Packaging Corporation of America (NYSE: PKG) today reported
first quarter 2019 net income of $187 million, or $1.97 per share
and $1.98 per share excluding special items. First quarter net
sales were $1.73 billion in 2019 and $1.69 billion in 2018.
Diluted earnings per share attributable to Packaging
Corporation of America shareholders
Three Months Ended March 31 2019
2018 Change Reported Diluted EPS $ 1.97 $ 1.48
$ 0.49 Special Items Expense (1) 0.01 0.07 (0.06)
Diluted EPS excluding Special items $
1.98 $
1.55 $ 0.43 (1) For descriptions
and amounts of our special items, see the schedules with this
release.
Reported earnings in the first quarter of 2019 and 2018 include
special items 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.
Excluding special items, the $.43 per share increase in first
quarter 2019 earnings compared to first quarter 2018 was driven
primarily by higher prices and mix $.37 and volumes $.27 in our
Packaging segment, higher prices and mix in our Paper segment $.21,
lower annual outage expenses $.02, and lower depreciation expense
$.02. These items were partially offset by lower volumes in our
Paper segment ($.13), higher indirect and converting costs ($.17),
higher direct material costs ($.11), and higher fixed expenses
($.05).
Results were $.01 above first quarter guidance of $1.97 per
share primarily due to higher prices and mix in both our Packaging
and Paper segments.
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended March
31 2019 2018 Segment income (loss)
Packaging $ 249.6 $ 224.7 Paper 45.6 7.2 Corporate and Other
(19.8) (19.0)
$ 275.4 $ 212.9
Segment income (loss) excluding special items
Packaging $ 250.0 $ 224.8 Paper 45.8 16.0 Corporate and Other
(19.8) (18.8)
$ 276.0 $
222.0 EBITDA excluding special items Packaging
$ 333.8 $ 307.9 Paper 54.9 31.3 Corporate and Other (18.1)
(17.4)
$ 370.6 $ 321.8
In the Packaging segment, total corrugated products shipments
and shipments per day were up 0.7% over last year’s first quarter.
Containerboard production was 1,037,000 tons, and containerboard
inventory was up 9,000 tons from the fourth quarter of 2018 and up
42,000 tons compared to the first quarter of 2018. In the Paper
segment, compared to the first quarter of 2018, sales volume was
21% lower and production volume was 14% 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 had record first quarter
volumes in both our containerboard mills and corrugated products
plants as well as higher prices and mix, compared to the first and
fourth quarters of 2018. We ran our containerboard system to
demand, and our production allowed us to supply the necessary
containerboard to achieve a first quarter record for box shipments
per day. In our Paper segment, prices and mix continued to move
higher due to the successful execution of our announced price
increases, and sales volume improved as we moved out of the
seasonally slower fourth quarter. Overall, we were able to exceed
our expected results even though we had to overcome significant
weather-related challenges across the Company that negatively
impacted us during the quarter.”
“Looking ahead to the second 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 our Paper segment, volume should be similar to
the first quarter and we will continue implementing the previously
announced paper price increases, but scheduled outage costs will be
higher due to the annual shutdown at our International Falls mill.
Across both segments we anticipate slightly higher freight,
repairs, and certain fixed costs as well as higher share-based
compensation costs due to the accounting treatment of restricted
stock. Energy costs should improve as we move into seasonally
milder weather, recycled fiber prices should be slightly lower, and
our effective tax rate should be lower. Considering these items, we
expect second quarter earnings of $2.05 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 second quarter earnings. However, additional special
items may arise due to second 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 95 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 1st Quarter 2019 Earnings
Conference Call Conference ID: 4393636
WHEN:
Thursday, April 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:
April 25, 2019 1:00 p.m. Eastern Time through May 9, 2019 11:59
p.m. Eastern Time
REBROADCAST NUMBERS:
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International)
Passcode: 4393636
Packaging Corporation of
America Consolidated Earnings Results Unaudited
(dollars in millions, except per-share data)
Three Months
Ended March 31, 2019 2018 Net sales $
1,733.7 $ 1,690.6 Cost of sales (1,312.3 )
(1)
(1,334.5 )
(2)
Gross profit 421.4 356.1 Selling, general, and administrative
expenses (140.0 ) (134.9 ) Other expense, net (6.0 )
(1)
(8.3 )
(2)
Income from operations 275.4 212.9 Non-operating pension expense
(2.0 ) (0.5 ) Interest expense, net (24.1 ) (25.8 )
Income before taxes 249.3 186.6 Provision for income taxes
(62.5 ) (46.5 ) Net income $ 186.8 $ 140.1
Earnings per share: Basic $ 1.98 $ 1.48
Diluted $ 1.97 $ 1.48 Computation of diluted
earnings per share under the two class method: Net income $ 186.8 $
140.1 Less: Distributed and undistributed income available to
participating securities (1.4 ) (1.1 ) Net income
attributable to PCA shareholders $ 185.4 $ 139.0
Diluted weighted average shares outstanding 94.0
93.8 Diluted earnings per share $ 1.97 $ 1.48
Supplemental financial information: Capital
spending $ 78.8 $ 108.0 Cash balance $ 442.4 $ 102.4
(1)
The three months ended March 31, 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
months ended March 31, 2018 include the following: a. $8.8 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. b. $0.3 million 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 March 31, 2019
2018 Segment sales Packaging $ 1,477.6 $ 1,402.9
Paper 239.7 269.4 Corporate and Other 16.4
18.3
$ 1,733.7 $ 1,690.6
Segment income (loss) Packaging $ 249.6 $
224.7 Paper 45.6 7.2 Corporate and Other (19.8 )
(19.0 ) Income from operations
275.4
212.9 Non-operating pension expense (2.0 ) (0.5 )
Interest expense, net (24.1 ) (25.8 ) Income before
taxes
$ 249.3 $ 186.6
Segment income (loss) excluding special items (1)
Packaging $ 250.0 $ 224.8 Paper 45.8 16.0 Corporate and Other
(19.8 ) (18.8 )
$ 276.0 $
222.0 EBITDA excluding special items
(1) Packaging $ 333.8 $ 307.9 Paper 54.9 31.3 Corporate and
Other (18.1 ) (17.4 )
$ 370.6
$ 321.8 (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 March 31, 2019 2018 Packaging
Segment income $ 249.6 $ 224.7 Wallula mill restructuring 0.4 —
Facilities closure and other costs — 0.1
Segment income excluding special items (1)
$
250.0 $ 224.8
Paper Segment income $ 45.6 $ 7.2 Wallula mill restructuring
0.2 8.8 Segment income excluding
special items (1)
$ 45.8 $ 16.0
Corporate and Other Segment loss $ (19.8 ) $
(19.0 ) Facilities closure and other costs —
0.2 Segment loss excluding special items (1)
$
(19.8 ) $ (18.8 )
Income from operations $ 275.4 $
212.9 Income from operations, excluding
special items (1) $ 276.0 $
222.0 (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 March
31, 2019 2018
Incomebeforetaxes
IncomeTaxes
Net Income
DilutedEPS
Incomebeforetaxes
IncomeTaxes
NetIncome
DilutedEPS
As reported $ 249.3 $ (62.5 ) $ 186.8 $ 1.97 $ 186.6 $ (46.5 ) $
140.1 $ 1.48 Special items (2): Wallula mill restructuring 0.6 (0.1
) 0.5 0.01 8.8 (2.2 ) 6.6 0.07 Facilities closure and other costs
— — — — 0.3 (0.1 )
0.2 — Total special items 0.6 (0.1 )
0.5 0.01 9.1 (2.3 ) 6.8
0.07 Excluding special items
$ 249.9 $
(62.6 ) $ 187.3 $ 1.98
$ 195.7 $ (48.8 ) $
146.9 $ 1.55 (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 March 31, 2019
2018 Net income $ 186.8 $ 140.1 Non-operating pension
expense 2.0 0.5 Interest expense, net 24.1 25.8 Provision for
income taxes 62.5 46.5 Depreciation, amortization, and depletion
94.8 108.1
EBITDA (1) $
370.2 $ 321.0 Special items: Wallula mill
restructuring 0.4 0.7 Facilities closure and other costs —
0.1
EBITDA excluding special items (1)
$ 370.6 $ 321.8 (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 March 31, 2019
2018 Packaging Segment income $ 249.6 $ 224.7
Depreciation, amortization, and depletion 84.0
83.1 EBITDA (1) 333.6 307.8
Wallula mill restructuring 0.2 — Facilities closure and other costs
— 0.1 EBITDA excluding special items
(1)
$ 333.8 $ 307.9
Paper Segment income $ 45.6 $ 7.2 Depreciation,
amortization, and depletion 9.1 23.4
EBITDA (1) 54.7 30.6 Wallula mill
restructuring 0.2 0.7 EBITDA excluding
special items (1)
$ 54.9 $ 31.3
Corporate and Other Segment loss $ (19.8 ) $
(19.0 ) Depreciation, amortization, and depletion 1.7
1.6 EBITDA (1) (18.1 ) (17.4 ) EBITDA
excluding special items (1)
$ (18.1 ) $
(17.4 ) EBITDA excluding special items
(1) $ 370.6 $ 321.8
(1) See footnote (1) on page 3, for a discussion of
non-GAAP financial measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190424006130/en/
CONTACT:Barbara SessionsPackaging Corporation of
AmericaINVESTOR RELATIONS: (877) 454-2509PCA’s Website:
www.packagingcorp.com
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