KapStone Reports Record First Quarter Results

                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
 
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