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Jan. 27, 2021 (Press Release) - Packaging Corporation of America (NYSE: PKG) today reported fourth quarter 2020 net income of $124 million, or $1.30 per share, and net income of $127 million, or $1.33 per share, excluding special items. Fourth quarter net sales were $1.7 billion in both 2020 and 2019.
Full year 2020 net income was $461 million, or $4.84 per share, and net income of $550 million, or $5.78 per share, excluding special items. Full year net sales were $6.7 billion in 2020 and $7.0 billion in 2019.
Reported earnings in the fourth quarter include special items for facilities closure and restructuring costs. Full year 2020 earnings include special items primarily for costs associated with facility closures, expenses associated with the impact of Hurricane Laura at our DeRidder, Louisiana mill, and goodwill impairment charges in our Paper segment resulting from the exacerbated deterioration in uncoated freesheet market conditions arising from the COVID-19 pandemic.
Excluding special items, the ($.38) per share decrease in fourth quarter 2020 earnings compared to the fourth quarter of 2019 was driven primarily by lower prices and mix in our Packaging segment ($.30) and Paper segment ($.05), lower volumes in our Paper segment ($.27), higher scheduled maintenance outage costs ($.08), higher freight expense ($.07) and a higher tax rate ($.05). These items were partially offset by higher volumes in our Packaging segment $.40, lower operating costs $.01, and other costs $.03.
In the Packaging segment, total corrugated products shipments with one less workday were up 9.9%, and shipments per day were up 11.7% over last year's fourth quarter. Containerboard production was 1,174,000 tons, and containerboard inventory was down 13,000 tons from the fourth quarter of 2019 and up 40,000 tons compared to the third quarter of 2020.
In the Paper segment, sales volume was down 80,000 tons compared to the fourth quarter of 2019, and down 17,000 tons from the third quarter of 2020.
Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, "Demand in our Packaging segment remained very strong as sales volumes in both our containerboard mills and our corrugated products plants set all-time records. Even though we postponed a large discretionary outage during the quarter, as well as utilized our Jackson, Alabama mill for additional containerboard production, we again ended the period with inventory levels lower than planned. Late in the quarter, we began to realize our previously announced Packaging segment price increases.
"Market conditions in our Paper segment continue to be challenged due to the nationwide responses to help control the spread of the pandemic. As expected, sales volume was below seasonally-stronger third quarter levels, and over 30% below the fourth quarter of 2019. As mentioned previously, with the scheduled outage at our International Falls mill, the Jackson mill was restarted on white paper in October and produced both paper and containerboard during the quarter."
Mr. Kowlzan added, "As they have done throughout this pandemic, our employees demonstrated tremendous resiliency to overcome adversity, in both their personal and work lives, to deliver significant accomplishments throughout the company. Not the least of which was running our manufacturing and office locations safely during these times of constant change and distraction. Without question we experienced difficulties and unique challenges during the year; however, our employees never lost their resolve to succeed.
"Our manufacturing and sales organizations continue to successfully adapt to the needs of our customers during this period of unprecedented demand in our packaging business and effectively manage the market challenges in our paper business brought on by the pandemic, as well as worked through the impact of multiple hurricanes. Our engineering and technology organization has stayed on track with the key capital projects and process improvements for our box plants and mills. Also, our corporate staff groups found innovative solutions for remote working conditions to ensure we continue to manage the company effectively, as well as perform all of the necessary administrative activities that are necessary for our employees or are required as a public company. I am very proud of our accomplishments and the strong partnerships we have built with our customers and suppliers over many years."
"Looking ahead as we move from the fourth and into the first quarter," Mr. Kowlzan continued, "our Packaging segment demand should remain strong, with shipments exceeding those of last year's record first quarter. This will require us to continue producing containerboard at our Jackson Mill in addition to an appropriate amount of white paper to maintain optimal inventory levels for servicing our paper customers. We expect to realize the majority of our recently announced packaging segment price increases during the first quarter, and we expect average export prices to move higher as well. However, higher freight costs are expected to continue, and labor costs will be higher with annual wage inflation and timing-related increases to fringes and benefits as we start a new year. Seasonally colder weather will increase energy and wood costs, and we also expect higher prices for recycled fiber. Finally, scheduled outage expenses should be lower although inflation-related increases with our operating supplies and repair costs are expected to offset much of this benefit."
Mr. Kowlzan concluded, "Shelter-in-place and lockdown conditions are constantly changing across the country, and with a new federal administration in place we expect that guidelines and requirements will continue to evolve. There continues to be numerous events and actions that could significantly impact our expectations and assumptions for the upcoming quarter in both our packaging and paper segments. This is true not only for the operation of our facilities, but also for the needs of our customers and the availability of services and products we rely upon from our suppliers. As a result, we are not able to appropriately quantify our guidance for the first quarter."
PCA is the third largest producer of containerboard products and the third largest producer of uncoated freesheet paper in North America. PCA operates eight mills and 92 corrugated products plants and related facilities. To learn more, visit: www.packagingcorp.com.
SOURCE: Packaging Corporation of America
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