Business News
Graham Packaging Announces 2007 Results
Wednesday 02. April 2008 - raham Packaging Holdings Company, parent company of Graham Packaging Company, L.P., today announced results for the year ended December 31, 2007.
The company reported net sales of $2,493.5 million for 2007, compared to $2,520.9 million for 2006, a decrease of $27.4 million, or 1.1 percent on a 0.4 percent increase in units sold. The results were driven primarily by increased sales of lower-priced products and price reductions in response to competitive pressures, offset by an increase in resin costs which was passed along to customers and to the positive impact of changes in exchange rates.
Sales were down $80.4 million, or 3.6 percent, in North America, primarily due to higher sales of lower-priced products, price reductions due to competitive pressures, and fewer units sold. Sales were up $42 million, or 17.8 percent, in Europe, due to an increase in units sold and currency conversion. Sales were up $11 million, or 17.1 percent, in South America, due to increased volume and currency conversion.
Operating income for 2007 was $25.4 million, compared to $116.4 million in 2006, a decrease of 78.2 percent. Excluding impairment charges of $157.9 million for 2007 and $25.9 million for 2006, operating income would have increased $41.0 million year-over-year.
During the fourth quarter of 2007, the company recorded non-cash impairment charges on fixed and intangible assets to reflect their net realizable value. These impairment charges were necessitated by the steady conversion to concentrate in the liquid laundry detergent market, which has resulted in the use of small and fewer bottles; an ongoing reduction in one- quart motor oil containers as customers convert to multi-quart containers; and the obsolescence of older machinery used in the food and beverage sector.
As a result of all of the foregoing factors, the company experienced a net loss of $206.1 million for the year ended December 31, 2007, compared to a net loss of $120.4 million for the year ended December 31, 2006, a decline of 71.2 percent.
Covenant compliance EBITDA* (earnings before interest, taxes, depreciation and amortization) totaled $440.8 million in 2007, compared to $418.2 million in 2006.
“We succeeded in growing our 2007 EBITDA by more than 5 percent by focusing on cost saving, productivity gains, quality improvement initiatives, and strategic pricing programs that offset the flat sales in our current economic environment,” said Warren Knowlton, CEO of Graham Packaging. “We will continue to focus on these same priorities in 2008.”
*Covenant compliance EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) further adjusted to exclude non-recurring items, non-cash items and other adjustments required in calculating covenant compliance under the Credit Agreement and the Notes, as shown in the table below. Covenant compliance EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. The company believes that the inclusion of covenant compliance EBITDA in this annual report on Form 10-K is appropriate to provide additional information to investors about the calculation of certain financial covenants in the Credit Agreement and the Notes. Because not all companies use identical calculations, these presentations of covenant compliance EBITDA may not be comparable to other similarly titled measures of other companies.