01—Abstract
Summary
Summary of the 10-K filed February 23, 2023. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America (PCA) is the third largest producer of containerboard products and a leading producer of uncoated freesheet (UFS) paper in North America, operating eight mills and 89 corrugated products plants.
For 2022, net sales were $8.5 billiona, up from $7.7 billion in 2021, and net income was $1,029.8 million, or $11.03 per diluted share, compared with $841.1 million, or $8.83 per diluted share, in 2021. Excluding special items, net income was $1,040.2 million, or $11.14 per diluted share. The Packaging segment drove the results, with segment income from operations of $1,423.7 million, supported by higher containerboard and corrugated prices and mix, partially offset by lower corrugated shipments of 63.4 billion square feet, down 3.4% for the year.
The filing describes a deterioration in packaging demand beginning in mid-2022 as customers reduced inventories, leading PCA to cut containerboard production during the second half of the year, and published containerboard prices began declining in the fourth quarter of 2022. Management expects first-quarter 2023 earnings to be lower than the fourth quarter of 2022. Cash from operating activities was $1,495.0 millionb, capital expenditures were $824.2 million, and dividends paid were $420.3 million, while the company repurchased 4.0 million shares for $522.6 million.
At year-end, the company had $2.5 billionc of fixed-rate senior notes outstanding and $470 million of cash and marketable debt securities. The Paper segment improved, with income from operations of $103.0 million compared with $39.1 million in 2021, driven mainly by higher paper prices and mix. The company's largest Paper customer, ODP Corporation, accounted for 48% of Paper segment sales and 4% of consolidated sales, and a new agreement with ODP runs through December 31, 2024.
02—Key points
Key Highlights
- Net sales rose to $8,478.0 million in 2022 from $7,730.3 million in 2021, driven by higher Packaging prices and mix of $963 million, partially offset by lower volumes of $235 million.
- Net income was $1,029.8 million, or $11.03 per diluted share, versus $841.1 million, or $8.83 per diluted share, in 2021; excluding special items, diluted EPS was $11.14 versus $9.39.
- Packaging segment income from operations was $1,423.7 million, up from $1,306.0 million, while corrugated products shipments fell 3.4% to 63.4 billion square feet.
- Demand weakened from mid-2022 as customers reduced inventories; containerboard prices published by trade publications declined beginning in the fourth quarter of 2022, and management expects first-quarter 2023 earnings to be lower than fourth-quarter 2022.
- Cash from operations was $1,495.0 million, capital expenditures were $824.2 million, and 2023 capital investments are expected to be approximately $475 million.
- Shareholder returns included $420.3 million of dividends paid and $522.6 million of share repurchases; $477.5 million remained available under the $1 billion authorization at year-end.
- Debt totaled $2.5 billion, all fixed-rate senior notes, with a $321.3 million unused revolving credit facility balance at December 31, 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Packaging Corp. of America kept $0.12.
- Revenue$8.48B100.0%
- Cost of revenue−$6.39B75.3%
- Gross profit$2.09B24.7%
- Operating costs−$669.9M7.9%
- Operating income$1.42B16.8%
- Interest, other & tax−$390.9M4.6%
- Net income$1.03B12.1%
Where FY2022 revenue went
$8.48B- Cost of revenue: $6.39B, 75% of revenue
- Net income: $1.03B, 12% of revenue
- SG&A: $608.6M, 7.2% of revenue
- Other operating costs: $61.3M, 0.7% of revenue
- Interest, other & tax: $390.9M, 4.6% of revenue
Kept 12% as net incomeNet income $1.03B · 12%Other operating costs $61.3M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 23, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $8.48B$7.73B | +9.7% |
| Cost of Revenue | $6.39B$5.86B | +9.1% |
| Gross Profit | $2.09B$1.87B | +11.6% |
| SG&A Expenses | $608.60M$576.80M | +5.5% |
| Operating Income | $1.42B$1.24B | +14.4% |
| Net Income | $1.03B$841.10M | +22.4% |
| EPS (Basic) | $11.08$8.87 | +24.9% |
| EPS (Diluted) | $11.03$8.83 | +24.9% |
| Shares Outstanding (Basic) | 92.30M94.10M | −1.9% |
| Shares Outstanding (Diluted) | 92.70M94.50M | −1.9% |
05—Questions
Frequently Asked Questions
How did Packaging Corporation of America perform financially in 2022?
Net sales increased to $8,478.0 million from $7,730.3 million, and net income rose to $1,029.8 million, or $11.03 per diluted share, from $841.1 million, or $8.83 per diluted share. Higher prices and mix drove the gains, partially offset by lower volumes and higher operating, converting, and freight costs.
What trends does management highlight for 2023?
Management reported that Packaging demand deteriorated from mid-2022 as customers lowered inventories, and that published containerboard prices decreased beginning in the fourth quarter of 2022. For the first quarter of 2023, the company expects prices to decrease and first-quarter earnings to be lower than the fourth quarter of 2022, while expecting lower wood fiber, recycled fiber, and energy prices.
How concentrated is the company's customer base?
No single customer exceeds 10% of segment sales. In the Paper segment, ODP Corporation accounted for 48% of Paper segment sales revenue and 4% of consolidated sales in 2022. A new agreement with ODP covers supply through December 31, 2024.
What is the company's debt and liquidity position?
At December 31, 2022, the company had $2.5 billion of fixed-rate senior notes outstanding, $320.0 million of cash and cash equivalents, $150 million of marketable debt securities, and $321.3 million of unused revolving credit facility capacity, net of letters of credit. The company stated that it was in compliance with its debt covenants.
How much did the company return to shareholders in 2022?
The company paid $420.3 million in common stock dividends and repurchased 4.0 million shares for $522.6 million. Quarterly dividends increased from an annual rate of $4.00 to $5.00 per share in May 2022, and $477.5 million remained available under the $1 billion repurchase authorization at December 31, 2022.
06—Continue