SmurfitStone Container Corp. 7% Series A (SSCCP) filed Quarterly Report for the period ended 2009-09-30.
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Highlight of Business Operations:
Overview We had net income of $68 million for the third quarter of 2009 compared to net income of $65 million for the third quarter of 2008. The third quarter of 2009 results benefited from the alternative fuel tax credit income of $179 million, but were negatively impacted by reorganization items of $16 million and lower segment operating profits of $40 million. The third quarter of 2008 results benefited $84 million from the resolution of certain Canadian income tax examination matters. While sales volumes and average selling prices for containerboard and corrugated containers were lower for the third quarter of 2009, results benefited from lower costs compared to 2008.
For the nine months ended September 30, 2009, we had net income of $12 million compared to net income of $15 million for the same period last year. The 2009 results benefited from the alternative fuel tax credit income of $455 million, but were negatively impacted by debtor-in-possession debt issuance costs of $63 million, reorganization items of $109 million, lower segment operating profits of $80 million, higher interest expense of $30 million and loss on early extinguishment of debt of $20 million. The 2008 results benefited from the resolution of certain Canadian income tax examination matters and higher non-cash foreign currency exchange gains, but were negatively impacted by a charge of $22 million to fully reserve for all amounts due from Calpine Corrugated, LLC and litigation charges of $8 million. The segment operating results for the nine months ended September 30, 2009 were negatively impacted by lower sales volume for containerboard and corrugated containers and lower average selling prices for containerboard and corrugated containers. The 2009 nine month results benefited from lower energy and reclaimed fiber costs compared to the comparable period in 2008.
Alternative Fuel Tax Credit The U.S. Internal Revenue Code allows 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. The credit is scheduled to expire on December 31, 2009. On May 6, 2009, we were notified that our registration as an alternative fuel mixer was approved by the Internal Revenue Service. We submitted refund claims of approximately $473 million for the periods January 1, 2009 through September 30, 2009 related to production at ten of our U.S. mills, of which $415 million of this refund request was received during the nine months ended September 30, 2009. During the three and nine months ended September 30, 2009, we recorded other operating income of $179 million and $455 million, respectively, net of fees and expenses, in our consolidated statements of operations related to this matter.
Restructuring Activities During the third quarter of 2009, we closed four converting facilities. We recorded restructuring charges of $14 million, which were net of a $2 million gain on the sale of previously closed facilities. Restructuring charges included non-cash charges of $4 million related to the write-down of assets, primarily property, plant and equipment, to estimated net realizable values and the acceleration of depreciation for converting equipment expected to be abandoned or taken out of service. The remaining charges of $12 million were primarily for severance and benefits. As a result of the closures in the third quarter of 2009 and other ongoing initiatives, we reduced our headcount by approximately 300 employees.
For the nine months ended September 30, 2009, we closed 11 converting facilities. As a result of the closures in the first nine months of 2009 and other ongoing initiatives, we reduced our headcount by approximately 1,800 employees. We recorded restructuring charges of $38 million, which were net of a $2 million gain on the sale of previously closed facilities. Restructuring charges included non-cash charges of $8 million related to the write-down of assets, primarily property, plant and equipment, to estimated net realizable values and the acceleration of depreciation for converting equipment expected to be abandoned or taken out of service. The remaining charges of $32 million were primarily for severance
Cost of goods sold as a percent of net sales in the third quarter of 2009 was 90.6%, compared to 90.3% last year. Cost of goods sold decreased from $1,696 million for the third quarter of 2008 to $1,284 million for the third quarter of 2009 due primarily to lower sales volumes of containerboard and corrugated containers in the third quarter of 2009 and lower costs of reclaimed material ($58 million) and energy ($43 million).
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