Business News

Graphic Packaging Corporation Reports Fourth Quarter and Full Year 2007 Results

Thursday 21. February 2008 - -- Net Sales increase 6.4% over prior year quarter -- Gross Margin improves to 15.9% from 11.8% in the prior year quarter. -- Loss from Continuing Operations is $(0.03) per diluted share compared to $(0.17) per diluted share in the prior year quarter. -- EBITDA improves approximately 43% over prior year quarter

Graphic Packaging Corporation (NYSE:GPK), a leading provider of paperboard packaging solutions to multinational food, beverage and other consumer products companies, today reported net sales in the fourth quarter of $601.9 million, an increase of 6.4% over the same period last year. Loss from Continuing Operations was $(7.1) million compared to a Loss from Continuing Operations of $(34.0) million in the fourth quarter of 2006.

Net Loss for fourth quarter 2007 was $(0.7) million or $(0.00) per diluted share, based upon 202.1 million shares. This compares to a fourth quarter 2006 Net Loss of $(35.9) million, or $(0.18) per diluted share, based upon 201.3 million shares. Net Loss in the fourth quarter 2007 was positively impacted by an impairment adjustment of $6.6 million, or $0.03 per diluted share, for the non-cash currency translation adjustments related to the sale of the Company’s operations in Sweden.

For the full year 2007, Net Loss was $(0.37) per diluted share, based on 201.8 million shares. This compares to a 2006 Net Loss of $(0.50) per diluted share, based on 201.1 million shares. Net Loss in 2007 was negatively impacted by an $18.6 million, or $(0.09) per diluted share, non-cash impairment charge to the Company’s operations in Sweden.

“I’m extremely pleased with fourth quarter results, particularly the strong growth in the top line,” said David W. Scheible, President and Chief Executive Officer. “The approximate six-and-half percent increase in net sales represents the largest quarter over prior-year quarter increase since the merger that formed the Company in 2003.”

“Although we are still being negatively impacted by higher input costs, we were able to more than offset both fourth quarter and full year cost inflation through a combination of increased pricing and our ongoing cost cutting programs. Specifically, we took another $12 million of costs out of the system this quarter, bringing full year 2007 benefits from our continuous improvement efforts to approximately $46 million.”

In conjunction with the sale of the Company’s operations in Sweden, the results of this facility have been reclassified as discontinued operations for all periods presented.

Net Sales

Net Sales increased 6.4% to $601.9 million during fourth quarter 2007, compared to fourth quarter 2006 Net Sales of $565.7 million. Full year 2007 Net Sales were $2,421.2 million, or 4.3% higher than 2006 net sales of $2,321.7 million. When comparing against the prior year quarter, net sales in the fourth quarter of 2007 were positively impacted by:

— Approximately $18 million of higher volume and favorable mix;
— Approximately $10 million of favorable pricing;
— Approximately $8 million of favorable foreign currency exchange rates.




Attached is supplemental data showing net sales and net tons sold for each quarter of 2007 and 2006.

Income from Operations

Income from Operations for fourth quarter 2007 was $37.8 million, compared to fourth quarter 2006 Income from Operations of $15.3 million. When comparing to the prior year quarter, Income from Operations was positively impacted by:

— Approximately $12 million of lower operating costs as a result of
ongoing continuous improvement programs and other cost reduction
initiatives;
— Approximately $10 million of favorable pricing;
— Approximately $7 million of higher volume and favorable mix; and
— Approximately $4 million of lower depreciation and amortization.


Income from Operations was negatively impacted by:

— Approximately $10 million of higher input costs primarily related to
increased prices for fiber.


Other Results



Net interest expense was $40.3 million for fourth quarter 2007, as compared to net interest expense of $44.0 million for fourth quarter 2006. For the full year 2007, net interest expense was $167.8 million compared to $171.4 in 2006. The decrease was primarily due to lower interest rates resulting from the second quarter 2007 refinancing of the Company’s senior secured credit facility.

During the fourth quarter of 2007, the Company’s total debt decreased by $71.3 million to $1,878.4 million, as compared to $1,949.7 million at the end of the third quarter. Full year debt reduction for 2007 was $44.3 million. The Company contributed $3.4 million to its U.S. pension plans in the fourth quarter and $24.9 million for the full year 2007.

The Company incurred $4.8 million of income tax expense in the fourth quarter, primarily related to a non-cash expense associated with the amortization of goodwill for tax purposes. The Company has a $1.4 billion net operating loss that is available to offset future taxable income in the United States.

Capital expenditures for fourth quarter 2007 were $34.3 million compared to $30.7 million in the fourth quarter of 2006. For the full year 2007, capital expenditures were $95.9 million compared to $94.5 million in 2006.

EBITDA for fourth quarter 2007 was $90.1 million versus EBITDA of $63.0 million for fourth quarter 2006. Excluding the favorable $6.6 million non- cash impairment adjustment, Adjusted EBITDA for the fourth quarter 2007 was $83.5 million. Full year 2007 EBITDA was $321.5 million versus $286.3 million in 2006. Excluding the $18.6 million non-cash impairment charge, Adjusted

EBITDA for the full year 2007 was $340.1 million. A tabular reconciliation of EBITDA and Adjusted EBITDA to Net Loss is attached to this release.