Commitments, Guarantees, Indemnifications, and Legal Proceedings

We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt (discussed in Note 9, Debt), capital commitments, lease obligations, purchase commitments for goods and services, and legal proceedings (discussed below).

Capital Commitments

The Company had capital commitments of approximately $94.7 million and $83.7 million as of December 31, 2016 and 2015, 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 75,000 acres of timberland, land for a fiber farm, and equipment, primarily vehicles and rolling stock. Remaining lease terms average 14 years and may contain renewal options or escalation clauses. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to purchase the leased property. Additionally, some agreements contain renewal options averaging approximately six years. 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 were as follows (dollars in millions):



2017	$	64.4
2018	54.4
2019	41.8
2020	26.2
2021	19.1
Thereafter	48.4
Total	$	254.3

Total lease expense, including base rent on all leases and executory costs, such as insurance, taxes, and maintenance, for the years ended December 31, 2016, 2015, and 2014, was $88.3 million, $87.9 million and $85.6 million, respectively. These costs are included in "Cost of sales" and "Selling, general, and administrative expenses" in our Consolidated Statements of Income. We had an insignificant amount of sublease rental income in the periods presented.

PCA was obligated under capital leases covering buildings and machinery and equipment in the amount of $21.6 million and $22.8 million at December 31, 2016 and 2015, respectively. Assets held under capital lease obligations were included in property, plant, and equipment as follows (dollars in millions):



	Year Ended December 31
	2016			2015
Buildings	$	0.3		$	0.3
Machinery and equipment	28.5			28.5
Total	28.8			28.8
Less accumulated amortization	(13.7		)	(12.2		)
Total	$	15.1		$	16.6

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

The future minimum payments under capitalized leases at December 31, 2016 were as follows (dollars in millions):



2017	$	2.7
2018	2.7
2019	2.7
2020	2.7
2021	2.7
Thereafter	17.7
Total minimum capital lease payments	31.2
Less amounts representing interest	(9.6		)
Present value of net minimum capital lease payments	21.6
Less current maturities of capital lease obligations	(1.3		)
Total long-term capital lease obligations	$	20.3

Interest expense related to capital lease obligations was $1.5 million during the year ended December 31, 2016, and $1.6 million during both years ended December 31, 2015 and 2014.

Purchase Commitments

In the table below, we set forth our enforceable and legally binding purchase obligations as of December 31, 2016. Some of the amounts are based on management's estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties, and other factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table. Purchase orders made in the ordinary course of business are excluded below. Any amounts for which we are liable under purchase orders are reflected on the Consolidated Balance Sheets as accounts payable and accrued liabilities. These obligations relate to various purchase agreements for items such as minimum amounts of fiber and energy purchases over periods ranging from one year to 22 years. Total purchase commitments were as follows (dollars in millions):



2017	$	93.4
2018	34.0
2019	27.8
2020	21.4
2021	17.7
Thereafter	45.7
Total	$	240.0

The Company purchased a total of $362.0 million, $299.6 million, and $265.9 million during the years ended December 31, 2016, 2015, and 2014, respectively, under these purchase agreements.

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 2006 through 2016, there were no significant environmental remediation costs at PCA's mills and corrugated plants. At December 31, 2016, the Company had $25.3 million of environmental-related reserves recorded on its Consolidated Balance Sheet. Of the $25.3 million, approximately $17.2 million related to environmental-related asset retirement obligations discussed in Note 11, Asset Retirement Obligations, and $8.1 million related to our estimate of other environmental contingencies. The Company recorded $6.4 million in "Accrued liabilities" and $18.9 million in "Other long-term liabilities" on the Consolidated Balance Sheet. 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. The Company believes that it is not reasonably possible that future environmental expenditures for remediation costs and asset retirement obligations above the $25.3 million accrued as of December 31, 2016, will have a material impact on its financial condition, results of operations, or cash flows.

Guarantees and Indemnifications

We provide guarantees, indemnifications, and other assurances to third parties in the normal course of our business. These include tort indemnifications, environmental assurances, and representations and warranties in commercial agreements. At December 31, 2016, we are not aware of any material liabilities arising from any guarantee, indemnification, or financial assurance we have provided. If we determined such a liability was probable and subject to reasonable determination, we would accrue for it at that time.

Legal proceedings

During 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 were 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 October 2010 (the time of filing of the complaint). The complaint was filed as a class action suit on behalf of all purchasers of containerboard products during such period. In 2014, we settled the class action lawsuit for $17.6 million. These costs were recorded in "Other expense, net" in our Consolidated Statement of Income for the year ended December 31, 2014.

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