Smurfit-Stone Reports Second Quarter 2010 Results
Company completes reorganization and positions itself for improved
performance in the second half of 2010
</pre>
<p>CREVE COEUR, Mo. and <span class="xn-location">CHICAGO</span>, <span class="xn-chron">Aug. 3</span> /CNW/ -- Smurfit-Stone Container Corporation (NYSE: SSCC) today reported net income attributable to common stockholders of <span class="xn-money">$1.41 billion</span>, or <span class="xn-money">$5.41</span> per diluted share, for the second quarter of 2010, compared with a net loss of (<span class="xn-money">$91</span>) million, or (<span class="xn-money">$0.35</span>) per diluted share in the first quarter of 2010, and net income of <span class="xn-money">$155 million</span>, or <span class="xn-money">$0.60</span> per diluted share, for the second quarter of 2009.</p>
<p/>
<p>Smurfit-Stone's second-quarter 2010 adjusted net income was <span class="xn-money">$2 million</span>, or <span class="xn-money">$0.01</span> per diluted share, compared with an adjusted net loss of (<span class="xn-money">$59</span>) million, or (<span class="xn-money">$0.23</span>) per diluted share, in the first quarter of this year, and an adjusted net loss of (<span class="xn-money">$21</span>) million, or (<span class="xn-money">$0.08</span>) per diluted share, in the second quarter of 2009. The most significant adjustment in the second quarter of 2010 was exclusion of <span class="xn-money">$1.42 billion</span> of income, including tax benefits, related to the Company's emergence from bankruptcy reorganization proceedings in the U.S. and <span class="xn-location">Canada</span>.</p>
<p/>
<p> </p>
<p> Diluted Earnings Per Share Attributable to Common Stockholders</p>
<p> </p>
<p> </p>
<pre>
Second First Second
Quarter Quarter Quarter
2010 2010 2009
---- ---- ----
</pre>
<p> </p>
<p>Net Income (loss) <span class="xn-money">$5.41</span> (<span class="xn-money">$0.35</span>) <span class="xn-money">$0.60</span></p>
<p> </p>
<p>Adjustments (<span class="xn-money">$5.40</span>) <span class="xn-money">$0.12</span> (<span class="xn-money">$0.68</span>)</p>
<p> </p>
<pre>
Adjusted Net Income
(loss) $0.01 ($0.23) ($0.08)
===== ====== ======
</pre>
<p>The Company reported an operating loss of (<span class="xn-money">$6</span>) million for the three months ended <span class="xn-chron">June 30, 2010</span>, compared to an operating loss of (<span class="xn-money">$31</span>) million in the first quarter of 2010, and operating income of <span class="xn-money">$271 million</span> in the second quarter of 2009. The second quarter 2010 operating loss was primarily driven by a concentration of planned maintenance-related downtime. Second quarter 2009 operating income was significantly impacted by the income related to the alternative fuel tax credits that were received in 2009.</p>
<p/>
<p>Patrick J. Moore, Smurfit-Stone's Chief Executive Officer, commented, "We believe our successful financial restructuring positions us for long-term profitable growth. We will continue to focus on what matters - serving our customers, improving margins and delivering shareholder value. Looking ahead, we are confident that continued high operating rates, productivity improvements, higher average prices, and low inventories combined with assumed stable demand will drive significant earnings improvement in the second half of the year."</p>
<p/>
<p>Adjusted EBITDA for the second quarter ended <span class="xn-chron">June 30, 2010</span>, was <span class="xn-money">$102 million</span> compared with <span class="xn-money">$46 million</span> in the first quarter of this year and <span class="xn-money">$103 million</span> in the second quarter a year ago. The improvement in adjusted EBITDA from the first quarter reflects the benefits of higher selling prices and volumes, offset by significant maintenance-related downtime and related expenses.</p>
<p/>
<p>Net sales for the second quarter of this year were <span class="xn-money">$1.56 billion</span>, compared with <span class="xn-money">$1.46 billion</span> in this year's first quarter and <span class="xn-money">$1.41 billion</span> in the second quarter of 2009. The improvement in second quarter 2010 net sales is primarily due to higher average selling prices and corrugated container shipments during the period.</p>
<pre>
Second-Quarter 2010 Highlights
-- The Company successfully emerged from its financial reorganization on
June 30 with a significant reduction in leverage and a strong
liquidity
position.
-- Operating results improved significantly due to steady demand
improvement, higher capacity utilization, and improved selling prices.
-- Continuing year-to-date productivity gains included a 5 percent
improvement in tons per operating day per facility in our
containerboard mills and a 3 percent improvement in average units of
production per machine hour in our converting facilities.
-- The Company closed three converting facilities.
Year-to-Date Results
</pre>
<p>For the six months ended <span class="xn-chron">June 30, 2010</span>, net income was <span class="xn-money">$1.32 billion</span>, or <span class="xn-money">$5.07</span> per diluted share, compared with a net loss of (<span class="xn-money">$62</span>) million, or (<span class="xn-money">$0.24</span>) per diluted share, in the first half of 2009.</p>
<p/>
<p>Smurfit-Stone's first-half 2010 adjusted net loss was (<span class="xn-money">$57</span>) million, or (<span class="xn-money">$0.20</span>) per diluted share, compared with an adjusted net loss of (<span class="xn-money">$56</span>) million, or (<span class="xn-money">$0.22</span>) per diluted share, in the first half of 2009.</p>
<p/>
<p>The Company reported an operating loss of (<span class="xn-money">$37</span>) million for the six months ended <span class="xn-chron">June 30, 2010</span>, compared with operating income of <span class="xn-money">$265 million</span> in the first half of 2009, which was primarily attributable to the alternative fuel tax credit income.</p>
<pre>
Other Financial Items
-- As a result of emergence and fresh start accounting, as of June 30,
2010, net property, plant and equipment was fair valued at $4.41
billion, representing a write-up of $1.43 billion, goodwill of $126
million was recorded, and pension and postretirement benefit
liabilities were adjusted to $1.64 billion on the balance sheet.
-- As of June 30, 2010, Smurfit-Stone had net tax operating loss
carryforwards (NOLs) for U.S. federal income tax purposes of $722
million. As a result of the NOL carryforwards and the tax benefit of
projected pension contributions described below, the Company estimates
it will have limited cash tax obligations in the U.S. for at least the
next several years.
-- The Company's defined benefit pension plans in the U.S. and Canada
were
underfunded at June 30, 2010, by approximately $1.45 billion combined.
The Company's current annual funding requirements are estimated to be
$77 million for 2010, and $235 million in 2011, with contributions
increasing to a range of approximately $270 million to $300 million
through 2014.
-- Capital expenditures for the first half of 2010 totaled $83 million.
The Company expects its capital expenditures for 2010 will be
approximately $200 million.
Outlook
</pre>
<p>Smurfit-Stone expects its operating rates to remain at high levels throughout the remainder of the year. Input costs, particularly fiber, energy and transportation, have stabilized moving into the second half of the year. The price increases announced in the first and second quarters are expected to be substantially reflected in earnings during the second half of this year. With the impact of the reorganization now complete, the Company expects to be solidly profitable in the third quarter and to achieve positive earnings and free cash flow for the second half of 2010.</p>
<p/>
<p>As previously announced, the Company's Chief Executive Officer, Patrick J. Moore, will retire by early 2011. The Company's Board of Directors is launching a confidential search for a chief executive officer. A search is also currently underway for a chief financial officer. Both searches are expected to be completed by the end of the year.</p>
<pre>
Conference Call and Webcast
</pre>
<p>Smurfit-Stone will host a conference call for analysts, institutional investors and shareholders on <span class="xn-chron">Tuesday, Aug. 3, 2010</span>, at <span class="xn-chron">10 a.m. Eastern Time</span>. To access the call, participants should dial the number below approximately 10 minutes before the start time.</p>
<pre>
U.S. - (888) 679-8037 or International - (617) 213-4849
Passcode: 20306220
</pre>
<p>The call will also be webcast in a listen-only format with an accompanying slide presentation and can be accessed at <a href="http://www.smurfit-stone.com">www.smurfit-stone.com</a>.</p>
<p/>
<p>A replay of the conference call will be available through <span class="xn-chron">Aug. 17, 2010</span>. To access the replay, dial (888) 286-8010 (U.S.) or (617) 801-6888 (International), and enter passcode 16228881.</p>
<pre>
A replay of the webcast will be available at www.smurfit-stone.com.
Forward-Looking Statements
</pre>
<p>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, pricing pressures in key product lines, seasonality, changes in input costs including 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 <span class="xn-chron">December 31, 2009</span>, 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. The Company does not intend to review, revise or update any particular forward-looking statements in light of future events.</p>
<pre>
About Smurfit-Stone
</pre>
<p>Smurfit-Stone Container Corporation is one of the industry's leading integrated containerboard and corrugated packaging producers and one of the world's largest paper recyclers. Smurfit-Stone generated revenue of <span class="xn-money">$5.57 billion</span> in 2009, 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. The company is a member of the Sustainable Forestry Initiative® .</p>
<pre>
(Financial statements follow)
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
</pre>
<p> </p>
<pre>
Predecessor
-----------
Three Months Ended
June 30, March 31,
-------- ---------
(In millions, except per share data) 2010 2009 2010
------------------------------------ ---- ---- ----
Net sales $1,563 $1,407 $1,461
Costs and expenses
Cost of goods sold 1,407 1,256 1,356
Selling and administrative expenses 143 146 151
Restructuring (income) expenses 19 11 (4)
(Gain) loss on disposal of assets (1)
Other operating income (276) (11)
---- ---
Operating income (loss) (6) 271 (31)
Other income (expense)
Interest expense, net (10) (74) (13)
Debtor-in-possession debt issuance
costs
Loss on early extinguishment of debt
Foreign currency exchange gains
(losses) 9 (2) (6)
Other, net 2 6 2
--- --- ---
Income (loss) before reorganization
items and income taxes (5) 201 (48)
Reorganization items income
(expense), net 1,219 (39) (41)
----- --- ---
Income (loss) before income taxes 1,214 162 (89)
(Provision for) benefit from income
taxes 199 (4)
--- ---
Net income (loss) 1,413 158 (89)
Preferred stock dividends and
accretion (2) (3) (2)
--- --- ---
Net income (loss) attributable to
common stockholders $1,411 $155 $(91)
------ ---- ----
</pre>
<p> </p>
<p> </p>
<pre>
Basic earnings per common share
Net income (loss) attributable to
common stockholders $5.47 $0.60 $(0.35)
----- ----- ------
Weighted average shares outstanding 258 257 258
--- --- ---
</pre>
<p> </p>
<pre>
Diluted earnings per common share
Net income (loss) attributable to
common stockholders $5.41 $0.60 $(0.35)
----- ----- ------
Weighted average shares outstanding 261 257 258
----------------------------------- --- --- ---
</pre>
<p> </p>
<p> </p>
<pre>
Predecessor
-----------
Six Months Ended
June 30,
--------
(In millions, except per share data) 2010 2009
------------------------------------ ---- ----
Net sales $3,024 $2,778
Costs and expenses
Cost of goods sold 2,763 2,473
Selling and administrative expenses 294 291
Restructuring (income) expenses 15 24
(Gain) loss on disposal of assets 1
Other operating income (11) (276)
--- ----
Operating income (loss) (37) 265
Other income (expense)
Interest expense, net (23) (145)
Debtor-in-possession debt issuance costs (63)
Loss on early extinguishment of debt (20)
Foreign currency exchange gains (losses) 3 1
Other, net 4 4
--- ---
Income (loss) before reorganization items and
income taxes (53) 42
Reorganization items income (expense), net 1,178 (93)
----- ---
Income (loss) before income taxes 1,125 (51)
(Provision for) benefit from income taxes 199 (5)
--- ---
Net income (loss) 1,324 (56)
Preferred stock dividends and accretion (4) (6)
--- ---
Net income (loss) attributable to common
stockholders $1,320 $(62)
------ ----
</pre>
<p> </p>
<p> </p>
<pre>
Basic earnings per common share
Net income (loss) attributable to common
stockholders $5.12 $(0.24)
----- ------
Weighted average shares outstanding 258 257
--- ---
</pre>
<p> </p>
<pre>
Diluted earnings per common share
Net income (loss) attributable to common
stockholders $5.07 $(0.24)
----- ------
Weighted average shares outstanding 261 257
----------------------------------- --- ---
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED BALANCE SHEETS
</pre>
<p> </p>
<pre>
Successor Predecessor
June 30, December 31,
(In millions, except share data) 2010 2009
-------------------------------- ---- ----
Assets (Unaudited)
</pre>
<p> </p>
<pre>
Current assets
Cash and cash equivalents $340 $704
Restricted cash 7 9
Receivables 750 674
Inventories 496 452
Refundable income taxes 31 23
Prepaid expenses and other current
assets 47 43
--- ---
Total current assets 1,671 1,905
Net property, plant and equipment 4,405 3,081
Deferred income taxes 23
Goodwill 126
Intangible assets, net 77
Other assets 121 68
--- ---
$6,400 $5,077
------ ------
Liabilities and Stockholders' Equity
(Deficit)
</pre>
<p> </p>
<pre>
Liabilities not subject to compromise
Current liabilities
Current maturities of long-term debt $18 $1,354
Accounts payable 515 387
Accrued compensation and payroll taxes 176 145
Interest payable 5 12
Other current liabilities 81 164
--- ---
Total current liabilities 795 2,062
Long-term debt, less current
maturities 1,188
Pension and postretirement benefits,
net of current portion 1,639
Other long-term liabilities 140 117
Deferred income taxes 286
---
Total liabilities not subject to
compromise 4,048 2,179
</pre>
<p> </p>
<pre>
Liabilities subject to compromise 4,272
-----
Total liabilities 4,048 6,451
</pre>
<p> </p>
<pre>
Stockholders' equity
Successor preferred stock, par value
$.001 per share; 10,000,000 shares
authorized;
none issued and outstanding in 2010
Successor common stock, par value
$.001 per share; 150,000,000 shares
authorized; 90,702,816
issued and outstanding in 2010
Predecessor preferred stock, aggregate
liquidation preference of $126;
25,000,000 shares authorized;
4,599,300 issued and outstanding in
2009 104
Predecessor common stock, par value
$.01 per share; 400,000,000 shares
authorized;
257,482,839 issued and outstanding in
2009 3
Additional paid-in capital 2,352 4,081
Retained earnings (deficit) (4,883)
Accumulated other comprehensive income
(loss) (679)
----
Total stockholders' equity (deficit) 2,352 (1,374)
----- ------
$6,400 $5,077
------ ------
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
</pre>
<p> </p>
<pre>
Predecessor
-----------
2010
----
Pre
Six Months Ended June 30, (In
millions) Emergence Adjustments
----------------------------- --------- -----------
Cash flows from operating
activities
Net income (loss) $(198) $1,522
Adjustments to reconcile net
income (loss) to net cash
provided by
(used for) operating
activities
Loss on early extinguishment
of debt
Depreciation, depletion and
amortization 168
Debtor-in-possession debt
issuance costs
Amortization of deferred debt
issuance costs
Deferred income taxes (1) (200)
Pension and postretirement
benefits 50
Loss on disposal of assets
Non-cash restructuring
expense 7
Non-cash stock-based
compensation 3
Non-cash foreign currency
exchange gains (3)
Gain due to plan effects (580)
Gain due to fresh start
accounting adjustments (742)
Payment to settle non-debt
liabilities subject to
compromise (202)
Non-cash reorganization
items 101
Change in restricted cash for
utility deposits 2
Change in operating assets
and liabilities,
net of effects from
acquisitions and
dispositions
Receivables and retained
interest in receivables sold (129)
Receivable for alternative
energy tax credits 48
Inventories 1
Prepaid expenses and other
current assets 1
Accounts payable and accrued
liabilities 57
Interest payable 2
Other, net 8
</pre>
<p> </p>
<pre>
Net cash provided by (used
for) operating activities 117 (202)
--- ----
Cash flows from investing
activities
Expenditures for property,
plant and equipment (83)
Proceeds from property
disposals 10
Advances to affiliates, net
</pre>
<p> </p>
<pre>
Net cash used for investing
activities (73)
---
Cash flows from financing
activities
Proceeds from exit credit
facility 1,200
Original issue discount (12)
Proceeds from debtor-in-
possession financing
Net borrowings (repayments)
of long-term debt (1) (1,346)
Repurchase of receivables
Debtor-in-possession debt
issuance costs
Debt issuance costs on exit
credit facility (15) (32)
Change in restricted cash for
collateralizing outstanding
letters of credit (11) 11
--- ---
Net cash provided by (used
for) financing activities (27) (179)
--- ----
</pre>
<p> </p>
<pre>
Increase (decrease) in cash
and cash equivalents 17 (381)
Cash and cash equivalents
Beginning of period 704
---
End of period $721 $(381)
------------- ---- -----
</pre>
<p> </p>
<p> </p>
<pre>
Predecessor
-----------
2010
----
Post
Six Months Ended June 30,
(In millions) Emergence 2009
------------------------- --------- ----
Cash flows from operating
activities
Net income (loss) $1,324 $(56)
Adjustments to reconcile net
income (loss) to net cash
provided by
(used for) operating
activities
Loss on early extinguishment
of debt 20
Depreciation, depletion and
amortization 168 182
Debtor-in-possession debt
issuance costs 63
Amortization of deferred
debt issuance costs 3
Deferred income taxes (201) 3
Pension and postretirement
benefits 50 20
Loss on disposal of assets 1
Non-cash restructuring
expense 7 4
Non-cash stock-based
compensation 3 4
Non-cash foreign currency
exchange gains (3) (1)
Gain due to plan effects (580)
Gain due to fresh start
accounting adjustments (742)
Payment to settle non-debt
liabilities subject to
compromise (202)
Non-cash reorganization
items 101 61
Change in restricted cash
for utility deposits 2 (13)
Change in operating assets
and liabilities,
net of effects from
acquisitions and
dispositions
Receivables and retained
interest in receivables
sold (129) (38)
Receivable for alternative
energy tax credits 48 (89)
Inventories 1 19
Prepaid expenses and other
current assets 1 (5)
Accounts payable and accrued
liabilities 57 204
Interest payable 2 77
Other, net 8 33
</pre>
<p> </p>
<pre>
Net cash provided by (used
for) operating activities (85) 492
--- ---
Cash flows from investing
activities
Expenditures for property,
plant and equipment (83) (69)
Proceeds from property
disposals 10 4
Advances to affiliates, net (15)
</pre>
<p> </p>
<pre>
Net cash used for investing
activities (73) (80)
--- ---
Cash flows from financing
activities
Proceeds from exit credit
facility 1,200
Original issue discount (12)
Proceeds from debtor-in-
possession financing 440
Net borrowings (repayments)
of long-term debt (1,347) 60
Repurchase of receivables (385)
Debtor-in-possession debt
issuance costs (63)
Debt issuance costs on exit
credit facility (47)
Change in restricted cash
for collateralizing
outstanding
letters of credit
</pre>
<p> </p>
<pre>
Net cash provided by (used
for) financing activities (206) 52
---- ---
</pre>
<p> </p>
<pre>
Increase (decrease) in cash
and cash equivalents (364) 464
Cash and cash equivalents
Beginning of period 704 126
--- ---
End of period $340 $590
------------- ---- ---
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
REORGANIZED CONSOLIDATED BALANCE SHEET
</pre>
<p> </p>
<pre>
June 30, 2010
-------------
(In millions) Predecessor Plan Effect
------------- ----------- Adjustments
-----------
Assets
</pre>
<p> </p>
<pre>
Current assets
Cash and cash equivalents $721 $(381)
Restricted cash 18 (11)
Receivables 750
Inventories 449
Refundable income taxes 24 7
Prepaid expenses and other current
assets 42
---
Total current assets 2,004 (385)
Net property, plant and equipment 2,979
Deferred income taxes 22 148
Goodwill
Intangible assets, net
Other assets 75 31
--- ---
$5,080 $(206)
------ -----
Liabilities and Stockholders' Equity
(Deficit)
</pre>
<p> </p>
<pre>
Liabilities not subject to compromise
Current liabilities
Current maturities of long-term debt $1,352 $(1,334)
Accounts payable 488 27
Accrued compensation and payroll taxes 139 34
Interest payable 12 (7)
Other current liabilities 141 (59)
--- ---
Total current liabilities 2,132 (1,339)
Long-term debt, less current maturities 1,176
Pension and postretirement benefits,
net of current portion 1,179
Other long-term liabilities 116
Deferred income taxes
</pre>
<p> </p>
<pre>
Total liabilities not subject to
compromise 2,248 1,016
</pre>
<p> </p>
<pre>
Liabilities subject to compromise 4,354 (4,354)
----- ------
Total liabilities 6,602 (3,338)
</pre>
<p> </p>
<pre>
Stockholders' equity
Preferred stock successor
Common stock successor
Preferred stock predecessor 104 (104)
Common stock predecessor 3 (3)
Additional paid-in capital 4,084 (1,732)
Retained earnings (deficit) (5,081) 4,971
Accumulated other comprehensive income
(loss) (632)
----
Total stockholders' equity (deficit) (1,522) 3,132
------ -----
$5,080 $(206)
------ -----
</pre>
<p> </p>
<p> </p>
<pre>
June 30, 2010
-------------
(In millions) Fresh Start Successor
------------- Adjustments ---------
-----------
Assets
</pre>
<p> </p>
<pre>
Current assets
Cash and cash equivalents $ $340
Restricted cash 7
Receivables 750
Inventories 47 496
Refundable income taxes 31
Prepaid expenses and other current
assets 5 47
--- ---
Total current assets 52 1,671
Net property, plant and equipment 1,426 4,405
Deferred income taxes (170)
Goodwill 126 126
Intangible assets, net 77 77
Other assets 15 121
--- ---
$1,526 $6,400
------ ------
Liabilities and Stockholders' Equity
(Deficit)
</pre>
<p> </p>
<pre>
Liabilities not subject to compromise
Current liabilities
Current maturities of long-term debt $ $18
Accounts payable 515
Accrued compensation and payroll taxes 3 176
Interest payable 5
Other current liabilities (1) 81
--- ---
Total current liabilities 2 795
Long-term debt, less current maturities 12 1,188
Pension and postretirement benefits,
net of current portion 460 1,639
Other long-term liabilities 24 140
Deferred income taxes 286 286
--- ---
Total liabilities not subject to
compromise 784 4,048
</pre>
<p> </p>
<p>Liabilities subject to compromise</p>
<p> </p>
<p> Total liabilities 784 4,048</p>
<p> </p>
<pre>
Stockholders' equity
Preferred stock successor
Common stock successor
Preferred stock predecessor
Common stock predecessor
Additional paid-in capital 2,352
Retained earnings (deficit) 110
Accumulated other comprehensive income
(loss) 632
---
Total stockholders' equity (deficit) 742 2,352
--- -----
$1,526 $6,400
------ ------
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
ADJUSTED NET INCOME (LOSS) PER DILUTED SHARE
(In Millions, Except Per Share Data)
(Unaudited)
</pre>
<p> </p>
<pre>
2Q 10 2Q 09 1Q 10 1H 10 1H 09
----- ----- ----- ----- -----
</pre>
<p> </p>
<p> </p>
<pre>
Net income (loss)
attributable to common
stockholders (GAAP) $1,411 $155 $(91) $1,320 $(62)
Reorganization items
(income) expense, net
of income taxes (1,419) 39 41 (1,378) 93
Debtor-in-possession
financing costs - - - - 63
Alternative fuel mixture
tax credits - (276) (11) (11) (276)
Loss on early
extinguishment of debt - - - - 20
Non-cash foreign
currency exchange
(gains)/losses (9) 2 6 (3) (1)
Interest on unsecured
debt - 48 - - 83
Restructuring (income)
charges 19 11 (4) 15 24
--- --- --- --- ---
Adjusted net income
(loss) attributable to
common stockholders
(Note 1) $2 $(21) $(59) $(57) $(56)
--- ---- ---- ---- ----
</pre>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<pre>
2Q 10 2Q 09 1Q 10 1H 10 1H 09
----- ----- ----- ----- -----
</pre>
<p> </p>
<p> </p>
<pre>
Net income (loss) per
diluted share
attributable to common
stockholders (GAAP) $5.41 $0.60 $(0.35) $5.07 $(0.24)
Reorganization items
(income) expense, net
of income taxes (5.44) 0.15 0.16 (5.28) 0.36
Debtor-in-possession
financing costs - - - - 0.24
Alternative fuel mixture
tax credits - (1.07) (0.04) (0.04) (1.07)
Loss on early
extinguishment of debt - - - - 0.08
Non-cash foreign
currency exchange
(gains)/losses (0.03) 0.01 0.02 (0.01) -
Interest on unsecured
debt - 0.19 - - 0.32
Restructuring (income)
charges 0.07 0.04 (0.02) 0.06 0.09
---- ---- ----- ---- ----
Adjusted net income
(loss) per diluted
share attributable to
common stockholders
(Note 1) $0.01 $(0.08) $(0.23) $(0.20) $(0.22)
----- ------ ------ ------ ------
</pre>
<p> </p>
<pre>
Note 1: Exclusive of reorganization items (income) expense, debtor-
in-possession financing costs, alternative fuel mixture
tax credits, loss on early extinguishment of debt, non-cash foreign
currency (gains) losses, accrued but unpaid interest on
unsecured debt and restructuring (income) charges. Adjusted net
income (loss) attributable to common stockholders and
adjusted net income (loss) per diluted share attributable to common
stockholders are non-GAAP financial measures.
See disclosure regarding the use of non-GAAP financial measures
following these financial statements.
Diluted earnings per common share computations for the three and six
months ended June 30, 2010 were adjusted to reflect
the assumed conversion of preferred stock into common stock because
the effect was dilutive.
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
EBITDA, As Defined Below
(In millions)
(Unaudited)
</pre>
<p> </p>
<pre>
2Q 10 1Q 10 2Q 09
----- ----- -----
</pre>
<p> </p>
<p>Net Sales <span class="xn-money">$1,563</span> <span class="xn-money">$1,461</span> <span class="xn-money">$1,407</span></p>
<p> </p>
<pre>
Net income (loss) $1,413 $(89) $158
(Benefit from) provision for income
taxes (199) - 4
Interest expense, net. 10 13 74
Depreciation, depletion and amortization 83 85 92
--- --- ---
EBITDA 1,307 9 328
</pre>
<p> </p>
<pre>
Reorganization items (income) expense (1,219) 41 39
Restructuring (income) charges 19 (4) 11
Alternative fuel mixture tax credits - (11) (276)
Non-cash foreign currency exchange
(gains) losses (9) 6 2
Other 4 5 (1)
</pre>
<p> </p>
<p> </p>
<pre>
Adjusted EBITDA $102 $46 $103
---- --- ----
</pre>
<p> </p>
<pre>
Adjusted EBITDA Margin 6.5% 3.1% 7.3%
--- --- ---
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
Other Financial Information:
----------------------------
Capital Expenditures $49 $34 $30
Pension Expense 34 31 30
Pension Contribution 12 2 -
Cash Taxes 1 2 -
Change in Working Capital (2) (18) 62
</pre>
<p> </p>
<pre>
"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 regarding
the use of
non-GAAP financial measures following these financial statements.
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
STATISTICAL INFORMATION
</pre>
<p> </p>
<pre>
2010 2009
---- ----
1st 2nd 1st 2nd
Qtr Qtr June YTD Qtr Qtr June YTD
---- ---- -------- ---- ---- --------
</pre>
<p> </p>
<pre>
Containerboard System
North American Mill
Operating Rates
(Containerboard
Only) 100.0% 97.1% 98.9% 82.4% 85.0% 83.7%
</pre>
<p> </p>
<pre>
North American
Containerboard
Production -M Tons 1,585 1,545 3,130 1,435 1,497 2,932
Sequential Avg.
Domestic Linerboard
Price Change 6.3% 13.2% N/A -7.4% -9.8% N/A
</pre>
<p> </p>
<pre>
Pulp Production -M
Tons 62 72 134 66 76 142
SBS/Bleached Board
Production -M Tons 35 31 66 33 32 65
Kraft Paper
Production -M Tons 29 26 55 19 28 47
</pre>
<p> </p>
<pre>
Total Maintenance
Downtime Tons -M
Tons 20 76 96 46 50 96
</pre>
<p> </p>
<pre>
Corrugated Containers
North American
Shipments -BSF 16.4 17.3 33.7 16.6 16.7 33.3
Per Day North
American Shipments -
MMSF 260.9 273.7 267.3 267.8 265.7 266.7
Sequential Avg.
Corrugated Price
Change -0.6% 3.6% N/A -0.9% -3.0% N/A
</pre>
<p> </p>
<pre>
Fiber Reclaimed and
Brokered -M Tons 1,423 1,468 2,891 1,241 1,280 2,521
SMURFIT-STONE CONTAINER CORPORATION
NON-GAAP FINANCIAL MEASURES
</pre>
<p>In the accompanying financial presentation, we use the financial measures "adjusted net income (loss) attributable to common stockholders" (adjusted net income (loss)), "adjusted net income (loss) per diluted share attributable to common stockholders" (adjusted net income (loss) per diluted share), "EBITDA" and "adjusted EBITDA" which are derived from our consolidated financial information but are not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). These measures are considered "non-GAAP financial measures" under the U.S. Securities and Exchange Commission (SEC) rules. Adjusted net income (loss) and adjusted net income (loss) per diluted share are non-GAAP financial measures that exclude from net income (loss) attributable to common stockholders the effects of reorganization items (income) expense, debtor-in-possession financing costs, alternative fuel mixture tax credits, loss on early extinguishment of debt, restructuring (income) charges, non-cash foreign currency exchange (gains) losses, and interest on unsecured debt. EBITDA is defined as net income (loss) before (provision for) benefit from income taxes, interest expense, net and depreciation, depletion and amortization. Adjusted EBITDA is defined as EBITDA adjusted for reorganization items (income) expense, debtor-in-possession financing costs, alternative fuel mixture tax credits, loss on early extinguishment of debt, non-cash foreign currency exchange (gains) losses, (gain) loss on sale of assets, restructuring charges and other adjustments.</p>
<p/>
<p>The accompanying financial presentation includes a reconciliation of net income (loss) attributable to common stockholders and net income (loss) per diluted share attributable to common stockholders, the most directly comparable GAAP financial measures, to adjusted net income (loss) and adjusted net income (loss) per diluted share, respectively. A reconciliation of net (income) loss to EBITDA and adjusted EBITDA is also presented.</p>
<p/>
<p>We use these supplemental non-GAAP measures to evaluate performance period over period, to analyze the underlying trends in our business, to assess our performance relative to our competitors and to establish operational goals and forecasts that are used in allocating resources. These non-GAAP measures of operating results are reported to our board of directors, chief executive officer and our president and chief operating officer and are used to make strategic and operating decisions and assess performance. These non-GAAP measures are presented to enhance an understanding of our operating results and are not intended to represent cash flows or results of operations. We also believe these non-GAAP measures are beneficial to investors, potential investors and other key stakeholders, including analysts and creditors who use these measures in their evaluations of our performance from period to period and against the performance of other companies in our industry. Our creditors also use these measures to evaluate our ability to service our debt. The use of these non-GAAP financial measures is beneficial to these stakeholders because they exclude certain items that management believes are not indicative of the on-going operating performance of our business, and including them would distort comparisons to our past operating performance. Accordingly, we have excluded the adjustments, as detailed below, for the purpose of calculating these non-GAAP measures.</p>
<p/>
<p>The following is an explanation of each of the adjustments that we have made to arrive at these non-GAAP measures for the three and six months ended <span class="xn-chron">June 30, 2010</span> and 2009, as well as the reasons management believes each of these items is not indicative of operating performance:</p>
<pre>
-- Reorganization items (income) expense, net of income taxes - These
income and expense items are directly related to the process of our
reorganizing under Chapter 11 and the Companies' Creditors Arrangement
Act in Canada. The items include gain due to plan effects, gain due
to
fresh start accounting adjustments, provision for rejected/settled
executory contracts and leases, accounts payable settlement gains and
professional fees. These income and expense items are not considered
indicative of our ongoing operating performance and are not used by us
to assess our operating performance.
-- Debtor-in-possession (DIP) financing costs - These expenses were
incurred and paid during the first quarter of 2009 in connection with
entering into the DIP Credit Agreement. These expense items are not
considered indicative of our ongoing operating performance and are not
used by us to assess our operating performance.
-- Alternative fuel mixture tax credits - These amounts represent an
excise tax credit for alternative fuel mixtures produced by a taxpayer
for sale, or for use as a fuel in a taxpayer's trade or business,
through December 31, 2009, at which time the credit expired. These
items are not considered indicative of our ongoing operating
performance and are not used by us to assess our operating
performance.
-- Loss on early extinguishment of debt - These losses represent
unamortized deferred debt issuance cost and call premiums charged to
expense in connection with our financing activities. These losses
were
not considered indicative of our ongoing operating performance because
they related to specific financing activities and were not used by us
to assess our operating performance.
-- Non-cash foreign currency (gains) losses- The functional currency for
our Canadian operations was the U.S. dollar. Fluctuations in Canadian
dollar-denominated monetary assets and liabilities resulted in
non-cash
gains or losses. We excluded the impact of foreign currency exchange
gains and losses because the impact of foreign exchange is highly
variable and difficult to predict from period to period and is not
tied
to our operating performance. These gains or losses are not
considered
indicative of our ongoing operating performance and are not used by us
to assess our operating performance.
-- Interest on unsecured debt - These amounts represent the post-petition
interest accrued on unsecured debt from the time of our bankruptcy
filing, which was stayed and not paid as a result of the bankruptcy
proceedings. In the fourth quarter of 2009, we concluded it was not
probable that interest expense that was accrued from the time of our
bankruptcy filing through November 30, 2009, would be an allowed
claim.
This expense was not considered indicative of our ongoing operating
performance and was excluded by management in assessing our operating
performance.
-- Restructuring (income) charges - These adjustments represent the
write-down of assets, primarily property, plant and equipment, to
estimated net realizable values, the acceleration of depreciation for
equipment to be abandoned or taken out of service, severance costs and
other costs associated with our restructuring activities. These income
and expense items were not considered indicative of our ongoing
operating performance and were excluded by management in assessing our
operating performance.
-- (Gain) loss on sale of assets - These amounts represent gains and
losses we recognized related to the sale of non-strategic assets.
These gains and losses were not considered indicative of ongoing
operating performance and were excluded by management in assessing our
operating performance.
-- Other - These adjustments principally represent amounts accrued under
our 2009 long-term incentive plan. These income and expense items
were
not considered indicative of our ongoing operating performance and
were
excluded by management in assessing our operating performance.
</pre>
<p>Adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and adjusted EBITDA have certain material limitations associated with their use as compared to net income (loss). These limitations are primarily due to the exclusion of certain amounts that are material to our consolidated results of operations, as discussed above. In addition, these adjusted net income (loss) and EBITDA measures may differ from adjusted net income (loss) and EBITDA calculations of other companies in our industry, limiting their usefulness as comparative measures. Because of these limitations, adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and adjusted EBITDA 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 adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and adjusted EBITDA only as supplemental measures of our operating performance. 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.</p>
<p/>
<p>We believe that providing these non-GAAP measures in addition to the related GAAP measures provides investors greater transparency to the information our management uses for financial and operational decision-making and allows investors to see our results as management sees them. We also believe that providing this information better enables investors to understand our operating performance and to evaluate the methodology used by our management to evaluate and measure our operating performance, and the methodology and financial measures used by our board of directors to assess management's performance.</p>
<pre>
For further information: Media, Sue Neumann, +1-314-656-5287, or Investors, Tim Griffith or Scott Dudley, +1-314-656-5553, all of Smurfit-Stone Container Corporation Web Site: http://www.smurfit-stone.com
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