NORTHBROOK, Ill., April 26, 2017 /PRNewswire/ -- KapStone
Paper and Packaging Corporation (NYSE:KS) today reported
results for the first quarter ended March
31, 2017. As compared to 2016's first quarter, results for
2017's first quarter are below:
- Net sales of $766 million up
$28 million, or 4 percent
- Net income of $6 million down
$10 million, or 63 percent
- Diluted EPS of $0.06 down
$0.11 per share, or 65 percent
Non U.S. GAAP financial measures for the 2017 first quarter
compared to 2016 are as follows:
- Adjusted EBITDA of $81 million
down $7 million, or 9
percent
- Adjusted net income of $15
million down $7 million, or 32
percent
- Adjusted diluted EPS of $0.15
down $0.08 per share, or 35
percent
Matt Kaplan, President and Chief
Executive Officer, stated, "While first quarter results were
disappointing, we are experiencing exceptional positive
momentum. Demand for containerboard, corrugated boxes, and
kraft paper is strong. Pricing across our important product
lines is rapidly increasing. Our product mix has improved as
domestic containerboard and box sales have increased while exports
have declined.
"Victory Packaging, our distribution business, had a solid first
quarter and is entering its seasonally strong portion of the
year. Our operations, after a slow start in January and
February, are improving. All of these factors combined
contributed to a strong March which accounted for about 45 percent
of our adjusted quarterly EBITDA and point to an improved second
quarter and a strong back half of 2017."
First Quarter Operating Highlights
Consolidated net sales of $766
million in the first quarter of 2017 increased by
$28 million, or 4 percent compared to
$738 million for the 2016 first
quarter. The increase is primarily due to a better product mix,
higher containerboard prices and higher sales volume. The Company
sold 699,000 tons of paper during the first quarter of 2017
compared to 692,000 tons a year earlier. The Company's average mill
selling price of $648 per ton in the
first quarter of 2017 increased by $23 per ton, or about 4 percent compared to the
first quarter of 2016 due to higher domestic and export
containerboard prices and a favorable product mix. Mill selling
prices increased by $31 per ton or 5
percent compared to the fourth quarter of 2016 due to a favorable
product mix.
Operating income of $20 million
for the 2017 first quarter decreased by $14
million, or 42 percent, compared to the 2016 first quarter.
The lower operating earnings primarily reflect higher fiber costs
due to the rapid increase in OCC costs over the last six
months. In addition, there were one-time costs associated
with ratifying a union contract at the Company's North Charleston
paper mill and higher operating costs, including restoration of
employee benefits, stock compensation expenses and change in the
fair value of a contingent consideration liability. These items
were partially offset by a better product mix, higher
containerboard prices and lower severance expenses.
Interest expense, net, was $11
million for the first quarter of 2017, up $1 million from a year ago as a result of higher
interest rates. Our weighted average interest rate as of
March 31, 2017 is 2.6 percent
compared to 2.1 percent as of March
31, 2016.
The effective income tax rate for the 2017 first quarter was
41.0 percent compared to 34.5 percent for the 2016 first quarter.
The higher effective income tax rate in the current quarter
reflects the Company adopting a new accounting standard which
requires the tax impact of elements of stock compensation to be
recorded in the provision for income taxes.
Cash Flow and Working Capital
Cash and cash equivalents of $8
million as of March 31, 2017,
declined by $21 million from
December 31, 2016. Operating
activities provided $33 million
during the first quarter. Investing activities used $72 million, including $39
million for capital expenditures and $33.5 million for an acquisition. Financing
activities provided $18 million of
cash in the current quarter reflecting higher borrowings, partially
offset by a quarterly dividend payment.
On March 8, 2017, our Board of
Directors approved a regular $0.10
per share cash dividend which was paid on April 12th.
At March 31, 2017, the Company had
approximately $388 million of working
capital and $457 million of revolver
borrowing capacity.
Conclusion
In summary, Kaplan commented, "Looking ahead to the second
quarter, I expect to see our operations continue to perform better.
In addition, operating earnings should benefit from our March price
increases and a better product mix, but will be impacted by higher
scheduled maintenance outage costs and high OCC costs."
Conference Call
KapStone will host a conference call at 10:00 a.m. CDT, Thursday,
April 27, 2017, to discuss the Company's financial results
for the 2017 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: 888-608-7946
International: 484-747-6633
Participant Passcode: 5574428
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.
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 the fifth
largest producer of containerboard and corrugated packaging
products and is the largest kraft paper producer in the United States. The Company has four paper
mills, 24 converting plants and over 60 distribution centers. The
business has approximately 6,400 employees.
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 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, 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; (2) market and economic factors; (3) results of legal
proceedings and compliance costs; (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; (7) managing
labor relations; and (8) realizing the synergies and benefits of
the Victory Packaging acquisition and other strategic investments.
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, 2016 and elsewhere in reports that
the Company files with the SEC. These filings can be found on
KapStone's Web site at http://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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Net
sales
|
$
765,843
|
|
$
738,215
|
|
|
|
|
|
|
|
|
Cost and
expenses:
|
|
|
|
|
|
Cost of sales,
excluding depreciation and amortization
|
560,898
|
|
533,277
|
|
|
Depreciation
and amortization
|
45,348
|
|
44,539
|
|
|
Freight and
distribution expenses
|
72,988
|
|
65,059
|
|
|
Selling,
general and administrative expenses
|
66,485
|
|
60,740
|
|
|
Operating
income
|
20,124
|
|
34,600
|
|
|
|
|
|
|
|
|
Foreign exchange
(gain) / loss
|
(82)
|
|
103
|
|
|
Equity method
investments income
|
(677)
|
|
-
|
|
|
Interest expense,
net
|
10,730
|
|
9,811
|
|
|
Income before
provision for income taxes
|
10,153
|
|
24,686
|
|
|
Provision for income
taxes
|
4,161
|
|
8,512
|
|
|
Net
income
|
$
5,992
|
|
$
16,174
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
Basic
|
$
0.06
|
|
$
0.17
|
|
|
Diluted
|
$
0.06
|
|
$
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares
outstanding:
|
|
|
|
|
|
Basic
|
96,698,637
|
|
96,399,351
|
|
|
Diluted
|
98,463,667
|
|
97,509,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax
rate
|
41.0%
|
|
34.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information
|
GAAP to Non-GAAP
Reconciliations
|
($ in thousands,
except share and per share amounts)
|
(unaudited)
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
2017
|
|
2016
|
|
|
|
|
Net Income (GAAP)
to EBITDA (Non-GAAP) to Adjusted EBITDA (Non-GAAP):
|
|
|
Net income
(GAAP)
|
$
5,992
|
|
$
16,174
|
Interest
expense, net
|
10,730
|
|
9,811
|
Provision for income taxes
|
4,161
|
|
8,512
|
Depreciation and amortization
|
45,348
|
|
44,539
|
EBITDA
(Non-GAAP)
|
$
66,231
|
|
$
79,036
|
|
|
|
|
Acquisition,
integration, start-up and other expenses
|
1,805
|
|
1,229
|
Union contract
ratification cost
|
4,979
|
|
–
|
Change in fair value
of contingent consideration liability
|
2,516
|
|
1,526
|
Severance
expenses
|
–
|
|
3,048
|
Stock-based
compensation expense
|
5,265
|
|
3,421
|
Accumulated EBITDA
adjustments
|
14,565
|
|
9,224
|
Adjusted EBITDA
(Non-GAAP)
|
$
80,796
|
|
$
88,260
|
|
|
|
|
Net Income (GAAP)
to Adjusted Net Income (Non-GAAP):
|
|
|
|
Net income
(GAAP)
|
$
5,992
|
|
$
16,174
|
Accumulated EBITDA
adjustments
|
14,565
|
|
9,224
|
Accumulated tax
adjustments
|
(5,462)
|
|
(3,163)
|
Adjusted Net
Income (Non-GAAP)
|
$
15,095
|
|
$
22,235
|
|
|
|
|
|
|
|
|
Diluted EPS (GAAP)
to Adjusted Diluted EPS (Non-GAAP):
|
|
|
|
Diluted earnings per
share (GAAP)
|
$
0.06
|
|
$
0.17
|
Accumulated EBITDA
adjustments
|
0.15
|
|
0.09
|
Accumulated tax
adjustments
|
( 0.06)
|
|
( 0.03)
|
Adjusted Diluted
EPS (Non-GAAP)
|
$
0.15
|
|
$
0.23
|
|
|
|
|
KapStone Paper and
Packaging Corporation
|
Consolidated
Balance Sheets
|
(In
thousands)
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2017
|
|
2016
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and
cash equivalents
|
$
7,915
|
|
$
29,385
|
|
Trade
accounts receivable, net of allowances
|
416,591
|
|
392,962
|
|
Other
receivables
|
14,177
|
|
13,562
|
|
Inventories
|
341,403
|
|
322,664
|
|
Prepaid
expenses and other current assets
|
22,824
|
|
10,247
|
|
Total current
assets
|
802,910
|
|
768,820
|
|
|
|
|
|
|
Plant, property and
equipment, net
|
1,452,636
|
|
1,441,557
|
|
Other
assets
|
25,887
|
|
25,468
|
|
Intangible assets,
net
|
320,913
|
|
314,413
|
|
Goodwill
|
720,473
|
|
705,617
|
|
Total
assets
|
$
3,322,819
|
|
$
3,255,875
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Short-term
borrowings
|
$
25,988
|
|
$
–
|
|
Other
borrowings
|
6,214
|
|
–
|
|
Dividend
payable
|
10,043
|
|
10,052
|
|
Accounts
payable
|
232,429
|
|
189,350
|
|
Accrued
expenses
|
94,023
|
|
76,480
|
|
Accrued compensation
costs
|
45,797
|
|
48,840
|
|
Accrued income
taxes
|
225
|
|
15,971
|
|
Total current
liabilities
|
414,719
|
|
340,693
|
|
|
|
|
|
|
Long-term debt, net
of current portion
|
1,481,912
|
|
1,485,323
|
|
Pension and
post-retirement benefits
|
32,805
|
|
34,207
|
|
Deferred income
taxes
|
407,393
|
|
405,561
|
|
Other
liabilities
|
79,212
|
|
85,761
|
|
Total other
liabilities
|
2,001,322
|
|
2,010,852
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Common stock $0.0001
par value
|
10
|
|
10
|
|
Additional paid-in
capital
|
281,317
|
|
275,970
|
|
Retained
earnings
|
685,891
|
|
689,668
|
|
Accumulated other
comprehensive loss
|
(60,440)
|
|
(61,318)
|
|
Total stockholders'
equity
|
906,778
|
|
904,330
|
|
Total liabilities and
stockholders' equity
|
$
3,322,819
|
|
$
3,255,875
|
|
|
|
|
|
|
KapStone Paper and
Packaging Corporation
|
Consolidated
Statement of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
|
2017
|
|
2016
|
|
|
Operating
activities:
|
|
|
|
|
|
Net
income
|
$
5,992
|
|
$
16,174
|
|
|
Adjustments to reconcile net income to net cash provided
by
|
|
|
|
|
|
operating activities:
|
|
|
|
|
|
Depreciation of plant and equipment
|
37,758
|
|
35,603
|
|
|
Amortization of intangible assets
|
7,590
|
|
8,936
|
|
|
Stock-based compensation expense
|
5,265
|
|
3,421
|
|
|
Pension
and postretirement
|
(572)
|
|
(448)
|
|
|
Excess tax
benefit from stock-based compensation
|
–
|
|
140
|
|
|
Amortization of debt issuance costs
|
1,179
|
|
1,124
|
|
|
(Gain) /
Loss on disposal of fixed assets
|
526
|
|
(62)
|
|
|
Deferred
income taxes
|
1,521
|
|
1,064
|
|
|
Change
in fair value of contingent consideration liability
|
2,516
|
|
1,526
|
|
|
Equity
method investments income, net of cash received
|
(167)
|
|
–
|
|
|
Changes
in operating assets and liabilities
|
(28,939)
|
|
(8,873)
|
|
|
Net cash provided by
operating activities
|
$
32,669
|
|
$
58,605
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Capital expenditures
|
(38,669)
|
|
(36,163)
|
|
|
Purchase of intangible assets
|
–
|
|
(500)
|
|
|
API acquisition
|
(33,500)
|
|
–
|
|
|
Proceeds from the sale of assets
|
–
|
|
4,856
|
|
|
Net cash used in
investing activities
|
$ (72,169)
|
|
$
(31,807)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Proceeds from
revolving credit facility
|
$ 122,988
|
|
$
134,600
|
|
|
Repayments on
revolving credit facility
|
(97,000)
|
|
(131,000)
|
|
|
Proceeds from
receivables credit facility
|
17,031
|
|
6,670
|
|
|
Repayments on
receivables credit facility
|
(21,621)
|
|
(24,700)
|
|
|
Payment of loan
amendment costs
|
-
|
|
(2,250)
|
|
|
Proceeds from other
current borrowings
|
6,214
|
|
–
|
|
|
Cash dividends
paid
|
(9,664)
|
|
(9,696)
|
|
|
Payment of
withholding taxes on vested stock awards
|
(856)
|
|
(692)
|
|
|
Proceeds from
exercises of stock options
|
451
|
|
209
|
|
|
Proceeds from
issuance of shares to ESPP
|
487
|
|
464
|
|
|
Excess tax benefit
from stock-based compensation
|
-
|
|
(140)
|
|
|
Net cash (used in) /
provided by financing activities
|
$
18,030
|
|
$
(26,535)
|
|
|
|
|
|
|
|
|
Net (decrease) /
increase in cash and cash equivalents
|
(21,470)
|
|
263
|
|
|
Cash and cash
equivalents-beginning of period
|
29,385
|
|
6,821
|
|
|
Cash and cash
equivalents-end of period
|
$
7,915
|
|
$
7,084
|
|
|
|
|
|
|
|
|
KapStone Paper and
Packaging Corporation
|
Operating Segment
Information
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2017
|
Trade
|
|
Inter-
segment
|
|
Total
|
|
Operating
Income
(Loss)
|
|
Depreciation
and
Amortization
|
|
Capital
Expenditures
|
|
Total Assets
at March 31,
2017
|
Paper and
Packaging
|
$ 547,644
|
|
$ 21,197
|
|
$ 568,841
|
|
$
34,315
|
|
$
37,406
|
|
$
36,490
|
|
$
2,591,747
|
Distribution
|
218,199
|
|
-
|
|
218,199
|
|
2,597
|
|
5,978
|
|
679
|
|
687,854
|
Corporate
|
-
|
|
-
|
|
-
|
|
(16,788)
|
|
1,964
|
|
1,500
|
|
43,218
|
Intersegment
eliminations
|
-
|
|
(21,197)
|
|
(21,197)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
$ 765,843
|
|
$
-
|
|
$ 765,843
|
|
$
20,124
|
|
$
45,348
|
|
$
38,669
|
|
$
3,322,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2016
|
Trade
|
|
Inter-
segment
|
|
Total
|
|
Operating
Income
(Loss)
|
|
Depreciation
and
Amortization
|
|
Capital
Expenditures
|
|
Total Assets
at March 31,
2016
|
Paper and
Packaging
|
$ 520,040
|
|
$ 16,469
|
|
$ 536,509
|
|
$
46,241
|
|
$
37,136
|
|
$
32,355
|
|
$
2,501,605
|
Distribution
|
218,175
|
|
-
|
|
218,175
|
|
1,381
|
|
5,661
|
|
2,066
|
|
665,458
|
Corporate
|
-
|
|
-
|
|
-
|
|
(13,022)
|
|
1,742
|
|
1,742
|
|
45,603
|
Intersegment
eliminations
|
-
|
|
(16,469)
|
|
(16,469)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
$ 738,215
|
|
$
-
|
|
$ 738,215
|
|
$
34,600
|
|
$
44,539
|
|
$
36,163
|
|
$
3,212,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KapStone Paper and
Packaging Corporation
|
Operating Segment
EBITDA and Adjusted EBITDA
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
Paper and
Packaging
|
|
2017
|
|
2016
|
|
|
Segment operating
income
|
|
$
34,315
|
|
$
46,241
|
|
|
Equity method
investments income
|
|
(677)
|
|
-
|
|
|
Foreign exchange
(gain) / loss
|
|
(45)
|
|
(287)
|
|
|
Depreciation and
amortization
|
|
37,406
|
|
37,136
|
|
|
EBITDA
|
|
72,443
|
|
83,664
|
|
|
Severance
expenses
|
|
-
|
|
2,262
|
|
|
Acquisition,
integration, start-up and other expenses
|
|
1,366
|
|
884
|
|
|
Union contract
ratification costs
|
|
4,979
|
|
-
|
|
|
Adjusted
EBITDA
|
|
$
78,788
|
|
$
86,810
|
|
|
Adjusted EBITDA
margin
|
|
14.4%
|
|
16.7%
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
Distribution
|
|
2017
|
|
2016
|
|
|
Segment operating
income
|
|
$
2,597
|
|
$
1,381
|
|
|
Foreign exchange
(gain) / loss
|
|
(37)
|
|
390
|
|
|
Depreciation and
amortization
|
|
5,978
|
|
5,661
|
|
|
EBITDA
|
|
8,612
|
|
6,652
|
|
|
Acquisition,
integration, start-up and other expenses
|
|
163
|
|
263
|
|
|
Severance
expenses
|
|
-
|
|
391
|
|
|
Adjusted
EBITDA
|
|
$
8,775
|
|
$
7,306
|
|
|
Adjusted EBITDA
margin
|
|
4.0%
|
|
3.3%
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
Corporate
|
|
2017
|
|
2016
|
|
|
Segment operating
(loss)
|
|
$
(16,788)
|
|
$
(13,022)
|
|
|
Depreciation and
amortization
|
|
1,964
|
|
1,742
|
|
|
EBITDA
|
|
(14,824)
|
|
(11,280)
|
|
|
Stock-based
compensation expense
|
|
5,265
|
|
3,421
|
|
|
Acquisition,
integration, start-up and other expenses
|
|
276
|
|
82
|
|
|
Change in fair value
of contingent consideration liability
|
|
2,516
|
|
1,526
|
|
|
Severance
expenses
|
|
-
|
|
395
|
|
|
Adjusted
EBITDA
|
|
$
(6,767)
|
|
$
(5,856)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
March 31,
|
|
|
Consolidated
|
|
2017
|
|
2016
|
|
|
Segment operating
income
|
|
$
20,124
|
|
$
34,600
|
|
|
Equity method
investments income
|
|
(677)
|
|
-
|
|
|
Foreign exchange
(gain) / loss
|
|
(82)
|
|
103
|
|
|
Depreciation and
amortization
|
|
45,348
|
|
44,539
|
|
|
EBITDA
|
|
66,231
|
|
79,036
|
|
|
Stock-based
compensation expense
|
|
5,265
|
|
3,421
|
|
|
Acquisition,
integration, start-up and other expenses
|
|
1,805
|
|
1,229
|
|
|
Union contract
ratification costs
|
|
4,979
|
|
-
|
|
|
Change in fair value
of contingent consideration liability
|
|
2,516
|
|
1,526
|
|
|
Severance
expenses
|
|
-
|
|
3,048
|
|
|
Adjusted
EBITDA
|
|
$
80,796
|
|
$
88,260
|
|
|
|
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/kapstone-reports-first-quarter-results-300446490.html
SOURCE KapStone Paper and Packaging Corporation