Graphic Packaging Reports Second Quarter 2023 Results; to Acquire Bell Inc.

"We grew Sales, Adjusted EBITDA and Adjusted EBITDA margins year over year in the second quarter while actively managing supply to meet demand in response to short-term inventory destocking by retailers and our customers." – Mike Doss, President and CEO, Graphic Packaging Holding Company.

Aug. 1, 2023 - Graphic Packaging Holding Company today reported results for the second quarter of 2023.

Net Income for second quarter 2023 was $150 million, or $0.49 per share, based upon 309.1 million weighted average diluted shares. This compares to second quarter 2022 Net Income of $66 million, or $0.21 per share, based upon 309.9 million weighted average diluted shares.

The second quarters of 2023 and 2022 were impacted by a net $37 million and a net $102 million of special charges, respectively. When adjusting for special charges and amortization of purchased intangibles, Adjusted Net Income for the second quarter of 2023 was $203 million, or $0.66 per diluted share. This compares to second quarter 2022 Adjusted Net Income of $185 million, or $0.60 per diluted share.

Michael Doss, the Company's President and CEO said, "We grew Sales, Adjusted EBITDA and Adjusted EBITDA margins year over year in the second quarter while actively managing supply to meet demand in response to short-term inventory destocking by retailers and our customers. Importantly, our global team continued to advance key initiatives to drive sustained future organic growth and higher profitability through commercial execution, quality improvement and cost reduction. Our focus remains on delivering renewable and recyclable, fiber-based packaging solutions preferred by consumers.

"Consistent with that, we are pleased to announce a definitive agreement to acquire Bell Incorporated, a well-capitalized U.S. packaging provider, strategically expanding our network, customer breadth and category presence. The pending transaction will strengthen our integrated packaging network in the U.S., further solidifying our commitment to deliver service excellence in packaging. Our Board of Directors has also approved an incremental $500 million share repurchase authorization. These announcements demonstrate our balanced approach to capital allocation as we continue to deliver value for stakeholders.

"Finally, we are reiterating full year 2023 guidance. Our expectations for growth and cash generation enable the continued allocation of capital into initiatives that strengthen the business and support growth, while providing a path to return leverage to the low-end of our historical targeted range. Our execution and focus on innovation, along with favorable consumer trends, provide confidence in our ability to drive 100 to 200 basis points of net organic sales growth annually for years to come."

Bell Incorporated Acquisition

The Company has entered into a definitive agreement to acquire Bell Incorporated. The proposed acquisition is expected to add approximately $200 million in sales, $30 million in Adjusted EBITDA and will support strategic priorities of increasing integration rates and expanding customers and categories. Annual synergies of approximately $10 million are expected within 24 months of closing. The transaction includes three well-capitalized packaging facilities in the Midwest that consume 95,000 tons of paperboard annually.

The transaction is expected to close in the fourth quarter of 2023, subject to regulatory approvals and other customary closing conditions.

Operating Results

Net Sales

Net Sales increased 1% to $2,392 million in the second quarter of 2023, compared to $2,358 million in the prior year period. The $34 million increase was driven by $188 million of positive pricing, partially offset by $154 million of unfavorable volume/mix.

EBITDA

EBITDA for the second quarter of 2023 was $434 million, $140 million higher than the second quarter of 2022. After adjusting both periods for business combinations and other special charges, Adjusted EBITDA was $453 million in the second quarter of 2023 versus $396 million in the second quarter of 2022. When comparing against the prior year quarter, Adjusted EBITDA in the second quarter of 2023 was positively impacted by $188 million in pricing and $4 million in commodity input cost deflation. This was partially offset by $40 million in unfavorable volume/mix, $48 million in labor, benefits and other inflation, $43 million in unfavorable net performance and $4 million of foreign exchange impact.

Other Results

Total Debt (Long-Term, Short-Term and Current Portion) decreased $13 million during the second quarter of 2023 to $5,535 million compared to the first quarter of 2023. Total Net Debt (Total Debt less Cash and Cash Equivalents) decreased $25 million during the second quarter of 2023 to $5,410 million compared to the first quarter of 2023. The Company returned $31 million in total capital to stockholders, including $30 million in dividend payments and $1 million via share repurchases, in the second quarter of 2023. The Company's second quarter 2023 Net Leverage Ratio was 3.0x Adjusted EBITDA compared to 3.1x at the end of the first quarter 2023.

At June 30, 2023, the Company had available liquidity of $1,259 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $60 million in the second quarter of 2023, higher when compared to $48 million reported in the second quarter of 2022 due to higher interest rates.

Capital expenditures for the second quarter of 2023 were $189 million, higher when compared to $138 million in the second quarter of 2022 due to the Waco, Texas CRB mill project.

Second quarter 2023 Income Tax Expense was $57 million, up from $39 million in the second quarter of 2022.

Graphic Packaging's complete second quarter 2023 financial results are available on the company's website: www.graphicpkg.com.

Graphic Packaging, headquartered in Atlanta, Georgia, is a leading provider of sustainable fiber-based packaging solutions for a wide variety of products to food, beverage, foodservice, 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 Europe, and holds leading market positions in coated recycled paperboard, coated unbleached kraft paperboard and solid bleached sulfate paperboard.

SOURCE: Graphic Packaging Holding Company