01—Abstract
Summary
Summary of the 10-K filed February 28, 2013. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America (PCA) reported net sales of $2.84 billiona and net income of $163.8 million for 2012, compared with $2.62 billion and $158.0 million in 2011.
Income from operations rose to $443.5 millionb from $272.7 million, but this figure includes a $95.5 million benefit from reallocating alternative fuel credits. Excluding special items, the company reported net income of $200.7 million ($2.06 per diluted share) for 2012, versus $161.8 million ($1.61 per diluted share) for 2011. Management attributed the improvement to higher sales volumes and prices, along with lower energy, recycled fiber and chemical costs, partially offset by higher labor, fringe benefit, depreciation and transportation costs.
The filing shows a company that remained cash generative and returned capital to shareholders. Net cash from operating activities was $404.2 millionc in 2012, and the company paid dividends, repurchased $45.2 million of stock, and redeemed its $400.0 million 5.75% notes using proceeds from new $400.0 million 3.90% notes due 2022. Total debt obligations were $819.5 million at year-end 2012 against stockholders' equity of $969.5 million.
The quarterly dividend was raised to $0.3125d per share from $0.25, and management expects first-quarter 2013 earnings, excluding special items, to be lower than the fourth quarter's $0.61 per diluted share. Key risks disclosed include a pending Sherman Act class action (Kleen Products LLC v.
Packaging Corp. of America et al.) alleging containerboard price-fixing, for which the company cannot estimate a range of losses, and expected Boiler MACT capital expenditures of $45.0 million to $55.0 million over three years. The 2012 results also reflect a $19.6 million net charge tied to alternative energy tax credits and a $21.3 million redemption premium on the 5.75% notes.
02—Key points
Key Highlights
- Net sales rose to $2,843.9 million in 2012 from $2,620.1 million in 2011, driven primarily by a $214.8 million increase from sales volumes.
- Reported net income was $163.8 million ($1.68 per diluted share) versus $158.0 million ($1.57 per diluted share) in 2011; excluding special items, net income was $200.7 million ($2.06 per diluted share).
- Income from operations of $443.5 million included a $95.5 million benefit from amending the 2009 tax return to reallocate alternative fuel credits, with an offsetting $118.5 million tax expense.
- Operating cash flow was $404.2 million in 2012, up from $345.5 million in 2011, and the company paid $117.9 million in dividends and repurchased $45.2 million of common stock.
- The company issued $400.0 million of 3.90% senior notes due 2022 and redeemed its $400.0 million 5.75% notes, incurring a $21.3 million redemption premium.
- The quarterly dividend increased to $0.3125 per share from $0.25, and management expects first-quarter 2013 earnings to be lower than fourth-quarter 2012 earnings of $0.61 per diluted share, excluding special items.
- Liquidity included $327.3 million in unused borrowing capacity at year-end 2012, and the company estimates 2013 normal capital expenditures of about $125.0 million plus $50.0 million for box plant acquisitions or investments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Packaging Corp. of America kept $0.06.
- Revenue$2.84B100.0%
- Cost of revenue−$2.21B77.7%
- Gross profit$634.7M22.3%
- Operating costs−$197.1M6.9%
- Operating income$437.6M15.4%
- Interest, other & tax−$277.4M9.8%
- Net income$160.2M5.6%
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 28, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $2.84B$2.62B | +8.5% |
| Cost of Revenue | $2.21B$2.08B | +6.3% |
| Gross Profit | $634.70M$542.02M | +17.1% |
| R&D Expenses | $11.30M$12.50M | −9.6% |
| SG&A Expenses | $280.80M$258.55M | +8.6% |
| Operating Income | $437.60M$272.75M | +60.4% |
| Net Income | $160.20M$158.03M | +1.4% |
| EPS (Basic) | $1.66$1.59 | +4.4% |
| EPS (Diluted) | $1.64$1.57 | +4.5% |
| Shares Outstanding (Basic) | 96.40M99.28M | −2.9% |
| Shares Outstanding (Diluted) | 97.50M100.38M | −2.9% |
05—Questions
Frequently Asked Questions
How did Packaging Corporation of America perform in 2012?
Net sales increased to $2.84 billion from $2.62 billion, and net income rose to $163.8 million from $158.0 million. Excluding special items, net income was $200.7 million, or $2.06 per diluted share, compared with $161.8 million, or $1.61 per diluted share, in 2011.
What drove the improvement in 2012 results?
Management cited higher corrugated products and containerboard sales volumes and prices, plus lower costs for energy, recycled fiber and chemicals. These were partially offset by higher fringe benefit, depreciation, labor and transportation costs.
What special items affected 2012 reported earnings?
Reported 2012 results included a $95.5 million income-from-operations benefit and $118.5 million tax charge related to amending the 2009 tax return, a $16.0 million after-tax debt refinancing charge, and state income tax adjustments of $3.4 million. These items resulted in a net $36.9 million after-tax charge for the year.
What legal risk does the company face?
PCA and eight other containerboard producers are defendants in a consolidated Sherman Act class action alleging conspiracy to artificially raise containerboard prices from August 2005 onward. The company believes the claims are without merit but cannot predict the outcome or estimate a range of possible losses.
What is the company's outlook for 2013 spending and shareholder returns?
PCA expects normal capital expenditures of about $125.0 million in 2013, plus $50.0 million for box plant acquisitions or strategic investments, and Boiler MACT compliance capital of up to $10.0 million in 2013. The quarterly dividend increased to $0.3125 per share, and the board's remaining $105.9 million stock repurchase authorization was available at December 31, 2012.
06—Continue