##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 or
 o
    
    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: 1-13182
 Graphic Packaging Corporation
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    58-2205241
(I.R.S. employer
identification no.)814 Livingston Court 
Marietta, Georgia
(Address of principal executive offices)
    
    30067
(Zip Code)
 (770) 644-3000
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  o þ




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Information Concerning Forward-Looking Statements
  2




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    4ITEM 1. FINANCIAL STATEMENTS
    
    
    4ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    15ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    25ITEM 4. CONTROLS AND PROCEDURES
    
    
    25PART II  OTHER INFORMATION
    
    
    26ITEM 1. LEGAL PROCEEDINGS
    
    
    26ITEM 1A. RISK FACTORS
    
    
    26ITEM 6. EXHIBITS
    
    
    26SIGNATURES
    
    
    27EX-10.1 GRAPHIC PACKAGING INTERNATIONAL, INC. SEVERANCE PAY PLANEX-10.2 GRAPHIC PACKAGING INTERNATIONAL, INC. MANAGEMENT INCENTIVE PLANEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 GRAPHIC PACKAGING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,In millions, except share and per share amounts
    
    2007
    
    
    2006(Unaudited)ASSETSCurrent Assets:Cash and Equivalents
    
    $
    9.7
    
    
    $
    7.3Receivables, Net
    
    
    248.5
    
    
    
    230.9Inventories
    
    
    311.8
    
    
    
    301.3Other Current Assets
    
    
    24.0
    
    
    
    24.8Total Current Assets
    
    
    594.0
    
    
    
    564.3Property, Plant and Equipment, Net
    
    
    1,459.4
    
    
    
    1,488.7Goodwill
    
    
    642.3
    
    
    
    642.3Intangible Assets, Net
    
    
    146.3
    
    
    
    148.5Deferred Tax Assets
    
    
    345.6
    
    
    
    345.0Other Assets
    
    
    42.2
    
    
    
    44.8Total Assets
    
    $
    3,229.8
    
    
    $
    3,233.6LIABILITIESCurrent Liabilities:Short Term Debt
    
    $
    15.7
    
    
    $
    12.0Accounts Payable
    
    
    211.2
    
    
    
    214.4Other Accrued Liabilities
    
    
    164.4
    
    
    
    193.9Total Current Liabilities
    
    
    391.3
    
    
    
    420.3Long Term Debt
    
    
    1,962.0
    
    
    
    1,910.7Deferred Tax Liabilities
    
    
    479.8
    
    
    
    475.2Accrued Pension and Postretirement Benefits
    
    
    209.8
    
    
    
    206.7Other Noncurrent Liabilities
    
    
    36.7
    
    
    
    39.0Total Liabilities
    
    
    3,079.6
    
    
    
    3,051.9SHAREHOLDERS EQUITYPreferred Stock, par value $.01 per share;
50,000,000 shares authorized; no shares issued or
outstanding
    
    
    
    
    
    
    Common Stock, par value $.01 per share;
500,000,000 shares authorized; 200,853,883 and
200,584,591 shares issued and outstanding at
March 31, 2007 and December 31, 2006, respectively
    
    
    2.0
    
    
    
    2.0Capital in Excess of Par Value
    
    
    1,187.6
    
    
    
    1,186.8Accumulated Deficit
    
    
    (939.8
    )
    
    
    (901.1
    )Accumulated Other Comprehensive Loss
    
    
    (99.6
    )
    
    
    (106.0
    )Total Shareholders Equity
    
    
    150.2
    
    
    
    181.7Total Liabilities and Shareholders Equity
    
    $
    3,229.8
    
    
    $
    3,233.6
  4




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GRAPHIC PACKAGING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedMarch 31,In millions, except per share amounts
    
    2007
    
    
    2006Net Sales
    
    $
    608.7
    
    
    $
    580.4Cost of Sales
    
    
    545.5
    
    
    
    518.4Selling, General and Administrative
    
    
    47.8
    
    
    
    49.6Research, Development and Engineering
    
    
    2.6
    
    
    
    3.0Other Expense, Net
    
    
    1.1
    
    
    
    0.3Income from Operations
    
    
    11.7
    
    
    
    9.1Interest Income
    
    
    0.2
    
    
    
    0.2Interest Expense
    
    
    (43.4
    )
    
    
    (41.5
    )Loss before Income Taxes and Equity in Net Earnings of Affiliates
    
    
    (31.5
    )
    
    
    (32.2
    )Income Tax Expense
    
    
    (7.4
    )
    
    
    (4.6
    )Loss before Equity in Net Earnings of Affiliates
    
    
    (38.9
    )
    
    
    (36.8
    )Equity in Net Earnings of Affiliates
    
    
    0.2
    
    
    
    0.1Net Loss
    
    $
    (38.7
    )
    
    $
    (36.7
    )Loss Per Share  Basic
    
    $
    (0.19
    )
    
    $
    (0.18
    )Loss Per Share  Diluted
    
    $
    (0.19
    )
    
    $
    (0.18
    )Weighted Average Number of Shares Outstanding  Basic

    

    
    201.3
    
    
    
    200.8Weighted Average Number of Shares Outstanding  Diluted
    
    
    201.3
    
    
    
    200.8
  5




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GRAPHIC PACKAGING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,In millions
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (38.7
    )
    
    $
    (36.7
    )Noncash Items Included in Net Loss:Depreciation and Amortization
    
    
    53.2
    
    
    
    49.8Deferred Income Taxes
    
    
    4.3
    
    
    
    4.9Pension, Postemployment and Postretirement Benefits Expense, Net of Contributions
    
    
    5.8
    
    
    
    6.4Amortization of Deferred Debt Issuance Costs
    
    
    2.2
    
    
    
    2.2Other, Net
    
    
    1.9
    
    
    
    0.6Changes in Operating Assets & Liabilities
    
    
    (61.5
    )
    
    
    (70.2
    )Net Cash Used in Operating Activities
    
    
    (32.8
    )
    
    
    (43.0
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital Spending
    
    
    (19.8
    )
    
    
    (22.7
    )Other, Net
    
    
    (0.8
    )
    
    
    1.7Net Cash Used in Investing Activities
    
    
    (20.6
    )
    
    
    (21.0
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowing under Revolving Credit Facilities
    
    
    142.9
    
    
    
    210.5Payments on Revolving Credit Facilities
    
    
    (87.9
    )
    
    
    (151.9
    )Other, Net
    
    
    0.8
    
    
    
    (0.3
    )Net Cash Provided by Financing Activities
    
    
    55.8
    
    
    
    58.3EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    
    
    
    
    (0.2
    )Net Increase (Decrease) in Cash and Equivalents
    
    
    2.4
    
    
    
    (5.9
    )Cash and Equivalents at Beginning of Period
    
    
    7.3
    
    
    
    12.7CASH AND EQUIVALENTS AT END OF PERIOD
    
    $
    9.7
    
    
    $
    6.8
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GRAPHIC PACKAGING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 1  ORGANIZATION
      NOTE 2  ACCOUNTING POLICIES
   Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement 109
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Fair Value Measurements,
 Accounting for Planned Major
Maintenance Activities
 NOTE 3  STOCK INCENTIVE PLANS
  Share-Based Payment
 Stock Options
  8




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Stock Awards, Restricted Stock and Restricted Stock Units
   Shares in thousands
    
    March 31, 2007RSUs  employees
    
    
    877Weighted average price per share
    
    $
    4.63
     NOTE
4  INVENTORIES
  March 31,
    
    
    December 31,In millions
    
    2007
    
    
    2006Finished goods
    
    $
    159.2
    
    
    $
    159.4Work in progress
    
    
    29.0
    
    
    
    22.1Raw materials
    
    
    73.8
    
    
    
    71.9Supplies
    
    
    58.4
    
    
    
    56.8320.4
    
    
    
    310.2Less, Allowance
    
    
    8.6
    
    
    
    8.9Total
    
    $
    311.8
    
    
    $
    301.3
 NOTE 5  ENVIRONMENTAL AND LEGAL MATTERS
 Environmental Matters
  9




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Legal Matters
  NOTE 6  BUSINESS SEGMENT INFORMATION
  10




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Three Months EndedMarch 31,In millions
    
    2007
    
    
    2006NET SALES:Paperboard Packaging
    
    $
    586.4
    
    
    $
    560.3Containerboard/Other
    
    
    22.3
    
    
    
    20.1Total
    
    $
    608.7
    
    
    $
    580.4INCOME (LOSS) FROM OPERATIONS:Paperboard Packaging
    
    $
    25.3
    
    
    $
    22.7Containerboard/Other
    
    
    (3.7
    )
    
    
    (4.7
    )Corporate
    
    
    (9.9
    )
    
    
    (8.9
    )Total
    
    $
    11.7
    
    
    $
    9.1
 NOTE 7  PENSIONS AND OTHER POSTRETIREMENT BENEFITS
   Pension and Postretirement Expense
  Pension Benefits
    
    Postretirement BenefitsThree Months Ended March 31,In millions
    
    2007
    
    2006
    
    2007
    
    2006Service Cost
    
    $
    3.4
    
    
    $
    4.0
    
    
    $
    0.3
    
    
    $
    0.3Interest Cost
    
    
    8.7
    
    
    
    8.1
    
    
    
    0.6
    
    
    
    0.6Expected Return on Plan Assets
    
    
    (9.0
    )
    
    
    (8.0
    )
    
    
    
    
    
    
    Amortizations:Prior Service Cost
    
    
    0.7
    
    
    
    0.5
    
    
    
    
    
    
    
    Actuarial Loss
    
    
    0.6
    
    
    
    1.3
    
    
    
    
    
    
    
    Net Periodic Cost
    
    $
    4.4
    
    
    $
    5.9
    
    
    $
    0.9
    
    
    $
    0.9
   11




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NOTE 8  DEBT
  March 31,
    
    
    December 31,In millions
    
    2007
    
    
    2006Senior Notes with interest payable semi-annually at 8.5%, payable in 2011
    
    $
    425.0
    
    
    $
    425.0Senior Subordinated Notes with interest payable semi-annually at 9.5%,
payable in 2013
    
    
    425.0
    
    
    
    425.0Senior Secured Term Loan Facility with interest payable at various dates at
floating rates (7.44% at March 31, 2007 and 7.47% at December 31, 2006)
payable through 2010
    
    
    1,055.0
    
    
    
    1,055.0Senior Secured Revolving Facility with interest payable at various dates at
floating rates (8.35% at March 31, 2007 and 10.25% at December 31, 2006)
payable in 2009
    
    
    55.0
    
    
    
    3.6Other
    
    
    2.4
    
    
    
    2.41,962.4
    
    
    
    1,911.0Less, current portion
    
    
    0.4
    
    
    
    0.3Total
    
    $
    1,962.0
    
    
    $
    1,910.7
  Total Amount of
    
    Total Amount
    
    Total AmountIn millions
    
    Commitments
    
    Outstanding
    
    Available(a)Revolving Credit Facility
    
    $
    325.0
    
    
    $
    55.0
    
    
    $
    255.6International Facilities
    
    
    18.0
    
    
    
    13.0
    
    
    
    5.0Total
    
    $
    343.0
    
    
    $
    68.0
    
    
    $
    260.6
  (a)
    
    In accordance with its debt agreements, the Companys
availability under its Revolving Credit Facility has been reduced
by the amount of standby letters of credit issued of $14.4
million as of March 31, 2007. These letters of credit are used as
security against its self-insurance obligations and workers
compensation obligations. These letters of credit expire at
various dates through 2007 unless extended.
   Minimum CreditMaximum Consolidated
    
    Agreement EBITDA toDebt to Credit Agreement
    
    Consolidated InterestFour Fiscal Quarters Ending
    
    EBITDA Leverage Ratio(a)
    
    Expense Ratio(a)2007March 31, 2007
    
    6.50 to 1.00
    
    1.75 to 1.00June 30, 2007
    
    6.50 to 1.00
    
    1.75 to 1.00September 30, 2007
    
    6.50 to 1.00
    
    1.75 to 1.00December 31, 2007
    
    6.00 to 1.00
    
    1.85 to 1.00
 12




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2008March 31, 2008
    
    6.00 to 1.00
    
    1.85 to 1.00June 30, 2008
    
    6.00 to 1.00
    
    1.85 to 1.00September 30, 2008
    
    6.00 to 1.00
    
    1.85 to 1.00December 31, 2008
    
    5.50 to 1.00
    
    2.00 to 1.002009March 31, 2009 and thereafter
    
    4.50 to 1.00
    
    2.90 to 1.00
  (a)
    
    Credit Agreement EBITDA is calculated in accordance with the definitions contained in the
Companys Senior Secured Credit Agreement, as amended. Credit Agreement EBITDA is defined as
consolidated net income before consolidated interest expense, non-cash expenses and charges,
total income tax expense, depreciation expense, expense associated with amortization of
intangibles and other assets, non-cash provisions for reserves for discontinued operations,
extraordinary, unusual or non-recurring gains or losses or charges or credits, gain or loss
associated with sale or write-down of assets not in the ordinary course of business, and any
income or loss accounted for by the equity method of accounting.
  
   Twelve Months EndedIn millions
    
    March 31, 2007Net Loss
    
    $
    (102.5
    )Income Tax Expense
    
    
    23.0Interest Expense, Net
    
    
    173.5Depreciation and Amortization
    
    
    199.4Dividends Received, Net of Earnings of Equity Affiliates
    
    
    1.2Pension, Postemployment and Postretirement Benefits Expense
    
    
    29.8Merger Related Expenses
    
    
    0.2Write-Down of Assets
    
    
    4.3Credit Agreement EBITDA
    
    $
    328.9
 Twelve Months EndedIn millions
    March 31, 2007Interest Expense, Net
    
    $
    173.5Amortization of Deferred Debt Issuance Costs
    
    
    (8.8
    )Credit Agreement Interest Expense Adjustments (a)
    
    
    0.1Consolidated Interest Expense (b)
    
    $
    164.8As ofIn millions
    March 31, 2007Short Term Debt
    
    $
    15.7Long Term Debt
    
    
    1,962.0Total Debt
    
    $
    1,977.7
  (a)
    
    Credit agreement interest expense adjustments include the discount from the financing of
receivables.(b)
    
    Consolidated Interest Expense is calculated in accordance with the definitions contained
in the Companys Senior Secured Credit Agreement. Consolidated Interest Expense is defined
as consolidated interest expense minus consolidated interest income plus any discount from
the financing of receivables.
 13




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NOTE
9  COMPREHENSIVE INCOME (LOSS)
  Three Months EndedIn millions
    
    March 31,2007
    2006Net Loss
    
    $
    (38.7
    )
    
    $
    (36.7
    )Other Comprehensive (Loss) Income:Derivative Instruments Gain (Loss)
    
    
    4.1
    
    
    
    (5.5
    )Currency Translation Adjustments
    
    
    0.8
    
    
    
    2.7Amortization of Prior Service Cost
    
    
    0.7
    
    
    
    Amortization of Net Actuarial Loss
    
    
    0.8
    
    
    
    Comprehensive Loss
    
    $
    (32.3
    )
    
    $
    (39.5
    )
 14




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 INTRODUCTION
  Ø
    
    Overview of BusinessØ
    
    Overview of 2007 ResultsØ
    
    Results of OperationsØ
    
    Financial Condition, Liquidity and Capital ResourcesØ
    
    Critical Accounting PoliciesØ
    
    New Accounting StandardsØ
    
    Business Outlook
 OVERVIEW OF BUSINESS
  Significant Factors That Impact The Companys Business
 Impact of Inflation.
 Substantial Debt Obligations
 15




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Commitment to Cost Reduction
 Market Factors.
  OVERVIEW OF 2007 RESULTS
 
    
    Net Sales in the first three months of 2007 increased by $28.3 million, or 4.9%, to
$608.7 million from $580.4 million in the first quarter of 2006 due primarily to improved
pricing and volumes across all of the Companys product lines. Also contributing to the
increase was $5.7 million relating to the favorable foreign currency exchange rates,
primarily in Europe.
    
    Income from Operations in the first three months of 2007 increased by $2.6 million, or
28.6%, to $11.7 million from $9.1 million in the first
quarter of 2006. Improved
pricing and worldwide continuous improvement programs and other cost reduction initiatives
were partially offset by higher inflation, and higher costs due to continued infrastructure
and reliability upgrades at the Companys West Monroe, LA mill.
    
    Debt increased by $55.0 million during the first three months of 2007 due to seasonal
factors, primarily higher working capital requirements.
 16




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RESULTS OF OPERATIONS
 Segment Information
  FIRST QUARTER 2007 COMPARED WITH FIRST QUARTER 2006
 Net Sales
 Three Months Ended March 31,PercentIn millions
    
    2007
    
    
    2006
    
    
    Increase
    
    
    ChangePaperboard Packaging
    
    $
    586.4
    
    
    $
    560.3
    
    
    $
    26.1
    
    
    
    4.7
    %Containerboard/Other
    
    
    22.3
    
    
    
    20.1
    
    
    
    2.2
    
    
    
    10.9Total
    
    $
    608.7
    
    
    $
    580.4
    
    
    $
    28.3
    
    
    
    4.9
    %
  Three Months Ended March 31,VariancesIn millions
    
    2006
    
    
    Price
    
    
    Volume/Mix
    
    
    Exchange
    
    
    Total
    
    
    2007Paperboard Packaging
    
    $
    560.3
    
    
    
    11.3
    
    
    
    9.1
    
    
    
    5.7
    
    
    
    26.1
    
    
    $
    586.4Containerboard/Other
    
    
    20.1
    
    
    
    1.9
    
    
    
    0.3
    
    
    
    
    
    
    
    2.2
    
    
    
    22.3Total
    
    $
    580.4
    
    
    
    13.2
    
    
    
    9.4
    
    
    
    5.7
    
    
    
    28.3
    
    
    $
    608.7
 Paperboard Packaging
  Containerboard/Other
  Income (Loss) from Operations
 Three Months Ended March 31,Increase
    
    
    PercentIn millions
    
    2007
    
    
    2006
    
    
    (Decrease)
    
    
    ChangePaperboard Packaging
    
    $
    25.3
    
    
    $
    22.7
    
    
    $
    2.6
    
    
    
    11.5
    %Containerboard/Other
    
    
    (3.7
    )
    
    
    (4.7
    )
    
    
    1.0
    
    
    
    21.3Corporate
    
    
    (9.9
    )
    
    
    (8.9
    )
    
    
    (1.0
    )
    
    
    (11.2
    )Total
    
    $
    11.7
    
    
    $
    9.1
    
    
    $
    2.6
    
    
    
    28.6
    %
 17




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##### Table of Contents



Three Months Ended March 31,VariancesIn millions
    
    2006
    
    
    Price
    
    
    Volume/Mix
    
    
    Inflation
    
    
    Exchange
    
    
    Other(a)
    
    
    Total
    
    
    2007Paperboard Packaging
    
    $
    22.7
    
    
    
    11.3
    
    
    
    0.6
    
    
    
    (10.3
    )
    
    
    2.3
    
    
    
    (1.3
    )
    
    
    2.6
    
    
    $
    25.3Containerboard/Other
    
    
    (4.7
    )
    
    
    1.9
    
    
    
    (0.2
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    0.2
    
    
    
    1.0
    
    
    
    (3.7
    )Corporate
    
    
    (8.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.0
    )
    
    
    (1.0
    )
    
    
    (9.9
    )Total
    
    $
    9.1
    
    
    
    13.2
    
    
    
    0.4
    
    
    
    (11.2
    )
    
    
    2.3
    
    
    
    (2.1
    )
    
    
    2.6
    
    
    $
    11.7
  (a)
    
    Includes the benefits from the Companys cost reduction initiatives and the impact of
higher depreciation and amortization expense as well as the infrastructure upgrade at the
Companys West Monroe, LA mill.
 Paperboard Packaging
  Containerboard/Other
  Corporate
  18




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INTEREST INCOME, INTEREST EXPENSE, INCOME TAX EXPENSE AND EQUITY IN NET EARNINGS OF AFFILIATES
 Interest Income
  Interest Expense
  Income Tax Expense
  Equity in Net Earnings of Affiliates
  FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
  Cash Flows
  19




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##### Table of Contents



Liquidity and Capital Resources
   March 31,
    
    
    December 31,In millions
    
    2007
    
    
    2006Senior Notes with interest payable semi-annually at 8.5%, payable in 2011
    
    $
    425.0
    
    
    $
    425.0Senior Subordinated Notes with interest payable semi-annually at 9.5%,
payable in 2013
    
    
    425.0
    
    
    
    425.0Senior Secured Term Loan Facility with interest payable at various dates at
floating rates (7.44% at March 31, 2007 and 7.47% at December 31, 2006)
payable through 2010
    
    
    1,055.0
    
    
    
    1,055.0Senior Secured Revolving Facility with interest payable at various dates at
floating rates (8.35% at March 31, 2007 and 10.25% at December 31, 2006)
payable in 2009
    
    
    55.0
    
    
    
    3.6Other
    
    
    2.4
    
    
    
    2.41,962.4
    
    
    
    1,911.0Less, current portion
    
    
    0.4
    
    
    
    0.3Total
    
    $
    1,962.0
    
    
    $
    1,910.7
  Total Amount of
    
    Total Amount
    
    Total AmountIn millions
    
    Commitments
    
    Outstanding
    
    Available(a)Revolving Credit Facility
    
    $
    325.0
    
    
    $
    55.0
    
    
    $
    255.6International Facilities
    
    
    18.0
    
    
    
    13.0
    
    
    
    5.0Total
    
    $
    343.0
    
    
    $
    68.0
    
    
    $
    260.6
  (a)
    
    In accordance with its debt agreements, the Companys availability
under its Revolving Credit Facility has been reduced by the amount of
standby letters of credit issued of $14.4 million as of March 31,
2007. These letters of credit are used as security against its
self-insurance obligations and workers compensation obligations.
These letters of credit expire at various dates through 2007 unless
extended.
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##### Table of Contents



Covenant Restrictions
   Minimum CreditMaximum Consolidated
    
    Agreement EBITDA toDebt to Credit Agreement
    
    Consolidated InterestFour Fiscal Quarters Ending
    
    EBITDA Leverage Ratio(a)
    
    Expense Ratio(a)2007March 31, 2007
    
    6.50 to 1.00
    
    1.75 to 1.00June 30, 2007
    
    6.50 to 1.00
    
    1.75 to 1.00September 30, 2007
    
    6.50 to 1.00
    
    1.75 to 1.00December 31, 2007
    
    6.00 to 1.00
    
    1.85 to 1.002008March 31, 2008
    
    6.00 to 1.00
    
    1.85 to 1.00June 30, 2008
    
    6.00 to 1.00
    
    1.85 to 1.00September 30, 2008
    
    6.00 to 1.00
    
    1.85 to 1.00December 31, 2008
    
    5.50 to 1.00
    
    2.00 to 1.002009March 31, 2009 and thereafter
    
    4.50 to 1.00
    
    2.90 to 1.00
  (a)
    
    Credit Agreement EBITDA is calculated in accordance with the definitions contained in the
Companys Senior Secured Credit Agreement. Credit Agreement EBITDA is defined as
consolidated net income before consolidated interest expense, non-cash expenses and charges,
total income tax expense, depreciation expense, expense associated with
amortization of intangibles and other assets, non-cash provisions for reserves for
discontinued operations, extraordinary, unusual or non-recurring gains or losses or charges
or credits, gain or loss associated with sale or write-down of assets not in the ordinary
course of business, and any income or loss accounted for by the equity method of accounting.
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##### Table of Contents



Twelve Months EndedIn millions
    
    March 31, 2007Net Loss
    
    $
    (102.5
    )Income Tax Expense
    
    
    23.0Interest Expense, Net
    
    
    173.5Depreciation and Amortization
    
    
    199.4Dividends Received, Net of Earnings of Equity Affiliates
    
    
    1.2Pension, Postemployment and Postretirement Benefits Expense
    
    
    29.8Merger Related Expenses
    
    
    0.2Write-Down of Assets
    
    
    4.3Credit Agreement EBITDA
    
    
    328.9
 Twelve Months EndedIn millions
    
    March 31, 2007Interest Expense, Net
    
    $
    173.5Amortization of Deferred Debt Issuance Costs
    
    
    (8.8
    )Credit Agreement Interest Expense Adjustments (a)
    
    
    0.1Consolidated Interest Expense (b)
    
    $
    164.8
 As ofIn millions
    
    March 31, 2007Short Term Debt
    
    $
    15.7Long Term Debt
    
    
    1,962.0Total Debt
    
    $
    1,977.7
  (a)
    
    Credit agreement interest expense adjustments include the discount from the financing of
receivables.(b)
    
    Consolidated Interest Expense is calculated in accordance with the definitions contained
in the Companys Senior Secured Credit Agreement. Consolidated Interest Expense is defined
as consolidated interest expense minus consolidated interest income plus any discount from
the financing of receivables.
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##### Table of Contents



Capital Investment
  Environmental Matters
     CRITICAL ACCOUNTING POLICIES
  23




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##### Table of Contents



NEW ACCOUNTING STANDARDS
  BUSINESS OUTLOOK
     
    
    Depreciation and amortization between $185 million and $195 million.
    
    Interest expense of $170 million to $180 million, including $9
million of non-cash interest expense associated with amortization
of debt issuance costs.
    
    Debt reduction of $60 million to $70 million.
    
    Pension plan contributions of $28 million to $30 million.
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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
  Exhibit Number
    
    Description10.1
    
    Graphic Packaging International, Inc. Severance Pay Plan.10.2
    
    Graphic Packaging International,
Inc. Management Incentive Plan.31.1
    
    Certification required by Rule 13a-14(a).31.2
    
    Certification required by Rule 13a-14(a).32.1
    
    Certification required by Section 1350 of Chapter 63 of Title 18 of the United States Code.32.2
    
    Certification required by Section 1350 of Chapter 63 of Title 18 of the United States Code.
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##### Table of Contents



SIGNATURES
  GRAPHIC PACKAGING CORPORATION

(Registrant)/s/ STEPHEN A. HELLRUNG
    
    Senior Vice President, GeneralStephen A. Hellrung
    
    Counsel and Secretary
    
    May 3, 2007/s/ DANIEL J. BLOUNT
    
    Senior Vice President andDaniel J. Blount
    
    Chief Financial Officer (Principal
    
    May 3, 2007Financial Officer)/s/ DEBORAH R. FRANK
    
    Vice President and ControllerDeborah R. Frank
    
    (Principal Accounting Officer)
    
    May 3, 2007
 27