KapStone Reports First Quarter 2016 Results

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Consolidated net sales of $738 million in the first quarter of 2016 increased by $192 million, or 35 percent compared to $546 million for the 2015 first quarter

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April 27, 2016 - KapStone Paper and Packaging Corporation (KS) today reported results for the first quarter ended March 31, 2016. As compared to 2015's first quarter, results for 2016's first quarter are below:
  • Net sales of $738 million up $192 million, or 35 percent
  • Net income of $16 million down $10 million, or 38 percent
  • Adjusted net income of $22 million down $7 million, or 24 percent
  • Adjusted EBITDA of $88 million up $1 million, or 2 percent
  • Diluted EPS of $0.17 down $0.10 per share, or 37 percent
  • Adjusted diluted EPS of $0.23 down $0.07 per share, or 23 percent
Roger W. Stone, Chairman and Chief Executive Officer, stated, "KapStone's operations performed very well in the first quarter with our mills recording record first quarter production. Our strong operating performance and benefits from Victory, though, were mostly offset by lower prices and less favorable product mix. Although first quarter cash flows are typically weak, our operating cash flow this quarter improved $63 million over the prior year benefitting from lower cash taxes and Victory. We continue to make good progress on integrating Victory's packaging needs into our mill and plant system."
 
First Quarter Operating Highlights
Consolidated net sales of $738 million in the first quarter of 2016 increased by $192 million, or 35 percent compared to $546 million for the 2015 first quarter. The increase is primarily due to $218 million reflecting the Victory Packaging acquisition which occurred in June 2015 and higher sales volume, offset by lower domestic and export containerboard and export kraft paper prices. The Company sold 692,000 tons of paper during the first quarter of 2016 compared to 661,000 tons a year earlier. The Company's average mill selling price of $625 per ton in the first quarter of 2016 decreased by $58 per ton, or about 8 percent compared to the first quarter of 2015 due to lower domestic and export containerboard prices, lower export kraft paper prices and a less favorable product mix.
Operating income of $35 million for the 2016 first quarter decreased by $13 million, or 27 percent, compared to the 2015 first quarter. The lower operating earnings primarily reflect lower domestic and export containerboard and export kraft paper prices, inflation on salary and certain benefit costs, an increase of the fair value of the Victory contingent consideration liability and higher severance charges partially offset by the Victory Packaging acquisition and related synergies, lower fuel costs, and lower management incentives.
Interest expense, net, was $10 million for the first quarter of 2016, up $3 million from a year ago as a result of borrowings associated with the Victory Packaging acquisition and higher interest rates. Our weighted average interest rate as of March 31, 2016 is 2.1 percent compared to 1.8 percent as of March 31, 2015.
The effective income tax rate for the 2016 first quarter was 34.5 percent compared to 34.8 percent for the 2015 first quarter.
 
Cash Flow and Working Capital
Cash and cash equivalents of $7 million as of March 31, 2016, remained consistent with balances at December 31, 2015. Operating activities provided $59 million during the first quarter while investing and financing activities used $32 and $27 million, respectively. Capital expenditures in the first quarter were $36 million.
On March 10, 2016, our Board of Directors approved a regular $0.10 per share cash dividend which was paid in April.
At March 31, 2016, the Company had approximately $417 million of working capital and $473 million of revolver borrowing capacity.
 
Conclusion
In summary, Stone commented, "I expect to see our operations continue to perform better and as Victory moves into its strongest seasonal period, the integration of Victory's corrugated packaging needs should accelerate."
 
Headquartered in Northbrook, Illinois, KapStone Paper and Packaging Corporation is the fifth largest producer of containerboard and corrugated packaging products and is the largest kraft paper producer in the United States. To learn more, please visit: www.kapstonepaper.com.
 

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