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Six Sigma News Makers
GRAPHIC PACKAGING SAYS IMPROVEMENT DUE TO SIX SIGMA
April 22, 2002
By Tom Locke
DOW JONES NEWSWIRES
Graphic Packaging 2nd Quarter Impairment
Charge No More Than $200 Million
DENVER – Graphic Packaging International Corp. (GPK) expects to take a second-quarter charge of not more than $200 million for goodwill impairment, said Chief Financial Officer Luis Leon Monday.
In a conference call discussing first-quarter results, Leon said that because of new accounting rules that became effective this year, Graphic Packaging is no longer amortizing goodwill.
"The historical amortization of $21 million a year will cease, and we will book an extraordinary non-cash charge in the second quarter of 2002, relating to goodwill impairment," he said.
The company is evaluating how large the charge should be, he said, "but we expect it to be in the range, not to exceed, $200 million." Leon said management was pleased with first-quarter results since operating profit margins increased versus the fourth quarter even though sales fell to $ 264 million from $270 million
"Both quarters experienced reduced volumes with some of our customers tracking with reports of industry-wide inventory alignments," Leon said. "In addition, some of our customers experienced slowdowns due to acquisition integration." Since most of Graphic's customers are on a just-in-time supply basis, their cutbacks had an immediate impact on Graphic Packaging, said Leon.
"However, operating income and margins for the first quarter of 2002 of $19.4 million, or 7.4%, are well ahead of the fourth quarter's $17.4 million, or 6.4%. This 100 basis point improvement on lower sales attests to the success of our Six Sigma and other efficiency programs, as well as our ability to schedule operations and manage variable costs."
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