- Net sales of $590 million up $264 million, or 81 percent
- Net income of $51 million up $30 million, or 143 percent
- Adjusted net income of $56 million up $33 million, or 143 percent
- Adjusted EBITDA of $126 million up $70 million, or 125 percent
- Adjusted EBITDA margin of 21.4 percent, up from 17.0 percent
- Diluted EPS of $0.53 up $0.31 per share, or 141 percent
- Adjusted diluted EPS of $0.58 up $0.34 per share, or 142 percent
Roger W. Stone, Chairman and Chief Executive Officer, stated, "KapStone recovered nicely in the second quarter from the severe winter, and we achieved outstanding all-time record results. EBITDA and EPS are more than double the prior year's results.
"During the second quarter, much progress was made on previously announced initiatives. The $50 per ton Kraft paper price was implemented by the end of the quarter. In April, the major upgrade to the Longview paper machine was completed enabling us to produce ultra-high performance linerboard at our Longview mill while increasing efficiency. The voluntary separation plan at our legacy mills was well received, and we now expect the program to reduce annual personnel costs by approximately $5 million."
Second Quarter Operating Highlights
Consolidated net sales of $590 million in the second quarter of 2014 increased by $264 million, or 81 percent compared to $326 million for the 2013 second quarter. The increase is primarily due to the Longview acquisition, which contributed $240 million of additional revenue, and higher prices and sales volumes for the legacy operations. The Company sold 720,000 tons of products during the second quarter of 2014 compared to 418,000 tons a year earlier. The Company's average mill selling price of $685 per ton in the second quarter of 2014 increased by $21 per ton compared to the second quarter of 2013 due to the impact of the 2013 containerboard and corrugated product price increases, higher specialty paper prices and the inclusion of Longview.
Operating income of $85 million for the 2014 second quarter increased by $50 million, or 143 percent, compared to the 2013 second quarter. The improved financial performance primarily reflects benefits from the Longview acquisition, higher prices and sales volumes from legacy operations and lower outage costs, partially offset by inflation on labor and input costs and the cost associated with a voluntary separation plan.
Interest expense, net, was $6 million for the second quarter of 2014, up $4 million from a year ago as a result of a higher debt balance associated with the Longview acquisition. As of June 30, 2014, the average interest rate on our term loans was 2 percent which is 50 basis points, or $6 million on an annualized basis, lower than at December 31, 2013 due to a recently amended credit facility agreement that reduced the borrowing rates, as well as an improved debt to EBITDA ratio that improved our position on the interest rate pricing grid.
The effective income tax rate for the 2014 second quarter was 33.6 percent compared to 34.5 percent for the 2013 second quarter. The Company's cash tax rate is forecasted at 35 percent for 2014.
Cash Flow and Working Capital
Cash and cash equivalents increased by $25 million in the quarter ended June 30, 2014, from March 31, 2014 to $49 million. The Company generated $70 million of net cash from operating activities during the second quarter. At June 30, 2014 the debt leverage ratio was 2.7 times, down from 3.8 times at the time of the Longview acquisition. Capital expenditures in the second quarter were $41 million and include costs to upgrade a paper machine at Longview.
At June 30, 2014, the Company had approximately $266 million of working capital and $395 million of revolver borrowing capacity.