FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 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 (State or other jurisdiction of incorporation or organization) |
84-1208699 (I.R.S. Employer Identification No.) |
| 4455 Table Mountain Drive, Golden, Colorado (Address of principal executive offices) |
80403 (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 32,837,085 shares of common stock outstanding as of August 1, 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 | Six months ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Net sales |
$ | 263,917 | $ | 283,252 | $ | 527,641 | $ | 571,696 | |||||||||
Cost of goods sold |
231,022 | 240,976 | 460,454 | 489,186 | |||||||||||||
Gross profit |
32,895 | 42,276 | 67,187 | 82,510 | |||||||||||||
Selling, general and administrative expense |
15,808 | 16,428 | 30,695 | 30,917 | |||||||||||||
Goodwill amortization |
— | 5,143 | — | 10,312 | |||||||||||||
Asset impairment and restructuring charges |
— | 1,000 | — | 3,000 | |||||||||||||
Operating income |
17,087 | 19,705 | 36,492 | 38,281 | |||||||||||||
Gain on sale of assets |
— | — | — | 3,650 | |||||||||||||
Interest expense |
(12,453 | ) | (13,530 | ) | (23,749 | ) | (29,655 | ) | |||||||||
Income before income taxes, extraordinary
item and cumulative effect of change in
accounting principle |
4,634 | 6,175 | 12,743 | 12,276 | |||||||||||||
Income tax expense |
(1,808 | ) | (2,446 | ) | (4,971 | ) | (4,866 | ) | |||||||||
Income before extraordinary item and
cumulative effect of change in accounting
principle |
2,826 | 3,729 | 7,772 | 7,410 | |||||||||||||
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 |
2,826 | 3,729 | (1,845 | ) | 7,410 | ||||||||||||
Cumulative effect of change in goodwill
accounting, net of tax of $0 |
— | — | (180,000 | ) | — | ||||||||||||
Net income (loss) |
2,826 | 3,729 | (181,845 | ) | 7,410 | ||||||||||||
Preferred stock dividends declared |
2,500 | 2,500 | 5,000 | 5,000 | |||||||||||||
Net income (loss) attributable to common
shareholders |
$ | 326 | $ | 1,229 | $ | (186,845 | ) | $ | 2,410 | ||||||||
See Notes to Consolidated Financial Statements.
2
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 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 |
$ | 0.01 | $ | 0.04 | $ | 0.09 | $ | 0.08 | ||||||||
Extraordinary loss |
— | — | (0.30 | ) | — | |||||||||||
Cumulative effect of change in accounting
principle |
— | — | (5.55 | ) | — | |||||||||||
| $ | 0.01 | $ | 0.04 | $ | (5.76 | ) | $ | 0.08 | ||||||||
Weighted average shares outstanding — basic |
32,567 | 31,535 | 32,456 | 31,245 | ||||||||||||
Weighted average shares outstanding — diluted |
34,093 | 32,551 | 33,830 | 32,017 | ||||||||||||
See Notes to Consolidated Financial Statements.
3
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
| Three months ended | Six months ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Net income (loss) |
$ | 2,826 | $ | 3,729 | $ | (181,845 | ) | $ | 7,410 | ||||||||
Other comprehensive income: |
|||||||||||||||||
Foreign currency translation adjustments |
355 | (56 | ) | 341 | (330 | ) | |||||||||||
Cumulative effect of change in accounting principle,
net of tax of $2,012 |
— | — | — | (3,217 | ) | ||||||||||||
Recognition of hedge results to interest expense
during the period, net of tax of $882, $371,
$1,819, and $579, respectively |
1,421 | 593 | 2,928 | 926 | |||||||||||||
Amortization of cancelled interest rate swap, net of
tax of $137 and $183, respectively |
220 | — | 293 | — | |||||||||||||
Change in fair value of cash flow hedges during the
period, net of tax of $82, $461, $130, and $1,048, respectively |
(132 | ) | (737 | ) | (208 | ) | (1,673 | ) | |||||||||
Other comprehensive income (loss) |
1,864 | (200 | ) | 3,354 | (4,294 | ) | |||||||||||
Comprehensive income (loss) |
$ | 4,690 | $ | 3,529 | $ | (178,491 | ) | $ | 3,116 | ||||||||
See Notes to Consolidated Financial Statements.
4
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
| June 30, | December 31, | ||||||||||
| 2002 | 2001 | ||||||||||
ASSETS |
|||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 4,982 | $ | 6,766 | |||||||
Accounts receivable |
74,409 | 59,474 | |||||||||
Inventories: |
|||||||||||
Finished |
61,823 | 55,057 | |||||||||
In process |
10,900 | 15,258 | |||||||||
Raw materials |
25,239 | 22,093 | |||||||||
Total inventories |
97,962 | 92,408 | |||||||||
Other assets |
28,260 | 33,156 | |||||||||
Total current assets |
205,613 | 191,804 | |||||||||
Properties, net |
428,379 | 443,712 | |||||||||
Goodwill, net |
379,696 | 559,696 | |||||||||
Other assets |
31,195 | 34,123 | |||||||||
Total assets |
$ | 1,044,883 | $ | 1,229,335 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|||||||||||
Current maturities of long-term debt |
$ | 3,831 | $ | 37,373 | |||||||
Accounts payable |
47,665 | 59,002 | |||||||||
Interest payable |
11,275 | 2,665 | |||||||||
Other current liabilities |
74,951 | 70,361 | |||||||||
Total current liabilities |
137,722 | 169,401 | |||||||||
Long-term debt |
515,685 | 488,386 | |||||||||
Other long-term liabilities |
74,665 | 73,900 | |||||||||
Total liabilities |
728,072 | 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 | 100,000 | |||||||||
Common stock, $0.01 par value 100,000,000 shares authorized
and 32,677,033 and 32,188,941 issued and outstanding at
June 30, 2002, and December 31, 2001, respectively |
327 | 322 | |||||||||
Paid-in capital |
415,398 | 417,749 | |||||||||
Accumulated deficit |
(182,407 | ) | (562 | ) | |||||||
Accumulated other comprehensive loss |
(16,507 | ) | (19,861 | ) | |||||||
Total shareholders’ equity |
316,811 | 497,648 | |||||||||
Total liabilities and shareholders’ equity |
$ | 1,044,883 | $ | 1,229,335 | |||||||
See Notes to Consolidated Financial Statements.
5
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
| Six months ended | |||||||||||
| June 30, | |||||||||||
| 2002 | 2001 | ||||||||||
Cash flows from operating activities: |
|||||||||||
Net income (loss) |
$ | (181,845 | ) | $ | 7,410 | ||||||
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
|||||||||||
Goodwill impairment |
180,000 | — | |||||||||
Asset impairment charges |
— | 1,500 | |||||||||
Extraordinary loss on early extinguishment of debt |
15,766 | — | |||||||||
Gain on sale of assets |
— | (3,650 | ) | ||||||||
Depreciation |
30,716 | 29,930 | |||||||||
Amortization of goodwill |
— | 10,312 | |||||||||
Amortization of debt issuance costs |
1,945 | 3,970 | |||||||||
Compensation expense settled in stock |
2,237 | 2,879 | |||||||||
Change in current assets and current liabilities: |
|||||||||||
Accounts receivable |
(14,935 | ) | (4,232 | ) | |||||||
Inventory |
(5,554 | ) | 7,506 | ||||||||
Other current assets |
5,833 | (1,952 | ) | ||||||||
Accounts payable |
(11,337 | ) | 2,082 | ||||||||
Interest payable |
8,610 | 747 | |||||||||
Other current liabilities |
8,540 | 9,062 | |||||||||
Other |
423 | 3,344 | |||||||||
Net cash provided by operating activities |
40,399 | 68,908 | |||||||||
Cash flows from investing activities: |
|||||||||||
Capital expenditures |
(15,454 | ) | (16,374 | ) | |||||||
Proceeds from sale of assets |
— | 7,050 | |||||||||
Net cash used in investing activities |
(15,454 | ) | (9,324 | ) | |||||||
Cash flows from financing activities: |
|||||||||||
Repayment of debt |
(619,343 | ) | (141,450 | ) | |||||||
Proceeds from borrowings |
613,100 | 86,700 | |||||||||
Payment of debt issuance costs |
(15,922 | ) | — | </ | |||||||