Packaging Corp. of America Posts 2Q Earnings Record on Sales
"We had another strong quarter with record corrugated products shipments, highly productive mill operations, and lower than expected mill costs." – Mark Kowlzan, CEO of PCA.
July 17, 2012 - Packaging Corporation of America [yesterday] reported second quarter net income of $45 million, or $0.46 per share, which included after-tax debt refinancing charges of $2.5 million, or $0.025 per share. Excluding the refinancing charges, earnings were $48 million, or $0.49 per share, a second quarter record, compared to second quarter 2011 net income of $40 million, or $0.39 per share. Net sales were a record $712 million, up 7% compared to second quarter 2011 net sales of $665 million.
The $0.10 per share increase in net income, excluding refinancing charges, was driven by higher containerboard and corrugated products volume ($0.07) and lower costs for energy ($0.05), recycled fiber ($0.02), chemicals ($0.02) and maintenance ($0.02). These items were partially offset by higher costs for transportation ($0.02), medical ($0.02), depreciation ($0.02), and interest expense ($0.02).
Excluding special items, net income for the first six months of 2012 was a record $88 million, or $0.91 per share, compared to net income for the first six months of 2011 of $79 million, or $0.78 per share, excluding special items. Year-to-date net sales were a record $1.4 billion compared to $1.3 billion in 2011.
Corrugated products shipments were up 6.6% compared to last year’s second quarter. This increase in shipments included 3.6% from box plant acquisitions. With the higher containerboard consumption required to support the increased volume at PCA box plants, export sales of containerboard were reduced by 13,000 tons compared to last year’s second quarter. Containerboard production was 638,000 tons, up 5.3% or 32,000 tons over the second quarter of 2011. PCA ended the quarter with its containerboard inventories about 1,000 tons below the end of the first quarter.
As reported in a separate press release on June 26, 2012, the company completed an offering of $400 million in senior notes due in 2022 and expects to complete, in July, the redemption of its existing $400 million in notes due in 2013. In connection with the debt offering and note redemption, after- tax charges of $2.5 million, or $0.025 per share, were recorded in the second quarter for the note offering, and the company expects to record an estimated after-tax charge of $13 million, or $0.14 per share, in the third quarter for the note redemption.
Commenting on reported results, Mark W. Kowlzan, Chief Executive Officer of PCA, said, “We had another strong quarter with record corrugated products shipments, highly productive mill operations, and lower than expected mill costs. Pricing for corrugated products and domestic containerboard remained steady, export prices were higher and mix improved compared to the first quarter. Our mills ran extremely well setting a second quarter production record, even with 23,000 tons of lost production related to the completion of our 2012 annual maintenance outages.”
“Looking ahead to the third quarter,” Mr. Kowlzan added, “we expect seasonally higher sales volumes, increased mill production and lower mill costs. Considering these items, and excluding the estimated note redemption charge, we expect third quarter earnings to be about $0.54 per share.”
PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.6 billion in 2011. PCA operates four paper mills and 72 corrugated products plants in 26 states across the country.
SOURCE: Packaging Corporation of America