Packaging Corporation of America (NYSE: PKG) today reported
first quarter 2023 net income of $190 million, or $2.11 per share,
and net income of $198 million, or $2.20 per share, excluding
special items. First quarter net sales were $2.0 billion in 2023
and $2.1 billion in 2022.
Diluted earnings
per share attributable to Packaging Corporation of America
shareholders
Three Months Ended
March 31
2023
2022
Change
Reported Diluted EPS
$
2.11
$
2.70
$
(0.59
)
Special Items Expense (1)
0.09
0.02
0.07
Diluted EPS excluding Special items
$
2.20
$
2.72
$
(0.52
)
(1) For descriptions and amounts of our
special items, see the schedules with this release.
Reported earnings in the first quarter of 2023 include special
items primarily for closure costs related to corrugated products
facilities and design centers.
Excluding special items, the ($.52) per share decrease in first
quarter 2023 earnings compared to the first quarter of 2022 was
driven primarily by lower volumes in the Packaging ($.95) and Paper
($.04) segments, higher operating costs ($.27), higher depreciation
expense ($.11), higher freight and logistics expenses ($.04),
higher non-operating pension expense ($.04), and higher converting
costs ($.02). These items were partially offset by higher prices
and mix in the Packaging $.58 and Paper $.18 segments, a lower
share count resulting from share repurchases in the second half of
2022 $.11, lower interest expense $.03, lower other expenses $.03,
lower scheduled maintenance outage expenses $.01, and a lower tax
rate $.01.
Results were ($.03) below first quarter guidance of $2.23 per
share primarily due to lower volume and lower prices and mix in the
Packaging segment.
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended
March 31
2023
2022
Segment income (loss)
Packaging
$
268.0
$
362.2
Paper
34.1
22.4
Corporate and Other
(31.4
)
(28.1
)
$
270.7
$
356.5
Segment income (loss) excluding special
items
Packaging
$
277.4
$
363.0
Paper
35.6
23.7
Corporate and Other
(31.4
)
(28.1
)
$
281.6
$
358.6
EBITDA excluding special items
Packaging
$
391.6
$
463.9
Paper
41.0
29.0
Corporate and Other
(27.7
)
(25.7
)
$
404.9
$
467.2
In the Packaging segment, total corrugated products shipments
and shipments per day were down (12.7%) compared to the first
quarter of 2022. Containerboard production was 1,086,000 tons, and
containerboard inventory was down 36,000 tons from the first
quarter of 2022 and up 6,000 tons compared to the fourth quarter of
2022. In the Paper segment, sales volume was down 23,000 tons from
the first quarter of 2022 and down 6,000 tons compared to the
fourth quarter of 2022.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “Packaging segment demand was below our expectations for
the quarter. Consumer spending continues to be negatively impacted
by higher interest rates and persistent inflation along with
consumer buying preferences skewed more towards services versus
durable and non-durable goods. After a strong start in January,
consumer spending was increasingly softer as the quarter
progressed, similar to our box shipments during the quarter. In
addition, the PMI index indicates manufacturing has remained in
contraction territory for the last five months and continued to
decline. We ran our system in a very cost-effective manner based on
this lower demand, and we managed containerboard inventories to our
targeted weeks-of-inventory supply. Price and mix in our Packaging
segment are still above last year’s levels, although the positive
impact was lower than expected primarily due to a price decrease in
the published benchmark containerboard grades after our guidance
was provided. However, even with these unanticipated market
headwinds, we were able to offset most of the negative impact
through our cost management and process efficiency optimization
efforts at our mills and corrugated products plants, along with
energy prices being lower than expected. The Paper segment had
outstanding results driven by continued realization of our
previously announced price increases and the benefits of our newly
optimized paper business.”
“Looking ahead as we move from the first and into the second
quarter,” Mr. Kowlzan added, “although there is one less shipping
day for the corrugated business, we expect improved volume in our
Packaging segment. However, prices will be lower as a result of the
previously published domestic containerboard price decreases along
with lower export prices. Sales volume as well as prices and mix in
the Paper segment are assumed to be slightly lower based on lower
demand. Although we do look for most operating costs to trend
lower, our converting costs, scheduled maintenance outage expense
and depreciation expense will be higher. Primarily due to recent
increases in contract rail rates at most of our mills, we expect
higher freight and logistics expenses compared to the first
quarter. Considering these items, we expect second quarter earnings
of $1.96 per share.”
We present various non-GAAP financial measures in this press
release, including diluted EPS excluding special items, segment
income excluding special items and EBITDA excluding special items.
We provide information regarding our use of non-GAAP financial
measures and reconciliations of historical non-GAAP financial
measures presented in this press release to the most comparable
measure reported in accordance with GAAP in the schedules to this
press release. We present our earnings expectation for the upcoming
quarter excluding special items as special items are difficult to
predict and quantify and may reflect the effect of future events.
We currently anticipate special items in the second quarter of 2023
to include charges, fees, and expenses for paper-to-containerboard
conversion related activities at the Jackson, AL mill. We do not
currently expect any additional significant special items during
the second quarter; however, additional special items may arise due
to second quarter events.
PCA is the third largest producer of containerboard products and
a leading producer of uncoated freesheet paper in North America.
PCA operates eight mills and 88 corrugated products plants and
related facilities.
Some of the statements in this press release are forward-looking
statements. Forward-looking statements include statements about our
future earnings and financial condition, the impact of the COVID-19
pandemic on our business, expected benefits from acquisitions and
restructuring activities, our industry and our business strategy.
Statements that contain words such as “will”, “should”,
“anticipate”, “believe”, “expect”, “intend”, “estimate”, “hope” or
similar expressions, are forward-looking statements. These
forward-looking statements are based on the current expectations of
PCA. Because forward-looking statements involve inherent risks and
uncertainties, the plans, actions and actual results of PCA could
differ materially. Among the factors that could cause plans,
actions and results to differ materially from PCA’s current
expectations include the following: the impact of the COVID-19
pandemic on the health of our employees and on the employees of our
suppliers and customers, on our ability to operate our business,
and on economic conditions affecting our business and demand for
our products; the impact of general economic conditions; conditions
in the paper and packaging industries, including competition,
product demand and product pricing; fluctuations in wood fiber and
recycled fiber costs; fluctuations in purchased energy costs; the
possibility of unplanned outages or interruptions at our principal
facilities; and legislative or regulatory requirements,
particularly concerning environmental matters, as well as those
identified under Item 1A. Risk Factors in PCA’s Annual Report on
Form 10-K for the year ended December 31, 2022 filed with the
Securities and Exchange Commission and available at the SEC’s
website at “www.sec.gov”.
Conference Call
Information:
WHAT:
Packaging Corporation of
America’s 1st Quarter 2023 Earnings Conference Call
Conference ID: Packaging
Corporation of America
WHEN:
Tuesday, April 25, 2023 at 9:00am
Eastern Time
PRE-REGISTRATION:
https://dpregister.com/sreg/10173949/f56146fa14
CALL-IN NUMBER:
(866) 777-2509 (U.S.); (866)
605-3852 (Canada) or (412) 317-5413 (International)
Dial in by 8:45am Eastern
Time
WEBCAST INFO:
www.packagingcorp.com
REBROADCAST DATES:
April 25, 2023 through May 9,
2023
REBROADCAST NUMBERS:
(877) 344-7529 (U.S.); (855)
669-9658 (Canada) or (412) 317-0088 (International)
Passcode: 5863789
Packaging Corporation of America Consolidated Earnings
Results Unaudited (dollars in millions, except per-share
data)
Three Months Ended March 31,
2023
2022
Net sales
$
1,976.3
$
2,136.4
Cost of sales
(1,544.9
)
(1)
(1,603.2
)
(2)
Gross profit
431.4
533.2
Selling, general, and administrative expenses
(148.2
)
(1)
(161.1
)
Other expense, net
(12.5
)
(1)
(15.6
)
(2)
Income from operations
270.7
356.5
Non-operating pension (expense) income
(2.0
)
3.6
Interest expense, net
(15.4
)
(19.8
)
Income before taxes
253.3
340.3
Provision for income taxes
(63.2
)
(86.1
)
Net income
$
190.1
$
254.2
Earnings per share: Basic
$
2.12
$
2.71
Diluted
$
2.11
$
2.70
Computation of diluted earnings per share under the two
class method: Net income
$
190.1
$
254.2
Less: Distributed and undistributed income available to
participating securities
(1.6
)
(2.0
)
Net income attributable to PCA shareholders
$
188.5
$
252.2
Diluted weighted average shares outstanding
89.4
93.3
Diluted earnings per share
$
2.11
$
2.70
Supplemental financial information: Capital spending
$
112.4
$
213.2
Cash, cash equivalents, and marketable debt securities
$
520.2
$
778.4
(1)
The three months ended March 31, 2023 include the following: a.
$9.7 million of charges consisting of closure costs related to
corrugated products facilities and design centers. These items were
recorded in "Cost of sales", "Selling, general, and administrative
expenses", and "Other expense, net", as appropriate. b. $1.2
million of charges related to the announced discontinuation of
production of uncoated freesheet paper grades on the No. 3 machine
at the Jackson, Alabama mill associated with the permanent
conversion of the machine to produce linerboard and other
paper-to-containerboard conversion related activities. The costs
were recorded in “Cost of sales” and “Other expense, net”, as
appropriate.
(2)
The three months ended March 31, 2022 include the following: a.
$1.5 million of charges related to the announced discontinuation of
production of uncoated freesheet paper grades on the No. 3 machine
at the Jackson, Alabama mill associated with the permanent
conversion of the machine to produce linerboard and other
paper-to-containerboard conversion related activities. The costs
were recorded in “Cost of sales” and “Other expense, net”, as
appropriate. b. $0.6 million of charges consisting of closure costs
related to corrugated products facilities and acquisition and
integration costs related to the December 2021 Advance Packaging
Corporation acquisition, which were recorded in "Cost of sales" and
“Other expense, net”, as appropriate.
Packaging Corporation of
America Segment Information Unaudited (dollars in
millions)
Three Months Ended March 31,
2023
2022
Segment sales Packaging
$
1,808.6
$
1,964.5
Paper
150.9
153.5
Corporate and Other
16.8
18.4
$
1,976.3
$
2,136.4
Segment income (loss) Packaging
$
268.0
$
362.2
Paper
34.1
22.4
Corporate and Other
(31.4
)
(28.1
)
Income from operations
270.7
356.5
Non-operating pension (expense) income
(2.0
)
3.6
Interest expense, net
(15.4
)
(19.8
)
Income before taxes
$
253.3
$
340.3
Segment income (loss) excluding special items (1)
Packaging
$
277.4
$
363.0
Paper
35.6
23.7
Corporate and Other
(31.4
)
(28.1
)
$
281.6
$
358.6
EBITDA excluding special items (1) Packaging
$
391.6
$
463.9
Paper
41.0
29.0
Corporate and Other
(27.7
)
(25.7
)
$
404.9
$
467.2
(1)
Segment income (loss) excluding special items, earnings before
non-operating pension (expense) income, interest, income taxes, and
depreciation, amortization, and depletion (EBITDA), and EBITDA
excluding special items are non-GAAP financial measures. Management
excludes special items as it believes these items are not
necessarily reflective of the ongoing results of operations of our
business. We present these measures because they provide a means to
evaluate the performance of our segments and our company on an
ongoing basis using the same measures that are used by our
management, because these measures assist in providing a meaningful
comparison between periods presented and because these measures are
frequently used by investors and other interested parties in the
evaluation of companies and the performance of their segments. The
tables included in "Reconciliation of Non-GAAP Financial Measures"
on the following pages reconcile the non-GAAP measures with the
most directly comparable GAAP measures. Any analysis of non-GAAP
financial measures should be done only in conjunction with results
presented in accordance with GAAP. The non-GAAP measures are not
intended to be substitutes for GAAP financial measures and should
not be used as such.
Packaging Corporation of
America Reconciliation of Non-GAAP Financial Measures
Unaudited (dollars in millions)
Three Months
Ended March 31,
2023
2022
Packaging Segment income
$
268.0
$
362.2
Facilities closure and other costs
9.7
0.6
Jackson mill conversion-related activities
(0.3
)
0.2
Segment income excluding special items (1)
$
277.4
$
363.0
Paper Segment income
$
34.1
$
22.4
Jackson mill conversion-related activities
1.5
1.3
Segment income excluding special items (1)
$
35.6
$
23.7
Corporate and Other Segment loss
$
(31.4
)
$
(28.1
)
Segment loss excluding special items (1)
$
(31.4
)
$
(28.1
)
Income from operations
$
270.7
$
356.5
Income from operations, excluding special items (1)
$
281.6
$
358.6
(1) See footnote (1) on page 2, for a discussion of non-GAAP
financial measures.
Packaging Corporation of America
Reconciliation of Non-GAAP Financial Measures
Unaudited (dollars in millions)
Net Income and EPS
Excluding Special Items (1) Three Months Ended March
31,
2023
2022
Income before taxes Income Taxes Net Income
Diluted EPS Income before taxes Income Taxes
Net Income Diluted EPS As reported
$
253.3
$
(63.2
)
$
190.1
$
2.11
$
340.3
$
(86.1
)
$
254.2
$
2.70
Special items (2): Facilities closure and other costs
9.7
(2.4
)
7.3
0.08
0.6
(0.2
)
0.4
0.01
Jackson mill conversion-related activities
1.2
(0.3
)
0.9
0.01
1.5
(0.4
)
1.1
0.01
Total special items
10.9
(2.7
)
8.2
0.09
2.1
(0.6
)
1.5
0.02
Excluding special items
$
264.2
$
(65.9
)
$
198.3
$
2.20
$
342.4
$
(86.7
)
$
255.7
$
2.72
(1)
Net income and earnings per share excluding special items are
non-GAAP financial measures. Management excludes special items as
it believes these items are not necessarily reflective of the
ongoing results of operations of our business. We present these
measures because they provide a means to evaluate the performance
of our company on an ongoing basis using the same measures that are
used by our management, because these measures assist in providing
a meaningful comparison between periods presented and because these
measures are frequently used by investors and other interested
parties in the evaluation of companies and their performance. Any
analysis of non-GAAP financial measures should be done only in
conjunction with results presented in accordance with GAAP. The
non-GAAP measures are not intended to be substitutes for GAAP
financial measures and should not be used as such.
(2)
Pre-tax special items are tax-effected at a combined federal and
state income tax rate in effect for the period the special items
were recorded and this rate is adjusted for each subsequent quarter
to be consistent with the estimated annual effective tax rate, in
accordance with ASC 270, Interim Reporting, and ASC 740-270, Income
Taxes – Intra Period Tax Allocation. For all periods presented,
income taxes on pre-tax special items represent the current amount
of tax. For more information related to these items, see the
footnotes to the Consolidated Earnings Results on page 1.
Packaging Corporation of America Reconciliation of
Non-GAAP Financial Measures Unaudited (dollars in
millions)
EBITDA and EBITDA Excluding Special Items (1)
EBITDA represents income before non-operating pension
expense (income), interest, income taxes, and depreciation,
amortization, and depletion. The following table reconciles net
income to EBITDA and EBITDA excluding special items:
Three Months Ended March 31,
2023
2022
Net income
$
190.1
$
254.2
Non-operating pension expense (income)
2.0
(3.6
)
Interest expense, net
15.4
19.8
Provision for income taxes
63.2
86.1
Depreciation, amortization, and depletion
129.6
109.7
EBITDA (1)
$
400.3
$
466.2
Special items: Facilities closure and other costs
4.9
0.6
Jackson mill conversion-related activities
(0.3
)
0.4
EBITDA excluding special items (1)
$
404.9
$
467.2
(1) See footnote (1) on page 2, for a discussion of non-GAAP
financial measures.
Packaging Corporation of America
Reconciliation of Non-GAAP Financial Measures
Unaudited (dollars in millions) The following table
reconciles segment income (loss) to EBITDA excluding special items:
Three Months Ended March 31,
2023
2022
Packaging Segment income
$
268.0
$
362.2
Depreciation, amortization, and depletion
119.0
100.9
EBITDA (1)
387.0
463.1
Facilities closure and other costs
4.9
0.6
Jackson mill conversion-related activities
(0.3
)
0.2
EBITDA excluding special items (1)
$
391.6
$
463.9
Paper Segment income
$
34.1
$
22.4
Depreciation, amortization, and depletion
6.9
6.4
EBITDA (1)
41.0
28.8
Jackson mill conversion-related activities
-
0.2
EBITDA excluding special items (1)
$
41.0
$
29.0
Corporate and Other Segment loss
$
(31.4
)
$
(28.1
)
Depreciation, amortization, and depletion
3.7
2.4
EBITDA (1)
(27.7
)
(25.7
)
EBITDA excluding special items (1)
$
(27.7
)
$
(25.7
)
EBITDA excluding special items (1)
$
404.9
$
467.2
(1) See footnote (1) on page 2, for a discussion of non-GAAP
financial measures.
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version on businesswire.com: https://www.businesswire.com/news/home/20230424005875/en/
Barbara Sessions Packaging Corporation of America INVESTOR
RELATIONS: (877) 454-2509 PCA’s Website: www.packagingcorp.com
Grafico Azioni Packaging (NYSE:PKG)
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