Graphic Packaging Holding Company Reports Third Quarter 2019 Results

"The third quarter of 2019 was a solid quarter with Adjusted EBITDA of $244 million at the high-end of our expectations. Pricing improved by $34 million reflecting the benefits of our pricing initiatives." – Michael Doss, President and CEO, Graphic Packaging Holding Company.

Oct. 22, 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 third quarter 2019 of $52.1 million, or $0.18 per share, based on 293.7 million weighted average diluted shares. This compares to third quarter 2018 Net Income of $94.3 million, or $0.30 per share, based on 311.5 million weighted average diluted shares.

Third quarter 2019 Net Income was impacted by a net $5.3 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 third quarter of 2019 was $57.4 million, or $0.20 per diluted share. This compares to third quarter 2018 Adjusted Net Income of $69.1 million, or $0.22 per diluted share.

Highlights

Michael Doss, the Company's President and CEO said, "The third quarter of 2019 was a solid quarter with Adjusted EBITDA of $244 million at the high-end of our expectations. Pricing improved by $34 million reflecting the benefits of our pricing initiatives. Importantly, our pricing to commodity input cost relationship was a positive $26 million for the quarter and $67 million for the first nine months of 2019.

"In addition, we successfully completed the previously announced and planned extensive maintenance outage at our Texarkana SBS mill on time and on budget." Doss added, "We remain focused on capturing benefits from the consumer-driven shift into our innovative paperboard solutions and continue to expect that new product wins will drive 100-200 basis points of net organic volume growth in 2020."

Net Sales increased 3.3% to $1,581.6 million in the third quarter of 2019, compared to $1,531.8 million in the prior year period. The $49.8 million increase was driven by $33.8 million of higher pricing and $27.9 million of improved volume/mix related primarily to acquisitions and organic volume growth. These benefits were partially offset by $11.9 million of unfavorable foreign exchange.

EBITDA for the third quarter of 2019 was $235.7 million. After adjusting both periods for charges associated with business combinations and other special charges, and the third quarter 2018 gain on sale of assets, Adjusted EBITDA decreased $12.0 million to $244.3 million in the third quarter of 2019 from $256.3 million in the third quarter of 2018. When comparing against the prior year quarter, Adjusted EBITDA in the third quarter of 2019 was positively impacted by $33.8 million of higher pricing. Favorable pricing was offset by $20.4 million of operating items (primarily the previously announced extensive mill maintenance outage at Texarkana), $7.6 million of commodity input cost inflation (primarily wood), $12.0 million of other inflation (primarily labor and benefits), $3.3 million of foreign exchange, and $2.5 million from volume/mix.

Total Debt (Long-Term, Short-Term and Current Portion) decreased $67.8 million during the third quarter of 2019 to $3,002.8 million compared to the second quarter of 2019. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) decreased $51.8 million during the third quarter of 2019 to $2,954.1 million compared to the second quarter of 2019. The Company's third quarter 2019 pro forma Net Leverage Ratio was 2.90 times Adjusted EBITDA compared to 2.91 times at the end of the second quarter of 2019.

At September 30, 2019, the Company had available liquidity of $1,486.7 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $35.9 million in the third quarter of 2019, up compared to the $31.0 million reported in the third quarter of 2018, primarily reflecting higher average borrowing rates.

Capital expenditures for the third quarter of 2019 were $71.6 million compared to $96.6 million in the third quarter of 2018.

Third quarter 2019 Income Tax Expense was $16.9 million, compared to a $17.8 million expense in the third quarter of 2018.

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 operates on a global basis, is one of the largest producers of folding cartons and paper-based foodservice products in the United States, and holds leading market positions in coated recycled paperboard, coated unbleached kraft paperboard and solid bleached sulfate paperboard. To learn more about Graphic Packaging, please visit: www.graphicpkg.com.