Boise Inc. Reports 4th Quarter, Full Year 2012 Results

Feb. 26, 2013 - Boise Inc. today reported net income of $13.5 million, or $0.13 per diluted share, for fourth quarter 2012, compared with net income of $16.3 million, or $0.15 per diluted share, for fourth quarter 2011. Net income for the year ended 2012 was $52.2 million, or $0.52 per diluted share, compared with $75.2 million, or $0.70 per diluted share, for the year ended 2011. Net income excluding special items for the year ended 2012 was $71.6 million, compared with $79.9 million for the year ended 2011.

EBITDA excluding special items (1) was $78.7 million for fourth quarter 2012, compared with EBITDA excluding special items of $85.0 million for fourth quarter 2011. EBITDA excluding special items was $331.8 million for the year ended 2012, versus our record 2011 EBITDA excluding special items of $340.2 million.

2012 HIGHLIGHTS

  • Record annual sales of $2.56 billion, a 6% increase over 2011
  • EBITDA excluding special items of $331.8 million for 2012 and $78.7 million for 4Q 2012 (1)
  • Special items include pretax costs of $31.7 million, primarily related to ceasing uncoated freesheet production at our paper mill in St. Helens, Oregon
  • Generated annual free cash flow of $97.4 million (1)
  • Paid two special cash dividends totaling $1.20 per common share, or $119.7 million

"We were pleased with our overall 2012 operating results," said Alexander Toeldte, president and chief executive officer of Boise Inc. "Our mills and converting operations ran well, and we reduced costs through productivity improvement by reducing usage of key raw materials. During the year, we generated significant free cash flow and returned capital to our shareholders through the payment of two special cash dividends totaling $1.20 per common share. Despite these achievements, our 2012 results were affected adversely by margin compression in some of our Packaging operations and declining prices in our Paper business."

"In Packaging, we experienced margin compression in some of our converting operations, primarily in our California and Texas markets. We saw little benefit from the announced $50 per ton linerboard price increase during the fourth quarter in our converting operations, but we expect to more fully benefit from the increase in first quarter 2013. As of January 31, 2013, we had implemented over 90% of the $50 price increase through our converting operations. We are making targeted capital investments in our converting operations to improve efficiency and keep pace with our sales growth."

"In Paper, we faced declining prices for communication-grade papers throughout the year, particularly in the fourth quarter. The average price for uncoated freesheet in the fourth quarter 2012 declined $27 per ton from the previous quarter and dropped $45 per ton from the fourth quarter 2011, as industry supply continued to outpace demand. These dynamics factored heavily into our decision to cease paper production at our mill in St. Helens, Oregon, reducing our production capacity in 2013 by 60,000 tons. During fourth quarter, we took 16,000 tons of market-related downtime in addition to the 8,000 tons of downtime from our annual maintenance outage at our mill in Jackson, Alabama. Going forward, we will continue to aggressively manage our costs and evaluate the optimal configuration of our white paper assets, to balance our production with demand for our products."

Packaging Segment
Packaging segment sales for fourth quarter 2012 were $287.3 million, an increase of $35.9 million, or 14%, compared with $251.4 million in fourth quarter 2011. About half of the increase was the result of our acquisition of Hexacomb on December 1, 2011. The remaining increase resulted from sales volume growth in our network of box plants, which increased 9% in fourth quarter 2012, compared with the same quarter in 2011. Our vertical integration rose from an average of 71% during 2011 to 84% in 2012, and we expect it to increase to approximately 90% in 2013 based on our current volumes. Our increased vertical integration decreased our sales to third parties by 46% in fourth quarter 2012, compared with fourth quarter 2011. Net sales prices for our corrugated products, excluding Hexacomb, increased 2% during fourth quarter 2012, compared with fourth quarter 2011. Packaging segment sales for fourth quarter 2012 were essentially flat, compared with third quarter 2012.

Packaging segment sales for full year 2012 were $1,130.1 million, an increase of $180.4 million, or 19%, compared with $949.7 million for 2011. Sales volumes of corrugated products increased 16% in 2012, compared with 2011. Slightly more than half of this increase related to growth from our 2011 acquisitions and the remainder was due to increased sales from our network of box plants, which offset the decline in linerboard net sales prices and volumes sold to third parties during 2012 by 2% and 31%, respectively, compared with 2011. Packaging segment EBITDA, excluding special items, was $47.1 million for fourth quarter 2012, a slight increase from $46.9 million in fourth quarter 2011. Although we benefited from two additional months of operations at Hexacomb in the quarter, this was offset by higher input costs and margin compression on the sale of some of our corrugated products at our converting operations. Packaging segment EBITDA in fourth quarter 2012 increased $9.6 million, or 25%, compared with third quarter 2012, due to improved sales prices of linerboard sold to third parties and lower maintenance outage costs, offset partially by higher fiber costs.

Packaging segment EBITDA, excluding special items, for full year 2012 was $162.5 million, an increase of $3.2 million, or 2%, compared with 2011. The increase reflects a full year impact from our acquisitions. Our corrugated products sales volumes increased 16% year over year; however, these increases were largely offset by margin compression on the sale of some of our corrugated products.

During first quarter 2013, we will conduct a cold outage at our mill in DeRidder, Louisiana. Cold outages at this facility occur every five years and are more extensive and costly than our normal annual maintenance outages. We expect total maintenance outage costs for our Packaging segment in 2013 to be approximately $23 million, an increase of approximately $12 million from 2012, with $20 million expected in first quarter 2013, relative to $2 million in first quarter 2012, with the remaining $3 million expected in third quarter 2013.

Paper Segment
Lower uncoated freesheet sales prices affected our fourth quarter 2012 sales, compared with fourth quarter 2011 and third quarter 2012. Paper segment sales for fourth quarter 2012 were $352.7 million, a decrease of $7.0 million, or 2%, compared with fourth quarter 2011. Paper segment sales decreased $17.3 million, or 5%, compared with third quarter 2012. Our average sales price of uncoated freesheet declined from $993 per short ton in fourth quarter 2011 and $975 per short ton in third quarter 2012 to $948 per short ton in fourth quarter 2012. Total uncoated freesheet sales volumes increased 3% versus the prior-year period but were down 4% versus third quarter 2012 as a result of seasonal demand decline.

Paper segment sales for full year 2012 were $1,468.3 million, down 2% compared with 2011, due to lower sales prices of uncoated freesheet and lower sales prices and volumes of market pulp. Our average sales price of uncoated freesheet was $968 per short ton in 2012, down from an average of $990 per short ton in 2011. Sales volumes of uncoated freesheet were up 2% in 2012, compared with 2011. The increase in our uncoated freesheet sales volumes for the year is due to a 5% increase in sales of label and release and premium office papers and higher purchase volumes by our cut-size customers. Combined sales volumes of label and release and premium office papers represented 34% of our total uncoated freesheet sales volumes for 2012, up from 33% in the prior year.

Paper segment EBITDA, excluding special items, was $38.7 million for fourth quarter 2012, a decrease of $5.7 million, or 13%, compared with fourth quarter 2011. This decrease was due primarily to lower sales prices of uncoated freesheet. This decline was largely offset by generally lower input and maintenance outage costs. Paper segment EBITDA, excluding special items, for fourth quarter 2012 decreased $19.9 million from third quarter 2012 as a result of lower sales volumes and net selling prices for uncoated freesheet and higher maintenance outage costs as a result of our annual outage at our Jackson, Alabama, mill.

Paper segment EBITDA, excluding special items, for full year 2012 was $193.3 million, a decrease of $8.2 million, or 4%, compared with $201.5 million for the year ended December 31, 2011. This decrease resulted from the $22 per short ton reduction in the average sales price of uncoated freesheet and the $107 per short ton reduction in the average sales price of market pulp. Additionally, chemical costs increased $13.8 million year over year, due to higher prices and increased volumes for key chemicals such as caustic soda and starch. These changes were offset partially by an overall $34.0 million reduction in fiber costs as higher wood chip prices, primarily in the Pacific Northwest, were offset by lower purchased pulp prices and improved pulp production at International Falls, Minnesota, and Jackson, Alabama, which reduced our consumption of purchased pulp.

Headquartered in Boise, Idaho, Boise Inc. manufactures a wide variety of packaging and paper products. Boise`s range of packaging products includes linerboard and corrugating medium, corrugated containers and sheets, and protective packaging products. Boise`s paper products include imaging papers for the office and home, printing and converting papers, and papers used in packaging, such as label and release papers. Our employees are committed to delivering excellent value while managing our businesses to sustain environmental resources for future generations. Visit our website at www.BoiseInc.com.

SOURCE: Boise Inc.