Business News
Graphic Packaging Holding Company Reports First Quarter 2008 Results
Friday 09. May 2008 - - Completed combination with Altivity Packaging, LLC ("Altivity") on March 10, 2008; therefore, the first quarter 2008 includes approximately three weeks of Altivity results.
First Quarter Highlights
– Completed combination with Altivity Packaging, LLC (“Altivity”) on March 10, 2008; therefore, the first quarter 2008 includes approximately three weeks of Altivity results.
– Net Sales were $724.3 million, up approximately 24 percent from the prior year period. Excluding Altivity Net Sales, Adjusted Net Sales increased approximately 5 percent over the prior year period.
– Excluding charges related to the combination with Altivity, Adjusted Net Loss was $(0.00) per share compared to $(0.19) per share in the prior year period.
– Excluding charges related to the combination with Altivity, Adjusted EBITDA was $98.4 million compared to $64.8 million in the prior year period.
– Announced new reporting business segments: Paperboard Packaging; Multiwall Bag and Specialty Packaging.
Graphic Packaging Holding Company (NYSE:GPK), formerly Graphic Packaging Corporation (“Graphic”), a leading provider of packaging solutions to food, beverage and other consumer products companies, today reported a Net Loss for the first quarter 2008 of $(23.3) million, or $(0.10) per diluted share, based upon 234.5 million shares. This compares to a first quarter 2007 Net Loss of $(38.7) million, or $(0.19) per diluted share, based upon 201.3 million shares. Excluding charges related to the combination with Altivity, Adjusted Net Loss was $(1.0) million, or $(0.00) per diluted share.
“We are excited that the combination of Graphic and Altivity was consummated on March 10th and we are now focused on moving toward recognizing the benefits of the transaction,” said David W. Scheible, President and Chief Executive Officer. “Despite the many hours dedicated to completing the transaction, I am proud that our teams never lost focus on the day-to-day operations and delivered another solid quarter of performance. This represents the sixth consecutive quarter that income from operations has exceeded the prior year quarter, despite operating in a rapidly rising inflationary environment.”
On March 10, 2008, the businesses of Graphic and Altivity were combined through a series of transactions. As a result, a new publicly traded parent company, Graphic Packaging Holding Company, was formed. The combination has been accounted for as a purchase transaction. The first quarter 2008 statement of operations includes approximately three weeks of Altivity’s results and three months of Graphic’s results. 2007 period results reflect Graphic only.
Net Sales
Net Sales increased approximately 24% to $724.3 million during first quarter 2008, compared to first quarter 2007 Net Sales of $584.1 million. When comparing against the prior year quarter, net sales in the first quarter of 2008 were positively impacted by approximately:
— $113 million from the inclusion of Altivity results;
— $11 million of favorable pricing;
— $9 million of favorable foreign currency exchange rates; and
— $8 million of higher volume and favorable mix.
Attached is supplemental data showing first quarter 2008 net sales and net tons sold by each of the Company’s newly defined business segments: Paperboard Packaging, Multi-wall Bag and Specialty Packaging.
Income from Operations
Income from Operations for first quarter 2008 was $25.5 million, compared to first quarter 2007 Income from Operations of $12.8 million. When comparing to the prior year quarter, Income from Operations was positively impacted by approximately:
— $22 million of improved manufacturing and operational efficiencies,
primarily the result of stronger performance at the Company’s West
Monroe, LA mill;
— $13 million of lower operating costs as a result of ongoing continuous
improvement programs and other cost reduction initiatives;
— $11 million of favorable pricing;
— $9 million of lower depreciation and amortization;
— $2 million from the inclusion of Altivity results; and
— $3 million of higher volume and favorable mix.
Income from Operations was negatively impacted by approximately:
— $27 million of higher input costs primarily related to increased prices
for fiber and chemicals;
— $13 million related to a step-up in inventory basis to fair value as a
result of the combination with Altivity; and
— $10 million of charges related to the combination with Altivity;
Other Results
Net interest expense was $42.7 million for first quarter 2008, as compared to net interest expense of $43.1 million for first quarter 2007. The decrease was primarily due to lower interest rates on the unhedged portion of the Company’s floating rate debt.
At the end of the first quarter of 2008, the Company’s total debt was $3,154.7 million, as compared to $1,977.7 million at the end of first quarter 2007. Approximately $1.2 billion of additional debt was assumed in connection with the combination with Altivity.
In the first quarter of 2008, the Company incurred $6.4 million of income tax expense, which was predominately attributable to the noncash expense associated with the amortization of goodwill for tax purposes. The Company has a $1.4 billion net operating loss that is available to offset future taxable income in the United States.
Capital expenditures for first quarter 2008 were $35.9 million compared to $19.8 million in the first quarter of 2007. Approximately $6 million of first quarter 2008 capital expenditures were related to the inclusion of Altivity results.
EBITDA for first quarter 2008 was $76.1 million versus EBITDA of $64.8 million for first quarter 2007. Excluding charges related to the combination with Altivity, Adjusted EBITDA was $98.4 million. Approximately $7 million of first quarter 2008 Adjusted EBITDA was related to the inclusion of Altivity results. A tabular reconciliation of EBITDA, Adjusted EBITDA and Adjusted Net Loss to Net Loss is attached to this release.