##### 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 1934For the quarterly period ended March 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934o
    
    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
  o þ o
  o þ




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##### Table of Contents



Information Concerning Forward-Looking Statements
 Certain statements of Graphic Packaging Corporations expectations, including, but not
limited to, statements regarding inflationary pressures, cost savings from its
continuous improvement programs and manufacturing rationalization,
price increases, capital spending,
depreciation and amortization, and interest expense, in this report constitute forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995. Such
statements are based on currently available operating, financial and competitive
information and are subject to various risks and uncertainties that could cause actual
results to differ materially from the Companys historical experience and its present
expectations. These risks and uncertainties include, but are not limited to, inflation
of and volatility in raw material and energy costs, the Companys substantial amount of
debt, continuing pressure for lower cost products, the Companys ability to implement
its business strategies, currency translation movements and other risks of conducting
business internationally, and the impact of regulatory and litigation matters,
including those that impact the Companys ability to protect and use its intellectual
property. 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 Part II, Item 1A. Risk Factors herein.
 2




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 1A. RISK FACTORSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 6. EXHIBITSSIGNATURESEX-31.1 SECTION 302 CERT OF CEOEX-31.2 SECTION 302 CERT OF CFOEX-32.1 SECTION 906 CERT OF CEOEX-32.2 SECTION 906 CERT OF CFO    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 3




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GRAPHIC PACKAGING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Millions, Except Share Amounts)
(Unaudited)
 March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent Assets:Cash and Equivalents
    
    $
    6.8
    
    
    $
    12.7Receivables, Net
    
    
    231.3
    
    
    
    216.3Inventories
    
    
    320.1
    
    
    
    298.5Other Current Assets
    
    
    27.7
    
    
    
    26.1Total Current Assets
    
    
    585.9
    
    
    
    553.6Property, Plant and Equipment, Net
    
    
    1,529.7
    
    
    
    1,551.5Goodwill
    
    
    642.7
    
    
    
    642.6Intangible Assets, Net
    
    
    154.8
    
    
    
    157.3Deferred Tax Assets
    
    
    350.8
    
    
    
    350.8Other Assets
    
    
    96.4
    
    
    
    100.2Total Assets
    
    $
    3,360.3
    
    
    $
    3,356.0LIABILITIESCurrent Liabilities:Short Term Debt
    
    $
    12.1
    
    
    $
    11.0Accounts Payable and Other Accrued Liabilities
    
    
    380.0
    
    
    
    409.6Total Current Liabilities
    
    
    392.1
    
    
    
    420.6Long Term Debt
    
    
    2,024.6
    
    
    
    1,967.3Deferred Tax Liabilities
    
    
    466.2
    
    
    
    461.5Other Noncurrent Liabilities
    
    
    242.8
    
    
    
    237.9Total Liabilities
    
    
    3,125.7
    
    
    
    3,087.3SHAREHOLDERS 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;
198,698,698 and 198,663,007 shares issued and outstanding at
March 31, 2006 and December 31, 2005, respectively
    
    
    2.0
    
    
    
    2.0Capital in Excess of Par Value
    
    
    1,169.7
    
    
    
    1,169.6Unearned Compensation
    
    
    
    
    
    
    (0.1
    )Accumulated Deficit
    
    
    (832.1
    )
    
    
    (800.6
    )Minimum Pension Liability Adjustment
    
    
    (90.0
    )
    
    
    (90.0
    )Accumulated Derivative Instruments (Loss) Gain
    
    
    (0.3
    )
    
    
    5.2Cumulative Currency Translation Adjustment
    
    
    (14.7
    )
    
    
    (17.4
    )Total Shareholders Equity
    
    
    234.6
    
    
    
    268.7Total Liabilities and Shareholders Equity
    
    $
    3,360.3
    
    
    $
    3,356.0
  4




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GRAPHIC PACKAGING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
 Three Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2005Net Sales
    
    $
    580.4
    
    
    $
    583.0Cost of Sales
    
    
    513.2
    
    
    
    515.8Selling, General and Administrative
    
    
    49.6
    
    
    
    47.7Research, Development and Engineering
    
    
    3.0
    
    
    
    2.3Other Expense, Net
    
    
    0.3
    
    
    
    4.9Income from Operations
    
    
    14.3
    
    
    
    12.3Interest Income
    
    
    0.2
    
    
    
    0.1Interest Expense
    
    
    (41.5
    )
    
    
    (37.2
    )Loss before Income Taxes and Equity in Net Earnings of
Affiliates
    
    
    (27.0
    )
    
    
    (24.8
    )Income Tax Expense
    
    
    (4.6
    )
    
    
    (4.9
    )Equity in Net Earnings of Affiliates
    
    
    0.1
    
    
    
    0.1Net Loss
    
    $
    (31.5
    )
    
    $
    (29.6
    )Loss Per Share  Basic
    
    $
    (0.16
    )
    
    $
    (0.15
    )Loss Per Share  Diluted
    
    $
    (0.16
    )
    
    $
    (0.15
    )Weighted Average Number of Shares Outstanding  Basic
    
    
    198.7
    
    
    
    198.6Weighted Average Number of Shares Outstanding  Diluted
    
    
    198.7
    
    
    
    198.6
  5




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GRAPHIC PACKAGING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in Millions)
(Unaudited)
 Three Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2005Net Loss
    
    $
    (31.5
    )
    
    $
    (29.6
    )Other Comprehensive (Loss) Income:Derivative Instruments (Loss) Gain, Net of Tax of $0
    
    
    (5.5
    )
    
    
    16.4Currency Translation Adjustments, Net of Tax of $0
    
    
    2.7
    
    
    
    (4.7
    )Comprehensive Loss
    
    $
    (34.3
    )
    
    $
    (17.9
    )
  6




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GRAPHIC PACKAGING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Millions)
(Unaudited)
 Three Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (31.5
    )
    
    $
    (29.6
    )Noncash Items Included in Net Loss:Depreciation and Amortization
    
    
    49.8
    
    
    
    52.4Deferred Income Taxes
    
    
    4.9
    
    
    
    4.8Pension, Postemployment and Postretirement Benefits
Expense, Net of Contributions
    
    
    6.4
    
    
    
    7.0Amortization of Deferred Debt Issuance Costs
    
    
    2.2
    
    
    
    2.0Other, Net
    
    
    0.6
    
    
    
    3.2Changes in Operating Assets & Liabilities
    
    
    (75.3
    )
    
    
    (75.4
    )Net Cash Used in Operating Activities
    
    
    (42.9
    )
    
    
    (35.6
    )CASH FLOWS FROM INVESTING ACTIVITIES:Capital Spending
    
    
    (15.8
    )
    
    
    (33.3
    )Change in Other Assets
    
    
    (5.3
    )
    
    
    (4.4
    )Net Cash Used in Investing Activities
    
    
    (21.1
    )
    
    
    (37.7
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowing under Revolving Credit Facilities
    
    
    210.5
    
    
    
    161.7Payments on Revolving Credit Facilities
    
    
    (151.9
    )
    
    
    (88.1
    )Other, Net
    
    
    (0.3
    )
    
    
    0.9Net Cash Provided by Financing Activities
    
    
    58.3
    
    
    
    74.5Effect of Exchange Rate Changes on Cash
    
    
    (0.2
    )
    
    
    (0.2
    )Net (Decrease) Increase in Cash and Equivalents
    
    
    (5.9
    )
    
    
    1.0Cash and Equivalents at Beginning of Period
    
    
    12.7
    
    
    
    7.3Cash and Equivalents at End of Period
    
    $
    6.8
    
    
    $
    8.3
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GRAPHIC PACKAGING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 1  ORGANIZATION AND BASIS OF PRESENTATION
      NOTE 2  ACCOUNTING POLICIES
  Recent Accounting Pronouncements
 Inventory Costs, an Amendment of ARB No. 43,
Chapter 4
 Exchanges of Nonmonetary
Assets, an Amendment of APB Opinion No. 29
 Accounting Changes and Error Corrections, a
replacement of APB Opinion No. 20 and Statement No. 3
 NOTE 3
 STOCK INCENTIVE PLANS
 Stock
Options
 Accounting for Stock
Issued to Employees Accounting for Stock-Based Compensation Share-Based
Payment
  8




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Three Months Ended(Amounts in Millions, Except Per Share Amounts)
    
    March 31, 2005Net Loss, As Reported
    
    $
    (29.6
    )Add: Stock-Based Employee Compensation Expense Included in Reported Net Loss
    
    
    Deduct: Total Stock-Based Employee Compensation Expense Determined Under
Fair Value Based Method for All Awards
    
    
    (0.8
    )Adjusted Net Loss
    
    $
    (30.4
    )Loss Per Basic Share-As Reported
    
    $
    (0.15
    )Loss Per Basic Share-As Adjusted
    
    $
    (0.15
    )Loss Per Diluted Share-As Reported
    
    $
    (0.15
    )Loss Per Diluted Share-As Adjusted
    
    $
    (0.15
    )
     Restricted
Stock Awards
    Three Months EndedMarch 31, 2006(Shares
in thousands)RSUs  employees
    
    1,574Weighted average
price per share
    
    $2.68


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NOTE 4 INVENTORIES
  March 31,
    
    
    December 31,(Amounts in Millions)
    
    2006
    
    
    2005Finished goods
    
    $
    180.2
    
    
    $
    164.2Work in progress
    
    
    25.0
    
    
    
    22.7Raw materials
    
    
    68.7
    
    
    
    67.3Supplies
    
    
    46.2
    
    
    
    44.3Total
    
    $
    320.1
    
    
    $
    298.5
 NOTE 5  ENVIRONMENTAL AND LEGAL MATTERS
      10




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NOTE 6  BUSINESS SEGMENT INFORMATION
   Three Months EndedMarch 31,
    
    
    March 31,(Amounts in Millions)
    
    2006
    
    
    2005NET SALES:Paperboard Packaging
    
    $
    560.3
    
    
    $
    559.0Containerboard/Other
    
    
    20.1
    
    
    
    24.0Total
    
    $
    580.4
    
    
    $
    583.0INCOME (LOSS) FROM OPERATIONS:Paperboard Packaging
    
    $
    27.9
    
    
    $
    28.9Containerboard/Other
    
    
    (4.7
    )
    
    
    (4.2
    )Corporate
    
    
    (8.9
    )
    
    
    (12.4
    )Total
    
    $
    14.3
    
    
    $
    12.3
 NOTE 7
 PENSIONS AND OTHER POSTRETIREMENT BENEFITS
   Three Months EndedMarch 31,
    
    
    March 31,(Amounts in Millions)
    
    2006
    
    
    2005Service Cost
    
    $
    4.0
    
    
    $
    3.9Interest Cost
    
    
    8.1
    
    
    
    7.5Expected Return on Plan Assets
    
    
    (8.0
    )
    
    
    (7.4
    )Amortizations:Prior Service Cost
    
    
    0.5
    
    
    
    0.7Actuarial Loss
    
    
    1.3
    
    
    
    0.8Net Periodic Pension Cost
    
    $
    5.9
    
    
    $
    5.5
  11




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OTHER POSTRETIREMENT BENEFITS
   Three Months EndedMarch 31,
    
    
    March 31,(Amounts in Millions)
    
    2006
    
    
    2005Service Cost
    
    $
    0.3
    
    
    $
    0.2Interest Cost
    
    
    0.6
    
    
    
    0.8Amortizations:Actuarial Loss
    
    
    
    
    
    
    0.2Net Periodic Postretirement Benefits Cost
    
    $
    0.9
    
    
    $
    1.2
   12




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NOTE 8
 RESTRUCTURING CHARGES
   AdjustmentsBalance at
    
    
    (Statement of
    
    
    Purchase
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    Operations Impact)
    
    
    Price
    
    
    Cash
    
    
    March 31,(Amounts in Millions)
    
    2005
    
    
    Expense
    
    
    Reversal
    
    
    Allocation
    
    
    Payments
    
    
    2006Equipment Removal Costs
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Facility Restoration and Carrying Costs
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    0.3Severance of Employees and Other
Employee Termination-Related Charges
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    0.1Total
    
    $
    1.2
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.8
    )
    
    $
    0.4
  AdjustmentsBalance at
    
    
    (Statement of
    
    
    Purchase
    
    
    
    
    
    
    Balance atJanuary 1,
    
    
    Operations Impact)
    
    
    Price
    
    
    Cash
    
    
    December 31,(Amounts in Millions)
    
    2005
    
    
    Expense
    
    
    Reversal
    
    
    Allocation
    
    
    Payments
    
    
    2005Equipment Removal Costs
    
    $
    0.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.8
    )
    
    $
    Facility Restoration and Carrying Costs
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.6Severance of Employees and Other
Employee Termination-Related Charges
    
    
    3.1
    
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.5
    )
    
    $
    0.6Total
    
    $
    4.5
    
    
    $
    
    
    
    $
    (1.0
    )
    
    $
    
    
    
    $
    (2.3
    )
    
    $
    1.2
 13




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NOTE 9
 DEBT
  March 31,
    
    
    December 31,(Amounts in Millions)
    
    2006
    
    
    2005Senior 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 (6.98% at March 31, 2006 and 6.60% at December 31,
2005) payable through 2010
    
    
    1,109.0
    
    
    
    1,109.0Senior Secured Revolving Facility with interest payable at various dates
at floating rates (7.98%at March 31, 2006
and 9.25
% at December 31, 2005) payable in 2009
    
    
    63.2
    
    
    
    6.0Other
    
    
    3.1
    
    
    
    3.52,025.3
    
    
    
    1,968.5Less, current portion
    
    
    0.7
    
    
    
    1.2Total
    
    $
    2,024.6
    
    
    $
    1,967.3
    14




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Maximum Consolidated
    
    Minimum Credit AgreementDebt to Credit Agreement
    
    EBITDA to ConsolidatedEBITDA Leverage Ratio (a)
    
    Interest Expense Ratio (a)Four Fiscal Quarters Ending2006March 31, 2006
    
    
    6.75 to 1.00
    
    
    
    1.75 to 1.00June 30, 2006
    
    
    6.75 to 1.00
    
    
    
    1.75 to 1.00September 30, 2006
    
    
    6.75 to 1.00
    
    
    
    1.75 to 1.00December 31, 2006
    
    
    6.75 to 1.00
    
    
    
    1.75 to 1.002007March 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
        15




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 INTRODUCTION
         OVERVIEW OF BUSINESS
  Significant Factors That Impact The Companys Business
 Impact of Inflation.
 16




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Substantial Debt Obligations
 Commitment to Cost Reduction
 Market Factors.
  17




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OVERVIEW OF 2006 RESULTS
 
    
    Net Sales in the first three months of 2006 decreased by $2.6 million, or
0.4%, to $580.4 million from $583.0 million in the first three months of 2005
due primarily to the negative impact of foreign currency exchange rates,
somewhat offset by improved pricing.
    
    Income from Operations in the first three months of 2006
increased by $2.0
million, or 16.3%, to $14.3 million from $12.3 million in the first three
months of 2005 due primarily to cost savings of approximately
$18 million, increased pricing, lower depreciation and
amortization expense as well as improved product mix which
helped offset inflation of approximately $17 million and unfavorable
manufacturing variances of approximately
$9 million primarily at the Companys
West Monroe, LA paper mill.
    
    Debt increased by $58.4 million due to seasonal factors, including the
semi-annual interest payments related to the Companys fixed rate bonds.
 RESULTS OF OPERATIONS
 Segment Information
  Three Months EndedMarch 31,
    
    
    March 31,(Amounts in Millions)
    
    2006
    
    
    2005NET SALES:Paperboard Packaging
    
    $
    560.3
    
    
    $
    559.0Containerboard/Other
    
    
    20.1
    
    
    
    24.0Total
    
    $
    580.4
    
    
    $
    583.0INCOME (LOSS) FROM OPERATIONS:Paperboard Packaging
    
    $
    27.9
    
    
    $
    28.9Containerboard/Other
    
    
    (4.7
    )
    
    
    (4.2
    )Corporate
    
    
    (8.9
    )
    
    
    (12.4
    )Total
    
    $
    14.3
    
    
    $
    12.3
 FIRST QUARTER 2006 COMPARED WITH FIRST QUARTER 2005
 Net Sales
  Three Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Three MonthsEnded
    
    Variances
    
    Ended(Amounts in Millions)
    
    March 31, 2005
    
    Price
    
    Volume/Mix
    
    Exchange
    
    Total
    
    March 31, 2006Net Sales
    
    $
    583.0
    
    
    
    3.7
    
    
    
    0.2
    
    
    
    (6.5
    )
    
    
    (2.6
    )
    
    $
    580.4
 Paperboard Packaging
  18




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Containerboard/Other
  Income (Loss) from Operations
  Three Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Three MonthsEnded
    
    Variances
    
    Ended(Amounts in Millions)
    
    March 31, 2005
    
    Price
    
    Volume/Mix
    
    Inflation
    
    Exchange
    
    Other (a)
    
    Total
    
    March 31, 2006Income (Loss) from Operations
    
    $
    12.3
    
    
    
    3.7
    
    
    
    2.1
    
    
    
    (17.1
    )
    
    
    1.5
    
    
    
    11.8
    
    
    
    2.0
    
    
    $
    14.3
 Note:
 Paperboard Packaging
  Containerboard/Other
  Corporate
  19




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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
  20




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Liquidity and Capital Resources
   March 31,
    
    
    December 31,(Amounts in Millions)
    
    2006
    
    
    2005Senior 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 (6.98% at March 31, 2006 and 6.60% at December 31,
2005) payable through 2010
    
    
    1,109.0
    
    
    
    1,109.0Senior Secured Revolving Facility with interest payable at various dates
at floating rates (7.98%at March 31, 2006 and 9.25% at
December 31, 2005) payable in 2009
    
    
    63.2
    
    
    
    6.0Other
    
    
    3.1
    
    
    
    3.52,025.3
    
    
    
    1,968.5Less, current portion
    
    
    0.7
    
    
    
    1.2Total
    
    $
    2,024.6
    
    
    $
    1,967.3
   Total Amount of
    
    
    Total Amount
    
    
    Total Amount(Amounts in Millions)
    
    Commitments
    
    
    Outstanding
    
    
    Available (A)Revolving Credit Facility
    
    $
    325.0
    
    
    $
    63.2
    
    
    $
    250.4International Facilities
    
    
    18.2
    
    
    
    10.8
    
    
    
    7.4Total
    
    $
    343.2
    
    
    $
    74.0
    
    
    $
    257.8
 Note:
 
 (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 $11.4 million as of March 31, 2006. 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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Covenant Restrictions
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##### Table of Contents



Maximum Consolidated
    
    Minimum Credit AgreementDebt to Credit Agreement
    
    EBITDA to ConsolidatedEBITDA Leverage Ratio
    
    Interest Expense RatioFour Fiscal Quarters Ending2006March 31, 2006
    
    
    6.75 to 1.00
    
    
    
    1.75 to 1.00June 30, 2006
    
    
    6.75 to 1.00
    
    
    
    1.75 to 1.00September 30, 2006
    
    
    6.75 to 1.00
    
    
    
    1.75 to 1.00December 31, 2006
    
    
    6.75 to 1.00
    
    
    
    1.75 to 1.002007March 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
  
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##### Table of Contents



Twelve Months Ended(Amounts in Millions)
    
    March 31, 2006Net Loss
    
    $
    (93.0
    )Income Tax Expense
    
    
    23.0Interest Expense, Net
    
    
    160.1Depreciation and Amortization
    
    
    202.7Equity in Net Earnings of Affiliates
    
    
    (1.2
    )Pension, Postemployment and Postretirement Benefits Expense, Net of Contributions
    
    
    8.9Merger Related Expenses
    
    
    15.8Write-Down of Assets
    
    
    1.0Dividends from Equity Investments
    
    
    0.8Credit Agreement EBITDA (a)
    
    $
    318.1
 Twelve Months Ended(Amounts in Millions)
    
    March 31, 2006Interest Expense, Net
    
    $
    160.1Amortization of Deferred Debt Issuance Costs
    
    
    (8.5
    )Credit Agreement Interest Expense Adjustments (b)
    
    
    Consolidated Interest Expense (c)
    
    $
    151.6
 As of(Amounts in Millions)
    
    March 31, 2006Short-Term Debt
    
    $
    12.1Long-Term Debt
    
    
    2,024.6Total Debt
    
    $
    2,036.7
  
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##### Table of Contents



Capital Investment
  Environmental Matters
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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
   NEW ACCOUNTING STANDARDS
  BUSINESS OUTLOOK
      
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 6. EXHIBITS
  Exhibit Number
    
    Description31.1
    
    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
 /s/ STEPHEN A. HELLRUNG
    
    Senior Vice President, GeneralStephen A. Hellrung
    
    Counsel and Secretary
    
    May 4, 2006/s/ DANIEL J. BLOUNT
    
    Senior Vice President andDaniel J. Blount
    
    Chief Financial Officer (Principal
    
    May 4, 2006Financial Officer)/s/ DEBORAH R. FRANK
    
    Vice President and ControllerDeborah R. Frank
    
    (Principal Accounting Officer)
    
    May 4, 2006
 28