KapStone Reports Record First Quarter Results PR Newswire NORTHBROOK, Ill., May 7, 2013 NORTHBROOK, Ill., May 7, 2013 /PRNewswire/ --KapStone Paper and Packaging Corporation (NYSE:KS) today reported record results for the first quarter ended March 31, 2013. oNet sales of $319.8 million up $20.0 million, or 7 percent, versus prior year oNet income of $18.5 million up $2.9 million, or 19 percent, versus 2012 oAdjusted EBITDA of $50.7 million up $4.4 million, or 9 percent, versus prior year oDiluted EPS of $0.38 up $0.05 per share, or 15 percent, versus 2012 oAdjusted diluted EPS of $0.42 up $0.04 per share, or 11 percent, versus prior year Roger W. Stone, Chairman and Chief Executive Officer, stated, "Our operations performed well during the quarter, propelling the Company to record first quarter results. Average mill selling prices of $653 per ton increased by $45 per ton compared to the first quarter of 2012. In the first quarter of 2013, we realized 2012's domestic containerboard and corrugated price increases, and we benefitted from increasing prices of over $100 per ton on export containerboard sales compared to 2012's first quarter." First Quarter Operating Highlights Consolidated net sales of $319.8 million in the first quarter of 2013 increased by $20.0 million, or 6.7 percent, compared to $299.8 million for the 2012 first quarter, primarily due to full realization of the October 2012 $50 per ton containerboard price increase, higher box and sheet prices and continued recovery of export containerboard prices. Average mill selling prices per ton climbed to $653 from $608 a year ago. A better product mix in the 2013 quarter was partially offset by lower volume. Operating income of $30.8 million for the 2013 first quarter increased by $3.3 million, or 12.1%, compared to the 2012 first quarter. The improved financial performance primarily reflects benefits from higher prices, partially offset by inflation on input, labor and benefit costs, higher outage costs, increased depreciation charges resulting mainly from the 2012 investment in new information systems and start-up expenses for the Company's new manufacturing plant in Aurora, Illinois. The first quarter's operating income included $2.3 million of stock compensation expense. We expect total stock compensation expense to approximate $1 million for each of the remaining three quarters of 2013. Interest expense was $1.9 million for the first quarter of 2013, down $0.5 million from a year ago mainly due to lower interest rates. At March 31, 2013, the interest rate on the majority of the Company's debt was 1.95 percent down from 2.24 percent a year ago. Amortization of debt issuance costs of $0.7 million for the first quarter of 2013 decreased by $0.2 million from a year ago. The effective income tax rate for the 2013 first quarter was 33.8 percent compared to 36.0 percent for the 2012 first quarter. The lower effective income tax rate is due to a higher expected benefit from the domestic manufacturing deduction and lower state income taxes. The 2013 rate also includes a favorable discrete benefit for a 2012 R&D tax credit. For 2013, the Company estimates its full year effective income tax rate to be 34.3 percent and its cash tax rate to be 10 percent. Cash Flow and Working Capital Cash and cash equivalents decreased by $8.9 million in the quarter ended March 31, 2013, to $7.6 million reflecting $15.6 million of net cash provided by operating activities, $16.8 million of cash used by investing activities and $7.7 million of cash used for financing activities. Capital expenditures for the first quarter of 2013 totaled $16.8 million which included $7.4 million for the new manufacturing plant in Aurora, Illinois. The Company estimates $73.0 million of capital expenditures for the year. At March 31, 2013, the Company had approximately $97.4 million of working capital and $95.1 million of revolver borrowing capacity. Conclusion In summary, Stone commented, "The April 2013 $50 per ton domestic containerboard price increase should be fully implemented late in the second quarter and should boost our EBITDA by approximately $50 million annually. Our new Aurora, Illinois manufacturing plant made its first shipment in April. With our strong cash flows and balance sheet KapStone is in an excellent position to continue growing profitably." Conference Call KapStone will host a conference call at 11 a.m. EDT, Wednesday, May 8, 2013, to discuss the Company's financial results for the 2013 first quarter. All interested parties are invited to listen and may do so by either accessing a simultaneous broadcast webcast on KapStone's website, http://www.kapstonepaper.com, or for those unable to access the webcast, the following dial-in numbers are available: Domestic: 877.415.3178 International: 857.244.7321 Participant Passcode: 78657838 A presentation to be viewed in conjunction with the call will also be available on our website, http://www.kapstonepaper.com, in the "Investors" section. The webcast is also being distributed through the Thomson StreetEvents Network. Individual investors can listen to the call at http://earnings.com, Thomson's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson StreetEvents (http://www.streetevents.com) a password-protected event management site. Replay of the webcast will be available for 30 days on the Company's website following the call. About the Company Headquartered in Northbrook, IL, KapStone Paper and Packaging Corporation is a leading North American producer of unbleached kraft paper and corrugated products. The Company is the parent company of KapStone Kraft Paper Corporation and KapStone Container Corporation which includes three paper mills and 15 converting plants across the eastern and midwestern US. The business employs approximately 2,700 people. Non-GAAP Financial Measures This press release includes certain non-GAAP financial measures, including "EBITDA", "Adjusted EBITDA", "Adjusted Net Income", and "Adjusted Diluted EPS" to measure our operating performance. Management uses these measures to focus on the on-going operations, and believes it is useful to investors because they enable them to perform meaningful comparisons of past and present operating results. The Company believes that EBITDA and Adjusted EBITDA provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency to key measures used to evaluate the performance and liquidity of the Company. Management uses EBITDA and Adjusted EBITDA for evaluating the Company's performance against competitors and as a primary measure for employees' incentive programs. Reconciliations of Net Income to EBITDA, EBITDA to Adjusted EBITDA, Net Income to Adjusted Net Income, Basic EPS to Adjusted Basic EPS, and Diluted EPS to Adjusted Diluted EPS are included in the financial schedules contained in this press release. However, these measures should not be construed as an alternative to any other measure of performance determined in accordance with GAAP. Forward-Looking Statements Statements in this news release that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified by words such as "may," "will," "should," "would,' "expect," "project," "anticipate," "intend," "plan," "believe," "estimate," "potential," "outlook," or "continue," the negative of these terms or other similar expressions. These statements reflect management's current views and are subject to risks, uncertainties and assumptions, many of which are beyond the Company's control that could cause actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ materially include, but are not limited to: (1) industry conditions, including changes in cost, competition, changes in the Company's product mix and demand and pricing for the Company's products; (2) market and economic factors, including changes in raw material and healthcare costs, exchange rates and interest rates; (3) results of legal proceedings and compliance costs, including unanticipated expenditures related to the cost of compliance with environmental and other governmental regulations; (4) the ability to achieve and effectively manage growth; (5) the ability to pay the Company's debt obligations; (6) the ability to carry out the Company's strategic initiatives and manage associated costs and (7) the income tax impact of the federal incentive program for cellulosic biofuel producers. Further information on these and other risks and uncertainties is provided under Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and elsewhere in reports that the Company files with the SEC. These filings can be found on KapStone's Web site at www.kapstonepaper.comand the SEC's Web site at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and the Company disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances. KapStone Paper and Packaging Corporation Consolidated Statements of Income (In thousands, except share and per share amounts) (unaudited) Fav / (Unfav) Quarter Ended March 31, Variance 2013 2012 % Net sales $ 319,813 $ 299,843 6.7% Cost and expenses: Cost of sales, excluding 224,946 214,074 -5.1% depreciation and amortization Depreciation and amortization 17,224 15,176 -13.5% Freight and distribution expenses 27,920 25,743 -8.5% Selling, general and 19,128 17,572 -8.9% administrative expenses Other operating income 202 198 2.0% Operating income 30,797 27,476 12.1% Foreign exchange gain / (loss) (311) 120 -359.2% Interest expense, net 1,875 2,373 21.0% Amortization of debt issuance costs 726 906 19.9% Income before provision for income 27,885 24,317 14.7% taxes Provision for income taxes 9,426 8,754 -7.7% Net income $ 18,459 $ 18.6% 15,563 Net income per share: Basic $ $ 0.39 0.33 Diluted $ $ 0.38 0.33 Weighted-average number of shares outstanding: Basic 47,482,010 46,491,626 Diluted 48,226,209 47,841,371 Effective tax rate 33.8% 36.0% Supplemental Information GAAP to Non-GAAP Reconciliations ($ in thousands, except share and per share amounts) (unaudited) Quarter Ended March 31, 2013 2012 Net Income (GAAP) to EBITDA (Non-GAAP) to Adjusted EBITDA (Non-GAAP): Net income (GAAP) $ 18,459 $ 15,563 Interest expense, net 1,875 2,373 Amortization of debt issuance 726 906 costs Provision for income taxes 9,426 8,754 Depreciation and amortization 17,224 15,176 EBITDA (Non-GAAP) $ 47,710 $ 42,772 Acquisition, start up and other 611 1,223 expenses Stock-based compensation expense 2,345 2,313 Adjusted EBITDA (Non-GAAP) $ 50,666 $ 46,308 Net Income (GAAP) to Adjusted Net Income (Non-GAAP): Net income (GAAP) $ 18,459 $ 15,563 Acquisition, start up and other 404 783 expenses Stock-based compensation expense 1,552 1,480 Adjusted Net Income (Non-GAAP) $ 20,415 $ 17,826 Basic EPS (GAAP) to Adjusted Basic EPS (Non-GAAP): Basic EPS (GAAP) $ $ 0.39 0.33 Acquisition, start up and other 0.01 0.02 expenses Stock-based compensation expense 0.03 0.03 Adjusted Basic EPS (Non-GAAP) $ $ 0.43 0.38 Diluted EPS (GAAP) to Adjusted Diluted EPS (Non-GAAP): Diluted earnings per share (GAAP) $ $ 0.38 0.33 Acquisition, start up and other 0.01 0.02 expenses Stock-based compensation expense 0.03 0.03 Adjusted Diluted EPS (Non-GAAP) $ $ 0.42 0.38 KapStone Paper and Packaging Corporation Consolidated Balance Sheets (In thousands) March 31, December 31, 2013 2012 (Unaudited) Assets Current assets: Cash and cash equivalents $ 7,618 $ 16,488 Trade accounts receivable, net 136,752 111,592 Other receivables 6,263 10,061 Inventories 110,699 113,511 Prepaid expenses and other current 9,588 9,808 assets Deferred income taxes 5,864 5,864 Total current assets 276,784 267,324 Plant, property and equipment, net 577,459 576,115 Other assets 4,484 4,412 Intangible assets, net 54,884 57,027 Goodwill 226,289 226,289 Total assets $ 1,139,900 $ 1,131,167 Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings $ 52,200 $ 63,500 Other current borrowings 2,719 – Accounts payable 82,033 89,638 Accrued expenses 25,679 25,032 Accrued compensation costs 16,334 20,421 Accrued income taxes 446 – Total current liabilities 179,411 198,591 Long-term debt, net of current portion 294,973 294,310 Accrued pension and post retirement 13,313 13,193 benefits Deferred income taxes 101,001 96,459 Other liabilities 11,507 10,666 Total other liabilities 420,794 414,628 Stockholders' equity: Common stock $.0001 par value 5 5 Additional paid-in capital 239,285 236,034 Retained earnings 303,470 285,011 Accumulated other comprehensive loss (3,065) (3,102) Total stockholders' equity 539,695 517,948 Total liabilities and stockholders' equity $ 1,139,900 $ 1,131,167 KapStone Paper and Packaging Corporation Consolidated Statement of Cash Flows (In thousands) (unaudited) Quarter Ended March 31, 2013 2012 Operating activities: Net income $ 18,459 $ 15,563 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,224 15,176 Stock-based compensation expense 2,345 2,313 Excess tax benefit for stock-based (386) (445) compensation Amortization of debt issuance costs 726 906 Loss on disposal of fixed assets 18 68 Deferred income taxes 4,906 6,202 Changes in operating assets and (27,655) (19,992) liabilities Net cash provided by operating $ 15,637 $ 19,791 activities Investing activities: USC acquisition $ $ – (314) Capital expenditures (16,832) (10,905) Net cash used in investing activities $ (16,832) $ (11,219) Financing activities: Proceeds from revolving credit facility $ 49,500 $ 38,000 Repayments on revolving credit facility (60,800) (38,000) Proceeds from other current borrowings 3,731 3,398 Repayments on other current borrowings (1,012) (921) Proceeds from exercises of stock options 362 420 Proceeds from issuance of shares to ESPP 170 90 Payment of withholding taxes on vested (12) – stock awards Excess tax benefit for stock-based 386 445 compensation Net cash provided by (used in) financing $ $ 3,432 activities (7,675) Net (decrease) / increase in cash and (8,870) 12,004 cash equivalents Cash and cash equivalents-beginning of 16,488 8,062 period Cash and cash equivalents-end of period $ 7,618 $ 20,066 SOURCE KapStone Paper and Packaging Corporation Website: http://www.kapstonepaper.com Contact: Andrea K. Tarbox, Vice President and Chief Financial Officer, 847.239.8812
KapStone Reports Record First Quarter Results
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