Packaging Corporation of America Reports Record Second Quarter 2015 Results

Packaging Corporation of America (NYSE: PKG) today reported record second quarter net income of $114 million, or $1.16 per share, compared to last year’s second quarter net income of $100 million, or $1.01 per share. Earnings included a net charge for special items for the Boise integration and DeRidder, Louisiana mill restructuring of $2 million, or $0.02 per share. Excluding special items, second quarter 2015 net income was a record $116 million, or $1.18 per share, compared to second quarter 2014 net income of $114 million, or $1.16 per share. Second quarter net sales were $1.5 billion in both 2015 and 2014.

Excluding special items, the $0.02 per share increase in second quarter 2015 earnings, compared to the second quarter of 2014, was driven by increased volume ($0.10), improved corrugated products sales mix ($0.02), lower costs for energy ($0.07) and chemicals ($0.02), and a lower tax rate ($0.04). These items were partially offset by lower white paper prices and mix ($0.10), lower export containerboard prices ($0.02), higher labor and benefit costs ($0.05), increased annual mill outage costs ($0.03) and higher wood costs ($0.02).

Packaging segment EBITDA in the second quarter of 2015 was $267 million with sales of $1,142 million compared to second quarter 2014 packaging EBITDA of $259 million, excluding special items, with sales of $1,145 million. Corrugated products shipments were up 2.1% compared to the second quarter of last year with the same number of workdays. Containerboard production was 937,000 tons which was an increase of 91,000 tons over last year’s second quarter including 79,000 tons from the D3 machine at DeRidder. Containerboard inventories were down 1,400 tons compared to the end of the first quarter and were down about 4,000 tons from year-end 2014.

Paper segment EBITDA in the second quarter of 2015 was $37 million with sales of $281 million compared to second quarter 2014 EBITDA of $45 million, excluding special items, with sales of $295 million. Office paper and printing and converting shipments were up, while pressure sensitive paper shipments were down compared to the second quarter of last year.

Commenting on results, Mark W. Kowlzan, CEO, said “We had an outstanding quarter operationally in both our mills and box plants which increased earnings significantly over prior guidance. The benefits from the improvements made at the DeRidder mill, during its first quarter outage, were realized faster than expected, which allowed further grade optimization in our containerboard mill system. In corrugated products, our sales mix improved seasonally more than we expected contributing to higher earnings. We also continued to improve operations and lower costs in our white paper mills which offset some of the impact of lower paper prices.”

“Looking ahead to the third quarter,” Mr. Kowlzan added, “we expect higher containerboard, corrugated products and white paper shipments, lower mill annual outage costs, and lower chemical costs. White paper prices are expected to be lower with announced price changes in industry trade publications. Finally, we plan to take our D3 paper machine at DeRidder down in September for 13 days to install additional dryers which will provide the capability to achieve design capacity and lower our costs. Considering these items, we expect third quarter earnings of $1.28 per share.”

In addition to PCA’s consolidated earnings results and the segment information that accompanies this press release, we posted other supplemental financial data for the second quarter on our website at www.packagingcorp.com.

PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated freesheet paper in North America. 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, 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, 2014 filed with the Securities and Exchange Commission and available at the SEC’s website at “www.sec.gov”.

Non-GAAP measures used in this press release are reconciled to the most comparable measure reported in accordance with GAAP in the schedules to this press release.

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