KAPSTONE PAPER AND PACKAGING CORP. NORTHBROOK, Ill., May 4, 2015 /PRNewswire/ -- KapStone Paper and Packaging Corporation (NYSE:KS) today reported results for the first quarter ended March 31, 2015. As compared to 2014's first quarter, results for 2015's first quarter are below:
-- Net sales of $546 million down $3 million, or 1 percent
-- Net income of $26 million down $6 million, or 19 percent
-- Adjusted net income of $29 million down $6 million, or 17 percent
-- Adjusted EBITDA of $87 million down $9 million, or 9 percent
-- Adjusted EBITDA margin of 15.8 percent, down from 17.4 percent
-- Diluted EPS of $0.27 down $0.06 per share, or 18 percent
-- Adjusted diluted EPS of $0.30 down $0.06 per share, or 17 percent
Roger W. Stone, Chairman and Chief Executive Officer, stated, "KapStone delivered lower first quarter earnings as our mills struggled with some temporary operational issues. Fiber costs were higher, particularly in the Pacific Northwest, and the stronger dollar compared to the Euro negatively impacted our sales in Europe and exports. Once again, the weather affected our operations with almost the same intensity as last year's Polar Vortex as only the timing and geographic locations impacted changed from last year. On the positive side, our corrugated products performed very well and shipments were up 6.5 percent on an average weekly basis over the first quarter of 2014."
First Quarter Operating Highlights
Consolidated net sales of $546 million in the first quarter of 2015 decreased by $3 million, or 1 percent compared to $549 million for the 2014 first quarter. The decrease is primarily due to $3 million reflecting a stronger U.S. dollar compared to the Euro which impacted sales in Europe and exports, and lower sales volume. The Company sold 661,000 tons of paper during the first quarter of 2015 compared to 673,000 tons a year earlier. The Company's average mill selling price of $683 per ton in the first quarter of 2015 decreased by $2 per ton compared to the first quarter of 2014, due to the stronger U.S. dollar and lower export prices partially offset by higher kraft paper prices.
Operating income of $47 million for the 2015 first quarter decreased by $11 million, or 19 percent, compared to the 2014 first quarter. The lower operating earnings primarily reflects lower productivity, 12,000 tons of lower sales volume, higher fiber costs and compensation costs and the stronger U.S. dollar which impacted prices in Europe and for exports, partially offset by lower planned outage costs.
Interest expense, net, was $6 million for the first quarter of 2015, down $3 million from a year ago as a result of a lower borrowings and interest rates. Our weighted average interest rate as of March 31, 2015 is 1.8 percent compared to 2.0 percent as of March 31, 2014.
The effective income tax rate for the 2015 first quarter was 34.8 percent compared to 34.3 percent for the 2014 first quarter.
Cash Flow and Working Capital
Cash and cash equivalents decreased by $18 million in the quarter ended March 31, 2015, from December 31, 2014 to $11 million. Operating activities used $4 million during the first quarter while financing activities generated $15 million. Capital expenditures in the first quarter were $29 million.
At March 31, 2015, the Company had approximately $270 million of working capital and $386 million of revolver borrowing capacity.
Conclusion
In summary, Stone commented, "I expect to see our operations perform better in the second quarter."
Conference Call
KapStone will host a conference call at 11:30 a.m. EDT, Tuesday, May 5, 2015, to discuss the Company's financial results for the 2015 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: 866-515-2910
International: 617-399-5124
Participant Passcode: 51290081
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 is the parent company of KapStone Kraft Paper Corporation and KapStone Container Corporation which includes four paper mills and 21 converting plants, respectively, across the U.S. The business employs approximately 4,600 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 integration of the Longview acquisition. 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, 2014 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)
Fav / (Unfav)
Quarter Ended March 31, Variance
-----------------------
2015 2014 %
---- ---- ---
Net sales $546,289 $548,952 -0.5%
Cost and expenses:
Cost of sales, excluding
depreciation and
amortization 382,198 383,248 0.3%
Depreciation and
amortization 35,121 32,709 -7.4%
Freight and distribution
expenses 43,427 40,732 -6.6%
Selling, general and
administrative expenses 38,194 34,145 -11.9%
------ ------ -----
Operating income 47,349 58,118 -18.5%
Foreign exchange loss 885 24 -3587.5%
Interest expense, net 6,413 9,229 30.5%
----- -----
Income before provision
for income taxes 40,051 48,865 -18.0%
Provision for income taxes 13,951 16,766 16.8%
------ ------ ----
Net income $26,100 $32,099 -18.7%
======= ======= =====
Net income per share:
Basic $0.27 $0.34
===== =====
Diluted $0.27 $0.33
===== =====
Weighted-average number of shares outstanding:
Basic 96,123,351 95,720,328
========== ==========
Diluted 97,662,608 97,315,766
========== ==========
Effective income tax rate 34.8% 34.3%
==== ====
Supplemental Information
GAAP to Non-GAAP Reconciliations
($ in thousands, except share and per share amounts)
(unaudited)
Quarter Ended March 31,
-----------------------
2015 2014
---- ----
Net Income (GAAP) to EBITDA (Non-
GAAP) to Adjusted EBITDA (Non-
GAAP):
Net
income
(GAAP) $26,100 $32,099
Interest
expense,
net 6,413 9,229
Provision
for
income
taxes 13,951 16,766
Depreciation
and
amortization 35,121 32,709
------ ------
EBITDA
(Non-
GAAP) $81,585 $90,803
======= =======
Acquisition,
start
up
and
other
expenses 1,207 1,814
Stock-
based
compensation
expense 3,780 2,918
----- -----
Adjusted
EBITDA
(Non-
GAAP) $86,572 $95,535
======= =======
Net Income (GAAP) to Adjusted Net
Income (Non-GAAP):
Net
income
(GAAP) $26,100 $32,099
Acquisition,
start
up
and
other
expenses 794 1,188
Stock-
based
compensation
expense 2,485 1,911
----- -----
Adjusted
Net
Income
(Non-
GAAP) $29,379 $35,198
======= =======
Basic EPS (GAAP) to Adjusted Basic
EPS (Non-GAAP):
Basic
EPS
(GAAP) $0.27 $0.34
Acquisition,
start
up
and
other
expenses 0.01 0.01
Stock-
based
compensation
expense 0.03 0.02
Adjusted
Basic
EPS
(Non-
GAAP) $0.31 $0.37
===== =====
Diluted EPS (GAAP) to Adjusted
Diluted EPS (Non-GAAP):
Diluted
earnings
per
share
(GAAP) $0.27 $0.33
Acquisition,
start
up
and
other
expenses 0.01 0.01
Stock-
based
compensation
expense 0.02 0.02
Adjusted
Diluted
EPS
(Non-
GAAP) $0.30 $0.36
===== =====
KapStone Paper and Packaging Corporation
Consolidated Balance Sheets
(In thousands)
March 31, December 31,
2015 2014
---- ----
(unaudited)
Assets
Current assets:
Cash
and
cash
equivalents $10,545 $28,467
Trade
accounts
receivable,
net
of
allowances 255,435 228,740
Other
receivables 13,779 12,833
Inventories 255,507 238,329
Prepaid
expenses
and
other
current
assets 16,814 7,172
Total
current
assets 552,080 515,541
------- -------
Plant,
property
and
equipment,
net 1,384,786 1,386,670
Other
assets 10,296 10,135
Intangible
assets,
net 106,662 110,077
Goodwill 533,851 533,851
------- -------
Total
assets $2,587,675 $2,556,274
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Short-
term
borrowings $10,000 $ -
Other
current
borrowings 6,615 -
Dividend
payable 9,721 9,911
Accounts
payable 150,788 149,600
Accrued
expenses 46,972 48,340
Accrued
compensation
costs 46,012 62,491
Accrued
income
taxes 9,668 6,477
Deferred
income
taxes 1,804 1,990
Total
current
liabilities 281,580 278,809
------- -------
Long-
term
debt,
net
of
current
portion 1,055,014 1,046,063
Pension
and
post-
retirement
benefits 29,582 32,800
Deferred
income
taxes 415,067 412,293
Other
liabilities 7,895 8,182
----- -----
Total
other
liabilities 1,507,558 1,499,338
--------- ---------
Stockholders' equity:
Common
stock
$0.0001
par
value 10 10
Additional
paid-
in
capital 259,260 255,505
Retained
earnings 591,053 574,601
Accumulated
other
comprehensive
(loss)
income (51,786) (51,989)
------- -------
Total
stockholders'
equity 798,537 778,127
Total
liabilities
and
stockholders'
equity $2,587,675 $2,556,274
========== ==========
KapStone Paper and Packaging Corporation
Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Quarter Ended March 31,
-----------------------
2015 2014
---- ----
Operating activities:
Net
income $26,100 $32,099
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation
and
amortization 35,121 32,709
Stock-
based
compensation
expense 3,780 2,918
Pension
and
postretirement (2,892) (4,080)
Excess
tax
benefit
for
stock-
based
compensation (1,391) (2,221)
Amortization
of debt
issuance
costs 1,007 1,452
Loss on
disposal
of
fixed
assets 178 979
Deferred
income
taxes 1,864 3,323
Changes
in
operating
assets
and
liabilities (67,679) (28,228)
Net cash
(used
in)
provided
by
operating
activities $(3,912) $38,951
------- -------
Investing activities:
Capital
expenditures (28,762) (32,420)
Net cash
used in
investing
activities $(28,762) $(32,420)
-------- --------
Financing activities:
Proceeds
from
revolving
credit
facility $86,400 $56,500
Repayments
on
revolving
credit
facility (76,400) (56,500)
Proceeds
from
receivables
credit
facility 12,962 -
Repayments
on
receivables
credit
facility (4,962) -
Payments
on long-
term
debt - (1,175)
Proceeds
from
other
current
borrowings 6,615 6,300
Repayments
on
other
current
borrowings - (1,673)
Cash
dividend
paid (9,838) -
Payment
of
withholding
taxes
on
vested
stock
awards (2,322) (1,641)
Proceeds
from
exercises
of stock
options 491 214
Proceeds
from
issuance
of
shares
to ESPP 415 205
Excess
tax
benefit
from
stock-
based
compensation 1,391 2,221
Net cash
provided
by
(used
in)
financing
activities $14,752 $4,451
------- ------
Net
(decrease)
/
increase
in cash
and
cash
equivalents (17,922) 10,982
Cash and
cash
equivalents-
beginning
of
period 28,467 12,967
Cash and
cash
equivalents-
end of
period $10,545 $23,949
======= =======
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SOURCE KapStone Paper and Packaging Corporation
