Packaging Corporation of America (NYSE: PKG) today reported
fourth quarter 2016 net income of $111 million, or $1.17 per share
and $1.23 per share excluding special items. Fourth quarter net
sales were $1.5 billion in 2016 and $1.4 billion in 2015. Full year
2016 earnings were $450 million, or $4.75 per share and $4.88 per
share excluding special items. Full year 2016 net sales were $5.78
billion compared to 2015 net sales of $5.74 billion.
Diluted earnings
per share attributable to Packaging Corporation of America
shareholders
Three Months Ended Full Year Ended
December 31 December 31 2016
2015 Change
2016 2015
Change Reported Diluted EPS $ 1.17 $ 1.07 $ 0.10 $ 4.75 $ 4.47 $
0.28 Special Items Expense (1) 0.06 0.01 0.05
0.13 0.06 0.07 Diluted EPS excluding Special items
$ 1.23 $ 1.08 $
0.15 $ 4.88 $ 4.53 $ 0.35 (1)
For descriptions and amounts of our special items, see page 5 of
the schedules included with this release.
Reported earnings include the impact of $.06 per share of
special items expense in the fourth quarter of 2016 and $.01 per
share of special items expense in 2015. Excluding special items,
the $.15 per share increase in fourth quarter 2016 earnings
compared to the fourth quarter of 2015 was driven primarily by
higher containerboard and corrugated products volume ($.16), higher
white paper prices and mix ($.03), lower fiber costs ($.06), and
lower annual outage costs ($.09). These items were partially offset
by lower containerboard and corrugated products prices and mix
($.04), lower paper volume ($.04), higher costs for labor ($.02)
and repairs ($.02), higher expenses for depreciation ($.02) and
interest ($.01), and a higher tax rate ($.04).
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended
Full Year Ended December 31 December 31
2016 2015 2016 2015
Segment income (loss) Packaging $ 177.5 $ 181.0 $ 711.1 $
714.9 Paper 33.1 13.9 138.1 112.5 Corporate and Other (17.7 ) (19.0
) (68.9 ) (77.4 )
$ 192.9 $
175.9 $ 780.3 $
750.0 Segment income (loss) excluding
special items Packaging $ 183.2 $ 179.0 $ 725.5 $ 721.0 Paper
35.8 13.9 142.5 105.8 Corporate and Other (17.7 ) (16.7 ) (68.6 )
(68.1 )
$ 201.3 $ 176.2
$ 799.4 $ 758.7
EBITDA excluding special items Packaging $ 259.2 $ 252.1 $
1,018.8 $ 1,009.3 Paper 50.0 28.2 199.2 160.7 Corporate and Other
(16.4 ) (15.5 ) (63.5 ) (63.8 )
$ 292.8
$ 264.8 $ 1,154.5
$ 1,106.2
In the Packaging segment, total corrugated products shipments
were up 9.7%, or 11.5% per workday, over last year’s fourth
quarter. Packaging segment price and mix was lower compared to the
fourth quarter of 2015 and up compared to the third quarter of
2016. Containerboard production was 962,000 tons, and
containerboard inventory was flat compared to year-end 2015
levels.
Paper segment price and mix was higher than the fourth quarter
of 2015 and flat compared to the third quarter of 2016. Paper
volume was lower compared to the fourth quarter of 2015, primarily
due to the previously announced fourth quarter shutdown of market
pulp operations at our Wallula Mill, and down versus the seasonally
stronger third quarter of 2016.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “We had an excellent quarter as we quickly integrated
our containerboard volume into the TimBar and Columbus Container
acquisitions. Our containerboard mill and corrugated products plant
volumes were new all-time records while inventories, including our
new acquisitions, were flat with year-end 2015 levels. Packaging
segment prices, which had been declining throughout the year, moved
higher as we began implementing the announced price increases to
our containerboard and corrugated products customers throughout the
fourth quarter. Our Paper segment also performed exceptionally
well, maintaining good cost control during the seasonally slower
fourth quarter.”
“Looking ahead to the first quarter,” Mr. Kowlzan added, “we
expect to realize the vast majority of our previously announced
packaging segment price increases and we expect higher corrugated
products shipments. We will have lower containerboard and paper
production volume as we have scheduled maintenance outages on one
of our machines at both the Counce and DeRidder packaging mills and
on one of our machines at our Jackson, Alabama paper mill. We
expect higher freight costs as well as higher labor and benefits
costs with annual wage increases and other timing-related expenses.
We also anticipate continued price inflation on recycled fiber,
energy and certain chemicals, and seasonally colder weather will
increase wood and energy costs. Considering these items, we expect
first quarter earnings of $1.26 per share.”
We provide information regarding our use of non-GAAP financial
measures and reconciliations of historical non-GAAP financial
measures presented in this press release to the most comparable
measure reported in accordance with GAAP in the schedules to this
press release. We present our earnings expectation for the upcoming
quarter excluding special items as special items are difficult to
predict and quantify and may reflect the effect of future events.
Additional special items may arise due to first quarter events.
PCA is the fourth largest producer of containerboard and
corrugated packaging products in the United States and the third
largest producer of uncoated freesheet paper in North America. PCA
operates eight mills and 95 corrugated products plants and related
facilities.
Conference Call
Information:
WHAT:
Packaging Corporation of America’s 4th
Quarter and Full Year 2016 Earnings Conference Call
WHEN:
Tuesday, January 31, 2017 at 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:
http://www.packagingcorp.com
REBROADCAST DATES:
January 31, 2017 1:00 p.m. Eastern Time through February 14, 2017
11:59 p.m. Eastern Time
REBROADCAST NUMBERS:
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International)
Passcode: 3724943
Some of the statements in this press release are forward-looking
statements. Forward-looking statements include statements about our
future earnings and financial condition, expected benefits from
acquisitions and facility closures, 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 December 31,
2015 filed with the Securities and Exchange Commission and
available at the SEC’s website at “www.sec.gov”.
Packaging Corporation of America Consolidated Earnings
Results Unaudited (dollars in millions, except per-share
data)
Three Months Ended Full
Year Ended December 31 December 31
2016 2015 2016
2015 Net sales $ 1,476.6 $ 1,390.9 $
5,779.0 $ 5,741.7 Cost of sales (1,149.5 )
(1)
(1,105.9 )
(2)
(4,503.3 )
(1)
(4,533.7 )
(2)
Gross profit 327.1 285.0 1,275.7 1,208.0 Selling, general, and
administrative expenses (125.1 ) (105.3 ) (471.1 ) (451.3 ) Other
expense, net (9.1 )
(1)
(3.8 )
(2)
(24.3 )
(1)
(6.7 )
(2)
Income from operations 192.9 175.9 780.3 750.0 Interest expense,
net (24.4 ) (22.3 ) (91.8 ) (85.5 )
Income before taxes 168.5 153.6 688.5 664.5 Provision for income
taxes (57.9 ) (49.3 ) (238.9 ) (227.7 )
Net income $ 110.6 $ 104.3 $ 449.6 $ 436.8
Earnings per share: Basic $ 1.17 $ 1.07 $ 4.76
$ 4.47 Diluted $ 1.17 $ 1.07 $ 4.75
$ 4.47 Computation of diluted earnings
per share under the two class method: Net income $ 110.6 $ 104.3 $
449.6 $ 436.8 Less: Distributed and undistributed income available
to participating securities (1.0 ) (1.2 ) (4.4
) (5.2 ) Net income attributable to PCA shareholders $ 109.6
$ 103.1 $ 445.2 $ 431.6 Diluted
weighted average shares outstanding 93.6 96.0
93.7 96.7 Diluted earnings per
share $ 1.17 $ 1.07 $ 4.75 $ 4.47
Supplemental financial information: Capital spending
$ 86.2 $ 96.6 $ 274.3 $ 314.5 Cash balance $ 239.3 $ 184.2 $ 239.3
$ 184.2
(1) The three and twelve months ended
December 31, 2016 include closure costs related to corrugated
products facilities and a paper products facility. The closure
costs are recorded within "Other expense, net" and "Cost of sales",
as appropriate. See page 4 for amounts recorded in each period.
The three and twelve months ended December
31, 2016 include $1.2 million and $4.5 million of
acquisition-related costs for the TimBar Corporation and Columbus
Container Inc. acquisitions, which we recorded in "Other expense,
net" and "Cost of sales", as appropriate.
The twelve months ended December 31, 2016
include $0.9 million of costs related to our withdrawal from a
multiemployer pension plan for one of our corrugated products
facilities. The costs correspond to our share of the pension plan's
unfunded vested benefits, which we recorded in "Other expense,
net".
The three and twelve months ended December
31, 2016 include $2.7 million of costs related to ceased production
of softwood market pulp operations at our Wallula, Washington mill
and the permanent shutdown of the No. 1 machine. The restructuring
costs are recorded within "Other expense, net" and "Cost of sales",
as appropriate.
(2) The three and twelve months ended
December 31, 2015 include restructuring charges at our mill in
DeRidder, Louisiana, which were recorded in "Other expense, net"
and "Cost of sales", as appropriate. See page 4 for amounts
recorded in each period.
The twelve months ended December 31, 2015
include a $3.6 million tax credit from the State of Louisiana
related to our capital investment and the jobs retained at the
DeRidder, Louisiana mill, which was recorded as a benefit in "Other
expense, net".
The three and twelve months ended December
31, 2015 include Boise acquisition integration-related and other
costs, primarily recorded in "Other expense, net". See page 4 for
the amounts recorded in each period.
In September 2015, we sold the remaining
land, buildings, and equipment at our paper mill site in St.
Helens, Oregon, where we ceased paper production in December 2012.
We recorded a $6.7 million gain on the sale in "Other expense,
net".
Packaging Corporation of America Segment Information
Unaudited (dollars in millions)
Three Months Ended Full Year Ended December 31
December 31 2016 2015 2016 2015
Segment sales Packaging $ 1,196.9 $ 1,091.4 $ 4,584.8 $
4,477.3 Paper 253.8 272.8 1,093.9 1,143.1 Corporate and Other
25.9 26.7 100.3
121.3 $ 1,476.6 $ 1,390.9 $ 5,779.0 $
5,741.7
Segment income (loss) Packaging $
177.5 $ 181.0
$ 711.1
$ 714.9 Paper 33.1 13.9
138.1
112.5 Corporate and Other (17.7 ) (19.0 )
(68.9 )
(77.4 ) Income from operations
192.9
175.9
780.3
750.0 Interest expense, net (24.4 )
(22.3 )
(91.8 )
(85.5 ) Income before taxes
$ 168.5
$ 153.6
$ 688.5
$ 664.5 Segment income (loss)
excluding special items (1) Packaging $ 183.2 $ 179.0
$ 725.5
$ 721.0 Paper 35.8 13.9
142.5
105.8 Corporate and Other (17.7 ) (16.7 )
(68.6 )
(68.1 )
$ 201.3 $ 176.2
$ 799.4
$ 758.7 EBITDA excluding special
items (1) Packaging $ 259.2 $ 252.1
$ 1,018.8
$ 1,009.3 Paper 50.0 28.2
199.2
160.7 Corporate and Other (16.4 ) (15.5 )
(63.5 )
(63.8 )
$ 292.8 $ 264.8
$ 1,154.5
$ 1,106.2
(1) 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. Management
excludes special items as it believes these items are not
necessarily reflective of the ongoing results of operations of our
business. 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, because these measures assist in providing a meaningful
comparison between periods presented 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.
Packaging Corporation of America Reconciliation of
Non-GAAP Financial Measures Unaudited (dollars in
millions)
Three Months Ended Full
Year Ended December 31 December 31 2016
2015 2016 2015 Packaging
Segment income $ 177.5 $ 181.0 $ 711.1 $ 714.9 Facilities closure
costs 4.5 — 9.3 — Acquisition-related costs 1.2 — 4.2 —
Multiemployer pension withdrawal — — 0.9 — DeRidder restructuring —
(3.5 ) — 2.0 Integration-related and other costs —
1.5 — 4.1 Segment income
excluding special items (1)
$ 183.2 $
179.0 $ 725.5 $
721.0 Paper Segment income $ 33.1 $
13.9 $ 138.1 $ 112.5 Wallula mill restructuring
2.7
—
2.7
— Facilities closure costs — — 1.7 — Sale of St. Helens paper mill
site — — — (6.7 )
Segment income excluding special items (1)
$ 35.8
$ 13.9 $ 142.5
$ 105.8 Corporate and Other
Segment loss $ (17.7 ) $ (19.0 ) $ (68.9 ) $ (77.4 )
Acquisition-related costs — — 0.3 — Integration-related and other
costs — 2.3 — 9.3
Segment loss excluding special items (1)
$
(17.7 ) $ (16.7 ) $
(68.6 ) $ (68.1 )
Income from operations $ 192.9
$ 175.9 $ 780.3
$ 750.0 Income
from operations, excluding special items (1) $
201.3 $ 176.2 $
799.4 $ 758.7 (1) See
footnote (1) on page 3, for a discussion of non-GAAP financial
measures.
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 December 31 2016
2015
Income
before
taxes
Income
Taxes
Net
Income
Diluted
EPS
Income
before
taxes
Income
Taxes
Net
Income
Diluted
EPS
As reported $ 168.5 $ (57.9 ) $ 110.6 $ 1.17 $ 153.6 $ (49.3 ) $
104.3 $ 1.07 Special items (2): Facilities closure costs 4.5 (1.6 )
2.9 0.03 — — — — Wallula mill restructuring 2.7 (0.9 ) 1.8 0.02 — —
— — Acquisition-related costs 1.2 (0.4 ) 0.8 0.01 — — — — DeRidder
restructuring — — — — (3.5 ) 1.3 (2.2 ) (0.02 ) Integration-related
and other costs — — — —
3.8 (1.2 ) 2.6 0.03 Total
special items 8.4 (2.9 ) 5.5 0.06
0.3 0.1 0.4 0.01
Excluding special items
$ 176.9 $
(60.8 ) $ 116.1 $ 1.23
$ 153.9 $ (49.2 )
$ 104.7 $ 1.08
Full Year Ended December 31 2016 2015
Income
before
taxes
Income
Taxes
Net
Income
Diluted
EPS
Income
before
taxes
Income
Taxes
Net
Income
Diluted
EPS
As reported $ 688.5 $ (238.9 ) $ 449.6 $ 4.75 $ 664.5 $ (227.7 ) $
436.8 $ 4.47 Special items (2): Facilities closure costs 11.0 (3.9
) 7.1 0.07 — — — — Acquisition-related costs 4.5 (1.6 ) 2.9 0.03 —
— — — Wallula mill restructuring 2.7 (0.9 ) 1.8 0.02 — — — —
Multiemployer pension withdrawal 0.9 (0.3 ) 0.6 0.01 — — — —
DeRidder restructuring — — — — 2.0 (0.7 ) 1.3 0.01
Integration-related and other costs — — — — 13.4 (4.5 ) 8.9 0.10
Sale of St. Helens paper mill site — —
— — (6.7 ) 2.3 (4.4 )
(0.05 ) Total special items 19.1 (6.7 ) 12.4
0.13 8.7 (2.9 ) 5.8
0.06 Excluding special items
$ 707.6
$ (245.6 ) $ 462.0 $
4.88 $ 673.2 $ (230.6
) $ 442.6 $ 4.53
(1) Net income and earnings per share excluding special items are
non-GAAP financial measures. Management excludes special items as
it believes these items are not necessarily reflective of the
ongoing results of operations of our business. We present these
measures 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, because these measures assist in providing
a meaningful comparison between periods presented 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)
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 all periods presented, income taxes on special items
represent the current amount of tax. For more information related
to these items, see the footnotes to the Consolidated Earnings
Results on page 1.
Packaging Corporation of America
Reconciliation of Non-GAAP Financial Measures
Unaudited (dollars in millions)
EBITDA and EBITDA
Excluding Special Items (1)
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 Full Year Ended December 31
December 31 2016 2015 2016 2015
Net income $ 110.6 $ 104.3 $ 449.6 $ 436.8 Interest expense, net
24.4 22.3 91.8 85.5 Provision for income taxes 57.9 49.3 238.9
227.7 Depreciation, amortization, and depletion 93.6
88.6 358.0 356.5
EBITDA
(1) $ 286.5 $ 264.5
$ 1,138.3 $ 1,106.5 Special
items: Facilities closure costs 4.5 — 10.2 — Acquisition-related
costs 1.2 — 4.5 — Wallula mill restructuring 0.6 — 0.6 —
Multiemployer pension withdrawal — — 0.9 — DeRidder restructuring —
(3.5 ) — (7.0 ) Integration-related and other costs — 3.8 — 13.4
Sale of St. Helens paper mill site — —
— (6.7 )
EBITDA excluding special items (1)
$ 292.8 $ 264.8 $
1,154.5 $ 1,106.2 (1) See
footnote (1) on page 3, for a discussion of non-GAAP financial
measures.
Packaging Corporation of America Reconciliation
of Non-GAAP Financial Measures Unaudited (dollars in
millions) The following table reconciles segment income
(loss) to EBITDA excluding special items:
Three Months Ended Full Year Ended December 31
December 31 2016 2015 2016 2015
Packaging Segment income $ 177.5 $ 181.0 $ 711.1 $ 714.9
Depreciation, amortization, and depletion 76.0
73.1 293.3 297.3 EBITDA (1)
253.5 254.1 1,004.4
1,012.2 Facilities closure costs 4.5 — 9.3 —
Acquisition-related costs 1.2 — 4.2 — Multiemployer pension
withdrawal — — 0.9 — DeRidder restructuring — (3.5 ) — (7.0 )
Integration-related and other costs — 1.5
— 4.1 EBITDA excluding special
items (1)
$ 259.2 $ 252.1
$ 1,018.8 $ 1,009.3
Paper Segment income $ 33.1 $ 13.9 $ 138.1 $ 112.5
Depreciation, amortization, and depletion 16.3
14.3 59.6 54.9 EBITDA (1)
49.4 28.2 197.7 167.4
Wallula mill restructuring 0.6 — 0.6 — Facilities closure
costs — — 0.9 — Sale of St. Helens paper mill site —
— — (6.7 ) EBITDA excluding
special items (1)
$ 50.0 $ 28.2
$ 199.2 $ 160.7
Corporate and Other Segment loss $ (17.7 ) $ (19.0 )
$ (68.9 ) $ (77.4 ) Depreciation, amortization, and depletion
1.3 1.2 5.1 4.3
EBITDA (1) (16.4 ) (17.8 ) (63.8 )
(73.1 ) Acquisition-related costs — — 0.3 —
Integration-related and other costs — 2.3
— 9.3 EBITDA excluding special
items (1)
$ (16.4 ) $ (15.5
) $ (63.5 ) $ (63.8
) EBITDA excluding special
items (1) $ 292.8 $
264.8 $ 1,154.5 $
1,106.2 (1) See footnote (1) on page 3, for a
discussion of non-GAAP financial measures.
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version on businesswire.com: http://www.businesswire.com/news/home/20170130006152/en/
Packaging Corporation of AmericaBarbara SessionsINVESTOR
RELATIONS: (877) 454-2509PCA’s Website: www.packagingcorp.com
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