KapStone Paper and Packaging Corporation
) reported second-quarter 2012 adjusted earnings per share (EPS) of
42 cents, up 8% from the year-ago quarter EPS of 39 cents but short
of the Zacks Consensus Estimate of 45 cents. Including special
items, EPS in the quarter stood at 39 cents, up 3% year over year
from 38 cents.
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Revenues increased 43% to $306 million from $214.8 million in the
year-ago quarter but missed the Zacks Consensus Estimate of $308
million. The year-over-year climb can be attributed to $92.7
million of incremental sales from the USC acquisition.
KapStone's paper production was a record 390,000 tons in the
quarter. Average selling price decreased $10 from the prior-year
quarter, mainly due to lower export containerboard prices, which
have been recovering after declining significantly in March.
However, average selling prices increased $15 per ton sequentially
to $623 per ton, based on product mix improvements and a recovery
of export containerboard prices.
Cost of sales increased 49% to $213.3 million in the quarter.
Selling, general and administrative expenses surged 97% to $17.4
million. The company's operating profit increased 6% to $32
million, driven by benefits from acquisition partially offset by
lower selling prices, lower sales volume, unfavorable foreign
exchange rates, increase in input costs and acquisition start up
expenses. Operating margin contracted 370 basis points to 10.6%
from 14.3% in the prior-year quarter.
Cash and cash equivalents decreased to $9.7 million as of June 30,
2012 from $20.1 million as of March 31, 2012. During the quarter,
cash flow from operations increased to $57.2 million from $40.6
million in the prior year quarter.
Long-term debt decreased to $293.3 million as of June 30, 2012,
from $329.4 million as of March 31, 2012. Consequently, the
debt-to-capitalization ratio improved to 33.5% as of June 30, 2012
from 37.9% as of March 31, 2012. KapStone repaid $50 million of
loan in the quarter.
KapStone's backlog remains strong, which bodes well for the company
in 2012. Furthermore, its strong cash flow and balance sheet
provides it with flexibility to invest in growth opportunities. The
company's loan repayment in the quarter helped reduce the interest
burden to a certain extent, which in turn will boost margins going
forward. The company has also announced a price hike in July, with
shipments beginning in mid-August that will benefit third quarter
Northbrook, Illinois-based KapStone Paper is a leading producer of
unbleached kraft paper and corrugated products. The company is the
parent company of KapStone Kraft Paper Corporation and KapStone
Container Corporation which includes three paper mills and 14
converting plants across the eastern and midwestern U.S. It
). KapStone currently maintains a Zacks #3 Rank (Hold) on its stock
for the short term.