Graphic Packaging Announces Q3 Earnings & G-Box Acquisition
Friday, October 23rd, 2015
Graphic Packaging Holding Company, a leading provider of paper-based packaging solutions to food, beverage and other consumer products companies, today reported Net Income for third quarter 2015 of $60.2 million, or $0.18 per share, based upon 330.4 million weighted average diluted shares. This compares to third quarter 2014 Net Income of $53.0 million, or $0.16 per share, based on 330.6 million weighted average diluted shares.
Third quarter 2015 Net Income was negatively impacted by $5.8 million of special charges after taxes (primarily Charges Associated with Business Combinations). When adjusting for these charges, Adjusted Net Income for the third quarter of 2015 was $66.0 million, or $0.20 per diluted share. This compares to third quarter 2014 Adjusted Net Income of $57.5 million or $0.17 per diluted share.
"We delivered another solid quarter of performance, producing and selling more tons than a year ago and improving our Adjusted EBITDA margin by 20 basis points to 18.4%," said Chairman and CEO David Scheible. The increases were driven by our ongoing asset optimization strategies, acquisition integration and strong operating performance. We have generated nearly $60 million in productivity benefits through the first three quarters of the year, which puts us on track to deliver full-year performance benefits at the upper end of our range of $60-$80 million."
"In line with our strategy to grow profitably through reinvestments back into the business and acquisitions, I am pleased to announce our definitive agreement to purchase G-Box, S.A. de C.V., a Mexico-based operator of two folding carton facilities. G-Box, along with the October 1, 2015 announced acquisition of the assets of Carded Graphics, expands Graphic Packaging's geographic footprint, manufacturing scope, customer base and range of products. G-Box increases Graphic's presence in Mexico by adding two folding carton facilities located in Monterrey and Tijuana, while Carded Graphics allows us to better service new and existing customers on the east coast, specifically in the fast growing craft beer markets."
Net Sales increased 1.9%, or $20 million, to $1,070.0 million in the third quarter of 2015 compared to $1,050.0 million in the prior year period. The $20.0 million increase was driven by $56.5 million of improved volume/mix, primarily related to acquisitions. The sales increase was partially offset by $30.2 million of unfavorable foreign exchange rates and $6.3 million of lower pricing.
Attached is supplemental data showing Net Tons Sold, Net Sales and Income (Loss) from Operations for the first three quarters of 2015 and each quarter of 2014.
EBITDA increased 3.7%, or $6.8 million, to $189.1 million in the third quarter of 2015 compared to $182.3 million in the third quarter of 2014. After adjusting both periods for special charges, Adjusted EBITDA increased 3.4% to $197.1 million in the third quarter of 2015 from $190.6 million in the third quarter of 2014. When comparing against the prior year quarter, Adjusted EBITDA in the third quarter of 2015 was positively impacted by $18.9 million of improved net operating performance and $6.3 million of favorable volume/mix. These benefits were partially offset by $7.3 million in higher costs (primarily for labor and benefits), $7.3 million of unfavorable foreign exchange rates and $4.1 million of lower price, net of commodity deflation.
Total Net Debt declined $84.9 million during the third quarter 2015 to $1,912.7 million. At quarter end, the Company's Net Leverage Ratio was 2.58 times Adjusted EBITDA compared to 2.90 times Adjusted EBITDA at the end of the third quarter of 2014. As of September 30, 2015, the Company had available domestic liquidity of $1,034.8 million, including the undrawn availability under its $1.25 billion domestic revolving credit facility.
Net Interest Expense was $16.5 million in the third quarter of 2015 compared to $20.4 million in the third quarter of 2014. The decrease was due to both lower debt balances and lower overall interest rates.
Capital expenditures for third quarter 2015 were $54.7 million, compared to $42.5 million in the third quarter of 2014. The increase is primarily the result of additional investments being made in the Company's mills, including the previously announced cogen installation at the West Monroe, LA mill.
Income Tax Expense was $33.6 million in the third quarter of 2015 compared to $39.3 million in the third quarter of 2014. As of September 30, 2015, the Company had approximately $455 million of NOLs for U.S. federal income tax purposes, which may be used to offset future taxable income.
Please note that a tabular reconciliation of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Sales, Total Net Debt and Net Leverage Ratio is attached to this release.
Today, the Company announced that its wholly-owned subsidiary, Graphic Packaging International, Inc., has entered into a definitive agreement to purchase G-Box, S.A. de C.V. The acquisition includes two folding carton converting facilities located in Monterrey, Mexico and Tijuana, Mexico. The purchase allows Graphic Packaging to expand its manufacturing scope in Mexico, broaden its customer base and offer its current customers a wider range of products. The acquisition is subject to standard closing requirements, regulatory approvals, and is expected to close in the fourth quarter of 2015.
As previously announced, Graphic Packaging International, Inc., a wholly owned subsidiary of the Company, acquired the converting assets of Carded Graphics, LLC. on October 1, 2015 Based in Staunton, VA, Carded Graphics' state-of-the-art converting facility produces award winning printed folding cartons and has a strong regional position in the food, craft beer and other consumer product markets.