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Corrugated products shipments in the first quarter were up 3.4% in total and up 1.7% per workday compared to the first quarter of 2015.
April 20, 2016 - Packaging Corporation of America (PKG) today reported record first quarter net income of $104 million, or $1.09 per share. Earnings included charges for special items related to facilities closure costs of $1.9 million. Excluding special items, first quarter 2016 net income was $106 million, or a record $1.11 per share, compared to first quarter 2015 net income of $100 million, or $1.01 per share. First quarter net sales were $1.4 billion in both 2015 and 2016.
Excluding special items, the $.10 per share increase in first quarter 2016 earnings, compared to the first quarter of 2015, was driven primarily by higher containerboard and corrugated products volumes ($.03), lower annual mill outage costs ($.08), lower costs for fiber ($.06), energy ($.06), and freight ($.04) as well as a lower share count ($.04) resulting from share repurchases. These items were partially offset by lower white paper prices and mix ($.04), lower containerboard export prices ($.03), lower domestic containerboard and corrugated products prices and mix ($.03), lower pulp volume ($.02), higher labor costs ($.01), higher depreciation ($.03), higher interest expense ($.02), and a state incentive received in 2015 related to investments at our DeRidder mill ($.02).
Packaging segment EBITDA, excluding special items, in the first quarter of 2016 was $235 million with sales of $1.1 billion compared to first quarter 2015 EBITDA of $222 million with sales of $1.1 billion. Corrugated products shipments were up 3.4% in total and up 1.7% per workday compared to the first quarter of 2015. Containerboard production was 897,000 tons which was a 15,000 ton increase compared to the first quarter of 2015. Containerboard inventories ended the quarter flat with the first quarter of 2015 and year-end 2015 levels.
Paper segment EBITDA, excluding special items, in the first quarter of 2016 was a record $51 million with sales of $281 million compared to first quarter 2015 EBITDA of $49 million with sales of $297 million. White paper sales volume was flat with the first quarter of 2015 while price and mix were lower. Sales volume and mix were favorable compared to the fourth quarter of 2015 while prices were slightly lower.
Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “Overall, our operations performed exceptionally well despite annual maintenance outages at three of our containerboard mills. Our corrugated products demand was strong, and containerboard inventories ended the quarter flat with last quarter.
"Manufacturing and freight costs across our packaging and paper mills as well as our box plants were outstanding, and white paper volume and mix showed positive trends from the fourth quarter and achieved an EBITDA margin of 18.2%.
"Our white paper customers were notified of price increases for printing and converting grades and cutsize office papers with effective dates beginning in the second quarter. Finally, we repurchased $100 million of our stock which completed our $150 million share repurchase program that was authorized in July of 2015. The Board of Directors authorized a new $200 million share repurchase program that we announced in February.”
OUTLOOK
“Looking ahead to the second quarter, we expect seasonally higher containerboard and corrugated products shipments," Mr. Kowlzan said. "White paper prices should begin to improve late in the second quarter as a result of our paper price increases, but the vast majority of any price increase will not be realized until the third quarter.
“We also expect some seasonal improvement in our energy costs as we move into warmer weather and our share count will be lower due to our repurchases in the first quarter. Prices for containerboard and corrugated products are expected to be slightly lower as a result of the published price decreases.
"Our annual maintenance outage costs will be about $.08 per share higher as we have four scheduled mill outages compared to three in the first quarter. Everything considered, we currently expect second quarter earnings of $1.18 per share.”
PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated freesheet paper in North America. PCA operates eight mills and 93 corrugated products plants and related facilities. To learn more, please visit: www.packagingcorp.com.