KapStone Paper and Packaging Corporation
) reported third-quarter 2012 adjusted earnings per share (EPS)
of 41 cents, up 14% from 36 cents a year ago but short of the
Zacks Consensus Estimate of 48 cents. Including special items,
EPS in the quarter stood at 38 cents, up 9% year over year from
Revenues increased 43% to $309 million from $216 million in
the year-ago quarter but missed the Zacks Consensus Estimate of
$312 million. The year-over-year climb can be attributed to
incremental sales of $99 million from the USC acquisition.
KapStone's paper production was 389,000 tons in the quarter.
Production at KapStone's Roanoke Rapids mill was hit by a flood
in late August and its Charleston mill also encountered some
productivity problems, which temporarily impacted operations.
Average selling price increased $2 per ton sequentially but
decreased $14 per ton on a year-over-year basis due to lower
export containerboard prices and product mix.
Cost of sales increased 50% to $219 million in the quarter.
Selling, general and administrative expenses surged 84% to $16
million. The company's operating profit increased 3% to $31
million, driven by benefits from acquisition and timing of annual
planned maintenance outages partially offset by lower selling
prices, and unplanned downtime at the Roanoke Rapids mill and
unfavorable foreign exchange rates. Operating margin contracted
390 basis points year over year to 10%.
Cash and cash equivalents increased to $36 million as of
September 30, 2012 from $9.7 million as of June 30, 2012. During
the quarter, cash flow from operations decreased to $40 million
from $51 million in the prior-year quarter.
Long-term debt increased to $294.3 million as of September 30,
2012, from $293.3 million as of June 30, 2012. The
debt-to-capitalization ratio improved to 32.8% as of September
30, 2012 from 33.5% as of June 30, 2012.
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 announced $50 per ton containerboard price
increase for mid-August shipments was implemented late in the
third quarter and is expected to benefit fourth quarter results.
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 competes with
). KapStone currently maintains a Zacks #1 Rank (Strong Buy) on
its stock for the short term.
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