Packaging Corporation of America Reports Record Sales and Earnings

Packaging Corporation of America (NYSE: PKG) today reported third quarter 2010 net income of $93 million, or $0.91 per share. Reported results include a $33 million, or $0.33 per share, addition to income from cellulosic bio-fuel credits generated in 2009, and after-tax charges totaling $2 million, or $0.02 per share, from asset disposals related to the Counce and Valdosta mills’ major energy projects and costs related to the closure of a corrugated products facility. Reported results for the third quarter of 2009 were $73 million, or $0.71 per share, which included income of $47 million, or $0.46 per share, from alternative fuel mixture tax credits. Net sales in the third quarter were a record $643 million, up 16% compared to third quarter 2009 net sales of $554 million.

Excluding income from tax credits and disposal and closure charges, net income was a record $62 million, or $0.60 per share, versus third quarter 2009 net income of $25 million, or $0.25 per share. This $0.35 per share increase in third quarter 2010 earnings was driven by higher containerboard and corrugated products price and mix ($0.37) and higher volume ($0.07). These increases were partially offset by higher costs for recycled fiber ($0.03), transportation ($0.02), wood ($0.02) and other cost increases ($0.02).

Excluding income from tax credits and disposal and closure charges, earnings for the first nine months of 2010 were $113 million, or $1.10 per share, compared to $80 million, or $0.78 per share in 2009. Year-to-date net sales were $1.8 billion compared to $1.6 billion in 2009.

Corrugated products shipments were up 4.3%, and outside sales of containerboard were up 12% compared to last year’s third quarter. Containerboard production was a record 646,000 tons, up 58,000 tons, or 9.8%, over the third quarter of 2009. Containerboard inventories at the end of September were up about 3,000 tons compared to year-end 2009.

Mark W. Kowlzan, CEO of PCA, said, "We had an outstanding quarter in all aspects of our operations setting all-time quarterly records for sales, production and earnings. Corrugated products demand remained strong with our September shipments per workday the highest of any month in the quarter. Containerboard and corrugated products pricing improved significantly year-over-year reflecting a full pass-through of our containerboard price increases to boxes. Our mills ran extremely well allowing us to begin to replenish inventories and release some tons to traditional export customers.”

"Looking ahead,” Mr. Kowlzan added, "we expect seasonally lower volumes in the fourth quarter related, in part, to three less corrugated products shipping days. Wood costs and energy costs are expected to be higher with colder weather, and recycled costs have begun to trend up and are expected to be higher in the fourth quarter. Considering these items, we currently estimate our fourth quarter earnings at $0.53 per share.”

PCA is the fifth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.15 billion in 2009. PCA operates four paper mills and 67 corrugated products plants in 26 states across the country.

Some of the statements in this press release are forward-looking statements. Forward-looking statements include statements about our future earnings and financial condition, our industry and our business strategy. Statements that contain words such as " will”, "should”, "anticipate”, "believe”, "expect”, "intend”, "estimate”, "hope” or similar expressions, are forward-looking statements. These forward-looking statements are based on the current expectations of PCA. Because forward-looking statements involve inherent risks and uncertainties, the plans, actions and actual results of PCA could differ materially. Among the factors that could cause plans, actions and results to differ materially from PCA’s current expectations include the following: the impact of general economic conditions; containerboard and corrugated products 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 requirements, particularly concerning environmental matters, as well as those identified under Item 1A. Risk Factors in PCA’s Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission and available at the SEC’s website at "www.sec.gov.”