Boise Inc., International Falls largest private employer, this week announced record annual sales for 2012 at $2.56 billion, according to a company-wide earnings disclosure released this week to investors.
The year for Boise and its various plants and mills may have generated impressive sales and stayed in the black, but fourth-quarter and overall year-end net incomes for last year were down compared to 2011.
Last year’s net income made up $52.2 million of all sales across all divisions.
And paper sales continue to drop with less demand, the company reported. But it’s unclear if the Falls’ mill will be impacted negatively. However, it was credited with offsetting some costs.
The publicly traded company appears to be focusing more on its packaging business of late, according to this report and a much shorter one issued early last month.
Retail and industry experts note that more people are buying items online as tablet, smartphone and laptop sales continue to go up while faxes and Xerox machines are often replaced by emails and file folders that exist in the Internet’s ether of clouds instead of on paper and in cabinets.
“We were pleased with our overall 2012 operating results,” said Alexander Toeldte, president and chief executive officer of Boise Inc. “Our mills and converting operations ran well, and we reduced costs through productivity improvement by reducing usage of key raw materials.
“During the year, we generated significant free cash flow and returned capital to our shareholders through the payment of two special cash dividends totaling $1.20 per common share. Despite these achievements, our 2012 results were affected adversely by margin compression in some of our packaging operations and declining prices in our paper business.”
International Falls’ Boise Public Affairs Manager Lori Lyman said the paper mill here is “very important” to the company. It has one of Boise’s two largest machines, which combine to make 60 percent of the company’s paper products.
The Falls also plays a key role due to its relationship with Office Max, Boise’s largest paper customer, Lyman said.
Retired 50-year Boise Inc. employee, former public affairs manager and current mayor, Bob Anderson, said casually after a public meeting this week that there always will be a market for paper and expressed little concern for the paper industry’s future.
And there was no mention of lessening production here in the year-end report either. The report did briefly credit the partial offset of chemical cost increases by fewer purchases and improved pulp production in International Falls.
So, the average sales price of uncoated freesheet declined from $993 per short ton in the fourth quarter 2011 to $948 per short ton in the fourth quarter of 2012. Total uncoated freesheet sales volumes increased 3 percent versus the prior-year, but were down 4 percent as a result of seasonal demand declines.
As for all paper sales, they were at $1.46 billion, which is down 2 percent over last year.
Just paper segment sales for 2012’s fourth quarter were $352.7 million, a decrease of $7 million, or 2 percent compared with the same period last year.
“In Paper, we faced declining prices for communication-grade papers throughout the year, particularly in the fourth quarter,” according to the report. “The average price for uncoated freesheet in the fourth quarter 2012 declined $27 per ton from the previous quarter and dropped $45 per ton from the fourth quarter 2011, as industry supply continued to outpace demand.
“These dynamics factored heavily into our decision to cease paper production at our mill in St. Helen’s, Oregon, reducing our production capacity in 2013 by 60,000 tons. During fourth quarter, we took 16,000 tons of market-related downtime in addition to the 8,000 tons of downtime from our annual maintenance outage at our mill in Jackson, Alabama. Going forward, we will continue to aggressively manage our costs and evaluate the optimal configuration of our white paper assets, to balance our production with demand for our products.”
See the full report online at http://investor.boiseinc.com.
For the year, the Idaho-based paper company generated a $13.5 million, or 13 cents per diluted share, for 2012’s last three months. But that is in comparison to earning $16.3 million, or 15 cents per diluted share, for 2011.
The year’s net income was $52.2 million, or 52 cents per deluded share, for 2012.
Earnings were $23 million more in 2011 or $75.2 million, which was 70 cents per diluted share.
Paper segment earnings before interest, taxes, depreciation and amortization, known as EBITDA, excluding special items, was $38.7 million for the last fourth quarter, a decrease of $5.7 million, or 13 percent, compared with 2011. This decrease was due primarily to lower sales prices of uncoated freesheet, the report stated.
But the decline also was largely offset by generally lower input and maintenance outage costs.
The company also recently said it’s been investing in the corrugated paper market to meet packaging demands. Those investments have nothing to do with International Falls’ mill, spokeswoman Lori Lyman said.
More and more people are flocking to sites like Amazon.com or UPS to purchase or ship online purchases. And Boise executives said they expect their undisclosed capital investments to start yielding more profits by as soon as this summer.
In addition, EBITDA, not including special items, was valued at $78.7 million for the fourth quarter. That’s down almost $6 million from the prior year. For all of 2012, Boise spent $331 million on special items, which is just shy of the company record set in 2011 of $340.2 million.
Special items include the pretax cost of $31.7 million primarily related to ceasing uncoated freesheet production the St. Helen’s paper mill.
Still, the company generated free cash flow of $97.4 million; and it paid two special cash dividends totaling $1.20 per common share, or $119.7 million.
“In Packaging, we experienced margin compression in some of our converting operations, primarily in our California and Texas markets,” Toeldte said. “We saw little benefit from the announced $50 per ton linerboard price increase during the fourth quarter in our converting operations, but we expect to more fully benefit from the increase in first quarter 2013... We are making targeted capital investments in our converting operations to improve efficiency and keep pace with our sales growth.”
The packaging segment sales for fourth quarter 2012 were $287.3 million, an increase of $35.9 million, or 14 percent, compared with $251.4 million in 2011.
About half of the increase was the result of Boise’s acquisition of Hexacomb in December 2011, according to the report.
The remaining increase resulted from sales volume growth in the company’s network of box plants, which increased again by 9 percent in fourth quarter 2012. And again, sales volumes of other corrugated shipping products rose by 16 percent.
