01—Abstract
Summary
Summary of the 10-K filed February 28, 2017. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America (PCA) reported 2016 net sales of $5,779.0 milliona, up from $5,741.7 million in 2015, and net income of $449.6 million, or $4.75 per diluted share, compared with $436.8 million, or $4.47 per share, in 2015.
Excluding special items, net income was $462.0 millionb, or $4.88 per diluted share. Packaging segment income from operations was $711.1 million, roughly flat versus $714.9 million, as higher volumes and lower operating costs were offset by lower containerboard and corrugated prices and mix. Paper segment income rose to $138.1 million from $112.5 million, driven mainly by lower fiber, mill outage and energy costs.
The company generated operating cash flow of $801.2 millionc and paid $216.1 million in dividends during the year. During 2016 PCA acquired TimBar Corporation for $385.6 million net of cash acquired, funded by a new $385.0 million five-year term loan, and Columbus Container, Inc. for $99.7 million, funded with cash on hand. Long-term debt reached $2,620.0 million at year-end, with $1,010.7 million of variable-rate term loans outstanding, and $193.0 million remained available under the share repurchase authorization.
The company expects 2017 capital investments of $310 million to $325 milliond and notes that its quarterly dividend was raised to $0.63 per share. A subsequent event disclosed in the filing is an February 8, 2017 explosion at the DeRidder, Louisiana paper mill during annual repair work on piping, which resulted in three contractor fatalities. The mill resumed full operation as of February 19, 2017, and the company was estimating the financial impact, with property and business interruption insurance subject to a $5 million deductible.
02—Key points
Key Highlights
- Net sales of $5,779.0 million in 2016, up from $5,741.7 million in 2015; net income of $449.6 million, or $4.75 per diluted share.
- Excluding special items, net income was $462.0 million, or $4.88 per diluted share, compared with $442.6 million and $4.53 per diluted share in 2015.
- Record operating cash flow of $801.2 million in 2016, with $274.3 million of capital expenditures.
- Acquired TimBar Corporation ($385.6 million, net of cash acquired) and Columbus Container, Inc. ($99.7 million) during 2016, extending corrugated products integration.
- Total debt obligations of $2,667.4 million at year-end 2016, including $1,010.7 million of variable-rate term loans; a 1% rate increase on variable-rate debt would reduce pre-tax income by $10.1 million annually.
- Quarterly dividend raised to $0.63 per share from $0.55; $100.3 million of shares repurchased in 2016 with $193.0 million of authorization remaining.
- Subsequent event: February 8, 2017 explosion at the DeRidder, Louisiana paper mill caused three contractor fatalities; the mill resumed full operation by February 19, 2017, and the financial impact was still being estimated.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Packaging Corp. of America kept $0.10.
- Revenue$6.44B100.0%
- Cost of revenue−$4.97B77.2%
- Gross profit$1.47B22.8%
- Operating costs−$538.3M8.4%
- Operating income$932.5M14.5%
- Interest, other & tax−$263.9M4.1%
- Net income$668.6M10.4%
Where FY2017 revenue went
$6.44B- Cost of revenue: $4.97B, 77% of revenue
- Net income: $668.6M, 10% of revenue
- R&D: $12.8M, 0.2% of revenue
- SG&A: $519.9M, 8.1% of revenue
- Interest, other & tax: $263.9M, 4.1% of revenue
Kept 10% as net incomeNet income $668.6M · 10%R&D $12.8M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 28, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $6.44B$5.78B | +11.5% |
| Cost of Revenue | $4.97B$4.50B | +10.4% |
| Gross Profit | $1.47B$1.28B | +15.3% |
| R&D Expenses | $12.80M$13.30M | −3.8% |
| SG&A Expenses | $519.90M$468.50M | +11.0% |
| Operating Income | $932.50M$783.30M | +19.0% |
| Net Income | $668.60M$449.60M | +48.7% |
| EPS (Basic) | $7.09$4.76 | +48.9% |
| EPS (Diluted) | $7.07$4.75 | +48.8% |
| Shares Outstanding (Basic) | 93.50M93.50M | 0.0% |
| Shares Outstanding (Diluted) | 93.70M93.70M | 0.0% |
05—Questions
Frequently Asked Questions
How did the Packaging and Paper segments perform in 2016?
Packaging segment income from operations was $711.1 million, compared with $714.9 million in 2015, as higher volumes and improved operating costs were partially offset by lower containerboard and corrugated products prices and mix. Paper segment income from operations rose to $138.1 million from $112.5 million, due primarily to lower fiber, mill outage, energy and labor costs, partially offset by lower volumes.
How were the TimBar and Columbus Container acquisitions financed?
TimBar, acquired August 29, 2016 for a purchase price of $386 million, was financed with a new $385 million five-year term loan facility. Columbus Container, acquired November 30, 2016 for $100 million, was funded with available cash on hand. TimBar contributed $116.9 million, or 2.0%, of 2016 net sales.
What is the company's debt position and exposure to interest rates?
At December 31, 2016, long-term debt was $2,620.0 million, with $1,647.5 million of fixed-rate senior notes and $1,010.7 million of variable-rate term loans outstanding. The interest rates on approximately 62% of debt are fixed. The company had a $324.9 million undrawn revolving credit facility after letters of credit.
What does the filing say about the DeRidder mill explosion?
On February 8, 2017, an explosion occurred at the DeRidder, Louisiana paper mill during annual repair work on piping in the pulp mill area, resulting in three contractor fatalities. The cause is under investigation. The D3 machine was running at the time and continues to operate, and the mill resumed full operation as of February 19, 2017. The company is estimating the financial impact and maintains property and business interruption insurance subject to a $5 million deductible.
What are the company's capital spending plans and dividend policy?
The company expects 2017 capital investments of between $310 million and $325 million, excluding acquisitions. PCA expects to continue paying regular cash dividends; the Board raised the quarterly dividend to $0.63 per share from $0.55 in 2016, and $216.1 million of dividends were paid in 2016.
06—Continue