CREVE COEUR, Mo. and CHICAGO, April 22 /PRNewswire-FirstCall/ — Smurfit-Stone Container Corporation today reported a first quarter 2008 adjusted net loss of $24 million, or $0.09 per diluted share. Results were flat on a year-over-year basis, and down from adjusted net income of $23 million, or $0.09 per share, in the fourth quarter 2007. Adjusted net income (loss) reflects adjustments to net income (loss) available to common stockholders per diluted share, as detailed in the chart above.
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Sales of $1.8 billion for the first quarter 2008 were comparable to both the prior year quarter and fourth quarter 2007.
Commenting on the company’s first quarter, Moore said, “First quarter results were disappointing as we faced a challenging US business climate. We remain focused on transforming our operations and I expect continued savings from our strategic initiatives program will benefit future earnings. Selling prices improved for the fifth consecutive quarter as we completed our box price initiative from last fall. Despite this, earnings declined sequentially due to a charge related to Calpine Corrugated, seasonal factors, and significantly higher than expected cost inflation. The slower US economy also negatively impacted packaging demand.” As previously announced, Smurfit-Stone expects to acquire a controlling interest in Calpine Corrugated LLC in the second quarter 2008. The first quarter results include a $0.05 per share charge related to Calpine.
First quarter operating highlights:
— Seasonal factors and higher than expected cost inflation reduced
earnings
— Average box prices improved 1.2 percent sequentially
— Per-day US box shipments down 4.4 percent year-over-year due to plant
closures and business exits
— Strong containerboard export demand and historically low containerboard
inventory levels
— Headcount reductions were 230 in the quarter, 5,580 since June 2005
Commenting on operations, Steven J. Klinger, president and COO, said: “The first quarter is typically a challenging period for our business due to softer packaging demand, the timing of employee benefit costs, and higher energy usage. The surge in oil prices further impacted energy, transportation, and chemical costs. While experiencing continued cost inflation, we successfully completed last fall’s corrugated box price increase. Smurfit-Stone’s per-day US box shipments were down 4.4 percent year-over-year. However, volume was flat when excluding the impact of box plant closures and efforts to improve low margin accounts. Our adjusted shipments compare favorably to the overall US market, which declined 0.7 percent as reported by the Fibre Box Association. While domestic packaging demand was down more than originally projected, containerboard export shipments were strong, our mills ran full, and our containerboard inventories remained low. We also made progress with our strategic initiatives program. In the first quarter, we closed one additional box plant and reduced headcount by 230 positions. Since June 2005, we have closed 29 box plants and headcount is down over 21 percent. While continued cost inflation is likely, we are on track to deliver targeted operational improvements in 2008.”
First quarter financial highlights:
— Reported debt of $3.48 billion at March 31, 2008
— $94 million in capital expenditures
Commenting on the company’s financial position, Charles A. Hinrichs, senior vice president and CFO, said, “Our debt increased in the first quarter due to the seasonal increase in working capital and capital spending in our converting operations. Over the past two years, Smurfit-Stone has significantly improved its financial flexibility by reducing debt more than $1 billion, lowering interest expense, and extending debt maturities.”
Smurfit-Stone remains focused on transformation program
Smurfit-Stone expects sequential earnings improvement in the second quarter. Results should benefit from seasonally stronger packaging demand, less energy usage, and lower employee benefit costs despite continued significant cost inflation. Commenting on Smurfit-Stone’s long term outlook, Moore said, “As a result of our transformation program, our operations are more cost effective, our mills are more productive, and we are building one of the most modern converting operations in North America. We are confident that by staying the course and executing our plan, we will deliver long-term value for our shareholders, customers, and employees.”
Smurfit-Stone management will discuss the company’s financial performance at 9:00am ET on Wednesday, April 23, 2008, via a live webcast and teleconference. Participants can join the presentation by linking to the webcast through the investor page of the company’s website at or by calling (800) 931-6429 (no passcode) at least 10 minutes prior to the commencement of the presentation. The presentation will be archived on the company’s website for subsequent viewing.
Smurfit-Stone Container Corporation is the industry’s leading integrated containerboard and corrugated packaging producer and is one of the world’s largest paper recyclers. The company is a member of the World business Council for Sustainable Development, the Sustainable Forestry Initiative(R), and the Chicago Climate Exchange. Smurfit-Stone generated revenue of $7.4 billion in 2007, has led the industry in safety every year since 2001, and conducts its business in compliance with the environmental, health, and safety principles of the American Forest & Paper Association.
This press release contains statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to changes in general economic conditions, continued pricing pressures in key product lines, seasonality and higher recycled fiber and energy costs, as well as other risks and uncertainties described in the company’s Annual Report on Form 10-K for the year ended December 31, 2007, as updated from time to time in the company’s Securities and Exchange Commission filings. In this press release, certain non-U.S. GAAP financial information is presented. A reconciliation of that information to U.S. GAAP financial measures and additional disclosure regarding our use of non-GAAP financial measures are included in the attached schedules.
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions)
March 31, December 31,
2008 2007
Assets (Unaudited)
Current assets
Cash and cash equivalents $10 $7
Receivables, net 162 170
Retained interest in receivables sold (Note 1) 259 249
Inventories 576 540
Prepaid expenses and other current assets 46 36
Total current assets 1,053 1,002
Net property, plant and equipment 3,459 3,454
Timberland, less timber depletion 32 32
Goodwill 2,727 2,727
Other assets 158 172
$7,429 $7,387
Liabilities and Stockholders’ Equity
Current liabilities
Current maturities of long-term debt $9 $11
Accounts payable 587 582
Accrued compensation and payroll taxes 165 193
Interest payable 61 66
Income taxes payable 35 10
Current deferred income taxes 21 21
Other current liabilities 108 106
Total current liabilities 986 989
Long-term debt, less current maturities 3,472 3,348
Other long-term liabilities 811 834
Deferred income taxes 310 361
Stockholders’ equity
Preferred stock 98 97
Common stock 3 3
Additional paid-in capital 4,074 4,066
Retained earnings (deficit) (2,074) (2,058)
Accumulated other comprehensive income (loss) (251) (253)
Total stockholders’ equity 1,850 1,855
$7,429 $7,387
Note 1: At March 31, 2008 and December 31, 2007, $693 million and
$656 million, respectively, of receivables had been sold under
two accounts receivable programs, of which the company retained a
subordinated interest. The off-balance sheet debt related to the
two accounts receivable programs totaled $420 million and $422
million, respectively, as of those dates. See our Annual Report
on Form 10-K for the year ended December 31, 2007 for a further
description of these programs.
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended
March 31,
2008 2007
Net sales $1,795 $1,824
Costs and expenses
Cost of goods sold 1,583 1,610
Selling and administrative expenses 191 169
Restructuring expenses 4 24
Gain on disposal of assets (3)
Income from operations 20 21
Other income (expense)
Interest expense, net (63) (74)
Loss on early extinguishment of debt (23)
Foreign currency exchange gains (losses) 15 (5)
Other, net (3) (5)
Loss before income taxes (31) (86)
Benefit from income taxes 18 34
Net loss (13) (52)
Preferred stock dividends and accretion (3) (3)
Net loss available to common
stockholders $(16) $(55)
Basic and diluted earnings per common share
Net loss available to common
stockholders $(0.06) $(0.21)
Weighted average shares outstanding 256 256
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
March 31,
2008 2007
Cash flows from operating activities
Net loss $(13) $(52)
Adjustments to reconcile net
loss to net cash provided by
(used for) operating activities
Loss on early extinguishment
of debt 23
Depreciation, depletion and amortization 87 88
Amortization of deferred debt issuance
costs 2 2
Deferred income taxes (27) (38)
Pension and postretirement benefits (9) (4)
Gain on disposal of assets (3)
Non-cash restructuring expenses 12
Non-cash stock-based compensation 5 6
Non-cash foreign currency exchange
(gains) losses (15) 5
Change in current assets and
liabilities, net of effects
from acquisitions and dispositions
Receivables and retained interest
in receivables sold (1) (21)
Inventories (35) (16)
Prepaid expenses and other current
assets (12) 4
Accounts payable and accrued
liabilities (6) 25
Interest payable (5) (16)
Other, net 5 2
Net cash provided by (used for) operating
activities (27) 20
Cash flows from investing activities
Expenditures for property, plant
and equipment (94) (96)
Proceeds from property disposals 4 2
Net cash used for investing activities (90) (94)
Cash flows from financing activities
Proceeds from long-term debt 675
Net borrowings (repayments) of
long-term debt 122 (571)
Debt repurchase premiums (19)
Preferred dividends paid (2) (2)
Deferred debt issuance costs (7)
Net cash provided by financing activities 120 76
Increase in cash and cash equivalents 3 2
Cash and cash equivalents
Beginning of period 7 9
End of period $10 $11
SMURFIT-STONE CONTAINER CORPORATION
SELECTED FINANCIAL HIGHLIGHTS
(In millions, except per share data)
(Unaudited)
2008 2007
1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year
Net sales $1,795 $1,824 $1,870 $1,885 $1,841 $7,420
Containerboard and
corrugated containers
segment operating
profit $108 $102 $162 $182 $158 $604
Interest expense, net (63) (74) (73) (73) (65) (285)
Corporate expenses (48) (44) (46) (44) (43) (177)
Other income (expense),
net (28) (70) (47) (114) 13 (218)
Pre-tax income (loss)
from operations $(31) $(86) $(4) $(49) $63 $(76)
Net income (loss)
available to common
stockholders $(16) $(55) $(5) $(96) $41 $(115)
Net income (loss)
available to common
stockholders per
diluted share $(0.06) $(0.21) $(0.02) $(0.38) $0.16 $(0.45)
Adjusted net income
(loss) per diluted
share. $(0.09) $(0.09) $0.06 $0.11 $0.09 $0.17
Adjusted EBITDA $121 $135 $206 $217 $197 $755
Depreciation, depletion
and amortization $87 $88 $93 $91 $88 $360
Capital expenditures $94 $96 $75 $97 $116 $384
Pension contributions $20 $31 $36 $48 $14 $129
Total reported debt $3,481 $3,739 $3,734 $3,406 $3,359 $3,359
SMURFIT-STONE CONTAINER CORPORATION
STATISTICAL INFORMATION
2008 2007
1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year
Containerboard
System
North American
Mill Operating
Rates
(Containerboard
Only) 100.0% 97.1% 98.1% 100.0% 99.8% 99.2%
North American
Containerboard
Production
- M Tons 1,784 1,813 1,851 1,893 1,779 7,336
Year over Year
Avg. Domestic
Linerboard
Price Change 7.5% 12.8% 3.1% -0.2% 7.8% 4.9%
Sequential Avg.
Domestic
Linerboard
Price Change -0.5% -0.3% 0.6% 1.6% 5.7% N/A
Pulp Production
- M Tons 123 145 134 149 146 574
SBS/Bleached
Board
Production
- M Tons 33 78 82 76 33 269
Kraft Paper
Production
- M Tons 43 46 47 39 45 177
Corrugated
Containers
North American
Shipments
- BSF 17.6 19.0 18.9 18.5 17.9 74.3
Per Day North
American
Shipments
- MMSF 279.1 296.7 299.3 293.7 295.0 296.2
Year over Year
Avg.
Corrugated
Price Change 4.7% 6.9% 3.3% 0.6% 3.5% 3.5%
Sequential Avg.
Corrugated
Price Change 1.2% 0.1% 0.7% 0.3% 2.4% N/A
Fiber Reclaimed
and Brokered
- M tons 1,716 1,721 1,679 1,688 1,754 6,842
SMURFIT-STONE CONTAINER CORPORATION
EBITDA, As Defined Below
(In millions)
(Unaudited)
2008 2007
1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year
Net income (loss) $(13) $(52) $(2) $(93) $44 $(103)
(Benefit from)
provision for
income taxes (18) (34) (2) 44 19 27
Interest expense,
net 63 74 73 73 65 285
Depreciation,
depletion and
amortization 87 88 93 91 88 360
EBITDA 119 76 162 115 216 569
Receivables
discount
expense 6 7 9 7 4 27
Restructuring
(income)
charges 4 24 10 11 (29) 16
Non-cash foreign
currency
exchange
(gains)
losses (15) 5 20 22 5 52
Litigation
charges 8
Loss on early
extinguishment
of debt - 23 5 1 - 29
(Gain) loss on
sale of assets (1) - - 64 1 65
Pension
curtailment - - - (3) - (3)
Adjusted EBITDA $121 $135 $206 $217 $197 $755
“EBITDA” is defined as net income (loss) before (benefit from) provision
for income taxes, interest expense, net and depreciation, depletion and
amortization. “Adjusted EBITDA” is defined as EBITDA adjusted as indicated
above. EBITDA and Adjusted EBITDA are non-GAAP financial measures. See
disclosure following regarding the use of non-GAAP financial measures.
SMURFIT-STONE CONTAINER CORPORATION
ADJUSTED NET INCOME (LOSS) PER DILUTED SHARE
(In Millions, Except Per Share Data)
(Unaudited)
2008 2007
1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year
Net income (loss)
available to
common
stockholders
(GAAP) $(16) $(55) $(5) $(96) $41 $(115)
Loss on early
extinguishment
of debt, net
of income taxes - 14 3 - - 17
Non-cash foreign
currency
exchange
(gains)/losses (15) 5 20 22 5 52
(Gain) loss on
sale of assets,
net of income tax (1) - - 97 - 97
Restructuring
(income)
charges, net
of income taxes 3 14 1 7 (18) 4
Litigation
charges, net
of income taxes 5 - - - - -
Pension
curtailment,
net of income
taxes - - - (2) - (2)
Resolution of a
prior year
income tax
matter - - (4) - - (4)
Reduction in
Canadian
statutory
income tax
rates - - - - (5) (5)
Adjusted net
income (loss)
available to
common
stockholders
(Note 1) $(24) $(22) $15 $28 $23 $44
2008 2007
1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year
Net income (loss)
per diluted
share
available
to common
stockholders
(GAAP) $(0.06) $(0.21) $(0.02) $(0.38) $0.16 $(0.45)
Loss on early
extinguishment
of debt - 0.05 0.01 - - 0.07
Non-cash
foreign
currency
exchange
(gains)/losses (0.06) 0.02 0.08 0.09 0.02 0.20
(Gain) loss on
sale of assets - - - 0.38 - 0.38
Restructuring
(income)
charges 0.01 0.05 0.01 0.03 (0.07) 0.02
Litigation
charges 0.02 - - - - -
Pension
curtailment - - - (0.01) - (0.01)
Resolution of
a prior year
income tax
matter - - (0.02) - - (0.02)
Reduction in
Canadian
statutory
income tax
rates - - - - (0.02) (0.02)
Adjusted net
income (loss)
per diluted
share
available to
common
stockholders
(Note 1) $(0.09) $(0.09) $0.06 $0.11 $0.09 $0.17
Note 1: Exclusive of loss on early extinguishment of debt, non-cash
foreign currency (gain) loss, (gain) loss on sale of assets,
restructuring charges, litigation charges, pension curtailment,
resolution of a prior year income tax matter and reduction in
Canadian statutory income tax rate. Adjusted net income (loss)
available to common stockholders and adjusted net income (loss)
per diluted share available to common stockholders are non-GAAP
financial measures. See disclosure following regarding the use of
non-GAAP financial measures.
SMURFIT-STONE CONTAINER CORPORATION
NON-GAAP FINANCIAL MEASURES
We measure our performance primarily through our operating profit. In addition to our audited consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (”GAAP”), management uses certain non-GAAP financial measures, including “EBITDA,”"adjusted EBITDA” and “adjusted net income (loss) per diluted share available to common stockholders” to measure our operating performance. We provide a definition of the components of these measurements and reconciliation to the most directly comparable GAAP financial measure.
These non-GAAP measures are considered by our Board of Directors and management as a basis for measuring and evaluating our overall operating performance. They are presented to enhance an understanding of our operating results and are not intended to represent cash flow or results of operations. The use of these non-GAAP measures provides an indication of our ability to service debt and we consider them appropriate measures to use because of our highly leveraged position. We believe these non-GAAP measures are useful in evaluating our operating performance compared to other companies in our industry, and are beneficial to investors, potential investors and other key stakeholders, including analysts and creditors who use these measures in their evaluations of our performance.
EBITDA has certain material limitations associated with its use as compared to net income. These limitations are primarily due to the exclusion of certain amounts that are material to our consolidated results of operations, such as interest expense, income tax expense and depreciation and amortization. In addition, EBITDA may differ from the EBITDA calculations of other companies in our industry, limiting its usefulness as a comparative measure.
Because of these limitations, EBITDA should not be considered a measure of discretionary cash available to us to invest in our business and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and adjusted EBITDA only as supplemental measures of our operating results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with GAAP. The EBITDA presentation includes a reconciliation to net income which we believe is clear and useful to our stakeholders. A further reconciliation to adjusted EBITDA excludes certain unusual or non-recurring items, and presents a more accurate picture of our operating performance.
We use adjusted EBITDA to provide meaningful supplemental information regarding our operating performance and profitability by excluding from EBITDA certain unusual or nonrecurring items that we believe are not indicative of our ongoing operating results as follows:
— Loss on Early Extinguishment of Debt — which represents unamortized
deferred debt issuance cost or call premiums charged to expense in
connection with our financing activities.
— Non-Cash Foreign Currency Gain or Loss — which is recorded in
connection with fluctuations in the Canadian dollar. The functional
currency for our Canadian operations is the U.S. dollar. Fluctuations
in Canadian dollar-denominated monetary assets and liabilities result
in non-cash gains or losses.
— Gain or Loss on Sale of Assets — related to significant transactions
which occur on an infrequent basis.
— Receivables Discount Expense — which is recorded in connection with
our accounts receivable securitization program and is considered a
financing activity similar to interest expense that is added back in
our presentation of adjusted EBITDA in a manner consistent with our
interest expense.
— Restructuring Charges - which consist primarily of facility closures
and other headcount reductions. A significant amount of these
restructuring charges are non-cash charges related to the write-down of
property, plant and equipment to estimated net realizable value. We
exclude these restructuring charges to more clearly reflect our ongoing
operating performance.
— Litigation Charges — related to significant legal matters which occur
on an infrequent basis.
— Pension Curtailment — which occur on an infrequent basis.
We also use the non-GAAP measure “adjusted net income (loss) per diluted share available to common stockholders.” Management believes this non-GAAP financial measure provides investors, potential investors, security analysts and others with useful information to evaluate the performance of the business because it excludes gains and losses and charges that management believes are not indicative of the ongoing operating results of the business. In addition, this non-GAAP financial measure is used by management to evaluate our operating performance for the same reasons as detailed above in the description of the related components excluded from EBITDA to arrive at adjusted EBITDA.
Smurfit-Stone Container Corporation
