Packaging Corporation of America (NYSE: PKG) today reported
first quarter 2024 net income of $147 million, or $1.63 per share,
and net income of $155 million, or $1.72 per share, excluding
special items. First quarter net sales were $2.0 billion in 2024
and 2023.
Diluted
earnings per share attributable to Packaging Corporation of America
shareholders
Three Months Ended
March 31
2024
2023
Change
Reported Diluted EPS
$
1.63
$
2.11
$
(0.48
)
Special Items Expense (1)
0.09
0.09
-
Diluted EPS excluding Special items
$
1.72
$
2.20
$
(0.48
)
(1) For descriptions and amounts of our
special items, see the schedules with this release.
Reported earnings in the first quarter of 2024 include special
items primarily for certain costs at the Jackson, AL mill for
paper-to-containerboard conversion related activities.
Excluding special items, the ($.48) per share decrease in first
quarter 2024 earnings compared to the first quarter of 2023 was
driven primarily by lower prices and mix in the Packaging segment
($1.33) and Paper segment ($.08), higher scheduled mill outage
expenses ($.10), higher depreciation ($.03), higher expenses
related to corrugated plant capital projects ($.02), and other
expenses ($.04). These items were partially offset by higher volume
in the Packaging segment $.71 and Paper segment $.06, lower
operating and converting costs $.15, lower freight and logistics
expenses $.04, lower interest expense $.07, and a lower tax rate
$.09.
Results were $.18 above first quarter guidance of $1.54 per
share primarily due to higher volume in the Packaging and Paper
segments, lower operating and converting costs, lower scheduled
mill outage expenses, 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
March 31
2024
2023
Segment income (loss)
Packaging
$
203.8
$
268.0
Paper
29.7
34.1
Corporate and Other
(37.5
)
(31.4
)
$
196.0
$
270.7
Segment income (loss) excluding special
items
Packaging
$
207.7
$
277.4
Paper
36.1
35.6
Corporate and Other
(37.5
)
(31.4
)
$
206.3
$
281.6
EBITDA excluding special items
Packaging
$
326.2
$
391.6
Paper
40.6
41.0
Corporate and Other
(33.6
)
(27.7
)
$
333.2
$
404.9
In the Packaging segment, total corrugated products shipments
with one less workday were up 9.2% and shipments per day were up
11.0% compared to the first quarter of 2023. Containerboard
production was 1,162,000 tons, and containerboard inventory was
down 15,000 tons from the first quarter of 2023 and down 24,000
tons compared to the fourth quarter of 2023. In the Paper segment,
sales volume was up 18,000 tons from the first quarter of 2023 and
up 17,000 tons compared to the fourth quarter of 2023.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “Throughout the quarter, containerboard and corrugated
products demand exceeded our expectations. We were able to service
this higher demand from strong operational performance at our box
plants and containerboard mills as well as from excellent execution
of the conversion outage at our Jackson, AL mill which enabled us
to restart both machines earlier than planned. Despite these
efforts, with the higher demand, we ended the quarter at a record
low weeks-of-inventory supply for this time of year. Prices and mix
in the Packaging segment moved slightly higher from fourth quarter
2023 levels, although less than we anticipated due to our total
announced increase not being recognized in the published benchmark
prices. Volume in the Paper segment was very good at about 13%
above guidance estimates, and an improved mix moved prices slightly
higher from the previous quarter, as expected. In addition, during
the quarter we announced a price increase of $100 per ton across
all of our paper grades, and we began implementing these increases
on April 1st. The strong volume in both the Packaging and Paper
segments along with the continued emphasis on cost management and
process efficiencies across our manufacturing and converting
facilities drove operating and converting costs lower, even with
the persistent inflation we continue to experience across most of
our cost structure.”
“Looking ahead as we move from the first and into the second
quarter,” Mr. Kowlzan added, “in our Packaging segment we expect
continued strong demand and higher corrugated products and
containerboard shipments. Prices and mix will move higher due to
our announced price increases and the increase in published
domestic index prices, as well as higher export prices. Orders in
our Paper segment are expected to remain strong however, volume
will be lower due to a scheduled maintenance outage at our
International Falls, MN mill during the quarter. Although we are
implementing our recently announced paper price increases, average
prices and mix are expected to be slightly lower due to the
published decrease in index prices earlier this year and how that
impacts contract triggers with certain customers. Operating and
converting costs should be slightly lower primarily due to the
sequential improvement in seasonal weather and wage and benefit
timing expenses that we incurred in the first quarter, and
scheduled maintenance outage expenses will be lower. Rail rate
increases at six of our mills during the first and second quarters
will result in higher freight and logistics expenses, and
depreciation expense will be higher. Finally, our tax rate will be
sequentially higher due to the tax-related benefit of share-based
compensation vests in the first quarter. Considering these items,
we expect second quarter earnings of $2.07 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 do not currently expect any 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 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, 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, 2023 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 2024 Earnings Conference Call
Conference ID: Packaging Corporation of
America
WHEN:
Tuesday, April 23, 2024 at 9:00am Eastern
Time
PRE-REGISTRATION:
https://dpregister.com/sreg/10184911/fb33520f25
CALL-IN NUMBER:
(833) 816-1102 (U.S.); (866) 605-3852
(Canada) or (412) 317-0684 (International)
Dial in by 8:45am Eastern Time
WEBCAST INFO:
www.packagingcorp.com
REBROADCAST DATES:
April 23, 2024 through May 7, 2024
REBROADCAST NUMBERS:
(877) 344-7529 (U.S.); (855) 669-9658
(Canada) or (412) 317-0088 (International)
Passcode: 1401612
Packaging Corporation of America Consolidated Earnings
Results Unaudited (dollars in millions, except per-share
data)
Three Months Ended
March 31,
2024
2023
Net sales
$
1,979.5
$
1,976.3
Cost of sales
(1,609.1
)
(1)
(1,544.9
)
(2)
Gross profit
370.4
431.4
Selling, general, and administrative expenses
(151.9
)
(148.2
)
(2)
Other expense, net
(22.5
)
(1)
(12.5
)
(2)
Income from operations
196.0
270.7
Non-operating pension income (expense)
1.1
(2.0
)
Interest expense, net
(9.6
)
(15.4
)
Income before taxes
187.5
253.3
Provision for income taxes
(40.6
)
(63.2
)
Net income
$
146.9
$
190.1
Earnings per share:
Basic
$
1.64
$
2.12
Diluted
$
1.63
$
2.11
Computation of diluted earnings per share under the two class
method:
Net income
$
146.9
$
190.1
Less: Distributed and undistributed income available to
participating securities
(1.0
)
(1.6
)
Net income attributable to PCA shareholders
$
145.9
$
188.5
Diluted weighted average shares outstanding
89.4
89.4
Diluted earnings per share
$
1.63
$
2.11
Supplemental financial information: Capital spending
$
76.7
$
112.4
Cash, cash equivalents, and marketable debt securities
$
1,253.2
$
520.2
(1)
The three months ended March 31, 2024 include the following: a.
$10.4 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. $0.1 million of income primarily related to a
favorable lease buyout for a closed corrugated products facility,
partially offset by closure costs related to corrugated products
facilities and design centers. These items were recorded in "Other
expense, net."
(2)
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.
Packaging Corporation of America Segment
Information Unaudited (dollars in millions)
Three Months Ended
March 31,
2024
2023
Segment sales Packaging
$
1,798.3
$
1,808.6
Paper
163.8
150.9
Corporate and Other
17.4
16.8
$
1,979.5
$
1,976.3
Segment income (loss) Packaging
$
203.8
$
268.0
Paper
29.7
34.1
Corporate and Other
(37.5
)
(31.4
)
Income from operations
196.0
270.7
Non-operating pension income (expense)
1.1
(2.0
)
Interest expense, net
(9.6
)
(15.4
)
Income before taxes
$
187.5
$
253.3
Segment income (loss) excluding special items (1)
Packaging
$
207.7
$
277.4
Paper
36.1
35.6
Corporate and Other
(37.5
)
(31.4
)
$
206.3
$
281.6
EBITDA excluding special items (1) Packaging
$
326.2
$
391.6
Paper
40.6
41.0
Corporate and Other
(33.6
)
(27.7
)
$
333.2
$
404.9
(1)
Segment income (loss) excluding special items, earnings before
non-operating pension income (expense), 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,
2024
2023
Packaging Segment income
$
203.8
$
268.0
Jackson mill conversion-related activities
4.0
(0.3
)
Facilities closure and other (income) costs
(0.1
)
9.7
Segment income excluding special items (1)
$
207.7
$
277.4
Paper Segment income
$
29.7
$
34.1
Jackson mill conversion-related activities
6.4
1.5
Segment income excluding special items (1)
$
36.1
$
35.6
Corporate and Other Segment loss
$
(37.5
)
$
(31.4
)
Segment loss excluding special items (1)
$
(37.5
)
$
(31.4
)
Income from operations
$
196.0
$
270.7
Income from operations, excluding special items (1)
$
206.3
$
281.6
(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,
2024
2023
Income
before taxes
Income
Taxes
Net Income
Diluted
EPS
Income
before taxes
Income
Taxes
Net Income
Diluted
EPS
As reported
$
187.5
$
(40.6
)
$
146.9
$
1.63
$
253.3
$
(63.2
)
$
190.1
$
2.11
Special items (2): Jackson mill conversion-related activities
10.4
(2.6
)
7.8
0.09
1.2
(0.3
)
0.9
0.01
Facilities closure and other (income) costs
(0.1
)
-
(0.1
)
-
9.7
(2.4
)
7.3
0.08
Total special items
10.3
(2.6
)
7.7
0.09
10.9
(2.7
)
8.2
0.09
Excluding special items
$
197.8
$
(43.2
)
$
154.6
$
1.72
$
264.2
$
(65.9
)
$
198.3
$
2.20
(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
(income) expense, 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,
2024
2023
Net income
$
146.9
$
190.1
Non-operating pension (income) expense
(1.1
)
2.0
Interest expense, net
9.6
15.4
Provision for income taxes
40.6
63.2
Depreciation, amortization, and depletion
128.4
129.6
EBITDA (1)
$
324.4
$
400.3
Special items: Jackson mill conversion-related activities
8.9
(0.3
)
Facilities closure and other (income) costs
(0.1
)
4.9
EBITDA excluding special items (1)
$
333.2
$
404.9
(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,
2024
2023
Packaging Segment income
$
203.8
$
268.0
Depreciation, amortization, and depletion
118.5
119.0
EBITDA (1)
322.3
387.0
Jackson mill conversion-related activities
4.0
(0.3
)
Facilities closure and other (income) costs
(0.1
)
4.9
EBITDA excluding special items (1)
$
326.2
$
391.6
Paper Segment income
$
29.7
$
34.1
Depreciation, amortization, and depletion
6.0
6.9
EBITDA (1)
35.7
41.0
Jackson mill conversion-related activities
4.9
-
EBITDA excluding special items (1)
$
40.6
$
41.0
Corporate and Other Segment loss
$
(37.5
)
$
(31.4
)
Depreciation, amortization, and depletion
3.9
3.7
EBITDA (1)
(33.6
)
(27.7
)
EBITDA excluding special items (1)
$
(33.6
)
$
(27.7
)
EBITDA excluding special items (1)
$
333.2
$
404.9
(1) See footnote (1) on page 2, for a discussion of non-GAAP
financial measures.
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Barbara Sessions Packaging Corporation of America INVESTOR
RELATIONS: (877) 454-2509 PCA’s Website: www.packagingcorp.com
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