CREVE COEUR, Mo., and
CHICAGO, April 26, 2011 /PRNewswire/ -- Smurfit-Stone
Container Corporation (NYSE: SSCC) today reported net income of
$54 million, or $0.54 per diluted share, for the first quarter
ended March 31, 2011, compared with
net income of $49 million, or
$0.49 per diluted share, for the
fourth quarter of 2010, and a net loss attributable to common
stockholders of ($91) million, or
($0.35) per diluted share, for the
first quarter of 2010.
(Logo:
http://photos.prnewswire.com/prnh/20070129/SMURFIT-STONELOGO)
Smurfit-Stone's first quarter 2011 adjusted net income was
$43 million, or $0.43 per diluted share, compared to adjusted net
income of $62 million, or
$0.62 per diluted share, in the
fourth quarter of 2010, and an adjusted net loss of ($59) million, or ($0.23) per diluted share, in the first quarter
of 2010. The primary adjustment in the first quarter of 2011
was the exclusion of the cellulosic biofuel production income tax
credit recognized in the quarter. The major adjustments in
the first and fourth quarters of 2010 were the exclusion of costs
or income related to reorganization and restructuring. The
first quarter of 2010 was also adjusted to exclude the alternative
fuel mixture tax credit recognized in that quarter.
|
Diluted
Earnings Per Share Attributable to Common
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
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|
First
|
|
Fourth
|
|
First
|
|
|
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Quarter
|
|
Quarter
|
|
Quarter
|
|
|
|
|
2011
|
|
2010
|
|
2010
|
|
|
Net Income (Loss) Attributable
to
|
|
|
|
|
|
|
|
Common
Stockholders
|
$ 0.54
|
|
$ 0.49
|
|
$ (0.35)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
$ (0.11)
|
|
$ 0.13
|
|
$ 0.12
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
(loss)
|
$ 0.43
|
|
$ 0.62
|
|
$ (0.23)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
(MM)
|
101
|
|
100
|
|
258
|
|
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|
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|
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|
The Company reported operating income of $92 million for the first quarter of 2011,
compared to operating income of $103
million in the fourth quarter of 2010, and an operating loss
of $31 million in the first quarter
of 2010. Adjusted EBITDA for the first quarter of 2011 was
$179 million, down from $205 million in the fourth quarter of 2010, and
up from $46 million in the first
quarter of 2010. The sequential decline in earnings was the
result of the moderate improvement in pricing and lower scheduled
maintenance downtime costs being more than offset by cost inflation
primarily related to fuels, higher seasonal energy usage, and the
impact of benefit cost timing in the quarter.
Net sales for the first quarter of 2011 were $1.58 billion, down slightly from $1.63 billion in the fourth quarter of 2010 and
up 8 percent compared with sales of $1.46
billion in the first quarter of 2010. The sequential
decline in sales in first quarter 2011 reflects modestly higher
selling prices, more than offset by seasonally lower volumes.
First Quarter Highlights
- The Company achieved solid financial results in line with its
expectations despite the impacts of cost inflation for freight,
energy, and fiber.
- Total debt was $1.17 billion at
March 31, 2011, representing 1.6x LTM
adjusted EBITDA or 1.0x on a net debt basis.
- The Company maintained a strong liquidity position of just
under $1 billion including
$446 million of cash at March 31, 2011.
Outlook
Smurfit-Stone expects sequentially lower earnings in the second
quarter as operating efficiencies and seasonal volume improvements
will be more than offset by continued cost inflation and higher
maintenance downtime costs.
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,
2010, as amended by the Company's Annual Report on Form
10-K/A filed on March 29, 2011, 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 $6.3
billion in 2010, 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
|
|
Predecessor
|
|
|
Three
Months
|
|
Three
Months
|
|
Three
Months
|
|
|
Ended
|
|
Ended
|
|
Ended
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
|
2011
|
|
2010
|
|
2010
|
|
Net sales
|
$
1,581
|
|
$
1,628
|
|
$
1,461
|
|
Costs and expenses
|
|
|
|
|
|
|
Cost of goods
sold
|
1,363
|
|
1,379
|
|
1,356
|
|
Selling and administrative
expenses
|
122
|
|
129
|
|
151
|
|
Restructuring (income)
expense
|
4
|
|
18
|
|
(4)
|
|
Gain on disposal of
assets
|
|
|
(1)
|
|
|
|
Other operating
income
|
|
|
|
|
(11)
|
|
Operating income
(loss)
|
92
|
|
103
|
|
(31)
|
|
Other income (expense)
|
|
|
|
|
|
|
Interest expense,
net
|
(22)
|
|
(22)
|
|
(13)
|
|
Foreign currency exchange
losses
|
|
|
|
|
(6)
|
|
Other, net
|
(4)
|
|
|
|
2
|
|
Income (loss) before
reorganization items and income taxes
|
66
|
|
81
|
|
(48)
|
|
Reorganization items
|
(1)
|
|
(5)
|
|
(41)
|
|
Income (loss) before
income taxes
|
65
|
|
76
|
|
(89)
|
|
Provision for income
taxes
|
(11)
|
|
(27)
|
|
|
|
Net income
(loss)
|
54
|
|
49
|
|
(89)
|
|
Preferred stock dividends
and accretion
|
|
|
|
|
(2)
|
|
Net income (loss)
attributable to common stockholders
|
$
54
|
|
$
49
|
|
$
(91)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
|
|
|
|
|
Net income (loss)
attributable to common stockholders
|
$
0.54
|
|
$
0.49
|
|
$
(0.35)
|
|
Weighted average shares
outstanding
|
100
|
|
100
|
|
258
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share
|
|
|
|
|
|
|
Net income (loss)
attributable to common stockholders
|
$
0.54
|
|
$
0.49
|
|
$
(0.35)
|
|
Weighted average shares
outstanding
|
101
|
|
100
|
|
258
|
|
|
|
|
|
|
|
SMURFIT-STONE CONTAINER
CORPORATION
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
Successor
|
|
|
|
March
31,
|
December
31,
|
|
(In millions, except share
data)
|
|
2011
|
2010
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
446
|
$
449
|
|
Receivables
|
|
825
|
765
|
|
Receivable for alternative
energy tax credits
|
|
11
|
11
|
|
Inventories
|
|
550
|
496
|
|
Refundable income
taxes
|
|
4
|
6
|
|
Prepaid expenses and other
current assets
|
|
32
|
24
|
|
Total current
assets
|
|
1,868
|
1,751
|
|
Net property, plant and
equipment
|
|
4,334
|
4,374
|
|
Goodwill
|
|
102
|
100
|
|
Intangible assets,
net
|
|
74
|
75
|
|
Other assets
|
|
156
|
159
|
|
|
$
|
6,534
|
$
6,459
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Current maturities of
long-term debt
|
$
|
18
|
$
39
|
|
Accounts
payable
|
|
561
|
503
|
|
Accrued compensation and
payroll taxes
|
|
147
|
180
|
|
Interest
payable
|
|
3
|
3
|
|
Other current
liabilities
|
|
80
|
86
|
|
Total current
liabilities
|
|
809
|
811
|
|
Long-term debt, less current
maturities
|
|
1,151
|
1,155
|
|
Pension and postretirement
benefits, net of current portion
|
|
1,308
|
1,300
|
|
Other long-term
liabilities
|
|
129
|
129
|
|
Deferred income taxes
|
|
465
|
453
|
|
Total
liabilities
|
|
3,862
|
3,848
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
Preferred stock
|
|
|
|
|
Common stock
|
|
|
|
|
Additional paid-in
capital
|
|
2,369
|
2,366
|
|
Retained
earnings
|
|
168
|
114
|
|
Accumulated other
comprehensive income
|
|
135
|
131
|
|
Total stockholders'
equity
|
|
2,672
|
2,611
|
|
|
$
|
6,534
|
$
6,459
|
|
|
|
|
|
SMURFIT-STONE CONTAINER
CORPORATION
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
Three months ended March 31, (In
millions)
|
|
2011
|
|
|
2010
|
|
Cash flows
from operating activities
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
54
|
|
$
|
(89)
|
|
Adjustments to reconcile
net income (loss) to net cash provided by operating
activities
|
|
|
|
|
|
|
Depreciation, depletion
and amortization
|
|
87
|
|
|
85
|
|
Amortization of deferred
debt issuance costs and original issue discount
|
|
3
|
|
|
|
|
Deferred income
taxes
|
|
12
|
|
|
(2)
|
|
Pension and postretirement
benefits
|
|
3
|
|
|
28
|
|
Non-cash restructuring
income
|
|
|
|
|
(3)
|
|
Non-cash stock-based
compensation
|
|
3
|
|
|
1
|
|
Non-cash foreign currency
exchange losses
|
|
|
|
|
6
|
|
Non-cash reorganization
items
|
|
|
|
|
26
|
|
Change in restricted cash
for utility deposits
|
|
|
|
|
2
|
|
Change in operating assets
and liabilities, net of effects from acquisitions and
dispositions
|
|
|
|
|
|
|
Receivables
|
|
(60)
|
|
|
(93)
|
|
Receivable for alternative
energy tax credits
|
|
|
|
|
48
|
|
Inventories
|
|
(51)
|
|
|
(19)
|
|
Prepaid expenses and other
current assets
|
|
(6)
|
|
|
(3)
|
|
Accounts payable and
accrued liabilities
|
|
18
|
|
|
46
|
|
Interest
payable
|
|
|
|
3
|
|
Other, net
|
|
(6)
|
|
|
14
|
|
Net cash provided by
operating activities
|
|
57
|
|
|
50
|
|
Cash flows
from investing activities
|
|
|
|
|
|
|
Expenditures for property,
plant and equipment
|
|
(35)
|
|
|
(34)
|
|
Proceeds from property
disposals
|
|
1
|
|
|
6
|
|
Net cash used for
investing activities
|
|
(34)
|
|
|
(28)
|
|
Cash flows
from financing activities
|
|
|
|
|
|
|
Net repayments of
long-term debt
|
|
(26)
|
|
|
(1)
|
|
Debt issuance costs on
exit credit facilities and other financing costs
|
|
|
|
|
(9)
|
|
Change in restricted cash
for collateralizing outstanding letters of credit
|
|
|
|
|
(15)
|
|
Net cash used for
financing activities
|
|
(26)
|
|
|
(25)
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash
|
|
|
|
|
1
|
|
Decrease in cash and cash
equivalents
|
|
(3)
|
|
|
(2)
|
|
Cash and cash
equivalents
|
|
|
|
|
|
|
Beginning of
period
|
|
449
|
|
|
704
|
|
End of period
|
$
|
446
|
|
$
|
702
|
|
|
|
|
|
|
|
SMURFIT-STONE CONTAINER
CORPORATION
|
|
EBITDA, As
Defined Below
|
|
(In
millions)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
|
1Q
11
|
|
4Q
10
|
|
1Q
10
|
|
|
|
|
|
|
|
|
|
Net sales
|
$ 1,581
|
|
$ 1,628
|
|
$
1,461
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
54
|
|
$
49
|
|
$
(89)
|
|
|
Provision for income taxes (Note
1)
|
11
|
|
27
|
|
-
|
|
|
Interest expense,
net
|
22
|
|
22
|
|
13
|
|
|
Depreciation, depletion
and amortization
|
87
|
|
85
|
|
85
|
|
EBITDA
|
174
|
|
183
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Reorganization items
|
1
|
|
5
|
|
41
|
|
|
Restructuring (income)
expense
|
4
|
|
18
|
|
(4)
|
|
|
Alternative fuel mixture tax
credits
|
-
|
|
-
|
|
(11)
|
|
|
Non-cash foreign currency
exchange losses
|
-
|
|
-
|
|
6
|
|
|
Bankruptcy claims settlement
gain
|
(3)
|
|
-
|
|
-
|
|
|
Rock-Tenn merger transaction
expense
|
3
|
|
-
|
|
-
|
|
|
Gain on disposal of
assets
|
-
|
|
(1)
|
|
-
|
|
|
Other
|
-
|
|
-
|
|
5
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
$ 179
|
|
$ 205
|
|
$
46
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin
|
11.3%
|
|
12.6%
|
|
3.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial
Information:
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
57
|
|
$
50
|
|
$
50
|
|
Capital
expenditures
|
35
|
|
67
|
|
34
|
|
Pension expense
|
10
|
|
14
|
|
31
|
|
Pension
contributions
|
7
|
|
154
|
|
2
|
|
Cash taxes
refunded
|
1
|
|
14
|
|
2
|
|
Change in working
capital
|
(99)
|
|
19
|
|
(18)
|
|
Containerboard, corrugated
containers and reclamation
|
|
|
|
|
|
|
|
operations segment
operating profit
|
141
|
|
174
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"EBITDA" is defined as net
income before 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.
|
|
|
|
Note 1: Provision for income
taxes for the three months ended March 31, 2011
is net of cellulosic biofuel production income tax credit of $14
million.
|
|
|
|
|
|
|
|
|
SMURFIT-STONE CONTAINER
CORPORATION
|
|
STATISTICAL
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
|
|
1Q
11
|
4Q
10
|
|
1Q
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Containerboard
System
|
|
|
|
|
|
|
North American Mill Operating
Rates (Containerboard Only)
|
97.1%
|
95.4%
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
North American
Containerboard Production - M Tons
|
1,576
|
1,534
|
|
1,585
|
|
|
Sequential Avg. Domestic
Linerboard Price Change
|
-1.4%
|
-1.5%
|
|
6.3%
|
|
|
|
|
|
|
|
|
|
Pulp Production - M
Tons
|
59
|
73
|
|
62
|
|
|
SBS/SBL Board Production -
M Tons
|
33
|
28
|
|
35
|
|
|
Kraft Paper Production - M
Tons
|
28
|
27
|
|
29
|
|
|
|
|
|
|
|
|
|
Total Maintenance Downtime
Tons - M Tons
|
23
|
43
|
|
20
|
|
|
|
|
|
|
|
|
Corrugated Containers
|
|
|
|
|
|
|
North American Shipments -
BSF
|
16.2
|
16.3
|
|
16.4
|
|
|
Per Day North American
Shipments - MMSF
|
252.6
|
267.9
|
|
260.9
|
|
|
Sequential Avg. Corrugated
Price Change
|
1.2%
|
0.5%
|
|
-0.6%
|
|
|
|
|
|
|
|
|
Fiber Reclaimed and
Brokered - M Tons
|
1,501
|
1,458
|
|
1,423
|
|
|
|
|
|
|
|
|
SMURFIT-STONE CONTAINER
CORPORATION
|
|
ADJUSTED NET
INCOME (LOSS) PER DILUTED SHARE
|
|
(In
Millions, Except Per Share Data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
(Note 1)
|
|
Predecessor
(Note 1)
|
|
|
|
1Q
11
|
|
4Q
10
|
|
|
1Q
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to common stockholders (GAAP)
|
$ 54
|
|
$ 49
|
|
|
$ (91)
|
|
|
Reorganization items, net of
income taxes
|
1
|
|
3
|
|
|
41
|
|
|
Restructuring (income)
expense, net of income taxes
|
2
|
|
11
|
|
|
(4)
|
|
|
Alternative fuel mixture tax
credits
|
-
|
|
-
|
|
|
(11)
|
|
|
Non-cash foreign currency
exchange losses
|
-
|
|
-
|
|
|
6
|
|
|
Bankruptcy claims
settlement gain, net of income taxes
|
(2)
|
|
-
|
|
|
-
|
|
|
Rock-Tenn merger
transaction expense, net of income taxes
|
2
|
|
-
|
|
|
-
|
|
|
Gain on disposal of
assets, net of income taxes
|
-
|
|
(1)
|
|
|
-
|
|
|
Cellulosic biofuel
production income tax credit
|
(14)
|
|
-
|
|
|
-
|
|
Adjusted net income (loss)
attributable to common stockholders (Note 2)
|
$ 43
|
|
$ 62
|
|
|
$ (59)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
(Note 1)
|
|
Predecessor
(Note 1)
|
|
|
|
1Q
11
|
|
4Q
10
|
|
|
1Q
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted
share attributable to common stockholders (GAAP)
|
$ 0.54
|
|
$ 0.49
|
|
|
$ (0.35)
|
|
|
Reorganization items, net of
income taxes
|
0.01
|
|
0.03
|
|
|
0.16
|
|
|
Restructuring (income)
expense, net of income taxes
|
0.02
|
|
0.11
|
|
|
(0.02)
|
|
|
Alternative fuel mixture tax
credits
|
-
|
|
-
|
|
|
(0.04)
|
|
|
Non-cash foreign currency
exchange losses
|
-
|
|
-
|
|
|
0.02
|
|
|
Bankruptcy claims
settlement gain, net of income taxes
|
(0.02)
|
|
-
|
|
|
-
|
|
|
Rock-Tenn merger
transaction expense, net of income taxes
|
0.02
|
|
-
|
|
|
-
|
|
|
Gain on disposal of
assets, net of income taxes
|
-
|
|
(0.01)
|
|
|
-
|
|
|
Cellulosic biofuel
production income tax credit
|
(0.14)
|
|
-
|
|
|
-
|
|
Adjusted net income (loss) per
diluted share attributable to common stockholders (Note
2)
|
$ 0.43
|
|
$ 0.62
|
|
|
$ (0.23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 1: For
the Predecessor Company, adjustments to GAAP net income were not
tax effected during the three months ended March 31, 2010 because
it was more likely than not that substantially all of the deferred
tax assets that were generated during bankruptcy would not be
realized.
For the Successor Company
periods, we recorded a provision for income taxes related to the
statements 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, restructuring (income)
expense, alternative fuel mixture tax credits, non-cash foreign
currency exchange losses, bankruptcy claims settlement gain,
Rock-Tenn merger transaction expense, gain on disposal of assets
and cellulosic biofuel production income tax credit. 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.
|
|
|
|
|
|
|
|
|
|
RESULTS OF OPERATIONS
Non-GAAP Financial Measures
In the accompanying analysis of financial information, 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 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, restructuring
(income) expense, alternative fuel mixture tax credits, non-cash
foreign currency exchange losses, bankruptcy claims settlement
gain, Rock-Tenn merger transaction expense, gain on disposal of
assets and cellulosic biofuel production income tax credit.
EBITDA is defined as net income (loss) before provision for
income taxes, interest expense, net and depreciation, depletion and
amortization. Adjusted EBITDA is defined as EBITDA adjusted
for reorganization items, restructuring (income) expense,
alternative fuel mixture tax credits, non-cash foreign currency
exchange losses, bankruptcy claims settlement gain, Rock-Tenn
merger transaction expense, gain on disposal of assets and other
adjustments.
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 and chief executive 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. 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 ongoing 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 the three
months ended March 31, 2011 and
December 31, 2010 of the Successor
and the three months ended March 31,
2010 of the Predecessor, as well as the reasons management
believes each of these items is not indicative of operating
performance:
- Reorganization items - These expense items are directly related
to the process of our reorganizing under Chapter 11 and the CCAA.
The items include a provision for rejected/settled executory
contracts and leases, accounts payable settlement gains and
professional fees. These items are not considered indicative
of ongoing operating performance and are not used by us to assess
our operating performance.
- Restructuring (income) expense - These adjustments primarily
represent severance costs and other costs associated with our
restructuring activities, net of gains related to the sale of
previously closed facilities. These income and expense items are
not considered indicative of 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 ongoing operating performance and are not
used by us to assess our operating performance.
- Non-cash foreign currency exchange 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 losses. We excluded the
impact of foreign currency exchange 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 losses are not considered indicative of
ongoing operating performance and are not used by us to assess our
operating performance.
- Bankruptcy claims settlement gain – These amounts represent the
return of reserved funds due to the favorable resolution of
bankruptcy claims. These items are not considered indicative
of ongoing operating performance and are not used by us to assess
our operating performance.
- Rock-Tenn merger transaction expense - These amounts represent
charges for legal, consulting and other direct expenses related to
the announced merger with Rock-Tenn. These items are not
considered indicative of ongoing operating performance and are not
used by us to assess our operating performance.
- Gain on disposal of assets - These amounts represent gains we
recognized related to the sale of non-strategic assets. These
gains are not considered indicative of ongoing operating
performance and are not used by us to assess our operating
performance.
- Cellulosic biofuel production income tax credit – These amounts
represent an income tax credit for registered cellulosic biofuel
producers which did not otherwise qualify for the alternative fuel
mixture credit. Under current law, this tax credit can be utilized
to offset income tax through December 31,
2015. These items are not considered indicative of
ongoing operating performance and are not used by us to assess our
operating performance.
- Other - These adjustments principally represent amounts accrued
under our 2009 long-term incentive plan. These income and
expense items are not considered indicative of ongoing operating
performance and are not used by us to assess 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.
The following 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) attributable to common stockholders
and adjusted net income (loss) per diluted share attributable to
common stockholders, respectively. The adjustments to GAAP
net income (loss) attributable to common stockholders for the
Predecessor period for the three months ended March 31, 2010 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.
For the three months ended March 31,
2011, we recorded a provision for income taxes related to
the Successor statement of operations. As a result, the
Successor period adjustments to net income (loss) attributable to
common stockholders are presented on a net of tax basis.
A reconciliation of net income (loss) to EBITDA and adjusted
EBITDA is also presented.
SOURCE Smurfit-Stone Container Corporation