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Packaging Corporation of America Reports Record Fourth Quarter and Full Year 2012 Results



  Packaging Corporation of America Reports Record Fourth Quarter and Full Year
  2012 Results

Business Wire

LAKE FOREST, Ill. -- January 22, 2013

Packaging Corporation of America (NYSE: PKG) today reported fourth quarter
2012 net income of $61 million, or $0.63 per share. The reported results
included net income of $3 million, or $0.03 per share, from state income tax
adjustments and after tax charges of $1 million, or $0.01 per share, from
plant closures. Excluding these items, net income was $59 million, or $0.61
per share, compared to fourth quarter 2011 net income of $39 million, or $0.40
per share. Net sales in the fourth quarter were $737 million, up 13% compared
to the fourth quarter of 2011.

The $0.21 per share increase in earnings, excluding special items, was driven
by higher containerboard and corrugated products price and mix ($0.12), higher
volume ($0.09) and lower costs for recycled fiber ($0.04) and energy ($0.02).
These items were partially offset by higher costs for labor and benefits
($0.05).

Full year earnings, excluding special items, were $201 million, or $2.06 per
share, compared to 2011 earnings of $162 million, or $1.61 per share. The
$0.45 per share increase in earnings was driven by higher volume ($0.33) and
price and mix ($0.06), lower costs for energy ($0.17), recycled fiber ($0.12)
and chemicals ($0.05) and a lower share count ($0.05). These items were
partially offset by higher costs for labor and benefits ($0.14), depreciation
($0.08), interest ($0.06) and transportation ($0.05). Net sales in 2012 were a
record $2.844 billion, up 9% over 2011. Full year earnings, including special
items, were $164 million, or $1.68 per share, compared to 2011 earnings of
$158 million, or $1.57 per share. Special items for both years are shown on
the schedule included in this press release.

Corrugated products shipments for the fourth quarter were up 5.8% per workday,
and total shipments were up 7.6% with one more workday compared to last year’s
fourth quarter. Containerboard production was 652,500 tons, up 12,000 tons
over the fourth quarter of 2011. For the full year, PCA mills produced 2.600
million tons of containerboard which is essentially 100% of capacity. PCA
ended the year with its containerboard inventories about 6,000 tons above 2011
year-end levels.

Commenting on results, Mark W. Kowlzan, CEO of PCA, said, “We had an
exceptional quarter and full year, setting records for earnings, sales and
shipments. Our corrugated products demand remained strong throughout the
fourth quarter, and we completed our corrugated products price increase as
planned. For the year, our earnings of $2.06 per share were up 27% over our
previous record driven by strong sales volumes and the benefits from our
energy project. ”

“Looking ahead to the first quarter,” Mr. Kowlzan added, “we expect lower
containerboard production and higher operating costs compared to the fourth
quarter with two less mill production days and annual maintenance downtime. We
also expect higher energy costs with colder weather, and a pattern of
extremely wet weather in the south is putting pressure on wood costs and
availability. Corrugated products volume will be seasonally lower, and we
expect higher costs for recycled fiber and labor and benefits. These items
will be partially offset by higher average corrugated products prices with a
full quarter’s realization of fourth quarter price increases. Considering all
of these items, we currently estimate our first quarter earnings at about
$0.56 per share.”

PCA is the fourth largest producer of containerboard and corrugated packaging
products in the United States with sales of $2.8 billion in 2012. 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 4th Quarter and Full
                      Year 2012 Earnings Conference Call
 
WHEN:                 Tuesday, January 22, 2013
                      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:    January 22, 2013 1:00 p.m. Eastern Time through
                      February 5, 2013 11:59 p.m. Eastern Time
 
REBROADCAST NUMBER:   (888) 266-2081 (U.S. and Canada) or (703) 925-2533 for
                      International
                      Passcode: 1601861
                       

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”.

Non-GAAP measures used in this press release are reconciled to the most
comparable measure reported in accordance with GAAP in the schedules to this
press release.

                                      
Packaging Corporation of America
Consolidated Earnings Results
Unaudited
                                        
                                       Three Months Ended Dec. 31,
(in millions, except per share data)   2012              2011
 
Net sales                              $ 736.6           $ 654.3
Cost of sales                            (562.6 )          (520.1 )
 
Gross profit                             174.0             134.2
Selling and administrative expenses      (54.5  )          (48.9  )
Corporate overhead                       (17.5  )          (16.2  )
Other expense, net                       (3.6   )          (1.3   )
 
Income before interest and taxes         98.4              67.8
Interest expense, net                    (9.4   )          (9.3   )
 
 
Income before taxes                      89.0              58.5
Provision for income taxes               (28.0  ) ^(1)     (19.0  )
                                                                   
Net income                             $ 61.0            $ 39.5    
 
Earnings per share:
Basic                                  $ 0.63            $ 0.41    
Diluted                                $ 0.63            $ 0.40    
                                                                   
Basic common shares outstanding          96.3              97.3
Diluted common shares outstanding        97.4              98.4
 
Supplemental financial information:
Capital spending                       $ 34.1            $ 65.3
Cash balance                           $ 207.4           $ 156.3
                                                                   

Notes to Consolidated Earnings Results
 
(1) Includes income of $3.4 million from state income tax adjustments.

                                      
Packaging Corporation of America
Consolidated Earnings Results
Unaudited
                                        
                                       Full Year Ended Dec. 31,
(in millions, except per share data)     2012                    2011
 
Net sales                              $ 2,843.9               $ 2,620.1
Cost of sales                            (2,204.3 )              (2,078.2 )
 
Gross profit                             639.6                   541.9
Selling and administrative expenses      (210.8   )              (193.9   )
Corporate overhead                       (69.1    )              (64.6    )
Alternative fuel mixture credits         95.5       ^(1)       -
Other expense, net                       (11.8    )              (10.7    )
 
Income before interest and taxes         443.4                   272.7
Interest expense, net                    (62.9    ) ^(2)         (29.2    )
 
Income before taxes                      380.5                   243.5
Provision for income taxes               (216.7   ) ^(1) (3)     (85.5    )
                                                                           
Net income                             $ 163.8      ^(1)       $ 158.0     
 
Earnings per share:
Basic                                  $ 1.70                  $ 1.59      
Diluted                                $ 1.68                  $ 1.57      
                                                                           
Basic common shares outstanding          96.4                    99.3
Diluted common shares outstanding        97.5                    100.4
 
Supplemental financial information:
Capital Spending                       $ 128.5                 $ 280.2
                                                                  

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.
 
(3) Includes income of $3.4 million from state income tax adjustments.

                              
Packaging Corporation of America
Reconciliation of Non-GAAP Financial Measures^(1)
Unaudited
                                
                               Three Months Ended December 31,
                               2012                     2011
(in millions, except per       Net Income   EPS         Net Income   EPS
share data)
 
As reported                    $  61.0      $ 0.63      $  39.5      $ 0.40
 
Special items:
State income tax adjustments      (3.4  )     (0.03 )   -            -
^(2)
Plant closure charges ^(3)        1.4         0.01      -            -        
 
Total special items               (2.0  )     (0.02 )   -            -        
 
Excluding special items        $  59.0      $ 0.61      $  39.5      $ 0.40   
 
 
                               Year Ended December 31,
                               2012                     2011
(in millions, except per       Net Income   EPS         Net Income   EPS
share data)
 
As reported                    $  163.8     $ 1.68      $  158.0     $ 1.57
 
Special items:
State income tax adjustments      (3.4  )     (0.03 )   -            -
^(2)
Plant closure charges ^(3)        1.4         0.01      -            -
Biofuel tax credits ^(4)          23.0        0.24      -            -
Debt refinancing charges          16.0        0.16      -            -
^(5)
Asset disposal charges ^(6)    -            -              4.8         0.05
Medical benefits reserve       -            -              (1.0  )     (0.01 )
adjustment ^(7)
 
Total special items               37.0        0.38         3.8         0.04   
 
Excluding special items        $  200.8     $ 2.06      $  161.8     $ 1.61   
                                                                              

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 not necessarily be indicative of PCA’s
ongoing operations. Management uses these measures to focus on PCA's ongoing
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 income from state income tax adjustments.
 
(3) Represents charges from plant closures, net of tax of $0.6 million.
                                                     
(4) Represents a charge from the amendment of our 2009 federal income tax
return related to biofuel credits. (See Notes under Consolidated Earnings
Results.)
                                                     
(5) Represents charges from the company’s debt refinancing completed in July
2012, net of tax of $8.9 million.
 
(6) Represents charges from asset disposals related to major energy projects,
net of tax of $2.6 million.
 
(7) Represents income from an adjustment to reserves related to medical
benefits, net of tax of $0.6 million.

Contact:

Packaging Corporation of America
Barbara Sessions
INVESTOR RELATIONS: (877) 454-2509
PCA’s Website: www.packagingcorp.com
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