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> <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 Web Site: http://www.smurfit-stone.com
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