Packaging Corporation of America (NYSE: PKG) today reported
second quarter 2024 net income of $199 million, or $2.21 per share,
and net income of $199 million, or $2.20 per share, excluding
special items. Second quarter net sales were $2.1 billion in 2024
and $2.0 billion in 2023.
Diluted earnings
per share attributable to Packaging Corporation of America
shareholders
Three Months Ended
June 30
2024
2023
Change
Reported Diluted EPS (1)
$
2.21
$
2.24
$
(0.04)
Special Items Expense (Income) (2)
-
0.07
(0.07)
Diluted EPS excluding Special items
(1)
$
2.20
$
2.31
$
(0.11)
(1) Amounts may not foot due to
rounding.
(2) For descriptions and amounts of our special items, see the
schedule with this release.
Excluding special items, the ($.11) per share decrease in second
quarter 2024 earnings compared to the second quarter of 2023 was
driven primarily by lower prices and mix in the Packaging segment
($.87) and Paper segment ($.07), higher operating costs ($.31),
higher depreciation expense ($.03), and a higher tax rate ($.03).
These items were partially offset by higher volume in the Packaging
segment $.94 and Paper segment $.07, lower other converting costs
$.07, lower freight and logistics expenses $.06, and lower interest
expense $.06.
Results were $.13 above second quarter guidance of $2.07 per
share primarily due to higher volume in the Packaging segment,
lower operating and converting costs, and lower freight costs.
Financial information by segment is summarized below and in the
schedules with this release.
(dollars in millions)
Three Months Ended
June 30
2024
2023
Segment income (loss)
Packaging
$
279.8
$
285.8
Paper
26.7
29.1
Corporate and Other
(30.5
)
(30.5
)
$
276.0
$
284.4
Segment income (loss) excluding special
items
Packaging
$
279.9
$
289.7
Paper
26.1
33.5
Corporate and Other
(30.5
)
(30.5
)
$
275.5
$
292.7
EBITDA excluding special items
Packaging
$
400.0
$
405.3
Paper
30.6
38.8
Corporate and Other
(26.6
)
(26.6
)
$
404.0
$
417.5
In the Packaging segment, corrugated products shipments per day
were up 9.2% over last year’s second quarter and total shipments,
with one additional shipping day, were up 10.9%. Containerboard
production was 1,281,000 tons, and containerboard inventory was up
16,000 tons compared to the second quarter of 2023 and up 20,000
tons versus the first quarter of 2024. In the Paper segment, sales
volume was up 12% compared to the second quarter of 2023 and down
(8%) versus the first quarter of 2024.
Commenting on reported results, Mark W. Kowlzan, Chairman and
CEO, said, “results for the quarter reflect our strong market
conditions in the Packaging segment. This drove a new all-time
containerboard production record in order to service corrugated
products and containerboard demand which grew stronger each month,
ending with a new corrugated shipments-per-day record for the month
of June. We were also able to build some inventory ahead of what we
expect to be a busy second half of the year. Packaging segment
prices and mix moved higher from first quarter levels as we
continue to implement our announced price increases. Paper segment
prices and mix as well as volume came in as expected, and the
scheduled outage at our International Falls mill was managed very
well. Results also reflect our constant focus on minimizing
inflationary cost increases through efficiency and usage
initiatives and capital project benefits throughout our mills and
converting facilities.”
Mr. Kowlzan continued, “Looking ahead as we move from the second
and into the third quarter, prices and mix in both our Packaging
and Paper segments will move higher as we continue to implement
previously announced increases along with higher containerboard
export prices. Although there is one less shipping day for the
corrugated business we expect shipments-per-day to continue to
strengthen, potentially setting a new third quarter record, and
higher containerboard volume. With current containerboard inventory
below our target levels, we will also attempt to build some
inventory ahead of the scheduled maintenance outage at our Deridder
mill in October. Paper volume will be slightly lower primarily due
to the timing of the back-to-school business received in the second
quarter. Operating and converting costs should be higher primarily
due to seasonal electricity usage and prices and slightly higher
recycled fiber costs, with scheduled outage expenses expected to be
slightly lower. Considering these items, we expect third quarter
earnings of $2.45 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 do not currently expect any significant special items during the
third quarter; however, additional special items may arise due to
third quarter events.
PCA is the third largest producer of containerboard products and
a leading producer of uncoated freesheet paper in North America.
PCA operates eight mills and 86 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, 2023, and in subsequent quarterly reports on Form
10-Q, filed with the Securities and Exchange Commission and
available at the SEC’s website at “www.sec.gov”.
Conference Call
Information:
WHAT:
Packaging Corporation of America’s 2nd Quarter 2024 Earnings
Conference Call
Conference ID:Packaging Corporation of
America
WHEN:
Wednesday, July 24, 2024 at 9:00am Eastern
Time
PRE-REGISTRATION:
https://dpregister.com/sreg/10184912/fb348a7e90
CALL-IN NUMBER:
(833) 816-1102 (U.S.); (866) 605-3852 (Canada) or (412) 317-0684
(International) Dial in by 8:45am Eastern Time
WEBCAST INFO:
www.packagingcorp.com
REBROADCAST DATES:
July 24, 2024 through August 7, 2024
REBROADCAST NUMBERS:
(877) 344-7529 (U.S.); (855) 669-9658
(Canada) or (412) 317-0088 (International) Passcode: 7255107
Packaging Corporation of America Consolidated Earnings
Results Unaudited (dollars in millions, except per-share
data)
Three Months Ended Six Months Ended June
30, June 30,
2024
2023
2024
2023
Net sales
$
2,075.3
$
1,952.1
$
4,054.8
$
3,928.4
Cost of sales
(1,637.6
)
(1,507.4
)
(2
)
(3,246.7
)
(1
)
(3,052.3
)
(2
)
Gross profit
437.7
444.7
808.1
876.1
Selling, general, and administrative expenses
(149.5
)
(145.6
)
(2
)
(301.3
)
(293.9
)
(2
)
Other expense, net
(12.2
)
(1
)
(14.7
)
(2
)
(34.8
)
(1
)
(27.2
)
(2
)
Income from operations
276.0
284.4
472.0
555.0
Non-operating pension income (expense)
1.1
(2.0
)
2.2
(4.0
)
Interest expense, net
(10.4
)
(14.6
)
(19.9
)
(29.9
)
Income before taxes
266.7
267.8
454.3
521.1
Provision for income taxes
(67.8
)
(65.1
)
(108.4
)
(128.3
)
Net income
$
198.9
$
202.7
$
345.9
$
392.8
Earnings per share: Basic
$
2.22
$
2.25
$
3.86
$
4.37
Diluted
$
2.21
$
2.24
$
3.84
$
4.35
Computation of diluted earnings per share under the two
class method: Net income
$
198.9
$
202.7
$
345.9
$
392.8
Less: Distributed and undistributed income available to
participating securities
(1.4
)
(1.9
)
(2.5
)
(3.5
)
Net income attributable to PCA shareholders
$
197.5
$
200.8
$
343.4
$
389.3
Diluted weighted average shares outstanding
89.5
89.5
89.5
89.5
Diluted earnings per share
$
2.21
$
2.24
$
3.84
$
4.35
Supplemental financial information: Capital spending
$
245.0
$
126.4
$
321.7
$
238.8
Cash, cash equivalents, and marketable debt securities
$
1,172.8
$
629.6
$
1,172.8
$
629.6
(1)
The three and six months ended June 30, 2024 include the following:
a. $0.6 million of income and $9.7 million of charges,
respectively, related to the announced discontinuation of
production of uncoated freesheet paper grades on the No. 3 machine
at the Jackson, Alabama mill associated with the permanent
conversion of the machine to produce linerboard and other
paper-to-containerboard conversion related activities. The costs
were recorded in “Cost of sales” and “Other expense, net”, as
appropriate. b. $0.1 million of charges consisting of closure costs
related to corrugated products facilities. For the six months ended
June 30, 2024, these charges were completely offset by $0.1 million
of income primarily related to a favorable lease buyout for a
closed corrugated products facility during the first quarter of
2024. These items were recorded in "Cost of sales" and "Other
expense, net", as appropriate.
(2)
The three and six months ended June 30, 2023 include the following:
a. $4.4 million and $5.7 million, respectively, of charges related
to the announced discontinuation of production of uncoated
freesheet paper grades on the No. 3 machine at the Jackson, Alabama
mill associated with the permanent conversion of the machine to
produce linerboard and other paper-to-containerboard conversion
related activities. The costs were recorded in “Cost of sales” and
“Other expense, net”, as appropriate. b. $3.9 million and $13.6
million, respectively, of charges consisting of closure costs
related to corrugated products facilities and design centers. These
items were recorded in "Cost of sales", "Selling, general, and
administrative expenses", and "Other expense, net", as appropriate.
Packaging Corporation of America Segment Information
Unaudited (dollars in millions)
Three Months
Ended Six Months Ended June 30, June 30,
2024
2023
2024
2023
Segment sales Packaging
$
1,908.3
$
1,790.3
$
3,706.5
$
3,598.9
Paper
150.1
142.8
313.9
293.7
Corporate and Other
16.9
19.0
34.4
35.8
$
2,075.3
$
1,952.1
$
4,054.8
$
3,928.4
Segment income (loss) Packaging
$
279.8
$
285.8
$
483.6
$
553.7
Paper
26.7
29.1
56.4
63.2
Corporate and Other
(30.5
)
(30.5
)
(68.0
)
(61.9
)
Income from operations
276.0
284.4
472.0
555.0
Non-operating pension income (expense)
1.1
(2.0
)
2.2
(4.0
)
Interest expense, net
(10.4
)
(14.6
)
(19.9
)
(29.9
)
Income before taxes
$
266.7
$
267.8
$
454.3
$
521.1
Segment income (loss) excluding special items (1)
Packaging
$
279.9
$
289.7
$
487.5
$
567.0
Paper
26.1
33.5
62.2
69.2
Corporate and Other
(30.5
)
(30.5
)
(68.0
)
(61.9
)
$
275.5
$
292.7
$
481.7
$
574.3
EBITDA excluding special items (1) Packaging
$
400.0
$
405.3
$
726.2
$
796.8
Paper
30.6
38.8
71.2
79.9
Corporate and Other
(26.6
)
(26.6
)
(60.2
)
(54.3
)
$
404.0
$
417.5
$
737.2
$
822.4
(1)
Segment income (loss) excluding special items, earnings before
non-operating pension income (expense), interest, income taxes, and
depreciation, amortization, and depletion (EBITDA), and EBITDA
excluding special items are non-GAAP financial measures. Management
excludes special items as it believes these items are not
necessarily reflective of the ongoing results of operations of our
business. We present these measures because they provide a means to
evaluate the performance of our segments and our company on an
ongoing basis using the same measures that are used by our
management, because these measures assist in providing a meaningful
comparison between periods presented and because these measures are
frequently used by investors and other interested parties in the
evaluation of companies and the performance of their segments. The
tables included in "Reconciliation of Non-GAAP Financial Measures"
on the following pages reconcile the non-GAAP measures with the
most directly comparable GAAP measures. Any analysis of non-GAAP
financial measures should be done only in conjunction with results
presented in accordance with GAAP. The non-GAAP measures are not
intended to be substitutes for GAAP financial measures and should
not be used as such.
Packaging Corporation of
America
Reconciliation of Non-GAAP Financial Measures
Unaudited (dollars in millions)
Three Months
Ended Six Months Ended June 30, June 30,
2024
2023
2024
2023
Packaging Segment income
$
279.8
$
285.8
$
483.6
$
553.7
Facilities closure and other costs
0.1
3.9
-
13.6
Jackson mill conversion-related activities
-
-
3.9
(0.3
)
Segment income excluding special items (1)
$
279.9
$
289.7
$
487.5
$
567.0
Paper Segment income
$
26.7
$
29.1
$
56.4
$
63.2
Jackson mill conversion-related activities
(0.6
)
4.4
5.8
6.0
Segment income excluding special items (1)
$
26.1
$
33.5
$
62.2
$
69.2
Corporate and Other Segment loss
$
(30.5
)
$
(30.5
)
$
(68.0
)
$
(61.9
)
Segment loss excluding special items (1)
$
(30.5
)
$
(30.5
)
$
(68.0
)
$
(61.9
)
Income from operations
$
276.0
$
284.4
$
472.0
$
555.0
Income from operations, excluding special items (1)
$
275.5
$
292.7
$
481.7
$
574.3
(1) See footnote (1) on page 2, for a discussion of non-GAAP
financial measures.
Packaging Corporation of America
Reconciliation of Non-GAAP Financial Measures
Unaudited (dollars in millions)
Net Income and EPS
Excluding Special Items (1) Three Months Ended June
30,
2024
2023
Incomebeforetaxes IncomeTaxes NetIncome
DilutedEPS Incomebeforetaxes IncomeTaxes
NetIncome DilutedEPS As reported
$
266.7
$
(67.8
)
$
198.9
$
2.21
$
267.8
$
(65.1
)
$
202.7
$
2.24
Special items (2): Jackson mill conversion-related activities
(0.6
)
0.2
(0.4
)
-
4.4
(1.1
)
3.3
0.04
Facilities closure and other costs
0.1
-
0.1
-
3.9
(1.0
)
2.9
0.03
Total special items
(0.5
)
0.2
(0.3
)
-
8.3
(2.1
)
6.2
0.07
Excluding special items
$
266.2
$
(67.6
)
$
198.6
$
2.20 (3
)
$
276.1
$
(67.2
)
$
208.9
$
2.31
Six Months Ended June 30,
2024
2023
Incomebeforetaxes IncomeTaxes NetIncome
DilutedEPS Incomebeforetaxes IncomeTaxes
NetIncome DilutedEPS As reported
$
454.3
$
(108.4
)
$
345.9
$
3.84
$
521.1
$
(128.3
)
$
392.8
$
4.35
Special items (2): Jackson mill conversion-related activities
9.7
(2.4
)
7.3
0.08
5.7
(1.4
)
4.3
0.05
Facilities closure and other costs
-
-
-
-
13.6
(3.4
)
10.2
0.11
Total special items
9.7
(2.4
)
7.3
0.08
19.3
(4.8
)
14.5
0.16
Excluding special items
$
464.0
$
(110.8
)
$
353.2
$
3.92
$
540.4
$
(133.1
)
$
407.3
$
4.51
(1)
Net income and earnings per share excluding special items are
non-GAAP financial measures. Management excludes special items as
it believes these items are not necessarily reflective of the
ongoing results of operations of our business. We present these
measures because they provide a means to evaluate the performance
of our company on an ongoing basis using the same measures that are
used by our management, because these measures assist in providing
a meaningful comparison between periods presented and because these
measures are frequently used by investors and other interested
parties in the evaluation of companies and their performance. Any
analysis of non-GAAP financial measures should be done only in
conjunction with results presented in accordance with GAAP. The
non-GAAP measures are not intended to be substitutes for GAAP
financial measures and should not be used as such.
(2)
Pre-tax special items are tax-effected at a combined federal and
state income tax rate in effect for the period the special items
were recorded and this rate is adjusted for each subsequent quarter
to be consistent with the estimated annual effective tax rate, in
accordance with ASC 270, Interim Reporting, and ASC 740-270, Income
Taxes – Intra Period Tax Allocation. For all periods presented,
income taxes on pre-tax special items represent the current amount
of tax. For more information related to these items, see the
footnotes to the Consolidated Earnings Results on page 1.
(3)
Amount may not foot due to rounding.
Packaging Corporation of
America
Reconciliation of
Non-GAAP Financial Measures
Unaudited (dollars in millions)
EBITDA and EBITDA
Excluding Special Items (1) EBITDA represents income
before non-operating pension (income) expense, interest, income
taxes, and depreciation, amortization, and depletion. The following
table reconciles net income to EBITDA and EBITDA excluding special
items:
Three Months Ended Six Months Ended
June 30, June 30,
2024
2023
2024
2023
Net income
$
198.9
$
202.7
$
345.9
$
392.8
Non-operating pension (income) expense
(1.1
)
2.0
(2.2
)
4.0
Interest expense, net
10.4
14.6
19.9
29.9
Provision for income taxes
67.8
65.1
108.4
128.3
Depreciation, amortization, and depletion
128.5
127.9
256.9
257.5
EBITDA (1)
$
404.5
$
412.3
$
728.9
$
812.5
Special items: Jackson mill conversion-related activities
(0.6
)
2.0
8.3
1.7
Facilities closure and other costs
0.1
3.2
-
8.2
EBITDA excluding special items (1)
$
404.0
$
417.5
$
737.2
$
822.4
(1) See footnote (1) on page 2, for a discussion of non-GAAP
financial measures.
Packaging Corporation of America
Reconciliation of Non-GAAP Financial Measures
Unaudited (dollars in millions) The following table
reconciles segment income (loss) to EBITDA excluding special items:
Three Months Ended Six Months Ended June
30, June 30,
2024
2023
2024
2023
Packaging Segment income
$
279.8
$
285.8
$
483.6
$
553.7
Depreciation, amortization, and depletion
120.1
116.3
238.6
235.2
EBITDA (1)
399.9
402.1
722.2
788.9
Facilities closure and other costs
0.1
3.2
-
8.2
Jackson mill conversion-related activities
-
-
4.0
(0.3
)
EBITDA excluding special items (1)
$
400.0
$
405.3
$
726.2
$
796.8
Paper Segment income
$
26.7
$
29.1
$
56.4
$
63.2
Depreciation, amortization, and depletion
4.5
7.7
10.5
14.7
EBITDA (1)
31.2
36.8
66.9
77.9
Jackson mill conversion-related activities
(0.6
)
2.0
4.3
2.0
EBITDA excluding special items (1)
$
30.6
$
38.8
$
71.2
$
79.9
Corporate and Other Segment loss
$
(30.5
)
$
(30.5
)
$
(68.0
)
$
(61.9
)
Depreciation, amortization, and depletion
3.9
3.9
7.8
7.6
EBITDA (1)
(26.6
)
(26.6
)
(60.2
)
(54.3
)
EBITDA excluding special items (1)
$
(26.6
)
$
(26.6
)
$
(60.2
)
$
(54.3
)
EBITDA excluding special items (1)
$
404.0
$
417.5
$
737.2
$
822.4
(1) See footnote (1) on page 2, for a discussion of non-GAAP
financial measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240723941292/en/
Barbara Sessions Packaging Corporation of America INVESTOR
RELATIONS: (877) 454-2509 PCA’s Website: www.packagingcorp.com
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