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Smurfit-Stone Reports Second Quarter 2010 Results

Aug. 3, 2010 - Smurfit-Stone Container Corp. today reported net income attributable to common stockholders of $1.41 billion, or $5.41 per diluted share, for the second quarter of 2010, compared with a net loss of ($91) million, or ($0.35) per diluted share in the first quarter of 2010, and net income of $155 million, or $0.60 per diluted share, for the second quarter of 2009.

Smurfit-Stone's second-quarter 2010 adjusted net income was $2 million, or $0.01 per diluted share, compared with an adjusted net loss of ($59) million, or ($0.23) per diluted share, in the first quarter of this year, and an adjusted net loss of ($21) million, or ($0.08) per diluted share, in the second quarter of 2009. The most significant adjustment in the second quarter of 2010 was exclusion of $1.42 billion of income, including tax benefits, related to the Company's emergence from bankruptcy reorganization proceedings in the U.S. and Canada.

The Company reported an operating loss of ($6) million for the three months ended June 30, 2010, compared to an operating loss of ($31) million in the first quarter of 2010, and operating income of $271 million in the second quarter of 2009. The second quarter 2010 operating loss was primarily driven by a concentration of planned maintenance-related downtime. Second quarter 2009 operating income was significantly impacted by the income related to the alternative fuel tax credits that were received in 2009.

Patrick J. Moore, Smurfit-Stone's Chief Executive Officer, commented, "We believe our successful financial restructuring positions us for long-term profitable growth. We will continue to focus on what matters serving our customers, improving margins and delivering shareholder value. Looking ahead, we are confident that continued high operating rates, productivity improvements, higher average prices, and low inventories combined with assumed stable demand will drive significant earnings improvement in the second half of the year."

Adjusted EBITDA for the second quarter ended June 30, 2010, was $102 million compared with $46 million in the first quarter of this year and $103 million in the second quarter a year ago. The improvement in adjusted EBITDA from the first quarter reflects the benefits of higher selling prices and volumes, offset by significant maintenance-related downtime and related expenses.

Net sales for the second quarter of this year were $1.56 billion, compared with $1.46 billion in this year's first quarter and $1.41 billion in the second quarter of 2009. The improvement in second quarter 2010 net sales is primarily due to higher average selling prices and corrugated container shipments during the period.

Second-Quarter 2010 Highlights

  • The Company successfully emerged from its financial reorganization on June 30 with a significant reduction in leverage and a strong liquidity position.
  • Operating results improved significantly due to steady demand improvement, higher capacity utilization, and improved selling prices.
  • Continuing year-to-date productivity gains included a 5 percent improvement in tons per operating day per facility in our containerboard mills and a 3 percent improvement in average units of production per machine hour in our converting facilities.
  • The Company closed three converting facilities.

Year-to-Date Results

For the six months ended June 30, 2010, net income was $1.32 billion, or $5.07 per diluted share, compared with a net loss of ($62) million, or ($0.24) per diluted share, in the first half of 2009.

Smurfit-Stone's first-half 2010 adjusted net loss was ($57) million, or ($0.20) per diluted share, compared with an adjusted net loss of ($56) million, or ($0.22) per diluted share, in the first half of 2009.

The Company reported an operating loss of ($37) million for the six months ended June 30, 2010, compared with operating income of $265 million in the first half of 2009, which was primarily attributable to the alternative fuel tax credit income.

Other Financial Items

  • As a result of emergence and fresh start accounting, as of June 30, 2010, net property, plant and equipment was fair valued at $4.41 billion, representing a write-up of $1.43 billion, goodwill of $126 million was recorded, and pension and postretirement benefit liabilities were adjusted to $1.64 billion on the balance sheet.
  • As of June 30, 2010, Smurfit-Stone had net tax operating loss carryforwards (NOLs) for U.S. federal income tax purposes of $722 million. As a result of the NOL carryforwards and the tax benefit of projected pension contributions described below, the Company estimates it will have limited cash tax obligations in the U.S. for at least the next several years.
  • The Company's defined benefit pension plans in the U.S. and Canada were underfunded at June 30, 2010, by approximately $1.45 billion combined. The Company's current annual funding requirements are estimated to be $77 million for 2010, and $235 million in 2011, with contributions increasing to a range of approximately $270 million to $300 million through 2014.
  • Capital expenditures for the first half of 2010 totaled $83 million. The Company expects its capital expenditures for 2010 will be approximately $200 million.

Outlook

Smurfit-Stone expects its operating rates to remain at high levels throughout the remainder of the year. Input costs, particularly fiber, energy and transportation, have stabilized moving into the second half of the year. The price increases announced in the first and second quarters are expected to be substantially reflected in earnings during the second half of this year. With the impact of the reorganization now complete, the Company expects to be solidly profitable in the third quarter and to achieve positive earnings and free cash flow for the second half of 2010.

As previously announced, the Company's Chief Executive Officer, Patrick J. Moore, will retire by early 2011. The Company's Board of Directors is launching a confidential search for a chief executive officer. A search is also currently underway for a chief financial officer. Both searches are expected to be completed by the end of the year.

SOURCE: Smurfit-Stone Container Corp.




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