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Graphic Packaging Swings to 4th Quarter Profit

Feb. 23, 2010 - Graphic Packaging Holding Company today reported Net Income for fourth quarter 2009 of $31.8 million, or $0.09 per share based upon 346.5 million weighted average diluted shares. This compares to a fourth quarter 2008 Net Loss of $(57.7) million, or $(0.17) per share based upon 342.6 million weighted average shares.

Adjusted Net Income for the quarter, which excludes $44.0 million in alternative fuel tax credits (net of expenses related to fuel tax credits), $10.7 million of asset impairment charges and $10.1 million of charges associated with the combination with Altivity Packaging, LLC ("Altivity"), was $8.6 million, or $0.02 per share. This compares to a fourth quarter 2008 Adjusted Net Loss of $(38.9) million, or $(0.11) per share.

For the full year 2009, Net Income was $56.4 million, or $0.16 per share, based on 344.6 million weighted average diluted shares. This compares to a 2008 Net Loss of $(99.7) million or $(0.32) per share based on 315.8 million weighted average shares. Excluding charges associated with the combination with Altivity, asset impairment charges, loss on early extinguishment of debt and alternative fuel tax credits (net of expenses related to fuel tax credits), full year 2009 Adjusted Net Income was $10.4 million or $0.03 per share compared to a full year 2008 Adjusted Net Loss of $(42.1) million or $(0.13) per share.

"Given the global economic headwinds faced in 2009, I'm pleased with our results and direction," said CEO David Scheible. "Although volumes declined slightly in 2009, we were able to deliver over 190 basis points of Adjusted EBITDA margin improvement from our successful integration activities and ongoing cost reduction initiatives. Our first full year as a combined company with Altivity has been extremely successful both financially and operationally."

"Our focus on operating performance and working capital reduction in 2009 helped generate record operating cash flows and a reduction in net debt of approximately $363 million, representing a decrease in our net leverage ratio from 6.3 times EBITDA to 4.8 times EBITDA. Since closing the combination with Altivity in March of 2008, we have reduced net debt by over $482 million. Going forward, we remain committed to further deleveraging the balance sheet and improving our margins and credit profile."

Net Sales

Net sales decreased 6.6% to $978.6 million during fourth quarter 2009, compared to fourth quarter 2008 net sales of $1,047.7 million. On a segment basis, Paperboard Packaging sales, which comprised approximately 83.5% of total fourth quarter net sales, declined 3.2% compared to the fourth quarter of 2008. The moderate decline reflects the relative recession-resistant nature of the food and beverage packaging end markets. Sales in the Multi-wall Bag and Specialty segments declined 20.6% compared to the fourth quarter of 2008. This decline was primarily the result of continued weakness in construction and industrial end use markets. Full year 2009 net sales were $4,095.8 million, or 0.4% higher than 2008 net sales of $4,079.4 million.

When comparing against the prior year quarter, net sales in the fourth quarter of 2009 were negatively impacted by $62 million related to volume and mix and $14 million due to lower pricing. Favorable foreign currency exchange rates benefitted net sales by $7 million.

EBITDA

EBITDA for fourth quarter 2009 was $146.9 million. Excluding $44.0 million in alternative fuel tax credits (net of expenses related to fuel tax credits), $10.7 million of asset impairment and shutdown charges and $10.1 million of charges associated with the combination with Altivity, Adjusted EBITDA was $123.7 million. This compares to fourth quarter 2008 EBITDA of $85.7 million and Adjusted EBITDA of $104.5 million.

Full year 2009 EBITDA was $602.4 million. Excluding $137.8 million in alternative fuel tax credits (net of expenses related to fuel tax credits), $13.0 million of asset impairment and shutdown charges, a $7.1 million loss on early extinguishment of debt and $71.7 million of charges associated with the combination with Altivity, full year 2009 Adjusted EBITDA was $556.4 million compared to 2008 Adjusted EBITDA of $475.8 million. When comparing against the prior year quarter, Adjusted EBITDA in the fourth quarter of 2009 was positively impacted by:

  • $33 million of improved performance;
  • $4 million of lower input costs primarily related to chemicals, resin and energy; and
  • $3 million due to favorable foreign currency exchange rates.

Fourth quarter 2009 Adjusted EBITDA was negatively impacted by:

  • $14 million due to lower pricing; and
  • $7 million related to volume and mix.

Other Results

At the end of 2009, the Company's total debt was $2,800.2 million, or $383.6 million lower than debt of $3,183.8 million at the end of 2008. Taking cash and cash equivalents into account, total net debt at the end of the fourth quarter 2009 was $2,650.4 million. This represents a reduction of $363.3 million in net debt since year-end 2008. Including cash and cash equivalents, as of December 31, 2009, the company had available liquidity of approximately $512.8 million and had not drawn on its $400 million revolving credit facility.

Net cash provided by operating activities was $502.9 million in 2009 compared to $184.2 million in 2008. Full Year 2009 operating cash flow includes $134.8 million of alternative fuel tax credits.

Net interest expense was $38.4 million for fourth quarter 2009, as compared to net interest expense of $58.2 million in fourth quarter 2008. Full year 2009 net interest expense was $196.4 million compared to $215.4 million in 2008.

Fourth quarter 2009 income tax benefit was $5.6 million, primarily due to the release of valuation allowances on certain foreign deferred tax assets. Full year 2009 income tax expense was $24.1 million and was predominately attributable to the noncash expense associated with the amortization of goodwill for tax purposes. The Company has a $1.3 billion net operating loss carry-forward which may be available to offset future taxable income in the United States.

Capital expenditures for fourth quarter 2009 were $33.6 million compared to $56.9 million in the fourth quarter of 2008. For the full year 2009, capital expenditures were $129.9 million compared to $183.3 million in 2008.

SOURCE: Graphic Packaging Holding Company




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