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Graphic Packaging Holding Company Reports First Quarter 2017 Results

Tuesday, April 25, 2017

Press release from the issuing company

ATLANTA- Graphic Packaging Holding Company (NYSE: GPK), (the "Company"), a leading provider of packaging solutions to food, beverage and consumer product companies, today reported Net Income for first quarter 2017 of $37.0 million, or $0.12 per share, based on 314.1 million weighted average diluted shares.  This compares to first quarter 2016 Net Income of $57.5 million, or $0.18 per share, based on 324.2 million weighted average diluted shares.

First quarter 2017 Net Income was negatively impacted by $5.7 million (net of a $2.9 million tax benefit) of business combinations and other special charges. When adjusting for these charges, Adjusted Net Income for the first quarter of 2017 was $42.7 million, or $0.14 per diluted share. This compares to first quarter 2016 Adjusted Net Income of $64.6 million or $0.20 per diluted share.

"Our first quarter Adjusted EBITDA was lower as expected at $161 million compared to $193 million in the prior year period. Net sales were up 2.7%, reflecting recent acquisitions and stable core volumes, consistent with the trends we experienced in 2016. Operating efficiencies improved during the quarter and we successfully upgraded two headboxes on the number six paper machine at our West Monroe, Louisiana mill" said President and CEO Michael Doss. "The quarter was negatively impacted by accelerating commodity input costs, primarily recycled fiber, and the planned downtime costs associated with the upgrade of the two headboxes."

"We are executing price increases to offset the unprecedented recycled fiber input cost inflation we are experiencing and expect margins to improve from our pricing actions during the second half of 2017, and in 2018. Our focus on meeting cash flow commitments, growing cash flow, and returning more of it to stockholders over time has not changed. We returned $64 million to stockholders in the first quarter of 2017 through dividends and share repurchases. We remain committed to a balanced capital allocation strategy, which includes reinvesting in our business to drive strong cash returns on cash invested, strategic acquisitions at compelling post-synergy multiples, and returning cash to stockholders through dividends and share repurchases."

Operating Results

Net Sales

Net Sales increased 2.7% to $1,061.5 million in the first quarter of 2017, compared to $1,034.0 million in the prior year period.  The $27.5 millionincrease was driven by $56.2 million of improved volume/mix related to acquisitions and stable core volumes.  The net sales increase was partially offset by $14.9 million of unfavorable foreign exchange rates and $13.8 million of lower pricing.

Attached is supplemental data showing Net Tons Sold for the first quarter of 2017 and each quarter of 2016.

EBITDA

EBITDA for the first quarter of 2017 was $152.3 million, or $30.6 million lower than the first quarter of 2016.  After adjusting both periods for expenses associated with business combinations and other special charges, Adjusted EBITDA decreased as expected to $160.9 million in the first quarter of 2017 from $193.4 million in the first quarter of 2016.  When comparing against the prior year quarter, Adjusted EBITDA in the first quarter of 2017 was positively impacted by $7.4 million of improved net operating performance and $1.6 million of favorable volume/mix. These benefits were more than offset by $19.4 million of commodity input cost inflation, $13.8 million of lower pricing, $4.8 million of other inflation (primarily labor and benefits), and $3.5 million of unfavorable foreign exchange rates.

Other Results

Total Debt (Long-Term, Short-Term and Current Portion) increased $100.1 million during the first quarter of 2017 to $2,267.9 million compared to the fourth quarter of 2016. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) increased $121.8 million during the first quarter of 2017 to $2,230.5 million compared to the fourth quarter of 2016.  At quarter end, the Company's Net Leverage Ratio was 3.05 times Adjusted EBITDA compared to 2.76 times at the end of 2016.

At March 31, 2017, the Company had available global liquidity of $1,143.1 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $21.3 million in the first quarter of 2017, up compared to the $16.9 million in the first quarter of 2016, reflecting higher average debt balances and interest rates.

Capital expenditures for the first quarter of 2017 were $76.1 million compared to $103.0 million in the first quarter of 2016.

First quarter 2017 Income Tax Expense was $17.6 million compared to $33.2 million in the first quarter of 2016.

Please note that a tabular reconciliation of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Total Net Debt and Net Leverage Ratio is attached to this release.

 

 

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