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Packaging Corp. of America Reports Operating Results (10-K)

February 22, 2011 | About:

Packaging Corp. of America (NYSE:PKG) filed Annual Report for the period ended 2010-12-31.

Packaging Corp Of America has a market cap of $3.07 billion; its shares were traded at around $29.95 with a P/E ratio of 18.49 and P/S ratio of 1.26. The dividend yield of Packaging Corp Of America stocks is 2%. Packaging Corp Of America had an annual average earning growth of 2.1% over the past 10 years.Hedge Fund Gurus that owns PKG: Steven Cohen of SAC Capital Advisors, Paul Tudor Jones of The Tudor Group, Bruce Kovner of Caxton Associates, George Soros of Soros Fund Management LLC. Mutual Fund and Other Gurus that owns PKG: Jean-Marie Eveillard of First Eagle Investment Management, LLC, NWQ Managers of NWQ Investment Management Co, Pioneer Investments.

Highlight of Business Operations:

Packaging Corporation of America (we, us, our, PCA or the Company) is the fifth largest producer of containerboard and corrugated products in the United States in terms of production capacity. During 2010, we produced 2.4 million tons of containerboard at our mills, of which about 80% was consumed in PCAs corrugated products manufacturing plants, 9% was sold to domestic customers and 11% was sold in the export market. Our corrugated products manufacturing plants sold about 31.0 billion square feet (BSF) of corrugated products. Our net sales to third parties totaled $2.4 billion in 2010.

Containerboard produced in our mills is shipped by rail or truck. Rail shipments represent about 50% to 55% of the tons shipped and the remaining 45% to 50% is comprised of truck shipments. Our individual mills do not own or maintain outside warehousing facilities.

Fiber supply. Fiber is the single largest cost in the manufacture of containerboard. PCA consumes both wood fiber and recycled fiber in its containerboard mills. We have no 100% recycled mills, or those mills whose fiber consumption consists solely of recycled fiber. To reduce our fiber costs, we have invested in processes and equipment to ensure a high degree of fiber flexibility. Our mill system has the capability to shift a portion of its fiber consumption between softwood, hardwood and recycled sources. All of our mills, other than our Valdosta mill, can utilize some recycled fiber in their containerboard production. Our ability to use various types of virgin and recycled fiber helps mitigate the impact of changes in the prices of various fibers. Our corrugated manufacturing operations generate recycled fiber as a by-product from the manufacturing process, which is sold to our mills directly or through trade agreements. During 2010, our containerboard mills consumed approximately 638,000 tons of recycled fiber, and our corrugated converting operations generated approximately 200,000 tons of recycled fiber. As a result, PCA was a net recycled fiber buyer of 438,000 tons, or 18% of PCAs total fiber requirements.

Energy supply. Energy at the mills is obtained through purchased electricity or through various fuels, which are converted to steam or electricity on-site. Fuel sources include coal, natural gas, oil, internally produced and purchased bark and by-products of the containerboard manufacturing and pulping process, including black liquor. These fuels are burned in boilers to produce steam. Steam turbine generators are used to produce electricity. To reduce our mill energy cost, we have invested in processes and equipment to ensure a high level of purchased fuel flexibility. In recent history, natural gas and fuel oil have exhibited higher costs per thermal unit and more price volatility than coal and bark. During 2010, 11.3 million MMBTUs (million BTUs), or approximately 70% of our mills purchased fuel needs, were from purchased bark and coal, historically our two lowest cost purchased fuels. For the same period, our mills consumed about 3.6 million MMBTUs of natural gas (22% of the mills total purchased fuels) and 0.3 million MMBTUs of oil (2% of the mills total purchased fuels).

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