Packaging Corporation of America (NYSE: PKG) today reported
third quarter 2016 net income of $119 million, or $1.26 per share
and $1.30 per share excluding special items. Third quarter net
sales were $1.5 billion in 2016 and in 2015.
Diluted earnings per share attributable to
Packaging Corporation of America shareholders
Three Months Ended September 30 2016
2015 Change Reported Diluted EPS $ 1.26
$ 1.31 $ (0.05) Special Items Expense (Income) (1) 0.04
(0.05) 0.09 Diluted EPS excluding Special items $
1.30 $
1.26 $ 0.04
(1) For descriptions and amounts of our special items see page 4.
Reported earnings include the impact of $.04 of special items
expense in the third quarter of 2016 and $.05 of special items
income in 2015. Excluding special items, the $.04 per share
increase in third quarter 2016 earnings compared to the third
quarter of 2015, was driven primarily by higher containerboard,
corrugated products and white paper sales volumes ($.04), higher
white paper prices and mix ($.03), lower costs for energy ($.03),
fiber ($.07) and freight ($.03), lower annual outage costs ($.01)
and a lower share count resulting from share repurchases ($.04).
These items were partially offset by lower domestic containerboard
and corrugated products prices and mix ($.13), lower containerboard
export prices ($.02), lower paper production volume ($.02), and
higher costs for labor and fringes ($.04).
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended September
30 2016 2015 Segment income (loss)
Packaging $ 179.6 $ 198.2 Paper 44.5 39.5 Corporate and Other
(17.7 ) (18.3 )
$ 206.4 $
219.4 Segment income (loss) excluding
special items Packaging $ 184.0 $ 194.4 Paper 45.0 32.8
Corporate and Other (17.7 ) (15.9 )
$
211.3 $ 211.3 EBITDA
excluding special items Packaging $ 256.0 $ 267.9 Paper 59.3
46.1 Corporate and Other (16.4 ) (15.0 )
$
298.9 $ 299.0
In the Packaging segment, corrugated products shipments,
excluding TimBar, set all-time records for both total shipments as
well as shipments per day with shipments up 1.7% over last year’s
record third quarter with the same number of workdays. Packaging
segment price and mix was lower than the third quarter of 2015 and
the second quarter of 2016. Containerboard production was 950,000
tons, and containerboard inventory was down 11,000 tons compared to
the end of the second quarter of 2016 and 16,000 tons below the
third quarter of 2015.
Paper segment price and mix was higher than the third quarter of
2015 and the second quarter of 2016. White paper sales volume was
higher and pulp volumes were lower compared to the third quarter of
2015 while both paper sales volume and pulp volumes were up versus
the second quarter of 2016.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “We had an excellent quarter even with lower pricing and
mix in our containerboard and corrugated products. Our packaging
mills ran very well, and we set all-time record volumes in our
corrugated products plants while reducing inventory levels as we
quickly integrate our containerboard volume through our new
corrugated products plants from the TimBar acquisition. Our Paper
segment EBITDA margin increased as we grew our paper volume and
achieved additional operational efficiencies while continuing to
improve prices since the second quarter 2016 price increase
announcements.”
“Looking ahead to the fourth quarter,” Mr. Kowlzan added, “we
expect seasonally lower volumes for containerboard and corrugated
products, which includes four less shipping days, as well as a
seasonally less rich mix in corrugated products, compared to the
third quarter. However, we will have three months of TimBar
activity in the fourth quarter versus only one month in the third
quarter. In addition, we did announce a price increase of $50 per
ton effective October 1st to our containerboard customers as well
as a price increase to our corrugated products customers. We expect
seasonally lower volumes and a less rich mix in white papers and,
with colder weather, wood and fuel costs are expected to be
seasonally higher along with some price inflation on recycled
fiber. Our annual outage costs also will be higher with the
scheduled maintenance work at our Filer City, Michigan
containerboard mill. Considering these items, we expect fourth
quarter earnings of $1.15 per share. In addition, as previously
announced, we are on track to close the acquisition of Columbus
Container during the fourth 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 fourth quarter to include
fees, expenses and accounting charges relating to the TimBar and
Columbus Container acquisitions and other facilities closures.
Additional special items may arise due to fourth 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 95 corrugated products plants and related
facilities.
Conference Call
Information:
WHAT:
Packaging Corporation of America’s 3rd Quarter 2016 Earnings
Conference Call
WHEN:
Thursday, October 20, 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:
October 20, 2016 1:00 p.m. Eastern Time through November 3, 2016
11:59 p.m. Eastern Time
REBROADCAST NUMBERS:
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International)
Passcode: 55071195
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 timing of completion
of the Columbus Container acquisition, 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,
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 Nine Months
Ended September 30 September 30
2016 2015 2016
2015 Net sales $ 1,484.0 $ 1,470.8 $
4,302.4 $ 4,350.8 Cost of sales (1,154.5 )
(1)
(1,142.5 )
(2)
(3,353.8 )
(1)
(3,427.9 )
(2)
Gross profit 329.5 328.3 948.6 922.9 Selling, general, and
administrative expenses (116.9 ) (112.7 ) (346.0 ) (345.9 ) Other
income (expense), net (6.2 )
(1)
3.8
(2)
(15.2 )
(1)
(2.9 )
(2)
Income from operations 206.4 219.4 587.4 574.1 Interest expense,
net (23.4 ) (21.7 ) (67.5 ) (63.2 )
Income before taxes 183.0 197.7 519.9 510.9 Provision for income
taxes (63.7 ) (69.9 ) (181.0 ) (178.3 )
Net income $ 119.3 $ 127.8 $ 338.9 $ 332.6
Earnings per share: Basic $ 1.27 $ 1.31 $ 3.59
$ 3.39 Diluted $ 1.26 $ 1.31 $ 3.58
$ 3.39 Computation of diluted earnings
per share under the two class method: Net income $ 119.3 $ 127.8 $
338.9 $ 332.6 Less: Distributed and undistributed income available
to participating securities (1.1 ) (1.5 ) (3.4
) (4.0 ) Net income attributable to PCA shareholders $ 118.2
$ 126.3 $ 335.5 $ 328.6 Diluted
weighted average shares outstanding 93.6 96.6
93.7 96.9 Diluted earnings per
share $ 1.26 $ 1.31 $ 3.58 $ 3.39
Supplemental financial information: Capital spending
$ 66.3 $ 76.0 $ 188.1 $ 217.9 Cash balance $ 279.8 $ 186.9 $ 279.8
$ 186.9 (1)The three and nine months ended September 30,
2016 include closure costs related to corrugated products
facilities and a paper products facility. The closure costs are
recorded within "Other income (expense), net" and "Cost of sales",
as appropriate. See page 3 for amounts recorded in each period.
The three and nine months ended September
30, 2016 include $2.9 million and $3.2 million of
acquisition-related costs for the announced TimBar Corporation
acquisition, which we recorded in "Other income (expense),
net".
The nine months ended September 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 income
(expense), net".
(2)The three and nine months ended September 30, 2015
include restructuring charges at our mill in DeRidder, Louisiana,
which were recorded in "Other income (expense), net" and "Cost of
sales", as appropriate. See page 3 for amounts recorded in each
period.
The nine months ended September 30, 2015
include 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
income (expense), net".
The three and nine months ended September
30, 2015 include Boise acquisition integration-related and other
costs, primarily recorded in "Other income (expense), net". See
page 3 for the amounts recorded in each period.
In September 2015, we sold the remaining
land, buildings, and equipment at our paper mill site in St.
Helens, Oregon, where we ceased paper production in December 2012.
We recorded a $6.7 million gain on the sale in "Other income
(expense), net".
Packaging Corporation of America
Segment Information Unaudited (dollars in millions)
Three Months Ended Nine Months Ended
September 30 September 30 2016 2015
2016 2015 Segment sales Packaging $ 1,167.1 $
1,144.4 $ 3,387.9 $ 3,385.9 Paper 292.8 291.9 840.1 870.3
Intersegment eliminations and other 24.1 34.5
74.4 94.6 $ 1,484.0 $
1,470.8 $ 4,302.4 $ 4,350.8
Segment
income (loss) Packaging $ 179.6 $ 198.2 $ 533.5 $ 533.9 Paper
44.5 39.5 105.0 98.6 Corporate and Other (17.7 )
(18.3 ) (51.1 ) (58.4 ) Income from operations
206.4 219.4 587.4
574.1 Interest expense, net
(23.4 ) (21.7 ) (67.5 ) (63.2 ) Income before
taxes
$ 183.0 $ 197.7
$ 519.9 $ 510.9
Segment income (loss) excluding special items (1) Packaging
$ 184.0 $ 194.4 $ 542.1 $ 542.0 Paper 45.0 32.8 106.7 91.9
Corporate and Other (17.7 ) (15.9 ) (50.8 )
(51.5 )
$ 211.3 $ 211.3
$ 598.0 $ 582.4
EBITDA excluding special items (1) Packaging $
256.0 $ 267.9 $ 759.4 $ 757.2 Paper 59.3 46.1 149.1 132.5 Corporate
and Other (16.4 ) (15.0 ) (47.0 ) (48.4
)
$ 298.9 $ 299.0
$ 861.5 $ 841.3
(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 Nine Months Ended
September 30 September 30 2016
2015 2016 2015 Packaging Segment
income $ 179.6 $ 198.2 $ 533.5 $ 533.9 Facilities closure costs 1.5
— 4.8 — Acquisition-related costs 2.9 — 2.9 — Multiemployer pension
withdrawal — — 0.9 — DeRidder restructuring — (3.8 ) — 5.4
Integration-related and other costs — —
— 2.7 Segment income excluding special
items (1)
$ 184.0 $ 194.4
$ 542.1 $ 542.0
Paper Segment income $ 44.5 $ 39.5 $ 105.0 $ 98.6 Facilities
closure costs 0.5 — 1.7 — Sale of St. Helens paper mill site
— (6.7 ) — (6.7 ) Segment income
excluding special items (1)
$ 45.0 $
32.8 $ 106.7 $
91.9 Corporate and Other Segment loss $
(17.7 ) $ (18.3 ) $ (51.1 ) $ (58.4 ) Acquisition-related costs — —
0.3 — Integration-related and other costs —
2.4 — 6.9 Segment loss excluding
special items (1)
$ (17.7 ) $
(15.9 ) $ (50.8 ) $
(51.5 ) Income from
operations $ 206.4 $ 219.4
$ 587.4 $ 574.1
Income from operations, excluding
special items (1) $ 211.3 $
211.3 $ 598.0 $
582.4
(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 September 30 2016
2015 Income Income before Income
Net Diluted before Income Net
Diluted taxes Taxes Income EPS
taxes Taxes Income EPS As reported $
183.0 $ (63.7 ) $ 119.3 $ 1.26 $ 197.7 $ (69.9 ) $ 127.8 $ 1.31
Special items (2): Facilities closure costs 2.0 (0.6 ) 1.4 0.02 — —
— — Acquisition-related costs 2.9 (1.0 ) 1.9 0.02 — — — — DeRidder
restructuring — — — — (3.8 ) 1.5 (2.3 ) (0.02 ) Integration-related
and other costs — — — — 2.4 (0.7 ) 1.7 0.02 Sale of St. Helens
paper mill site — — — —
(6.7 ) 2.3 (4.4 ) (0.05 ) Total special
items 4.9 (1.6 ) 3.3 0.04 (8.1 )
3.1 (5.0 ) (0.05 ) Excluding special
items
$ 187.9 $ (65.3 ) $
122.6 $ 1.30 $ 189.6
$ (66.8 ) $ 122.8
$ 1.26 Nine Months Ended September
30 2016 2015 Income Income
before Income Net Diluted before
Income Net Diluted taxes Taxes
Income EPS taxes Taxes Income
EPS As reported $ 519.9 $ (181.0 ) $ 338.9 $ 3.58 $ 510.9 $
(178.3 ) $ 332.6 $ 3.39 Special items (2): Facilities closure costs
6.5 (2.2 ) 4.3 0.04 — — — — Acquisition-related costs 3.2 (1.1 )
2.1 0.02 — — — — Multiemployer pension withdrawal 0.9 (0.3 ) 0.6
0.01 — — — — DeRidder restructuring — — — — 5.4 (1.8 ) 3.6 0.04
Integration-related and other costs — — — — 9.6 (3.3 ) 6.3 0.06
Sale of St. Helens paper mill site — —
— — (6.7 ) 2.3 (4.4 )
(0.04 ) Total special items 10.6 (3.6 ) 7.0
0.07 8.3 (2.8 ) 5.5
0.06 Excluding special items
$ 530.5
$ (184.6 ) $ 345.9 $
3.65 $ 519.2 $ (181.1
) $ 338.1 $ 3.45
(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 Nine Months Ended September 30 September
30 2016 2015 2016 2015 Net income $
119.3 $ 127.8 $ 338.9 $ 332.6 Interest expense, net 23.4 21.7 67.5
63.2 Provision for income taxes 63.7 69.9 181.0 178.3 Depreciation,
amortization, and depletion 88.0 87.7
264.3 267.9
EBITDA (1) $
294.4 $ 307.1 $ 851.7
$ 842.0 Special items: Facilities closure
costs 1.6 — 5.7 — Acquisition-related costs 2.9 — 3.2 —
Multiemployer pension withdrawal — — 0.9 — DeRidder restructuring —
(3.8 ) — (3.6 ) Integration-related and other costs — 2.4 — 9.6
Sale of St. Helens paper mill site — (6.7 ) —
(6.7 )
EBITDA excluding special items (1)
$ 298.9 $ 299.0 $
861.5 $ 841.3 (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 Nine Months Ended
September 30 September 30 2016 2015
2016 2015 Packaging Segment income $ 179.6 $
198.2 $ 533.5 $ 533.9 Depreciation, amortization, and depletion
72.0 73.5 217.3
224.2 EBITDA (1) 251.6 271.7
750.8 758.1 Facilities closure costs
1.5 — 4.8 — Acquisition-related costs 2.9 — 2.9 — Multiemployer
pension withdrawal — — 0.9 — DeRidder restructuring — (3.8 ) — (3.6
) Integration-related and other costs — —
— 2.7 EBITDA excluding special
items (1)
$ 256.0 $ 267.9
$ 759.4 $ 757.2
Paper Segment income $ 44.5 $ 39.5 $ 105.0 $ 98.6
Depreciation, amortization, and depletion 14.7
13.3 43.2 40.6 EBITDA (1)
59.2 52.8 148.2 139.2
Facilities closure costs 0.1 — 0.9 — Sale of St. Helens
paper mill site — (6.7 ) —
(6.7 ) EBITDA excluding special items (1)
$
59.3 $ 46.1 $
149.1 $ 132.5
Corporate and Other Segment loss $ (17.7 ) $ (18.3 ) $ (51.1
) $ (58.4 ) Depreciation, amortization, and depletion 1.3
0.9 3.8 3.1 EBITDA
(1) (16.4 ) (17.4 ) (47.3 ) (55.3 )
Acquisition-related costs — — 0.3 — Integration-related and other
costs — 2.4 — 6.9
EBITDA excluding special items (1)
$ (16.4
) $ (15.0 ) $ (47.0
) $ (48.4 )
EBITDA excluding special items (1) $
298.9 $ 299.0 $
861.5 $ 841.3 (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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