Packaging Corporation of America (PKG) recently reported third quarter net income of $104 million, or $1.06 per share. Third quarter net income included after-tax charges for the Boise integration, debt refinancing and DeRidder mill restructuring of $20 million, or $0.20 per share, including cash charges of $6 million, or $0.06 per share, and non-cash charges of $14 million, or $0.14 per share. Excluding special items, third quarter 2014 net income was $124 million, or $1.26 per share, compared to third quarter 2013 net income of $89 million, or $0.92 per share, and second quarter 2014 net income of $114 million, or $1.16 per share. Details of special items are shown in the schedules included with this press release. Third quarter net sales were $1,519 million compared to third quarter 2013 net sales of $845 million and second quarter 2014 net sales of $1,468 million.
Excluding special items, the $0.10 per share increase in third quarter 2014 earnings, compared to second quarter 2014 earnings, was driven by increased sales volume and improved mix ($0.12), lower fuel costs ($0.02) and lower chemical and recycled fiber costs ($0.02). These items were partially offset by higher annual outage costs ($0.03), higher electricity costs ($0.02) and higher medical and worker’s compensation costs ($0.02).
In the packaging segment, EBITDA, excluding special items, was $262 million on sales of $1,176 million. With the acquisition of Boise, corrugated products shipments were up 33% compared to the third quarter of 2013. Excluding Boise, PCA shipments were up 6.2% in total and 4.5% per workday compared to the third quarter of last year. With strong internal demand, PCA reduced its outside sales of containerboard by 19,000 tons compared to last year’s third quarter. Containerboard production was 858,000 tons, up 12,000 tons compared to the second quarter of this year.
In the paper segment, EBITDA, excluding special items, was $56 million on sales of $313 million. Office paper shipments were up 7.3% compared with this year's second quarter, and down 5.4% compared to last year’s third quarter. Printing and converting and pressure sensitive paper shipments were up 3,000 tons compared to the second quarter, and decreased by 22,000 tons compared to last year's third quarter, as a result of the fourth quarter 2013 paper machine closures at the International Falls, Minnesota mill.
Commenting on reported results, Mark W. Kowlzan, Chief Executive Officer of PCA, said, “This was our 8th consecutive quarter of record earnings driven by strong sales volume, record mill productivity, and mill cost reductions. The integration of Boise packaging continues to generate significant synergies, and operational improvements in White Papers have resulted in lower costs and higher margins. The conversion of the No. 3 newsprint machine to containerboard at DeRidder was completed on October 17th, two weeks ahead of schedule. The start-up of the machine is progressing as planned with no major production or quality issues so far”
