PaperAge Magazine

Graphic Packaging Holding Company Reports Third Quarter 2016 Results

Michael Doss "Net sales were up 3.1% driven by acquisitions, while volume in our core business was down 1.4% driven by packaged food softness. Adjusted EBITDA was $200.1 million, up 1.5% compared to the prior year period of $197.1 million. – Michael Doss, President and CEO, Graphic Packaging.

Oct. 25, 2016 - Graphic Packaging Holding Company (NYSE: GPK) today reported Net Income for third quarter 2016 of $57.8 million, or $0.18 per share, based upon 320.4 million weighted average diluted shares. This compares to third quarter 2015 Net Income of $60.2 million, or $0.18 per share, based on 330.4 million weighted average diluted shares.

Third quarter 2016 Net Income was negatively impacted by $6.2 million (net of a $2.7 million tax benefit) of business combinations and other special charges. When adjusting for these charges, Adjusted Net Income for the third quarter of 2016 was $64.0 million, or $0.20 per diluted share. This compares to third quarter 2015 Adjusted Net Income of $66.0 million or $0.20 per diluted share.

"Our third quarter Adjusted EBITDA was only modestly above the prior year period as packaged food volume softened during the quarter and we incurred operating costs associated with transferring volume to lower cost converting facilities and on-boarding new business," said President and CEO Michael Doss.

"Net sales were up 3.1% driven by acquisitions, while volume in our core business was down 1.4% driven by packaged food softness. Adjusted EBITDA was $200.1 million, up 1.5% compared to the prior year period of $197.1 million.

"Free cash flow generation in the business remains strong. Our focus on growing free cash flow and returning more of it to shareholders over time has not changed. We are pleased to announce that our Board of Directors has declared a 50% increase in our quarterly dividend to $0.075 per share. This material increase in the quarterly dividend demonstrates the confidence we have in our free cash flow profile.

“We remain committed to a balanced capital allocation strategy, which includes reinvesting in our business to drive strong cash returns on cash invested, strategic acquisitions at compelling post-synergy multiples, and returning cash to shareholders through dividends and share repurchases."

The first increased cash dividend of $0.075 per share is payable January 5, 2017 to stockholders of record on December 15, 2016.

OPERATING RESULTS

Net Sales

Net Sales increased 3.1% to $1,103.7 million in the third quarter of 2016, compared to $1,070.0 million in the prior year period. The $33.7 million increase was driven by $51.3 million of improved volume/mix related to acquisitions. The net sales increase was partially offset by $11.5 million of unfavorable foreign exchange rates and $6.1 million of lower pricing.

[Below] is supplemental data showing Net Tons Sold for the first, second and third quarters of 2016 and each quarter of 2015.

Graphic Packaging - Net Tons Sold 2016

EBITDA

EBITDA for third quarter of 2016 was $191.2 million, or $2.1 million higher than the third quarter of 2015. After adjusting both periods for business combinations and other special charges, Adjusted EBITDA increased 1.5% to $200.1 million in the third quarter of 2016 from $197.1 million in the third quarter of 2015. When comparing against the prior year quarter, Adjusted EBITDA in the third quarter of 2016 was positively impacted by $14.4 million of improved net operating performance and $2.7 million of favorable volume/mix. These benefits were partially offset by $6.1 million of lower pricing, $5.1 million of other inflation (primarily labor and benefits), $2.0 million of commodity inflation, and $0.9 million of unfavorable foreign exchange rates.

OTHER RESULTS

Total Debt (Long-Term, Short-Term and Current Portion) decreased $15.2 million during the third quarter of 2016 to $2,271.8 million. Total Net Debt decreased $22.2 million during the third quarter of 2016 to $2,226.1 million. At quarter end, the Company's Net Leverage Ratio was 2.89 times Adjusted EBITDA compared to 2.93 times at the end of the second quarter of 2016.

At September 30, 2016, the Company had available global liquidity of $1,155.7 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $20.0 million in the third quarter of 2016, up when compared to the $16.5 million reported in the third quarter of 2015, largely reflecting higher debt balances.

Capital expenditures for the third quarter of 2016 were $72.4 million compared to $54.7 million in the third quarter of 2015. The increase is primarily the result of investments made in the Company's paperboard mills, including the successful installation of a new curtain coater on the number one paper machine in Macon, GA.

Third quarter 2016 Income Tax Expense was $28.0 million compared to $33.6 million in the third quarter of 2015.

Graphic Packaging Holding Company, headquartered in Atlanta, Georgia, is a leading provider of paper-based packaging solutions for a wide variety of products to food, beverage and other consumer product companies. The Company operates on a global basis, is one of the largest producers of folding cartons in the United States, and holds leading market positions in coated unbleached kraft paperboard and coated-recycled paperboard. To learn more about Graphic Packaging, please visit: www.graphicpkg.com.

SOURCE: Graphic Packaging Holding Company