01—Abstract
Summary
Summary of the 10-K filed February 17, 2010. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America (PCA) reported 2009 net sales of $2.15 billiona, down from $2.36 billion in 2008, as lower sales volume and lower corrugated products and containerboard prices weighed on results.
Net income rose to $265.9 millionb, or $2.60 per diluted share, from $135.6 million, but the increase was driven largely by an alternative fuel mixture tax credit of $168.4 million recorded in income from operations. Excluding that credit, the company's income from operations decreased $57.8 million for 2009, according to the filing. The company describes itself as the fifth largest producer of containerboard and corrugated products in the United States by production capacity, operating four containerboard mills and 68 corrugated manufacturing operations.
Demand and pricing showed signs of recovery during 2009. Corrugated products shipments fell 4.6% for the year but improved steadily from the second quarter, and the mills ran at 94% of capacity. Containerboard prices dropped $70c per ton during 2009 and then rose $50 per ton in January 2010.
Management expects first-quarter 2010 earnings to be lower than the fourth-quarter 2009 earnings of $16 milliond, which excluded $44 million of alternative fuel mixture tax credit income. The filing also notes that the credit expired on December 31, 2009, and that PCA plans about $300.0 million of 2010 capital expenditures, including up to $200.0 million for energy optimization projects at its Counce and Valdosta mills. Cash flow from operations was $306.1 million in 2009, and cash and cash equivalents rose to $260.7 million at year end.
Total debt obligations were $680.9 million, and stockholders' equity increased to $898.8 million. The company paid dividends of $0.15 per share in each quarter of 2009, versus $0.30 per quarter in 2008, and made no share repurchases in 2009.
02—Key points
Key Highlights
- Net sales of $2.15 billion in 2009, down $212.9 million, or 9.0%, from 2008, driven by lower sales volume and lower prices.
- Net income of $265.9 million ($2.60 per diluted share) in 2009, versus $135.6 million in 2008, helped by a $168.4 million alternative fuel mixture tax credit.
- Income from operations excluding the alternative fuel mixture tax credit decreased $57.8 million in 2009, according to the filing.
- Corrugated products volume fell 4.6% to 28.9 billion square feet in 2009, with steady improvement from the second quarter onward.
- Cash provided by operating activities was $306.1 million in 2009, and cash and cash equivalents ended the year at $260.7 million.
- Management expects first-quarter 2010 earnings to be lower than fourth-quarter 2009 earnings of $16 million, excluding tax credit income, citing higher recycled fiber and energy costs.
- Quarterly dividends were cut to $0.15 per share in 2009 from $0.30 per share in 2008; no shares were repurchased in 2009.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Packaging Corp. of America kept $0.12.
- Revenue$2.15B100.0%
- Cost of revenue−$1.72B80.1%
- Gross profit$426.6M19.9%
- Operating costs−$74.1M3.5%
- Operating income$352.5M16.4%
- Interest, other & tax−$86.6M4.0%
- Net income$265.9M12.4%
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 17, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $2.15B$2.36B | −9.0% |
| Cost of Revenue | $1.72B$1.87B | −7.9% |
| Gross Profit | $426.58M$491.36M | −13.2% |
| R&D Expenses | $9.40M— | — |
| SG&A Expenses | $173.44M$173.26M | +0.1% |
| Operating Income | $352.45M$241.81M | +45.8% |
| Net Income | $265.89M$135.61M | +96.1% |
| EPS (Basic) | $2.62$1.32 | +98.5% |
| EPS (Diluted) | $2.60$1.31 | +98.5% |
| Shares Outstanding (Basic) | 101.58M102.75M | −1.1% |
| Shares Outstanding (Diluted) | 102.36M103.59M | −1.2% |
05—Questions
Frequently Asked Questions
How much of the 2009 net income came from the alternative fuel mixture tax credit?
The filing states that the alternative fuel mixture tax credit contributed $168.4 million to income from operations in 2009, and that PCA recorded $171.3 million from these credits after deducting $5.0 million of net after-tax operating expenses. The credit expired on December 31, 2009.
What is PCA's capital spending outlook for 2010?
PCA expects capital expenditures of $300.0 million in 2010, including up to $200.0 million for major energy optimization projects at its Counce and Valdosta mills. The remaining $100.0 million will be used primarily for maintenance capital, cost reduction, business growth and environmental compliance.
Is PCA's debt structure a concern for investors?
Total debt obligations were $680.9 million at December 31, 2009. The filing states that the company was in compliance with its debt covenants at year end and that it had $172.2 million of unused borrowing capacity under its existing credit facilities. The filing also notes that a prolonged and severe economic downturn could affect the company's ability to comply with those covenants.
What did management say about demand and pricing trends entering 2010?
Industry containerboard prices rose $50 per ton in January 2010, except for West Coast shipments, which rose $70 per ton. Management expects higher containerboard and box prices in the first quarter of 2010, with most of the earnings benefit realized in the second quarter, though recycled fiber and energy costs are expected to be higher.
06—Continue