01—Abstract
Summary
Summary of the 10-Q filed May 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America reported first-quarter 2024 net sales of $1,979.5 milliona, essentially flat versus $1,976.3 million in the first quarter of 2023.
Net income was $146.9 millionb, or $1.63 per diluted share, compared with $190.1 million, or $2.11 per diluted share, a year earlier. Excluding special items, net income was $154.6 million, or $1.72 per diluted share, versus $198.3 million, or $2.20 per diluted share, in the prior-year quarter. The decline was driven primarily by lower containerboard and corrugated products prices and mix, higher scheduled mill outage expenses, and higher depreciation, partially offset by higher volumes and lower operating and converting costs.
Packaging segment income from operations fell to $203.8 millionc from $268.0 million, while Paper segment income from operations was $29.7 million compared with $34.1 million. Cash generation remained solid, with net cash provided by operating activities of $260.4 million and cash and cash equivalents of $692.4 million at March 31, 2024. The company paid $112.0 million in dividends and did not repurchase any shares under its $1 billion authorization, leaving $436.0 million available.
Management expects capital investments of $470 million to $490 milliond in 2024 and anticipates second-quarter earnings will be higher than the first quarter, citing announced price increases and higher published index prices. A material subsequent event occurred on April 24, 2024, when a jury in the remaining DeRidder mill lawsuit awarded plaintiffs approximately $91.8 million in compensatory damages plus prejudgment interest. The company recorded a $123.7 million accrual, including $31.9 million of interest, and an equal $123.7 million insurance recovery receivable, and it intends to appeal, believing its insurance covers the verdict.
02—Key points
Key Highlights
- Net sales were $1,979.5 million, up $3.2 million from $1,976.3 million in the first quarter of 2023.
- Net income fell to $146.9 million ($1.63 diluted EPS) from $190.1 million ($2.11 diluted EPS); excluding special items, diluted EPS was $1.72 versus $2.20.
- Packaging segment income from operations declined to $203.8 million from $268.0 million, driven primarily by lower containerboard and corrugated products prices and mix ($158 million impact), partially offset by higher sales and production volumes ($87 million).
- Packaging segment net sales decreased to $1,798.3 million; the filing reports corrugated products shipments up 11.0% per workday.
- DeRidder litigation: a jury awarded approximately $91.8 million in compensatory damages plus prejudgment interest on April 24, 2024; the company recorded a $123.7 million accrual offset by a $123.7 million insurance recovery receivable and intends to appeal.
- Operating cash flow was $260.4 million; capital expenditures for 2024 are expected to be $470 million to $490 million.
- Management expects second-quarter 2024 earnings to be higher than the first quarter, citing announced price increases and higher published domestic index prices.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Packaging Corp. of America kept $0.07.
- Revenue$1.98B100.0%
- Cost of revenue−$1.61B81.3%
- Gross profit$370.4M18.7%
- Operating costs−$174.4M8.8%
- Operating income$196.0M9.9%
- Interest, other & tax−$49.1M2.5%
- Net income$146.9M7.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 8, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.98B$1.98B | +0.2% |
| Cost of Revenue | $1.61B$1.54B | +4.2% |
| Gross Profit | $370.40M$431.40M | −14.1% |
| SG&A Expenses | $151.90M$148.20M | +2.5% |
| Operating Income | $196.00M$270.70M | −27.6% |
| Net Income | $146.90M$190.10M | −22.7% |
| EPS (Basic) | $1.64$2.12 | −22.6% |
| EPS (Diluted) | $1.63$2.11 | −22.7% |
| Shares Outstanding (Basic) | 89.00M89.00M | 0.0% |
| Shares Outstanding (Diluted) | 89.40M89.40M | 0.0% |
05—Questions
Frequently Asked Questions
Why did earnings decline year over year?
Diluted EPS fell to $1.63 from $2.11, driven primarily by lower containerboard and corrugated products prices and mix in the Packaging and Paper segments, higher scheduled mill outage expenses, higher depreciation, and higher expenses related to corrugated plant capital projects. Higher volumes, lower operating and converting costs, lower freight and logistics expenses, lower interest expense, and a lower tax rate partially offset these pressures.
What is the financial impact of the DeRidder litigation?
The company recorded a $123.7 million accrual at March 31, 2024, which includes $31.9 million of interest, in accrued liabilities. A matching $123.7 million insurance recovery receivable was recorded in prepaid expenses and other current assets. The company intends to appeal and believes its insurance is sufficient to cover the verdict and prejudgment interest.
What does management expect for the rest of 2024?
Management expects continued strong demand and higher corrugated products and containerboard shipments in the second quarter, with prices and mix moving higher due to announced price increases. Paper segment volume will be lower due to a scheduled outage at the International Falls, MN mill. Second-quarter earnings are expected to be higher than the first quarter. Capital investments for 2024 are expected to be between $470 million and $490 million.
How strong is the company's liquidity and shareholder return position?
At March 31, 2024, the company had $692 million of cash and cash equivalents, $561 million of marketable debt securities, and $323 million of unused revolving credit facility capacity, net of letters of credit. It paid $112.0 million in dividends during the quarter and repurchased no shares, leaving $436.0 million available under its repurchase authorization. All of its outstanding debt carries fixed interest rates.
06—Continue