Packaging Corp of America (PKG) 10-K risk factor changes: FY2022 vs FY2021

This discussion includes forward-looking statements regarding our expectations with respect to our future performance, liquidity, [added: ESG goals,] and capital resources.

For our discussion and analysis of our results of operations, financial condition and cash flows for the year ended December 31, [removed: 2019,] [added: 2020,] 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, [removed: 2020,] [added: 2021,] filed with the Securities and Exchange Commission on February 24, [removed: 2021.][added: 2022.]

Such information is presented in Item 7 of such report under the subcaptions “Results of Operations —Year Ended December 31, [removed: 2020,] [added: 2021,] Compared with Year Ended December 31, [removed: 2019”] [added: 2020”] and “Liquidity and Capital Resources” and is incorporated by reference herein.

We operate eight mills and [removed: 90] [added: 89] corrugated products manufacturing plants.

Net sales were [removed: $7.73] [added: $8.5] billion for the year ended December 31, [removed: 2021] [added: 2022] and [removed: $6.66] [added: $7.7] billion [removed: in 2020.][added: for 2021.]

We reported [removed: $841] [added: $1,030] million of net income, or [removed: $8.83] [added: $11.03] per diluted share, in [removed: 2021,] [added: 2022,] compared to [removed: $461] [added: $841] million, or [removed: $4.84] [added: $8.83] per diluted share, in [removed: 2020.][added: 2021.]

Net income included [removed: $53] [added: $10] million of expense for special items in [removed: 2021,] [added: 2022,] compared to [removed: $89] [added: $53] million of expense for special items in [removed: 2020.][added: 2021.]

Excluding special items, we recorded [removed: $894] [added: $1,040] million of net income, or [removed: $9.39] [added: $11.14] per diluted share, in [removed: 2021,] [added: 2022,] compared to [removed: $550] [added: $894] million, or [removed: $5.78] [added: $9.39] per diluted share, in [removed: 2020.][added: 2021.]

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

Reconciliations of Non-GAAP Financial Measures to Reported Amounts.” PCA ended the year with [removed: $765] [added: $470] million of cash and marketable debt securities and, including borrowing availability under its revolving credit facility, [removed: $1.1 billion] [added: $791 million] in liquidity.

Packaging segment income from operations was [removed: $1,306] [added: $1,424] million in [removed: 2021,] [added: 2022,] compared to [removed: $830] [added: $1,306] million [removed: in 2020.][added: for 2021.]

Packaging segment EBITDA excluding special items was [removed: $1,688] [added: $1,849] million in [removed: 2021,] [added: 2022,] compared to [removed: $1,229] [added: $1,688] million in [removed: 2020.][added: 2021.]

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

We [removed: also] continued to experience cost inflation across our business, including in the areas of labor and benefits, [removed: recycled fiber,] [added: chemicals,] energy, repairs, materials, and supplies, as well as higher transportation [removed: costs, driven by higher fuel costs, tight rail supply, driver and truck shortages, and higher spot prices.][added: costs.]

Paper segment income from operations was [removed: $39] [added: $103] million in [removed: 2021,] [added: 2022,] compared to [removed: a loss of $20] [added: $39] million in [removed: 2020.][added: 2021.]

Paper segment EBITDA excluding special items was [removed: $72] [added: $132] million in [removed: 2021,] [added: 2022,] compared to [removed: $73] [added: $72] million in [removed: 2020.][added: 2021.]

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

[removed: In the first quarter of] [added: For 2022 and] 2021, [removed: we announced] [added: includes charges related to] the [added: announced] discontinuation of production of uncoated freesheet paper grades on the [added: No. 3] machine [removed: and] [added: at] the [added: Jackson, Alabama mill associated with the] permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

[removed: On December 10,] [added: During] 2021, we [removed: completed the acquisition of the assets of] [added: acquired] Advance Packaging [removed: Corporation, an independent corrugated products producer,] [added: Corporation] for [removed: a cash purchase price of $195] [added: $193] million, including a purchase price adjustment based upon net working capital.

Earnings per diluted share, excluding special items, in [removed: 2021] [added: 2022] and [removed: 2020] [added: 2021] were as follows:

| Earnings per diluted share | | $ | [removed: 8.83] [added: 11.03] | | | $ | [removed: 4.84] [added: 8.83] | |

| Facilities closure and other costs (income) [removed: (a)] [added: (b)] | | | [removed: (0.03] [added: 0.01] | [removed: )] | | | [removed: 0.23] [added: (0.03] | [added: )] |

| Debt refinancing [removed: (b)] [added: (d)] | | | [removed: 0.47] [added: —] | | | | [removed: —] [added: 0.47] | |

| Jackson mill conversion-related activities [removed: (c)] [added: (a)] | | 0.11 | | | | [added: 0.11] | [removed: —] | |

| Acquisition and [removed: integration related costs (d)] [added: integration-related activities (c)] | | [removed: 0.01] | [added: (0.01] | [added: )] | | [added: 0.01] | [removed: —] | |

| Total special items expense | | | [removed: 0.56] [added: 0.11] | | | | [removed: 0.94] [added: 0.56] | |

| Earnings per diluted share, excluding special items | | $ | [removed: 9.39] [added: 11.14] | | | $ | [removed: 5.78] [added: 9.39] | |

[removed: Includes $14.0] [added: For 2022 and 2021, includes $14.1] million [added: and $14.0 million, respectively,] of charges related to the announced discontinuation of production of uncoated freesheet paper grades on the No. 3 machine at the Jackson, Alabama mill associated with the permanent conversion of the machine to produce linerboard and other paper-to-containerboard conversion related activities.

[removed: Includes] [added: For 2021, includes] $0.9 million of charges for acquisition and integration costs related to the [removed: December 2021 Advance Packaging Corporation] acquisition.

Trade publications reported North American industry-wide corrugated products shipments [removed: per workday] were [removed: up 2.8%] [added: down 3.8%] during [removed: 2021,] [added: 2022,] compared to [removed: 2020.][added: 2021.]

Reported industry containerboard production [removed: increased 5.6%] [added: decreased 5.2%] compared to [removed: 2020,] [added: 2021,] and reported industry containerboard inventories at the end of [removed: 2021] [added: 2022] were approximately [removed: 2.8] [added: 2.7] million tons, [removed: up 19.5%] [added: down 2.1%] compared to [removed: 2020.][added: 2021.]

Reported containerboard export shipments [removed: increased 9.9%] [added: decreased 7.7%] compared to [removed: 2020.][added: 2021.]

Prices reported by trade publications increased by [removed: $20] [added: $60] per ton for linerboard and [removed: $30] [added: $70] per ton for corrugating medium in March [removed: 2021, $40 per ton for linerboard and corrugating medium in April 2021, and a further $50 per ton for linerboard and $60 per ton for corrugating medium in August 2021.][added: 2022.]

Trade publications reported North American uncoated freesheet paper shipments were [removed: down 0.4%] [added: flat] in [removed: 2021,] [added: 2022,] compared to [removed: 2020.][added: 2021.]

Average prices reported by a trade publication for cut size office papers increased [removed: $20 per ton in March 2021,] $40 per ton in [removed: April 2021, $30 per ton in June 2021, $30] [added: February and March 2022, $90] per ton in [removed: July 2021,] [added: May 2022,] and [removed: $80] [added: $65] per ton in [removed: November 2021.][added: September 2022.]

[removed: We] [added: Considering these items, we] expect [removed: maintenance outage expenses in the] first quarter [added: earnings] to be lower than the fourth [removed: quarter.][added: quarter of 2022.]

Year Ended December 31, [removed: 2021,] [added: 2022,] Compared with Year Ended December 31, [removed: 2020][added: 2021]

The historical results of operations of PCA for the years ended December 31, [removed: 2021] [added: 2022] and [removed: 2020] [added: 2021] are set forth below (dollars in millions):

| | | [removed: 2021] [added: 2022] | | | | [removed: 2020] [added: 2021] | | | | Change | | |

| Corporate and other and eliminations | | | [removed: 78.0] [added: 75.2] | | | | [removed: 63.9] [added: 78.0] | | | | [removed: 14.1] [added: (2.8] | [added: )] |

The increase was driven primarily by higher prices and mix in our Packaging and Paper segments, partially offset by lower volumes in our Packaging and Paper segments, higher operating and converting costs, higher freight and logistic expenses, and higher annual outage expense.

Packaging volumes remained strong at or above 2021 levels through the middle of the year.

Volume then began to decline as general economic conditions deteriorated and our customers began to reduce their inventories and orders accordingly, which has resulted in lower demand for our products.

Overall, our corrugated products shipments were down 3.4% for the year as those trends continued through the second half of the year.

In order to achieve appropriate production levels for our demand and necessary inventory levels, we reduced our production of containerboard at our packaging mills during the second half of the year.

For more information on our containerboard production and corrugated products shipments, refer to the table presented under the caption "Production and Shipments" in "Part I, Item 1.

After increasing throughout 2021 and through the first three quarters of 2022, containerboard prices published by industry publications began to decline during the fourth quarter of 2022.

Over the past several years, we made extensive capital investments throughout the packaging segment to improve productivity and efficiencies at our containerboard mills and corrugated products facilities and believe that our success in execution of these capital investments has helped us to mitigate cost inflation and better serve our customers.

The Jackson mill produced only containerboard, and no paper products, during 2022, which drove lower sales and production volumes.

We have undertaken activities to convert the Jackson mill from production of paper products, which the mill historically produced, to production of containerboard.

For more information, see the Packaging caption in "Part I, Item 1.

For 2022, includes $0.7 million of charges consisting of closure costs related to corrugated products facilities.

These costs were partially offset by insurance proceeds received for a natural disaster at one of the corrugated products facilities, a gain on sale of assets related to a corrugated products facility, and a favorable lease buyout for a closed corrugated products facility.

For 2022, includes $1.0 million of income from a favorable inventory adjustment related to the December 2021 Advance Packaging Corporation acquisition, partially offset by acquisition and integration related costs.

Prices decreased $20 per ton for linerboard and $40 per ton for corrugating medium in November, followed by an additional decrease in December of $20 per ton each.

In January 2023, prices decreased $10 per ton for linerboard and $30 per ton for corrugating medium.

The average price was higher by $259, or 22%, in 2022 compared to 2021.

For the first quarter of 2023, in our Packaging segment we expect corrugated products demand on a per day basis to be similar to fourth quarter levels, although we expect higher total volume as there are four additional shipping days compared to the fourth quarter of 2022.

Prices for containerboard and corrugated products are expected to decrease as a result of the recent decreases in the published domestic containerboard prices, and prices for containerboard in export markets are expected to be lower as well.

We expect slightly higher paper prices on flat sales volume.

Labor costs and certain indirect costs will increase as some containerboard mill operations were temporarily idled during the fourth quarter and resumed operations during the first quarter.

In addition, we anticipate higher labor and benefits costs and other timing-related expenses that occur at the beginning of a new year as well as higher prices for many chemicals, particularly starch and caustic soda.

However, we expect lower wood and recycled fiber prices, lower energy prices, and lower scheduled maintenance outage expenses during the first quarter when compared to the fourth quarter of 2022.

Lastly, we expect higher interest and non-operating pension expenses and a higher tax rate, but we expect to benefit on an earnings per share basis from recent share repurchases.

| Packaging | | $ | 7,780.7 | | | $ | 7,052.6 | | | $ | 728.1 | |

| Paper | | | 622.1 | | | | 599.7 | | | | 22.4 | |

| Packaging | | $ | 1,423.7 | | | $ | 1,306.0 | | | $ | 117.7 | |

| Paper | | | 103.0 | | | | 39.1 | | | | 63.9 | |

Net sales increased $748 million, or 9.7%, to $8,478 million in 2022, compared to $7,730 million in 2021.

*Packaging.* Net sales increased $728 million, or 10.3%, to $7,781 million, compared to $7,053 million in 2021, due to higher prices and mix ($963 million), partially offset by lower volumes ($235 million).

*Paper.* Net sales increased $22 million, or 3.7%, to $622 million, compared to $600 million in 2021.

Special items in 2022 consisted of $14 million of expense for Jackson mill conversion-related activities, $1 million of corrugated facility closure costs, and $1 million of income related to acquisition and integration-related activities.

Special items in 2022 included $5 million of expense for Jackson mill conversion-related activities, corrugated facility closure costs, and income related to acquisition and integration-related activities.

The decrease in interest expense, net in 2022 was primarily due to higher charges ($59 million) in the prior year related to the Company's October 2021 debt refinancing, lower interest rates on the Company's fixed-rate debt ($8 million) as a result of the Company's debt refinancing, higher interest income ($8 million) due to higher rates on invested cash balances, and higher capitalized interest ($4 million) related to the Company's increased levels of capital expenditures in 2022.

The higher effective tax rate for 2022 was primarily due to higher nondeductible employee remuneration paid to covered employees.

| | | 2022 | | | | 2021 | | |

a net favorable change in inventories in 2022 due to a smaller increase in Packaging segment inventory levels in 2022 compared to 2021, primarily in raw materials and finished goods.

These favorable changes were partially offset by:

a)

an unfavorable change in accounts payable in 2022 compared to 2021 primarily due to lower Packaging production and sales volumes, which resulted in lower purchasing and manufacturing activities in 2022; and

Demand for Packaging segment products remained strong throughout the year, with record-setting shipments from our corrugated products and record containerboard production.

We have experienced some workforce availability issues late in the year and early in 2022 due to the spread of the Omicron variant, as well as effects from supply chain and transportation service disruptions, but we have generally been able to manage through these issues such that our operations have not been materially disrupted.

We continue to deploy capital to improve productivity and efficiencies at our facilities and believe that our success in doing so is helping us to manage cost inflation and better serve our customers.

As described in Note 9, Goodwill and Intangible Assets included in Item 8 of this Annual Report on Form 10-K, we incurred a charge of $55.2 million during 2020 associated with the full impairment of goodwill within the Paper segment.

Sales and production volumes in the Paper segment significantly declined after the first quarter of 2020 as the COVID-19 pandemic caused lower demand for our paper products.

During the second and third quarters of 2020, in response to such lower demand, we temporary idled both machines at our Jackson, Alabama mill.

During the fourth quarter of 2020, in order to meet strong packaging demand and maintain appropriate inventory levels in the Packaging segment, we temporarily began producing linerboard on the No. 3 machine at the mill, and we have produced linerboard on the machine since that time.

Demand for paper products has improved since the beginning of the pandemic, but our sales and production in the Paper segment will remain below pre-pandemic levels as we will no longer be producing paper products on the machine.

Later in 2021, we began to produce corrugating medium on the No. 1 machine at the Jackson mill (which had produced uncoated freesheet paper in the past) to help satisfy our demand for containerboard, build necessary inventories, and evaluate the capability of the machine to produce containerboard on a cost-effective basis.

We expect to continue to produce corrugating medium on the machine for the foreseeable future.

Before October 2020, operating results for the Jackson mill were included in the Paper segment.

Beginning in October 2020, operating results for the Jackson mill are included in both the Packaging and Paper segments.

Advance Packaging is a full-service producer of corrugated packaging products, including graphics, retail displays, sustainable shipping containers, and protective packaging.

Advance Packaging owns and operates a 500,000 square foot corrugated products facility in Grand Rapids, Michigan.

The operating results of Advance Packaging are included in PCA's results after the date of acquisition.

The acquisition is consistent with our historical growth strategy and will provide additional integration of containerboard we produce into our own corrugated products facilities.

| | | 2021 | | | | 2020 | | |

| Goodwill impairment (e) | | | — | | | | 0.58 | |

| Hurricane Laura impact (f) | | | — | | | | 0.08 | |

| Incremental costs for COVID-19 (g) | | | — | | | | 0.05 | |

For 2020, includes $28.1 million of restructuring costs for paper administrative functions and closure costs related to corrugated products facilities, substantially all of which relates to the previously announced closure of the San Lorenzo, California facility during the second quarter of 2020, partially offset by income related to the sale of a corrugated products facility during the second quarter of 2020.

(e)

During the second quarter of 2020, with the exacerbated deterioration in uncoated freesheet market conditions and the estimated impact on our Paper reporting unit arising from the COVID-19 pandemic, as well as projected future results of operations, we identified a triggering event indicating possible impairment of goodwill within our Paper reporting unit.

The Company performed an interim quantitative impairment analysis as of May 31, 2020, and, based on the evaluation performed, we determined that goodwill was fully impaired for the Paper reporting unit and recognized a non-cash impairment charge of $55.2 million.

(f)

Includes $10.0 million of charges related to the impact of Hurricane Laura at our DeRidder, Louisiana mill, including unabsorbed costs related to lost production, excess purchased containerboard and freight costs, repair expenses, rental and supplies costs, and other recovery expenses.

(g)

Includes $6.9 million of incremental, out-of-pocket costs related to COVID-19, including supplies, cleaning and sick pay.

Beginning in July 2020, all corresponding COVID-19 related expenses were included in normalized costs.

For the first quarter of 2022, in the Packaging segment, we expect higher corrugated products volume than the fourth quarter of 2021, driven by continued strong demand and three additional shipping days, along with slightly higher domestic and export containerboard sale prices and mix.

Earlier in the first quarter, we notified our customers of a $70 per ton price increase for all of our linerboard and corrugating grades.

We do not expect to realize significant benefits of this price increase during the first quarter of 2022.

In our Paper segment, we expect higher prices and mix from price increases previously communicated to customers during the fourth quarter and earlier in the first quarter of 2022.

We also expect continued cost inflation to persist at higher than historical levels across our mills, converting plants, and other operations as well as freight and logistics expenses.

In addition to the effect of cost inflation, labor and benefits costs will also be higher due to timing-related increases such as annual wage increases, and seasonally colder weather is expected to increase energy and wood fiber costs.

The effect of higher costs is expected to offset any sequential benefit of higher corrugated products volume and more favorable prices and mix in our Packaging and Paper segments.

Considering these items, and excluding the effect of any special items, we expect first quarter earnings to be lower than our earnings for the fourth quarter of 2021.

| Packaging | | $ | 7,052.6 | | | $ | 5,919.5 | | | $ | 1,133.1 | |

| Paper | | | 599.7 | | | | 674.8 | | | | (75.1 | ) |

| Packaging | | $ | 1,306.0 | | | $ | 829.5 | | | $ | 476.5 | |

PCA is exposed to the impact of [added: commodity price changes,] interest rate [removed: changes] [added: changes,] and changes in the market value of its financial instruments.

For a discussion of derivatives and hedging activities, see Note [removed: 16, Derivative Instruments and Hedging Activities,] [added: 2, Summary] of [added: Significant Accounting Policies, of] the Notes to Consolidated Financial Statements in “Part II, Item 8.

At December 31, [removed: 2021,] [added: 2022,] the interest rates on 100% of PCA’s outstanding debt are fixed.

To manage these risks, we may from time to time enter into transactions, including certain physical commodity transactions, that are determined to be derivatives.

As of December 31, 2022, we are party to certain physical commodity transactions related to natural gas supply contracts.

PCA periodically enters into derivatives in order to minimize these risks, but not for trading purposes.

We were not party to any derivative-based arrangements at December 31, 2021.

We operate eight mills and [removed: 90] [added: 89] corrugated products plants and related facilities.

For segment financial information see Note [removed: 20,] [added: 19,] Segment Information, of the Notes to Consolidated Financial Statements in “Part II, Item 8, Financial Statements and Supplementary Data” of this Form 10-K.

| [removed: Containerboard Production] | | | 2021 | | | | 1,195 | | | | 1,193 | | | | 1,256 | | | | 1,243 | | | | 4,887 | |

| [removed: (thousand tons)] | | | 2020 | | | | 1,047 | | | | 1,072 | | | | 1,048 | | | | 1,174 | | | | 4,341 | |

| Corrugated Products Shipments (billion square feet) | | | [removed: 2021] [added: 2022] | | | | [removed: 16.4] [added: 16.8] | | | | 16.5 | | | | [removed: 16.4] [added: 15.4] | | | | [removed: 16.4] [added: 14.7] | | | | [removed: 65.7] [added: 63.4] | |

| [removed: UFS Production] | | | 2021 | | | | 145 | | | | 149 | | | | 148 | | | | 130 | | | | 572 | |

| [removed: (thousand tons)] | | | 2020 | | | | 224 | | | | 148 | | | | 129 | | | | 147 | | | | 648 | |

[removed: ][added: ]

During the year ended December 31, [removed: 2021,] [added: 2022,] our Packaging segment produced [removed: 4.9] [added: 4.6] million tons of containerboard at our mills.

Our corrugated products manufacturing plants sold [removed: 65.7] [added: 63.4] billion square feet (BSF) of corrugated products.

The Packaging segment’s net sales to third parties totaled [removed: $7.1] [added: $7.8] billion in [removed: 2021.][added: 2022.]

Total annual containerboard capacity was approximately 5.0 million tons as of December 31, [removed: 2021.][added: 2022.]

We also produce corrugated and protective packaging products at [removed: 90] [added: 89] manufacturing locations.

*Jackson.* Our Jackson, Alabama mill produces kraft linerboard on its No. 3 machine [removed: and, beginning in the third quarter of 2021, we began producing] [added: and] corrugating medium on its No. 1 machine.

[added: Before October 2020,] Jackson had historically operated as a UFS paper mill, with its results of operations reported in our Paper segment.

[removed: We operate 90] [added: As of December 31, 2022, we operated 89] corrugated manufacturing and protective packaging operations, a technical and development center, 10 regional design centers, a rotogravure printing operation, and a complement of packaging supplies and distribution centers.

Of the [removed: 90] [added: 89] manufacturing facilities, [removed: 59 operate as] [added: 58 are] combining operations, commonly called corrugated plants, which manufacture corrugated sheets and finished corrugated packaging products, 30 are sheet plants, which procure combined sheets and manufacture finished corrugated packaging products, and one is a corrugated sheet-only manufacturer.

In [removed: 2021,] [added: 2022,] our usage of recycled fiber, net of internal generation, represents [removed: 18%] [added: 17%] of our containerboard production.

In [removed: 2021,] [added: 2022,] our packaging mills consumed about [removed: 81] [added: 80] million MMBTUs of fuel to produce both steam and electricity.

Of the [removed: 81] [added: 80] million MMBTUs consumed, about [removed: 61%] [added: 63%] was from mill-generated biogenic fuels that are by-products of our containerboard manufacturing and pulping process and [removed: 39%] [added: 37%] was from purchased fuels.

Of the purchased fuels, [removed: 81%] [added: 73%] was from natural gas, [removed: 18%] [added: 25%] was from purchased wood waste and [removed: 1%] [added: 2%] was from other purchased fuels.

*Chemical supply.* We consume various chemicals in the production of containerboard, including caustic soda, [added: starch,] sulfuric acid, soda ash, and lime.

General marketing support is [removed: located] [added: provided] at our corporate headquarters.

Our containerboard sales group is responsible for linerboard and corrugating medium order processing and [removed: sales] [added: supply] to our corrugated plants, to outside domestic customers, and to export customers.

Containerboard produced in our mills is [added: primarily] shipped by rail or truck.

We [removed: have] experienced higher freight costs in [removed: 2021] [added: 2022] due to truck and driver shortages and limited boxcar availability, as well as fuel surcharges.

We sell containerboard and corrugated products to approximately 15,000 customers in approximately [removed: 33,000] [added: 31,000] locations.

The remaining 30% of our [added: corrugated products] 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: 2020] [added: 2021] Fibre Box Association annual report:

| Food, beverages, and agricultural products | | | [removed: 44] [added: 48] | % |

| Retail and wholesale trade | | | [removed: 25] [added: 22] | % |

| Paper and other products | | | [removed: 12] [added: 10] | % |

| Miscellaneous manufacturing | | | [removed: 9] [added: 10] | % |

As of December 31, [removed: 2021,] [added: 2022,] we were the third largest producer of containerboard products in North America, according to industry sources and our own estimates.

On a national level, our primary competitors are International Paper, WestRock Company, [removed: Georgia-Pacific LLC,] and [removed: Pratt Industries.][added: Georgia-Pacific LLC.]

However, with our strategic focus on regional and local accounts, we also compete with [removed: the] [added: many] smaller, independent producers.

[removed: *International Falls.* Our] [added: We currently have one paper mill located in] International Falls, Minnesota [removed: mill] [added: that] produces both commodity and specialty papers on two paper machines.

[removed: Each of the] [added: The] paper [removed: mills] [added: mill] self-generates process steam requirements from by-products (black liquor and wood waste), as well as from the various purchased fuels.

In [removed: 2021,] [added: 2022,] our paper [removed: mills] [added: mill] consumed about [removed: 12] [added: 11] million MMBTUs of fuel to produce both steam and electricity.

Of the [removed: 12] [added: 11] million MMBTUs consumed, about 75% was from mill-generated biogenic fuels that are by-products of the manufacturing and pulping process and 25% was from purchased [removed: fuels.][added: natural gas.]

| Containerboard Production (thousand tons) | | | 2022 | | | | 1,233 | | | | 1,256 | | | | 1,116 | | | | 961 | | | | 4,566 | |

| | | | 2021 | | | | 16.4 | | | | 16.5 | | | | 16.4 | | | | 16.4 | | | | 65.7 | |

| UFS Production (thousand tons) | | | 2022 | | | | 126 | | | | 127 | | | | 123 | | | | 130 | | | | 506 | |

The mill can produce linerboard in basis weights from 22 lb.

to 34 lb.

and medium in basis weights from 23 lb.

to 33 lb.

Beginning in the third quarter of 2021, we began producing corrugating medium on the No. 1 machine.

The mill has the capacity to produce approximately 500,000 tons annually.

To promote employee engagement and improve the work experience of our employees, PCA regularly conducts employee engagement surveys.

In 2022, PCA worked with a new external partner who specializes in developing, administering, and interpreting employee surveys.

With their help, we transitioned our survey to an online format which made it more accessible to our employees.

We also adopted updated methodologies and industry comparisons to measure employee engagement.

According to the survey, PCA’s overall employee engagement level is in line with other U.S. manufacturing companies.

For the first time, our survey introduced a question related to Diversity and Inclusion and our employees’ perceptions on this topic were favorable.

In addition, most employees acknowledged that they know what is expected from them and how their work contributes to PCA’s success.

Our next survey is scheduled for early 2024.

During 2022, PCA reached new six-year master labor agreements covering seven mills and 25 container plants.

Interest rates have increased, which may result in lower consumer demand and higher borrowing costs, and may cause general economic conditions to deteriorate.

Beginning in mid-2022, we have experienced a deterioration in operating conditions involving our Packaging business as a result of general economic conditions and our customers lowering their inventories.

This has resulted in lower demand for our containerboard and corrugated products and lower production, which is continuing into 2023 and has negatively affected our profitability.

These factors may result in continued lower demand for our products and negatively affect our business, results of operations and cash flows.

Published containerboard prices have decreased beginning in the fourth quarter of 2022, which will result in lower prices for our containerboard and corrugated products and lower profitability.

ODP Corporation ("ODP"), formerly Office Depot, Inc., along with its subsidiaries and affiliates, is our largest customer in the Paper segment.

Effective January 1, 2023, we have a new agreement with ODP in which we will continue to supply commodity and non-commodity office papers through December 31, 2024.

If the agreement is not renewed by the parties, ODP’s obligation to purchase paper would phase down over a two-year period beginning January 1, 2025.

The effect of a pandemic or other health event, such as the COVID-19 pandemic.

PCA experienced some disruptions as a result of labor shortage issues due to the pandemic between 2020 and mid-2022.

The pandemic also disrupted supply chains and transportation services.

ESG - We may not achieve or make satisfactory progress on our goals and targets to reduce emissions and satisfy other ESG metrics. Investors, governmental authorities, and other interested parties have recently focused on ESG matters, including with respect to climate change, greenhouse gas emissions, and sustainable business practices.

This increased awareness with respect to ESG matters, including climate change, is expected to result in more prescriptive reporting requirements with respect to ESG metrics and expectations that companies establish goals and commitments regarding ESG metrics and take actions to achieve those goals and commitments.

We have voluntarily established targets and goals with respect to greenhouse gas emissions, which are discussed elsewhere in this report under the caption "Regulatory and Environmental Matters" in "Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.

Our ability to achieve those targets and goals will depend on certain factors beyond our control, including regulatory actions, emergence of and advances in technology, and availability of required products and services.

Our efforts to achieve ESG targets and goals may result in higher costs and capital expenditures with a low return on investment and may distract management efforts from other operational matters.

We may not achieve or make satisfactory progress on our ESG goals and targets.

If we are unable to meet these goals and targets, our reputation with investors, customers and other stakeholders and businesses may be harmed.

| | | | 2019 | | | | 1,037 | | | | 1,063 | | | | 1,070 | | | | 1,079 | | | | 4,249 | |

| | | | 2019 | | | | 14.5 | | | | 14.9 | | | | 15.1 | | | | 14.9 | | | | 59.4 | |

| | | | 2019 | | | | 239 | | | | 236 | | | | 236 | | | | 236 | | | | 947 | |

Before October 2020, operating results for the Jackson mill were included in the Paper segment.

Jackson remains capable of producing white paper grades on the No. 1 and No. 3 machines.

In order to improve our fiber flexibility and production capabilities, we have invested in additional capacity to process recycled fiber at our DeRidder, Wallula, and Jackson mills.

We sometimes use third-party warehouses for short-term storage of corrugated products.

We currently have two paper mills located in the United States with the capacity to produce 602,000 tons annually.

Our operations include the following:

*Jackson.* Our Jackson, Alabama mill has historically produced UFS and has the capability to produce both commodity and specialty papers on its No. 1 and No. 3 machines.

Since October 2020, the mill has also produced containerboard.

See "Packaging — Facilities — Jackson" for further information.

Of the purchased fuels, 95% was from natural gas and 5% from purchased wood waste.

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

To promote strong and increasing engagement of all PCA employees, we regularly conduct employee engagement surveys and are next scheduled to do so in 2022.

Our most recent 2018 employee engagement index trended upward and remained notably above the Global Manufacturing Benchmark index.

Our next survey will include diversity, equity and inclusion topics.

Prior to this, he served as Vice President – Containerboard Mill Operations since January 2011.

Risks Related to the COVID-19 Pandemic

The future effect of the COVID-19 pandemic on our operations is uncertain. Since the onset of the COVID-19 pandemic in 2020, federal, state and local authorities have taken measures to control the outbreak of COVID-19 in the United States, where we primarily operate.

Due to the importance of our products to the continued distribution of food, beverage and other necessities, our operating facilities have remained in operation throughout the pandemic, and we have not experienced material disruptions in operations to date.

PCA has experienced some labor shortage issues due to labor market conditions in general, which has been exacerbated by the pandemic, particularly the recent spread of the Omicron variant in late 2021 and early 2022.

We have also experienced and may experience in the future higher supply chain and transportation costs, in part, due to the impacts of COVID-19.

The impact of future variants of the virus and governmental measures to control the spread of the virus, including vaccine mandates or mandatory testing protocols, are uncertain and may materially restrict or hinder our ability to operate our facilities due to measures we may need to take to assure the health and safety of our employees, lack of available workforce, disruptions in the supply of key materials and services or restrictions due to governmental actions.

If our operations are hindered or restricted, we may not be able to serve our customers, which could have a material adverse effect on our business, financial condition and results of operations.

The pandemic resulting from the COVID-19 outbreak, and measures to control the outbreak, have had a negative impact on certain businesses, which could adversely affect demand for our products and our business, financial condition and results of operations. Many businesses in the United States have been required to cease or curtail operations and workers have been laid off or furloughed, and have slowed down economic activity.

The severity and duration of the impact on the economy will depend on the future spread of the outbreak, future measures by governmental authorities to control the outbreak, the timing and effectiveness of vaccination efforts, the timing and manner in which normal social and business activities are permitted to resume and the willingness of businesses and citizens to resume those activities and the effectiveness of governmental efforts to mitigate the economic effect of the outbreak, all of which are highly uncertain.

We have experienced significantly lower demand for our uncoated freesheet paper products, due to economic conditions, office closings and school shutdowns associated with the COVID-19 pandemic, which harmed the performance of our Paper segment and was a factor in our decision to permanently convert the No. 3 machine at our Jackson mill to permanently produce containerboard.

While we have not experienced lower demand for our containerboard and corrugated packaging products to date, the effect of the pandemic on economic conditions affecting our business and future demand is uncertain.

It is uncertain whether, to what extent and for what period of time current favorable demand conditions in the Packaging segment will continue.

With the uncertainty of economic conditions, we are unable to determine the impact on our future operating and financial performance.

A prolonged period of lower earnings and reduced cash flow could adversely affect our ability to fund operations, capital requirements, and common stock dividend payments and access capital markets.

Periods of supply and demand imbalance have created significant price volatility.

In 2020, Hurricane Laura resulted in widespread damage and power interruption at our DeRidder, Louisiana containerboard mill resulting in a multiple day outage and significant lost production and incremental costs.

These conditions are expected to persist into 2022 and may lead to higher labor costs.

Information concerning legal proceedings can be found in Note [removed: 21,] [added: 20,] Commitments, Guarantees, Indemnifications, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

For the fiscal year ended December [removed: 31, 2021][added: 31, 2022]

[removed: ][added: ]

At June 30, [removed: 2021,] [added: 2022,] 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: $12,670,117,556] [added: $12,686,128,813] based upon the closing sale price as reported on the New York Stock Exchange.

On February [removed: 18, 2022,] [added: 17, 2023,] there were [removed: 93,533,810] [added: 89,693,421] shares of Common Stock outstanding.

Specified portions of the Proxy Statement for the Registrant's [removed: 2022] [added: 2023] Annual Meeting of Stockholders are incorporated by reference to the extent indicated in Part III of this Form 10-K.

| | [Results of Operations](#results_operations) | [removed: 22] [added: 21] |

| | [Liquidity and Capital Resources](#liquidity_capital_resources) | [removed: 24] [added: 23] |

| | [Commitments](#commitments) | [removed: 26] [added: 25] |

| | [Off-Balance Sheet Arrangements](#off_balance_sheet_arrangements) | [removed: 26] [added: 25] |

| | [Inflation and Other General Cost Increases](#inflation_or_general_cost_increases) | [removed: 26] [added: 25] |

| | [Regulatory and Environmental Matters](#em1) | [removed: 27] [added: 26] |

| | [New and Recently Adopted Accounting Standards](#new_recently_adopted_accounting_stards) | [removed: 31] [added: 29] |

| | [Reconciliations of Non-GAAP Financial Measures to Reported Amounts](#reconciliations_nongaap_financial_measur) | [removed: 32] [added: 29] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#item_7a_quantitative_and_qualitative) | [removed: 34] [added: 31] |

| Item 8. | [Financial Statements and Supplementary Data](#item_8_financial_statements_supplementar) | [removed: 35] [added: 32] |

| Item 9. | [Changes In and Disagreements With Accountants on Accounting and Financial Disclosure](#item_9_changes_in_disagreements_with_acc) | [removed: 76] [added: 72] |

| Item 9A. | [Controls and Procedures](#item_9a_controls_procedures) | [removed: 76] [added: 72] |

| Item 9B. | [Other Information](#item_9b_or_information) | [removed: 77] [added: 72] |

| Item 9C. | [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](#item_9c_foreign_jurisdictions) | [removed: 77] [added: 72] |

| Item 10. | [Directors, Executive Officers, and Corporate Governance](#item_10_directors_executive_ficers_corpo) | [removed: 78] [added: 73] |

| Item 11. | [Executive Compensation](#item_11_executive_compensation) | [removed: 78] [added: 73] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#item_12_security_ownership_certain_benef) | [removed: 78] [added: 73] |

| Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#item_13_certain_relationships_related_tr) | [removed: 78] [added: 74] |

| Item 14. | [Principal Accounting Fees and Services](#item_14_principal_accounting_fees_servic) | [removed: 79] [added: 74] |

| Item 15. | [Exhibits, Financial Statement Schedules](#item_15_exhibits_financial_statement_sch) | [removed: 80] [added: 75] |

| | [Signatures](#signatures) | [removed: 83] [added: 78] |

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

[removed: We currently] [added: As of December 31, 2022, we] own buildings and land for our eight mills.

Additionally, we have [removed: 90] [added: 89] corrugated manufacturing operations, of which the buildings and land for 53 are owned, including 45 combining operations, or corrugated plants, one corrugated sheet-only manufacturer, and seven sheet plants.

We lease the buildings for [removed: 14] [added: 13] corrugated plants and 23 sheet plants.

On February [removed: 18, 2022,] [added: 17, 2023,] there were [removed: 137] [added: 142] holders of record of our common stock.

[removed: Stock] [added: Share] Repurchase Program

During the fourth quarter of 2021, we paid [removed: $193.0 million] [added: $193 million, including fees,] to repurchase 1.4 million shares of common stock, which was the entire remaining amount of repurchase authority we had under previously announced share repurchase programs.

The Company did not repurchase any shares of its common stock during the [removed: years] [added: year] ended December 31, [removed: 2020 and 2019.][added: 2020.]

[removed: Total shares] [added: We] withheld [added: 110,827 shares] in [removed: 2021 were] [added: 2022 to cover $15.4 million in employee tax liabilities,] 95,437 [added: shares in 2021] to cover $12.9 million in employee tax [added: liabilities, and 107,627 shares in 2020 to cover $10.5 million 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: 2021:][added: 2022:]

| Period | | Total Number of Shares [removed: Purchased] [added: Purchased (a)] | | | | | Average Price Paid Per Share (b) | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions) | | |

[removed: 7,471] [added: Includes 606] shares [removed: were] withheld from employees to cover income and payroll taxes on equity awards that vested during the period.

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: 2016] [added: 2017] through December 31, [removed: 2021.][added: 2022.]

[removed: ][added: ]

| | | [removed: 2016 | | | |] 2017 | | | | 2018 | | | | 2019 | | | | 2020 | | | | 2021 | | | [added: | 2022 | | |]

During the third and fourth quarters of 2022, we paid $523 million, including fees, to repurchase 4.0 million shares of common stock.

At December 31, 2022, $477 million of the authorized amount remained available for repurchase of the Company's common stock.

| October 1-31, 2022 | | | 333,321 | | | | $ | 118.83 | | | | 333,200 | | | $ | 818.4 | |

| November 1-30, 2022 | | | 2,073,127 | | | | | 125.70 | | | | 2,073,127 | | | | 557.8 | |

| December 1-31, 2022 | | | 597,185 | | | | | 134.59 | | | | 596,700 | | | | 477.5 | |

| Total | | | 3,003,633 | | | | $ | 126.70 | | | | 3,003,027 | | | $ | 477.5 | |

| Packaging Corporation of America | | $ | 100.00 | | | $ | 71.14 | | | $ | 98.42 | | | $ | 125.25 | | | $ | 127.27 | | | $ | 123.91 | |

| S&P 500 | | | 100.00 | | | | 95.62 | | | | 125.72 | | | | 148.85 | | | | 191.58 | | | | 156.89 | |

| S&P Midcap 400 | | | 100.00 | | | | 88.92 | | | | 112.21 | | | | 127.54 | | | | 159.12 | | | | 138.34 | |

| Peer Group | | | 100.00 | | | | 67.94 | | | | 81.26 | | | | 89.63 | | | | 92.95 | | | | 73.08 | |

Total shares withheld in 2020 were 107,627 to cover $10.5 million in employee tax liabilities.

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

| October 1-31, 2021 | | | — | | | | $ | — | | | | — | | | $ | 193.0 | |

| November 1-30, 2021 | | | 1,209,317 | | (a) | | | 133.91 | | | | 1,206,612 | | | | 31.4 | |

| December 1-31, 2021 | | | 240,765 | | (a) | | | 133.17 | | | | 235,999 | | | | — | |

| Total | | | 1,450,082 | | | | $ | 133.78 | | | | 1,442,611 | | | $ | — | |

Domtar Corporation, which was included in the peer group in prior years, is no longer actively traded due to a recent acquisition.

As a result, Domtar Corporation was subsequently removed from the peer group for the 2021 analysis.

| Packaging Corporation of America | | $ | 100.00 | | | $ | 145.49 | | | $ | 103.50 | | | $ | 143.19 | | | $ | 182.23 | | | $ | 185.17 | |

| S&P 500 | | | 100.00 | | | | 121.83 | | | | 116.49 | | | | 153.17 | | | | 181.35 | | | | 233.41 | |

| S&P Midcap 400 | | | 100.00 | | | | 116.24 | | | | 103.36 | | | | 130.44 | | | | 148.26 | | | | 184.96 | |

| Peer Group | | | 100.00 | | | | 118.91 | | | | 80.79 | | | | 96.62 | | | | 106.57 | | | | 110.53 | |

| [Reports of Independent Registered Public Accounting Firm (KPMG LLP, Chicago, IL, Auditor Firm ID: 185)](#report_independent_registered_public_acc) | [removed: 36] [added: 33] |

| [Consolidated Statements of Income and Comprehensive Income for the years ended December 31, [added: 2022,] 2021, [removed: 2020,] and [removed: 2019](#consolidated_statements_income_comprehen)] [added: 2020](#consolidated_statements_income_comprehen)] | [removed: 38] [added: 35] |

| [Consolidated Balance Sheets as of December 31, [removed: 2021] [added: 2022] and [removed: 2020](#consolidated_balance_sheets)] [added: 2021](#consolidated_balance_sheets)] | [removed: 39] [added: 36] |

| [Consolidated Statements of Cash Flows for the years ended December 31, [added: 2022,] 2021, [removed: 2020,] and [removed: 2019](#consolidated_statements_cash_flows)] [added: 2020](#consolidated_statements_cash_flows)] | [removed: 40] [added: 37] |

| [Consolidated Statement of Changes in Stockholders' Equity for the years ended December 31, [added: 2022,] 2021, [removed: 2020,] and [removed: 2019](#consolidated_statements_changes_in_stock)] [added: 2020](#consolidated_statements_changes_in_stock)] | [removed: 41] [added: 38] |

| [Notes to Consolidated Financial Statements](#notes_to_consolidated_financial_statemen) | [removed: 42] [added: 39] |

We have audited the accompanying consolidated balance sheets of Packaging Corporation of America and subsidiaries (the Company) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] 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: 2021,] [added: 2022,] 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: 2021,] [added: 2022,] 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.

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: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, [removed: 2021,] [added: 2022,] 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: 2021] [added: 2022] 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.

As discussed in Note 13 to the consolidated financial statements, the Company’s estimated pension benefit obligation totaled [removed: $1,504] [added: $1,167] million as of December 31, [removed: 2021.][added: 2022.]

In [removed: addition,] [added: particular,] the measurement of the pension benefit obligation is sensitive to minor changes in the discount rate assumption.

The following are [added: the] primary procedures we performed to address this critical audit matter.

| | | [removed: 2021] [added: 2022] | | | | [removed: 2020] [added: 2021] | | | | [removed: 2019] [added: 2020] | | |

| Net sales | | $ | [removed: 7,730.3] [added: 8,478.0] | | | $ | [removed: 6,658.2] [added: 7,730.3] | | | $ | [removed: 6,964.3] [added: 6,658.2] | |

| Cost of sales | | | [removed: (5,857.3] [added: (6,387.4] | ) | | | [removed: (5,288.8] [added: (5,857.3] | ) | | | [removed: (5,320.3] [added: (5,288.8] | ) |

| Gross profit | | | [removed: 1,873.0] [added: 2,090.6] | | | | [removed: 1,369.4] [added: 1,873.0] | | | | [removed: 1,644.0] [added: 1,369.4] | |

| Selling and administrative expenses | | | [removed: (576.8] [added: (608.6] | ) | | | [removed: (539.6] [added: (576.8] | ) | | | [removed: (557.6] [added: (539.6] | ) |

| Goodwill impairment | | | — | | | | [removed: (55.2] [added: —] | [removed: )] | | | [removed: —] [added: (55.2] | [added: )] |

| Other expense, net | | | [removed: (54.8] [added: (61.3] | ) | | | [removed: (50.7] [added: (54.8] | ) | | | [removed: (32.7] [added: (50.7] | ) |

| Income from operations | | | [removed: 1,241.4] [added: 1,420.7] | | | | [removed: 723.9] [added: 1,241.4] | | | | [removed: 1,053.7] [added: 723.9] | |

| Non-operating pension income [removed: (expense)] | | | [removed: 19.7] [added: 14.5] | | | | [removed: 2.3] [added: 19.7] | | | | [removed: (7.9] [added: 2.3] | [removed: )] |

| Interest expense, net | | | [removed: (152.4] [added: (70.4] | ) | | | [removed: (93.5] [added: (152.4] | ) | | | [removed: (128.8] [added: (93.5] | ) |

| Income before taxes | | | [removed: 1,108.7] [added: 1,364.8] | | | | [removed: 632.7] [added: 1,108.7] | | | | [removed: 917.0] [added: 632.7] | |

| Provision for income taxes | | | [removed: (267.6] [added: (335.0] | ) | | | [removed: (171.7] [added: (267.6] | ) | | | [removed: (220.6] [added: (171.7] | ) |

| Net income | | $ | [removed: 841.1] [added: 1,029.8] | | | $ | [removed: 461.0] [added: 841.1] | | | $ | [removed: 696.4] [added: 461.0] | |

| Basic | | $ | [removed: 8.87] [added: 11.08] | | | $ | [removed: 4.86] [added: 8.87] | | | $ | [removed: 7.36] [added: 4.86] | |

| Diluted | | $ | [removed: 8.83] [added: 11.03] | | | $ | [removed: 4.84] [added: 8.83] | | | $ | [removed: 7.34] [added: 4.84] | |

| Dividends declared per common share | | $ | [removed: 4.00] [added: 4.75] | | | $ | [removed: 3.37] [added: 4.00] | | | $ | [removed: 3.16] [added: 3.37] | |

| Other comprehensive [removed: income (loss),] [added: (loss) income,] net of tax: | | | | | | | | | | | | |

| Foreign currency translation adjustment | | $ | [removed: 0.4] [added: —] | | | $ | [removed: —] [added: 0.4] | | | $ | — | |

| Changes in unrealized (losses) gains on marketable debt securities, net of tax of [removed: $0.2] [added: $0.5] million, [removed: ($0.1)] [added: $0.2] million, and [removed: $0.0] [added: ($0.1)] million for [added: 2022,] 2021, [removed: 2020,] and [removed: 2019,] [added: 2020,] respectively | | | [removed: (0.5] [added: (1.7] | ) | | | [removed: 0.3] [added: (0.5] | [added: )] | | | [removed: —] [added: 0.3] | |

| Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of [removed: ($3.3)] [added: ($1.5)] million, [removed: ($3.6)] [added: ($3.3)] million, and [removed: ($3.2)] [added: ($3.6)] million for [added: 2022,] 2021, [removed: 2020,] and [removed: 2019,] [added: 2020,] respectively | | | [removed: 10.0] [added: 4.7] | | | | [removed: 10.7] [added: 10.0] | | | | [removed: 9.6] [added: 10.7] | |

| Changes in unfunded employee benefit obligations, net of tax of [removed: ($19.9)] [added: $10.1] million, [removed: ($1.3)] [added: ($19.9)] million, and [removed: $13.6] [added: ($1.3)] million for [added: 2022,] 2021, [removed: 2020,] and [removed: 2019,] [added: 2020,] respectively | | | [removed: 59.4] [added: (30.2] | [added: )] | | | [removed: 4.0] [added: 59.4] | | | | [removed: (40.5] [added: 4.0] | [removed: )] |

| Other comprehensive [removed: income] (loss) [added: income] | | | [removed: 69.3] [added: (27.2] | [added: )] | | | [removed: 15.0] [added: 69.3] | | | | [removed: (20.7] [added: 15.0] | [removed: )] |

| Comprehensive income | | $ | [removed: 910.4] [added: 1,002.6] | | | $ | [removed: 476.0] [added: 910.4] | | | $ | [removed: 675.7] [added: 476.0] | |

| | | [added: 2022 | | | |] 2021 | | | | 2020 | | |

| Cash and cash equivalents | | $ | [removed: 618.7] [added: 320.0] | | | $ | [removed: 974.6] [added: 618.7] | |

| Short-term marketable debt securities | | | [removed: 86.1] [added: 85.2] | | | | [removed: 105.6] [added: 86.1] | |

| Accounts receivable, net of allowance for credit losses and customer deductions of [removed: $14.3] [added: $19.6] million and [removed: $10.6] [added: $14.3] million as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively | | | [removed: 1,071.0] [added: 1,031.8] | | | | [removed: 832.4] [added: 1,071.0] | |

| | February 23, 2023 |

| Net income | | $ | 1,029.8 | | | $ | 841.1 | | | $ | 461.0 | |

| Finance lease obligations | | | 10.8 | | | | 12.7 | |

| Net income | | $ | 1,029.8 | | | $ | 841.1 | | | $ | 461.0 | |

| Common stock repurchases and retirements | | | (4,035 | ) | | | — | | | | (33.5 | ) | | | (489.1 | ) | | | — | | | | | (522.6 | ) |

| Other | | | — | | | | — | | | | (0.4 | ) | | | (0.3 | ) | | | — | | | | | (0.7 | ) |

| Comprehensive income | | | — | | | | — | | | | — | | | | 1,029.8 | | | | (27.2 | ) | | | | 1,002.6 | |

| Balance at December 31, 2022 | | | 89,695 | | | $ | 0.9 | | | $ | 581.8 | | | $ | 3,186.8 | | | $ | (102.4 | ) | | | $ | 3,667.1 | |

In the third quarter of 2021, we began producing corrugating medium on the No. 1 machine at the Jackson mill (which had produced UFS paper in the past) to help satisfy our demand for containerboard, build necessary inventories, and evaluate the capability of the machine to produce containerboard on a cost-effective basis.

PCA is exposed to the impact of commodity price changes, interest rate changes, and changes in the market value of its financial instruments.

To manage these risks, we may, from time to time, enter into transactions, including certain physical commodity transactions, that are determined to be derivatives.

As of December 31, 2022, PCA has entered into master supply contracts, or physical commodity contracts, with suppliers and distributors of natural gas for several of its manufacturing locations.

These physical commodity contracts meet the criteria of derivatives under ASC 815 but qualify for the normal purchase normal sales (“NPNS”) scope exception, which we have elected.

As such, PCA is not required to apply derivative accounting treatment as required in ASC 815 to these physical commodity transactions.

| | | 2022 | | | | 2021 | | |

| | | 2022 | | | | 2021 | | |

For 2020, the incremental depreciation expense related to closures of corrugated products facilities.

In the second quarter of 2020, we recorded an impairment to write off the remaining goodwill balance associated with our Paper segment.

In December 2022, the FASB issued ASU 2022-06, *Reference Rate Reform* (Topic 848): *Deferral of the Sunset Date of Topic 848,* which further extends the relief offered in this series of ASUs through December 31, 2024.

| | 2022 | | | | 2021 | | |

| | 2022 | | | | 2021 | | |

| | 2022 | | | | 2021 | | |

| 2027 | | | 27.9 | | | | 2.7 | |

| Thereafter | | | 52.3 | | | | 1.8 | |

During the second quarter of 2022, we received $1.9 million from the seller related to a final working capital adjustment.

We recorded the adjustment as a decrease to goodwill, which decreased the purchase price to $193.0 million.

The Company accounted for the Advance Packaging acquisition using the acquisition method of accounting in accordance with ASC 805, *Business Combinations*.

The total purchase price has been allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values, as follows (dollars in millions):

| | | 12/31/2021 Allocation | | | | Adjustments | | | | Revised Allocation | | |

| Goodwill | | $ | 60.0 | | | $ | (1.0 | ) | | $ | 59.0 | |

| Other intangible assets | | | 50.2 | | | | (1.4 | ) | | | 48.8 | |

| Property, plant and equipment | | | 66.7 | | | | 0.5 | | | | 67.2 | |

| Other net assets | | | 18.0 | | | | — | | | | 18.0 | |

| Net assets acquired | | $ | 194.9 | | | $ | (1.9 | ) | | $ | 193.0 | |

Goodwill is calculated as the excess of the purchase price over the fair value of the net assets acquired.

Among the factors that contributed to the recognition of goodwill were Advance Packaging's commitment to continuous improvement and synergies, as well as the expected increases in PCA's containerboard integration levels.

Goodwill is deductible for tax purposes.

Other intangible assets, primarily customer relationships, were assigned an estimated weighted average useful life of 12.8 years.

Property, plant, and equipment were assigned estimated useful lives ranging from one to 20 years.

| Net income | | $ | 1,029.8 | | | $ | 841.1 | | | $ | 461.0 | |

The Company acquired Advance Packaging Corporation during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Advance Packaging Corporation’s internal control over financial reporting associated with approximately 3% of the Company’s consolidated total assets and less than 1% of consolidated net sales included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Advance Packaging Corporation.

| | February 24, 2022 |

| Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.0 million, $0.0 million, and ($7.9) million for 2021, 2020, and 2019, respectively | | | — | | | | — | | | | 10.2 | |

| Balance at January 1, 2019 | | | 94,497 | | | $ | 0.9 | | | $ | 494.5 | | | $ | 2,315.8 | | | $ | (138.8 | ) | | | $ | 2,672.4 | |

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

Before October 2020, operating results for the Jackson mill were included in the Paper segment.

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

Research and Development

Research and development costs are expensed as incurred.

Derivative Instruments and Hedging Activities

We were not party to any derivative-based arrangements at December 31, 2021 and 2020.

For 2020, the incremental depreciation expense related to closures of corrugated products facilities, while the incremental depreciation expense for 2019 primarily related to the second quarter 2018 discontinuation of paper grades at the Wallula, Washington mill associated with the conversion of the No. 3 paper machine to produce virgin kraft linerboard.

The recoverability test was based on forecasts of undiscounted cash flows.

The results of the recoverability test indicated that the long-lived assets within our Paper segment, inclusive of property, plant, and equipment, were 100% recoverable.

During the second quarter of 2020, with the exacerbated deterioration in uncoated freesheet market conditions arising from the COVID-19 pandemic and the estimated impact on our Paper segment and its projected future results of operations, we identified a triggering event indicating possible impairment of goodwill within our Paper reporting unit and performed an interim quantitative impairment analysis as of May 31, 2020.

Based on the evaluation performed, we determined that the carrying value of the Paper reporting unit exceeded its fair value, which resulted in a goodwill impairment charge totaling $55.2 million.

The amount of depletion expense was $2.0 million, $3.1 million, and $2.7 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The Company is currently evaluating the impact of this guidance but does not expect the guidance to have a significant impact on the Company's financial position, results of operations, or cash flow.

The optional guidance will only be available until December 31, 2022.

| Total finance lease obligations | $ | 14.4 | | | $ | 16.0 | |

| 2022 | | $ | 73.6 | | | $ | 2.7 | |

| Thereafter | | | 38.4 | | | | 4.4 | |

We have estimated the allocation of the purchase price to the assets acquired and liabilities assumed based on estimates of the fair value at the date of acquisition, of which $66.7 million was allocated to property, plant, and equipment, $60.0 million was allocated to goodwill (which is deductible for tax purposes) and $50.2 million to intangible assets (to be amortized over a weighted average life of approximately 9.7 years), primarily customer relationships, in the Packaging segment.

The purchase price continues to be preliminary, as estimates and assumptions are subject to change as more information becomes available.

Had the acquisition occurred at the beginning of 2020, the Company's net sales would have been $7.8 billion and $6.8 billion for 2021 and 2020, respectively.

| Wallula mill restructuring (d) | | | — | | | | — | | | | (0.7 | ) |

to the sale of a closed corrugated products facility during the second quarter of 2020.

(b)

(c)

Includes charges related to the discontinuation of production of uncoated free sheet and coated one-side white paper grades at the Wallula, Washington mill in the second quarter of 2018 and the conversion of the No. 3 paper machine to produce virgin kraft linerboard.

For additional information regarding the impairment of goodwill within our Paper reporting unit, see Note 9, Goodwill and Intangible Assets.

| Total | | $ | 24.0 | | | $ | 0.1 | | | $ | 0.1 | | | $ | 24.2 | |

As of December 31, 2021, we did not recognize U.S. deferred income taxes on our cumulative total of undistributed foreign earnings for our foreign subsidiaries.

We indefinitely reinvest our earnings in operations outside the United States.

It is not practicable to determine the amount of unrecognized deferred tax liability on these undistributed earnings because the actual tax liability, if any, is dependent on circumstances existing when the repatriation occurs.

At December 31, 2021 and 2020, we had no goodwill recorded in our Paper segment on our Consolidated Balance Sheets.

| | | Packaging | | | | Paper | | | | Goodwill | | |

| Impairment of Paper segment | | | — | | | | (55.2 | ) | | | (55.2 | ) |

| Balance at December 31, 2020 | | | 863.5 | | | | — | | | | 863.5 | |

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: 2021.][added: 2022.]

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: 2021.][added: 2022.]

[removed: Except as may relate to] [added: During] the [removed: Advance Packaging acquisition,] [added: quarter ended December 31, 2022,] there were no [removed: other] changes [removed: in our] [added: to] internal [removed: control] [added: controls] over financial reporting [removed: (as defined in Rule 13a-15(f) under the Exchange Act)] that [removed: occurred during the most recent fiscal quarter ended December 31, 2021 that] have materially affected, or are reasonably likely to materially affect, [removed: our] [added: 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: 2021,] [added: 2022,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, [removed: and excluding the operations acquired from Advance Packaging,] PCA’s management concluded that its internal control over financial reporting was effective as of December 31, [removed: 2021,] [added: 2022] based on the specified criteria.

Changes in Internal Control over Financial Reporting

On December 10, 2021, PCA acquired Advance Packaging Corporation ("Advance Packaging").

We are currently in the process of evaluating and integrating Advance Packaging's controls over financial reporting which may result in changes or additions to PCA's internal control over financial reporting.

Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company.

We excluded Advance Packaging from the assessment of internal control over financial reporting at December 31, 2021.

As of and for the year ended December 31, 2021, Advance Packaging accounted for approximately 3% of the Company's consolidated total assets and less than 1% of consolidated net sales.

The following information required by this Item 10 will be included in PCA’s Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Stockholders and is incorporated by reference herein:

Information with respect to executive compensation required by this Item 11 will be included in PCA’s Proxy Statement under the captions “Compensation Discussion and Analysis,” [added: "Compensation Committee Report,"] “Executive Officer [removed: and Director] Compensation” (including all subcaptions and tables [removed: thereunder)] [added: thereunder), "Director Compensation,"] and “Board Committees - Compensation Committee” and is incorporated herein by reference.

*Authorization of Securities under Equity Compensation Plans —* Securities authorized for issuance under our equity compensation plans at December 31, [removed: 2021] [added: 2022] are as follows:

| Equity compensation plans approved by securityholders | | | — | | | $ | — | | | | [removed: 1,317,879] [added: 1,010,073] | |

Does not include [removed: 1,009,540] [added: 1,014,363] shares of unvested restricted stock and performance units granted pursuant to our Amended and Restated 1999 Long-Term Equity Incentive Plan.

| Total | | | — | | | $ | — | | | | 1,010,073 | |

| Total | | | — | | | $ | — | | | | 1,317,879 | |

| 10.4 | | [Packaging Corporation of America Supplemental Executive Retirement Plan, as Amended and Restated Effective as of [removed: February 27, 2019. (Incorporated herein by reference to Exhibit 10.4 to PCA's Annual Report on Form 10-K for the year ended December 31, 2019, File No. 1-15399).*](https://www.sec.gov/Archives/edgar/data/75677/000156459020006774/pkg-ex104_432.htm)] [added: January 1, 2023.*†](https://www.sec.gov/Archives/edgar/data/75677/000095017023003990/pkg-ex10_4.htm)] |

| 21.1 | | [Subsidiaries of the [removed: Registrant.†](https://www.sec.gov/Archives/edgar/data/75677/000095017022001913/pkg-ex21_1.htm)] [added: Registrant.†](https://www.sec.gov/Archives/edgar/data/75677/000095017023003990/pkg-ex21_1.htm)] |

| 23.1 | | [Consent of KPMG [removed: LLP.†](https://www.sec.gov/Archives/edgar/data/75677/000095017022001913/pkg-ex23_1.htm)] [added: LLP.†](https://www.sec.gov/Archives/edgar/data/75677/000095017023003990/pkg-ex23_1.htm)] |

| 24.1 | | [Powers of [removed: Attorney.†](https://www.sec.gov/Archives/edgar/data/75677/000095017022001913/pkg-ex24_1.htm)] [added: Attorney.†](https://www.sec.gov/Archives/edgar/data/75677/000095017023003990/pkg-ex24_1.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/75677/000095017022001913/pkg-ex31_1.htm)] [added: 2002.†](https://www.sec.gov/Archives/edgar/data/75677/000095017023003990/pkg-ex31_1.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/75677/000095017022001913/pkg-ex31_2.htm)] [added: 2002.†](https://www.sec.gov/Archives/edgar/data/75677/000095017023003990/pkg-ex31_2.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/75677/000095017022001913/pkg-ex32.htm)] [added: 2002.†](https://www.sec.gov/Archives/edgar/data/75677/000095017023003990/pkg-ex32.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: 24, 2022.][added: 23, 2023.]

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February [removed: 24, 2022,] [added: 23, 2023,] by the following persons on behalf of the registrants and in the capacities indicated.

| | | |

| * | | |

| James D. Woodrum | | Director |