Packaging Corp. of America Posts Record First Quarter 2014 Results
In PCA's packaging segment, box shipments were up 31% over the first quarter of last year.
April 23, 2014 - Packaging Corporation of America (PKG) [yesterday] reported first quarter net income of $90 million, or $0.92 per share. First quarter 2014 net income included after-tax charges for special items of $16 million, or $0.16 per share, including accrual of costs for the settlement of the containerboard antitrust lawsuit ($0.11), Boise integration related costs ($0.03) and non-cash charges related to the DeRidder restructuring ($0.02). Excluding these special items, first quarter 2014 net income was a record $106 million, or $1.08 per share, compared to first quarter 2013 net income of $62 million, or $0.64 per share. Net sales were a record $1.4 billion compared to first quarter 2013 net sales of $755 million.
The $0.44 per share increase in earnings, excluding special items, was driven by the acquisition of Boise ($0.35) and by PCA earnings improvement ($0.09). The PCA earnings improvement was a result of improved price and mix ($0.21) and lower medical, pension and worker’s compensation costs ($0.03), partially offset by higher costs for labor ($0.04), energy ($0.03), freight ($0.02), repairs ($0.02) and other items ($0.04). Higher costs and lower shipments from extreme weather conditions equated to $0.09 per share, of which $0.06 per share was recognized in first quarter earnings, and $0.03 per share was capitalized in inventory and will reduce second quarter earnings.
In PCA's packaging segment, box shipments were up 31% over the first quarter of last year and up 29% per workday with one additional workday in the first quarter of 2014. Excluding Boise, PCA’s corrugated products shipments were up 3.4% in total, and up 1.8% per workday. With strong internal demand, PCA reduced its outside sales of containerboard by 12,000 tons compared to last year’s first quarter. Containerboard production was 821,000 tons, and PCA ended the quarter with its containerboard inventories down 4,000 tons compared to the first quarter of 2013. Packaging EBITDA in the first quarter of 2014, excluding special items, was $244 million on sales of $1,097 million.
In PCA’s paper segment, office paper shipments were up 5.5% over the first quarter of last year, or about 10,000 tons, but down about 20,000 tons in printing and converting and pressure sensitive grades as a result of last year’s capacity rationalization at the International Falls, MN mill. Prices improved during the quarter as the result of previously announced increases, and total paper inventories fell by about 25,000 tons compared to last year’s first quarter. Paper EBITDA in the first quarter of 2014, excluding special items, was $40 million on sales of $309 million.
Commenting on reported results, Mark W. Kowlzan, Chief Executive Officer of PCA, said, "We had an outstanding quarter, despite extremely severe weather conditions, driven by strong operations and the acquisition of Boise which was 48% accretive to PCA’s earnings. The integration of Boise with PCA operations remains ahead of schedule and positively impacted first quarter results."
"Looking ahead to the second quarter," Mr. Kowlzan added, "we expect higher volume in corrugated products, higher prices in white papers, and lower fuel consumption with warmer weather. Three of our mills will be down for annual maintenance outages in the second quarter, compared to only one mill down in the first quarter, which will result in increased costs and lower production. We expect higher medical and worker’s compensation costs compared to the abnormally low costs experienced in the first quarter, and higher electricity costs with normal seasonal rate increases. In addition, earnings will be reduced with recognition of the remaining earnings impact from the first quarter extreme weather conditions and a higher tax rate. Considering these items, we currently expect second quarter earnings of about $1.10 per share."
PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated freesheet paper in North America. PCA operates eight paper mills and 98 corrugated products plants and related facilities. To learn more, please visit: www.packagingcorp.com
SOURCE: Packaging Corporation of America