01—Abstract
Summary
Summary of the 8-K filed April 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Packaging Corporation of America (NYSE: PKG) reported first quarter 2024 net income of $147 milliona, or $1.63 per diluted share, and net income of $155 million, or $1.72 per share, excluding special items, on net sales of $2.0 billion in both 2024 and 2023.
Reported diluted EPS declined from $2.11b in the first quarter of 2023, and the filing attributes the decline excluding special items primarily to lower prices and mix in the Packaging segment ($1.33 per share), partially offset by higher Packaging volume ($0.71 per share). Results were $0.18 above first quarter guidance of $1.54 per share. Special items were primarily costs at the Jackson, AL mill related to paper-to-containerboard conversion.
Operationally, management said containerboard and corrugated products demand exceeded expectations, with corrugated shipments per day up 11.0% year over year and the company ending the quarter at a record low weeks-of-inventory supply for the time of year. Cash, cash equivalents, and marketable debt securities rose to $1.25 billionc from $520.2 million a year earlier, and capital spending fell to $76.7 million from $112.4 million. For the second quarter, management expects second quarter earnings of $2.07 per share, citing higher Packaging prices and mix, strong demand, and lower operating and converting costs, offset by lower Paper volume from a scheduled outage at the International Falls, MN mill, higher freight costs from rail rate increases, and higher depreciation.
02—Key points
Key Highlights
- Q1 2024 net income of $146.9 million, or $1.63 diluted EPS, versus $190.1 million, or $2.11 diluted EPS, in Q1 2023
- Excluding special items, Q1 2024 EPS was $1.72, down $0.48 from $2.20, and $0.18 above first quarter guidance of $1.54
- Packaging segment income was $203.8 million versus $268.0 million a year earlier; segment income excluding special items was $207.7 million versus $277.4 million
- Corrugated products shipments per day were up 11.0% year over year, and containerboard inventory ended the quarter at a record low weeks-of-inventory supply for the time of year
- Cash, cash equivalents, and marketable debt securities were $1,253.2 million at March 31, 2024, up from $520.2 million a year earlier
- Management guided to second quarter 2024 earnings of $2.07 per share, with higher Packaging prices and mix expected
- A $100 per ton paper price increase across all paper grades was announced during the quarter and implementation began April 1
03—Questions
Frequently Asked Questions
What drove the year-over-year decline in earnings?
Excluding special items, the $0.48 per share decrease was driven primarily by lower prices and mix in the Packaging segment ($1.33) and Paper segment ($0.08), higher scheduled mill outage expenses ($0.10), higher depreciation ($0.03), and other items. These were partially offset by higher Packaging volume ($0.71), higher Paper volume ($0.06), lower operating and converting costs ($0.15), lower freight and logistics expenses ($0.04), lower interest expense ($0.07), and a lower tax rate ($0.09).
What special items affected first quarter 2024 results?
Reported results included $10.4 million of charges related to the discontinuation of uncoated freesheet paper production on the No. 3 machine at the Jackson, Alabama mill and related paper-to-containerboard conversion activities, and $0.1 million of net income related to corrugated facility closures and a lease buyout. Total special items were $0.09 per share.
What is the company's outlook for the second quarter of 2024?
Management expects second quarter earnings of $2.07 per share. It expects higher Packaging prices and mix from announced increases and higher published domestic and export prices, and continued strong demand. Paper volume will be lower due to a scheduled outage at the International Falls, MN mill, and Paper prices and mix are expected to be slightly lower. Freight costs will rise from rail rate increases, depreciation will be higher, and the tax rate will be sequentially higher.
How did demand and capacity utilization trend in the quarter?
Management said demand for containerboard and corrugated products exceeded expectations. Containerboard production was 1,162,000 tons, and containerboard inventory fell 15,000 tons from a year earlier and 24,000 tons from the fourth quarter of 2023. Paper segment sales volume was up 18,000 tons year over year.
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