Packaging Corporation of America
), the fourth largest containerboard and corrugated packaging
manufacturer in the U.S., reported stellar first-quarter 2014
results with record net sales and earnings. Net income for the
reported quarter increased to $90.1 million or 92 cents per share
from $62.3 million or 64 cents per share in the year-earlier
Excluding integration costs of $2.6 million related to the Boise
Inc. acquisition and $2.6 million non-cash charge for the
DeRidder restructuring, recurring earnings for the reported
quarter were a record $106.5 million or $1.08 per share compared
with $62.3 million or 64 cents in the year-ago quarter. Recurring
earnings for the reported quarter comfortably beat the Zacks
Consensus Estimate of 99 cents by a huge margin.
The year-over-year rise in earnings was driven by synergies from
the Boise acquisition as well as higher prices for corrugated and
containerboard products. While improved product price and sales
mix contributed 21 cents per share to the recurring earnings,
lower medical, pension and worker's compensation costs
contributed 3 cents to the tally, partially offset by higher
energy costs, fiber costs as well as labor and repair expenses.
Severe weather conditions translated into lower shipments and
increased costs, costing the company 9 cents per share, of which
6 cents were recognized in first-quarter earnings.
Net sales for the reported quarter hit a record high of $1.4
billion, up from $755 million in the year-ago period,
representing an outstanding year-over-year increase of 85.4%.
Record revenues were largely driven by strong operations and the
accretive Boise acquisition. The acquired company, whose
integration remains ahead of schedule, generated synergies that
accounted for 48% of earnings. Net sales for first-quarter 2014
were in line with the Zacks Consensus Estimate.
segment, box shipments increased 31% year over year and 29% per
workday. Excluding Boise, corrugated products' shipments
increased 3.4% over the prior-year period, and were up 1.8% per
workday in the reported quarter. Total containerboard production
stood at 821,000 tons, and inventories were down 4,000 tons at
quarter-end on year over year basis. Excluding special items,
segment EBITDA for the reported quarter was $244 million, on
revenues of $1,097 million.
segment, office paper shipments increased 5.5% to about 10,000
tons over the prior-year period, but printing and converting and
pressure sensitive grades went down about 20,000 tons due to last
year's capacity rationalization at the International Falls, MN
mill. Total paper inventories decreased by about 25,000 tons from
first-quarter 2013. Aided by improved prices, segment EBITDA for
the reported quarter came in at $40 million (excluding special
items), on sales of $309 million.
Packaging Corporation had cash balance of $185.7 million at
quarter-end, while capital spending in the quarter stood at $50.9
million, compared with $268 million in the year-ago quarter.
Management expects higher volume in the second quarter for
corrugated products, and white paper performance is expected to
benefit from improved prices. With a relatively warmer weather,
fuel consumption will reduce, leading to lower costs. However,
production is likely to be weakened due to annual maintenance
outage in three mills, thus increasing costs.
The reported quarter saw comparatively low medical and workers'
compensation costs, and management expects them to rise for the
second quarter. Earnings are expected to be negatively impacted
by increased electricity costs and higher tax rates. Moreover,
earnings will be diminished as the capitalized portion of extreme
weather-related costs is written off in the coming quarter.
Consequently, the company anticipates second-quarter earnings to
be approximately $1.10 per share.
Packaging Corporation currently has a Zacks Rank #3 (Hold). Other
companies in the Industrial Products sector that are worth
), each carrying a Zacks Rank #1 (Strong Buy).
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