PaperAge Magazine

KapStone Paper and Packaging Reports Fourth Quarter and Full Year 2016 Results

KapStone Paper and Packaging Consolidated net sales of $777 million in the fourth quarter of 2016 were $13 million higher than 2015, reflecting higher volumes in the paper and packaging segment.

Feb. 8, 2017 - KapStone Paper and Packaging Corporation (KS) today reported preliminary results for the fourth quarter and year ended December 31, 2016.

As compared to 2015's fourth quarter, results for 2016's fourth quarter:

  • Net sales of $777 million, up $13 million, or 2 percent
  • Net income of $18 million, up $7 million, or 55 percent
  • Diluted EPS of $0.19, up $0.07 per share, or 58 percent

Non U.S. GAAP financial measures for 2016's fourth quarter as compared to 2015's fourth quarter:

  • Adjusted EBITDA of $92 million, up $10 million, or 13 percent
  • Adjusted net income of $23 million, up $7 million, or 43 percent
  • Adjusted diluted EPS of $0.24, up $0.07 per share, or 41 percent

As compared to the year ended December 31, 2015, results for the year ended December 31, 2016:

  • Net sales of $3,077 million, up $288 million, or 10 percent
  • Net income of $86 million, down $20 million, or 19 percent
  • Diluted EPS of $0.88, down $0.21 per share, or 19 percent

Non U.S. GAAP financial measures for the year ended December 31, 2016 as compared to 2015's year:

  • Adjusted EBITDA of $384 million, down $20 million, or 5 percent
  • Adjusted net income of $107 million, down $30 million, or 22 percent
  • Adjusted diluted EPS of $1.10, down $0.31 per share, or 22 percent

Matthew Kaplan, President and Chief Executive Officer, stated, "During 2016, we made substantial progress in our initiatives to improve productivity and reduce costs. These efforts helped to mitigate the negative impact of eroding pricing and a less favorable product mix.

"We've made good progress towards our goal to increase integration. We achieved our goals at Victory while making several investments / acquisitions, the most recent being the purchase of Associated Packaging, Inc. on February 1, 2017, that will further increase integration levels.

"Operating cash flow continues to be strong as we generated $282 million during 2016, up $20 million compared to 2015."

Randy Nebel, recently appointed Executive Vice President of KapStone's Integrated Packaging System, stated, "2016 operating performance reflected a record production year for the Company's Longview and Roanoke Rapids mills, while progress continues on improving reliability and quality at our other mills. In addition, with the recent capital investments made at corrugated products plants, we expect that efficiency will be improved in 2017. In addition, in the fourth quarter we implemented a $40 per ton containerboard price increase and began raising prices for corrugated products. Also, demand was stronger in a quarter when we normally see lower volumes. Our results were negatively impacted by the impact of Hurricane Matthew which reduced pre-tax earnings by about $6 million."

Fourth Quarter Operating Highlights

Consolidated net sales of $777 million in the fourth quarter of 2016 were $13 million higher than 2015, reflecting higher volumes in the paper and packaging segment as 724,000 tons of paper were shipped during the fourth quarter of 2016 compared to 658,000 tons a year earlier. The Company's average mill selling price of $617 per ton in the fourth quarter of 2016 was lower by $29 per ton compared to the fourth quarter of 2015 due to the combined impact of lower export and domestic containerboard selling prices and lower export kraft paper prices. Average mill selling prices decreased $9 per ton from the third quarter of 2016, reflecting seasonal mix, partially offset by the impact from the October $40 per ton containerboard price increase. Distribution segment sales declined by $5 million due to lower volume and prices when compared to the fourth quarter of 2015.

Operating income of $38 million for the 2016 fourth quarter increased by $9 million, or 30 percent, compared to the 2015 fourth quarter. Financial performance in the current quarter improved mainly due to higher sales volumes, lower planned maintenance costs, lower compensation and benefit costs and a reduction in the fair value of the contingent consideration for the Victory Packaging acquisition. These factors were partially offset by lower selling prices, the impact of Hurricane Matthew and a non-cash charge for withdrawing from a multiemployer pension plan.

Interest expense was $10 million for the fourth quarter of 2016, up $1 million from a year ago, as a result of higher interest rates. At December 31, 2016, the average interest rate on our debt was 2.1 percent compared to 2.0 percent at the end of 2015.

The effective income tax rate for the fourth quarter of 2016 was 32.6 percent compared to 34.6 percent for the fourth quarter of 2015.

Conclusion

In summary, Kaplan commented, "Our selling prices are increasing and we are generating more cash flow. We have implemented the October containerboard price increase based on contractual agreements. We anticipate improved performance in 2017."

Kapstone's full 2016 results are available at: www.kapstonepaper.com.

Headquartered in Northbrook, Illinois (USA), 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 has four paper mills, 24 converting plants and 60 distribution centers. To learn more, please visit: www.kapstonepaper.com.

SOURCE: KapStone Paper and Packaging Corporation