Packaging

Graphic Packaging Holding Company Reports First Quarter 2011 Results

Thursday 21. April 2011 - Q1 Earnings per Share were $0.08 versus Adjusted Earnings per Share of $0.04 in the prior year period.

Financial Highlights
Q1 Earnings per Share were $0.08 versus Adjusted Earnings per Share of $0.04 in the prior year period.
Q1 Net Sales declined 0.3% versus the prior year period.
Q1 EBITDA was $142.7 million versus Adjusted EBITDA of $144.8 million in the prior year period.
Q1 Net Cash Provided by Operations was $6.1 million compared to Cash Used by Operations of $(25.2) million in the prior year period.
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 first quarter 2011 of $26.7 million, or $0.08 per share based upon 349.8 million weighted average diluted shares. This compares to first quarter 2010 Net Income of $6.3 million, or $0.02 per share and Adjusted Net Income of $14.8 million, or $0.04 per share based upon 346.9 million weighted average diluted shares. First quarter 2010 Adjusted Net Income excludes $8.5 million of Charges Associated with the Combination with Altivity Packaging, LLC.
“The first quarter was solid despite the negative impact that severe weather had on volumes along with the rapid increase of input costs,” said CEO David Scheible. “Our volumes were down considerably in the month of February as winter storms disrupted the overall supply chain and forced the closure of a number of our facilities as well as many of our customers’ manufacturing sites. At the same time, we continued to experience higher costs for secondary fiber and many petro-based chemicals, as crude remained over $100 a barrel.”
“Our volumes returned to normal levels in March and we expect the positive pricing momentum to carry forward. This, along with accelerated cost reduction efforts, including the recently announced transition of our Cincinnati beverage operations to our West Monroe, Louisiana and Perry, Georgia plants, should more than offset the impact of input cost inflation this year.”
“While the closing of the Cincinnati facility was a difficult decision, it was a necessary step in our ongoing efforts to align our manufacturing footprint to the changing needs of the market. This plan includes an expansion to the Perry site and will further capitalize on Perry and West Monroe’s close proximity to the Macon and West Monroe mills, respectively.”
“Finally, we are pleased with the result of last week’s stock offering and will use the proceeds to accelerate debt reduction and to finance the acquisition of Sierra Pacific Packaging. Sierra provides us with a strategic west coast location and will further integrate our Santa Clara, CA mill. It also provides us with a platform for growth into the craft beer and wine box markets. We expect to begin to realize synergies from this acquisition in the second half of 2011.”
Net Sales
Net sales decreased 0.3% to $1,000.6 million during first quarter 2011, compared to first quarter 2010 net sales of $1,004.1 million. The slight decline resulted from approximately $32 million of lower volumes and mix, partially offset by approximately $24 million of increased pricing and approximately $4 million of favorable exchange rates.
On a segment basis, Paperboard Packaging sales, which comprised 82.4% of total first quarter net sales, decreased 1.2% compared to the first quarter of 2010. The slight decline reflected the negative volume impact related to the severe weather conditions in February. Net sales in the Flexible Packaging segment increased 3.6% compared to the first quarter of 2010. The increase was primarily the result of continued inflationary price recovery.
Attached is supplemental data showing net sales and net tons sold by business segment for the first quarter of 2011 and each quarter of 2010.
EBITDA
EBITDA for first quarter 2011 was $142.7 million. This compares to first quarter 2010 EBITDA of $136.3 million and Adjusted EBITDA of $144.8 million. When comparing against the prior year quarter, EBITDA in the first quarter of 2011 was negatively impacted by approximately $36 million of input cost inflation, approximately $7 million of higher benefits and long-term stock-based incentives, and approximately $6 million of lower volumes and mix. First quarter 2011 EBITDA was positively impacted by approximately $24 million from increased pricing and approximately $23 million of net operating performance and cost reduction initiatives.
Other Results
Taking cash and cash equivalents into account, total Net Debt at the end of the first quarter 2011 was $2,470.9 million. This represents a reduction of $224 million in net debt since March 31, 2010. The Company’s Net Leverage Ratio decreased to 4.32 times Adjusted EBITDA at the end of the first quarter 2011 from 4.72 times Adjusted EBITDA at March 31, 2010. At the end of the first quarter 2011, the Company had available liquidity of approximately $472.7 million including the undrawn availability under its $400 million revolving credit facility.
Net Cash Provided by Operations was $6.1 million in the first quarter of 2011 compared to Net Cash Used by Operations of $(25.2) million in the first quarter of 2010.
Net interest expense was $39.3 million in first quarter 2011 compared to $45.0 million in first quarter 2010. The decrease was due to both lower debt balances and lower interest rates.
First quarter 2011 Income Tax Expense was $2.9 million compared to Income Tax Expense of $8.6 million in the first quarter of 2010. The reduction was primarily due to a portion of goodwill being fully amortized at the end of 2010 and certain discrete events including the revision of state tax positions and the expiration of the statute of limitation associated with reserves in a foreign jurisdiction. The Company has a $1.3 billion net operating loss carry-forward which may be available to offset future taxable income in the United States.
Capital expenditures for first quarter 2011 were $36.8 million compared to $18.2 million in the first quarter of 2010. The increase was driven by additional spending to improve process capability and reduce costs.
Under the terms of its Credit Agreement, the Company must comply with a maximum consolidated secured leverage ratio. As of March 31, 2011, the Company’s ratio was 2.74 to 1.00, in compliance with the required maximum ratio of 4.75 to 1.00.