YORK, Pa., Nov. 2 /PRNewswire/ -- Graham Packaging Holdings Company (the "Company" or "Graham Packaging"), parent company of Graham Packaging Company, L.P., today announced results for the third quarter.

Net sales for the quarter ended September 30, 2009, were $588.8 million compared to $659.1 million for the same quarter last year, a decrease of 10.7%. Unit volumes increased 5.4% in the quarter, but were offset by lower resin costs, which are passed through to customers, and the effect of foreign exchange rates. The market price per pound of PET resin in the U.S. averaged $0.77 in the third quarter of 2009 compared to $0.96 in the third quarter of 2008, and the market price per pound of HDPE resin in the U.S. averaged $0.69 in the third quarter of 2009 compared to $1.01 in the third quarter of 2008. The effect of exchange rates reduced sales by $23.6 million.

In North America, sales decreased $61.7 million, or 11.0%, due to a combination of lower resin costs and the impact of exchange rates, partially offset by an increase in unit volume. In Europe, sales decreased $9.4 million, or 13.3%, primarily due to the impact of exchange rates of $7.8 million and lower resin costs. In South America, sales increased $0.8 million, or 3.0%, primarily due to an increase in unit volumes, partially offset by the impact of exchange rates of $3.7 million.

Operating income for the quarter ended September 30, 2009, increased to $71.6 million from $51.4 million for the quarter ended September 30, 2008. The increase was driven by continued productivity initiatives and an increase in unit volume, along with lower depreciation and amortization expense and asset impairment charges versus the prior year. This was partially offset by the negative impact of exchange rates.

Interest expense for the quarter ended September 30, 2009, increased to $50.2 million from $42.2 million in the quarter ended September 30, 2008, an increase of 19.0%. The increase was due to higher interest rates on the portion of the Company's term loan which was extended in May 2009.

Income tax expense increased by $4.5 million primarily due to a tax benefit recognized in the third quarter of 2008 for an asset tax credit carryforward in Mexico.

As of the end of the third quarter, the Company had made a decision to sell a European subsidiary. Accordingly, the Company has reported the results of this subsidiary's operations as discontinued operations for all years reported.

Primarily as a result of the factors discussed above, net income for the quarter ended September 30, 2009, increased to $12.8 million from $5.7 million for the quarter ended September 30, 2008.

Mark Burgess, CEO of Graham, commented on the Company's performance. "I am pleased with our performance in the third quarter. Our sales improvement program and strengthening market volumes drove unit volume gains that, along with continued productivity initiatives and cost containment, led to increased covenant compliance EBITDA. These results, when combined with our working capital management and disciplined approach to capital spending, translated into strong cash flow performance. While sales volumes have shown improvement, we are still cautious about the overall economic environment, and will remain focused on implementing productivity initiatives, controlling expenses and managing working capital."

For the nine months ended September 30, 2009, net sales decreased 13.3% to $1,736.4 million from $2,003.4 million during the nine months ended September 30, 2008. Operating income over the same periods increased 14.3% to $210.3 million from $184.0 million and net income increased to $66.5 million from $37.8 million.

Covenant compliance EBITDA* (earnings before interest, taxes, depreciation and amortization) totaled $471.0 million for the four quarters ended September 30, 2009.

Reconciliation of loss from continuing operations to EBITDA

                                                        Four Quarters
                                                            Ended
                                                        September 30,
                                                            2009
                                                          --------
                                                       (In millions)

    Loss from continuing operations                       $(15.8)
    Interest income                                         (1.1)
    Interest expense                                       172.0
    Income tax provision                                    18.7
    Depreciation and amortization                          161.9
                                                           -----

    EBITDA                                                $335.7
                                                          ======

Reconciliation of EBITDA to covenant compliance EBITDA

                                                       Four Quarters
                                                           Ended
                                                        September 30,
                                                            2009
                                                          --------
                                                       (In millions)

    EBITDA                                                $335.7
    Asset impairment charges                                98.4
    Other non-cash charges (a)                               6.6
    Fees related to monitoring agreements (b)                5.0
    Gain on debt extinguishment                             (0.8)
    Non-recurring items (c)                                 26.1
                                                            ----

    Covenant compliance EBITDA                            $471.0
                                                          ======


    (a) Represents the net loss on disposal of fixed assets and stock-based
        compensation expense.
    (b) Represents annual fees paid to Blackstone Management Partners III
        L.L.C. and a limited partner of the Company under certain agreements.
    (c) The Company is required to adjust EBITDA, as defined above, for the
        following non-recurring items as defined in its credit agreement:


                                            Four Quarters
                                                Ended
                                             September 30,
                                                 2009
                                               --------
                                            (In millions)

    Reorganization and other costs (i)         $14.0
    Project startup costs (ii)                  12.1
                                                ----

                                               $26.1
                                               =====


    (i)  Represents non-recurring costs related to employee severance, plant
         closures, the hurricanes of Gustav and Ike, professional fees
         associated with an aborted transaction and other costs defined in
         the Company's credit agreement.
    (ii) Represents costs associated with startups of manufacturing lines to
         produce new products.

*Covenant compliance EBITDA is defined as EBITDA (i.e., earnings before interest, taxes, depreciation and amortization) further adjusted to exclude non-recurring items, non-cash items and other adjustments required in calculating covenant compliance under the Company's credit agreement and its indentures. Covenant compliance EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. The Company believes that the inclusion of covenant compliance EBITDA is appropriate to provide additional information to investors about the calculation of certain financial covenants in the Company's credit agreement and its indentures. Because not all companies use identical calculations, these presentations of covenant compliance EBITDA may not be comparable to other similarly titled measures of other companies.

About Graham Packaging

Graham Packaging, based in York, Pennsylvania, is a worldwide leader in the design, manufacture and sale of technology-based, customized blow molded plastic containers for the branded food and beverage, household, personal care/specialty and automotive lubricants product categories. The Company has an extensive blue-chip customer base that includes many of the world's largest branded consumer products companies. It produces more than 20 billion container units annually at 84 plants in North America, Europe and South America.

Graham Packaging is a leading U.S. supplier of plastic containers for hot-fill juice and juice drinks, sports drinks, drinkable yogurt and smoothies, nutritional supplements, wide-mouth food, dressings, condiments and beers; the leading global supplier of plastic containers for yogurt drinks; a leading supplier of plastic containers for liquid fabric care products, dish care products and hard-surface cleaners; and the leading supplier in the U.S., Canada and Brazil of one-quart/liter plastic motor oil containers. The Blackstone Group of New York is the majority owner of Graham Packaging.

Information Concerning Forward-Looking Statements

Information provided and statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this press release and Graham Packaging assumes no obligation to update the information included in this press release. Such forward-looking statements include information concerning Graham Packaging's possible or assumed future results of operations. These statements often include words such as "approximate," "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about Graham Packaging's industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond Graham Packaging's control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although Graham Packaging believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Unless otherwise required by law, Graham Packaging also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this press release.

SOURCE Graham Packaging