KapStone Reports Record Third Quarter Results

                KapStone Reports Record Third Quarter Results

Adjusted Diluted EPS Soars To $1.05 Per Share, Up 156 Percent

PR Newswire

NORTHBROOK, Ill., Oct. 30, 2013

NORTHBROOK, Ill., Oct. 30, 2013 /PRNewswire/ -- KapStone Paper and Packaging
Corporation (NYSE:KS) today reported record results for the third quarter
ended September 30, 2013. As compared to 2012's third quarter, results for
2013's third quarter are below:

  oNet sales of $539 million up $229 million, or 74 percent
  oNet income of $44 million up $26 million, or 144 percent
  oAdjusted net income of $51 million up $31 million, or 155 percent
  oAdjusted EBITDA of $117 million up $68 million, or 139 percent
  oAdjusted EBITDA margin of 21.7 percent up from 15.8 percent
  oDiluted EPS of $0.92 up $0.54 per share, or 142 percent
  oAdjusted diluted EPS of $1.05 up $0.64 per share, or 156 percent

Roger W. Stone, Chairman and Chief Executive Officer, stated, "The third
quarter was an exceptional quarter for KapStone. On July 18, 2013, we
completed the Longview acquisition and while our third quarter results include
only 75 days of Longview's operations, the benefits of the acquisition are
clear as Longview generated $54 million of adjusted EBITDA in the period.

"Excluding the impact of the Longview acquisition, legacy KapStone delivered
all-time record adjusted EBITDA of $63 million due to higher containerboard
and corrugated products prices despite higher fiber costs from the unusually
wet summer. Our consolidated adjusted EBITDA soared to a record $117 million,
and we generated $75 million of free cash flow which we used to reduce our
debt."

Third Quarter Operating Highlights

Consolidated net sales of $539 million in the third quarter of 2013 increased
by $229 million, or 74 percent compared to $310 million for the 2012 third
quarter. The increase is primarily due to the Longview acquisition which
contributed $198 million of additional revenue and higher average selling
prices for the legacy operations. In 2013's third quarter, 662,000 tons of
paper were sold compared to 427,000 tons a year earlier. The Company's average
selling price increased by $18 per ton compared to the second quarter of 2013
and was $57 per ton higher than the third quarter of 2012 due to the combined
impact of 2012 and 2013 containerboard and corrugated products price increases
and the inclusion of Longview.

Operating income of $80.7 million for the 2013 third quarter increased by
$49.6 million, or 159 percent, compared to the 2012 third quarter. The
improved financial performance primarily reflects benefits from the Longview
acquisition and higher containerboard prices partially offset by higher fiber
costs, lower production volumes, higher compensation and benefit costs and
Longview transaction fees and acquisition expenses.

Interest expense, net, was $8.0 million for the third quarter of 2013, up $6.2
million from a year ago as a result of a higher debt balance associated with
the Longview acquisition. At September 30, 2013, the average interest rate on
our term loans was 2.60 percent. Amortization of debt issuance costs of $1.6
million for the third quarter of 2013 increased by $0.6 million from a year
ago due to costs associated with the Company's amended and restated credit
agreement.

The effective income tax rate for the 2013 third quarter was 37.9 percent
compared to 35.1 percent for the 2012 third quarter. The higher effective
income tax rate in the 2013 third quarter is due to a discrete tax adjustment
relating to prior year tax return. For 2013, the Company estimates its cash
tax rate to be approximately 11 percent reflecting complete utilization of
remaining cellulosic biofuel tax credits.

Cash Flow and Working Capital

Cash and cash equivalents increased by $3.8 million in the quarter ended
September 30, 2013, to $12.2 million reflecting $98.2 million of net cash
provided by operating activities, $561.0 million of cash used in investing
activities primarily reflecting the Longview acquisition and $466.6 million of
cash provided by financing activities reflecting $1.3 billion of borrowings
from our new credit facility offset by the repayment of $305.3 million of debt
under the prior credit facility and the redemption of $507.5 million of
Longview senior notes assumed as part of the acquisition.

Capital expenditures for the third quarter of 2013 totaled $23.6 million,
including $7.0 million for Longview. The Company estimates $93.0 million of
capital expenditures for the year.

At September 30, 2013, the Company had approximately $164.3 million of working
capital and $358.8 million of revolver borrowing capacity.

Conclusion

In summary, Stone commented, "Our integration of Longview continues on plan.
We have now identified $18 million of synergies that should benefit KapStone
by the end of 2015. However, more significant than the synergies identified
thus far are the substantial benefits from operating efficiencies and capital
programs in progress. Looking ahead, we believe we are well positioned to
improve our profitability by benefitting from full quarters of Longview
results, strong performance from our legacy operations, and robust cash
flows."

Conference Call

KapStone will host a conference call at 11 a.m. EDT, Thursday, October 31,
2013, to discuss the Company's financial results for the 2013 third 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: 877.546.5020
International: 857.244.7552
Participant Passcode: 39786674

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.

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
the fifth largest producer of containerboard and corrugated packaging products
and is the largest kraft paper producer in the United States. The Company is
the parent company of KapStone Kraft Paper Corporation and KapStone Container
Corporation which includes four paper mills and 22 converting plants,
respectively, across the US. The business employs approximately 4,500 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 integration of the Longview acquisition. 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
http://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 /                              Fav /
                                             (Unfav)                            (Unfav)
                     Quarter Ended           Variance   Nine Months Ended       Variance
                     September 30,                      September 30,
                     2013        2012        %          2013        2012        %
Net sales           $ 538,603  $ 309,544  74.0%      $1,184,737  $ 915,646  29.4%
Cost and expenses:
Cost of sales,
excluding            352,346     219,091     -60.8%     803,045     646,500     -24.2%
depreciation and
amortization
Depreciation and    28,522      15,605      -82.8%     62,999      46,108      -36.6%
amortization
Freight and
distribution         39,679      27,945      -42.0%     95,448      81,624      -16.9%
expenses
Selling, general
and administrative   37,538      16,039      -134.0%    77,738      51,047      -52.3%
expenses
Other operating      177         200         -11.5%     575         628         -8.4%
income
Operating income    80,695      31,064      159.8%     146,082     90,995      60.5%
Foreign exchange     359         (11)        3363.6%    137         (399)       134.3%
gain / (loss)
Interest expense,    8,034       1,857       -332.6%    11,818      6,526       -81.1%
net
Amortization of debt 1,551       936         -65.7%     3,004       2,739       -9.7%
issuance costs
Income before
provision for income 71,469      28,260      152.9%     131,397     81,331      61.6%
taxes
Provision for income 27,055      9,915       -172.9%    47,533      29,019      -63.8%
taxes
Net income          $          $          142.1%     $         $          60.3%
                     44,414     18,345                83,864      52,312
Net income per
share:
Basic                $        $                   $       $   
                     0.93       0.39                  1.76        1.12
Diluted              $        $                   $       $   
                     0.92       0.38                  1.74        1.09
Weighted-average
number of shares
outstanding:
Basic                47,708,908  46,747,095             47,580,448  46,619,692
Diluted              48,478,570  47,914,816             48,307,538  47,833,592
Effective income tax 37.9%       35.1%                  36.2%       35.7%
rate
Net Income (GAAP) to EBITDA (Non-GAAP) to Adjusted
EBITDA (Non-GAAP):
Net income (GAAP)    $          $          142.1%     $         $          60.3%
                     44,414     18,345                83,864      52,312
 Interest expense, 8,034       1,857       -332.6%    11,818      6,526       -81.1%
net
 Amortization of   1,551       936         -65.7%     3,004       2,739       -9.7%
debt issuance costs
 Provision for     27,055      9,915       -172.9%    47,533      29,019      -63.8%
income taxes
 Depreciation and  28,522      15,605      -82.8%     62,999      46,108      -36.6%
amortization
EBITDA (Non-GAAP)    $ 109,576  $          134.8%     $          $ 136,704  53.0%
                                 46,658                209,218
Acquisition, start
up and other         6,256       1,353       -362.4%    9,540       3,958       -141.0%
expenses
Stock-based          972         745         -30.5%     4,271       4,322       1.2%
compensation expense
Adjusted EBITDA      $ 116,804  $          139.6%     $          $ 144,984  53.8%
(Non-GAAP)                       48,756                223,029
Net Income (GAAP) to Adjusted Net Income (Non-GAAP):
Net income (GAAP)    $          $                     $         $ 
                     44,414     18,345                83,864      52,312
Acquisition, start
up and other         4,060       878                    6,191       2,546
expenses
Stock-based          631         484                    2,772       2,780
compensation expense
Discrete tax         1,606       -                      1,406       -
adjustment
Adjusted Net Income  $          $                     $         $ 
(Non-GAAP)           50,711     19,707                94,233      57,638
Basic EPS (GAAP) to Adjusted Basic EPS (Non-GAAP):
Basic EPS (GAAP)     $        $                   $       $   
                     0.93       0.39                  1.76        1.12
Acquisition, start
up and other         0.09        0.02                   0.13        0.05
expenses
Stock-based          0.01        0.01                   0.06        0.06
compensation expense
Discrete tax         0.03        -                      0.03        -
adjustment
Adjusted Basic EPS   $        $                   $       $   
(Non-GAAP)           1.06       0.42                  1.98        1.23
Diluted EPS (GAAP) to Adjusted Diluted EPS
(Non-GAAP):
Diluted earnings per $        $                   $       $   
share (GAAP)         0.92       0.38                  1.74        1.09
Acquisition, start
up and other         0.09        0.02                   0.12        0.05
expenses
Stock-based          0.01        0.01                   0.06        0.06
compensation expense
Discrete tax         0.03        -                      0.03        -
adjustment
Adjusted Diluted EPS $        $                   $       $   
(Non-GAAP)          1.05       0.41                  1.95        1.20





KapStone Paper and Packaging Corporation
Consolidated Balance Sheets
(In thousands)
                                        September 30,     December 31,
                                        2013              2012
                                        (unaudited)
Assets
Current assets:
 Cash and cash equivalents            $     12,187  $    16,488
 Trade accounts receivable, net of    238,784           111,592
allowances
 Other receivables                    15,629            10,061
 Inventories                          223,461           113,511
 Prepaid expenses and other current   8,239             9,808
assets
 Deferred income taxes                49                5,864
Total current assets                    498,349           267,324
Plant, property and equipment, net      1,366,334         576,115
Other assets                            122,363           4,412
Intangible assets, net                  128,293           57,027
Goodwill                                541,858           226,289
Total assets                            $  2,657,197    $  1,131,167
Liabilities and Stockholders' Equity
Current liabilities:
 Current portion of long-term debt    $     44,950  $         –
 Short-term borrowings                 36,500            63,500
 Other current borrowings              1,376             –
Accounts payable                        146,160           89,638
Accrued expenses                        44,248            25,032
Accrued compensation costs              56,696            20,421
Accrued income taxes                    4,166             –
Total current liabilities               334,096           198,591
Long-term debt, net of current portion  1,202,213         294,310
Pension and post-retirement benefits    85,925            13,193
Deferred income taxes                   412,163           96,459
Other liabilities                       12,941            10,666
Total other liabilities                 1,713,242         414,628
Stockholders' equity:
Common stock $0.0001 par value          5                 5
Additional paid-in capital              243,969           236,034
Retained earnings                       368,875           285,011
Accumulated other comprehensive loss    (2,990)           (3,102)
Total stockholders' equity              609,859           517,948
Total liabilities and stockholders'     $  2,657,197    $  1,131,167
equity





KapStone Paper and Packaging Corporation
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
                              Quarter Ended September   Nine Months Ended
                              30,                       September 30,
                              2013         2012         2013         2012
Operating activities:
 Net income                 $  44,414  $ 18,345    $  83,864  $ 52,312
 Adjustments to reconcile
net income to net cash
provided by operating
activities:
 Depreciation and           28,522       15,605       62,999       46,108
amortization
 Stock-based compensation   972          745          4,271        4,322
expense
Excess tax benefits from   (817)        (382)        (2,547)      (1,878)
stock-based compensation
 Amortization of debt       1,551        936          3,004        2,739
issuance costs
 Loss on disposal of fixed  248          282          390          873
assets
 Deferred income taxes      21,087       7,851        34,513       22,579
 Changes in operating       2,234        (2,930)      (17,611)     (9,603)
assets and liabilities
Net cash provided by          $  98,211  $ 40,452    $ 168,883   $117,452
operating activities
Investing activities:
 Longview acquisition, net  (537,465)    –            (537,465)    –
of cash acquired
 USC acquisition            –            –            –            (314)
 Capital expenditures       (23,558)     (13,945)     (56,271)     (41,399)
Net cash used in investing    $(561,023)   $(13,945)    $(593,736)   $
activities                                                           (41,713)
Financing activities:
Proceeds from revolving       $ 197,713   $ 40,000    $ 289,113   $ 79,400
credit facility
Repayments on revolving       (174,913)    (40,000)     (316,113)    (79,400)
credit facility
Proceeds from long-term debt  1,275,000    –            1,275,000    –
Repayment of long-term debt  (305,313)    –            (305,313)    (50,000)
Repayment of Longview senior  (507,520)    –            (507,520)    –
notes
Payment of debt issuance      (19,654)     –            (19,654)     –
costs
Proceeds from other current   1,384        –            5,115        3,398
borrowings
Repayments of other current   (1,711)      (930)        (3,739)      (2,776)
borrowings
Payment of withholding taxes  –            –            (860)        (1,179)
on stock awards
Proceeds from exercises of    613          598          1,627        1,073
stock options
Excess tax benefits from      817          382          2,547        1,878
stock-based compensation
Proceeds from issuance of     179          151          349          241
shares to ESPP
Loan amendment costs          –            (87)         –            (132)
Net cash provided by (used    $ 466,595   $    114  $ 420,552   $
in) financing activities                                             (47,497)
Net increase / (decrease) in  3,783        26,621       (4,301)      28,242
cash and cash equivalents
Cash and cash
equivalents-beginning of      8,404        9,683        16,488       8,062
period
Cash and cash equivalents-end $  12,187  $ 36,304    $  12,187  $ 36,304
of period



SOURCE KapStone Paper and Packaging Corporation

Website: http://www.kapstonepaper.com
Contact: Andrea K. Tarbox, Vice President and Chief Financial Officer,
847.239.8812