Packaging Corp of America (PKG) 10-K risk factor changes: FY2019 vs FY2018

| --- | --- |

Some of the statements in this report and, in particular, statements found in 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, but are not limited to, the factors described below.

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 so, what impact they will have on our results of operations or financial condition.

In view of these uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements.

We expressly disclaim any obligation to publicly revise or otherwise update any forward-looking statements that have been made to reflect the occurrence of events after the date hereof.

In addition to the risks and uncertainties we discuss elsewhere in this Form 10-K (particularly in “Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations”) or in our other filings with the Securities and Exchange Commission (SEC), the following are important factors that could cause our actual results to differ materially from those we project in any forward-looking statement.

Industry Cyclicality - Changes in the prices of our products could materially affect our financial condition, results of operations, and liquidity.

Macroeconomic conditions and fluctuations in industry capacity can create changes in prices, sales volumes, and margins for most of our products, particularly commodity grades of packaging and paper products.

Prices for all of our products are driven by many factors, including demand for our products, industry capacity and decisions made by other producers with respect to capacity, and other competitive conditions in our industry.

These factors are affected by general global and domestic economic conditions.

We have little influence over the timing and extent of price changes of our products, which may be unpredictable and volatile.

In addition, our selling prices are influenced by index levels published by trade publications.

Changes in how these index levels are determined or maintained may affect our sales prices.

If supply exceeds demand, industry operating conditions deteriorate or other factors result in lower prices for our products, our earnings and operating cash flows would be harmed.

General Economic Conditions - If business, political, and economic conditions change in an adverse manner, our business, results of operations, liquidity, and financial position may be harmed.

General global and domestic economic conditions directly affect the levels of demand and production of consumer goods, levels of employment, the availability and cost of credit, and ultimately, the profitability of our business.

If economic conditions deteriorate and result in higher unemployment rates, lower disposable income, unfavorable currency exchange rates, lower corporate earnings, lower business investment, and lower consumer spending, we may experience lower demand for our products, which is largely driven by demand for products of our customers which utilize our products.

If economic conditions result in higher inflation, we may experience higher production and transportation costs, which we may not be able to recover through higher prices or otherwise.

In addition, changes in trade policy, including renegotiating or potentially terminating existing bilateral or multilateral agreements as well as the imposition of tariffs, could impact global markets and demand for our and our customers’ products and the costs associated with certain of our capital investments.

Further changes in tax laws or tax rates may have a material impact on our future cash taxes, effective tax rate or deferred tax assets and liabilities.

These conditions are beyond our control and may have a material impact on our business, results of operations, liquidity, and financial position.

Competition - The intensity of competition in the industries in which we operate could result in downward pressure on pricing and volume, which could lower earnings and operating cash flows.

Our industries are highly competitive, with no single containerboard, corrugated packaging, or white paper producer having a dominant position.

Containerboard and commodity white paper products cannot generally be differentiated by producer, which tends to intensify price competition.

The corrugated packaging industry is also sensitive to changes in economic conditions, as well as other factors including innovation, design, quality, and service.

To the extent that one or more competitors are more successful than we are with respect to any key competitive factor, our business could be adversely affected.

Our packaging products also compete, to some extent, with various other packaging materials, including products made of paper, plastics, wood, and various types of metal.

If we are unable to successfully compete, we may lose market share or may be required to charge lower sales prices for our products, both of which would reduce our earnings and operating cash flows.

White paper products compete with electronic data transmission and document storage alternatives.

Increasing shifts to electronic alternatives have had and will continue to have an adverse effect on usage of these products.

As a result of such competition, the industry is experiencing decreasing demand for existing white paper products.

As the use of these alternatives grows, demand for paper products is likely to further decline.

Declines in demand for our paper products may adversely affect our earnings and operating cash flows.

Some of our competitors are larger than we are and may have greater financial and other resources, greater manufacturing economies of scale, greater energy self-sufficiency, or lower operating costs, compared to our company.

We also manufacture and sell [removed: white] [added: UFS] papers, including both commodity and specialty papers, which may have custom or specialized features such as colors, coatings, high brightness, and recycled content.

Net sales were [removed: $7.01] [added: $6.96] billion for the year ended December 31, [removed: 2018] [added: 2019] and [removed: $6.44] [added: $7.01] billion in [removed: 2017.][added: 2018.]

We reported [removed: $738] [added: $696] million of net income, or [removed: $7.80] [added: $7.34] per diluted share, in [removed: 2018,] [added: 2019,] compared to [removed: $669] [added: $738] million, or [removed: $7.07] [added: $7.80] per diluted share, in [removed: 2017.][added: 2018.]

Excluding special items, we recorded [removed: $760] [added: $726] million of net income, or [removed: $8.03] [added: $7.65] per diluted share, in [removed: 2018,] [added: 2019,] compared to [removed: $569] [added: $760] million, or [removed: $6.02] [added: $8.03] per diluted share, in [removed: 2017.][added: 2018.]

The [removed: increase] [added: decrease] was driven primarily by [removed: higher] [added: lower] prices and mix [removed: and volumes] in our Packaging segment, [removed: higher prices and mix] [added: lower volumes] in our Paper segment, [removed: lower taxes,] and [removed: lower wood] [added: higher operating] and [removed: recycled fiber] [added: converting] costs, partially offset by [removed: lower] [added: higher] volumes in our [removed: Paper] [added: Packaging] segment, higher [removed: operating and converting costs, higher freight and logistic expenses,] [added: prices] and [removed: higher] [added: mix in our Paper segment, lower] annual outage expense, and [removed: other costs.][added: lower freight and logistic expenses.]

For additional detail on special items included in reported GAAP [removed: results] [added: results, as well as segment income (loss) excluding special items, earnings before non-operating pension expense, interest, income taxes,] and [removed: other non-GAAP measures,] [added: depreciation, amortization, and depletion (EBITDA), and EBITDA excluding special items,] see “Item 7.

Packaging segment income from operations was [removed: $1,045] [added: $963] million in [removed: 2018,] [added: 2019,] compared to [removed: $950] [added: $1,045] million in [removed: 2017.][added: 2018.]

Packaging segment EBITDA excluding special items was [removed: $1,401] [added: $1,310] million in [removed: 2018,] [added: 2019,] compared to [removed: $1,264] [added: $1,401] million in [removed: 2017.][added: 2018.]

The [removed: increase] [added: decrease] was driven primarily by [removed: higher containerboard] [added: lower domestic] and [removed: corrugated products] [added: export containerboard] prices and mix and [removed: sales and production volumes driven by strong demand,] [added: higher operating] and [removed: lower recycled fiber costs;] [added: converting costs,] partially offset by higher [removed: operating] [added: sales] and [removed: converting costs;] [added: production volumes,] higher [removed: freight and logistic expense;] [added: corrugated products prices] and [removed: higher] [added: mix, lower] annual outage [removed: expense.][added: expense, and lower freight and logistic expenses.]

Paper segment income from operations was [removed: $98] [added: $175] million in [removed: 2018,] [added: 2019,] compared to [removed: $54] [added: $98] million in [removed: 2017.][added: 2018.]

Paper segment EBITDA excluding special items was [removed: $165] [added: $213] million in [removed: 2018,] [added: 2019,] compared to [removed: $145] [added: $165] million in [removed: 2017.][added: 2018.]

The increase was due primarily to higher paper prices and mix, lower operating costs, and lower [removed: annual outage expense,] [added: freight and logistic expenses,] partially offset by [removed: higher freight] [added: lower sales] and [removed: logistic expense] [added: production volumes,] and higher [removed: fiber costs.][added: annual outage expense.]

During the second quarter of 2018, the Company discontinued production of [removed: uncoated freesheet and coated one-side] [added: paper] 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 incurred charges in the Packaging and Paper segments relating to these activities during [removed: 2017] [added: 2019] and 2018 as described below under “Special Items and Earnings per Diluted Share, Excluding Special Items.”

[removed: Special] [added: *Special] Items and Earnings per Diluted Share, Excluding Special [removed: Items][added: Items*]

Earnings per diluted share, excluding special items, in [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] were as follows:

| Earnings per diluted share | | $ | [removed: 7.80] [added: 7.34] | | | $ | [removed: 7.07] [added: 7.80] | |

| Wallula mill restructuring [removed: (a)] [added: (c)] | | | [removed: 0.24] [added: 0.01] | | | | [removed: 0.21] [added: 0.24] | |

| Facilities closure and other costs [removed: (b)] [added: (d)] | | | [removed: 0.01] [added: —] | | | | [removed: (0.04] [added: 0.01] | [removed: )] |

| Tax reform [removed: (c)] [added: (e)] | | | [removed: (0.02] [added: —] | [removed: )] | | | [removed: (1.29] [added: (0.02] | ) |

| Acquisition and integration related costs [removed: (f)] | | | — | | | | [removed: 0.01] [added: (0.2] | [added: )] |

| Total special items [removed: (income)] expense | | | [removed: 0.23] [added: 0.31] | | | | [removed: (1.05] [added: 0.23] | [removed: )] |

| Earnings per diluted share, excluding special items | | $ | [removed: 8.03] [added: 7.65] | | | $ | [removed: 6.02] [added: 8.03] | |

| [removed: (a)] [added: (c)] | For [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] includes [removed: $30.0] [added: $1.0] million and [removed: $33.4] [added: $30.0] million, respectively, of charges related to the second quarter 2018 discontinuation of uncoated free sheet and coated one-side [added: paper] grades at the Wallula, Washington mill associated with the conversion of the No. 3 paper machine to [removed: a high-performance 100%] [added: produce] virgin kraft [removed: linerboard machine.] [added: linerboard.] |

| (b) | For [removed: 2018,] [added: 2019,] includes [removed: $1.8 million of] charges consisting of closure costs related to corrugated products [removed: facilities and a corporate administration facility. For 2017, includes $5.8 million of] [added: facilities, partially offset by] income [removed: primarily related to] [added: from] the sale of [removed: land corresponding] [added: a building related] to [removed: the closure of] a [added: closed] corrugated products [removed: facility, partially offset by] [added: facility. For 2018, includes charges consisting of] closure costs related to corrugated products [removed: facilities, a paper administration facility,] [added: facilities and] a corporate administration [removed: facility, and a lump sum settlement of a multiemployer pension plan withdrawal liability for one of our corrugated products facilities.] [added: facility.] |

| [removed: (c)] [added: (e)] | [removed: For 2018 and 2017, includes] [added: Includes] $2.0 million [removed: and $122.1 million, respectively,] of income tax benefit for the re-measurement of our net deferred tax liability for the reduction in the U.S. corporate federal statutory income tax rate related to our 2017 measurement period adjustments in accordance with SEC Staff Accounting Bulletin No. 118 (SAB 118), [removed: Income] [added: *Income] Tax Accounting Implications of the Tax Cuts and Jobs [removed: Act.] [added: Act*.] |

| (f) | Includes [removed: $1.7 million of] charges for acquisition and integration costs related to recent acquisitions. |

A reconciliation of diluted [removed: EPS] [added: earnings per share] to diluted [removed: EPS] [added: earnings per share] 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.

Trade publications reported North American industry-wide corrugated products total shipments [removed: increased 1.7%] [added: were flat] during [removed: 2018,] [added: 2019,] compared to [removed: 2017.][added: 2018.]

Reported industry containerboard production [removed: increased 1.7%] [added: decreased 3.7%] compared to [removed: 2017,] [added: 2018,] and reported industry containerboard inventories at the end of [removed: 2018] [added: 2019] were approximately [removed: 2.7] [added: 2.5] million tons, [removed: up 11.7%] [added: down 5.1%] compared to [removed: 2017.][added: 2018.]

Reported containerboard export shipments [removed: were flat] [added: decreased 13.1%] compared to [removed: 2017.][added: 2018.]

Trade publications reported North American uncoated freesheet paper shipments were down [removed: 4.0%] [added: 10.9%] in [removed: 2018,] [added: 2019,] compared to [removed: 2017.][added: 2018.]

Average [added: copy paper] prices reported by a trade publication for cut size office papers increased [removed: $83] [added: $3] per [removed: ton, or 8.7%,] [added: ton] in [removed: 2018, compared to 2017.][added: the first quarter and]

[removed: We anticipate higher labor] [added: Labor] and benefits costs [added: will be higher] with annual wage increases and other timing-related expenses.

[removed: Although we] [added: We also] expect [removed: costs for freight and recycled fiber to be fairly flat, we do anticipate some] [added: input cost] inflation with [added: purchased electricity and] most of our chemical and repair and materials costs, while seasonally colder weather will increase energy [removed: usage] and wood costs.

We also expect our tax rate [added: and depreciation expense] to be slightly higher.

Considering these items, we expect first quarter [removed: 2019 earnings, excluding special items,] [added: earnings] to be lower than fourth quarter [removed: 2018.][added: 2019.]

Year Ended December 31, [removed: 2018,] [added: 2019,] Compared with Year Ended December 31, [removed: 2017][added: 2018]

The historical results of operations of PCA for the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] are set forth below (dollars in millions):

| | | Year Ended December 31, | | | | | | | [removed: | | | |]

For our discussion and analysis of our results of operations, financial condition and cash flows for the year ended December 31, 2017, the earliest of the years presented in the accompanying audited financial statements included in Item 8 herein, please refer to our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on February 28, 2019.

Such information is presented in Item 7 of such report under the subcaptions “Results of Operations —Year Ended December 31, 2018, Compared with Year Ended December 31, 2017” and “Liquidity and Capital Resources” and is incorporated by reference herein.

| Debt refinancing (a) | | | 0.28 | | | | — | |

| DeRidder mill fixed asset disposals (b) | | | 0.02 | | | | — | |

| (a) | Includes $38.7 million of charges related to the Company’s November 2019 debt refinancing, which included premiums paid to redeem the debt being refinanced and the write-offs of remaining balances of treasury locks and unamortized debt issuance costs. Also includes $3.2 million of income tax benefit from the stranded tax effects in Accumulated Other Comprehensive Income related to the write-offs of the treasury locks in connection with the debt refinancing. |

| (b) | Includes $3.0 million of charges for the disposal of fixed assets related to the containerboard mill conversion at our DeRidder, Louisiana mill. |

| (d) | Includes $1.8 million of charges consisting of closure costs related to corrugated products facilities and a corporate administration facility. |

Additionally, prices decreased by $10 per ton for linerboard and $15 per ton for corrugating medium in January 2020.

$35 per ton in the second quarter, followed by a decrease of $35 per ton in the third quarter and $13 per ton in the fourth quarter of 2019.

Looking ahead to the first quarter of 2020, in our Packaging segment we expect lower prices as the remaining impact of the published domestic containerboard price decreases from 2019 are fully realized as well as the negative impact from the decreases in the published index prices for kraft linerboard and medium reported in January 2020.

We also expect export prices to continue to decline.

Containerboard volumes will be lower due to scheduled maintenance outages at our three largest mills during the quarter, but we do expect higher corrugated products shipments driven by higher demand.

In our Paper segment, volumes are expected to be lower partly due to timing, as we shipped higher than expected volumes during the fourth quarter as well as the scheduled outage we have at our Jackson Mill.

Expenses relating to our scheduled maintenance outage activities will be significantly higher with four outages scheduled in the first quarter versus one in the fourth quarter of 2019.

Freight costs will be higher due to rail rate increases in certain areas and scheduled outage-related increases.

| Packaging | | $ | 5,932.2 | | | $ | 5,938.5 | | | $ | (6.3 | ) |

| Paper | | | 964.3 | | | | 1,002.0 | | | | (37.7 | ) |

| Packaging | | $ | 963.4 | | | $ | 1,045.4 | | | $ | (82.0 | ) |

| Paper | | | 175.4 | | | | 97.7 | | | | 77.7 | |

| Non-operating pension expense | | | (7.9 | ) | | | (2.1 | ) | | | (5.8 | ) |

| Interest expense, net | | | (128.8 | ) | | | (95.1 | ) | | | (33.7 | ) |

| EBITDA (a) | | $ | 1,441.2 | | | $ | 1,478.6 | | | $ | (37.4 | ) |

Net sales decreased $50 million, or 0.7%, to $6,964 million in 2019, compared to $7,015 million in 2018.

Net sales decreased $7 million, or 0.1%, to $5,932 million, compared to $5,939 million in 2018, due to lower prices and mix ($31 million), primarily for domestic and export containerboard, partially offset by increased volumes ($24 million), primarily due to corrugated products.

Prices reported by trade publications decreased by

$10 per ton for linerboard in March, May, and June 2019, and corrugating medium decreased $20 per ton in January and $10 per ton in May and June 2019, which drove lower selling prices for containerboard and corrugated products.

Gross profit decreased $1 million in 2019, compared to 2018.

Special items in 2019 consisted of $3 million of charges for the disposal of fixed assets related to the containerboard mill conversion at our DeRidder, Louisiana mill and $1 million of charges related to the conversion of the Wallula, Washington mill No. 3 paper machine.

Special items in 2019 included expense of $3 million for the disposal of fixed assets related to the containerboard mill conversion at our DeRidder, Louisiana mill and $1 million of charges related to the conversion of the Wallula No. 3 paper machine.

There were an insignificant amount of

During 2019, non-operating pension expense increased $6 million compared to 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.

The increase is primarily related to the $38 million of charges from the Company’s November 2019 debt refinancing, partially offset by 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 2019, we recorded $221 million of income tax expense, compared with $232 million of income tax expense during 2018.

| | a) | a decrease in accounts receivable in 2019 compared to 2018 due to lower net sales in 2019 as previously discussed and the timing of collections in the Packaging segment, and |

| | b) | a net decrease in inventory in 2019 compared to 2018 primarily due to less containerboard inventory on hand in the Packaging segment, partially offset by higher levels of finished goods in the Paper segment. |

These favorable changes were partially offset by the following:

| | a) | higher taxes paid in 2019 compared to 2018 due to the 2018 use of a federal overpayment from the 2017 tax year resulting from Federal Tax Reform, and |

Cash from operations excluding changes in cash used for operating assets and liabilities decreased $35 million, primarily due to lower income from operations as discussed above, as well as higher pension contributions made in 2019 compared to 2018 of $36 million, partially offset by a higher deferred tax provision in 2019 compared to 2018.

In October 2019, we used $146 million of cash-on-hand to invest in available-for-sale (AFS) marketable debt securities.

| --- | --- |

Net income included $22 million of expense for special items in 2018, compared to $100 million of income for special items in 2017, including $122 million of estimated income tax benefit related to the enactment in December 2017 of the Tax Cut and Jobs Act (H.R.1).

In October 2017, the Company acquired substantially all of the assets of Sacramento Container Corporation, and 100% of the membership interests of Northern Sheets, LLC and Central California Sheets, LLC (collectively the “Sacramento Container acquisition”) for $274 million with cash on hand.

The acquired companies operate two full-line corrugated product operations and sheet feeders in McClellan, California and Kingsburg, California.

The operating results of the companies acquired in the Sacramento Container acquisition are included in our results and reported in the Packaging segment from and after October 2017.

These operations have been substantially integrated into our business and have helped drive growth in our corrugated products volumes during 2018.

| | | 2018 | | | | 2017 | | |

| Internal legal entity consolidation (d) | | | — | | | | 0.04 | |

| DeRidder mill incident (e) | | | — | | | | 0.03 | |

| Deferred debt issuance costs (g) | | | — | | | | 0.01 | |

| Expiration of timberland repurchase option (h) | | | — | | | | (0.01 | ) |

| Hexacomb working capital adjustment (i) | | | — | | | | (0.01 | ) |

| (d) | Includes $3.3 million of tax expense for the change in value of deferred taxes as a result of an internal legal entity consolidation that will simplify future operating activities. |

| (e) | Includes $5.0 million of costs for the property damage and business interruption insurance deductible corresponding to the February 2017 explosion at our DeRidder, Louisiana mill. |

| (g) | Includes $1.8 million of expense related to the write-off of deferred debt issuance costs in connection with the December 2017 debt refinancing. |

| (h) | Includes a $2.0 million gain related to the expiration of a repurchase option corresponding to timberland previously sold. |

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

In March 2018, trade publications reported a $50 price per ton increase on linerboard and corrugating medium.

In January 2019, trade publications reported a $10 price per ton decrease on corrugating medium.

Looking ahead to the first quarter of 2019, we expect continued strong demand in our Packaging segment for both containerboard volume and corrugated products volume, and we expect strong market conditions in our Paper segment to continue.

Finally, the recent decrease in the published price for domestic medium will have a minimal effect on earnings.

We do not expect special items to be significant during the first quarter of 2019.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Packaging | | $ | 5,938.5 | | | $ | 5,312.3 | | | $ | 626.2 | |

| Paper | | | 1,002.0 | | | | 1,051.8 | | | | (49.8 | ) |

| Packaging | | $ | 1,045.4 | | | $ | 950.3 | | | $ | 95.1 | |

| Paper | | | 97.7 | | | | 54.0 | | | | 43.7 | |

| Interest expense, net and other | | | (97.2 | ) | | | (103.9 | ) | | | 6.7 | |

| --- | --- | --- |

| | (c) | Effective January 1, 2018, the Company adopted ASU 2017-07, Compensation: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost and applied this standard retrospectively to the |

| | | prior period reflected herein. See Note 2, Summary of Significant Accounting Policies and Note 18, Segment Information, for more information. |

Net Sales

Net sales increased $570 million, or 8.8%, to $7,015 million in 2018, compared to $6,445 million in 2017.

Packaging.

Net sales increased $626 million, or 11.8%, to $5,939 million, compared to $5,312 million in 2017, due to increased containerboard and corrugated products volume ($367 million) and higher domestic and export containerboard and corrugated products prices and mix ($259 million).

Paper.

Gross Profit

Gross profit increased $175 million in 2018, compared to 2017.

Selling, general, and administrative expenses (SG&A) increased $17 million in 2018, compared to 2017.

These increases were partially offset by certain expenses that were previously recorded in SG&A for 2017 which are now recorded in cost of sales for 2018 ($25 million).

We were not party to any derivative-based arrangements at December 31, [removed: 2018.][added: 2019.]

For a discussion of derivatives and hedging activities, see Note [removed: 14,] [added: 16,] Derivative Instruments and Hedging Activities, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

At December 31, [removed: 2018,] [added: 2019,] the interest rates on 100% of PCA’s outstanding debt are fixed.

Packaging Corporation of America (“we,” “us,” “our,” “PCA,” or the “Company”) is the third largest producer of containerboard products and the third largest producer of uncoated freesheet (UFS) [added: paper] in North America.

We operate six containerboard mills, two [removed: white] [added: uncoated freesheet (UFS)] paper mills and 95 corrugated products manufacturing plants.

For segment financial information see Note [removed: 18,] [added: 20,] Segment Information, of the Notes to Consolidated Financial Statements in “Part II, Item 8, Financial Statements and Supplementary Data” of this Form 10-K.

During the second quarter of 2018, we discontinued the production of [removed: uncoated free sheet and coated one-side] [added: paper] grades at the Wallula, Washington mill and converted the No. 3 machine to [removed: a] [added: production of] virgin kraft [removed: linerboard machine.][added: linerboard.]

[removed: Subsequent to the date of conversion in] [added: After] May 2018, operating results for the Wallula mill are primarily included in the Packaging segment.

Before [removed: such date,] [added: May 2018,] operating results [added: for the Wallula mill] were included in the Paper segment.

The following table summarizes the Packaging segment's containerboard production and corrugated products shipments and the Paper segment's [removed: white paper and market pulp] [added: UFS] production.

| | | | | | | [removed: | |] First Quarter | | | | Second Quarter | | | | Third Quarter | | | | Fourth Quarter | | | | Full Year | | |

| [removed: Containerboard Production (a) | | PCA] [added: (thousand tons)] | | | 2018 | | | | 953 | | | | 1,020 | | | | 1,087 | | | | 1,021 | | | | 4,081 | |

| [removed: (thousand tons)] | | | [removed: | |] 2017 | | | | 932 | | | | 947 | | | | 996 | | | | 1,006 | | | | 3,881 | |

| [removed: Corrugated Shipments (BSF)] | | [removed: PCA] | [removed: | |] 2018 | | | | 14.4 | | | | 15.1 | | | | 14.8 | | | | 14.6 | | | | 58.9 | |

| | | | [removed: | |] 2017 | | | | 13.6 | | | | 13.9 | | | | 13.7 | | | | 14.5 | | | | 55.7 | |

| [removed: White Paper (UFS) Production (a) | | PCA] [added: (thousand tons)] | | | 2018 | | | | 279 | | | | 252 | | | | 239 | | | | 247 | | | | 1,017 | |

| [removed: (thousand tons)] | | | [removed: | |] 2017 | | | | 273 | | | | 289 | | | | 278 | | | | 278 | | | | 1,118 | |

| (a) | In May 2018, PCA ceased production of [removed: uncoated free sheet and coated one-side] [added: paper] grades at our Wallula, Washington mill and converted the No. 3 machine to [removed: a] [added: produce] virgin kraft [removed: linerboard machine.] [added: linerboard. We provide more information about the production capability of the converted machine elsewhere in this section under “– Packaging – Facilities – Wallula.”] |

[removed: ][added: ]

Our containerboard mills produce linerboard and [removed: semi-chemical] corrugating medium, which are [removed: papers] primarily used in the production of corrugated products.

During the year ended December 31, [removed: 2018,] [added: 2019,] our Packaging segment produced [removed: 4.1] [added: 4.2] million tons of containerboard at our mills.

Our corrugated products manufacturing plants sold [removed: 58.9] [added: 59.4] billion square feet (BSF) of corrugated products.

Our net sales to third parties totaled $5.9 billion in [removed: 2018.][added: 2019.]

[removed: Facilities][added: Facilities]

Total annual containerboard capacity was approximately [removed: 4.4] [added: 4.3] million tons as of December 31, [removed: 2018.][added: 2019.]

Our Counce, Tennessee mill produces kraft linerboard on two [removed: paper] machines.

Our DeRidder, Louisiana mill produces kraft linerboard [added: on its No. 1 machine] and [removed: semi-chemical] [added: kraft linerboard and] corrugating medium on [removed: two paper machines.][added: its No. 2 machine.]

Our Valdosta, Georgia mill produces kraft linerboard on one [removed: paper] machine.

Our Tomahawk, Wisconsin mill produces [removed: semi-chemical] corrugating medium on two [removed: paper] machines.

Our Filer City, Michigan mill produces [removed: semi-chemical] corrugating medium on three [removed: paper] machines.

Our Wallula, Washington mill produces [removed: semi-chemical] corrugating medium on its No. 2 machine and kraft linerboard on its No. 3 machine.

We operate 95 corrugated manufacturing and protective packaging operations, a technical and development center, [removed: 10] [added: 11] regional design centers, a rotogravure printing operation, and a complement of packaging supplies and distribution centers.

Of the 95 manufacturing facilities, [removed: 61] [added: 62] operate as combining operations, commonly called corrugated plants, which manufacture corrugated sheets and finished corrugated packaging products, [removed: 33] [added: 32] are sheet plants, which procure combined sheets and manufacture finished corrugated packaging products, and one is a corrugated sheet-only manufacturer.

In [removed: 2018,] [added: 2019,] our usage of recycled fiber, net of internal generation, represents [removed: 18%] [added: 17%] of our containerboard production.

We participate in the Sustainable Forestry Initiative® [removed: (SFI),] [added: (SFI®),] the Programme for the Endorsement of Forest [removed: Certification™] [added: Certification] (PEFC), as well as the Forest Stewardship Council® [removed: (FSC),] [added: (FSC®),] and we are certified under their sourcing and chain of custody standards.

[added: *Energy supply.*] Energy at our packaging mills is obtained through self-generated or purchased fuels and electricity.

In [removed: 2018,] [added: 2019,] our packaging mills consumed about [removed: 70] [added: 75] million MMBTU’s of fuel to produce both steam and electricity.

Of the [removed: 70] [added: 75] million MMBTU’s consumed, about [removed: 64%] [added: 62%] was from mill generated by-products and [removed: 36%] [added: 38%] was from purchased fuels.

Of the purchased fuels, [removed: 65%] [added: 72%] was from natural gas, [removed: 31%] [added: 25%] was from purchased wood waste and [removed: 4%] [added: 3%] was from other purchased fuels.

We sell containerboard and corrugated products to approximately [removed: 18,000] [added: 17,000] customers in [removed: over 36,000] [added: approximately 35,000] locations.

About [removed: three-quarters] [added: 70%] of our corrugated products sales are to regional and local accounts, which are broadly diversified across industries and geographic locations.

The remaining [removed: one-quarter] [added: 30%] of our customer base consists primarily of national accounts that have multiple locations and are served by a number of PCA plants.

The primary end-use markets in the United States for corrugated products are shown below as reported in the [removed: 2017] [added: 2018] Fibre Box Association annual report:

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Containerboard Production (a) | | | 2019 | | | | 1,037 | | | | 1,063 | | | | 1,070 | | | | 1,079 | | | | 4,249 | |

| Corrugated Shipments (BSF) | | | 2019 | | | | 14.5 | | | | 14.9 | | | | 15.1 | | | | 14.9 | | | | 59.4 | |

| UFS Production (a) | | | 2019 | | | | 239 | | | | 236 | | | | 236 | | | | 236 | | | | 947 | |

Our operations include the following:

We participate in the Sustainable Forestry Initiative® (SFI®), the Programme for the Endorsement of Forest Certification (PEFC), as well as the Forest Stewardship Council® (FSC®), and we are certified under their sourcing and chain of custody standards.

customers.

Office Depot is not subject to a minimum volume commitment and is entitled to receive rebates for achieving certain volume thresholds.

If the agreement is not renewed by the parties, Office Depot’s obligation to purchase paper would phase down over a two-year period beginning on January 1, 2023.

and managerial positions within its mill organization.

Mundy, 58, Executive Vice President and Chief Financial Officer - Mr. Mundy has served as Executive Vice President and Chief Financial Officer since May 2019.

Pamela A.

Barnes, 55, Senior Vice President – Finance and Controller \- Ms. Barnes has served as Senior Vice President – Finance and Controller since May 2019.

Ms. Barnes previously served as a Vice President in PCA’s finance organization from 2012 to 2019.

After joining the company in 1992, she has held various positions of increasing responsibility, including serving as PCA’s Treasurer since 1999.

Before joining PCA, Ms. Barnes worked for Deloitte & Touche.

Bruce A.

Ridley, 64, Senior Vice President – Environmental Health and Safety and Operational Services - Mr. Ridley has served as Senior Vice President – Environmental Health and Safety and Operational Services since May 2019.

Mr. Ridley previously served as Vice President of Operations from 2012 to 2019 and at PCA’s Tomahawk, Wisconsin containerboard mill as the Operations Manager and Mill Manager from 1999 to 2011.

Before joining PCA, he held several positions of increasing responsibility at multiple locations during his 19 years with International Paper Co. and two years with Champion International.

Robert A.

Schneider, 54, Senior Vice President and Chief Information Officer - Mr. Schneider has served as Senior Vice President and Chief Information Officer since May 2019.

He previously served as Vice President and Chief Information Officer from 2000 to 2019.

Mr. Schneider joined the company in 1989 and has held various management and other positions of increasing responsibility in information systems for PCA.

D.

Ray Shirley, 48, Senior Vice President – Corporate Engineering and Process Technology - Mr. Shirley has served as PCA’s Senior Vice President – Corporate Engineering and Process Technology since May 2019.

Mr. Shirley previously served as PCA’s Vice President – Containerboard Mills Engineering and Process Technology from 2012 to 2019 and as Mill Manager at PCA’s Counce, Tennessee containerboard mill from 2010 to 2012.

He has served in various management roles within the company, including the Operations Manager at the Filer City, Michigan containerboard mill.

Before joining PCA in 1996, Mr. Shirley worked for Georgia-Pacific Corporation.

| Item 1A. | *RISK FACTORS* |

Some of the statements in this report and, in particular, statements found in 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, but are not limited to, the factors described below.

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 so, what impact they will have on our results of operations or financial condition.

In view of these uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements.

We expressly disclaim any obligation to publicly revise or otherwise update any forward-looking statements that have been made to reflect the occurrence of events after the date hereof.

In addition to the risks and uncertainties we discuss elsewhere in this Form 10-K (particularly in “Part II, Item 7.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | 2016 | | | | 898 | | | | 926 | | | | 950 | | | | 962 | | | | 3,736 | |

| | | | | | 2016 | | | | 12.3 | | | | 12.7 | | | | 13.1 | | | | 13.2 | | | | 51.3 | |

| | | | | | 2016 | | | | 283 | | | | 268 | | | | 288 | | | | 288 | | | | 1,127 | |

| Market Pulp Production (b) | | PCA | | | 2018 | | | | — | | | | — | | | | — | | | | — | | | | — | |

| (thousand tons) | | | | | 2017 | | | | — | | | | — | | | | — | | | | — | | | | — | |

| | | | | | 2016 | | | | 16 | | | | 10 | | | | 12 | | | | 7 | | | | 45 | |

| (b) | On December 1, 2016, PCA ceased production of softwood market pulp at our Wallula, Washington mill and permanently shut down the No. 1 machine. |

Wallula.

As described above, the No. 3 machine was converted from white paper to linerboard in May of 2018.

Energy supply.

The following paragraphs describe our white paper mills:

Our Wallula, Washington mill produced pressure sensitive papers and a variety of white paper grades on its No. 3 machine, prior to its conversion to kraft linerboard during the second quarter of 2018.

The agreement will renew automatically through December 2020; however, there are circumstances that could cause the agreement to terminate in 2019.

If this were to occur, Office Depot's purchase obligations under the agreement would phase out over two years.

From 1998 through June 2010, Mr. Kowlzan led

Information concerning legal proceedings can be found in Note [removed: 19,] [added: 21,] Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

[added: | ☒ |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) [added: OF THE SECURITIES EXCHANGE ACT OF 1934 |]

[added: | ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)] OF THE SECURITIES EXCHANGE ACT OF 1934 [added: FOR THE TRANSITION PERIOD FROM TO |]

For the fiscal year ended December 31, [removed: 2018][added: 2019]

[removed: ][added: ]

| Title of [removed: Each Class] [added: each class] | [added: Trading Symbol(s)] | Name of [removed: Each Exchange On Which Registered] [added: each exchange on which registered] |

| Common Stock, [removed: $0.01] par value [added: $0.01 per share] | [added: PKG] | New York Stock Exchange |

Securities registered pursuant to Section 12(g) of the Act: [added: None]

Yes ☐ No [removed: ☒][added: ☐]

At June 30, [removed: 2018,] [added: 2019,] the last day of the Registrant's most recently completed second fiscal quarter, the aggregate market value of Registrant's common equity held by non-affiliates was approximately [removed: $10,429,672,301] [added: $8,891,651,488] based upon the closing sale price as reported on the New York Stock Exchange.

On February [removed: 22, 2019,] [added: 21, 2020,] there were [removed: 94,495,930] [added: 94,652,815] shares of Common Stock outstanding.

Specified portions of the Proxy Statement for the Registrant's [removed: 2019] [added: 2020] Annual Meeting of Stockholders are incorporated by reference to the extent indicated in Part III of this Form 10-K.

[removed: Table] [added: Table] of [removed: Contents][added: Contents]

| Item 1. | [Business](#ITEM_1_BUSINESS) | [removed: 1] [added: 3] |

| | [Packaging](#PACKAGING) | [removed: 2] [added: 4] |

| | [Paper](#PAPER) | [removed: 5] [added: 7] |

| | [Corporate and Other](#CORPORATE_OR) | [removed: 6] [added: 8] |

| | [Employees](#EMPLOYEES) | [removed: 6] [added: 8] |

| | [Environmental Matters](#EM) | [removed: 6] [added: 8] |

| | [Executive Officers of the Registrant](#EXECUTIVE_FICERS__REGISTRANT) | [removed: 6] [added: 8] |

| Item 1A. | [Risk Factors](#Item_1A_RISK_FACTORS) | [removed: 7] [added: 10] |

| Item 1B. | [Unresolved Staff Comments](#Item_1B_UNRESOLVED_STAFF_COMMENTS) | [removed: 12] [added: 14] |

| Item 2. | [Properties](#Item_2_PROPERTIES) | [removed: 12] [added: 14] |

| Item 3. | [Legal Proceedings](#Item_3_LEGAL_PROCEEDINGS) | [removed: 12] [added: 15] |

| Item 4. | [Mine Safety Disclosure](#Item_4_MINE_SAFETY_DISCLOSURE) | [removed: 12] [added: 15] |

| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](#Item_5_MARKET_FOR_REGISTRANTS_COMMON) | [removed: 13] [added: 16] |

| Item 6. | [Selected Financial Data](#ITEM_6_SELECTED_FINANCIAL_DATA) | [removed: 15] [added: 18] |

| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F) | [removed: 16] [added: 19] |

| | [Overview](#OVERVIEW) | [removed: 16] [added: 19] |

| | [Executive Summary](#EXECUTIVE_SUMMARY) | [removed: 16] [added: 19] |

| | [Industry and Business Conditions](#INDUSTRY_BUSINESS_CONDITIONS) | [removed: 18] [added: 20] |

| | [Outlook](#OUTLOOK) | [removed: 18] [added: 21] |

| | [Results of Operations](#RESULTS_OPERATIONS) | [removed: 18] [added: 21] |

| | [Signatures](#SIGNATURES) | [removed: 84] [added: 83] |

| --- | --- |

| --- | --- |

10-K 1 pkg-10k_20181231.htm 10-K

None

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Primarily all of our leases are [removed: noncancelable] [added: non-cancelable] and are accounted for as operating leases.

We currently own buildings and land for six containerboard mills and two [removed: white] paper mills.

Additionally, we have 95 corrugated manufacturing operations, of which the buildings and land for [removed: 51] [added: 53] are owned, including [removed: 43] [added: 45] combining operations, or corrugated plants, one corrugated sheet-only manufacturer, and seven sheet plants.

We lease the buildings for [removed: 18] [added: 17] corrugated plants and [removed: 26] [added: 25] sheet plants.

We lease the cutting rights to approximately [removed: 75,000] [added: 73,000] acres of timberland located near our Valdosta mill [removed: (68,000] [added: (66,000] acres) and our Counce mill (7,000 acres).

On average, these cutting rights agreements have terms with approximately [removed: 13] [added: 18] years remaining.

The headquarter facility is owned, and we lease additional neighboring office space through the next [removed: three] [added: two] years with provisions for two additional five year lease extensions.

Additionally, we previously leased 3,000 acres of land where we operated fiber farms as a source of future fiber supply; however, we exited the leases in conjunction with the conversion of the No. 3 machine at the Wallula mill to kraft linerboard.

Additionally, we lease approximately 3,000 acres of land for a fiber farm, located near our Wallula mill, where we plant, grow, and harvest fiber.

On February [removed: 22, 2019,] [added: 21, 2020,] there were [removed: 78] [added: 96] holders of record of our common stock.

The Company did not repurchase any shares of its common stock under this authority during the years ended December 31, [removed: 2018] [added: 2019, 2018,] and 2017.

As of December 31, [removed: 2018,] [added: 2019,] we are authorized to repurchase $193.0 million of the Company’s common stock.

Total shares withheld in 2018 were 69,255 to cover $7.9 million [removed: in] [added: of] employee tax liabilities.

Total shares withheld in 2017 were 97,946 [removed: to cover] [added: for] $10.8 million [removed: of] [added: in] employee tax liabilities.

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 December 31, [removed: 2018:][added: 2019:]

| October 1-31, [removed: 2018] [added: 2019] | | | — | | | | $ | — | | | | — | | | $ | 193.0 | |

| (a) | [removed: 635] [added: 763] shares were withheld from employees to cover income and payroll taxes on equity awards that vested during the period. |

[removed: Performance Graph][added: Performance Graph]

The graph below compares PCA’s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the S&P 500 index; the S&P Midcap 400 index; [added: and] a [removed: New Peer Group that includes] [added: customized peer group of] three [removed: publicly-traded companies, which are] [added: companies that includes:] International Paper Company, WestRock Company, and Domtar [removed: Corporation; and an Old Peer Group that includes two publicly-traded companies, which are International Paper Company and KapStone Paper and Packaging] Corporation.

The graph tracks the performance of a $100 investment (including the reinvestment of all dividends) in our common stock, in each index, and in each peer group's common stock from December 31, [removed: 2013,] [added: 2014,] through December 31, [removed: 2018.][added: 2019.]

[removed: ][added: ]

| | | [removed: 2013 | | | |] 2014 | | | | 2015 | | | | 2016 | | | | 2017 | | | | 2018 | | | [added: | 2019 | | |]

Total shares withheld in 2019 were 87,668 to cover $8.2 million in employee tax liabilities.

| November 1-30, 2019 | | | 65 | | | | | 111.33 | | | | — | | | | 193.0 | |

| December 1-31, 2019 | | | 698 | | | | | 111.99 | | | | — | | | | 193.0 | |

| Total | | | 763 | | | | $ | 111.93 | | | | — | | | $ | 193.0 | |

| Packaging Corporation of America | | $ | 100.00 | | | $ | 83.41 | | | $ | 116.02 | | | $ | 168.80 | | | $ | 120.08 | | | $ | 166.13 | |

| S&P 500 | | | 100.00 | | | | 101.38 | | | | 113.51 | | | | 138.29 | | | | 132.23 | | | | 173.86 | |

| S&P Midcap 400 | | | 100.00 | | | | 97.82 | | | | 118.11 | | | | 137.30 | | | | 122.08 | | | | 154.07 | |

| Peer Group | | | 100.00 | | | | 75.15 | | | | 102.67 | | | | 122.72 | | | | 83.96 | | | | 99.89 | |

In 2016, we paid $100.3 million to repurchase 1,987,187 shares of common stock, which fully depleted the $93.3 million of repurchase authority under previous authorizations by our board of directors.

Total shares withheld in 2016 were 172,438 for $11.2 million.

Shares withheld are included in the number of shares repurchased in the table below.

| November 1-30, 2018 | | | 186 | | | | | 88.05 | | | | — | | | | 193.0 | |

| December 1-31, 2018 | | | 449 | | | | | 83.46 | | | | — | | | | 193.0 | |

| Total | | | 635 | | (a) | | $ | 84.80 | | | | — | | | $ | 193.0 | |

Peer group members WestRock Company and Domtar Corporation were added to the New Peer Group because they are primarily

domestic integrated packaging and paper companies who, similar to PCA, produce and sell corrugated and paper products, respectively.

In addition, these two companies are included in the competitive group for executive compensation purposes in PCA’s Proxy Statement.

Old Peer Group member KapStone Paper and Packaging Corporation was acquired by New Peer Group member WestRock Company in 2018.

| Packaging Corporation of America | | $ | 100.00 | | | $ | 126.09 | | | $ | 105.18 | | | $ | 146.29 | | | $ | 212.84 | | | $ | 151.41 | |

| S&P 500 | | | 100.00 | | | | 113.69 | | | | 115.26 | | | | 129.05 | | | | 157.22 | | | | 150.33 | |

| S&P Midcap 400 | | | 100.00 | | | | 109.77 | | | | 107.38 | | | | 129.65 | | | | 150.71 | | | | 134.01 | |

| 2017 Peer Group | | | 100.00 | | | | 114.15 | | | | 83.10 | | | | 122.09 | | | | 138.07 | | | | 99.79 | |

| 2018 Peer Group | | | 100.00 | | | | 111.00 | | | | 83.42 | | | | 113.97 | | | | 136.22 | | | | 93.20 | |

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Net [removed: Sales] [added: sales] | | $ | [removed: 7,014.6] [added: 6,964.3] | | | $ | [removed: 6,444.9] [added: 7,014.6] | | | $ | [removed: 5,779.0] [added: 6,444.9] | | | $ | [removed: 5,741.7] [added: 5,779.0] | | | $ | [removed: 5,852.6] [added: 5,741.7] | |

| Net [removed: Income] [added: income] | | | [removed: 738.0] [added: 696.4] | | | | [removed: 668.6] [added: 738.0] | | | | [removed: 449.6] [added: 668.6] | | | | [removed: 436.8] [added: 449.6] | | | | [removed: 392.6] [added: 436.8] | |

| — basic | | | [removed: 7.82] [added: 7.36] | | | | [removed: 7.09] [added: 7.82] | | | | [removed: 4.76] [added: 7.09] | | | | [removed: 4.47] [added: 4.76] | | | | [removed: 3.99] [added: 4.47] | |

| — diluted | | | [removed: 7.80] [added: 7.34] | | | | [removed: 7.07] [added: 7.80] | | | | [removed: 4.75] [added: 7.07] | | | | [removed: 4.47] [added: 4.75] | | | | [removed: 3.99] [added: 4.47] | |

| — basic | | | [removed: 93.7] [added: 93.8] | | | | [removed: 93.5] [added: 93.7] | | | | 93.5 | | | | [removed: 96.6] [added: 93.5] | | | | [removed: 97.0] [added: 96.6] | |

| — diluted | | | [removed: 93.9] [added: 94.1] | | | | [removed: 93.7] [added: 93.9] | | | | 93.7 | | | | [removed: 96.7] [added: 93.7] | | | | [removed: 97.1] [added: 96.7] | |

| Cash dividends declared per common share | | | [removed: 3.00] [added: 3.16] | | | | [removed: 2.52] [added: 3.00] | | | | [removed: 2.36] [added: 2.52] | | | | [removed: 2.20] [added: 2.36] | | | | [removed: 1.60] [added: 2.20] | |

| Total assets | | $ | [removed: 6,569.7] [added: 7,235.8] | | | $ | [removed: 6,197.5] [added: 6,569.7] | | | $ | [removed: 5,777.0] [added: 6,197.5] | | | $ | [removed: 5,272.3] [added: 5,777.0] | | | $ | [removed: 5,258.7] [added: 5,272.3] | |

| Total [removed: debt] [added: long-term] obligations [added: (b)] | | | [removed: 2,502.7] [added: 2,494.3] | | | | [removed: 2,650.7] [added: 2,502.7] | | | | [removed: 2,667.4] [added: 2,650.7] | | | | [removed: 2,319.7] [added: 2,667.4] | | | | [removed: 2,365.2] [added: 2,319.7] | |

| Stockholders' equity | | | [removed: 2,672.4] [added: 3,071.0] | | | | [removed: 2,182.6] [added: 2,672.4] | | | | [removed: 1,759.8] [added: 2,182.6] | | | | [removed: 1,633.3] [added: 1,759.8] | | | | [removed: 1,521.4] [added: 1,633.3] | |

[removed: | (a) | Effective January 1, 2016, the Company adopted Accounting Standards Update (ASU) 2015-03 (Topic 835): Simplifying the Presentation of Debt Issuance Costs.] We applied this guidance retrospectively, as required, and reclassified the debt issuance costs from “Other long-term assets” to “Long-term debt” on our Consolidated Balance Sheet to conform with current period presentation. [removed: Total assets for all periods presented have been updated to reflect this adoption. |]

[removed: Our total] [added: Total] assets for all periods presented have been updated to reflect this adoption.

Net income and net income per common share are impacted by a lower U.S. corporate federal statutory income tax rate of 21% in [added: 2019 and] 2018 and 35% in [removed: in] all prior years presented in this table.

See Note [removed: 7,] [added: 8,] Income Taxes, for more information.

| (a) | Effective January 1, 2019, the Company adopted ASU 2016-02 (Topic 842): *Leases*, which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under the previous guidance. We elected to apply this guidance as of its effective date and did not restate comparative periods. See Note 2, Summary of Significant Accounting Policies, and Note 3, Leases, for more information. |

Effective January 1, 2016, the Company adopted Accounting Standards Update (ASU) 2015-03 (Topic 835): *Simplifying the Presentation of Debt Issuance Costs*.

| (b) | Includes long-term debt and finance lease obligations. |

| --- | --- |

Effective December 31, 2015, the Company adopted Accounting Standards Update 2015-17, Balance Sheet Classification of Deferred Taxes.

The guidance eliminates the requirement to classify deferred taxes between current and noncurrent and requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet.

Effective January 1, 2014, the Company changed its method of accounting for inventories from lower of cost, as determined by the LIFO method, or market, to lower of cost, as determined by the average cost method, or market.

The Company applied the change retrospectively to all prior periods presented herein in accordance with US generally accepted accounting principles (GAAP) relating to accounting changes.

| [Consolidated Statements of Income and Comprehensive Income for the years ended December 31, [removed: 2017, 2016,] [added: 2019, 2018,] and [removed: 2015](#CONSOLIDATED_STATEMENTS_INCOME_COMPREHEN)] [added: 2017](#CONSOLIDATED_STATEMENTS_INCOME_COMPREHEN)] | 37 |

| [Consolidated Balance Sheets as of December 31, [removed: 2017] [added: 2019] and [removed: 2016](#CONSOLIDATED_BALANCE_SHEETS)] [added: 2018](#CONSOLIDATED_BALANCE_SHEETS)] | 38 |

| [Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2017, 2016,] [added: 2019, 2018,] and [removed: 2015](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] [added: 2017](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] | 39 |

| [Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, [removed: 2017, 2016,] [added: 2019, 2018,] and [removed: 2015](#CONSOLIDATED_STATEMENTS_CHANGES_IN_STOCK)] [added: 2017](#CONSOLIDATED_STATEMENTS_CHANGES_IN_STOCK)] | 40 |

We have audited the accompanying consolidated balance sheets of Packaging Corporation of America and subsidiaries (the Company) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of income and comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2018,] [added: 2019,] and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, [removed: 2018,] [added: 2019,] in conformity with U.S. generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying [removed: Management’s] [added: “Management’s] Report on Internal Control [removed: over] [added: Over] Financial [removed: Reporting.][added: Reporting”.]

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally [removed: accepted accounting principles.]

| | We have served as the Company’s auditor since [removed: 2014.] [added: 2014*.*] |

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Net sales | | $ | [removed: 7,014.6] [added: 6,964.3] | | | $ | [removed: 6,444.9] [added: 7,014.6] | | | $ | [removed: 5,779.0] [added: 6,444.9] | |

| Cost of sales | | | [removed: (5,369.3] [added: (5,320.3] | ) | | | [removed: (4,974.1] [added: (5,369.3] | ) | | | [removed: (4,502.9] [added: (4,974.1] | ) |

| Gross profit | | | [removed: 1,645.3] [added: 1,644.0] | | | | [removed: 1,470.8] [added: 1,645.3] | | | | [removed: 1,276.1] [added: 1,470.8] | |

| Selling and administrative expenses | | | [removed: (536.4] [added: (557.6] | ) | | | [removed: (519.9] [added: (536.4] | ) | | | [removed: (468.5] [added: (519.9] | ) |

| Other expense, net | | | [removed: (41.2] [added: (32.7] | ) | | | [removed: (18.4] [added: (41.2] | ) | | | [removed: (24.3] [added: (18.4] | ) |

| Income from operations | | | [removed: 1,067.7] [added: 1,053.7] | | | | [removed: 932.5] [added: 1,067.7] | | | | [removed: 783.3] [added: 932.5] | |

| Income before taxes | | | [removed: 970.5] [added: 917.0] | | | | [removed: 828.6] [added: 970.5] | | | | [removed: 688.5] [added: 828.6] | |

| [removed: (Provision) benefit] [added: Provision] for income taxes | | | [removed: (232.5] [added: (220.6] | ) | | | [removed: (160.0] [added: (232.5] | ) | | | [removed: (238.9] [added: (160.0] | ) |

| Net income | | $ | [removed: 738.0] [added: 696.4] | | | $ | [removed: 668.6] [added: 738.0] | | | $ | [removed: 449.6] [added: 668.6] | |

| Basic | | $ | [removed: 7.82] [added: 7.36] | | | $ | [removed: 7.09] [added: 7.82] | | | $ | [removed: 4.76] [added: 7.09] | |

| Diluted | | $ | [removed: 7.80] [added: 7.34] | | | $ | [removed: 7.07] [added: 7.80] | | | $ | [removed: 4.75] [added: 7.07] | |

| Dividends declared per common share | | $ | [removed: 3.00] [added: 3.16] | | | $ | [removed: 2.52] [added: 3.00] | | | $ | [removed: 2.36] [added: 2.52] | |

| Foreign currency translation adjustment | | $ | [removed: (0.1] [added: —] | [removed: )] | | $ | [removed: (0.2] [added: (0.1] | ) | | $ | [removed: —] [added: (0.2] | [added: )] |

| Reclassification adjustments to cash flow hedges included in net income, net of tax of [removed: $1.3] [added: $7.9] million, [removed: $2.2] [added: $1.3] million, and $2.2 million for [added: 2019,] 2018, [removed: 2017,] and [removed: 2016,] [added: 2017,] respectively | | | [removed: 4.0] [added: 10.2] | | | | [removed: 3.5] [added: 4.0] | | | | 3.5 | |

| Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of [removed: $4.0] [added: $3.2] million, [removed: $4.9] [added: $4.0] million, and [removed: $4.2] [added: $4.9] million for [added: 2019,] 2018, [removed: 2017,] and [removed: 2016,] [added: 2017,] respectively | | | [removed: 11.8] [added: 9.6] | | | | [removed: 8.2] [added: 11.8] | | | | [removed: 6.7] [added: 8.2] | |

| Changes in unfunded employee benefit obligations, net of tax of [removed: ($0.8)] [added: $13.6] million, [removed: $18.0] [added: ($0.8)] million, and [removed: $15.7] [added: $18.0] million for [added: 2019,] 2018, [removed: 2017,] and [removed: 2016,] [added: 2017,] respectively | | | [removed: 2.4] [added: (40.5] | [added: )] | | | [removed: (28.8] [added: 2.4] | [removed: )] | | | [removed: (24.9] [added: (28.8] | ) |

| Other comprehensive income (loss) | | | [removed: 18.1] [added: (20.7] | [added: )] | | | [removed: (17.3] [added: 18.1] | [removed: )] | | | [removed: (14.7] [added: (17.3] | ) |

| Comprehensive income | | $ | [removed: 756.1] [added: 675.7] | | | $ | [removed: 651.3] [added: 756.1] | | | $ | [removed: 434.9] [added: 651.3] | |

| | | [added: 2019 | | | |] 2018 | | | | 2017 | | |

| Cash and cash equivalents | | $ | [removed: 361.5] [added: 679.5] | | | $ | [removed: 216.9] [added: 361.5] | |

| Accounts receivable, net of allowance for doubtful accounts and customer deductions of [removed: $13.6] [added: $12.6] million and [removed: $12.6] [added: $13.6] million as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively | | | [removed: 901.9] [added: 845.6] | | | | [removed: 830.7] [added: 901.9] | |

| Inventories | | | [removed: 795.6] [added: 794.1] | | | | [removed: 762.5] [added: 795.6] | |

| Prepaid expenses and other current assets | | | [removed: 39.4] [added: 44.8] | | | | [removed: 35.5] [added: 39.4] | |

| Federal and state income taxes receivable | | | [removed: 16.7] [added: 26.5] | | | | [removed: 69.5] [added: 16.7] | |

| Total current assets | | | [removed: 2,115.1] [added: 2,478.4] | | | | [removed: 1,915.1] [added: 2,115.1] | |

| Property, plant and equipment, net | | | [removed: 3,108.6] [added: 3,151.7] | | | | [removed: 2,924.9] [added: 3,108.6] | |

| Goodwill | | | [removed: 917.3] [added: 918.7] | | | | [removed: 883.2] [added: 917.3] | |

| Other intangible assets, net | | | [removed: 378.2] [added: 338.8] | | | | [removed: 410.0] [added: 378.2] | |

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases effective January 1, 2019 due to the adoption of Accounting Standards Update 2016-02, *Leases (Topic 842)*, and its subsequent amendments.

accepted accounting principles.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*Evaluation of the value of the pension obligation*

As discussed in Note 13 to the consolidated financial statements, the Company’s estimated pension benefit obligation totaled $1,420 million as of December 31, 2019.

The pension benefit obligation is measured at the actuarial present value as of a date of all benefits attributed by the pension benefit formula to employee service rendered before that date.

The determination of the Company’s pension benefit obligation is dependent, in part, on the selection of certain actuarial assumptions, including the discount rate.

We identified the evaluation of the value of the pension benefit obligation as a critical audit matter because of the specialized skills required to measure the value of the pension benefit obligation.

In addition, the measurement of the pension benefit obligation is sensitive to minor changes in the discount rate assumption.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s pension benefit obligation valuation process, including controls related to the development of the discount rate.

We involved an actuarial professional with specialized skills and knowledge, who assisted in understanding and assessing the actuarial methods and assumptions used to measure the pension benefit obligation.

In addition, the actuarial professional assisted with our evaluation of the discount rate by assessing:

- changes in the discount rate from the prior year against changes in published indices,

- the pattern of cash flows, including consideration of the plan type and plan provisions, and

- the selected yield curve and its consistency with the prior year and spot rates.

| | February 26, 2020 |

| Non-operating pension expense | | | (7.9 | ) | | | (2.1 | ) | | | (1.3 | ) |

| Interest expense, net | | | (128.8 | ) | | | (95.1 | ) | | | (102.6 | ) |

| Net income | | $ | 696.4 | | | $ | 738.0 | | | $ | 668.6 | |

| Short-term marketable debt securities | | | 87.9 | | | | — | |

| Operating lease right-of-use assets | | | 234.3 | | | | — | |

| Long-term marketable debt securities | | | 58.1 | | | | — | |

| Operating lease obligations | | $ | 62.6 | | | $ | — | |

| Operating lease obligations | | | 177.6 | | | | — | |

| Net income | | $ | 696.4 | | | $ | 738.0 | | | $ | 668.6 | |

| Loss on early extinguishment of debt | | | 22.2 | | | | — | | | | — | |

| Purchases of marketable debt securities, net of redemptions | | | (146.1 | ) | | | — | | | | — | |

| Comprehensive income | | | — | | | | — | | | | — | | | | 696.4 | | | | (20.7 | ) | | | | 675.7 | |

| Balance at December 31, 2019 | | | 94,655 | | | $ | 0.9 | | | $ | 524.8 | | | $ | 2,704.8 | | | $ | (159.5 | ) | | | $ | 3,071.0 | |

Before May 2018, operating results for the Wallula mill were included in the Paper segment.

Marketable Debt Securities

The Company’s marketable debt securities have been classified and accounted for as available-for-sale (AFS) in accordance with ASU 2016-01, *Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities*.

The Company classifies its marketable debt securities as either short-term or long-term based on each security’s underlying contractual maturity date.

Our investments in AFS securities are reported at fair value.

Unrealized gains and losses on AFS securities are recognized in accumulated other comprehensive income (loss) (AOCI).

Realized gains and losses on the sale of AFS securities are accounted for using the specific identification method.

| --- | --- |

| | February 28, 2019 |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Interest expense, net and other | | | (97.2 | ) | | | (103.9 | ) | | | (94.8 | ) |

| Current maturities of long-term debt | | $ | — | | | $ | 150.0 | |

| Repurchases of common stock | | | — | | | | — | | | | (100.3 | ) |

| Balance at January 1, 2016 | | | 96,129 | | | $ | 1.0 | | | $ | 439.9 | | | $ | 1,317.3 | | | $ | (124.9 | ) | | | $ | 1,633.3 | |

| Common stock repurchases and retirements | | | (1,987 | ) | | | (0.1 | ) | | | (13.1 | ) | | | (87.1 | ) | | | — | | | | | (100.3 | ) |

| Restricted stock/performance unit grants and cancellations | | | 243 | | | | — | | | | 5.7 | | | | — | | | | — | | | | | 5.7 | |

| Comprehensive income | | | — | | | | — | | | | — | | | | 449.6 | | | | (14.7 | ) | | | | 434.9 | |

In January 2018, the Company adopted ASU 2014-09 (Topic 606): Revenue from Contracts with Customers.

Repairs and maintenance costs are expensed as incurred.

During the year ended December 31, 2016, we recognized $2.9 million of incremental depreciation expense primarily related to facilities closure costs and the Wallula, Washington mill restructuring due to the discontinuation of market pulp production.

We assess lease classification as either capital or operating at lease inception or upon modification.

We lease some of our locations, as well as other property and equipment, under operating leases.

For purposes of determining straight-line rent expense, the lease term is calculated from the date of possession of the facility, including any periods of free rent and any renewal option periods that are reasonably assured of being exercised.

In February 2016, the FASB issued ASU 2016-02 (Topic 842): Leases, which amends a number of aspects of lease accounting.

The guidance of ASU 2016-02 is effective for the Company beginning in January 2019.

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.

We lease the cutting rights to approximately 75,000 acres of timberland, and we lease 3,000 acres of land where we operate fiber farms as a source of future fiber supply.

Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 (Topic 606): Revenue from Contracts with Customers.

This ASU supersedes the revenue recognition requirements in Topic 605 Revenue Recognition (Topic 605) and requires entities to recognize revenue when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The ASU requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates, and changes in those estimates.

The Company adopted the standard utilizing the modified retrospective method, in which case the cumulative effect was recognized at the date of initial application on January 1, 2018.

The adoption of the standard did not have a material effect on the Company’s financial position or results of operations; however, the following adjustment and reclassification of certain costs were made in 2018:

a.

The Company ships a portion of its products to customers under consignment agreements.

These products do not have an alternative use, and, under the new standard, revenue associated with these products is required to be recognized earlier than under prior revenue recognition standards.

Utilizing the modified retrospective method, the cumulative impact of adopting the new standard resulted in an increase of approximately $1.6 million, net of tax, to opening retained earnings as of January 1, 2018.

b.

The new revenue standard also provides additional clarity concerning contract fulfillment costs, which resulted in certain costs being classified as cost of sales rather than selling, general and administrative expenses beginning January 1, 2018.

For the year ended December 31, 2018, this amount totaled $28.2 million.

The guidance in this update requires that an employer disaggregate the service cost component from the other components of net benefit cost.

Non-service cost components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside the subtotal of operating income.

The update also allows only the service cost component to be eligible for capitalization for internally developed capital projects.

The amendments in this update are applied retrospectively for the income statement presentations and prospectively for the capitalization of service costs.

The adoption of this ASU retrospectively resulted in a $1.3 million and $3.0 million reclassification between cost of sales and selling, general and administrative expenses (both components of income from operations) and interest expense, net and other (a component outside of income from operations) for the years ended December 31, 2017 and 2016, respectively.

Effective January 1, 2018, the Company adopted ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies what changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.

This ASU will be applied prospectively when changes to the terms or conditions of a share-based payment award occur.

The ASU changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business.

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 December 31, [removed: 2018.][added: 2019.]

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 December 31, [removed: 2018.][added: 2019.]

During the quarter ended December 31, [removed: 2018,] [added: 2019,] there were no changes in internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, PCA’s internal control over financial reporting.

PCA’s management, under the supervision of and with the participation of the Chief Executive Officer and Chief Financial Officer, assessed the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, PCA’s management concluded that its internal control over financial reporting was effective as of December 31, [removed: 2018,] [added: 2019,] based on the specified criteria.

The following information required by this Item 10 will be included in PCA’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders and is incorporated by reference herein:

| | • | Information regarding PCA’s stockholder nominating procedures included under the captions “Election of Directors - Nominating and Governance Committee,” “Other Information - Recommendations for Board - Nominated Director Nominees,” and “Other Information - Procedures for Nominating Directors or Bringing Business Before the [removed: 2019] [added: 2021] Annual Meeting” |

| | • | Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 included under the caption [removed: “Section] [added: “Delinquent Section] 16(a) [removed: Beneficial Ownership Reporting Compliance”] [added: Reports”] |

Authorization of Securities under Equity Compensation Plans — Securities authorized for issuance under our equity compensation plans at December 31, [removed: 2018] [added: 2019] are as follows:

| Equity compensation plans approved by securityholders | | | — | | | $ | — | | | | [removed: 741,765] [added: 423,342] | |

| (a) | Does not include [removed: 1,010,295] [added: 1,040,099] shares of unvested restricted stock and performance units granted pursuant to our Amended and Restated 1999 Long-Term Equity Incentive Plan. |

| Total | | | — | | | $ | — | | | | 423,342 | |

| Total | | | — | | | $ | — | | | | 741,765 | |

| 4.4 | | [Officers’ Certificate, dated as of [removed: June 26, 2012,] [added: November 21, 2019,] pursuant to Section 301 of the Indenture [added: establishing 3.000% Senior Notes due 2029] and [removed: 3.90%] [added: 4.050%] Senior Notes due [removed: 2022.] [added: 2049.] (Incorporated herein by reference to Exhibit [removed: 4.2] [added: 4.1] to PCA’s Current Report on Form 8-K filed [removed: June 26, 2012,] [added: November 21, 2019,] File No. [removed: 1-15399.)](http://www.sec.gov/Archives/edgar/data/75677/000119312512283981/d373098dex42.htm)] [added: 1-15399.)](http://www.sec.gov/Archives/edgar/data/75677/000119312519297139/d811970dex41.htm)] |

| [removed: 4.5] [added: 4.7] | | [Officers’ Certificate, dated as of October 22, 2013, pursuant to Section 301 of the [removed: Indenture.] [added: Indenture establishing 4.500% Senior Notes due 2023.] (Incorporated herein by reference to Exhibit 4.1 to PCA’s Current Report on Form 8-K filed October 22, 2013, File No [removed: 1-15399.)](http://www.sec.gov/Archives/edgar/data/75677/000119312513406139/d615313dex42.htm)] [added: 1-15399.)](http://www.sec.gov/Archives/edgar/data/75677/000119312513406139/d615313dex41.htm)] |

| [removed: 4.6] [added: 4.8] | | [4.500% Senior Notes due 2023. (Incorporated herein by reference to Exhibit 4.2 to PCA’s Current Report on Form 8-K filed October 22, 2013, File No 1-15399.)](http://www.sec.gov/Archives/edgar/data/75677/000119312513406139/d615313dex42.htm) |

| [removed: 4.7] [added: 4.9] | | [Officers’ Certificate, dated September 5, 2014, pursuant to Section 301 of the [removed: Indenture.] [added: Indenture establishing 3.650% Senior Notes due 2024.] (Incorporated herein by reference to Exhibit 4.1 to PCA’s Current Report on Form 8-K filed September 5, 2014, File No. [removed: 1-15399).](http://www.sec.gov/Archives/edgar/data/75677/000119312514333019/d784171dex42.htm)] [added: 1-15399).](http://www.sec.gov/Archives/edgar/data/75677/000119312514333019/d784171dex41.htm)] |

| [removed: 4.8] [added: 4.10] | | [3.650% Senior Notes due 2024 (Incorporated herein by reference to Exhibit 4.2 to PCA’s Current Report on Form 8-K filed September 5, 2014, File No. 1-15399).](http://www.sec.gov/Archives/edgar/data/75677/000119312514333019/d784171dex42.htm) |

| [removed: 4.9] [added: 4.11] | | [Officer’s Certificate, dated December 13, 2017, pursuant to Section 301 of the [removed: Indenture.] [added: Indenture establishing 2.450% Senior Notes due 2020 (redeemed and no longer outstanding) and 3.400% Senior Notes due 2027.] (Incorporated herein by reference to Exhibit 4.1 to PCA’s Current Report on Form 8-K filed December 13, 2017, File No. 1-15399).](http://www.sec.gov/Archives/edgar/data/75677/000119312517367914/d496380dex41.htm) |

| [removed: 4.10] [added: 4.12] | | [removed: [2.450%] [added: [3.400%] Senior Notes due [removed: 2020] [added: 2027] (Incorporated herein by reference to Exhibit [removed: 4.2] [added: 4.3] to PCA’s Current Report on Form 8-K filed December 13, 2017, File No. [removed: 1-15399).](http://www.sec.gov/Archives/edgar/data/75677/000119312517367914/d496380dex42.htm)] [added: 1-15399).](http://www.sec.gov/Archives/edgar/data/75677/000119312517367914/d496380dex43.htm)] |

| [removed: 4.11] [added: 4.6] | | [removed: [3.400%] [added: [4.050%] Senior Notes due [removed: 2027] [added: 2049.] (Incorporated herein by reference to Exhibit 4.3 to PCA’s Current Report on Form 8-K filed [removed: December 13, 2017,] [added: November 21, 2019,] File No. [removed: 1-15399).](http://www.sec.gov/Archives/edgar/data/75677/000119312517367914/d496380dex43.htm)] [added: 1-15399.)](http://www.sec.gov/Archives/edgar/data/75677/000119312519297139/d811970dex43.htm)] |

| [removed: 10.4] [added: 10.7] | | [removed: [Packaging Corporation of America Supplemental Executive Retirement Plan, as Amended] [added: [Amended] and Restated [removed: Effective] [added: Executive Incentive Compensation Plan, effective] as of [removed: January 1, 2005.] [added: December 29, 2017.] (Incorporated herein by reference to Exhibit [removed: 10.31] [added: 10.10] to [removed: PCA’s] [added: PCA's] Annual Report on Form 10-K for the year ended December 31, [removed: 2006,] [added: 2017,] File No. [removed: 1-15399.)*](http://www.sec.gov/Archives/edgar/data/75677/000110465907015513/a07-3305_1ex10d31.htm)] [added: 1-15399.)*](http://www.sec.gov/Archives/edgar/data/75677/000156459018003690/pkg-ex1010_155.htm)] |

| [removed: 10.5] [added: 10.6] | | [removed: [Packaging Corporation of America Deferred Compensation] [added: [Amended and Restated 1999 Long-Term Equity Incentive] Plan, effective as of [removed: January] [added: May] 1, [removed: 2009,] [added: 2013,] conformed to incorporate all amendments. (Incorporated herein by reference to Exhibit [removed: 10.6] [added: 10.8] to PCA’s Annual Report on Form 10-K for the year ended December 31, 2016, File No. [removed: 1-15399.)*](http://www.sec.gov/Archives/edgar/data/75677/000007567717000004/pkg12312016-exx106.htm)] [added: 1-15399.)*](http://www.sec.gov/Archives/edgar/data/75677/000007567717000004/pkg12312016-exx108.htm)] |

| 10.8 | | [removed: [Amended and Restated Executive Incentive Compensation Plan, effective as] [added: [Form] of [removed: December 29,] [added: Restricted Stock Agreement for executive officer awards made in June] 2017. (Incorporated [removed: herein] by reference to Exhibit [removed: 10.10] [added: 10.1] to [removed: PCA's Annual] [added: PCA’s Quarterly] Report on Form [removed: 10-K] [added: 10-Q] for the [removed: year] [added: period] ended [removed: December 31,] [added: June 30,] 2017, File No. [removed: 1-15399.)*](http://www.sec.gov/Archives/edgar/data/75677/000156459018003690/pkg-ex1010_155.htm)] [added: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459017015560/pkg-ex101_300.htm)] |

| [removed: 10.11] [added: 10.13] | | [Form of Restricted Stock Agreement for executive officer awards made in June [removed: 2017.] [added: 2016.] (Incorporated by reference to Exhibit 10.1 to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, [removed: 2017,] [added: 2016,] File No. [removed: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459017015560/pkg-ex101_300.htm)] [added: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000007567716000039/pkg-06302016xexx101formofe.htm)] |

| [removed: 10.12] [added: 10.9] | | [Form of Performance Unit Agreement for executive officer awards made in June 2017. (Incorporated by reference to Exhibit 10.2 to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, 2017, File No. 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459017015560/pkg-ex102_301.htm) |

| [removed: 10.13] [added: 10.10] | | [Performance Based Equity Award Pool for Executive Officers relating to awards made in June 2017. (Incorporated by reference to Exhibit 10.3 to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, 2017, File No. 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459017015560/pkg-ex103_302.htm) |

| [removed: 10.17] [added: 10.12] | | [Form of Performance Unit Agreement for executive officer awards made in June [removed: 2014.] [added: 2016.] (Incorporated by reference to Exhibit [removed: 10.1] [added: 10.2] to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, [removed: 2014,] [added: 2016,] File No. [removed: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000007567714000033/pkg-06302014xexx101.htm)] [added: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000007567716000039/pkg-06302016xexx102formofe.htm)] |

| [removed: 10.18] [added: 10.16] | | [Form of Restricted Stock Agreement for executive officer awards made in [added: and after] June [removed: 2014.] [added: 2018.] (Incorporated by reference to Exhibit [removed: 10.2] [added: 10.1] to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, [removed: 2014,] [added: 2018,] File No. [removed: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000007567714000033/pkg-06302014xexx102.htm)] [added: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459018020254/pkg-ex101_55.htm)] |

| [removed: 10.19] [added: 10.14] | | [Form of [added: Return on Invested Capital] Performance Unit Agreement for executive officer awards made in [added: and after] June [removed: 2015.] [added: 2018.] (Incorporated by reference to Exhibit [removed: 10.1] [added: 10.2] to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, [removed: 2015,] [added: 2018,] File No. [removed: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000007567715000018/formofexecutiveofficerperf.htm)] [added: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459018020254/pkg-ex102_54.htm)] |

| [removed: 10.20] [added: 10.15] | | [Form of [removed: Restricted Stock] [added: Total Shareholder Return Performance Unit] Agreement for executive officer awards made in [added: and after] June [removed: 2015.] [added: 2018.] (Incorporated by reference to Exhibit [removed: 10.2] [added: 10.3] to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, [removed: 2015,] [added: 2018,] File No. [removed: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000007567714000033/pkg-06302014xexx102.htm)] [added: 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459018020254/pkg-ex103_53.htm)] |

| 21.1 | | [Subsidiaries of the [removed: Registrant.](https://www.sec.gov/Archives/edgar/data/75677/000156459019005284/pkg-ex211_216.htm)†] [added: Registrant.](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex211_10.htm)†] |

| 23.1 | | [Consent of KPMG [removed: LLP.](https://www.sec.gov/Archives/edgar/data/75677/000156459019005284/pkg-ex231_305.htm)†] [added: LLP.](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex231_7.htm)†] |

| 24.1 | | [Powers of [removed: Attorney.](https://www.sec.gov/Archives/edgar/data/75677/000156459019005284/pkg-ex241_215.htm)†] [added: Attorney.](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex241_9.htm)†] |

| 31.1 | | [Certification of Chief Executive Officer, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002.†](https://www.sec.gov/Archives/edgar/data/75677/000156459019005284/pkg-ex311_214.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex311_11.htm)†] |

| 31.2 | | [Certification of Chief Financial Officer, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/75677/000156459019005284/pkg-ex312_213.htm)†] [added: 2002.](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex312_8.htm)†] |

| 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 [removed: 2002.](https://www.sec.gov/Archives/edgar/data/75677/000156459019005284/pkg-ex32_212.htm)†] [added: 2002.](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex32_6.htm)†] |

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized on February [removed: 28, 2019.][added: 26, 2020.]

| | | [removed: Senior] [added: Executive] Vice President and Chief Financial Officer |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February [removed: 28, 2019,] [added: 26, 2020,] by the following persons on behalf of the registrants and in the capacities indicated.

| Robert P. Mundy | | [removed: Senior] [added: Executive] Vice President and Chief Financial Officer |

| | | (Principal Financial [removed: and Accounting] Officer) |

| 4.5 | | [3.000% Senior Notes due 2029. (Incorporated herein by reference to Exhibit 4.2 to PCA’s Current Report on Form 8-K filed November 21, 2019, File No. 1-15399.)](http://www.sec.gov/Archives/edgar/data/75677/000119312519297139/d811970dex42.htm) |

| 4.13 | | [Description of Common Stock †](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex413_182.htm) |

| 10.4 | | [Packaging Corporation of America Supplemental Executive Retirement Plan, as Amended and Restated Effective as of February 27, 2019. *†](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex104_432.htm) |

| 10.5 | | [Packaging Corporation of America Deferred Compensation Plan, as Amended and Restated Effective as of February 27, 2019.*†](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex105_433.htm) |

| 10.11 | | [Trade Vendor Purchasing Agreement, dated December 6, 2019, between Boise White Paper, L.L.C. and Office Depot, Inc.†](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex1011_301.htm) |

| 101.INS | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because 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 (embedded within the Inline XBRL document) |

| | Confidential information in this exhibit has been omitted. |

| | | /s/ PAMELA A. BARNES |

| | | Pamela A. Barnes |

| | | Senior Vice President, Finance and Controller |

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

| Pamela A. Barnes | | (Principal Accounting Officer) |

| Donna A. Harman | | Director |

| | | |

| | | |

| * | | |

| | | |

| | | |

| --- | --- | --- |

| Exhibit Number | | Description |

| 10.6 | | [First Amendment of Packaging Corporation of America Supplemental Executive Retirement Plan, effective as of January 1, 2008. (Incorporated herein by reference to Exhibit 10.17 to PCA’s Annual Report on Form 10-K for the year ended December 31, 2008, file No. 1-15399.)*](http://www.sec.gov/Archives/edgar/data/75677/000095013709001376/c49472exv10w17.htm) |

| 10.7 | | [Amended and Restated 1999 Long-Term Equity Incentive Plan, effective as of May 1, 2013, conformed to incorporate all amendments. (Incorporated herein by reference to Exhibit 10.8 to PCA’s Annual Report on Form 10-K for the year ended December 31, 2016, File No. 1-15399.)*](http://www.sec.gov/Archives/edgar/data/75677/000007567717000004/pkg12312016-exx108.htm) |

| 10.9 | | [Second Amendment of Packaging Corporation of America Supplemental Executive Retirement Plan, effective as of February 28, 2013. (Incorporated herein by reference to Exhibit 10.22 to PCA’s Annual Report on Form 10-K for the year ended December 31, 2012, File No. 1-15399.)*](http://www.sec.gov/Archives/edgar/data/75677/000119312513083569/d450554dex1022.htm) |

| 10.10 | | [Third Amendment of Packaging Corporation of America Supplemental Executive Retirement Plan, effective as of February 28, 2013. (Incorporated herein by reference to Exhibit 10.23 to PCA’s Annual Report on Form 10-K for the year ended December 31, 2012, File No. 1-15399.) *](http://www.sec.gov/Archives/edgar/data/75677/000119312513083569/d450554dex1023.htm) |

| 10.14 | | [Paper Purchase Agreement, dated June 25, 2011 (the “Paper Purchase Agreement”), between Boise White Paper, L.L. C. and OfficeMax Incorporated (Incorporated by reference to Exhibit 10.1 to Boise, Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2013, File No. 1-33541)](http://www.sec.gov/Archives/edgar/data/1391390/000139139013000056/bz-06302013xexx101.htm) |

| 10.15 | | [First Amendment to Paper Purchase Agreement, dated June 20, 2013, between Boise White Paper, L.L.C. and OfficeMax Incorporated (Incorporated by reference to Exhibit 10.2 to Boise, Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2013, File No. 1-33541)](http://www.sec.gov/Archives/edgar/data/1391390/000139139013000056/bz-06302013xexx102.htm) |

| 10.16 | | [Second Amendment to Paper Purchase Agreement, effective January 1, 2015 and executed and delivered August 19, 2015, between Boise White Paper, L.L.C. and Office Depot Inc. (Incorporated by reference to Exhibit 10.1 to PCA’s Quarterly Report on Form 10-Q for the period ended September 30, 2015, File No. 1-33541)](http://www.sec.gov/Archives/edgar/data/75677/000007567715000024/ex101finalapprovedredact.htm) |

| 10.21 | | [Form of Performance Unit Agreement for executive officer awards made in June 2016. (Incorporated by reference to Exhibit 10.2 to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, 2016, File No. 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000007567716000039/pkg-06302016xexx102formofe.htm) |

| 10.22 | | [Form of Restricted Stock Agreement for executive officer awards made in June 2016. (Incorporated by reference to Exhibit 10.1 to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, 2016, File No. 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000007567716000039/pkg-06302016xexx101formofe.htm) |

| 10.23 | | [Form of Return on Invested Capital Performance Unit Agreement for executive officer awards made in June 2018. (Incorporated by reference to Exhibit 10.2 to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, 2018, File No. 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459018020254/pkg-ex102_54.htm) |

| 10.24 | | [Form of Total Shareholder Return Performance Unit Agreement for executive officer awards made in June 2018. (Incorporated by reference to Exhibit 10.3 to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, 2018, File No. 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459018020254/pkg-ex103_53.htm) |

| 10.25 | | [Form of Restricted Stock Agreement for executive officer awards made in and after June 2018. (Incorporated by reference to Exhibit 10.1 to PCA’s Quarterly Report on Form 10-Q for the period ended June 30, 2018, File No. 1-15399).*](http://www.sec.gov/Archives/edgar/data/75677/000156459018020254/pkg-ex101_55.htm) |

| 101 | | The following financial information from Packaging Corporation of America’s Annual Report on Form 10-K for the year ended December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income for the years ended December 31, 2018, 2017, and 2016, (ii) Consolidated Balance Sheets at December 31, 2018 and 2017, (iii) Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016, (iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018, 2017, and 2016, (v) the Notes to Consolidated Financial Statements, and (vi) Financial Statement Schedule-Valuation and Qualifying Accounts. |

| | Confidential information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 406 of the Securities Act of 1933, as amended. |