Packaging Corporation of America Reports Record Third Quarter 2014 Results
Excluding special items, the
In the packaging segment, EBITDA, excluding special items, was
In the paper segment, EBITDA, excluding special items, was
Commenting on reported results,
“Looking ahead to the fourth quarter, with the Deridder machine
conversion, we expect higher mill production which will allow us to
reduce our outside purchases of containerboard. Corrugated products
shipments are expected to be lower than in the third quarter with three
less shipping days, and we also expect seasonally lower white paper
shipments. Amortization of annual outage repair costs will be about
PCA is the fourth largest producer of containerboard and corrugated
packaging products in
Conference Call Information:
WHAT: |
Packaging Corporation of America’s 3rd Quarter 2014 Earnings | |
Conference Call | ||
WHEN: |
Tuesday, October 21, 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: |
||
REBROADCAST DATES: |
October 21, 2014 1:00 p.m. Eastern Time through | |
November 4, 2014 11:59 p.m. Eastern Time | ||
REBROADCAST NUMBERS: |
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International) | |
Passcode: 35494226 | ||
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 | Nine Months Ended | |||||||||||
September 30 | June 30, | September 30 | ||||||||||
2014 (1) | 2013 (2) | 2014 (1) | 2014 (1) | 2013 (2) | ||||||||
Net sales | $ 1,518.9 | $ 845.4 | $ 1,468.4 | $ 4,418.7 | $ 2,400.9 | |||||||
Cost of sales | (1,198.6) | (3) | (617.8) | (1,157.6) | (3) | (3,486.2) | (3) | (1,792.8) | ||||
Gross profit | 320.3 | 227.6 | 310.8 | 932.5 | 608.1 | |||||||
Selling, general, and administrative expenses | (119.6) | (77.1) | (122.9) | (359.0) | (226.6) | |||||||
Other expense, net | (12.3) | (4) | (7.7) | (5) | (7.7) | (4) | (44.0) | (4) | (22.5) | (5) | ||
Income from operations | 188.4 | 142.8 | 180.2 | 529.5 | 359.0 | |||||||
Interest expense, net | (23.1) | (4) | (11.9) | (5) | (21.4) | (65.3) | (4) | (30.4) | (5) | |||
Income before taxes | 165.3 | 130.9 | 158.8 | 464.2 | 328.6 | |||||||
Provision for income taxes | (60.9) | (46.2) | (59.2) | (170.1) | (115.4) | |||||||
Net income | $ 104.4 | $ 84.7 | $ 99.6 | $ 294.1 | $ 213.2 | |||||||
Earnings per share: | ||||||||||||
Basic | $ 1.06 | $ 0.88 | $ 1.01 | $ 2.99 | $ 2.21 | |||||||
Diluted | $ 1.06 | $ 0.87 | $ 1.01 | $ 2.99 | $ 2.19 | |||||||
Supplemental financial information: | ||||||||||||
Capital spending | $ 106.7 | $ 49.5 | $ 97.3 | $ 254.9 | $ 130.4 | |||||||
Cash balance | $ 154.3 | $ 396.6 | $ 162.0 | $ 154.3 | $ 396.6 | |||||||
(1) On October 25, 2013, we acquired Boise Inc. (Boise). The 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: Inventories, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements to be included in our Quarterly Report on Form 10-Q for the period ended September 30, 2014, which we plan to file on or about November 7, 2014. | ||||||||||||
(3) 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 and nine months ended September 30, 2014, include $26.0 million and $47.8 million, respectively, and the three months ended June 30, 2014, includes $17.8 million, of restructuring charges, primarily related to accelerated depreciation. | ||||||||||||
(4) The three and nine months ended September 30, 2014, include $4.5
million and $13.5 million of Boise acquisition integration-related,
debt refinancing, and other costs, of which $3.0 million and $12.0
million was recorded in "Other expense, net" and in both periods
$1.5 million was recorded in "Interest expense, net".
The three months ended June 30, 2014, includes $4.9 million of Boise acquisition integration-related and other costs recorded in "Other expense, net".
The nine months ended September 30, 2014, includes $17.6 million of costs recorded in "Other expense, net" for the settlement of the Kleen Products LLC v Packaging Corp. of America et al class action lawsuit. |
||||||||||||
(5) The three and nine months ended September 30, 2013, include $3.1
million and $10.9 million, respectively, of non-cash pension
curtailment charges related to pension plan changes in which certain
hourly corrugated plant and containerboard mill employees will
transition from a defined benefit pension plan to a defined
contribution (401k) plan.
The three and nine months ended September 30, 2013, both include $4.2 million of acquisition-related costs ($1.5 million recorded in "Other expense, net" and $2.7 million recorded in "Interest expense, net"), primarily for professional fees related to transaction-advisory services and expenses related to financing the acquisition of Boise. |
||||||||||||
1 |
Packaging Corporation of America | |||||||||||
Segment Information | |||||||||||
Unaudited | |||||||||||
(dollars in millions) | |||||||||||
Three Months Ended | Nine Months Ended | ||||||||||
September 30 | June 30, | September 30 | |||||||||
2014 (1) | 2013 (2) | 2014 (1) | 2014 (1) | 2013 (2) | |||||||
Segment sales (3) | |||||||||||
Packaging | $ 1,175.7 | $ 845.4 | $ 1,145.2 | $ 3,418.3 | $ 2,400.9 | ||||||
Paper | 312.5 | — | 295.2 | 917.0 | — | ||||||
Intersegment eliminations and other | 30.7 | — | 28.0 | 83.4 | — | ||||||
$ 1,518.9 | $ 845.4 | $ 1,468.4 | $ 4,418.7 | $ 2,400.9 | |||||||
Segment income (loss) (3) | |||||||||||
Packaging | $ 164.7 | $ 154.9 | $ 166.4 | $ 501.8 | $ 395.1 | ||||||
Paper | 43.0 | — | 33.6 | 104.3 | — | ||||||
Corporate and Other | (19.3) | (12.1) | (19.8) | (76.6) | (36.1) | ||||||
Income from operations | 188.4 | 142.8 | 180.2 | 529.5 | 359.0 | ||||||
Interest expense, net | (23.1) | (11.9) | (21.4) | (65.3) | (30.4) | ||||||
Income before taxes | $ 165.3 | $ 130.9 | $ 158.8 | $ 464.2 | $ 328.6 | ||||||
Segment income (loss) excluding special items (3)(4) | |||||||||||
Packaging | $ 191.7 | $ 158.0 | $ 188.6 | $ 555.0 | $ 406.0 | ||||||
Paper | 43.0 | — | 32.6 | 103.9 | — | ||||||
Corporate and Other | (17.3) | (10.6) | (18.3) | (52.0) | (34.6) | ||||||
$ 217.4 | $ 147.4 | $ 202.9 | $ 606.9 | $ 371.4 | |||||||
EBITDA (3)(4) | |||||||||||
Packaging | $ 253.5 | $ 198.6 | $ 253.8 | $ 747.5 | $ 523.8 | ||||||
Paper | 55.9 | — | 45.9 | 141.5 | — | ||||||
Corporate and Other | (17.2) | (11.7) | (17.9) | (70.7) | (35.0) | ||||||
$ 292.2 | $ 186.9 | $ 281.8 | $ 818.3 | $ 488.8 | |||||||
EBITDA excluding special items (3)(4) | |||||||||||
Packaging | $ 262.3 | $ 201.7 | $ 258.8 | $ 765.3 | $ 534.7 | ||||||
Paper | 55.9 | — | 44.9 | 141.1 | — | ||||||
Corporate and Other | (15.2) | (10.2) | (16.4) | (46.1) | (33.5) | ||||||
$ 303.0 | $ 191.5 | $ 287.3 | $ 860.3 | $ 501.2 | |||||||
(1) On October 25, 2013, we acquired Boise Inc. (Boise). The 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 and our Current Report on Form 8-K filed on May 9, 2014. | |||||||||||
(4) Income from operations excluding special items, 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" on the following pages 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 | Nine Months Ended | ||||||||||
September 30 | June 30, | September 30 | |||||||||
2014 (1) | 2013 (2) | 2014 (1) | 2014 (1) | 2013 (2) | |||||||
Packaging | |||||||||||
Segment income (3) | $ 164.7 | $ 154.9 | $ 166.4 | $ 501.8 | $ 395.1 | ||||||
DeRidder restructuring | 26.0 | — | 17.8 | 47.8 | — | ||||||
Integration-related and other costs | 1.0 | — | 4.4 | 5.4 | — | ||||||
Pension curtailment charge | — | 3.1 | — | — | 10.9 | ||||||
Segment income excluding special items (4) | $ 191.7 | $ 158.0 | $ 188.6 | $ 555.0 | $ 406.0 | ||||||
Paper | |||||||||||
Segment income (3) | $ 43.0 | $ — | $ 33.6 | $ 104.3 | $ — | ||||||
Integration-related and other costs | — | — | (1.0) | (0.4) | — | ||||||
Segment income excluding special items (4) | $ 43.0 | $ — | $ 32.6 | $ 103.9 | $ — | ||||||
Corporate and Other | |||||||||||
Segment loss (3) | $ (19.3) | $ (12.1) | $ (19.8) | $ (76.6) | $ (36.1) | ||||||
Integration-related and other costs | 2.0 | — | 1.5 | 7.0 | — | ||||||
Class action lawsuit settlement | — | — | — | 17.6 | — | ||||||
Acquisition-related costs | — | 1.5 | — | — | 1.5 | ||||||
Segment loss excluding special items (4) | $ (17.3) | $ (10.6) | $ (18.3) | $ (52.0) | $ (34.6) | ||||||
Income from operations | $ 188.4 | $ 142.8 | $ 180.2 | $ 529.5 | $ 359.0 | ||||||
Income from operations, excluding special items (4) | $ 217.4 | $ 147.4 | $ 202.9 | $ 606.9 | $ 371.4 | ||||||
(1) On October 25, 2013, we acquired Boise Inc. (Boise). The 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 September 30 | Three Months Ended | ||||||||||||
2014 (2) | 2013 (3) | June 30, 2014 (2) | |||||||||||
Diluted | Diluted | Diluted | |||||||||||
Net Income | EPS | Net Income | EPS | Net Income | EPS | ||||||||
As reported | $ 104.4 | $ 1.06 | $ 84.7 | $ 0.87 | $ 99.6 | $ 1.01 | |||||||
Special items (4): | |||||||||||||
DeRidder restructuring | 16.6 | 0.17 | — | — | 11.2 | 0.12 | |||||||
Integration-related and other costs | 2.9 | 0.03 | — | — | 3.0 | 0.03 | |||||||
Pension curtailment charges | — | — | 2.0 | 0.02 | — | — | |||||||
Acquisition-related financing costs | — | — | 1.7 | 0.02 | — | — | |||||||
Acquisition-related costs | — | — | 1.0 | 0.01 | — | — | |||||||
Total special items | 19.5 | 0.20 | 4.7 | 0.05 | 14.2 | 0.15 | |||||||
Excluding special items | $ 123.9 | $ 1.26 | $ 89.4 | $ 0.92 | $ 113.8 | $ 1.16 | |||||||
Nine Months Ended September 30 | |||||||||||||
2014 (2) | 2013 (3) | ||||||||||||
Diluted | Diluted | ||||||||||||
Net Income | EPS | Net Income | EPS | ||||||||||
As reported | $ 294.1 | $ 2.99 | $ 213.2 | $ 2.19 | |||||||||
Special items (4): | |||||||||||||
DeRidder restructuring | 30.4 | 0.31 | — | — | |||||||||
Integration-related and other costs | 8.5 | 0.09 | — | — | |||||||||
Class action lawsuit settlement | 11.2 | 0.11 | — | — | |||||||||
Pension curtailment charges | — | — | 7.0 | 0.07 | |||||||||
Acquisition-related financing costs | — | — | 1.7 | 0.02 | |||||||||
Acquisition-related costs | — | — | 1.0 | 0.01 | |||||||||
Total special items | 50.1 | 0.51 | 9.7 | 0.10 | |||||||||
Excluding special items | $ 344.2 | $ 3.50 | $ 222.9 | $ 2.29 | |||||||||
(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 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-effected 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 1 and our Quarterly Report on Form 10-Q for the period ended September 30, 2014, which we plan to file on or about November 7, 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 excluding special items: | |||||||||||
Three Months Ended | Nine Months Ended | ||||||||||
September 30 | June 30, | September 30 | |||||||||
2014 (1) | 2013 (2) | 2014 (1) | 2014 (1) | 2013 (2) | |||||||
Net income | $ 104.4 | $ 84.7 | $ 99.6 | $ 294.1 | $ 213.2 | ||||||
Interest expense, net | 23.1 | 11.9 | 21.4 | 65.3 | 30.4 | ||||||
Provision for income taxes | 60.9 | 46.2 | 59.2 | 170.1 | 115.4 | ||||||
Depreciation, amortization, and depletion | 103.8 | 44.1 | 101.6 | 288.8 | 129.8 | ||||||
EBITDA (3) | $ 292.2 | $ 186.9 | $ 281.8 | $ 818.3 | $ 488.8 | ||||||
Special items: | |||||||||||
DeRidder restructuring | $ 7.8 | $ — | $ 0.6 | $ 12.4 | $ — | ||||||
Integration-related and other costs | 3.0 | — | 4.9 | 12.0 | — | ||||||
Class action lawsuit settlement | — | — | — | 17.6 | — | ||||||
Pension curtailment charges | — | 3.1 | — | — | 10.9 | ||||||
Acquisition-related costs | — | 1.5 | — | — | 1.5 | ||||||
EBITDA excluding special items (3) | $ 303.0 | $ 191.5 | $ 287.3 | $ 860.3 | $ 501.2 | ||||||
(1) On October 25, 2013, we acquired Boise, Inc. (Boise). The 2014 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 (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 | Nine Months Ended | ||||||||||
September 30 | June 30, | September 30 | |||||||||
2014 (1) | 2013 (2) | 2014 (1) | 2014 (1) | 2013 (2) | |||||||
Packaging | |||||||||||
Segment income | $ 164.7 | $ 154.9 | $ 166.4 | $ 501.8 | $ 395.1 | ||||||
Depreciation, amortization, and depletion | 88.8 | 43.7 | 87.4 | 245.7 | 128.7 | ||||||
EBITDA (3) | 253.5 | 198.6 | 253.8 | 747.5 | 523.8 | ||||||
DeRidder restructuring | 7.8 | — | 0.6 | 12.4 | — | ||||||
Integration-related and other costs | 1.0 | — | 4.4 | 5.4 | — | ||||||
Pension curtailment charges | — | 3.1 | — | — | 10.9 | ||||||
EBITDA excluding special items (3) | $ 262.3 | $ 201.7 | $ 258.8 | $ 765.3 | $ 534.7 | ||||||
Paper | |||||||||||
Segment income | $ 43.0 | $ — | $ 33.6 | $ 104.3 | $ — | ||||||
Depreciation, amortization, and depletion | 12.9 | — | 12.3 | 37.2 | — | ||||||
EBITDA (3) | 55.9 | — | 45.9 | 141.5 | — | ||||||
Integration-related and other costs | — | — | (1.0) | (0.4) | — | ||||||
EBITDA excluding special items (3) | $ 55.9 | $ — | $ 44.9 | $ 141.1 | $ — | ||||||
Corporate and Other | |||||||||||
Segment loss | $ (19.3) | $ (12.1) | $ (19.8) | $ (76.6) | $ (36.1) | ||||||
Depreciation, amortization, and depletion | 2.1 | 0.4 | 1.9 | 5.9 | 1.1 | ||||||
EBITDA (3) | (17.2) | (11.7) | (17.9) | (70.7) | (35.0) | ||||||
Integration-related and other costs | 2.0 | — | 1.5 | 7.0 | — | ||||||
Class action lawsuit settlement | — | — | — | 17.6 | — | ||||||
Acquisition-related costs | — | 1.5 | — | — | 1.5 | ||||||
EBITDA excluding special items (3) | $ (15.2) | $ (10.2) | $ (16.4) | $ (46.1) | $ (33.5) | ||||||
EBITDA (3) | $ 292.2 | $ 186.9 | $ 281.8 | $ 818.3 | $ 488.8 | ||||||
EBITDA excluding special items (3) | $ 303.0 | $ 191.5 | $ 287.3 | $ 860.3 | $ 501.2 | ||||||
(1) On October 25, 2013, we acquired Boise, Inc. (Boise). The 2014 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 (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