Business News
KapStone Reports Second Quarter 2008 Results
Tuesday 05. August 2008 - KapStone Paper and Packaging Corporation (NASDAQ:KPPC) today reported results for the second quarter ended June 30, 2008.
— Second Quarter Basic and Diluted EPS of $0.32 and $0.22, Respectively
— YTD Cash Flows from Operations of $21 Million
— Acquisition of Charleston Kraft Division of MeadWestvaco Corporation
Completed
Three Months Ended Six Months Ended
June 30, June 30,
$ 000’s 2008 2007 2008 2007
Net Sales $68,162 $60,242 $135,291 $125,669
Net Income $ 8,251 $ 3,449 $ 15,481 $10,527
Basic Earnings
per Share $0.32 $0.14 $0.61 $0.42
Diluted Earnings
per Share $0.22 $0.09 $0.43 $0.30
EBITDA $16,061 $ 9,050 $ 30,299 $23,096
Second Quarter Operating Highlights
Net sales of $68.2 million in the second quarter of 2008 increased by 13.1% compared to 2007. Net income of $8.3 million increased by 139.2% and EBITDA of $16.1 million was up 77.5% over the same quarter last year.
Unbleached kraft paper sales increased to $60.5 million, an increase of 15.3% over 2007. Higher prices resulting from the full realization of 2007 actions and the partial realization of first quarter 2008 price increases produced a $4.4 million boost in sales. Also contributing to the higher sales was a 15% increase in production volume. As previously announced, the annual maintenance outage is planned for third quarter of 2008 compared with the second quarter a year ago. As a result, second quarter 2008’s production exceeded prior year’s by 11%. Productivity improvements added 4% to volume growth.
Operating income for the unbleached kraft paper segment was $15.9 million in the second quarter, a 101.8% increase over the prior year. Operating income improved as a result of the maintenance outage timing, higher selling prices and improved productivity, partially offset by inflation of raw material and freight costs. The cost of the 2007 annual planned maintenance outage was approximately $4.6 million. In addition, second quarter 2007 operating income was negatively impacted by approximately $1.0 million due to a two-day unplanned outage caused by an electrical fire.
Dunnage bag net sales in the second quarter were up $0.2 million to $8.9 million mainly due to a 5.5% increase in volume while average revenue per bag decreased by 2.8%. Dunnage bag operating income of $1.3 million, decreased by $0.5 million for the second quarter of 2008 compared to the same quarter a year ago, due to lower selling prices and inflation on raw material and freight costs.
Corporate expenses of $4.0 million for the second quarter were $0.4 million higher than the comparable quarter in the prior year and reflect increases mainly due to stock compensation expense and Charleston Kraft Division (CKD) acquisition expenses, partially offset by lower transitional services provided by International Paper Company (IP) as the Company migrated to its own enterprise resource planning (ERP) system and terminated transitional services with IP on April 1, 2008.
Cash Flow and Working Capital
Net cash from operating activities for the six months ended June 30, 2008 totaled $20.9 million. Capital expenditures of $4.6 million in the quarter primarily related to the new ERP system and equipment upgrades for the unbleached kraft facility. During the quarter the Company repaid $11.6 million of long-term debt. Working capital at June 30, 2008, prior to the consummation of the CKD acquisition, was $79.6 million including cash and cash equivalents of $56.5 million.
Roger W. Stone, Chairman and Chief Executive Officer, stated, “Our operations performed remarkably well during the quarter and compared favorably to first quarter. We have implemented additional price increases to offset the substantial impact of inflation on our raw materials and freight costs. The Charleston operation, which joined our company on July l, 2008, represents an important step in achieving our strategic vision. Our meetings last month with our new Charleston employees were well received and filled with enthusiasm. We look forward to realizing the potential of our expanding company.”