Graphic Packaging Holding Company Reports Strong First Quarter 2023 Financial Results

Raises Full Year 2023 Adjusted EBITDA Guidance Midpoint to $1.9 Billion

Q1 2023 Highlights

• Net Sales were $2,438 million, an increase of 9% versus the prior year quarter.
• Net Organic Sales increased 1% versus the prior year quarter.
• Net Income was $207 million, an increase of 93% versus the prior year quarter.
• Adjusted EBITDA was $484 million, an increase of 38% versus the prior year quarter.
• Earnings per Diluted Share were $0.67, an increase of 91% versus the prior year quarter.
• Adjusted Earnings per Diluted Share were $0.77, an increase of 60% versus the prior year quarter.
• Net leverage was 3.1x versus 3.2x at year-end 2022.
• Full-year 2023 Adjusted EBITDA guidance increased by $100 million to $1.9 billion at the midpoint of the guidance range.

ATLANTA, May 2, 2023 /PRNewswire/ -- Graphic Packaging Holding Company (NYSE: GPK), (the "Company"), a leading fiber-based consumer packaging company, today reported results for the first quarter of 2023.

Net Income for first quarter 2023 was $207 million, or $0.67 per share, based upon 309.7 million weighted average diluted shares. This compares to first quarter 2022 Net Income of $107 million, or $0.35 per share, based upon 309.7 million weighted average diluted shares.

The first quarters of 2023 and 2022 were impacted by a net $14 million and a net $25 million of special charges, respectively. When adjusting for special charges and amortization of purchased intangibles, Adjusted Net Income for the first quarter of 2023 was $237 million, or $0.77 per diluted share. This compares to first quarter 2022 Adjusted Net Income of $149 million, or $0.48 per diluted share.

Michael Doss, the Company's President and CEO said, "During the first quarter, our global team continued to advance our proven strategy of running a different race to deliver strong results for our customers and our shareholders. We drove continued net organic sales growth and positioned the business to further capitalize on the growing consumer preference for renewable and recyclable, fiber-based packaging.

"Significant investments in our business continue to result in quality and production cost advantages. During the quarter our newest coated recycled paperboard machine in Kalamazoo exceeded quality, yield and financial expectations. We also began construction on the recently announced state-of-the-art mill in Waco, Texas to further advance our leadership in fiber-based consumer packaging.

"Brands and manufacturers recognize the consumer preference for more sustainable packaging and are making investments to meet that demand. We are pleased to announce that Chick-fil-A is launching our new, highly insulated, double-wall fiber-based cups as a potential long-term solution for their beverage program.

"Confidence in the stability of our business, coupled with our team's unwavering focus on innovation and delivering quality and service to customers, is providing a path to an improved outlook for the full year. As such, we are raising our 2023 Adjusted EBITDA guidance and remain on track to achieve our enhanced Vision 2025 financial goals."

Operating Results

Net Sales

Net Sales increased 9% to $2,438 million in the first quarter of 2023, compared to $2,245 million in the prior year period. The $193 million increase was driven by $236 million of positive pricing, partially offset by $4 million of unfavorable volume/mix and $39 million of foreign exchange impact.

EBITDA

EBITDA for the first quarter of 2023 was $469 million, $134 million higher than the first quarter of 2022.  After adjusting both periods for business combinations and other special charges, Adjusted EBITDA was $484 million in the first quarter of 2023 versus $350 million in the first quarter of 2022.  When comparing against the prior year quarter, Adjusted EBITDA in the first quarter of 2023 was positively impacted by $236 million in pricing and $10 million in net performance. This was partially offset by $2 million in unfavorable volume/mix, $54 million of commodity input cost inflation, $40 million in labor, benefits and other inflation and $16 million of foreign exchange impact.

Other Results

Total Debt (Long-Term, Short-Term and Current Portion) increased $265 million during the first quarter of 2023 to $5,548 million compared to the fourth quarter of 2022. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) increased $302 million during the first quarter of 2023 to $5,435 million compared to the fourth quarter of 2022. The Company returned $59 million in total capital to stockholders, including $31 million in dividend payments and $28 million via share repurchases, in the first quarter of 2023. The Company's first quarter 2023 Net Leverage Ratio was 3.1x Adjusted EBITDA compared to 3.2x at the end of 2022.

At March 31, 2023, the Company had available liquidity of $1,237 million, including the undrawn availability under its global revolving credit facilities.

Net Interest Expense was $58 million in the first quarter of 2023, higher when compared to $42 million reported in the first quarter of 2022 due to higher interest rates.

Capital expenditures for the first quarter of 2023 were $196 million, lower when compared to $223 million in the first quarter of 2022.

First quarter 2023 Income Tax Expense was $64 million, up from $46 million in the first quarter of 2022.

2023 Annual Guidance

The Company is raising its Adjusted EBITDA guidance by $100 million, to $1.9 billion at the midpoint of the range, and updating other guidance metrics as a result. The Company's updated fiscal 2023 annual guidance is as follows:

• Net Sales are expected to be approximately $10 billion.
• Adjusted EBITDA is expected to be between $1.8 and $2.0 billion.
• Adjusted Cash Flow is expected to be between $600 and $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 $2.70 and $3.10.

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 (May 2, 2023) to discuss the results of first 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 073165 and dialing:

• 833-470-1428 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 updated 2023 Adjusted EBITDA, Net Sales, Adjusted Cash Flow, Net Leverage Ratio and Adjusted Earning per Diluted Share guidance, 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 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 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 Europe, 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, 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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SOURCE Graphic Packaging Holding Company