KapStone Paper and Packaging Reports 2017 Fourth Quarter and Full Year Results
Consolidated net sales of $859 million in the fourth quarter of 2017 were $81 million higher than 2016, reflecting higher prices for containerboard and corrugated products.
Feb. 7, 2018 - KapStone Paper and Packaging Corporation (NYSE:KS) today reported preliminary results for the fourth quarter and year ended December 31, 2017.
Matthew Kaplan, President and Chief Executive Officer, stated, "Eleven years ago, we began a journey to build a world-class paper and packaging company with the resources and skills of our largest competitors — that focused on maximization of stockholder value and that treated our customers and employees like a small, family-oriented company. On January 29, 2018, we announced signing a definitive agreement to be acquired by WestRock for $35.00 per share, subject to customary closing conditions, including KapStone stockholder approval. We believe this acquisition is a compelling transaction for our stockholders and an exciting development for both KapStone and WestRock."
Fourth Quarter Operating Highlights
Consolidated net sales of $859 million in the fourth quarter of 2017 were $81 million higher than 2016, reflecting higher prices for containerboard and corrugated products. Tons of paper sold in the paper and packaging segment increased to 731,000 tons during the fourth quarter of 2017 compared to 724,000 tons a year earlier. The Company's average mill selling price of $698 per ton in the fourth quarter of 2017 was higher by $81 per ton compared to the fourth quarter of 2016 due to the combined impact of higher export and domestic containerboard selling prices and kraft paper prices. Average mill selling prices were flat compared to the third quarter of 2017. Distribution segment sales increased by $14 million compared to the prior year quarter due to higher prices, partially offset by lower volume.
Net income of $188 million for the 2017 fourth quarter increased by $169 million compared to the 2016 fourth quarter. The current quarter includes a provisional tax benefit of $144 million associated with the passage of the Tax Cuts and Jobs Act on December 22, 2017. The tax benefit consists of a non-cash adjustment to re-measure deferred income tax liabilities at the new 21 percent federal statutory income tax rate compared to the prior 35 percent income tax rate.
Adjusted EBITDA for the fourth quarter of 2017 of $136 million increased by $44 million compared to the fourth quarter of 2016 as follows:
- $57 million due to higher selling prices,
- Higher sales volume of $3 million,
- Productivity improvements and cost savings of $10 million, and
- $6 million due to the impact of Hurricane Matthew in 2016, which did not recur.
These items were partially offset by:
- Higher compensation and benefit costs of $16 million,
- $7 million of higher planned maintenance outages, and
- Inflation of $8 million driven by higher OCC costs.
The effective income tax rate for the fourth quarter of 2017, when excluding the impact of the new tax law, was 31.4 percent compared to 32.6 percent for the fourth quarter of 2016.
Cash Flow and Working Capital
Cash and cash equivalents increased by $17 million during the current quarter to $28 million at December 31, 2017. The Company generated $150 million of net cash from operating activities during the fourth quarter of 2017. Capital expenditures in the fourth quarter of 2017 were $30 million. The Company paid $10 million of dividends and made a voluntary debt repayment to reduce term loan borrowings by $80 million in the fourth quarter of 2017.
KapStone's full 2017 Fourth Quarter and Full Year Results can be found on the company's website: www.kapstonepaper.com.
Headquartered in Northbrook, IL, 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, 23 converting plants and 60 distribution centers. The business has approximately 6,400 employees. To learn more, please visit: www.kapstonepaper.com.
SOURCE: KapStone Paper and Packaging Corporation