Graphic Packaging Holding Company Reports Second Quarter 2023 Financial Results; Reiterates Full Year 2023 Guidance
- Net sales increased by 1% compared to the prior year quarter, reflecting positive pricing and partially offset by unfavorable volume/mix.
- Adjusted EBITDA saw a significant 14% increase versus the prior year quarter, driven by positive pricing and commodity input cost deflation.
- The acquisition of Bell Incorporated is expected to add approximately $200 million in sales and $30 million in Adjusted EBITDA, with annual synergies of approximately $10 million expected within 24 months of closing.
- The approval of a $500 million increase to share repurchase authorization demonstrates the company's balanced approach to capital allocation and commitment to delivering value for stakeholders.
- Full year 2023 guidance was reiterated, with expectations for growth and cash generation supporting capital allocation into initiatives that strengthen the business and support growth.
- Net Sales were impacted by unfavorable volume/mix and labor, benefits, and other inflation.
- The increase in net interest expense due to higher interest rates may impact the company's bottom line in the future.
- The increase in capital expenditures for the Waco, Texas CRB mill project may affect the company's cash flow in the short term.
Highlights
- Net Sales were
, an increase of$2,392 million 1% versus the prior year quarter. - Net Income was
, an increase of$150 million 127% versus the prior year quarter. - Adjusted EBITDA was
, an increase of$453 million 14% versus the prior year quarter. - Earnings per Diluted Share were
, an increase of$0.49 133% versus the prior year quarter. - Adjusted Earnings per Diluted Share were
, an increase of$0.66 10% versus the prior year quarter. - Full year 2023 guidance reiterated.
- Announcing definitive agreement to acquire Bell Incorporated, a well-capitalized
U.S. packaging provider. - Board of Directors approved
increase to share repurchase authorization.$500 million
Net Income for second quarter 2023 was
The second quarters of 2023 and 2022 were impacted by a net
Michael Doss, the Company's President and CEO said, "We grew Sales, Adjusted EBITDA and Adjusted EBITDA margins year over year in the second quarter while actively managing supply to meet demand in response to short-term inventory destocking by retailers and our customers. Importantly, our global team continued to advance key initiatives to drive sustained future organic growth and higher profitability through commercial execution, quality improvement and cost reduction. Our focus remains on delivering renewable and recyclable, fiber-based packaging solutions preferred by consumers.
"Consistent with that, we are pleased to announce a definitive agreement to acquire Bell Incorporated, a well-capitalized
"Finally, we are reiterating full year 2023 guidance. Our expectations for growth and cash generation enable the continued allocation of capital into initiatives that strengthen the business and support growth, while providing a path to return leverage to the low-end of our historical targeted range. Our execution and focus on innovation, along with favorable consumer trends, provide confidence in our ability to drive 100 to 200 basis points of net organic sales growth annually for years to come."
Bell Incorporated Acquisition
The Company has entered into a definitive agreement to acquire Bell Incorporated. The proposed acquisition is expected to add approximately
The transaction is expected to close in the fourth quarter of 2023, subject to regulatory approvals and other customary closing conditions.
Operating Results
Net Sales
Net Sales increased
EBITDA
EBITDA for the second quarter of 2023 was
Other Results
Total Debt (Long-Term, Short-Term and Current Portion) decreased
At June 30, 2023, the Company had available liquidity of
Net Interest Expense was
Capital expenditures for the second quarter of 2023 were
Second quarter 2023 Income Tax Expense was
Full Year 2023 Guidance
The Company is reiterating 2023 guidance.
- Net Sales are expected to be approximately
.$10 billion - Adjusted EBITDA is expected to be between
and$1.8 .$2.0 billion - Adjusted Cash Flow is expected to be between
and$600 .$800 million - Net Leverage Ratio at year-end is expected to be at or below 2.5x Adjusted EBITDA.
- Adjusted Earnings per Diluted Share (Excluding Amortization of Purchased Intangibles) is expected to be between
and$2.70 .$3.10 - Guidance excludes the pending acquisition of Bell Incorporated.
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 (August 1, 2023) to discuss the results of second 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 122832 and dialing:
- 833-470-1428 from
the United States , - 833-950-0062 from
Canada , and - 929-526-1599 from outside
the United States andCanada .
Forward Looking Statements
Any statements of the Company's expectations in this press release, including but not limited to updated 2023 Adjusted EBITDA, Net Sales, Adjusted Cash Flow, Net Leverage Ratio and Adjusted Earning per Diluted Share guidance; and the timing of closing, acquisition cost, Sales, Adjusted EBITDA and synergies related to the Bell Incorporated acquisition, 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
About Graphic Packaging Holding Company
Graphic Packaging Holding Company (NYSE: GPK), headquartered in
GRAPHIC PACKAGING HOLDING COMPANY | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
(Unaudited) | ||||||
Three Months Ended | Six Months Ended | |||||
June 30, | June 30, | |||||
In millions, except per share amounts | 2023 | 2022 | 2023 | 2022 | ||
Net Sales | $ 2,392 | $ 2,358 | $ 4,830 | $ 4,603 | ||
Cost of Sales | 1,886 | 1,917 | 3,764 | 3,775 | ||
Selling, General and Administrative | 205 | 185 | 402 | 366 | ||
Other Expense, Net | 15 | 2 | 33 | — | ||
Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net | 19 | 102 | 34 | 117 | ||
Income from Operations | 267 | 152 | 597 | 345 | ||
Nonoperating Pension and Postretirement Benefit Income (Expense) | — | 1 | (1) | 3 | ||
Interest Expense, Net | (60) | (48) | (118) | (90) | ||
Income before Income Taxes | 207 | 105 | 478 | 258 | ||
Income Tax Expense | (57) | (39) | (121) | (85) | ||
Net Income | $ 150 | $ 66 | $ 357 | $ 173 | ||
Net Income Per Share — Basic | $ 0.49 | $ 0.21 | $ 1.16 | $ 0.56 | ||
Net Income Per Share — Diluted | $ 0.49 | $ 0.21 | $ 1.15 | $ 0.56 | ||
Weighted Average Number of Shares Outstanding - Basic | 308.2 | 309.2 | 308.4 | 309.0 | ||
Weighted Average Number of Shares Outstanding - Diluted | 309.1 | 309.9 | 309.4 | 309.8 |
GRAPHIC PACKAGING HOLDING COMPANY | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||
(Unaudited) | |||
In millions, except share and per share amounts | June 30, | December 31, | |
ASSETS | |||
Current Assets: | |||
Cash and Cash Equivalents | $ 125 | $ 150 | |
Receivables, Net | 933 | 879 | |
Inventories, Net | 1,729 | 1,606 | |
Other Current Assets | 114 | 71 | |
Total Current Assets | 2,901 | 2,706 | |
Property, Plant and Equipment, Net | 4,753 | 4,579 | |
Goodwill | 2,048 | 1,979 | |
Intangible Assets, Net | 693 | 717 | |
Other Assets | 344 | 347 | |
Total Assets | $ 10,739 | $ 10,328 | |
LIABILITIES | |||
Current Liabilities: | |||
Short-Term Debt and Current Portion of Long-Term Debt | $ 463 | $ 53 | |
Accounts Payable | 996 | 1,123 | |
Other Accrued Liabilities | 678 | 757 | |
Total Current Liabilities | 2,137 | 1,933 | |
Long-Term Debt | 5,046 | 5,200 | |
Deferred Income Tax Liabilities | 708 | 668 | |
Other Noncurrent Liabilities | 398 | 377 | |
SHAREHOLDERS' EQUITY | |||
Preferred Stock, par value or outstanding | — | — | |
Common Stock, par value and 307,116,089 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 3 | 3 | |
Capital in Excess of Par Value | 2,052 | 2,054 | |
Retained Earnings | 743 | 469 | |
Accumulated Other Comprehensive Loss | (349) | (377) | |
Total Graphic Packaging Holding Company Shareholders' Equity | 2,449 | 2,149 | |
Noncontrolling Interest | 1 | 1 | |
Total Equity | 2,450 | 2,150 | |
Total Liabilities and Shareholders' Equity | $ 10,739 | $ 10,328 |
GRAPHIC PACKAGING HOLDING COMPANY | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(Unaudited) | |||
Six Months Ended | |||
June 30, | |||
In millions | 2023 | 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net Income | $ 357 | $ 173 | |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | |||
Depreciation and Amortization | 304 | 278 | |
Deferred Income Taxes | 38 | 40 | |
Amount of Postretirement Expense Greater (Less) Than Funding | — | (5) | |
Impairment Charges related to Divestiture | 7 | 92 | |
Other, Net | 35 | 19 | |
Changes in Operating Assets and Liabilities | (450) | (309) | |
Net Cash Provided by Operating Activities | 291 | 288 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Capital Spending | (372) | (351) | |
Packaging Machinery Spending | (13) | (10) | |
Acquisition of Businesses, Net of Cash Acquired | (100) | — | |
Beneficial Interest on Sold Receivables | 60 | 54 | |
Beneficial Interest Obtained in Exchange for Proceeds | (9) | (2) | |
Other, Net | (3) | (2) | |
Net Cash Used in Investing Activities | (437) | (311) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Repurchase of Common Stock | (29) | (7) | |
Payments on Debt | (10) | (7) | |
Borrowings under Revolving Credit Facilities | 2,636 | 2,517 | |
Payments on Revolving Credit Facilities | (2,379) | (2,480) | |
Repurchase of Common Stock related to Share-Based Payments | (20) | (17) | |
Dividends Paid | (61) | (46) | |
Other, Net | (6) | 10 | |
Net Cash Provided by (Used In) Financing Activities | 131 | (30) | |
Effect of Exchange Rate Changes on Cash | (3) | (7) | |
Net Decrease in Cash and Cash Equivalents | (18) | (60) | |
Cash and Cash Equivalents at Beginning of Period (includes sale as of December 31, 2022) | 155 | 172 | |
Cash and Cash Equivalents at End of Period (includes as of June 30, 2023) | $ 137 | $ 112 |
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
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 | Six Months Ended | ||||||
June 30, | June 30, | ||||||
In millions, except per share amounts | 2023 | 2022 | 2023 | 2022 | |||
Net Income | $ 150 | $ 66 | $ 357 | $ 173 | |||
Add (Subtract): | |||||||
Income Tax Expense | 57 | 39 | 121 | 85 | |||
Interest Expense, Net | 60 | 48 | 118 | 90 | |||
Depreciation and Amortization | 167 | 141 | 307 | 281 | |||
EBITDA | $ 434 | $ 294 | $ 903 | $ 629 | |||
Charges Associated with Business Combinations, Shutdown and Other Special Charges,and Exit Activities, Net | 19 | 102 | 34 | 117 | |||
Adjusted EBITDA | $ 453 | $ 396 | $ 937 | $ 746 | |||
Adjusted EBITDA Margin (Adjusted EBITDA/Net Sales) | 18.9 % | 16.8 % | 19.4 % | 16.2 % | |||
Net Income | $ 150 | $ 66 | $ 357 | $ 173 | |||
Charges Associated with Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net | 19 | 102 | 34 | 117 | |||
Accelerated Depreciation Related to Shutdown | 30 | 3 | 32 | 7 | |||
Tax Impact of Business Combinations, Shutdown and Other Special Charges and Exit Activities, Net, Accelerated Depreciation and Other Tax Items | (12) | (3) | (15) | 3 | |||
Amortization Related to Purchased Intangible Assets, Net of Tax | 16 | 17 | 32 | 34 | |||
Adjusted Net Income (a) | $ 203 | $ 185 | $ 440 | $ 334 | |||
Adjusted Earnings Per Share - Basic (a) | $ 0.66 | $ 0.60 | $ 1.43 | $ 1.08 | |||
Adjusted Earnings Per Share - Diluted (a) | $ 0.66 | $ 0.60 | $ 1.42 | $ 1.08 | |||
(a) Excludes amortization related to purchased intangibles. |
GRAPHIC PACKAGING HOLDING COMPANY | |||||
Reconciliation of Non-GAAP Financial Measures | |||||
(Continued) | |||||
Twelve Months Ended | |||||
June 30, | June 30, | December 31, | |||
In millions | 2023 | 2022 | 2022 | ||
Net Income | $ 706 | $ 285 | $ 522 | ||
Add (Subtract): | |||||
Income Tax Expense | 230 | 115 | 194 | ||
Interest Expense, Net | 225 | 154 | 197 | ||
Depreciation and Amortization | 582 | 539 | 556 | ||
EBITDA | 1,743 | 1,093 | 1,469 | ||
Charges Associated with Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net | 48 | 221 | 131 | ||
Adjusted EBITDA | $ 1,791 | $ 1,314 | $ 1,600 | ||
June 30, | June 30, | December 31, | |||
Calculation of Net Debt: | 2023 | 2022 | 2022 | ||
Short-Term Debt and Current Portion of Long-Term Debt | $ 463 | $ 292 | $ 53 | ||
Long-Term Debt (a) | 5,072 | 5,539 | 5,230 | ||
Less: | |||||
Cash and Cash Equivalents | (125) | (108) | (150) | ||
Total Net Debt | $ 5,410 | $ 5,723 | $ 5,133 | ||
Net Leverage Ratio (Total Net Debt/Adjusted EBITDA) | 3.02 | 4.36 | 3.21 | ||
(a) Excludes unamortized deferred debt issue costs. |
Six Months Ended | |||
June 30, | |||
In millions | 2023 | 2022 | |
Net Cash Provided by Operating Activities | $ 291 | $ 288 | |
Net Cash Receipts from Receivables Sold included in Investing Activities | 51 | 52 | |
Cash Payments Associated with Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net | 9 | 27 | |
Adjusted Net Cash Provided by Operating Activities | $ 351 | $ 367 | |
Capital Spending | (385) | (361) | |
Adjusted Cash Flow | $ (34) | $ 6 |
Calculation of Net Organic Sales Growth: | Three Months Ended | Six Months Ended | ||||
June 30, | June 30, | |||||
In millions | 2023 | 2022 | 2023 | 2022 | ||
Net Sales | $ 2,392 | $ 2,358 | $ 4,830 | $ 4,603 | ||
Open Market Paperboard Sales (Paperboard Mills Segment) | (252) | (292) | (568) | (588) | ||
Impact of Pricing (a) | (160) | — | (356) | — | ||
Impact of Foreign Exchange (b) | (1) | — | 37 | — | ||
Net Organic Sales | $ 1,979 | $ 2,066 | $ 3,943 | $ 4,015 | ||
Net Organic Sales Growth | (4.2) % | (1.8) % | ||||
(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
FAQ
What were Graphic Packaging Holding Company's net sales in the second quarter of 2023?
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What is Graphic Packaging Holding Company's full year 2023 guidance?