Graphic Packaging Reports Rise in Net Income for Third Quarter 2013

Oct. 30, 2013 - Graphic Packaging Holding Company (GPK), (the "Company"), a leading provider of packaging solutions to food, beverage and other consumer products companies, today reported Net Income for third quarter 2013 of $44.5 million, or $0.13 per share, based upon 352.2 million weighted average diluted shares. This compares to third quarter 2012 Net Income of $40.1 million, or $0.10 per share, based on 398.2 million weighted average diluted shares.

Third Quarter Highlights:

  • Net Sales increased 5.3% versus the prior year period.
  • Adjusted Earnings per Diluted Share were $0.12 versus $0.11 in the prior year period.
  • Adjusted EBITDA was $175.2 million versus $170.8 million in the prior year period.
  • Net Debt Reduction in the quarter was $149.3 million resulting in a Net Leverage Ratio of 3.23x.

Third quarter 2013 Net Income included a $1.6 million after tax benefit primarily related to the sale of certain assets related to the Company's flexible plastics business and the sale of its URB mill. When adjusting for this, Adjusted Net Income for the third quarter of 2013 was $42.9 million, or $0.12 per diluted share compared to third quarter 2012 Adjusted Net Income of $42.8 million or $0.11 per diluted share.

"We posted a solid quarter despite a difficult operating environment in our key end-use markets," said CEO David Scheible. "Strong operating performance more than offset cost inflation and soft demand in core end-markets like beer, soft drink and cereal. Unemployment levels and fuel prices remain higher than most had forecasted, forcing end consumers to continue to tightly manage discretionary spending. We continue to more than offset these demand headwinds by delivering improved performance and cost reductions and expect to achieve approximately $100 million in performance benefits for the full year."

Net Sales
Net Sales increased 5.3% to $1,163.0 million during third quarter 2013, compared to third quarter 2012 Net Sales of $1,104.7 million. The $58.3 million increase resulted from $70.0 million of favorable volume/mix, partially offset by $6.5 million of unfavorable exchange rates and $5.2 million of lower pricing. The favorable volume/mix was primarily driven by the fourth quarter 2012 European acquisitions of Contego Packaging Holdings Limited and A&R Carton Holding B.V.

On a segment basis, Paperboard Packaging sales, which comprised 85.7% of total third quarter Net Sales, increased 7.2% compared to the third quarter of 2012. The increase primarily reflected the addition of the two acquisitions. Net sales in the Flexible Packaging segment decreased 5.1% compared to the third quarter of 2012. A significant portion of the decline was attributable to the planned shift from external sales to internal consumption of kraft paper produced at our Pine Bluff, AR mill. Attached is supplemental data showing Net Tons Sold, Net Sales and Income (Loss) from Operations by business segment for the first three quarters of 2013 and each quarter of 2012.

EBITDA
EBITDA for third quarter 2013 increased 13.5% to $188.8 million from $166.4 million in the third quarter last year. Excluding a $14.8 million Restructuring and Other Special Credit and a $1.2 million Loss on Modification or Extinguishment of Debt, Adjusted EBITDA increased 2.6% to $175.2 million in third quarter 2013 from $170.8 million in third quarter 2012. The $14.8 million adjustment was primarily the result of a Gain on Sale of certain assets related to the Company's flexible plastics business and the sale of its URB mill. When comparing against the prior year quarter, Adjusted EBITDA in the third quarter of 2013 was positively impacted by $23.4 million of improved net operating performance and $5.5 million of favorable volume/mix. These benefits were partially offset by $7.9 million of commodity inflation, $6.4 million in other costs, primarily for labor and benefits, $5.2 million of lower pricing and $5.0 million of unfavorable exchange rates.

Other Results
Taking cash and cash equivalents into account, total Net Debt at the end of third quarter 2013 was $2,140.8 million. This represents a decrease in Net Debt of $149.3 million during the third quarter and a Net Leverage Ratio of 3.23x at quarter end. Including cash and cash equivalents, at September 30, 2013, the Company had available domestic liquidity of $754.7 million, including the undrawn availability under its $1.0 billion U.S. revolving credit facility.

Net Interest Expense was $23.5 million in the third quarter of 2013, compared to $26.1 million in the third quarter of 2012. The decrease was primarily attributable to the Company's decision to issue new 4.75% Senior Notes and use the proceeds to redeem its higher 9.5% notes during the second quarter of 2013.

Capital expenditures were $68.6 million in the third quarter of 2013, compared to $47.5 million in the third quarter of 2012. Through the first nine months of 2013, capital expenditures were $153.2 million compared to $128.4 million over the same period in 2012. The year to date increase was due to investments made as part of the European integrations along with several planned asset upgrades at U.S. based converting operations.

Income Tax Expense was $35.8 million in the third quarter of 2013 compared to $27.0 million in the third quarter of 2012. The increase was primarily attributable to higher pre-tax earnings. As of September 30, 2013, the Company had approximately $766 million of NOLs for U.S. federal cash income tax purposes.

Graphic Packaging Holding Company (GPK), headquartered in Atlanta, Georgia, is a leading provider of packaging solutions for a wide variety of products to food, beverage and other consumer products companies. The Company is one of the largest producers of folding cartons and holds a leading market position in coated-unbleached kraft, coated-recycled boxboard and specialty packaging. Additional information about Graphic Packaging is available on the Company's web site at www.graphicpkg.com.

SOURCE: Graphic Packaging Holding Company