Packaging Corporation of America (NYSE: PKG) today reported
third quarter 2023 net income of $183 million, or $2.03 per share,
and net income of $185 million, or $2.05 per share, excluding
special items. Third quarter net sales were $1.9 billion in 2023
and $2.1 billion in 2022.
Diluted
earnings per share attributable to Packaging Corporation of America
shareholders
Three Months Ended
September 30
2023
2022
Change
Reported Diluted EPS
$
2.03
$
2.80
$
(0.77
)
Special Items Expense (1)
0.02
0.03
(0.01
)
Diluted EPS excluding Special items
$
2.05
$
2.83
$
(0.78
)
(1) For descriptions and amounts of our
special items, see the schedules with this release.
Reported earnings in the third quarter of 2023 include special
items primarily for certain costs at the Jackson, AL mill for
paper-to-containerboard conversion related activities.
Excluding special items, the ($.78) per share decrease in third
quarter 2023 earnings compared to the third quarter of 2022 was
driven primarily by lower price and mix ($1.33) and volume ($.09)
in the Packaging segment, higher depreciation expense ($.11), lower
volume in the Paper segment ($.04), a higher tax rate ($.02), and
other expenses ($.02). These items were partially offset by lower
operating costs $.58, a lower share count resulting from share
repurchases in the second half of 2022 $.11, higher prices and mix
in the Paper segment $.04, lower converting costs $.04, lower
scheduled maintenance outage expenses $.04, and lower freight and
logistics expenses $.02.
Results were $.17 above third quarter guidance of $1.88 per
share primarily due to higher volume in the Packaging and Paper
segments and lower operating and converting costs.
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended
September 30
2023
2022
Segment income (loss)
Packaging
$
256.8
$
359.2
Paper
27.6
26.1
Corporate and Other
(25.8
)
(25.0
)
$
258.6
$
360.3
Segment income (loss) excluding special
items
Packaging
$
256.7
$
362.0
Paper
30.2
27.4
Corporate and Other
(25.8
)
(25.0
)
$
261.1
$
364.4
EBITDA excluding special items
Packaging
$
374.2
$
467.1
Paper
35.4
32.6
Corporate and Other
(21.8
)
(22.6
)
$
387.8
$
477.1
In the Packaging segment, corrugated products shipments per day
were up 1.9% over last year’s third quarter and total shipments,
with two less shipping days, were down (1.3%). Shipments per day
were up 3.9% versus the second quarter of 2023. Containerboard
production was 1,118,000 tons, and containerboard inventory was
down 84,000 tons from the third quarter of 2022 and down 12,000
tons compared to the second quarter of 2023. In the Paper segment,
sales volume was down 10,000 tons compared to the third quarter of
2022 and up 14,000 tons compared to the second quarter of 2023.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “We were able to exceed our guidance for the quarter
with better demand in our Packaging and Paper segments and by
remaining focused on process efficiency optimization efforts across
our mills and corrugated products facilities. The scheduled
maintenance outages at our mills were executed well, and we also
ran the containerboard system in a very cost-effective manner to
match our supply with demand, which included keeping our Wallula,
WA mill temporarily idled during the quarter. With the stronger
demand in our Packaging segment, we ended the quarter with
inventory levels lower than anticipated. Based on our current
outlook for improving demand together with current plans in the
first half of 2024 for scheduled mill maintenance outages and
completing the final phase of the containerboard conversion of the
No. 3 machine at our Jackson, AL mill, we are planning to restart
the No. 3 machine at our Wallula mill during the fourth quarter in
order to bring our inventories to desired levels.”
“Looking ahead as we move from the third and into the fourth
quarter,” Mr. Kowlzan added, “in our Packaging segment, we expect
less market-related downtime as we build our inventories back to
appropriate levels along with higher shipments per day in our
corrugated products facilities, although our plants will have one
less shipping day compared to the third quarter. We also expect
lower average prices primarily due to the majority of the May
decrease in the published benchmark index grades being realized
throughout the third quarter as well as a seasonally less rich mix.
In our Paper segment, volume will be lower compared to the
seasonally stronger third quarter, and prices and mix are assumed
to trend lower with declines in the index prices. Operating and
converting costs will increase driven by higher recycled fiber
prices, seasonal energy costs, and the re-start of the Wallula
mill. Depreciation expense is estimated to be slightly higher, and
scheduled maintenance outage expenses will be lower. Considering
these items, we expect fourth quarter earnings of $1.76 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 fourth 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 fourth quarter; however, additional special items may arise due
to fourth 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 3rd Quarter 2023 Earnings Conference Call
Conference ID: Packaging
Corporation of America
WHEN:
Tuesday, October 24, 2023 at
9:00am Eastern Time
PRE-REGISTRATION:
https://dpregister.com/sreg/10173953/f56283c8a6
OR
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:
October 24, 2023 through November
7, 2023
REBROADCAST NUMBERS:
(877) 344-7529 (U.S.); (855)
669-9658 (Canada) or (412) 317-0088 (International)
Passcode: 2565561
Packaging Corporation of
America
Consolidated Earnings
Results
Unaudited
(dollars in millions, except
per-share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net sales
$
1,936.0
$
2,125.9
$
5,864.5
$
6,499.6
Cost of sales
(1,523.3
)
(1)
(1,607.5
)
(2)
(4,575.7
)
(1)
(4,859.3
)
(2)
Gross profit
412.7
518.4
1,288.8
1,640.3
Selling, general, and administrative expenses
(144.2
)
(145.2
)
(438.1
)
(1)
(462.9
)
Other expense, net
(9.9
)
(1)
(12.9
)
(2)
(37.1
)
(1)
(44.7
)
(2)
Income from operations
258.6
360.3
813.6
1,132.7
Non-operating pension (expense) income
(1.8
)
3.6
(5.8
)
10.9
Interest expense, net
(12.3
)
(16.5
)
(42.2
)
(55.3
)
Income before taxes
244.5
347.4
765.6
1,088.3
Provision for income taxes
(61.3
)
(84.9
)
(189.6
)
(270.1
)
Net income
$
183.2
$
262.5
$
576.0
$
818.2
Earnings per share:
Basic
$
2.04
$
2.81
$
6.41
$
8.74
Diluted
$
2.03
$
2.80
$
6.38
$
8.70
Computation of diluted earnings per share under the two class
method:
Net income
$
183.2
$
262.5
$
576.0
$
818.2
Less: Distributed and undistributed income available to
participating securities
(1.4
)
(1.9
)
(4.8
)
(6.4
)
Net income attributable to PCA shareholders
$
181.8
$
260.6
$
571.2
$
811.8
Diluted weighted average shares outstanding
89.5
93.2
89.5
93.3
Diluted earnings per share
$
2.03
$
2.80
$
6.38
$
8.70
Supplemental financial information:
Capital spending
$
89.8
$
179.7
$
328.6
$
577.1
Cash, cash equivalents, and marketable debt securities
$
726.5
$
793.5
$
726.5
$
793.5
(1)
The three and nine months ended September 30, 2023 include the
following:
a.
$2.6 million and $8.2 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.
$0.1 million of income and $13.5 million of charges, respectively,
related to the closure of corrugated products facilities and design
centers. Included therein are closure costs as well as the gain on
sale of a corrugated products facility. These items were recorded
in "Cost of sales", "Selling, general, and administrative
expenses", and "Other expense, net", as appropriate.
(2)
The three and nine months ended September 30, 2022 include the
following:
a.
$3.9 million and $9.4 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.
$0.2 million of charges and $0.2 million of income, respectively,
consisting of closure costs related to corrugated products
facilities and acquisition and integration costs related to the
December 2021 Advance Packaging Corporation acquisition, partially
offset by a gain on sale of assets related to a corrugated products
facility. For the nine months ended September 30, 2022, these costs
were offset by 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. These items 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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Segment sales Packaging
$
1,759.8
$
1,940.2
$
5,358.7
$
5,971.6
Paper
157.9
165.3
451.6
468.6
Corporate and Other
18.3
20.4
54.2
59.4
$
1,936.0
$
2,125.9
$
5,864.5
$
6,499.6
Segment income (loss) Packaging
$
256.8
$
359.2
$
810.5
$
1,141.3
Paper
27.6
26.1
90.8
71.2
Corporate and Other
(25.8
)
(25.0
)
(87.7
)
(79.8
)
Income from operations
258.6
360.3
813.6
1,132.7
Non-operating pension (expense) income
(1.8
)
3.6
(5.8
)
10.9
Interest expense, net
(12.3
)
(16.5
)
(42.2
)
(55.3
)
Income before taxes
$
244.5
$
347.4
$
765.6
$
1,088.3
Segment income (loss) excluding special items (1)
Packaging
$
256.7
$
362.0
$
823.7
$
1,144.3
Paper
30.2
27.4
99.3
77.4
Corporate and Other
(25.8
)
(25.0
)
(87.7
)
(79.8
)
$
261.1
$
364.4
$
835.3
$
1,141.9
EBITDA excluding special items (1) Packaging
$
374.2
$
467.1
$
1,171.0
$
1,456.3
Paper
35.4
32.6
115.3
93.0
Corporate and Other
(21.8
)
(22.6
)
(76.1
)
(72.5
)
$
387.8
$
477.1
$
1,210.2
$
1,476.8
(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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Packaging Segment income
$
256.8
$
359.2
$
810.5
$
1,141.3
Facilities closure and other costs (income)
(0.1
)
0.2
13.5
(0.2
)
Jackson mill conversion-related activities
-
2.6
(0.3
)
3.2
Segment income excluding special items (1)
$
256.7
$
362.0
$
823.7
$
1,144.3
Paper Segment income
$
27.6
$
26.1
$
90.8
$
71.2
Jackson mill conversion-related activities
2.6
1.3
8.5
6.2
Segment income excluding special items (1)
$
30.2
$
27.4
$
99.3
$
77.4
Corporate and Other Segment loss
$
(25.8
)
$
(25.0
)
$
(87.7
)
$
(79.8
)
Segment loss excluding special items (1)
$
(25.8
)
$
(25.0
)
$
(87.7
)
$
(79.8
)
Income from operations
$
258.6
$
360.3
$
813.6
$
1,132.7
Income from operations, excluding special items (1)
$
261.1
$
364.4
$
835.3
$
1,141.9
(1) See footnote (1) on page 3, 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 September
30,
2023
2022
Income before taxes
Income Taxes
Net Income
Diluted EPS
Income before taxes
Income Taxes
Net Income
Diluted EPS
As reported
$
244.5
$
(61.3
)
$
183.2
$
2.03
$
347.4
$
(84.9
)
$
262.5
$
2.80
Special items (2): Jackson mill conversion-related activities
2.6
(0.6
)
2.0
0.02
3.9
(1.0
)
2.9
0.03
Facilities closure and other costs (income)
(0.1
)
-
(0.1
)
-
0.2
-
0.2
-
Total special items
2.5
(0.6
)
1.9
0.02
4.1
(1.0
)
3.1
0.03
Excluding special items
$
247.0
$
(61.9
)
$
185.1
$
2.05
$
351.5
$
(85.9
)
$
265.6
$
2.83
Nine Months Ended September
30,
2023
2022
Income before taxes
Income Taxes
Net Income
Diluted EPS
Income before taxes
Income Taxes
Net Income
Diluted EPS
As reported
$
765.6
$
(189.6
)
$
576.0
$
6.38
$
1,088.3
$
(270.1
)
$
818.2
$
8.70
Special items (2): Facilities closure and other costs (income)
13.5
(3.4
)
10.1
0.11
(0.2
)
-
(0.2
)
-
Jackson mill conversion-related activities
8.2
(2.0
)
6.2
0.07
9.4
(2.3
)
7.1
0.08
Total special items
21.7
(5.4
)
16.3
0.18
9.2
(2.3
)
6.9
0.08
Excluding special items
$
787.3
$
(195.0
)
$
592.3
$
6.56
$
1,097.5
$
(272.4
)
$
825.1
$
8.78
(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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net income
$
183.2
$
262.5
$
576.0
$
818.2
Non-operating pension expense (income)
1.8
(3.6
)
5.8
(10.9
)
Interest expense, net
12.3
16.5
42.2
55.3
Provision for income taxes
61.3
84.9
189.6
270.1
Depreciation, amortization, and depletion
129.3
114.0
386.8
338.0
EBITDA (1)
$
387.9
$
474.3
$
1,200.4
$
1,470.7
Special items: Facilities closure and other costs (income)
(0.1
)
0.1
8.1
(0.3
)
Jackson mill conversion-related activities
-
2.7
1.7
6.4
EBITDA excluding special items (1)
$
387.8
$
477.1
$
1,210.2
$
1,476.8
(1) See footnote (1) on page 3, 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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Packaging Segment income
$
256.8
$
359.2
$
810.5
$
1,141.3
Depreciation, amortization, and depletion
117.5
105.3
352.7
312.2
EBITDA (1)
374.3
464.5
1,163.2
1,453.5
Facilities closure and other costs (income)
(0.1
)
0.1
8.1
(0.3
)
Jackson mill conversion-related activities
-
2.5
(0.3
)
3.1
EBITDA excluding special items (1)
$
374.2
$
467.1
$
1,171.0
$
1,456.3
Paper Segment income
$
27.6
$
26.1
$
90.8
$
71.2
Depreciation, amortization, and depletion
7.8
6.3
22.5
18.5
EBITDA (1)
35.4
32.4
113.3
89.7
Jackson mill conversion-related activities
-
0.2
2.0
3.3
EBITDA excluding special items (1)
$
35.4
$
32.6
$
115.3
$
93.0
Corporate and Other Segment loss
$
(25.8
)
$
(25.0
)
$
(87.7
)
$
(79.8
)
Depreciation, amortization, and depletion
4.0
2.4
11.6
7.3
EBITDA (1)
(21.8
)
(22.6
)
(76.1
)
(72.5
)
EBITDA excluding special items (1)
$
(21.8
)
$
(22.6
)
$
(76.1
)
$
(72.5
)
EBITDA excluding special items (1)
$
387.8
$
477.1
$
1,210.2
$
1,476.8
(1) See footnote (1) on page 3, for a discussion of non-GAAP
financial measures.
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version on businesswire.com: https://www.businesswire.com/news/home/20231023070170/en/
Barbara Sessions Packaging Corporation of America INVESTOR
RELATIONS: (877) 454-2509 PCA’s Website: www.packagingcorp.com
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