Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of historical results of operations and financial condition should be read in conjunction with the audited financial statements and the notes thereto which appear elsewhere in this Form 10-K. This discussion includes forward-looking statements regarding our expectations with respect to our future performance, liquidity, and capital resources. Such statements, along with any other nonhistorical statements in the discussion, are forward-looking. See our discussion regarding forward-looking statements included under "Part I, Item 1A. Risk Factors" of this Form 10-K.

Overview

PCA is the fourth largest producer of containerboard products in the United States and the third largest producer of uncoated freesheet paper in the United States, based on production capacity. We operate five containerboard mills, three 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 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.

During 2016, we made two acquisitions in our corrugated products business: Tim-Bar Corporation ("TimBar") and Columbus Container, Inc. ("Columbus Container"). On August 29, 2016, we acquired substantially all of the assets of TimBar, a large independent corrugated products producer with six corrugated products production facilities for a purchase price of $386 million. To finance the acquisition, we borrowed $385 million under a new five-year term loan facility. TimBar provides solutions to customers in the higher margin retail, industrial packaging and display and fulfillment markets with a focus on multi-color graphics and technical innovation. On November 30, 2016, we acquired substantially all of the assets of Columbus Container for a purchase price of $100 million. Columbus Container is a full-service provider of corrugated packaging products, with a full-line corrugated products plant and warehousing facilities and other related operations located in Indiana and Illinois. We used available cash on hand to pay the purchase price. The operating results of TimBar and Columbus Container are included in our results and reported in the Packaging segment from and after the respective dates of acquisition. These acquisitions will accelerate the growth strategy and increase the containerboard integration level in our Packaging segment.

Executive Summary

We reported $450 million of net income, or $4.75 per diluted share, compared with $437 million, or $4.47 per share in 2015. Income included $19 million of pre-tax expense for special items in 2016 compared to $9 million in 2015. Excluding special items, we recorded $462 million of net income, or $4.88 per diluted share in 2016, compared with $443 million and $4.53 per diluted share in 2015. The increase was driven primarily by increased containerboard and corrugated products volumes, improved operating costs, and a lower share count, partially offset by lower containerboard and corrugated products prices and mix and lower paper volumes. In 2016, we successfully completed the acquisitions of TimBar and Columbus Container, achieved a record $801 million of operating cash flow, and returned $316 million to our shareholders through share repurchases and dividends.

Packaging segment income from operations was $711 million, compared with $715 million in 2015, and earnings before interest, taxes, depreciation, amortization, and depletion (EBITDA) excluding special items was $1,019 million, compared with $1,009 million in 2015. Volumes were up in both our containerboard mills and corrugated products plants in 2016, and we began implementing announced price increases during the fourth quarter. Higher volumes and improved operating costs were partially offset by unfavorable changes in containerboard and corrugated products price and mix compared with 2015.

Paper segment income from operations was $138 million, compared with $112 million in 2015, and EBITDA excluding special items was $199 million, compared with $161 million in 2015. The increase was primarily due to improved operating costs and favorable changes in price and mix, partially offset by lower volume as a result of the 2016 shutdown of market pulp operations at our Wallula, Washington mill.

Earnings per diluted share, excluding special items, in 2016 and 2015 were as follows:

	Year Ended December 31
	2016				2015
Earnings per diluted share	$	4.75			$	4.47
Special items:
Facilities closure costs (a)	0.07				—
Acquisition-related costs (b)	0.03				—
Wallula mill restructuring (c)	0.02				—
Multiemployer pension withdrawal (d)	0.01				—
DeRidder restructuring (e)	—				0.01
Integration-related and other costs (f)	—				0.10
Sale of St. Helens paper mill site (g)	—				(0.05		)
Total special items	0.13				0.06
Earnings per diluted share, excluding special items	$	4.88			$	4.53

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(a)	Includes $11.0 million of closure costs related to corrugated product facilities and a paper products facility.

(b)	Includes $4.5 million of acquisition-related costs for the TimBar Corporation and Columbus Container, Inc. acquisitions.

(c)	Includes $2.7 million of costs related to ceased production of softwood market pulp operations at our Wallula, Washington mill and the permanent shutdown of the No.1 machine.

(d)	Includes $0.9 million of costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities.

(e)	Includes $2.0 million of restructuring activities at our mill in DeRidder, Louisiana, including costs related to the conversion of the No. 3 newsprint machine to containerboard, our exit from the newsprint business, and other improvements. The restructuring charges primarily related to accelerated depreciation.

(f)	Includes $13.4 million of Boise acquisition integration-related and other costs. These costs primarily relate to professional fees, severance, retention, relocation, travel, and other integration-related costs.

(g)	In September 2015, we sold the remaining land, buildings, and equipment at our paper mill site in St. Helens, Oregon, where we ceased paper production in December 2012. We recorded a $6.7 million gain on the sale.

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 later in Item 7 under "Reconciliations of Non-GAAP Financial Measures to Reported Amounts." Any analysis of non-GAAP financial measures should be done in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such.

Industry and Business Conditions

Trade publications reported that industry corrugated products shipments increased 2.1% during 2016, compared with 2015. Reported industry containerboard production was 1.2% higher than 2015, with export shipments up 4.6%. Published open market containerboard prices for linerboard decreased $15 per ton in January, followed by a $40 per ton increase in October. Medium decreased $20, $10, and $15 per ton in January, February, and August respectively, followed by a $40 increase in October.

The market for communication papers competes heavily with electronic data transmission and document storage alternatives. Increasing shifts to these alternatives have reduced usage of traditional print media and communication papers.

Trade publications reported that uncoated freesheet paper shipments were down 3.4% in 2016, compared with 2015. Trade publication average prices for uncoated freesheet decreased $19 per ton, or 1.9%, in 2016, compared with 2015.

Outlook

Looking ahead to the first quarter of 2017, we expect to realize the vast majority of our previously announced Packaging segment price increases and we expect higher corrugated products shipments with continuing strong demand. We expect lower containerboard and paper production volume as we have scheduled maintenance outages on one of our machines at both the Counce and DeRidder containerboard mills and on one of our machines at our Jackson, Alabama paper mill. We expect higher freight costs as well as higher labor and benefits costs with annual wage increases and other timing-related expenses. We also anticipate continued price inflation on recycled fiber, energy, and certain chemicals, and seasonally colder weather is expected to increase wood and energy costs. Considering these items, we expect first quarter earnings per share to be higher than fourth quarter 2016.

Results of Operations

Year Ended December 31, 2016, Compared with Year Ended December 31, 2015

The historical results of operations of PCA for the years ended December 31, 2016 and 2015 are set forth below (dollars in millions):

	Year Ended December 31
	2016				2015				Change
Packaging	$	4,584.8			$	4,477.3			$	107.5
Paper	1,093.9				1,143.1				(49.2		)
Corporate and other and eliminations	100.3				121.3				(21.0		)
Net sales	$	5,779.0			$	5,741.7			$	37.3
Packaging	$	711.1			$	714.9			$	(3.8	)
Paper	138.1				112.5				25.6
Corporate and other	(68.9		)		(77.4		)		8.5
Income from operations	$	780.3			$	750.0			$	30.3
Interest expense, net	(91.8		)		(85.5		)		(6.3		)
Income before taxes	688.5				664.5				24.0
Income tax expense	(238.9		)		(227.7		)		(11.2		)
Net income	$	449.6			$	436.8			$	12.8
Net income excluding special items (a)	$	462.0			$	442.6			$	19.4
EBITDA (a)	$	1,138.3			$	1,106.5			$	31.8
EBITDA excluding special items (a)	$	1,154.5			$	1,106.2			$	48.3

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(a)	See "Reconciliations of Non-GAAP Financial Measures to Reported Amounts" included in this Item 7 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.

Net Sales

Net sales increased $37 million, or 0.6%, to $5,779 million in 2016, compared with $5,742 million in 2015.

Packaging. Sales increased $108 million, or 2.4%, to $4,585 million, compared with $4,477 million in 2015. The increase was driven by increased corrugated products sales volume ($177 million), of which $117 million is related to our TimBar and Columbus acquisitions, partially offset by unfavorable changes in price and mix ($58 million) and the April 1, 2015 sale of our Hexacomb operations in Mexico and Europe ($11 million). Total corrugated products shipments in 2016 increased 5.0% over 2015. Packaging segment prices were lower than 2015, but trended up in the fourth quarter as we began implementing previously announced price increases to our containerboard and corrugated products customers. On average

during the year, our export prices were down 7.0% and domestic containerboard pricing was down 2.9% compared to last year. Containerboard mill production in 2016 was 3,736,000 total tons, compared with 3,656,000 total tons in 2015.

Paper. Sales decreased $49 million, or 4.3%, to $1,094 million, compared with $1,143 million in 2015. The decrease was related to lower volume as a result of the 2016 shutdown of market pulp operations at our Wallula mill, ($53 million), partially offset by favorable changes in price and mix ($3 million).

Gross Profit

Gross profit increased $68 million, or 5.6%, in 2016, compared with 2015. The increase was primarily due to higher containerboard and corrugated products volumes and lower fiber, energy, and freight costs, partially offset by lower prices and mix in containerboard and corrugated products. In 2016, gross profit included special items of $5 million for facility closure and acquisition-related costs, compared to $9 million in 2015, most of which related to incremental depreciation expense related to changing the estimated useful lives of assets in connection with our DeRidder mill restructuring. Excluding special items, gross profit increased $64 million in 2016, compared with 2015.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses increased $20 million, or 4.4%, in 2016, compared with 2015. The increase in 2016 was due primarily to higher administrative costs of $16 million corresponding to the TimBar and Columbus Container, Inc., acquisitions.

Other Expense, Net

Other expense, net, in 2016 was $24 million, compared with $7 million during 2015. Other expense in 2016 included $9 million of facility closure costs, $9 million of asset disposal costs, and $3 million of acquisition-related costs, among other miscellaneous expense items. Other expense in 2015 included $14 million of asset disposal costs and $13 million of Boise integration-related and other costs, partially offset by $7 million of income related to the DeRidder restructuring, a $7 million gain on the sale of our St. Helens paper mill site, and $4 million of income from a refundable state tax credit received related to our investments and the jobs retained at our DeRidder mill, among other miscellaneous income and expense items. We discuss these items in more detail in Note 5, Other Expense, Net of the Condensed Notes to the Consolidated Financial Statements in "Part II, Item 8. Financial Statements" of this Form 10-K.

Income from Operations

Income from operations increased $30 million, or 4.0%, for the year ended December 31, 2016, compared with 2015. Our 2016 income from operations included $19 million of expense from special items, compared with $9 million of expense from special items in 2015. Special items for 2016 included $11 million of facility closure costs related to corrugated manufacturing facilities and a paper distribution center, $4 million of TimBar and Columbus Container acquisition-related costs, $3 million related to shutdown of market pulp operations at our Wallula mill, and $1 million related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities. Special items for 2015 included $14 million of Boise acquisition-related expense, $2 million of expense related to restructuring the DeRidder mill, partially offset by $7 million gain on the sale of our St. Helens paper mill site. Excluding special items, income from operations increased $41 million in 2016, compared with 2015. The increase was driven primarily by higher containerboard and corrugated products volumes and lower operating costs, partially offset by lower prices and mix in containerboard and corrugated products.

Packaging. Segment income from operations decreased $4 million, or 0.5%, to $711 million, compared with $715 million in 2015. The decrease is primarily related to lower domestic containerboard and corrugated products prices and mix ($48 million), lower export containerboard prices ($12 million), higher labor costs ($12 million), greater expense for special items in 2016 compared to 2015 ($8 million), higher depreciation expense ($5 million), a 2015 state tax credit related to investments and jobs retained at our DeRidder mill ($4 million), and other items that were individually insignificant. These items were partially offset by higher volumes ($34 million), and lower freight ($19 million), mill outage ($14 million), energy ($13 million), and fiber ($9 million) costs. Special items in 2016 included $9 million of facility closure costs, $4 million of TimBar and Columbus Container acquisition-related costs, and $1 million related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities. Special items in 2015 included $4 million of Boise integration-related costs and $2 million of DeRidder restructuring charges.

Paper. Segment income from operations increased $26 million, or 22.8%, to $138 million, compared with $113 million for 2015. The increase is due primarily to lower fiber ($32 million), mill outage ($14 million), energy ($8 million), and labor ($3 million) costs, and higher paper prices and mix ($3 million), partially offset by lower volumes ($23 million), and greater expense for special items in 2016 compared to special items income in 2015 ($12 million). Special items expense in 2016 included $3 million related to the shutdown of market pulp operations at our Wallula mill and $2 million of facility closure costs in 2016. Special items income in 2015 included a $7 million gain on the sale of the St. Helens mill site in 2015.

Interest Expense, Net, and Income Taxes

Interest expense, net, was $92 million in 2016, compared with $86 million in 2015. The $6 million increase in interest expense was primarily due to higher interest rates on PCA’s variable rate debt and additional interest due to the TimBar acquisition during 2016 compared to 2015.

During 2016, we recorded $239 million of income tax expense, compared with $228 million of expense during 2015. The effective tax rate for 2016 and 2015 was 34.7% and 34.3%, respectively.

Year Ended December 31, 2015, Compared with Year Ended December 31, 2014

The historical results of operations of PCA for the years ended December 31, 2015 and 2014 are set forth below (dollars in millions):

	Year Ended December 31
	2015				2014				Change
Packaging	$	4,477.3			$	4,540.3			$	(63.0	)
Paper	1,143.1				1,201.4				(58.3		)
Corporate and other and eliminations	121.3				110.9				10.4
Net sales	$	5,741.7			$	5,852.6			$	(110.9	)
Packaging	$	714.9			$	663.2			$	51.7
Paper	112.5				135.4				(22.9		)
Corporate and other	(77.4		)		(95.9		)		18.5
Income from operations	$	750.0			$	702.7			$	47.3
Interest expense, net	(85.5		)		(88.4		)		2.9
Income before taxes	664.5				614.3				50.2
Income tax expense	(227.7		)		(221.7		)		(6.0		)
Net income	$	436.8			$	392.6			$	44.2
Net income excluding special items (a)	$	442.6			$	458.6			$	(16.0	)
EBITDA (a)	$	1,106.5			$	1,083.7			$	22.8
EBITDA excluding special items (a)	$	1,106.2			$	1,143.6			$	(37.4	)

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(a)	See "Reconciliations of Non-GAAP Financial Measures to Reported Amounts" included in this Item 7 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.

Net Sales

Net sales decreased $111 million, or 1.9%, to $5,742 million in 2015, compared with $5,853 million in 2014.

Packaging. Sales decreased $63 million, or 1.4%, to $4,477 million, compared with $4,540 million in 2014. Sales decreased $115 million due to the exit from our newsprint business in third quarter 2014 and the April 1, 2015, sale of our Hexacomb operations in Mexico and Europe. This decrease was partially offset by increased sales volumes in our corrugated products business ($17 million) and external containerboard sales ($31 million). Total corrugated products volume sold in 2015 increased approximately 1% over 2014. Our prices for corrugated products were approximately the same as 2014. With a full year of containerboard production on our D3 machine at our DeRidder, Louisiana mill, we increased our outside sales of containerboard, both domestic and export, by 52,000 tons compared with last year and we purchased 174,000 less tons of

containerboard from the outside market in 2015. On average during the year, our export prices were down 7% compared with 2014, while pricing for domestic containerboard sales was flat with last year. Containerboard mill production in 2015 was 3,656,000 total tons, compared with 3,452,000 total tons in 2014.

Paper. Sales decreased $58 million, or 4.9%, to $1,143 million, compared with $1,201 million in 2014. The decrease was primarily due to unfavorable changes in sales prices and mix ($58 million).

Gross Profit

Gross profit decreased $22 million, or 1.7%, in 2015, compared with 2014. In 2015 and 2014, gross profit included expenses of $9 million and $58 million of special items, respectively, most of which related to incremental depreciation expense related to changing the estimated useful lives of assets in connection with our DeRidder mill restructuring. Excluding special items, gross profit decreased $71 million in 2015, compared with 2014. The decrease was primarily due to lower paper prices and changes in mix, lower export containerboard prices, and higher labor and benefit costs, partially offset by higher packaging sales volume and lower energy, chemical, and freight costs. Gross profit was 21.0% of net sales in both 2015 and 2014.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses decreased $18 million, or 3.9%, in 2015, compared with 2014. The decrease in 2015 was due primarily to lower administrative employee costs from the headcount reductions related to the Boise integration.

Other Expense, Net

Other expense, net, in 2015 was $7 million, compared with $57 million during 2014. Other expense in 2015 included $14 million of asset disposals and write-off charges and $13 million of Boise integration-related and other costs, partially offset by $7 million of income, net of expenses, related to the DeRidder restructuring, a $7 million gain on the sale of our St. Helens paper mill site, and $4 million of income from a refundable state tax credit received related to our investments and the jobs retained at our DeRidder mill, among other miscellaneous income and expense items. Other expense, net, in 2014 included $20 million of Boise integration-related and other costs, $18 million of costs for the settlement of the Kleen Products LLC v Packaging Corp. of America et al class action lawsuit, $10 million of asset disposals and write-off charges, and $7 million of DeRidder restructuring charges.

Income from Operations

Income from operations increased $47 million, or 6.7%, for the year ended December 31, 2015, compared with 2014. Our 2015 income from operations included $9 million of expense from special items, compared with $102 million of expense from special items in 2014. See "Reconciliations of Non-GAAP Financial Measures to Reported Amounts" in this Item 7 for more information on special items. Excluding special items, income from operations decreased $46 million in 2015, compared with 2014. The decrease in income from operations, excluding special items, was driven primarily by lower gross profit as described above, partially offset by a decrease in employee administrative costs and a $4 million state tax credit related to investments and jobs retained at our DeRidder mill.

Packaging. Segment income from operations increased $52 million, or 7.8%, to $715 million, compared with $663 million in 2014. The increase in income from operations is primarily related to lower expense from special items in 2015 compared to 2014 ($65 million), higher volumes ($26 million) and lower energy costs ($24 million), partially offset by higher labor and benefit costs ($20 million), lower export containerboard prices ($13 million), higher annual outage costs due mostly to the first quarter extended annual outage at our DeRidder mill ($9 million), increased depreciation ($9 million), freight ($8 million), and fiber ($5 million) costs. Special items in 2015 included restructuring costs at our mill in DeRidder, Louisiana of $2 million and integration-related and other costs relating to the Boise acquisition of $4 million, compared with $66 million and $5 million, respectively, in 2014.

Paper. Segment income from operations decreased $23 million, or 16.9%, to $112 million, compared with $135 million for 2014. The decrease in income from operations is due primarily to lower white paper prices and mix ($58 million), partially offset by lower freight ($11 million), chemical ($10 million), and energy costs ($9 million), and special item income ($7 million) in 2015 related to the gain on the sale of our paper mill site in St. Helens, Oregon, where we ceased paper production in 2012. There were no special items in 2014.

Interest Expense, Net, and Income Taxes

Interest expense, net, was $85 million in 2015, compared with $88 million in 2014. Interest expense in 2014 included $2 million of expense related to the write-off of deferred financing costs in connection with the refinancing of debt.

During 2015, we recorded $228 million of income tax expense, compared with $222 million of expense during 2014. The effective tax rate for 2015 and 2014 was 34.3% and 36.1%, respectively. The decrease in our effective tax rate in 2015 was primarily due to an increased domestic manufacturing deduction resulting from less tax net operating losses remaining from the acquisition of Boise Inc.

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of liquidity are net cash provided by operating activities and available borrowing capacity under our revolving credit facility. We ended the year with $239 million of cash and $325 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 (including voluntary payments of debt), declared common stock dividends and share repurchases. We believe that net cash generated from operating activities, cash on hand, available borrowings under our revolving credit facility and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements, including payments of any declared common stock dividends, for the foreseeable future. As our debt or credit facilities become due, we will need to repay, extend or replace such facilities. Our ability to do so will be subject to future economic conditions and financial, business, and other factors, many of which are beyond our control.

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

	Year Ended December 31
	2016				2015				2014
Net cash provided by (used for):
Operating activities	$	801.2			$	762.6			$	736.1
Investing activities	(769.6		)		(298.1		)		(451.1		)
Financing activities	23.5				(405.2		)		(351.1		)
Net increase (decrease) in cash and cash equivalents	$	55.1			$	59.3			$	(66.1	)

Operating Activities

2016

During 2016, net cash provided by operating activities was $801 million, compared with $763 million for 2015, an increase of $38 million. Cash from operations excluding changes in cash used for operating assets and liabilities decreased $31 million. The decrease was primarily driven by 2016 cash contributions of $57 million to our pension plans, partially offset by record earnings in 2016. The remaining $69 million increase from changes in cash provided by operating assets and liabilities was primarily due higher accounts payable levels in 2016 compared to 2015 due to the timing of payments; lower required cash tax payments in 2016 resulting from utilization of prior year overpayments; and an increase in accrued liabilities due primarily to higher compensation and benefits accruals. These changes were partially offset by larger inventory prebuild for our first quarter 2017 planned maintenance outages and an increase in accounts receivable related to differences in the timing of collections of receivables. 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.

2015

During 2015, net cash provided by operating activities was $763 million, compared with $736 million for 2014, an increase of $27 million. Cash from operations excluding changes in cash used for operating assets and liabilities decreased $1 million. The remaining $28 million increase from changes in cash used for operating assets and liabilities was primarily related

to no inventory prebuild for our first quarter 2016 planned maintenance outages due to additional capacity added at our reconfigured DeRidder, Louisiana mill and a decrease in accounts receivable related to differences in the timing of collections of receivables. These changes were partially offset by higher required cash tax payments resulting from less net operating loss utilization and a decrease in accrued liabilities due primarily to lower compensation and benefits accruals. 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.

Investing Activities

2016

We used $770 million for investing activities in 2016, compared with $298 million in 2015. In 2016, we spent $274 million for capital investments, compared with $314 million in 2015. During 2016, we spent $485 million, net of cash acquired, for the TimBar and Columbus Container acquisitions. In April of 2015, we received $23 million of cash proceeds for the sale of our Hexacomb corrugated manufacturing operations in Mexico and Europe.

The details of capital expenditures for property and equipment, excluding acquisitions, by segment for the years ended December 31, 2016, 2015, and 2014, are included in the table below (dollars in millions).

		Year Ended December 31
		2016				2015				2014
Packaging		$	239.9			$	250.3			$	362.1
Paper		31.6				58.5				51.7
Corporate and Other		2.8				5.7				6.4
		$	274.3			$	314.5			$	420.2

We expect capital investments in 2017 to be between $310 million and $325 million, including capital required for Boiler MACT spending, but excluding any acquisitions. These expenditures could increase or decrease as a result of a number of factors, including our financial results, future economic conditions, and our regulatory compliance requirements. We currently estimate capital expenditures to comply with Boiler MACT regulations (as discussed below under "Environmental Matters") in 2017 of up to $1 million and we expect other environmental capital expenditures of about $7 million in 2017. 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 this Management's Discussion and Analysis of Financial Condition and Results of Operations.

At December 31, 2016, PCA had commitments for capital expenditures of $95 million. PCA believes that cash-on-hand combined with cash flow from operations will be sufficient to fund these commitments.

2015

We used $298 million for investing activities in 2015, compared with $451 million in 2014. In 2015, we spent $315 million for capital investments, compared with $420 million in 2014. The decrease in capital spending was due primarily to $104 million invested in 2014 for the conversion of the No. 3 newsprint machine at our DeRidder, Louisiana mill to produce containerboard. We received $23 million of cash proceeds for the sale of our Hexacomb corrugated manufacturing operations in Mexico and Europe during 2015.

Financing Activities

2016

In 2016, net cash used for financing activities changed by $429 million to a source of $24 million, compared with a use of $405 million in 2015. The change primarily related to proceeds from the issuance of a new $385 million unsecured five-year term loan facility, which PCA fully borrowed to finance its acquisition of TimBar Corporation, and lower repurchases of PCA common stock in 2016 compared to 2015. In 2016, we made $37 million of principal payments on long-term debt and capital leases, compared with $48 million of payments in 2015. During 2016, we paid $100 million to repurchase 1,987,187 shares of common stock, and we withheld 172,438 shares from vesting equity awards to cover employee tax liabilities of $11 million, compared with $155 million of share repurchases and $9 million of shares withheld on equity award vesting in 2015. We paid $216 million of dividends in 2016, compared with $201 million of dividends in 2015. On August 31, 2016, PCA's Board of Directors increased the regular quarterly cash dividend to $0.63 per share from the previous $0.55 per share, beginning with the dividend paid on September 15, 2016.

On February 25, 2016, PCA announced that its Board of Directors authorized the repurchase of $200 million of the Company's outstanding common stock. At the time of announcement, there was no remaining authority under previously announced programs. Repurchases may be made from time to time in the 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.

For more information about our debt, commitments, and treasury lock derivative instruments, see Note 9, Debt, Note 13, Derivative Instruments and Hedging Activities, and Note 18, Commitments, Guarantees, Indemnifications, and Legal Proceedings, respectively, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

2015

In 2015, we used $405 million for financing activities, compared with $351 million in 2014. The increase in cash used for financing activities primarily relates to share repurchases and increased dividend payments, partially offset by a decrease in debt repayments, net of proceeds received. In 2015, we made $48 million of principal payments on long-term debt and capital leases, compared with $194 million of payments, net of debt proceeds received, in 2014. In 2014, we also paid $3 million of financing costs. We paid $201 million of dividends in 2015, compared with $157 million of dividends in 2014. On February 26, 2015, PCA's Board of Directors increased the regular quarterly cash dividend to $0.55 per share from the previous $0.40 per share dividend, beginning with the dividend paid on April 15, 2015. During 2015, we paid $155 million to repurchase 2,326,493 shares of common stock, and we withheld 129,983 shares from vesting equity awards to cover employee tax liabilities of $9 million, compared with no share repurchases and $13 million of shares withheld on equity award vesting in 2014. Tax benefits from share-based awards and proceeds from the exercise of stock options contributed $6 million in 2015, compared with $16 million in 2014.

Commitments

Contractual Obligations

The table below sets forth our enforceable and legally binding obligations as of December 31, 2016, for the categories described below. Some of the amounts included in the table are based on management's estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties, and other factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table. Purchase orders made in the ordinary course of business are excluded from the table below. Any amounts for which we are liable under purchase orders are reflected on the Consolidated Balance Sheets as accounts payable and accrued liabilities (dollars in millions):

	Payments Due by Period
	Total				Less Than 1 Year				1-3 Years				3-5 Years				More Than 5 Years
Term loan, due October 2020	$	630.5			$	6.5			$	13.0			$	611.0			$	—
Term loan, due August 2021	380.2				19.3				38.5				322.4				—
6.50% Senior Notes, due March 2018	150.0				—				150.0				—				—
3.90% Senior Notes, due June 2022	400.0				—				—				—				400.0
4.50% Senior notes, due November 2023	700.0				—				—				—				700.0
3.65% Senior notes, due September 2024	400.0				—				—				—				400.0
Total short-term and long-term debt (a)	2,660.7				25.8				201.5				933.4				1,500.0
Interest on long-term debt (b)	515.3				94.5				170.0				146.3				104.5
Capital lease obligations, including interest	31.2				2.7				5.4				5.4				17.7
Operating leases (c)	254.3				64.4				96.2				45.3				48.4
Capital commitments	94.7				94.7				—				—				—
Purchase commitments:
Raw materials (d)	201.3				61.2				55.3				39.1				45.7
Energy related (e)	38.7				32.2				6.5				—				—
Other liabilities reflected on our Consolidated Balance Sheet (f):
Compensation and benefits (g)	359.7				45.0				97.5				112.0				105.2
Other (h)	71.8				18.5				7.1				3.8				42.4
	$	4,227.7			$	439.0			$	639.5			$	1,285.3			$	1,863.9

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(a)	The table assumes our long-term debt is held to maturity and includes the current portion of long-term debt. See Note 9, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Form 10-K. Amounts are reported gross and do not include unamortized debt discounts of $2.5 million at December 31, 2016.

(b)	Amounts represent estimated future interest payments as of December 31, 2016, assuming our long-term debt is held to maturity and using interest rates in effect at December 31, 2016. See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for the impact of changes in interest rates on PCA’s future cash flows.

(c)

We enter into operating leases in the normal course of business. We lease some of our operating facilities, as well as other property and equipment, under operating leases. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our operating lease obligations would change if we exercised these renewal options and/or if we entered into additional operating lease agreements.

(d)

Included among our raw materials purchase obligations are contracts to purchase approximately $171.7 million of wood fiber. Purchase prices under most of these agreements are set quarterly, semiannually, or annually based on regional market prices, and the estimate is based on contract terms or first quarter 2017 pricing. Except for deposits required pursuant to wood supply contracts, these obligations are not recorded in our consolidated financial statements until contract payment terms take effect. Our log, fiber, and wood chip obligations are subject to change based on, among other things, the effect of governmental laws and regulations, disruptions to our manufacturing operations, and log and fiber availability.

(e)	We enter into utility contracts for the purchase of electricity and natural gas. We also purchase these services under utility tariffs. The contractual and tariff arrangements include multiple-year commitments and minimum annual purchase requirements. Our payment obligations were based upon prices in effect on December 31, 2016, or contract language, if available.

(f)	Long-term deferred income taxes of $334.7 million and unrecognized tax benefits of $6.3 million, including interest and penalties, are excluded from this table, because the timing of their future cash outflows are uncertain.

(g)

Amounts primarily consist of pension and postretirement obligations, including current portion of $2.5 million. We have minimum qualified pension contributions of approximately $8 million in 2017. See Note 10, Employee Benefit Plans and Other Postretirement Benefits, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Form 10-K, for additional information.

(h)	Amounts primarily consist of workers compensation, environmental, and asset retirement obligations.

Off-Balance-Sheet Arrangements

The Company does not have any off-balance sheet arrangements as of December 31, 2016.

Inflation and Other General Cost Increases

We are subject to both contractual, inflation, and other general cost increases. If we are unable to offset these cost increases by price increases, growth, and/or cost reductions in our operations, these inflation and other general cost increases could have a material adverse effect on our operating cash flows, profitability, and liquidity.

In 2016, our total company costs including cost of sales (COS) and selling, general, and administrative expenses (SG&A) was $5.0 billion, and excluding non-cash costs (depreciation, pension and postretirement expense, and share-based compensation expense) was $4.6 billion. A 1% increase in COS and SG&A costs would increase costs by $50 million and cash costs by $46 million.

Certain items of product input costs have historically been subject to more cost volatility including fiber, purchased energy, and chemicals.

Energy

In 2016, our mills, including both packaging and paper mills, consumed about 89 million MMBTU’s of fuel, including internally generated and externally purchased, to produce both steam and electricity. The following table for 2016 provides the total MMBTU's purchased externally by fuel type each quarter and the average cost per MMBTU by fuel type for the year. Our mills represent about 90% of our total purchased fuel costs. The cost per MMBTU includes the cost of the fuel plus our transportation and delivery costs.

		2016 Fuel Purchased (millions of MMBTU's)															2016 Avg.
Fuel Type		First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year			Cost / MMBTU
Natural gas		6.86			6.09			5.71			6.36			25.02			$	3.08
Purchased bark		2.31			1.99			1.87			2.34			8.51			2.32
Other purchased fuels		0.45			0.39			0.40			0.31			1.55			3.81
Total Mills		9.62			8.47			7.98			9.01			35.08			$	2.93

In addition, the mills purchased 21.59 million CkWh (hundred kilowatt-hours) of purchased electricity in 2016. The purchases by quarter and the average cost per CkWh were as follows:

		2016 Purchased Electricity (millions of CkWh)															2016 Avg.
		First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year			Cost / CkWh
Purchased electricity		5.12			5.17			5.67			5.63			21.59			$	5.49

Environmental Matters

Environmental compliance requirements are a significant factor affecting our business. We employ processes in the manufacture of containerboard, paper, and pulp, which result in various discharges, emissions and waste disposal. These processes are subject to numerous federal, state, local and foreign environmental laws and regulations. We operate and expect to continue to operate, under environmental permits and similar authorizations from various governmental authorities that regulate such discharges, emissions, and waste disposal. The most significant of these laws affecting the Company are:

•	Resource Conservation and Recovery Act (RCRA);

•	Clean Water Act (CWA);

•	Clean Air Act (CAA);

•	The Emergency Planning and Community Right-to-Know-Act (EPCRA);

•	Toxic Substance Control Act (TSCA); and

•	Safe Drinking Water Act (SDWA).

We believe that we are currently in material compliance with these and all applicable environmental rules and regulations. Because environmental regulations are constantly evolving, the Company has incurred, and will continue to incur, costs to maintain compliance with these and other environmental laws. The Company works diligently to anticipate and budget for the impact of applicable environmental regulations, and does not currently expect that future environmental compliance obligations will materially affect its business or financial condition. For the years ended December 31, 2016, 2015, and 2014, we spent $44 million, $43 million, and $44 million, respectively, to comply with the requirements of these and other environmental laws. Additionally, we had $8 million of environmental capital expenditures in 2016, $16 million in 2015, and $29 million in 2014.

In January 2013, the U.S. Environmental Protection Agency (the "EPA") established a three-year deadline for compliance with the Boiler MACT regulations, establishing air emissions standards and certain other requirements for industrial boilers. PCA's compliance actions involved modifying or replacing certain boilers and PCA was set to achieve compliance by the deadline. On July 29, 2016, the U.S. Court of Appeals for the District of Columbia Circuit issued a ruling on the consolidated cases challenging Boiler MACT. The court vacated key portions of the rule, including emission limits for certain subcategories of solid fuel boilers, and remanded issues to the EPA for further rulemaking. At this time, we cannot predict with certainty how the recent decision will impact our existing Boiler MACT compliance efforts or whether we will incur additional costs to comply with any revised standards.

As is the case with any industrial operation, PCA has, in the past, incurred costs associated with the remediation of soil or groundwater contamination, as required by the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as the federal "Superfund" law, and analogous state laws. Cleanup requirements arise with respect to properties the Company currently owns or operates, former facilities and off-site facilities where the Company has disposed of hazardous substances. As part of the sale to PCA of the containerboard and corrugated products business of Pactiv Corporation in April 1999, Pactiv agreed to retain all liability for all former facilities and all sites associated with pre-closing off-site waste disposal. Pactiv also retained environmentally impaired real property in Filer City, Michigan unrelated to current mill operations. In addition, OfficeMax (now an indirect, wholly owned subsidiary of Office Depot) retains responsibility for certain environmental liabilities related to some of the businesses, facilities, and assets we acquired from Boise. Generally, this responsibility relates to hazardous substance releases and other environmental incidents that arose before 2004. Some of these liabilities could be significant; however, Office Depot may not have sufficient funds to satisfy its indemnification obligations, and in some cases, we may not be entitled to such indemnification.

Because liability for remediation costs under environmental laws is strict, meaning that liability is imposed without fault, joint and several, meaning that liability is imposed on each party without regard to contribution, and retroactive, PCA could receive notifications of cleanup liability in the future and this liability could be material. From 2006 through 2015, there were no significant environmental remediation costs at PCA's mills and corrugated plants. As of December 31, 2016, we maintained an environmental reserve of $25 million relating to on-site landfills and surface impoundments as well as ongoing and anticipated remedial projects. The Company believes that it is not reasonably possible that future environmental expenses above the $25 million accrued at December 31, 2016, will have a material impact on its financial condition, results of operations, and cash flows.

While legislation regarding the regulation of greenhouse gas emissions has been proposed at the federal level, it is uncertain whether such legislation will be passed and, if so, what the breadth and scope of such legislation will be. The result of the regulation of greenhouse gas emissions could be an increase in our future environmental compliance costs, through caps, taxes or additional capital expenditures to modify facilities, which may be material. However, climate change legislation and the resulting future energy policy could also provide us with opportunities if the use of renewable energy is encouraged. We currently self-generate a significant portion of our power requirements at our mills using bark, black liquor and biomass as fuel, which are derived from renewable resources. While we believe we are well-positioned to take advantage of any renewable energy incentives, it is uncertain what the ultimate costs and opportunities of any climate change legislation will be and how our business and industry will be affected.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, PCA evaluates its estimates, including those related to business combinations, goodwill and intangible assets, pensions and other postretirement benefits, environmental liabilities, income taxes, and long-lived asset impairment, 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.

Critical accounting estimates are those that are most important to the portrayal of our financial condition and results. These estimates require management's most difficult, subjective, or complex judgments. We review the development, selection, and disclosure of our critical accounting estimates with the Audit Committee of our board of directors. The Company believes that of its significant accounting policies, the following involve a higher degree of judgment and/or complexity:

Pensions

The Company accounts for defined benefit pension plans in accordance with Accounting Standards Codification (ASC) 715, "Compensation - Retirement Benefits." The calculation of pension expense and pension liabilities requires decisions about a number of key assumptions that can significantly affect expense and liability amounts, including discount rates, expected return on plan assets, expected rate of compensation increases, longevity and service lives of participants, expected contributions, and other factors. The pension assumptions used to measure pension expense and liabilities are discussed in Note 10, Employee Benefit Plans and Other Postretirement Benefits.

We recognize the funded status of our pension plans on our Consolidated Balance Sheet and recognize the actuarial and experience gains and losses and the prior service costs and credits as a component of "Accumulated Other Comprehensive Loss" in our Consolidated Statement of Changes in Stockholders' Equity. Actual results that differ from assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense in future periods. At December 31, 2016, we had approximately $121.5 million of actuarial losses and prior service costs, net of tax, recorded in "Accumulated other comprehensive loss" on our Consolidated Balance Sheet. Accumulated losses in excess of 10% of the greater of the projected benefit obligation or the market-related value of assets will be recognized on a straight-line basis over the average remaining service period of active employees in PCA plans (which is between seven to ten years) and over the average remaining lifetime of inactive participants of Boise plans (which is between 26 and 29 years), to the extent that losses are not offset by gains in subsequent years. While we believe that the assumptions used to measure our pension obligations are reasonable, differences in actual experience or changes in assumptions may materially affect our pension obligations and future expense.

We believe that the accounting estimate related to pensions is a critical accounting estimate because it is highly susceptible to change from period to period. As discussed above, the future effects of pension plans on our financial position and results of operations will depend on economic conditions, employee demographics, mortality rates, retirement rates, investment performance, and funding decisions, among other factors. The following table presents selected assumptions used and expected to be used in the measurement of pension expense in the following periods (dollars in millions):

	Year Ending December 31, 2017				Year Ended December 31
	2016				2015
Pension expense	$	25.3			$	27.4			$	31.3
Assumptions
Discount rate	4.24		%		4.49		%		4.14		%
Expected rate of return on plan assets	6.55		%		6.57		%		6.73		%

A change of 0.25% in either direction to the discount rate or the expected rate of return on plan assets would have had the following effect on 2016 and 2017 pension expense (dollars in millions):

	Base Expense				Increase (Decrease) in Pension Expense (a)
	0.25% Increase				0.25% Decrease
2016 Expense (b)
Discount rate	$	27.4			$	(2.6	)		$	3.1
Expected rate of return on plan assets	27.4				(1.9		)		1.9
2017 Expense
Discount rate	$	25.3			$	(1.9	)		$	2.2
Expected rate of return on plan assets	25.3				(2.1		)		2.1

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(a)	The sensitivities shown above are specific to 2016 and 2017. The sensitivities may not be additive, so the impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities shown.

(b)

Beginning in 2016, we refined the method used to determine the service and interest cost components of our net periodic benefit cost. Previously, the cost was determined using a single weighted-average discount rate derived from the yield curve. Under the refined method, known as the spot rate approach, we use individual spot rates along the yield curve that correspond with the timing of each benefit payment. We believe this change provides a more precise measurement of service and interest costs by improving the correlation between projected cash outflows and corresponding spot rates on the yield curve. Compared to the previous method, the spot rate approach decreased the service and interest components of our benefit costs by about $8 million in 2016.

For more information related to our pension benefit plans, see Note 10, Employee Benefit Plans and Other Postretirement Benefits, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Form 10-K.

Goodwill Impairment

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 December 31, 2016, we had $737.9 million of goodwill, of which, during 2016, we recorded $157.3 million in connection with the acquisition of TimBar Corporation and $36.6 million in connection with the acquisition of Columbus Container, Inc. At December 31, 2016, we had $682.7 million and $55.2 million of goodwill recorded in our Packaging and Paper segments, respectively.

We maintain two reporting units for purposes of our goodwill impairment testing, Packaging and Paper, which are the same as our operating segments discussed in Note 17, Segment Information, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of this Form 10-K. We test goodwill for impairment annually in the fourth quarter or sooner if events or changes in circumstances indicate that the carrying value of the asset may exceed fair value.

Under ASC 350, “Intangibles - Goodwill and Other,” companies have the option of performing either a qualitative analysis or a quantitative analysis to test goodwill for possible impairment. The qualitative analysis is commonly referred to as "Step 0". The Step 0 assessment requires the evaluation of certain events and circumstances such as macroeconomic conditions, industry and market considerations, cost factors and overall financial performance, as well as company and reporting unit specific items. If, after assessing these qualitative factors, the Company determines that it is more likely than not that the carrying value of the reporting unit is less than its fair value, then no further testing is required. Otherwise, the Company would perform a quantitative analysis, also known as the two-step impairment analysis, below.

Step One of the analysis requires companies to compare the fair value of the reporting units to which goodwill was assigned to their respective carrying values. In calculating fair value, we use the income approach as our primary indicator of fair value. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. These estimates are based on a number of factors including industry experience, business expectations and the economic environment. If the fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the fair value, the goodwill of the reporting unit is potentially impaired and the Company would then complete Step Two of the analysis in order to measure the impairment loss of the reporting unit. This step requires the determination of the fair value of all the individual assets and liabilities of the reporting unit as of the analysis date. Once these fair values have been determined, the implied fair value of the unit’s goodwill is calculated as the excess, if any, of the fair value of the reporting unit determined in Step One over the fair value of the net assets determined in Step Two. The carrying value of goodwill is then reduced to the implied value, or to zero if the fair value of the assets exceeds the fair value of the reporting unit, through an impairment charge.

During the annual goodwill impairment test, we assessed qualitative factors to determine whether it was more likely than not that the fair value of each reporting unit was less than its carrying value. Based on the results of the Step 0 goodwill impairment test, we determined that it was more likely than not that the carrying value was less than the fair value of the Packaging and Paper reporting units.

If management's estimates of future operating results materially change or if there are changes to other assumptions, the estimated fair value of our goodwill could change significantly. Such change could result in impairment charges in future periods, which could have a significant noncash impact on our operating results and financial condition. We cannot predict the occurrence of future events that might adversely affect the reported value of our goodwill. As additional information becomes known, we may change our estimates.

Long-Lived Asset Impairment

An impairment of a long-lived asset exists when the carrying value of an asset is not recoverable through future undiscounted cash flows from operations and when the carrying value of the asset exceeds its fair value. Long-lived asset impairment is a critical accounting estimate, as it is susceptible to change from period to period.

We review the carrying value of long-lived assets, including intangible assets, for impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. For purposes of testing for impairment, we group our long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows from other assets and liabilities. Our asset groupings vary based on the related business in which the long-lived asset is employed and the interrelationship between those long-lived assets in producing net cash flows. Asset groupings could change in the future if changes in the operations of the business or business environment affect the way particular long-lived assets are employed or the interrelationships between assets. To estimate whether the carrying value of an asset or asset group is impaired, we estimate the undiscounted cash flows that could be generated under a range of possible outcomes. To measure future cash flows, we are required to make assumptions about future production volumes, future product pricing, and future expenses to be incurred. In addition, estimates of future cash flows may change based on the availability of fiber, environmental requirements, capital spending, and other strategic management decisions. We estimate the fair value of an asset or asset group based on quoted market prices for similar assets and liabilities or inputs that are observable either directly (Level 1 measurement) or indirectly (the amount for which the asset(s) could be bought or sold in a current transaction with a third party) when available (Level 2 measurement). When quoted market prices are not available, we use a discounted cash flow model to estimate fair value (Level 3 measurement).

We periodically assess the estimated useful lives of our assets. Changes in circumstances, such as changes to our operational or capital strategy, changes in regulation, or technological advances, may result in the actual useful lives differing

from our estimates. Revisions to the estimated useful lives of assets requires judgment and constitutes a change in accounting estimate, which is accounted for prospectively by adjusting or accelerating depreciation and amortization rates. In 2016, we recognized incremental depreciation expense of $2.9 million, primarily related to facilities closure costs and the Wallula mill restructuring. During the year ended December 31, 2015, we recognized $9.0 million of accelerated depreciation expense related to shortening the useful lives of assets at the DeRidder, Louisiana mill, which primarily related to the newsprint business we exited in 2014.

New and Recently Adopted Accounting Standards

For a listing of our new and recently adopted accounting standards, see 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 this Form 10-K.

Reconciliations of Non-GAAP Financial Measures to Reported Amounts

Income from operations excluding special items, net income excluding special items, EBITDA, and EBITDA excluding special items are non-GAAP financial measures. Management excludes special items, as it believes that these items are not necessarily reflective of the ongoing operations of our business. These measures are presented because they provide a means to evaluate the performance of our segments and our Company on an ongoing basis using the same measures that are used by our management, because these measures assist in providing a meaningful comparison between periods and because these measures are frequently used by investors and other interested parties in the evaluation of companies and the performance of their segments. Any analysis of non-GAAP financial measures should be done in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. Reconciliations of the non-GAAP measures to the most comparable measure reported in accordance with GAAP for the years ended December 31, 2016, 2015, and 2014, follow (dollars in millions):

	Year Ended December 31
	2016												2015
	Income before Taxes				Income taxes				Net Income				Income before Taxes				Income Taxes				Net Income
As reported in accordance with GAAP	$	688.5			$	(238.9	)		$	449.6			$	664.5			$	(227.7	)		$	436.8
Special items:
Facilities closure costs (a)	11.0				(3.9		)		7.1				—				—				—
Acquisition-related costs (b)	4.5				(1.6		)		2.9				—				—				—
Wallula mill restructuring (c)	2.7				(0.9		)		1.8				—				—				—
Multiemployer pension withdrawal (d)	0.9				(0.3		)		0.6				—				—				—
DeRidder restructuring (e)	—				—				—				2.0				(0.7		)		1.3
Integration-related and other costs (f)	—				—				—				13.4				(4.5		)		8.9
Sale of St. Helens paper mill site (g)	—				—				—				(6.7		)		2.3				(4.4		)
Total special items	19.1				(6.7		)		12.4				8.7				(2.9		)		5.8
Excluding special items	$	707.6			$	(245.6	)		$	462.0			$	673.2			$	(230.6	)		$	442.6

		Year Ended December 31
		2014
		Income before Taxes				Income Taxes				Net Income
As reported in accordance with GAAP		$	614.3			$	(221.7	)		$	392.6
Special items:
DeRidder restructuring (e)		65.8				(23.7		)		42.1
Integration-related and other costs (f)		19.9				(7.2		)		12.7
Class action lawsuit settlement (h)		17.6				(6.4		)		11.2
Total special items		103.3				(37.3		)		66.0
Excluding special items		$	717.6			$	(259.0	)		$	458.6

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(a)	Includes closure costs related to corrugated facilities and a paper products facility.

(b)	Includes acquisition-related costs for the TimBar Corporation and Columbus Container, Inc. acquisitions.

(c)	Includes costs related to ceased softwood market pulp operations at our Wallula, Washington mill and the permanent shutdown of the No.1 machine.

(d)	Includes costs related to our withdrawal from a multiemployer pension plan for one of our corrugated products facilities.

(e)	2015 and 2014 include amounts from restructuring activities at our mill in DeRidder, Louisiana including costs related to the conversion of the No. 3 newsprint machine to containerboard, our exit from the newsprint business, and other improvements.

(f)	2015 and 2014 include Boise acquisition integration-related and other costs, primarily for severance, retention, travel, and professional fees. 2014 also includes $1.5 million of expense related to the write-off of deferred financing costs in connection with the debt refinancing.

(g)	In September 2015, we sold the remaining land, buildings, and equipment at our paper mill site in St. Helens, Oregon where we ceased paper production in December 2012. We recorded a $6.7 million gain on the sale.

(h)	Includes $17.6 million of costs for the settlement of the Kleen Products LLC v Packaging Corp. of America et al class action lawsuit. See Note 18, Commitments, Guarantees, Indemnifications, and Legal Proceedings, for more information.

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

	Year Ended December 31
	2016				2015				2014				2013				2012
Net income	$	449.6			$	436.8			$	392.6			$	441.3			$	160.2
Interest expense, net	91.8				85.5				88.4				58.3				62.9
Provision (benefit) for income taxes	238.9				227.7				221.7				(17.7		)		214.5
Depreciation, amortization, and depletion	358.0				356.5				381.0				201.8				170.8
EBITDA	$	1,138.3			$	1,106.5			$	1,083.7			$	683.7			$	608.4
Special items:
Facilities closure costs	$	10.2			$	—			$	—			$	—			$	2.0
Acquisition-related costs	4.5				—				—				17.2				—
Wallula mill restructuring	0.6				—				—				—				—
Multiemployer pension withdrawal	0.9				—				—				—				—
DeRidder restructuring	—				(7.0		)		23.9				—				—
Integration-related and other costs	—				13.4				18.4				17.4				—
Sale of St. Helens paper mill site	—				(6.7		)		—				—				—
Class action lawsuit settlement	—				—				17.6				—				—
Acquisition inventory step-up	—				—				—				21.5				—
Pension curtailment charges	—				—				—				10.9				—
Alternative energy tax credits	—				—				—				—				(95.5		)
EBITDA excluding special items	$	1,154.5			$	1,106.2			$	1,143.6			$	750.7			$	514.9

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

	Year Ended December 31
	2016				2015				2014
Packaging
Segment income	$	711.1			$	714.9			$	663.2
Depreciation, amortization, and depletion	293.3				297.3				323.0
EBITDA	1,004.4				1,012.2				986.2
Facilities closure costs	9.3				—				—
Acquisition-related costs	4.2				—				—
Multiemployer pension withdrawal	0.9				—				—
DeRidder restructuring	—				(7.0		)		23.9
Integration-related and other costs	—				4.1				4.9
EBITDA excluding special items	$	1,018.8			$	1,009.3			$	1,015.0
Paper
Segment income	$	138.1			$	112.5			$	135.4
Depreciation, amortization, and depletion	59.6				54.9				50.6
EBITDA	197.7				167.4				186.0
Wallula mill restructuring	0.6				—				—
Facilities closure costs	0.9				—				—
Sale of St. Helens paper mill site	—				(6.7		)		—
EBITDA excluding special items	$	199.2			$	160.7			$	186.0
Corporate and Other
Segment income (loss)	$	(68.9	)		$	(77.4	)		$	(95.9	)
Depreciation, amortization, and depletion	5.1				4.3				7.4
EBITDA	(63.8		)		(73.1		)		(88.5		)
Acquisition-related costs	0.3				—				—
Integration-related and other costs	—				9.3				13.5
Class action lawsuit settlement	—				—				17.6
EBITDA excluding special items	$	(63.5	)		$	(63.8	)		$	(57.4	)
EBITDA	$	1,138.3			$	1,106.5			$	1,083.7
EBITDA excluding special items	$	1,154.5			$	1,106.2			$	1,143.6