Packaging Corporation of America (PKG) reported net income from continuing operations (excluding income from bio-fuel tax credits and asset disposal charges) of $41 million or 42 cents per share in the first quarter of 2012 compared to a net income of $39 million or 40 cents per share in the fourth quarter of 2011, and a net income of $39 million or 39 cents per share in the year-ago quarter.

The record earnings were primarily attributable to increased sales volume of containerboards and corrugated products coupled with reduced production costs during the quarter. The company’s earnings surpassed management’s expectations and also the Zacks Consensus Estimate of 40 cents per share for the quarter.

GAAP EPS reported by the company was 18 cents per share compared to 37 cents per share in the previous year quarter and 40 cents per share in the last quarter.

Revenues

Net sales came to $671 million, up 7% year over year and 2.6% sequentially, comprehensively beating the Zacks Consensus Estimate of $661 million.

Corrugated products’ shipments were up 8.3% year over year. Outside sales of containerboards were the same as last year. Containerboard production was 640,000 tons, up 38,000 tons year over year. Packaging Corporation ended the quarter with its containerboard inventories of about 11,000 tons, above the December 2011 levels.

Margins

Gross margin came in at 21.6% in the first quarter of 2012 versus 21.1% in the year-ago quarter and 20.5% in the previous quarter. Selling and administrative expenses amounted to $51.9 million compared with $47.9 million in the previous year quarter.

Management was quite appeased with the productivity boost surging higher than before due to lower inflationary costs accruing during the quarter.

Outlook

Management expects earnings per share of 45 cents in the second quarter of 2012, after considering higher fiber and transportation costs. The company also anticipates that there would be higher sales accruing from corrugated products in the upcoming quarter which is likely to be affected by escalating costs of production.

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