Graphic Packaging Holding Company Reports Second Quarter 2022 Results; Progress Toward Enhanced and Stronger Vision 2025 Goals Continues

Financial Results

• Net Sales were $2,358 million versus $1,737 million in the prior year quarter.
• Net Organic Sales increased 3% in the quarter driven by global demand for sustainability-supported, innovative consumer packaging solutions.
• Net Income was $66 million versus $38 million in the prior year quarter.
• Adjusted EBITDA was $396 million versus $248 million in the prior year quarter, driven by $93 million of positive price-cost relationship, $81 million of volume/mix and $16 million of net performance.
• Earnings per Diluted Share were $0.21 versus $0.13 in the prior year quarter.
• Adjusted Earnings per Diluted Share (excluding amortization of purchased intangibles) were $0.60 versus $0.29 in the prior year quarter.
• Global liquidity was $1.2 billion at quarter end.
• Repurchased $7 million of common stock during the quarter; returned $30 million in total to stockholders in share repurchases and dividends.

ATLANTA, July 26, 2022 /PRNewswire/ -- 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 2022 of $66 million, or $0.21 per share, based upon 309.9 million weighted average diluted shares. This compares to second quarter 2021 Net Income of $38 million, or $0.13 per share, based upon 295.8 million weighted average diluted shares.

The second quarters of 2022 and 2021 were negatively impacted by a net $102 million and a net $38 million of special charges, respectively. Special charges in the second quarter of 2022 included a $92 million expense associated with the write down of two folding carton plants in Russia now classified as held for sale. Adjusted Net Income also includes adjustments for amortization related to purchased intangible assets, net of tax. The second quarters of 2022 and 2021 were impacted by $17 million and $11 million of amortization related to purchased intangibles, respectively. The charges are detailed in the Reconciliation of Non-GAAP Financial Measures table attached. When adjusting for both types of charges, Adjusted Net Income for the second quarter of 2022 was $185 million, or $0.60 per diluted share. This compares to second quarter 2021 Adjusted Net Income of $87 million, or $0.29 per diluted share.

Michael Doss, the Company's President and CEO said, "Our growing pipeline of innovative, fiber-based consumer packaging solutions is meeting demand for more sustainable packaging and driving organic growth globally in our business. This continued in the second quarter, with Net Organic Sales up 3%, matching our first quarter growth rate and exceeding our targeted range. This growth is indicative of the ongoing transition of our customers to more recyclable and circular fiber-based packaging solutions. Our integrated business model and global scale have been essential to procuring raw materials in today's challenging supply chain environment and ensuring supply to our customers. Furthermore, the strategic investments we have completed uniquely position us to expand in new market segments and deliver industry-leading quality at the lowest cost to produce, all while advancing our leadership in the industry."

Doss added, "The operating leverage we have driven in our financial model remains on full display this year. We are on track to deliver our recently enhanced and stronger Vision 2025 goals by meeting or exceeding 2022 milestones. We continue to execute multiple pricing and productivity initiatives focused on improving profit margins and capturing returns on strategic investments. Our upwardly revised Adjusted EBITDA range, with $1.55 billion at the midpoint, reflects a substantial step up of approximately $500 million of incremental EBITDA when compared to 2021. As committed, we are utilizing cash flow to reduce debt and continue to expect year-end leverage to be in the 3.0 to 3.5x range."

Operating Results

Net Sales

Net Sales increased 36% to $2,358 million in the second quarter of 2022, compared to $1,737 million in the prior year period. The $621 million increase was driven by $278 million of pricing and $379 million of improved volume/mix related to organic growth from conversions to fiber-based packaging solutions and acquisitions. Net sales were unfavorably impacted by $36 million of foreign exchange.

EBITDA

EBITDA for the second quarter of 2022 was $294 million, compared to $214 million in the prior year period.  After adjusting both periods for business combinations and other special charges, Adjusted EBITDA was $396 million in the second quarter of 2022 versus $248 million in the second quarter of 2021.  When comparing against the prior year quarter, Adjusted EBITDA in the second quarter of 2022 was positively impacted by $278 million of price, $81 million of volume/mix and $16 million in net productivity. Adjusted EBITDA was unfavorably impacted by $185 million of commodity input cost inflation, $25 million of other inflation and $17 million of unfavorable foreign exchange.

Other Results

Total Debt (Long-Term, Short-Term and Current Portion) decreased $136 million during the second quarter of 2022 to $5,831 million compared to the first quarter of 2022. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) decreased $133 million during the second quarter of 2022 to $5,723 million compared to the first quarter of 2022. The Company returned $30 million in capital to stockholders in the second quarter of 2022 through dividends and share repurchases. The Company's second quarter 2022 Net Leverage Ratio was 4.36 times Adjusted EBITDA compared to 5.36 times at the end of 2021.

At June 30, 2022, the Company had available liquidity of $1,194 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $48 million in the second quarter of 2022 as compared to $29 million reported in the second quarter of 2021. Capital expenditures for the second quarter of 2022 were $138 million compared to $200 million in the second quarter of 2021. Second quarter 2022 Income Tax Expense was $39 million, compared to $26 million in the second quarter of 2021.

Please note that a tabular reconciliation of Net Organic Sales, Net Organic Sales Growth, 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 26, 2022) to discuss the results of second quarter 2022. 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 798328 and dialing:

844-200-6205 from the United States,
833-950-0062 from Canada, and
929-526-1599 from outside the United States and Canada.

Forward Looking Statements

Any statements of the Company's expectations in this press release, including but not limited to Adjusted EBITDA growth and year-end leverage 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 U.S. federal income tax attributes to offset U.S. federal income taxes and the timing related to the Company's future U.S. federal income tax payments. 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 to the world's most widely-recognized food, beverage, foodservice and other consumer products companies and brands.  The Company operates on a global basis, is one of the largest producers of folding cartons and fiber-based foodservice products in the United States and Europe, and holds leading market positions in coated recycled paperboard, coated unbleached kraft paperboard and solid bleached sulfate paperboard. Additional information about Graphic Packaging, its business and its products is available 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, 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 the United States ("GAAP"), and are not measures of net income, operating income, operating performance, liquidity or net sales 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, 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.

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