Packaging Corp. of America (PKG) filed Quarterly Report for the period ended 2009-09-30.
Packaging Corp. of America is one of the largest producers of containerboard in the United States and also one of the largest manufacturers of corrugated packaging products. The company produces corrugated containers as well as the containerboard used to manufacture corrugated containers. Corrugated containers are the most commonlyused type of paper packaging. Corrugated containers referred to as cardboard boxes are made by combining multiple layers of heavyweight paper known as containerboard and fabricating them into finished boxes. Packaging Corp. Of America has a market cap of $1.9 billion; its shares were traded at around $18.47 with a P/E ratio of 17.2 and P/S ratio of 0.8. The dividend yield of Packaging Corp. Of America stocks is 3.2%. Packaging Corp. Of America had an annual average earning growth of 28.2% over the past 5 years.
Highlight of Business Operations:
Net sales decreased by $67.2 million, or 10.8%, for the three months ended September 30, 2009 from the comparable period in 2008, primarily as a result of the impact of decreased sales volume of corrugated products and containerboard to third parties ($35.0 million) and decreased sales prices ($32.2 million). Sales prices decreased as a result of monthly published industry containerboard price decreases from December 2008 through May 2009 and also in September 2009, which reduced linerboard and corrugating medium transaction prices by a total $80 per ton (or 13.1%) and $90 per ton (or 15.3%), respectively, compared to November 2008 published price levels.
Income from operations increased by $27.6 million, or 40.2%, for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, primarily due to an alternative fuel mixture tax credit ($47.1 million). Please see Note 13 to the financial statements included in this report for a description of the alternative fuel mixture tax credit. Excluding the alternative fuel mixture tax credit, income from operations was $19.5 million below the previous year’s third quarter primarily as a result of the impact of decreased sales prices of corrugated products and containerboard ($32.2 million) and lower sales volume ($10.2 million). These items were partially offset by decreased costs of transportation ($8.8 million) energy ($7.8 million), recycled fiber ($3.2 million) and chemicals ($2.7 million).
Income from operations increased by $91.6 million, or 48.2%, for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, primarily attributable to the alternative fuel mixture tax credit of $126.8 million described previously. Excluding the alternative fuel mixture tax credit, income from operations decreased $35.2 million for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 primarily attributable to lower sales volume ($66.4 million), decreased sales prices of corrugated products and containerboard ($13.5 million) and increased labor and fringe benefit costs ($7.7 million). These items were partially offset by decreased costs of recycled fiber ($19.7 million), transportation ($18.6 million), energy ($11.8 million) and starch and wax ($1.9 million).
Net interest expense increased $4.0 million, or 17.5%, for the nine months ended September 30, 2009 from the nine months ended September 30, 2008, primarily as a result of lower interest income ($4.9 million) earned on PCA’s cash equivalents, partially offset by lower interest expense ($0.9 million) related to PCA’s outstanding debt balances. The $4.9 million decrease in interest income was primarily due to lower interest income rates during the nine months ended September 30, 2009 compared to the same period in 2008. The $0.9 million decrease in interest expense was primarily due to a decrease in interest expense related to the Company’s receivables credit facility due to lower interest rates.
Net cash provided by operating activities for the nine months ended September 30, 2009 was $209.3 million compared to $182.2 million for the nine months ended September 30, 2008, an increase of $27.1 million, or 14.9%. Net income, excluding the impact of the alternative fuel mixture tax credits described in Note 13 to the financial statements included in this report, was $79.7 million for the first nine months of 2009 compared to $105.4 million for the comparable period in 2008, a decrease of $25.7 million that reduced net cash provided by operating activities. This decrease was more than offset by reduced cash requirements, including a $22.4 million reduction in federal tax payments in the second and third quarters of 2009 as a result of the alternative fuel mixture tax credits. Cash requirements for operating activities are subject to PCA’s operating needs, which were impacted by the weakened business conditions during the first nine months of 2009, the timing of collection of receivables and payments of payables and expenses, and seasonal fluctuations in the Company’s operations.
Net cash used for financing activities totaled $60.8 million for the nine months ended September 30, 2009, a decrease of $101.2 million, or 62.5%, compared to the same period in 2008. The difference was primarily attributable to lower debt payments of $169.7 million in 2009, $45.3 million in repurchases of PCA common stock during the first nine months of 2008 and lower common stock dividends paid of $32.5 million during the first nine months of 2009 compared to the same period in 2008, partially offset by $145.2 million in net proceeds received from PCA’s notes offering in 2008 described below.
PKG is in the portfolios of NWQ Managers of NWQ Investment Management Co, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
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