- Q1 Net Sales decreased $27.8 million or 2.5% versus the prior year period. Excluding prior year sales from divested businesses, Q1 Net Sales increased $17.5 million or 1.7%.
Q1 Adjusted Earnings per Diluted Share increased to $0.13 versus $0.10 in the prior year period.
Q1 Adjusted EBITDA was $157.6 million versus $161.6 million in the prior year period, as severe weather negatively impacted results by approximately $14.5 million.
Reduced Net Debt by $24.9 million in Q1 resulting in a quarter end Net Leverage Ratio of 3.27x.
Graphic Packaging Holding Company, (the "Company"), a leading provider of packaging solutions to food, beverage and other consumer products companies, today reported Net Income for first quarter 2014 of $35.2 million, or $0.11 per share, based upon 330.3 million weighted average diluted shares. This compares to first quarter 2013 Net Income of $34.9 million, or $0.10 per share, based on 350.4 million weighted average diluted shares.
First quarter 2014 Net Income included $9.3 million of Restructuring and Other Special Charges (including tax impact) primarily related to the sale of the Company's labels business. When adjusting for this, Adjusted Net Income for the first quarter of 2014 was $44.5 million, or $0.13 per diluted share compared to first quarter 2013 Adjusted Net Income of $35.8 million or $0.10 per diluted share.
"We had a solid quarter despite mother nature not cooperating," said CEO David Scheible. "Our key operating and financial metrics were trending positive, but the harsh winter weather significantly impacted board production, particularly at our two virgin mills in the southeast. Power supply interruptions from major storms forced us to take unplanned downtime at our Macon, Georgia mill in February and our West Monroe, Louisiana mill in March. The storms, in addition to lost production, resulted in higher energy, fiber and freight costs. The weather impact overall cost us almost $15 million in EBITDA this quarter."
"The good news is that we didn't experience a drop in demand from the weather. Beer demand remained healthy here in the U.S and overall carton demand in Europe was extremely strong in the first quarter. The positive demand signals in Europe are welcome and we also had a nice benefit this quarter from the restructuring we did in Europe last year. We are very excited about our growing footprint in Europe and expect the previously announced Benson Group acquisition to close in the second quarter."
Net Sales decreased 2.5% to $1,072.7 million in the first quarter 2014, compared to $1,100.5 million in the prior year period. Excluding $45.3 million of sales in the prior year period from divested businesses, Net Sales increased $17.5 million or 1.7%. After adjusting the prior period for the divested businesses, the Net Sales increase was driven by $18.9 million of higher pricing and $1.5 million of favorable exchange rates. This was partially offset by unfavorable volume/mix of $2.9 million.
Paperboard Packaging Net Sales, which comprised 87.8% of total first quarter Net Sales, increased 0.6% to $941.8 million in first quarter 2014, compared to $936.1 million in the prior year period. Excluding $15.0 million of sales in the prior year period for the divested Uncoated Recycled Board (URB) mill and the divested labels business, Paperboard Packaging Net Sales increased $20.7 million or 2.2%.
Net sales in the Flexible Packaging segment decreased 20.4% to $130.9 million in the first quarter 2014, compared to $164.4 million in the prior year period. Excluding $30.3 million of sales in the prior year period for the divested flexible plastics business, Flexible Packaging Net Sales decreased $3.2 million or 2.4%.
Attached is supplemental data showing Net Tons Sold, Net Sales and Income (Loss) from Operations by business segment for the first quarter of 2014 and each quarter of 2013.
EBITDA for first quarter 2014 decreased 6.5% to $149.8 million from $160.2 million in the first quarter last year. Excluding $7.8 million of Restructuring and Other Special Charges, Adjusted EBITDA decreased 2.5% to $157.6 million in first quarter 2014 from $161.6 million in first quarter 2013. The $7.8 million adjustment was primarily related to the February 2014 sale of the Company's labels business. When comparing against the prior year quarter, Adjusted EBITDA in the first quarter of 2014 was positively impacted by $18.9 million of higher pricing and $7.9 million of improved net operating performance. These benefits were offset by $14.5 million in higher costs related to severe weather, $6.5 million of commodity inflation, $6.9 million in other costs, primarily for labor and benefits, and $2.9 million of unfavorable exchange rates/other.
Total Net Debt at the end of first quarter 2014 was $2,176.5 million, $24.9 million lower than at the end of 2013. The first quarter Net Debt reduction was driven by proceeds from the sale of the Company's labels business in February, partially offset by higher working capital levels associated with normal seasonality in the business.
The Company's March 31, 2014 Net Leverage Ratio dropped to 3.27 times Adjusted EBITDA from 3.54 times Adjusted EBITDA at the end of the first quarter of 2013. At March 31, 2014, the Company had available domestic liquidity of $717.0 million, including the undrawn availability under its $1.0 billion U.S. revolving credit facility.
Net Interest Expense was $20.4 million in the first quarter of 2014, compared to $27.2 million in the first quarter of 2013. The decrease was primarily attributable to the Company's decision to issue new 4.75% Senior Notes and use the proceeds to redeem its higher 9.5% notes during the second quarter of 2013 and overall lower debt levels.
Capital expenditures were $59.3 million in the first quarter of 2014, compared to $32.9 million in the first quarter of 2013. The increase was primarily due to investments made as part of the European integration, as well as several planned asset upgrades at our U.S. based mills.
Income Tax Expense was $24.8 million in the first quarter of 2014 compared to $23.7 million in the first quarter of 2013. The increase was the result of a write-off of non-deductible goodwill associated with the sale of the labels business. As of March 31, 2014, the Company had approximately $830 million of Net Operating Losses (NOLs) for U.S. federal cash income tax purposes, which may be used to offset future taxable income.
During February 2014, certain shareholders of the Company sold 30.0 million shares of common stock in a secondary public offering at $9.85 per share. The shares were sold by certain affiliates of TPG Capital, L.P., Clayton, Dubilier & Rice Fund V Limited Partnership and Old Town, S.A. As a result of these actions, the Clayton, Dubilier & Rice fund and Old Town no longer hold shares of the Company. The TPG Entities and certain Coors family trusts and the Adolph Coors Foundation now hold approximately 13% of shares outstanding.