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Graphic Packaging Holding Company reports First Quarter 2015 results

Graphic Packaging Holding Company reports First Quarter 2015 results

Q1 Adjusted Earnings per Diluted Share increased $0.04 to $0.17 from $0.13 in the prior year period.
Q1 Adjusted EBITDA increased 15.0% to $181.3 million from $157.6 million in the prior year period.
Q1 Adjusted EBITDA margin increased 330 basis points to 18.0% from 14.7% in the prior year period.

Graphic Packaging Holding Company, a leading provider of paper-based packaging solutions to food, beverage and other consumer products companies,  reported Net Income for first quarter 2015 of $55.1 million, or $0.17 per share, based upon 331.9 million weighted average diluted shares.

This compares to first quarter 2014 Net Income of $35.2 million, or $0.11 per share, based on 330.3 million weighted average diluted shares.

Including the tax impact, first quarter 2015 Net Income was negatively impacted by $1.6 million of Charges Associated with Business Combinations and Other Special Charges. When adjusting for these charges, Adjusted Net Income for the first quarter of 2015 was $56.7 million, or $0.17 per diluted share. This compares to first quarter 2014 Adjusted Net Income of $44.5 million or $0.13 per diluted share.

“We continue to perform well in a difficult operating environment, as demand in some of our key end-use markets remains challenged,” said Chairman, President and CEO David Scheible. “We produced over 20,000 more tons in our U.S. mills and sold nearly 57,000 more net tons through our global system as compared to the first quarter last year.  The sales volume growth was driven through acquisitions, new product launches and substrate substitution.  Overall, we achieved a $24 million increase in Adjusted EBITDA over last year’s first quarter primarily driven from our global performance initiatives and a $15 million favorable year-over-year weather benefit, resulting in a 4 cent increase in Adjusted Earnings per Diluted Share to 17 cents.”

Net Sales

Net Sales decreased 6.0% to $1,008.2 million in the first quarter of 2015, compared to $1,072.7 million in the prior year period. Excluding $113.9 million of sales in the prior year period from divested businesses, Adjusted Net Sales increased $49.4 million or 5.2%.  The increase was driven by $76.2 million of improved volume/mix and $2.2 million of higher pricing.  The sales increase was partially offset by $29.0 million of unfavorable foreign exchange rates.

Attached is supplemental data showing Net Tons Sold, Net Sales and Income (Loss) from Operations by segment for the first quarter of 2015 and each quarter of 2014.

EBITDA

EBITDA for first quarter 2015 was $179.1 million, or $29.3 million higher than the first quarter of 2014.  When adjusting for Charges Associated with Business Combinations and Other Special Charges, Adjusted EBITDA increased 15.0% to $181.3 million in the first quarter of 2015 from $157.6 million in the first quarter of 2014.  When comparing against the prior year quarter, Adjusted EBITDA in the first quarter of 2015 was positively impacted by $28.4 million of improved net operating performance vs. the weather impacted first quarter of 2014, $10.8 million of favorable volume/mix, $2.2 million of higher pricing and $2.7 million of commodity cost deflation.  These benefits were partially offset by $7.8 million of unfavorable foreign exchange rates, $7.5 million in other costs, primarily for labor and benefits, and $5.1 million of EBITDA from divested businesses.

Other Results

Total Net Debt at the end of the first quarter 2015 was $2,062.5 million, or $169.8 million higher than at the end of 2014.  In addition to a normal first quarter seasonal build in working capital, the Company used funds in the first quarter to acquire the folding carton converting and paperboard mill assets of Cascades’ Norampac Division and Rose City Printing and Packaging, Inc.

The Company’s March 31, 2015 Net Leverage Ratio dropped to 2.81 times Adjusted EBITDA from 3.27 times Adjusted EBITDA at the end of the first quarter of 2014.  At March 31, 2015, the Company had available domestic liquidity of $902.4 million, including the undrawn availability under its $1.25 billion domestic revolving credit facility.

Net Interest Expense was $16.9 million in first quarter 2015, compared to $20.4 million in first quarter 2014. The decrease was due to both lower debt balances and lower overall interest rates.

Capital expenditures for first quarter 2015 were $60.7 million, compared to $59.3 million in the first quarter of 2014.

First quarter 2015 Income Tax Expense was $33.6 million compared to $24.8 million in the first quarter of 2014.  As of March 31, 2015, the Company had approximately $633 million of NOLs for U.S. federal income tax purposes, which may be used to offset future taxable income.

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

Earnings Call

The Company will host a conference call at 10:00 am eastern time today (April 23, 2015) to discuss the results of first quarter 2015.  To access the conference call, listeners calling from within North America should dial 800-392-9489 at least 10 minutes prior to the start of the conference call (Conference ID #18695656).  Listeners may also access the audio webcast, along with a slide presentation, at the Investor Relations section of the Graphic Packaging website: http://www.graphicpkg.com.  Replays of the call can be accessed for one week by dialing 855-859-2056.

Forward Looking Statements

Any statements of the Company’s expectations in this press release constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such statements, including but not limited to, assessments regarding the use of the Company’s NOLs 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 and cost reduction plans, the Company’s debt level, currency movements and other risks of conducting business internationally, the impact of regulatory and litigation matters, including the continued availability of the Company’s net operating loss offset to taxable income.  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.  Additional information regarding these and other risks is contained in the Company’s periodic filings with the SEC.

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