SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2017
or
☐ | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to
Commission file number 1-15399
(Exact Name of Registrant as Specified in its Charter)
Delaware | 36-4277050 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
1955 West Field Court, Lake Forest, Illinois | 60045 | |
(Address of Prinicpal Executive Offices) | (Zip Code) |
Registrant's telephone number, including area code
(847) 482-3000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer,"” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | (Do not check if a smaller reporting company) | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x
As of October 28, 201631, 2017 the Registrant had outstanding 94,226,32694,350,499 shares of common stock, par value $0.01 per share.
PART I | |||
Item 1. | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 15 | |
Item 3. | 27 | ||
Item 4. | 27 | ||
PART II | |||
Item 1. | 28 | ||
Item 1A. | 28 | ||
Item 2. | 28 | ||
Item 3. | 28 | ||
Item 4. | 28 | ||
Item 5. | 28 | ||
Item 6. | |||
29 |
All reports we file with the Securities and Exchange Commission (SEC) are available free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC website at www.sec.gov. We also provide copies of our SEC filings at no charge upon request and make electronic copies of our reports available through our website at
www.packagingcorp.com as soon as reasonably practicable after filing such material with the SEC.i
FINANCIAL INFORMATION
Item 1. |
Packaging Corporation of America
Consolidated Statements of Income and Comprehensive Income
(unaudited, dollars in millions, except per-share data)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Statements of Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 1,640.1 |
|
| $ | 1,484.0 |
|
| $ | 4,760.6 |
|
| $ | 4,302.4 |
|
Cost of sales |
|
| (1,242.8 | ) |
|
| (1,154.5 | ) |
|
| (3,660.1 | ) |
|
| (3,353.8 | ) |
Gross profit |
|
| 397.3 |
|
|
| 329.5 |
|
|
| 1,100.5 |
|
|
| 948.6 |
|
Selling, general, and administrative expenses |
|
| (130.2 | ) |
|
| (116.9 | ) |
|
| (388.9 | ) |
|
| (346.0 | ) |
Other expense, net |
|
| (24.8 | ) |
|
| (6.2 | ) |
|
| (32.4 | ) |
|
| (15.2 | ) |
Income from operations |
|
| 242.3 |
|
|
| 206.4 |
|
|
| 679.2 |
|
|
| 587.4 |
|
Interest expense, net |
|
| (25.4 | ) |
|
| (23.4 | ) |
|
| (74.6 | ) |
|
| (67.5 | ) |
Income before taxes |
|
| 216.9 |
|
|
| 183.0 |
|
|
| 604.6 |
|
|
| 519.9 |
|
Provision for income taxes |
|
| (77.8 | ) |
|
| (63.7 | ) |
|
| (204.9 | ) |
|
| (181.0 | ) |
Net income |
| $ | 139.1 |
|
| $ | 119.3 |
|
| $ | 399.7 |
|
| $ | 338.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.47 |
|
| $ | 1.27 |
|
| $ | 4.24 |
|
| $ | 3.59 |
|
Diluted |
| $ | 1.47 |
|
| $ | 1.26 |
|
| $ | 4.23 |
|
| $ | 3.58 |
|
Dividends declared per common share |
| $ | 0.63 |
|
| $ | 0.63 |
|
| $ | 1.89 |
|
| $ | 1.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 139.1 |
|
| $ | 119.3 |
|
| $ | 399.7 |
|
| $ | 338.9 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| 0.1 |
|
|
| — |
|
|
| (0.2 | ) |
|
| — |
|
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.5 million, $0.5 million, $1.6 million, and $1.6 million |
|
| 0.9 |
|
|
| 0.9 |
|
|
| 2.6 |
|
|
| 2.6 |
|
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $1.2 million, $1.0 million, $3.7 million, and $3.1 million |
|
| 1.9 |
|
|
| 1.8 |
|
|
| 6.2 |
|
|
| 5.0 |
|
Changes in unfunded employee benefit obligation net of tax of $2.0 million |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.1 |
|
Other comprehensive income |
|
| 2.9 |
|
|
| 2.7 |
|
|
| 8.6 |
|
|
| 10.7 |
|
Comprehensive income |
| $ | 142.0 |
|
| $ | 122.0 |
|
| $ | 408.3 |
|
| $ | 349.6 |
|
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Statements of Income: | |||||||||||||||
Net sales | $ | 1,484.0 | $ | 1,470.8 | $ | 4,302.4 | $ | 4,350.8 | |||||||
Cost of sales | (1,154.5 | ) | (1,142.5 | ) | (3,353.8 | ) | (3,427.9 | ) | |||||||
Gross profit | 329.5 | 328.3 | 948.6 | 922.9 | |||||||||||
Selling, general, and administrative expenses | (116.9 | ) | (112.7 | ) | (346.0 | ) | (345.9 | ) | |||||||
Other income (expense), net | (6.2 | ) | 3.8 | (15.2 | ) | (2.9 | ) | ||||||||
Income from operations | 206.4 | 219.4 | 587.4 | 574.1 | |||||||||||
Interest expense, net | (23.4 | ) | (21.7 | ) | (67.5 | ) | (63.2 | ) | |||||||
Income before taxes | 183.0 | 197.7 | 519.9 | 510.9 | |||||||||||
Income tax provision | (63.7 | ) | (69.9 | ) | (181.0 | ) | (178.3 | ) | |||||||
Net income | $ | 119.3 | $ | 127.8 | $ | 338.9 | $ | 332.6 | |||||||
Less net income attributable to noncontrolling interests | — | — | — | — | |||||||||||
Net income attributable to Packaging Corporation of America | $ | 119.3 | $ | 127.8 | $ | 338.9 | $ | 332.6 | |||||||
Net income per common share attributable to Packaging Corporation of America common shareholders: | |||||||||||||||
Basic | $ | 1.27 | $ | 1.31 | $ | 3.59 | $ | 3.39 | |||||||
Diluted | $ | 1.26 | $ | 1.31 | $ | 3.58 | $ | 3.39 | |||||||
Dividends declared per common share | $ | 0.63 | $ | 0.55 | $ | 1.73 | $ | 1.65 | |||||||
Statements of Comprehensive Income: | |||||||||||||||
Net income | $ | 119.3 | $ | 127.8 | $ | 338.9 | $ | 332.6 | |||||||
Other comprehensive income, net of tax: | |||||||||||||||
Foreign currency translation adjustment | — | — | — | 2.8 | |||||||||||
Reclassification adjustments to cash flow hedges included in net income, net of tax of $0.5 million, $0.5 million, $1.6 million, and $1.6 million | 0.9 | 0.9 | 2.6 | 2.6 | |||||||||||
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of $1.0 million, $1.4 million, $3.1 million, and $4.2 million | 1.8 | 2.1 | 5.0 | 6.5 | |||||||||||
Changes in unfunded employee benefit obligations net of tax of $2.0 million | — | — | 3.1 | — | |||||||||||
Other comprehensive income | 2.7 | 3.0 | 10.7 | 11.9 | |||||||||||
Less net income attributable to noncontrolling interests | — | — | — | — | |||||||||||
Comprehensive income attributable to Packaging Corporation of America | $ | 122.0 | $ | 130.8 | $ | 349.6 | $ | 344.5 |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
(unaudited, dollars and shares in millions, except per-share data)
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 370.5 |
|
| $ | 239.3 |
|
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $11.3 million and $10.1 million as of September 30, 2017, and December 31, 2016, respectively |
|
| 831.3 |
|
|
| 689.2 |
|
Inventories |
|
| 736.6 |
|
|
| 723.6 |
|
Prepaid expenses and other current assets |
|
| 43.4 |
|
|
| 30.3 |
|
Federal and state income taxes receivable |
|
| 20.0 |
|
|
| 13.9 |
|
Total current assets |
|
| 2,001.8 |
|
|
| 1,696.3 |
|
Property, plant, and equipment, net |
|
| 2,881.6 |
|
|
| 2,895.7 |
|
Goodwill |
|
| 732.1 |
|
|
| 737.9 |
|
Intangible assets, net |
|
| 347.8 |
|
|
| 367.1 |
|
Other long-term assets |
|
| 63.9 |
|
|
| 80.0 |
|
Total assets |
| $ | 6,027.2 |
|
| $ | 5,777.0 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
| $ | 156.5 |
|
| $ | 25.8 |
|
Capital lease obligations |
|
| 1.3 |
|
|
| 1.3 |
|
Accounts payable |
|
| 379.5 |
|
|
| 323.8 |
|
Dividends payable |
|
| 60.3 |
|
|
| 59.9 |
|
Accrued liabilities |
|
| 207.8 |
|
|
| 201.2 |
|
Accrued interest |
|
| 18.9 |
|
|
| 13.4 |
|
Total current liabilities |
|
| 824.3 |
|
|
| 625.4 |
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
Long-term debt |
|
| 2,456.3 |
|
|
| 2,620.0 |
|
Capital lease obligations |
|
| 19.3 |
|
|
| 20.3 |
|
Deferred income taxes |
|
| 342.1 |
|
|
| 334.7 |
|
Compensation and benefits |
|
| 322.8 |
|
|
| 357.2 |
|
Other long-term liabilities |
|
| 68.2 |
|
|
| 59.6 |
|
Total long-term liabilities |
|
| 3,208.7 |
|
|
| 3,391.8 |
|
Commitments and contingent liabilities |
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.4 million and 94.2 million shares issued as of September 30, 2017, and December 31, 2016, respectively |
|
| 0.9 |
|
|
| 0.9 |
|
Additional paid in capital |
|
| 466.1 |
|
|
| 451.4 |
|
Retained earnings |
|
| 1,658.2 |
|
|
| 1,447.1 |
|
Accumulated other comprehensive loss |
|
| (131.0 | ) |
|
| (139.6 | ) |
Total stockholders' equity |
|
| 1,994.2 |
|
|
| 1,759.8 |
|
Total liabilities and stockholders' equity |
| $ | 6,027.2 |
|
| $ | 5,777.0 |
|
September 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | �� | ||||||
Cash and cash equivalents | $ | 279.8 | $ | 184.2 | |||
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $9.4 million and $10.3 million as of September 30, 2016 and December 31, 2015, respectively | 713.2 | 636.5 | |||||
Inventories | 690.6 | 676.8 | |||||
Prepaid expenses and other current assets | 45.1 | 28.8 | |||||
Federal and state income taxes receivable | 18.3 | 28.2 | |||||
Total current assets | 1,747.0 | 1,554.5 | |||||
Property, plant, and equipment, net | 2,878.7 | 2,832.1 | |||||
Goodwill | 692.1 | 544.0 | |||||
Intangible assets, net | 354.8 | 270.8 | |||||
Other long-term assets | 74.6 | 70.9 | |||||
Total assets | $ | 5,747.2 | $ | 5,272.3 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Current maturities of long-term debt | $ | 25.8 | $ | 6.5 | |||
Capital lease obligations | 1.2 | 1.2 | |||||
Accounts payable | 327.0 | 294.2 | |||||
Dividends payable | 59.8 | 53.4 | |||||
Accrued interest | 18.8 | 13.1 | |||||
Accrued liabilities | 204.9 | 193.5 | |||||
Total current liabilities | 637.5 | 561.9 | |||||
Long-term liabilities: | |||||||
Long-term debt | 2,625.8 | 2,290.4 | |||||
Capital lease obligations | 20.7 | 21.6 | |||||
Deferred income taxes | 360.9 | 347.0 | |||||
Compensation and benefits | 312.2 | 358.6 | |||||
Other long-term liabilities | 60.1 | 59.5 | |||||
Total long-term liabilities | 3,379.7 | 3,077.1 | |||||
Commitments and contingent liabilities | |||||||
Stockholders' equity: | |||||||
Common stock, par value $0.01 per share, 300.0 million shares authorized, 94.2 million and 96.1 million shares issued as of September 30, 2016 and December 31, 2015, respectively | 0.9 | 1.0 | |||||
Additional paid in capital | 446.0 | 439.9 | |||||
Retained earnings | 1,396.9 | 1,317.3 | |||||
Accumulated other comprehensive loss | (114.2 | ) | (124.9 | ) | |||
Total stockholders' equity | 1,729.6 | 1,633.3 | |||||
Noncontrolling interests | $ | 0.4 | $ | — | |||
Total equity | $ | 1,730.0 | $ | 1,633.3 | |||
Total liabilities and equity | $ | 5,747.2 | $ | 5,272.3 |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
(unaudited, dollars in millions)
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 399.7 |
|
| $ | 338.9 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation, depletion, and amortization of intangibles |
|
| 283.7 |
|
|
| 264.3 |
|
Amortization of deferred financing costs |
|
| 6.0 |
|
|
| 5.8 |
|
Share-based compensation expense |
|
| 15.4 |
|
|
| 15.0 |
|
Deferred income tax provision |
|
| 1.6 |
|
|
| 6.5 |
|
Net loss on impairment of assets |
|
| 13.5 |
|
|
| — |
|
Pension and post retirement benefits expense, net of contributions |
|
| (25.3 | ) |
|
| (33.5 | ) |
Other, net |
|
| 12.0 |
|
|
| 3.7 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
(Increase) decrease in assets — |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (142.2 | ) |
|
| (36.0 | ) |
Inventories |
|
| (13.0 | ) |
|
| 4.1 |
|
Prepaid expenses and other current assets |
|
| (10.3 | ) |
|
| (11.2 | ) |
Increase (decrease) in liabilities — |
|
|
|
|
|
|
|
|
Accounts payable |
|
| 37.7 |
|
|
| 13.6 |
|
Accrued liabilities |
|
| 9.6 |
|
|
| 10.8 |
|
Federal and state income taxes payable / receivable |
|
| (5.1 | ) |
|
| 11.5 |
|
Net cash provided by operating activities |
|
| 583.3 |
|
|
| 593.5 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Additions to property, plant, and equipment |
|
| (226.2 | ) |
|
| (188.1 | ) |
Acquisition of business, net of cash acquired |
|
| — |
|
|
| (385.6 | ) |
Additions to other long term assets |
|
| (6.9 | ) |
|
| (9.4 | ) |
Proceeds from disposals |
|
| 4.4 |
|
|
| — |
|
Other, net |
|
| 1.1 |
|
|
| 0.4 |
|
Net cash used for investing activities |
|
| (227.6 | ) |
|
| (582.7 | ) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Repayments of debt and capital lease obligations |
|
| (35.6 | ) |
|
| (30.7 | ) |
Proceeds from issuance of debt |
|
| — |
|
|
| 385.0 |
|
Financing costs paid |
|
| — |
|
|
| (2.1 | ) |
Common stock dividends paid |
|
| (178.2 | ) |
|
| (156.7 | ) |
Repurchases of common stock |
|
| — |
|
|
| (100.3 | ) |
Shares withheld to cover employee restricted stock taxes |
|
| (10.7 | ) |
|
| (10.2 | ) |
Other, net |
|
| — |
|
|
| (0.2 | ) |
Net cash (used for) provided by financing activities |
|
| (224.5 | ) |
|
| 84.8 |
|
Net increase in cash and cash equivalents |
|
| 131.2 |
|
|
| 95.6 |
|
Cash and cash equivalents, beginning of period |
|
| 239.3 |
|
|
| 184.2 |
|
Cash and cash equivalents, end of period |
| $ | 370.5 |
|
| $ | 279.8 |
|
Nine Months Ended September 30 | |||||||
2016 | 2015 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | 338.9 | $ | 332.6 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, depletion, and amortization of intangibles | 264.3 | 267.9 | |||||
Amortization of deferred financing costs | 5.8 | 5.8 | |||||
Share-based compensation expense | 15.0 | 13.7 | |||||
Deferred income tax provision | 6.5 | 1.2 | |||||
Pension and postretirement benefits expense, net of contributions | (33.5 | ) | 24.0 | ||||
Other, net | 3.7 | (16.4 | ) | ||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Decrease (increase) in assets — | |||||||
Accounts receivable | (36.0 | ) | (37.5 | ) | |||
Inventories | 4.1 | (31.0 | ) | ||||
Prepaid expenses and other current assets | (11.2 | ) | (16.8 | ) | |||
Increase (decrease) in liabilities — | |||||||
Accounts payable | 13.6 | (14.1 | ) | ||||
Accrued liabilities | 10.8 | 5.2 | |||||
Federal and state income taxes payable / receivable | 6.2 | 7.4 | |||||
Net cash provided by operating activities | 588.2 | 542.0 | |||||
Cash Flows from Investing Activities: | |||||||
Additions to property, plant, and equipment | (188.1 | ) | (217.9 | ) | |||
Proceeds from sale of a business | — | 23.0 | |||||
Acquisition of business, net of cash acquired | (385.6 | ) | — | ||||
Additions to other long-term assets | (9.4 | ) | (9.2 | ) | |||
Other, net | 0.4 | 1.3 | |||||
Net cash used for investing activities | (582.7 | ) | (202.8 | ) | |||
Cash Flows from Financing Activities: | |||||||
Repayments of debt and capital lease obligations | (30.7 | ) | (30.7 | ) | |||
Proceeds from issuance of debt | 385.0 | — | |||||
Financing costs paid | (2.1 | ) | — | ||||
Common stock dividends paid | (156.7 | ) | (147.3 | ) | |||
Repurchases of common stock | (100.3 | ) | (98.1 | ) | |||
Excess tax benefits from stock-based awards | 5.3 | 5.6 | |||||
Shares withheld to cover employee restricted stock taxes | (10.2 | ) | (7.4 | ) | |||
Other, net | (0.2 | ) | 0.7 | ||||
Net cash provided by (used for) financing activities | 90.1 | (277.2 | ) | ||||
Net increase in cash and cash equivalents | 95.6 | 62.0 | |||||
Cash and cash equivalents, beginning of period | 184.2 | 124.9 | |||||
Cash and cash equivalents, end of period | $ | 279.8 | $ | 186.9 |
See accompanying condensed notes to unaudited quarterly consolidated financial statements.
Condensed Notes to Unaudited Quarterly Consolidated Financial Statements
1. | Nature of Operations and Basis of Presentation |
Packaging Corporation of America ("we," "us," "our," PCA," or the "Company") was incorporated on January 25, 1999. In April 1999, PCA acquired the containerboard and corrugated packaging products business of Pactiv Corporation (Pactiv), formerly known as Tenneco Packaging, Inc., a wholly owned subsidiary of Tenneco Inc. We are a large diverse manufacturer of both packaging and paper products. We are headquartered in Lake Forest, Illinois and we operate primarily in the United States.
We report our business in three reportable segments: Packaging, Paper, and Corporate and Other. Our Packaging segment produces a wide variety of corrugated packaging products. The Paper segment manufactures and sells a range of white papers, including communication-based papersuncoated free sheet and pressure sensitive papers, and market pulp. In October 2016, wecoated one-side grades. During the third quarter of 2017, the Company announced that weit will cease softwood market pulp operationsdiscontinue the production of uncoated free sheet and coated one-side grades at ourthe Wallula, Washington mill and permanently shutdownin the second quarter of 2018 to begin the conversion of the No. 13 machine with pulp capacity of approximately 100,000 tons, effective December 1, 2016.to a 400,000 ton-per-year virgin kraft linerboard machine. Corporate and Other includes support staff services and related assets and liabilities, transportation assets, and activity related to other ancillary support operations. For more information about our segments, see Note 16 Segment Information.
In these consolidated financial statements, certain amounts in prior periods' consolidated financial statements have been reclassified to conform with the current period presentation.
The consolidated financial statements of PCA as of September 30, 20162017 and for the three and nine months ended September 30, 20162017 and 20152016 are unaudited but include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of such financial statements. The preparation of the consolidated financial statements involves the use of estimates and accruals. Actual results may vary from those estimates. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with Article 10 of SEC Regulation S-X.S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete audited financial statements. Operating results for the three and nine months ended September 30, 20162017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.2017. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015.
The consolidated financial statements include the accounts of PCA and its majority-owned subsidiaries after elimination of intercompany balances and transactions.
TimBar Acquisition
On August 29, 2016, PCA acquired substantially all of the assets of TimBar Corporation (“TimBar”), a large independent corrugated products producer with six corrugated products production facilities, for a purchase price of $385.6 million, net of cash acquired. Funding forWe financed the acquisition came fromwith a new $385.0 million five-year term loan facility. TimBar provides solutions to customers in the higher margin retail, industrial packaging and display and fulfillment markets with a focus on a multi-color graphics and technical innovation. With the August acquisition of TimBar, we acquired a 51% controlling interest in a wholesale distributor of polywoven plastic bags used in the transportation industry. TimBarTimBar’s financial results are included in the Packaging segment from the date of acquisition.
The Company accounted for the TimBar acquisition using the acquisition method of accounting in accordance with ASC 805,
Business Combinations. The total purchase price has been
|
| 12/31/16 Allocation |
|
| Adjustments |
|
| Revised Allocation |
| |||
Goodwill |
| $ | 157.3 |
|
| $ | (1.1 | ) |
| $ | 156.2 |
|
Other intangible assets |
|
| 94.4 |
|
|
| - |
|
| 94.4 |
| |
Property, plant and equipment |
|
| 95.3 |
|
|
| - |
|
| 95.3 |
| |
Other net assets |
|
| 38.6 |
|
|
| - |
|
| 38.6 |
| |
Net assets acquired |
| $ | 385.6 |
|
| $ | (1.1 | ) |
| $ | 384.5 |
|
Goodwill | $ | 148.1 | |
Other intangible assets | 101.6 | ||
Property, plant and equipment | 96.9 | ||
Other net assets | 39.0 | ||
Net assets acquired | $ | 385.6 |
During the first quarter of 2017, we received $1.1 million from the seller related to a working capital adjustment. We recorded the adjustment as a decrease to goodwill which lowered the purchase price allocation presented above is preliminary and is subject to the finalization of various valuations and assessments, primarily related to property, plant, and equipment and intangible assets. Our current estimates and assumptions may change as more information becomes available. We expect to finalize the valuations within the 12-month period following the acquisition date.
Goodwill is calculated as the excess of the purchase price over the fair value of the net assets acquired. Among the factors that contributed to the recognition of goodwill were TimBar's commitment to continuous improvement and innovation in their operations, as well as the expected increases in PCA's containerboard integration levels. Goodwill is expected to be deductible for tax purposes.
Other intangible assets, primarily customer relationships, were assigned an estimated weighted average useful life of 14.514.2 years.
Property, plant and equipment were assigned estimated useful lives ranging from two to 24 years.
Columbus Container Acquisition
On November 30, 2016, PCA acquired substantially all of the assets of Columbus Container, Inc., an independent corrugated products producer with one production facility and five warehousing facilities, for a purchase price of $99.7 million, net of cash acquired. We paid the purchase price with available cash on hand. Columbus Container, Inc. is a full-service provider of corrugated packaging products utilizing state-of-the-art technologies and design centers to provide customers a solution for nearly any packaging need. Columbus Container’s financial results are included in the Packaging segment from the date of acquisition.
The Company accounted for the Columbus Container acquisition using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The total purchase price has been preliminarily allocated to tangible and intangible assets acquired and liabilities assumed based on respective fair values, as follows (dollars in millions):
|
| 12/31/16 Allocation |
|
| Adjustments |
|
| Revised Allocation |
| |||
Goodwill |
| $ | 36.6 |
|
| $ | (4.7 | ) |
| $ | 31.9 |
|
Other intangible assets |
|
| 26.3 |
|
|
| 6.0 |
|
|
| 32.3 |
|
Property, plant and equipment |
|
| 27.2 |
|
|
| 1.0 |
|
|
| 28.2 |
|
Other net assets |
|
| 9.6 |
|
|
| (0.1) |
|
|
| 9.5 |
|
Net assets acquired |
| $ | 99.7 |
|
| $ | 2.2 |
|
| $ | 101.9 |
|
During the third quarter of 2017, we increased the purchase price by $2.2 million as a result of a working capital adjustment expected to be paid to the seller. We recorded the adjustment as a $2.2 million increase to goodwill. The purchase price allocation above is preliminary and is subject to the finalization of working capital adjustments. Our current estimates and assumptions may change as more information becomes available.
Goodwill is calculated as the excess of the purchase price over the fair value of the net assets acquired. Among the factors that contributed to the recognition of goodwill were Columbus Container's commitment to continuous improvement and innovation in their operations, as well as the expected increases in PCA's containerboard integration levels. Goodwill is deductible for tax purposes.
Other intangible assets, primarily customer relationships, were assigned an estimated weighted average useful life of 14.1 years.
Property, plant and equipment were assigned estimated useful lives ranging from one to 32 years.
3. | Earnings Per Share |
The following table sets forth the computation of basic and diluted income per common share for the periods presented (dollars and shares in millions, except per share data):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
Numerator: |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net income |
| $ | 139.1 |
|
| $ | 119.3 |
|
| $ | 399.7 |
|
| $ | 338.9 |
|
Less: distributed and undistributed earnings allocated to participating securities |
|
| (1.1 | ) |
|
| (1.1 | ) |
|
| (3.4 | ) |
|
| (3.4 | ) |
Net income attributable to common shareholders |
| $ | 138.0 |
|
| $ | 118.2 |
|
| $ | 396.3 |
|
| $ | 335.5 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic common shares outstanding |
|
| 93.6 |
|
|
| 93.4 |
|
|
| 93.5 |
|
|
| 93.6 |
|
Effect of dilutive securities |
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.1 |
|
Weighted average diluted common shares outstanding |
|
| 93.8 |
|
|
| 93.6 |
|
|
| 93.7 |
|
|
| 93.7 |
|
Basic income per common share |
| $ | 1.47 |
|
| $ | 1.27 |
|
| $ | 4.24 |
|
| $ | 3.59 |
|
Diluted income per common share |
| $ | 1.47 |
|
| $ | 1.26 |
|
| $ | 4.23 |
|
| $ | 3.58 |
|
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Numerator: | |||||||||||||||
Net income attributable to Packaging Corporation of America | $ | 119.3 | $ | 127.8 | $ | 338.9 | $ | 332.6 | |||||||
Less: distributed and undistributed earnings allocated to participating securities | (1.1 | ) | (1.5 | ) | (3.4 | ) | (4.0 | ) | |||||||
Net income attributable to common shareholders | $ | 118.2 | $ | 126.3 | $ | 335.5 | $ | 328.6 | |||||||
Denominator: | |||||||||||||||
Weighted average basic common shares outstanding | 93.4 | 96.5 | 93.6 | 96.8 | |||||||||||
Effect of dilutive securities | 0.2 | 0.1 | 0.1 | 0.1 | |||||||||||
Weighted average diluted common shares outstanding | 93.6 | 96.6 | 93.7 | 96.9 | |||||||||||
Basic income per common share | $ | 1.27 | $ | 1.31 | $ | 3.59 | $ | 3.39 | |||||||
Diluted income per common share | $ | 1.26 | $ | 1.31 | $ | 3.58 | $ | 3.39 |
The components of other income (expense), net, were as follows (dollars in millions):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Wallula mill restructuring (a) |
| $ | (22.7 | ) |
| $ | — |
|
| $ | (22.7 | ) |
| $ | — |
|
DeRidder mill incident (b) |
|
| 2.6 |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
Facilities closure and other costs (c)(f) |
|
| (0.9 | ) |
|
| (1.6 | ) |
|
| (1.9 | ) |
|
| (5.9 | ) |
Acquisition and integration related costs (d)(g) |
|
| (0.5 | ) |
|
| (2.0 | ) |
|
| (0.8 | ) |
|
| (2.3 | ) |
Hexacomb working capital adjustment (e) |
|
| — |
|
|
| — |
|
|
| 2.3 |
|
|
| — |
|
Asset disposals and write-offs |
|
| (3.9 | ) |
|
| (0.6 | ) |
|
| (8.6 | ) |
|
| (3.5 | ) |
Other |
|
| 0.6 |
|
|
| (2.0 | ) |
|
| (0.8 | ) |
|
| (3.5 | ) |
Total |
| $ | (24.8 | ) |
| $ | (6.2 | ) |
| $ | (32.4 | ) |
| $ | (15.2 | ) |
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Facilities closure costs (a) | $ | (1.6 | ) | $ | — | $ | (5.0 | ) | $ | — | |||||
Acquisition-related costs (b) | (2.0 | ) | — | (2.3 | ) | — | |||||||||
Multiemployer pension withdrawal (c) | — | — | (0.9 | ) | — | ||||||||||
Asset disposals and write-offs | (0.6 | ) | (5.0 | ) | (3.5 | ) | (9.7 | ) | |||||||
Integration-related and other costs (d) | — | (2.4 | ) | — | (9.0 | ) | |||||||||
Sale of St. Helens paper mill site (e) | — | 6.7 | — | 6.7 | |||||||||||
DeRidder restructuring (f) | — | 3.8 | — | 3.6 | |||||||||||
Refundable state tax credit (g) | — | — | — | 3.6 | |||||||||||
Other | (2.0 | ) | 0.7 | (3.5 | ) | 1.9 | |||||||||
Total | $ | (6.2 | ) | $ | 3.8 | $ | (15.2 | ) | $ | (2.9 | ) |
(a) | The three and nine months ended September 30, 2017 include $22.7 million of charges related to the announced second quarter 2018 discontinuation of uncoated free sheet and coated one-side grades at the Wallula, Washington mill associated with the conversion of the No. 3 paper machine to a high-performance 100% virgin kraft linerboard machine. |
(b) | The three and nine months ended September 30, 2017 include $2.6 million and $0.1 million of net recoveries, respectively, for the property damage and business interruption insurance recoveries and corresponding costs related to the February 2017 explosion at our DeRidder, LA mill. |
(c) | The three and nine months ended September 30, 2017 include $0.9 million and $1.9 million, respectively, of charges consisting of closure costs related to corrugated products facilities, a paper administration facility and costs related to a lump sum settlement payment of a multiemployer pension plan withdrawal liability for one of our corrugated products facilities. |
(d) | The three and nine months ended September 30, 2017 include $0.5 million and $0.8 million, respectively, of charges related to the Sacramento Container Corporation acquisition and integration costs related to other recent acquisitions. |
(e) | The nine months ended September 30, 2017 include $2.3 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico. |
(f) | The three and nine months ended September 30, 2016 include |
(g) | |
The three and nine months ended September 30, |
5. | Income Taxes |
For the three months ended September 30, 20162017 and 20152016 we recorded $63.7$77.8 million and $69.9$63.7 million of income tax expense and had an effective tax rate of 34.8%35.9% and 35.4%34.8%, respectively. The increase in our effective tax rate for the three months ended September 30, 2017 compared with the same period in 2016, was primarily due to an internal legal entity consolidation that will simplify future operating activities and resulted in $3.3 million of tax expense for the change in value of deferred taxes.
For the nine months ended September 30, 20162017 and 2015,2016, we recorded $181.0$204.9 million and $178.3$181.0 million of income tax expense and had an effective tax rate of 34.8%33.9% and 34.9%34.8%, respectively. The decrease in our effective tax rate for the three and nine months ended September 30, 20162017 compared with the same periodsperiod in 2015,2016, was primarily due to the 2016 benefitadoption of federalASU 2016-09 (Topic 718): Improvements to Employee Share-Based Payment Accounting, which requires all excess tax benefits and deficiencies from employee share-based payment awards to be recognized in the income statement as opposed to additional paid in capital. This was partially offset by the tax credits that were not available at September 30, 2015 due toexpense from the expiration and later reinstatement on December 18, 2015 as part of the Protecting Americans from Tax Hikes Act (PATH Act)internal legal entity consolidation.
Our effective tax rate may differ from the federal statutory income tax rate of 35.0%, due primarily to the
effect of employee share-based payment awards, the domestic manufacturing deduction, and state and local income taxes.During the three and nine months ended September 30, 20162017 there were no significant changes to our uncertain tax positions. For more information, see Note 6, Income Taxes, of the Notes to Consolidated Financial Statements in "Part“Part II, Item 8. Financial Statements and Supplementary Data"Data” of our 20152016 Annual Report on Form 10-K.
During the nine months ended September 30, 20162017 and 20152016 cash paid for taxes, net of refunds received, was $208.3 million and $158.8 million, and $163.7 million, respectively.
We value our raw materials, work in process, and finished goods inventories using lower of cost, as determined by the average cost method, or market. Supplies and materials are valued at the first-in, first-out (FIFO) or average cost methods.
The components of inventories were as follows (dollars in millions):
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Raw materials |
| $ | 263.7 |
|
| $ | 271.9 |
|
Work in process |
|
| 13.0 |
|
|
| 12.9 |
|
Finished goods |
|
| 214.5 |
|
|
| 206.5 |
|
Supplies and materials |
|
| 245.4 |
|
|
| 232.3 |
|
Inventories |
| $ | 736.6 |
|
| $ | 723.6 |
|
7. | Property, Plant, and Equipment |
September 30, 2016 | December 31, 2015 | ||||||
Raw materials | $ | 259.8 | $ | 260.6 | |||
Work in process | 14.9 | 14.2 | |||||
Finished goods | 188.0 | 189.7 | |||||
Supplies and materials | 227.9 | 212.3 | |||||
Inventories | $ | 690.6 | $ | 676.8 |
The components of property, plant, and equipment were as follows (dollars in millions):
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Land and land improvements |
| $ | 156.1 |
|
| $ | 149.7 |
|
Buildings |
|
| 731.2 |
|
|
| 717.1 |
|
Machinery and equipment |
|
| 5,066.2 |
|
|
| 4,951.4 |
|
Construction in progress |
|
| 177.6 |
|
|
| 125.4 |
|
Other |
|
| 66.5 |
|
|
| 66.7 |
|
Property, plant and equipment, at cost |
|
| 6,197.6 |
|
|
| 6,010.3 |
|
Less accumulated depreciation |
|
| (3,316.0 | ) |
|
| (3,114.6 | ) |
Property, plant, and equipment, net |
| $ | 2,881.6 |
|
| $ | 2,895.7 |
|
September 30, 2016 | December 31, 2015 | ||||||
Land and land improvements | $ | 148.6 | $ | 146.4 | |||
Buildings | 687.8 | 640.9 | |||||
Machinery and equipment | 4,902.2 | 4,747.1 | |||||
Construction in progress | 151.2 | 119.1 | |||||
Other | 62.6 | 61.3 | |||||
Property, plant, and equipment, at cost | 5,952.4 | 5,714.8 | |||||
Less accumulated depreciation | (3,073.7 | ) | (2,882.7 | ) | |||
Property, plant, and equipment, net | $ | 2,878.7 | $ | 2,832.1 |
Depreciation expense for the three months ended September 30, 2017 and 2016 and 2015 was $79.9$87.0 million and $79.6$79.9 million, respectively. During the nine months ended September 30, 20162017 and 2015,2016, depreciation expense was $240.5$253.0 million and $243.5$240.5 million, respectively. During the nine months ended September 30, 2016 and 2015,2017, we recognized $0.8$2.6 million and $9.0 million, respectively, of incremental depreciation expense from shortening the useful lives of certain assets related to facilities closures in 2016 and restructuring activities at our DeRidder, Louisianathe Wallula mill in 2015.
At September 30, 20162017 and December 31, 20152016 purchases of property, plant, and equipment included in accounts payable were $20.1$30.4 million and $15.0$12.8 million, respectively.
Goodwill | |||
Balance at December 31, 2015 | $ | 544.0 | |
Acquisition (a) | 148.1 | ||
Balance at September 30, 2016 | $ | 692.1 |
8. | |
Goodwill and Intangible Assets |
Goodwill
Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. At September 30, 20162017 and December 31, 20152016 we had $636.9$676.9 million and $488.8$682.7 million of goodwill recorded in our Packaging segment, respectively. At both September 30, 20162017 and December 31, 20152016 we had $55.2 million of goodwill recorded in our Paper segment.
Changes in the carrying amount of our goodwill are as follows (dollars in millions):
|
| Goodwill |
| |
Balance at January 1, 2017 |
| $ | 737.9 |
|
Acquisitions (a)(b) |
|
| (5.8 | ) |
Balance at September 30, 2017 |
| $ | 732.1 |
|
(a) | During the nine months ended September 30, 2017, the Company recorded a $4.7 million opening balance sheet adjustment to decrease the goodwill balance for the Company’s November 2016 acquisition of Columbus Container, Inc. |
(b) | During the nine months ended September 30, 2017, the Company received $1.1 million from the seller related to a working capital adjustment. This adjustment was recorded as a decrease to the goodwill balance for the Company's August 2016 acquisition of TimBar Corporation. |
Intangible assets are primarily comprised of customer relationships and trademarks and trade names.
The weighted average remaining useful life, gross carrying amount, and accumulated amortization of our intangible assets were as follows (dollars in millions):
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||||||||||||||
|
| Weighted Average Remaining Useful Life (in Years) |
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Weighted Average Remaining Useful Life (in Years) |
| Gross Carrying Amount |
|
| Accumulated Amortization |
| ||||
Customer relationships |
| 12.5 |
| $ | 429.4 |
|
| $ | 100.9 |
|
| 13.1 |
| $ | 424.5 |
|
| $ | 79.8 |
|
Trademarks and trade names |
| 10.7 |
|
| 28.8 |
|
|
| 11.8 |
|
| 10.5 |
|
| 27.7 |
|
|
| 8.1 |
|
Other |
| 3.9 |
|
| 4.2 |
|
|
| 1.9 |
|
| 4.3 |
|
| 4.2 |
|
|
| 1.4 |
|
Total intangible assets (excluding goodwill) |
| 12.3 |
| $ | 462.4 |
|
| $ | 114.6 |
|
| 12.9 |
| $ | 456.4 |
|
| $ | 89.3 |
|
September 30, 2016 | December 31, 2015 | ||||||||||||||||||
Weighted Average Remaining Useful Life (in Years) | Gross Carrying Amount | Accumulated Amortization | Weighted Average Remaining Useful Life (in Years) | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||
Customer relationships (b) | 13.3 | $ | 408.0 | $ | 73.2 | 13.3 | $ | 311.5 | $ | 57.3 | |||||||||
Trademarks and trade names (b) | 11.7 | 25.6 | 6.9 | 13.6 | 21.8 | 5.2 | |||||||||||||
Other (b) | 2.9 | 1.5 | 0.2 | 1.2 | 0.2 | 0.2 | |||||||||||||
Total intangible assets (excluding goodwill) | 13.2 | $ | 435.1 | $ | 80.3 | 13.6 | $ | 333.5 | $ | 62.7 |
During the three months ended September 30, 20162017 and 2015,2016, amortization expense was $6.3$8.4 million and $5.7$6.3 million, respectively. During the nine months ended September 30, 20162017 and 2015,2016, amortization expense was $25.3 million and $17.5 million, and $17.1 million, respectively.respectively.
9. | Accrued Liabilities |
The components of accrued liabilities were as follows (dollars in millions):
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Compensation and benefits |
| $ | 119.3 |
|
| $ | 120.4 |
|
Medical insurance and workers’ compensation |
|
| 28.8 |
|
|
| 28.8 |
|
Franchise, property, sales and use taxes |
|
| 22.8 |
|
|
| 16.7 |
|
Customer volume discounts and rebates |
|
| 21.0 |
|
|
| 18.9 |
|
Environmental liabilities and asset retirement obligations |
|
| 4.2 |
|
|
| 6.4 |
|
Severance, retention, and relocation |
|
| 4.2 |
|
|
| 3.0 |
|
Other |
|
| 7.5 |
|
|
| 7.0 |
|
Total |
| $ | 207.8 |
|
| $ | 201.2 |
|
10. | Debt |
September 30, 2016 | December 31, 2015 | ||||||
Compensation and benefits | $ | 114.7 | $ | 106.4 | |||
Medical insurance and workers’ compensation | 32.0 | 31.1 | |||||
Franchise, property, and sales and use taxes | 19.4 | 16.0 | |||||
Customer volume discounts and rebates | 20.1 | 15.3 | |||||
Environmental liabilities and asset retirement obligations | 7.1 | 7.9 | |||||
Severance, retention, and relocation | 3.3 | 7.3 | |||||
Other | 8.3 | 9.5 | |||||
Total | $ | 204.9 | $ | 193.5 |
September 30, 2016 | December 31, 2015 | ||||||||||||
Amount | Interest Rate | Amount | Interest Rate | ||||||||||
Revolving Credit Facility, due October 2018 | $ | — | — | % | $ | — | — | % | |||||
Revolving Credit Facility, due August 2021 | — | — | — | — | |||||||||
Five-Year Term Loan, due October 2018 | — | — | 25.0 | 1.80 | |||||||||
Five-Year Term Loan, due August 2021 | 385.0 | 1.77 | — | — | |||||||||
Seven-Year Term Loan, due October 2020 | 632.1 | 2.15 | 637.0 | 2.05 | |||||||||
6.50% Senior Notes due March 2018 | 150.0 | 6.50 | 150.0 | 6.50 | |||||||||
3.90% Senior Notes, net of discounts of $0.2 million and $0.3 million as of September 30, 2016 and December 31, 2015, due June 2022 | 399.8 | 3.90 | 399.7 | 3.90 | |||||||||
4.50% Senior Notes, net of discount of $1.4 million and $1.5 million as of September 30, 2016 and December 31, 2015, due November 2023 | 698.6 | 4.50 | 698.5 | 4.50 | |||||||||
3.65% Senior Notes, net of discount of $0.9 million and $1.0 million as of September 30, 2016 and December 31, 2015, due September 2024 | 399.1 | 3.65 | 399.0 | 3.65 | |||||||||
Total | 2,664.6 | 3.44 | % | 2,309.2 | 3.67 | % | |||||||
Less current portion | 25.8 | 6.5 | |||||||||||
Less unamortized debt issuance costs | 13.0 | 12.3 | |||||||||||
Total long-term debt | $ | 2,625.8 | $ | 2,290.4 |
During the nine months ended September 30, 2016,2017, we made principal payments of $25.0$29.8 million and $4.9 million on our five-year term loan due October 2018 (which is no longer outstanding)August 2021 and our seven-year term loan due October 2020, respectively. During the nine months ended September 30, 2015, we made principal payments of $25.0 million on our five-year term loan due October 2018, and $4.9 million on our seven-year term loan, due October 2020. For the nine months ended September 30, 20162017 and 20152016, cash payments for interest were $67.2 million and $59.5 million, and $58.6 million, respectively.
Included in interest expense, net, are amortization of treasury lock settlements and amortization of financing costs. For both the three months ended September 30, 20162017 and 20152016, amortization of treasury lock settlements was $1.4 million, and for both the nine months ended September 30, 20162017 and 2015,2016, amortization of treasury lock settlementslocks was $4.2 million. For both the three months ended September 30, 20162017 and 20152016, amortization of financing costs was $0.5 million and during the nine months ended for both September 30, 20162017 and 2015,2016, amortization of financing costs was $1.5 million and $1.4 million, and $1.3 million, respectively.
At September 30, 20162017 we had $1,647.5$1,647.7 million of fixed-rate senior notes and $1,017.1$977.6 million of variable-rate term loans outstanding. At September 30, 20162017 the fair value of our fixed-rate debt was estimated to be $1,767.1$1,739.2 million. The difference between the book value and fair value is due to the difference between the period-end market interest rate and the stated rate of our fixed-rate debt. We estimated the fair value of our fixed-rate debt using quoted market prices (Level 2 inputs) within the fair value hierarchy, which is further defined in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our 20152016 Annual Report on Form 10-K. The fair value of our variable-rate term debt approximates the carrying amount as our cost of borrowing is variable and approximates current market rates.
For more information on our long-term debt and interest rates on that debt, see Note 10,9, Debt, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our 20152016 Annual Report on Form 10-K.
The components of net periodic benefit cost for our pension plans were as follows (dollars in millions):
|
| Pension Plans |
| |||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Service cost |
| $ | 5.8 |
|
| $ | 6.2 |
|
| $ | 18.0 |
|
| $ | 18.4 |
|
Interest cost |
|
| 10.4 |
|
|
| 10.2 |
|
|
| 31.1 |
|
|
| 30.6 |
|
Expected return on plan assets |
|
| (13.5 | ) |
|
| (12.3 | ) |
|
| (40.5 | ) |
|
| (37.1 | ) |
Net amortization of unrecognized amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost |
|
| 1.4 |
|
|
| 1.4 |
|
|
| 4.4 |
|
|
| 4.3 |
|
Actuarial loss |
|
| 1.9 |
|
|
| 1.5 |
|
|
| 5.7 |
|
|
| 4.3 |
|
Net periodic benefit cost |
| $ | 6.0 |
|
| $ | 7.0 |
|
| $ | 18.7 |
|
| $ | 20.5 |
|
Pension Plans | |||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Service cost | $ | 6.2 | $ | 6.1 | $ | 18.4 | $ | 17.9 | |||||||
Interest cost | 10.2 | 11.6 | 30.6 | 34.6 | |||||||||||
Expected return on plan assets | (12.3 | ) | (13.3 | ) | (37.1 | ) | (39.8 | ) | |||||||
Net amortization of unrecognized amounts | |||||||||||||||
Prior service cost | 1.4 | 1.4 | 4.3 | 4.2 | |||||||||||
Actuarial loss | 1.5 | 2.1 | 4.3 | 6.4 | |||||||||||
Net periodic benefit cost | $ | 7.0 | $ | 7.9 | $ | 20.5 | $ | 23.3 |
PCA makes pension plan contributions that are sufficient to fund its actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act (ERISA). From time to time, PCA may make additional discretionary contributions based on the funded status of the plans, tax deductibility, income from operations, and other factors. During the three and nine months ended September 30, 2017 and 2016 payments to our nonqualified pension plans were insignificant. For the three and nine months ended September 30, 2017, we made contributions of $36.2 million and $42.1 million, respectively, to our qualified pension plans, which exceeded our 2017 minimum pension contributions of $8.0. We made contributions of $49.7 million and $53.0$53.4 million to our qualified plans during the three
The components of net periodic benefit cost for our postretirement plans were as follows (dollars in millions):
|
| Postretirement Plans |
| |||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Service cost |
| $ | 0.1 |
|
| $ | 0.1 |
|
| $ | 0.2 |
|
| $ | 0.5 |
|
Interest cost |
|
| 0.2 |
|
|
| 0.1 |
|
|
| 0.5 |
|
|
| 0.5 |
|
Net amortization of unrecognized amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost |
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| (0.1 | ) |
Actuarial income |
|
| (0.1 | ) |
|
| — |
|
|
| (0.1 | ) |
|
| (0.4 | ) |
Net periodic benefit cost |
| $ | 0.1 |
|
| $ | 0.1 |
|
| $ | 0.5 |
|
| $ | 0.5 |
|
12. | Share-Based Compensation |
Postretirement Plans | |||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Service cost | $ | 0.1 | $ | 0.4 | $ | 0.5 | $ | 1.3 | |||||||
Interest cost | 0.1 | 0.3 | 0.5 | 0.9 | |||||||||||
Net amortization of unrecognized amounts | |||||||||||||||
Prior service cost | (0.1 | ) | — | (0.1 | ) | — | |||||||||
Actuarial (income) loss | — | — | (0.4 | ) | 0.1 | ||||||||||
Net periodic benefit cost | $ | 0.1 | $ | 0.7 | $ | 0.5 | $ | 2.3 |
The Company has a long-term equity incentive plan, which allows for grants of restricted stock, performance awards, stock appreciation rights, and stock options to directors, officers, and employees, as well as others who engage in services for PCA. The Company has not granted option awards since 2007. The plan, as amended, terminates May 1, 2023 and authorizes 10.6 million
The following table presents restricted stock and performance unit award activity for the nine months ended September 30, 2016:2017:
|
| Restricted Stock |
|
| Performance Units |
| ||||||||||
|
| Shares |
|
| Weighted Average Grant- Date Fair Value |
|
| Shares |
|
| Weighted Average Grant- Date Fair Value |
| ||||
Outstanding at January 1, 2017 |
|
| 786,079 |
|
| $ | 63.44 |
|
|
| 232,088 |
|
| $ | 62.68 |
|
Granted |
|
| 173,199 |
|
|
| 107.57 |
|
|
| 61,861 |
|
|
| 108.19 |
|
Vested |
|
| (212,172 | ) |
|
| 51.54 |
|
|
| (67,391 | ) |
|
| 56.08 |
|
Forfeitures |
|
| (4,714 | ) |
|
| 68.85 |
|
|
| — |
|
|
| — |
|
Outstanding at September 30, 2017 |
|
| 742,392 |
|
| $ | 77.11 |
|
|
| 226,558 |
|
| $ | 77.07 |
|
Restricted Stock | Performance Units | ||||||||||||
Shares | Weighted Average Grant- Date Fair Value | Shares | Weighted Average Grant- Date Fair Value | ||||||||||
Outstanding at January 1, 2016 | 1,007,794 | $ | 49.47 | 175,675 | $ | 59.94 | |||||||
Granted | 242,835 | 67.48 | 77,017 | 67.57 | |||||||||
Vested (a) | (417,544 | ) | 33.19 | (20,604 | ) | 57.58 | |||||||
Forfeitures | (18,233 | ) | 58.72 | — | — | ||||||||
Outstanding at September 30, 2016 | 814,852 | $ | 62.98 | 232,088 | $ | 62.68 |
Our share-based compensation expense is recorded in "Selling, general, and administrative expenses". Compensation expense for share-based awards recognized in the Consolidated Statements of Income, net of forfeitures, was as follows (dollars in millions):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Restricted stock |
| $ | 3.8 |
|
| $ | 3.5 |
|
| $ | 11.3 |
|
| $ | 12.2 |
|
Performance units |
|
| 1.4 |
|
|
| 1.3 |
|
|
| 4.1 |
|
|
| 2.8 |
|
Total share-based compensation expense |
|
| 5.2 |
|
|
| 4.8 |
|
|
| 15.4 |
|
|
| 15.0 |
|
Income tax benefit |
|
| (2.0 | ) |
|
| (1.8 | ) |
|
| (5.9 | ) |
|
| (5.8 | ) |
Share-based compensation expense, net of tax benefit |
| $ | 3.2 |
|
| $ | 3.0 |
|
| $ | 9.5 |
|
| $ | 9.2 |
|
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Restricted stock | $ | 3.5 | $ | 3.7 | $ | 12.2 | $ | 11.7 | |||||||
Performance units | 1.3 | 0.9 | 2.8 | 2.0 | |||||||||||
Total share-based compensation expense | 4.8 | 4.6 | 15.0 | 13.7 | |||||||||||
Income tax benefit | (1.8 | ) | (1.8 | ) | (5.8 | ) | (5.3 | ) | |||||||
Share-based compensation expense, net of tax benefit | $ | 3.0 | $ | 2.8 | $ | 9.2 | $ | 8.4 |
The fair value of restricted stock and performance units is determined based on the closing price of the Company’s common stock on the grant date. As PCA’s Board of Directors has the ability to accelerate vesting of share-based awards upon an employee’s retirement, the Company accelerates the recognition of compensation expense for certain employees approaching normal retirement age.
The unrecognized compensation expense for all share-based awards at September 30, 20162017 was as follows (dollars in millions):
|
| September 30, 2017 |
| |||||
|
| Unrecognized Compensation Expense |
|
| Remaining Weighted Average Recognition Period (in years) |
| ||
Restricted stock |
| $ | 34.3 |
|
| 2.7 |
| |
Performance units |
|
| 10.9 |
|
|
| 3.0 |
|
Total unrecognized share-based compensation expense |
| $ | 45.2 |
|
|
| 2.8 |
|
13. | Stockholders' Equity |
September 30, 2016 | |||||
Unrecognized Compensation Expense | Remaining Weighted Average Recognition Period (in years) | ||||
Restricted stock | $ | 30.7 | 2.9 | ||
Performance units | 9.1 | 3.0 | |||
Total unrecognized share-based compensation expense | $ | 39.8 | 2.9 |
Dividends
During the nine months ended September 30, 2016,2017, we paid $156.7$178.2 million of dividends to shareholders. On August 31, 2016 PCA announced an increase of its quarterly cash dividend on its common stock from an annual payout of $2.20 per share to $2.52 per share. Also, on August 31, 201625, 2017 PCA's Board of Directors declaredannounced a regular quarterly cash dividend of $0.63 per share of common stock, which was paid on October 14, 201613, 2017 to shareholders of record as of September 15, 2016.2017. The October 2016July 2017 dividend payment was $59.4 million.
Repurchases of Common Stock
On February 25, 2016, PCA announced that its Board of Directors authorized the repurchase of an additional $200.0 million of the Company’s outstanding common stock. Repurchases may be made from time to time in open market or privately negotiated transactions in accordance with applicable securities regulations. The timing and amount of repurchases will be determined by the Company in its discretion based on factors such as PCA’s stock price and market and business conditions.
The Company did not repurchase any shares of its common stock during the three and nine months ended September 30, 2016, we paid $100.3 million to repurchase 1,987,187 shares of common stock.
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) (AOCI) by component were as follows.follows (dollars in millions). Amounts in parentheses indicate losses (dollars in millions):losses:
|
| Unrealized Loss On Treasury Locks, Net |
|
| Unrealized Loss on Foreign Exchange Contracts |
|
| Unfunded Employee Benefit Obligations |
|
| Total |
| ||||
Balance at January 1, 2017 |
| $ | (17.8 | ) |
| $ | (0.4 | ) |
| $ | (121.4 | ) |
| $ | (139.6 | ) |
Amounts reclassified from AOCI, net of tax |
|
| 2.6 |
|
|
| (0.2 | ) |
|
| 6.2 |
|
|
| 8.6 |
|
Balance at September 30, 2017 |
| $ | (15.2 | ) |
| $ | (0.6 | ) |
| $ | (115.2 | ) |
| $ | (131.0 | ) |
Unrealized Loss On Treasury Locks, Net | Unrealized Loss on Foreign Exchange Contracts | Unfunded Employee Benefit Obligations | Total | |||||||||||||
Balance at January 1, 2016 | $ | (21.2 | ) | $ | (0.4 | ) | $ | (103.3 | ) | $ | (124.9 | ) | ||||
Other comprehensive income (loss) before reclassifications, net of tax | — | — | 3.1 | 3.1 | ||||||||||||
Amounts reclassified from AOCI, net of tax | 2.6 | (a) | — | 5.0 | (b) | 7.6 | ||||||||||
Balance at September 30, 2016 | $ | (18.6 | ) | $ | (0.4 | ) | $ | (95.2 | ) | $ | (114.2 | ) |
Reclassifications out of AOCI were as follows.follows (dollars in millions). Amounts in parentheses indicate expenses in the Consolidated Statements of Income (dollars in millions):Income:
|
| Amounts Reclassified from AOCI |
|
|
| |||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
|
| ||||||||||
Details about AOCI Components |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
|
| ||||
Unrealized loss on treasury locks, net |
| $ | (1.4 | ) |
| $ | (1.4 | ) |
| $ | (4.2 | ) |
| $ | (4.2 | ) |
| See (a) below |
|
|
| 0.5 |
|
|
| 0.5 |
|
|
| 1.6 |
|
|
| 1.6 |
|
| Tax benefit |
|
| $ | (0.9 | ) |
| $ | (0.9 | ) |
| $ | (2.6 | ) |
| $ | (2.6 | ) |
| Net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded employee benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service costs |
| $ | (1.3 | ) |
| $ | (1.3 | ) |
| $ | (4.3 | ) |
| $ | (4.2 | ) |
| See (b) below |
Amortization of actuarial losses |
|
| (1.8 | ) |
|
| (1.5 | ) |
|
| (5.6 | ) |
|
| (3.9 | ) |
| See (b) below |
|
|
| (3.1 | ) |
|
| (2.8 | ) |
|
| (9.9 | ) |
|
| (8.1 | ) |
| Total before tax |
|
|
| 1.2 |
|
|
| 1.0 |
|
|
| 3.7 |
|
|
| 3.1 |
|
| Tax benefit |
|
| $ | (1.9 | ) |
| $ | (1.8 | ) |
| $ | (6.2 | ) |
| $ | (5.0 | ) |
| Net of tax |
Amounts Reclassified from AOCI | ||||||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | Affected Line Item in the Statement Where Net Income is Presented | ||||||||||||||||
Details about AOCI Components | 2016 | 2015 | 2016 | 2015 | ||||||||||||||
Foreign currency translation adjustments | $ | — | $ | — | $ | — | $ | (4.2 | ) | Other expense, net | ||||||||
— | — | — | — | Tax benefit | ||||||||||||||
$ | — | $ | — | $ | — | $ | (4.2 | ) | Net of tax | |||||||||
Unrealized loss on treasury locks, net | $ | (1.4 | ) | $ | (1.4 | ) | $ | (4.2 | ) | $ | (4.2 | ) | See (a) below | |||||
0.5 | 0.5 | 1.6 | 1.6 | Tax benefit | ||||||||||||||
$ | (0.9 | ) | $ | (0.9 | ) | $ | (2.6 | ) | $ | (2.6 | ) | Net of tax | ||||||
Unfunded employee benefit obligations | ||||||||||||||||||
Amortization of prior service costs | $ | (1.3 | ) | $ | (1.4 | ) | $ | (4.2 | ) | $ | (4.2 | ) | See (b) below | |||||
Amortization of actuarial losses | (1.5 | ) | (2.1 | ) | (3.9 | ) | (6.5 | ) | See (b) below | |||||||||
(2.8 | ) | (3.5 | ) | (8.1 | ) | (10.7 | ) | Total before tax | ||||||||||
1.0 | 1.4 | 3.1 | 4.2 | Tax benefit | ||||||||||||||
$ | (1.8 | ) | $ | (2.1 | ) | $ | (5.0 | ) | $ | (6.5 | ) | Net of tax |
(a) | |
This AOCI component is included in interest expense, net. Amount relates to the amortization of the effective portion of treasury lock derivative instruments recorded in AOCI. The net amount of settlement gains or losses on derivative instruments included in AOCI to be amortized over the next 12 months is a net loss of |
(b) | |
These AOCI components are included in the computation of net pension and postretirement benefit costs. See Note 11, Employee Benefit Plans and Other Postretirement Benefits, for additional information. |
Our Paper segment has had a long-standing commercial and contractual relationship with Office Depot, our largest customer in the paper business. This relationship exposes us to a significant concentration of business and financial risk. Our sales to Office Depot represent approximately 8%7% and 9%8% of our total Company sales revenue for the nine months ended September 30, 20162017 and 2015,2016, respectively, and approximately 41%42% and 45%41% of our Paper segment sales revenue for both of those periods, respectively. At September 30, 20162017 and December 31, 20152016 we had $31.6$31.2 million and $39.5$31.8 million of accounts receivable due from Office Depot, which represents 4% and 6%5% of our total Company accounts receivable for both of those periods, respectively.
In 2015,2016, sales to Office Depot represented 45%42% of our Paper segment sales. If these sales are reduced, we would need to find new customers. We may not be able to fully replace any lost sales, and any new sales may be at lower prices or higher costs. Any significant deterioration in the financial condition of Office Depot affecting its ability to pay or any other change that affects its willingness to purchase our products will harm our business and results of operations.
Louisiana Timber Procurement Company, L.L.C. (LTP) is a variable-interest entity that is 50% owned by PCA and 50% owned by Boise Cascade Company (Boise Cascade). LTP procures sawtimber, pulpwood, residual chips, and other residual wood fiber to meet the wood and fiber requirements of PCA and Boise Cascade in Louisiana. PCA is the primary beneficiary of LTP, and has the power to direct the activities that most significantly affect the economic performance of LTP. Therefore, we consolidate 100% of LTP in our financial statements in our Corporate and Other segment. The carrying amounts of LTP's assets and liabilities (which relate primarily to noninventory working capital items) on our Consolidated Balance Sheets were $5.1$4.6 million at September 30, 20162017 and $4.5$5.0 million at December 31, 2015.2016. During the three months ended September 30, 20162017 and 2015,2016, we recorded $15.5$20.8 million and $25.2$15.5 million, respectively, and during the nine months ended September 30, 20162017 and 20152016 we recorded $54.8$66.0 million and $70.3$54.8 million, respectively, of LTP sales to Boise Cascade in "Net Sales" in the Consolidated Statements of Income and approximately the same amount of expenses in "Cost of Sales". The sales were at prices designed to approximate market prices.
During the three months ended September 30, 20162017 and 2015,2016, fiber purchases from related parties were $3.9$4.0 million and $5.0$3.9 million
16. | Segment Information |
We report our business in three reportable segments: Packaging, Paper, and Corporate and Other. These segments represent distinct businesses that are managed separately because of differing products and services. Each of these businesses requires distinct operating and marketing strategies.
Each segment'ssegment’s profits and losses are measured on operating profits before interest expense, net, and income taxes. For many of these allocated expenses, the related assets and liabilities remain in the Corporate and Other segment.
Selected financial information by reportable segment was as follows (dollars in millions):
|
| Sales, net |
|
|
|
|
|
| |||||||||
Three Months Ended September 30, 2017 |
| Trade |
|
| Inter-segment |
|
| Total |
|
| Operating Income (Loss) |
|
| ||||
Packaging |
| $ | 1,340.6 |
|
| $ | 6.0 |
|
| $ | 1,346.6 |
|
| $ | 261.5 |
| (a) |
Paper |
|
| 271.4 |
|
|
| — |
|
|
| 271.4 |
|
|
| (0.7 | ) | (a) |
Corporate and Other |
|
| 28.1 |
|
|
| 33.0 |
|
|
| 61.1 |
|
|
| (18.5 | ) |
|
Intersegment eliminations |
|
| — |
|
|
| (39.0 | ) |
|
| (39.0 | ) |
|
| — |
|
|
|
| $ | 1,640.1 |
|
|
| — |
|
| $ | 1,640.1 |
|
|
| 242.3 |
|
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (25.4 | ) |
|
Income before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 216.9 |
|
|
|
| Sales, net |
|
|
|
|
|
| |||||||||
Three Months Ended September 30, 2016 |
| Trade |
|
| Inter-segment |
|
| Total |
|
| Operating Income (Loss) |
|
| ||||
Packaging |
| $ | 1,165.0 |
|
| $ | 2.1 |
|
| $ | 1,167.1 |
|
| $ | 179.6 |
| (c) |
Paper |
|
| 292.8 |
|
|
| — |
|
|
| 292.8 |
|
|
| 44.5 |
| (c) |
Corporate and Other |
|
| 26.2 |
|
|
| 36.7 |
|
|
| 62.9 |
|
|
| (17.7 | ) |
|
Intersegment eliminations |
|
| — |
|
|
| (38.8 | ) |
|
| (38.8 | ) |
|
| — |
|
|
|
| $ | 1,484.0 |
|
| $ | — |
|
| $ | 1,484.0 |
|
|
| 206.4 |
|
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (23.4 | ) |
|
Income before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 183.0 |
|
|
|
| Sales, net |
|
|
|
|
|
| |||||||||
Nine Months Ended September 30, 2017 |
| Trade |
|
| Inter-segment |
|
| Total |
|
| Operating Income (Loss) |
|
| ||||
Packaging |
| $ | 3,897.4 |
|
| $ | 17.6 |
|
| $ | 3,915.0 |
|
| $ | 676.8 |
| (a)(b) |
Paper |
|
| 784.3 |
|
|
| — |
|
|
| 784.3 |
|
|
| 58.1 |
| (a) |
Corporate and Other |
|
| 78.9 |
|
|
| 92.3 |
|
|
| 171.2 |
|
|
| (55.7 | ) | (a)(b) |
Intersegment eliminations |
|
| — |
|
|
| (109.9 | ) |
|
| (109.9 | ) |
|
| — |
|
|
|
| $ | 4,760.6 |
|
|
| — |
|
| $ | 4,760.6 |
|
|
| 679.2 |
|
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (74.6 | ) |
|
Income before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 604.6 |
|
|
|
| Sales, net |
|
|
|
|
|
| |||||||||
Nine Months Ended September 30, 2016 |
| Trade |
|
| Inter-segment |
|
| Total |
|
| Operating Income (Loss) |
|
| ||||
Packaging |
| $ | 3,382.4 |
|
| $ | 5.5 |
|
| $ | 3,387.9 |
|
| $ | 533.5 |
| (c) |
Paper |
|
| 840.1 |
|
|
| — |
|
|
| 840.1 |
|
|
| 105.0 |
| (c) |
Corporate and Other |
|
| 79.9 |
|
|
| 105.7 |
|
|
| 185.6 |
|
|
| (51.1 | ) | (c) |
Intersegment eliminations |
|
| — |
|
|
| (111.2 | ) |
|
| (111.2 | ) |
|
| — |
|
|
|
| $ | 4,302.4 |
|
| $ | — |
|
| $ | 4,302.4 |
|
|
| 587.4 |
|
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (67.5 | ) |
|
Income before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 519.9 |
|
|
Sales, net | Operating Income (Loss) | ||||||||||||||||
Three Months Ended September 30, 2016 | Trade | Inter-segment | Total | ||||||||||||||
Packaging | $ | 1,165.0 | $ | 2.1 | $ | 1,167.1 | $ | 179.6 | (a) | ||||||||
Paper | 292.8 | — | 292.8 | 44.5 | (a) | ||||||||||||
Corporate and Other | 26.2 | 36.7 | 62.9 | (17.7 | ) | ||||||||||||
Intersegment eliminations | — | (38.8 | ) | (38.8 | ) | — | |||||||||||
$ | 1,484.0 | $ | — | $ | 1,484.0 | 206.4 | |||||||||||
Interest expense, net | (23.4 | ) | |||||||||||||||
Income before taxes | $ | 183.0 |
Sales, net | Operating Income (Loss) | ||||||||||||||||
Three Months Ended September 30, 2015 | Trade | Inter-segment | Total | ||||||||||||||
Packaging | $ | 1,144.0 | $ | 0.4 | $ | 1,144.4 | $ | 198.2 | (b) | ||||||||
Paper | 291.9 | — | 291.9 | 39.5 | (c) | ||||||||||||
Corporate and Other | 34.9 | 36.3 | 71.2 | (18.3 | ) | (d) | |||||||||||
Intersegment eliminations | — | (36.7 | ) | (36.7 | ) | — | |||||||||||
$ | 1,470.8 | $ | — | $ | 1,470.8 | 219.4 | |||||||||||
Interest expense, net | (21.7 | ) | |||||||||||||||
Income before taxes | $ | 197.7 |
Sales, net | Operating Income (Loss) | ||||||||||||||||
Nine Months Ended September 30, 2016 | Trade | Inter-segment | Total | ||||||||||||||
Packaging | $ | 3,382.4 | $ | 5.5 | $ | 3,387.9 | $ | 533.5 | (a) | ||||||||
Paper | 840.1 | — | 840.1 | 105.0 | (a) | ||||||||||||
Corporate and Other | 79.9 | 105.7 | 185.6 | (51.1 | ) | (a) | |||||||||||
Intersegment eliminations | — | (111.2 | ) | (111.2 | ) | — | |||||||||||
$ | 4,302.4 | $ | — | $ | 4,302.4 | 587.4 | |||||||||||
Interest expense | (67.5 | ) | |||||||||||||||
Income before taxes | $ | 519.9 |
Sales, net | Operating Income (Loss) | ||||||||||||||||
Nine Months Ended September 30, 2015 | Trade | Inter-segment | Total | ||||||||||||||
Packaging | $ | 3,382.8 | $ | 3.1 | $ | 3,385.9 | $ | 533.9 | (b) | ||||||||
Paper | 870.3 | — | 870.3 | 98.6 | (c) | ||||||||||||
Corporate and Other | 97.7 | 101.0 | 198.7 | (58.4 | ) | (d) | |||||||||||
Intersegment eliminations | — | (104.0 | ) | (104.0 | ) | — | |||||||||||
$ | 4,350.8 | $ | — | $ | 4,350.8 | 574.1 | |||||||||||
Interest expense | (63.2 | ) | |||||||||||||||
Income before taxes | $ | 510.9 |
(a) | The three and nine months ended September 30, 2017 include: |
1. $0.9 million and $1.9 million, respectively, of charges consisting of closure costs related to corrugated products facilities, a paper administration facility, and a lump sum settlement of a multiemployer pension plan withdrawal liability for one of our corrugated products facilities. |
2. $0.5 million and $0.8 million, respectively, of charges related to the Sacramento Container Corporation acquisition and integration costs related to other recent acquisitions. |
(b) | The nine months ended September 30, 2017 include the following: |
1. | $5.0 million of costs for the property damage and business interruption insurance deductible corresponding to the February 2017 explosion at our DeRidder, LA mill. |
2. | $2.3 million of income related to a working capital adjustment from the April 2015 sale of our Hexacomb corrugated manufacturing operations in Europe and Mexico. |
(c) | The three and nine months ended September 30, 2016 |
1. | $2.0 million and |