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Actionable news in KS: KAPSTONE PAPER AND PACKAGING CORPORATION,

KapStone Reports First Quarter Results

NORTHBROOK, Ill., April 27, 2016 /PRNewswire/ -- KapStone Paper and Packaging Corporation KS, +1.66% today reported results for the first quarter ended March 31, 2016. As compared to 2015's first quarter, results for 2016's first quarter are below:

  • Net sales of $738 million up $192 million, or 35 percent
  • Net income of $16 million down $10 million, or 38 percent
  • Adjusted net income of $22 million down $7 million, or 24 percent
  • Adjusted EBITDA of $88 million up $1 million, or 2 percent
  • Diluted EPS of $0.17 down $0.10 per share, or 37 percent
  • Adjusted diluted EPS of $0.23 down $0.07 per share, or 23 percent

Roger W. Stone, Chairman and Chief Executive Officer, stated, "KapStone's operations performed very well in the first quarter with our mills recording record first quarter production. Our strong operating performance and benefits from Victory, though, were mostly offset by lower prices and less favorable product mix. Although first quarter cash flows are typically weak, our operating cash flow this quarter improved $63 million over the prior year benefitting from lower cash taxes and Victory. We continue to make good progress on integrating Victory's packaging needs into our mill and plant system."

First Quarter Operating Highlights

Consolidated net sales of $738 million in the first quarter of 2016 increased by $192 million, or 35 percent compared to $546 million for the 2015 first quarter. The increase is primarily due to $218 million reflecting the Victory Packaging acquisition which occurred in June 2015 and higher sales volume, offset by lower domestic and export containerboard and export kraft paper prices. The Company sold 692,000 tons of paper during the first quarter of 2016 compared to 661,000 tons a year earlier. The Company's average mill selling price of $625 per ton in the first quarter of 2016 decreased by $58 per ton, or about 8 percent compared to the first quarter of 2015 due to lower domestic and export containerboard prices, lower export kraft paper prices and a less favorable product mix.

Operating income of $35 million for the 2016 first quarter decreased by $13 million, or 27 percent, compared to the 2015 first quarter. The lower operating earnings primarily reflect lower domestic and export containerboard and export kraft paper prices, inflation on salary and certain benefit costs, an increase of the fair value of the Victory contingent consideration liability and higher severance charges partially offset by the Victory Packaging acquisition and related synergies, lower fuel costs, and lower management incentives.

Interest expense, net, was $10 million for the first quarter of 2016, up $3 million from a year ago as a result of borrowings associated with the Victory Packaging acquisition and higher interest rates. Our weighted average interest rate as of March 31, 2016 is 2.1 percent compared to 1.8 percent as of March 31, 2015.

The effective income tax rate for the 2016 first quarter was 34.5 percent compared to 34.8 percent for the 2015 first quarter.

Cash Flow and Working Capital

Cash and cash equivalents of $7 million as of March 31, 2016, remained consistent with balances at December 31, 2015. Operating activities provided $59 million during the first quarter while investing and financing activities used $32 and $27 million, respectively. Capital expenditures in the first quarter were $36 million.

On March 10, 2016, our Board of Directors approved a regular $0.10 per share cash dividend which was paid in April.

At March 31, 2016, the Company had approximately $417 million of working capital and $473 million of revolver borrowing capacity.

Conclusion

In summary, Stone commented, "I expect to see our operations continue to perform better and as Victory moves into its strongest seasonal period, the integration of Victory's corrugated packaging needs should accelerate."

Conference Call

KapStone will host a conference call at 10:00 a.m. CDT, Thursday, April 28, 2016, to discuss the Company's financial results for the 2016 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: 86874247

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, 20 converting plants and 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 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...


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