.5	)	$	186.8
Special items:
Wallula mill restructuring (b)		—		—			—		13.6		(3.4	)		10.2
Incremental costs for COVID-19 (a)																0.8		(0.2	)		0.6		—		—			—
Facilities closure and other costs (b)		—		—			—		0.2		—			0.2		0.4		(0.1	)		0.3		—		—			—
Wallula mill restructuring (c)																—		—			—		0.6		(0.1	)		0.5
Total special items		—		—			—		13.8		(3.4	)		10.4		1.2		(0.3	)		0.9		0.6		(0.1	)		0.5
Excluding special items	$	256.0	$	(62.4	)	$	193.6	$	259.1	$	(62.1	)	$	197.0	$	191.3	$	(48.7	)	$	142.6	$	249.9	$	(62.6	)	$	187.3

Six Months Ended June 30,

2019

2018

Income
before
Taxes

Income
Taxes

Net
Income

Income
before
Taxes

Income
Taxes

Net
Income

As reported in accordance with GAAP

$
505.3

$
(124.9
)

$
380.4

$
431.8

$
(105.1
)

$
326.7

Special items:

Wallula mill restructuring (a)(b)

0.6

(0.1
)

0.5

22.4

(5.6
)

16.8

Facilities closure and other costs (b)

—

—

—

0.5

(0.1
)

0.4

Total special items

0.6

(0.1
)

0.5

22.9

(5.7
)

17.2

Excluding special items

$
505.9

$
(125.0
)

$
380.9

$
454.7

$
(110.8
)

$
343.9

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

	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2019		2018		2019		2018		2020			2019
Net income	$	193.6	$	186.6	$	380.4	$	326.7	$	141.7		$	186.8
Non-operating pension expense		2.0		0.5		4.1		1.1
Non-operating pension (income) expense										(0.6	)		2.0
Interest expense, net		22.4		23.8		46.4		49.6		19.6			24.1
Income tax provision		62.4		58.7		124.9		105.1		48.4			62.5
Depreciation, amortization, and depletion		95.8		104.1		190.6		212.2		100.3			94.8
EBITDA	$	376.2	$	373.7	$	746.4	$	694.7	$	309.4		$	370.2

Special items:
Incremental costs for COVID-19										0.8			—
Facilities closure and other costs										0.4			—
Wallula mill restructuring		—		8.6		0.4		9.3		—			0.4
Facilities closure and other costs		—		—		—		0.1
Total special items		—		8.6		0.4		9.4		1.2			0.4
EBITDA excluding special items	$	376.2	$	382.3	$	746.8	$	704.1	$	310.6		$	370.6

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

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018			2019			2018			2020			2019
Packaging
Segment income	$	263.9		$	273.2		$	513.4		$	497.9		$	199.8		$	249.6
Depreciation, amortization, and depletion		84.7			84.5			168.8			167.7			89.0			84.0
EBITDA		348.6			357.7			682.2			665.6			288.8			333.6
Incremental costs for COVID-19														0.7			—
Facilities closure and other costs														0.4			—
Wallula mill restructuring		—			5.1			0.2			5.1			—			0.2
Facilities closure and other costs		—			—			—			0.1
EBITDA excluding special items	$	348.6		$	362.8		$	682.4		$	670.8		$	289.9		$	333.8

Paper
Segment income	$	38.8		$	16.2		$	84.4		$	23.5		$	32.5		$	45.6
Depreciation, amortization, and depletion		9.4			18.0			18.5			41.3			9.4			9.1
EBITDA		48.2			34.2			102.9			64.8			41.9			54.7
Incremental costs for COVID-19														0.1			—
Wallula mill restructuring		—			3.5			0.2			4.2			—			0.2
EBITDA excluding special items	$	48.2		$	37.7		$	103.1		$	69.0		$	42.0		$	54.9

Corporate and Other
Segment loss	$	(22.3	)	$	(19.8	)	$	(42.0	)	$	(38.9	)	$	(23.2	)	$	(19.8	)
Depreciation, amortization, and depletion		1.7			1.6			3.3			3.2			1.9			1.7
EBITDA		(20.6	)		(18.2	)		(38.7	)		(35.7	)		(21.3	)		(18.1	)
EBITDA excluding special items	$	(20.6	)	$	(18.2	)	$	(38.7	)	$	(35.7	)	$	(21.3	)	$	(18.1	)

EBITDA	$	376.2		$	373.7		$	746.4		$	694.7		$	309.4		$	370.2

EBITDA excluding special items	$	376.2		$	382.3		$	746.8		$	704.1		$	310.6		$	370.6

PCA is exposed to the impact of interest rate changes and changes in the market value of its financial instruments. We periodically enter into derivatives to minimize these risks, but not for trading purposes. We were not a party to any derivatives-based arrangements at ~~June 30, 2019.~~March 31, 2020. For a discussion of derivatives and hedging activities, see Note ~~14,~~16, Derivative Instruments and Hedging Activities, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of our ~~2018~~2019 Annual Report on Form 10-K.

At ~~June 30, 2019,~~March 31, 2020, interest rates on 100% of PCA’s outstanding debt are fixed.

The Company does not have any off-balance sheet arrangements as of ~~June 30, 2019.~~March 31, 2020.

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 ~~2018~~2019 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 ~~2018~~2019 Annual Report on Form 10-K a discussion of its critical accounting policies and estimates which require management’s most difficult, subjective, or complex judgments used in the preparation of its consolidated financial statements. PCA has not had any changes to these critical accounting estimates during the first ~~six~~three months of ~~2019.~~2020.

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

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

Our actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, we can give no assurances that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on our results of operations or financial condition. Given these uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. We expressly disclaim any obligation to publicly revise any forward-looking statements that have been made to reflect the occurrence of events after the date hereof. For a discussion of other factors, risks and uncertainties that may affect our business, see Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019, as supplemented by Part II, Item 1A. Risk Factors hereof.

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

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

Prior to filing this report, PCA completed an evaluation under the supervision and with the participation of PCA’s management, including PCA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of PCA’s disclosure controls and procedures as of ~~June 30, 2019.~~March 31, 2020. The evaluation of PCA’s disclosure controls and procedures included a review of the controls’ objectives and design, PCA’s implementation of the controls, and the effect of the controls on the information generated for use in this report. Based on this evaluation, PCA’s Chief Executive Officer and Chief Financial Officer concluded that PCA’s disclosure controls and procedures were effective at the reasonable assurance level as of ~~June 30, 2019.~~March 31, 2020.

The disclosure set forth under the caption "Legal Proceedings" in Note ~~20,~~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~~In addition to the risk factors ~~disclosed~~discussed in ~~"Part~~“Part I, Item ~~1A.~~1A, Risk ~~Factors" in~~Factors” of our 2019 Annual Report on Form 10-K, the following are important factors that could cause our actual results to differ materially from those we project in any forward-looking statement.

The future effect of the COVID-19 pandemic on our operations is uncertain. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Since that time, federal, state and local authorities have taken measures to control the outbreak of COVID-19 in the United States, where we primarily operate. These measures have included travel bans and restrictions, quarantines and shelter in place orders. Due to the importance of our products to the continued distribution of food, beverage and other necessities, our operating facilities are permitted to remain in operation and we have not experienced material disruptions in operations to date. Despite the spread of the virus in the United States, we have maintained sufficient workforce availability as well as adequate supply of raw materials and necessary services to continue operating without material disruption. However, the impact of the further spread of the virus and the measures to control the spread of the virus are uncertain and may materially restrict or hinder our ability to operate our facilities, due to measures we may need to take to assure the health and safety of our employees, lack of available workforce, disruptions in the supply of key materials and services or restrictions due to governmental actions. If our operations are hindered or restricted, we may not be able to serve our customers, which could have a material adverse effect on our business, financial condition and results of operations.

The pandemic resulting from the COVID-19 outbreak, and measures to control the outbreak, are having a negative impact on domestic economic activity, which could adversely affect demand for our products and our business, financial condition and results of operations. Many businesses in the ~~year ended December 31, 2018.~~United States have been required to cease or curtail operations and workers have been laid off or furloughed, which could cause the economy to enter a recession. The severity and duration of the impact on the economy will depend on the future spread of the outbreak, future measures by governmental authorities to control the outbreak, the timing and manner in which normal social and business activities are permitted to resume and the effectiveness of governmental efforts to mitigate the economic effect of the outbreak, all of which are highly uncertain.

We are currently experiencing significantly lower demand for our uncoated freesheet paper products, due to economic conditions associated with the COVID-19 pandemic. Accordingly, we determined to cease production of products at our Jackson, Alabama paper mill for two months in the second quarter, which will negatively affect our income. While we have not experienced lower demand for our containerboard and corrugated packaging products to date, the effect of the pandemic on economic conditions affecting our business and future demand is uncertain and we have historically experienced lower demand for these products during periods of recession.It is uncertain to what extent economic conditions will deteriorate, or when and to what extent economic conditions will improve. With the uncertainty of economic conditions, we are unable to determine the effect on our operating and financial performance. A prolonged period of lower earnings and reduced cash flow could adversely affect our ability to fund operations, capital requirements, and common stock dividend payments and access capital markets.

The following table presents information related to our repurchases of common stock made under repurchase plans authorized by PCA's Board of Directors, and shares withheld to cover taxes on vesting of equity awards, during the three months ended ~~June 30, 2019:~~March 31, 2020:

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)
April 1-30, 2019			—	$	—		—	$	193.0
May 1-31, 2019			1,216		95.42		—		193.0
June 1-30, 2019			81,455		92.89		—		193.0
January 1-31, 2020												309	$	99.62		—	$	193.0
February 1-29, 2020												224		94.80		—		193.0
March 1-31, 2020												168		86.83		—		193.0
Total			82,671	$	92.92		—	$	193.0			701	$	95.01		—	$	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.)

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

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

	PART I

Item 1.	Financial Statements	1

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1816

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2824

Item 4.	Controls and Procedures	2824

	PART II

Item 1.	Legal Proceedings	2925

Item 1A.	Risk Factors	2925

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2925

Item 3.	Defaults Upon Senior Securities	2926

Item 4.	Mine Safety Disclosures	2926

Item 5.	Other Information	2926

Item 6.	Exhibits	3027

	June 30, 2019
Operating leases:
Operating lease right-of-use assets	$	238.0

Current portion of operating lease obligations	$	59.9
Long-term portion of operating lease obligations		183.4
Total operating lease obligations	$	243.3

Finance leases:
Buildings	$	0.3
Machinery and equipment		28.5
Total		28.8
Less accumulated amortization		(17.4	)
Total	$	11.4

Current portion of finance lease obligations	$	1.5
Long-term portion of finance lease obligations		16.8
Total finance lease obligations	$	18.3

Weighted-average remaining lease term (years):
Operating leases		5.9
Finance leases		9.3
Weighted-average discount rate:
Operating leases	4.38%
Finance leases	6.66%

	Six Months Ended
	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	(29.5	)
Operating cash flows for finance leases		(0.7	)
Financing cash flows for finance leases		(0.6	)
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	(16.1	)
Finance leases		—

Supplemental non-cash information on changes in lease liabilities	$	28.8
Supplemental non-cash information on changes in right-of-use assets	$	6.1

Large accelerated filer	☒	Accelerated filer	☐	Emerging growth company	☐

Non-accelerated filer	☐	Smaller reporting company	☐

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Finance lease cost:
Amortization of finance lease assets	$	0.4	$	0.7
Interest on lease liabilities		0.3		0.6
Total finance lease cost		0.7		1.3
Operating lease cost		17.3		34.7
Short-term lease cost		6.4		10.7
Variable lease cost		3.9		9.8
Total lease cost	$	28.3	$	56.5

	June 30, 2019						December 31, 2018
	Weighted Average Remaining Useful Life (in Years)		Gross Carrying Amount		Accumulated Amortization		Weighted Average Remaining Useful Life (in Years)		Gross Carrying Amount		Accumulated Amortization
Customer relationships (b)		10.4	$	503.8	$	162.4		10.9	$	504.6	$	144.5
Trademarks and trade names		9.7		34.8		19.3		10.1		34.8		18.3
Other		2.5		4.3		3.0		3.0		4.3		2.7
Total intangible assets (excluding goodwill)		10.3	$	542.9	$	184.7		10.8	$	543.7	$	165.5

	March 31. 2020							December 31, 2019
	Fair Value of Marketable Debt Securities		Number of Marketable Debt Securities in a Loss Position		Unrealized Losses			Fair Value of Marketable Debt Securities		Number of Marketable Debt Securities in a Loss Position		Unrealized Losses
Certificates of deposit	$	1.7	2		$	—		$	—		—	$	—
U.S. Treasury securities		—		—		—			14.0	9			—
U.S. government agency securities		1.1	1			—			0.8	1			—
Corporate debt securities		102.1	105			(0.8	)		63.3	61			—
	$	104.9	108		$	(0.8	)	$	78.1	71		$	—

	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, 2019	$	(0.4	)	$	(10.2	)	$	(0.3	)	$	(127.9	)	$	(138.8	)
Amounts reclassified from AOCI, net of tax		—			1.9			—			4.7			6.6
Balance at June 30, 2019	$	(0.4	)	$	(8.3	)	$	(0.3	)	$	(123.2	)	$	(132.2	)

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

	Sales, net
Six Months Ended June 30, 2018	Trade		Intersegment			Total			Operating Income (Loss)
Packaging	$	2,886.3	$	12.8		$	2,899.1		$	497.9		(b)
Paper		520.2		—			520.2			23.5		(b)
Corporate and Other		51.6		62.6			114.2			(38.9	)	(b)
Intersegment eliminations		—		(75.4	)		(75.4	)		—
	$	3,458.1	$	—		$	3,458.1			482.5
Non-operating pension expense										(1.1	)
Interest expense, net										(49.6	)
Income before taxes									$	431.8

Exhibit Number		Description

~~10.1~~		~~Form of 2019 Executive Officer Restricted Stock Award. †~~

~~10.2~~		~~Form of 2019 Executive Officer Performance Unit Award – ROIC. †~~

~~10.3~~		~~Form of 2019 Executive Officer Performance Unit Award – TSR. †~~

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.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. †

101.SCH		Inline XBRL Taxonomy Extension Schema Document. †

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

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

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

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

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). †

		Packaging Corporation of America

		/s/ PAMELA A. BARNES
		Pamela A. Barnes Senior Vice President, Finance and Controller