Graphic Packaging(US:GPK)2023-10-31 19:05Financial Performance - Net Sales for Q3 2023 decreased by $102 million or 4% to $2,349 million compared to $2,451 million in Q3 2022, attributed to lower organic sales and open market volumes, partially offset by higher pricing and favorable foreign exchange [144]. - Income from Operations for Q3 2023 decreased by $6 million or 2% to $287 million from $293 million in Q3 2022, impacted by accelerated depreciation and inflation-related costs [144]. - Net Sales for the first nine months of 2023 increased by $125 million or 2% to $7,179 million from $7,054 million in the same period of 2022, attributed to higher pricing and new product introductions [156]. - Income from Operations for the first nine months of 2023 increased by $246 million or 39% to $884 million from $638 million in the same period of 2022, due to higher pricing and cost savings [157]. - Net Sales for the Paperboard Mills segment in Q3 2023 decreased to $236 million from $345 million in Q3 2022, primarily due to lower open market volume [167]. - The Americas Paperboard Packaging segment's Net Sales for Q3 2023 were $1,569 million, slightly down from $1,577 million in Q3 2022, with lower organic sales offset by higher pricing [167]. - Net Sales for the first nine months of 2023 amounted to $5,446 million, with Income from Operations at $799 million and Net Income at $482 million [187]. Acquisitions and Investments - The Company completed the acquisition of Bell Incorporated for $264 million in September 2023, adding three packaging facilities [148]. - The Company acquired Bell Incorporated in September 2023, contributing to new product introductions in the Americas Paperboard Packaging segment [171]. - Net Cash Used in Investing Activities for the first nine months of 2023 was $875 million, compared to $367 million in 2022, including acquisitions of Tama and Bell Incorporated [183]. - The Company completed the acquisition of Bell Incorporated for $264 million, enhancing its packaging capabilities [177][183]. - The Company's capital investments for the first nine months of 2023 were $587 million, up from $313 million in the same period of 2022, primarily due to the construction of a new CRB mill in Waco, Texas [201]. - Total capital investment for 2023 is expected to be approximately $800 million [210]. Debt and Financial Flexibility - The Company reported a total outstanding debt of $5,608 million as of September 30, 2023, which may restrict its financial flexibility and ability to respond to market changes [142]. - The Company reported a maximum Consolidated Total Leverage Ratio of 2.74 to 1.00 as of September 30, 2023, compliant with the covenant requirement of less than 4.25 to 1.00 [199]. - The Company expects sufficient liquidity from cash flows and revolving credit facilities to meet ongoing cash requirements for at least the next twelve months [189]. - The Company has active interest rate swap agreements with a notional amount of $750 million expiring on April 1, 2024, to manage interest rate risks [214]. Cost and Inflation - The Company experienced a cost increase of $149 million for the nine months ended September 30, 2023, primarily due to higher labor and benefits costs [136]. - Inflation for Q3 2023 increased by $11 million compared to Q3 2022, driven by higher labor and benefits costs of $22 million, offset by commodity deflation of $32 million [151]. - Income from Operations decreased due to commodity inflation, lower organic sales, and increased impairment charges related to the divestiture of Russian operations [174][176]. Operational Changes - The Company announced the closure of three packaging facilities by the end of 2023, consolidating production into other plants [148]. - The Company has implemented strategies to reduce costs and improve productivity through continuous improvement initiatives and Lean Sigma principles [138]. - The Company’s core packaging volumes were lower in several categories, including beverage and dairy, while foodservice volumes increased [149]. Tax and Impairment - Income Tax Expense for Q3 2023 was $54 million on Income before Income Taxes of $224 million, with an effective tax rate impacted by charges related to the divestiture of Russian operations [153]. - The Company recorded a $12 million non-cash impairment charge related to its packaging plants in Russia, reducing the carrying value of goodwill for these facilities to zero [208]. - The Company expects its U.S. federal cash tax liability in 2023 to be reduced by approximately $112 million due to remaining net operating loss carryforwards [155]. Cash Flow and Expenses - Net Cash Provided by Operating Activities for the first nine months of 2023 totaled $702 million, an increase from $620 million in the same period of 2022 [182]. - Capital spending increased to $592 million in 2023 from $445 million in 2022, driven by the construction of a new CRB mill in Waco, Texas [183]. - Capitalized interest costs incurred during the first nine months of 2023 were $3 million, compared to $4 million in the same period of 2022 [202]. - Depreciation and amortization expense is projected to be between $615 million and $625 million for 2023 [212]. Credit Rating - The Company’s credit rating is BB+ by Standard & Poor's and Ba1 by Moody's, both with a stable outlook [200].