PCA(PKG) - 2024 Q2 - Quarterly Results

Packaging Corporation of America Q2 2024 Earnings Release Financial Highlights The company reported Q2 2024 net sales of $2.1 billion and adjusted EPS of $2.20, exceeding guidance Q2 2024 Key Financial Metrics (vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,075.3 M | $1,952.1 M | +6.3% | | Net Income | $198.9 M | $202.7 M | -1.9% | | Diluted EPS (Reported) | $2.21 | $2.24 | ($0.03) | | Diluted EPS (Excluding Special Items) | $2.20 | $2.31 | ($0.11) | - The Q2 2024 diluted EPS of $2.20 (excluding special items) was $0.13 above the company's guidance of $2.07 per share, driven by higher volume in the Packaging segment and lower costs[11] - The year-over-year decrease of $0.11 in adjusted EPS was primarily caused by lower prices and mix in both Packaging ($-0.87) and Paper ($-0.07) segments, partially offset by higher volumes[1] Segment Performance Strong volume growth in the Packaging segment set a new production record, though income declined for both segments Segment Performance (Q2 2024 vs Q2 2023, $ in millions) | Segment | Net Sales (Q2 2024) | Net Sales (Q2 2023) | Segment Income (Excl. Special Items, Q2 2024) | Segment Income (Excl. Special Items, Q2 2023) | | :--- | :--- | :--- | :--- | :--- | | Packaging | $1,908.3 | $1,790.3 | $279.9 | $289.7 | | Paper | $150.1 | $142.8 | $26.1 | $33.5 | | Corporate and Other | $16.9 | $19.0 | $(30.5) | $(30.5) | - Packaging segment volumes showed significant strength with corrugated products shipments per day increasing by 9.2% YoY and containerboard production reaching a record 1,281,000 tons[30] - Paper segment sales volume increased by 12% compared to Q2 2023 but decreased by 8% compared to Q1 2024[30] Management Commentary & Outlook Management highlighted strong market conditions and issued Q3 2024 earnings guidance of $2.45 per share - CEO Mark W. Kowlzan attributed the strong quarterly results to robust market conditions, which led to record containerboard production and corrugated shipment levels in June[15] - For Q3 2024, the company expects higher prices and continued strength in corrugated shipment volume, offset by higher seasonal operating and converting costs[31] - The company expects third quarter 2024 earnings of $2.45 per share[31] Consolidated Financial Statements This section presents the unaudited consolidated earnings results for the three and six months ended June 30, 2024 Consolidated Earnings Results (Unaudited, $ in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,075.3 | $1,952.1 | $4,054.8 | $3,928.4 | | Gross profit | $437.7 | $444.7 | $808.1 | $876.1 | | Income from operations | $276.0 | $284.4 | $472.0 | $555.0 | | Income before taxes | $266.7 | $267.8 | $454.3 | $521.1 | | Net income | $198.9 | $202.7 | $345.9 | $392.8 | | Diluted EPS | $2.21 | $2.24 | $3.84 | $4.35 | Reconciliation of Non-GAAP Financial Measures This section reconciles GAAP figures to non-GAAP measures like EBITDA and earnings excluding special items - Management presents non-GAAP measures to evaluate ongoing operational performance and facilitate period-over-period comparisons[3][24] Net Income and EPS Excluding Special Items This reconciliation adjusts reported Net Income and Diluted EPS for special items related to mill conversion and closures Q2 Reconciliation of Net Income and EPS ($ in millions, except per-share data) | Description | Income before Taxes | Income Taxes | Net Income | Diluted EPS | | :--- | :--- | :--- | :--- | :--- | | As reported (Q2 2024) | $266.7 | $(67.8) | $198.9 | $2.21 | | Total special items | $(0.5) | $0.2 | $(0.3) | $0.00 | | Excluding special items (Q2 2024) | $266.2 | $(67.6) | $198.6 | $2.20 | Six Months Reconciliation of Net Income and EPS ($ in millions, except per-share data) | Description | Income before Taxes | Income Taxes | Net Income | Diluted EPS | | :--- | :--- | :--- | :--- | :--- | | As reported (YTD 2024) | $454.3 | $(108.4) | $345.9 | $3.84 | | Total special items | $9.7 | $(2.4) | $7.3 | $0.08 | | Excluding special items (YTD 2024) | $464.0 | $(110.8) | $353.2 | $3.92 | EBITDA and EBITDA Excluding Special Items This table reconciles GAAP Net Income to EBITDA, showing Q2 2024 adjusted EBITDA of $404.0 million Reconciliation of Net Income to EBITDA ($ in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income | $198.9 | $202.7 | $345.9 | $392.8 | | Interest expense, net | $10.4 | $14.6 | $19.9 | $29.9 | | Provision for income taxes | $67.8 | $65.1 | $108.4 | $128.3 | | Depreciation, amortization, and depletion | $128.5 | $127.9 | $256.9 | $257.5 | | EBITDA | $404.5 | $412.3 | $728.9 | $812.5 | | Special items | $(0.5) | $5.2 | $8.3 | $9.9 | | EBITDA excluding special items | $404.0 | $417.5 | $737.2 | $822.4 | Segment Income to EBITDA Excluding Special Items This section provides a segment-level breakdown of the reconciliation from segment income to adjusted EBITDA Packaging Segment EBITDA Reconciliation (Q2 2024 vs Q2 2023, $ in millions) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Segment income | $279.8 | $285.8 | | Depreciation, amortization, and depletion | $120.1 | $116.3 | | EBITDA | $399.9 | $402.1 | | Special Items | $0.1 | $3.2 | | EBITDA excluding special items | $400.0 | $405.3 | Paper Segment EBITDA Reconciliation (Q2 2024 vs Q2 2023, $ in millions) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Segment income | $26.7 | $29.1 | | Depreciation, amortization, and depletion | $4.5 | $7.7 | | EBITDA | $31.2 | $36.8 | | Special Items | $(0.6) | $2.0 | | EBITDA excluding special items | $30.6 | $38.8 |