Highlights
- Net Sales were $2,392 million, an
increase of 1% versus the prior year quarter.
- Net Income was $150 million, an
increase of 127% versus the prior year quarter.
- Adjusted EBITDA was $453 million,
an increase of 14% versus the prior year quarter.
- Earnings per Diluted Share were $0.49, an increase of 133% versus the prior year
quarter.
- Adjusted Earnings per Diluted Share were $0.66, an increase of 10% versus the prior year
quarter.
- Full year 2023 guidance reiterated.
- Announcing definitive agreement to acquire Bell Incorporated, a
well-capitalized U.S. packaging provider.
- Board of Directors approved $500
million increase to share repurchase authorization.
ATLANTA, Aug. 1, 2023 /PRNewswire/ -- Graphic Packaging
Holding Company (NYSE: GPK), (the "Company"), a leading fiber-based
consumer packaging company, today reported results for the second
quarter of 2023.
Net Income for second quarter 2023 was $150 million, or $0.49 per share, based upon 309.1 million
weighted average diluted shares. This compares to second quarter
2022 Net Income of $66 million, or
$0.21 per share, based upon 309.9
million weighted average diluted shares.
The second quarters of 2023 and 2022 were impacted by a net
$37 million and a net $102 million of special charges, respectively.
When adjusting for special charges and amortization of purchased
intangibles, Adjusted Net Income for the second quarter of 2023 was
$203 million, or $0.66 per diluted share. This compares to second
quarter 2022 Adjusted Net Income of $185
million, or $0.60 per diluted
share.
Michael Doss, the Company's
President and CEO said, "We grew Sales, Adjusted EBITDA and
Adjusted EBITDA margins year over year in the second quarter while
actively managing supply to meet demand in response to short-term
inventory destocking by retailers and our customers. Importantly,
our global team continued to advance key initiatives to drive
sustained future organic growth and higher profitability through
commercial execution, quality improvement and cost reduction. Our
focus remains on delivering renewable and recyclable, fiber-based
packaging solutions preferred by consumers.
"Consistent with that, we are pleased to announce a definitive
agreement to acquire Bell Incorporated, a well-capitalized U.S.
packaging provider, strategically expanding our network, customer
breadth and category presence. The pending transaction will
strengthen our integrated packaging network in the U.S., further
solidifying our commitment to deliver service excellence in
packaging. Our Board of Directors has also approved an incremental
$500 million share repurchase
authorization. These announcements demonstrate our balanced
approach to capital allocation as we continue to deliver value for
stakeholders.
"Finally, we are reiterating full year 2023 guidance. Our
expectations for growth and cash generation enable the continued
allocation of capital into initiatives that strengthen the business
and support growth, while providing a path to return leverage to
the low-end of our historical targeted range. Our execution and
focus on innovation, along with favorable consumer trends, provide
confidence in our ability to drive 100 to 200 basis points of net
organic sales growth annually for years to come."
Bell Incorporated Acquisition
The Company has entered
into a definitive agreement to acquire Bell Incorporated. The
proposed acquisition is expected to add approximately $200 million in sales, $30
million in Adjusted EBITDA and will support strategic
priorities of increasing integration rates and expanding customers
and categories. Annual synergies of approximately $10 million are expected within 24 months of
closing. The transaction includes three well-capitalized packaging
facilities in the Midwest that consume 95,000 tons of paperboard
annually.
The transaction is expected to close in the fourth quarter of
2023, subject to regulatory approvals and other customary closing
conditions.
Operating Results
Net Sales
Net Sales
increased 1% to $2,392 million in the
second quarter of 2023, compared to $2,358
million in the prior year period. The $34 million increase was driven by $188 million of positive pricing, partially
offset by $154 million of unfavorable
volume/mix.
EBITDA
EBITDA for the second quarter of 2023 was
$434 million, $140 million higher than the second quarter of
2022. After adjusting both periods for business combinations
and other special charges, Adjusted EBITDA was $453 million in the second quarter of 2023 versus
$396 million in the second quarter of
2022. When comparing against the prior year quarter, Adjusted
EBITDA in the second quarter of 2023 was positively impacted by
$188 million in pricing and
$4 million in commodity input cost
deflation. This was partially offset by $40
million in unfavorable volume/mix, $48 million in labor, benefits and other
inflation, $43 million in unfavorable
net performance and $4 million of
foreign exchange impact.
Other Results
Total Debt (Long-Term, Short-Term and
Current Portion) decreased $13
million during the second quarter of 2023 to $5,535 million compared to the first quarter of
2023. Total Net Debt (Total Debt less Cash and Cash Equivalents)
decreased $25 million during the
second quarter of 2023 to $5,410
million compared to the first quarter of 2023. The Company
returned $31 million in total capital
to stockholders, including $30
million in dividend payments and $1
million via share repurchases, in the second quarter of
2023. The Company's second quarter 2023 Net Leverage Ratio was 3.0x
Adjusted EBITDA compared to 3.1x at the end of the first quarter
2023.
At June 30, 2023, the Company had
available liquidity of $1,259
million, including the undrawn availability under its global
revolving credit facilities.
Net Interest Expense was $60
million in the second quarter of 2023, higher when compared
to $48 million reported in the second
quarter of 2022 due to higher interest rates.
Capital expenditures for the second quarter of 2023 were
$189 million, higher when compared to
$138 million in the second quarter of
2022 due to the Waco, Texas CRB
mill project.
Second quarter 2023 Income Tax Expense was $57 million, up from $39
million in the second quarter of 2022.
Full Year 2023 Guidance
The Company is reiterating
2023 guidance.
- 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.
- Guidance excludes the pending acquisition of Bell
Incorporated.
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 (August 1, 2023) to discuss the results of second
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 122832 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; and the timing of closing, acquisition cost, Sales,
Adjusted EBITDA and synergies related to the Bell Incorporated
acquisition, 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
|
Six Months
Ended
|
|
June
30,
|
June
30,
|
In millions, except
per share amounts
|
2023
|
|
2022
|
2023
|
|
2022
|
Net Sales
|
$
2,392
|
|
$
2,358
|
$ 4,830
|
|
$
4,603
|
Cost of
Sales
|
1,886
|
|
1,917
|
3,764
|
|
3,775
|
Selling, General and
Administrative
|
205
|
|
185
|
402
|
|
366
|
Other Expense,
Net
|
15
|
|
2
|
33
|
|
—
|
Business Combinations,
Shutdown and Other Special Charges, and Exit Activities,
Net
|
19
|
|
102
|
34
|
|
117
|
Income from
Operations
|
267
|
|
152
|
597
|
|
345
|
Nonoperating Pension
and Postretirement Benefit Income (Expense)
|
—
|
|
1
|
(1)
|
|
3
|
Interest Expense,
Net
|
(60)
|
|
(48)
|
(118)
|
|
(90)
|
Income before Income
Taxes
|
207
|
|
105
|
478
|
|
258
|
Income Tax
Expense
|
(57)
|
|
(39)
|
(121)
|
|
(85)
|
Net Income
|
$
150
|
|
$
66
|
$
357
|
|
$
173
|
|
|
|
|
|
|
|
Net Income Per Share
— Basic
|
$
0.49
|
|
$
0.21
|
$ 1.16
|
|
$ 0.56
|
Net Income Per Share
— Diluted
|
$
0.49
|
|
$
0.21
|
$ 1.15
|
|
$ 0.56
|
|
|
|
|
|
|
|
Weighted Average Number
of Shares Outstanding - Basic
|
308.2
|
|
309.2
|
308.4
|
|
309.0
|
Weighted Average Number
of Shares Outstanding - Diluted
|
309.1
|
|
309.9
|
309.4
|
|
309.8
|
GRAPHIC PACKAGING
HOLDING COMPANY
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
In millions, except
share and per share amounts
|
June 30,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash and Cash
Equivalents
|
$
125
|
|
$
150
|
Receivables,
Net
|
933
|
|
879
|
Inventories,
Net
|
1,729
|
|
1,606
|
Other Current
Assets
|
114
|
|
71
|
Total Current
Assets
|
2,901
|
|
2,706
|
Property, Plant and
Equipment, Net
|
4,753
|
|
4,579
|
Goodwill
|
2,048
|
|
1,979
|
Intangible Assets,
Net
|
693
|
|
717
|
Other Assets
|
344
|
|
347
|
Total Assets
|
$
10,739
|
|
$
10,328
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Short-Term Debt and
Current Portion of Long-Term Debt
|
$
463
|
|
$
53
|
Accounts
Payable
|
996
|
|
1,123
|
Other Accrued
Liabilities
|
678
|
|
757
|
Total Current
Liabilities
|
2,137
|
|
1,933
|
Long-Term
Debt
|
5,046
|
|
5,200
|
Deferred Income Tax
Liabilities
|
708
|
|
668
|
Other Noncurrent
Liabilities
|
398
|
|
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;
307,202,827
and 307,116,089
shares issued and outstanding at June 30, 2023 and
December 31, 2022,
respectively
|
3
|
|
3
|
Capital in Excess of
Par Value
|
2,052
|
|
2,054
|
Retained
Earnings
|
743
|
|
469
|
Accumulated Other
Comprehensive Loss
|
(349)
|
|
(377)
|
Total Graphic
Packaging Holding Company Shareholders' Equity
|
2,449
|
|
2,149
|
Noncontrolling
Interest
|
1
|
|
1
|
Total
Equity
|
2,450
|
|
2,150
|
Total Liabilities
and Shareholders' Equity
|
$
10,739
|
|
$
10,328
|
GRAPHIC PACKAGING
HOLDING COMPANY
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
Six Months
Ended
|
|
June
30,
|
In
millions
|
2023
|
|
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net Income
|
$
357
|
|
$
173
|
Adjustments to
Reconcile Net Income to Net Cash Provided by Operating
Activities:
|
|
|
|
Depreciation and
Amortization
|
304
|
|
278
|
Deferred Income
Taxes
|
38
|
|
40
|
Amount of
Postretirement Expense Greater (Less) Than Funding
|
—
|
|
(5)
|
Impairment Charges
related to Divestiture
|
7
|
|
92
|
Other, Net
|
35
|
|
19
|
Changes in Operating
Assets and Liabilities
|
(450)
|
|
(309)
|
Net Cash Provided by
Operating Activities
|
291
|
|
288
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Capital
Spending
|
(372)
|
|
(351)
|
Packaging Machinery
Spending
|
(13)
|
|
(10)
|
Acquisition of
Businesses, Net of Cash Acquired
|
(100)
|
|
—
|
Beneficial Interest on
Sold Receivables
|
60
|
|
54
|
Beneficial Interest
Obtained in Exchange for Proceeds
|
(9)
|
|
(2)
|
Other, Net
|
(3)
|
|
(2)
|
Net Cash Used in
Investing Activities
|
(437)
|
|
(311)
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Repurchase of Common
Stock
|
(29)
|
|
(7)
|
Payments on
Debt
|
(10)
|
|
(7)
|
Borrowings under
Revolving Credit Facilities
|
2,636
|
|
2,517
|
Payments on Revolving
Credit Facilities
|
(2,379)
|
|
(2,480)
|
Repurchase of Common
Stock related to Share-Based Payments
|
(20)
|
|
(17)
|
Dividends
Paid
|
(61)
|
|
(46)
|
Other, Net
|
(6)
|
|
10
|
Net Cash Provided by
(Used In) Financing Activities
|
131
|
|
(30)
|
Effect of Exchange Rate
Changes on Cash
|
(3)
|
|
(7)
|
Net Decrease in Cash
and Cash Equivalents
|
(18)
|
|
(60)
|
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 $12 million classified as
held for sale
as of June 30,
2023)
|
$
137
|
|
$
112
|
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
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
In millions, except
per share amounts
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net Income
|
$
150
|
|
$
66
|
|
$
357
|
|
$ 173
|
Add
(Subtract):
|
|
|
|
|
|
|
|
Income Tax
Expense
|
57
|
|
39
|
|
121
|
|
85
|
Interest Expense,
Net
|
60
|
|
48
|
|
118
|
|
90
|
Depreciation and
Amortization
|
167
|
|
141
|
|
307
|
|
281
|
EBITDA
|
$
434
|
|
$ 294
|
|
$
903
|
|
$ 629
|
Charges Associated with
Business Combinations, Shutdown and Other Special
Charges,and
Exit Activities, Net
|
19
|
|
102
|
|
34
|
|
117
|
Adjusted
EBITDA
|
$
453
|
|
$ 396
|
|
$
937
|
|
$ 746
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin
(Adjusted EBITDA/Net Sales)
|
18.9 %
|
|
16.8 %
|
|
19.4 %
|
|
16.2 %
|
|
|
|
|
|
|
|
|
Net Income
|
$
150
|
|
$
66
|
|
$
357
|
|
$ 173
|
Charges Associated with
Business Combinations, Shutdown and Other Special
Charges, and Exit
Activities, Net
|
19
|
|
102
|
|
34
|
|
117
|
Accelerated
Depreciation Related to Shutdown
|
30
|
|
3
|
|
32
|
|
7
|
Tax Impact of Business
Combinations, Shutdown and Other Special Charges and
Exit Activities,
Net, Accelerated Depreciation and Other Tax Items
|
(12)
|
|
(3)
|
|
(15)
|
|
3
|
Amortization Related to
Purchased Intangible Assets, Net of Tax
|
16
|
|
17
|
|
32
|
|
34
|
Adjusted Net Income
(a)
|
$
203
|
|
$ 185
|
|
$
440
|
|
$ 334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings Per
Share - Basic (a)
|
$ 0.66
|
|
$ 0.60
|
|
$
1.43
|
|
$
1.08
|
Adjusted Earnings Per
Share - Diluted (a)
|
$ 0.66
|
|
$ 0.60
|
|
$
1.42
|
|
$
1.08
|
(a) Excludes amortization related to
purchased intangibles.
|
GRAPHIC PACKAGING
HOLDING COMPANY
|
Reconciliation of
Non-GAAP Financial Measures
|
(Continued)
|
|
Twelve Months
Ended
|
|
June
30,
|
|
June
30,
|
|
December
31,
|
In
millions
|
2023
|
|
2022
|
|
2022
|
Net Income
|
$
706
|
|
$
285
|
|
$
522
|
Add
(Subtract):
|
|
|
|
|
|
Income Tax
Expense
|
230
|
|
115
|
|
194
|
Interest Expense,
Net
|
225
|
|
154
|
|
197
|
Depreciation and
Amortization
|
582
|
|
539
|
|
556
|
EBITDA
|
1,743
|
|
1,093
|
|
1,469
|
Charges Associated with
Business Combinations, Shutdown and Other
Special Charges, and
Exit Activities, Net
|
48
|
|
221
|
|
131
|
Adjusted
EBITDA
|
$
1,791
|
|
$
1,314
|
|
$
1,600
|
|
|
|
|
|
|
|
June
30,
|
|
June
30,
|
|
December
31,
|
Calculation of Net
Debt:
|
2023
|
|
2022
|
|
2022
|
Short-Term Debt and
Current Portion of Long-Term Debt
|
$
463
|
|
$
292
|
|
$
53
|
Long-Term Debt
(a)
|
5,072
|
|
5,539
|
|
5,230
|
Less:
|
|
|
|
|
|
Cash and Cash
Equivalents
|
(125)
|
|
(108)
|
|
(150)
|
Total Net
Debt
|
$
5,410
|
|
$
5,723
|
|
$
5,133
|
|
|
|
|
|
|
Net Leverage Ratio
(Total Net Debt/Adjusted EBITDA)
|
3.02
|
|
4.36
|
|
3.21
|
(a) Excludes
unamortized deferred debt issue costs.
|
|
Six Months
Ended
|
|
June
30,
|
In
millions
|
2023
|
|
2022
|
Net Cash Provided by
Operating Activities
|
$
291
|
|
$
288
|
Net Cash Receipts from
Receivables Sold included in Investing Activities
|
51
|
|
52
|
Cash Payments
Associated with Business Combinations, Shutdown and Other
Special
Charges, and Exit
Activities, Net
|
9
|
|
27
|
Adjusted Net Cash
Provided by Operating Activities
|
$
351
|
|
$
367
|
Capital
Spending
|
(385)
|
|
(361)
|
Adjusted Cash
Flow
|
$
(34)
|
|
$
6
|
Calculation of Net
Organic Sales Growth:
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30,
|
June
30,
|
In
millions
|
2023
|
|
2022
|
2023
|
|
2022
|
Net Sales
|
$
2,392
|
|
$
2,358
|
$
4,830
|
|
$
4,603
|
Open Market Paperboard
Sales (Paperboard Mills Segment)
|
(252)
|
|
(292)
|
(568)
|
|
(588)
|
Impact of Pricing
(a)
|
(160)
|
|
—
|
(356)
|
|
—
|
Impact of Foreign
Exchange (b)
|
(1)
|
|
—
|
37
|
|
—
|
Net Organic
Sales
|
$
1,979
|
|
$
2,066
|
$
3,943
|
|
$
4,015
|
Net Organic Sales
Growth
|
(4.2) %
|
|
|
(1.8) %
|
|
|
(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