Packaging Corporation of America (NYSE: PKG) today reported
second quarter 2016 net income of $116 million, or $1.23 per share
and $1.25 per share excluding special items. Second quarter net
sales were $1.42 billion in 2016 and $1.45 billion in 2015.
Diluted earnings per share attributable to Packaging
Corporation of America shareholders Three
Months Ended June 30 2016 2015
Change Reported Diluted EPS $ 1.23 $ 1.16 $ 0.07
Special Items Expense (1) 0.02 0.02 — Diluted EPS
excluding Special items
$ 1.25 $
1.18 $ 0.07
(1) For descriptions and amounts of our
special items see page 4.
The $.07 per share increase in second quarter 2016 earnings,
compared to the second quarter of 2015, was driven primarily by
higher corrugated products volumes ($.04), lower costs for energy
($.06), fiber ($.05), freight ($.04) and a lower share count
resulting from share repurchases ($.04). These items were partially
offset by lower domestic containerboard and corrugated products
prices and mix ($.04), lower containerboard export prices ($.03),
lower containerboard domestic and export volume ($.04), lower pulp
volume ($.02), lower white paper and pulp prices and mix ($.01),
and higher depreciation and other fixed costs ($.02).
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended June
30 2016 2015 Segment income (loss)
Packaging $ 192.4 $ 194.6 Paper 24.4 23.4 Corporate and Other
(16.6) (20.4)
$ 200.2 $ 197.6 Segment
income (loss) excluding special items Packaging $ 194.7 $ 195.3
Paper 24.7 23.4 Corporate and Other (16.3) (18.4)
$ 203.1
$ 200.3 EBITDA excluding special items
Packaging $ 266.7 $ 267.4 Paper 38.7 37.1 Corporate and Other
(15.0) (17.4)
$ 290.4 $ 287.1
Corrugated products shipments were up 2.2% in total and up 0.6%
per workday compared to the second quarter of 2015. Packaging
segment price and mix was lower than the second quarter of 2015,
but up compared to the first quarter of 2016. Containerboard
production was 926,000 tons, and containerboard inventory was flat
compared to the end of the first quarter of 2016 and the end of the
second quarter of 2015.
Paper segment price and mix was lower than the second quarter of
2015, but higher than the first quarter of 2016. White paper sales
volume was up slightly and pulp volume was lower compared to the
second quarter of 2015, while volume for both white paper and pulp
was lower than the first quarter of 2016 primarily due to scheduled
annual outages at two mills.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “We achieved record second quarter earnings despite
lower pricing in packaging and paper products. Our corrugated
products volume for the quarter set all-time records for both total
shipments as well as shipments per day, and corrugated prices and
mix were up compared to first quarter 2016 levels. White paper
prices and mix showed positive trends towards the end of the
quarter as a result of the previously announced price increases.
Operationally, we had another exceptional quarter as manufacturing
and freight costs across our packaging and paper mills were
outstanding and we successfully completed four annual outages.”
“Looking ahead to the third quarter,” Mr. Kowlzan added, “we
expect higher containerboard, corrugated products and white paper
shipments. Paper prices should move higher reflecting continued
realization of the announced price increases, and our annual outage
costs will be lower. We expect a less rich mix in corrugated
products and higher prices for recycled fiber, electricity and
fuels. Considering these items, we expect third quarter earnings of
$1.30 per share. Finally, as previously announced, we are on track
to close the acquisition of TimBar later in the third quarter.”
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 currently expect special items in the third quarter to include
fees, expenses and purchase accounting charges relating to the
TimBar acquisition. Additional special items may arise due to third
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 90 corrugated products plants and related
facilities.
Conference Call
Information:
WHAT:
Packaging Corporation of America’s 2nd Quarter 2016 Earnings
Conference Call
WHEN:
Thursday, July 21, 2016 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:
July 21, 2016 1:00 p.m. Eastern Time through August 4, 2016 11:59
p.m. Eastern Time
REBROADCAST NUMBERS:
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International)
Passcode: 55069110
Some of the statements in this press release are forward-looking
statements. Forward-looking statements include statements about our
future earnings and financial condition, the benefits and timing of
completion of the TimBar acquisition, 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 Six Months Ended
June 30 June 30 2016 2015 2016
2015 Net sales $ 1,417.4 $ 1,454.3 $ 2,818.4 $ 2,880.0 Cost
of sales (1,097.3 )
(1)
(1,136.6 )
(2)(3)
(2,199.3 )
(1)
(2,285.3 )
(2)(3)
Gross profit 320.1 317.7 619.1 594.7 Selling, general, and
administrative expenses (114.8 ) (115.9 )
(3)
(229.1 ) (233.2 )
(3)
Other expense, net (5.1 )
(1)
(4.2 )
(2)
(9.0 )
(1)
(6.8 )
(2)
Income from operations 200.2 197.6 381.0 354.7 Interest expense,
net (22.5 ) (22.2 ) (44.1 ) (41.4 )
Income before taxes 177.7 175.4 336.9 313.3 Provision for income
taxes (61.8 ) (61.4 ) (117.3 ) (108.5 )
Net income $ 115.9 $ 114.0 $ 219.6 $ 204.8
Earnings per share: Basic $ 1.23 $ 1.16 $ 2.32
$ 2.09 Diluted $ 1.23 $ 1.16 $ 2.32
$ 2.08 Computation of diluted earnings
per share under the two class method: Net income $ 115.9 $ 114.0 $
219.6 $ 204.8 Less: Distributed and undistributed income available
to participating securities (1.2 ) (1.4 ) (2.3
) (2.6 ) Net income attributable to PCA shareholders $ 114.7
$ 112.6 $ 217.3 $ 202.2 Diluted
weighted average shares outstanding 93.3 96.9
93.7 97.0 Diluted earnings per
share $ 1.23 $ 1.16 $ 2.32 $ 2.08
Supplemental financial information: Capital spending
$ 68.9 $ 86.3 $ 121.8 $ 141.9 Cash balance $ 213.6 $ 163.7 $ 213.6
$ 163.7
(1) The three and six months ended June 30, 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 3 for
amounts recorded in each period.
The three months ended June 30, 2016 include $0.3 million of
acquisition-related costs for the announced TimBar Corporation
acquisition, which we recorded in "Other expense, net".
The three months ended June 30, 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".
(2) The three and six months ended June 30, 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 3 for amounts recorded in each period.
The six months ended June 30, 2015 includes 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 six months ended June 30, 2015 include Boise
acquisition integration-related and other costs, primarily recorded
in "Other expense, net". See page 3 for the amounts recorded in
each period.
(3) Certain amounts in prior periods' consolidated financial
statements have been revised to correct an error in the previous
presentation totaling $6.0 million reclassified from “Selling,
general, and administrative expenses” to “Cost of Sales” for both
the three and six months ended June 30, 2015.
Packaging Corporation of America
Segment Information Unaudited (dollars in millions)
Three Months Ended Six Months Ended June
30 June 30 2016 2015 2016
2015 Segment sales Packaging $ 1,125.3 $ 1,142.2 $
2,220.8 $ 2,241.5 Paper 266.8 281.1 547.3 578.4 Intersegment
eliminations and other 25.3 31.0
50.3 60.1 $ 1,417.4 $ 1,454.3 $
2,818.4 $ 2,880.0
Segment income (loss)
Packaging $ 192.4 $ 194.6 $ 353.9 $ 335.7 Paper 24.4 23.4 60.5 59.0
Corporate and Other (16.6 ) (20.4 ) (33.4 )
(40.0 ) Income from operations
200.2
197.6 381.0
354.7 Interest expense, net (22.5 )
(22.2 ) (44.1 ) (41.4 ) Income before taxes
$
177.7 $ 175.4 $
336.9 $ 313.3 Segment
income (loss) excluding special items (1) Packaging $ 194.7 $
195.3 $ 358.1 $ 347.6 Paper 24.7 23.4 61.7 59.0 Corporate and Other
(16.3 ) (18.4 ) (33.1 ) (35.4 )
$ 203.1 $ 200.3 $
386.7 $ 371.2 EBITDA
excluding special items (1) Packaging $ 266.7 $ 267.4 $
503.4 $ 489.4 Paper 38.7 37.1 89.8 86.4 Corporate and Other
(15.0 ) (17.4 ) (30.6 ) (33.4 )
$
290.4 $ 287.1 $
562.6 $ 542.4
(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 Six Months Ended June 30 June 30
2016 2015 2016 2015 Packaging
Segment income $ 192.4 $ 194.6 $ 353.9 $ 335.7 Facilities closure
costs 1.4 — 3.3 — Multiemployer pension withdrawal 0.9 — 0.9 —
DeRidder restructuring — (1.0 ) — 9.3 Integration-related and other
costs — 1.7 — 2.6
Segment income excluding special items (1)
$
194.7 $ 195.3 $
358.1 $ 347.6
Paper Segment income $ 24.4 $ 23.4 $ 60.5 $ 59.0 Facilities
closure costs 0.3 — 1.2
— Segment income excluding special items (1)
$
24.7 $ 23.4 $ 61.7
$ 59.0 Corporate and
Other Segment loss $ (16.6 ) $ (20.4 ) $ (33.4 ) $ (40.0 )
Acquisition-related costs 0.3 — 0.3 — Integration-related and other
costs — 2.0 — 4.6
Segment loss excluding special items (1)
$
(16.3 ) $ (18.4 ) $
(33.1 ) $ (35.4 )
Income from operations $ 200.2
$ 197.6 $ 381.0
$ 354.7 Income
from operations, excluding special items (1) $
203.1 $ 200.3 $
386.7 $ 371.2 (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)
Net Income and EPS Excluding Special Items (1)
Three Months Ended June 30 2016 2015
Income Income before Income
Diluted before Income Diluted
taxes Taxes Net Income
EPS taxes Taxes Net
Income EPS As reported $ 177.7 $ (61.8 ) $ 115.9
$ 1.23 $ 175.4 $ (61.4 ) $ 114.0 $ 1.16 Special items (2):
Facilities closure costs 1.7 (0.7 ) 1.0 0.01 — — — — Acquisition
related costs 0.3 (0.1 ) 0.2 — — — — — Multiemployer pension
withdrawal 0.9 (0.3 ) 0.6 0.01 — — — — DeRidder restructuring — — —
— (1.0 ) 0.3 (0.7 ) (0.01 ) Integration-related and other costs
— — — — 3.7
(1.4 ) 2.3 0.03 Total special items
2.9 (1.1 ) 1.8 0.02 2.7
(1.1 ) 1.6 0.02 Excluding
special items
$ 180.6 $ (62.9 )
$ 117.7 $ 1.25 $ 178.1
$ (62.5 ) $ 115.6
$ 1.18 Six Months Ended June 30
2016 2015 Income Income before
Income Diluted before Income
Diluted taxes Taxes Net
Income EPS taxes Taxes
Net Income EPS As reported $ 336.9 $ (117.3 )
$ 219.6 $ 2.32 $ 313.3 $ (108.5 ) $ 204.8 $ 2.08 Special items (2):
Facilities closure costs 4.5 (1.6 ) 2.9 0.03 — — — — Acquisition
related costs 0.3 (0.1 ) 0.2 — — — — — Multiemployer pension
withdrawal 0.9 (0.3 ) 0.6 0.01 — — — — DeRidder restructuring — — —
— 9.3 (3.4 ) 5.9 0.06 Integration-related and other costs —
— — — 7.2 (2.7 )
4.5 0.05 Total special items 5.7
(2.0 ) 3.7 0.04 16.5 (6.1
) 10.4 0.11 Excluding special items
$ 342.6 $ (119.3 ) $
223.3 $ 2.36 $ 329.8
$ (114.6 ) $ 215.2
$ 2.19
(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 Six Months Ended
June 30 June 30 2016 2015 2016
2015 Net income $ 115.9 $ 114.0 $ 219.6 $ 204.8 Interest
expense, net 22.5 22.2 44.1 41.4 Provision for income taxes 61.8
61.4 117.3 108.5 Depreciation, amortization, and depletion
87.6 86.8 176.3 180.2
EBITDA
(1) $ 287.8 $ 284.4
$ 557.3 $ 534.9 Special items:
Facilities closure costs 1.4 — 4.1 — Acquisition related costs 0.3
— 0.3 — Multiemployer pension withdrawal 0.9 — 0.9 — DeRidder
restructuring — (1.0 ) — 0.3 Integration-related and other costs
— 3.7 — 7.2
EBITDA excluding
special items (1) $ 290.4 $
287.1 $ 562.6 $ 542.4
(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) The
following table reconciles segment income (loss) to EBITDA
excluding special items:
Three Months Ended Six
Months Ended June 30 June 30 2016
2015 2016 2015 Packaging Segment income
$ 192.4 $ 194.6 $ 353.9 $ 335.7 Depreciation, amortization, and
depletion 72.0 72.1 145.3
150.8 EBITDA (1) 264.4 266.7
499.2 486.5 Facilities closure
costs 1.4 — 3.3 — Multiemployer pension withdrawal 0.9 — 0.9 —
DeRidder restructuring — (1.0 ) — 0.3 Integration-related and other
costs — 1.7 — 2.6
EBITDA excluding special items (1)
$ 266.7
$ 267.4 $ 503.4
$ 489.4 Paper Segment income $
24.4 $ 23.4 $ 60.5 $ 59.0 Depreciation, amortization, and depletion
14.3 13.7 28.5
27.4 EBITDA (1) 38.7 37.1
89.0 86.4 Facilities closure costs —
— 0.8 — EBITDA
excluding special items (1)
$ 38.7 $
37.1 $ 89.8 $ 86.4
Corporate and Other Segment loss $ (16.6 ) $
(20.4 ) $ (33.4 ) $ (40.0 ) Depreciation, amortization, and
depletion 1.3 1.0
2.5 2.0 EBITDA (1) (15.3 )
(19.4 ) (30.9 ) (38.0 )
Acquisition related costs 0.3 — 0.3 — Integration-related and other
costs — 2.0 — 4.6
EBITDA excluding special items (1)
$ (15.0
) $ (17.4 ) $ (30.6
) $ (33.4 )
EBITDA excluding special items (1) $
290.4 $ 287.1 $
562.6 $ 542.4 (1) See
footnote (1) on page 2, for a discussion of non-GAAP financial
measures.
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Packaging Corporation of AmericaBarbara SessionsINVESTOR
RELATIONS: (877) 454-2509PCA’s Website: www.packagingcorp.com
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