KapStone Reports First Quarter Results

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: 866-515-2910International: 617-399-5124Participant 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.

 

 

 

 

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SOURCE KapStone Paper and Packaging Corporation