Packaging Corp. of America (PKG, Financial) filed Quarterly Report for the period ended 2009-03-31.
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 $1.75 billion; its shares were traded at around $17.07 with a P/E ratio of 13.4 and P/S ratio of 0.8. The dividend yield of Packaging Corp. of America stocks is 3.5%. Packaging Corp. of America had an annual average earning growth of 28.2% over the past 5 years.
Income from operations decreased by $7.5 million, or 13.2%, for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, primarily attributable to the impact of lower sales volume ($32.5 million), increased labor and fringe benefit costs ($4.4 million) and chemical costs ($3.5 million). The impact of reduced sales volume and higher labor and chemical costs was partially offset by increased sales prices of corrugated products and containerboard ($21.5 million) and decreased costs of recycled fiber ($7.7 million) and transportation ($3.0 million).
Net interest expense increased $2.4 million, or 38.6%, for the three months ended March 31, 2009 from the three months ended March 31, 2008, primarily as a result of lower interest income ($1.8 million) earned on PCAs cash equivalents and higher interest expense ($0.6 million) related to PCAs outstanding debt balances. The $1.8 million decrease in interest income was primarily due to lower interest income rates during the three months ended March 31, 2009 compared to the same period in 2008. The $0.6 million increase in interest expense was due to a $1.1 million increase in interest expense related to PCAs senior notes as a result of the higher interest rates on the 61/2% notes due 2018 we issued in March 2008, the proceeds of which were used to refinance the 43/8% notes due August 2008. This was partially offset by a $0.7 million decrease in interest expense related to the Companys receivables credit facility due to lower interest rates.
Net cash provided by operating activities for the three months ended March 31, 2009 was $50.7 million compared to $44.6 million for the three months ended March 31, 2008, an increase of $6.1 million, or 13.7%. Although lower net income reduced net cash provided by operating activities by $6.4 million, this decrease was more than offset by reduced cash requirements. Cash requirements for operating activities are subject to PCAs operating needs, which were impacted by the weakened business conditions during the first quarter of 2009, the timing of collection of receivables and payments of payables and expenses, and seasonal fluctuations in the Companys operations.
Net cash used for financing activities totaled $30.7 million for the three months ended March 31, 2009, an increase of $103.5 million, or 142.2%. The increase was primarily attributable to $144.4 million in net proceeds received from PCAs notes offering in 2008 described below, partially offset by a debt prepayment of $20.0 million made in the first quarter of 2008 and $20.4 million in repurchases of PCA common stock during the first quarter of 2008.
In connection with the senior notes offering in March of 2008, PCA received proceeds, net of discount, of $149.9 million and paid $4.4 million for settlement of a treasury lock that it entered into to protect it against increases in the ten-year U.S. Treasury rate, which served as a reference in determining the interest rate applicable to the notes. PCA also incurred financing costs in the amount of $1.1 million in connection with the senior notes offering. PCA later used the proceeds of this offering, together with cash on hand, to repay all of the $150.0 million of outstanding 43/8% senior notes due 2008 on August 1, 2008.
Read the The complete ReportPKG is in the portfolios of John Griffin, NWQ Managers of NWQ Investment Management Co, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
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 $1.75 billion; its shares were traded at around $17.07 with a P/E ratio of 13.4 and P/S ratio of 0.8. The dividend yield of Packaging Corp. of America stocks is 3.5%. Packaging Corp. of America had an annual average earning growth of 28.2% over the past 5 years.
Highlight of Business Operations:
The U.S. economy experienced a severe downturn in the fourth quarter of 2008 which continued into the first quarter of 2009. As a result, reported industry-wide shipments of corrugated products decreased 11.5% for the three months ended March 31, 2009 compared to the same period in 2008. During this same period, reported industry containerboard production decreased 18.6% from first quarter of 2008 levels. As reported by industry publications, containerboard prices declined $10 per ton both in January and February and an additional $15 per ton in March. Average published prices for linerboard ended March 2009 $10 per ton higher than March 2008 and average published prices for corrugating medium at the end of March 2009 were unchanged from March 2008. During this same period, industry containerboard inventory levels at the end of March 2009 decreased approximately 109,800 tons, or 4.3%, compared to March 2008. In April 2009 industry publications further reported that prices for linerboard and corrugating medium dropped an additional $15 per ton.Income from operations decreased by $7.5 million, or 13.2%, for the three months ended March 31, 2009 compared to the three months ended March 31, 2008, primarily attributable to the impact of lower sales volume ($32.5 million), increased labor and fringe benefit costs ($4.4 million) and chemical costs ($3.5 million). The impact of reduced sales volume and higher labor and chemical costs was partially offset by increased sales prices of corrugated products and containerboard ($21.5 million) and decreased costs of recycled fiber ($7.7 million) and transportation ($3.0 million).
Net interest expense increased $2.4 million, or 38.6%, for the three months ended March 31, 2009 from the three months ended March 31, 2008, primarily as a result of lower interest income ($1.8 million) earned on PCAs cash equivalents and higher interest expense ($0.6 million) related to PCAs outstanding debt balances. The $1.8 million decrease in interest income was primarily due to lower interest income rates during the three months ended March 31, 2009 compared to the same period in 2008. The $0.6 million increase in interest expense was due to a $1.1 million increase in interest expense related to PCAs senior notes as a result of the higher interest rates on the 61/2% notes due 2018 we issued in March 2008, the proceeds of which were used to refinance the 43/8% notes due August 2008. This was partially offset by a $0.7 million decrease in interest expense related to the Companys receivables credit facility due to lower interest rates.
Net cash provided by operating activities for the three months ended March 31, 2009 was $50.7 million compared to $44.6 million for the three months ended March 31, 2008, an increase of $6.1 million, or 13.7%. Although lower net income reduced net cash provided by operating activities by $6.4 million, this decrease was more than offset by reduced cash requirements. Cash requirements for operating activities are subject to PCAs operating needs, which were impacted by the weakened business conditions during the first quarter of 2009, the timing of collection of receivables and payments of payables and expenses, and seasonal fluctuations in the Companys operations.
Net cash used for financing activities totaled $30.7 million for the three months ended March 31, 2009, an increase of $103.5 million, or 142.2%. The increase was primarily attributable to $144.4 million in net proceeds received from PCAs notes offering in 2008 described below, partially offset by a debt prepayment of $20.0 million made in the first quarter of 2008 and $20.4 million in repurchases of PCA common stock during the first quarter of 2008.
In connection with the senior notes offering in March of 2008, PCA received proceeds, net of discount, of $149.9 million and paid $4.4 million for settlement of a treasury lock that it entered into to protect it against increases in the ten-year U.S. Treasury rate, which served as a reference in determining the interest rate applicable to the notes. PCA also incurred financing costs in the amount of $1.1 million in connection with the senior notes offering. PCA later used the proceeds of this offering, together with cash on hand, to repay all of the $150.0 million of outstanding 43/8% senior notes due 2008 on August 1, 2008.
Read the The complete ReportPKG is in the portfolios of John Griffin, NWQ Managers of NWQ Investment Management Co, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
