Packaging Corporation of America Reports Record First Quarter 2014 Results
The
In PCA’s packaging segment, box shipments were up 31% over the first
quarter of last year and up 29% per workday with one additional workday
in the first quarter of 2014. Excluding
In PCA’s paper segment, office paper shipments were up 5.5% over the
first quarter of last year, or about 10,000 tons, but down about 20,000
tons in printing and converting and pressure sensitive grades as a
result of last year’s capacity rationalization at the
Commenting on reported results,
“Looking ahead to the second quarter,” Mr. Kowlzan added, “we expect
higher volume in corrugated products, higher prices in white papers, and
lower fuel consumption with warmer weather. Three of our mills will be
down for annual maintenance outages in the second quarter, compared to
only one mill down in the first quarter, which will result in increased
costs and lower production. We expect higher medical and worker’s
compensation costs compared to the abnormally low costs experienced in
the first quarter, and higher electricity costs with normal seasonal
rate increases. In addition, earnings will be reduced with recognition
of the remaining earnings impact from the first quarter extreme weather
conditions and a higher tax rate. Considering these items, we currently
expect second quarter earnings of about
PCA is the fourth largest producer of containerboard and corrugated
packaging products in
Conference Call Information: |
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WHAT: |
Packaging Corporation of America’s 1st Quarter 2014 Earnings | ||
Conference Call | |||
WHEN: |
Wednesday, April 23, 2014 | ||
10:00 a.m. Eastern Time | |||
CALL-IN |
(855) 730-0288 (U.S. and Canada) or (832) 412-2295 (International) | ||
NUMBER: |
Dial in by 9:45 a.m. Eastern Time | ||
Conference Call Leader: Mr. Mark Kowlzan | |||
WEBCAST: |
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REBROADCAST DATES: |
April 23, 2014 1:00 p.m. Eastern Time through | ||
May 7, 2014 11:59 p.m. Eastern Time | |||
REBROADCAST NUMBERS: |
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) | ||
Passcode: 35494224 | |||
Some of the statements in this press release are forward-looking
statements. Forward-looking statements include statements about our
future earnings and financial condition, our industry and our business
strategy. Statements that contain words such as “ will”, “should”,
“anticipate”, “believe”, “expect”, “intend”, “estimate”, “hope” or
similar expressions, are forward-looking statements. These
forward-looking statements are based on the current expectations of PCA.
Because forward-looking statements involve inherent risks and
uncertainties, the plans, actions and actual results of PCA could differ
materially. Among the factors that could cause plans, actions and
results to differ materially from PCA’s current expectations include the
following: the impact of general economic conditions; conditions in the
paper and packaging industries, including competition, product demand
and product pricing; fluctuations in wood fiber and recycled fiber
costs; fluctuations in purchased energy costs; the possibility of
unplanned outages or interruptions at our principal facilities; and
legislative or regulatory requirements, particularly concerning
environmental matters, as well as those identified under Item 1A. Risk
Factors in PCA’s Annual Report on Form 10-K for the year ended
Non-GAAP measures used in this press release are reconciled to the most comparable measure reported in accordance with GAAP in the schedules to this press release.
Packaging Corporation of America | |||||||||
Consolidated Earnings Results | |||||||||
Unaudited | |||||||||
(dollars in millions, except per-share data) | |||||||||
Three Months Ended | |||||||||
March 31 | |||||||||
2014 (1) | 2013 (2) | ||||||||
Net sales | $ | 1,431.3 | $ | 755.2 | |||||
Cost of sales | (1,129.9 | ) |
(3) |
(570.0 | ) | ||||
Gross profit | 301.4 | 185.2 | |||||||
Selling, general, and administrative expenses | (116.5 | ) | (75.3 | ) | |||||
Other expense, net | (24.0 | ) |
(3) |
(3.9 | ) | ||||
Income from operations | 160.9 | 106.0 | |||||||
Interest expense, net | (20.8 | ) | (9.3 | ) | |||||
Income before taxes | 140.1 | 96.7 | |||||||
Provision for income taxes | (50.0 | ) | (34.4 | ) | |||||
Net income | $ | 90.1 | $ | 62.3 | |||||
Earnings per share: | |||||||||
Basic | $ | 0.92 | $ | 0.65 | |||||
Diluted | $ | 0.92 | $ | 0.64 | |||||
Supplemental financial information: | |||||||||
Capital spending | $ | 50.9 | $ | 27.3 | |||||
Cash balance | $ | 185.7 | $ | 268.0 | |||||
(1) On October 25, 2013, we acquired Boise Inc. (Boise). The first quarter 2014 consolidated earnings results include Boise for the full period. | |||||||||
(2) Effective January 1, 2014, the Company elected to change its method of accounting for inventories from lower of cost, as determined by the LIFO method, or market, to lower of cost, as determined by the average cost method, or market. The Company has applied this change in method of inventory costing retrospectively to all prior periods presented herein in accordance with US generally accepted accounting principles relating to accounting changes. For more information, see Note 2, Change in Accounting Principle, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in our March 31, 2014, Form 10-Q which we plan to file on or about May 8, 2014. | |||||||||
(3) The three months ended March 31, 2014, includes $4.1 million of integration-related costs recorded in "Other expense, net". | |||||||||
In March 2014, we announced our plan to restructure the DeRidder, Louisiana, mill and convert the Number 3 newsprint machine (D3) to a lightweight linerboard and corrugated medium machine. The three months ended March 31, 2014, includes $4.0 million of restructuring charges, of which $2.9 million is recorded in "Cost of sales" and $1.1 million is recorded in "Other expense, net". | |||||||||
The three months ended March 31, 2014, includes $17.6 million of costs accrued for the settlement of the Kleen Products LLC v Packaging Corp. of America et al class action lawsuit. These costs are recorded in “Other expense, net.” | |||||||||
1 |
Packaging Corporation of America | ||||||||
Segment Information | ||||||||
Unaudited | ||||||||
(dollars in millions) | ||||||||
Three Months Ended | ||||||||
March 31 | ||||||||
2014 (1) | 2013 (2) | |||||||
Segment sales (3) | ||||||||
Packaging | $ | 1,097.4 | $ | 755.2 | ||||
Paper | 309.3 | — | ||||||
Intersegment eliminations and other | 24.6 | — | ||||||
$ | 1,431.3 | $ | 755.2 | |||||
Segment income (loss) (3) | ||||||||
Packaging | $ | 170.7 | $ | 117.9 | ||||
Paper | 27.7 | — | ||||||
Corporate and Other | (37.5 | ) | (11.9 | ) | ||||
Income from operations | 160.9 | 106.0 | ||||||
Interest expense, net | (20.8 | ) | (9.3 | ) | ||||
Income before taxes | $ | 140.1 | $ | 96.7 | ||||
Segment income (loss) excluding special items (3)(4) | ||||||||
Packaging | $ | 174.7 | $ | 117.9 | ||||
Paper | 28.4 | — | ||||||
Corporate and Other | (16.5 | ) | (11.9 | ) | ||||
$ | 186.6 | $ | 106.0 | |||||
EBITDA (3)(4) | ||||||||
Packaging | $ | 240.3 | $ | 160.2 | ||||
Paper | 39.7 | — | ||||||
Corporate and Other | (35.7 | ) | (11.5 | ) | ||||
$ | 244.3 | $ | 148.7 | |||||
EBITDA excluding special items (3)(4) | ||||||||
Packaging | $ | 244.3 | $ | 160.2 | ||||
Paper | 40.4 | — | ||||||
Corporate and Other | (14.7 | ) | (11.5 | ) | ||||
$ | 270.0 | $ | 148.7 | |||||
(1) On October 25, 2013, we acquired Boise Inc. (Boise). The first quarter 2014 consolidated earnings results include Boise for the full period. | ||||||||
(2) See footnote (2) on page 1, for a discussion of the change in our method of accounting for inventories. | ||||||||
(3) Prior to the acquisition of Boise in fourth quarter 2013, we reported our results in one reportable segment. After the acquisition, we began reporting our business in three reportable segments: Packaging, Paper, and Corporate and Other. These segments represent distinct businesses that we manage separately because of differing products and services. In accordance with Accounting Standards Codification 280, "Segment Reporting," we recast prior period segment information to conform with current period information. For more information, see Note 19, Segment Information, of the Notes to Consolidated Financial Statements in our 2013 Form 10-K. | ||||||||
(4) Segment income (loss) excluding special items, earnings before interest, income taxes, and depreciation, amortization, and depletion (EBITDA), and EBITDA excluding special items are non-GAAP financial measures. We present these measures because they provide a means to evaluate the performance of our segments and our company on an ongoing basis using the same measures that are used by our management and because these measures are frequently used by investors and other interested parties in the evaluation of companies and the performance of their segments. The tables included in "Reconciliation of Non-GAAP Financial Measures" reconcile the non-GAAP measures with the most directly comparable GAAP measures. Any analysis of non-GAAP financial measures should be done only in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. | ||||||||
2 |
Packaging Corporation of America | ||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||
Unaudited | ||||||||
(dollars in millions) | ||||||||
Three Months Ended | ||||||||
March 31 | ||||||||
2014 (1) | 2013 (2) | |||||||
Packaging | ||||||||
Segment income (3) | $ | 170.7 | $ | 117.9 | ||||
DeRidder restructuring | 4.0 | — | ||||||
Segment income excluding special items (4) | $ | 174.7 | $ | 117.9 | ||||
Paper | ||||||||
Segment income (3) | $ | 27.7 | $ | — | ||||
Integration-related costs | 0.7 | — | ||||||
Segment income excluding special items (4) | $ | 28.4 | $ | — | ||||
Corporate and Other | ||||||||
Segment loss (3) | $ | (37.5 | ) | $ | (11.9 | ) | ||
Containerboard lawsuit settlement | 17.6 | — | ||||||
Integration-related costs | 3.4 | — | ||||||
Segment loss excluding special items (4) | $ | (16.5 | ) | $ | (11.9 | ) | ||
Income from operations | $ | 160.9 | $ | 106.0 | ||||
Income from operations, excluding special items (4) | $ | 186.6 | $ | 106.0 | ||||
(1) On October 25, 2013, we acquired Boise Inc. (Boise). The first quarter 2014 consolidated earnings results include Boise for the full period. | ||||||||
(2) See footnote (2) on page 1, for a discussion of the change in our method of accounting for inventories. | ||||||||
(3) See footnote (3) on page 2, for a discussion of our segment reporting. | ||||||||
(4) See footnote (4) on page 2, for a discussion of non-GAAP financial measures. | ||||||||
3 |
Packaging Corporation of America | ||||||||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||||||||
Unaudited | ||||||||||||||
(dollars in millions) | ||||||||||||||
Net Income and EPS Excluding Special Items (1) | ||||||||||||||
Three Months Ended March 31 | ||||||||||||||
2014 (2) | 2013 (3) | |||||||||||||
Diluted | Diluted | |||||||||||||
Net Income | EPS | Net Income | EPS | |||||||||||
As reported | $ | 90.1 | $ | 0.92 | $ | 62.3 | $ | 0.64 | ||||||
Special items (4): | ||||||||||||||
Containerboard lawsuit settlement | 11.2 | 0.11 | — | — | ||||||||||
Integration-related costs | 2.6 | 0.03 | — | — | ||||||||||
DeRidder restructuring | 2.6 | 0.02 | — | — | ||||||||||
Total special items | 16.4 | 0.16 | — | — | ||||||||||
Excluding special items | $ | 106.5 | $ | 1.08 | $ | 62.3 | $ | 0.64 | ||||||
(1) Net income and earnings per share excluding special items are non-GAAP financial measures. The after-tax effect of special items are presented because they provide a means to evaluate the performance of our company on an ongoing basis using the same measures that are used by our management and because these measures are frequently used by investors and other interested parties in the evaluation of companies and their performance. Any analysis of non-GAAP financial measures should be done only in conjunction with results presented in accordance with GAAP. The non-GAAP measures are not intended to be substitutes for GAAP financial measures and should not be used as such. | ||||||||||||||
(2) On October 25, 2013, we acquired Boise, Inc. (Boise). The first quarter 2014 results include Boise for the full period. | ||||||||||||||
(3) See footnote (2) on page 1, for a discussion of the change in our method of accounting for inventories. | ||||||||||||||
(4) Special items are tax-affected at a combined federal and state income tax rate in effect for the period the special items were recorded. For more information related to these items, see the footnotes to the Consolidated Earnings Results on page one and our 2014 Form 10-Q for the quarter ended March 31, 2014, which we plan to file on or about May 8, 2014. | ||||||||||||||
4 |
Packaging Corporation of America | |||||||
Reconciliation of Non-GAAP Financial Measures | |||||||
Unaudited | |||||||
(dollars in millions) | |||||||
EBITDA and EBITDA Excluding Special Items | |||||||
EBITDA represents income before interest (interest expense and interest income), income taxes, and depreciation, amortization, and depletion. The following table reconciles net income to EBITDA and EBITDA to EBITDA excluding special items: | |||||||
Three Months Ended | |||||||
March 31 | |||||||
2014 | 2013 (1) | ||||||
Net income | $ | 90.1 | $ | 62.3 | |||
Interest expense, net | 20.8 | 9.3 | |||||
Provision for income taxes | 50.0 | 34.4 | |||||
Depreciation, amortization, and depletion | 83.4 | 42.7 | |||||
EBITDA (2) | $ | 244.3 | $ | 148.7 | |||
Special items: | |||||||
Containerboard lawsuit settlement | $ | 17.6 | $ | — | |||
Integration-related costs | 4.1 | — | |||||
DeRidder restructuring | 4.0 | — | |||||
EBITDA excluding special items (2) | $ | 270.0 | $ | 148.7 | |||
(1) See footnote (2) on page 1, for a discussion of the change in our method of accounting for inventories. | |||||||
(2) See footnote (4) on page 2, for a discussion of non-GAAP financial measures. | |||||||
5 |
Packaging Corporation of America | ||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||
Unaudited | ||||||||
(dollars in millions) | ||||||||
The following table reconciles segment income (loss) to EBITDA and EBITDA excluding special items: | ||||||||
Three Months Ended | ||||||||
March 31 | ||||||||
2014 | 2013 (1) | |||||||
Packaging | ||||||||
Segment income | $ | 170.7 | $ | 117.9 | ||||
Depreciation, amortization, and depletion | 69.6 | 42.3 | ||||||
EBITDA (2) | 240.3 | 160.2 | ||||||
DeRidder restructuring | 4.0 | — | ||||||
EBITDA excluding special items (2) | $ | 244.3 | $ | 160.2 | ||||
Paper | ||||||||
Segment income | $ | 27.7 | $ | — | ||||
Depreciation, amortization, and depletion | 12.0 | — | ||||||
EBITDA (2) | 39.7 | — | ||||||
Integration-related costs | 0.7 | — | ||||||
EBITDA excluding special items (2) | $ | 40.4 | $ | — | ||||
Corporate and Other | ||||||||
Segment loss | $ | (37.5 | ) | $ | (11.9 | ) | ||
Depreciation, amortization, and depletion | 1.8 | 0.4 | ||||||
EBITDA (2) | (35.7 | ) | (11.5 | ) | ||||
Containerboard lawsuit settlement | 17.6 | — | ||||||
Integration-related costs | 3.4 | — | ||||||
EBITDA excluding special items (2) | $ | (14.7 | ) | $ | (11.5 | ) | ||
EBITDA (2) | $ | 244.3 | $ | 148.7 | ||||
EBITDA excluding special items (2) | $ | 270.0 | $ | 148.7 | ||||
(1) See footnote (2) on page 1, for a discussion of the change in our method of accounting for inventories. | ||||||||
(2) See footnote (4) on page 2, for a discussion of non-GAAP financial measures. | ||||||||
6 |
Source:
Packaging Corporation of America
Barbara Sessions
INVESTOR
RELATIONS: (877) 454-2509
PCA’s Website: www.packagingcorp.com