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TheStreet Open House

Packaging Corporation Of America Reports Third Quarter 2012 Results

Stocks in this article: PKG

Commenting on results, Mark W. Kowlzan, Chief Executive Officer of PCA, said, “We had a very strong quarter in all aspects of our operations. Our mills ran extremely well setting an all-time production record, and both our containerboard and corrugated products demand remained strong. We implemented a $50 per ton domestic containerboard price increase during the third quarter and are now in the process of implementing a corresponding price increase for corrugated products, which we expect to essentially complete in the fourth quarter.”

“Looking ahead,” Mr. Kowlzan added, “we expect higher earnings from our announced price increases, but an entire quarter’s earnings benefit from these price increases will not be fully realized until the first quarter of 2013. The earnings improvement from higher prices in the fourth quarter is expected to be partially offset by seasonally higher costs due, in part, to colder weather. Considering these items, we expect fourth quarter earnings of about $0.61 per share.”

PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.6 billion in 2011. PCA operates four paper mills and 71 corrugated products plants in 26 states across the country.

Conference Call Information:

WHAT:     Packaging Corporation of America’s 3rd Quarter 2012 Earnings Conference Call
 
WHEN: Tuesday, October 16, 2012
10:00 a.m. Eastern Time
 
NUMBER: (866) 814-1914 (U.S. and Canada) or (703) 639-1358 (International)
Dial in by 9:45 a.m. Eastern Time
Conference Call Leader: Mr. Mark Kowlzan
 
WEBCAST:

http://www.packagingcorp.com

 
 
REBROADCAST DATES: October 16, 2012 1:00 p.m. Eastern Time through
October 30, 2012 11:59 p.m. Eastern Time
 
REBROADCAST NUMBER: (888) 266-2081 (U.S. and Canada) or (703) 925-2533 (International)
Passcode: 1593080
 

Some of the statements in this press release are forward-looking statements. Forward-looking statements include statements about our future earnings and financial condition, 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; containerboard and corrugated products general industry conditions, 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, 2011 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

 
 
     

Three Months Ended September 30,

(in millions, except per share data)

2012

2011

 
Net sales $ 723.5 $ 670.8
Cost of sales   (560.9 )   (533.1 )
 
Gross profit 162.6 137.7
Selling and administrative expenses (51.5 ) (48.9 )
Corporate overhead (17.0 ) (16.4 )
Other expense, net   (2.0 )   (1.2 )
 
Income before interest and taxes 92.1 71.2
Interest expense, net   (30.6

)

(1)

  (6.7 )
 
Income before taxes 61.5 64.5
Provision for income taxes   (21.7 )   (22.7 )
 
Net income $ 39.8   $ 41.8  
 
Earnings per share:
Basic $ 0.41   $ 0.42  
Diluted $ 0.41   $ 0.42  
 
Basic common shares outstanding 96.4 99.0
Diluted common shares outstanding 97.3 100.0
 
Supplemental financial information:
Capital spending $ 25.1 $ 69.8
Cash balance $ 140.9 $ 40.1
 
 
 
 

Notes to Consolidated Earnings Results

 
(1) Includes $21.1 million of pre-tax debt refinancing charges.
 
 

Packaging Corporation of America

Consolidated Earnings Results

Unaudited

 
 
     

Nine Months Ended September 30,

(in millions, except per share data)

2012

 

2011

 
Net sales $ 2,107.3 $ 1,965.8
Cost of sales   (1,641.6 )   (1,558.0 )
 
Gross profit 465.7 407.8
Selling and administrative expenses (156.4 ) (145.1 )
Alternative fuel mixture credits 95.5

(1)

-
Corporate overhead (51.6 ) (48.3 )
Other expense, net   (8.2 )   (9.5 )
 
Income before interest and taxes 345.0 204.9
Interest expense, net   (53.5 )

(2)

  (19.9 )
 
Income before taxes 291.5 185.0
Provision for income taxes   (188.7 )

(1)

  (66.4 )
 
Net income $ 102.8  

(1)

$ 118.6  
 
Earnings per share:
Basic $ 1.07   $ 1.19  
Diluted $ 1.05   $ 1.17  
 
Basic common shares outstanding 96.4 99.9
Diluted common shares outstanding 97.5 101.0
 
Supplemental financial information:
Capital Spending $ 94.4 $ 215.0
 
 

Notes to Consolidated Earnings Results

 
(1)     In the first quarter of 2012, the company amended its 2009 tax return to reduce the gallons claimed as cellulosic biofuel producer credits previously recorded as a tax benefit, and increase the gallons claimed for alternative fuel mixture credits previously recorded as income. The increase in gallons claimed as alternative fuel mixture credits resulted in income of $95.5 million, and the decrease in gallons claimed as cellulosic biofuel producer credits resulted in a decrease in tax benefits of $118.5 million, or a net charge of $23.0 million.
 
(2) Includes $24.8 million of pre-tax debt refinancing charges.
 
 

Packaging Corporation of America

Reconciliation of Non-GAAP Financial Measures (1)

Unaudited

 
 
     

Three Months Ended September 30,

2012

     

2011

(in millions, except per share data)

Net Income

   

EPS

Net Income

   

EPS

 
As reported $ 39.8 $ 0.41 $ 41.8 $ 0.42
 
Special items:

Debt refinancing charges (2)

13.5 0.14 - -

Asset disposal charges (3)

- -   1.0   0.01
 
Total special items   13.5   0.14   1.0   0.01
 
 
Excluding special items $ 53.3 $ 0.55 $ 42.8 $ 0.43
 
 

Nine Months Ended September 30,

2012

2011

(in millions, except per share data)

Net Income

EPS

Net Income

EPS

 
As reported $ 102.8 $ 1.05 $ 118.6 $ 1.17
 
Special items:

Debt refinancing charges (2)

16.0 0.16 - -

Asset disposal charges (3)

- - 4.2 0.04

Medical benefits reserve adjustment (4)

- - (1.0 ) -

Biofuel tax credits (5)

  23.0   0.24 - -
 
Total special items   39.0   0.40   3.2   0.04
 
 
Excluding special items $ 141.8 $ 1.45 $ 121.8 $ 1.21
 
 

Notes to Reconciliation of Non-GAAP Financial Measures

 
(1) Net income and earnings per share excluding special items are non-GAAP financial measures. The after-tax effect of special items are excluded as management considers such items to be unusual in nature. Management uses these measures to focus on PCA's on-going operations and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present operating results.
 
(2) Represents charges from the company’s debt refinancing.
 
(3) Represents charges from asset disposals related to major energy projects.
 
(4) Represents income from an adjustment to reserves related to medical benefits.
 
(5) Represents a charge from the amendment of our 2009 federal income tax return related to biofuel credits. (See Notes under Consolidated Earnings Results.)




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