Packaging Corporation of America (NYSE: PKG) today reported
second quarter 2023 net income of $203 million, or $2.24 per share,
and net income of $209 million, or $2.31 per share, excluding
special items. Second quarter net sales were $2.0 billion in 2023
and $2.2 billion in 2022.
Diluted earnings per share attributable
to Packaging Corporation of America shareholders
Three Months Ended
June 30
2023
2022
Change
Reported Diluted EPS
$
2.24
$
3.20
$
(0.96
)
Special Items Expense (1)
0.07
0.02
0.05
Diluted EPS excluding Special items
(2)
$
2.31
$
3.23
$
(0.92
)
(1) For descriptions and amounts of our
special items, see the schedules with this release.
(2) Amounts may not foot due to
rounding.
Reported earnings in the second quarter of 2023 include special
items for certain costs at the Jackson, AL mill for
paper-to-containerboard conversion related activities and closure
costs related to corrugated products facilities and design
centers.
Excluding special items, the ($.92) per share decrease in second
quarter 2023 earnings compared to the second quarter of 2022 was
driven primarily by lower volumes in the Packaging ($.90) and Paper
($.07) segments, lower price and mix in the Packaging segment
($.47), higher depreciation expense ($.09), and higher other
converting costs ($.03). These items were partially offset by lower
operating costs $.34, higher prices and mix in the Paper segment
$.12, a lower share count resulting from share repurchases in the
second half of 2022 $.13, lower scheduled maintenance outage
expenses $.03, and a lower tax rate $.02.
Results were $.35 above second quarter guidance of $1.96 per
share primarily due to lower operating costs resulting from
efficiency and usage initiatives and lower freight and logistics
expenses.
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended
June 30
2023
2022
Segment income (loss)
Packaging
$
285.8
$
419.8
Paper
29.1
22.7
Corporate and Other
(30.5
)
(26.7
)
$
284.4
$
415.8
Segment income (loss) excluding special
items
Packaging
$
289.7
$
419.3
Paper
33.5
26.2
Corporate and Other
(30.5
)
(26.7
)
$
292.7
$
418.8
EBITDA excluding special items
Packaging
$
405.3
$
525.3
Paper
38.8
31.5
Corporate and Other
(26.6
)
(24.2
)
$
417.5
$
532.6
In the Packaging segment, total corrugated products shipments
and shipments per day were down (9.8%) compared to last year’s
second quarter. Shipments per day were up 2.7% versus the first
quarter of 2023. Containerboard production was 1,112,000 tons, and
containerboard inventory was down (11,000) tons versus the first
quarter of 2023 and down (49,000) tons compared to the second
quarter of 2022. In the Paper segment, sales volume was down
(5,000) tons compared to the first quarter of 2023 and down
(19,000) tons versus the second quarter of 2022.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “Actual results versus our guidance for the quarter
reflect the outstanding efforts by employees across the Company to
manage our operations in an efficient and cost-effective manner as
we continued to operate both our Packaging and Paper segments
against a challenging demand environment. Results also reflect
energy and virgin fiber prices being lower than anticipated, and
our logistics and distribution personnel did a great job minimizing
the effect of higher freight rates in certain regions as well as
optimizing freight routes and transportation modes. During the
second quarter, we temporarily idled our Wallula, WA mill as we
continued to operate the Packaging segment based on our outlook for
demand.”
“Looking ahead as we move from the second and into the third
quarter,” Mr. Kowlzan added, “in our Packaging segment, although
there is one less shipping day for the corrugated business, we
expect shipments per day to improve versus the second quarter.
However, prices will be lower as a result of the previously
published domestic containerboard price decreases along with
slightly lower export prices. We expect seasonally stronger volume
in our Paper segment from back-to-school shipments, although prices
are expected to trend lower based on the recent declines in index
prices. Operating and converting costs should trend slightly higher
primarily due to higher recycled fiber prices and seasonal energy
cost. Scheduled outage expenses will be higher by approximately
($.06) per share driven by the scheduled maintenance planned at our
International Falls, MN mill. Finally, we estimate our depreciation
expense and tax rate to be slightly higher as well. Considering
these items, we expect third quarter earnings of $1.88 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 third quarter of 2023
to include accounting 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 third quarter; however,
additional special items may arise due to third 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 86 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 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, and in subsequent quarterly reports on Form 10-Q, 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 2nd
Quarter 2023 Earnings Conference Call
Conference ID: Packaging Corporation of
America
WHEN:
Tuesday, July 25, 2023 at 9:00am Eastern
Time
PRE-REGISTRATION:
https://dpregister.com/sreg/10173951/f561e5615b
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:
July 25, 2023 through August 8, 2023
REBROADCAST NUMBERS:
(877) 344-7529 (U.S.); (855) 669-9658
(Canada) or (412) 317-0088 (International)
Passcode: 8004934
Packaging Corporation of America Consolidated Earnings
Results Unaudited (dollars in millions, except per-share
data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net sales
$
1,952.1
$
2,237.3
$
3,928.4
$
4,373.7
Cost of sales
(1,507.4
)
(1)
(1,648.5
)
(2)
(3,052.3
)
(1)
(3,251.7
)
(2)
Gross profit
444.7
588.8
876.1
1,122.0
Selling, general, and administrative expenses
(145.6
)
(1)
(156.7
)
(293.9
)
(1)
(317.7
)
Other expense, net
(14.7
)
(1)
(16.3
)
(2)
(27.2
)
(1)
(31.9
)
(2)
Income from operations
284.4
415.8
555.0
772.4
Non-operating pension (expense) income
(2.0
)
3.6
(4.0
)
7.3
Interest expense, net
(14.6
)
(18.8
)
(29.9
)
(38.7
)
Income before taxes
267.8
400.6
521.1
741.0
Provision for income taxes
(65.1
)
(99.1
)
(128.3
)
(185.3
)
Net income
$
202.7
$
301.5
$
392.8
$
555.7
Earnings per share: Basic
$
2.25
$
3.22
$
4.37
$
5.93
Diluted
$
2.24
$
3.20
$
4.35
$
5.91
Computation of diluted earnings per share under the two
class method: Net income
$
202.7
$
301.5
$
392.8
$
555.7
Less: Distributed and undistributed income available to
participating securities
(1.9
)
(2.6
)
(3.5
)
(4.6
)
Net income attributable to PCA shareholders
$
200.8
$
298.9
$
389.3
$
551.1
Diluted weighted average shares outstanding
89.5
93.4
89.5
93.3
Diluted earnings per share
$
2.24
$
3.20
$
4.35
$
5.91
Supplemental financial information: Capital spending
$
126.4
$
189.1
$
238.8
$
402.3
Cash, cash equivalents, and marketable debt securities
$
629.6
$
810.8
$
629.6
$
810.8
(1)
The three and six months ended June 30, 2023 include the following:
a.
$4.4 million and $5.7 million, respectively, 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.
$3.9 million and $13.6 million, respectively, 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.
(2)
The three and six months ended June 30, 2022 include the following:
a.
$3.9 million and $5.4 million, respectively, 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.
$0.9 million and $0.3 million, respectively, of income primarily
consisting of insurance proceeds received for a natural disaster at
one of the corrugated products facilities and a favorable lease
buyout for a closed corrugated products facility, partially offset
by 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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Segment sales Packaging
$
1,790.3
$
2,066.9
$
3,598.9
$
4,031.3
Paper
142.8
149.8
293.7
303.3
Corporate and Other
19.0
20.6
35.8
39.1
$
1,952.1
$
2,237.3
$
3,928.4
$
4,373.7
Segment income (loss) Packaging
$
285.8
$
419.8
$
553.7
$
782.1
Paper
29.1
22.7
63.2
45.1
Corporate and Other
(30.5
)
(26.7
)
(61.9
)
(54.8
)
Income from operations
284.4
415.8
555.0
772.4
Non-operating pension (expense) income
(2.0
)
3.6
(4.0
)
7.3
Interest expense, net
(14.6
)
(18.8
)
(29.9
)
(38.7
)
Income before taxes
$
267.8
$
400.6
$
521.1
$
741.0
Segment income (loss) excluding special items (1)
Packaging
$
289.7
$
419.3
$
567.0
$
782.3
Paper
33.5
26.2
69.2
50.0
Corporate and Other
(30.5
)
(26.7
)
(61.9
)
(54.8
)
$
292.7
$
418.8
$
574.3
$
777.5
EBITDA excluding special items (1) Packaging
$
405.3
$
525.3
$
796.8
$
989.2
Paper
38.8
31.5
79.9
60.4
Corporate and Other
(26.6
)
(24.2
)
(54.3
)
(49.8
)
$
417.5
$
532.6
$
822.4
$
999.8
(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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Packaging Segment income
$
285.8
$
419.8
$
553.7
$
782.1
Facilities closure and other costs (income)
3.9
(0.9
)
13.6
(0.3
)
Jackson mill conversion-related activities
-
0.4
(0.3
)
0.5
Segment income excluding special items (1)
$
289.7
$
419.3
$
567.0
$
782.3
Paper Segment income
$
29.1
$
22.7
$
63.2
$
45.1
Jackson mill conversion-related activities
4.4
3.5
6.0
4.9
Segment income excluding special items (1)
$
33.5
$
26.2
$
69.2
$
50.0
Corporate and Other Segment loss
$
(30.5
)
$
(26.7
)
$
(61.9
)
$
(54.8
)
Segment loss excluding special items (1)
$
(30.5
)
$
(26.7
)
$
(61.9
)
$
(54.8
)
Income from operations
$
284.4
$
415.8
$
555.0
$
772.4
Income from operations, excluding special items (1)
$
292.7
$
418.8
$
574.3
$
777.5
(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 June
30,
2023
2022
Income before taxes
Income Taxes
Net Income
Diluted EPS
Income before taxes
Income Taxes
Net Income
Diluted EPS
As reported
$
267.8
$
(65.1
)
$
202.7
$
2.24
$
400.6
$
(99.1
)
$
301.5
$
3.20
Special items (2): Jackson mill conversion-related activities
4.4
(1.1
)
3.3
0.04
3.9
(1.0
)
2.9
0.03
Facilities closure and other costs (income)
3.9
(1.0
)
2.9
0.03
(0.9
)
0.2
(0.7
)
(0.01
)
Total special items
8.3
(2.1
)
6.2
0.07
3.0
(0.8
)
2.2
0.02
Excluding special items
$
276.1
$
(67.2
)
$
208.9
$
2.31
$
403.6
$
(99.9
)
$
303.7
$
3.23
(3)
Six Months Ended June 30,
2023
2022
Incomebeforetaxes IncomeTaxes NetIncome
DilutedEPS Incomebeforetaxes IncomeTaxes
NetIncome DilutedEPS As reported
$
521.1
$
(128.3
)
$
392.8
$
4.35
$
741.0
$
(185.3
)
$
555.7
$
5.91
Special items (2): Facilities closure and other costs (income)
13.6
(3.4
)
10.2
0.11
(0.3
)
0.1
(0.2
)
-
Jackson mill conversion-related activities
5.7
(1.4
)
4.3
0.05
5.4
(1.4
)
4.0
0.04
Total special items
19.3
(4.8
)
14.5
0.16
5.1
(1.3
)
3.8
0.04
Excluding special items
$
540.4
$
(133.1
)
$
407.3
$
4.51
$
746.1
$
(186.6
)
$
559.5
$
5.95
(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.
(3)
Amount may not foot due to rounding.
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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net income
$
202.7
$
301.5
$
392.8
$
555.7
Non-operating pension expense (income)
2.0
(3.6
)
4.0
(7.3
)
Interest expense, net
14.6
18.8
29.9
38.7
Provision for income taxes
65.1
99.1
128.3
185.3
Depreciation, amortization, and depletion
127.9
114.3
257.5
224.0
EBITDA (1)
$
412.3
$
530.1
$
812.5
$
996.4
Special items: Facilities closure and other costs (income)
3.2
(0.9
)
8.2
(0.3
)
Jackson mill conversion-related activities
2.0
3.4
1.7
3.7
EBITDA excluding special items (1)
$
417.5
$
532.6
$
822.4
$
999.8
(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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Packaging Segment income
$
285.8
$
419.8
$
553.7
$
782.1
Depreciation, amortization, and depletion
116.3
106.0
235.2
206.9
EBITDA (1)
402.1
525.8
788.9
989.0
Facilities closure and other costs (income)
3.2
(0.9
)
8.2
(0.3
)
Jackson mill conversion-related activities
-
0.4
(0.3
)
0.5
EBITDA excluding special items (1)
$
405.3
$
525.3
$
796.8
$
989.2
Paper Segment income
$
29.1
$
22.7
$
63.2
$
45.1
Depreciation, amortization, and depletion
7.7
5.8
14.7
12.1
EBITDA (1)
36.8
28.5
77.9
57.2
Jackson mill conversion-related activities
2.0
3.0
2.0
3.2
EBITDA excluding special items (1)
$
38.8
$
31.5
$
79.9
$
60.4
Corporate and Other Segment loss
$
(30.5
)
$
(26.7
)
$
(61.9
)
$
(54.8
)
Depreciation, amortization, and depletion
3.9
2.5
7.6
5.0
EBITDA (1)
(26.6
)
(24.2
)
(54.3
)
(49.8
)
EBITDA excluding special items (1)
$
(26.6
)
$
(24.2
)
$
(54.3
)
$
(49.8
)
EBITDA excluding special items (1)
$
417.5
$
532.6
$
822.4
$
999.8
(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/20230724606871/en/
Barbara Sessions Packaging Corporation of America INVESTOR
RELATIONS: (877) 454-2509 PCA’s Website: www.packagingcorp.com
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