Boise Inc. has reported net income of $3.6 million, or $0.04 per diluted share, for third quarter 2012, compared with net income of $28.4 million, or $0.24 per diluted share, for the same period in 2011. Excluding special items, net income was $22.8 million, or $0.23 per diluted share for third quarter 2012. EBITDA, excluding special items, was $90.5 million for third quarter 2012, compared with $98.5 million for third quarter 2011.
"We operated well and achieved good results, including generating $62 million of free cash flow," said Alexander Toeldte, president and chief executive officer.
"Our third quarter results include the costs associated with our recently announced decision to cease paper production on the company's one remaining paper machine (H2) at our St. Helens, Oregon, paper mill. This decision will reduce our annual uncoated freesheet capacity by almost 60,000 tons and allow us to focus our efforts and resources on products and machines elsewhere in our system that drive the financial performance and cash flow of our paper operations. We thank the employees, customers, suppliers, and community who supported the St. Helens operation over so many years," said Mr. Toeldte.
Third Quarter Highlights
- Overall sales of $645.2 million, up 2% from third quarter 2011
- Record Packaging segment sales of $285.7 million, up 14% from third quarter 2011
- Special items include pretax costs of $31.3 million primarily related to our plan to cease uncoated freesheet production at our paper mill in St. Helens, Oregon, by December 31, 2012
- Net income excluding special items of $22.8 million, down 20% from third quarter 2011
- EBITDA excluding special items of $90.5 million, down 8% from third quarter 2011
- Free cash flow of $62.3 million1, up from $49.3 million in third quarter 2011
"Looking ahead to fourth quarter, we anticipate benefits from recently announced price increases in our Packaging segment, higher outage costs in our Paper segment, compared with third quarter, and slightly increasing energy costs in both segments. We continue to focus on building shareholder value through well-performing operations and disciplined capital allocation."
Packaging segment sales for third quarter 2012 were $285.7 million, an increase of $34.1 million, or 14%, compared with third quarter 2011. The increase primarily related to the acquisition of Hexacomb on December 1, 2011, which increased our corrugated product sales volumes, compared with the prior-year period. Additionally, corrugated sales volumes for our other operations also increased. During the quarter, we continued to increase our vertical integration as a result of our acquisitions of Tharco and Hexacomb, successfully reducing our exposure to linerboard export markets, which experienced declines in selling prices, compared with the prior-year quarter. We sold 34% less linerboard to external markets in third quarter, compared with the same quarter a year ago. Packaging segment sales for third quarter 2012 were flat, compared with second quarter 2012. In third quarter 2012, we announced a $50-per-short-ton price increase on linerboard sales. We did not see any benefit from the price increase in third quarter 2012, but expect to begin to recognize benefits in fourth quarter.
Packaging segment EBITDA was $37.5 million for third quarter 2012, compared with $45.1 million for the same period last year. Compared with the prior year, the decrease resulted from higher annual maintenance outage costs and margin compression at our converting operations. This year, the majority of our annual maintenance outage work at our DeRidder mill fell in the second and third quarters, while in 2011, the majority occurred during the first quarter. Accordingly, third quarter 2012 annual maintenance outage costs at DeRidder were higher, compared with the prior-year quarter, but lower compared with second quarter 2012. Compared with second quarter 2012, Packaging segment EBITDA decreased $2.5 million, or 6%, due primarily to higher energy costs and some margin compression.
Paper segment sales for third quarter 2012 were $370.0 million, a decrease of $20.7 million, or 5%, compared with third quarter 2011, due primarily to decreased net selling prices and volumes of market pulp. Net selling prices of uncoated freesheet decreased 3% but were offset partially by slight increases in volumes, compared with third quarter 2011. Paper segment sales increased $6.7 million, or 2%, compared with second quarter 2012, due to increased volumes of market pulp. Uncoated freesheet prices and volumes were essentially flat compared with second quarter 2012.
In third quarter 2012, we recognized $31.3 million of pretax costs primarily related to our plan to cease operations at our paper mill in St. Helens, Oregon, which we have recorded as a special item. Paper segment EBITDA, excluding the special item, was $58.6 million for third quarter 2012, essentially flat compared with third quarter 2011. Lower fiber costs were offset by the effect of weak market pulp sales. Paper segment EBITDA, excluding the special item, for third quarter 2012 increased $17.7 million from second quarter 2012 as a result of lower fiber costs and minimal annual outage costs in third quarter, offset slightly by higher chemical costs.
General and administrative expenses were $19.2 million in third quarter 2012, an increase of $4.8 million, compared with $14.4 million in third quarter 2011, and down slightly from $20.0 million in second quarter 2012. The increase compared with the prior-year quarter is due primarily to Hexacomb, which was acquired in December 2011, as well as increased employee-related costs.