x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2014
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____________ to ____________
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Delaware
|
|
36-4277050
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(State or Other Jurisdiction of
Incorporation or Organization)
|
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(I.R.S. Employer Identification No.)
|
|
|
|
1955 West Field Court, Lake Forest, Illinois
|
|
60045
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(Address of Prinicpal Executive Offices)
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(Zip Code)
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Large accelerated filer
|
x
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Accelerated filer
|
¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
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¨
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|
PART I
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|
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Item 1.
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||
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Item 2.
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Item 3.
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Item 4.
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PART II
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|
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 1.
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FINANCIAL STATEMENTS
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
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2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Statements of Income:
|
|
|
|
|
|
|
|
||||||||
Net sales
|
$
|
1,468,388
|
|
|
$
|
800,230
|
|
|
$
|
2,899,713
|
|
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$
|
1,555,437
|
|
Cost of sales
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(1,157,580
|
)
|
|
(604,980
|
)
|
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(2,287,501
|
)
|
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(1,174,941
|
)
|
||||
Gross profit
|
310,808
|
|
|
195,250
|
|
|
612,212
|
|
|
380,496
|
|
||||
Selling, general, and administrative expenses
|
(122,848
|
)
|
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(74,225
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)
|
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(239,362
|
)
|
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(149,510
|
)
|
||||
Other expense, net
|
(7,712
|
)
|
|
(10,828
|
)
|
|
(31,694
|
)
|
|
(14,789
|
)
|
||||
Income from operations
|
180,248
|
|
|
110,197
|
|
|
341,156
|
|
|
216,197
|
|
||||
Interest expense, net
|
(21,409
|
)
|
|
(9,232
|
)
|
|
(42,200
|
)
|
|
(18,483
|
)
|
||||
Income before taxes
|
158,839
|
|
|
100,965
|
|
|
298,956
|
|
|
197,714
|
|
||||
Income tax provision
|
(59,282
|
)
|
|
(34,713
|
)
|
|
(109,313
|
)
|
|
(69,168
|
)
|
||||
Net income
|
$
|
99,557
|
|
|
$
|
66,252
|
|
|
$
|
189,643
|
|
|
$
|
128,546
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
1.01
|
|
|
$
|
0.69
|
|
|
$
|
1.93
|
|
|
$
|
1.33
|
|
Diluted
|
$
|
1.01
|
|
|
$
|
0.68
|
|
|
$
|
1.93
|
|
|
$
|
1.32
|
|
Dividends declared per common share
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.80
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
||||||||
Statements of Comprehensive Income:
|
|
|
|
|
|
|
|
||||||||
Net Income
|
$
|
99,557
|
|
|
$
|
66,252
|
|
|
$
|
189,643
|
|
|
$
|
128,546
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment, net of tax of $70, $0, $30, and $0, respectively
|
(74
|
)
|
|
—
|
|
|
(92
|
)
|
|
—
|
|
||||
Reclassification adjustments to cash flow hedges included in net income, net of tax of $553, $553, $1,115, and $1,105, respectively
|
869
|
|
|
870
|
|
|
1,729
|
|
|
1,739
|
|
||||
Amortization of pension and postretirement plans actuarial loss and prior service cost, net of tax of
$688, $4,221, $1,472, and $5,421, respectively
|
1,078
|
|
|
6,645
|
|
|
2,057
|
|
|
8,534
|
|
||||
Changes in unfunded employee benefit obligation, net of tax of $0, $5,370, $0, and $5,370, respectively
|
—
|
|
|
8,455
|
|
|
—
|
|
|
8,455
|
|
||||
Other comprehensive income
|
1,873
|
|
|
15,970
|
|
|
3,694
|
|
|
18,728
|
|
||||
Comprehensive income
|
$
|
101,430
|
|
|
$
|
82,222
|
|
|
$
|
193,337
|
|
|
$
|
147,274
|
|
|
June 30,
2014 |
|
December 31,
2013 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
161,991
|
|
|
$
|
190,960
|
|
Accounts receivable, net of allowance for doubtful accounts and customer deductions of $11,712 and $10,567 as of June 30, 2014, and December 31, 2013, respectively
|
704,218
|
|
|
643,083
|
|
||
Inventories
|
611,342
|
|
|
594,291
|
|
||
Prepaid expenses and other current assets
|
59,737
|
|
|
32,101
|
|
||
Federal and state income taxes receivable
|
2,870
|
|
|
22,958
|
|
||
Deferred income taxes
|
34,091
|
|
|
47,616
|
|
||
Total current assets
|
1,574,249
|
|
|
1,531,009
|
|
||
Property, plant, and equipment, net
|
2,817,249
|
|
|
2,805,704
|
|
||
Goodwill
|
537,363
|
|
|
526,789
|
|
||
Intangible assets, net
|
306,002
|
|
|
310,539
|
|
||
Other long-term assets
|
69,374
|
|
|
69,738
|
|
||
Total assets
|
$
|
5,304,237
|
|
|
$
|
5,243,779
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current maturities of long-term debt
|
$
|
6,500
|
|
|
$
|
39,000
|
|
Capital lease obligations
|
1,065
|
|
|
1,030
|
|
||
Accounts payable
|
394,743
|
|
|
357,432
|
|
||
Dividends payable
|
39,359
|
|
|
39,297
|
|
||
Accrued liabilities
|
207,314
|
|
|
214,058
|
|
||
Accrued interest
|
8,932
|
|
|
9,722
|
|
||
Total current liabilities
|
657,913
|
|
|
660,539
|
|
||
Long-term liabilities:
|
|
|
|
||||
Long-term debt
|
2,425,441
|
|
|
2,508,845
|
|
||
Capital lease obligations
|
23,333
|
|
|
23,874
|
|
||
Deferred income taxes
|
430,947
|
|
|
434,835
|
|
||
Pension and postretirement benefit plans
|
200,900
|
|
|
193,548
|
|
||
Other long-term liabilities
|
83,084
|
|
|
65,318
|
|
||
Total long-term liabilities
|
3,163,705
|
|
|
3,226,420
|
|
||
Commitments and contingent liabilities
|
|
|
|
|
|
||
Stockholders' equity:
|
|
|
|
||||
Common stock, par value $0.01 per share, 300,000 shares authorized, 98,389 and 98,172 shares issued as of June 30, 2014, and December 31, 2013, respectively
|
984
|
|
|
982
|
|
||
Additional paid in capital
|
423,598
|
|
|
401,761
|
|
||
Retained earnings
|
1,119,367
|
|
|
1,019,101
|
|
||
Accumulated other comprehensive loss
|
(61,330
|
)
|
|
(65,024
|
)
|
||
Total stockholders' equity
|
1,482,619
|
|
|
1,356,820
|
|
||
Total liabilities and stockholders' equity
|
$
|
5,304,237
|
|
|
$
|
5,243,779
|
|
|
Six Months Ended
June 30 |
||||||
|
2014
|
|
2013
|
||||
Cash Flows from Operating Activities:
|
|
|
|
||||
Net income
|
$
|
189,643
|
|
|
$
|
128,546
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation, depletion, and amortization of intangibles and deferred financing costs
|
189,120
|
|
|
88,979
|
|
||
Share-based compensation expense
|
7,601
|
|
|
6,774
|
|
||
Deferred income tax provision (benefit)
|
19,583
|
|
|
(6,786
|
)
|
||
Alternative energy tax credits
|
—
|
|
|
72,437
|
|
||
Pension and postretirement benefits expense, net of contributions
|
12,657
|
|
|
28,023
|
|
||
Other, net
|
(102
|
)
|
|
2,494
|
|
||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
||||
(Increase) decrease in assets —
|
|
|
|
||||
Accounts receivable
|
(47,640
|
)
|
|
(51,225
|
)
|
||
Inventories
|
(13,277
|
)
|
|
78
|
|
||
Prepaid expenses and other current assets
|
(27,497
|
)
|
|
(15,695
|
)
|
||
Federal and state income taxes receivable
|
20,088
|
|
|
(11,656
|
)
|
||
Increase (decrease) in liabilities —
|
|
|
|
||||
Accounts payable
|
(6,258
|
)
|
|
47,400
|
|
||
Accrued liabilities
|
(9,775
|
)
|
|
(6,332
|
)
|
||
Net cash provided by operating activities
|
334,143
|
|
|
283,037
|
|
||
Cash Flows from Investing Activities:
|
|
|
|
||||
Additions to property, plant, and equipment
|
(148,183
|
)
|
|
(80,891
|
)
|
||
Acquisition of business, net of cash acquired
|
(20,290
|
)
|
|
—
|
|
||
Additions to other long term assets
|
(5,949
|
)
|
|
(2,196
|
)
|
||
Other
|
3,111
|
|
|
234
|
|
||
Net cash used for investing activities
|
(171,311
|
)
|
|
(82,853
|
)
|
||
Cash Flows from Financing Activities:
|
|
|
|
||||
Repayments of debt and capital lease obligations
|
(116,506
|
)
|
|
(7,974
|
)
|
||
Common stock dividends paid
|
(78,645
|
)
|
|
(30,658
|
)
|
||
Repurchases of common stock
|
—
|
|
|
(5,149
|
)
|
||
Proceeds from exercise of stock options
|
3,739
|
|
|
2,125
|
|
||
Excess tax benefits from stock-based awards
|
11,569
|
|
|
5,444
|
|
||
Shares withheld to cover employee restricted stock taxes
|
(11,759
|
)
|
|
(1,308
|
)
|
||
Other
|
(199
|
)
|
|
—
|
|
||
Net cash used for financing activities
|
(191,801
|
)
|
|
(37,520
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
(28,969
|
)
|
|
162,664
|
|
||
Cash and cash equivalents, beginning of period
|
190,960
|
|
|
207,393
|
|
||
Cash and cash equivalents, end of period
|
$
|
161,991
|
|
|
$
|
370,057
|
|
|
|
Three Months Ended
June 30, 2013 |
|
Six Months Ended
June 30, 2013 |
||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income
|
|
As Previously Reported (a)
|
|
Effect of Change
|
|
As Adjusted
|
|
As Previously Reported (a)
|
|
Effect of Change
|
|
As Adjusted
|
||||||||||||
Cost of sales
|
|
$
|
(607,907
|
)
|
|
$
|
2,927
|
|
|
$
|
(604,980
|
)
|
|
$
|
(1,180,622
|
)
|
|
$
|
5,681
|
|
|
$
|
(1,174,941
|
)
|
Gross profit
|
|
192,323
|
|
|
2,927
|
|
|
195,250
|
|
|
374,815
|
|
|
5,681
|
|
|
380,496
|
|
||||||
Income from operations
|
|
107,270
|
|
|
2,927
|
|
|
110,197
|
|
|
210,516
|
|
|
5,681
|
|
|
216,197
|
|
||||||
Income before taxes
|
|
98,038
|
|
|
2,927
|
|
|
100,965
|
|
|
192,033
|
|
|
5,681
|
|
|
197,714
|
|
||||||
Provision for income taxes
|
|
(33,573
|
)
|
|
(1,140
|
)
|
|
(34,713
|
)
|
|
(66,955
|
)
|
|
(2,213
|
)
|
|
(69,168
|
)
|
||||||
Net income
|
|
64,465
|
|
|
1,787
|
|
|
66,252
|
|
|
125,078
|
|
|
3,468
|
|
|
128,546
|
|
||||||
Comprehensive income
|
|
80,435
|
|
|
1,787
|
|
|
82,222
|
|
|
143,806
|
|
|
3,468
|
|
|
147,274
|
|
||||||
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
0.67
|
|
|
0.02
|
|
|
0.69
|
|
|
1.30
|
|
|
0.03
|
|
|
1.33
|
|
||||||
Diluted
|
|
0.66
|
|
|
0.02
|
|
|
0.68
|
|
|
1.28
|
|
|
0.04
|
|
|
1.32
|
|
(a)
|
Certain amounts in prior periods' consolidated financial statements have been reclassified to conform with the current period presentation.
|
|
|
December 31, 2013
|
||||||||||
Consolidated Balance Sheet
|
|
As Previously Reported
|
|
Effect of Change
|
|
As Adjusted
|
||||||
Inventories
|
|
$
|
522,523
|
|
|
$
|
71,768
|
|
|
$
|
594,291
|
|
Deferred income tax assets
|
|
75,579
|
|
|
(27,963
|
)
|
|
47,616
|
|
|||
Retained earnings
|
|
975,296
|
|
|
43,805
|
|
|
1,019,101
|
|
|
|
Six Months Ended
June 30, 2013 |
||||||||||
Consolidated Statement of Cash Flows
|
|
As Previously Reported
|
|
Effect of Change
|
|
As Adjusted
|
||||||
Net income
|
|
$
|
125,078
|
|
|
$
|
3,468
|
|
|
$
|
128,546
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Deferred income tax provision (benefit)
|
|
(8,999
|
)
|
|
2,213
|
|
|
(6,786
|
)
|
|||
Change in inventories
|
|
5,759
|
|
|
(5,681
|
)
|
|
78
|
|
|
June 30,
2014 |
|
December 31,
2013 |
||||
Raw materials
|
$
|
239,393
|
|
|
$
|
212,027
|
|
Work in process
|
12,506
|
|
|
13,898
|
|
||
Finished goods
|
196,436
|
|
|
209,972
|
|
||
Supplies and materials
|
163,007
|
|
|
158,394
|
|
||
Inventories
|
$
|
611,342
|
|
|
$
|
594,291
|
|
|
Pro Forma (a)
|
||
|
Six Months Ended
June 30, 2013 |
||
Net sales
|
$
|
2,768.6
|
|
Net income (b)
|
$
|
143.3
|
|
Net income per share—diluted (b)
|
$
|
1.47
|
|
(a)
|
The pro forma financial information presented in the table above has been adjusted to give effect to adjustments that are directly related to the acquisition, factually supportable, and expected to have a continuing impact. These adjustments include, but are not limited to, the application of our accounting policies (including the deferral method of accounting for planned major maintenance activities, which increased pro forma net income
$12.7 million
for the
six months ended June 30,
2013
); elimination of intercompany transactions; depreciation and amortization related to fair value adjustments to property, plant, and equipment and intangible assets; and interest expense on acquisition-related debt.
|
(b)
|
Included in pro forma net income for the
six months ended June 30,
2013
, are
$13.3 million
of pre-tax costs, related primarily to the restructuring of Boise's white paper mill in International Falls, Minnesota,
$10.8 million
of incremental depreciation expense related to shortening the estimated useful lives of certain assets, primarily at the white paper mill in International Falls, Minnesota, and
$2.0 million
in transaction-related costs.
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
DeRidder restructuring (a)
|
$
|
319
|
|
|
$
|
—
|
|
|
$
|
1,420
|
|
|
$
|
—
|
|
Integration-related and other costs (b)
|
4,863
|
|
|
—
|
|
|
8,959
|
|
|
—
|
|
||||
Class action lawsuit settlement (c)
|
—
|
|
|
—
|
|
|
17,600
|
|
|
—
|
|
||||
Pension curtailment charges (d)
|
—
|
|
|
7,776
|
|
|
—
|
|
|
7,776
|
|
||||
Asset disposals and write-offs
|
2,798
|
|
|
3,243
|
|
|
4,058
|
|
|
6,022
|
|
||||
Other
|
(268
|
)
|
|
(191
|
)
|
|
(343
|
)
|
|
991
|
|
||||
Total
|
$
|
7,712
|
|
|
$
|
10,828
|
|
|
$
|
31,694
|
|
|
$
|
14,789
|
|
(a)
|
Costs relate primarily to our plans to convert the Number 3 newsprint machine at our DeRidder, Louisiana, mill to produce lightweight linerboard and corrugating medium and exit the newsprint business in September 2014.
|
(b)
|
The
three and six
months ended
June 30, 2014
, include Boise acquisition integration-related and other costs.
|
(c)
|
The
six
months ended
June 30, 2014
, includes
$17.6 million
of costs for the settlement of the
Kleen Products LLC v Packaging Corp. of America et al
class action lawsuit. See Note
18
,
Commitments, Guarantees, Indemnifications and Legal Proceedings
, for more information.
|
(d)
|
The
three and six
months ended
June 30, 2013
, both include
$7.8 million
of non-cash pension curtailment charges related to pension plan changes in which certain hourly corrugated plant employees transitioned from a defined benefit pension plan to a defined contribution (401k) plan.
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
99,557
|
|
|
$
|
66,252
|
|
|
$
|
189,643
|
|
|
$
|
128,546
|
|
Less: distributed and undistributed earnings allocated to participating securities
|
(1,514
|
)
|
|
—
|
|
|
(2,918
|
)
|
|
—
|
|
||||
Net income attributable to common shareholders
|
$
|
98,043
|
|
|
$
|
66,252
|
|
|
$
|
186,725
|
|
|
$
|
128,546
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average basic common shares outstanding
|
96,906
|
|
|
96,432
|
|
|
96,847
|
|
|
96,424
|
|
||||
Effect of dilutive securities
|
8
|
|
|
1,062
|
|
|
34
|
|
|
1,037
|
|
||||
Diluted common shares outstanding
|
96,914
|
|
|
97,494
|
|
|
96,881
|
|
|
97,461
|
|
||||
Basic income per common share
|
$
|
1.01
|
|
|
$
|
0.69
|
|
|
$
|
1.93
|
|
|
$
|
1.33
|
|
Diluted income per common share
|
$
|
1.01
|
|
|
$
|
0.68
|
|
|
$
|
1.93
|
|
|
$
|
1.32
|
|
|
June 30,
2014 |
|
December 31,
2013 |
||||
Land and land improvements
|
$
|
141,391
|
|
|
$
|
140,592
|
|
Buildings
|
642,542
|
|
|
628,948
|
|
||
Machinery and equipment
|
4,348,431
|
|
|
4,246,294
|
|
||
Construction in progress
|
195,631
|
|
|
168,808
|
|
||
Other
|
53,324
|
|
|
48,058
|
|
||
Property, plant, and equipment, at cost
|
5,381,319
|
|
|
5,232,700
|
|
||
Less accumulated depreciation
|
(2,564,070
|
)
|
|
(2,426,996
|
)
|
||
Property, plant, and equipment, net
|
$
|
2,817,249
|
|
|
$
|
2,805,704
|
|
|
Goodwill
|
||
Balance at December 31, 2013
|
$
|
526,789
|
|
Acquisitions (a)
|
9,404
|
|
|
Adjustments related to purchase accounting (b)
|
1,170
|
|
|
Balance at June 30, 2014
|
$
|
537,363
|
|
(a)
|
In April 2014, we acquired the assets of Crockett Packaging, a corrugated products manufacturer, for
$21.2 million
, before
$0.9 million
of working capital adjustments, and recorded
$9.4 million
of goodwill in our Packaging segment.
|
(b)
|
Adjustments relate primarily to the Boise acquisition, see Note
3
,
Acquisitions
, for more information.
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||
|
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
|
14.7
|
|
$
|
312,923
|
|
|
$
|
26,678
|
|
|
15.4
|
|
$
|
306,361
|
|
|
$
|
16,509
|
|
Trademarks and trade names
|
14.0
|
|
21,502
|
|
|
1,870
|
|
|
14.7
|
|
21,370
|
|
|
794
|
|
||||
Other
|
2.7
|
|
259
|
|
|
134
|
|
|
3.0
|
|
220
|
|
|
109
|
|
||||
Total intangible assets (excluding goodwill)
|
14.6
|
|
$
|
334,684
|
|
|
$
|
28,682
|
|
|
15.4
|
|
$
|
327,951
|
|
|
$
|
17,412
|
|
|
June 30,
2014 |
|
December 31,
2013 |
||||
Compensation and benefits
|
$
|
126,470
|
|
|
$
|
130,455
|
|
Medical insurance and workers’ compensation
|
25,143
|
|
|
26,399
|
|
||
Franchise, property, sales and use taxes
|
21,884
|
|
|
20,232
|
|
||
Customer volume discounts and rebates
|
11,268
|
|
|
11,436
|
|
||
Environmental liabilities and asset retirement obligations
|
7,465
|
|
|
7,812
|
|
||
Severance
|
3,315
|
|
|
8,172
|
|
||
Legal contingencies
|
905
|
|
|
1,000
|
|
||
Other
|
10,864
|
|
|
8,552
|
|
||
Total
|
$
|
207,314
|
|
|
$
|
214,058
|
|
|
Pension Plans
|
||||||||||||||
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Service cost
|
$
|
5,806
|
|
|
$
|
6,249
|
|
|
$
|
11,600
|
|
|
$
|
12,497
|
|
Interest cost
|
11,459
|
|
|
3,991
|
|
|
22,893
|
|
|
7,982
|
|
||||
Expected return on plan assets
|
(12,672
|
)
|
|
(3,751
|
)
|
|
(25,351
|
)
|
|
(7,501
|
)
|
||||
Net amortization of unrecognized amounts
|
|
|
|
|
|
|
|
||||||||
Prior service cost
|
1,640
|
|
|
1,560
|
|
|
3,281
|
|
|
3,121
|
|
||||
Actuarial loss
|
155
|
|
|
1,502
|
|
|
310
|
|
|
3,003
|
|
||||
Curtailment loss (a)
|
—
|
|
|
7,776
|
|
|
—
|
|
|
7,776
|
|
||||
Net periodic benefit cost
|
$
|
6,388
|
|
|
$
|
17,327
|
|
|
$
|
12,733
|
|
|
$
|
26,878
|
|
(a)
|
In June 2013, the United Steelworkers (“USW”) ratified a master labor agreement with PCA under which we froze certain USW-represented corrugated plant employees pension accruals under PCA’s hourly pension plan. As of the date of the pension freeze, affected USW-represented employees will transition to a defined contribution 401k plan. In accordance with ASC 715, “Compensation — Retirement Benefits,” we recorded a
$7.8 million
pre-tax pension curtailment charge related to the unrecognized prior service costs of employees impacted by the pension freeze during the second quarter of 2013. We also remeasured the hourly pension plan benefit obligation using current fair values of plan assets and current assumptions, resulting in a decrease in the benefit obligation of
$13.8 million
with a corresponding decrease in accumulated other comprehensive income (loss) of
$8.4 million
and deferred taxes of
$5.4 million
.
|
|
Postretirement Plans
|
||||||||||||||
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Service cost
|
$
|
393
|
|
|
$
|
515
|
|
|
$
|
785
|
|
|
$
|
1,030
|
|
Interest cost
|
314
|
|
|
311
|
|
|
622
|
|
|
623
|
|
||||
Net amortization of unrecognized amounts
|
|
|
|
|
|
|
|
||||||||
Prior service benefit
|
(56
|
)
|
|
(106
|
)
|
|
(113
|
)
|
|
(212
|
)
|
||||
Actuarial loss
|
27
|
|
|
134
|
|
|
51
|
|
|
267
|
|
||||
Net periodic benefit cost
|
$
|
678
|
|
|
$
|
854
|
|
|
$
|
1,345
|
|
|
$
|
1,708
|
|
|
Restricted Stock
|
|
Performance Units
|
||||||||||
|
Shares
|
|
Weighted Average Grant- Date Fair Value
|
|
Shares
|
|
Weighted Average Grant- Date Fair Value
|
||||||
Outstanding at December 31, 2013
|
1,463,694
|
|
|
$
|
31.48
|
|
|
70,600
|
|
|
$
|
47.83
|
|
Granted
|
229,489
|
|
|
70.24
|
|
|
56,889
|
|
|
71.19
|
|
||
Vested
|
(470,374
|
)
|
|
23.77
|
|
|
—
|
|
|
—
|
|
||
Forfeitures
|
(225
|
)
|
|
27.44
|
|
|
—
|
|
|
—
|
|
||
Outstanding at June 30, 2014
|
1,222,584
|
|
|
$
|
41.72
|
|
|
127,489
|
|
|
$
|
58.25
|
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Restricted stock
|
$
|
(3,727
|
)
|
|
$
|
(3,121
|
)
|
|
$
|
(7,048
|
)
|
|
$
|
(6,758
|
)
|
Performance units
|
(286
|
)
|
|
(16
|
)
|
|
(553
|
)
|
|
(16
|
)
|
||||
Impact on income before income taxes
|
(4,013
|
)
|
|
(3,137
|
)
|
|
(7,601
|
)
|
|
(6,774
|
)
|
||||
Income tax benefit
|
1,562
|
|
|
1,219
|
|
|
2,958
|
|
|
2,631
|
|
||||
Impact on net income
|
$
|
(2,451
|
)
|
|
$
|
(1,918
|
)
|
|
$
|
(4,643
|
)
|
|
$
|
(4,143
|
)
|
|
June 30, 2014
|
||||
|
Unrecognized Compensation Expense
|
|
Remaining Weighted Average Recognition Period (in years)
|
||
Restricted stock
|
$
|
33,901
|
|
|
2.9
|
Performance units
|
6,546
|
|
|
3.6
|
|
Total unrecognized share-based compensation expense
|
$
|
40,447
|
|
|
3.0
|
|
Foreign Currency Translation Adjustments
|
|
Unrealized Loss On Treasury Locks, Net
|
|
Unrealized Loss on Foreign Exchange Contracts
|
|
Unfunded Employee Benefit Obligations
|
|
Total
|
||||||||||
Balance at December 31, 2013
|
$
|
(136
|
)
|
|
$
|
(28,191
|
)
|
|
$
|
(371
|
)
|
|
$
|
(36,326
|
)
|
|
$
|
(65,024
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
(92
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(92
|
)
|
|||||
Amounts reclassified from AOCI, net of tax
|
—
|
|
|
1,719
|
|
(a)
|
10
|
|
(b)
|
2,057
|
|
(c)
|
3,786
|
|
|||||
Net current-period other comprehensive income (loss)
|
(92
|
)
|
|
1,719
|
|
|
10
|
|
|
2,057
|
|
|
3,694
|
|
|||||
Balance at June 30, 2014
|
$
|
(228
|
)
|
|
$
|
(26,472
|
)
|
|
$
|
(361
|
)
|
|
$
|
(34,269
|
)
|
|
$
|
(61,330
|
)
|
|
|
Amounts Reclassified from AOCI
|
|
|
||||||||||||||
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
|
Affected Line Item in the Statement Where Net Income is Presented
|
||||||||||||
Details about AOCI Components
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|||||||||
Unrealized loss on treasury locks, net
|
|
$
|
(1,414
|
)
|
|
$
|
(1,414
|
)
|
|
$
|
(2,828
|
)
|
|
$
|
(2,827
|
)
|
|
See (a) below
|
|
|
550
|
|
|
549
|
|
|
1,109
|
|
|
1,098
|
|
|
Tax benefit
|
||||
|
|
$
|
(864
|
)
|
|
$
|
(865
|
)
|
|
$
|
(1,719
|
)
|
|
$
|
(1,729
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Unrealized loss on foreign exchange contracts
|
|
$
|
(8
|
)
|
|
$
|
(9
|
)
|
|
$
|
(16
|
)
|
|
$
|
(17
|
)
|
|
See (b) below
|
|
|
3
|
|
|
4
|
|
|
6
|
|
|
7
|
|
|
Tax benefit
|
||||
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
|
$
|
(10
|
)
|
|
$
|
(10
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Unfunded employee benefit obligations
|
|
|
|
|
|
|
|
|
|
|
||||||||
Amortization of prior service costs
|
|
$
|
(1,584
|
)
|
|
$
|
(1,454
|
)
|
|
$
|
(3,168
|
)
|
|
$
|
(2,909
|
)
|
|
See (c) below
|
Curtailment loss
|
|
—
|
|
|
(7,776
|
)
|
|
—
|
|
|
(7,776
|
)
|
|
See (c) below
|
||||
Amortization of actuarial losses
|
|
(182
|
)
|
|
(1,636
|
)
|
|
(361
|
)
|
|
(3,270
|
)
|
|
See (c) below
|
||||
|
|
(1,766
|
)
|
|
(10,866
|
)
|
|
(3,529
|
)
|
|
(13,955
|
)
|
|
Total before tax
|
||||
|
|
688
|
|
|
4,221
|
|
|
1,472
|
|
|
5,421
|
|
|
Tax benefit
|
||||
|
|
$
|
(1,078
|
)
|
|
$
|
(6,645
|
)
|
|
$
|
(2,057
|
)
|
|
$
|
(8,534
|
)
|
|
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
$5.7 million
(
$3.5 million
after tax). For a discussion of treasury lock derivative instrument activity, see Note 11, Derivative Instruments and Hedging Activities, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of our
updated 2013 Financial Statements
.
|
(b)
|
This AOCI component is included as depreciation in cost of sales.
|
(c)
|
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.
|
|
|
Sales, net
|
|
Operating Income (Loss)
|
|
||||||||||||
Three Months Ended June 30, 2014 (a)
|
|
Trade
|
|
Inter-
segment |
|
Total
|
|
|
|||||||||
Packaging
|
|
$
|
1,144.0
|
|
|
$
|
1.2
|
|
|
$
|
1,145.2
|
|
|
$
|
166.4
|
|
(b)
|
Paper
|
|
295.2
|
|
|
—
|
|
|
295.2
|
|
|
33.6
|
|
(c)
|
||||
Corporate and Other
|
|
29.2
|
|
|
38.1
|
|
|
67.3
|
|
|
(19.8
|
)
|
(d)
|
||||
Intersegment eliminations
|
|
—
|
|
|
(39.3
|
)
|
|
(39.3
|
)
|
|
—
|
|
|
||||
|
|
$
|
1,468.4
|
|
|
$
|
—
|
|
|
$
|
1,468.4
|
|
|
180.2
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
(21.4
|
)
|
|
|||||||
Income before taxes
|
|
|
|
|
|
|
|
$
|
158.8
|
|
|
|
|
Sales, net
|
|
Operating Income (Loss)
|
|
||||||||||||
Three Months Ended June 30, 2013
|
|
Trade
|
|
Inter-
segment |
|
Total
|
|
|
|||||||||
Packaging
|
|
$
|
800.2
|
|
|
$
|
—
|
|
|
$
|
800.2
|
|
|
$
|
122.3
|
|
(e)
|
Corporate and Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.1
|
)
|
|
||||
|
|
$
|
800.2
|
|
|
$
|
—
|
|
|
$
|
800.2
|
|
|
110.2
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
(9.2
|
)
|
|
|||||||
Income before taxes
|
|
|
|
|
|
|
|
$
|
101.0
|
|
|
|
|
Sales, net
|
|
Operating Income (Loss)
|
|
||||||||||||
Six Months Ended June 30, 2014 (a)
|
|
Trade
|
|
Inter-
segment |
|
Total
|
|
|
|||||||||
Packaging
|
|
$
|
2,239.6
|
|
|
$
|
3.0
|
|
|
$
|
2,242.6
|
|
|
$
|
337.1
|
|
(b)
|
Paper
|
|
604.5
|
|
|
—
|
|
|
604.5
|
|
|
61.3
|
|
(c)
|
||||
Corporate and Other
|
|
55.6
|
|
|
75.8
|
|
|
131.4
|
|
|
(57.2
|
)
|
(d)
|
||||
Intersegment eliminations
|
|
—
|
|
|
(78.8
|
)
|
|
(78.8
|
)
|
|
—
|
|
|
||||
|
|
$
|
2,899.7
|
|
|
$
|
—
|
|
|
$
|
2,899.7
|
|
|
341.2
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
(42.2
|
)
|
|
|||||||
Income before taxes
|
|
|
|
|
|
|
|
$
|
299.0
|
|
|
|
|
Sales, net
|
|
Operating Income (Loss)
|
|
||||||||||||
Six Months Ended June 30, 2013
|
|
Trade
|
|
Inter-
segment |
|
Total
|
|
|
|||||||||
Packaging
|
|
$
|
1,555.4
|
|
|
$
|
—
|
|
|
$
|
1,555.4
|
|
|
$
|
240.2
|
|
(e)
|
Corporate and Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24.0
|
)
|
|
||||
|
|
$
|
1,555.4
|
|
|
$
|
—
|
|
|
$
|
1,555.4
|
|
|
216.2
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
(18.5
|
)
|
|
|||||||
Income before taxes
|
|
|
|
|
|
|
|
$
|
197.7
|
|
|
(a)
|
On October 25, 2013, we acquired Boise. The 2014 results include Boise for the full period.
|
(b)
|
Includes costs related primarily to our plans to convert the Number 3 newsprint machine at our DeRidder, Louisiana, mill to produce lightweight linerboard and corrugating medium and to exit the newsprint business in September 2014. The
three and six
months ended
June 30, 2014
, include
$17.8 million
and
$21.8 million
, respectively, of restructuring charges, primarily accelerated depreciation, recorded in "Cost of sales". The
three and six
months ended
June 30, 2014
, both include
$4.4 million
of Boise acquisition integration-related and other costs recorded in "Other expense, net".
|
(c)
|
Includes
$1.0 million
and
$0.4 million
of income, net of expenses, for the
three and six
months ended
June 30, 2014
, respectively, of integration related and other costs recorded in "Other expense, net".
|
(d)
|
Includes
$1.5 million
and
$5.0 million
, for the
three and six
months ended
June 30, 2014
, respectively, of Boise acquisition integration-related and other costs. The
six
months ended
June 30, 2014
, includes
$17.6 million
of costs for the settlement of the
|
(e)
|
Includes
$7.8 million
of non-cash pension curtailment charges related to pension plan changes in which certain hourly corrugated plant employees transitioned from a defined benefit pension plan to a defined contribution (401k) plan.
|
Item 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
|
2014 (a)
|
|
2013
|
|
2014 (a)
|
|
2013
|
||||||||
Earnings per diluted share, as reported
|
$
|
1.01
|
|
|
$
|
0.68
|
|
|
$
|
1.93
|
|
|
$
|
1.32
|
|
Special items:
|
|
|
|
|
|
|
|
||||||||
DeRidder restructuring (b)
|
0.12
|
|
|
—
|
|
|
0.14
|
|
|
—
|
|
||||
Integration-related and other costs (c)
|
0.03
|
|
|
—
|
|
|
0.06
|
|
|
—
|
|
||||
Class action lawsuit settlement (d)
|
—
|
|
|
—
|
|
|
0.11
|
|
|
—
|
|
||||
Pension curtailment charges (e)
|
—
|
|
|
0.05
|
|
|
—
|
|
|
0.05
|
|
||||
Total special items
|
0.15
|
|
|
0.05
|
|
|
0.31
|
|
|
0.05
|
|
||||
Earnings per diluted share, excluding special items
|
$
|
1.16
|
|
|
$
|
0.73
|
|
|
$
|
2.24
|
|
|
$
|
1.37
|
|
(a)
|
On October 25, 2013, we acquired Boise Inc. (Boise). The 2014 consolidated results include Boise for the full period.
|
(b)
|
Amounts relate primarily to our plans to convert the Number 3 newsprint machine at our DeRidder, Louisiana, mill to produce lightweight linerboard and corrugating medium and exit the newsprint business in September 2014. Most of the costs relate to accelerating the depreciation on the Number 3 newsprint machine.
|
(c)
|
The
three and six
months ended
June 30, 2014
, include Boise acquisition integration-related and other costs.
|
(d)
|
The
six
months ended
June 30, 2014
, includes
$17.6 million
of costs for the settlement of the
Kleen Products LLC v Packaging Corp. of America et al
class action lawsuit. See Note
18
,
Commitments, Guarantees, Indemnifications and Legal Proceedings
, for more information.
|
(e)
|
The
three and six
months ended
June 30, 2013
, both include non-cash pension curtailment charges related to pension plan changes in which certain hourly corrugated plant employees transitioned from a defined benefit pension plan to a defined contribution (401k) plan.
|
|
Three Months Ended
June 30 |
|
|
||||||||
|
2014 (a)
|
|
2013
|
|
Change
|
||||||
Packaging
|
$
|
1,145.2
|
|
|
$
|
800.2
|
|
|
$
|
345.0
|
|
Paper
|
295.2
|
|
|
—
|
|
|
295.2
|
|
|||
Corporate and other and eliminations
|
28.0
|
|
|
—
|
|
|
28.0
|
|
|||
Net sales
|
$
|
1,468.4
|
|
|
$
|
800.2
|
|
|
$
|
668.2
|
|
|
|
|
|
|
|
||||||
Packaging
|
$
|
166.4
|
|
|
$
|
122.3
|
|
|
$
|
44.1
|
|
Paper
|
33.6
|
|
|
—
|
|
|
33.6
|
|
|||
Corporate and other and eliminations
|
(19.8
|
)
|
|
(12.1
|
)
|
|
(7.7
|
)
|
|||
Income from operations
|
$
|
180.2
|
|
|
$
|
110.2
|
|
|
$
|
70.0
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
(21.4
|
)
|
|
(9.2
|
)
|
|
(12.2
|
)
|
|||
Income before taxes
|
158.8
|
|
|
101.0
|
|
|
57.8
|
|
|||
Income tax provision
|
(59.2
|
)
|
|
(34.7
|
)
|
|
(24.5
|
)
|
|||
Net income
|
$
|
99.6
|
|
|
$
|
66.3
|
|
|
$
|
33.3
|
|
Net income excluding special items (b)
|
$
|
113.8
|
|
|
$
|
71.3
|
|
|
$
|
42.5
|
|
Earnings, before interest, taxes, depreciation, and amortization (EBITDA)
|
$
|
281.8
|
|
|
$
|
153.3
|
|
|
$
|
128.5
|
|
EBITDA excluding special items (b)
|
$
|
287.3
|
|
|
$
|
161.1
|
|
|
$
|
126.2
|
|
(a)
|
On October 25, 2013, we acquired Boise Inc. (Boise). The 2014 consolidated results include Boise for the full period.
|
(b)
|
See "Reconciliations of Non-GAAP Financial Measures to Reported Amounts" included in this Item 2 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.
|
|
Six Months Ended
June 30 |
|
|
||||||||
|
2014 (a)
|
|
2013
|
|
Change
|
||||||
Packaging
|
$
|
2,242.6
|
|
|
$
|
1,555.4
|
|
|
$
|
687.2
|
|
Paper
|
604.5
|
|
|
—
|
|
|
604.5
|
|
|||
Corporate and other and eliminations
|
52.6
|
|
|
—
|
|
|
52.6
|
|
|||
Net sales
|
$
|
2,899.7
|
|
|
$
|
1,555.4
|
|
|
$
|
1,344.3
|
|
|
|
|
|
|
|
||||||
Packaging
|
$
|
337.1
|
|
|
$
|
240.2
|
|
|
$
|
96.9
|
|
Paper
|
61.3
|
|
|
—
|
|
|
61.3
|
|
|||
Corporate and other and eliminations
|
(57.2
|
)
|
|
(24.0
|
)
|
|
(33.2
|
)
|
|||
Income from operations
|
$
|
341.2
|
|
|
$
|
216.2
|
|
|
$
|
125.0
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
(42.2
|
)
|
|
(18.5
|
)
|
|
(23.7
|
)
|
|||
Income before taxes
|
299.0
|
|
|
197.7
|
|
|
101.3
|
|
|||
Income tax provision
|
(109.4
|
)
|
|
(69.2
|
)
|
|
(40.2
|
)
|
|||
Net income
|
$
|
189.6
|
|
|
$
|
128.5
|
|
|
$
|
61.1
|
|
Net income excluding special items (b)
|
$
|
220.3
|
|
|
$
|
133.5
|
|
|
$
|
86.8
|
|
Earnings, before interest, taxes, depreciation, and amortization (EBITDA)
|
$
|
526.2
|
|
|
$
|
301.9
|
|
|
$
|
224.3
|
|
EBITDA excluding special items (b)
|
$
|
557.4
|
|
|
$
|
309.7
|
|
|
$
|
247.7
|
|
(a)
|
On October 25, 2013, we acquired Boise Inc. (Boise). The 2014 consolidated results include Boise for the full period.
|
(b)
|
See "Reconciliations of Non-GAAP Financial Measures to Reported Amounts" included in this Item 2 for a reconciliation of non-GAAP measures to the most comparable GAAP measure.
|
|
Six Months Ended
June 30 |
|
|
||||||||
|
2014
|
|
2013
|
|
Change
|
||||||
Net cash provided by (used for):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
334.1
|
|
|
$
|
283.0
|
|
|
$
|
51.1
|
|
Investing activities
|
(171.3
|
)
|
|
(82.9
|
)
|
|
(88.4
|
)
|
|||
Financing activities
|
(191.8
|
)
|
|
(37.5
|
)
|
|
(154.3
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
$
|
(29.0
|
)
|
|
$
|
162.6
|
|
|
$
|
(191.6
|
)
|
|
Three Months Ended
June 30 |
||||||||||||||
|
2014 (a)
|
|
2013
|
||||||||||||
|
Income
from
Operations
|
|
Net
Income
|
|
Income
from
Operations
|
|
Net
Income
|
||||||||
As reported in accordance with GAAP
|
$
|
180.2
|
|
|
$
|
99.6
|
|
|
$
|
110.2
|
|
|
$
|
66.3
|
|
Special items:
|
|
|
|
|
|
|
|
||||||||
DeRidder restructuring (b)
|
17.8
|
|
|
11.2
|
|
|
—
|
|
|
—
|
|
||||
Integration-related and other costs (c)
|
4.9
|
|
|
3.0
|
|
|
—
|
|
|
—
|
|
||||
Pension curtailment charges (e)
|
—
|
|
|
—
|
|
|
7.8
|
|
|
5.0
|
|
||||
Total special items
|
22.7
|
|
|
14.2
|
|
|
7.8
|
|
|
5.0
|
|
||||
Excluding special items
|
$
|
202.9
|
|
|
$
|
113.8
|
|
|
$
|
118.0
|
|
|
$
|
71.3
|
|
|
Six Months Ended
June 30 |
||||||||||||||
|
2014 (a)
|
|
2013
|
||||||||||||
|
Income
from
Operations
|
|
Net
Income
|
|
Income
from
Operations
|
|
Net
Income
|
||||||||
As reported in accordance with GAAP
|
$
|
341.2
|
|
|
$
|
189.6
|
|
|
$
|
216.2
|
|
|
$
|
128.5
|
|
Special items:
|
|
|
|
|
|
|
|
||||||||
DeRidder restructuring (b)
|
21.8
|
|
|
13.8
|
|
|
—
|
|
|
—
|
|
||||
Integration-related and other costs (c)
|
9.0
|
|
|
5.7
|
|
|
—
|
|
|
—
|
|
||||
Class action lawsuit settlement (d)
|
17.6
|
|
|
11.2
|
|
|
—
|
|
|
—
|
|
||||
Pension curtailment charges (e)
|
—
|
|
|
—
|
|
|
7.8
|
|
|
5.0
|
|
||||
Total special items
|
48.4
|
|
|
30.7
|
|
|
7.8
|
|
|
5.0
|
|
||||
Excluding special items
|
$
|
389.6
|
|
|
$
|
220.3
|
|
|
$
|
224.0
|
|
|
$
|
133.5
|
|
(a)
|
On October 25, 2013, we acquired Boise Inc. (Boise). The 2014 consolidated results include Boise for the full period.
|
(b)
|
Amounts relate primarily to our plans to convert the Number 3 newsprint machine at our DeRidder, Louisiana, mill to produce lightweight linerboard and corrugating medium and exit the newsprint business in September 2014. Most of the costs relate to accelerating the depreciation on the Number 3 newsprint machine.
|
(c)
|
The
three and six
months ended
June 30, 2014
, include Boise acquisition integration-related and other costs recorded in "Other expense, net".
|
(d)
|
The
six
months ended
June 30, 2014
, includes
$17.6 million
of costs for the settlement of the
Kleen Products LLC v Packaging Corp. of America et al
class action lawsuit. See Note
18
,
Commitments, Guarantees, Indemnifications and Legal Proceedings
, for more information. These costs are recorded in "Other expense, net".
|
(e)
|
The
three and six
months ended
June 30, 2013
, both include non-cash pension curtailment charges related to pension plan changes in which certain hourly corrugated plant employees transitioned from a defined benefit pension plan to a defined contribution (401k) plan. These costs are recorded in "Other expense, net".
|
|
Three Months Ended
June 30 |
|
Six Months Ended
June 30 |
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Net income
|
$
|
99.6
|
|
|
$
|
66.3
|
|
|
$
|
189.6
|
|
|
$
|
128.5
|
|
Interest expense, net
|
21.4
|
|
|
9.2
|
|
|
42.2
|
|
|
18.5
|
|
||||
Income tax provision
|
59.2
|
|
|
34.7
|
|
|
109.4
|
|
|
69.2
|
|
||||
Depreciation, amortization, and depletion
|
101.6
|
|
|
43.1
|
|
|
185.0
|
|
|
85.7
|
|
||||
EBITDA
|
$
|
281.8
|
|
|
$
|
153.3
|
|
|
$
|
526.2
|
|
|
$
|
301.9
|
|
Special items:
|
|
|
|
|
|
|
|
||||||||
DeRidder restructuring
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
—
|
|
Integration-related and other costs
|
4.9
|
|
|
—
|
|
|
9.0
|
|
|
—
|
|
||||
Class action lawsuit settlement
|
—
|
|
|
—
|
|
|
17.6
|
|
|
—
|
|
||||
Pension curtailment charges
|
—
|
|
|
7.8
|
|
|
—
|
|
|
7.8
|
|
||||
EBITDA excluding special items
|
$
|
287.3
|
|
|
$
|
161.1
|
|
|
$
|
557.4
|
|
|
$
|
309.7
|
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Packaging
|
|
|
|
|
|
|
|
||||||||
Segment income
|
$
|
166.4
|
|
|
$
|
122.3
|
|
|
$
|
337.1
|
|
|
$
|
240.2
|
|
Depreciation, amortization, and depletion
|
87.4
|
|
|
42.7
|
|
|
156.9
|
|
|
85.0
|
|
||||
EBITDA
|
253.8
|
|
|
165.0
|
|
|
494.0
|
|
|
325.2
|
|
||||
DeRidder restructuring
|
0.6
|
|
|
—
|
|
|
4.6
|
|
|
—
|
|
||||
Integration-related and other costs
|
4.4
|
|
|
—
|
|
|
4.4
|
|
|
—
|
|
||||
Pension curtailment charges
|
—
|
|
|
7.8
|
|
|
—
|
|
|
7.8
|
|
||||
EBITDA excluding special items
|
$
|
258.8
|
|
|
$
|
172.8
|
|
|
$
|
503.0
|
|
|
$
|
333.0
|
|
|
|
|
|
|
|
|
|
||||||||
Paper
|
|
|
|
|
|
|
|
||||||||
Segment income
|
$
|
33.6
|
|
|
$
|
—
|
|
|
$
|
61.3
|
|
|
$
|
—
|
|
Depreciation, amortization, and depletion
|
12.3
|
|
|
—
|
|
|
24.3
|
|
|
—
|
|
||||
EBITDA
|
45.9
|
|
|
—
|
|
|
85.6
|
|
|
—
|
|
||||
Integration-related and other costs
|
(1.0
|
)
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
||||
EBITDA excluding special items
|
$
|
44.9
|
|
|
$
|
—
|
|
|
$
|
85.2
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Corporate and Other
|
|
|
|
|
|
|
|
||||||||
Segment loss
|
$
|
(19.8
|
)
|
|
$
|
(12.1
|
)
|
|
$
|
(57.2
|
)
|
|
$
|
(24.0
|
)
|
Depreciation, amortization, and depletion
|
1.9
|
|
|
0.4
|
|
|
3.8
|
|
|
0.7
|
|
||||
EBITDA
|
(17.9
|
)
|
|
(11.7
|
)
|
|
(53.4
|
)
|
|
(23.3
|
)
|
||||
Integration-related and other costs
|
1.5
|
|
|
—
|
|
|
5.0
|
|
|
—
|
|
||||
Class action lawsuit settlement
|
—
|
|
|
—
|
|
|
17.6
|
|
|
—
|
|
||||
EBITDA excluding special items
|
$
|
(16.4
|
)
|
|
$
|
(11.7
|
)
|
|
$
|
(30.8
|
)
|
|
$
|
(23.3
|
)
|
|
|
|
|
|
|
|
|
||||||||
EBITDA
|
$
|
281.8
|
|
|
$
|
153.3
|
|
|
$
|
526.2
|
|
|
$
|
301.9
|
|
|
|
|
|
|
|
|
|
||||||||
EBITDA excluding special items
|
$
|
287.3
|
|
|
$
|
161.1
|
|
|
$
|
557.4
|
|
|
$
|
309.7
|
|
•
|
the impact of general economic conditions;
|
•
|
the impact of the Boise acquisition and risks and uncertainties relating to the integration of Boise’s business into our business;
|
•
|
containerboard, corrugated products, and white paper, general industry conditions, including competition, product demand and product pricing;
|
•
|
fluctuations in wood fiber and recycled fiber costs;
|
•
|
fluctuations in purchased energy costs;
|
•
|
the possibility of unplanned outages or interruptions at our principal facilities; and
|
•
|
legislative or regulatory actions or requirements, particularly concerning environmental or tax matters.
|
Item 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 4.
|
CONTROLS AND PROCEDURES
|
Item 1.
|
LEGAL PROCEEDINGS
|
Item 1A.
|
RISK FACTORS
|
Item 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Issuer Purchases of Equity Securities
|
||||||||||||||
Period
|
|
Total
Number of Shares Purchased (a) |
|
Average Price Paid Per Share
|
|
Total Number
of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
Approximate
Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs |
||||||
April 1-30, 2014
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
98,086
|
|
May 1-31, 2014
|
|
—
|
|
|
—
|
|
|
—
|
|
|
98,086
|
|
||
June 1-30, 2014
|
|
130,985
|
|
|
71.49
|
|
|
—
|
|
|
98,086
|
|
||
Total
|
|
130,985
|
|
(a)
|
$
|
71.49
|
|
|
—
|
|
|
$
|
98,086
|
|
(a)
|
130,985 shares were withheld from employees to cover income and payroll taxes on equity awards that vested during the period.
|
Item 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
Item 5.
|
OTHER INFORMATION
|
Item 6.
|
EXHIBITS
|
Exhibit
Number |
|
Description
|
10.1
|
|
Form of Executive Officer 2014 Performance Unit Award Agreement. †
|
10.2
|
|
Form of Executive Officer 2014 Restricted Stock Agreement. †
|
31.1
|
|
Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
|
31.2
|
|
Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
|
32
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †
|
101
|
|
The following financial information from Packaging Corporation of America’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2014 and 2013, (ii) Consolidated Balance Sheets at June 30, 2014 and December 31, 2013, (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013, and (iv) the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements. †
|
†
|
Filed herewith.
|
|
|
Packaging Corporation of America
|
|
|
|
|
|
/s/ M
ARK
W. K
OWLZAN
|
|
|
Mark K. Kowlzan
|
|
|
Chief Executive Officer
|
|
|
|
|
|
/s/ R
ICHARD
B. W
EST
|
|
|
Richard B. West
|
|
|
Senior Vice President and Chief Financial Officer
|
PARTICIPANT:
|
|
DATE OF GRANT:
|
June 23, 2014
|
NUMBER OF PERFORMANCE UNITS:
|
|
PERFORMANCE PERIOD:
|
2015-2017
|
SERVICE VESTING DATE
|
June 23, 2018
|
1.
|
Grant of Performance Units
. Subject to the restrictions, terms and conditions of this Agreement and the Plan Documents (as hereafter defined), the Company hereby awards to the Participant the number of performance units stated above (the “Performance Units”).
|
2.
|
Governing Documents
. This Agreement and the Performance Units awarded hereby are subject to all the restrictions, terms and provisions of the Amended and Restated 1999 Long-Term Equity Incentive Plan (the “Plan”) and the 2014 Performance-Based Equity Award Pool for Executive Officers (the “Award Pool”) adopted by the Section 162(m) Subcommittee of the Compensation Committee on June 23, 2014 (together with the Plan, the “Plan Documents”) which are herein incorporated by reference and to the terms of which the Participant hereby agrees. Capitalized terms used in this Agreement that are not defined herein shall have the meaning set forth in the Plan Documents.
|
3.
|
No Stockholder Rights
. The Performance Units will be a book entry credited in the name of the Participant representing a Full Value Award under the Plan and are not actual Shares. The Participant will not have the right to vote the Performance Units.
|
4.
|
Vesting
. Except as otherwise provided in the Plan Documents and subject to paragraphs 6 and 8 hereof, all of the Participant’s Performance Units covered hereby shall (to the extent not previously forfeited) vest as of the occurrence of a Vesting Date (as defined on Exhibits A and B). The terms and conditions of vesting shall be as provided on Exhibit A and Exhibit B, which are separate and independent from each other, with the amount of Shares being paid out on vesting to equal the sum of: (i) the number of Shares vesting pursuant to Exhibit A; and (ii) the number of Shares vesting pursuant to Exhibit B. Payout on any vesting shall be in the form of Shares.
|
5.
|
Forfeiture Upon Separation from Service
. Except as provided by the Company’s Compensation Committee or the Board of Directors, upon the Participant’s cessation of employment (or provision of other services as permitted under the Plan Documents) prior to a Vesting Date for any reason, all Performance Units granted hereunder shall be forfeited.
|
6.
|
Recovery of Unearned Compensation
. The Performance Units are subject to the Company’s compensation recovery policy as shall be in effect from time to time.
|
7.
|
Dividend Equivalents
. Dividend equivalents are hereby granted on the Performance Units, which shall accrue to the extent that dividends are declared on the Shares of the Company’s common stock. Accrued dividend equivalents shall be paid out on the Vesting Date in Shares equal in value to the amount of dividends declared between the date of award and the Vesting Date on the number of Shares actually paid out pursuant to these Performance Units on such Vesting Date pursuant to Exhibits A and B (howsoever such vesting occurs).
|
8.
|
Pool Provisions
. This award is subject to the Award Pool. The number of Shares to be awarded on any Vesting Date may in no event exceed the number of Shares to which Participant is entitled under the Award Pool for this Award as certified by the Committee in accordance with the Award Pool (the “Certified Share Amount”). In the event the number of Performance Units awarded hereby exceeds the Certified Share Amount, then such excess will be forfeited as of the date of such certification.
|
9.
|
Miscellaneous
. The Committee may from time to time modify or amend this Agreement in accordance with the provisions of the Plan Documents. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns and shall be binding upon and inure to the benefit of the Participant and his or her legatees, distributees and personal representatives. By signing this Agreement, the Participant acknowledges and expressly agrees that the Participant has read the Agreement and the Plan Documents and agrees to their terms. This Agreement may be executed by the Company and the Participant by means of electronic or digital signatures, which shall have the same force and effect as manual signatures. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.
|
10.
|
Section 409A Compliance
. It is the intention that this Agreement conform and be administered in all respects in a manner that complies with Section 409A of the Code; provided, however, that the Company does not make any representations or guarantees of the tax treatment of the award under Section 409A or otherwise.
Notwithstanding any provision contained in this Agreement to the contrary, if (i) any payment hereunder is subject to Section 409A of the Code, (ii) such payment is to be paid on account of the Participant’s separation from service (within the meaning of Section 409A of the Code) and (iii) the Participant is a “
specified employee
” (within the meaning of Section 409A(a)(2)(B) of the Code), then such payment shall be delayed, if necessary, until the first day of the seventh month following the Participant’s separation from service (or, if later, the date on which such payment is otherwise to be paid under this Agreement). With respect to any payments hereunder that are subject to Section 409A of the Code and that are payable on account of a separation from service, the determination of whether the Recipient has had a separation from service shall be determined in accordance with Section 409A of the Code.
|
PACKAGING CORPORATION OF AMERICA
|
|
|
|
|
|
|
|
BY:
|
|
|
|
|
|
|
Participant
|
Peer Group Ranking
|
Applicable Percentage
|
|
Top quartile
|
100%
|
|
Second quartile
|
80%
|
|
Third quartile
|
40%
|
|
Fourth quartile
|
0%
|
Peer Group Ranking
|
Applicable Percentage
|
|
Top quartile
|
Up to 20% of the Performance Units
|
|
Second quartile
|
Up to 20% of the Performance Units
|
|
Third quartile
|
Up to 40% of the Performance Units
|
|
Fourth quartile
|
No Performance Units may be vested under this Exhibit B
|
Participant
|
Percentage of Award Pool Shares
|
Maximum for Restricted Stock Awards (in shares)
|
Maximum for Performance Units (in shares)
1
|
Mark W. Kowlzan
|
30.0%
|
18,963
|
22,756
|
Thomas A. Hassfurther
|
20.0%
|
15,100
|
18,120
|
Richard B. West
|
15.0%
|
8,604
|
10,325
|
Thomas W.H. Walton
|
10.0%
|
3,863
|
4,636
|
Judith M. Lassa
|
8.33%
|
4,916
|
5,899
|
Kent A. Pflederer
|
8.33%
|
2,809
|
3,371
|
Charles J. Carter
|
8.33%
|
2,634
|
3,161
|
1
|
In all cases, PLUS the number of dividend equivalents provided in the Performance Unit Agreement
|
Grant Date:
June 23, 2014
|
Number of Restricted Shares Awarded
:
|
Fair Market Value at Grant
:
|
Restriction expires
: June 23, 2018
|
|
Packaging Corporation of America
|
||
|
By:
|
||
Accepted and Agreed:
|
|
||
|
Title:
|
||
|
|
|
|
|
|
Date:
|
Participant
|
Percentage of Award Pool Shares
|
Maximum for Restricted Stock Awards (in shares)
|
Maximum for Performance Units (in shares)
1
|
Mark W. Kowlzan
|
30.0%
|
18,963
|
22,756
|
Thomas A. Hassfurther
|
20.0%
|
15,100
|
18,120
|
Richard B. West
|
15.0%
|
8,604
|
10,325
|
Thomas W.H. Walton
|
10.0%
|
3,863
|
4,636
|
Judith M. Lassa
|
8.33%
|
4,916
|
5,899
|
Kent A. Pflederer
|
8.33%
|
2,809
|
3,371
|
Charles J. Carter
|
8.33%
|
2,634
|
3,161
|
1
|
In all cases, PLUS the number of dividend equivalents provided in the Performance Unit Award Agreement
|
|
|
/s/ MARK W. KOWLZAN
|
|
|
Mark W. Kowlzan
Chief Executive Officer
|
|
|
/s/ RICHARD B. WEST
|
|
|
Richard B. West
Senior Vice President and Chief Financial Officer
|
|
|
/s/ M
ARK
W. K
OWLZAN
|
|
|
Mark W. Kowlzan
|
|
|
Chief Executive Officer
|
|
|
/s/ R
ICHARD
B. W
EST
|
|
|
Richard B. West
|
|
|
Senior Vice President and Chief Financial Officer
|