Raises Full Year 2023 Adjusted EBITDA Guidance
Midpoint to $1.9 Billion
Q1 2023 Highlights
- Net Sales were $2,438 million, an
increase of 9% versus the prior year quarter.
- Net Organic Sales increased 1% versus the prior year
quarter.
- Net Income was $207 million, an
increase of 93% versus the prior year quarter.
- Adjusted EBITDA was $484 million,
an increase of 38% versus the prior year quarter.
- Earnings per Diluted Share were $0.67, an increase of 91% versus the prior year
quarter.
- Adjusted Earnings per Diluted Share were $0.77, an increase of 60% versus the prior year
quarter.
- Net leverage was 3.1x versus 3.2x at year-end 2022.
- Full-year 2023 Adjusted EBITDA guidance increased by
$100 million to $1.9 billion at the midpoint of the guidance
range.
ATLANTA, May 2, 2023
/PRNewswire/ -- Graphic Packaging Holding Company (NYSE: GPK), (the
"Company"), a leading fiber-based consumer packaging company, today
reported results for the first quarter of 2023.
Net Income for first quarter 2023 was $207 million, or $0.67 per share, based upon 309.7 million
weighted average diluted shares. This compares to first quarter
2022 Net Income of $107 million, or
$0.35 per share, based upon 309.7
million weighted average diluted shares.
The first quarters of 2023 and 2022 were impacted by a net
$14 million and a net $25 million of special charges, respectively.
When adjusting for special charges and amortization of purchased
intangibles, Adjusted Net Income for the first quarter of 2023 was
$237 million, or $0.77 per diluted share. This compares to first
quarter 2022 Adjusted Net Income of $149
million, or $0.48 per diluted
share.
Michael Doss, the Company's
President and CEO said, "During the first quarter, our global team
continued to advance our proven strategy of running a different
race to deliver strong results for our customers and our
shareholders. We drove continued net organic sales growth and
positioned the business to further capitalize on the growing
consumer preference for renewable and recyclable, fiber-based
packaging.
"Significant investments in our business continue to result in
quality and production cost advantages. During the quarter our
newest coated recycled paperboard machine in Kalamazoo exceeded
quality, yield and financial expectations. We also began
construction on the recently announced state-of-the-art mill in
Waco, Texas to further advance our
leadership in fiber-based consumer packaging.
"Brands and manufacturers recognize the consumer preference for
more sustainable packaging and are making investments to meet that
demand. We are pleased to announce that Chick-fil-A is launching
our new, highly insulated, double-wall fiber-based cups as a
potential long-term solution for their beverage program.
"Confidence in the stability of our business, coupled with our
team's unwavering focus on innovation and delivering quality and
service to customers, is providing a path to an improved outlook
for the full year. As such, we are raising our 2023 Adjusted EBITDA
guidance and remain on track to achieve our enhanced Vision 2025
financial goals."
Operating Results
Net Sales
Net Sales increased 9% to $2,438
million in the first quarter of 2023, compared to
$2,245 million in the prior year
period. The $193 million increase was
driven by $236 million of positive
pricing, partially offset by $4
million of unfavorable volume/mix and $39 million of foreign exchange impact.
EBITDA
EBITDA for the first quarter of 2023 was $469 million, $134
million higher than the first quarter of 2022. After
adjusting both periods for business combinations and other special
charges, Adjusted EBITDA was $484
million in the first quarter of 2023 versus $350 million in the first quarter of 2022.
When comparing against the prior year quarter, Adjusted EBITDA in
the first quarter of 2023 was positively impacted by $236 million in pricing and $10 million in net performance. This was
partially offset by $2 million in
unfavorable volume/mix, $54 million
of commodity input cost inflation, $40
million in labor, benefits and other inflation and
$16 million of foreign exchange
impact.
Other Results
Total Debt (Long-Term, Short-Term and Current Portion) increased
$265 million during the first quarter
of 2023 to $5,548 million compared to
the fourth quarter of 2022. Total Net Debt (Total Debt, net of Cash
and Cash Equivalents) increased $302
million during the first quarter of 2023 to $5,435 million compared to the fourth quarter of
2022. The Company returned $59
million in total capital to stockholders, including
$31 million in dividend payments and
$28 million via share repurchases, in
the first quarter of 2023. The Company's first quarter 2023 Net
Leverage Ratio was 3.1x Adjusted EBITDA compared to 3.2x at the end
of 2022.
At March 31, 2023, the Company had
available liquidity of $1,237
million, including the undrawn availability under its global
revolving credit facilities.
Net Interest Expense was $58
million in the first quarter of 2023, higher when compared
to $42 million reported in the first
quarter of 2022 due to higher interest rates.
Capital expenditures for the first quarter of 2023 were
$196 million, lower when compared to
$223 million in the first quarter of
2022.
First quarter 2023 Income Tax Expense was $64 million, up from $46
million in the first quarter of 2022.
2023 Annual Guidance
The Company is raising its Adjusted EBITDA guidance by
$100 million, to $1.9 billion at the midpoint of the range, and
updating other guidance metrics as a result. The Company's updated
fiscal 2023 annual guidance is as follows:
- Net Sales are expected to be approximately $10 billion.
- Adjusted EBITDA is expected to be between $1.8 and $2.0
billion.
- Adjusted Cash Flow is expected to be between $600 and $800
million.
- Net Leverage Ratio at year-end is expected to be at or below
2.5x Adjusted EBITDA.
- Adjusted Earnings per Diluted Share (Excluding Amortization of
Purchased Intangibles) is expected to be between $2.70 and $3.10.
Non-GAAP Reconciliation
Please note that a tabular reconciliation of Net Organic Sales
Growth, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted
Net Income, Adjusted EPS (Excluding Amortization of Purchased
Intangibles), Adjusted Net Cash Provided by Operating Activities,
Adjusted Cash Flow and Total Net Debt is attached to this
release.
Earnings Call
The Company will host a conference call at 10:00 a.m. ET today (May
2, 2023) to discuss the results of first quarter 2023. The
conference call will be webcast and can be accessed from the
Investors section of the Graphic Packaging website at
www.graphicpkg.com. Participants may also listen via
telephone by referencing conference ID 073165 and dialing:
- 833-470-1428 from the United
States,
- 833-950-0062 from Canada,
and
- 929-526-1599 from outside the United
States and Canada.
Forward Looking Statements
Any statements of the Company's expectations in this press
release, including but not limited to updated 2023 Adjusted EBITDA,
Net Sales, Adjusted Cash Flow, Net Leverage Ratio and Adjusted
Earning per Diluted Share guidance, constitute "forward-looking
statements" as defined in the Private Securities Litigation Reform
Act of 1995. Such statements are based on currently available
information and are subject to various risks and uncertainties that
could cause actual results to differ materially from the Company's
present expectations. These risks and uncertainties include, but
are not limited to, inflation of and volatility in raw material and
energy costs, continuing pressure for lower cost products, the
Company's ability to implement its business strategies, including
productivity initiatives, cost reduction plans, and integration
activities, as well as the Company's debt level, currency movements
and other risks of conducting business internationally and the
impact of regulatory and litigation matters, including the
continued availability of the Company's U.S. federal income tax
attributes to offset U.S. federal income taxes and the timing
related to the Company's future U.S. federal income tax payments.
Undue reliance should not be placed on such forward-looking
statements, as such statements speak only as of the date on which
they are made and the Company undertakes no obligation to update
such statements, except as required by law. Additional information
regarding these and other risks is contained in the Company's
periodic filings with the SEC.
About Graphic Packaging Holding Company
Graphic Packaging Holding Company (NYSE: GPK), headquartered in
Atlanta, Georgia, is committed to
providing consumer packaging that makes a world of difference. The
Company 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. The Company's customers include
many of the world's most widely-recognized companies and brands.
Additional information about Graphic Packaging, its business and
its products is available on the Company's web site at
www.graphicpkg.com.
GRAPHIC PACKAGING
HOLDING COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
In millions, except
per share amounts
|
2023
|
|
2022
|
Net Sales
|
$
2,438
|
|
$
2,245
|
Cost of
Sales
|
1,878
|
|
1,858
|
Selling, General and
Administrative
|
197
|
|
181
|
Other Expense (Income),
Net
|
18
|
|
(2)
|
Business Combinations,
Shutdown and Other Special Charges, and Exit Activities,
Net
|
15
|
|
15
|
Income from
Operations
|
330
|
|
193
|
Nonoperating Pension
and Postretirement Benefit (Expense) Income
|
(1)
|
|
2
|
Interest Expense,
Net
|
(58)
|
|
(42)
|
Income before Income
Taxes
|
271
|
|
153
|
Income Tax
Expense
|
(64)
|
|
(46)
|
Net Income
|
207
|
|
107
|
|
|
|
|
Net Income Per Share
— Basic
|
$
0.67
|
|
$
0.35
|
Net Income Per Share
— Diluted
|
$
0.67
|
|
$
0.35
|
|
|
|
|
Weighted Average Number
of Shares Outstanding - Basic
|
308.6
|
|
308.8
|
Weighted Average Number
of Shares Outstanding - Diluted
|
309.7
|
|
309.7
|
GRAPHIC PACKAGING
HOLDING COMPANY
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
In millions, except
share and per share amounts
|
March 31,
2023
|
|
December 31,
2022
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash and Cash
Equivalents
|
$
113
|
|
$
150
|
Receivables,
Net
|
915
|
|
879
|
Inventories,
Net
|
1,700
|
|
1,606
|
Other Current
Assets
|
84
|
|
71
|
Total Current
Assets
|
2,812
|
|
2,706
|
Property, Plant and
Equipment, Net
|
4,678
|
|
4,579
|
Goodwill
|
2,053
|
|
1,979
|
Intangible Assets,
Net
|
710
|
|
717
|
Other Assets
|
346
|
|
347
|
Total Assets
|
$
10,599
|
|
$
10,328
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Short-Term Debt and
Current Portion of Long-Term Debt
|
$
57
|
|
$
53
|
Accounts
Payable
|
1,009
|
|
1,123
|
Other Accrued
Liabilities
|
669
|
|
757
|
Total Current
Liabilities
|
1,735
|
|
1,933
|
Long-Term
Debt
|
5,463
|
|
5,200
|
Deferred Income Tax
Liabilities
|
697
|
|
668
|
Other Noncurrent
Liabilities
|
394
|
|
377
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
Preferred Stock, par
value $0.01 per share; 100,000,000 shares authorized; no shares
issued
or outstanding
|
—
|
|
—
|
Common Stock, par value
$0.01 per share; 1,000,000,000 shares authorized; 307,187,962
and 307,116,089 shares issued and outstanding at March 31,
2023 and December 31, 2022,
respectively
|
3
|
|
3
|
Capital in Excess of
Par Value
|
2,040
|
|
2,054
|
Retained
Earnings
|
623
|
|
469
|
Accumulated Other
Comprehensive Loss
|
(358)
|
|
(377)
|
Total Graphic
Packaging Holding Company Shareholders' Equity
|
2,308
|
|
2,149
|
Noncontrolling
Interest
|
2
|
|
1
|
Total
Equity
|
2,310
|
|
2,150
|
Total Liabilities
and Shareholders' Equity
|
$
10,599
|
|
$
10,328
|
GRAPHIC PACKAGING
HOLDING COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
In
millions
|
2023
|
|
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net Income
|
$
207
|
|
$
107
|
Adjustments to
Reconcile Net Income to Net Cash Provided by Operating
Activities:
|
|
|
|
Depreciation and
Amortization
|
139
|
|
139
|
Deferred Income
Taxes
|
30
|
|
17
|
Amount of
Postretirement Expense Greater (Less) Than Funding
|
1
|
|
(5)
|
Impairment Charges
related to Divestiture
|
4
|
|
—
|
Other, Net
|
16
|
|
—
|
Changes in Operating
Assets and Liabilities
|
(337)
|
|
(240)
|
Net Cash Provided by
Operating Activities
|
60
|
|
18
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Capital
Spending
|
(189)
|
|
(221)
|
Packaging Machinery
Spending
|
(7)
|
|
(2)
|
Acquisition of
Businesses, Net of Cash Acquired
|
(100)
|
|
—
|
Beneficial Interest on
Sold Receivables
|
30
|
|
31
|
Beneficial Interest
Obtained in Exchange for Proceeds
|
(6)
|
|
(2)
|
Other, Net
|
(1)
|
|
(1)
|
Net Cash Used in
Investing Activities
|
(273)
|
|
(195)
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Repurchase of Common
Stock
|
(28)
|
|
—
|
Payments on
Debt
|
(5)
|
|
(3)
|
Borrowings under
Revolving Credit Facilities
|
1,832
|
|
1,972
|
Payments on Revolving
Credit Facilities
|
(1,569)
|
|
(1,812)
|
Repurchase of Common
Stock related to Share-Based Payments
|
(20)
|
|
(17)
|
Dividends and
Distributions Paid to GPIP Partner
|
(31)
|
|
(23)
|
Other, Net
|
(2)
|
|
2
|
Net Cash Provided by
Financing Activities
|
177
|
|
119
|
Effect of Exchange Rate
Changes on Cash
|
1
|
|
(3)
|
Net Decrease in Cash
and Cash Equivalents
|
(35)
|
|
(61)
|
Cash and Cash
Equivalents at Beginning of Period (includes $5 million classified
as held for sale
as of December 31, 2022)
|
155
|
|
172
|
Cash and Cash
Equivalents at End of Period (includes $7 million classified as
held for sale as
of March 31, 2023)
|
$
120
|
|
$
111
|
GRAPHIC PACKAGING HOLDING
COMPANY
Reconciliation of Non-GAAP Financial
Measures
The tables below set forth the calculation of the Company's
earnings before interest expense, income tax expense, depreciation
and amortization, including pension amortization ("EBITDA"),
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income,
Adjusted Earnings Per Share, Adjusted Net Cash Provided by
Operating Activities, Adjusted Cash Flow, Net Leverage Ratio, Total
Net Debt and Net Organic Sales Growth. Adjusted EBITDA and Adjusted
Net Income exclude charges (income) associated with: the Company's
business combinations, facility shutdowns, and other special
charges. The Company's management believes that the presentation of
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per
Share, Adjusted Net Cash Provided by Operating Activities, Adjusted
Cash Flow, Net Leverage Ratio and Net Organic Sales Growth provides
useful information to investors because these measures are
regularly used by management in assessing the Company's
performance. EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted
Earnings Per Share, Adjusted Net Cash Provided by Operating
Activities, Adjusted Cash Flow, Net Leverage Ratio, and Net Organic
Sales Growth are financial measures not calculated in accordance
with generally accepted accounting principles in the United States ("GAAP"), and are not
measures of net income, operating income, operating performance,
liquidity or net sales presented in accordance with GAAP.
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings
Per Share, Adjusted Net Cash Provided by Operating Activities,
Adjusted Cash Flow, Net Leverage Ratio and Net Organic Sales Growth
should be considered in addition to results prepared in accordance
with GAAP, but should not be considered substitutes for or superior
to GAAP results. In addition, our EBITDA, Adjusted EBITDA, Adjusted
Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided
by Operating Activities, Adjusted Cash Flow, Net Leverage Ratio and
Net Organic Sales Growth may not be comparable to Adjusted EBITDA
or similarly titled measures utilized by other companies since such
other companies may not calculate such measures in the same manner
as we do.
|
Three Months
Ended
|
|
March
31,
|
In millions, except
per share amounts
|
2023
|
|
2022
|
Net Income
|
$
207
|
|
$ 107
|
Add
(Subtract):
|
|
|
|
Income Tax
Expense
|
64
|
|
46
|
Interest Expense,
Net
|
58
|
|
42
|
Depreciation and
Amortization
|
140
|
|
140
|
EBITDA
|
$
469
|
|
$ 335
|
Charges Associated with
Business Combinations, Shutdown and Other Special Charges, and Exit
Activities, Net
|
15
|
|
15
|
Adjusted
EBITDA
|
$
484
|
|
$ 350
|
|
|
|
|
Adjusted EBITDA Margin
(Adjusted EBITDA/Net Sales)
|
19.9 %
|
|
15.6 %
|
|
|
|
|
Net Income
|
$
207
|
|
$ 107
|
Charges Associated with
Business Combinations, Shutdown and Other Special Charges, and
Exit
Activities, Net
|
15
|
|
15
|
Accelerated
Depreciation Related to Shutdown
|
2
|
|
4
|
Tax Impact of Business
Combinations, Shutdown and Other Special Charges and Exit
Activities, Net,
Accelerated Depreciation and Other Tax Items
|
(3)
|
|
6
|
Amortization Related to
Purchased Intangible Assets, Net of Tax
|
16
|
|
17
|
Adjusted Net Income
(a)
|
$
237
|
|
$ 149
|
|
|
|
|
Adjusted Earnings Per
Share - Basic (a)
|
$ 0.77
|
|
$ 0.48
|
Adjusted Earnings Per
Share - Diluted (a)
|
$ 0.77
|
|
$ 0.48
|
(a) Excludes
amortization related to purchased intangibles.
|
GRAPHIC PACKAGING
HOLDING COMPANY
Reconciliation of
Non-GAAP Financial Measures
(Continued)
|
|
|
|
Twelve Months
Ended
|
|
March
31,
|
|
March
31,
|
|
December
31,
|
In
millions
|
2023
|
|
2022
|
|
2022
|
Net Income
|
$
622
|
|
$
257
|
|
$
522
|
Add
(Subtract):
|
|
|
|
|
|
Net Income
Attributable to Noncontrolling Interest
|
—
|
|
4
|
|
—
|
Income Tax
Expense
|
212
|
|
102
|
|
194
|
Equity Income of
Unconsolidated Entity
|
—
|
|
(1)
|
|
—
|
Interest Expense,
Net
|
213
|
|
135
|
|
197
|
Depreciation and
Amortization
|
556
|
|
516
|
|
556
|
EBITDA
|
1,603
|
|
1,013
|
|
1,469
|
Charges Associated with
Business Combinations, Shutdown and Other
Special Charges, and Exit Activities, Net
|
131
|
|
153
|
|
131
|
Adjusted
EBITDA
|
$
1,734
|
|
$
1,166
|
|
$
1,600
|
|
|
|
|
|
|
|
March
31,
|
|
March
31,
|
|
December
31,
|
Calculation of Net
Debt:
|
2023
|
|
2022
|
|
2022
|
Short-Term Debt and
Current Portion of Long-Term Debt
|
$
57
|
|
$
286
|
|
$
53
|
Long-Term Debt
(a)
|
5,491
|
|
5,681
|
|
5,230
|
Less:
|
|
|
|
|
|
Cash and Cash
Equivalents
|
(113)
|
|
(111)
|
|
(150)
|
Total Net
Debt
|
$
5,435
|
|
$
5,856
|
|
$
5,133
|
|
|
|
|
|
|
Net Leverage Ratio
(Total Net Debt/Adjusted EBITDA)
|
3.13
|
|
5.02
|
|
3.21
|
|
(a) Excludes
unamortized deferred debt issue costs.
|
|
Three Months
Ended
|
|
March
31,
|
In
millions
|
2023
|
|
2022
|
Net Cash Provided by
Operating Activities
|
$
60
|
|
$
18
|
Net Cash Receipts from
Receivables Sold included in Investing Activities
|
24
|
|
29
|
Cash Payments
Associated with Business Combinations, Shutdown and Other
Special
Charges, and Exit Activities, Net
|
1
|
|
14
|
Adjusted Net Cash
Provided by Operating Activities
|
$
85
|
|
$
61
|
Capital
Spending
|
(196)
|
|
(223)
|
Adjusted Cash
Flow
|
$
(111)
|
|
$
(162)
|
Calculation of Net
Organic Sales Growth:
|
Three Months
Ended
|
|
March
31,
|
In
millions
|
2023
|
|
2022
|
Net Sales
|
$
2,438
|
|
$
2,245
|
Open Market Paperboard
Sales (Paperboard Mills Segment)
|
(316)
|
|
(296)
|
Impact of Pricing
(a)
|
(196)
|
|
—
|
Impact of Foreign
Exchange (b)
|
38
|
|
—
|
Net Organic
Sales
|
$
1,964
|
|
$
1,949
|
Net Organic Sales
Growth
|
0.8 %
|
|
|
|
|
(a)
|
Represents pricing from
converting sales, including price recovery from
acquisitions.
|
(b)
|
Impact of Foreign
Exchange is measured as the increase or decrease in sales for the
current period by applying prior period foreign currency exchange
rates to present a constant currency comparison to prior
periods.
|
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SOURCE Graphic Packaging Holding Company