Packaging Corporation of America (NYSE: PKG) today reported
first quarter 2017 net income of $117 million, or $1.24 per share
and $1.27 per share excluding special items. First quarter net
sales were $1.5 billion in 2017 and $1.4 billion in 2016.
Diluted earnings per share attributable to
Packaging Corporation of America shareholders
Three Months Ended March 31 2017
2016 Change Reported Diluted EPS $ 1.24 $ 1.09
$ 0.15 Special Items Expense (1) 0.03 0.02 0.01
Diluted EPS excluding Special items $
1.27 $
1.11 $ 0.16 (1) For descriptions
and amounts of our special items see page 4.
Reported earnings include the impact of $.03 of special items
expense in the first quarter of 2017 and $.02 of special items
expense in 2016.
Our current estimate of the total property damage and business
interruption losses associated with the DeRidder Mill incident is
between $20 million to $25 million, including capital costs of
approximately $4 million. The estimated impact to first quarter
earnings, excluding capital costs, is $15 million of which $5
million, or $.03 per share, is included in special items expense
for the quarter representing our property damage and business
interruption deductible. The remaining loss of $10 million, or $.07
per share, that impacted our first quarter results is expected to
be resolved with our insurance carrier over the next several
months. Additionally, to ensure adequate linerboard inventory
during the extended DeRidder mill annual outage, we moved a
previously scheduled maintenance outage at our Counce Mill from the
first quarter to the second quarter of 2017, which improved
expected first quarter results by $.01 per share.
Excluding special items, the $.16 per share increase in first
quarter 2017 earnings compared to the first quarter of 2016, was
driven primarily by higher containerboard and corrugated products
prices and mix ($.16) and sales volumes ($.12), higher paper
segment prices and mix ($.04), higher containerboard production
volumes ($.07), and lower wood costs ($.05). These items were
partially offset by lower paper segment sales and production
volumes ($.06), higher costs for recycled fiber ($.07), energy
($.06), and freight ($.02), higher labor and fixed costs ($.02),
and higher expenses for depreciation ($.03) and interest
($.02).
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended March
31 2017 2016 Segment income (loss)
Packaging $ 190.8 $ 161.5 Paper 29.8 36.1 Corporate and Other
(17.5) (16.8)
$ 203.1 $
180.8 Segment income (loss) excluding special
items Packaging $ 195.0 $ 163.4 Paper 29.8 37.0 Corporate and
Other (18.2) (16.8)
$ 206.6 $
183.6 EBITDA excluding special items Packaging
$ 272.2 $ 236.7 Paper 43.8 51.1 Corporate and Other (16.9)
(15.6)
$ 299.1 $ 272.2
In the Packaging segment, total corrugated products shipments
with one additional workday were up 10.7% and shipments per day
were up 8.9% over last year’s first quarter. Containerboard
production was 932,000 tons, and containerboard inventory was down
16,000 tons compared to year end 2016 and 12,000 tons below the
first quarter of 2016.
Paper segment price and mix was higher than the first and fourth
quarters of 2016 primarily due to the previously announced shutdown
of pulp operations at our Wallula Mill in December 2016. Sales
volume was lower than the first quarter of 2016 and slightly higher
compared to the fourth quarter of 2016.
Commenting on the quarter, Mark W. Kowlzan, Chairman and CEO,
said, “Our results were driven by strong demand and higher prices
for containerboard and corrugated products as well as from the
benefits of our recent TimBar and Columbus Container acquisitions.
We continued to implement our announced containerboard and
corrugated products price increases throughout the quarter, which
helped us offset higher inflation in many of our manufacturing and
converting costs and higher freight costs. The integration of our
recent corrugated plant acquisitions has gone very well and is
ahead of schedule, and our containerboard inventory levels were
below those of a year ago and year-end levels despite the
additional containerboard inventory requirements of our
acquisitions.”
“Looking ahead to the second quarter,” Mr. Kowlzan added, “we
expect to continue implementing our previously announced packaging
segment price increases, and we expect higher corrugated products
shipments resulting from strong demand and our two recent
acquisitions. Mill maintenance outage costs will be higher as we
have scheduled outages at our three largest containerboard mills.
We expect flat paper volumes although price and mix should move
lower. We also anticipate continued price inflation in recycled
fiber, certain chemicals and freight costs, but our energy costs
should improve as we move into seasonally milder weather.
Considering these items, we expect second quarter earnings of $1.45
per share. This does not include any potential additional costs or
anticipated recoveries related to the DeRidder Mill insurance
claim.”
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 second quarter
events.
PCA is the fourth largest producer of containerboard and
corrugated packaging products and the third largest producer of
uncoated freesheet paper in the United States. PCA operates eight
mills and 93 corrugated products plants and related facilities.
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,
2016 filed with the Securities and Exchange Commission and
available at the SEC’s website at “www.sec.gov”.
Conference Call
Information:
WHAT:
Packaging Corporation of America’s 1st Quarter 2017 Earnings
Conference Call
WHEN:
Thursday, April 27, 2017 at 8:30 a.m. Eastern Time
CALL-IN
(855) 730-0288 (U.S. and Canada) or (832) 412-2295 (International)
NUMBER:
Dial in by 8:15 a.m. Eastern Time Conference Call Leader: Mr. Mark
Kowlzan
WEBCAST:
http://www.packagingcorp.com
REBROADCAST DATES:
April 27, 2017 11:30 a.m. Eastern Time through May 11, 2017 11:59
p.m. Eastern Time
REBROADCAST NUMBERS:
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International)
Passcode: 3726610
Packaging Corporation of America
Consolidated Earnings Results Unaudited (dollars in
millions, except per-share data)
Three Months
Ended March 31 2017 2016 Net sales $
1,536.5 $ 1,401.0 Cost of sales (1,198.0 ) (1,102.0 )
(2)
Gross profit 338.5 299.0 Selling, general, and administrative
expenses (128.4 ) (114.3 ) Other expense, net (7.0 )
(1)
(3.9 )
(2)
Income from operations 203.1 180.8 Interest expense, net
(24.0 ) (21.6 ) Income before taxes 179.1 159.2 Provision
for income taxes (61.7 ) (55.5 ) Net income $ 117.4
$ 103.7 Earnings per share: Basic $ 1.25 $
1.09 Diluted $ 1.24 $ 1.09
Computation of diluted earnings per share under the two class
method: Net income $ 117.4 $ 103.7 Less: Distributed and
undistributed income available to participating securities
(1.0 ) (1.1 ) Net income attributable to PCA shareholders $
116.4 $ 102.6 Diluted weighted average shares
outstanding 93.6 94.2 Diluted earnings
per share $ 1.24 $ 1.09 Supplemental
financial information: Capital spending $ 57.8 $ 52.9 Cash balance
$ 254.0 $ 162.3 (1) The three months ended March 31, 2017
include the following: a. $0.8 million of charges consisting
of closure costs related to corrugated products facilities,
integration costs related to the TimBar Corporation and Columbus
Container, Inc. acquisitions, and costs related to a lump sum
settlement payment of a multiemployer pension plan withdrawal
liability for one of our corrugated products facilities. b.
$5.0 million of costs for the property damage and business
interruption insurance deductible corresponding to the February
2017 explosion at our DeRidder, LA mill. c. $2.3 million of
income related to a working capital adjustment from the April 2015
sale of our Hexacomb corrugated manufacturing operations in Europe
and Mexico. (2) The three months ended March 31, 2016
include $2.8 million of facilities closure costs recorded within
"Other expense, net" and "Cost of sales", as appropriate.
Packaging Corporation of America Segment
Information Unaudited (dollars in millions)
Three Months Ended March 31 2017 2016
Segment sales Packaging $ 1,257.0 $ 1,095.5 Paper 259.2
280.5 Corporate and Other 20.3 25.0
$ 1,536.5 $ 1,401.0
Segment income (loss) Packaging $ 190.8 $ 161.5 Paper
29.8 36.1 Corporate and Other (17.5 ) (16.8 ) Income
from operations
203.1 180.8
Interest expense, net (24.0 ) (21.6 ) Income
before taxes
$ 179.1 $ 159.2
Segment income (loss) excluding special items
(1) Packaging $ 195.0 $ 163.4 Paper 29.8 37.0 Corporate and Other
(18.2 ) (16.8 )
$ 206.6 $
183.6 EBITDA excluding special items
(1) Packaging $ 272.2 $ 236.7 Paper 43.8 51.1 Corporate and
Other (16.9 ) (15.6 )
$ 299.1
$ 272.2 (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 March 31 2017 2016
Packaging Segment income $ 190.8 $ 161.5 DeRidder mill
incident 5.0 — Integration-related, facilities closure and other
costs 0.8 1.9 Hexacomb working capital adjustment (1.6 )
— Segment income excluding special items (1)
$
195.0 $ 163.4
Paper Segment income $ 29.8 $ 36.1 Integration-related,
facilities closure and other costs — $ 0.9
Segment income excluding special items (1)
$ 29.8
$ 37.0 Corporate and
Other Segment loss $ (17.5 ) $ (16.8 ) Hexacomb working capital
adjustment (0.7 ) — Segment loss excluding
special items (1)
$ (18.2 ) $
(16.8 ) Income from operations
$ 203.1 $ 180.8
Income from operations, excluding special items
(1) $ 206.6 $ 183.6
(1) See footnote (1) on page 2, 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 March
31 2017 2016 Income Income
before Income Net Diluted before
Income Net Diluted taxes
Taxes Income EPS taxes
Taxes Income EPS As
reported $ 179.1 $ (61.7 ) $ 117.4 $ 1.24 $ 159.2 $ (55.5 ) $ 103.7
$ 1.09 Special items (2): DeRidder mill incident 5.0 (1.9 ) 3.1
0.03 — — — — Integration-related, facilities closure and other
costs 0.8 (0.3 ) 0.5 0.01 2.8 (0.9 ) 1.9 0.02 Hexacomb working
capital adjustment (2.3 ) 0.9 (1.4 )
(0.01 ) — — — — Total
special items 3.5 (1.3 ) 2.2
0.03 2.8 (0.9 ) 1.9 0.02
Excluding special items
$ 182.6 $
(63.0 ) $ 119.6 $
1.27 $ 162.0 $ (56.4
) $ 105.6 $ 1.11 (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 March 31 2017
2016 Net income $ 117.4 $ 103.7 Interest expense, net 24.0
21.6 Provision for income taxes 61.7 55.5 Depreciation,
amortization, and depletion 92.5 88.7
EBITDA (1) $ 295.6 $
269.5 Special items: DeRidder mill incident 5.0 —
Integration-related, facilities closure and other costs 0.8 2.7
Hexacomb working capital adjustment (2.3 ) —
EBITDA excluding special items (1) $
299.1 $ 272.2 (1) See footnote
(1) on page 2, 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 March 31 2017
2016 Packaging Segment income $ 190.8 $ 161.5
Depreciation, amortization, and depletion 77.2
73.3 EBITDA (1) 268.0 234.8
DeRidder mill incident 5.0 — Integration-related, facilities
closure and other costs 0.8 1.9 Hexacomb working capital adjustment
(1.6 ) — EBITDA excluding special items (1)
$ 272.2 $ 236.7
Paper Segment income $ 29.8 $ 36.1 Depreciation,
amortization, and depletion 14.0 14.2
EBITDA (1) 43.8 50.3
Integration-related, facilities closure and other costs —
0.8 EBITDA excluding special items (1)
$ 43.8 $ 51.1
Corporate and Other Segment loss $ (17.5 ) $ (16.8 )
Depreciation, amortization, and depletion 1.3
1.2 EBITDA (1) (16.2 ) (15.6 ) Hexacomb
working capital adjustment (0.7 ) — EBITDA
excluding special items (1)
$ (16.9 ) $
(15.6 ) EBITDA excluding special
items (1) $ 299.1 $
272.2 (1) See footnote (1) on page 2, for a
discussion of non-GAAP financial measures.
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version on businesswire.com: http://www.businesswire.com/news/home/20170426006770/en/
Packaging Corporation of AmericaBarbara SessionsINVESTOR
RELATIONS: (877) 454-2509PCA’s Website: www.packagingcorp.com
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