Graphic Packaging Holding Company Reports Fourth Quarter and Full Year 2009 Results
MARIETTA, Ga., Feb. 23 /PRNewswire-FirstCall/ --
Financial Highlights
- Q4 earnings per share were $0.09 versus a loss of $(0.17) in the prior year period.
- Q4 Adjusted EBITDA was $123.7 million, 18.4% higher than the prior year period.
- Excluding alternative fuel tax credits, full year 2009 operating cash flow was $368.1 million, representing an increase of $183.9 million over the prior year.
- Net debt reduced by $143.7 million in Q4, resulting in full year 2009 net debt reduction of $363.3 million.
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 fourth quarter 2009 of $31.8 million, or $0.09 per share based upon 346.5 million weighted average diluted shares. This compares to a fourth quarter 2008 Net Loss of $(57.7) million, or $(0.17) per share based upon 342.6 million weighted average shares. Adjusted Net Income for the quarter, which excludes $44.0 million in alternative fuel tax credits (net of expenses related to fuel tax credits), $10.7 million of asset impairment charges and $10.1 million of charges associated with the combination with Altivity Packaging, LLC ("Altivity"), was $8.6 million, or $0.02 per share. This compares to a fourth quarter 2008 Adjusted Net Loss of $(38.9) million, or $(0.11) per share.
For the full year 2009, Net Income was $56.4 million, or $0.16 per share, based on 344.6 million weighted average diluted shares. This compares to a 2008 Net Loss of $(99.7) million or $(0.32) per share based on 315.8 million weighted average shares. Excluding charges associated with the combination with Altivity, asset impairment charges, loss on early extinguishment of debt and alternative fuel tax credits (net of expenses related to fuel tax credits), full year 2009 Adjusted Net Income was $10.4 million or $0.03 per share compared to a full year 2008 Adjusted Net Loss of $(42.1) million or $(0.13) per share.
"Given the global economic headwinds faced in 2009, I'm pleased with our results and direction," said CEO David Scheible. "Although volumes declined slightly in 2009, we were able to deliver over 190 basis points of Adjusted EBITDA margin improvement from our successful integration activities and ongoing cost reduction initiatives. Our first full year as a combined company with Altivity has been extremely successful both financially and operationally."
"Our focus on operating performance and working capital reduction in 2009 helped generate record operating cash flows and a reduction in net debt of approximately $363 million, representing a decrease in our net leverage ratio from 6.3 times EBITDA to 4.8 times EBITDA. Since closing the combination with Altivity in March of 2008, we have reduced net debt by over $482 million. Going forward, we remain committed to further deleveraging the balance sheet and improving our margins and credit profile."
Net Sales
Net sales decreased 6.6% to $978.6 million during fourth quarter 2009, compared to fourth quarter 2008 net sales of $1,047.7 million. On a segment basis, Paperboard Packaging sales, which comprised approximately 83.5% of total fourth quarter net sales, declined 3.2% compared to the fourth quarter of 2008. The moderate decline reflects the relative recession-resistant nature of the food and beverage packaging end markets. Sales in the Multi-wall Bag and Specialty segments declined 20.6% compared to the fourth quarter of 2008. This decline was primarily the result of continued weakness in construction and industrial end use markets. Full year 2009 net sales were $4,095.8 million, or 0.4% higher than 2008 net sales of $4,079.4 million.
When comparing against the prior year quarter, net sales in the fourth quarter of 2009 were negatively impacted by $62 million related to volume and mix and $14 million due to lower pricing. Favorable foreign currency exchange rates benefitted net sales by $7 million.
Attached is supplemental data showing quarterly 2009 net sales and net tons sold by each of the Company's 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.
EBITDA
EBITDA for fourth quarter 2009 was $146.9 million. Excluding $44.0 million in alternative fuel tax credits (net of expenses related to fuel tax credits), $10.7 million of asset impairment and shutdown charges and $10.1 million of charges associated with the combination with Altivity, Adjusted EBITDA was $123.7 million. This compares to fourth quarter 2008 EBITDA of $85.7 million and Adjusted EBITDA of $104.5 million. Full year 2009 EBITDA was $602.4 million. Excluding $137.8 million in alternative fuel tax credits (net of expenses related to fuel tax credits), $13.0 million of asset impairment and shutdown charges, a $7.1 million loss on early extinguishment of debt and $71.7 million of charges associated with the combination with Altivity, full year 2009 Adjusted EBITDA was $556.4 million compared to 2008 Adjusted EBITDA of $475.8 million. When comparing against the prior year quarter, Adjusted EBITDA in the fourth quarter of 2009 was positively impacted by:
- $33 million of improved performance;
- $4 million of lower input costs primarily related to chemicals, resin and energy; and
- $3 million due to favorable foreign currency exchange rates.
Fourth quarter 2009 Adjusted EBITDA was negatively impacted by:
- $14 million due to lower pricing; and
- $7 million related to volume and mix.
Other Results
At the end of 2009, the Company's total debt was $2,800.2 million, or $383.6 million lower than debt of $3,183.8 million at the end of 2008. Taking cash and cash equivalents into account, total net debt at the end of the fourth quarter 2009 was $2,650.4 million. This represents a reduction of $363.3 million in net debt since year-end 2008. Including cash and cash equivalents, as of December 31, 2009, the company had available liquidity of approximately $512.8 million and had not drawn on its $400 million revolving credit facility.
Net cash provided by operating activities was $502.9 million in 2009 compared to $184.2 million in 2008. Full Year 2009 operating cash flow includes $134.8 million of alternative fuel tax credits.
Net interest expense was $38.4 million for fourth quarter 2009, as compared to net interest expense of $58.2 million in fourth quarter 2008. Full year 2009 net interest expense was $196.4 million compared to $215.4 million in 2008.
Fourth quarter 2009 income tax benefit was $5.6 million, primarily due to the release of valuation allowances on certain foreign deferred tax assets. Full year 2009 income tax expense was $24.1 million and was predominately attributable to the noncash expense associated with the amortization of goodwill for tax purposes. The Company has a $1.3 billion net operating loss carry-forward which may be available to offset future taxable income in the United States.
Capital expenditures for fourth quarter 2009 were $33.6 million compared to $56.9 million in the fourth quarter of 2008. For the full year 2009, capital expenditures were $129.9 million compared to $183.3 million in 2008.
Under the terms of its Credit Agreement, the Company must comply with a maximum consolidated secured leverage ratio. As of December 31, 2009, the Company's ratio was 2.94 to 1.00, in compliance with the required maximum ratio of 4.75 to 1.00. The calculation of this covenant and the Company's 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) is attached to this release.
Earnings Call
The Company will host a conference call at 8:30 am eastern time today (February 23, 2010) to discuss the results of the fourth quarter and full year 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# 53274877). 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 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, the availability of the Company's net operating loss to offset taxable income in the U.S. and debt prepayments to deleverage the Company, 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 Company's 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 Company's products or actions taken by our customers in response to the difficult economic environment, continuing pressure for lower cost products, the Company's 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 the continued availability of the Company's net operating loss offset to taxable income, and those that impact the Company's 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 Company's 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 Company's 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 Company's web site at www.graphicpkg.com.
GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, December 31,
In millions, except share and per share amounts 2009 2008
--------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and Cash Equivalents $149.8 $170.1
Receivables, Net 382.3 369.6
Inventories, Net 436.5 532.0
Other Current Assets 52.7 56.9
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Total Current Assets 1,021.3 1,128.6
Property, Plant and Equipment, Net 1,797.4 1,935.1
Goodwill 1,204.6 1,204.8
Intangible Assets, Net 620.0 664.6
Other Assets 58.5 50.0
--------------------------------------------------------------------------
Total Assets $4,701.8 $4,983.1
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LIABILITIES
Current Liabilities:
Short-Term Debt and Current Portion of
Long-Term Debt $17.6 $18.6
Accounts Payable 350.8 333.4
Other Accrued Liabilities 275.9 333.6
--------------------------------------------------------------------------
Total Current Liabilities 644.3 685.6
Long-Term Debt 2,782.6 3,165.2
Deferred Income Tax Liabilities 226.9 187.8
Accrued Pension and Postretirement Benefits 284.6 375.8
Other Noncurrent Liabilities 34.6 43.5
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Total Liabilities 3,973.0 4,457.9
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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 December 31, 2009 and
2008, respectively 3.4 3.4
Capital in Excess of Par Value 1,958.2 1,955.4
Accumulated Deficit (1,019.0) (1,075.4)
Accumulated Other Comprehensive Loss (213.8) (358.2)
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Total Shareholders' Equity 728.8 525.2
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Total Liabilities and Shareholders' Equity $4,701.8 $4,983.1
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GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
In millions, except per --------------- ---------------
share amounts 2009 2008 2009 2008
--------------------------------------------------------------------------
Net Sales $978.6 $1,047.7 $4,095.8 $4,079.4
Cost of Sales 864.8 936.0 3,567.2 3,587.1
Selling, General and
Administrative 73.3 80.2 305.3 298.9
Research, Development and
Engineering 1.9 2.0 7.2 8.0
Other (Income) Expense, Net (2.3) 0.7 (13.5) 2.3
Restructuring and Other
Special (Credits) Charges (23.2) 18.8 (53.1) 33.2
--------------------------------------------------------------------------
Income from Operations 64.1 10.0 282.7 149.9
Interest Income 0.1 0.3 0.4 1.3
Interest Expense (38.5) (58.5) (196.8) (216.7)
Loss on Early Extinguishment of Debt - - (7.1) -
--------------------------------------------------------------------------
Income (Loss) before Income Taxes
and Equity in Net Earnings of
Affiliates 25.7 (48.2) 79.2 (65.5)
Income Tax Benefit (Expense) 5.6 (9.4) (24.1) (34.4)
--------------------------------------------------------------------------
Income (Loss) before Equity
in Net Earnings of Affiliates 31.3 (57.6) 55.1 (99.9)
Equity in Net Earnings of Affiliates 0.5 (0.1) 1.3 1.1
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Income (Loss) from Continuing
Operations 31.8 (57.7) 56.4 (98.8)
Loss from Discontinued
Operations, Net of Taxes - - - (0.9)
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Net Income (Loss) $31.8 $(57.7) $56.4 (99.7)
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Income (Loss) Per Share - Basic
Continuing Operations $0.09 $(0.17) $0.16 (0.31)
Discontinued Operations - - - (0.00)
Total $0.09 $(0.17) $0.16 (0.32)
Income (Loss) Per Share - Diluted
Continuing Operations $0.09 $(0.17) $0.16 (0.31)
Discontinued Operations - - - (0.00)
Total $0.09 $(0.17) $0.16 (0.32)
Weighted Average Number of
Shares Outstanding - Basic 343.4 342.6 343.1 315.8
Weighted Average Number of
Shares Outstanding - Diluted 346.5 342.6 344.6 315.8
GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twelve Months
Ended
December 31,
--------------
In millions 2009 2008
--------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $56.4 $(99.7)
Noncash Items Included in Net Income (Loss):
Depreciation and Amortization 305.4 264.3
Amortization of Deferred Debt Issuance Costs 8.5 7.9
Deferred Income Taxes 19.6 28.0
Amount of Postemployment Expense Greater (Less) Than
Funding 4.7 (38.4)
Inventory Step Up Related to Altivity - 24.4
Impairment Charges/Asset Write-offs 17.6 14.9
Other, Net (5.1) 1.8
Changes in Operating Assets & Liabilities 95.8 (19.0)
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Net Cash Provided by Operating Activities 502.9 184.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Spending (129.9) (183.3)
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 (4.0) (10.7)
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Net Cash Used in Investing Activities (124.1) (143.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Debt 423.8 1,200.0
Payments on Debt (664.5) (1,195.9)
Borrowings under Revolving Credit Facilities 105.9 985.8
Payments on Revolving Credit Facilities (249.1) (853.4)
Debt Issuance Costs and Early Tender Premiums (16.1) (16.3)
Other, Net 0.8 (0.4)
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Net Cash (Used in) Provided by Financing Activities (399.2) 119.8
Effect of Exchange Rate Changes on Cash 0.1 0.6
--------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents (20.3) 160.8
Cash and Cash Equivalents at Beginning of Period 170.1 9.3
--------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $149.8 $170.1
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Reconciliation of Non-GAAP Financial Measures
(Unaudited)
The table below sets forth the Company's earnings before interest
expense, income tax expense, equity in the net earnings of the Company's
affiliates, depreciation and amortization ("EBITDA"), Adjusted EBITDA, and
Adjusted Net Loss. Adjusted EBITDA and Adjusted Net Loss exclude charges
associated with the Company's combination with Altivity Packaging, LLC and
other Restructuring and Other Special (Credits) Charges. The Company's
management believes that the presentation of EBITDA, Adjusted EBITDA and
Adjusted Net Loss provides useful information to investors because these
measures are regularly used by management in assessing the Company's
performance. EBITDA, Adjusted EBITDA and Adjusted Net 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 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 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 Twelve Months Ended
December 31, December 31,
------------------ -------------------
In millions 2009 2008 2009 2008
--------------------------------------------------------------------------
Net Income (Loss) $31.8 $(57.7) $56.4 $(99.7)
Add (Subtract):
Income Tax (Benefit)
Expense (5.6) 9.4 24.1 34.4
Equity in Net Earnings of
Affiliates (0.5) 0.1 (1.3) (1.1)
Interest Expense, Net 38.4 58.2 196.4 215.4
Depreciation and
Amortization 82.8 75.7 326.8 269.2
--------------------------------------------------------------------------
EBITDA 146.9 85.7 602.4 418.2
Charges Associated with
Combination with Altivity 10.1 3.3 71.7 17.7
Inventory Step Up Related to
Altivity - - - 24.4
Loss on Early Extinguishment
of Debt - - 7.1 -
Alternative Fuel Tax Credits Net
of Expenses (44.0) - (137.8) -
Asset Impairment and Shutdown
Charges 10.7 15.5 13.0 15.5
--------------------------------------------------------------------------
Adjusted EBITDA $123.7 $104.5 $556.4 $475.8
--------------------------------------------------------------------------
Net Income (Loss) $31.8 $(57.7) $56.4 $(99.7)
Charges Associated with
Combination with Altivity 10.1 3.3 71.7 17.7
Inventory Step Up Related to
Altivity - - - 24.4
Loss on Early Extinguishment
of Debt - - 7.1 -
Alternative Fuel Tax Credits
Net of Expenses (44.0) - (137.8) -
Asset Impairment and Shutdown
Charges 10.7 15.5 13.0 15.5
--------------------------------------------------------------------------
Adjusted Net Income (Loss) $8.6 $(38.9) $10.4 $(42.1)
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Per Share - Basic and Diluted
Net Income (Loss) $0.09 $(0.17) $0.16 $(0.32)
Charges Associated with
Combination with
Altivity 0.03 0.01 0.21 0.06
Inventory Step Up Related
to Altivity - - - 0.08
Loss on Early Extinguishment
of Debt - - 0.02 -
Alternative Fuel Tax Credits
Net of Expenses (0.13) - (0.40) -
Asset Impairment and
Shutdown Charges 0.03 0.05 0.04 0.05
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Adjusted Net Income (Loss)
Per Share * $0.02 $(0.11) $0.03 $(0.13)
--------------------------------------------------------------------------
* May not foot due to rounding
December September December March
31, 30, 31, 31,
Calculation of -------- --------- -------- -----
Net Debt: 2009 2009 2008 2008
--------------------------------------------------------------------------
Short-Term Debt and
Current Portion of
Long- Term Debt $17.6 $29.2 $18.6 $20.3
Long-Term Debt 2,782.6 3,009.6 3,165.2 3,134.4
Less:
Cash and Cash Equivalents (149.8) (244.7) (170.1) (21.9)
--------------------------------------------------------------------------
Total Net Debt $2,650.4 $2,794.1 $3,013.7 $3,132.8
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GRAPHIC PACKAGING HOLDING COMPANY
Reconciliation of Non-GAAP Financial Measures (continued)
Pro Forma Results
The following pro forma results for the three months and twelve months
ended December 31, 2008, respectively, give effect to Graphic Packaging
Corporation's 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 Company's
management believes that the pro forma presentation provides useful
information to investors in light of the Company's 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 Twelve Months
Ended Ended
December 31, December 31,
----------------- -----------------
In millions 2009 2008 2009 2008
------------------------------------------------------------------------
Net Sales $978.6 $1,047.7 $4,095.8 $4,079.4
Altivity Net Sales - - - 335.6
------------------------------------------------------------------------
Pro Forma Net Sales $978.6 $1,047.7 $4,095.8 $4,415.0
------------------------------------------------------------------------
Pro Forma Net Income (Loss) $31.8 $(57.7) $56.4 $(124.2)
Add (Subtract):
Income Tax (Benefit) Expense (5.6) 9.4 24.1 35.1
Equity in Net Earnings of Affiliates (0.5) 0.1 (1.3) (1.1)
Interest Expense, Net 38.4 58.2 196.4 246.9
Depreciation and Amortization 82.8 75.7 326.8 287.7
------------------------------------------------------------------------
Pro Forma EBITDA 146.9 85.7 602.4 444.4
Charges Associated with Combination
with Altivity 10.1 3.3 71.7 17.7
Inventory Step Up Related to Altivity - - - 24.4
Loss on Early Extinguishment of Debt - - 7.1 -
Alternative Fuel Tax Credits Net of
Expenses (44.0) - (137.8) -
Asset Impairment and Shutdown Charges 10.7 15.5 13.0 15.5
------------------------------------------------------------------------
Pro Forma Adjusted EBITDA $123.7 $104.5 $556.4 $502.0
------------------------------------------------------------------------
Pro Forma Net Income (Loss) $31.8 $(57.7) $56.4 $(124.2)
Charges Associated with Combination
with Altivity 10.1 3.3 71.7 17.7
Inventory Step Up Related to Altivity - - - 24.4
Loss on Early Extinguishment of Debt - - 7.1 -
Alternative Fuel Tax Credits Net of
Expenses (44.0) - (137.8) -
Asset Impairment and Shutdown Charges 10.7 15.5 13.0 15.5
------------------------------------------------------------------------
Pro Forma Adjusted Net Income (Loss) $8.6 $(38.9) $10.4 $(66.6)
------------------------------------------------------------------------
Per Share - Basic and Diluted
Pro Forma Net Income (Loss) $0.09 $(0.17) $0.16 $(0.36)
Charges Associated with Combination
with Altivity 0.03 0.01 0.21 0.05
Inventory Step Up Related to Altivity - - - 0.07
Loss on Early Extinguishment of Debt - - 0.02 -
Alternative Fuel Tax Credits Net of
Expenses (0.13) - (0.40) -
Asset Impairment and Shutdown
Charges 0.03 0.05 0.04 0.05
------------------------------------------------------------------------
Pro Forma Adjusted Net Income (Loss)
Per Share $0.02 $(0.11) $0.03 $(0.19)
------------------------------------------------------------------------
GRAPHIC PACKAGING HOLDING COMPANY
Reconciliation of Non-GAAP Financial Measures
(Continued)
The Credit Agreement dated May 15, 2007, as amended (“the Credit
Agreement”) and the indentures governing the Company’s 9.5% Senior Notes
due 2017 and 9.5% Senior Subordinated Notes due 2013 (“the Notes”) limit
the Company’s ability to incur additional indebtedness. Additional
covenants contained in the Credit Agreement and the indentures governing
the Notes, 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 Company’s 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 December 31, 2009, the Company was in compliance with the financial
covenant in the Credit Agreement and the ratio was as follows:
Consolidated Secured Leverage Ratio — 2.94 to 1.00
The Company’s 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 Company’s liquidity, and the Company’s 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.
The calculations of the components of the maximum consolidated secured
leverage ratio for and as of the period ended December 31, 2009 are listed
below:
Twelve Months Ended
In millions December 31, 2009
-------------------------------------------------------------------------
Net Income $56.4
Income Tax Expense 24.1
Interest Expense, Net 196.4
Depreciation and Amortization 305.4
Dividends Received, Net of Earnings of Equity Affiliates 0.1
Non-Cash Provisions for Reserves for Discontinued Operations -
Other Non-Cash Charges 56.5
Merger Related Expenses 50.8
Losses Associated with Sale/Write-Down of Assets 39.1
Other Non-Recurring/Extraordinary/Unusual Items (127.5)
Projected Run Rate Cost Savings (a) 60.1
-------------------------------------------------------------------------
Credit Agreement EBITDA $661.4
-------------------------------------------------------------------------
As of
In millions December 31, 2009
-------------------------------------------------------------------------
Short-Term Debt $17.6
Long-Term Debt 2,782.6
---------------------------------------------------- ---------------------
Total Debt $2,800.2
Less Adjustments(b) 857.0
-------------------------------------------------------------------------
Consolidated Secured Indebtedness $1,943.2
-------------------------------------------------------------------------
Notes:
(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 $60.1 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 December 31, 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) all subordinated indebtedness
permitted to be incurred under the Credit Agreement, or secured
indebtedness permitted to be incurred by the Company’s 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 Company’s ability to increase its
profitability, the Company may not be able to maintain its compliance with
the financial covenant in its Credit Agreement. The Company’s 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 Company’s
control, and will be substantially dependent on the selling prices for the
Company’s products, raw material and energy costs, and the Company’s
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 Company’s domestic assets.
GRAPHIC PACKAGING HOLDING COMPANY
Unaudited Supplemental Data
Three Months Ended
--------------------------------------------------
March 31, June 30, September 30, December 31,
--------------------------------------------------
2009
Net Tons Sold (000's):
----------------------
Paperboard Packaging 617.1 648.3 655.9 614.8
Multi-wall Bag 60.3 60.0 63.3 60.4
Specialty Packaging (1) 5.2 4.8 6.1 4.8
--------------------------------------------------------------------------
Total 682.6 713.1 725.3 680.0
--------------------------------------------------------------------------
Net Sales ($ Millions):
-----------------------
Paperboard Packaging $840.4 $879.3 $886.2 $817.6
Multi-wall Bag 124.8 115.3 117.5 114.0
Specialty Packaging 54.0 49.2 50.5 47.0
--------------------------------------------------------------------------
Total $1,019.2 $1,043.8 $1,054.2 $978.6
--------------------------------------------------------------------------
2008
Net Tons Sold (000's):
----------------------
Paperboard Packaging 535.7 705.5 748.4 640.0
Multi-wall Bag 27.8 75.2 75.3 67.3
Specialty Packaging (1) 1.6 7.4 7.5 5.7
--------------------------------------------------------------------------
Total 565.1 788.1 831.2 713.0
--------------------------------------------------------------------------
Net Sales ($ 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 $1,047.7
--------------------------------------------------------------------------
(1) Tonnage is not applicable to the majority of the Specialty
Packaging segment due to the nature of products sold (e.g. inks,
labels, etc.)
GRAPHIC PACKAGING HOLDING COMPANY
Unaudited Supplemental Data (continued)
Pro Forma Results
The following pro forma results for the three months and twelve
months ended December 31, 2008, respectively, give effect to Graphic
Packaging Corporation's combination with Altivity Packaging, LLC as
if it had occurred on January 1, 2008 and exclude the 2008 results
for the two coated-recycled board mills divested in September 2008.
The Company's management believes that the pro forma presentation
provides useful information to investors in light of the Company's
recent combination with Altivity Packaging, LLC. The pro forma
information is not necessarily indicative of what the combined
companies' results of operations actually would have been if the
transaction had been completed on the date indicated.
Three Months Ended
--------------------------------------------------
March 31, June 30, September 30, December 31,
--------------------------------------------------
2009
Net Tons Sold (000's):
----------------------
Paperboard Packaging 617.1 648.3 655.9 614.8
Multi-wall Bag 60.3 60.0 63.3 60.4
Specialty Packaging (1) 5.2 4.8 6.1 4.8
--------------------------------------------------------------------------
Total 682.6 713.1 725.3 680.0
--------------------------------------------------------------------------
Net Sales ($ Millions):
-----------------------
Paperboard Packaging $840.4 $879.3 $886.2 $817.6
Multi-wall Bag 124.8 115.3 117.5 114.0
Specialty Packaging 54.0 49.2 50.5 47.0
--------------------------------------------------------------------------
Total $1,019.2 $1,043.8 $1,054.2 $978.6
--------------------------------------------------------------------------
2008
Net Tons Sold (000's):
----------------------
Paperboard Packaging 690.0 672.9 715.0 640.0
Multi-wall Bag 73.3 75.2 75.3 67.3
Specialty Packaging (1) 7.1 7.4 7.5 5.7
--------------------------------------------------------------------------
Total 770.4 755.5 797.8 713.0
--------------------------------------------------------------------------
Net Sales ($ 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.)
SOURCE Graphic Packaging International, Inc.
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