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Packaging Corporation of America Reports Record Second Quarter 2013 Results



  Packaging Corporation of America Reports Record Second Quarter 2013 Results

Business Wire

LAKE FOREST, Ill. -- July 16, 2013

Packaging Corporation of America (NYSE: PKG) today reported second quarter net
income of $64 million, or $0.66 per share, which included a one-time, non-cash
charge of $5 million after tax, or $0.05 per share, for pension plan changes.
Excluding special items, net income was $69 million, or $0.71 per share, a
quarterly record, compared to second quarter 2012 net income of $48 million,
or $0.49 per share. Net sales were a record $800 million, up 12% from second
quarter 2012 net sales of $712 million.

The $0.22 per share increase in net income, excluding special items, was
driven by higher containerboard and corrugated products prices and mix ($0.27)
and higher corrugated products sales volume ($0.05). These items were
partially offset by higher costs for energy ($0.04), labor and fringe benefits
($0.03) and the timing of annual mill maintenance outages ($0.03).

Excluding special items, net income for the first six months of 2013 was $130
million, or $1.33 per share, compared to net income for the first six months
of 2012 of $88 million, or $0.91 per share. Year-to-date net sales were $1.56
billion compared to $1.38 billion in 2012, up 12%.

Corrugated products shipments per workday were up 5.2%, and total shipments
were up 6.8% with one more workday in this year’s second quarter.
Containerboard production was 629,000 tons, down 9,000 tons from last year’s
second quarter, and outside sales of containerboard were down by the same
amount. Lower containerboard production was the result of scheduling more
annual mill maintenance downtime in this year’s second quarter, but based on
days of operation, the mills set a second quarter record for tons produced per
day. PCA ended the quarter with its containerboard inventories down about
12,000 tons below the end of the first quarter.

Commenting on reported results, Mark W. Kowlzan, Chief Executive Officer of
PCA, said, “We had an outstanding quarter in all aspects of our operations
with record earnings driven by higher prices and higher corrugated products
volume. The annual outages at three of our mills went extremely well with very
efficient start-ups and record productivity. Earnings were higher than our
second quarter guidance driven by better than forecasted sales volume and
price, and lower than forecasted costs.”

“Looking ahead to the third quarter,” Mr. Kowlzan added, “we expect higher
corrugated products prices, higher sales volume, and with no planned annual
outages, increased mill production and lower mill operating costs. We also
expect higher purchased electricity costs with summer pricing, higher
amortization of annual outage repair costs, and a higher tax rate. Considering
these items, we expect third quarter earnings to be about $0.88 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 2nd Quarter 2013
                      Earnings Conference Call
 
WHEN:                 Wednesday, July 17, 2013
                      10:00 a.m. Eastern Time
 
NUMBER:               (866) 818-1393 (U.S. and Canada) or (703) 639-1377
                      (International)
                      Dial in by 9:45 a.m. Eastern Time
                      Conference Call Leader: Mr. Mark Kowlzan
 
WEBCAST:              http://www.packagingcorp.com
 
 
REBROADCAST DATES:    July 17, 2013 1:00 p.m. Eastern Time through
                      July 31, 2013 11:59 p.m. Eastern Time
 
REBROADCAST NUMBER:   (888) 266-2081 (U.S. and Canada) or (703) 925-2533
                      (International)
                      Passcode: 1618497
                       

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, 2012 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 June 30,
(in millions, except per share data)   2013             2012
 
Net sales                              $ 800.2          $ 712.5
Cost of sales                            (608.1 )         (554.4 )
 
Gross profit                             192.1            158.1
Selling and administrative expenses      (54.8  )         (52.9  )
Corporate overhead                       (19.2  )         (17.7  )
Other expense, net                       (10.8  )^(1)     (3.6   )
 
Income before interest and taxes         107.3            83.9
Interest expense, net                    (9.2   )         (13.3  )^(2)
 
Income before taxes                      98.1             70.6
Provision for income taxes               (33.6  )         (25.4  )
                                                                  
Net income                             $ 64.5           $ 45.2    
 
Earnings per share:
Basic                                  $ 0.67           $ 0.47    
Diluted                                $ 0.66           $ 0.46    
                                                                  
Basic common shares outstanding          96.4             96.3
Diluted common shares outstanding        97.5             97.4
                                                         
Supplemental financial information:
Capital spending                       $ 53.6           $ 34.5
Cash balance                           $ 370.1          $ 515.1  ^(3)
                                                         

Notes to Consolidated Earnings Results
 
      Includes a $7.8 million non-cash pre-tax pension curtailment charge
(1)   related to a pension plan change in which certain hourly corrugated
      employees will transition from an hourly defined benefit pension plan to
      a defined contribution (401k) plan.
(2)   Includes $3.7 million of pre-tax debt refinancing charges.
      Includes proceeds of $397 million, net of fees, received from the notes
(3)   offering completed June 26, 2012. The proceeds were used to redeem the
      existing 2013 notes in July of 2012.

 
Packaging Corporation of America
Consolidated Earnings Results
Unaudited
 
                                       Six Months Ended June 30,
(in millions, except per share data)   2013               2012
 
Net sales                              $ 1,555.4          $ 1,383.8
Cost of sales                            (1,180.9 )         (1,080.7 )
 
Gross profit                             374.5              303.1
Selling and administrative expenses      (110.5   )         (104.8   )
Alternative fuel mixture credits       -                  95.5       ^(2)
Corporate overhead                       (38.7    )         (34.6    )
Other expense, net                     (14.8      )^(1)     (6.3     )
 
Income before interest and taxes         210.5              252.9
Interest expense, net                    (18.5    )       (22.9      )^(3)
 
Income before taxes                      192.0              230.0
Provision for income taxes               (66.9    )       (167.0     )^(2)
 
Net income                             $ 125.1            $ 63.0     ^(2)
 
Earnings per share:
Basic                                  $ 1.30             $ 0.65      
Diluted                                $ 1.28             $ 0.65      
                                                             
Basic common shares outstanding          96.4               96.4
Diluted common shares outstanding        97.5               97.6
 
Supplemental financial information:
Capital spending                       $ 80.9             $ 69.3
                                                                      

Notes to Consolidated Earnings Results
 
(1)   Includes a $7.8 million non-cash pre-tax pension curtailment charge.
      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
(2)   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.
(3)   Includes $3.7 million of pre-tax debt restructuring charges.

 
Packaging Corporation of America
Reconciliation of Non-GAAP Financial Measures ^(1)
Unaudited
 
                                   Three Months Ended June 30,
                                   2013                   2012
(in millions, except per share     Net Income   EPS       Net Income   EPS
data)
 
As reported                        $   64.5     $ 0.661   $   45.2     $ 0.464
 
Special items:
Pension curtailment charge ^(2)        5.0        0.051   -            -
Debt refinancing charges ^(3)      -            -             2.5        0.025
 
Total special items                    5.0        0.051       2.5        0.025
 
Excluding special items            $   69.5     $ 0.712   $   47.7     $ 0.489
 
 
 
                                   Six Months Ended June 30,
                                   2013                   2012
(in millions, except per share     Net Income   EPS       Net Income   EPS
data)
 
As reported                        $   125.1    $ 1.283   $   63.0     $ 0.646
 
Special items:
Pension curtailment charge ^(2)        5.0        0.051   -            -
Debt refinancing charges ^(3)      -            -             2.5        0.025
Biofuel tax credits ^(4)           -            -         23.0           0.236
 
Total special items                    5.0        0.051       25.5       0.261
 
Excluding special items            $   130.1    $ 1.334   $   88.5     $ 0.907
                                                                          

Notes to Reconciliation of Non-GAAP Financial Measures
 
      Net income and earnings per share excluding special items are non-GAAP
      financial measures. The after-tax effects of special items are excluded
      as management considers such items to not necessarily be indicative of
(1)   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.
      Represents a curtailment charge of $7.8 million pre-tax less $2.8
(2)   million in taxes, or $5.0 million after-tax, related to the Company’s
      hourly defined benefit plan (see Notes to Consolidated Earnings
      Results).
      Represents charges from the company’s debt refinancing completed June
(3)   26, 2012 of $3.7 million pre-tax less $1.2 million in taxes, or $2.5
      million after-tax.
      Represents a charge from the amendment of our 2009 federal income tax
(4)   return related to biofuel credits (see Notes to Consolidated Earnings
      Results).

Contact:

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