Graphic Packaging Holding Company Reports Third Quarter 2020 Results; Net Organic Sales Growth Exceeds 4%

Graphic Packaging Holding Company (NYSE: GPK), (the “Company”), a leading provider of packaging solutions to food, beverage, foodservice, and other consumer products companies, today reported Net Income for third quarter 2020 of $63.7 million, or $0.23 per share, based on 278.0 million weighted average diluted shares. This compares to the third quarter 2019 Net Income of $52.1 million, or $0.18 per share, based on 293.7 million weighted average diluted shares.

Third-quarter 2020 Net Income was impacted by a net $8.6 million of special charges that are detailed in the Reconciliation of Non-GAAP Financial Measures table attached. When adjusting for these charges, Adjusted Net Income for the third quarter of 2020 was $72.3 million, or $0.26 per diluted share. This compares to the third quarter 2019 Adjusted Net Income of $57.9 million, or $0.20 per diluted share.

Q3 2020 Highlights

  • Net Sales were $1,697.7 million versus $1,581.6 million in the prior-year period.
  • Net organic sales increased by 4.2% in the quarter and increased by 3.5% for the first nine months of 2020 versus the prior-year period.
  • Net Income was $63.7 million versus $52.1 million in the prior-year period.
  • Earnings per Diluted Share were $0.23 versus $0.18 in the prior-year period.
  • Adjusted Earnings per Diluted Share were $0.26 versus $0.20 in the prior-year period.
  • Adjusted EBITDA was $250.2 million versus $244.3 million in the prior-year period.
  • Global liquidity was $1,557.1 million at quarter-end.
  • Returned $366.7 million to stakeholders in share repurchases, dividends, partnership distributions, and redemptions; included $89.9 million in common shares repurchased during the quarter.

Michael Doss, the Company’s President, and CEO said, “We continue to deliver excellent results in 2020 consistent with our

Net organic sales growth accelerated on a sequential basis to over 4% in the third quarter. Our business pipeline remains robust and we are uniquely positioned to capture growth with our innovative fiber-based packaging solutions.” – Michael Doss, President and CEO, Graphic Packaging Holding Company.

Vision 2025 goals and we are capturing organic sales growth as we answer the call from consumers for more sustainable packaging solutions. Net organic sales growth accelerated on a sequential basis to over 4% in the third quarter. Our business pipeline remains robust and we are uniquely positioned to capture growth with our innovative fiber-based packaging solutions.”

Doss added, “At Graphic Packaging, we are ensuring continuity of service for our customers, a safe environment for our employees, and long-term returns for our stakeholders. Our transformation to a growth culture is a direct result of the compelling value proposition we offer customers and the ongoing investments we are making to ensure we lead the industry in quality, service, and innovation. Our teams are executing during a challenging time, and we are committed to leadership in the paperboard packaging industry by providing sustainable and exciting new packaging solutions.”

Operating Results

Net Sales

Net Sales increased by 7.3% to $1,697.7 million in the third quarter of 2020, compared to $1,581.6 million in the prior-year period. The $116.1 million increase was driven by $118.8 million of improved volume/mix related to organic growth and acquisitions and $6.9 million in favorable foreign exchange. These benefits were partially offset by $9.6 million in unfavorable pricing.

Note: The closing of the White Pigeon, Michigan mill and the shutdown of the West Monroe containerboard machine led to a decrease of tons sold of 30,400 in the three months ended September 30, 2020.

EBITDA

EBITDA for the third quarter of 2020 was $241.2 million. After adjusting both periods for charges associated with business combinations and other special charges, Adjusted EBITDA increased $5.9 million to $250.2 million in the third quarter of 2020 from $244.3 million in the third quarter of 2019. When comparing against the prior-year quarter, Adjusted EBITDA in the third quarter of 2020 was positively impacted by $14.8 million of favorable volume/mix, $3.0 million of commodity input cost deflation, $6.7 million of improved net operating performance, and $3.4 million of foreign exchange. The net operating performance included a previously announced $12 million expense related to market downtime of the SBS cup stock paper machine executed during the third quarter. These items were partially offset by $9.6 million in unfavorable pricing and $12.4 million of other inflation (primarily labor and benefits).

Other Results

Total Debt (Long-Term, Short-Term, and Current Portion) increased $184.6 million during the third quarter of 2020 to $3,713.9 million compared to the second quarter of 2020. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) increased $212.7 million during the third quarter of 2020 to $3,658.4 million compared to the second quarter of 2020. The Company’s third quarter 2020 Net Leverage Ratio was 3.44 times Adjusted EBITDA compared to 3.26 times at the end of the second quarter of 2020.

On September 30, 2020, the Company had available liquidity of $1,557.1 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $32.0 million in the third quarter of 2020, down compared to the $35.9 million reported in the third quarter of 2019, reflecting lower average borrowing rates.

Capital expenditures for the third quarter of 2020 were $119.1 million, up compared to $71.6 million in the third quarter of 2019, largely due to the strategic investment in a new coated recycled board paper machine in Kalamazoo, Michigan.

Third-quarter 2020 Income Tax Expense was $8.3 million, down compared to a $16.9 million expense in the third quarter of 2019, reflecting favorable outcomes from tax planning and credits recognized in the quarter.

Graphic Packaging’s complete Third Quarter 2020 Earnings Report can be found on the company’s website: www.graphicpkg.com.

Graphic Packaging Holding Company, headquartered in Atlanta, Georgia, is a leading provider of paper-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 holds leading market positions in coated recycled paperboard, coated unbleached kraft paperboard, and solid bleached sulfate paperboard. For further information, visit: www.graphicpkg.com.

SOURCE: Graphic Packaging Holding Company

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