Adjusted net income for the first quarter of 2013 was $35.8 million, or $0.10 per diluted share, when adjusted for $0.9 million in restructuring and other special charges (net of tax). This compares to first quarter 2012 adjusted net income of $24.7 million or $0.06 per diluted share.
"Our first quarter results were in line with our expectations as we grew our business and expanded our margins in what remains a sluggish operating environment," said CEO David Scheible. "Volumes in our core legacy folding carton business increased in the quarter. Both new product commercializations and new customers over the past year drove the volume increase despite soft demand in some core end markets like soft drink and cereal. Undoubtedly, weather impacted demand for some products, but high unemployment and fuel prices are the more important factors negatively affecting demand for our products. These factors force end consumers to tightly manage discretionary spending, and we must continue to adapt our business accordingly. Our first quarter results benefited from strong manufacturing performance at our mills driven by improvement initiatives in energy, operating efficiencies and fixed costs. These initiatives generated a significant increase in output from a year ago and contributed to $23 million of total net performance improvements in the quarter."
Net sales increased 3.1% to $1,100.5 million during first quarter 2013, compared to first quarter 2012 net sales of $1,067.2 million. The $33.3 million increase resulted from $42.2 million of favorable volume/mix, partially offset by $4.9 million of lower pricing and $4.0 million of unfavorable exchange rates. The favorable volume/mix was primarily driven by the fourth quarter 2012 acquisitions of Contego Packaging Holdings Limited and A&R Carton Holding B.V.
On a segment basis, Paperboard Packaging sales, which comprised 85.1% of total first quarter net sales, increased 6.0% compared to the first quarter of 2012. The increase primarily reflected the addition of the two acquisitions. Net sales in the Flexible Packaging segment decreased 10.6% compared to the first quarter of 2012. The decline was primarily the result of the continued weakness in key end-markets including construction and agriculture, as well as the planned shift from external sales to internal consumption of kraft paper produced at our Pine Bluff, AR mill.
EBITDA for first quarter 2013 increased 16.4% to $160.2 million from $137.6 million in the first quarter last year. Excluding restructuring and other special charges, adjusted EBITDA increased 7.7% to $161.6 million in the first quarter 2013 from $150.0 million in the first quarter 2012. When comparing against the prior year quarter, Adjusted EBITDA in the first quarter of 2013 was positively impacted by $23.1 million of improved net operating performance and $0.4 million of cost deflation. These benefits were partially offset by $4.9 million of lower pricing, $3.8 million of unfavorable exchange rates and $3.2 million of unfavorable volume/mix.
Taking cash and cash equivalents into account, total net debt at the end of the first quarter 2013 was $2,333.7 million. This represents an increase of $51.9 million in net debt from the end of the fourth quarter 2012. The increase was the result of higher working capital levels associated with normal seasonality in the business. Including cash and cash equivalents, at March 31, 2013, the company had available domestic liquidity of $596.4 million, including the undrawn availability under its $1.0 billion revolving credit facility.
Net interest expense was $27.2 million in the first quarter of 2013, compared to $32.1 million in the first quarter of 2012. The decrease was due to lower effective interest rates primarily attributable to the refinancing of the company's senior secured credit facility in March 2012.
Capital expenditures were $32.9 million in the first quarter of 2013, compared to $41.7 million in the first quarter of 2012. The decrease was the result of higher than normal spending in the prior year period related to the Macon biomass project and expenses associated with the integration of Delta Natural Kraft, LLC and Mid-America Packaging, LLC.
During March 2013, certain shareholders of the company sold 28.0 million shares of common stock in a secondary public offering at $7.00 per share, as well as an additional 4.2 million shares pursuant to the underwriters' overallotment option.
Subsequent to quarter end, on April 2, 2013, the company completed a debt offering of $425 million aggregate principal amount of 4.75% senior notes due 2021 in a registered public offering. The company expects to use the net proceeds of this offering, together with cash on hand, to refinance through a redemption, all $425 million of its 9.5% senior notes due 2017, at a redemption premium plus accrued and unpaid interest to June 15, 2013. The refinancing will result in an annualized reduction in net interest expense of approximately $20 million.