Exhibit 99.1
Graphic Packaging Corporation
4455 Table Mountain Drive Contact:
Golden, Colorado 80403 Gardner Edgarton
Telephone: 303-215-4600 Director of Investor Relations
Fax: 303-273-1571 Tel: 303-215-4619
www.graphicpackaging.com edgartong@graphicpkg.com
Graphic Packaging Announces Second Quarter 2003 Results;
Increased Sales, Reduced Debt
Golden, Colorado, July 22, 2003 - Graphic Packaging International
Corporation (NYSE:GPK) reported a net loss attributable to common
shareholders of $0.8 million ($0.02 per diluted share) for the
second quarter of 2003, compared to net income of $0.3 million
($0.01 per diluted share) for the same period of 2002. The net
loss attributable to common shareholders for the six months ended
June 30, 2003 was $3.3 million ($0.10 per diluted share) compared
to a net loss attributable to common shareholders of $186.8
million ($5.76 per diluted share) for the same period of 2002.
The reported results include merger and acquisition transaction
costs, net of tax, of $0.8 million ($0.02 per diluted share) for
the second quarter and $2.4 million ($0.07 per diluted share) for
the first six months of 2003. Results for the first six months
of 2002 include a loss on the early extinguishment of debt of
$9.6 million ($0.30 per diluted share) net of tax, as well as a
$180.0 million ($5.55 per diluted share) goodwill impairment
charge net of tax, when the company adopted Statement of
Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets".
Net sales for the second quarter of 2003 were $275.0 million, an
increase of 5.4% from the previous quarter and 4.2% higher than
the second quarter of 2002. Net sales were $260.9 million and
$263.9 million for the first quarter of 2003 and second quarter
of 2002, respectively. Net sales for the first six months of
2003 were $535.9 million compared to $527.6 million for the same
period of 2002. The improvement in sales is attributed to
stronger demand from the dry and frozen food sectors, the
addition of new customer business, and sales from the March 2003
acquisition of the assets of J.D. Cahill Co., Inc.
Market prices for several grades of paperboard increased during
the second quarter, including coated recycled paperboard that
increased $40 per ton, from $625 per ton in March to $665 per ton
in June. The company, in most cases, has the opportunity to pass
market-related paperboard price changes through to its customers,
although the full effect of such adjustments typically lag the
market price change by several months.
Gross margin of 11.8% for the second quarter of 2003 was an
improvement from 11.0% during the first quarter of the year, but
down from 12.5% during the second quarter of 2002. Fiber costs
due to market price fluctuation had a negative impact on
operating earnings of $0.5 million compared to the first quarter
of 2003 and $1.6 million compared to the second quarter of 2002.
Energy costs due to market price fluctuation at the Kalamazoo
mill were favorable by $0.4 million compared to the first
quarter, but $0.4 million unfavorable compared to the second
quarter of last year.
SG&A expenses of $18.5 million, excluding expenses related to
merger and acquisition transactions, increased by $1.8 million
from the first quarter. The quarter-on-quarter increase relates
to additional overhead expenses from the acquired J.D. Cahill
business, additional legal expenses associated with litigation
and patent activity, increased marketing efforts, and other
general administrative spending. Increases from the previous
year, in addition to those listed above, include additional
depreciation and other expenses related to our information
systems that had been placed in service during 2002 as well as
changes in benefit plan expenses.
Interest expense was higher during the second quarter of 2003
compared to the previous quarter due to higher average daily debt
balances as a result of the acquisition of the J.D. Cahill Co.,
Inc. assets, partially offset by slightly lower interest rates.
Interest expense was significantly lower than the second quarter
of 2002 due to lower interest rates, lower borrowings, and the
absence of unfavorable interest rate swap agreements that were in
place during most of 2002.
Working capital was reduced by $6.1 million compared to the
balances at the end of the first quarter of 2003, and $2.7
million compared to balances at the end of 2002. Net debt,
defined as total debt less cash, decreased $14.2 million during
the second quarter, from $482.4 million to $468.2 million.
Capital spending was $9.4 million for the second quarter and
$14.0 million for the first six months of 2003, excluding the
purchase of the assets of J.D. Cahill Co., Inc. for $18.1 million
during the first quarter of 2003.
For further information, please refer to the financial statements
that are provided, below.
Graphic Packaging International Corporation is the leading
supplier of folding carton packaging for consumer products
companies in the United States. The company has approximately
4,200 full time employees, one recycled paperboard mill, and 19
converting facilities located throughout the nation. Additional
information can be found at the company's website,
www.graphicpackaging.com.
Forward Looking Statements
Some of the statements in this release may be forward looking and
involve uncertainties that may cause actual results to be
materially different from those stated or implied. Specifically,
market pricing for raw materials fluctuate and the company may
not have the ability to fully pass the changes through to
customers. Historical results are not necessarily adequate
measures to predict future performance. Please read other
cautionary statements in our filings with the Securities and
Exchange Commission.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three months ended Six months ended
------------------------------ --------------------
June 30, March 31, June 30, June 30, June 30,
2003 2003 2002 2003 2002
-------- --------- -------- -------- --------
Net sales $274,994 $260,883 $263,917 $535,877 $527,641
Cost of
goods sold 242,527 232,174 231,022 474,701 460,454
-------- -------- -------- -------- --------
Gross profit 32,467 28,709 32,895 61,176 67,187
Selling,
general
and
admini-
strative
expense 18,483 16,668 15,808 35,151 30,695
Merger
and
acquisi-
tion
trans-
action
costs 1,331 2,698 --- 4,029 ---
-------- -------- -------- -------- --------
Operating
income 12,653 9,343 17,087 21,996 36,492
Interest
expense (9,697) (9,416) (12,453) (19,113) (23,749)
Loss on
early
extinguish-
ment of
debt --- --- --- --- (15,766)
-------- -------- -------- -------- --------
Income (loss)
before income
taxes and
cumulative
effect
of change
in accounting
principle 2,956 (73) 4,634 2,883 (3,023)
Income tax
(expense)
benefit (1,212) 30 (1,808) (1,182) 1,178
-------- -------- -------- -------- --------
Income (loss)
before
cumulative
effect of
change in
accounting
principle 1,744 (43) 2,826 1,701 (1,845)
Cumulative
effect of
change in
goodwill
accounting,
net of tax
of $0 --- --- --- --- (180,000)
-------- -------- -------- -------- --------
Net income
(loss) 1,744 (43) 2,826 1,701 (181,845)
Preferred
stock
dividends
declared (2,500) (2,500) (2,500) (5,000) (5,000)
-------- -------- -------- -------- --------
Net income
(loss)
attributable
to common
shareholders ($756) ($2,543) $326 ($3,299) ($186,845)
======= ======= ======= ======= =========
Net income
(loss)
attributable
to common
shareholders
per basic
and diluted
share:
Before
cumulative
change in
accounting
principle ($0.02) ($0.08) $0.01 ($0.10) ($0.21)
Cumulative
effect of
change in
goodwill
accounting --- --- --- --- (5.55)
------- ------- ------- ------- ---------
($0.02) ($0.08) $0.01 ($0.10) ($5.76)
======= ======= ======= ======= =========
Weighted
average
shares
outstanding
- - basic 33,709 33,574 32,567 33,648 32,456
======= ======= ======= ======= =========
Weighted
average
shares
outstanding
- - diluted 33,709 33,574 34,093 33,648 32,456
======= ======= ======= ======= =========
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands)
June 30, December 31,
2003 2002
----------- ------------
ASSETS
Cash and cash equivalents $6,959 $28,626
Accounts receivable 76,899 63,546
Inventories 100,371 87,243
Other assets 22,589 21,686
---------- ----------
Total current assets 206,818 201,101
Properties, net 399,248 410,592
Goodwill, net 391,803 379,696
Other assets 28,099 29,477
---------- ----------
Total assets $1,025,968 $1,020,866
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $3,626 $3,432
Accounts payable 93,673 82,106
Other current liabilities 66,076 69,451
---------- ----------
Total current liabilities 163,375 154,989
Long-term debt 471,512 474,899
Other long-term liabilities 85,980 83,940
---------- ----------
Total liabilities 720,867 713,828
Shareholders' equity 305,101 307,038
---------- ----------
Total liabilities and shareholders'
equity $1,025,968 $1,020,866
========== ==========
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three months ended Six months ended
------------------------------- -------------------
June 30, March 31, June 30, June 30, June 30,
2003 2003 2002 2003 2002
-------- --------- --------- -------- --------
Cash flows
from
operating
activities:
Net income
(loss) $1,744 ($43) $2,826 $1,701 ($181,845)
Adjustments
to reconcile
net income
to net cash
provided by
operating
activities:
Goodwill --- --- --- --- 180,000
impairment
charge
Loss on
early
extinguish-
ment of
debt --- --- --- --- 15,766
Depreciation 15,776 15,425 15,487 31,201 30,716
Amortization
of debt
issuance
costs 582 570 577 1,152 1,945
Change in
current
assets and
current
liabilities
and other 8,024 (23,605) 6,844 (15,581) (6,183)
------- ------- ------- ------- --------
Net cash
provided by
(used in)
operating
activities 26,126 (7,653) 25,734 18,473 40,399
------- ------- ------- ------- --------
Cash flows
from
investing
activities:
Capital
expenditures (9,416) (4,540) (8,254) (13,956) (15,454)
Acquisition
of J.D.
Cahill Co.
assets --- (18,088) --- (18,088) ---
------- ------- ------- ------- --------
Net cash
used in
investing
activities (9,416) (22,628) (8,254) (32,044) (15,454)
------- ------- ------- ------- --------
Cash flows
provided
by (used in)
financing
activities (14,779) 6,683 (17,770) (8,096) (26,729)
------- ------- ------- ------- --------
Cash and
cash
equivalents:
Net
increase
(decrease)
in cash
and cash
equivalents 1,931 (23,598) (290) (21,667) (1,784)
Balance
at
beginning
of period 5,028 28,626 5,272 28,626 6,766
------- ------- ------- ------- --------
Balance
at end
of period $6,959 $5,028 $4,982 $6,959 $4,982
======= ======= ======= ======= ========
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