EX-99.1
Published on November 5, 2009
Exhibit 99.1
Investor Relations: Kevin Crum
Graphic Packaging International, Inc.
770-644-3071
Graphic Packaging International, Inc.
770-644-3071
Media: Cathy Worthy
Graphic Packaging International, Inc.
770-644-3515
Graphic Packaging International, Inc.
770-644-3515
Graphic Packaging Holding Company Reports Third Quarter 2009 Results
Third Quarter Highlights
| Earnings per share were $0.10 versus a loss of $(0.04) per share in the prior year period. | ||
| Adjusted EBITDA was $155.1 million, 17.1% higher than the prior year period. | ||
| Excluding alternative fuel tax credits, operating cash flow increased $74.9 million versus the prior year period. | ||
| Net Debt reduced by $113.6 million during the quarter. |
MARIETTA, Ga., November 5, 2009. Graphic Packaging Holding Company (NYSE: GPK), a leading provider
of packaging solutions to food, beverage and other consumer products companies, today reported Net
Income for third quarter 2009 of $33.2 million, or $0.10 per share, based upon 344.9 million
weighted average diluted shares outstanding. Adjusted Net Income for the quarter, which excludes
$38.5 million of alternative fuel tax credits net of expenses, a $1.0 million loss on early
extinguishment of debt, and $14.6 million of restructuring and other charges primarily associated
with the combination with Altivity Packaging, LLC (Altivity), was $10.3 million, or $0.03 per
weighted average diluted share. This compares to a third quarter 2008 Net Loss of $(14.4) million,
or $(0.04) per share and Adjusted Net Loss of $(7.0) million, or $(0.02) per share.
Our focus on food and beverage and the execution of our operational plans put in place following
the combination with Altivity have allowed us to perform well in this difficult operating
environment, said David W. Scheible, President and Chief Executive Officer. Our third quarter
Adjusted EBITDA grew over 17% from the prior year period and our Adjusted EBITDA margin improved to
14.7% from
11.5% a year ago and 14.2% in second quarter 2009. We continue to recognize synergies
from the Altivity combination and realize the benefits of our continuous improvement programs. We
also continue to strengthen our balance sheet as year-to-date Net Debt decreased by over $219
million. This is a result of generating $322 million of operating cash, including $97 million of
alternative fuel tax credits, through the first nine months of 2009, compared to $43 million in the
same period last year.
Net Sales
Third quarter 2009 Net Sales of $1,054.2 million increased 1.0% from second quarter 2009 Net Sales
of $1,043.8 million but decreased 9.6% from third quarter 2008 Net Sales of $1,165.7 million. The
Companys Multi-wall Bag and Specialty Packaging segments were particularly impacted by the
economy, as the core end-use markets of construction and general manufacturing continued to be
demand challenged. When comparing to the prior year quarter, Net Sales in the third quarter of
2009 were negatively impacted by:
| $76 million related to volume and mix; | ||
| $19 million of lower sales related to the divestiture of the Wabash, IN and the Philadelphia, PA paper mills; | ||
| $13 million due to price; and | ||
| $4 million due to unfavorable changes in foreign currency exchange rates. |
Attached is supplemental data showing third quarter 2009 Net Sales and net tons sold by each of the
Companys business segments: Paperboard Packaging, Multi-wall Bag and Specialty Packaging. Pro
forma Net Sales and pro forma net tons sold are also shown, each assuming that the combination with
Altivity occurred on January 1, 2008 and excluding 2008 results of the Wabash, IN and the
Philadelphia, PA paper mills divested in September 2008.
2
EBITDA
EBITDA for third quarter 2009 was $178.0 million. Excluding $38.5 million of alternative fuel tax
credits net of expenses, $1.0 million loss on early extinguishment of debt, and $14.6 million of
restructuring and other charges primarily related to the combination with Altivity, Adjusted EBITDA
was $155.1 million. This compares to second quarter 2009 Adjusted EBITDA of $147.7 million and
third quarter 2008 Adjusted EBITDA of $132.4 million. When comparing against the prior year
quarter, Adjusted EBITDA in the third quarter of 2009 was positively impacted by:
| $29 million of lower input costs primarily related to energy, fiber, chemicals, and resin; | ||
| $20 million of favorable net performance driven by synergies and continuous improvement cost reductions; and | ||
| $6 million of positive foreign currency exchange rates. |
Third quarter 2009 Adjusted EBITDA was negatively impacted by:
| $19 million related to volume, mix and lower fixed cost absorption; and | ||
| $13 million due to pricing. |
Other Results
At the end of the third quarter of 2009, the Companys total debt was $3,038.8 million, or $29.5
million lower than debt of $3,068.3 million at the end of the second quarter 2009. Taking cash and
cash equivalents into account, total Net Debt at the end of the third quarter 2009 was $2,794.1
million. This represents a reduction of $338.7 million in Net Debt since first quarter 2008. As a
precaution against possible future volatility in the credit and securities markets, at September
30, 2009, the Company kept $219.6 million invested in short-term investments that are fully
collateralized by U.S. Treasuries. The Company currently intends to
use a portion of this cash to make a voluntary pre-payment of debt.
3
Including Cash and Cash Equivalents, as of September 30,
2009, the Company had available liquidity of approximately $608.6 million and had not drawn on its
$400 million revolving credit facility.
Net cash provided by operating activities was $321.5 million through the first nine months of 2009,
compared to $42.8 million during the same period last year. YTD 2009 operating cash flow includes
$97.2 million of alternative fuel tax credits received. The alternative fuel tax credits are
currently scheduled to expire on December 31, 2009.
Net interest expense was $53.3 million for third quarter 2009, as compared to net interest expense
of $57.4 million in third quarter 2008. The decrease was due to both lower interest rates and
lower debt balances. During the third quarter, the Company refinanced the remaining $180.1 million
aggregate principal amount of its 8.5% senior unsecured notes due August 2011 by issuing, at a
premium, $180.0 million aggregate principal amount of new 9.5% senior notes due June 2017. The
premium proceeds of $5.4 million from the new notes were used to pay accrued interest on the 2011
notes as well as all fees and expenses incurred in connection with the offering and redemption.
Third quarter 2009 income tax expense was $10.3 million. This was predominately attributable to
the noncash expense associated with the amortization of goodwill for tax purposes. The Company has
a $1.4 billion net operating loss carry-forward which may be available to offset future taxable
income in the United States.
Capital expenditures for third quarter 2009 were $29.9 million compared to $43.1 million in the
third quarter of 2008. Capital expenditures were $96.3 million through the first nine months of
2009 compared to $126.4 million over the same period last year.
Under the terms of its Credit Agreement, the Company must comply with a maximum consolidated
secured leverage ratio. As of September 30, 2009, the Companys ratio was 3.44 to 1.00, in
compliance with the required maximum ratio of 5.00 to 1.00. The required maximum ratio stepped
4
down to 4.75 to 1.00 on October 1, 2009. The calculation of this covenant and the Companys Net
Debt, along with a tabular reconciliation of EBITDA, Adjusted EBITDA, Pro Forma Adjusted EBITDA,
Pro Forma Net Sales, Credit Agreement EBITDA and Adjusted Net Income (Loss) to Net Income (Loss) is
attached to this release.
Earnings Call
The Company will host a conference call at 8:30 am eastern time today (November 5th) to
discuss the results of third quarter 2009. 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# 33401838). Listeners may also access the audio webcast 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 800-642-1687.
Forward Looking Statements
Any statements of the Companys 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,
the availability of the Companys net operating loss to offset
taxable income in the U.S. and voluntary debt pre-payments, are
based on currently available information and are subject to various risks and uncertainties that
could cause actual results to differ materially from the Companys present expectations. These
risks and uncertainties include, but are not limited to, the Companys substantial amount of debt,
inflation of and volatility in raw material and energy costs, volatility in the credit and
securities markets, cutbacks in consumer spending that could affect demand for the Companys
products or actions taken by our customers in response to the difficult economic environment,
continuing pressure for lower cost products, the Companys ability to implement its business
strategies, including productivity initiatives and cost reduction plans, currency movements and
other risks of conducting business internationally, and the impact of regulatory and litigation
matters, including
5
the
continued availability of the alternative fuel tax credits, the
Companys net operating loss offset to taxable income, and those that impact the Companys
ability to protect and use its intellectual property. 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 Companys periodic filings with the SEC.
About Graphic Packaging Holding Company
Graphic Packaging Holding Company (NYSE:GPK), headquartered in Marietta, Georgia, is a leading
provider of packaging solutions for a wide variety of products to food, beverage and other consumer
products companies. The Company is one of the largest producers of folding cartons and holds a
leading market position in coated-recycled boxboard and specialty bag packaging. The Companys
customers include some of the most widely recognized companies in the world. Additional information
about Graphic Packaging, its business and its products is available on the Companys web site at
www.graphicpkg.com.
6
GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, | December 31, | ||||||||
In millions, except share and per share amounts | 2009 | 2008 | |||||||
ASSETS |
|||||||||
Current Assets: |
|||||||||
Cash and Cash Equivalents |
$ | 244.7 | $ | 170.1 | |||||
Receivables, Net |
413.8 | 369.6 | |||||||
Inventories, Net |
465.4 | 532.0 | |||||||
Other Current Assets |
52.6 | 56.9 | |||||||
Total Current Assets |
1,176.5 | 1,128.6 | |||||||
Property, Plant and Equipment, Net |
1,835.2 | 1,935.1 | |||||||
Goodwill |
1,210.4 | 1,204.8 | |||||||
Intangible Assets, Net |
630.6 | 664.6 | |||||||
Other Assets |
47.0 | 50.0 | |||||||
Total Assets |
$ | 4,899.7 | $ | 4,983.1 | |||||
LIABILITIES |
|||||||||
Current Liabilities: |
|||||||||
Short-Term Debt and Current Portion of Long-Term Debt |
$ | 29.2 | $ | 18.6 | |||||
Accounts Payable |
313.5 | 333.4 | |||||||
Other Accrued Liabilities |
314.2 | 333.6 | |||||||
Total Current Liabilities |
656.9 | 685.6 | |||||||
Long-Term Debt |
3,009.6 | 3,165.2 | |||||||
Deferred Income Tax Liabilities |
218.3 | 187.8 | |||||||
Accrued Pension and Postretirement Benefits |
366.9 | 375.8 | |||||||
Other Noncurrent Liabilities |
48.2 | 43.5 | |||||||
Total Liabilities |
4,299.9 | 4,457.9 | |||||||
SHAREHOLDERS EQUITY |
|||||||||
Preferred Stock, par value $.01 per share; 100,000,000 shares
authorized;
no shares issued or outstanding |
| | |||||||
Common Stock, par value $.01 per share; 1,000,000,000 shares authorized;
343,245,250 and 342,522,470 shares issued and outstanding at
September 30, 2009 and December 31, 2008, respectively |
3.4 | 3.4 | |||||||
Capital in Excess of Par Value |
1,957.6 | 1,955.4 | |||||||
Accumulated Deficit |
(1,050.8 | ) | (1,075.4 | ) | |||||
Accumulated Other Comprehensive Loss |
(310.4 | ) | (358.2 | ) | |||||
Total Shareholders Equity |
599.8 | 525.2 | |||||||
Total Liabilities and Shareholders Equity |
$ | 4,899.7 | $ | 4,983.1 | |||||
7
GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
In millions, except per share amounts | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Net Sales |
$ | 1,054.2 | $ | 1,165.7 | $ | 3,117.2 | $ | 3,031.7 | ||||||||
Cost of Sales |
907.8 | 1,015.3 | 2,702.4 | 2,626.7 | ||||||||||||
Selling, General and Administrative |
74.1 | 85.4 | 232.0 | 218.7 | ||||||||||||
Research, Development and Engineering |
1.7 | 2.1 | 5.3 | 6.0 | ||||||||||||
Other (Income) Expense, Net |
(3.0 | ) | 3.0 | (11.2 | ) | 1.6 | ||||||||||
Restructuring and Other Special (Credits) Charges |
(23.9 | ) | 7.4 | (29.9 | ) | 38.8 | ||||||||||
Income from Operations |
97.5 | 52.5 | 218.6 | 139.9 | ||||||||||||
Interest Income |
0.1 | 0.5 | 0.3 | 1.0 | ||||||||||||
Interest Expense |
(53.4 | ) | (57.9 | ) | (158.3 | ) | (158.2 | ) | ||||||||
Loss on Early Extinguishment of Debt |
(1.0 | ) | | (7.1 | ) | | ||||||||||
Income (Loss) before Income Taxes and Equity in Net
Earnings of Affiliates |
43.2 | (4.9 | ) | 53.5 | (17.3 | ) | ||||||||||
Income Tax Expense |
(10.3 | ) | (9.0 | ) | (29.7 | ) | (25.0 | ) | ||||||||
Income (Loss) before Equity in Net Earnings of Affiliates |
32.9 | (13.9 | ) | 23.8 | (42.3 | ) | ||||||||||
Equity in Net Earnings of Affiliates |
0.3 | 0.4 | 0.8 | 1.2 | ||||||||||||
Income (Loss) from Continuing Operations |
33.2 | (13.5 | ) | 24.6 | (41.1 | ) | ||||||||||
Loss from Discontinued Operations, Net of Taxes |
| (0.9 | ) | | (0.9 | ) | ||||||||||
Net Income (Loss) |
$ | 33.2 | $ | (14.4 | ) | $ | 24.6 | $ | (42.0 | ) | ||||||
Income (Loss) Per Share Basic |
||||||||||||||||
Continuing Operations |
$ | 0.10 | $ | (0.04 | ) | $ | 0.07 | $ | (0.14 | ) | ||||||
Discontinued Operations |
| | | | ||||||||||||
Total |
$ | 0.10 | $ | (0.04 | ) | $ | 0.07 | $ | (0.14 | ) | ||||||
Income (Loss) Per Share Diluted |
||||||||||||||||
Continuing Operations |
$ | 0.10 | $ | (0.04 | ) | $ | 0.07 | $ | (0.14 | ) | ||||||
Discontinued Operations |
| | | | ||||||||||||
Total |
$ | 0.10 | $ | (0.04 | ) | $ | 0.07 | $ | (0.14 | ) | ||||||
Weighted Average Number of Shares Outstanding Basic |
343.4 | 342.5 | 343.0 | 306.8 | ||||||||||||
Weighted Average Number of Shares Outstanding Diluted |
344.9 | 342.5 | 343.9 | 306.8 |
8
GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | ||||||||
September 30, | ||||||||
In millions | 2009 | 2008 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net Income (Loss) |
$ | 24.6 | $ | (42.0 | ) | |||
Noncash Items Included in Net Income (Loss): |
||||||||
Depreciation and Amortization |
228.0 | 190.0 | ||||||
Write-off of Debt Issuance Costs on Early Extinguishment of Debt |
2.3 | | ||||||
Deferred Income Taxes |
27.9 | 20.8 | ||||||
Amount of Postemployment Expense Greater (Less) Than Funding |
13.1 | (38.6 | ) | |||||
Amortization of Deferred Debt Issuance Costs |
6.4 | 5.9 | ||||||
Other, Net |
8.4 | 20.2 | ||||||
Changes in Operating Assets & Liabilities |
10.8 | (113.5 | ) | |||||
Net Cash Provided by Operating Activities |
321.5 | 42.8 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Capital Spending |
(96.3 | ) | (126.4 | ) | ||||
Acquisition Costs Related to Altivity |
| (30.3 | ) | |||||
Cash Acquired Related to Altivity |
| 60.2 | ||||||
Proceeds from Sale of Assets, Net of Selling Costs |
9.8 | 20.3 | ||||||
Other, Net |
(1.2 | ) | (4.6 | ) | ||||
Net Cash Used in Investing Activities |
(87.7 | ) | (80.8 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Proceeds from Issuance of Debt |
423.8 | 1,200.0 | ||||||
Payments on Debt |
(425.3 | ) | (1,195.6 | ) | ||||
Borrowings under Revolving Credit Facilities |
105.9 | 747.4 | ||||||
Payments on Revolving Credit Facilities |
(249.1 | ) | (544.5 | ) | ||||
Debt Issuance Costs and Early Tender Premiums |
(14.7 | ) | (16.3 | ) | ||||
Other, Net |
(0.1 | ) | (0.5 | ) | ||||
Net Cash (Used in) Provided by Financing Activities |
(159.5 | ) | 190.5 | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
0.3 | (0.7 | ) | |||||
Net Increase in Cash and Cash Equivalents |
74.6 | 151.8 | ||||||
Cash and Cash Equivalents at Beginning of Period |
170.1 | 9.3 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 244.7 | $ | 161.1 | ||||
9
Reconciliation of Non-GAAP Financial Measures
The table below sets forth the Companys earnings before interest expense,
income tax expense, equity in the net earnings of the Companys affiliates,
depreciation and amortization (EBITDA), Adjusted EBITDA, and Adjusted Net
Income (Loss). Adjusted EBITDA and Adjusted Net Income (Loss) exclude charges
associated with the Companys combination with Altivity Packaging, LLC and
other Restructuring and Other Special Charges (Credits). The Companys
management believes that the presentation of EBITDA, Adjusted EBITDA and
Adjusted Net Income (Loss) provides useful information to investors because
these measures are regularly used by management in assessing the Companys
performance. EBITDA, Adjusted EBITDA and Adjusted Net Income (Loss) 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 or liquidity presented in
accordance with GAAP.
EBITDA, Adjusted EBITDA and Adjusted Net Income (Loss) 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 and Adjusted Net Income (Loss) 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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
In millions | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Net Income (Loss) |
$ | 33.2 | $ | (14.4 | ) | $ | 24.6 | $ | (42.0 | ) | ||||||
Add (Subtract): |
||||||||||||||||
Income Tax Expense |
10.3 | 9.0 | 29.7 | 25.0 | ||||||||||||
Equity in Net Earnings of Affiliates |
(0.3 | ) | (0.4 | ) | (0.8 | ) | (1.2 | ) | ||||||||
Interest Expense, Net |
53.3 | 57.4 | 158.0 | 157.2 | ||||||||||||
Depreciation and Amortization |
81.5 | 73.4 | 244.0 | 193.5 | ||||||||||||
EBITDA |
178.0 | 125.0 | 455.5 | 332.5 | ||||||||||||
Charges Associated with Combination with Altivity |
14.6 | 7.4 | 61.6 | 38.8 | ||||||||||||
Grenoble Plant Shutdown Charges |
| | 2.3 | | ||||||||||||
Loss on Early Extinguishment of Debt |
1.0 | | 7.1 | | ||||||||||||
Alternative Fuel Tax Credits Net of Expenses |
(38.5 | ) | | (93.8 | ) | | ||||||||||
Adjusted EBITDA |
$ | 155.1 | $ | 132.4 | $ | 432.7 | $ | 371.3 | ||||||||
Net Income (Loss) |
$ | 33.2 | $ | (14.4 | ) | $ | 24.6 | $ | (42.0 | ) | ||||||
Charges Associated with Combination with Altivity |
14.6 | 7.4 | 61.6 | 38.8 | ||||||||||||
Grenoble Plant Shutdown Charges |
| | 2.3 | | ||||||||||||
Loss on Early Extinguishment of Debt |
1.0 | | 7.1 | | ||||||||||||
Alternative Fuel Tax Credits Net of Expenses |
(38.5 | ) | | (93.8 | ) | | ||||||||||
Adjusted Net Income (Loss) |
$ | 10.3 | $ | (7.0 | ) | $ | 1.8 | $ | (3.2 | ) | ||||||
Per Share Basic |
||||||||||||||||
Net Income (Loss) |
$ | 0.10 | $ | (0.04 | ) | $ | 0.07 | $ | (0.14 | ) | ||||||
Charges Associated with Combination with Altivity |
0.04 | 0.02 | 0.18 | 0.13 | ||||||||||||
Grenoble Plant Shutdown Charges |
| | 0.01 | | ||||||||||||
Loss on Early Extinguishment of Debt |
| | 0.02 | | ||||||||||||
Alternative Fuel Tax Credits Net of Expenses |
(0.11 | ) | | (0.27 | ) | | ||||||||||
Adjusted Net Income (Loss) * |
$ | 0.03 | $ | (0.02 | ) | $ | 0.01 | $ | (0.01 | ) | ||||||
Per Share Diluted |
||||||||||||||||
Net Income (Loss) |
$ | 0.10 | $ | (0.04 | ) | $ | 0.07 | $ | (0.14 | ) | ||||||
Charges Associated with Combination with Altivity |
0.04 | 0.02 | 0.18 | 0.13 | ||||||||||||
Grenoble Plant Shutdown Charges |
| | 0.01 | | ||||||||||||
Loss on Early Extinguishment of Debt |
| | 0.02 | | ||||||||||||
Alternative Fuel Tax Credits Net of Expenses |
(0.11 | ) | | (0.27 | ) | | ||||||||||
Adjusted Net Income (Loss) * |
$ | 0.03 | $ | (0.02 | ) | $ | 0.01 | $ | (0.01 | ) | ||||||
* | May not foot due to rounding |
September 30, | March 31, | |||||||
Calculation of Net Debt: | 2009 | 2008 | ||||||
Short-Term Debt and Current Portion of Long-Term Debt |
$ | 29.2 | $ | 20.3 | ||||
Long-Term Debt |
3,009.6 | 3,134.4 | ||||||
Less: |
||||||||
Cash and Cash Equivalents |
(244.7 | ) | (21.9 | ) | ||||
Total Net Debt |
$ | 2,794.1 | $ | 3,132.8 | ||||
10
GRAPHIC PACKAGING HOLDING COMPANY
Reconciliation of Non-GAAP Financial Measures (continued)
Pro Forma Results
Reconciliation of Non-GAAP Financial Measures (continued)
Pro Forma Results
The following pro forma results for the three months and nine months ended September 30, 2008, respectively, give effect to
Graphic Packaging Corporations combination with Altivity Packaging, LLC as if it had occurred on January 1, 2008 and
exclude the 2008 results for the two coated-recycled board mills divested in September 2008. The Companys management
believes that the pro forma presentation provides useful information to investors in light of the Companys combination
with Altivity Packaging, LLC. The pro forma information is not necessarily indicative of what the combined companies
results of operations actually would have been if the transaction had been completed on the date indicated.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
In millions | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Net Sales |
$ | 1,054.2 | $ | 1,165.7 | $ | 3,117.2 | $ | 3,031.7 | ||||||||
Altivity Net Sales |
| (18.5 | ) | | 335.6 | |||||||||||
Pro Forma Net Sales |
$ | 1,054.2 | $ | 1,147.2 | $ | 3,117.2 | $ | 3,367.3 | ||||||||
Pro Forma Net Income (Loss) |
$ | 33.2 | $ | (15.4 | ) | $ | 24.6 | $ | (66.5 | ) | ||||||
Add (Subtract): |
||||||||||||||||
Income Tax Expense |
10.3 | 9.0 | 29.7 | 25.7 | ||||||||||||
Equity in Net Earnings of Affiliates |
(0.3 | ) | (0.4 | ) | (0.8 | ) | (1.2 | ) | ||||||||
Interest Expense, Net |
53.3 | 57.4 | 158.0 | 188.7 | ||||||||||||
Depreciation and Amortization |
81.5 | 73.4 | 244.0 | 212.0 | ||||||||||||
Pro Forma EBITDA |
178.0 | 124.0 | 455.5 | 358.7 | ||||||||||||
Charges Associated with Combination with Altivity |
14.6 | 7.4 | 61.6 | 38.8 | ||||||||||||
Grenoble Plant Shutdown Charges |
| | 2.3 | | ||||||||||||
Loss on Early Extinguishment of Debt |
1.0 | | 7.1 | | ||||||||||||
Alternative Fuel Tax Credits Net of Expenses |
(38.5 | ) | | (93.8 | ) | | ||||||||||
Pro Forma Adjusted EBITDA |
$ | 155.1 | $ | 131.4 | $ | 432.7 | $ | 397.5 | ||||||||
Pro Forma Net Income (Loss) |
$ | 33.2 | $ | (15.4 | ) | $ | 24.6 | $ | (66.5 | ) | ||||||
Charges Associated with Combination with Altivity |
14.6 | 7.4 | 61.6 | 38.8 | ||||||||||||
Grenoble Plant Shutdown Charges |
| | 2.3 | | ||||||||||||
Loss on Early Extinguishment of Debt |
1.0 | | 7.1 | | ||||||||||||
Alternative Fuel Tax Credits Net of Expenses |
(38.5 | ) | | (93.8 | ) | | ||||||||||
Pro Forma Adjusted Net Income (Loss) |
$ | 10.3 | $ | (8.0 | ) | $ | 1.8 | $ | (27.7 | ) | ||||||
Per Share Basic |
||||||||||||||||
Pro Forma Net Income (Loss) |
$ | 0.10 | $ | (0.04 | ) | $ | 0.07 | $ | (0.19 | ) | ||||||
Charges Associated with Combination with Altivity |
0.04 | 0.02 | 0.18 | 0.11 | ||||||||||||
Grenoble Plant Shutdown Charges |
| | 0.01 | | ||||||||||||
Loss on Early Extinguishment of Debt |
| | 0.02 | | ||||||||||||
Alternative Fuel Tax Credits Net of Expenses |
(0.11 | ) | | (0.27 | ) | | ||||||||||
Pro Forma Adjusted Net Income (Loss)* |
$ | 0.03 | $ | (0.02 | ) | $ | 0.01 | $ | (0.08 | ) | ||||||
Per Share Diluted |
||||||||||||||||
Pro Forma Net Income (Loss) |
$ | 0.10 | $ | (0.04 | ) | $ | 0.07 | $ | (0.19 | ) | ||||||
Charges Associated with Combination with Altivity |
0.04 | 0.02 | 0.18 | 0.11 | ||||||||||||
Grenoble Plant Shutdown Charges |
| | 0.01 | | ||||||||||||
Loss on Early Extinguishment of Debt |
| | 0.02 | | ||||||||||||
Alternative Fuel Tax Credits Net of Expenses |
(0.11 | ) | | (0.27 | ) | | ||||||||||
Pro Forma Adjusted Net Income (Loss)* |
$ | 0.03 | $ | (0.02 | ) | $ | 0.01 | $ | (0.08 | ) | ||||||
* | May not foot due to rounding |
11
GRAPHIC PACKAGING HOLDING COMPANY
Reconciliation of Non-GAAP Financial Measures
(Continued)
Reconciliation of Non-GAAP Financial Measures
(Continued)
The Credit Agreement dated May 15, 2007, as amended (the Credit Agreement) and the indentures
governing the Companys 9.5% Senior Notes due 2017 and 9.5% Senior Subordinated Notes due 2013
(the Notes) limit the Companys ability to incur additional indebtedness. Additional covenants
contained in the Credit Agreement, among other things, restrict the ability of the Company to
dispose of assets, incur guarantee obligations, prepay other indebtedness, make dividends and other
restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms
of the indentures under which the Notes are issued, engage in mergers or consolidations, change the
business conducted by the Company and its subsidiaries, and engage in certain transactions with
affiliates. Such restrictions, together with the highly leveraged nature of the Company and recent
disruptions in the credit markets, could limit the Companys ability to respond to changing market
conditions, fund its capital spending program, provide for unexpected capital investments or take
advantage of business opportunities.
Under the terms of the Credit Agreement, the Company must comply with a maximum consolidated
secured leverage ratio, which is defined as the ratio of: (a) total long-term and short-term
indebtedness of the Company and its consolidated subsidiaries as determined in accordance with
generally accepted accounting principles in the United States (U.S. GAAP), plus the aggregate
cash proceeds received by the Company and its subsidiaries from any receivables or other
securitization but excluding therefrom (i) all unsecured indebtedness, (ii) all subordinated
indebtedness permitted to be incurred under the Credit Agreement, and (iii) all secured
indebtedness of foreign subsidiaries to (b) Adjusted EBITDA, which we refer to as Credit Agreement
EBITDA(1). Pursuant to this financial covenant, the Company must maintain a maximum consolidated
secured leverage ratio of less than the following:
Maximum Consolidated Secured | ||
Leverage Ratio(1) | ||
October 1, 2008 September 30, 2009
|
5.00 to 1.00 | |
October 1, 2009 and thereafter
|
4.75 to 1.00 | |
Note:
(1) | Credit Agreement EBITDA is defined in the Credit Agreement as consolidated net income before consolidated net interest expense, non-cash expenses and charges, total income tax expense, depreciation expense, expense associated with amortization of intangibles and other assets, non-cash provisions for reserves for discontinued operations, extraordinary, unusual or non-recurring gains or losses or charges or credits, gain or loss associated with sale or write-down of assets not in the ordinary course of business, any income or loss accounted for by the equity method of accounting, and projected run rate cost savings, prior to or within a twelve month period. |
At September 30, 2009, the Company was in compliance with the financial covenant in the Credit
Agreement and the ratio was as follows:
Consolidated Secured Leverage Ratio 3.44 to 1.00
The Companys management believes that presentation of the consolidated secured leverage ratio and
Credit Agreement EBITDA herein provides useful information to investors because borrowings under
the Credit Agreement are a key source of the Companys liquidity, and the Companys ability to
borrow under the Credit Agreement is dependent on, among other things, its compliance with the
financial ratio covenant. Any failure by the Company to comply with this financial covenant could
result in an event of default, absent a waiver or amendment from the lenders under such agreement,
in which case the lenders may be entitled to declare all amounts owed to be due and payable
immediately.
Credit Agreement EBITDA is a financial measure not calculated in accordance with U.S. GAAP, and is
not a measure of net income, operating income, operating performance or liquidity presented in
accordance with U.S. GAAP. Credit Agreement EBITDA should be considered in addition to results
prepared in accordance with U.S. GAAP, but should not be considered a substitute for or superior to
U.S. GAAP results. In addition, Credit Agreement EBITDA may not be comparable to EBITDA or
similarly titled measures utilized by other companies because other companies may not calculate
Credit Agreement EBITDA in the same manner as the Company does.
12
The calculations of the components of the maximum consolidated secured leverage ratio for and as of
the period ended September 30, 2009 are listed below:
Twelve Months Ended | ||||
In millions | September 30, 2009 | |||
Pro Forma Net Loss
|
$ | (33.1 | ) | |
Income Tax Expense
|
39.1 | |||
Interest Expense, Net
|
216.2 | |||
Depreciation and Amortization
|
302.3 | |||
Dividends Received, Net of Earnings of Equity Affiliates
|
0.6 | |||
Non-Cash Provisions for Reserves for Discontinued Operations
|
0.3 | |||
Other Non-Cash Charges
|
49.6 | |||
Merger Related Expenses
|
50.4 | |||
Losses Associated with Sale/Write-Down of Assets
|
36.8 | |||
Other Non-Recurring/Extraordinary/Unusual Items
|
(86.3 | ) | ||
Projected Run Rate Cost Savings (a)
|
57.6 | |||
Credit Agreement EBITDA
|
$ | 633.5 | ||
As of | ||||
In millions | September 30, 2009 | |||
Short-Term Debt
|
$ | 29.2 | ||
Long-Term Debt
|
3,009.6 | |||
Total Debt
|
$ | 3,038.8 | ||
Less Adjustments (b)
|
856.5 | |||
Consolidated Secured Indebtedness
|
$ | 2,182.3 | ||
Note:
(a) | As defined by the Credit Agreement, this represents projected cost savings expected by the Company to be realized as a result of specific actions taken or expected to be taken prior to or within twelve months of the period in which Credit Agreement EBITDA is to be calculated, net of the amount of actual benefits realized or expected to be realized from such actions. | |
The terms of the Credit Agreement limit the amount of projected run rate cost savings that may be used in calculating Credit Agreement EBITDA by stipulating that such amount may not exceed the lesser of (i) ten percent of EBITDA as defined in the Credit Agreement for the last twelve-month period (before giving effect to projected run rate cost savings) or (ii) $100 million. | ||
As a result, in calculating Credit Agreement EBITDA above, the Company used projected run rate cost savings of $57.6 million, or ten percent of EBITDA, as calculated in accordance with the Credit Agreement, which amount is lower than total projected cost savings identified by the Company, net of actual benefits realized for the twelve month period ended September 30, 2009. Projected run rate cost savings were calculated by the Company solely for its use in calculating Credit Agreement EBITDA for purposes of determining compliance with the maximum consolidated secured leverage ratio contained in the Credit Agreement and should not be used for any other purpose. | ||
(b) | Represents consolidated indebtedness/securitization that is either (i) unsecured, or (ii) Permitted Subordinated Indebtedness as defined in the Credit Agreement, or secured indebtedness permitted to be incurred by the Companys foreign subsidiaries per the Credit Agreement. |
If inflationary pressures on key inputs resume, or depressed selling prices, lower sales volumes,
increased operating costs or other factors have a negative impact on the Companys ability to
increase its profitability, the Company may not be able to maintain its compliance with the
financial covenant in its Credit Agreement. The Companys ability to comply in future periods with
the financial covenant in the Credit Agreement will depend on its ongoing financial and operating
performance, which in turn will be subject to economic conditions and to financial, business and
other factors, many of which are beyond the Companys control, and will be substantially dependent
on the selling prices for the Companys products, raw material and energy costs, and the Companys
ability to successfully implement its overall business strategies and meet its profitability
objective. If a violation of the financial covenant or any of the other covenants occurred, the
Company would attempt to obtain a waiver or an amendment from its lenders, although no assurance
can be given that the Company would be successful in this regard. The Credit Agreement and the
indentures governing the Notes have certain cross-default or cross-acceleration provisions; failure
to comply with these covenants in any agreement could result in a violation of such agreement which
could, in turn, lead to violations of other agreements pursuant to such cross-default or
cross-acceleration provisions. If an event of default occurs, the lenders are entitled to declare
all amounts owed to be due and payable immediately. The Credit Agreement is collateralized by
substantially all of the Companys domestic assets.
13
GRAPHIC PACKAGING HOLDING COMPANY
Unaudited Supplemental Data
Unaudited Supplemental Data
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2009 | ||||||||||||||||
Net Tons Sold (000s): |
||||||||||||||||
Paperboard Packaging |
617.1 | 648.3 | 655.9 | |||||||||||||
Multi-wall Bag |
60.3 | 60.0 | 63.3 | |||||||||||||
Specialty Packaging (1) |
5.2 | 4.8 | 6.1 | |||||||||||||
Total |
682.6 | 713.1 | 725.3 | | ||||||||||||
Net
Sales ($ Millions): |
||||||||||||||||
Paperboard Packaging |
$ | 840.4 | $ | 879.3 | $ | 886.2 | ||||||||||
Multi-wall Bag |
124.8 | 115.3 | 117.5 | |||||||||||||
Specialty Packaging |
54.0 | 49.2 | 50.5 | |||||||||||||
Total |
$ | 1,019.2 | $ | 1,043.8 | $ | 1,054.2 | $ | | ||||||||
2008
|
||||||||||||||||
Net Tons Sold (000s): |
||||||||||||||||
Paperboard Packaging |
535.7 | 705.5 | 748.4 | 640.0 | ||||||||||||
Multi-wall Bag |
27.8 | 75.2 | 75.3 | 67.3 | ||||||||||||
Specialty Packaging (1) |
1.6 | 7.4 | 7.5 | 5.7 | ||||||||||||
Total |
565.1 | 788.1 | 831.2 | 713.0 | ||||||||||||
Net
Sales ($ Millions): |
||||||||||||||||
Paperboard Packaging |
$ | 657.1 | $ | 928.5 | $ | 946.9 | $ | 844.9 | ||||||||
Multi-wall Bag |
50.0 | 143.5 | 145.3 | 139.3 | ||||||||||||
Specialty Packaging |
17.2 | 69.7 | 73.5 | 63.5 | ||||||||||||
Total |
$ | 724.3 | $ | 1,141.7 | $ | 1,165.7 | $ | 1,047.7 | ||||||||
(1) | Tonnage is not applicable to the majority of the Specialty Packaging segment due to the nature of products sold (e.g. inks, labels, etc.) |
14
GRAPHIC PACKAGING HOLDING COMPANY
Unaudited Supplemental Data (continued)
Pro Forma Results
Unaudited Supplemental Data (continued)
Pro Forma Results
The following pro forma results for the three months and nine months ended September 30,
2008, respectively, give effect to Graphic Packaging Corporations combination with
Altivity Packaging, LLC as if it had occurred on January 1, 2008 and exclude the 2008
results for the two coated-recycled board mills divested in September 2008. The Companys
management believes that the pro forma presentation provides useful information to
investors in light of the Companys recent combination with Altivity Packaging, LLC. The
pro forma information is not necessarily indicative of what the combined companies results
of operations actually would have been if the transaction had been completed on the date
indicated.
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2009 | ||||||||||||||||
Net Tons Sold (000s): |
||||||||||||||||
Paperboard Packaging |
617.1 | 648.3 | 655.9 | |||||||||||||
Multi-wall Bag |
60.3 | 60.0 | 63.3 | |||||||||||||
Specialty Packaging (1) |
5.2 | 4.8 | 6.1 | |||||||||||||
Total |
682.6 | 713.1 | 725.3 | | ||||||||||||
Net
Sales ($ Millions): |
||||||||||||||||
Paperboard Packaging |
$ | 840.4 | $ | 879.3 | $ | 886.2 | ||||||||||
Multi-wall Bag |
124.8 | 115.3 | 117.5 | |||||||||||||
Specialty Packaging |
54.0 | 49.2 | 50.5 | |||||||||||||
Total |
$ | 1,019.2 | $ | 1,043.8 | $ | 1,054.2 | $ | | ||||||||
2008
|
||||||||||||||||
Net Tons Sold (000s): |
||||||||||||||||
Paperboard Packaging |
690.0 | 672.9 | 715.0 | 640.0 | ||||||||||||
Multi-wall Bag |
73.3 | 75.2 | 75.3 | 67.3 | ||||||||||||
Specialty Packaging (1) |
7.1 | 7.4 | 7.5 | 5.7 | ||||||||||||
Total |
770.4 | 755.5 | 797.8 | 713.0 | ||||||||||||
Net
Sales ($ Millions): |
||||||||||||||||
Paperboard Packaging |
$ | 882.1 | $ | 910.3 | $ | 928.4 | $ | 844.9 | ||||||||
Multi-wall Bag |
144.2 | 143.5 | 145.3 | 139.3 | ||||||||||||
Specialty Packaging |
70.3 | 69.7 | 73.5 | 63.5 | ||||||||||||
Total |
$ | 1,096.6 | $ | 1,123.5 | $ | 1,147.2 | $ | 1,047.7 | ||||||||
(1) | Tonnage is not applicable to the majority of the Specialty Packaging segment due to the nature of products sold (e.g. inks, labels, etc.) |
15