Packaging Corporation of America (NYSE: PKG) today reported
second quarter 2019 net income of $194 million, or $2.04 per share.
Second quarter net sales were $1.8 billion in both 2019 and
2018.
Diluted earnings
per share attributable to Packaging Corporation of America
shareholders
Three Months Ended
June 30
2019
2018
Change
Reported Diluted EPS
$
2.04
$
1.97
$
0.07
Special Items Expense (1)
0.00
0.11
(0.11)
Diluted EPS excluding Special items
$
2.04
$
2.08
$
(0.04)
(1) For descriptions and amounts of our
special items, see the schedules with this release.
Reported earnings in the second quarter of 2018 include $.11 per
share of special items expense primarily for certain costs related
to discontinuing paper operations associated with the previously
announced conversion of the No. 3 paper machine at our Wallula,
Washington mill to linerboard.
The ($.04) per share decrease in second quarter 2019 earnings
compared to second quarter 2018, excluding special items, was
driven primarily by higher operating costs ($.27), higher
converting costs ($.05), lower Paper segment volume ($.04), higher
annual outage expenses ($.06), and a higher tax rate ($.01). These
items were partially offset by higher Packaging segment volume $.09
and prices and mix $.08, higher Paper segment prices and mix $.16,
lower Wallula No. 3 paper machine conversion-related costs $.04,
and lower freight costs $.02.
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended
June 30
2019
2018
Segment income (loss)
Packaging
$ 263.9
$ 273.2
Paper
38.8
16.2
Corporate and Other
(22.3)
(19.8)
$ 280.4
$ 269.6
Segment income (loss) excluding special
items
Packaging
$ 263.9
$ 278.6
Paper
38.8
24.4
Corporate and Other
(22.3)
(19.6)
$ 280.4
$ 283.4
EBITDA excluding special items
Packaging
$ 348.6
$ 362.8
Paper
48.2
37.7
Corporate and Other
(20.6)
(18.2)
$ 376.2
$ 382.3
In the Packaging segment, total corrugated products shipments
with one less workday were down (1.3)% and shipments per day were
up 0.3% over last year’s second quarter. Containerboard production
was 1,063,000 tons, and containerboard inventory was down 5,000
tons from the first quarter of 2019 and up 29,000 tons compared to
the second quarter of 2018. In the Paper segment, compared to the
second quarter of 2018, sales volume was 13% lower and production
volume was 6% lower, primarily due to discontinuing the paper
business at the Wallula Mill.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “In our Packaging segment, we continued to run our
containerboard system to demand, and our mills supplied the
necessary containerboard to achieve a second quarter record for box
shipments per day while lowering our inventory from first quarter
levels. Average prices and mix were above last year, although
export prices and the published domestic containerboard prices did
move lower during the quarter. In the Paper segment, volumes for
our office paper and converting grades were slightly above the
second quarter of 2018. Prices and mix continued to move higher
early in the quarter, but we began to see some softening late in
the quarter. Overall, we were able to deliver solid results despite
on-going increases with labor-related costs as well as several
indirect operating expenses across the Company that negatively
impacted us during the quarter.”
“Looking ahead to the third quarter,” Mr. Kowlzan added, “in our
Packaging segment we expect seasonally higher containerboard and
corrugated products shipments, with lower prices as a result of the
published domestic containerboard price decreases, and lower export
prices. In the Paper segment, volume should be seasonally stronger,
but prices and mix are expected to move lower. Converting and other
costs should be slightly higher, but operating costs and scheduled
maintenance outage costs should be lower. Considering these items,
we expect third quarter earnings of $1.91 per share.”
We present various non-GAAP financial measures in this press
release, including diluted EPS excluding special items, segment
income excluding special items and EBITDA excluding special items.
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.
We do not currently expect special items to have a significant
effect on third quarter earnings. However, additional special items
may arise due to third quarter events.
PCA is the third largest producer of containerboard products and
the third largest producer of uncoated freesheet paper in North
America. PCA operates eight mills and 94 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 restructuring activities, 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, 2018 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 2nd Quarter 2019 Earnings Conference Call
Conference ID: 8594367
WHEN:
Thursday, July 25, 2019 at 9:00
a.m. Eastern Time
CALL-IN
(855) 730-0288 (U.S. and Canada)
or (832) 412-2295 (International)
NUMBER:
Dial in by 8:45 a.m. Eastern
Time
Conference Call Leader: Mr. Mark
Kowlzan
WEBCAST INFO:
http://www.packagingcorp.com;
Investor Relations
REBROADCAST DATES:
July 25, 2019 2:00 p.m. Eastern
Time through August 8, 2019 11:59 p.m. Eastern Time
REBROADCAST NUMBERS:
(855) 859-2056 (U.S. and Canada)
or (404) 537-3406 (International)
Passcode: 8594367
Packaging Corporation of
America
Consolidated Earnings
Results
Unaudited
(dollars in millions, except
per-share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Net sales
$
1,759.9
$
1,767.5
$
3,493.6
$
3,458.1
Cost of sales
(1,332.0
)
(1,346.9
)
(2)
(2,644.3
)
(1)
(2,681.4
)
(2)
Gross profit
427.9
420.6
849.3
776.7
Selling, general, and administrative expenses
(143.7
)
(137.7
)
(283.7
)
(272.6
)
Other expense, net
(3.8
)
(13.3
)
(2)
(9.8
)
(1)
(21.6
)
(2)
Income from operations
280.4
269.6
555.8
482.5
Non-operating pension expense
(2.0
)
(0.5
)
(4.1
)
(1.1
)
Interest expense, net
(22.4
)
(23.8
)
(46.4
)
(49.6
)
Income before taxes
256.0
245.3
505.3
431.8
Provision for income taxes
(62.4
)
(58.7
)
(124.9
)
(105.1
)
Net income
$
193.6
$
186.6
$
380.4
$
326.7
Earnings per share: Basic
$
2.05
$
1.98
$
4.03
$
3.46
Diluted
$
2.04
$
1.97
$
4.02
$
3.46
Computation of diluted earnings per share under the two
class method: Net income
$
193.6
$
186.6
$
380.4
$
326.7
Less: Distributed and undistributed income available to
participating securities
(1.5
)
(1.4
)
(2.9
)
(2.5
)
Net income attributable to PCA shareholders
$
192.1
$
185.2
$
377.5
$
324.2
Diluted weighted average shares outstanding
94.0
93.8
94.0
93.8
Diluted earnings per share
$
2.04
$
1.97
$
4.02
$
3.46
Supplemental financial information: Capital spending
$
92.1
$
165.9
$
170.9
$
273.9
Cash balance
$
569.4
$
199.6
$
569.4
$
199.6
(1)
The six months ended June 30,
2019 include $0.6 million of charges related to the announced
second quarter 2018 discontinuation of uncoated free sheet and
coated one-side grades at the Wallula, Washington mill associated
with the conversion of the No. 3 paper machine to a
high-performance 100% virgin kraft linerboard machine. The costs
were recorded within “Other expense, net” and “Cost of sales”, as
appropriate.
(2)
The three and six months ended
June 30, 2018 include the following:
a.
$13.6 million and $22.4 million,
respectively, of charges related to the announced second quarter
2018 discontinuation of uncoated free sheet and coated one-side
grades at the Wallula, Washington mill associated with the
conversion of the No. 3 paper machine to a high-performance 100%
virgin kraft linerboard machine. The costs were recorded within
“Other expense, net” and “Cost of sales”, as appropriate.
b.
$0.2 million and $0.5 million,
respectively, of charges consisting of closure costs related to
corrugated products facilities and a corporate administration
facility, which were recorded in “Other expense, net” and “Cost of
sales”, as appropriate.
Packaging Corporation of
America
Segment Information
Unaudited
(dollars in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Segment sales Packaging
$
1,504.6
$
1,496.2
$
2,982.2
$
2,899.1
Paper
237.8
250.8
477.5
520.2
Corporate and Other
17.5
20.5
33.9
38.8
$
1,759.9
$
1,767.5
$
3,493.6
$
3,458.1
Segment income (loss) Packaging
$
263.9
$
273.2
$
513.4
$
497.9
Paper
38.8
16.2
84.4
23.5
Corporate and Other
(22.3
)
(19.8
)
(42.0
)
(38.9
)
Income from operations
280.4
269.6
555.8
482.5
Non-operating pension expense
(2.0
)
(0.5
)
(4.1
)
(1.1
)
Interest expense, net
(22.4
)
(23.8
)
(46.4
)
(49.6
)
Income before taxes
$
256.0
$
245.3
$
505.3
$
431.8
Segment income (loss) excluding special items (1)
Packaging
$
263.9
$
278.6
$
513.8
$
503.4
Paper
38.8
24.4
84.6
40.5
Corporate and Other
(22.3
)
(19.6
)
(42.0
)
(38.5
)
$
280.4
$
283.4
$
556.4
$
505.4
EBITDA excluding special items (1) Packaging
$
348.6
$
362.8
$
682.4
$
670.8
Paper
48.2
37.7
103.1
69.0
Corporate and Other
(20.6
)
(18.2
)
(38.7
)
(35.7
)
$
376.2
$
382.3
$
746.8
$
704.1
(1)
Segment income (loss) excluding
special items, earnings before non-operating pension expense,
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
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Packaging Segment income
$
263.9
$
273.2
$
513.4
$
497.9
Wallula mill restructuring
—
5.4
0.4
5.4
Facilities closure and other costs
—
—
—
0.1
Segment income excluding special items (1)
$
263.9
$
278.6
$
513.8
$
503.4
Paper
Segment income
$
38.8
$
16.2
$
84.4
$
23.5
Wallula mill restructuring
—
8.2
0.2
17.0
Segment income excluding special items (1)
$
38.8
$
24.4
$
84.6
$
40.5
Corporate and Other
Segment loss
$
(22.3
)
$
(19.8
)
$
(42.0
)
$
(38.9
)
Facilities closure and other costs
—
0.2
—
0.4
Segment loss excluding special items (1)
$
(22.3
)
$
(19.6
)
$
(42.0
)
$
(38.5
)
Income from operations
$
280.4
$
269.6
$
555.8
$
482.5
Income from operations, excluding
special items (1)
$
280.4
$
283.4
$
556.4
$
505.4
(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 June
30,
2019
2018
Income before taxes
Income Taxes
Net Income
Diluted EPS
Income before taxes
Income Taxes
Net Income
Diluted EPS
As reported
$
256.0
$
(62.4
)
$
193.6
$
2.04
$
245.3
$
(58.7
)
$
186.6
$
1.97
Special items (2): Wallula mill restructuring —
—
— —
13.6
(3.4
)
10.2
0.11
Facilities closure and other costs —
—
— —
0.2
—
0.2
— Total special items —
—
— —
13.8
(3.4
)
10.4
0.11
Excluding special items
$
256.0
$
(62.4
)
$
193.6
$
2.04
$
259.1
$
(62.1
)
$
197.0
$
2.08
Six Months Ended June
30,
2019
2018
Income before taxes
Income Taxes
Net Income
Diluted EPS
Income before taxes
Income Taxes
Net Income
Diluted EPS
As reported
$
505.3
$
(124.9
)
$
380.4
$
4.02
$
431.8
$
(105.1
)
$
326.7
$
3.46
Special items (2): Wallula mill restructuring
0.6
(0.1
)
0.5
—
22.4
(5.6
)
16.8
0.18
Facilities closure and other costs —
—
— —
0.5
(0.1
)
0.4
— Total special items
0.6
(0.1
)
0.5
—
22.9
(5.7
)
17.2
0.18
Excluding special items
$
505.9
$
(125.0
)
$
380.9
$
4.02
$
454.7
$
(110.8
)
$
343.9
$
3.64
(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)
Pre-tax special items are
tax-effected at a combined federal and state income tax rate in
effect for the period the special items were recorded and this rate
is adjusted for each subsequent quarter to be consistent with the
estimated annual effective tax rate, in accordance with ASC 270,
Interim Reporting, and ASC 740-270, Income Taxes – Intra Period Tax
Allocation. For all periods presented, income taxes on pre-tax
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 non-operating pension expense, interest, income taxes, and
depreciation, amortization, and depletion. The following table
reconciles net income to EBITDA and EBITDA excluding special items:
Three Months Ended
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Net income
$
193.6
$
186.6
$
380.4
$
326.7
Non-operating pension expense
2.0
0.5
4.1
1.1
Interest expense, net
22.4
23.8
46.4
49.6
Provision for income taxes
62.4
58.7
124.9
105.1
Depreciation, amortization, and depletion
95.8
104.1
190.6
212.2
EBITDA (1)
$
376.2
$
373.7
$
746.4
$
694.7
Special items: Wallula mill restructuring —
8.6
0.4
9.3
Facilities closure and other costs — — —
0.1
EBITDA excluding special items (1)
$
376.2
$
382.3
$
746.8
$
704.1
(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
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
Packaging Segment income
$
263.9
$
273.2
$
513.4
$
497.9
Depreciation, amortization, and depletion
84.7
84.5
168.8
167.7
EBITDA (1)
348.6
357.7
682.2
665.6
Wallula mill restructuring —
5.1
0.2
5.1
Facilities closure and other costs — — —
0.1
EBITDA excluding special items (1)
$
348.6
$
362.8
$
682.4
$
670.8
Paper Segment income
$
38.8
$
16.2
$
84.4
$
23.5
Depreciation, amortization, and depletion
9.4
18.0
18.5
41.3
EBITDA (1)
48.2
34.2
102.9
64.8
Wallula mill restructuring —
3.5
0.2
4.2
EBITDA excluding special items (1)
$
48.2
$
37.7
$
103.1
$
69.0
Corporate and Other Segment loss
$
(22.3
)
$
(19.8
)
$
(42.0
)
$
(38.9
)
Depreciation, amortization, and depletion
1.7
1.6
3.3
3.2
EBITDA (1)
(20.6
)
(18.2
)
(38.7
)
(35.7
)
EBITDA excluding special items (1)
$
(20.6
)
$
(18.2
)
$
(38.7
)
$
(35.7
)
EBITDA excluding special items (1)
$
376.2
$
382.3
$
746.8
$
704.1
(1) See footnote (1) on page 2, for a discussion of non-GAAP
financial measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190724005890/en/
CONTACT: Barbara Sessions Packaging Corporation of
America INVESTOR RELATIONS: (877) 454-2509 PCA’s Website:
www.packagingcorp.com
Packaging (NYSE:PKG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Packaging (NYSE:PKG)
Historical Stock Chart
From Apr 2023 to Apr 2024