UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 8, 2017
Date of Report (Date of earliest event reported)
KapStone Paper and Packaging Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware |
|
001-33494 |
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20-2699372 |
(State or other jurisdiction |
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(Commission |
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(IRS Employer |
1101 Skokie Boulevard, Suite 300 |
(Address of principal executive offices) |
(847) 239-8800
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On February 8, 2017, KapStone Paper and Packaging Corporation (KapStone) issued a press release announcing fourth quarter and full year 2016 financial results. A copy of the press release is attached hereto as Exhibit 99.1. In addition, a copy of KapStones 2016 Fourth Quarter and Full Year Financial Review slides which will be used for the conference call on February 9, 2017 is attached hereto as Exhibit 99.2.
Item 7.01 Regulation FD Disclosure
On February 9, 2017, the management of KapStone will participate in a conference call discussing KapStones financial results for the quarter and year ended December 31, 2016. A copy of a presentation entitled 2016 Fourth Quarter and Full Year Financial Review to be used in the conference call is attached as Exhibit 99.2 to this report.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
The following exhibits are being furnished herewith. The exhibits attached hereto, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall the exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Exhibit No. |
|
Description |
Exhibit 99.1 |
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Press release dated February 8, 2017, announcing fourth quarter and full year 2016 financial results |
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|
|
Exhibit 99.2 |
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2016 Fourth Quarter and Full Year Financial Review slides of KapStone Paper and Packaging Corporation, dated February 8, 2017 |
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 8, 2017 |
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| |
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KAPSTONE PAPER AND PACKAGING CORPORATION | |
|
| |
|
|
|
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By: |
/s/ Andrea K. Tarbox |
|
Name: |
Andrea K. Tarbox |
|
Title: |
Executive Vice President and Chief Financial Officer |
Exhibit 99.1
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION:
Andrea K. Tarbox Wednesday, February 8, 2017
Executive Vice President and Chief Financial Officer
847.239.8812
KAPSTONE REPORTS
FOURTH QUARTER AND FULL YEAR RESULTS
NORTHBROOK, IL February 8, 2017 KapStone Paper and Packaging Corporation (NYSE:KS) today reported preliminary results for the fourth quarter and year ended December 31, 2016.
As compared to 2015s fourth quarter, results for 2016s fourth quarter:
· Net sales of $777 million, up $13 million, or 2 percent
· Net income of $18 million, up $7 million, or 55 percent
· Diluted EPS of $0.19, up $0.07 per share, or 58 percent
Non U.S. GAAP financial measures for 2016s fourth quarter as compared to 2015s fourth quarter:
· Adjusted EBITDA of $92 million, up $10 million, or 13 percent
· Adjusted net income of $23 million, up $7 million, or 43 percent
· Adjusted diluted EPS of $0.24, up $0.07 per share, or 41 percent
As compared to the year ended December 31, 2015, results for the year ended December 31, 2016:
· Net sales of $3,077 million, up $288 million, or 10 percent
· Net income of $86 million, down $20 million, or 19 percent
· Diluted EPS of $0.88 down, $0.21 per share, or 19 percent
Non U.S. GAAP financial measures for the year ended December 31, 2016 as compared to 2015s year:
· Adjusted EBITDA of $384 million, down $20 million, or 5 percent
· Adjusted net income of $107 million, down $30 million, or 22 percent
· Adjusted diluted EPS of $1.10, down $0.31 per share, or 22 percent
Matthew Kaplan, President and Chief Executive Officer, stated, During 2016, we made substantial progress in our initiatives to improve productivity and reduce costs. These efforts helped to mitigate the negative impact of eroding pricing and a less favorable product mix.
Weve made good progress towards our goal to increase integration. We achieved our goals at Victory while making several investments / acquisitions, the most recent being the purchase of Associated Packaging, Inc. on February 1, 2017, that will further increase integration levels.
Operating cash flow continues to be strong as we generated $282 million during 2016, up $20 million compared to 2015.
Randy Nebel, recently appointed Executive Vice President of KapStones Integrated Packaging System, stated, 2016 operating performance reflected a record production year for the Companys Longview and Roanoke Rapids mills, while progress continues on improving reliability and quality at our other mills. In addition, with the recent capital investments made at corrugated products plants, we expect that efficiency will be improved in 2017. In addition, in the fourth quarter we implemented a $40 per ton containerboard price increase and began raising prices for corrugated products. Also, demand was stronger in a quarter when we normally see lower volumes. Our results were negatively impacted by the impact of Hurricane Matthew which reduced pre-tax earnings by about $6 million.
Fourth Quarter Operating Highlights
Consolidated net sales of $777 million in the fourth quarter of 2016 were $13 million higher than 2015, reflecting higher volumes in the paper and packaging segment as 724,000 tons of paper were shipped during the fourth quarter of 2016 compared to 658,000 tons a year earlier. The Companys average mill selling price of $617 per ton in the fourth quarter of 2016 was lower by $29 per ton compared to the fourth quarter of 2015 due to the combined impact of lower export and domestic containerboard selling prices and lower export kraft paper prices. Average mill selling prices decreased $9 per ton from the third quarter of 2016, reflecting seasonal mix, partially offset by the impact from the October $40 per ton containerboard price increase. Distribution segment sales declined by $5 million due to lower volume and prices when compared to the fourth quarter of 2015.
Operating income of $38 million for the 2016 fourth quarter increased by $9 million, or 30 percent, compared to the 2015 fourth quarter. Financial performance in the current quarter improved mainly due to higher sales volumes, lower planned maintenance costs, lower compensation and benefit costs and a reduction in the fair value of the contingent consideration for the Victory Packaging acquisition. These factors were partially offset by lower selling prices, the impact of Hurricane Matthew and a non-cash charge for withdrawing from a multiemployer pension plan.
Interest expense was $10 million for the fourth quarter of 2016, up $1 million from a year ago, as a result of higher interest rates. At December 31, 2016, the average interest rate on our debt was 2.1 percent compared to 2.0 percent at the end of 2015.
The effective income tax rate for the fourth quarter of 2016 was 32.6 percent compared to 34.6 percent for the fourth quarter of 2015.
Full Year Operating Highlights
Consolidated net sales for the year ended December 31, 2016, were $3,077 million, an increase of 10 percent, compared to 2015 sales of $2,789 million. The increase was due to twelve months of Victory Packaging results in 2016 compared to seven months in 2015, partially offset by lower selling prices and a less favorable product mix.
Operating income of $171 million for the year ended December 31, 2016 was lower than 2015s $199 million by 14%. The decrease was due to lower selling prices, a less favorable product mix, higher depreciation charges, the impact of Hurricane Matthew and a non-cash charge for withdrawing from a multiemployer pension plan. These factors were partially offset by twelve months of operating results for Victory Packaging and related synergies with KapStones mill and plant system, the cost associated with the 2015 Longview mill work stoppage, lower incentive compensation due to lower earnings and lower benefit costs.
Interest expense for the year ended December 31, 2016 was $40 million, up $6 million from a year ago, mainly due to the full-year effect of borrowings relating to the Victory Packaging acquisition. Also, interest rates were higher in 2016 compared to 2015. The average interest rate was about 2.1 percent for 2016 compared to 1.9 percent for 2015. Loss on debt extinguishment totaled $0.7 million in 2016 compared to $1.2 million in 2015, reflecting lower voluntary debt prepayments in 2016.
The effective income tax rate for the year ended December 31, 2016 was 32.7 percent compared to 34.2 percent for 2015.
Cash Flow and Working Capital
Cash and cash equivalents increased by $20 million during the current quarter to $29 million at December 31, 2016. The Company generated $70 million of net cash from operating activities during the fourth quarter of 2016. Capital expenditures in the fourth quarter were $28 million. The Company paid $10 million of dividends and reduced borrowings by $11 million in the fourth quarter of 2016.
Cash and cash equivalents increased by $23 million during 2016 compared to December 31, 2015, reflecting cash provided by operating activities of $282 million, cash used for capital expenditures of $127 million and $27 million of strategic investments mainly to increase mill integration. Cash used by financing activities totaled $108 million reflecting $39 million of cash dividends paid to shareholders and a $65 million debt prepayment.
At December 31, 2016, the Company had approximately $428 million of working capital and $483 million of revolver borrowing capacity.
Conclusion
In summary, Kaplan commented, Our selling prices are increasing and we are generating more cash flow. We have implemented the October containerboard price increase based on contractual agreements. We anticipate improved performance in 2017.
Conference Call
KapStone will host a conference call at 11 a.m. ET, Thursday, February 9, 2017, to discuss the Companys financial results for the 2016 fourth quarter and full year. All interested parties are invited to listen and may do so by either accessing a simultaneous broadcast webcast on KapStones 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: 52791124
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 Companys 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, 24 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 of the Company. Management uses EBITDA and Adjusted EBITDA for evaluating the Companys 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, 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 managements
current views and are subject to risks, uncertainties and assumptions, many of which are beyond the Companys 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; (2) market and economic factors; (3) results of legal proceedings and compliance costs; (4) the ability to achieve and effectively manage growth; (5) the ability to pay the Companys debt obligations; (6) the ability to carry out the Companys strategic initiatives and manage associated costs; (7) managing labor relations and (8) realizing the synergies and benefits of strategic investments. Further information on these and other risks and uncertainties is provided under Part I, Item 1A Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2015 and elsewhere in reports that the Company files with the SEC. These filings can be found on KapStones Web site at http://www.kapstonepaper.com and the SECs 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)
(Preliminary and Unaudited)
|
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Quarter Ended December 31, |
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Year Ended December 31, |
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2016 |
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2015 |
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2016 |
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2015 |
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Net sales |
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$ |
777,495 |
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$ |
764,238 |
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$ |
3,077,257 |
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$ |
2,789,345 |
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Cost and expenses: |
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|
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| ||||
Cost of sales, excluding depreciation and amortization |
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563,953 |
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560,743 |
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2,214,872 |
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1,982,686 |
| ||||
Depreciation and amortization |
|
46,685 |
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47,562 |
|
182,213 |
|
162,179 |
| ||||
Freight and distribution expenses |
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71,236 |
|
66,528 |
|
279,023 |
|
234,469 |
| ||||
Selling, general and administrative expenses |
|
51,720 |
|
60,592 |
|
224,127 |
|
210,844 |
| ||||
Multiemployer pension plan withdrawal expense |
|
6,376 |
|
|
|
6,376 |
|
|
| ||||
Operating income |
|
37,525 |
|
28,813 |
|
170,646 |
|
199,167 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange loss |
|
737 |
|
852 |
|
2,255 |
|
2,556 |
| ||||
Equity method investments income |
|
(548 |
) |
|
|
(548 |
) |
|
| ||||
Loss on debt extinguishment |
|
|
|
590 |
|
679 |
|
1,218 |
| ||||
Interest expense, net |
|
10,113 |
|
9,303 |
|
40,078 |
|
33,759 |
| ||||
Income before provision for income taxes |
|
27,223 |
|
18,068 |
|
128,182 |
|
161,634 |
| ||||
Provision for income taxes |
|
8,885 |
|
6,244 |
|
41,930 |
|
55,248 |
| ||||
Net income |
|
$ |
18,338 |
|
$ |
11,824 |
|
$ |
86,252 |
|
$ |
106,386 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
$ |
0.19 |
|
$ |
0.12 |
|
$ |
0.89 |
|
$ |
1.11 |
|
Diluted |
|
$ |
0.19 |
|
$ |
0.12 |
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$ |
0.88 |
|
$ |
1.09 |
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|
|
|
|
|
|
|
|
|
| ||||
Weighted-average number of shares outstanding: |
|
|
|
|
|
|
|
|
| ||||
Basic |
|
96,633,431 |
|
96,321,138 |
|
96,533,368 |
|
96,257,749 |
| ||||
Diluted |
|
98,257,232 |
|
97,663,564 |
|
97,777,066 |
|
97,635,539 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Effective income tax rate |
|
32.6 |
% |
34.6 |
% |
32.7 |
% |
34.2 |
% |
Supplemental Information
GAAP to Non-GAAP Reconciliations
($ in thousands, except share and per share amounts)
(unaudited)
|
|
Quarter Ended December 31, |
|
Year Ended December 31, |
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|
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2016 |
|
2015 |
|
2016 |
|
2015 |
| ||||
Net Income (GAAP) to EBITDA (Non-GAAP) to Adjusted EBITDA (Non-GAAP): |
|
|
|
|
|
|
|
|
| ||||
Net income (GAAP) |
|
$ |
18,338 |
|
$ |
11,824 |
|
$ |
86,252 |
|
$ |
106,386 |
|
Interest expense, net |
|
10,113 |
|
9,303 |
|
40,078 |
|
33,759 |
| ||||
Provision for income taxes |
|
8,885 |
|
6,244 |
|
41,930 |
|
55,248 |
| ||||
Depreciation and amortization |
|
46,685 |
|
47,562 |
|
182,213 |
|
162,179 |
| ||||
EBITDA (Non-GAAP) |
|
$ |
84,021 |
|
$ |
74,933 |
|
$ |
350,473 |
|
$ |
357,572 |
|
|
|
|
|
|
|
|
|
|
| ||||
Victory Packaging inventory step-up expense |
|
|
|
|
|
|
|
5,800 |
| ||||
Acquisition, casualty, impairment and other expenses |
|
2,123 |
|
1,989 |
|
8,608 |
|
6,082 |
| ||||
Change in fair value of contingent consideration liability |
|
(2,979 |
) |
1,647 |
|
1,600 |
|
3,700 |
| ||||
Severance expenses |
|
533 |
|
102 |
|
7,560 |
|
5,076 |
| ||||
Longview work stoppage |
|
|
|
673 |
|
|
|
15,137 |
| ||||
Loss on debt extinguishment |
|
|
|
590 |
|
679 |
|
1,218 |
| ||||
Multiemployer pension plan withdrawal expense |
|
6,376 |
|
|
|
6,376 |
|
|
| ||||
Stock-based compensation expense |
|
1,750 |
|
1,713 |
|
8,938 |
|
9,835 |
| ||||
Accumulated EBITDA adjustments |
|
7,803 |
|
6,714 |
|
33,761 |
|
46,848 |
| ||||
Adjusted EBITDA (Non-GAAP) |
|
$ |
91,824 |
|
$ |
81,647 |
|
$ |
384,234 |
|
$ |
404,420 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net Income (GAAP) to Adjusted Net Income (Non-GAAP): |
|
|
|
|
|
|
|
|
| ||||
Net income (GAAP) |
|
$ |
18,338 |
|
$ |
11,824 |
|
$ |
86,252 |
|
$ |
106,386 |
|
Accumulated EBITDA adjustments |
|
7,803 |
|
6,714 |
|
33,761 |
|
46,848 |
| ||||
Accumulated tax adjustments* |
|
(2,926 |
) |
(2,323 |
) |
(12,660 |
) |
(15,806 |
) | ||||
Adjusted Net Income (Non-GAAP) |
|
$ |
23,215 |
|
$ |
16,215 |
|
$ |
107,353 |
|
$ |
137,424 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted EPS (GAAP) to Adjusted Diluted EPS (Non-GAAP): |
|
|
|
|
|
|
|
|
| ||||
Diluted earnings per share (GAAP) |
|
$ |
0.19 |
|
$ |
0.12 |
|
$ |
0.88 |
|
$ |
1.09 |
|
Accumulated EBITDA adjustments |
|
0.08 |
|
0.07 |
|
0.35 |
|
0.48 |
| ||||
Accumulated tax adjustments |
|
(0.03 |
) |
(0.02 |
) |
(0.13 |
) |
(0.16 |
) | ||||
Adjusted Diluted EPS (Non-GAAP) |
|
$ |
0.24 |
|
$ |
0.17 |
|
$ |
1.10 |
|
$ |
1.41 |
|
* Accumulated tax adjustments in 2016 reflect Accumulated EBITDA adjustments tax affected at 37.5 percent, the Companys marginal income tax rate.
* Accumulated tax adjustments in 2015 reflect Accumulated EBITDA adjustments tax affected at 34.6 percent and 33.7 percent, respectively.
KapStone Paper and Packaging Corporation
Consolidated Balance Sheets
(In thousands)
|
|
December 31, |
|
December 31, |
| ||
|
|
2016 |
|
2015 |
| ||
|
|
(Preliminary and Unaudited) |
| ||||
Assets |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
29,385 |
|
$ |
6,821 |
|
Trade accounts receivable, net of allowances |
|
392,962 |
|
363,869 |
| ||
Other receivables |
|
13,562 |
|
18,732 |
| ||
Inventories |
|
322,664 |
|
335,903 |
| ||
Prepaid expenses and other current assets |
|
10,247 |
|
28,932 |
| ||
Total current assets |
|
768,820 |
|
754,257 |
| ||
|
|
|
|
|
| ||
Plant, property and equipment, net |
|
1,441,557 |
|
1,406,146 |
| ||
Other assets |
|
25,468 |
|
12,532 |
| ||
Intangible assets, net |
|
314,413 |
|
344,583 |
| ||
Goodwill |
|
705,617 |
|
704,592 |
| ||
Total assets |
|
$ |
3,255,875 |
|
$ |
3,222,110 |
|
|
|
|
|
|
| ||
Liabilities and Stockholders Equity |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Short-term borrowings |
|
$ |
|
|
$ |
6,400 |
|
Dividend payable |
|
10,052 |
|
9,862 |
| ||
Accounts payable |
|
189,350 |
|
196,491 |
| ||
Accrued expenses |
|
76,480 |
|
73,138 |
| ||
Accrued compensation costs |
|
48,840 |
|
64,149 |
| ||
Accrued income taxes |
|
15,971 |
|
15 |
| ||
Total current liabilities |
|
340,693 |
|
350,055 |
| ||
|
|
|
|
|
| ||
Long-term debt, net of current portion |
|
1,485,323 |
|
1,543,748 |
| ||
Pension and post-retirement benefits |
|
34,207 |
|
40,510 |
| ||
Deferred income taxes |
|
405,561 |
|
418,479 |
| ||
Other liabilities |
|
85,761 |
|
24,038 |
| ||
Total other liabilities |
|
2,010,852 |
|
2,026,775 |
| ||
|
|
|
|
|
| ||
Stockholders equity: |
|
|
|
|
| ||
Common stock $0.0001 par value |
|
10 |
|
10 |
| ||
Additional paid-in capital |
|
275,970 |
|
266,220 |
| ||
Retained earnings |
|
689,668 |
|
642,306 |
| ||
Accumulated other comprehensive loss |
|
(61,318 |
) |
(63,256 |
) | ||
Total stockholders equity |
|
904,330 |
|
845,280 |
| ||
Total liabilities and stockholders equity |
|
$ |
3,255,875 |
|
$ |
3,222,110 |
|
KapStone Paper and Packaging Corporation
Consolidated Statement of Cash Flows
(In thousands)
(Preliminary and Unaudited)
|
|
Quarter Ended December 31, |
|
Year Ended December 31, |
| ||||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
| ||||
Operating activities: |
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
18,338 |
|
$ |
11,824 |
|
$ |
86,252 |
|
$ |
106,386 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
| ||||
Depreciation of plant and equipment |
|
39,175 |
|
38,876 |
|
149,318 |
|
136,886 |
| ||||
Amortization of intangible assets |
|
7,510 |
|
8,686 |
|
32,895 |
|
25,293 |
| ||||
Stock-based compensation expense |
|
1,750 |
|
1,713 |
|
8,938 |
|
9,835 |
| ||||
Pension and postretirement |
|
(2,106 |
) |
(2,803 |
) |
(3,694 |
) |
(11,182 |
) | ||||
Excess tax benefit from stock-based compensation |
|
57 |
|
(131 |
) |
207 |
|
(1,649 |
) | ||||
Amortization of debt issuance costs |
|
1,179 |
|
1,182 |
|
4,804 |
|
5,546 |
| ||||
Loss on disposal of fixed assets |
|
443 |
|
946 |
|
3,599 |
|
951 |
| ||||
Loss on debt extinguishment |
|
|
|
590 |
|
679 |
|
1,218 |
| ||||
Inventory step-up expense |
|
|
|
|
|
|
|
5,800 |
| ||||
Deferred income taxes |
|
(14,660 |
) |
4,601 |
|
(14,440 |
) |
11,042 |
| ||||
Change in fair value of contingent consideration liability |
|
(2,979 |
) |
1,647 |
|
1,600 |
|
3,700 |
| ||||
Equity method investments income |
|
(548 |
) |
|
|
(548 |
) |
|
| ||||
Multiemployer pension plan withdrawal expense |
|
6,376 |
|
|
|
6,376 |
|
|
| ||||
Changes in operating assets and liabilities |
|
14,998 |
|
18,678 |
|
5,934 |
|
(31,369 |
) | ||||
Net cash provided by operating activities |
|
$ |
69,533 |
|
$ |
85,809 |
|
$ |
281,920 |
|
$ |
262,457 |
|
|
|
|
|
|
|
|
|
|
| ||||
Investing activities: |
|
|
|
|
|
|
|
|
| ||||
Equity method investments |
|
(57 |
) |
|
|
(11,807 |
) |
|
| ||||
Purchase of intangible assets |
|
(500 |
) |
|
|
(2,525 |
) |
|
| ||||
Acquisitions, net of cash acquired |
|
|
|
|
|
(15,438 |
) |
(617,046 |
) | ||||
Capital expenditures |
|
(27,619 |
) |
(31,861 |
) |
(126,865 |
) |
(126,756 |
) | ||||
Proceeds from the sales of assets |
|
|
|
|
|
4,881 |
|
|
| ||||
Net cash used in investing activities |
|
$ |
(28,176 |
) |
$ |
(31,861 |
) |
$ |
(151,754 |
) |
$ |
(743,802 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Financing activities: |
|
|
|
|
|
|
|
|
| ||||
Proceeds from revolving credit facility |
|
97,800 |
|
$ |
81,800 |
|
$ |
451,000 |
|
$ |
350,000 |
| |
Repayments on revolving credit facility |
|
(109,300 |
) |
(77,400 |
) |
(457,400 |
) |
(343,600 |
) | ||||
Proceeds from receivables credit facility |
|
6,445 |
|
21,740 |
|
43,001 |
|
134,701 |
| ||||
Repayments on receivables credit facility |
|
(6,675 |
) |
(17,639 |
) |
(39,342 |
) |
(36,088 |
) | ||||
Proceeds from long-term debt |
|
|
|
|
|
|
|
519,763 |
| ||||
Repayments on long-term debt |
|
|
|
(51,750 |
) |
(64,687 |
) |
(116,438 |
) | ||||
Payment of loan amendment costs and debt issuance fees |
|
|
|
|
|
(2,250 |
) |
(10,790 |
) | ||||
Proceeds from other current borrowings |
|
|
|
|
|
|
|
6,615 |
| ||||
Payment from other current borrowings |
|
|
|
(2,214 |
) |
|
|
(6,615 |
) | ||||
Cash dividends paid |
|
(9,735 |
) |
(9,631 |
) |
(38,736 |
) |
(38,729 |
) | ||||
Payment of withholding taxes on vested stock awards |
|
31 |
|
(48 |
) |
(810 |
) |
(2,508 |
) | ||||
Proceeds from exercises of stock options |
|
70 |
|
118 |
|
858 |
|
896 |
| ||||
Proceeds from issuance of shares to ESPP |
|
|
|
(1 |
) |
971 |
|
843 |
| ||||
Excess tax benefit from stock-based compensation |
|
(57 |
) |
131 |
|
(207 |
) |
1,649 |
| ||||
Net cash provided (used in) / provided by financing activities |
|
$ |
(21,421 |
) |
$ |
(54,894 |
) |
$ |
(107,602 |
) |
$ |
459,699 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net increase in cash and cash equivalents |
|
19,936 |
|
(946 |
) |
22,564 |
|
(21,646 |
) | ||||
Cash and cash equivalents-beginning of period |
|
9,449 |
|
7,767 |
|
6,821 |
|
28,467 |
| ||||
Cash and cash equivalents-end of period |
|
$ |
29,385 |
|
$ |
6,821 |
|
$ |
29,385 |
|
$ |
6,821 |
|
KapStone Paper and Packaging Corporation
Operating Segment Information
(In thousands)
(Preliminary and Unaudited)
|
|
Net Sales |
|
Segment |
|
Depreciation |
|
|
|
Total Assets |
| |||||||||||
Three Months Ended December 31, 2016 |
|
Trade |
|
Inter- |
|
Total |
|
Income |
|
and |
|
Capital |
|
at December |
| |||||||
Paper and Packaging |
|
$ |
541,047 |
|
$ |
16,422 |
|
$ |
557,469 |
|
$ |
36,103 |
|
$ |
38,716 |
|
$ |
24,502 |
|
$ |
2,541,634 |
|
Distribution |
|
236,448 |
|
|
|
236,448 |
|
7,349 |
|
5,869 |
|
415 |
|
658,208 |
| |||||||
Corporate |
|
|
|
|
|
|
|
(5,927 |
) |
2,100 |
|
2,702 |
|
56,033 |
| |||||||
Intersegment eliminations |
|
|
|
(16,422 |
) |
(16,422 |
) |
|
|
|
|
|
|
|
| |||||||
|
|
$ |
777,495 |
|
$ |
|
|
$ |
777,495 |
|
$ |
37,525 |
|
$ |
46,685 |
|
$ |
27,619 |
|
$ |
3,255,875 |
|
|
|
Net Sales |
|
Segment |
|
Depreciation |
|
|
|
Total Assets |
| |||||||||||
Three Months Ended December 31, 2015 |
|
Trade |
|
Inter- |
|
Total |
|
Income |
|
and |
|
Capital |
|
at December |
| |||||||
Paper and Packaging |
|
$ |
522,815 |
|
$ |
13,864 |
|
$ |
536,679 |
|
$ |
33,691 |
|
$ |
40,640 |
|
$ |
26,627 |
|
$ |
2,489,683 |
|
Distribution |
|
241,423 |
|
|
|
241,423 |
|
7,860 |
|
5,641 |
|
1,664 |
|
675,204 |
| |||||||
Corporate |
|
|
|
|
|
|
|
(12,738 |
) |
1,281 |
|
3,570 |
|
57,223 |
| |||||||
Intersegment eliminations |
|
|
|
(13,864 |
) |
(13,864 |
) |
|
|
|
|
|
|
|
| |||||||
|
|
$ |
764,238 |
|
$ |
|
|
$ |
764,238 |
|
$ |
28,813 |
|
$ |
47,562 |
|
$ |
31,861 |
|
$ |
3,222,110 |
|
|
|
Net Sales |
|
Segment |
|
Depreciation |
|
Capital |
| ||||||||||
Year Ended December 31, 2016 |
|
Trade |
|
Inter- |
|
Total |
|
Income |
|
and |
|
Expenditures |
| ||||||
Paper and Packaging |
|
$ |
2,127,220 |
|
$ |
72,089 |
|
$ |
2,199,309 |
|
$ |
181,157 |
|
$ |
151,506 |
|
$ |
116,022 |
|
Distribution |
|
950,037 |
|
|
|
950,037 |
|
29,296 |
|
23,027 |
|
4,349 |
| ||||||
Corporate |
|
|
|
|
|
|
|
(39,807 |
) |
7,680 |
|
6,494 |
| ||||||
Intersegment eliminations |
|
|
|
(72,089 |
) |
(72,089 |
) |
|
|
|
|
|
| ||||||
|
|
$ |
3,077,257 |
|
$ |
|
|
$ |
3,077,257 |
|
$ |
170,646 |
|
$ |
182,213 |
|
$ |
126,865 |
|
|
|
Net Sales |
|
Segment |
|
Depreciation |
|
|
| ||||||||||
Year Ended December 31, 2015 |
|
Trade |
|
Inter- |
|
Total |
|
Income |
|
and |
|
Capital |
| ||||||
Paper and Packaging |
|
$ |
2,206,396 |
|
$ |
22,280 |
|
$ |
2,228,676 |
|
$ |
224,012 |
|
$ |
145,363 |
|
$ |
108,599 |
|
Distribution (a) |
|
582,949 |
|
|
|
582,949 |
|
20,719 |
|
13,108 |
|
3,190 |
| ||||||
Corporate |
|
|
|
|
|
|
|
(45,564 |
) |
3,708 |
|
14,967 |
| ||||||
Intersegment eliminations |
|
|
|
(22,280 |
) |
(22,280 |
) |
|
|
|
|
|
| ||||||
|
|
$ |
2,789,345 |
|
$ |
|
|
$ |
2,789,345 |
|
$ |
199,167 |
|
$ |
162,179 |
|
$ |
126,756 |
|
(a) Reflects results of Victory Packaging which KapStone acquired on June 1, 2015
KapStone Paper and Packaging Corporation
Operating Segment EBITDA and Adjusted EBITDA
(In thousands)
(Preliminary and Unaudited)
|
|
Quarter Ended December 31, |
|
Year Ended December 31, |
| ||||||||
Paper and Packaging |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
| ||||
Segment operating income |
|
$ |
36,103 |
|
$ |
33,691 |
|
$ |
181,157 |
|
$ |
224,012 |
|
Equity method investments income |
|
548 |
|
|
|
548 |
|
|
| ||||
Foreign exchange loss |
|
(479 |
) |
(466 |
) |
(461 |
) |
(1,168 |
) | ||||
Depreciation and amortization |
|
38,716 |
|
40,640 |
|
151,506 |
|
145,363 |
| ||||
EBITDA |
|
74,888 |
|
73,865 |
|
332,750 |
|
368,207 |
| ||||
Victory Packaging inventory step-up expense |
|
|
|
|
|
|
|
|
| ||||
Acquisition, casualty, impairment and other expenses |
|
(550 |
) |
423 |
|
2,979 |
|
1,450 |
| ||||
Longview work stoppage |
|
|
|
673 |
|
|
|
15,137 |
| ||||
Multiemployer pension plan withdrawal expense |
|
6,376 |
|
|
|
6,376 |
|
|
| ||||
Severance expenses |
|
(448 |
) |
37 |
|
5,550 |
|
4,908 |
| ||||
Adjusted EBITDA |
|
$ |
80,266 |
|
$ |
74,998 |
|
$ |
347,655 |
|
$ |
389,702 |
|
Adjusted EBITDA margin |
|
14.8 |
% |
14.3 |
% |
16.3 |
% |
17.7 |
% |
|
|
Quarter Ended December 31, |
|
Year Ended December 31, |
| ||||||||
Distribution |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
| ||||
Segment operating income |
|
$ |
7,349 |
|
$ |
7,860 |
|
$ |
29,296 |
|
$ |
20,719 |
|
Foreign exchange loss |
|
(258 |
) |
(386 |
) |
(1,794 |
) |
(1,388 |
) | ||||
Depreciation and amortization |
|
5,869 |
|
5,641 |
|
23,027 |
|
13,108 |
| ||||
EBITDA |
|
12,960 |
|
13,115 |
|
50,529 |
|
32,439 |
| ||||
Victory Packaging inventory step-up expense |
|
|
|
|
|
|
|
5,800 |
| ||||
Acquisition, casualty, impairment and other expenses |
|
2,126 |
|
620 |
|
3,780 |
|
620 |
| ||||
Severance expenses |
|
981 |
|
65 |
|
1,614 |
|
168 |
| ||||
Adjusted EBITDA |
|
$ |
16,067 |
|
$ |
13,800 |
|
$ |
55,923 |
|
$ |
39,027 |
|
Adjusted EBITDA margin |
|
6.8 |
% |
5.7 |
% |
5.9 |
% |
6.7 |
% |
|
|
Quarter Ended December 31, |
|
Year Ended December 31, |
| ||||||||
Corporate |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
| ||||
Segment operating (loss) |
|
$ |
(5,927 |
) |
$ |
(12,738 |
) |
$ |
(39,807 |
) |
$ |
(45,564 |
) |
Loss on debt extinguishment |
|
|
|
(590 |
) |
(679 |
) |
(1,218 |
) | ||||
Depreciation and amortization |
|
2,100 |
|
1,281 |
|
7,680 |
|
3,708 |
| ||||
EBITDA |
|
(3,827 |
) |
(12,047 |
) |
(32,806 |
) |
(43,074 |
) | ||||
Victory Packaging inventory step-up expense |
|
|
|
|
|
|
|
|
| ||||
Acquisition, casualty, impairment and other expenses |
|
547 |
|
946 |
|
1,849 |
|
4,012 |
| ||||
Change in fair value of contingent consideration liability |
|
(2,979 |
) |
1,647 |
|
1,600 |
|
3,700 |
| ||||
Severance expenses |
|
|
|
|
|
396 |
|
|
| ||||
Stock-based compensation |
|
1,750 |
|
1,713 |
|
8,938 |
|
9,835 |
| ||||
Loss on debt extinguishment |
|
|
|
590 |
|
679 |
|
1,218 |
| ||||
Adjusted EBITDA |
|
$ |
(4,509 |
) |
$ |
(7,151 |
) |
$ |
(19,344 |
) |
$ |
(24,309 |
) |
|
|
Quarter Ended December 31, |
|
Year Ended December 31, |
| ||||||||
Consolidated |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
| ||||
Operating income |
|
$ |
37,525 |
|
$ |
28,813 |
|
$ |
170,646 |
|
$ |
199,167 |
|
Loss on debt extinguishment |
|
|
|
(590 |
) |
(679 |
) |
(1,218 |
) | ||||
Foreign exchange loss |
|
(737 |
) |
(852 |
) |
(2,255 |
) |
(2,556 |
) | ||||
Equity method investments income |
|
548 |
|
|
|
548 |
|
|
| ||||
Depreciation and amortization |
|
46,685 |
|
47,562 |
|
182,213 |
|
162,179 |
| ||||
EBITDA |
|
84,021 |
|
74,933 |
|
350,473 |
|
357,572 |
| ||||
Victory Packaging inventory step-up expense |
|
|
|
|
|
|
|
5,800 |
| ||||
Acquisition, casualty, impairment and other expenses |
|
2,123 |
|
1,989 |
|
8,608 |
|
6,082 |
| ||||
Longview work stoppage |
|
|
|
673 |
|
|
|
15,137 |
| ||||
Severance expenses |
|
533 |
|
102 |
|
7,560 |
|
5,076 |
| ||||
Change in fair value of contingent consideration liability |
|
(2,979 |
) |
1,647 |
|
1,600 |
|
3,700 |
| ||||
Stock-based compensation |
|
1,750 |
|
1,713 |
|
8,938 |
|
9,835 |
| ||||
Multiemployer pension plan withdrawal expense |
|
6,376 |
|
|
|
6,376 |
|
|
| ||||
Loss on debt extinguishment |
|
|
|
590 |
|
679 |
|
1,218 |
| ||||
Adjusted EBITDA |
|
$ |
91,824 |
|
$ |
81,647 |
|
$ |
384,234 |
|
$ |
404,420 |
|
Exhibit 99.2
2016 Fourth Quarter and Full Year Financial Review February 8, 2017 Matt Kaplan, President and Chief Executive Officer Randy Nebel, Executive Vice President of Integrated Packaging Andrea K. Tarbox, Executive Vice President and CFO
Forward-looking Statements The information in this presentation and statements made during this presentation may contain certain forward-looking statements within the meaning of federal securities laws. These statements reflect managements expectations regarding future events and operating performance. Risk Factors These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to differ materially from those expressed in, or underlying, any forward-looking statements can be found in the Companys filings with the Securities and Exchange Commission, such as its annual and quarterly reports. The Company disclaims any obligation to revise or update such statements to reflect the occurrence of events after the date of this presentation. Non-GAAP Financial Measures This presentation refers to non-U.S. GAAP financial information. A reconciliation of non-U.S. GAAP to U.S. GAAP financial measures is available at the end of the press release and on the companys website at KapStonepaper.com under Investors. Forward-Looking Statements 2
Full Year Financial Results (1) Percentage change calculations made using unrounded source financials (2) Excludes non-cash stock compensation and changes in contingent consideration, and acquisition, integration, severance expenses, multiemployer pension plan withdrawal expense and other charges. Net of accumulated tax adjustments for Adjusted Net Income (3) Includes amortization of purchase accounting intangibles, net of tax, of $21 million in 2016 and $16 million in 2015 (4) Includes amortization of purchase accounting intangibles, net of tax, of $0.21 per share in 2016 and $0.16 in 2015 3 ($ in Millions, except per share) 2016 2015 Inc/(Dec)(1) Inc/(Dec)(1) Net Sales $3,077 $2,789 $288 10% EBITDA $350 $358 ($8) (2%) Adj. EBITDA(2) $384 $404 ($20) (5%) Net Income(3) $86 $106 ($20) (19%) Adj. Net Income(2) $107 $137 ($30) (22%) Diluted EPS(4) $0.88 $1.09 ($0.21) (19%) Adj. Diluted EPS(4) $1.10 $1.41 ($0.31) (22%)
2016 Compared to 2015 $2,789 Acquisition reflects twelve months of Victory Packaging results in 2016 compared to seven months in 2015 Price/mix was unfavorably impacted by: Average mill selling prices down $44 per ton reflecting lower prices of $59 million due to lower domestic and export containerboard prices, lower prices for export kraft paper, and a less favorable product mix of $26 million due to lower specialty paper volume and higher export containerboard shipments Lower corrugated products selling prices due to a less favorable product mix and competitive pressures, $15 million Sales volume up 88,000 tons in Paper and Packaging segment, offset by lower sales in Distribution segment Other sales reflects elimination of Paper and Packaging segment sales to the Distribution segment Deflation of $5 million due to lower fiber and fuel costs, partially offset by higher OCC, salaries and wages Productivity and cost savings includes $14 million due to higher mill production, $13 million of lower costs for management incentives and $14 million of benefit curtailments, synergies related to the Victory Packaging acquisition and less market downtime, partially offset by $6 million of costs for Q4 2016 Hurricane Matthew and $6 million of lower pension income 4 $ in Millions $ in Millions Productivity Gains More than Offset by Price/Mix Declines Net Sales $367$100$71$50$3,077 Adjusted EBITDA $404$17$100$53$384 $5$5
Fourth Quarter Financial Results (1) Percentage change calculations made using unrounded source financials (2) Excludes non-cash stock compensation and changes in contingent consideration, and acquisition, integration, severance expenses, multiemployer pension plan withdrawal expense and other charges. Net of accumulated tax adjustments for Adjusted Net Income (3) Includes amortization of purchase accounting intangibles net of tax of $5 million in Q4 2016 , $6 million in Q4 2015, and $5 million in Q3 2016 (4) Includes amortization of purchase accounting intangibles net of tax of $0.05 per share in Q4 2016, $0.06 in Q4 2015, and $0.05 in Q3 2016 5 ($ in Millions, except per share) Q4 2016 Q4 2015 Inc/(Dec)(1) Q3 2016 Inc/(Dec)(1) Net Sales $777 $764 2% $777 --% EBITDA $84 $75 12% $99 (15%) Adj. EBITDA(2) $92 $82 13% $108 (15%) Net Income(3) $18 $12 55% $31 (41%) Adj. Net Income(2) $23 $16 43% $37 (37%) Diluted EPS(4) $0.19 $0.12 58% $0.32 (41%) Adj. Diluted EPS(4) $0.24 $0.17 41% $0.37 (35%)
Q4 2016 Compared to Q4 2015 $82 $19 $6 $7 Price/mix was unfavorably impacted by: Lower average mill selling prices, down $29 per ton reflecting: o Lower prices of $11 million due to Q1 2016 index driven lower domestic containerboard prices and lower prices for export containerboard and domestic and export kraft paper, partially offset by the October 2016 containerboard price increase o Less favorable product mix of $4 million reflecting lower Durasorb shipments Lower corrugated products selling prices due to a less favorable mix and competitive pressures, $4 million Sales volume up 66,000 tons in Paper and Packaging segment, offset by $5 million of lower sales in Distribution segment Productivity and cost savings include 29,000 tons of higher mill production, lower costs for management incentives and benefit curtailments and less market downtime 6 $ in Millions $ in Millions Productivity and Lower Outage Costs offset by Price Leads to Earnings Gain Net Sales $764$19$32$777 Adjusted EBITDA $18$92 $10
Strong Cash Flows In 2016, operating cash flow increased $20 million YOY primarily due to a reduction in inventories and timing of tax payments Company invested $27 million for new integration opportunities 2016 CAPEX of $127 million included approximately $40 million for strategic, value-adding projects Net debt at December 31, 2016 - $1,474 million In 2016, $65 million voluntary prepayment No mandatory principal payments due until Q1 2019 Debt to EBITDA leverage ratio (per credit agreement) 3.82 times December 31, 2016 3.98 times September 30, 2016 3.60 times December 31, 2015 No pension plan funding required in 2016 7 Operating Cash Flows Trend $282 $262 20162015
Quarterly Key Performance Indicators 8 (1)Containerboard includes all domestic and export sales of linerboard and medium (2)Specialty paper includes Kraft paper, Durasorb, Kraftpak and roll pulp Sales and Production Average Mill Revenue per Ton $617$626$646 4Q 163Q 164Q 15 Tons Produced (000) 685700 4Q 163Q 164Q 15 Mill External Shipments (000) 504469 4Q 163Q 164Q 15 Paper and Packaging Product Mix (000 Tons) Containerboard and Corrugated Products(1) 465451 Specialty Paper(2) 259249250 4Q 163Q 164Q 15 4Q 163Q 164Q 15
Operations Highlights Distribution Segment 9 erformance has been consistent with expectations for profitability, cash flow and integration et sales of $236 million for Q4 2016 were $5 million lower than prior year ower selling prices due to the pass through of the January 2016 containerboard price reduction ower sales volume, down about 1 percent, but expect 2017 growth to resume djusted EBITDA of $16 million for Q4 2016 was $2 million higher than prior year 4 million benefit from lower corrugated products costs artially offset by lower prices and volume xpect future opportunities to internalize Victory outside purchases
Integration Strategies 10 On February 1, 2017 we announced the acquisition of Associated Packaging Incorporated (API) Produces approximately 10,000 tons per year of corrugated boxes Strong management team will stay on with KapStone Strategically based in Greer, South Carolina near the Cowpens mill Well-equipped sheet plant Significant growth opportunities Lucrative fulfillment business Expect to increase throughput with Victory and strategic account relationships Increases KapStones integration by 17 thousand tons within 18 months
Integration Strategy 17 Previous 2016 initiatives announced should provide approximately 85,000 tons of additional integration by mid 2018 Our previously stated goal of integrating an additional 100,000 to 150,000 tons on an annualized basis by mid 2018 will be achieved with these initiatives 11 Annual Volume - Tons Integration from Recent Strategic Investments 115 60 48325 85 2019 Outlook Over 2013 Base Pre 2016
Market Update 12 Strong operating rates Inventories have declined significantly Improved box demand Rising OCC prices Record export shipments
Appendix 13
Key Assumptions for 2017 14 Realization of $40 per ton containerboard and corrugated products price increase should be mostly completed by end of Q1 Q1 benefit of $8 to $9 million versus Q4 2016 Annualized benefit should be $60 to $70 million oPartially offset by 2016 price reductions and timing of price increase implementation Improved mix due to lower reliance on export containerboard volume Average fiber costs higher due to higher OCC Q1 2017 versus Q4 2016 - $6 million Full year 2017 - $21 million Annualized cost savings of $10 million from new wood yards at Charleston and Roanoke Rapids beginning in late Q2 2017 Normal inflation for wage and salary increases, and higher payroll taxes in beginning of year Restoration of certain salaried benefits curtailed in 2016 Q1 2017 versus Q4 2016 - $4 million Full year 2017 - $14 million CAPEX Q1 2017 - $30 million Full year 2017 - $136 million No pension plan funding required Higher interest expense Effective income tax rate of 34 percent. Cash income tax rate of 39 percent
Maintenance Outage Expense & Production Impact *The 26,100 ton impact includes 7,800 tons for the tri-annual cold mill outage at Charleston and 13,000 tons at Roanoke Rapids ** The 10,800 ton impact is mainly due to machine upgrades at Longview 15 Financial Impact ($ in millions) Q1 Q2 Q3 Q4 Year 2015 Actual $ 8.6 $11.1 $4.4 $ 13.3 $ 37.4 2016 Actual $6.6 $19.0 $3.8 $3.2 $ 32.6 2017 Plan $6.5 $23.3 $3.1 $11.2 $ 44.1 Lost Production Impact (Tons) Q1 Q2 Q3 Q4 Year 2015 Actual 2,000 10,400 2,400 16,900 31,700 2016 Actual 4,800 12,900 1,900 5,300 24,900 2017 Plan 7,100 26,100* 2,500 10,800** 46,500
Annual Key Performance Indicators 1,857 (1)Containerboard includes all domestic and export sales of linerboard and medium (2)Specialty paper includes Kraft paper, Durasorb, Kraftpak and roll pulp 16 Sales and Production Average Mill Revenue per Ton $667$684 201620152014 Tons Produced (000) 2,7442,6792,715 201620152014 Mill External Shipments (000) 1,9351,936 201620152014 Paper and Packaging Product Mix (000 Tons) Containerboard and Corrugated Products(1) 1,7961,7141,765 Specialty Paper(2) 1,0241,0181,031 201620152014 201620152014
Q4 2016 Compared to Q3 2016 $5 $92 Average mill selling prices decrease $9 per ton reflecting: Less favorable product mix due to seasonally higher exports and lower Durasorb volume, $6 million Partial realization of $40 per ton October containerboard price increase, $2 million Corrugated products price/mix reflects less favorable mix, partially offset by partial realization of October price increase, $2 million Sales volume reflects Paper and Packaging segment up 24,000 tons. Distribution segment down $7 million Hurricane reflects costs for Hurricane Matthew at the Charleston mill Productivity reflects 15,000 tons of lower mill production and higher plant operating costs 17 $ in Millions $ in Millions Seasonality and Hurricane Drive Lower Results Net Sales $777$4$2$2$777 Adjusted EBITDA $108$6$1$6
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