12.

COMMITMENTS AND CONTINGENCIES

Capital Commitments

The Company had authorized capital commitments of approximately $27.0 million and $40.4 million as of December 31, 2012 and 2011, respectively, in connection with the expansion and replacement of existing facilities and equipment.

Lease Obligations

PCA leases space for certain of its facilities, cutting rights to approximately 88,000 acres of timberland, and equipment, primarily vehicles and rolling stock. Lease terms range from one to 11 years and may contain renewal options or escalation clauses. Some leases may require the Company to pay executory costs, which may include property taxes, maintenance and insurance. The minimum lease payments under non-cancelable operating leases with lease terms in excess of one year are as follows:


	(In thousands)
2013	$	33,888
2014		30,558
2015		22,279
2016		14,927
2017		10,645
Thereafter		66,080

Total	$	178,377

Total lease expense, including base rent on all leases and executory costs, such as insurance, taxes, and maintenance, for the years ended December 31, 2012, 2011 and 2010 was $49.4 million, $46.1 million and $42.0 million, respectively. These costs are included in cost of goods sold and selling and administrative expenses.

PCA was obligated under capital leases covering buildings and machinery and equipment in the amount of $25.9 million and $21.8 million at December 31, 2012 and 2011, respectively. Assets held under capital lease obligations are included in property, plant and equipment as follows:


	December 31,
	2012			2011
	(In thousands)
Buildings	$	250		$	250
Machinery and equipment		28,526			23,602

Total		28,776			23,852
Less accumulated amortization		(6,845	)		(5,028	)

Total	$	21,931		$	18,824

Amortization of assets under capital lease obligations is included in depreciation expense.

The future minimum payments under capitalized leases at December 31, 2012 are as follows:


	(In thousands)
2013	$	2,654
2014		2,654
2015		2,654
2016		2,654
2017		2,654
Thereafter		28,528

Total minimum capital lease payments		41,798
Less amounts representing interest		(15,930	)

Present value of net minimum capital lease payments		25,868
Less current maturities of capital lease obligations		964

Total long-term capital lease obligations	$	24,904

Interest paid as part of the capital lease obligations was $1.7 million, $1.5 million, and $1.6 million during the years ended December 31, 2012, 2011 and 2010, respectively.

Purchase Commitments

The Company has entered into various purchase agreements for minimum amounts of pulpwood processing and energy over periods ranging from one to 16 years at fixed prices. Total purchase commitments are as follows:


	(In thousands)
2013	$	5,960
2014		4,903
2015		1,486
2016		1,486
2017		1,486
Thereafter		15,980

Total	$	31,301

The Company purchased a total of $27.7 million, $28.5 million, and $32.8 million during the years ended December 31, 2012, 2011 and 2010, respectively, under these purchase agreements.

Litigation

During September and October 2010, PCA and eight other U.S. and Canadian containerboard producers were named as defendants in five purported class action lawsuits filed in the United States District Court for the Northern District of Illinois, alleging violations of the Sherman Act. The lawsuits have been consolidated in a single complaint under the caption Kleen Products LLC v Packaging Corp. of America et al. The consolidated complaint alleges that the defendants conspired to limit the supply of containerboard, and that the purpose and effect of the alleged conspiracy was to artificially increase prices of containerboard products during the period of August 2005 to the time of filing of the complaint. The complaint was filed as a purported class action suit on behalf of all purchasers of containerboard products during such period. The complaint seeks treble damages and costs, including attorney’s fees. The defendants’ motions to dismiss the complaint were denied by the court in April 2011. PCA believes the allegations are without merit and will defend this lawsuit vigorously. However, as the lawsuit is in the document production phase of discovery, PCA is unable to predict the ultimate outcome or estimate a range of reasonably possible losses.

PCA is a party to various other legal actions arising in the ordinary course of business. These legal actions cover a broad variety of claims spanning our entire business. As of the date of this filing, the Company believes it is not reasonably possible that the resolution of these legal actions will, individually or in the aggregate, have a material adverse effect on its financial position, results of operations, or cash flows.

Environmental Liabilities

The potential costs for various environmental matters are uncertain due to such factors as the unknown magnitude of possible cleanup costs, the complexity and evolving nature of governmental laws and regulations and their interpretations, and the timing, varying costs and effectiveness of alternative cleanup technologies. From 1994 through 2012, remediation costs at the Company’s mills and corrugated plants totaled approximately $3.2 million. As of December 31, 2012, the Company maintained an environmental reserve of $11.7 million (of which $11.1 million is included in “Other long-term liabilities” on PCA’s consolidated balance sheet), relating to on-site landfills (see Note 13) and surface impoundments as well as ongoing and anticipated remedial projects. Liabilities recorded for environmental contingencies are estimates of the probable costs based upon available information and assumptions. Because of these uncertainties, PCA’s estimates may change. As of the date of this filing, the Company believes that it is not reasonably possible that future environmental expenditures for remediation costs and asset retirement obligations above the $11.7 million accrued as of December 31, 2012, will have a material impact on its financial condition, results of operations, or cash flows.