News Release Details

LAKE FOREST, Ill.--(BUSINESS WIRE)--Jan. 30, 2018-- Packaging Corporation of America (NYSE: PKG) today reported fourth quarter 2017 net income of $269 million, or $2.84 per share and $1.56 per share excluding special items. Fourth quarter net sales were $1.7 billion in 2017 and $1.5 billion in 2016. Full year 2017 net income was $669 million, or $7.07 per share and $6.02 per share excluding special items. Full year 2017 net sales were $6.4 billion compared to 2016 net sales of $5.8 billion.

Special items in the fourth quarter and full year 2017 include, among other items, various tax-related items resulting from the Tax Cut and Jobs Act that was signed on December 22, 2017. Excluding special items, the $.33 per share increase in fourth quarter 2017 earnings compared to the fourth quarter of 2016 was driven primarily by higher prices and mix $.51 and volumes $.12 in our Packaging segment, higher volumes $.01 in our Paper segment, and the final insurance recovery related to the DeRidder Mill incident $.07. These items were partially offset by lower prices and mix ($.03) in our Paper segment, higher freight expense ($.04), higher input costs ($.04), higher operating costs ($.11), higher converting costs ($.02), higher annual outage expenses ($.10), and higher corporate and other costs ($.04).

Compared to fourth quarter guidance of $1.50 per share, lower than expected recycled fiber prices were offset by higher labor, medical and benefits costs in our box plants. Results were negatively impacted by ($.01) per share due to a slightly higher tax rate, offset by the final insurance recovery related to the DeRidder Mill incident of $.07 per share.

Financial information by segment is summarized below and in the schedules with this release.

In the Packaging segment, total corrugated products shipments with one additional workday were up 9.8% and shipments per day were up 8.0% over last year’s fourth quarter. Containerboard production was 1,006,000 tons, and containerboard inventory (including inventory for the fourth quarter 2017 acquisition of Sacramento Container) was up 38,000 tons compared to the fourth quarter of 2016 and up 48,000 tons from the third quarter of 2017. In the Paper segment, sales volumes in the fourth quarter of 2017 were up 20,000 tons compared to last year’s fourth quarter, while production volumes were lower due to scheduled outages.

Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “Demand in our Packaging segment remained very strong as sales volumes in both our containerboard mills and our corrugated products plants set all-time records. Record production in our containerboard mills allowed us to build some inventory to prepare for scheduled first quarter outages at three of our mills when our production volume will be significantly reduced. Higher year over year inflation came in close to where we expected, and the employees at our containerboard mills and corrugated products facilities did a great job working extra hours during the quarter and over the holiday periods to meet our customers’ needs in a timely manner. Additionally, we are off to a great start with the integration of Sacramento Container, and we were able to finalize our claim related to the DeRidder Mill incident with our insurance carrier which enables us to offset the negative impact to earnings from earlier in the year.”

“Looking ahead as we move from the fourth and into the first quarter,” Mr. Kowlzan added, “we expect continued strong demand in our Packaging segment, although our containerboard volumes will be lower due to scheduled outages at three of our mills during the quarter. We will continue to implement our recently announced price increases in our Paper segment and expect volume to be slightly lower. We expect inflation in almost all areas across our entire cost base. We anticipate continued higher freight costs as well as higher labor and benefits costs with annual wage increases and other timing-related expenses. Although we anticipate price inflation on recycled fiber to be fairly flat, we do expect some inflation in our energy costs and with most of our chemical, and repair and materials costs, and seasonally colder weather will increase energy usage and wood costs. Our depreciation and interest expense will be slightly higher as well. Considering these items, we expect first quarter earnings of $1.52 per share”.

We present various non-GAAP financial measures in this press release, including diluted EPS excluding special items, segment income excluding special items and EBITDA excluding special items. We provide information regarding our use of non-GAAP financial measures and reconciliations of historical non-GAAP financial measures presented in this press release to the most comparable measure reported in accordance with GAAP in the schedules to this press release. We present our earnings expectation for the upcoming quarter excluding special items as special items are difficult to predict and quantify and may reflect the effect of future events. We currently expect special items in the first quarter to include accounting charges, fees, and expenses related to the Wallula Mill paper machine conversion from paper to linerboard and the Sacramento Container Corporation acquisition. Additional special items may arise due to first quarter events.

PCA is the fourth largest producer of containerboard and corrugated packaging products and the third largest producer of uncoated freesheet paper in the United States. PCA operates eight mills and 94 corrugated products plants and related facilities.

Some of the statements in this press release are forward-looking statements. Forward-looking statements include statements about our future earnings and financial condition, expected benefits from acquisitions and restructuring activities, our industry and our business strategy. Statements that contain words such as “ will”, “should”, “anticipate”, “believe”, “expect”, “intend”, “estimate”, “hope” or similar expressions, are forward-looking statements. These forward-looking statements are based on the current expectations of PCA. Because forward-looking statements involve inherent risks and uncertainties, the plans, actions and actual results of PCA could differ materially. Among the factors that could cause plans, actions and results to differ materially from PCA’s current expectations include the following: the impact of general economic conditions; conditions in the paper and packaging industries, including competition, product demand and product pricing; fluctuations in wood fiber and recycled fiber costs; fluctuations in purchased energy costs; the possibility of unplanned outages or interruptions at our principal facilities; and legislative or regulatory requirements, particularly concerning environmental matters, as well as those identified under Item 1A. Risk Factors in PCA’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission and available at the SEC’s website at “www.sec.gov”.

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Source: Packaging Corporation of America

Packaging Corporation of America
Barbara Sessions
INVESTOR RELATIONS: (877) 454-2509
PCA’s Website: www.packagingcorp.com