01—Abstract
Summary
Summary of the 10-K filed March 27, 2001. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America (PCA), the Lake Forest, Illinois containerboard and corrugated products producer, reported net sales of $1.92 billiona for the year ended December 31, 2000, up $151.3 million, or 8.5%, from the pro forma 1999 figure.
Income before extraordinary item was $172.96 million, and operating income rose to $404.8 millionb, or 67.2% above pro forma 1999. The increase was driven mainly by higher sales prices for corrugated products and containerboard. Results also include fourth-quarter gains on timberland sales of $60.4 million in 2000, which are included in the reported figures.
Net income was $161.9 millionc, and diluted earnings per share were $1.33. The company's balance sheet improved considerably following its April 1999 acquisition from Pactiv Corporation and its January 2000 IPO. Total long-term debt fell to $869.2 million at December 31, 2000 from $1.33 billion a year earlier, reflecting voluntary term loan prepayments totaling approximately $460.0 million in 2000.
Net cash provided by operating activities was $339.0 milliond, and capital expenditures were $129.0 million. PCA has never paid dividends on its common stock and has no current plans to do so, and its debt agreements restrict dividend payments. The filing also highlights ongoing risks.
PCA faces a class action alleging a Sherman Act violation in linerboard pricing, with trial set for June 2002, which management believes lacks merit. Environmental compliance under the EPA Cluster Rules is expected to cost $8.1 million in 2001 in capital spending. Interest rate exposure is partly hedged through collar agreements covering $250.0 million of notional debt at year-end 2000.
02—Key points
Key Highlights
- Net sales of $1,921.9 million for 2000, up $151.3 million, or 8.5%, from pro forma 1999, driven by higher corrugated and containerboard prices
- Operating income of $404.8 million, up 67.2% from pro forma 1999, including $60.4 million of fourth-quarter timberland sale gains
- Net income of $161.9 million; diluted EPS of $1.33 for 2000
- Long-term debt reduced to $869.2 million at year-end 2000 from $1,329.2 million, after voluntary term loan prepayments of approximately $460.0 million in 2000
- Cash flow from operations of $339.0 million in 2000; capital expenditures of $129.0 million
- Initial public offering completed January 28, 2000 at $12.00 per share; common stock trades on the NYSE under 'PKG'
- No dividends paid to date and none planned; debt covenants restrict payments of dividends
- Pending Sherman Act class action on linerboard pricing with trial set for June 2002; management considers the claims without merit
03—Questions
Frequently Asked Questions
Does Packaging Corporation of America pay a dividend?
No. PCA has never paid dividends on its common stock and currently has no plans to do so. Future dividends would depend on earnings, financial condition, capital requirements, and restrictions in financing agreements, and the company's debt agreements and Delaware law limit the amount it can pay.
What drove the increase in 2000 operating income?
The filing attributes the increase primarily to higher sales prices of corrugated products and containerboard to third parties, along with reduced corporate overhead. Operating income excludes fourth-quarter timberland sale gains of $60.4 million in 2000, though the reported figures include them.
How much debt did PCA reduce in 2000?
Total long-term debt fell from $1,329.2 million at December 31, 1999 to $869.2 million at December 31, 2000. The company made voluntary term loan prepayments of approximately $460.0 million in 2000, funded by free cash flow from operations and timberland sale proceeds.
What legal and environmental risks does the filing disclose?
PCA is a defendant in a consolidated class action under Section 1 of the Sherman Act alleging linerboard supply restriction in 1993 to 1995, with trial set for June 2002. Management believes the claims lack merit and does not expect a material adverse effect. On environmental matters, PCA estimates $8.1 million of 2001 capital costs, including Cluster Rule compliance, and reports reserves of $2.9 million in total.
Who owned PCA after the IPO?
The filing states that Madison Dearborn Partners formed PCA Holdings LLC, which acquired a 55% common equity interest in PCA in the April 1999 transactions. Pactiv Corporation held the remaining 45% stake and sold 35,000,000 shares in the IPO, while PCA sold 11,250,000 new shares. The filing does not state post-IPO ownership percentages.
04—Continue