Graphic Packaging Fourth Quarter Net Income Rises on Performance Improvements

"The strong fourth quarter enabled us to achieve our targeted $100 million of performance improvements for the full year. – David Scheible, CEO, Graphic Packaging.

Feb. 6, 2014 - Graphic Packaging Holding Company today reported Net Income for fourth quarter 2013 of $46.0 million, or $0.13 per share, based upon 344.8 million weighted average diluted shares. This compares to fourth quarter 2012 Net Income of $22.9 million, or $0.06 per share, based on 392.2 million weighted average diluted shares.

Fourth quarter 2013 Net Income included $12.6 million of Restructuring and Other Special Charges (net of tax) primarily related to the integration of the December 2012 Contego Packaging and A&R Carton acquisitions in Europe. Without these non-recurring charges, Adjusted Net Income for the fourth quarter of 2013 was $58.6 million, or $0.17 per diluted share. This compares to fourth quarter 2012 Adjusted Net Income of $33.2 million or $0.08 per diluted share.

For the full year 2013, Net Income was $146.6 million, or $0.42 per diluted share, based on 349.7 million weighted average diluted shares. This compares to 2012 Net Income of $122.6 million or $0.31 per diluted share, based on 396.2 million weighted average diluted shares. Full year 2013 Adjusted Net Income was $181.4 million or $0.52 per diluted share, compared to full year 2012 Adjusted Net Income of $146.3 million, or $0.37 per diluted share.

"We delivered a solid operating quarter driving year over year margins higher by delivering another $25 million through improved operating performance and an ongoing commitment to cost reduction initiatives," said CEO David Scheible. "The strong fourth quarter enabled us to achieve our targeted $100 million of performance improvements for the full year. Additionally, with improving revenue due to better pricing this quarter and market share gain, particularly in Europe, we have a nice backdrop for 2014."

"We also delivered another strong year of cash flow, and in November, we completed a secondary offering concurrent with a $200 million share repurchase. This was a smart use of our cash to return value to the shareholders, while the offering and share repurchase combined to increase the public float of our stock to a level approaching 80%."

NET SALES

Net Sales increased 2.0% to $1,074.9 million during fourth quarter 2013, compared to fourth quarter 2012 Net Sales of $1,053.3 million. The $21.6 million increase resulted from $23.4 million of favorable volume/mix primarily attributable to the addition of the two European acquisitions. The acquisitions drove a 7.2% increase in Paperboard Packaging segment sales versus the fourth quarter of 2012. The remaining Net Sales increase was due to $4.3 million of higher pricing. These positive factors were partially offset by $6.1 million of unfavorable exchange rates. Full year 2013 Net Sales were $4,478.1 million, a gain of $141.0 million, or 3.2% over 2012.

EBITDA

EBITDA for fourth quarter 2013 increased 4.6% to $140.0 million from $133.8 million in the fourth quarter of 2012. Excluding $18.3 million of Restructuring and Other Special Charges, Adjusted EBITDA increased 5.4% to $158.3 million in the fourth quarter 2013 from $150.2 million in the fourth quarter 2012. The $18.3 million adjustment was primarily related to expenses associated with the integration of the two European acquisitions.

Compared to the prior year quarter, Adjusted EBITDA in the fourth quarter of 2013 was positively impacted by $24.5 million of improved net operating performance, $4.3 million of favorable volume/mix and $4.3 million of higher pricing. These benefits were partially offset by $15.8 million of commodity inflation, $5.0 million in other costs, primarily for labor and benefits, and $4.2 million of unfavorable exchange rates.

Full year 2013 EBITDA increased 3.2% to $628.7 million from $609.0 million in 2012. Excluding $14.4 million of Restructuring and Other Special Charges and a $27.1 million Loss on Modification or Extinguishment of Debt, full year 2013 Adjusted EBITDA increased 3.5% to $670.2 million from 2012 Adjusted EBITDA of $647.4 million.

OTHER RESULTS

Total Net Debt at the end of 2013 was $2,201.4 million, or $80.4 million lower compared to the end of 2012. Note that in the fourth quarter of 2013, the Company used $200.0 million to repurchase its common stock. The Company funded the share repurchase with a combination of cash on hand and borrowings under its revolving credit facility. Additionally, the Company did not receive the approximate $25 million government grant related to the 2013 completion of the bio-mass boiler at its Macon, GA, paper mill. This grant was originally expected to be received in the fourth quarter and is now anticipated to be received sometime in the first half of 2014.

The Company's year-end 2013 Net Leverage Ratio dropped to 3.28 times Adjusted EBITDA from 3.52 times Adjusted EBITDA in 2012. At December 31, 2013, the Company had available domestic liquidity of $684.9 million, including the undrawn availability under its $1.0 billion revolving credit facility.

Net Interest Expense was $21.5 million in fourth quarter 2013, compared to $25.5 million in fourth quarter 2012. Full year 2013 Net Interest Expense was $101.9 million compared to $111.1 million in 2012. The decrease was due to both lower debt balances and 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 for fourth quarter 2013 were $56.0 million compared to $74.9 million in the fourth quarter of 2012 Fourth quarter 2013 expenditures represent a more normalized run rate as the fourth quarter of 2012 included expenditures for the Macon, GA biomass boiler project and the consolidation of Delta Natural Kraft and Mid-America Packaging into Graphic Flexible Packaging. For full year 2013, capital expenditures were $209.2 million compared to $203.3 million in 2012.

Fourth quarter 2013 Income Tax Benefit was $3.5 million, compared to a $13.9 million Tax Expense in the fourth quarter of 2012. The fourth quarter 2013 benefit was driven by the recognition of a $29.4 million benefit associated with the taxability of the $147.2 million black liquor credit the Company received in 2009. Recent IRS guidance now indicates that the black liquor credit may be excluded from taxable income. For the full year 2013, Income Tax Expense was $67.4 million compared to $82.5 million in 2012. As of December 31, 2013, the Company had approximately $892 million of NOLs for U.S. federal income tax purposes, which may be used to offset future taxable income.

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. To learn more, please visit: www.graphicpkg.com.

SOURCE: Graphic Packaging Holding Company