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

ATLANTA, Oct. 20, 2020 /PRNewswire/ --

Q3 2020 Highlights

• Net Sales were $1,697.7 million versus $1,581.6 million in the prior year period.
• Net organic sales increased 4.2% in the quarter and increased 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.

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 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 third quarter 2019 Adjusted Net Income of $57.9 million, or $0.20 per diluted share.

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

Attached is supplemental data highlighting Net Tons Sold by quarter for 2020 and 2019.

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. Net operating performance included a previously announced $12 million expense related to market downtime of the SBS cupstock 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.

At 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.

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, Total Net Debt and pro forma Net Leverage Ratio is attached to this release.

Earnings Call

The Company will host a conference call at 10:00 a.m. ET today (October 20, 2020) to discuss the results of third quarter 2020. 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 5958519 and should call at least 10 minutes prior to the start of the conference call.

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 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 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. 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
Reconciliation of Non-GAAP Financial Measures

The tables below set forth the calculation of the Company's earnings before interest expense, income tax expense, equity income of unconsolidated entities, 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 and Total Net Debt. Adjusted EBITDA and Adjusted Net Income exclude charges (income) associated with: the Company's business combinations, facility shutdowns, extended mill outage, sale of assets 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, and Net Leverage Ratio 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, and Net Leverage Ratio 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, Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, and Net Leverage Ratio 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, and Net Leverage Ratio 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.

SOURCE Graphic Packaging Holding Company