PCA's 2Q Earnings Up on Alternative Fuel Credits

July 20, 2009 (Press Release) - Packaging Corporation of America today reported second quarter 2009 net income of $109 million, or $1.07 per share. Second quarter earnings included income of $80 million, or $0.79 per share, from alternative fuel mixture tax credits for the period from December 13, 2008 through June 30, 2009. Net sales for the second quarter were $549 million compared to $616 million in the second quarter of 2008.

Excluding income from alternative fuel mixture tax credits, net income was $29 million, or $0.28 per share versus second quarter 2008 net income of $35 million, or $0.34 per share. This $0.06 per share decrease in earnings, compared to last year, was driven primarily by the downturn in the economy which lowered containerboard and corrugated products volume and increased downtime ($0.14), as well as by higher costs for labor and benefits ($0.02), and lower prices ($0.02). These items were partially offset by lower costs for recycled fiber ($0.05), transportation ($0.04), and energy ($0.03).

Net income for the first six months of 2009 was $135 million, or $1.32 per share, and excluding alternative fuel mixture tax credits, earnings were $54 million, or $0.53 per share, compared to $67 million, or $0.65 per share, in 2008. Year-to-date net sales were $1.06 billion compared to $1.19 billion in 2008.

Corrugated products shipments were down 6.3% per workday and 7.8% in total, and outside sales of containerboard were down about 30,000 tons compared to last year’s second quarter. Containerboard production was 555,000 tons after taking approximately 60,000 tons of annual maintenance outage and market-related downtime. PCA’s June ending containerboard inventory was about 2,000 tons below the end of the first quarter.

Paul T. Stecko, Chairman and CEO of PCA, said, “Business conditions improved significantly during the quarter with higher than expected sales volumes, less market-related mill downtime, and lower operating costs. Compared to the first quarter, our corrugated products shipments were up 10%, or 40,000 tons, and outside sales of containerboard were up 20%, or 16,000 tons. Energy costs were also significantly lower than expected driven by operating efficiencies and lower prices. PCA’s containerboard inventory fell during the quarter, and industry inventories were at their lowest June ending level in almost 30 years.”

“Looking ahead,” Mr. Stecko added, “our sales volumes are expected to be higher in the third quarter, but some market-related mill downtime is still likely. Prices are expected to be lower as a result of previously published changes in prices for containerboard, and recycled fiber costs are expected to be significantly higher. Considering these items, and excluding any income from alternative fuel mixture tax credits, we currently estimate our third quarter earnings at about $0.24 per share.”

PCA is the fifth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.4 billion in 2008. PCA operates four paper mills and 68 corrugated products plants in 26 states across the country.

SOURCE: Packaging Corporation of America

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