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Graphic Packaging Holding Company Reports Second Quarter 2017 Results

Wednesday, July 26, 2017

Press release from the issuing company

ATLANTA - 

Highlights

  • Q2 Net Sales were $1,094.7 million versus $1,103.2 million in the prior year period.
  • Q2 Net Tons Sold were 733.9 thousand tons versus 721.9 thousand tons in the prior year period.
  • Q2 Earnings per Diluted Share were $0.14 versus $0.24 in the prior year period.
  • Q2 Adjusted Earnings per Diluted Share were $0.15 versus $0.19 in the prior year period.
  • Q2 Net Income was $42.0 million versus $77.8 million in the prior year period.
  • Q2 Adjusted EBITDA was $170.6 million versus $195.2 million in the prior year period.
  • Returned $42.8 million to stockholders in Q2 through dividends and share repurchases.

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 second quarter 2017 of $42.0 million, or $0.14 per share, based on 311.1 million weighted average diluted shares.  This compares to second quarter 2016 Net Income of $77.8 million, or $0.24 per share, based on 322.5 million weighted average diluted shares.

Second quarter 2017 Net Income was negatively impacted by $4.4 million (net of a $1.7 million tax benefit) of business combinations and other special charges. When adjusting for these charges, Adjusted Net Income for the second quarter of 2017 was $46.4 million, or $0.15 per diluted share. This compares to second quarter 2016 Adjusted Net Income of $60.1 million or $0.19 per diluted share.

"Our second quarter Adjusted EBITDA met our expectations at $171 million compared to $195 million in the prior year period. Net Tons Sold were up 1.7%, reflecting an acquisition and slightly positive core volumes. We successfully completed our bi-annual maintenance cold outage at the 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."

"We are executing price increases to offset the unprecedented recycled fiber input cost inflation 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 $43 million to stockholders in the second quarter of 2017 through dividends and share repurchases. We announced the Carton Craft acquisition in mid-June, and completed the transaction on July 10, 2017. 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 decreased 0.8% to $1,094.7 million in the second quarter of 2017, compared to $1,103.2 million in the prior year period.  When comparing against the prior year quarter, net sales were positively impacted by $13.0 million of improved volume/mix related to an acquisition and slightly positive core volumes.  These benefits were more than offset by $11.3 million of unfavorable foreign exchange rates and $10.2 million of lower pricing.

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

EBITDA

EBITDA for the second quarter of 2017 was $164.5 million, or $23.6 million lower than the second quarter of 2016.  After adjusting both periods for expenses associated with business combinations and other special charges, Adjusted EBITDA decreased as expected to $170.6 million in the second quarter of 2017 from $195.2 million in the second quarter of 2016.  When comparing against the prior year quarter, Adjusted EBITDA in the second quarter of 2017 was positively impacted by $15.8 million of improved net operating performance and $1.4 million of favorable volume/mix. These benefits were more than offset by $22.7 million of commodity input cost inflation, $10.2 million of lower pricing, $7.5 million of other inflation (primarily labor and benefits), and $1.4 million of unfavorable foreign exchange rates.

Other Results

Total Debt (Long-Term, Short-Term and Current Portion) decreased $40.5 million during the second quarter of 2017 to $2,227.4 million compared to the first quarter of 2017. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) decreased $15.6 million during the second quarter of 2017 to $2,214.9 million compared to the first quarter of 2017.  At quarter end, the Company's Net Leverage Ratio was 3.13 times Adjusted EBITDA compared to 2.76 times at the end of 2016.

At June 30, 2017, the Company had available global liquidity of $1,167.9 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $22.5 million in the second quarter of 2017, up compared to the $18.2 million in the second quarter of 2016, reflecting higher average debt balances and interest rates.

Capital expenditures for the second quarter of 2017 were $68.4 million compared to $83.0 million in the second quarter of 2016.

Second quarter 2017 Income Tax Expense was $23.6 million compared to $10.1 million in the second 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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Jennifer Matt

David Zwang, Editor/Analyst
David travels the globe helping companies increase their productivity, margins and market reach.

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