Business News
Graphic Packaging Holding Company Reports Third Quarter 2009 Results
Friday 06. November 2009 - Third Quarter Highlights -- Earnings per share were $0.10 versus a loss of $(0.04) per share in the prior year period. -- Adjusted EBITDA was $155.1 million, 17.1% higher than the prior year period. -- Excluding alternative fuel tax credits, operating cash flow increased $74.9 million versus the prior year period. -- Net Debt reduced by $113.6 million during the quarter.
Graphic Packaging Holding Company (NYSE:GPK), a leading provider of packaging solutions to food, beverage and other consumer products companies, today reported Net Income for third quarter 2009 of $33.2 million, or $0.10 per share, based upon 344.9 million weighted average diluted shares outstanding. Adjusted Net Income for the quarter, which excludes $38.5 million of alternative fuel tax credits net of expenses, a $1.0 million loss on early extinguishment of debt, and $14.6 million of restructuring and other charges primarily associated with the combination with Altivity Packaging, LLC (“Altivity”), was $10.3 million, or $0.03 per weighted average diluted share. This compares to a third quarter 2008 Net Loss of $(14.4) million, or $(0.04) per share and Adjusted Net Loss of $(7.0) million, or $(0.02) per share.
“Our focus on food and beverage and the execution of our operational plans put in place following the combination with Altivity have allowed us to perform well in this difficult operating environment,” said David W. Scheible, President and Chief Executive Officer. “Our third quarter Adjusted EBITDA grew over 17% from the prior year period and our Adjusted EBITDA margin improved to 14.7% from 11.5% a year ago and 14.2% in second quarter 2009. We continue to recognize synergies from the Altivity combination and realize the benefits of our continuous improvement programs. We also continue to strengthen our balance sheet as year-to-date Net Debt decreased by over $219 million. This is a result of generating $322 million of operating cash, including $97 million of alternative fuel tax credits, through the first nine months of 2009, compared to $43 million in the same period last year.”
Net Sales
Third quarter 2009 Net Sales of $1,054.2 million increased 1.0% from second quarter 2009 Net Sales of $1,043.8 million but decreased 9.6% from third quarter 2008 Net Sales of $1,165.7 million. The Company’s Multi-wall Bag and Specialty Packaging segments were particularly impacted by the economy, as the core end-use markets of construction and general manufacturing continued to be demand challenged. When comparing to the prior year quarter, Net Sales in the third quarter of 2009 were negatively impacted by:
— $76 million related to volume and mix;
— $19 million of lower sales related to the divestiture of the Wabash,
IN and the Philadelphia, PA paper mills;
— $13 million due to price; and
— $4 million due to unfavorable changes in foreign currency exchange
rates.
Attached is supplemental data showing third quarter 2009 Net Sales and net tons sold by each of the Company’s business segments: Paperboard Packaging, Multi-wall Bag and Specialty Packaging. Pro forma Net Sales and pro forma net tons sold are also shown, each assuming that the combination with Altivity occurred on January 1, 2008 and excluding 2008 results of the Wabash, IN and the Philadelphia, PA paper mills divested in September 2008.
EBITDA
EBITDA for third quarter 2009 was $178.0 million. Excluding $38.5 million of alternative fuel tax credits net of expenses, $1.0 million loss on early extinguishment of debt, and $14.6 million of restructuring and other charges primarily related to the combination with Altivity, Adjusted EBITDA was $155.1 million. This compares to second quarter 2009 Adjusted EBITDA of $147.7 million and third quarter 2008 Adjusted EBITDA of $132.4 million. When comparing against the prior year quarter, Adjusted EBITDA in the third quarter of 2009 was positively impacted by:
— $29 million of lower input costs primarily related to energy, fiber,
chemicals, and resin;
— $20 million of favorable net performance driven by synergies and
continuous improvement cost reductions; and
— $6 million of positive foreign currency exchange rates.
Third quarter 2009 Adjusted EBITDA was negatively impacted by:
— $19 million related to volume, mix and lower fixed cost absorption;
and
— $13 million due to pricing.
Other Results
At the end of the third quarter of 2009, the Company’s total debt was $3,038.8 million, or $29.5 million lower than debt of $3,068.3 million at the end of the second quarter 2009. Taking cash and cash equivalents into account, total Net Debt at the end of the third quarter 2009 was $2,794.1 million. This represents a reduction of $338.7 million in Net Debt since first quarter 2008. As a precaution against possible future volatility in the credit and securities markets, at September 30, 2009, the Company kept $219.6 million invested in short-term investments that are fully collateralized by U.S. Treasuries. The Company currently intends to use a portion of this cash to make a voluntary pre-payment of debt. Including Cash and Cash Equivalents, as of September 30, 2009, the Company had available liquidity of approximately $608.6 million and had not drawn on its $400 million revolving credit facility.
Net cash provided by operating activities was $321.5 million through the first nine months of 2009, compared to $42.8 million during the same period last year. YTD 2009 operating cash flow includes $97.2 million of alternative fuel tax credits received. The alternative fuel tax credits are currently scheduled to expire on December 31, 2009.
Net interest expense was $53.3 million for third quarter 2009, as compared to net interest expense of $57.4 million in third quarter 2008. The decrease was due to both lower interest rates and lower debt balances. During the third quarter, the Company refinanced the remaining $180.1 million aggregate principal amount of its 8.5% senior unsecured notes due August 2011 by issuing, at a premium, $180.0 million aggregate principal amount of new 9.5% senior notes due June 2017. The premium proceeds of $5.4 million from the new notes were used to pay accrued interest on the 2011 notes as well as all fees and expenses incurred in connection with the offering and redemption.
Third quarter 2009 income tax expense was $10.3 million. This 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 carry-forward which may be available to offset future taxable income in the United States.
Capital expenditures for third quarter 2009 were $29.9 million compared to $43.1 million in the third quarter of 2008. Capital expenditures were $96.3 million through the first nine months of 2009 compared to $126.4 million over the same period last year.
Under the terms of its Credit Agreement, the Company must comply with a maximum consolidated secured leverage ratio. As of September 30, 2009, the Company’s ratio was 3.44 to 1.00, in compliance with the required maximum ratio of 5.00 to 1.00. The required maximum ratio stepped down to 4.75 to 1.00 on October 1, 2009. The calculation of this covenant and the Company’s Net Debt, along with a tabular reconciliation of EBITDA, Adjusted EBITDA, Pro Forma Adjusted EBITDA, Pro Forma Net Sales, Credit Agreement EBITDA and Adjusted Net Income (Loss) to Net Income (Loss) is attached to this release.