Exhibit 99.1
Graphic Packaging Announces 2002 Results;
Strong Cash Flow, Net Debt Reduced $69.3 Million
Golden, Colorado, February 18, 2003 -- Graphic Packaging
International Corporation (NYSE: GPK) announced the financial
results for the fourth quarter and year ended December 31, 2002.
The Company reported a net loss attributable to common
shareholders of $0.3 million ($0.01 per diluted share) for the
fourth quarter and $188.7 million ($5.77 per diluted share) for
the twelve months ended December 31, 2002. The net loss
attributable to common shareholders during the fourth quarter of
2001 was $5.1 million ($0.16 per diluted share), and $3.6 million
($0.11 per diluted share) for the twelve months ended December
31, 2001.
Excluding goodwill amortization, impairment of goodwill, other
asset impairment and restructuring charges, an extraordinary loss
on the early extinguishment of debt, a gain on sale of assets,
and costs associated with a labor dispute, the net loss
attributable to common shareholders was $0.3 million ($0.01 per
diluted share) for the fourth quarter, and net income
attributable to common shareholders of $3.7 million ($0.11 per
diluted share) for the twelve months ended December 31, 2002.
This compares to net income attributable to common shareholders,
excluding these items, of $1.5 million ($0.05 per diluted share)
during the fourth quarter of 2001 and $12.0 million ($0.27 per
diluted share) for the year 2001. Please refer to the
reconciliation included in the accompanying financial statements.
Net sales for the fourth quarter of 2002 were $260.2 million,
3.6% lower than the third quarter's $270.0 million and the fourth
quarter of 2001 net sales of $270.0 million. The Company
generally expects fourth quarter sales to be softer than third
quarter due to the holidays and scheduled downtime. In addition,
several of our customers took extended shutdowns during December.
For the twelve months ended December 31, 2002, net sales were
$1.06 billion compared to $1.11 billon for the prior year.
Gross profit as a percent of net sales increased from 10.8% in
the third quarter to 11.9% in the fourth quarter; operating
margin improved from 4.8% to 5.1%. Compared to the previous
quarter, earnings were impacted positively by the absence of
costs associated with the labor dispute and lower fiber costs,
partially offset by lower sales volume and the associated
operating inefficiencies, lower absorption of fixed costs and
SG&A expense, and scheduled maintenance downtime taken at the
paperboard mill.
Recycled fiber market prices, particularly old corrugated
containers ("OCC"), continued to decline during the fourth
quarter, dropping approximately $20 per ton from $75 in September
to $55 in December. The impact to operating earnings due to
fiber was roughly $0.8 million favorable compared to the previous
quarter, but approximately $2.1 million unfavorable compared to
the fourth quarter of 2001.
On January 26, 2003, union employees at the Kalamazoo paperboard
mill and carton plant voted to accept a five-year proposal from
the Company, effectively ending a labor dispute that began on
July 27, 2002. The Company's earnings were impacted negatively
by costs directly attributable to the labor dispute of
approximately $4.5 million ($2.7 million after tax), all of which
were incurred during the third quarter. The Company believes
that it did not lose any business as a result of the dispute.
Capital spending for the quarter was $6.7 million. Total capital
spending for the year was $27.7 million. Cash flow from
operations continued to be strong, allowing the Company to reduce
net debt by $18.6 million during the fourth quarter, from $468.3
million to $449.7 million, and $69.3 million during the year
2002. Net debt is defined as total debt net of cash and cash
equivalents.
As a result of a decline in the market value of the Company's
pension plan assets, the Company recorded a reduction of equity
of $12.8 million net of tax. This adjustment is recorded in long-
term liabilities and shareholders' equity, but does not impact
current earnings.
Interest expense was $1.7 million less during the fourth quarter
compared to the third quarter, primarily due to the positive
impact of the expiration of unfavorable interest rate swap
agreements during the third quarter and the continued reduction
of debt.
Commenting on the Company's results, CEO and President Jeffrey H.
Coors said, "We are disappointed with our sales and earnings, but
we recognize that a great deal of the shortfall is a product of
the soft economic conditions in the United States and the world.
Despite reduced earnings, we continue to generate cash and pay
down debt. Our cost reduction efforts through Six Sigma projects
and purchasing initiatives continue to exhibit solid results.
Many of our metrics, like working capital as a percent of net
sales, lead the industry. I believe our ability to strengthen
our balance sheet in this economic climate is encouraging."
More information is available in the Company's filings with the
Securities and Exchange Commission. Those filings can be
accessed at the Company's website www.graphicpackaging.com in the
Investor Relations section.
Graphic Packaging is the leading manufacturer of folding cartons
in North America, supplying packaging for the food, beverage, and
other consumable product markets. The Company operates one large
recycled paperboard mill located in Kalamazoo, Michigan, and has
17 modern converting plants and 3 research and design centers
across the nation. Its customers make some of the most
recognizable brand-name products in their markets.
Conference Call & Webcast
A conference call will be held today at 3:00 pm ET. All
interested persons are invited to listen. To connect, please
access the webcast through the Investor Relations section of the
Company's website www.graphicpackaging.com. If you are unable to
listen to the live conference, the webcast will be archived on
the website.
The conference call is also accessible by dialing 800-874-9003
(international calls: 706-634-2401). Ask for the Graphic
Packaging Conference.
A replay will be available two hours after the call and through
February 25th. Please call 800-642-1687 (international calls: 706-
645-9291) and give the passcode 6493831.
Forward Looking Statements
Some of the statements in this release are forward looking and
involve uncertainties that may cause actual results to be
materially different from those stated or implied. Specifically,
a) plant closures, purchasing savings initiatives, and cost
reduction and efficiency programs, such as Six Sigma, might not
realize significant future benefits, b) sales might be lower than
expected due to the economy, lower prices, customer inventory
adjustments, and losing customers or market share, c) market
share estimations are based on third-party information that may
be or become obsolete or inaccurate, d) the Company may not have
maintained or may not be able to maintain market share for
various reasons including a change in customers' requirements and
competitors' ability to grow faster than the Company, e) margins
and earnings may be impacted due to competitive pressures, f)
capital expenditures may be more or less than projected and may
not be adequate to cover all possible business requirements, g)
the company's ability to generate cash flow may differ from past
performance and the cash that is generated may not be used to
reduce debt, h) future raw material pricing may fluctuate and may
not be as projected by management, i)savings or other benefits
expected from the labor agreement at the Kalamazoo paperboard
mill and carton plant may not materialize as estimated by
management, j) the company's efforts to increase value-added
business may not be successful due to business constraints and
market conditions.
###
Financial Statements and a Supplemental Financial Data Schedule
are attached.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
------------------ ----------------------
2002 2001 2002 2001
-------- -------- ---------- ----------
Net sales $260,200 $270,021 $1,057,843 $1,112,535
Cost of goods sold 229,178 236,709 930,581 960,258
-------- -------- ---------- ----------
Gross profit 31,022 33,312 127,262 152,277
Selling, general and
administrative
expense 17,733 15,896 64,620 62,874
Goodwill amortization --- 5,162 --- 20,649
Asset impairment and
restructuring charges --- 5,900 --- 8,900
-------- -------- ---------- ----------
Operating income 13,289 6,354 62,642 59,854
Gain on sale of assets --- --- --- 3,650
Interest expense (9,581) (10,727) (44,640) (52,811)
-------- -------- ---------- ----------
Income (loss) before
income taxes,
extraordinary item
and cumulative
effect of change in
accounting principle 3,708 (4,373) 18,002 10,693
Income tax (expense)
benefit (1,460) 1,769 (7,035) (4,257)
-------- -------- ---------- ----------
Income (loss) before
extraordinary item
and cumulative effect
of change in
accounting principle 2,248 (2,604) 10,967 6,436
Extraordinary loss on
early extinguishment
of debt, net of tax
of $6,149 --- --- (9,617) ---
-------- -------- ---------- ----------
Income (loss) before
cumulative effect of
change in accounting
principle 2,248 (2,604) 1,350 6,436
Cumulative effect of
change in goodwill
accounting,
net of tax of $0 --- --- (180,000) ---
-------- -------- ---------- ----------
Net income (loss) 2,248 (2,604) (178,650) 6,436
Preferred stock dividends
declared (2,500) (2,500) (10,000) (10,000)
-------- -------- ---------- ----------
Net loss attributable to
common shareholders ($252) ($5,104) ($188,650) ($3,564)
======== ======== ========== ==========
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
------------------ --------------------
2002 2001 2002 2001
-------- -------- ---------- --------
Net loss attributable to
common shareholders
per basic and
diluted share:
Before extraordinary item
and cumulative effect
of change in
accounting principle ($0.01) ($0.16) $0.03 ($0.11)
Extraordinary loss --- --- (0.30) ---
Cumulative effect of
change in
accounting principle --- --- (5.50) ---
-------- -------- ---------- ----------
($0.01) ($0.16) ($5.77) ($0.11)
======== ======== ========== ==========
Weighted average shares
outstanding - basic
and diluted 33,099 32,095 32,715 31,620
======== ======== ========== ==========
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands)
December 31, December 31,
2002 2001
------------ ------------
ASSETS
Cash and cash equivalents $28,626 $6,766
Accounts receivable 63,546 59,474
Inventories 87,243 92,408
Other assets 21,686 33,156
---------- ----------
Total current assets 201,101 191,804
Properties, net 410,592 443,712
Goodwill, net 379,696 559,696
Other assets 29,477 34,123
---------- ----------
Total assets $1,020,866 $1,229,335
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $3,432 $37,373
Accounts payable 82,106 59,002
Other current liabilities 69,451 73,026
---------- ----------
Total current liabilities 154,989 169,401
Long-term debt 474,899 488,386
Other long-term liabilities 83,940 73,900
---------- ----------
Total liabilities 713,828 731,687
Shareholders' equity 307,038 497,648
---------- ----------
Total liabilities and shareholders'
equity $1,020,866 $1,229,335
========== ==========
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three months ended Twelve months ended
December 31, December 31,
------------------- --------------------
2002 2001 2002 2001
------- -------- --------- ---------
Cash flows from
operating activities:
Net income (loss) $2,248 ($2,604) ($178,650) $6,436
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Goodwill impairment
charge --- --- 180,000 ---
Extraordinary loss
on early
extinguishment
of debt --- --- 15,766 ---
Asset impairment
charges --- 3,500 --- 5,000
Gain on sale of
assets --- --- --- (3,650)
Depreciation 15,215 14,193 61,165 58,757
Amortization of
goodwill --- 5,162 --- 20,649
Amortization of
debt issuance
costs 570 1,875 3,109 7,795
Change in current
assets and
current
liabilities and
other 9,981 35,977 40,705 56,712
------ ------- ------- -------
Net cash provided by
operating activities 28,014 58,103 122,095 151,699
------ ------- ------- -------
Cash flows from investing
activities:
Capital
expenditures (6,657) (9,749) (27,706) (31,884)
Sale of assets --- --- --- 8,950
------ ------- ------- -------
Net cash used in
investing activities (6,657) (9,749) (27,706) (22,934)
------ ------- ------- -------
Cash flows used in
financing activities (3,377) (45,880) (72,529) (126,011)
------ ------- ------- --------
Cash and cash
equivalents:
Net increase in cash
and cash
equivalents 17,980 2,474 21,860 2,754
Balance at beginning
of period 10,646 4,292 6,766 4,012
------- ------ ------- ------
Balance at end of
period $28,626 $6,766 $28,626 $6,766
======= ====== ======= ======
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
SUPPLEMENTAL FINANCIAL DATA
(in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
------------------ -----------------------
2002 2001 2002 2001
-------- -------- ---------- ----------
Net Sales $260,200 $270,021 $1,057,843 $1,112,535
======== ======== ========== ==========
Operating income in
accordance $13,289 $6,354 $62,642 $59,854
with GAAP (1)
Gain on sale of assets --- --- --- 3,650
Depreciation & goodwill
amortization 15,215 19,355 61,165 79,406
------- ------- -------- --------
EBITDA (2) 28,504 25,709 123,807 142,910
Estimated Kalamazoo
labor dispute costs --- --- 4,500 ---
Gain on sale of assets --- --- --- (3,650)
Asset impairment and
restructuring charges --- 5,900 --- 8,900
------- ------- -------- --------
EBITDA excluding
estimated Kalamazoo
labor dispute costs,
asset impairment
and restructuring
charges and gain
on sale of assets $28,504 $31,609 $128,307 $148,160
======= ======= ======== ========
Leverage (3)
Leverage, based upon
operating income 7.6x 8.8x
Leverage, based upon
EBITDA 3.9x 3.7x
Leverage, based upon
EBITDA excluding
estimated Kalamazoo
labor dispute costs,
asset impairment
and restructuring
charges and gain on
sale of assets 3.7x 3.5x
(1) Generally Accepted Accounting Principles
(2) Earnings before Interest, Taxes, Depreciation and Amortization
(3) Debt at period-end divided by trailing twelve-month operating
income, EBITDA, and EBITDA excluding estimated Kalamazoo labor
dispute costs, asset impairment and restructuring charges and
gain on sale of assets, respectively.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
SUPPLEMENTAL FINANCIAL DATA
(in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
------------------ -------------------
2002 2001 2002 2001
------- ------- --------- -------
Net income (loss)
attributable to
common shareholders ($252) ($5,104) ($188,650) ($3,564)
Estimated Kalamazoo labor
dispute costs, net of
tax --- --- 2,745 ---
Goodwill impairment
charge, net of tax --- --- 180,000 ---
Extraordinary loss on
early extinguishment
of debt, net of tax --- --- 9,617 ---
Asset impairment and
restructuring charges,
net of tax --- 3,552 --- 5,358
Goodwill amortization, net
of tax --- 3,097 --- 12,389
Gain on sale of assets,
net of tax --- --- --- (2,197)
------- ------- -------- --------
Net income (loss)
attributable to
common shareholders
before nonrecurring
items ($252) $1,545 $3,712 $11,986
======= ======= ======== ========
Net income (loss)
attributable to
common shareholders
per diluted share: ($0.01) ($0.16) ($5.77) ($0.11)
Estimated Kalamazoo labor
dispute costs, net of
tax --- --- 0.08 ---
Goodwill impairment
charge, net of tax --- --- 5.50 ---
Extraordinary loss on
early extinguishment
of debt, net of tax --- --- 0.30 ---
Asset impairment and
restructuring charges,
net of tax --- 0.11 --- 0.07
Goodwill amortization,
net of tax --- 0.10 --- 0.15
Gain on sale of assets,
net of tax --- --- --- (0.03)
Effect of preferred stock
conversion (1) --- --- --- 0.19
------- ------- -------- --------
Net income (loss)
attributable
to common shareholders
per diluted share
before nonrecurring items ($0.01) $0.05 $0.11 $0.27
======= ======= ======== ========
(1) Includes the effect from the conversion of preferred stock into
48.5 million shares of common stock and the elimination of $2.5
million per quarter of preferred stock dividends.