Packaging Corporation of America (NYSE: PKG) today reported
second quarter 2017 net income of $143 million, or $1.52 per share
and $1.52 per share excluding special items. Second quarter net
sales were $1.6 billion in 2017 and $1.4 billion in 2016.
Diluted earnings per share attributable to
Packaging Corporation of America shareholders
Three Months Ended June 30 2017
2016 Change Reported Diluted EPS $ 1.52 $ 1.23
$ 0.29 Special Items Expense (1) -- 0.02 (0.02)
Diluted EPS excluding Special items $
1.52 $
1.25 $ 0.27 (1) For descriptions
and amounts of our special items see page 4.
Excluding special items, the $.27 per share increase in second
quarter 2017 earnings compared to the second quarter of 2016, was
driven primarily by higher prices and mix ($.25), sales volumes
($.09), and production volumes ($.03) in our Packaging segment,
lower annual maintenance outage costs ($.05), lower taxes ($.06)
and a partial insurance recovery related to the DeRidder Mill
incident ($.02). These items were partially offset by higher costs
for energy ($.06), fiber ($.05), labor ($.03) and chemicals ($.01),
higher freight ($.02), interest ($.02), depreciation ($.02) and
other expenses ($.01), and lower Paper segment prices and mix
($.01).
Results were $.07 per share above the second quarter guidance
primarily due to higher Packaging segment sales prices and volume
($.03), a lower tax rate ($.03), and a partial insurance recovery
related to the DeRidder incident ($.02), partly offset by higher
recycled fiber prices ($.01).
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended June
30 2017 2016 Segment income (loss)
Packaging $ 224.5 $ 192.4 Paper 29.1 24.4 Corporate and Other
(19.8) (16.6)
$ 233.8 $
200.2 Segment income (loss) excluding special
items Packaging $ 225.0 $ 194.7 Paper 29.1 24.7 Corporate and
Other (19.8) (16.3)
$ 234.3 $
203.1 EBITDA excluding special items Packaging
$ 303.3 $ 266.7 Paper 43.1 38.7 Corporate and Other (18.4)
(15.0)
$ 328.0 $ 290.4
In the Packaging segment, total corrugated products shipments
with one less workday were up 10.0% and shipments per day were up
11.7% over last year’s second quarter. Containerboard production
was 947,000 tons, and containerboard inventory was down 25,000 tons
compared to the second quarter of 2016 and 14,000 tons below the
first quarter of 2017. In the Paper segment, price and mix as well
as sales volumes were lower than the second quarter of 2016 and the
first quarter of 2017.
Commenting on the quarter, Mark W. Kowlzan, Chairman and CEO,
said, “Our results were driven by continued strong demand as well
as from the benefits of our recent TimBar and Columbus Container
acquisitions. The containerboard and corrugated products price
increases were implemented as planned, which helped us offset
higher inflation in many of our manufacturing and converting costs
and higher freight costs. Our containerboard inventory levels were
below those of a year ago and year-end levels despite the
additional containerboard inventory requirements of our
acquisitions.”
“Looking ahead to the third quarter,” Mr. Kowlzan added, “we
expect to realize the vast majority of our previously announced
packaging segment price increases, and we expect higher
containerboard and corrugated products shipments resulting from
strong demand. White paper sales volumes should be seasonally
higher, although price and mix should move lower. We also
anticipate continued price inflation in recycled fiber and certain
chemicals, higher freight costs and a higher tax rate. Considering
these items, we expect third quarter earnings of $1.68 per share.
This does not include any potential additional costs or anticipated
recoveries related to the Deridder Mill insurance claim.”
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.
Additional special items may arise due to third quarter events.
PCA is the fourth largest producer of containerboard and
corrugated packaging products and the third largest producer of
uncoated freesheet paper in the United States. PCA operates eight
mills and 93 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 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,
2016 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 2017 Earnings
Conference Call
WHEN:
Thursday, July 27, 2017 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:
http://www.packagingcorp.com
REBROADCAST DATES:
July 27, 2017 12:00 p.m. Eastern Time through August 10, 2017 11:59
p.m. Eastern Time
REBROADCAST NUMBERS:
(855) 859-2056 (U.S. and Canada) or (404) 537-3406 (International)
Passcode: 3727291
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,
2017 2016 2017 2016 Net sales $ 1,584.0
$ 1,417.4 $ 3,120.5 $ 2,818.4 Cost of sales (1,219.4 )
(1,097.3 )
(2)
(2,417.3 ) (2,199.3 )
(2)
Gross profit 364.6 320.1 703.2 619.1 Selling, general, and
administrative expenses (130.2 ) (114.8 ) (258.7 ) (229.1 ) Other
expense, net (0.6 )
(1)
(5.1 )
(2)
(7.6 )
(1)
(9.0 )
(2)
Income from operations 233.8 200.2 436.9 381.0 Interest expense,
net (25.2 ) (22.5 ) (49.2 ) (44.1 )
Income before taxes 208.6 177.7 387.7 336.9 Provision for income
taxes (65.4 ) (61.8 ) (127.1 ) (117.3 )
Net income $ 143.2 $ 115.9 $ 260.6 $ 219.6
Earnings per share: Basic $ 1.52 $ 1.23 $ 2.76
$ 2.32 Diluted $ 1.52 $ 1.23 $ 2.76
$ 2.32 Computation of diluted earnings
per share under the two class method: Net income $ 143.2 $ 115.9 $
260.6 $ 219.6 Less: Distributed and undistributed income available
to participating securities (1.2 ) (1.2 ) (2.3
) (2.3 ) Net income attributable to PCA shareholders $ 142.0
$ 114.7 $ 258.3 $ 217.3 Diluted
weighted average shares outstanding 93.6 93.3
93.6 93.7 Diluted earnings per
share $ 1.52 $ 1.23 $ 2.76 $ 2.32
Supplemental financial information: Capital spending
$ 81.6 $ 68.9 $ 139.3 $ 121.8 Cash balance $ 321.0 $ 213.6 $ 321.0
$ 213.6 (1) The three months ended June 30, 2017 include
$0.5 million of charges consisting of closure costs related to
corrugated products facilities and integration costs related to the
recent acquisitions. The six months ended June 30, 2017
include the following: a. $1.3 million of charges consisting of
closure costs related to corrugated products facilities,
integration costs related to the recent acquisitions, and costs
related to a lump sum settlement payment of a multiemployer pension
plan withdrawal liability for one of our corrugated products
facilities. b. $5.0 million of costs for the property damage and
business interruption insurance deductible corresponding to the
February 2017 explosion at our DeRidder, LA mill. c. $2.3 million
of income related to a working capital adjustment from the April
2015 sale of our Hexacomb corrugated manufacturing operations in
Europe and Mexico. (2) The three and six months ended June
30, 2016 include $2.9 million and $5.7 million, respectively, of
closure costs related to corrugated products facilities and a paper
products facility, acquisition-related costs for the TimBar
Corporation acquisition, and costs related to our withdrawal from a
multiemployer pension plan for one of our corrugated products
facilities. The costs were recorded within "Other expense, net" and
"Cost of sales", as appropriate.
Packaging Corporation of America Segment Information
Unaudited (dollars in millions) (dollars in millions)
Three Months Ended Six Months Ended June 30,
June 30, 2017 2016 2017 2016
Segment sales Packaging $ 1,311.5 $ 1,125.3 $ 2,568.4 $
2,220.8 Paper 253.7 266.8 512.9 547.3 Corporate and Other
18.8 25.3 39.2 50.3
$ 1,584.0 $ 1,417.4
$ 3,120.5 $ 2,818.4
Segment income (loss) Packaging $ 224.5 $
192.4 $ 415.3 $ 353.9 Paper 29.1 24.4 58.9 60.5 Corporate and Other
(19.8 ) (16.6 ) (37.3 ) (33.4 ) Income
from operations
233.8 200.2
436.9 381.0
Interest expense, net (25.2 ) (22.5 ) (49.2 )
(44.1 ) Income before taxes
$ 208.6
$ 177.7 $ 387.7 $
336.9 Segment income (loss) excluding
special items (1) Packaging $ 225.0 $ 194.7 $ 420.0 $ 358.1
Paper 29.1 24.7 58.9 61.7 Corporate and Other (19.8 )
(16.3 ) (38.0 ) (33.1 )
$ 234.3
$ 203.1 $ 440.9 $
386.7 EBITDA excluding special items
(1) Packaging $ 303.3 $ 266.7 $ 575.5 $ 503.4 Paper 43.1
38.7 86.9 89.8 Corporate and Other (18.4 ) (15.0 )
(35.3 ) (30.6 )
$ 328.0 $
290.4 $ 627.1 $
562.6 (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, 2017 2016 2017 2016
Packaging Segment income $ 224.5 $ 192.4 $ 415.3 $ 353.9
Integration-related, facilities closure and other costs 0.5 2.3 1.3
4.2 DeRidder mill incident — — 5.0 — Hexacomb working capital
adjustment — — (1.6 ) —
Segment income excluding special items (1)
$
225.0 $ 194.7 $
420.0 $ 358.1
Paper Segment income $ 29.1 $ 24.4 $ 58.9 $ 60.5
Integration-related, facilities closure and other costs —
$ 0.3 — $ 1.2 Segment income
excluding special items (1)
$ 29.1 $
24.7 $ 58.9 $ 61.7
Corporate and Other Segment loss $ (19.8 ) $
(16.6 ) $ (37.3 ) $ (33.4 ) Acquisition-related costs — 0.3 — 0.3
Hexacomb working capital adjustment — —
(0.7 ) — Segment loss excluding special items
(1)
$ (19.8 ) $ (16.3 )
$ (38.0 ) $ (33.1 )
Income from operations $
233.8 $ 200.2 $
436.9 $ 381.0
Income from operations, excluding special
items (1) $ 234.3 $
203.1 $ 440.9 $
386.7 (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, 2017 2016 Income before taxes
Income Taxes Net Income
Diluted EPS Income before taxes Income
Taxes Net Income Diluted EPS As
reported $ 208.6 $ (65.4 ) $ 143.2 $ 1.52 $ 177.7 $ (61.8 ) $ 115.9
$ 1.23 Special items (2): Integration-related, facilities closure
and other costs 0.5 (0.1 ) 0.4 — 2.6 (1.0 ) 1.6 0.02
Acquisition-related costs — — —
— 0.3 (0.1 ) 0.2 —
Total special items 0.5 (0.1 ) 0.4
— 2.9 (1.1 ) 1.8
0.02 Excluding special items
$ 209.1 $
(65.5 ) $ 143.6 $
1.52 $ 180.6 $ (62.9
) $ 117.7 $ 1.25 Six
Months Ended June 30, 2017 2016 Income
before taxes Income Taxes Net
Income Diluted EPS Income before taxes
Income Taxes Net Income
Diluted EPS As reported $ 387.7 $ (127.1 ) $ 260.6 $ 2.76 $
336.9 $ (117.3 ) $ 219.6 $ 2.32 Special items (2):
Integration-related, facilities closure and other costs 1.3 (0.4 )
0.9 0.01 5.4 (1.9 ) 3.5 0.04 Acquisition-related costs — — — — 0.3
(0.1 ) 0.2 — DeRidder mill incident 5.0 (1.7 ) 3.3 0.03 — — — —
Hexacomb working capital adjustment (2.3 ) 0.8
(1.5 ) (0.01 ) — — —
— Total special items 4.0 (1.3 )
2.7 0.03 5.7 (2.0 ) 3.7
0.04 Excluding special items
$ 391.7
$ (128.4 ) $ 263.3
$ 2.79 $ 342.6 $
(119.3 ) $ 223.3 $ 2.36
(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 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 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, 2017 2016 2017
2016 Net income $ 143.2 $ 115.9 $ 260.6 $ 219.6 Interest
expense, net 25.2 22.5 49.2 44.1 Provision for income taxes 65.4
61.8 127.1 117.3 Depreciation, amortization, and depletion
93.7 87.6 186.2 176.3
EBITDA
(1) $ 327.5 $ 287.8 $
623.1 $ 557.3 Special items:
Integration-related, facilities closure and other costs 0.5 2.3 1.3
5.0 Acquisition-related costs — 0.3 — 0.3 DeRidder mill incident —
— 5.0 — Hexacomb working capital adjustment — —
(2.3 ) —
EBITDA excluding special items
(1) $ 328.0 $ 290.4 $
627.1 $ 562.6 (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, 2017
2016 2017 2016 Packaging Segment income
$ 224.5 $ 192.4 $ 415.3 $ 353.9 Depreciation, amortization, and
depletion 78.3 72.0 155.5
145.3 EBITDA (1) 302.8 264.4
570.8 499.2 Integration-related,
facilities closure and other costs 0.5 2.3 1.3
4.2
DeRidder mill incident — — 5.0 — Hexacomb working capital
adjustment — — (1.6 ) —
EBITDA excluding special items (1)
$ 303.3
$ 266.7 $ 575.5
$ 503.4 Paper Segment income $
29.1 $ 24.4 $ 58.9 $ 60.5 Depreciation, amortization, and depletion
14.0 14.3 28.0
28.5 EBITDA (1) 43.1 38.7
86.9 89.0 Integration-related, facilities
closure and other costs — — —
0.8 EBITDA excluding special items (1)
$ 43.1 $ 38.7 $
86.9 $ 89.8 Corporate
and Other Segment loss $ (19.8 ) $ (16.6 ) $ (37.3 ) $ (33.4 )
Depreciation, amortization, and depletion 1.4
1.3 2.7 2.5 EBITDA (1)
(18.4 ) (15.3 ) (34.6 ) (30.9 )
Acquisition-related costs — 0.3 — 0.3 Hexacomb working capital
adjustment — — (0.7 ) —
EBITDA excluding special items (1)
$ (18.4
) $ (15.0 ) $ (35.3
) $ (30.6 )
EBITDA (1) $ 327.5 $
287.8 $ 623.1 $
557.3 EBITDA excluding
special items (1) $ 328.0 $
290.4 $ 627.1 $
562.6 (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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