Highlights
- 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, Oct. 31,
2023 /PRNewswire/ -- Graphic Packaging Holding
Company (NYSE: GPK), (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.
Forward Looking Statements
Any statements of the
Company's expectations in this press release, including but not
limited to updated 2023 Net Sales, Adjusted EBITDA, Adjusted Cash
Flow, Net Leverage Ratio and Adjusted Earning per Diluted Share
guidance, constitute "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. Such statements
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, cost reduction plans, and integration activities, as
well as the Company's debt level, currency movements and other
risks of conducting business internationally and the impact of
regulatory and litigation matters, including the continued
availability of the Company's U.S. federal income tax attributes to
offset U.S. federal income taxes and the timing related to the
Company's future U.S. federal income tax payments. 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, except
as required by law. Additional information regarding these and
other risks is contained in the Company's periodic filings with the
SEC.
About Graphic Packaging Holding Company
Graphic
Packaging Holding Company (NYSE: GPK), headquartered in
Atlanta, Georgia, is committed to
providing consumer packaging that makes a world of difference. The
Company is a leading provider of sustainable fiber-based packaging
solutions for a wide variety of products to food, beverage,
foodservice, and other consumer products companies. The Company
operates on a global basis, is one of the largest producers of
folding cartons and paper-based foodservice products in
the United States and Europe, and holds leading market positions in
coated recycled paperboard, coated unbleached kraft paperboard and
solid bleached sulfate paperboard. The Company's customers include
many of the world's most widely-recognized companies and brands.
Additional information about Graphic Packaging, its business and
its products is available on the Company's web site at
www.graphicpkg.com.
GRAPHIC PACKAGING
HOLDING COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
Three Months
Ended
September
30,
|
Nine Months
Ended
September
30,
|
In millions, except
per share amounts
|
2023
|
2022
|
2023
|
2022
|
Net Sales
|
$
2,349
|
$
2,451
|
$ 7,179
|
$
7,054
|
Cost of
Sales
|
1,799
|
1,940
|
5,563
|
5,715
|
Selling, General and
Administrative
|
220
|
203
|
622
|
569
|
Other Expense,
Net
|
15
|
6
|
48
|
6
|
Business Combinations,
Shutdown and Other Special Charges, and Exit
Activities, Net
|
28
|
9
|
62
|
126
|
Income from
Operations
|
287
|
293
|
884
|
638
|
Nonoperating Pension
and Postretirement Benefit Income (Expense)
|
(1)
|
2
|
(2)
|
5
|
Interest Expense,
Net
|
(62)
|
(53)
|
(180)
|
(143)
|
Income before Income
Taxes
|
224
|
242
|
702
|
500
|
Income Tax
Expense
|
(54)
|
(49)
|
(175)
|
(134)
|
Net Income
|
$
170
|
$
193
|
$
527
|
$
366
|
|
|
|
|
|
Net Income Per Share
— Basic
|
$
0.55
|
$
0.63
|
$ 1.71
|
$ 1.18
|
Net Income Per Share
— Diluted
|
$
0.55
|
$
0.62
|
$ 1.70
|
$ 1.18
|
|
|
|
|
|
Weighted Average Number
of Shares Outstanding - Basic
|
308.3
|
308.8
|
308.4
|
308.9
|
Weighted Average Number
of Shares Outstanding - Diluted
|
309.2
|
309.6
|
309.3
|
309.7
|
GRAPHIC PACKAGING
HOLDING COMPANY
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
In millions, except
share and per share amounts
|
September 30,
2023
|
December 31,
2022
|
ASSETS
|
|
|
Current
Assets:
|
|
|
Cash and Cash
Equivalents
|
$
146
|
$
150
|
Receivables,
Net
|
881
|
879
|
Inventories,
Net
|
1,741
|
1,606
|
Other Current
Assets
|
90
|
71
|
Total Current
Assets
|
2,858
|
2,706
|
Property, Plant and
Equipment, Net
|
4,799
|
4,579
|
Goodwill
|
2,072
|
1,979
|
Intangible Assets,
Net
|
819
|
717
|
Other Assets
|
357
|
347
|
Total Assets
|
$
10,905
|
$
10,328
|
|
|
|
LIABILITIES
|
|
|
Current
Liabilities:
|
|
|
Short-Term Debt and
Current Portion of Long-Term Debt
|
$
762
|
$
53
|
Accounts
Payable
|
944
|
1,123
|
Other Accrued
Liabilities
|
732
|
757
|
Total Current
Liabilities
|
2,438
|
1,933
|
Long-Term
Debt
|
4,821
|
5,200
|
Deferred Income Tax
Liabilities
|
679
|
668
|
Other Noncurrent
Liabilities
|
426
|
377
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
Preferred Stock, par
value $0.01 per share; 100,000,000 shares authorized; no shares
issued
or outstanding
|
—
|
—
|
Common Stock, par value
$0.01 per share; 1,000,000,000 shares authorized; 306,869,053
and
307,116,089 shares issued and outstanding at September 30,
2023 and December 31, 2022,
respectively
|
3
|
3
|
Capital in Excess of
Par Value
|
2,059
|
2,054
|
Retained
Earnings
|
876
|
469
|
Accumulated Other
Comprehensive Loss
|
(399)
|
(377)
|
Total Graphic
Packaging Holding Company Shareholders' Equity
|
2,539
|
2,149
|
Noncontrolling
Interest
|
2
|
1
|
Total
Equity
|
2,541
|
2,150
|
Total Liabilities
and Shareholders' Equity
|
$
10,905
|
$
10,328
|
GRAPHIC PACKAGING
HOLDING COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Nine Months
Ended
September
30,
|
In
millions
|
2023
|
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
Net Income
|
$
527
|
$
366
|
Adjustments to
Reconcile Net Income to Net Cash Provided by Operating
Activities:
|
|
|
Depreciation and
Amortization
|
465
|
415
|
Deferred Income
Taxes
|
18
|
67
|
Amount of Postretirement Expense Less Than Funding
|
(6)
|
(17)
|
Other Asset Impairment
Adjustments
|
23
|
93
|
Other, Net
|
61
|
43
|
Changes in Operating
Assets and Liabilities
|
(386)
|
(347)
|
Net Cash Provided by
Operating Activities
|
702
|
620
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
Capital
Spending
|
(575)
|
(429)
|
Packaging Machinery
Spending
|
(17)
|
(16)
|
Acquisition of
Businesses, Net of Cash Acquired
|
(361)
|
—
|
Beneficial Interest on
Sold Receivables
|
110
|
83
|
Beneficial Interest
Obtained in Exchange for Proceeds
|
(27)
|
(2)
|
Other, Net
|
(5)
|
(3)
|
Net Cash Used in
Investing Activities
|
(875)
|
(367)
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
Repurchase of Common
Stock
|
(37)
|
(22)
|
Payments on
Debt
|
(18)
|
(10)
|
Borrowings under
Revolving Credit Facilities
|
3,631
|
3,166
|
Payments on Revolving
Credit Facilities
|
(3,266)
|
(3,387)
|
Repurchase of Common
Stock related to Share-Based Payments
|
(22)
|
(18)
|
Dividends
Paid
|
(92)
|
(69)
|
Other, Net
|
(8)
|
9
|
Net Cash Provided by
(Used In) Financing Activities
|
188
|
(331)
|
Effect of Exchange Rate
Changes on Cash
|
(8)
|
(11)
|
Net Increase (Decrease)
in Cash and Cash Equivalents
|
7
|
(89)
|
Cash and Cash
Equivalents at Beginning of Period (includes $5 million
classified as held for
sale as of December 31, 2022)
|
155
|
172
|
Cash and Cash
Equivalents at End of Period (includes $16 million and $1 million
as classified
as held for sale as of September 30, 2023 and 2022
respectively)
|
$
162
|
$
83
|
GRAPHIC PACKAGING HOLDING
COMPANY
Reconciliation of Non-GAAP Financial
Measures
The tables below set forth the calculation of the Company's
earnings before interest expense, income tax expense, depreciation
and amortization, including pension amortization ("EBITDA"),
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income,
Adjusted Earnings Per Share, Adjusted Net Cash Provided by
Operating Activities, Adjusted Cash Flow, Net Leverage Ratio, Total
Net Debt and Net Organic Sales Growth. Adjusted EBITDA and Adjusted
Net Income exclude charges (income) associated with: the Company's
business combinations, facility shutdowns, and other special
charges. The Company's management believes that the presentation of
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per
Share, Adjusted Net Cash Provided by Operating Activities, Adjusted
Cash Flow, Net Leverage Ratio and Net Organic Sales Growth provides
useful information to investors because these measures are
regularly used by management in assessing the Company's
performance. EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted
Earnings Per Share, Adjusted Net Cash Provided by Operating
Activities, Adjusted Cash Flow, Net Leverage Ratio, and Net Organic
Sales Growth 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,
liquidity or net sales presented in accordance with GAAP.
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings
Per Share, Adjusted Net Cash Provided by Operating Activities,
Adjusted Cash Flow, Net Leverage Ratio and Net Organic Sales Growth
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, Adjusted
Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided
by Operating Activities, Adjusted Cash Flow, Net Leverage Ratio and
Net Organic Sales Growth 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, except
per share amounts
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net Income
|
$
170
|
|
$ 193
|
|
$
527
|
|
$ 366
|
Add:
|
|
|
|
|
|
|
|
Income Tax
Expense
|
54
|
|
49
|
|
175
|
|
134
|
Interest Expense,
Net
|
62
|
|
53
|
|
180
|
|
143
|
Depreciation and
Amortization
|
162
|
|
137
|
|
469
|
|
418
|
EBITDA
|
$
448
|
|
$ 432
|
|
$ 1,351
|
|
$ 1,061
|
Charges Associated with
Business Combinations, Shutdown and Other Special
Charges, and Exit Activities, Net (a)
|
34
|
|
9
|
|
68
|
|
126
|
Adjusted
EBITDA
|
$
482
|
|
$ 441
|
|
$ 1,419
|
|
$ 1,187
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin
(Adjusted EBITDA/Net Sales)
|
20.5 %
|
|
18.0 %
|
|
19.8 %
|
|
16.8 %
|
|
|
|
|
|
|
|
|
Net Income
|
$
170
|
|
$ 193
|
|
$
527
|
|
$ 366
|
Charges Associated with
Business Combinations, Shutdown and Other Special
Charges, and Exit Activities, Net (a)
|
34
|
|
9
|
|
68
|
|
126
|
Accelerated
Depreciation Related to Shutdown
|
21
|
|
—
|
|
53
|
|
7
|
Tax Impact of Business
Combinations, Shutdown and Other Special Charges and
Exit Activities, Net, Accelerated Depreciation and Other Tax
Items
|
(13)
|
|
(12)
|
|
(28)
|
|
(9)
|
Amortization Related to
Purchased Intangible Assets, Net of Tax
|
17
|
|
17
|
|
49
|
|
51
|
Adjusted Net Income
(b)
|
$
229
|
|
$ 207
|
|
$
669
|
|
$ 541
|
|
|
|
|
|
|
|
|
Adjusted Earnings Per
Share - Basic (b)
|
$ 0.74
|
|
$ 0.67
|
|
$
2.17
|
|
$
1.75
|
Adjusted Earnings Per
Share - Diluted (b)
|
$ 0.74
|
|
$ 0.67
|
|
$
2.16
|
|
$
1.75
|
(a)
|
For the three and nine
months ended September 30, 2023, $6 million is recorded in costs of
sales for inventory write-offs related to the CRB machine
decommission.
|
(b)
|
Excludes amortization
related to purchased intangibles.
|
GRAPHIC PACKAGING
HOLDING COMPANY
Reconciliation of
Non-GAAP Financial Measures
(Continued)
|
|
|
Twelve Months
Ended
|
|
September
30,
|
|
September
30,
|
|
December
31,
|
In
millions
|
2023
|
|
2022
|
|
2022
|
Net Income
|
$
683
|
|
$
405
|
|
$
522
|
Add
(Subtract):
|
|
|
|
|
|
Income Tax
Expense
|
235
|
|
144
|
|
194
|
Interest Expense,
Net
|
234
|
|
178
|
|
197
|
Depreciation and
Amortization
|
607
|
|
552
|
|
556
|
EBITDA
|
1,759
|
|
1,279
|
|
1,469
|
Charges Associated with
Business Combinations, Shutdown and Other
Special Charges, and Exit Activities,
Net
|
73
|
|
192
|
|
131
|
Adjusted
EBITDA
|
$
1,832
|
|
$
1,471
|
|
$
1,600
|
|
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
December
31,
|
Calculation of Net
Debt:
|
2023
|
|
2022
|
|
2022
|
Short-Term Debt and
Current Portion of Long-Term Debt
|
$
762
|
|
$
300
|
|
$
53
|
Long-Term Debt
(a)
|
4,846
|
|
5,227
|
|
5,230
|
Less:
|
|
|
|
|
|
Cash and Cash
Equivalents
|
(146)
|
|
(82)
|
|
(150)
|
Total Net
Debt
|
$
5,462
|
|
$
5,445
|
|
$
5,133
|
|
|
|
|
|
|
Net Leverage Ratio
(Total Net Debt/Adjusted EBITDA)
|
2.98
|
|
3.70
|
|
3.21
|
(a) Excludes
unamortized deferred debt issue costs.
|
|
Nine Months
Ended
|
|
September
30,
|
In
millions
|
2023
|
|
2022
|
Net Cash Provided by
Operating Activities
|
$
702
|
|
$
620
|
Net Cash Receipts from
Receivables Sold included in Investing Activities
|
83
|
|
81
|
Cash Payments
Associated with Business Combinations, Shutdown and Other
Special
Charges, and Exit Activities, Net
|
16
|
|
36
|
Adjusted Net Cash
Provided by Operating Activities
|
$
801
|
|
$
737
|
Capital
Spending
|
(592)
|
|
(445)
|
Adjusted Cash
Flow
|
$
209
|
|
$
292
|
Calculation of Net
Organic Sales Growth:
|
Three Months
Ended
|
Nine Months
Ended
|
|
September
30,
|
September
30,
|
In
millions
|
2023
|
|
2022
|
2023
|
|
2022
|
Net Sales
|
$
2,349
|
|
$
2,451
|
$
7,179
|
|
$
7,054
|
Open Market Paperboard
Sales (Paperboard Mills
Segment)
|
(236)
|
|
(345)
|
(804)
|
|
(933)
|
Impact of Purchased
Sales from Acquisitions (a)
|
(9)
|
|
—
|
(9)
|
|
—
|
Impact of Pricing
(a)
|
(98)
|
|
—
|
(454)
|
|
—
|
Impact of Foreign
Exchange (b)
|
(29)
|
|
—
|
8
|
|
—
|
Net Organic
Sales
|
$
1,977
|
|
$
2,106
|
$
5,920
|
|
$
6,121
|
Net Organic Sales
Growth
|
(6.1) %
|
|
|
(3.3) %
|
|
|
(a)
|
Represents pricing from
converting sales, including price recovery from
acquisitions.
|
(b)
|
Impact of Foreign
Exchange is measured as the increase or decrease in sales for the
current period by applying prior period foreign currency
exchange rates to present a constant currency comparison to prior
periods.
|
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SOURCE Graphic Packaging Holding Company