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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    
 
For the quarterly period ended September 30, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    
 
For the transition period from                      to                     .
 
Commission file number: 0-20704
 
 
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
 
Colorado
  
84-1208699
(State or other jurisdiction of
  
(I.R.S. Employer Identification No.)
incorporation or organization)
    
 
4455 Table Mountain Drive, Golden, Colorado
  
80403
(Address of principal executive offices)
  
(Zip Code)
 
(303) 215-4600
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No   ¨
 
There were 32,926,055 shares of common stock outstanding as of September 30, 2002.
 

 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
 
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
 
    
Three months ended September 30,
     
Nine months ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Net sales
   
$
270,002
 
   
$
270,818
 
   
$
797,643
 
   
$
842,514
 
Cost of goods sold
   
 
240,949
 
   
 
234,363
 
   
 
701,403
 
   
 
723,549
 
    
  
  
  
Gross profit
   
 
29,053
 
   
 
36,455
 
   
 
96,240
 
   
 
118,965
 
Selling, general and administrative expense
   
 
16,192
 
   
 
16,061
 
   
 
46,887
 
   
 
46,978
 
Goodwill amortization
   
 
—  
 
   
 
5,175
 
   
 
—  
 
   
 
15,487
 
Asset impairment and restructuring charges
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
3,000
 
    
  
  
  
Operating income
   
 
12,861
 
   
 
15,219
 
   
 
49,353
 
   
 
53,500
 
Gain on sale of assets
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
3,650
 
Interest expense
   
 
(11,310
)
   
 
(12,429
)
   
 
(35,059
)
   
 
(42,084
)
    
  
  
  
Income before income taxes, extraordinary item and cumulative effect of change in accounting principle
   
 
1,551
 
   
 
2,790
 
   
 
14,294
 
   
 
15,066
 
Income tax expense
   
 
(604
)
   
 
(1,160
)
   
 
(5,575
)
   
 
(6,026
)
    
  
  
  
Income before extraordinary item and cumulative effect of change in accounting principle
   
 
947
 
   
 
1,630
 
   
 
8,719
 
   
 
9,040
 
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
   
 
947
 
   
 
1,630
 
   
 
(898
)
   
 
9,040
 
Cumulative effect of change in goodwill accounting, net of tax of $0
   
 
—  
 
   
 
—  
 
   
 
(180,000
)
   
 
—  
 
    
  
  
  
Net income (loss)
   
 
947
 
   
 
1,630
 
   
 
(180,898
)
   
 
9,040
 
Preferred stock dividends declared
   
 
(2,500
)
   
 
(2,500
)
   
 
(7,500
)
   
 
(7,500
)
    
  
  
  
Net income (loss) attributable to common shareholders
   
$
(1,553
)
   
$
(870
)
   
$
(188,398
)
   
$
1,540
 
    
  
  
  
 
 
 
See Notes to Consolidated Financial Statements.

2

 
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
 
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
 
    
Three months ended September 30,
     
Nine months ended
September 30,
    
2002
     
2001
     
2002
     
2001
Net income (loss) attributable to common shareholders per basic and diluted share:
                                  
Before extraordinary item and cumulative effect of change in accounting principle
   
$
(0.05
)
   
$
(0.03
)
   
$
0.04
 
   
$
0.05
Extraordinary loss
   
 
—  
 
   
 
—  
 
   
 
(0.30
)
   
 
—  
Cumulative effect of change in accounting principle
   
 
—  
 
   
 
—  
 
   
 
(5.52
)
   
 
—  
    
  
  
  
    
$
(0.05
)
   
$
(0.03
)
   
$
(5.78
)
   
$
0.05
    
  
  
  
Weighted average shares outstanding—basic
   
 
32,839
 
   
 
31,882
 
   
 
32,585
 
   
 
31,459
    
  
  
  
Weighted average shares outstanding—diluted
   
 
32,839
 
   
 
31,882
 
   
 
33,999
 
   
 
32,444
    
  
  
  
 
 
 
 
See Notes to Consolidated Financial Statements.

3

 
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
 
    
Three months ended September 30,
     
Nine months ended September 30,
  
    
2002
   
2001
     
2002
     
2001
  
Net income (loss)
   
$
947
   
$
1,630
 
   
$
(180,898
)
   
$
9,040
 
Other comprehensive income:
                                  
Foreign currency translation adjustments
   
 
1
   
 
46
 
   
 
342
 
   
 
(284
)
Cumulative effect of change in accounting for interest rate swaps, net of tax of $2,012
   
 
—  
   
 
—  
 
   
 
—  
 
   
 
(3,217
)
Recognition of hedge results to interest expense during the period, net of tax of $457, $214, $2,276, and $793, respectively
   
 
736
   
 
343
 
   
 
3,664
 
   
 
1,269
 
Amortization of cancelled interest rate swap, net of tax of $137 and $320, respectively
   
 
220
   
 
—  
 
   
 
513
 
   
 
—  
 
Change in fair value of cash flow hedges during the period, net of tax of $425, $969, $296, and $2,017, respectively
   
 
684
   
 
(1,551
)
   
 
476
 
   
 
(3,224
)
    
  
  
  
Other comprehensive income (loss)
   
 
1,641
   
 
(1,162
)
   
 
4,995
 
   
 
(5,456
)
    
  
  
  
Comprehensive income (loss)
   
$
2,588
   
$
468
 
   
$
(175,903
)
   
$
3,584
 
    
  
  
  
 
 
 
 
See Notes to Consolidated Financial Statements.

4

GRAPHIC PACKAGING INTERNATIONAL CORPORATION
 
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
 
    
September 30,
2002
     
December 31,
2001
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
10,646
 
   
$
6,766
 
Accounts receivable
   
 
68,755
 
   
 
59,474
 
Inventories:
                  
Finished
   
 
52,504
 
   
 
55,057
 
In process
   
 
10,691
 
   
 
15,258
 
Raw materials
   
 
26,391
 
   
 
22,093
 
    
  
Total inventories
   
 
89,586
 
   
 
92,408
 
Other assets
   
 
27,520
 
   
 
33,156
 
    
  
Total current assets
   
 
196,507
 
   
 
191,804
 
    
  
Properties, net
   
 
419,240
 
   
 
443,712
 
Goodwill, net
   
 
379,696
 
   
 
559,696
 
Other assets
   
 
30,033
 
   
 
34,123
 
    
  
Total assets
   
$
1,025,476
 
   
$
1,229,335
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current maturities of long-term debt
   
$
3,610
 
   
$
37,373
 
Accounts payable
   
 
89,633
 
   
 
59,002
 
Other current liabilities
   
 
66,638
 
   
 
73,026
 
    
  
Total current liabilities
   
 
159,881
 
   
 
169,401
 
Long-term debt
   
 
475,300
 
   
 
488,386
 
Other long-term liabilities
   
 
71,288
 
   
 
73,900
 
    
  
Total liabilities
   
 
706,469
 
   
 
731,687
 
Shareholders’ equity
                  
Preferred stock, nonvoting, 20,000,000 shares authorized:
                  
Series A, $0.01 par value, no shares issued or outstanding Series B, $0.01 par value, 1,000,000 shares issued and outstanding at stated value of $100 per share
   
 
100,000