Packaging Corporation of America Reports Record Third Quarter 2013 Results

  Packaging Corporation of America Reports Record Third Quarter 2013 Results

Business Wire

LAKE FOREST, Ill. -- October 14, 2013

Packaging Corporation of America (NYSE: PKG) today reported third quarter 2013
net income of $84 million, or $0.86 per share, which included an after tax
charge of $3 million, or $0.03 per share, for costs related to the announced
Boise Inc. acquisition agreement and a non-cash charge of $2 million after
tax, or $0.02 per share, for changes to PCA’s mill employee pension plan.
Excluding special items, net income was a record $89 million, or $0.91 per
share, compared to third quarter 2012 net income of $53 million, or $0.55 per
share, which excludes debt refinancing charges. Net sales were a record $845
million, up 17% from third quarter 2012 of $723 million.

The $0.36 per share earnings increase, excluding special items, was driven by
higher containerboard and corrugated products prices and mix ($0.44) and
increased volume ($0.05). These items were partially offset by higher costs
for fiber ($0.03), labor ($0.03), incentive compensation ($0.03), energy
($0.02), transportation ($0.01) and chemicals ($0.01).

Excluding special items, net income for the first nine months of 2013 was $219
million, or $2.25 per share, compared to $142 million, or $1.45 per share, in
2012. Year-to-date net sales were $2.4 billion, up 14% compared to $2.1
billion in 2012.

Corrugated products shipments were up 7.8% compared to last year’s third
quarter, and mill containerboard production was a record 671,000 tons. Outside
domestic sales of containerboard were up 8,000 tons from last year’s third
quarter, and export shipments were 20,000 tons lower as PCA reduced export
sales to support higher containerboard demand at its box plants.
Containerboard inventories at the end of September were 4,000 tons below
year-end 2012.

Commenting on results, Mark W. Kowlzan, Chief Executive Officer of PCA, said,
“We had an exceptional quarter setting records for earnings and sales. Our
mills ran extremely well, and both our containerboard and corrugated products
demand remained strong. Box shipments set an all-time record for shipments per
workday, and we realized a full pass-through of our April containerboard price
increase to corrugated products.”

“Looking ahead to the fourth quarter,” Mr. Kowlzan added, “we expect
seasonally lower corrugated products volume than the third quarter resulting,
in part, from two less corrugated products shipping days. We also expect lower
mill production and higher operating costs related to the annual maintenance
outage at our Filer City, Michigan mill. Fuel costs are also expected to be
seasonally higher with colder weather. Considering these items, we expect
fourth quarter earnings to be about $0.84 per share excluding any impact from
the Boise acquisition.”

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 3rd Quarter 2013
                      Earnings Conference Call

WHEN:                 Tuesday, October 15, 2013
                      8:00 a.m. Eastern Time

NUMBER:               (866) 655-9758 (U.S. and Canada) or (973) 935-8718
                      (International)
                      Dial in by 7:45 a.m. Eastern Time
                      Conference Call Leader: Mr. Mark Kowlzan

WEBCAST:              http://www.packagingcorp.com


REBROADCAST DATES:    October 15, 2013 1:00 p.m. Eastern Time through
                      October 29, 2013 11:59 p.m. Eastern Time

REBROADCAST NUMBER:   (855) 859-2056 (U.S. and Canada) or (404) 537-3406
                      (International)
                      Passcode: 77177589
                    

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 September 30,
(in millions, except per share data)   2013                  2012
                                                                        
Net sales                              $   845.4             $ 723.5
Cost of sales                             (619.6  )          (560.9 )
                                                                        
Gross profit                               225.8               162.6
Selling and administrative expenses        (56.5   )           (51.5  )
Corporate overhead                         (21.1   )  ^(1)     (17.0  )
Other expense, net                        (6.2    )  ^(2)    (2.0   )
                                                                        
Income before interest and taxes           142.0               92.1
Interest expense, net                     (11.9   )  ^(1)    (30.6  ) ^(3)
                                                                        
Income before taxes                        130.1               61.5
Provision for income taxes                (45.9   )          (21.7  )
                                                                        
Net income                             $   84.2             $ 39.8   
                                                                        
Earnings per share:
Basic                                  $   0.87             $ 0.41   
Diluted                                $   0.86             $ 0.41   
                                                                        
Basic common shares outstanding            96.8                96.4
Diluted common shares outstanding          97.6                97.3
                                                                        
Supplemental financial information:
Capital spending                       $   49.5              $ 25.1
Cash balance                           $   396.6             $ 140.9
                                                                        

                    Notes to Consolidated Earnings Results

(1) Includes pre-tax charges of $1.5 million in other expense, net and $2.7
million in interest expense, net for costs related to the announced Boise Inc.
acquisition agreement.

(2) Includes a $3.1 million non-cash pre-tax pension curtailment charge
related to a pension plan change in which certain hourly containerboard mill
employees will transition from an hourly defined benefit pension plan to a
defined contribution (401k) plan.

(3) 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)   2013                2012

Net sales                              $ 2,400.9           $ 2,107.3
Cost of sales                           (1,800.5 )         (1,641.6 ) 

Gross profit                             600.4               465.7
Selling and administrative expenses      (167.0   )          (156.4   )
Alternative fuel mixture credits       -                     95.5       ^(3)
Corporate overhead                       (59.9    ) ^(1)     (51.6    )
Other expense, net                      (21.0    ) ^(2)    (8.2     )

Income before interest and taxes         352.5               345.0
Interest expense, net                   (30.3    ) ^(1)    (53.5    ) ^(4)

Income before taxes                      322.2               291.5
Provision for income taxes              (112.9   )         (188.7   ) ^(3)

Net income                             $ 209.3            $ 102.8     ^(3)

Earnings per share:
Basic                                  $ 2.17             $ 1.07     
Diluted                                $ 2.15             $ 1.05     

Basic common shares outstanding          96.5                96.4
Diluted common shares outstanding        97.2                97.5

Supplemental financial information:
Capital Spending                       $ 130.4             $ 94.4
                                                                        

                    Notes to Consolidated Earnings Results

(1) Includes pre-tax charges of $1.5 million in other expense, net and $2.7
million in interest expense, net for costs related to the announced Boise Inc.
acquisition agreement.

(2) Includes $10.9 million of non-cash pre-tax pension curtailment charges
related to pension plan changes in which certain hourly corrugated and
containerboard mill employees will transition from an hourly defined benefit
pension plan to a defined contribution (401k) plan.

(3) 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.

(4) 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,
                                     2013                 2012
(in millions, except per share       Net Income  EPS      Net Income  EPS
data)

As reported                          $   84.2     $ 0.86   $   39.8     $ 0.41

Special items:
Pension curtailment charges^(2)          2.0        0.02   -            -
Acquisition costs ^(3)                   2.7        0.03   -            -
Debt refinancing charges^(4)         -            -           13.5      0.14

Total special items                     4.7       0.05      13.5      0.14


Excluding special items              $   88.9     $ 0.91   $   53.3     $ 0.55


                                     Nine Months Ended September 30,
                                     2013                  2012
(in millions, except per share       Net Income   EPS      Net Income   EPS
data)

As reported                          $   209.3    $ 2.15   $   102.8    $ 1.05

Special items:
Pension curtailment charges ^(2)         7.0        0.07   -            -
Acquisition costs^(3)                    2.7        0.03   -            -
Debt refinancing charges ^(4)        -            -            16.0       0.16
Biofuel tax credits ^(5)             -            -           23.0      0.24

Total special items                     9.7       0.10      39.0      0.40


Excluding special items              $   219.0    $ 2.25   $   141.8    $ 1.45
                                                                          

            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 pension curtailment charges of $3.1 million pre-tax less $1.1
million in taxes, or $2.0 million after-tax, recorded in the third quarter of
2013. For the nine month period ended September 30, 2013, represents pension
curtailment charges of $10.9 million pre-tax less $3.9 million in taxes, or
$7.0 million after-tax. See Notes to Consolidated Earnings Results.

(3) Represents charges of $4.2 million pre-tax less $1.5 million in taxes, or
$2.7 million after-tax, for costs related to the announced Boise Inc.
acquisition agreement.

(4) Represents debt refinancing charges of $21.1 million pre-tax less $7.6
million in taxes, or $13.5 million after-tax, recorded in the third quarter in
2012. For the nine month period ended September 30, 2012, represents debt
refinancing charges of $24.8 million pre-tax less $8.8 million in taxes, or
$16.0 million after-tax.

(5) Represents a charge from the amendment of our 2009 federal income tax
return related to biofuel credits. See Notes under 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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