Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 19, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | KAPSTONE PAPER & PACKAGING CORP | |
Entity Central Index Key | 1,325,281 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 96,792,424 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 7,915 | $ 29,385 |
Trade accounts receivable (Includes $383,209 at March 31, 2017, and $368,922 at December 31, 2016, associated with the receivables credit facility) | 416,591 | 392,962 |
Other receivables | 14,177 | 13,562 |
Inventories | 341,403 | 322,664 |
Prepaid expenses and other current assets | 22,824 | 10,247 |
Total current assets | 802,910 | 768,820 |
Plant, property and equipment, net | 1,452,636 | 1,441,557 |
Other assets | 25,887 | 25,468 |
Intangible assets, net | 320,913 | 314,413 |
Goodwill | 720,473 | 705,617 |
Total assets | 3,322,819 | 3,255,875 |
Current liabilities: | ||
Short-term borrowings | 25,988 | |
Other current borrowings | 6,214 | |
Dividend payable | 10,043 | 10,052 |
Accounts payable | 232,429 | 189,350 |
Accrued expenses | 94,023 | 76,480 |
Accrued compensation costs | 45,797 | 48,840 |
Accrued income taxes | 225 | 15,971 |
Total current liabilities | 414,719 | 340,693 |
Other liabilities: | ||
Long-term debt (Includes $264,683 at March 31, 2017, and $269,273 at December 31, 2016, associated with the receivables credit facility) | 1,481,912 | 1,485,323 |
Pension and postretirement benefits | 32,805 | 34,207 |
Deferred income taxes | 407,393 | 405,561 |
Other liabilities | 79,212 | 85,761 |
Total other liabilities | 2,001,322 | 2,010,852 |
Stockholders' equity: | ||
Preferred stock $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding | ||
Common stock-$0.0001 par value; 175,000,000 shares authorized; 96,787,331 shares issued and outstanding (excluding 40,000 treasury shares) at March 31, 2017 and 96,639,920 shares issued and outstanding (excluding 40,000 treasury shares) at December 31, 2016 | 10 | 10 |
Additional paid-in-capital | 281,317 | 275,970 |
Retained earnings | 685,891 | 689,668 |
Accumulated other comprehensive loss | (60,440) | (61,318) |
Total stockholders' equity | 906,778 | 904,330 |
Total liabilities and stockholders' equity | $ 3,322,819 | $ 3,255,875 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 175,000,000 | 175,000,000 |
Common stock, shares issued | 96,787,331 | 96,639,920 |
Common stock, shares outstanding | 96,787,331 | 96,639,920 |
Treasury shares, shares outstanding | 40,000 | 40,000 |
Receivable Credit Facility | ||
Trade accounts receivable | $ 383,209 | $ 368,922 |
Long term debt portion associated with securitization facility | $ 264,683 | $ 269,273 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Consolidated Statements of Comprehensive Income | ||
Net sales | $ 765,843 | $ 738,215 |
Cost of sales, excluding depreciation and amortization | 560,898 | 533,277 |
Depreciation and amortization | 45,348 | 44,539 |
Freight and distribution expenses | 72,988 | 65,059 |
Selling, general, and administrative expenses | 66,485 | 60,740 |
Operating income | 20,124 | 34,600 |
Foreign exchange (gain) / loss | (82) | 103 |
Equity method investments income | (677) | |
Interest expense, net | 10,730 | 9,811 |
Income before provision for income taxes | 10,153 | 24,686 |
Provision for income taxes | 4,161 | 8,512 |
Net income | 5,992 | 16,174 |
Other comprehensive income | ||
Foreign currency translation adjustment | 359 | |
Pension and postretirement plan reclassification adjustments, net of tax: | ||
Accretion of prior service costs | (117) | (104) |
Amortization of net loss | 636 | 621 |
Other comprehensive income, net of tax | 878 | 517 |
Total comprehensive income | $ 6,870 | $ 16,691 |
Weighted average number of shares outstanding: | ||
Basic (in shares) | 96,698,637 | 96,399,351 |
Diluted (in shares) | 98,463,667 | 97,509,528 |
Net income per share: | ||
Basic (in dollars per share) | $ 0.06 | $ 0.17 |
Diluted (in dollars per share) | 0.06 | 0.17 |
Dividends declared per common share | $ 0.10 | $ 0.10 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities | ||
Net income | $ 5,992 | $ 16,174 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation of plant and equipment | 37,758 | 35,603 |
Amortization of intangible assets | 7,590 | 8,936 |
Stock-based compensation expense | 5,265 | 3,421 |
Pension and postretirement | (572) | (448) |
Excess tax benefit from stock-based compensation | 140 | |
Amortization of debt issuance costs | 1,179 | 1,124 |
Loss (gain) on disposal of fixed assets | 526 | (62) |
Deferred income taxes | 1,521 | 1,064 |
Change in fair value of contingent consideration liability | 2,516 | 1,526 |
Equity method investments income | (167) | |
Changes in assets and liabilities: | ||
Trade accounts receivable, net | (21,145) | (8,169) |
Other receivables | (659) | 1,789 |
Inventories | (17,870) | 847 |
Prepaid expenses and other current assets | (12,549) | 8,007 |
Other assets | (208) | |
Accounts payable | 41,413 | 7,936 |
Accrued expenses and other liabilities | 964 | (6,303) |
Accrued compensation costs | (3,139) | (15,320) |
Accrued income taxes | (15,746) | 2,340 |
Net cash provided by operating activities | 32,669 | 58,605 |
Investing activities | ||
Capital expenditures | (38,669) | (36,163) |
Purchase of intangible assets | (500) | |
Acquisitions, net of cash acquired | (33,500) | |
Proceeds from the sale of assets | 4,856 | |
Net cash used in investing activities | (72,169) | (31,807) |
Financing activities | ||
Proceeds from revolving credit facility | 122,988 | 134,600 |
Repayments on revolving credit facility | (97,000) | (131,000) |
Proceeds from receivables credit facility | 17,031 | 6,670 |
Repayments on receivables credit facility | (21,621) | (24,700) |
Payment of loan amendment fees | (2,250) | |
Proceeds from other current borrowings | 6,214 | |
Cash dividends paid | (9,664) | (9,696) |
Payment of withholding taxes on stock awards | (856) | (692) |
Proceeds from exercises of stock options | 451 | 209 |
Proceeds from shares issued to ESPP | 487 | 464 |
Excess tax (deficiency) from stock-based compensation | (140) | |
Net cash (used in) provided by financing activities | 18,030 | (26,535) |
Net increase (decrease) in cash and cash equivalents | (21,470) | 263 |
Cash and cash equivalents-beginning of period | 29,385 | 6,821 |
Cash and cash equivalents-end of period | $ 7,915 | $ 7,084 |
Financial Statements
Financial Statements | 3 Months Ended |
Mar. 31, 2017 | |
Financial Statements | |
Financial Statements | 1. Financial Statements The accompanying unaudited consolidated financial statements of KapStone Paper and Packaging Corporation (the “Company,” “we,” “us,” “our” or “KapStone”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. For further information, refer to the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016. We report our operating results in two reportable segments: Paper and Packaging and Distribution. Our Paper and Packaging segment manufactures and sells a wide variety of containerboard, corrugated products and specialty paper for industrial and consumer markets. The Distribution segment, through Victory, a North American distributor of packaging materials, with more than 60 distribution centers located in the United States, Mexico and Canada, provides packaging materials and related products to a wide variety of customers. For more information about our segments, see Note 12, Segment Information. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2017 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | 2. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standard’s Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The guidance in this update supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, this update supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts”. The standard will be effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. Additionally the FASB approved the option to early adopt up to the original effective date (fiscal years beginning after December 15, 2016). We are in the diagnostic phase of evaluating the overall impact of ASU 2014-09. The Company has determined that it will adopt this standard utilizing the modified retrospective method, which will result in the recognition of the cumulative effect of initially applying the standard (if any) as an adjustment to opening retained earnings for the fiscal year beginning January 1, 2018. During 2016, the Company reported its progress to management and the Audit Committee on a periodic basis. The Company will provide additional disclosure as the implementation plan progresses during 2017. In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory”, which is intended to simplify the subsequent measurement of inventories by replacing the current lower of cost or market test with a lower of cost and net realizable value test. The guidance applies only to inventories for which cost is determined by methods other than last-in first-out and the retail inventory method. Application of the standard, which should be applied prospectively, is required for the annual and interim periods beginning after December 15, 2016. ASU 2015-11 was adopted during the interim period ended March 31, 2017, and it had no material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases”. This guidance revises existing practice related to accounting for leases under Accounting Standards Codification Topic 840 Leases (ASC 840) for both lessees and lessors. The new guidance in ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840), while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). While the new standard maintains similar accounting for lessors as under ASC 840, the new standard reflects updates to, among other things, align with certain changes to the lessee model. The guidance is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted for all entities. The Company does have a significant number of leases for both property and equipment. As such, the Company expects that there will be a material impact on our financial position, results of operations and disclosures upon the adoption of ASU 2016-02. The Company will provide additional disclosure as the implementation plan progresses. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The guidance was effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. ASU 2016-09 was adopted prospectively during the interim period ended March 31, 2017, and it increased the Company’s provision for incomes taxes by $0.5 million. The Company elected to continue to recognize estimated forfeitures over the term of the awards. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, which clarifies the treatment of several cash flow categories. In addition, ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, including adoption in an interim period. We are currently evaluating the impact that the adoption of ASU 2016-15 will have on our cash flows and related disclosures. In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment”, which amends the guidance in ASC 350, “Intangibles-Goodwill and Other”. The ASU eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The ASU will be applied prospectively. We currently do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business”, which amends the guidance in ASC 805, “Business Combinations”. The ASU changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. Under the new guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If it is not met, the entity then evaluates whether the set meets the requirements that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The ASU defines an output as “the result of inputs and processes applied to those inputs that provide goods or services to customers, investment income (such as dividends or interest), or other revenues.” The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods, and early adoption is permitted. The ASU will be applied prospectively to any transactions occurring within the period of adoption. We currently do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements. In March, 2017, the FASB issued ASU No. 2017-07, “Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU applies to all employers that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. The ASU requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The ASU also allows only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally manufactured inventory or a self-constructed asset). This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The Company is currently evaluating the effect that ASU No. 2017-07 will have on its consolidated financial statements and related disclosures. |
API Acquisition
API Acquisition | 3 Months Ended |
Mar. 31, 2017 | |
API Acquisition | |
API Acquisition | 3. API Acquisition On February 1, 2017, the Company acquired the assets of Associated Packaging, Inc. and Fast Pak, LLC (together, “API”) with operations located in Greer, South Carolina for $33.5 million. The acquisition was funded from borrowings on the Company’s $500 million revolving credit facility (“Revolver”). API provides corrugated packaging and digital production needs serving a diverse customer base, including an emphasis on fulfillment and kitting for the automotive and consumer products industries. Operating results of the acquisition since February 1, 2017 are included in the Company’s Paper and Packaging segment. The Company has allocated the purchase price to the assets acquired and liabilities assumed, of which $14.1 million has been allocated to customer relationship intangible assets, $2.8 million to plant, property and equipment, $1.8 million to net working capital and $14.8 million to goodwill (which is deductible for tax purposes). The purchase price allocation is preliminary pending further review by management of the fair value for intangible assets. Transaction fees and expenses for the API acquisition related to due diligence, advisory and legal services have been expensed as incurred. These expenses were $0.4 million for the three month period ended March 31, 2017, and were recorded as selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income. This acquisition further strengthens the Company’s goal of increasing mill integration. In conjunction with the API acquisition, the Company signed a 25-year lease agreement with a total commitment of approximately $14.7 million. |
Planned Maintenance Outages
Planned Maintenance Outages | 3 Months Ended |
Mar. 31, 2017 | |
Planned Maintenance Outages | |
Planned Maintenance Outages | 4. Planned Maintenance Outages Planned maintenance outage costs for the three months ended March 31, 2017 and 2016 totaled $6.2 million and $6.6 million, respectively, and are included in cost of sales. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2017 | |
Inventories | |
Inventories | 5. Inventories Inventories consist of the following at March 31, 2017 and December 31, 2016, respectively: (unaudited) March 31, December 31, 2017 2016 Raw materials $ $ Work in process Finished goods Replacement parts and supplies Inventory at FIFO costs LIFO inventory reserves ) ) Inventories $ $ |
Short-term Borrowings and Long-
Short-term Borrowings and Long-term Debt | 3 Months Ended |
Mar. 31, 2017 | |
Short-term Borrowings and Long-term Debt | |
Short-term Borrowings and Long-term Debt | 6. Short-term Borrowings and Long-term Debt KapStone and certain of our subsidiaries are parties to a Second Amended and Restated Credit Agreement dated June 1, 2015 (as amended from time to time, the “Credit Agreement”), which provides for a senior secured credit facility (the “Credit Facility”) of $1.915 billion, consisting of a Term Loan A-1 in the aggregate amount of $940 million and a Term Loan A-2 in the aggregate amount of $475 million and the Revolver. In addition, the Credit Facility also includes an uncommitted accordion feature that allows the Company, subject to certain significant conditions, to request additional commitments from our existing or new lenders under the Credit Facility without further approvals of any existing lenders thereunder. The aggregate amount of such increases in potential commitments (and potential borrowings) is limited to $600 million, unless the Company would maintain a pro forma total leverage ratio of 2.5 to 1.0 or less after giving effect to the increase in potential commitments (and potential borrowings). On March 27, 2017, the Company entered into the Second Amendment to the Credit Agreement which modified certain defined terms used in the calculation of the financial covenants in a manner favorable to the Company. Short-term Borrowings As of March 31, 2017, the Company had $26.0 million of short-term borrowings outstanding under the Revolver, with a weighted average interest of 3.42 percent. As of March 31, 2017, the Company has available borrowing capacity of $457.4 million under the Revolver. Receivables Credit Facility On February 21, 2017, the Company entered into Amendment No. 3 to the Receivables Sale Agreement to amend the accounts receivable securitization program (the “Securitization Program”) of the Company and certain of its subsidiaries. All accounts receivable purchased from API and Fast Pak, LLC (the “Sellers”) and all accounts receivable generated from facilities acquired from the Sellers that are not paid to an eligible bank account are designated as “Excluded Receivables”. Under our Securitization Program, the Company and its subsidiaries that participate in the Securitization Program (the “Originators”) sell, on an ongoing basis without recourse, certain trade receivables to KapStone Receivables, LLC (“KAR”), which is considered a wholly-owned, bankruptcy-remote variable interest entity (“VIE”). The Company has the authority to direct the activities of the VIE and, as a result, we have concluded that we maintain control of the VIE, are the primary beneficiary (as defined by accounting guidance) and, therefore, consolidate the account balances of KAR. As of March 31, 2017, $383.2 million of our trade accounts receivables were sold to KAR. KAR in turn assigns a collateral interest in these receivables to a financial institution under a one-year $275 million facility (the “Receivables Credit Facility”) for proceeds of $264.7 million. The assets of KAR are not available to us until all obligations of KAR are satisfied in the event of bankruptcy or insolvency proceedings. Other Borrowing In January 2017, the Company entered into a short-term financing agreement of $6.2 million at an annual interest rate of 2.4 percent for its annual property insurance premiums. The agreement requires the Company to pay three quarterly payments through the term of the financing agreement ending on December 1, 2017. As of March 31, 2017, there was $6.2 million outstanding under the current agreement. Debt Covenants Our Credit Agreement governing our Credit Facility contains, among other provisions, covenants with which we must comply. The covenants limit our ability to, among other things, incur indebtedness, create additional liens on our assets, make investments, engage in mergers and acquisitions and sell any assets outside the normal course of business. As of March 31, 2017, the Company was in compliance with all applicable covenants in the Credit Agreement. Fair Value of Debt As of March 31, 2017, the fair value of the Company’s debt approximates the carrying value of $1.5 billion as the variable interest rates re-price frequently at current market rates. Our weighted-average cost of borrowings was 2.61 percent and 2.08 percent for the three months ended March 31, 2017 and March 31, 2016, respectively. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Taxes | |
Income Taxes | 7. Income Taxes The Company’s effective income tax rate for the three months ended March 31, 2017 was 41.0 percent compared to 34.5 percent for the three months ended March 31, 2016. The higher effective income tax rate in the three months ended March 31, 2017 reflects $0.5 million in tax expense from the Company’s adoption of ASU 2016-09 which requires the tax impact of elements of stock compensation to be recorded in the provision for income taxes. Cash taxes paid in the quarter ending March 31, 2017 were $21.1 million compared to net cash tax refunds of $11.5 million for the quarter ended March 31, 2016. In the normal course of business, the Company is subject to examination by taxing authorities. The Company’s open federal tax years are 2013, 2014 and 2015. The Company has open tax years for state and foreign income tax filings generally starting in 2012. |
Net Income per Share
Net Income per Share | 3 Months Ended |
Mar. 31, 2017 | |
Net Income per Share | |
Net Income per Share | 8. Net Income per Share The Company’s basic and diluted net income per share for the three months ended March 31, 2017 and 2016 is calculated as follows: Three Months Ended March 31, 2017 2016 Net income $ $ Weighted-average number of common shares for basic net income per share Incremental effect of dilutive common stock equivalents: Unexercised stock options Unvested restricted stock awards Weighted-average number of shares for diluted net income per share Net income per share - basic $ $ Net income per share - diluted $ $ A total of 1,189,244 and 1,462,796 weighted average unexercised stock options were outstanding at March 31, 2017 and 2016, respectively, but were not included in the computation of diluted net income per share because the awards were anti-dilutive. |
Pension Plan and Post-Retiremen
Pension Plan and Post-Retirement Benefits | 3 Months Ended |
Mar. 31, 2017 | |
Pension Plan and Post-Retirement Benefits | |
Pension Plan and Post-Retirement Benefits | 9. Pension Plan and Post-Retirement Benefits Defined Benefit Plan Net pension cost (benefit) recognized for the three months ended March 31, 2017 and 2016 for the Company’s defined benefit plan (the “Pension Plan”) is as follows: Three Months Ended March 31, 2017 2016 Service cost for benefits earned during the quarter $ $ Interest cost on projected benefit obligations Expected return on plan assets ) ) Amortization of net loss Amortization of prior service cost Net pension cost (benefit) $ ) $ The Company currently does not anticipate making any Pension Plan contributions in 2017. This estimate is based on current tax laws, plan asset performance, and liability assumptions, which are subject to change. The Company provides postretirement health care insurance benefits through an indemnity plan for certain salary and non-salary of its subsidiary Longview Fibre Paper and Packaging, Inc. (“Longview”) employees and their dependents. The Company anticipates making contributions to its postretirement plans in 2017 as claims are submitted. Defined Contribution Plan The Company offers 401(k) Defined Contribution Plans (“Contribution Plans”) to eligible employees. The Company’s monthly contributions are based on the matching of certain employee contributions or based on a union negotiated formula. For the three months ended March 31, 2017 and 2016, the Company recognized expense of $6.2 million and $3.6 million, respectively, for matching contributions. In 2017, the Company restored matching contributions to its Contribution Plans for certain employees that were previously suspended during 2016. As a result, contributions were $2.6 million higher in the quarter ended March 31, 2017 compared to the same period in 2016. Multiemployer Pension Plan In conjunction with each of the Longview and U.S. Corrugated acquisitions, the Company assumed participation in the GCIU-Employer Retirement Fund for approximately 300 hourly employees at four corrugated products manufacturing plants. On October 31, 2016, the Company provided formal notification to the plan trustee of its withdrawal from the plan and cessation of plan contributions effective December 31, 2016. Accordingly, the Company recorded an estimated withdrawal liability of approximately $6.4 million, based on annual payments of approximately $0.4 million over 20 years, discounted at a credit adjusted risk-free rate return of approximately 3.6 percent. This liability is based on an analysis of the facts available to management; however, the withdrawal liability will ultimately be determined by the plan trustee. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Stock-Based Compensation | |
Stock-Based Compensation | 10. Stock-Based Compensation In the quarter ended March 31, 2017, the compensation committee of the board of directors approved stock-based awards to executive officers, certain employees and directors. The 2017 award consisted of the grant of 957,270 stock options, and 342,264 restricted stock units with a combined cost of $15.1 million. The Company accounts for stock-based awards in accordance with ASC 718, “ Compensation — Stock Compensation ,” which requires that the cost resulting from all share-based payment transactions be recognized as compensation cost over the vesting period based on the fair value of the instrument on the date of grant. Total stock-based compensation expense related to the stock option and restricted stock unit grants for the three months ended March 31, 2017 and 2016 is as follows: Three Months Ended March 31, 2017 2016 Stock option compensation expense $ $ Restricted stock unit compensation expense Total stock-based compensation expense $ $ Total unrecognized stock-based compensation cost related to the stock options and restricted stock units as of March 31, 2017 and December 31, 2016 is as follows: March 31, December 31, 2017 2016 Unrecognized stock option compensation expense $ $ Unrecognized restricted stock unit compensation expense Total unrecognized stock-based compensation expense $ $ As of March 31, 2017, total unrecognized compensation cost related to non-vested stock options and restricted stock units is expected to be recognized over a weighted average period of 2.5 years and 2.4 years, respectively. Stock Options Stock option awards to employees generally vest as follows: 50% after two years and the remaining 50% after three years or upon a grantee of such stock options attaining the age 65. The stock options awarded in 2017 have a contractual term of ten years and are subject to forfeiture should the recipient terminate his or her employment with the Company for certain reasons prior to vesting in his or her awards, or the occurrence of certain other events, such as termination with cause. The exercise price of these stock options is based on the average market price of our common stock on the date of grant ($22.20 for the 2017 awards described above) and compensation expense is recorded on an accelerated basis over the awards’ vesting periods. The weighted average fair value of the stock options granted in March 2017 and 2016 was $7.79 and $3.79, respectively. The fair value was calculated using the Black-Scholes option-pricing model based on the market price at the grant date and the weighted average assumptions specific to the underlying options. The expected term used by the Company is based on the historical average life of stock option awards. The expected volatility assumption is based on the volatility of our common stock from the same time period as the expected term of the stock options. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term similar to the expected life of the stock options. The expected dividend yield is calculated as the annual dividend per share amount divided by the average market price of the common stock on the date of the grant. The assumptions utilized for calculating the fair value of stock options during the period are as follows: Three Months Ended March 31, 2017 2016 KapStone Stock Options Black-Scholes assumptions (weighted average): Expected volatility % % Expected life (years) Risk-free interest rate % % Expected dividend yield % % The following table summarizes stock options amounts and activity: Weighted Weighted Intrinsic Average Average Value Exercise Remaining (dollars in Options Price Life (Years) thousands) Outstanding at January 1, 2017 $ Granted Exercised ) Lapsed (forfeited or cancelled) ) Outstanding at March 31, 2017 $ Exercisable at March 31, 2017 $ $ For the three months ended March 31, 2017 and 2016, cash proceeds from the exercise of stock options totaled $0.5 million and $0.2 million, respectively. Restricted Stock Restricted stock units for executive officers and certain employees are restricted as to transferability until they generally vest three years from the grant date or upon a grantee of such restricted stock units attaining the age 65. Restricted stock units for directors are restricted as to transferability until they generally vest one year from the grant date or upon a grantee of such restricted stock units attaining the age of 65. These restricted stock units are subject to forfeiture should applicable employees terminate their employment with the Company for certain reasons prior to vesting in their awards, or the occurrence of certain other events. The value of these restricted stock units is based on the average market price of our common stock on the date of grant and compensation expense is recorded on a straight-line basis over the awards’ vesting periods. The following table summarizes unvested restricted stock units amounts and activity: Weighted Average Grant Units Price Outstanding at January 1, 2017 $ Granted Vested ) Forfeited ) Outstanding at March 31, 2017 $ |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Commitments and Contingencies Legal Claims We are from time to time subject to various administrative and legal investigations, claims and proceedings incidental to our business, including environmental and occupational, health and safety matters, labor and employment matters, personal injury and property damage claims, contractual, commercial and other disputes and taxes. We establish reserves for claims and proceedings when it is probable that liabilities exist and where reasonable estimates can be made. We also maintain insurance that may limit our financial exposure for defense costs, as well as liability, if any, for claims covered by the insurance (subject also to deductibles and self-insurance amounts). While any investigation, claim or proceeding has an element of uncertainty, and we cannot predict or assure the outcome of any claim or proceeding involving the Company, we believe the outcome of any pending or threatened claim or proceeding (other than those that cannot be assessed due to their preliminary nature), or all of them combined, will not have a material adverse effect on our results of operations, cash flows or financial condition. The Company’s subsidiary, Longview is a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) with respect to the Lower Duwamish Waterway Superfund Site in the State of Washington (the “Site”). The U.S. Environmental Protection Agency (“EPA”) asserts that the Site is contaminated as a result of discharges from various businesses and government entities located along the Lower Duwamish Waterway, including a corrugated converting plant owned and operated by Longview. In November 2014, the EPA issued a Record of Decision (“ROD”) for the Site. The ROD includes a selected remedy for the Site. In the ROD, EPA states that the total estimated net present value costs (discounted at 2.3%) for the selected remedy are $342 million. Neither the Company nor Longview has received a specific monetary demand regarding its potential liability for the Site. In addition, Longview is a participant in a non-judicial allocation process with respect to the Site. Pursuant to the non-judicial allocation process, Longview and other participating parties will seek to allocate certain costs, including but not limited to the costs necessary to perform the work under the ROD. The non-judicial allocation process is not scheduled to be completed until 2019. Based upon the information available to the Company at this time, the Company cannot reasonably estimate its potential liability for this Site. In October 2016, the Company’s subsidiary KapStone Charleston Kraft LLC (“KCK”) received a Notice of Alleged Violation from the South Carolina Department of Health and Environmental Control (“DHEC”) in which DHEC made several allegations related to air regulatory requirements. Several of the allegations related to recordkeeping/reporting, monitoring or paperwork requirements which did not implicate actual emissions (and which have been corrected); however, three of the allegations related to periodic compliance monitoring of particulates from operating equipment sources that are considered to be serious under DHEC guidelines. No emissions from the monitoring resulted in any impact to the environment or human health, and no annual limits were exceeded because this allegation involved spare equipment that is operated only a limited number of days each year. Discussions with DHEC regarding the alleged violations are ongoing, and the resolution of the matters raised in this notice is uncertain at this time (and therefore the Company cannot reasonably estimate its potential liability for this enforcement matter). However, no capital expenditure is required and all repairs and corrective actions have been performed resulting in full compliance as of March 31, 2017; thus the Company currently does not expect that the result of those discussions will be material to the our results of operations, cash flows or financial condition. In January 2017, the Company received a letter from the state of Washington Department of Ecology contending that the Company may, along with several other companies, be responsible for investigation and cleanup of an allegedly contaminated site where the named companies, including Longview, may store or have stored petroleum products. The letter concerns the possible release of petroleum products into the environment. In 1998, Longview (before it was acquired by the Company) and certain other companies who owned or operated underground storage tanks and pipes entered into an agreement for investigating and remediating the area independently of (but in consultation with) the Washington Department of Ecology. Upon expiration of the 1998 agreement, groundwater monitoring continued. The Company plans to respond to the notice and further investigate the allegations in the letter. Based upon the information available to the Company at this time, the Company cannot reasonably estimate its potential liability, if any, for this site. There have been no material changes in any of our legal proceedings for the three months ended March 31, 2017. Contingent Consideration The Company’s contingent consideration obligation relates to the acquisition of Victory Packaging, L.P. (“Victory”) on June 1, 2015 and is considered a Level 3 liability. The fair value of the obligation as of March 31, 2017 and December 31, 2016 was $17.4 million and $14.9 million, respectively. The fair value of the contingent consideration is estimated based on the probability of reaching the performance measures through November 30, 2017. The probability is estimated by reviewing financial forecasts and assessing the likelihood of reaching the required performance measures based on factors specific to the acquisition. The discount rate is determined by applying a risk premium to a risk-free interest rate. The total potential payout under this obligation is $25.0 million. The Company expects to payout this obligation in the first quarter of 2018. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2017 | |
Segment Information | |
Segment Information | 12. Segment Information Paper and Packaging: This segment manufactures and sells a wide variety of container board, corrugated products and specialty paper for industrial and consumer markets. Distribution: Through Victory, a North American distributor of packaging materials, with more than 60 distribution centers located in the United States, Mexico and Canada, the Company provides packaging materials and related products to a wide variety of customers. Each segment’s profits and losses are measured on operating profits before income from equity investments, foreign exchange gains / (losses), loss on debt extinguishment, net interest expense and income taxes. Net Sales Operating Depreciation Three Months Ended March 31, 2017 Trade Inter- Total Income and Capital Assets Paper and Packaging: Containerboard / Corrugated products $ $ $ Specialty paper — Other — Paper and Packaging $ $ $ $ $ $ $ Distribution — Corporate — — — ) Intersegment eliminations — ) ) — — — — $ $ — $ $ $ $ $ Net Sales Operating Depreciation Three Months Ended March 31, 2016 Trade Inter- Total Income and Capital Assets Paper and Packaging: Containerboard / Corrugated products $ $ $ Specialty paper — Other — Paper and Packaging $ $ $ $ $ $ $ Distribution — Corporate — — — ) Intersegment eliminations — ) ) — — — — $ $ — $ $ $ $ $ |
North Charleston, South Carolin
North Charleston, South Carolina Paper Mill Union Contract | 3 Months Ended |
Mar. 31, 2017 | |
North Charleston, South Carolina Paper Mill Union Contract | |
North Charleston, South Carolina Paper Mill Union Contract | 13. North Charleston, South Carolina Paper Mill Union Contract On March 3, 2017, the labor unions at the Company’s paper mill in North Charleston, South Carolina ratified a new 8 year collective bargaining agreement covering approximately 600 employees. The agreement puts in place a high deductible health care plan beginning January 1, 2018. It allows for more efficient use of operating and maintenance employees and changes the defined pension benefit contribution plan. For the quarter ended March 31, 2017, the costs incurred were $5.0 million to ratify this agreement and are included in cost of sales in the period. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events | |
Subsequent Events | 14. Subsequent Events On April 2, 2017, the compensation committee of the board of directors granted 126,976 restricted stock units to certain Company employees for retention purposes. The total value of the award was $2.9 million. These restricted stock units to certain executive officers vest within one year of the grant date while the non-executive officers’ units vest within 90 days of the grant date. In addition to the restricted stock units, a retention award of $0.5 million was paid in cash to other employees. On April 9, 2017, the Company’s paper mill in Roanoke Rapids, North Carolina completed its annual planned maintenance outage. The outage lasted approximately 9 days with an estimated cost of $8.9 million, primarily for annual maintenance and inspections, and the fixed cost impact associated with lost paper production of 11,600 tons. |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Inventories | |
Schedule of Inventories | (unaudited) March 31, December 31, 2017 2016 Raw materials $ $ Work in process Finished goods Replacement parts and supplies Inventory at FIFO costs LIFO inventory reserves ) ) Inventories $ $ |
Net Income per Share (Tables)
Net Income per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Net Income per Share | |
Schedule of basic and diluted net income per share | Three Months Ended March 31, 2017 2016 Net income $ $ Weighted-average number of common shares for basic net income per share Incremental effect of dilutive common stock equivalents: Unexercised stock options Unvested restricted stock awards Weighted-average number of shares for diluted net income per share Net income per share - basic $ $ Net income per share - diluted $ $ |
Pension Plan and Post-Retirem22
Pension Plan and Post-Retirement Benefits (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Pension Plan and Post-Retirement Benefits | |
Schedule of pension and other postretirement benefit (income)/costs | Three Months Ended March 31, 2017 2016 Service cost for benefits earned during the quarter $ $ Interest cost on projected benefit obligations Expected return on plan assets ) ) Amortization of net loss Amortization of prior service cost Net pension cost (benefit) $ ) $ |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Stock-Based Compensation | |
Schedule of total stock-based compensation expense | Three Months Ended March 31, 2017 2016 Stock option compensation expense $ $ Restricted stock unit compensation expense Total stock-based compensation expense $ $ |
Schedule of total unrecognized stock-based compensation | March 31, December 31, 2017 2016 Unrecognized stock option compensation expense $ $ Unrecognized restricted stock unit compensation expense Total unrecognized stock-based compensation expense $ $ |
Schedule of the assumptions utilized for calculating the fair value of stock options | Three Months Ended March 31, 2017 2016 KapStone Stock Options Black-Scholes assumptions (weighted average): Expected volatility % % Expected life (years) Risk-free interest rate % % Expected dividend yield % % |
Summary of stock options amounts and activity | Weighted Weighted Intrinsic Average Average Value Exercise Remaining (dollars in Options Price Life (Years) thousands) Outstanding at January 1, 2017 $ Granted Exercised ) Lapsed (forfeited or cancelled) ) Outstanding at March 31, 2017 $ Exercisable at March 31, 2017 $ $ |
Summary of unvested restricted stock units amounts and activity | Weighted Average Grant Units Price Outstanding at January 1, 2017 $ Granted Vested ) Forfeited ) Outstanding at March 31, 2017 $ |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Information | |
Schedule of an analysis of operations by segment | Net Sales Operating Depreciation Three Months Ended March 31, 2017 Trade Inter- Total Income and Capital Assets Paper and Packaging: Containerboard / Corrugated products $ $ $ Specialty paper — Other — Paper and Packaging $ $ $ $ $ $ $ Distribution — Corporate — — — ) Intersegment eliminations — ) ) — — — — $ $ — $ $ $ $ $ Net Sales Operating Depreciation Three Months Ended March 31, 2016 Trade Inter- Total Income and Capital Assets Paper and Packaging: Containerboard / Corrugated products $ $ $ Specialty paper — Other — Paper and Packaging $ $ $ $ $ $ $ Distribution — Corporate — — — ) Intersegment eliminations — ) ) — — — — $ $ — $ $ $ $ $ |
Financial Statements (Details)
Financial Statements (Details) | 3 Months Ended |
Mar. 31, 2017segmentitem | |
Number of reportable segments | segment | 2 |
Distribution | |
Number of distribution centers | item | 60 |
Recent Accounting Pronounceme26
Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Prospective adoption of new accounting pronouncements | ||
Provision for income taxes | $ 4,161 | $ 8,512 |
Adjustment | Accounting Standards Update No. 2016-09 | ||
Prospective adoption of new accounting pronouncements | ||
Provision for income taxes | $ 500 |
API Acquisition (Details)
API Acquisition (Details) - USD ($) $ in Thousands | Feb. 01, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Fair value of the assets acquired and liabilities assumed | |||
Goodwill | $ 720,473 | $ 705,617 | |
API | |||
Fair value of the assets acquired and liabilities assumed | |||
Assets acquired | $ 33,500 | ||
Plant, property and equipment | 2,800 | ||
Net working capital | 1,800 | ||
Goodwill | $ 14,800 | ||
Lease agreement term | 25 years | ||
Total lease commitment | $ 14,700 | ||
API | Selling, general and administrative expenses | |||
Fair value of the assets acquired and liabilities assumed | |||
Transaction fees and expenses | $ 400 | ||
API | Revolver | |||
Fair value of the assets acquired and liabilities assumed | |||
Maximum borrowing capacity | 500,000 | ||
API | Customer relationship intangible assets | |||
Fair value of the assets acquired and liabilities assumed | |||
Customer relationships | $ 14,100 |
Planned Maintenance Outages (De
Planned Maintenance Outages (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cost of Sales | ||
Planned Maintenance Outage | ||
Planned maintenance outage costs | $ 6.2 | $ 6.6 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Inventories | ||
Raw materials | $ 93,672 | $ 79,377 |
Work in process | 4,557 | 6,371 |
Finished goods | 156,229 | 151,497 |
Replacement parts and supplies | 87,383 | 85,857 |
Inventory at FIFO costs | 341,841 | 323,102 |
LIFO inventory reserves | (438) | (438) |
Inventories | $ 341,403 | $ 322,664 |
Short-term Borrowings and Lon30
Short-term Borrowings and Long-term Debt - Second Amended and Restated Credit Agreement (Details) - Credit Facility $ in Millions | Jun. 01, 2015USD ($) |
Long term debt | |
Maximum borrowing capacity | $ 1,915 |
Term Loan A1 | |
Long term debt | |
Maximum borrowing capacity | 940 |
Term Loan A2 | |
Long term debt | |
Maximum borrowing capacity | $ 475 |
Maximum | |
Long term debt | |
Pro forma leverage ratio threshold to increase commitments under the Credit Facility | 2.5 |
Revolver | Maximum | |
Long term debt | |
Accordion maximum borrowing capacity | $ 600,000 |
Short-term Borrowings and Lon31
Short-term Borrowings and Long-term Debt - Short-term Borrowings (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Short-term borrowings | |
Short-term borrowings | $ 25,988 |
Revolver | |
Short-term borrowings | |
Short-term borrowings | $ 26,000 |
Line of credit weighted average interest rate (as a percent) | 3.42% |
Current availability under borrowing base | $ 457,400 |
Short-term Borrowings and Lon32
Short-term Borrowings and Long-term Debt - Receivables Credit Facility(Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Long-term Debt | |||
Proceeds from receivables credit facility | $ 17,031 | $ 6,670 | |
Receivable Credit Facility | |||
Long-term Debt | |||
Trade receivables with securitization facility | $ 383,209 | $ 368,922 | |
Term of debt instrument | 1 year | ||
Proceeds from receivables credit facility | $ 264,700 | ||
Maximum | Receivable Credit Facility | |||
Long-term Debt | |||
Maximum borrowing capacity | $ 275,000 |
Short-term Borrowings and Lon33
Short-term Borrowings and Long-term Debt - Other Borrowing and Fair Value of Debt (Details) $ in Millions | 1 Months Ended | ||
Jan. 31, 2017USD ($)payment | Mar. 31, 2017USD ($) | Mar. 31, 2016 | |
Fair Value of Debt | |||
Weighted average cost of borrowings | 2.61% | 2.08% | |
Level 2 | |||
Fair Value of Debt | |||
Fair value of debt | $ 1,500 | ||
Other Short-term Financing Agreement | |||
Other Borrowing | |||
Initial aggregate principal amount | $ 6.2 | ||
Interest rate on borrowings (as a percent) | 2.40% | ||
Number of quarterly payments | payment | 3 | ||
Amount outstanding | $ 6.2 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Taxes | ||
Effective tax rate (as a percent) | 41.00% | 34.50% |
Income Tax Expense (Benefit) | $ 4,161 | $ 8,512 |
Cash taxes paid | 21,100 | |
Net cash tax refunds | $ 11,500 | |
Adjustment | Accounting Standards Update No. 2016-09 | ||
Income Taxes | ||
Income Tax Expense (Benefit) | $ 500 |
Net Income per Share (Details)
Net Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method | ||
Net income | $ 5,992 | $ 16,174 |
Weighted-average number of common shares for basic net income per share | 96,698,637 | 96,399,351 |
Incremental effect of dilutive common stock equivalents: | ||
Unexercised stock options (in shares) | 1,319,602 | 806,311 |
Unvested restricted stock awards (in shares) | 445,428 | 303,866 |
Weighted-average number of shares for diluted net income per share | 98,463,667 | 97,509,528 |
Net income per share - basic (in dollars per share) | $ 0.06 | $ 0.17 |
Net income per share - diluted (in dollars per share) | $ 0.06 | $ 0.17 |
Weighted average | ||
Incremental effect of dilutive common stock equivalents: | ||
Anti-dilutive unexercised stock options (in shares) | 1,189,244 | 1,462,796 |
Pension Plan and Post-Retirem36
Pension Plan and Post-Retirement Benefits (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Net pension (benefit) / cost recognized for the Pension Plans | ||
Service cost for benefits earned during the quarter | $ 1,077 | $ 1,125 |
Interest cost on projected benefit obligations | 6,567 | 7,079 |
Expected return on plan assets | (9,031) | (9,340) |
Amortization of net loss | 1,197 | 1,157 |
Amortization of prior service cost | 4 | 24 |
Net pension cost (benefit) | (186) | 45 |
Defined Contribution Plan | ||
Defined contribution plan expense recognized | 6,200 | $ 3,600 |
Increase in matching contributions | $ 2,600 |
Pension and Postretirement Bene
Pension and Postretirement Benefits - Multiemployer Pension Plan (Details) - GCIU-Employer Retirement Fund $ in Millions | 12 Months Ended |
Dec. 31, 2016USD ($)employeePlant | |
Multiemployer Pension Plan | |
Number of hourly employees covered by the plan | employee | 300 |
Number of plants with hourly employees covered by plan | Plant | 4 |
Estimated withdrawal liability | $ 6.4 |
Annual contributions by the Company | $ 0.4 |
Number of years employer contributed to the plan | 20 years |
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate | 3.60% |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Stock-based compensation | ||
Stock-based compensation expense | $ 5,265 | $ 3,421 |
Stock Options | ||
Stock-based compensation | ||
Option grants (in shares) | 957,270 | |
Stock-based compensation expense | $ 2,616 | 1,789 |
Restricted Stock Units | ||
Stock-based compensation | ||
Restricted stock unit grants (in shares) | 342,264 | |
Stock-based compensation expense | $ 2,649 | $ 1,632 |
2017 Award | ||
Stock-based compensation | ||
Combined compensation cost | $ 15,100 | |
2017 Award | Stock Options | ||
Stock-based compensation | ||
Option grants (in shares) | 957,270 | |
2017 Award | Restricted Stock Units | ||
Stock-based compensation | ||
Restricted stock unit grants (in shares) | 342,264 |
Stock-Based Compensation - Unre
Stock-Based Compensation - Unrecognized Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Unrecognized stock-based compensation expense | ||
Total unrecognized stock-based compensation expense | $ 18,266 | $ 8,748 |
Stock Options | ||
Unrecognized stock-based compensation expense | ||
Unrecognized stock option compensation expense | $ 8,563 | 3,849 |
Weighted average period of recognition | 2 years 6 months | |
Restricted Stock Units | ||
Unrecognized stock-based compensation expense | ||
Unrecognized restricted stock unit compensation expense | $ 9,703 | $ 4,899 |
Weighted average period of recognition | 2 years 4 months 24 days |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Information Related to Stock Options (Details) - Stock Options $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017USD ($)age$ / sharesshares | Mar. 31, 2016USD ($)$ / shares | |
Stock Options | ||
Grantee's attained age when awards automatically vest (in years) | age | 65 | |
Exercise price (in dollars per share) | $ 13.47 | |
Weighted average fair value (in dollars per share) | $ 7.79 | $ 3.79 |
Cash proceeds from exercises of options | $ | $ 500 | $ 200 |
Stock Options Black-Scholes assumptions (weighted average): | ||
Expected volatility (as a percent) | 43.40% | 43.61% |
Expected life | 5 years 3 months 4 days | 5 years 26 days |
Risk-free interest rate (as a percent) | 2.06% | 1.35% |
Expected dividend yield | 1.73% | 3.14% |
Options | ||
Outstanding at the beginning of the period (in shares) | shares | 4,293,081 | |
Granted (in shares) | shares | 957,270 | |
Exercised (in shares) | shares | (38,763) | |
Lapsed (forfeited or cancelled) (in shares) | shares | (23,172) | |
Outstanding at the end of the period (in shares) | shares | 5,188,416 | |
Exercisable at the end of the period (in shares) | shares | 2,692,270 | |
Weighted Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ 14.61 | |
Granted (in dollars per share) | 22.20 | |
Exercised (in dollars per share) | 13.49 | |
Lapsed (forfeited or cancelled) (in dollars per share) | 21.76 | |
Outstanding at the end of the period (in dollars per share) | 15.99 | |
Exercisable at the end of the period (in dollars per share) | $ 13.47 | |
Weighted Average Remaining Life (Years) | ||
Exercisable at the end of the period | 4 years 9 months 18 days | |
Intrinsic Value | ||
Exercisable at the end of the period | $ | $ 31,087 | |
2017 Award | ||
Stock Options | ||
Contractual term | 10 years | |
Exercise price (in dollars per share) | $ 22.20 | |
Options | ||
Granted (in shares) | shares | 957,270 | |
Weighted Average Exercise Price | ||
Exercisable at the end of the period (in dollars per share) | $ 22.20 | |
Awards that vest after two years | ||
Stock Options | ||
Percentage of granted awards that will vest | 50.00% | |
Vesting period for awards | 2 years | |
Awards that vest after three years | ||
Stock Options | ||
Percentage of granted awards that will vest | 50.00% | |
Vesting period for awards | 3 years |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock (Details) - Restricted Stock Units | 3 Months Ended |
Mar. 31, 2017age$ / sharesshares | |
Units | |
Outstanding at the beginning of the period (in shares) | shares | 691,720 |
Restricted stock unit grants (in shares) | shares | 342,264 |
Vested (in shares) | shares | (127,251) |
Forfeited (in shares) | shares | (6,639) |
Outstanding at the end of the period (in shares) | shares | 900,094 |
Weighted Average Grant Date Fair Value | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 20.93 |
Granted (in dollars per share) | $ / shares | 22.20 |
Vested (in dollars per share) | $ / shares | 30.42 |
Forfeited (in dollars per share) | $ / shares | 21.40 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 20.07 |
Executive officers and certain employees | |
Stock-based compensation | |
Vesting period for awards | 3 years |
Grantee's attained age when awards automatically vest (in years) | age | 65 |
Directors | |
Stock-based compensation | |
Vesting period for awards | 1 year |
Grantee's attained age when awards automatically vest (in years) | age | 65 |
Commitments and Contingencies -
Commitments and Contingencies - Contingent Consideration (Details) - USD ($) $ in Millions | 1 Months Ended | ||
Nov. 30, 2014 | Mar. 31, 2017 | Dec. 31, 2016 | |
Victory | Maximum | |||
Contingent consideration | |||
Total potential payout | $ 25 | ||
Victory | Level 3 | |||
Contingent consideration | |||
Fair value of the obligation | $ 17.4 | $ 14.9 | |
Longview | |||
Legal Claims | |||
Discount rate (as a percent) | 2.30% | ||
Total estimated remedy | $ 342 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017USD ($)segmentitem | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
Segment information | |||
Number of reportable segments | segment | 2 | ||
Net Sales | $ 765,843 | $ 738,215 | |
Operating Income (Loss) | 20,124 | 34,600 | |
Depreciation and amortization | 45,348 | 44,539 | |
Capital Expenditures | 38,669 | 36,163 | |
Assets | 3,322,819 | $ 3,255,875 | |
Income from equity method investments excluded from income | 677 | ||
Operating Segment | |||
Segment information | |||
Net Sales | 765,843 | 738,215 | |
Operating Income (Loss) | 20,124 | 34,600 | |
Depreciation and amortization | 45,348 | 44,539 | |
Capital Expenditures | 38,669 | 36,163 | |
Assets | 3,322,819 | 3,212,666 | |
Intersegment | |||
Segment information | |||
Net Sales | (21,197) | (16,469) | |
Paper and Packaging | |||
Segment information | |||
Net Sales | 547,644 | 520,040 | |
Paper and Packaging | Operating Segment | |||
Segment information | |||
Net Sales | 568,841 | 536,509 | |
Operating Income (Loss) | 34,315 | 46,241 | |
Depreciation and amortization | 37,406 | 37,136 | |
Capital Expenditures | 36,490 | 32,355 | |
Assets | 2,591,747 | 2,501,605 | |
Paper and Packaging | Intersegment | |||
Segment information | |||
Net Sales | 21,197 | 16,469 | |
Distribution | |||
Segment information | |||
Net Sales | 218,199 | 218,175 | |
Distribution | Operating Segment | |||
Segment information | |||
Net Sales | 218,199 | 218,175 | |
Operating Income (Loss) | 2,597 | 1,381 | |
Depreciation and amortization | 5,978 | 5,661 | |
Capital Expenditures | 679 | 2,066 | |
Assets | 687,854 | 665,458 | |
Corporate | Operating Segment | |||
Segment information | |||
Operating Income (Loss) | (16,788) | (13,022) | |
Depreciation and amortization | 1,964 | 1,742 | |
Capital Expenditures | 1,500 | 1,742 | |
Assets | 43,218 | 45,603 | |
Containerboard / Corrugated Products | Paper and Packaging | |||
Segment information | |||
Net Sales | 345,342 | 324,290 | |
Containerboard / Corrugated Products | Paper and Packaging | Operating Segment | |||
Segment information | |||
Net Sales | 366,539 | 340,759 | |
Containerboard / Corrugated Products | Paper and Packaging | Intersegment | |||
Segment information | |||
Net Sales | 21,197 | 16,469 | |
Specialty paper | Paper and Packaging | |||
Segment information | |||
Net Sales | 180,348 | 174,438 | |
Specialty paper | Paper and Packaging | Operating Segment | |||
Segment information | |||
Net Sales | 180,348 | 174,438 | |
Other Products | Paper and Packaging | |||
Segment information | |||
Net Sales | 21,954 | 21,312 | |
Other Products | Paper and Packaging | Operating Segment | |||
Segment information | |||
Net Sales | $ 21,954 | $ 21,312 | |
Victory | Minimum | |||
Segment information | |||
Number of distribution centers | item | 60 |
North Charleston, South Carol44
North Charleston, South Carolina Paper Mill Union Contract (Details) $ in Millions | Mar. 07, 2017employee | Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) |
North Charleston, South Carolina Paper Mill Union Contract | |||
Costs incurred | $ 6.2 | $ 3.6 | |
North Charleston, South Carolina Paper Mill Union Contract | |||
North Charleston, South Carolina Paper Mill Union Contract | |||
Contract term | 8 years | ||
Number of employees covered | employee | 600 | ||
North Charleston, South Carolina Paper Mill Union Contract | Cost of Sales | |||
North Charleston, South Carolina Paper Mill Union Contract | |||
Costs incurred | $ 5 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | Apr. 09, 2017USD ($)T | Apr. 02, 2017USD ($)shares | Mar. 31, 2017shares |
Subsequent Event | Roanoke Rapids North Carolina | |||
Planned Maintenance Outage | |||
Period for which machine downtime lasted | 9 days | ||
Planned maintenance outage costs | $ 8.9 | ||
Reduction in production (in tons) | T | 11,600 | ||
Restricted Stock Units | |||
Restricted Stock Unit Awards | |||
Units granted (in shares) | shares | 342,264 | ||
April 2, 2017 Award | Restricted Stock Units | Subsequent Event | |||
Restricted Stock Unit Awards | |||
Units granted (in shares) | shares | 126,976 | ||
Fair value of awards granted | $ 2.9 | ||
April 2, 2017 Award | Other employees | Restricted Stock Units | Subsequent Event | |||
Restricted Stock Unit Awards | |||
Retention award paid in cash | $ 0.5 | ||
April 2, 2017 Award | Maximum | Executive officers | Restricted Stock Units | Subsequent Event | |||
Restricted Stock Unit Awards | |||
Vesting period for awards | 1 year | ||
April 2, 2017 Award | Maximum | Non-executive officers | Restricted Stock Units | Subsequent Event | |||
Restricted Stock Unit Awards | |||
Vesting period for awards | 90 days |