• Net Sales were $2,349 million, a decrease of 4% versus the prior year quarter.
• Net Income was $170 million, a decrease of 12% versus the prior year quarter.
• Adjusted EBITDA was $482 million, an increase of 9% versus the prior year quarter.
• Earnings per Diluted Share were $0.55, a decrease of 11% versus the prior year quarter.
• Adjusted Earnings per Diluted Share were $0.74, an increase of 10% versus the prior year quarter.
• Continued progress of multi-year coated recycled paperboard (CRB) system transformation.
• Completed acquisition and commenced integration of Bell Incorporated in September.
• Published 2022 ESG Report demonstrating progress on Vision 2025 ESG goals.

ATLANTA -- Graphic Packaging Holding Company, (the "Company"), a leading fiber-based consumer packaging company, today reported results for the third quarter of 2023.

Net Income for third quarter 2023 was $170 million, or $0.55 per share, based upon 309.2 million weighted average diluted shares. This compares to third quarter 2022 Net Income of $193 million, or $0.62 per share, based upon 309.6 million weighted average diluted shares.

The third quarters of 2023 and 2022 were impacted by a net negative $42 million and a net positive $3 million of special charges, respectively. When adjusting for special charges and amortization of purchased intangibles, Adjusted Net Income for the third quarter of 2023 was $229 million, or $0.74 per diluted share. This compares to third quarter 2022 Adjusted Net Income of $207 million, or $0.67 per diluted share.

Michael Doss, the Company's President and CEO said, "We made further progress toward achieving Vision 2025 goals in the quarter, operating the business at sustained, higher margin levels supported by our innovation engine and focus on consumer packaging. Our multi-year CRB system transformation continues with the 550,000-ton K2 recycled paperboard machine fully ramped and operating at or above committed efficiency and quality levels. Correspondingly, with the recent decommissioning of our longest-running CRB machine, we have removed approximately 480,000 tons of higher-cost, less-efficient production capacity since beginning the project in 2019. Paperboard quality on our state-of-the-art machine is generating significant interest and we recently sold our first packaging solution utilizing the new Pacesetter Rainier recycled paperboard. Finally, in alignment with our balanced approach to capital allocation and investments for growth, we completed the Bell Incorporated acquisition during the quarter, further expanding our portfolio of solutions into new product categories.

"Despite the continuing modest impact to packaging volume caused by inventory normalization and some fluctuations in consumer purchasing behavior, we delivered Adjusted EBITDA growth and margin expansion in the quarter. We exercised a disciplined approach to production and actively managed our supply to the current demand environment. During the quarter, we reduced paperboard production by 150,000 tons. Importantly, we remain on track to achieve $1.9 billion in Adjusted EBITDA, the midpoint of guidance for 2023, an increase of $300 million from 2022. In addition, leverage exiting the year is expected to return to the lower end of our targeted range. We were pleased to publish our 2022 ESG Report in September, and to learn in early October the Science Based Targets initiative approved our 2032 carbon reduction goals. We are focused on driving innovation with customers and advancing the circularity of our products. As we do this, we are fulfilling our purpose to package life's everyday moments for a renewable future."

Operating Results

Net Sales
Net Sales decreased 4% to $2,349 million in the third quarter of 2023, compared to $2,451 million in the prior year period. The $102 million decrease was driven by $223 million of unfavorable volume/mix. This was partially offset by $92 million of positive pricing and $29 million of foreign exchange impact.

EBITDA
EBITDA for the third quarter of 2023 was $448 million, $16 million higher than the third quarter of 2022. After adjusting both periods for business combinations and other special charges, Adjusted EBITDA was $482 million in the third quarter of 2023 versus $441 million in the third quarter of 2022. When comparing against the prior year quarter, Adjusted EBITDA in the third quarter of 2023 was positively impacted by $92 million in pricing, $32 million in commodity input cost deflation, $19 million in favorable net performance, and $5 million of foreign exchange impact. This was partially offset by $64 million in unfavorable volume/mix and $43 million in labor, benefits and other inflation.

Other Results
Total Debt (Long-Term, Short-Term and Current Portion) increased $73 million during the third quarter of 2023 to $5,608 million compared to the second quarter of 2023. Total Net Debt (Total Debt less Cash and Cash Equivalents) increased $52 million during the third quarter of 2023 to $5,462 million compared to the second quarter of 2023. The Company returned $39 million in total capital to stockholders, including $31 million in dividend payments and $8 million via share repurchases, in the third quarter of 2023. The Company's third quarter 2023 Net Leverage Ratio was 3.0x Adjusted EBITDA compared to 3.0x at the end of the second quarter 2023.

At September 30, 2023, the Company had available liquidity of $1,185 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $62 million in the third quarter of 2023, higher when compared to $53 million reported in the third quarter of 2022 due to higher interest rates.

Capital expenditures for the third quarter of 2023 were $207 million, higher when compared to $84 million in the third quarter of 2022 due to the Waco, Texas CRB mill project.

Third quarter 2023 Income Tax Expense was $54 million, up from $49 million in the third quarter of 2022.

Full Year 2023 Guidance
The Company updated its 2023 guidance to reflect current expectations and the acquisition of Bell Incorporated, which closed during the third quarter.

Net Sales are expected to be $9.5 billion to $9.6 billion.

Adjusted EBITDA is expected to be $1.875 billion to $1.925 billion.

Adjusted Cash Flow is expected to be $600 million to $700 million.

Net Leverage Ratio at year-end is expected to be 2.6x to 2.7x Adjusted EBITDA.

Adjusted Earnings per Diluted Share (Excluding Amortization of Purchased Intangibles) is expected to be $2.85 to $3.00.

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 (October 31, 2023) to discuss the results of third 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 856688 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.