Graphic Packaging Holding Company Reports First Quarter 2019 Results

"First quarter Adjusted EBITDA of $260 million was ahead of our expectations driven by strong execution on pricing, performance, growth initiatives, and synergies." – Michael Doss, President and CEO, Graphic Packaging Holding Company.

April 23, 2019 - Graphic Packaging Holding Company (NYSE: GPK), (the "Company"), a leading provider of packaging solutions to food, beverage, foodservice, and other consumer products companies, today reported Net Income for first quarter 2019 of $57.9 million, or $0.19 per share, based upon 298.2 million weighted average diluted shares. This compares to first quarter 2018 Net Income of $29.9 million, or $0.10 per share, based on 311.3 million weighted average diluted shares.

First quarter 2019 Net Income was negatively impacted by a net $3.8 million of special charges that are detailed in the Reconciliation of Non-GAAP Financial Measures table attached. When adjusting for these charges, Adjusted Net Income for the first quarter of 2019 was $61.7 million, or $0.21 per diluted share. This compares to first quarter 2018 Adjusted Net Income of $58.1 million or $0.19 per diluted share.

"We are very pleased with our performance in the first quarter reflecting a 160 basis point improvement in our Adjusted EBITDA margin to 17.2%. First quarter Adjusted EBITDA of $260 million was ahead of our expectations driven by strong execution on pricing, performance, growth initiatives, and synergies," said President and CEO Michael Doss.

"Pricing improved by $32 million during the quarter reflecting the benefits of pricing initiatives executed throughout 2018. Importantly, our pricing to commodity input cost relationship was a positive $16 million.

“The business operated well in the quarter generating $31 million in performance improvements driven by a continued emphasis on cost efficiencies, benefits from capital projects, and realization of synergies. We are starting to see benefits from the shift away from plastics into our innovative paperboard solutions and this was particularly evident in our strong European sales during the first quarter. We are generating improved profitability in 2019 driven by our pricing, new product development, and productivity initiatives."

Operating Results

Net Sales

Net Sales increased 2% to $1,505.9 million in the first quarter of 2019, compared to $1,477.4 million in the prior year period. The $28.5 million increase was driven by $32.2 million of higher pricing and $16.7 million of improved volume/mix related to acquisitions. These benefits were partially offset by $20.4 million of unfavorable foreign exchange.

NOTE: Supplemental data highlighting Net Tons Sold for the first quarter of 2019 and for each quarter of 2018 is available at: www.graphicpkg.com.

EBITDA

EBITDA for the first quarter of 2019 was $253.5 million, or $65.9 million higher than the first quarter of 2018. After adjusting both periods for business combinations and other special charges, Adjusted EBITDA increased 13% to $259.7 million in the first quarter of 2019 from $230.8 million in the first quarter of 2018. When comparing against the prior year quarter, Adjusted EBITDA in the first quarter of 2019 was positively impacted by $32.2 million of higher pricing and $31.4 million of improved net operating performance. These benefits were partially offset by $16.6 million of commodity input cost inflation (primarily wood), $10.6 million of other inflation (primarily labor and benefits), $4.4 million of unfavorable foreign exchange, and $3.1 million of unfavorable volume/mix.

Other Results

Total Debt (Long-Term, Short-Term and Current Portion) increased $221.0 million during the first quarter of 2019 to $3,188.7 million compared to the fourth quarter of 2018. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) increased $229.2 million during the first quarter of 2019 to $3,126.4 million compared to the fourth quarter of 2018. The Company's first quarter 2019 pro forma Net Leverage Ratio was 3.13 times Adjusted EBITDA compared to 2.98 times at the end of 2018.

At March 31, 2019, the Company had available liquidity of $1,043.7 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $35.0 million in the first quarter of 2019, up compared to the $28.8 million reported in the first quarter of 2018, primarily reflecting higher average borrowing rates.

Capital expenditures for the first quarter of 2019 were $80.0 million compared to $92.1 million in the first quarter of 2018.

First quarter 2019 Income Tax Expense was $21.0 million, compared to a $5.1 million expense in the first quarter of 2018.

Please note that a tabular reconciliation of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS, Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, Total Net Debt and pro forma Net Leverage Ratio is available on Graphic Packaging's website: www.graphicpkg.com.

Graphic Packaging Holding Company, 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 and coated-recycled board. To learn more about Graphic Packaging, please visit: www.graphicpkg.com.