UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 11-K

(Mark One)
x		ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
or
o		TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to

Commission file number 1-15399

A.                                                                                   Full title of the plan and the address of the plan, if different from that of the issuer named below:

Packaging Corporation of America

Thrift Plan for Hourly Employees

B.                                                                                     Name of the issuer of the securities held pursuant to the plan and the address of its principal executive office:

Packaging Corporation of America
1900 West Field Court
Lake Forest, IL 60045

 

Packaging Corporation of America
Thrift Plan for Hourly Employees

				Page
A.		Financial Statements
		Report of Independent Registered Public Accounting Firm		3
		Financial Statements:
		Statements of Net Assets Available for Benefits		4
		Statements of Changes in Net Assets Available for Benefits		5
		Notes to Financial Statements		6
B.		Supplemental Schedule
		Schedule H, Line 4i - Schedule of Assets (Held at End of Year)		10
C.		Exhibit
		Item 23.1 Consent of Independent Registered Public Accounting Firm		12

 

2

Report of Independent Registered Public Accounting Firm

Benefits Administration Committee
Packaging Corporation of America Thrift Plan for Hourly Employees

We have audited the accompanying statements of net assets available for benefits of the Packaging Corporation of America Thrift Plan for Hourly Employees as of December 31, 2006 and 2005, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2006 and 2005, and the changes in its net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2006 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/ Ernst & Young LLP

 

Chicago, Illinois
June 14, 2007

3

Packaging Corporation of America
Thrift Plan for Hourly Employees
Statements of Net Assets Available for Benefits

		December 31,
		2006			2005
Assets
Interest in Master Trust		$	111,348,372		$	97,656,789
Participant loans		2,756,043			2,340,245
Contributions receivable:
Company		51,156			54,536
Participant		187,172			200,725
		114,342,743			100,252,295
Liabilities
Administrative expenses		28,729			27,839
Refund of excess contributions		22,063			20,268
		50,792			48,107
Net assets at fair value		114,291,951			100,204,188
Adjustment from fair value to contract value		846,133			548,039
Net assets available for benefits		$	115,138,084		$	100,752,227

 

See accompanying notes.

4

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Packaging Corporation of America
Thrift Plan for Hourly Employees
Statements of Changes in Net Assets Available for Benefits

		Year Ended December 31,
		2006			2005
Additions
Contributions:
Participants		$	8,383,250		$	7,875,133
Company		2,297,068			2,175,909
Rollover		106,724			161,235
Net investment income from Master Trust		9,495,655			6,305,710
Interest income from participant loans		144,546			96,126
Total additions		20,427,243			16,614,113
Deductions
Benefit payments		5,851,269			5,516,165
Administrative expenses		190,117			193,771
Total deductions		6,041,386			5,709,936
Net increase		14,385,857			10,904,177
Net assets available for benefits:
Beginning of year		100,752,227			89,848,050
End of year		$	115,138,084		$	100,752,227

 

See accompanying notes.

5

Packaging Corporation of America
Thrift Plan for Hourly Employees
Notes to Financial Statements
December 31, 2006 and 2005

1.                 Description of the Plan

The following description of the Packaging Corporation of America (the Company or PCA) Thrift Plan for Hourly Employees (the Plan) provides general information. Participants should refer to the applicable Summary Plan Description, including the special appendix sections (Special Appendix) for a more complete description of eligibility requirements, contribution limits, Company matching contributions, and vesting provisions.

General

The Plan is a defined-contribution plan, established February 1, 2000, and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. The Plan covers eligible hourly employees of the Company, its subsidiaries, and the covered groups that have adopted the Plan.

Contributions

Eligible employees electing to participate in the Plan may make salary deferral contributions through payroll deductions based upon the deferral percentage limits specified in each covered location’s Special Appendix, with such contributions limited to $15,000 in 2006 and $14,000 in 2005 for employees under age 50 and $20,000 in 2006 and $18,000 in 2005 for employees age 50 and older. The Company contributes on behalf of the participants a matching contribution equal to an amount detailed in each location’s Special Appendix. The Company matching contributions are invested in the Plan’s investment funds based on the participant investment elections.

Participant Accounts

Each participant’s account is credited with the participant’s contributions, Company contributions, and an allocation of Plan earnings (losses) and is charged with an allocation of administrative expenses. Allocations are based on each participant’s account balance, as defined, in relation to the balance of all participants’ account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.

Vesting

Participants are immediately 100% vested in the value of their pre-tax contributions and rollovers from other qualified plans.

The Company’s matching contribution vests in accordance with the schedule detailed in each covered location’s Special Appendix. Upon attainment of age 65, or termination of employment due to death or permanent disability, a participant will become 100% vested in the Company matching contributions. Forfeited non-vested accounts are applied to reduce future Company contributions.

Investment Options

Participants may elect to invest their account balances in any of the available investment options provided by the Plan. Participants may change their investment options on any business day, subject to certain short-term trading restrictions outlined in the Summary Plan Description.

Benefit Payments

In the event of retirement, as defined, death, permanent disability, or termination of employment, the vested balance in the participant’s account will be distributed to the participant or the participant’s beneficiary in a single lump-sum cash payment. The portion of the participant’s account invested in the PCA Common Stock Fund will be distributed in kind unless elected to be distributed in cash.

6

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Certain participants, as specified in each covered location’s Special Appendix, who have attained age 55 may elect an in-service withdrawal from their vested Company matching contribution account. Participants, as specified in each location’s Special Appendix, who have attained age 59½ may elect to withdraw all or part of their account balance.

Certain participants, as specified in each covered location’s Special Appendix, may, subject to the approval of the Plan Administrator, make a hardship withdrawal from their salary deferral contributions. A hardship withdrawal can only be made in the event of a financial need constituting a hardship.

Administrative Expenses

Administrative expenses are paid from Plan assets, to the extent not paid by the Company.

Participant Loans

Certain participants, as specified in each covered location’s Special Appendix, may borrow an amount up to the lesser of $50,000 or 50% of their vested account balance. The minimum loan amount is $1,000. Such loans bear interest at the prime rate as published by the Wall Street Journal and are secured by a participant’s account balance in the Plan. Loans must be repaid within 54 months with principal and interest payments made primarily through payroll deductions. Employees on unpaid leave may continue to repay loans via personal check or money order during their period of absence. Participants also have the ability to elect to make a one-time prepayment of their outstanding loan balance, of which payment can be made via personal check or money order.

Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts.

2.                 Significant Accounting Policies

Basis of Accounting

The financial statements have been prepared on the accrual basis of accounting.

Investment Valuation and Income Recognition

The Plan’s beneficial interest in the PCA Defined Contribution Master Trust (Master Trust) represents the Plan’s share of the Master Trust’s investments stated at fair value. Securities traded on a national securities exchange are valued by the Master Trust at the last reported sales price on the last business day of the plan year, and investments traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued by the Master Trust at the average of the last reported bid and ask prices. The fair value of mutual funds and the commingled fund were based on quoted redemption values on the last business day of the Plan’s fiscal year. The fair value of the units owned by the Master Trust in the common collective trust fund is based on fair value of the underlying investments as determined by the fund sponsor. Participant loans are stated at their unpaid principal balance, which approximates fair value.

Purchases and sales of securities are recorded on settlement date. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

7

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In December 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position AAG INV-1 and SOP 94-4-1, “Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans” (the FSP).  The FSP defines the circumstances in which an investment contract is considered fully benefit and responsive and provides certain reporting and disclosure requirements for fully benefit responsive investment contracts in defined contribution health and welfare and pension plans.  The financial statement presentation and disclosure provisions of the FSP are effective for financial statements issued for annual periods ending after December 15, 2006 and are required to be applied retroactively to all prior periods presented for comparative purposes.  The Plan has adopted the provisions of the FSP at December 31, 2006.

As required by the FSP, investments in the accompanying statement of net assets available for benefits include fully benefit responsive contracts recognized at fair value.  AICPA Statement of Position 94-4-1, “Reporting of Invesment Contracts Held by Health and Welfare Benefit Plans and Defined Contribution Pensions Plans”, as amended, requires fully benefit responsive investment contracts to be reported at fair value in the Plan’s statement of net assets available for benefits with a corresponding adjustment to reflect these investments at contract value.  The requirements of the FSP have been applied retroactively to the statement of net assets available for benefits as of December 31, 2005 presented for comparative purposes.  Adoption of the FSP had no effect on the statement of changes in net assets available for benefits for any period presented.

Contributions

Participant contributions are made through payroll deductions and recorded in the period the deductions are made. Company contributions are deposited as soon as administratively practicable after each pay period.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Plan Administrator to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassification

Certain amounts in the 2005 financial statements have been reclassified to conform with the 2006 presentation.

3.                 Master Trust

The Master Trust includes assets of the Plan and the Packaging Corporation of America Retirement Savings Plan for Salaried Employees. The Plan’s investment in the Master Trust is stated at the Plan’s equity in the assets of the Master Trust at December 31, 2006 and 2005.

The following table presents investments held by the Master Trust:

		December 31,
		2006			2005
Assets
Mutual funds		$	157,446,532		$	130,999,710
Common collective trust fund		76,116,034			71,958,422
Other common stocks		11,416,915			8,637,299
PCA common stock fund:
PCA common stock		36,845,796			34,924,240
Short-term investment fund		607,230			664,173
Commingled fund		21,754,485			17,173,176
Short-term investment fund		506,462			285,660
Total assets at fair value		304,693,454			264,642,680
Adjustment from fair value to contract value		1,702,420			1,134,021
Total assets at contract value		$	306,395,874		$	265,776,701
Plan’s percentage interest in Master Trust at December 31, 2006 and 2005		36.54		%	36.90		%

 

 

8

Investment income is allocated to each participating plan in the Master Trust at the end of each month. The allocation is based on each plan’s individual interest in the Master Trust.

Investment income for the Master Trust was as follows:

		Year Ended December 31,
		2006			2005
Interest income		$	3,729,616		$	3,313,260
Dividends		2,707,182			2,180,471
Other income		353,930			243,743
Net realized and unrealized appreciation (depreciation) in fair value of:
Mutual funds		14,139,617			9,935,761
Other common stocks		3,189,535			(1,173,041		)
PCA common stock		2,873,200			(314,877		)
Commingled fund		(532		)	823,092
Total investment income		$	26,992,548		$	15,008,409

 

4.                 Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated May 9, 2001, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended and restated. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended and restated, is qualified and the related trust is tax exempt.

5.                 Risks and Uncertainties

The Master Trust invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

6.                 Differences Between Financial Statements and Form 5500

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

 

The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500 for the year ended December 31, 2006:

 

Amounts allocated to withdrawn participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to year-end but not yet paid.

9

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Supplemental Schedule

Packaging Corporation of America
Thrift Plan for Hourly Employees

Schedule H, Line 4i — Schedule of Assets
(Held at End of Year)

December 31, 2006

Description of Issue		Current Value
Participant loans — Interest rates ranging from 4.00% to 8.25% *		$	2,756,043

*                    Represents a party in interest to the plan.

10

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SIGNATURES

The Plan.  Pursuant to the requirements of the Securities Exchange Act of 1934, the Benefits Administration Committee of Packaging Corporation of America has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

		Packaging Corporation of America Thrift Plan for Hourly Employees (Name of Plan)
Date: June 26, 2007
		/s/ STEPHEN T. CALHOUN
		Stephen T. Calhoun Vice President-Human Resources

 

11

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INDEX TO EXHIBIT

Exhibit Number		Description
23.1		Consent of Independent Registered Public Accounting Firm

 

12

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-33176) pertaining to Packaging Corporation of America Thrift Plan for Hourly Employees, Packaging Corporation of America Retirement Savings Plan for Salaried Employees, and Packaging Corporation of America 1999 Long-Term Equity Incentive Plan of our report dated June 14, 2007, with respect to the financial statements and supplemental schedule of Packaging Corporation of America Thrift Plan for Hourly Employees included in this Annual Report (Form 11-K) for the year ended December 31, 2006.

/s/ Ernst & Young LLP

 

Chicago, Illinois
June 20, 2007