PACKAGING CORP OF AMERICA false 0000075677 0000075677 2024-02-28 2024-02-28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 28, 2024
Packaging Corporation of America
(Exact name of registrant as specified in its charter)
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| Delaware |
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1-15399 |
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36-4277050 |
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(IRS Employer Identification No.) |
1 N. Field Ct, Lake Forest IL 60045
(Address of Principal Executive Offices, including Zip Code)
(847) 482-3000
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2 (b)) |
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Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Exchange Act:
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PKG |
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New York Stock Exchange |
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On February 28, 2024, Pamela A. Barnes, Packaging Corporation of America’s (“PCA”) Senior Vice President, Finance, and Controller, and PCA’s principal accounting officer, notified PCA that she will retire on April 1, 2024. Effective upon her retirement, Robert P. Mundy, PCA’s Executive Vice President and Chief Financial Officer will serve as PCA’s principal accounting officer and will continue to serve as PCA’s principal financial officer.
Item 7.01. Regulation FD Disclosure
The following information, including the exhibit described below, shall not be deemed “filed” hereunder for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On February 29, 2024, Mark W. Kowlzan, PCA’s Chairman and Chief Executive Officer and Mr. Mundy will present at the Bank of America Global Agriculture and Materials Conference. The slides to be used in connection with such presentation are filed herewith as Exhibit 99.1 and incorporated by reference into this Item 7.01.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| PACKAGING CORPORATION OF AMERICA |
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| By: |
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/s/ Kent A. Pflederer |
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Senior Vice President, General Counsel & Secretary |
Date: February 29, 2024
Packaging Corporation of America Bank
of America Global Agriculture & Materials Conference February 29, 2024 Robert P. Mundy Executive V. P. & CFO Mark W. Kowlzan Chairman & CEO Exhibit 99.1
Certain statements in this
presentation are forward-looking statements. Forward-looking statements include statements about our future financial condition, our industry and our business strategy. Statements that contain words such as “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 are those identified under the caption “Risk Factors” in PCA’s Annual Report on Form 10-K for the year ended December 31, 2023, and in subsequent quarterly reports on Form 10-Q, filed with the Securities and
Exchange Commission and available at the SEC’s website at “www.sec.gov”. Non-GAAP financial measures are reconciled to the most comparable GAAP measure in the Appendix. Packaging Corporation of America
Improving Packaging segment market
conditions in 2nd half of 2023 sets-up great start to 2024 Packaging segment demand continues to strengthen; 1Q24 corrugated products volume exceeding guidance Higher prices in Packaging segment expected from 1Q24 price increases Completing Phase II
of Jackson conversion to containerboard provides value-creating solutions for Packaging and Paper segment demand and much needed strategic runway for high-value integrated box business, generating long-term value creation Continued value creation
from robust strategic, cost reduction, and process improvement capital spending programs in corrugated plants and mills Inflation expected to moderate and supply chain challenges have also improved Strong balance sheet continues to provide financial
flexibility for opportunistic capital allocation and enhancing shareholder returns Positioned to Continue Industry-Leading Performance in 2024 and Beyond
Industry PCA Corrugated Products
Volume Growth - Outperformance vs. the Industry Continues % Cumulative Growth in Volume/Day 26% 4% PCA CAGR 2.4% Industry CAGR 0.2% Cumulative Growth
Containerboard Production Packaging
EBITDA Margin % (1) . . . . and Growing Internal Containerboard Supply Supports Industry-Leading Margins 2017 2018 2019 2020 2021 2022 2023 000 Tons Wallula & Jackson Mills (1) See Appendix A for calculation of EBITDA and EBITDA margins = Avg
Integration Rate 91.4% 23% Avg EBITDA Margin Over This Period
Solid Cash Flow Generation Allows
Continuous Value-Creating Opportunities Cash Flow from Operations Free Cash Flow (1) $ Millions (1) See Appendix A for calculation of free cash flow. All-Time Record
$1,000 $500 $600 $700 % Consistently
Strong ROIC > WACC Creates Significant Value ROIC 6-Yr Avg: 16.8% WACC 6-Yr Avg: 7.9% Over $3 Billion of Value Creation (Pandemic) $400 $MM (1) See Appendix B for ROIC calculations. $900 $800 $1,100
Y/E Share Price ROIC High Correlation
Between Industry-Leading ROIC and Share Price Growth Share Price Average ROIC 16.8% (1) See Appendix B for ROIC calculations. ROIC (1)
Earnings Per Share Price Per Share (3)
( Trendline) ( Trendline) Share Price Growth and EPS vs. Key Competitors EPS Price/Share (1) Start of Pandemic See Appendix C for reconciliation of PCA reported EPS & recurring EPS As of December 31 EPS Price/Share (1) PCA Competitor B (1) EPS
Price/Share Competitor A CAGR EPS(7.7)% Price/Share(6.7)% CAGR EPS 6.3% Price/Share5.1% CAGR EPS 2.4% Price/Share (6.8)% Earnings Per Share (2) Price Per Share (3) ( Trendline) ( Trendline) Earnings Per Share Price Per Share (3) ( Trendline) (
Trendline)
Impressive Total Return Track
Record vs. Competitors and S&P 500 60 – 80%
Meaningful and Sustainable Approach
to Dividends EPS (1) Dividend Per Share EPS Dividend/Share Annualized 6 Year Average Dividend Payout Ratio 49% (Pandemic) 6 Year Average Yield 3% Y/E Share Price Dividend/Share Annualized Dividend Per Share Share Price (1) See Appendix C for
reconciliation of reported EPS to recurring EPS.
Overall Long-term Debt Maturity
15.5 Years Lowest Leverage Among Industry Peers Interest Coverage Strong Balance Sheet Provides for Continued Financial Flexibility 14.3x (1) (1) Excludes one-time debt refinancing charges. Including these charges, the ratio would have been 10.3x
and 10.7x for 2019 and 2021, respectively. 11.9x 17.0x 2017 2018 2019 2020 2021 2022 2023 Leverage Ratio 1.3x 1.3x 1.1x (1) 2017 2018 2019 2020 2021 2022 2023 $MM 2025 - 2027 2028 20292030 - 2033 2043 - 2049 2050 2051 20262032 2048 $400 $500 1.1x
1.1x 21.9x 18.3x $400 $400 $500 $700 1.5x 1.8x 14.7x 12.8x
Packaging segment income $
950.3$1,045.4$ 963.4$ 829.5$ 1,306.0$ 1,423.7$ 1,074.3 Depreciation, amortization and depletion317.5342.0342.8365.2381.0420.2472.5 EBITDA1,267.81,387.41,306.21,194.71,687.01,843.91,546.8 Special items(1) : -Acquisition-related, facilities closure
and other --0.318.2(3.1)(0.6)8.9 costs (income) - Jackson mill conversion–related activities(5.5)1.8--4.35.3--Hurricane Laura impact---10.0--- -Incremental costs for Covid-19---6.3--- -DeRidder mill fixed asset disposals--3.0---- -Wallula mill
restructuring -11.30.5---- -Insurance deductible for property damage-0.5------Expiration of timberland repurchase option(2.0)------ -DeRidder mill incident5.0------ -Hexacomb working capital adjustment(1.6)------EBITDA excluding special
Items$1,263.7$1,401.0$ 1,310.0$ 1,229.2$ 1,688.2$ 1,848.6$ 1,555.7 Packaging net sales $5,312.3$ 5,938.5 $ 5,932.2$ 5,919.5$ 7,052.6$ 7,780.7$ 7,135.6 EBITDA margin23.8%23.6%22.1%20.8%23.9%23.8%21.8% Cash flow from operations$ 856$ 1,180$ 1,207$
1,033$ 1,094$ 1,495$ 1,315 Less: additions to PP&E(343)(551)(399)(421)(605)(824)(470) Free cash flow$ 513$ 629 $ 808 $ 612$ 489$ 671$ 845 Appendix A For descriptions of special items, see “Management’s Discussion and Analysis of
Financial Conditions and Results of Operations” in Part II, Item 7 of our 2017 - 2023 Annual Reports on Form 10-K 20172018 2019202020212022 2023 20172018 2019202020212022 2023
Return on invested capital (ROIC)
is calculated as follows: Income from operations$ 932$ 1,068$ 1,054$ 724$ 1,241$ 1,421$ 1,075 Special items and adjustments: -Facilities closure costs (income)(6)2-28(3)114 -Jackson mill conversion----141411 -Incremental costs for COVID-19---7---
-Goodwill impairment---55--- -Hurricane Laura impact---10----DeRidder mill fixed asset disposals--3-- -- -Wallula mill restructuring 33301-- -- -Insurance deductible for property damage-1----- -Acquisition and integration related costs 2----(1)- -
DeRidder mill incident5------ -Hexacomb working capital adjustment (2)------ -Expiration of timberland repurchase option (2)------ -Ceased production of market pulp at Wallula ------- Adjusted income from operations$962$ 1,101$ 1,058$ 824$
1,2521,4351,101 Provision for income taxes(326)(266)(258)(206)(303)(352)(270) NOPAT$ 636$ 835$ 800$ 618$ 949$ 1,083$ 830 Stockholders’ Equity $ 1,760$ 2,183$ 2,672$ 3,071$ 3,246$ 3,607$ 3,667$ 3,997 Current maturities of long-term debt and
finance2715112222402 lease obligations Finance lease obligations (non-current)201918161413119 Long-term debt2,6202,4802,4842,4772,4792,4722,4742,472 Cash and cash equivalents(239)(217)(362)(680)(975)(619)(320)(648) Marketable debt
securities---(148)(148)(146)(150)(558) Invested capital$ 4,188$ 4,616$ 4,813$ 4,738$ 4,618$ 5,329$ 5,683$ 5,674 Average invested capital$ 4,402$ 4,715$ 4,776$ 4,678$ 4,974$ 5,506$ 5,679 ROIC (NOPAT/average invested
capital)14.5%17.7%16.7%13.2%19.1%19.7%14.6% Appendix B 2016 20172018 2019 2020 202120222023 2017 2018 2019 2020 2021 2022 2023
Reported earnings per diluted share
$ 7.07$ 7.80$ 7.34$ 4.84$ 8.83$ 11.03$ 8.48 Special items (1) - Jackson mill conversion-related activities----0.110.110.09 - Facilities closure and other costs(0.04)0.01-0.23(0.03)0.010.12 -Acquisition and integration related costs
0.01---0.01(0.01)- -Debt refinancing 0.01-0.28-0.47-- -Goodwill impairment---0.58--- -Hurricane Laura impact---0.08--- -Incremental costs for Covid-19---0.05--- -Tax reform(1.29)(0.02)----- -Wallula mill restructuring 0.21 0.240.01---- -DeRidder
mill fixed asset disposals--0.02---- -Internal legal entity consolidation0.04------ -Expiration of timberland repurchase option (0.01)----- -Hexacomb working capital adjustment(0.01)------ -Ceased production of market pulp at Wallula -------
-DeRidder mill incident0.03------ -Sale of St. Helens paper mill site------- -Class action lawsuit settlement------- Total special items (income) expense(1.05)0.230.310.940.560.110.21 Earnings per diluted share, excl. special items (2) $ 6.02$ 8.03$
7.65$ 5.78$ 9.39$ 11.14$ 8.70 Appendix C For descriptions of special items, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in Part II, Item 7 of our 2017-2023, Annual Reports on Form
10-K May not foot due to rounding 2017201820192020202120222023
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