01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America (PCA), headquartered in Lake Forest, Illinois, reported 2015 net sales of $5.74 billiona and net income of $436.8 million, or $4.47 per diluted share, compared with $392.6 million, or $3.99 per share, in 2014.
Excluding special items, net income was $442.6 millionb, or $4.53 per diluted share, versus $458.6 million and $4.66 per share in 2014. Management cited lower white paper prices and mix and lower export containerboard prices as headwinds, while the company completed integration of Boise Inc., generated a record $762.6 million of operating cash flow, and returned $355.5 million to shareholders through share repurchases and dividends. The Packaging segment reported segment income of $714.9 million, up from $663.2 million, with record volumes in both mills and corrugated plants.
The Paper segment's income fell to $112.5 millionc from $135.4 million, as total sales prices were lower. Net sales declined 1.9% to $5,741.7 million, with Paper sales down 4.9% due to 4.8% lower sales prices and mix. Long-term debt was $2.3 billion at year-end, with $326.5 million of unused revolver capacity, and the company expects 2016 capital investments of $250.0 million to $265.0 million.
The filing notes significant customer concentration: Office Depot represented 45% of Paper segment sales in 2015, and Office Depot has agreed to be acquired by Staples, Inc., a transaction subject to regulatory approval. In February 2016, antidumping and countervailing duties were imposed on certain white paper imports from Australia, Brazil, China, Indonesia, and Portugal. The board also authorized an additional $200 milliond share repurchase on February 25, 2016, after fully using the $150 million authorization from July 2015.
02—Key points
Key Highlights
- Net sales of $5,741.7 million in 2015, down 1.9% from $5,852.6 million in 2014.
- Net income of $436.8 million, or $4.47 per diluted share, up from $392.6 million, or $3.99 per share in 2014; excluding special items, EPS was $4.53 versus $4.66 in 2014.
- Packaging segment income rose to $714.9 million from $663.2 million; Paper segment income fell to $112.5 million from $135.4 million.
- Record operating cash flow of $762.6 million in 2015, compared with $736.1 million in 2014.
- Shareholder returns of $355.5 million in 2015 through share repurchases ($154.7 million) and dividends; quarterly dividend raised to $0.55 per share from $0.40.
- Office Depot accounted for 45% of Paper segment sales; Office Depot has agreed to be acquired by Staples, Inc., subject to regulatory approval.
- Long-term debt of $2.3 billion at December 31, 2015, with $326.5 million of unused revolving credit capacity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Packaging Corp. of America kept $0.08.
- Revenue$5.74B100.0%
- Cost of revenue−$4.53B79.0%
- Gross profit$1.21B21.0%
- Operating costs−$458.0M8.0%
- Operating income$750.0M13.1%
- Interest, other & tax−$313.2M5.5%
- Net income$436.8M7.6%
Where FY2015 revenue went
$5.74B- Cost of revenue: $4.53B, 79% of revenue
- Net income: $436.8M, 7.6% of revenue
- R&D: $13.1M, 0.2% of revenue
- SG&A: $451.3M, 7.9% of revenue
- Interest, other & tax: $313.2M, 5.5% of revenue
Kept 7.6% as net incomeNet income $436.8M · 7.6%R&D $13.1M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $5.74B$5.85B | −1.9% |
| Cost of Revenue | $4.53B$4.62B | −1.9% |
| Gross Profit | $1.21B$1.23B | −1.7% |
| R&D Expenses | $13.10M$12.30M | +6.5% |
| SG&A Expenses | $451.30M$469.50M | −3.9% |
| Operating Income | $750.00M$702.70M | +6.7% |
| Net Income | $436.80M$392.60M | +11.3% |
| EPS (Basic) | $4.47$3.99 | +12.0% |
| EPS (Diluted) | $4.47$3.99 | +12.0% |
| Shares Outstanding (Basic) | 96.60M97.00M | −0.4% |
| Shares Outstanding (Diluted) | 96.70M97.10M | −0.4% |
05—Questions
Frequently Asked Questions
How did PCA's profitability change in 2015?
Net income rose to $436.8 million, or $4.47 per diluted share, from $392.6 million, or $3.99 per share, in 2014. Excluding special items, net income was $442.6 million, or $4.53 per diluted share, down from $458.6 million and $4.66 per share in 2014.
What drove results in the Packaging and Paper segments?
Packaging segment income increased to $714.9 million from $663.2 million, with record volumes at packaging mills and corrugated plants. Paper segment income decreased to $112.5 million from $135.4 million, primarily due to lower white paper prices and mix, which reduced sales by $57.6 million.
How concentrated is PCA's customer base?
Office Depot represented 45% of Paper segment sales and 9% of total company sales in 2015. Office Depot has agreed to be acquired by Staples, Inc., and the filing states the company cannot predict how that acquisition will affect purchasing decisions or pricing.
What did PCA do with its cash in 2015?
The company generated $762.6 million of operating cash flow and spent $314.5 million on capital investments. It paid $154.7 million to repurchase 2,326,493 shares and $200.8 million in dividends. It also made $47.6 million of debt principal payments.
What new capital return actions were announced after year-end?
After year-end, PCA repurchased 1,868,487 shares for $93.4 million, fully using the July 2015 $150 million authorization. On February 25, 2016, the Board authorized an additional $200 million of share repurchases.
06—Continue