PR Newswire | Jul 27, 2021 06:31AM EDT

Organic Sales Growth Driven by Strong Demand for Fiber-Based Consumer Packaging Solutions

07/27 05:30 CDT

Graphic Packaging Holding Company Reports Second Quarter 2021 Results: 5% Net Organic Sales Growth Driven by Strong Demand for Fiber-Based Consumer Packaging Solutions ATLANTA, July 27, 2021

ATLANTA, July 27, 2021 /PRNewswire/ --

Q2 2021 Highlights

* Net Sales were $1,737 million versus $1,611 million in the prior year quarter. * Net Organic Sales increased 5% in the quarter driven by demand for sustainability-supported, innovative consumer packaging solutions. * Net Income was $38 million versus $52 million in the prior year quarter. * Earnings per Diluted Share were $0.13 versus $0.19 in the prior year quarter. * Adjusted Earnings per Diluted Share were $0.26 versus $0.26 in the prior year quarter. * Adjusted EBITDA was $248 million versus $260 million in the prior year quarter; positively impacted by $15 million of volume/mix related to net organic sales growth and $36 million in favorable net performance, offset by $67 million of commodity input cost inflation. * Executing $400 million in pricing actions to address commodity input cost inflation. * Announced the acquisition of AR Packaging in Europe for approximately $1.45 billion in cash; on track to close by year end, creating premier, global provider of sustainable fiber-based consumer packaging solutions. * Exchanged International Paper's remaining partnership units for shares; completion of transaction returns ownership of partnership interest back to 100%. * Global liquidity was $1.9 billion at quarter end. * Completed acquisition of Americraft Carton, Inc. on July 1st. * Raised approximately $530 million in secured bank debt in July to support announced acquisitions.

Graphic Packaging Holding Company (NYSE: GPK), (the "Company"), a leading provider of sustainable fiber-based consumer packaging solutions to food, beverage, foodservice, and other consumer products companies, today reported Net Income for second quarter 2021 of $38 million, or $0.13 per share, based upon 295.8 million weighted average diluted shares. This compares to second quarter 2020 Net Income of $52 million, or $0.19 per share, based upon 280.5 million weighted average diluted shares.

The second quarters of 2021 and 2020 were negatively impacted by a net $38 million and a net $20 million of special charges, respectively. The charges are detailed in the Reconciliation of Non-GAAP Financial Measures table attached. When adjusting for charges, Adjusted Net Income for the second quarter of 2021 was $76 million, or $0.26 per diluted share. This compares to second quarter 2020 Adjusted Net Income of $72 million, or $0.26 per diluted share.

Michael Doss, the Company's President and CEO said, "Strong demand continued across our markets in the second quarter as consumer preferences are driving conversions to our fiber-based packaging solutions. Increased consumer mobility and consumption outside of the home resulted in higher sales in our Foodservice markets up 22% year over year, while Food, Beverage and Consumer markets continued to show healthy growth of 4%. Our teams worked tirelessly to meet customer demand, and we swiftly implemented pricing actions to offset rising commodity input costs which impacted our results in the quarter. We expect to generate significantly higher Adjusted EBITDA in the second half of 2021 driven by price-cost recovery from the successful execution of approximately $400 million of implemented and recognized pricing actions, and continued momentum from organic sales growth and strong productivity. As we address the near-term inflationary headwinds, we remain unwavering in our commitment to introduce new and innovative packaging solutions across global markets supportive of the move to a more circular economy."

Doss added, "Sustainable packaging is increasingly a factor for consumers when deciding what products to purchase. We are focused on providing the best packaging solutions for consumers through our innovative 'design for the environment' approach and extending our capabilities and geographic reach with strategic acquisitions. We recently closed the Americraft Carton acquisition, gaining seven well-capitalized converting facilities in North America, and I am pleased to welcome this outstanding group of talented employees to our Company. The regulatory approval processes for our announced acquisition of AR Packaging are underway and we anticipate closing that transaction by year end."

Operating Results

Net Sales

Net Sales increased 8% to $1,737 million in the second quarter of 2021, compared to $1,611 million in the prior year period. The $126 million increase was driven by $76 million of improved volume/mix related to organic growth from conversions to fiber-based packaging solutions, $14 million of pricing and $36 million of favorable foreign exchange.

Attached is supplemental data highlighting Net Tons Sold for the first and second quarters of 2021 and for each quarter of 2020.

EBITDA

EBITDA for the second quarter of 2021 was $214 million. After adjusting both periods for business combinations and other special charges, Adjusted EBITDA was $248 million in the second quarter of 2021 versus $260 million in the second quarter of 2020. When comparing against the prior year quarter, Adjusted EBITDA in the second quarter of 2021 was positively impacted by $36 million in net productivity, $15 million of volume/mix, $14 million of price and $4 million of favorable foreign exchange. Adjusted EBITDA was unfavorably impacted by $67 million of commodity input cost inflation and $14 million of other inflation.

Other Results

Total Debt (Long-Term, Short-Term and Current Portion) decreased $77 million during the second quarter of 2021 to $3,788 million compared to the first quarter of 2021. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) decreased $50 million during the second quarter of 2021 to $3,699 million compared to the first quarter of 2021. The Company returned $24 million in capital to stakeholders in the second quarter of 2021 through dividends and partnership distributions. The Company's second quarter 2021 Net Leverage Ratio was 3.69 times Adjusted EBITDA compared to 3.26 times at the end of 2020.

At June 30, 2021, the Company had available liquidity of $1,883 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $29 million in the second quarter of 2021 as compared to $30 million reported in the second quarter of 2020. Capital expenditures for the second quarter of 2021 were $200 million compared to $154 million in the second quarter of 2020. Second quarter 2021 Income Tax Expense was $26 million, compared to $18 million in the second quarter of 2020.

Please note that a tabular reconciliation of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS, 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. EST today (July 27, 2021) to discuss the results of second quarter 2021. 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 dialing 833-900-1527 from the United States and Canada, and 236-384-2052 from outside the United States and Canada. Telephone participants are required to provide the conference ID 8992459.

Forward Looking Statements

Any statements of the Company's expectations in this press release, including but not limited to Adjusted EBITDA growth and the intent and timing to acquire AR Packaging, 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, the effects of the COVID-19 pandemic on the Company's operations and business, 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, 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, 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 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 EndedSix Months Ended

June 30, June 30,

In millions, except per share amounts 2021 2020 2021 2020

Net Sales $1,737$1,611$3,386$3,210

Cost of Sales 1,482 1,349 2,882 2,627

Selling, General and Administrative 125 132 251 268

Other Expense (Income), Net 1 (5) 4 1

Business Combinations, Shutdown and Other Special Charges, and Exit 34 20 46 39 Activities, Net

Income from Operations 95 115 203 275

Nonoperating Pension and Postretirement Benefit Income (Expense) 1 - 3 (151)

Interest Expense, Net (29) (30) (59) (64)

Income before Income Taxes and Equity Income of Unconsolidated Entity 67 85 147 60

Income Tax Expense (26) (18) (44) (13)

Income before Equity Income of Unconsolidated Entity 41 67 103 47

Equity Income of Unconsolidated Entity 1 - 1 -

Net Income 42 67 104 47

Net Income Attributable to Noncontrolling Interest (4) (15) (12) (8)

Net Income Attributable to Graphic Packaging Holding Company $38 $52 $92 $39



Net Income Per Share Attributable to Graphic Packaging Holding Company - $0.13 $0.19 $0.32 $0.14 Basic

Net Income Per Share Attributable to Graphic Packaging Holding Company - $0.13 $0.19 $0.32 $0.14 Diluted



Weighted Average Number of Shares Outstanding - Basic 295.1 279.9 285.5 284.4

Weighted Average Number of Shares Outstanding - Diluted 295.8 280.5 286.5 285.2

GRAPHIC PACKAGING HOLDING COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)



June 30,December 31,In millions, except share and per share amounts 2021 2020



ASSETS



Current Assets:

Cash and Cash Equivalents $89 $179

Receivables, Net 593 654

Inventories, Net 1,105 1,128

Other Current Assets 90 59

Total Current Assets 1,877 2,020

Property, Plant and Equipment, Net 3,753 3,560

Goodwill 1,478 1,478

Intangible Assets, Net 409 437

Other Assets 325 310

Total Assets $7,842$7,805



LIABILITIES



Current Liabilities:

Short-Term Debt and Current Portion of Long-Term Debt $20 $497

Accounts Payable 837 825

Other Accrued Liabilities 600 534

Total Current Liabilities 1,457 1,856

Long-Term Debt 3,742 3,147

Deferred Income Tax Liabilities 403 540

Other Noncurrent Liabilities 426 422



SHAREHOLDERS' EQUITY



Preferred Stock, par value $.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; 307,045,707 and 267,726,373 shares issued and outstanding at June 30, 2021 and 3 3 December 31, 2020, respectively

Capital in Excess of Par Value 2,030 1,715

Retained Earnings (Accumulated Deficit) 1 (48)

Accumulated Other Comprehensive Loss (220) (246)

Total Graphic Packaging Holding Company Shareholders' Equity 1,814 1,424

Noncontrolling Interest - 416

Total Equity 1,814 1,840

Total Liabilities and Shareholders' Equity $7,842$7,805

GRAPHIC PACKAGING HOLDING COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



Six Months Ended

June 30,

In millions 2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income $ 104 $ 47

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

Depreciation and Amortization 234 236

Deferred Income Taxes 31 (10)

Amount of Postretirement Expense (Less) Greater Than Funding (10) 157

Other, Net 49 31

Changes in Operating Assets and Liabilities (103) (317)

Net Cash Provided by Operating Activities 305 144



CASH FLOWS FROM INVESTING ACTIVITIES:

Capital Spending (329) (293)

Packaging Machinery Spending (17) (14)

Acquisition of Businesses, Net of Cash Acquired - (123)

Beneficial Interest on Sold Receivables 64 53

Beneficial Interest Obtained in Exchange for Proceeds (5) (5)

Other, Net (2) (7)

Net Cash Used in Investing Activities (289) (389)



CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of Common Stock - (157)

Proceeds from Issuance of Debt 1,225 450

Retirement of Long-Term Debt (1,226)-

Payments on Debt (9) (18)

Borrowings under Revolving Credit Facilities 1,827 1,535

Payments on Revolving Credit Facilities (1,691)(1,308)

Redemption of Noncontrolling Interest (150) (250)

Repurchase of Common Stock related to Share-Based Payments (14) (9)

Debt Issuance Costs (14) (7)

Dividends and Distributions Paid to GPIP Partner (48) (54)

Other, Net (5) (1)

Net Cash (Used in) Provided by Financing Activities (105) 181

Effect of Exchange Rate Changes on Cash (1) (5)

Net Decrease in Cash and Cash Equivalents (90) (69)

Cash and Cash Equivalents at Beginning of Period 179 153

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 89 $ 84

GRAPHIC PACKAGING HOLDING COMPANYReconciliation of Non-GAAP Financial Measures

The tables below set forth the calculation of the Company's earnings beforeinterest expense, income tax expense, depreciation and amortization, includingpension amortization ("EBITDA"), Adjusted EBITDA, Adjusted EBITDA Margin,Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided byOperating Activities, Adjusted Cash Flow, Net Leverage Ratio and Total NetDebt. Adjusted EBITDA and Adjusted Net Income exclude charges (income)associated with: the Company's business combinations, facility shutdowns, andother special charges. The Company's management believes that the presentationof EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per Share,Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, and NetLeverage Ratio provides useful information to investors because these measuresare 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, and NetLeverage Ratio are financial measures not calculated in accordance withgenerally accepted accounting principles in the United States ("GAAP"), and arenot measures of net income, operating income, operating performance orliquidity 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, and NetLeverage Ratio should be considered in addition to results prepared inaccordance with GAAP, but should not be considered substitutes for or superiorto GAAP results. In addition, our EBITDA, Adjusted EBITDA, Adjusted Net Income,Adjusted Earnings Per Share, Adjusted Net Cash Provided by OperatingActivities, Adjusted Cash Flow, and Net Leverage Ratio may not be comparable toAdjusted EBITDA or similarly titled measures utilized by other companies sincesuch other companies may not calculate such measures in the same manner as wedo.

Three Months Ended Six Months Ended

June 30, June 30,

In millions, except per share amounts 2021 2020 2021 2020

Net Income Attributable to Graphic Packaging Holding Company $ 38 $ 52 $ 92 $ 39

Add (Subtract):

Net Income Attributable to Noncontrolling Interest 4 15 12 8

Income Tax Expense 26 18 44 13

Equity Income of Unconsolidated Entity (1) - (1) -

Interest Expense, Net 29 30 59 64

Depreciation and Amortization 118 124 236 239

EBITDA $ 214 $ 239 $ 442 $ 363

Charges Associated with Business Combinations and Shutdown and Other Special 34 21 46 39Charges^ (a)

Pension Settlement Charge - - - 153

Adjusted EBITDA $ 248 $ 260 $ 488 $ 555

Adjusted EBITDA Margin (Adjusted EBITDA/Net Sales) 14.3 % 16.1 % 14.4 % 17.3 %

Net Income Attributable to Graphic Packaging Holding Company $ 38 $ 52 $ 92 $ 39

Charges Associated with Business Combinations and Shutdown and Other Special 34 21 46 39Charges ^(a)

Accelerated Depreciation Related to Shutdown 5 12 10 16

Pension Settlement Charge - - - 153

Tax Impact of Business Combinations, Shutdown and Other Special Charges, (1) (7) (5) (41)Accelerated Depreciation, Pension Plan Settlement and Tax Charges

Noncontrolling Interest, Net of Tax - (6) (2) (43)

Adjusted Net Income Attributable to Graphic Packaging Holding Company $ 76 $ 72 $ 141 $ 163

Adjusted Earnings Per Share - Basic $ 0.26 $ 0.26 $ 0.49 $ 0.57

Adjusted Earnings Per Share - Diluted $ 0.26 $ 0.26 $ 0.49 $ 0.57

^(a) For the three months and the six months ended June 30, 2020, $1 millionand $1 million, respectively, was recorded in costs of sales for inventoryvaluation adjustments related to business combinations.

GRAPHIC PACKAGING HOLDING COMPANY Reconciliation of Non-GAAP Financial Measures (Continued)



Twelve Months Ended

June 30,June 30, December 31,

In millions 2021 2020 2020

Net Income $220 $125 $167

Add (Subtract):

Net Income Attributable to Noncontrolling Interest 40 36 36

Income Tax Expense 73 45 42

Equity Income of Unconsolidated Entity (2) - (1)

Interest Expense, Net 124 134 129

Depreciation and Amortization 478 464 481

EBITDA 933 804 854

Charges Associated with Business Combinations and Shutdown and Other 69 62 62 Special Charges

Pension Plan Settlement Charge 1 192 154

Adjusted EBITDA $1,003$1,058$1,070



June 30,June 30, December 31,

Calculation of Net Debt: 2021 2020 2020

Short-Term Debt and Current Portion of Long-Term Debt $20 $483 $497

Long-Term Debt ^(a) 3,768 3,046 3,170

Less:

Cash and Cash Equivalents (89) (83) (179)

Total Net Debt $3,699$3,446$3,488



Net Leverage Ratio (Total Net Debt/Adjusted EBITDA) 3.69 3.26 3.26



^(a) Excludes unamortized deferred debt issue costs.

Six Months Ended

June 30,

In millions 2021 2020

Net Cash Provided by Operating Activities $305$144

Net Cash Receipts from Receivables Sold included in Investing Activities 59 48

Cash Payments Associated with Business Combinations and Shutdown and Other Special 49 29 Charges

Adjusted Net Cash Provided by Operating Activities $413$221

Capital Spending (346)(307)

Adjusted Cash Flow $67 $(86)

GRAPHIC PACKAGING HOLDING COMPANY Unaudited Supplemental Data



Three Months Ended

March 31, June 30, September 30, December 31,

2021



Net Tons Sold (000's)975 1,001

2020



Net Tons Sold (000's)1,012 1,013 1,036 991





The three months ended June 30, 2020 included 27,200 tons sold that did not reoccur in the three months ended June 30, 2021 due to the closing of the White Pigeon, Michigan mill and the shutdown of the West Monroe containerboard machine. The three months ended March 31, 2020 included 42,100tons sold that did not reoccur in the three months ended March 31, 2021.

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SOURCE Graphic Packaging Holding Company