KapStone Reports Record First Quarter Results
NORTHBROOK, Ill., May 7, 2013 /PRNewswire/ -- KapStone Paper and Packaging Corporation (NYSE:KS) today reported record results for the first quarter ended March 31, 2013.
- Net sales of $319.8 million up $20.0 million, or 7 percent, versus prior year
- Net income of $18.5 million up $2.9 million, or 19 percent, versus 2012
- Adjusted EBITDA of $50.7 million up $4.4 million, or 9 percent, versus prior year
- Diluted EPS of $0.38 up $0.05 per share, or 15 percent, versus 2012
- Adjusted diluted EPS of $0.42 up $0.04 per share, or 11 percent, versus prior year
Roger W. Stone, Chairman and Chief Executive Officer, stated, "Our operations performed well during the quarter, propelling the Company to record first quarter results. Average mill selling prices of $653 per ton increased by $45 per ton compared to the first quarter of 2012. In the first quarter of 2013, we realized 2012's domestic containerboard and corrugated price increases, and we benefitted from increasing prices of over $100 per ton on export containerboard sales compared to 2012's first quarter."
First Quarter Operating Highlights
Consolidated net sales of $319.8 million in the first quarter of 2013 increased by $20.0 million, or 6.7 percent, compared to $299.8 million for the 2012 first quarter, primarily due to full realization of the October 2012 $50 per ton containerboard price increase, higher box and sheet prices and continued recovery of export containerboard prices. Average mill selling prices per ton climbed to $653 from $608 a year ago. A better product mix in the 2013 quarter was partially offset by lower volume.
Operating income of $30.8 million for the 2013 first quarter increased by $3.3 million, or 12.1%, compared to the 2012 first quarter. The improved financial performance primarily reflects benefits from higher prices, partially offset by inflation on input, labor and benefit costs, higher outage costs, increased depreciation charges resulting mainly from the 2012 investment in new information systems and start-up expenses for the Company's new manufacturing plant in Aurora, Illinois. The first quarter's operating income included $2.3 million of stock compensation expense. We expect total stock compensation expense to approximate $1 million for each of the remaining three quarters of 2013.
Interest expense was $1.9 million for the first quarter of 2013, down $0.5 million from a year ago mainly due to lower interest rates. At March 31, 2013, the interest rate on the majority of the Company's debt was 1.95 percent down from 2.24 percent a year ago. Amortization of debt issuance costs of $0.7 million for the first quarter of 2013 decreased by $0.2 million from a year ago.
The effective income tax rate for the 2013 first quarter was 33.8 percent compared to 36.0 percent for the 2012 first quarter. The lower effective income tax rate is due to a higher expected benefit from the domestic manufacturing deduction and lower state income taxes. The 2013 rate also includes a favorable discrete benefit for a 2012 R&D tax credit. For 2013, the Company estimates its full year effective income tax rate to be 34.3 percent and its cash tax rate to be 10 percent.
Cash Flow and Working Capital
Cash and cash equivalents decreased by $8.9 million in the quarter ended March 31, 2013, to $7.6 million reflecting $15.6 million of net cash provided by operating activities, $16.8 million of cash used by investing activities and $7.7 million of cash used for financing activities.
Capital expenditures for the first quarter of 2013 totaled $16.8 million which included $7.4 million for the new manufacturing plant in Aurora, Illinois. The Company estimates $73.0 million of capital expenditures for the year.
At March 31, 2013, the Company had approximately $97.4 million of working capital and $95.1 million of revolver borrowing capacity.
Conclusion
In summary, Stone commented, "The April 2013 $50 per ton domestic containerboard price increase should be fully implemented late in the second quarter and should boost our EBITDA by approximately $50 million annually. Our new Aurora, Illinois manufacturing plant made its first shipment in April. With our strong cash flows and balance sheet KapStone is in an excellent position to continue growing profitably."
Conference Call
KapStone will host a conference call at 11 a.m. EDT, Wednesday, May 8, 2013, to discuss the Company's financial results for the 2013 first quarter. All interested parties are invited to listen and may do so by either accessing a simultaneous broadcast webcast on KapStone's website, http://www.kapstonepaper.com, or for those unable to access the webcast, the following dial-in numbers are available:
Domestic: 877.415.3178
International: 857.244.7321
Participant Passcode: 78657838
A presentation to be viewed in conjunction with the call will also be available on our website, http://www.kapstonepaper.com, in the "Investors" section.
The webcast is also being distributed through the Thomson StreetEvents Network. Individual investors can listen to the call at http://earnings.com, Thomson's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson StreetEvents (http://www.streetevents.com) a password-protected event management site.
Replay of the webcast will be available for 30 days on the Company's website following the call.
About the Company
Headquartered in Northbrook, IL, KapStone Paper and Packaging Corporation is a leading North American producer of unbleached kraft paper and corrugated products. The Company is the parent company of KapStone Kraft Paper Corporation and KapStone Container Corporation which includes three paper mills and 15 converting plants across the eastern and midwestern US. The business employs approximately 2,700 people.
Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including "EBITDA", "Adjusted EBITDA", "Adjusted Net Income", and "Adjusted Diluted EPS" to measure our operating performance. Management uses these measures to focus on the on-going operations, and believes it is useful to investors because they enable them to perform meaningful comparisons of past and present operating results. The Company believes that EBITDA and Adjusted EBITDA provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency to key measures used to evaluate the performance and liquidity of the Company. Management uses EBITDA and Adjusted EBITDA for evaluating the Company's performance against competitors and as a primary measure for employees' incentive programs. Reconciliations of Net Income to EBITDA, EBITDA to Adjusted EBITDA, Net Income to Adjusted Net Income, Basic EPS to Adjusted Basic EPS, and Diluted EPS to Adjusted Diluted EPS are included in the financial schedules contained in this press release. However, these measures should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.
Forward-Looking Statements
Statements in this news release that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified by words such as "may," "will," "should," "would,' "expect," "project," "anticipate," "intend," "plan," "believe," "estimate," "potential," "outlook," or "continue," the negative of these terms or other similar expressions. These statements reflect management's current views and are subject to risks, uncertainties and assumptions, many of which are beyond the Company's control that could cause actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ materially include, but are not limited to: (1) industry conditions, including changes in cost, competition, changes in the Company's product mix and demand and pricing for the Company's products; (2) market and economic factors, including changes in raw material and healthcare costs, exchange rates and interest rates; (3) results of legal proceedings and compliance costs, including unanticipated expenditures related to the cost of compliance with environmental and other governmental regulations; (4) the ability to achieve and effectively manage growth; (5) the ability to pay the Company's debt obligations; (6) the ability to carry out the Company's strategic initiatives and manage associated costs and (7) the income tax impact of the federal incentive program for cellulosic biofuel producers. Further information on these and other risks and uncertainties is provided under Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and elsewhere in reports that the Company files with the SEC. These filings can be found on KapStone's Web site at www.kapstonepaper.com and the SEC's Web site at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and the Company disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.
| KapStone Paper and Packaging Corporation |
|||||
| Consolidated Statements of Income |
|||||
| (In thousands, except share and per share amounts) |
|||||
| (unaudited) |
|||||
| Fav / (Unfav) |
|||||
| Quarter Ended March 31, |
Variance |
||||
| 2013 |
2012 |
% |
|||
| Net sales |
$ 319,813 |
$ 299,843 |
6.7% |
||
| Cost and expenses: |
|||||
| Cost of sales, excluding depreciation and amortization |
224,946 |
214,074 |
-5.1% |
||
| Depreciation and amortization |
17,224 |
15,176 |
-13.5% |
||
| Freight and distribution expenses |
27,920 |
25,743 |
-8.5% |
||
| Selling, general and administrative expenses |
19,128 |
17,572 |
-8.9% |
||
| Other operating income |
202 |
198 |
2.0% |
||
| Operating income |
30,797 |
27,476 |
12.1% |
||
| Foreign exchange gain / (loss) |
(311) |
120 |
-359.2% |
||
| Interest expense, net |
1,875 |
2,373 |
21.0% |
||
| Amortization of debt issuance costs |
726 |
906 |
19.9% |
||
| Income before provision for income taxes |
27,885 |
24,317 |
14.7% |
||
| Provision for income taxes |
9,426 |
8,754 |
-7.7% |
||
| Net income |
$ 18,459 |
$ 15,563 |
18.6% |
||
| Net income per share: |
|||||
| Basic |
$ 0.39 |
$ 0.33 |
|||
| Diluted |
$ 0.38 |
$ 0.33 |
|||
| Weighted-average number of shares outstanding: |
|||||
| Basic |
47,482,010 |
46,491,626 |
|||
| Diluted |
48,226,209 |
47,841,371 |
|||
| Effective tax rate |
33.8% |
36.0% |
|||
| Supplemental Information |
|||||
| GAAP to Non-GAAP Reconciliations |
|||||
| ($ in thousands, except share and per share amounts) |
|||||
| (unaudited) |
|||||
| Quarter Ended March 31, |
|||||
| 2013 |
2012 |
||||
| Net Income (GAAP) to EBITDA (Non-GAAP) to Adjusted EBITDA (Non-GAAP): |
|||||
| Net income (GAAP) |
$ 18,459 |
$ 15,563 |
|||
| Interest expense, net |
1,875 |
2,373 |
|||
| Amortization of debt issuance costs |
726 |
906 |
|||
| Provision for income taxes |
9,426 |
8,754 |
|||
| Depreciation and amortization |
17,224 |
15,176 |
|||
| EBITDA (Non-GAAP) |
$ 47,710 |
$ 42,772 |
|||
| Acquisition, start up and other expenses |
611 |
1,223 |
|||
| Stock-based compensation expense |
2,345 |
2,313 |
|||
| Adjusted EBITDA (Non-GAAP) |
$ 50,666 |
$ 46,308 |
|||
| Net Income (GAAP) to Adjusted Net Income (Non-GAAP): |
|||||
| Net income (GAAP) |
$ 18,459 |
$ 15,563 |
|||
| Acquisition, start up and other expenses |
404 |
783 |
|||
| Stock-based compensation expense |
1,552 |
1,480 |
|||
| Adjusted Net Income (Non-GAAP) |
$ 20,415 |
$ 17,826 |
|||
| Basic EPS (GAAP) to Adjusted Basic EPS (Non-GAAP): |
|||||
| Basic EPS (GAAP) |
$ 0.39 |
$ 0.33 |
|||
| Acquisition, start up and other expenses |
0.01 |
0.02 |
|||
| Stock-based compensation expense |
0.03 |
0.03 |
|||
| Adjusted Basic EPS (Non-GAAP) |
$ 0.43 |
$ 0.38 |
|||
| Diluted EPS (GAAP) to Adjusted Diluted EPS (Non-GAAP): |
|||||
| Diluted earnings per share (GAAP) |
$ 0.38 |
$ 0.33 |
|||
| Acquisition, start up and other expenses |
0.01 |
0.02 |
|||
| Stock-based compensation expense |
0.03 |
0.03 |
|||
| Adjusted Diluted EPS (Non-GAAP) |
$ 0.42 |
$ 0.38 |
|||
| KapStone Paper and Packaging Corporation |
||||
| Consolidated Balance Sheets |
||||
| (In thousands) |
||||
| March 31, |
December 31, |
|||
| 2013 |
2012 |
|||
| (Unaudited) |
||||
| Assets |
||||
| Current assets: |
||||
| Cash and cash equivalents |
$ 7,618 |
$ 16,488 |
||
| Trade accounts receivable, net |
136,752 |
111,592 |
||
| Other receivables |
6,263 |
10,061 |
||
| Inventories |
110,699 |
113,511 |
||
| Prepaid expenses and other current assets |
9,588 |
9,808 |
||
| Deferred income taxes |
5,864 |
5,864 |
||
| Total current assets |
276,784 |
267,324 |
||
| Plant, property and equipment, net |
577,459 |
576,115 |
||
| Other assets |
4,484 |
4,412 |
||
| Intangible assets, net |
54,884 |
57,027 |
||
| Goodwill |
226,289 |
226,289 |
||
| Total assets |
$ 1,139,900 |
$ 1,131,167 |
||
| Liabilities and Stockholders' Equity |
||||
| Current liabilities: |
||||
| Short-term borrowings |
$ 52,200 |
$ 63,500 |
||
| Other current borrowings |
2,719 |
– |
||
| Accounts payable |
82,033 |
89,638 |
||
| Accrued expenses |
25,679 |
25,032 |
||
| Accrued compensation costs |
16,334 |
20,421 |
||
| Accrued income taxes |
446 |
– |
||
| Total current liabilities |
179,411 |
198,591 |
||
| Long-term debt, net of current portion |
294,973 |
294,310 |
||
| Accrued pension and post retirement benefits |
13,313 |
13,193 |
||
| Deferred income taxes |
101,001 |
96,459 |
||
| Other liabilities |
11,507 |
10,666 |
||
| Total other liabilities |
420,794 |
414,628 |
||
| Stockholders' equity: |
||||
| Common stock $.0001 par value |
5 |
5 |
||
| Additional paid-in capital |
239,285 |
236,034 |
||
| Retained earnings |
303,470 |
285,011 |
||
| Accumulated other comprehensive loss |
(3,065) |
(3,102) |
||
| Total stockholders' equity |
539,695 |
517,948 |
||
| Total liabilities and stockholders' equity |
$ 1,139,900 |
$ 1,131,167 |
||
| KapStone Paper and Packaging Corporation |
|||
| Consolidated Statement of Cash Flows |
|||
| (In thousands) |
|||
| (unaudited) |
|||
| Quarter Ended March 31, |
|||
| 2013 |
2012 |
||
| Operating activities: |
|||
| Net income |
$ 18,459 |
$ 15,563 |
|
| Adjustments to reconcile net income to net cash provided by |
|||
| operating activities: |
|||
| Depreciation and amortization |
17,224 |
15,176 |
|
| Stock-based compensation expense |
2,345 |
2,313 |
|
| Excess tax benefit for stock-based compensation |
(386) |
(445) |
|
| Amortization of debt issuance costs |
726 |
906 |
|
| Loss on disposal of fixed assets |
18 |
68 |
|
| Deferred income taxes |
4,906 |
6,202 |
|
| Changes in operating assets and liabilities |
(27,655) |
(19,992) |
|
| Net cash provided by operating activities |
$ 15,637 |
$ 19,791 |
|
| Investing activities: |
|||
| USC acquisition |
$ – |
$ (314) |
|
| Capital expenditures |
(16,832) |
(10,905) |
|
| Net cash used in investing activities |
$ (16,832) |
$ (11,219) |
|
| Financing activities: |
|||
| Proceeds from revolving credit facility |
$ 49,500 |
$ 38,000 |
|
| Repayments on revolving credit facility |
(60,800) |
(38,000) |
|
| Proceeds from other current borrowings |
3,731 |
3,398 |
|
| Repayments on other current borrowings |
(1,012) |
(921) |
|
| Proceeds from exercises of stock options |
362 |
420 |
|
| Proceeds from issuance of shares to ESPP |
170 |
90 |
|
| Payment of withholding taxes on vested stock awards |
(12) |
– |
|
| Excess tax benefit for stock-based compensation |
386 |
445 |
|
| Net cash provided by (used in) financing activities |
$ (7,675) |
$ 3,432 |
|
| Net (decrease) / increase in cash and cash equivalents |
(8,870) |
12,004 |
|
| Cash and cash equivalents-beginning of period |
16,488 |
8,062 |
|
| Cash and cash equivalents-end of period |
$ 7,618 |
$ 20,066 |
|
SOURCE KapStone Paper and Packaging Corporation
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