Smurfit-Stone Reports Third Quarter 2010 Results
COMPANY POSTS STRONG EARNINGS AND OPERATING CASH FLOW
</pre>
<p>CREVE COEUR, Mo. and <span class="xn-location">CHICAGO</span>, <span class="xn-chron">Nov. 1, 2010</span> /CNW/ -- Smurfit-Stone Container Corporation (NYSE: SSCC) today reported net income of <span class="xn-money">$65 million</span>, or <span class="xn-money">$0.65</span> per diluted share, for the third quarter ended <span class="xn-chron">Sept. 30, 2010</span>, compared with 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, and <span class="xn-money">$65 million</span>, or <span class="xn-money">$0.25</span> per share, for the third quarter of 2009.</p>
<pre>
(Logo: http://photos.prnewswire.com/prnh/20070129/SMURFIT-STONELOGO)
(Logo: http://www.newscom.com/cgi-bin/prnh/20070129/SMURFIT-STONELOGO)
</pre>
<p>Smurfit-Stone's third quarter 2010 adjusted net income was <span class="xn-money">$76 million</span>, or <span class="xn-money">$0.76</span> per diluted share, up from adjusted net income of <span class="xn-money">$2 million</span>, or <span class="xn-money">$0.01</span> per diluted share, in the second quarter of this year, and an adjusted net loss of (<span class="xn-money">$23</span>) million, or (<span class="xn-money">$0.09</span>) per diluted share, in the third quarter of 2009. The adjustments in the third quarter of 2010 were primarily the exclusion of costs related to reorganization and restructuring. The major adjustment in the second quarter of 2010 was the exclusion of <span class="xn-money">$1.42 billion</span> of income, including tax benefits, related to the Company's emergence from bankruptcy.</p>
<p/>
<p> </p>
<p> Diluted Earnings Per Share Attributable to Common Stockholders</p>
<p> </p>
<pre>
Third Second Third
Quarter Quarter Quarter
2010 2010 2009
---- ---- ----
</pre>
<p> </p>
<pre>
Net Income Attributable to $0.65 $5.41 $0.25
Common Stockholders
</pre>
<p> </p>
<p>Adjustments <span class="xn-money">$0.11</span> (<span class="xn-money">$5.40</span>) (<span class="xn-money">$0.34</span>)</p>
<p> </p>
<pre>
Adjusted Net Income (Loss) $0.76 $0.01 ($0.09)
===== ===== ======
</pre>
<p> </p>
<pre>
Weighted Average Shares
(MM) 100 261 257
</pre>
<p>The Company reported operating income of <span class="xn-money">$142 million</span> for the third quarter of 2010, compared to an operating loss of (<span class="xn-money">$6</span>) million in the second quarter of 2010, and operating income of <span class="xn-money">$159 million</span> in the third quarter of 2009. The sequential improvement in operating income reflects increased net sales in the third quarter due to higher selling prices, lower maintenance-related downtime, lower fiber costs, and cost savings achieved in mill and container operations. Third quarter 2009 operating income significantly benefitted from 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, "I am pleased with our strong third quarter performance, which benefitted from favorable pricing trends and lower input costs driven primarily by fiber. Importantly, we are realizing cost savings and efficiency improvements from our financial restructuring, investments in our core business, and focused efforts such as our Operational Excellence initiative. I'm proud of the efforts and commitment of our employees which contributed significantly to the strong quarter. I view the positive momentum in the quarter as an important step in delivering on the accelerated performance improvement we are pursuing."</p>
<p/>
<p>Adjusted EBITDA for the third quarter of 2010 was <span class="xn-money">$239 million</span>, up from <span class="xn-money">$102 million</span> in the second quarter of 2010, and <span class="xn-money">$94 million</span> in the third quarter of 2009. The sequential improvement in adjusted EBITDA reflects higher selling prices, reduced maintenance-related downtime and related expenses, lower fiber costs, and improvements in overall operating productivity including additional headcount reductions made in the quarter.</p>
<p/>
<p>Net sales for the third quarter of this year were <span class="xn-money">$1.63 billion</span>, up 4.5 percent from <span class="xn-money">$1.56 billion</span> in the second quarter of 2010 and up 15.3 percent over sales of <span class="xn-money">$1.42 billion</span> in the third quarter of 2009. The improvement in third quarter 2010 net sales is primarily due to higher average selling prices during the quarter.</p>
<pre>
Third Quarter Highlights
-- The Company achieved very strong results in its first quarter since
emerging from bankruptcy, demonstrating the performance capabilities
of
the new Smurfit-Stone.
-- Ongoing efforts to reduce operating costs were also a significant
contributor to higher earnings and cash generation in the quarter,
with
overall headcount being reduced by 460 positions in the quarter and
1,368 positions year to date.
-- Strong cash generation, with cash balances growing by $124 million in
the quarter, resulting in net debt of less than $730 million at
September 30, 2010.
Outlook
</pre>
<p>Smurfit-Stone expects moderately lower sequential earnings in the fourth quarter from the third quarter, as continued price improvement will be more than offset by additional mill maintenance costs, normal seasonal demand declines and higher energy usage. The Company also expects higher recycled fiber costs in the fourth quarter.</p>
<p/>
<p>In addition to the major cost reduction focus in the business operations, the Company is undertaking a significant reduction in its selling, general and administrative costs, primarily through reductions of more than 450 positions for full-year 2010, or more than 14 percent of its workforce in these functions. The Company expects to realize net savings of more than <span class="xn-money">$50 million</span> in 2011 as compared to 2010, and has identified opportunities for additional savings in 2012.</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">Monday, Nov. 1, 2010</span>, at <span class="xn-chron">8:30 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. - (866) 783-2146 or International - (857) 350-1605
Passcode: 26779754
</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">Nov. 15, 2010</span>. To access the replay, dial (888) 286-8010 (U.S.) or (617) 801-6888 (International), and enter passcode 99716475</p>
<pre>
A replay of the webcast will be available at www.smurfit-stone.com.
Forward-Looking Statements & Non-GAAP Measures
</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>
</pre>
<p> </p>
<p> (Financial statements follow)</p>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
</pre>
<p> </p>
<p> </p>
<pre>
Successor
---------
Three
Months
Ended
September
30,
(In millions, except per share
data) 2010
------------------------------ ----
Net sales $1,634
Costs and expenses
Cost of goods sold 1,344
Selling and administrative expenses 141
Restructuring expenses 7
Loss on disposal of assets
Other operating income
</pre>
<p> </p>
<pre>
Operating income (loss) 142
Other income (expense)
Interest expense, net (23)
Debtor-in-possession debt
issuance costs
Loss on early extinguishment of
debt
Foreign currency exchange gains
(losses)
Other, net 2
---
Income (loss) before reorganization
items
and income taxes 121
Reorganization items income
(expense), net (7)
---
Income before income taxes 114
(Provision for) benefit from income
taxes (49)
---
Net income 65
Preferred stock dividends and
accretion
</pre>
<p> </p>
<pre>
Net income attributable to common
stockholders $65
---
</pre>
<p> </p>
<p> </p>
<pre>
Basic earnings per common share
Net income attributable to common
stockholders $0.65
-----
Weighted average shares outstanding 100
---
</pre>
<p> </p>
<pre>
Diluted earnings per common share
Net income attributable to common
stockholders $0.65
-----
Weighted average shares outstanding 100
----------------------------------- ---
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
Predecessor
-----------
Three Three Six Nine
Months Months Months Months
Ended Ended Ended Ended
September September
30, June 30, June 30, 30,
(In millions,
except per share
data) 2009 2010 2010 2009
----------------- ---- ---- ---- ----
Net sales $1,417 $1,563 $3,024 $4,195
Costs and expenses
Cost of goods sold 1,284 1,407 2,763 3,757
Selling and
administrative
expenses 137 143 294 428
Restructuring
expenses 14 19 15 38
Loss on disposal
of assets 2 3
Other operating
income (179) (11) (455)
---- --- ----
Operating income
(loss) 159 (6) (37) 424
Other income
(expense)
Interest expense,
net (72) (10) (23) (217)
Debtor-in-
possession debt
issuance costs (63)
Loss on early
extinguishment of
debt (20)
Foreign currency
exchange gains
(losses) (11) 9 3 (10)
Other, net 6 2 4 10
--- --- --- ---
Income (loss)
before
reorganization
items
and income taxes 82 (5) (53) 124
Reorganization
items income
(expense), net (16) 1,219 1,178 (109)
--- ----- ----- ----
Income before
income taxes 66 1,214 1,125 15
(Provision for)
benefit from
income taxes 2 199 199 (3)
--- --- --- ---
Net income 68 1,413 1,324 12
Preferred stock
dividends and
accretion (3) (2) (4) (9)
--- --- --- ---
Net income
attributable to
common
stockholders $65 $1,411 $1,320 $3
--- ------ ------ ---
</pre>
<p> </p>
<p> </p>
<pre>
Basic earnings per
common share
Net income
attributable to
common
stockholders $0.25 $5.47 $5.12 $0.01
----- ----- ----- -----
Weighted average
shares
outstanding 257 258 258 257
--- --- --- ---
</pre>
<p> </p>
<pre>
Diluted earnings
per common share
Net income
attributable to
common
stockholders $0.25 $5.41 $5.07 $0.01
----- ----- ----- -----
Weighted average
shares
outstanding 257 261 261 257
---------------- --- --- --- ---
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED BALANCE SHEETS
</pre>
<p> </p>
<p> </p>
<pre>
Successor Predecessor
--------- -----------
September December
30, June 30, 31,
(In millions, except
share data) 2010 2010 2009
-------------------- ---- ---- ----
Assets (Unaudited) (Unaudited)
</pre>
<p> </p>
<pre>
Current assets
Cash and cash
equivalents $464 $340 $704
Restricted cash 7 9
Receivables 750 739 615
Receivable for
alternative energy tax
credits 11 11 59
Inventories 529 496 452
Refundable income taxes 16 31 23
Prepaid expenses and
other current assets 35 47 43
--- --- ---
Total current assets 1,805 1,671 1,905
Net property, plant and
equipment 4,370 4,405 3,081
Deferred income taxes 23
Goodwill 96 93
Intangible assets, net 76 77
Other assets 162 163 68
--- --- ---
$6,509 $6,409 $5,077
------ ------ ------
Liabilities and
Stockholders' Equity
(Deficit)
</pre>
<p> </p>
<pre>
Liabilities not subject
to compromise
Current liabilities
Current maturities of
long-term debt $16 $18 $1,354
Accounts payable 519 515 387
Accrued compensation
and payroll taxes 165 176 145
Interest payable 2 5 12
Other current
liabilities 83 81 164
--- --- ---
Total current
liabilities 785 795 2,062
Long-term debt, less
current maturities 1,176 1,176
Pension and
postretirement
benefits, net of
current portion 1,632 1,639
Other long-term
liabilities 138 140 117
Deferred income taxes 352 307
--- ---
Total liabilities not
subject to compromise 4,083 4,057 2,179
</pre>
<p> </p>
<pre>
Liabilities subject to
compromise 4,272
-----
Total liabilities 4,083 4,057 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;
91,062,636 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 2,357 2,352 4,081
Retained earnings
(deficit) 65 (4,883)
Accumulated other
comprehensive income
(loss) 4 (679)
--- ----
Total stockholders'
equity (deficit) 2,426 2,352 (1,374)
----- ----- ------
$6,509 $6,409 $5,077
------ ------ ------
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
</pre>
<p> </p>
<p> </p>
<pre>
Successor Predecessor
--------- -----------
Three Six Nine
Months Months Months
Ended Ended Ended
September June September
30, 30, 30,
(In millions) 2010 2010 2009
------------- ---- ---- ----
Cash flows from
operating activities
Net income $65 $1,324 $12
Adjustments to reconcile
net income to net cash
provided by (used for)
operating activities
Loss on early
extinguishment of debt 20
Depreciation, depletion
and amortization 84 168 273
Debtor-in-possession
debt issuance costs 63
Amortization of deferred
debt issuance costs and
original issue discount 3 5
Deferred income taxes 58 (201) 1
Pension and
postretirement benefits (16) 50 49
Loss on disposal of
assets 3
Non-cash restructuring
expense 7 6
Non-cash stock-based
compensation 5 3 7
Non-cash foreign
currency exchange
(gains) losses (3) 10
Gain due to plan effects (580)
Gain due to fresh start
accounting adjustments (742)
Payments to settle pre-
petition liabilities
excluding debt (202)
Non-cash reorganization
items 101 65
Change in restricted
cash for utility
deposits 7 2 (9)
Change in operating
assets and liabilities,
net of effects from
acquisitions and
dispositions
Receivables and retained
interest in receivables
sold (7) (129) (50)
Receivable for
alternative energy tax
credits 48 (58)
Inventories (30) 1 35
Prepaid expenses and
other current assets 12 1 (13)
Accounts payable and
accrued liabilities (9) 57 200
Interest payable (2) 2 128
Other, net (9) 8 46
</pre>
<p> </p>
<pre>
Net cash provided by
(used for) operating
activities 161 (85) 793
--- --- ---
Cash flows from
investing activities
Expenditures for
property, plant and
equipment (39) (83) (112)
Proceeds from property
disposals 5 10 16
Advances to affiliates,
net (15)
</pre>
<p> </p>
<pre>
Net cash used for
investing activities (34) (73) (111)
--- --- ----
Cash flows from
financing activities
Proceeds from exit
credit facilities 1,200
Original issue discount (12)
Net borrowings of
debtor-in-possession
financing 130
Net borrowings
(repayments) of long-
term debt (3) (1,347) 71
Repurchase of
receivables (385)
Debtor-in-possession
debt issuance costs (63)
Debt issuance costs on
exit credit facilities
and other financing
costs (47)
---
Net cash used for
financing activities (3) (206) (247)
--- ---- ----
</pre>
<p> </p>
<pre>
Increase (decrease) in
cash and cash
equivalents 124 (364) 435
Cash and cash
equivalents
Beginning of period 340 704 126
--- --- ---
End of period $464 $340 $561
------------- --- --- ---
</pre>
<p> </p>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
ADJUSTED NET INCOME (LOSS) PER DILUTED SHARE
(In Millions, Except Per Share Data)
(Unaudited)
</pre>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<pre>
Successor (Note
1) Predecessor (Note 1)
---------------- --------------------
June Sept
2010 2009
3Q 10 3Q 09 2Q 10 YTD YTD
----- ----- ----- ----- -----
</pre>
<p> </p>
<p> </p>
<pre>
Net income
attributable
to common
stockholders
(GAAP) $65 $65 $1,411 $1,320 $3
Reorganization
items (income)
expense, net
of income
taxes 4 16 (1,419) (1,378) 109
Debtor-in-
possession
financing
costs - - - - 63
Alternative
fuel mixture
tax credits - (179) - (11) (455)
Loss on early
extinguishment
of debt - - - - 20
Non-cash
foreign
currency
exchange
(gains) losses - 11 (9) (3) 10
Loss on sale of
assets - 2 - - 2
Interest on
Predecessor
unsecured debt - 48 - - 131
Restructuring
charges 4 14 19 15 38
Multi-employer
pension plan
withdrawal
charge, net of
income taxes 3 - - - -
--- --- --- --- ---
Adjusted net
income (loss)
attributable
to common
stockholders
(Note 2) $76 $(23) $2 $(57) $(79)
--- ---- --- ---- ----
</pre>
<p> </p>
<p> </p>
<pre>
Successor (Note
1) Predecessor (Note 1)
---------------- --------------------
June Sept
2010 2009
3Q 10 3Q 09 2Q 10 YTD YTD
----- ----- ----- ----- -----
</pre>
<p> </p>
<p> </p>
<pre>
Net income per
diluted share
attributable
to common
stockholders
(GAAP) $0.65 $0.25 $5.41 $5.07 $0.01
Reorganization
items (income)
expense, net
of income
taxes 0.04 0.06 (5.44) (5.28) 0.42
Debtor-in-
possession
financing
costs - - - - 0.24
Alternative
fuel mixture
tax credits - (0.70) - (0.04) (1.77)
Loss on early
extinguishment
of debt - - - - 0.08
Non-cash
foreign
currency
exchange
(gains) losses - 0.04 (0.03) (0.01) 0.04
Loss on sale of
assets - 0.01 - - 0.01
Interest on
Predecessor
unsecured debt - 0.19 - - 0.51
Restructuring
charges 0.04 0.06 0.07 0.06 0.15
Multi-employer
pension plan
withdrawal
charge, net of
income taxes 0.03 - - - -
---- --- --- --- ---
Adjusted net
income (loss)
per diluted
share
attributable
to common
stockholders
(Note 2) $0.76 $(0.09) $0.01 $(0.20) $(0.31)
----- ------ ----- ------ ------
</pre>
<p> </p>
<p> </p>
<pre>
Note 1: For the Predecessor Company, adjustments to GAAP net income,
other than reorganization items (income) expense, were not tax
effected because it was more likely than not that substantially all
of the deferred tax assets that were generated during bankruptcy
would not be realized and we did not record any additional tax
benefit for 2009 and the six months ended June 30, 2010. Due to the
effects of the Plan of Reorganization, we concluded that it was more
likely than not that substantially all of the deferred tax assets
would be realized and we recognized an income tax benefit related to
reorganization items in the six months ended June 30, 2010.
</pre>
<p> </p>
<pre>
For the Successor Company, for the three months ended September 30,
2010, we recorded a provision for income taxes related to the
statement of operations. As a result, the Successor period
adjustments to net income are presented on a net of tax basis.
</pre>
<p> </p>
<pre>
Note 2: 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, loss on sale of assets, accrued but unpaid
interest on Predecessor unsecured debt, restructuring charges and a
multi-employer pension plan withdrawal charge. 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 following regarding
the use of non-GAAP financial measures.
</pre>
<p> </p>
<pre>
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>
<p> </p>
<pre>
Successor Predecessor
--------- -----------
3Q 10 2Q 10 3Q 09
----- ----- -----
</pre>
<p> </p>
<p>Net sales <span class="xn-money">$1,634</span> <span class="xn-money">$1,563</span> <span class="xn-money">$1,417</span></p>
<p> </p>
<pre>
Net income $65 $1,413 $68
(Benefit from) provision for
income taxes 49 (199) (2)
Interest expense, net 23 10 72
Depreciation, depletion and
amortization 84 83 91
--- --- ---
EBITDA 221 1,307 229
</pre>
<p> </p>
<pre>
Reorganization items (income)
expense 7 (1,219) 16
Restructuring charges 7 19 14
Alternative fuel mixture tax
credits - - (179)
Non-cash foreign currency
exchange (gains) losses - (9) 11
Loss on sale of assets - - 2
Multi-employer pension plan
withdrawal charge 4 - -
Other - 4 1
</pre>
<p> </p>
<p> </p>
<pre>
Adjusted EBITDA $239 $102 $94
---- ---- ---
</pre>
<p> </p>
<pre>
Adjusted EBITDA margin 14.6% 6.5% 6.6%
---- --- ---
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
Other Financial Information:
----------------------------
Net cash provided by (used for)
operating activities $161 $(135) $301
Capital expenditures 39 49 43
Pension expense 14 34 31
Pension contributions 31 12 1
Cash taxes refunded (paid) 9 (1) -
Change in working capital (36) (2) 74
Containerboard, corrugated
containers and reclamation
operations segment operating
profit 216 82 60
</pre>
<p> </p>
<pre>
"EBITDA" is defined as net income 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.
</pre>
<p> </p>
<pre>
SMURFIT-STONE CONTAINER CORPORATION
STATISTICAL INFORMATION
</pre>
<p> </p>
<p> </p>
<pre>
2010
----
Combined
Successor Predecessor (1)
--------- ----------- ---------
2nd 1st
3rd Qtr Qtr Qtr Sept YTD
------- ---- ---- --------
</pre>
<p> </p>
<pre>
Containerboard System
North American Mill
Operating Rates
(Containerboard Only) 99.7% 97.1% 100.0% 99.2%
</pre>
<p> </p>
<pre>
North American
Containerboard Production
-M Tons 1,603 1,545 1,585 4,733
Sequential Avg. Domestic
Linerboard Price Change 7.2% 13.2% 6.3% N/A
</pre>
<p> </p>
<pre>
Pulp Production - M Tons 73 72 62 207
SBS/Bleached Board
Production -M Tons 32 31 35 98
Kraft Paper Production -M
Tons 26 26 29 81
</pre>
<p> </p>
<pre>
Total Maintenance Downtime
Tons -M Tons 49 76 20 145
</pre>
<p> </p>
<pre>
Corrugated Containers
North American Shipments -
BSF 17.1 17.3 16.4 50.8
Per Day North American
Shipments -MMSF 266.9 273.7 260.9 267.1
Sequential Avg. Corrugated
Price Change 3.2% 3.6% -0.6% N/A
</pre>
<p> </p>
<pre>
Fiber Reclaimed and
Brokered -M Tons 1,494 1,468 1,423 4,385
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
2009
----
Predecessor
-----------
3rd 2nd 1st Sept
Qtr Qtr Qtr YTD
---- ---- ---- -----
</pre>
<p> </p>
<pre>
Containerboard System
North American Mill Operating Rates
(Containerboard Only) 87.2% 85.0% 82.4% 84.9%
</pre>
<p> </p>
<pre>
North American Containerboard
Production -M Tons 1,551 1,497 1,435 4,483
Sequential Avg. Domestic Linerboard
Price Change -5.9% -9.8% -7.4% N/A
</pre>
<p> </p>
<pre>
Pulp Production - M Tons 78 76 66 220
SBS/Bleached Board Production -M
Tons 29 32 33 94
Kraft Paper Production - M Tons 34 28 19 81
</pre>
<p> </p>
<pre>
Total Maintenance Downtime Tons -M
Tons 29 50 46 125
</pre>
<p> </p>
<pre>
Corrugated Containers
North American Shipments - BSF 16.7 16.7 16.6 50.0
Per Day North American Shipments -
MMSF 260.9 265.7 267.8 264.8
Sequential Avg. Corrugated Price
Change -2.6% -3.0% -0.9% N/A
</pre>
<p> </p>
<p>Fiber Reclaimed and Brokered - M Tons 1,317 1,280 1,241 3,838</p>
<p> </p>
<pre>
(1) Although the 2010 Successor Period and the 2010 Predecessor
Period are distinct reporting periods, we combined the statistical
information for the six months ended June 30, 2010 of the
Predecessor with the three months ended September 30, 2010 of the
Successor for analytical purposes.
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, non-cash foreign currency exchange (gains) losses, interest on Predecessor unsecured debt, restructuring charges, (gain) loss on sale of assets and a multi-employer pension plan withdrawal charge. 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, restructuring charges, 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, a multi-employer pension plan withdrawal charge 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 (1) the three months ended <span class="xn-chron">September 30, 2010</span> of the Successor, (2) the six months ended <span class="xn-chron">June 30, 2010</span> of the Predecessor and (3) the three and nine months ended <span class="xn-chron">September 30, 2009</span> of the Predecessor, 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 - Through June 30, 2010, 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 Predecessor 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 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.
-- Multi-employer pension plan withdrawal charge - This amount represents
the charge associated with the withdrawal from a multi-employer
pension
plan. This expense item was not considered indicative of our ongoing
operating performance and was 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>
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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 Web Site: http://www.smurfit-stone.com
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