01—Abstract
Summary
Summary of the 10-Q filed August 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America reported second-quarter 2024 net sales of $2.08 billiona, up from $1.95 billion in the second quarter of 2023, and net income of $198.9 million, or $2.21 per diluted share, compared with $202.7 million, or $2.24 per diluted share, a year earlier.
Excluding special items, diluted EPS was $2.20b versus $2.31. The filing attributes the earnings decline mainly to lower Packaging and Paper prices and mix, higher operating costs and depreciation, and a higher tax rate, partially offset by higher Packaging and Paper volumes. Packaging segment income from operations was $280 million, compared with $286 million a year earlier, while Packaging volumes benefited from a new all-time containerboard production record of 1.3 million tons.
For the first six months of 2024, net sales rose to $4.05 billionc from $3.93 billion, but income from operations fell to $472.0 million from $555.0 million and net income declined to $345.9 million from $392.8 million. The filing notes a $125.7 million accrual for the DeRidder litigation jury verdict, offset by an equal insurance recovery receivable. Operating cash flow for the six months was $538.7 million, down from $640.3 million, while capital expenditures were $321.7 million.
Cash and cash equivalents ended the period at $613.6 milliond, and the company did not repurchase any shares during the quarter. Management expects third-quarter 2024 earnings to be higher than second-quarter earnings, citing expected price and mix improvements, higher containerboard volume, and a potential new third-quarter shipment record, partly offset by seasonal energy costs and one fewer shipping day. The company expects 2024 capital investments of $670 million to $690 million, and all of its debt carries fixed interest rates.
02—Key points
Key Highlights
- Second-quarter 2024 net sales rose to $2,075.3 million from $1,952.1 million, driven by higher Packaging volume ($199 million) partially offset by lower prices and mix ($81 million).
- Second-quarter net income declined to $198.9 million ($2.21 diluted EPS) from $202.7 million ($2.24 diluted EPS); excluding special items, diluted EPS was $2.20 versus $2.31.
- Packaging segment income from operations was $279.8 million versus $285.8 million, with lower prices and mix ($103 million) and higher operating costs ($41 million) offsetting higher volumes ($114 million).
- Six-month income from operations fell to $472.0 million from $555.0 million, and operating cash flow declined to $538.7 million from $640.3 million.
- A jury verdict in the DeRidder mill lawsuit led to a $125.7 million accrual, which is matched by a $125.7 million insurance recovery receivable; the company intends to appeal.
- Management expects third-quarter 2024 earnings to exceed second-quarter earnings, with higher containerboard volume and improved prices and mix.
- Cash and cash equivalents were $613.6 million at June 30, 2024, and 100% of outstanding debt carries fixed interest rates; $436.0 million remained available under the share repurchase authorization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Packaging Corp. of America kept $0.10.
- Revenue$2.08B100.0%
- Cost of revenue−$1.64B78.9%
- Gross profit$437.7M21.1%
- Operating costs−$161.7M7.8%
- Operating income$276.0M13.3%
- Interest, other & tax−$77.1M3.7%
- Net income$198.9M9.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 8, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $2.08B$1.95B | +6.3% |
| Cost of Revenue | $1.64B$1.51B | +8.6% |
| Gross Profit | $437.70M$444.70M | −1.6% |
| SG&A Expenses | $149.50M$145.60M | +2.7% |
| Operating Income | $276.00M$284.40M | −3.0% |
| Net Income | $198.90M$202.70M | −1.9% |
| EPS (Basic) | $2.22$2.25 | −1.3% |
| EPS (Diluted) | $2.21$2.24 | −1.3% |
| Shares Outstanding (Basic) | 89.10M89.10M | 0.0% |
| Shares Outstanding (Diluted) | 89.50M89.50M | 0.0% |
05—Questions
Frequently Asked Questions
Why did net income decline in the second quarter of 2024?
The filing attributes the decline primarily to lower prices and mix in the Packaging and Paper segments, higher operating costs, higher depreciation expense, and a higher effective tax rate of 25.4% versus 24.3%. These were partially offset by higher Packaging and Paper volume, lower other converting costs, and lower freight and logistics expenses.
What is the outlook for the third quarter of 2024?
The company expects prices and mix in both Packaging and Paper to improve, along with higher containerboard volume and possibly a new third-quarter shipment record. Operating and converting costs are expected to rise on seasonal electricity usage and recycled fiber costs. Management expects third-quarter earnings to be higher than second-quarter earnings.
What is the financial impact of the DeRidder litigation?
A jury awarded plaintiffs approximately $91.8 million in compensatory damages on April 24, 2024. The Company recorded an accrual of $125.7 million, including interest of $33.9 million, and a matching $125.7 million insurance recovery receivable. The Company intends to appeal and believes its insurance is sufficient to cover the verdict and interest.
How much capital does the company plan to invest in 2024?
The company expects 2024 capital investments of between $670 million and $690 million. In the first six months of 2024 it spent $322 million on internal capital investments. It also estimates about $15 million of capital expenditures for environmental compliance in 2024.
How strong is the company's liquidity position?
At June 30, 2024, the company had $614 million of cash and cash equivalents, $559 million of marketable debt securities, and $323 million of unused revolving credit facility capacity, net of letters of credit. It did not repurchase shares in the quarter and had $436.0 million remaining under its repurchase authorization.
06—Continue