CREVE COEUR, Mo. and CHICAGO, Nov. 1, 2010 /CNW/ -- COMPANY POSTS
STRONG EARNINGS AND OPERATING CASH FLOW Smurfit-Stone Container
Corporation (NYSE: SSCC) today reported net income of $65 million,
or $0.65 per diluted share, for the third quarter ended Sept. 30,
2010, compared with net income attributable to common stockholders
of $1.41 billion, or $5.41 per diluted share, for the second
quarter of 2010, and $65 million, or $0.25 per share, for the third
quarter of 2009. (Logo:
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Smurfit-Stone's third quarter 2010 adjusted net income was $76
million, or $0.76 per diluted share, up from adjusted net income of
$2 million, or $0.01 per diluted share, in the second quarter of
this year, and an adjusted net loss of ($23) million, or ($0.09)
per diluted share, in the third quarter of 2009. The adjustments in
the third quarter of 2010 were primarily the exclusion of costs
related to reorganization and restructuring. The major adjustment
in the second quarter of 2010 was the exclusion of $1.42 billion of
income, including tax benefits, related to the Company's emergence
from bankruptcy. Diluted Earnings Per Share Attributable to Common
Stockholders Third Second Third Quarter Quarter Quarter 2010 2010
2009 ---- ---- ---- Net Income Attributable to $0.65 $5.41 $0.25
Common Stockholders Adjustments $0.11 ($5.40) ($0.34) Adjusted Net
Income (Loss) $0.76 $0.01 ($0.09) ===== ===== ====== Weighted
Average Shares (MM) 100 261 257 The Company reported operating
income of $142 million for the third quarter of 2010, compared to
an operating loss of ($6) million in the second quarter of 2010,
and operating income of $159 million in the third quarter of 2009.
The sequential improvement in operating income reflects increased
net sales in the third quarter due to higher selling prices, lower
maintenance-related downtime, lower fiber costs, and cost savings
achieved in mill and container operations. Third quarter 2009
operating income significantly benefitted from income related to
the alternative fuel tax credits that were received in 2009.
Patrick J. Moore, Smurfit-Stone's Chief Executive Officer,
commented, "I am pleased with our strong third quarter performance,
which benefitted from favorable pricing trends and lower input
costs driven primarily by fiber. Importantly, we are realizing cost
savings and efficiency improvements from our financial
restructuring, investments in our core business, and focused
efforts such as our Operational Excellence initiative. I'm proud of
the efforts and commitment of our employees which contributed
significantly to the strong quarter. I view the positive momentum
in the quarter as an important step in delivering on the
accelerated performance improvement we are pursuing." Adjusted
EBITDA for the third quarter of 2010 was $239 million, up from $102
million in the second quarter of 2010, and $94 million in the third
quarter of 2009. The sequential improvement in adjusted EBITDA
reflects higher selling prices, reduced maintenance-related
downtime and related expenses, lower fiber costs, and improvements
in overall operating productivity including additional headcount
reductions made in the quarter. Net sales for the third quarter of
this year were $1.63 billion, up 4.5 percent from $1.56 billion in
the second quarter of 2010 and up 15.3 percent over sales of $1.42
billion in the third quarter of 2009. The improvement in third
quarter 2010 net sales is primarily due to higher average selling
prices during the quarter. Third Quarter Highlights -- The Company
achieved very strong results in its first quarter since emerging
from bankruptcy, demonstrating the performance capabilities of the
new Smurfit-Stone. -- Ongoing efforts to reduce operating costs
were also a significant contributor to higher earnings and cash
generation in the quarter, with overall headcount being reduced by
460 positions in the quarter and 1,368 positions year to date. --
Strong cash generation, with cash balances growing by $124 million
in the quarter, resulting in net debt of less than $730 million at
September 30, 2010. Outlook Smurfit-Stone expects moderately lower
sequential earnings in the fourth quarter from the third quarter,
as continued price improvement will be more than offset by
additional mill maintenance costs, normal seasonal demand declines
and higher energy usage. The Company also expects higher recycled
fiber costs in the fourth quarter. In addition to the major cost
reduction focus in the business operations, the Company is
undertaking a significant reduction in its selling, general and
administrative costs, primarily through reductions of more than 450
positions for full-year 2010, or more than 14 percent of its
workforce in these functions. The Company expects to realize net
savings of more than $50 million in 2011 as compared to 2010, and
has identified opportunities for additional savings in 2012.
Conference Call and Webcast Smurfit-Stone will host a conference
call for analysts, institutional investors and shareholders on
Monday, Nov. 1, 2010, at 8:30 a.m. Eastern Time. To access the
call, participants should dial the number below approximately 10
minutes before the start time. U.S. - (866) 783-2146 or
International - (857) 350-1605 Passcode: 26779754 The call will
also be webcast in a listen-only format with an accompanying slide
presentation and can be accessed at www.smurfit-stone.com. A replay
of the conference call will be available through Nov. 15, 2010. To
access the replay, dial (888) 286-8010 (U.S.) or (617) 801-6888
(International), and enter passcode 99716475 A replay of the
webcast will be available at www.smurfit-stone.com. Forward-Looking
Statements & Non-GAAP Measures This press release contains
statements relating to future results, which are forward-looking
statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Actual results may differ materially
from those projected as a result of certain risks and
uncertainties, including but not limited to changes in general
economic conditions, pricing pressures in key product lines,
seasonality, changes in input costs including recycled fiber and
energy costs, as well as other risks and uncertainties described in
the Company's Annual Report on Form 10-K for the year ended
December 31, 2009, as updated from time to time in the Company's
Securities and Exchange Commission filings. In this press release,
certain non-U.S. GAAP financial information is presented. A
reconciliation of that information to U.S. GAAP financial measures
and additional disclosure regarding our use of non-GAAP financial
measures are included in the attached schedules. The Company does
not intend to review, revise or update any particular
forward-looking statements in light of future events. About
Smurfit-Stone Smurfit-Stone Container Corporation is one of the
industry's leading integrated containerboard and corrugated
packaging producers and one of the world's largest paper recyclers.
Smurfit-Stone generated revenue of $5.57 billion in 2009, has led
the industry in safety every year since 2001, and conducts its
business in compliance with the environmental, health, and safety
principles of the American Forest & Paper Association. The
company is a member of the Sustainable Forestry Initiative® .
(Financial statements follow) SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Successor
--------- Three Months Ended September 30, (In millions, except per
share data) 2010 ------------------------------ ---- Net sales
$1,634 Costs and expenses Cost of goods sold 1,344 Selling and
administrative expenses 141 Restructuring expenses 7 Loss on
disposal of assets Other operating income Operating income (loss)
142 Other income (expense) Interest expense, net (23)
Debtor-in-possession debt issuance costs Loss on early
extinguishment of debt Foreign currency exchange gains (losses)
Other, net 2 --- Income (loss) before reorganization items and
income taxes 121 Reorganization items income (expense), net (7) ---
Income before income taxes 114 (Provision for) benefit from income
taxes (49) --- Net income 65 Preferred stock dividends and
accretion Net income attributable to common stockholders $65 ---
Basic earnings per common share Net income attributable to common
stockholders $0.65 ----- Weighted average shares outstanding 100
--- Diluted earnings per common share Net income attributable to
common stockholders $0.65 ----- Weighted average shares outstanding
100 ----------------------------------- --- Predecessor -----------
Three Three Six Nine Months Months Months Months Ended Ended Ended
Ended September September 30, June 30, June 30, 30, (In millions,
except per share data) 2009 2010 2010 2009 ----------------- ----
---- ---- ---- Net sales $1,417 $1,563 $3,024 $4,195 Costs and
expenses Cost of goods sold 1,284 1,407 2,763 3,757 Selling and
administrative expenses 137 143 294 428 Restructuring expenses 14
19 15 38 Loss on disposal of assets 2 3 Other operating income
(179) (11) (455) ---- --- ---- Operating income (loss) 159 (6) (37)
424 Other income (expense) Interest expense, net (72) (10) (23)
(217) Debtor-in- possession debt issuance costs (63) Loss on early
extinguishment of debt (20) Foreign currency exchange gains
(losses) (11) 9 3 (10) Other, net 6 2 4 10 --- --- --- --- Income
(loss) before reorganization items and income taxes 82 (5) (53) 124
Reorganization items income (expense), net (16) 1,219 1,178 (109)
--- ----- ----- ---- Income before income taxes 66 1,214 1,125 15
(Provision for) benefit from income taxes 2 199 199 (3) --- --- ---
--- Net income 68 1,413 1,324 12 Preferred stock dividends and
accretion (3) (2) (4) (9) --- --- --- --- Net income attributable
to common stockholders $65 $1,411 $1,320 $3 --- ------ ------ ---
Basic earnings per common share Net income attributable to common
stockholders $0.25 $5.47 $5.12 $0.01 ----- ----- ----- -----
Weighted average shares outstanding 257 258 258 257 --- --- --- ---
Diluted earnings per common share Net income attributable to common
stockholders $0.25 $5.41 $5.07 $0.01 ----- ----- ----- -----
Weighted average shares outstanding 257 261 261 257
---------------- --- --- --- --- SMURFIT-STONE CONTAINER
CORPORATION CONSOLIDATED BALANCE SHEETS Successor Predecessor
--------- ----------- September December 30, June 30, 31, (In
millions, except share data) 2010 2010 2009 --------------------
---- ---- ---- Assets (Unaudited) (Unaudited) Current assets Cash
and cash equivalents $464 $340 $704 Restricted cash 7 9 Receivables
750 739 615 Receivable for alternative energy tax credits 11 11 59
Inventories 529 496 452 Refundable income taxes 16 31 23 Prepaid
expenses and other current assets 35 47 43 --- --- --- Total
current assets 1,805 1,671 1,905 Net property, plant and equipment
4,370 4,405 3,081 Deferred income taxes 23 Goodwill 96 93
Intangible assets, net 76 77 Other assets 162 163 68 --- --- ---
$6,509 $6,409 $5,077 ------ ------ ------ Liabilities and
Stockholders' Equity (Deficit) Liabilities not subject to
compromise Current liabilities Current maturities of long-term debt
$16 $18 $1,354 Accounts payable 519 515 387 Accrued compensation
and payroll taxes 165 176 145 Interest payable 2 5 12 Other current
liabilities 83 81 164 --- --- --- Total current liabilities 785 795
2,062 Long-term debt, less current maturities 1,176 1,176 Pension
and postretirement benefits, net of current portion 1,632 1,639
Other long-term liabilities 138 140 117 Deferred income taxes 352
307 --- --- Total liabilities not subject to compromise 4,083 4,057
2,179 Liabilities subject to compromise 4,272 ----- Total
liabilities 4,083 4,057 6,451 Stockholders' equity Successor
preferred stock, par value $.001 per share; 10,000,000 shares
authorized; none issued and outstanding in 2010 Successor common
stock, par value $.001 per share; 150,000,000 shares authorized;
91,062,636 issued and outstanding in 2010 Predecessor preferred
stock, aggregate liquidation preference of $126; 25,000,000 shares
authorized; 4,599,300 issued and outstanding in 2009 104
Predecessor common stock, par value $.01 per share; 400,000,000
shares authorized; 257,482,839 issued and outstanding in 2009 3
Additional paid-in capital 2,357 2,352 4,081 Retained earnings
(deficit) 65 (4,883) Accumulated other comprehensive income (loss)
4 (679) --- ---- Total stockholders' equity (deficit) 2,426 2,352
(1,374) ----- ----- ------ $6,509 $6,409 $5,077 ------ ------
------ SMURFIT-STONE CONTAINER CORPORATION CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited) Successor Predecessor ---------
----------- Three Six Nine Months Months Months Ended Ended Ended
September June September 30, 30, 30, (In millions) 2010 2010 2009
------------- ---- ---- ---- Cash flows from operating activities
Net income $65 $1,324 $12 Adjustments to reconcile net income to
net cash provided by (used for) operating activities Loss on early
extinguishment of debt 20 Depreciation, depletion and amortization
84 168 273 Debtor-in-possession debt issuance costs 63 Amortization
of deferred debt issuance costs and original issue discount 3 5
Deferred income taxes 58 (201) 1 Pension and postretirement
benefits (16) 50 49 Loss on disposal of assets 3 Non-cash
restructuring expense 7 6 Non-cash stock-based compensation 5 3 7
Non-cash foreign currency exchange (gains) losses (3) 10 Gain due
to plan effects (580) Gain due to fresh start accounting
adjustments (742) Payments to settle pre- petition liabilities
excluding debt (202) Non-cash reorganization items 101 65 Change in
restricted cash for utility deposits 7 2 (9) Change in operating
assets and liabilities, net of effects from acquisitions and
dispositions Receivables and retained interest in receivables sold
(7) (129) (50) Receivable for alternative energy tax credits 48
(58) Inventories (30) 1 35 Prepaid expenses and other current
assets 12 1 (13) Accounts payable and accrued liabilities (9) 57
200 Interest payable (2) 2 128 Other, net (9) 8 46 Net cash
provided by (used for) operating activities 161 (85) 793 --- ---
--- Cash flows from investing activities Expenditures for property,
plant and equipment (39) (83) (112) Proceeds from property
disposals 5 10 16 Advances to affiliates, net (15) Net cash used
for investing activities (34) (73) (111) --- --- ---- Cash flows
from financing activities Proceeds from exit credit facilities
1,200 Original issue discount (12) Net borrowings of
debtor-in-possession financing 130 Net borrowings (repayments) of
long- term debt (3) (1,347) 71 Repurchase of receivables (385)
Debtor-in-possession debt issuance costs (63) Debt issuance costs
on exit credit facilities and other financing costs (47) --- Net
cash used for financing activities (3) (206) (247) --- ---- ----
Increase (decrease) in cash and cash equivalents 124 (364) 435 Cash
and cash equivalents Beginning of period 340 704 126 --- --- ---
End of period $464 $340 $561 ------------- --- --- ---
SMURFIT-STONE CONTAINER CORPORATION ADJUSTED NET INCOME (LOSS) PER
DILUTED SHARE (In Millions, Except Per Share Data) (Unaudited)
Successor (Note 1) Predecessor (Note 1) ----------------
-------------------- June Sept 2010 2009 3Q 10 3Q 09 2Q 10 YTD YTD
----- ----- ----- ----- ----- Net income attributable to common
stockholders (GAAP) $65 $65 $1,411 $1,320 $3 Reorganization items
(income) expense, net of income taxes 4 16 (1,419) (1,378) 109
Debtor-in- possession financing costs - - - - 63 Alternative fuel
mixture tax credits - (179) - (11) (455) Loss on early
extinguishment of debt - - - - 20 Non-cash foreign currency
exchange (gains) losses - 11 (9) (3) 10 Loss on sale of assets - 2
- - 2 Interest on Predecessor unsecured debt - 48 - - 131
Restructuring charges 4 14 19 15 38 Multi-employer pension plan
withdrawal charge, net of income taxes 3 - - - - --- --- --- ---
--- Adjusted net income (loss) attributable to common stockholders
(Note 2) $76 $(23) $2 $(57) $(79) --- ---- --- ---- ---- Successor
(Note 1) Predecessor (Note 1) ---------------- --------------------
June Sept 2010 2009 3Q 10 3Q 09 2Q 10 YTD YTD ----- ----- -----
----- ----- Net income per diluted share attributable to common
stockholders (GAAP) $0.65 $0.25 $5.41 $5.07 $0.01 Reorganization
items (income) expense, net of income taxes 0.04 0.06 (5.44) (5.28)
0.42 Debtor-in- possession financing costs - - - - 0.24 Alternative
fuel mixture tax credits - (0.70) - (0.04) (1.77) Loss on early
extinguishment of debt - - - - 0.08 Non-cash foreign currency
exchange (gains) losses - 0.04 (0.03) (0.01) 0.04 Loss on sale of
assets - 0.01 - - 0.01 Interest on Predecessor unsecured debt -
0.19 - - 0.51 Restructuring charges 0.04 0.06 0.07 0.06 0.15
Multi-employer pension plan withdrawal charge, net of income taxes
0.03 - - - - ---- --- --- --- --- Adjusted net income (loss) per
diluted share attributable to common stockholders (Note 2) $0.76
$(0.09) $0.01 $(0.20) $(0.31) ----- ------ ----- ------ ------ Note
1: For the Predecessor Company, adjustments to GAAP net income,
other than reorganization items (income) expense, were not tax
effected because it was more likely than not that substantially all
of the deferred tax assets that were generated during bankruptcy
would not be realized and we did not record any additional tax
benefit for 2009 and the six months ended June 30, 2010. Due to the
effects of the Plan of Reorganization, we concluded that it was
more likely than not that substantially all of the deferred tax
assets would be realized and we recognized an income tax benefit
related to reorganization items in the six months ended June 30,
2010. For the Successor Company, for the three months ended
September 30, 2010, we recorded a provision for income taxes
related to the statement of operations. As a result, the Successor
period adjustments to net income are presented on a net of tax
basis. Note 2: Exclusive of reorganization items (income) expense,
debtor- in-possession financing costs, alternative fuel mixture tax
credits, loss on early extinguishment of debt, non-cash foreign
currency (gains) losses, loss on sale of assets, accrued but unpaid
interest on Predecessor unsecured debt, restructuring charges and a
multi-employer pension plan withdrawal charge. Adjusted net income
(loss) attributable to common stockholders and adjusted net income
(loss) per diluted share attributable to common stockholders are
non-GAAP financial measures. See disclosure following regarding the
use of non-GAAP financial measures. Diluted earnings per common
share computations for the three and six months ended June 30, 2010
were adjusted to reflect the assumed conversion of preferred stock
into common stock because the effect was dilutive. SMURFIT-STONE
CONTAINER CORPORATION EBITDA, As Defined Below (In millions)
(Unaudited) Successor Predecessor --------- ----------- 3Q 10 2Q 10
3Q 09 ----- ----- ----- Net sales $1,634 $1,563 $1,417 Net income
$65 $1,413 $68 (Benefit from) provision for income taxes 49 (199)
(2) Interest expense, net 23 10 72 Depreciation, depletion and
amortization 84 83 91 --- --- --- EBITDA 221 1,307 229
Reorganization items (income) expense 7 (1,219) 16 Restructuring
charges 7 19 14 Alternative fuel mixture tax credits - - (179)
Non-cash foreign currency exchange (gains) losses - (9) 11 Loss on
sale of assets - - 2 Multi-employer pension plan withdrawal charge
4 - - Other - 4 1 Adjusted EBITDA $239 $102 $94 ---- ---- ---
Adjusted EBITDA margin 14.6% 6.5% 6.6% ---- --- --- Other Financial
Information: ---------------------------- Net cash provided by
(used for) operating activities $161 $(135) $301 Capital
expenditures 39 49 43 Pension expense 14 34 31 Pension
contributions 31 12 1 Cash taxes refunded (paid) 9 (1) - Change in
working capital (36) (2) 74 Containerboard, corrugated containers
and reclamation operations segment operating profit 216 82 60
"EBITDA" is defined as net income before (benefit from) provision
for income taxes, interest expense, net and depreciation, depletion
and amortization. "Adjusted EBITDA" is defined as EBITDA adjusted
as indicated above. EBITDA and Adjusted EBITDA are non-GAAP
financial measures. See disclosure following regarding the use of
non-GAAP financial measures. SMURFIT-STONE CONTAINER CORPORATION
STATISTICAL INFORMATION 2010 ---- Combined Successor Predecessor
(1) --------- ----------- --------- 2nd 1st 3rd Qtr Qtr Qtr Sept
YTD ------- ---- ---- -------- Containerboard System North American
Mill Operating Rates (Containerboard Only) 99.7% 97.1% 100.0% 99.2%
North American Containerboard Production -M Tons 1,603 1,545 1,585
4,733 Sequential Avg. Domestic Linerboard Price Change 7.2% 13.2%
6.3% N/A Pulp Production - M Tons 73 72 62 207 SBS/Bleached Board
Production -M Tons 32 31 35 98 Kraft Paper Production -M Tons 26 26
29 81 Total Maintenance Downtime Tons -M Tons 49 76 20 145
Corrugated Containers North American Shipments - BSF 17.1 17.3 16.4
50.8 Per Day North American Shipments -MMSF 266.9 273.7 260.9 267.1
Sequential Avg. Corrugated Price Change 3.2% 3.6% -0.6% N/A Fiber
Reclaimed and Brokered -M Tons 1,494 1,468 1,423 4,385 2009 ----
Predecessor ----------- 3rd 2nd 1st Sept Qtr Qtr Qtr YTD ---- ----
---- ----- Containerboard System North American Mill Operating
Rates (Containerboard Only) 87.2% 85.0% 82.4% 84.9% North American
Containerboard Production -M Tons 1,551 1,497 1,435 4,483
Sequential Avg. Domestic Linerboard Price Change -5.9% -9.8% -7.4%
N/A Pulp Production - M Tons 78 76 66 220 SBS/Bleached Board
Production -M Tons 29 32 33 94 Kraft Paper Production - M Tons 34
28 19 81 Total Maintenance Downtime Tons -M Tons 29 50 46 125
Corrugated Containers North American Shipments - BSF 16.7 16.7 16.6
50.0 Per Day North American Shipments - MMSF 260.9 265.7 267.8
264.8 Sequential Avg. Corrugated Price Change -2.6% -3.0% -0.9% N/A
Fiber Reclaimed and Brokered - M Tons 1,317 1,280 1,241 3,838 (1)
Although the 2010 Successor Period and the 2010 Predecessor Period
are distinct reporting periods, we combined the statistical
information for the six months ended June 30, 2010 of the
Predecessor with the three months ended September 30, 2010 of the
Successor for analytical purposes. SMURFIT-STONE CONTAINER
CORPORATION NON-GAAP FINANCIAL MEASURES In the accompanying
financial presentation, we use the financial measures "adjusted net
income (loss) attributable to common stockholders" (adjusted net
income (loss)), "adjusted net income (loss) per diluted share
attributable to common stockholders" (adjusted net income (loss)
per diluted share), "EBITDA" and "adjusted EBITDA" which are
derived from our consolidated financial information but are not
presented in our financial statements prepared in accordance with
U.S. generally accepted accounting principles (GAAP). These
measures are considered "non-GAAP financial measures" under the
U.S. Securities and Exchange Commission (SEC) rules. Adjusted net
income (loss) and adjusted net income (loss) per diluted share are
non-GAAP financial measures that exclude from net income (loss)
attributable to common stockholders the effects of reorganization
items (income) expense, debtor-in-possession financing costs,
alternative fuel mixture tax credits, loss on early extinguishment
of debt, non-cash foreign currency exchange (gains) losses,
interest on Predecessor unsecured debt, restructuring charges,
(gain) loss on sale of assets and a multi-employer pension plan
withdrawal charge. EBITDA is defined as net income (loss) before
(provision for) benefit from income taxes, interest expense, net
and depreciation, depletion and amortization. Adjusted EBITDA is
defined as EBITDA adjusted for reorganization items (income)
expense, restructuring charges, debtor-in-possession financing
costs, alternative fuel mixture tax credits, loss on early
extinguishment of debt, non-cash foreign currency exchange (gains)
losses, (gain) loss on sale of assets, a multi-employer pension
plan withdrawal charge and other adjustments. The accompanying
financial presentation includes a reconciliation of net income
(loss) attributable to common stockholders and net income (loss)
per diluted share attributable to common stockholders, the most
directly comparable GAAP financial measures, to adjusted net income
(loss) and adjusted net income (loss) per diluted share,
respectively. A reconciliation of net (income) loss to EBITDA and
adjusted EBITDA is also presented. We use these supplemental
non-GAAP measures to evaluate performance period over period, to
analyze the underlying trends in our business, to assess our
performance relative to our competitors and to establish
operational goals and forecasts that are used in allocating
resources. These non-GAAP measures of operating results are
reported to our board of directors, chief executive officer and our
president and chief operating officer and are used to make
strategic and operating decisions and assess performance. These
non-GAAP measures are presented to enhance an understanding of our
operating results and are not intended to represent cash flows or
results of operations. We also believe these non-GAAP measures are
beneficial to investors, potential investors and other key
stakeholders, including analysts and creditors who use these
measures in their evaluations of our performance from period to
period and against the performance of other companies in our
industry. Our creditors also use these measures to evaluate our
ability to service our debt. The use of these non-GAAP financial
measures is beneficial to these stakeholders because they exclude
certain items that management believes are not indicative of the
on-going operating performance of our business, and including them
would distort comparisons to our past operating performance.
Accordingly, we have excluded the adjustments, as detailed below,
for the purpose of calculating these non-GAAP measures. The
following is an explanation of each of the adjustments that we have
made to arrive at these non-GAAP measures for (1) the three months
ended September 30, 2010 of the Successor, (2) the six months ended
June 30, 2010 of the Predecessor and (3) the three and nine months
ended September 30, 2009 of the Predecessor, as well as the reasons
management believes each of these items is not indicative of
operating performance: -- Reorganization items (income) expense,
net of income taxes - These income and expense items are directly
related to the process of our reorganizing under Chapter 11 and the
Companies' Creditors Arrangement Act in Canada. The items include
gain due to plan effects, gain due to fresh start accounting
adjustments, provision for rejected/settled executory contracts and
leases, accounts payable settlement gains and professional fees.
These income and expense items are not considered indicative of our
ongoing operating performance and are not used by us to assess our
operating performance. -- Debtor-in-possession (DIP) financing
costs - These expenses were incurred and paid during the first
quarter of 2009 in connection with entering into the DIP Credit
Agreement. These expense items are not considered indicative of our
ongoing operating performance and are not used by us to assess our
operating performance. -- Alternative fuel mixture tax credits -
These amounts represent an excise tax credit for alternative fuel
mixtures produced by a taxpayer for sale, or for use as a fuel in a
taxpayer's trade or business, through December 31, 2009, at which
time the credit expired. These items are not considered indicative
of our ongoing operating performance and are not used by us to
assess our operating performance. -- Loss on early extinguishment
of debt - These losses represent unamortized deferred debt issuance
cost and call premiums charged to expense in connection with our
financing activities. These losses were not considered indicative
of our ongoing operating performance because they related to
specific financing activities and were not used by us to assess our
operating performance. -- Non-cash foreign currency (gains) losses
- Through June 30, 2010, the functional currency for our Canadian
operations was the U.S. dollar. Fluctuations in Canadian
dollar-denominated monetary assets and liabilities resulted in
non-cash gains or losses. We excluded the impact of foreign
currency exchange gains and losses because the impact of foreign
exchange is highly variable and difficult to predict from period to
period and is not tied to our operating performance. These gains or
losses are not considered indicative of our ongoing operating
performance and are not used by us to assess our operating
performance. -- Interest on Predecessor unsecured debt - These
amounts represent the post-petition interest accrued on unsecured
debt from the time of our bankruptcy filing, which was stayed and
not paid as a result of the bankruptcy proceedings. In the fourth
quarter of 2009, we concluded it was not probable that interest
expense that was accrued from the time of our bankruptcy filing
through November 30, 2009, would be an allowed claim. This expense
was not considered indicative of our ongoing operating performance
and was excluded by management in assessing our operating
performance. -- Restructuring charges - These adjustments represent
the write-down of assets, primarily property, plant and equipment,
to estimated net realizable values, the acceleration of
depreciation for equipment to be abandoned or taken out of service,
severance costs and other costs associated with our restructuring
activities. These income and expense items were not considered
indicative of our ongoing operating performance and were excluded
by management in assessing our operating performance. -- (Gain)
loss on sale of assets - These amounts represent gains and losses
we recognized related to the sale of non-strategic assets. These
gains and losses were not considered indicative of ongoing
operating performance and were excluded by management in assessing
our operating performance. -- Multi-employer pension plan
withdrawal charge - This amount represents the charge associated
with the withdrawal from a multi-employer pension plan. This
expense item was not considered indicative of our ongoing operating
performance and was excluded by management in assessing our
operating performance. -- Other - These adjustments principally
represent amounts accrued under our 2009 long-term incentive plan.
These income and expense items were not considered indicative of
our ongoing operating performance and were excluded by management
in assessing our operating performance. Adjusted net income (loss),
adjusted net income (loss) per diluted share, EBITDA and adjusted
EBITDA have certain material limitations associated with their use
as compared to net income (loss). These limitations are primarily
due to the exclusion of certain amounts that are material to our
consolidated results of operations, as discussed above. In
addition, these adjusted net income (loss) and EBITDA measures may
differ from adjusted net income (loss) and EBITDA calculations of
other companies in our industry, limiting their usefulness as
comparative measures. Because of these limitations, adjusted net
income (loss), adjusted net income (loss) per diluted share, EBITDA
and adjusted EBITDA should be read in conjunction with our
consolidated financial statements prepared in accordance with GAAP.
We compensate for these limitations by relying primarily on our
GAAP results and using adjusted net income (loss), adjusted net
income (loss) per diluted share, EBITDA and adjusted EBITDA only as
supplemental measures of our operating performance. The
presentation of this additional information is not meant to be
considered in isolation or as a substitute for financial statements
prepared in accordance with GAAP. We believe that providing these
non-GAAP measures in addition to the related GAAP measures provides
investors greater transparency to the information our management
uses for financial and operational decision-making and allows
investors to see our results as management sees them. We also
believe that providing this information better enables investors to
understand our operating performance and to evaluate the
methodology used by our management to evaluate and measure our
operating performance, and the methodology and financial measures
used by our board of directors to assess management's performance.
media, Sue Neumann, +1-314-656-5287, or investors, Tim Griffith or
Scott Dudley, +1-314-656-5553, all of Smurfit-Stone Web Site:
http://www.smurfit-stone.com
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Smurfit-Stone Container Corp. Common Stock (NYSE:SSCC)
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