Packaging Corporation of America Reports Third Quarter 2015 Results

Packaging Corporation of America (NYSE: PKG) today reported third quarter net income of $128 million, or $1.31 per share, compared to last year’s third quarter net income of $104 million, or $1.06 per share. Earnings included a $5 million, or $.05 per share, net gain for special items related to the Boise integration including the sale of the former St. Helens mill site previously operated by Boise Inc. Excluding special items, third quarter 2015 net income was $123 million, or $1.26 per share, compared to third quarter 2014 net income of $124 million, or $1.26 per share. Third quarter net sales were $1.5 billion in both 2015 and 2014.

Excluding special items, third quarter 2015 earnings per share, compared to the third quarter of 2014, included improved volume ($.07), lower costs for chemicals ($.03), energy ($.03) and repairs ($.02) and a lower tax rate ($.03). These items were offset by lower white paper prices and mix ($.13), lower export containerboard prices ($.03), and higher fiber costs ($.01).

Packaging segment EBITDA in the third quarter of 2015, excluding special items, was $268 million with sales of $1,144 million compared to third quarter 2014 packaging EBITDA of $262 million with sales of $1,176 million. Revenues in 2014 included $36 million related to the discontinued newsprint business and other divested operations. Corrugated products shipments were up 1.3% over last year’s record third quarter with the same number of workdays. Containerboard production was 933,000 tons which was an increase of 75,000 tons over last year’s third quarter including 70,000 tons from the D3 machine at DeRidder. Containerboard inventories were up 2,000 tons compared to 2014 year-end levels.

Paper segment EBITDA in the third quarter of 2015, excluding special items, was $46 million with sales of $292 million compared to third quarter 2014 EBITDA of $56 million with sales of $313 million. Total sales prices were lower and volume was essentially equal to the third quarter of last year.

Commenting on third quarter results, Mark W. Kowlzan, CEO, said “We performed very well equaling last year’s record third quarter earnings despite lower white papers prices and mix and lower export containerboard prices which together totaled $.16 per share. We achieved record volumes in both our packaging mills and corrugated products plants and continued to reduce costs and optimize our operations. The planned capital outage on our D3 paper machine at DeRidder was successfully completed and has enabled the machine to achieve the 1,000 tons per day design capacity. Finally, in our paper segment, we were able to reduce about half of the impact from lower sales prices through our cost reduction and efficiency improvement efforts.”

“Looking ahead,” Mr. Kowlzan added, “we expect seasonally lower volumes for containerboard and corrugated products as well as a seasonally less rich mix in corrugated products, compared to the third quarter. In addition, we expect seasonally lower volumes and a less rich mix in white papers. With colder weather, wood and fuel costs are also expected to be seasonally higher. Finally, as previously reported, maintenance outage costs are expected to be $.10 per share higher in the fourth quarter due to the planned 24-day outage at our Jackson, Alabama white papers mill for a major rebuild of the recovery boiler which will reduce production and increase costs. Considering these items, we expect fourth quarter earnings of $1.03 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 third 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.

Conference Call Information:

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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