Q4 2013 earnings call slides v final iii

This information is confidential and proprietary to Graphic Packaging International, Inc. Any reproduction or distribution to any third party is prohibited

©2013 Graphic Packaging International, Inc.

Fourth Quarter and Full Year 2013 Earnings Call February 6, 2014

David W. Scheible Chairman, President and Chief Executive Officer

Daniel J. Blount Senior Vice President and Chief Financial Officer



Forward Looking Statements

Any statements of the Company’s expectations in these slides constitute "forward-looking statements“ as defined in the Private Securities Litigation Reform Act of 1995. Such statements, including but not limited to, statements relating to growth in European market share and revenues, receipt of the grant related to the Macon bio-mass boiler project, raw material inflation costs, consumer demand and pricing trends, capital expenditures, cash pension contributions and pension expense, depreciation and amortization, interest expense, income tax rates, debt and leverage reduction, performance improvements and cost reduction initiatives, are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from the Company's present expectations. These risks include, but are not limited to, volatility in raw material and energy costs, cutbacks in consumer spending that reduce demand for the Company’s products, continuing pressure for lower cost products, the Company’s ability to implement its business strategies, including productivity initiatives and cost reduction plans, and the Company’s debt. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date on which they are made and the Company undertakes no obligation to update such statements. Additional information regarding these and other risks is contained in the Company's periodic filings with the SEC.

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Financial Highlights

A reconciliation of non-GAAP financial measures can be found in the financials attached to the earnings release available on the Company’s website at www.graphicpkg.com.

Fourth Quarter

• Adjusted EBITDA of $158.3 million up 5.4% YoY

• Adjusted EBITDA margin increased 47 bps to 14.7% YoY

• Adjusted EPS increased to $0.17 from $0.08 YoY

Full Year 2013

• Net Sales up 3.3% primarily due to volume and mix

• Adjusted EBITDA of $670 million vs. $647 million

• Adjusted EBITDA margin increased to 15.0%

• Adjusted Net Income of $181 million vs. $146 million

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Committed to Core Food & Beverage

New product development • Help customers differentiate products and lower supply chain costs

– New strength packaging for fresh fruit – Warehouse club channel – Tite-Pak

Strategic Investments

• Optimizing asset structure and productivity

– Upgrade Kalamazoo paper machine – New Wausau production line for proprietary microwave products

• Tuck-under acquisitions

– Successfully integrated Contego Packaging and A&R beverage packaging businesses – Europe is a meaningful platform positioned for continued growth and market share gains

o Large and mature end markets, highly fragmented and ripe for change

Divesting non-core businesses • Free up capital to reinvest in core businesses or pay down debt

– Closed the sale of Labels business early this week – In Q3 sold Pekin URB mill and Flexible Retail Plastics business

4



Folding Carton

• Folding carton volumes up 2.7% vs. last year driven primarily by European acquisitions

• Legacy folding carton down

• Beverage mixed

• CSD demand weak

• New product development helped CSD volumes, but underlying trends unchanged

• Beer improved late 3rd quarter and held through the 4th quarter

• Craft beer continuing to be a bright spot

• Consumer Products saw weakness in cereal, frozen foods, and dry foods

• Slow employment recovery, curtailment of SNAP food stamp program and destocking by major retailers

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Flexible Packaging

• Remains a work in progress

• Sale of plastics business and labels reduces overall significance • Focus resources on smaller footprint to improve results

• No need for big capital investments

• Need to improve results • Margins remain modest

• Generate positive cash flow and a reasonable return on capital

• Cost structure projects • New equipment and other changes at Pine Bluff Mill have begun to improve

profitability

• Gaining traction with initiatives at New Philadelphia converting facility

• Announced $50/ton increase on kraft paper effective in March

6



Performance Improvement

Continue to Strategically Invest in the Business:

• Solid operating performance across mills and converting plants • Generated ~$25 million of performance improvements in Q4 • ~$100 million of performance improvements for 2013

• Biomass boiler • Generated our own energy • Estimate annual savings in energy ~$20 million • Receipt of ~$25 million government grant for this project pushed to 1H’14 due

to factors beyond GPK’s control

• European businesses • Completed consolidation of Gillingham, UK converting plant • Comfortable with $16-$18 million synergy target for 2014 • Pleased with performance and ahead of expectation in building platform in

region • Become a meaningful strategic business with significant opportunities

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Paperboard Production and Demand

• Mills continue to perform well

• Total production and tons per day increased

• Demand for SUS and CRB remain solid

• No unplanned downtime

• Came out of planned annual outages better than previous year

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800

850

900

950

1000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$ p

er

Ton

CRB Pricing Trend

CRB'11 CRB'12 CRB'13

950

1000

1050

1100

1150


$ p

er

Ton

SUS Pricing Trend

SUS'11 SUS'12 SUS'13

• Pricing turned positive in Q4 with a $4.3 million benefit

– Reverses trend through first 3 quarters where pricing declined $26 million

– RISI reported $85 per ton price increase for CUK and $75 per ton increase for CRB in 2014

– Setting up positive backdrop for pricing in 2014

Pricing

Source: Pulp & Paper Weekly Source: Pulp & Paper Weekly

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-

50

100

150

200

Q1 Q2 Q3 Q4

$ p

er

Ton

OCC

OCC'11 OCC'12 OCC'13

$400

$450

$500

$550

$600

$650

$700


$ p

er

Sho

rt T

on

Caustic Soda

Caustic Soda '11 Caustic Soda '12 Caustic Soda '13

32.0

33.0

34.0

35.0

36.0

37.0

38.0

39.0

Q1 Q2 Q3 Q4

$ p

er

Ton

Wood

Southwide'11 Southwide'12 Southwide'13

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00


$ p

er

MM

BTU

Natural Gas

NYMEX'11 NYMEX'12 NYMEX'13

Key Input Cost Trends : Market Prices

Source: Forest2Market

Source: Chemical Markets Associates, Inc. Source: RISI

Source: NYMEX

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Q4 and Full Year 2013 Financial Highlights

• Q4 EBITDA margin 14.7%; Full year EBITDA margin grew to 15.0%

• Q4 Adj. Net Income up 77%; Full year Adj. Net Income up 24%

• Q4 Adj. EPS up 9 cents; Full year Adj. EPS up 15 cents

• Q4 adjustments mostly related to European Integration

¹ A reconciliation of Non-GAAP Financial Measures can be found in the financials attached to the earning release.

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$millions ( except EPS) Q4 2013 Q4 2012 Variance YTD 2013 YTD 2012 Variance

Revenues $1,074.9 $1,053.3 $21.6 $4,478.1 $4,337.1 $141.0

Adjusted EBITDA $158.3 $150.2 $8.1 $670.2 $647.4 $22.8

Adj. Net Income $58.6 $33.2 $25.4 $181.4 $146.3 $35.1

Adj. EPS $0.17 $0.08 $0.09 $0.52 $0.37 $0.15



Y-o-Y Sales Comparisons

$975

$1,050

$1,125

Q4 2012 Price Volume/Mix Divestitures FX Q4 2013

$4.3

$1,074.9

$1,053.3

($6.1)

$56.0

$ millions

Q4’13 over Q4’12

12

($32.6)



$100

$125

$150

$175

$200

Q4 2012 Price Volume/Mix Divestitures Commodity Inflation

Labor & Benefits Inflation

Perform FX/Other Q4 2013

$4.3

$7.0

($15.8)

$(5.0)

$158.3

Y-o-Y Adjusted EBITDA Comparisons $ millions

Q4’13 over Q4’12

$24.5


$(4.2)

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$150.2 $(2.7)



Cash Flow, Debt and Liquidity

• Strong YTD Cash from Operations of $458 million

• Generated $280 million of free cash flow – Used $200 million for share repurchase

• 7% accretive to EPS

– Net debt $80 million lower than 2012

• Debt facility improvements in 2013 – Refinanced $425 million Sr. Notes to 4.75% from 9.5%

– Amended Sr. Secured Facility – extended maturity and lowered rate 25 bps


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6.0x

4.8x

4.3x

3.5x 3.5x 3.3x

0.0x

1.5x

3.0x

4.5x

6.0x

7.5x

2008** 2009 2010 2011 2012 2013

Adjusted Net Leverage Ratio

** Shown on a pro forma basis; GAAP based ratio was 6.3x.

• Adjusted net debt leverage ~3.3x – Improvement includes $200 million of net

debt for share repurchase

• Pension funded status improved by over $200 million in 2013

• FYE Domestic liquidity of ~$685 million



Annual Guidance

2014

• Performance improvement initiatives of $70-$90 million

• Capital Expenditures = $185-$205 million

• Cash Pension Contributions = $40-$60 million

• Pension Expense = ~$6 million

• Depreciation & Amortization = $275-$285 million

• Interest Expense = $90-$100 million

• Tax Rate = 37 - 39%

• Net Debt Reduction ~$350 million (excluding divestiture proceeds)

• 2014 Year-End Net Leverage Ratio = 2.5-3.0x

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Appendix – Reconciliation of Non-GAAP Financial Measures

Quarter Ended Quarter Ended

In millions December 31, 2013 December 31, 2012

Net Sales by Segments:

Paperboard Packaging 939.8$ 876.6$

Flexible Packaging 135.1 176.7

Total Net Sales 1,074.9$ 1,053.3$

Adjusted EBITDA by Segments:

Paperboard Packaging 167.7$ 151.7$

Flexible Packaging 2.9 7.5

Corporate (12.3) (9.0)

Total Adjusted EBITDA 158.3$ 150.2$

Adjusted EBITDA Margin by Segment:

Paperboard Packaging 17.8% 17.3%

Flexible Packaging 2.1% 4.2%

Total Adjusted EBITDA Margin 14.7% 14.3%

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Appendix – Reconciliation of Non-GAAP Financial Measures

December 31, December 31, December 31, December 31, December 31, December 31,

Calculation of Net Debt: 2013 2012 2011 2010 2009 2008 ¹

Short-Term Debt and Current Portion of Long-Term Debt 77.4$ 79.8$ 30.1$ 26.0$ 17.6$ 18.6$

Long-Term Debt 2,176.2 2,253.5 2,335.7 2,553.1 2,782.6 3,165.2

Less:

Cash and Cash Equivalents (52.2) (51.5) (271.8) (138.7) (149.8) (170.1)

Total Net Debt 2,201.4$ 2,281.8$ 2,094.0$ 2,440.4$ 2,650.4$ 3,013.7$

Adjusted EBITDA 670.2 647.4 591.3 573.9 556.4 502.0

Net Leverage Ratio 3.3 3.5 3.5 4.3 4.8 6.0

1) Presented on a pro forma basis.

The table below sets forth the calculation of the Company's Total Net Debt and Net Leverage Ratio. The Company's management believes that the

presentation of Total Net Debt and Net Debt Leverage provides useful information to investors because these measures are regularly used by management in

assessing the Company's performance. Total Net Debt is a financial measure not calculated in accordance with generally accepted accounting principles in

the United States ("GAAP"). Total Net Debt and Net Leverage Ratio should be considered in addition to results prepared in accordance with GAAP, but

should not be considered superior to GAAP results. In addition, our Total Net Debt and Net Leverage Ratio may not be comparable to similarly titled

measures utilized by other companies since other companies may not calculate such a measure in the same manner as we do.

Reconciliation of Non-GAAP Financial Measures

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Q4 2013 earnings call slides v final iii

Presentations & Public Speaking

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