Company Quick10K Filing
Graphic Packaging International
Price1.00 EPS-358,500,000
Shares-0 P/E-0
MCap-0 P/FCF-0
Net Debt2,886 EBIT477
TEV2,886 TEV/EBIT6
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-04-21
10-K 2019-12-31 Filed 2020-02-11
10-Q 2019-09-30 Filed 2019-10-22
10-Q 2019-06-30 Filed 2019-07-23
10-Q 2019-03-31 Filed 2019-04-23
10-K 2018-12-31 Filed 2019-02-13
10-Q 2018-09-30 Filed 2018-10-23
10-Q 2018-06-30 Filed 2018-07-24
10-Q 2018-03-31 Filed 2018-04-25
8-K 2020-03-06
8-K 2020-02-27
8-K 2020-02-21
8-K 2020-02-21
8-K 2020-01-23
8-K 2020-01-23
8-K 2019-12-18
8-K 2019-06-25
8-K 2019-06-11
8-K 2019-06-11
8-K 2018-08-31
8-K 2018-08-15

GPIL 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - General Information
Note 2 - Inventories, Net
Note 3 - Business Combinations
Note 4 - Debt
Note 5 - Equity Compensation
Note 6 - Pensions and Other Postretirement Benefits
Note 7 - Financial Instruments and Fair Value Measurement
Note 8 - Income Taxes
Note 9 - Environmental and Legal Matters
Note 10 - Related Party Transactions
Note 11 - Segment Information
Note 12 - Accumulated Other Comprehensive Loss
Note 13 - Guarantor Condensed Consolidating Financial Statements
Note 14 - Exit Activities
Note 15 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Mine Safety Disclosures
Item 6. Exhibits
EX-10.1 gpilex101aignon-particip.htm
EX-31.1 gpil03312020ex311.htm
EX-31.2 gpil03312020ex312.htm
EX-32.1 gpil03312020ex321.htm
EX-32.2 gpil03312020ex322.htm

Graphic Packaging International Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02016201720182020
Assets, Equity
1.61.31.00.60.30.02016201720182020
Rev, G Profit, Net Income
0.30.20.10.0-0.1-0.22016201720182020
Ops, Inv, Fin

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020
or
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: 033-80475

GRAPHIC PACKAGING INTERNATIONAL, LLC

(Exact name of registrant as specified in its charter)

Delaware84-0772929
(State or other jurisdiction of(I.R.S. employer
incorporation or organization)identification no.)
1500 Riveredge Parkway, Suite 100
Atlanta ,Georgia30328
(Address of principal executive offices)(Zip Code)

(770) 240-7200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer Accelerated filer Smaller reporting company
Non-accelerated filer (Do not check if a smaller reporting company)Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No



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Information Concerning Forward-Looking Statements

Certain statements regarding the expectations of Graphic Packaging International, LLC (“GPIL” and, together with its subsidiaries, the “Company”), including, but not limited to, the timing of the closure of the White Pigeon, MI mill and the shutdown of the PM1 containerboard machine in West Monroe, LA, the exit activity charges expected in connection with the closure of two CRB mills, capital investment, depreciation and amortization, and pension plan contributions 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, the effects of the COVID-19 pandemic on the Company's operations and business, inflation of and volatility in raw material and energy costs, changes in consumer buying habits and product preferences, competition with other paperboard manufacturers and converters, product substitution, the Company’s ability to implement its business strategies, including strategic acquisitions, the Company's ability to successfully integrate acquisitions, productivity initiatives and cost reduction plans, the Company’s debt level, currency 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, except as may be required by law. Additional information regarding these and other risks is contained in Part I, "Item 1A., Risk Factors" of the Company's 2019 Annual Report on Form 10-K, and in other filings with the Securities and Exchange Commission.

2

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TABLE OF CONTENTS

EX-31.1
EX-31.2
EX-32.1
EX-32.2
XBRL Content


3

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GRAPHIC PACKAGING INTERNATIONAL, LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended
March 31,
In millions, except per share amounts20202019
Net Sales$1,599.1  $1,505.9  
Cost of Sales1,278.3  1,239.8  
Selling, General and Administrative135.5  124.5  
Other Expense, Net6.5  1.2  
Business Combinations and Shutdown and Other Special Charges, Net
18.7  6.2  
Income from Operations160.1  134.2  
Nonoperating Pension and Postretirement Benefit Expense(151.6) (0.1) 
Interest Expense, Net(33.7) (35.0) 
(Loss) Income before Income Taxes and Equity Income of Unconsolidated Entity(25.2) 99.1  
Income Tax Benefit (Expense)1.6  (4.0) 
(Loss) Income before Equity Income of Unconsolidated Entity(23.6) 95.1  
Equity Income of Unconsolidated Entity0.1  0.2  
Net (Loss) Income$(23.5) $95.3  

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

4

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GRAPHIC PACKAGING INTERNATIONAL, LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended
March 31,
In millions20202019
Net (Loss) Income$(23.5) $95.3  
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments(1.7) (0.6) 
Pension and Postretirement Benefit Plans194.0  1.9  
Currency Translation Adjustment(57.0) 4.8  
Total Other Comprehensive Income, Net of Tax135.3  6.1  
Total Comprehensive Income
$111.8  $101.4  

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

5

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GRAPHIC PACKAGING INTERNATIONAL, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
In millions, except share and per share amountsMarch 31,
2020
December 31, 2019
ASSETS
Current Assets:
Cash and Cash Equivalents$110.2  $148.7  
Receivables, Net619.5  500.2  
Inventories, Net1,143.0  1,095.9  
Other Current Assets59.2  50.1  
Total Current Assets1,931.9  1,794.9  
Property, Plant and Equipment, Net3,288.1  3,253.8  
Goodwill1,463.2  1,477.0  
Intangible Assets, Net460.5  477.3  
Other Assets295.2  273.7  
Total Assets$7,438.9  $7,276.7  
LIABILITIES
Current Liabilities:
Short-Term Debt and Current Portion of Long-Term Debt
$49.1  $50.4  
Accounts Payable625.7  716.1  
Compensation and Employee Benefits111.3  168.4  
Other Accrued Liabilities233.6  241.6  
Total Current Liabilities1,019.7  1,176.5  
Long-Term Debt3,434.5  2,809.9  
Deferred Income Tax Liabilities17.6  27.7  
Accrued Pension and Postretirement Benefits117.9  140.4  
Other Noncurrent Liabilities278.1  265.6  
MEMBER'S INTEREST
Member's Interest2,816.0  3,236.8  
Accumulated Other Comprehensive Loss(244.9) (380.2) 
Total Member's Interest 2,571.1  2,856.6  
Total Liabilities and Member's Interest $7,438.9  $7,276.7  

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

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GRAPHIC PACKAGING INTERNATIONAL, LLC
CONDENSED CONSOLIDATED STATEMENTS OF MEMBER'S INTEREST
(Unaudited)
Member's InterestAccumulated Other Comprehensive (Loss) IncomeTotal Member's Interest
In millions, except share amounts
Balances at December 31, 2019
$3,236.8  $(380.2) $2,856.6  
Net Loss
(23.5) —  (23.5) 
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments
—  (1.7) (1.7) 
Pension and Postretirement Benefit Plans
—  194.0  194.0  
Currency Translation Adjustment
—  (57.0) (57.0) 
Distribution of Membership Interest, Net
(397.3) —  (397.3) 
Balances at March 31, 2020
$2,816.0  $(244.9) $2,571.1  


Member's InterestAccumulated Other Comprehensive (Loss) IncomeTotal Member's Interest
In millions, except share amounts
Balances at December 31, 2018
$3,142.6  $(397.3) $2,745.3  
Net Income
95.3  —  95.3  
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments
—  (0.6) (0.6) 
Pension and Postretirement Benefit Plans
—  1.9  1.9  
Currency Translation Adjustment
—  4.8  4.8  
Distribution of Membership Interest, Net
(88.7) —  (88.7) 
Balances at March 31, 2019
$3,149.2  $(391.2) $2,758.0  

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.


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GRAPHIC PACKAGING INTERNATIONAL, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended
March 31,
In millions20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income$(23.5) $95.3  
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:
Depreciation and Amortization113.6  117.1  
Deferred Income Taxes(7.6) (0.1) 
Amount of Postretirement Expense Greater Than Funding154.3  2.4  
Other, Net29.2  3.3  
Changes in Operating Assets and Liabilities(341.1) (390.1) 
Net Cash Used in Operating Activities(75.1) (172.1) 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Spending(146.6) (73.0) 
Packaging Machinery Spending(6.5) (7.0) 
Acquisition of Businesses, Net of Cash Acquired(42.1) (2.0) 
Beneficial Interest on Sold Receivables23.7  279.5  
Beneficial Interest Obtained in Exchange for Proceeds(3.3) (153.3) 
Other, Net(1.0) (1.0) 
Net Cash (Used in) Provided by Investing Activities(175.8) 43.2  
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Debt(9.1) (9.1) 
Proceeds from Issuance of Debt450.0    
Borrowings under Revolving Credit Facilities1,178.5  775.2  
Payments on Revolving Credit Facilities(986.9) (548.9) 
Debt Issuance Costs(6.4)   
Membership Distribution(404.9) (94.1) 
Other, Net(2.7) (2.6) 
Net Cash Provided by Financing Activities218.5  120.5  
Effect of Exchange Rate Changes on Cash(6.1) 0.2  
Net Decrease in Cash and Cash Equivalents(38.5) (8.2) 
Cash and Cash Equivalents at Beginning of Period148.7  70.5  
CASH AND CASH EQUIVALENTS AT END OF PERIOD$110.2  $62.3  
Non-cash Investing and Financing Activities:
Beneficial Interest Obtained (Sold) in Exchange for Trade Receivables$29.8  $(142.9) 
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities$14.0  $16.0  
Right-of-Use Assets Obtained in Exchange for New Finance Lease Liabilities$  $5.6  
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

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GRAPHIC PACKAGING INTERNATIONAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1 — GENERAL INFORMATION

Nature of Business and Basis of Presentation

On December 29, 2017, Graphic Packaging International, Inc. ("GPII"), the primary operating subsidiary of Graphic Packaging Holding Company, a Delaware corporation (“GPHC”), underwent a statutory conversion and became a Delaware limited liability company. As a result, GPII’s name changed to Graphic Packaging International, LLC.

Graphic Packaging International, LLC ("GPIL" and, together with its subsidiaries, the “Company”) is committed to providing consumer packaging that makes a world of difference. The Company is a leading provider of paper-based packaging solutions for a wide variety of products to food, beverage, foodservice, and other consumer products companies. The Company operates on a global basis, is one of the largest producers of folding cartons in the United States (“U.S.”) and holds leading market positions in coated-recycled paperboard (“CRB”), coated unbleached kraft paperboard (“CUK”) and solid bleached sulfate paperboard (“SBS”).

The Company’s customers include many of the world’s most widely recognized companies and brands with prominent market positions in beverage, food, foodservice and other consumer products. The Company strives to provide its customers with packaging solutions designed to deliver marketing and performance benefits at a competitive cost by capitalizing on its low-cost paperboard mills and converting facilities, its proprietary carton and packaging designs, and its commitment to quality and service.

On January 1, 2018, GPHC, International Paper Company, a New York corporation (“IP”), Graphic Packaging International Partners, LLC, a Delaware limited liability company formerly known as Gazelle Newco LLC and a wholly owned subsidiary of GPHC (“GPIP”), and GPIL, completed a series of transactions pursuant to an agreement dated October 23, 2017, among the foregoing parties (the “Transaction Agreement”). Pursuant to the Transaction Agreement (i) a wholly owned subsidiary of GPHC transferred its ownership interest in GPIL to GPIP; (ii) IP transferred its North America Consumer Packaging (“NACP”) business to GPIP, which was then subsequently transferred to GPIL; (iii) GPIP issued membership interests to IP, and IP was admitted as a member of GPIP; and (iv) GPIL assumed certain indebtedness of IP (the "NACP Combination"). GPIL is currently wholly-owned by GPIP, which is owned by GPI Holding III, LLC, a limited liability company that is classified as a partnership for U.S. Federal income tax purposes ("GPI Holding”) and IP. GPI Holding is a wholly-owned indirect subsidiary of GPHC and is the managing member of GPIP.

During 2019 and 2018, the Company distributed $247.9 million to GPIP to allow GPIP to repurchase 20.8 million partnership units from GPI Holding, which increased IP's ownership interest in GPIP from 20.5% at January 1, 2018 to 21.6% at December 31, 2019.

On January 28, 2020, GPHC announced that IP notified GPHC of its intent to begin the process of reducing its ownership interest in GPIP. Per the agreement between the parties, on January 29, 2020, GPIP purchased 15.1 million partnership units from IP for $250 million in cash. As a result, IP’s ownership interest in GPIP decreased from 21.6% to 18.3% as of January 29, 2020.

Unless otherwise negotiated by the parties, IP’s next opportunity to exchange their partnership units is 180 days from the purchase date and is limited to the lesser of $250 million or 25% of the units owned immediately following the transaction, subject to the cap on the number of units that may be exchanged for shares of GPHC's common stock. IP will have further opportunities to exchange their partnership units 180 days after each exchange date. GPHC may choose to satisfy these exchanges using shares of its common stock, cash, or a combination thereof.

The Company’s Condensed Consolidated Financial Statements include all subsidiaries in which the Company has the ability to exercise direct or indirect control over operating and financial policies. Intercompany transactions and balances are eliminated in consolidation.

In the Company’s opinion, the accompanying Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods. The Company’s year end Condensed Consolidated Balance Sheet data was derived from audited financial statements. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all the information required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. Therefore, these Condensed Consolidated Financial Statements should be read in conjunction with GPIL’s Form 10-K for the year ended December 31, 2019. In addition, the preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates and changes in these estimates are recorded when known.

Revenue Recognition

The Company has two primary activities, the manufacturing and converting of paperboard, from which it generates revenue from contracts with customers. Revenue is disaggregated primarily by geography and type of activity as further explained in "Note 11-Segments." All reportable segments and the Australia and Pacific Rim operating segments recognize revenue under the same method, allocate transaction price using similar methods, and have similar economic factors impacting the uncertainty of revenue and related cash flows.

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GRAPHIC PACKAGING INTERNATIONAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Revenue is recognized on the Company's annual and multi-year supply contracts when the Company satisfies the performance obligation by transferring control over the product or service to a customer, which is generally based on shipping terms and passage of title under the point-in-time method of recognition. For the three months ended March 31, 2020 and 2019, the Company recognized $1,594.6 million and $1,501.6 million, respectively, of revenue from contracts with customers.

The transaction price allocated to each performance obligation consists of the stand alone selling price, estimates of rebates and other sales or contract renewal incentives, and cash discounts and sales returns ("Variable Consideration") and excludes sales tax. Estimates are made for Variable Consideration based on contract terms and historical experience of actual results and are applied to the performance obligations as they are satisfied. Purchases by the Company’s principal customers are manufactured and shipped with minimal lead time, therefore performance obligations are generally satisfied shortly after manufacturing and shipment. The Company uses payment terms that are consistent with industry practice.

The Company's contract assets consist primarily of contract renewal incentive payments to customers which are amortized over the period in which performance obligations related to the contract renewal are satisfied. As of March 31, 2020 and December 31, 2019, contract assets were $21.0 million and $24.3 million, respectively. The Company's contract liabilities consist principally of rebates, and as of March 31, 2020 and December 31, 2019 were $43.7 million and $49.6 million, respectively.

The Company did not have a material amount relating to backlog orders at March 31, 2020 or December 31, 2019.

Accounts Receivable and Allowances

The Company has entered into agreements to sell, on a revolving basis, certain trade accounts receivable to third party financial institutions. Transfers under these agreements meet the requirements to be accounted for as sales in accordance with the Transfers and Servicing topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (the "Codification"). The loss on sale is not material and is included in Other Expense, Net on the Condensed Consolidated Statement of Operations. The following table summarizes the activity under these programs for the three months ended March 31, 2020 and 2019, respectively:
Three Months Ended
March 31,
In millions20202019
Receivables Sold and Derecognized
$610.2  $811.2  
Proceeds Collected on Behalf of Financial Institutions608.8  504.1  
Net Proceeds Paid to Financial Institutions(4.7) (28.8) 
Deferred Purchase Price at March 31(a)
6.7  4.3  
Pledged Receivables at March 31263.5  144.2  
(a) Included in Other Current Assets and represents a beneficial interest in the receivables sold to the financial institutions, which is a Level 3 fair value measure.

The Company participates in supply chain financing arrangements offered by certain customers and has entered into various factoring arrangements that also qualify for sale accounting in accordance with the Transfers and Servicing topic of the FASB Codification. For the three months ended March 31, 2020 and 2019, the Company sold receivables of approximately $72 million and $37 million, respectively, related to these factoring arrangements.

Receivables sold under all programs subject to continuing involvement, which consists principally of collection services, at March 31, 2020 and December 31, 2019, were approximately $563 million and $562 million, respectively.

Business Combinations and Shutdown and Other Special Charges, Net

The following table summarizes the transactions recorded in Business Combinations and Shutdown and Other Special Charges, Net in the Condensed Consolidated Statements of Operations:
Three Months Ended
March 31,
In millions20202019
Charges Associated with Business Combinations
$1.5  $2.1  
Shutdown and Other Special Charges
4.2  4.1  
Exit Activities(a)
13.0    
Total
$18.7  $6.2  
(a) Relates to the Company's CRB mills and the PM1 containerboard machine exit activities (see "Note 14 — Exit Activities").

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GRAPHIC PACKAGING INTERNATIONAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


2020

On January 31, 2020, the Company acquired a folding carton facility from Quad/Graphics, Inc. ("Quad"), a commercial printing company. The converting facility is located in Omaha, Nebraska and is included in the Americas Paperboard Packaging reportable segment.

In March 2020, the Company made the decision to close the White Pigeon, Michigan CRB mill and shut down the PM1 containerboard machine in West Monroe, Louisiana. Both will be effective June 30, 2020. Charges associated with these projects are included in Exit Activities in the table above. For more information, see "Note 14 — Exit Activities."

2019

On September 24, 2019, the Company announced its plan to invest approximately $600 million in a new CRB paper machine in Kalamazoo, Michigan. In conjunction with the completion of this project, the Company currently expects to close two of its smaller CRB Mills in 2022 in order to remain capacity neutral. Charges associated with this project are included in Exit Activities in the table above. For more information, see "Note 14 — Exit Activities."

On August 1, 2019, the Company acquired substantially all the assets of Artistic Carton Company ("Artistic"), a diversified producer of folding cartons and CRB. The acquisition included two converting facilities located in Auburn, Indiana and Elgin, Illinois (included in the Americas Paperboard Packaging reportable segment) and one CRB paperboard mill located in White Pigeon, Michigan (included in the Paperboard Mills reportable segment).

Charges associated with all acquisitions are included in Charges Associated with Business Combinations in the table above. For more information regarding these acquisitions see "Note 3 — Business Combinations."

During 2019, the Company began a three-year program to dismantle and dispose of idle and abandoned assets primarily at the paperboard mills. Expected charges for this program are approximately $40 million. Charges associated with this program are included in Shutdown and Other Special Charges in the table above.

Adoption of New Accounting Standards

Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which amends the FASB's guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model (known as the "current expected credit loss model") that is based on expected losses rather than incurred losses. The adoption of this standard did not have a material impact on the Company's financial position, results of operations and cash flows.

Effective January 1, 2020, the Company adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This amendment modifies the disclosure requirements on fair value measurements. The adoption of this standard did not have a material impact on the Company's financial disclosures.

Effective January 1, 2020, the Company adopted ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This ASU broadens the scope of Accounting Standards Codification ("ASC") 350-40 with an updated definition of a hosting arrangement and clarifies certain aspects of accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The adoption of this standard did not have a material impact on the Company's financial position, results of operations and cash flows.

Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20); Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This amendment removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The guidance is effective for fiscal years ending after December 15, 2020 and would be applied on a retrospective basis. The Company is currently evaluating the impact this guidance will have on its related disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This amendment modifies ASC 740 to simplify the accounting for income taxes. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently evaluating the impact of this new guidance.



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GRAPHIC PACKAGING INTERNATIONAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 2 — INVENTORIES, NET

Inventories, Net by major class:
In millionsMarch 31, 2020December 31, 2019
Finished Goods$464.7  $434.8  
Work in Progress132.7  123.4  
Raw Materials378.0  370.0  
Supplies167.6  167.7  
Total$1,143.0  $1,095.9  


NOTE 3 — BUSINESS COMBINATIONS

On January 31, 2020, the Company acquired a folding carton facility from Quad/Graphics, Inc., a commercial printing company. The converting facility is located in Omaha, Nebraska, close to many of the Company's existing food, beverage and industrial customers. The Company paid approximately $42 million using existing cash and borrowings under its revolving credit facility.

The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date and is subject to adjustments in subsequent periods once the third-party valuations are finalized. The Company recorded $4.0 million related to identifiable intangible assets (customer relationships) and $38.1 million related to net tangible assets (primarily working capital, land/buildings and equipment).

As disclosed in "Note 1 — General Information," the Company completed the Artistic acquisition in 2019. The Company paid approximately $53 million for the Artistic acquisition using existing cash and borrowings under its revolving credit facility. During the three months ended March 31, 2020, the acquisition accounting for Artistic was finalized.


NOTE 4 — DEBT

On March 6, 2020, GPIL completed a private offering of $450.0 million aggregate principal amount of its senior unsecured notes due 2028. The Senior Notes will bear interest at an annual rate of 3.50%. The net proceeds were used by the Company to repay a portion of the outstanding borrowings under GPIL's revolving credit facility, which is under its senior secured credit facility.

Long-Term Debt is comprised of the following:
In millionsMarch 31, 2020December 31, 2019
Senior Notes with interest payable semi-annually at 3.50%, effective rate of 3.55%, payable in 2028
$450.0  $  
Senior Notes with interest payable semi-annually at 4.75%, effective rate of 4.82%, payable in 2027
300.0  300.0  
Senior Notes with interest payable semi-annually at 4.125%, effective rate of 4.17%, payable in 2024
300.0  300.0  
Senior Notes with interest payable semi-annually at 4.875%, effective rate of 4.91%, payable in 2022
250.0  250.0  
Senior Notes with interest payable semi-annually at 4.75%, effective rate of 4.76%, payable in 2021
425.0  425.0  
Senior Secured Term Loan Facilities with interest payable at various dates at floating rates (2.45% at March 31, 2020) payable through 2023
1,387.0  1,396.1  
Senior Secured Revolving Facilities with interest payable at floating rates (1.93% at March 31, 2020) payable in 2023
243.0  52.8  
Finance Leases
133.3  134.2  
Other  5.7  5.4  
Total Long-Term Debt
3,494.0  2,863.5  
Less: Current Portion41.2  41.1  
3,452.8  2,822.4  
Less: Unamortized Deferred Debt Issuance Costs 18.3  12.5  
Total
$3,434.5  $2,809.9  

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GRAPHIC PACKAGING INTERNATIONAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


At March 31, 2020, the Company and its U.S. and international subsidiaries had the following commitments, amounts outstanding and amounts available under revolving credit facilities:
In millionsTotal
Commitments
Total
Outstanding
Total Available
Senior Secured Domestic Revolving Credit Facility(a)
$1,450.0  $170.0  $1,262.1  
Senior Secured International Revolving Credit Facility174.6  73.0  101.6  
Other International Facilities55.7  13.6  42.1  
Total$1,680.3  $256.6  $1,405.8  
(a) In accordance with its debt agreements, the Company’s availability under its revolving credit facilities has been reduced by the amount of standby letters of credit issued of $17.9 million as of March 31, 2020. These letters of credit are primarily used as security against the Company's self-insurance obligations and workers’ compensation obligations. These letters of credit expire at various dates through 2020 and 2021 unless extended.

The Credit Agreement, the 4.75% Senior Notes due 2027 and the 3.50% Senior Notes due 2028 are guaranteed by GPIP and certain domestic subsidiaries, and the 4.75% Senior Notes due 2021, 4.875% Senior Notes due 2022 and 4.125% Senior Notes due 2024 are guaranteed by GPHC and certain domestic subsidiaries. For additional information on the financial statements of GPIP, see "Note 13 - Guarantor Condensed Consolidating Financial Statements."

The Credit Agreement and the indentures governing the 4.75% Senior Notes due 2021, 4.875% Senior Notes due 2022, 4.125% Senior Notes due 2024, 4.75% Senior Notes due 2027 and 3.50% Senior Notes due 2028 (the "Indentures") limit the Company's ability to incur additional indebtedness. Additional covenants contained in the Credit Agreement and the Indentures may, among other things, restrict the ability of the Company to dispose of assets, incur guarantee obligations, prepay other indebtedness, pay membership distributions and make other restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of the Indentures, engage in mergers or consolidations, change the business conducted by the Company and its subsidiaries, and engage in certain transactions with affiliates. Such restrictions could limit the Company’s ability to respond to changing market conditions, fund its capital spending program, provide for unexpected capital investments or take advantage of business opportunities.

As of March 31, 2020, the Company was in compliance with the covenants in the Credit Agreement and the Indentures.


NOTE 5 — EQUITY COMPENSATION

The Company compensates certain of its employees with grants of restricted stock units (“RSUs”) under the Graphic Packaging Holding Company 2014 Omnibus Stock and Incentive Compensation Plan (the “2014 Plan”). Compensation costs related to the grants are recognized in the Consolidated Statements of Operations with a corresponding adjustment to Member's Interest. Under the 2014 Plan, GPHC may also grant to the Company's employees stock options, stock appreciation rights, restricted stock, and other types of stock-based and cash awards. Awards under the 2014 Plan generally vest and expire in accordance with terms established at the time of grant. Shares issued pursuant to awards under the 2014 Plan are from GPHC's authorized but unissued shares. Compensation costs are recognized on a straight-line basis over the requisite service period of the award and are adjusted for actual performance for performance-based awards.

Stock Awards, Restricted Stock and Restricted Stock Units

Under the 2014 Plan, all RSUs generally vest and become payable in three years from date of grant. RSUs granted to employees generally contain some combination of service and performance objectives based on various financial targets and relative total shareholder return that must be met for the RSUs to vest.

Data concerning RSUs granted in the first three months of 2020 is as follows:
RSUsWeighted Average
Grant Date Fair
Value Per Share
RSUs — Employees1,610,179  $15.45  

During the three months ended March 31, 2020 and 2019, $12.4 million and $4.9 million, respectively, were charged to compensation expense for stock incentive plans.

During the three months ended March 31, 2020 and 2019, 0.8 million and 0.5 million GPHC shares were issued, respectively. The shares issued were primarily related to RSUs granted during 2017 and 2016, respectively.


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GRAPHIC PACKAGING INTERNATIONAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 6 — PENSIONS AND OTHER POSTRETIREMENT BENEFITS

The Company maintains both defined benefit pension plans and postretirement health care plans that provide medical and life insurance coverage to eligible salaried and hourly retired employees in North America and their dependents. The Company maintains international defined benefit pension plans which are either noncontributory or contributory and are funded in accordance with applicable local laws. Pension or termination benefits are based primarily on years of service and the employee's compensation.

During 2018, the Company began the process of terminating its largest U.S. pension plan (the “US Plan”). This included freezing the plan as of December 31, 2018 and spinning off the active participants to the plan established as part of the NACP Combination (the “NACP Plan”). The NACP plan is open for union and non-union hourly employees of locations that were part of the NACP Combination. During the third quarter of 2019, the Company offered a lump-sum benefit option to certain participants of the US Plan. Lump sum payments of $150.2 million were paid in the fourth quarter of 2019 and the Company recognized a non-cash settlement charge of $39.2 million associated with the payouts.

In the first quarter of 2020, the Company purchased a group annuity contract using the assets held within the pension trust that transferred the remaining pension obligation under the US Plan of approximately $713 million to an insurance company and incurred an additional non-cash settlement charge of $152.5 million related to this transfer. These non-cash settlement charges relate to Net Actuarial Loss previously recognized in Accumulated Other Comprehensive Loss.

Pension and Postretirement Expense

The pension and postretirement expenses related to the Company’s plans consisted of the following:

Pension BenefitsPostretirement Health Care Benefits
Three Months EndedThree Months Ended
March 31,March 31,
In millions2020201920202019
Components of Net Periodic Cost:
Service Cost  $3.9  $3.3  $0.1  $0.1  
Interest Cost  4.6  11.5  0.2  0.4  
Administrative Expenses
0.1  0.1      
Expected Return on Plan Assets
(6.9) (13.8)     
Net Settlement/Curtailment Loss  152.5        
Amortization:  
 Prior Service Credit      (0.1) (0.1) 
Actuarial Loss (Gain) 1.6  2.5  (0.4) (0.5) 
Net Periodic Cost (Benefit) $155.8  $3.6  $(0.2) $(0.1) 

Employer Contributions

The Company made contributions of $0.6 million to its pension plans during the first three months of 2020 and 2019. The Company expects to make contributions in the range of $10 million to $20 million for the full year 2020. During 2019, the Company made $11.3 million of contributions to its pension plans.

The Company made postretirement health care benefit payments of $0.7 million and $0.5 million during the first three months of 2020 and 2019, respectively. The Company estimates its postretirement health care benefit payments for the full year 2020 to be approximately $3 million. During 2019, the Company made postretirement health care benefit payments of $1.2 million.


NOTE 7 — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT

The Company enters into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments under the Derivatives and Hedging topic of the FASB Codification and those not designated as hedging instruments under this guidance. The Company uses interest rate swaps, natural gas swap contracts, and forward exchange contracts. These derivative instruments are designated as cash flow hedges and, to the extent they are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value are not included in current earnings but are included in Accumulated Other Comprehensive Loss. These changes in fair value will subsequently be reclassified to earnings, contemporaneously with and offsetting changes in the related hedged exposure and presented in the same line of the income statement expected for the hedged item.
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GRAPHIC PACKAGING INTERNATIONAL, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


For more information regarding the Company’s financial instruments and fair value measurement, see “Note 10 — Financial Instruments, Derivatives and Hedging Activities and Note 11 — Fair Value Measurement” of the Notes to the Consolidated Financial Statements of the Company's 2019 Form 10-K.

Interest Rate Risk

The Company uses interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan facility. Changes in fair value will subsequently be reclassified into earnings as a component of Interest Expense, Net as interest is incurred on amounts outstanding under the term loan facility. The following table summarizes the Company's current interest rate swap positions for each period presented as of March 31, 2020:

StartEnd(In Millions)
Notional Amount
Weighted Average Interest Rate
04/03/201810/01/2020$150.02.36%
12/03/201801/01/2022$120.02.92%
12/03/201801/04/2022$80.02.79%


During the first three months of 2020 and 2019, there were no amounts of ineffectiveness related to changes in the fair value of interest rate swap agreements. Additionally, there were no amounts excluded from the measure of effectiveness.

Commodity Risk

To manage risks associated with future variability in cash flows and price risk attributable to purchases of natural gas, the Company enters into natural gas swap contracts to hedge prices for a designated percentage of its expected natural gas usage. Such contracts are designated as cash flow hedges. The contracts are carried at fair value with changes in fair value recognized in Accumulated Other Comprehensive Loss and resulting gain or loss reclassified into Cost of Sales concurrently with the recognition of the commodity consumed. The Company has hedged approximately 50% and 36% of its expected natural gas usage for the remainder of 2020 and all of 2021, respectively.

During the first three months of 2020 and 2019, there were no amounts of ineffectiveness related to changes in the fair value of natural gas swap contracts. Additionally, there were no amounts excluded from the measure of effectiveness.

Foreign Currency Risk

The Company enters into forward exchange contracts to manage risks associated with foreign currency transactions and future variability of cash flows arising from those transactions that may be adversely affected by changes in exchange rates. The contracts are carried at fair value with changes in fair value recognized in Accumulated Other Comprehensive Loss and gains/losses related to these contracts are recognized in Other Expense, Net or Net Sales, when appropriate.

At March 31, 2020, multiple forward exchange contracts existed that expire on various dates through the remainder of 2020. Those purchased forward exchange contracts outstanding at March 31, 2020 and December 31, 2019, when aggregated and measured in U.S. dollars at contractual rates at March 31, 2020 and December 31, 2019, had notional amounts totaling $62.3 million and $87.6 million, respectively.

No amounts were reclassified to earnings during the first three months of 2020 or during 2019 in connection with forecasted transactions that were considered probable of not occurring and there was no amount of ineffectiveness related to changes in the fair value of foreign currency forward contracts. Additionally, there were no amounts excluded from the measure of effectiveness.

Derivatives not Designated as Hedges

The Company enters into forward exchange contracts to effectively hedge substantially all of its accounts receivables resulting from sales transactions and intercompany loans denominated in foreign currencies in order to manage risks associated with variability in cash flows that may be adversely affected by changes in exchange rates. At March 31, 2020 and December 31, 2019, multiple foreign currency forward exchange contracts existed, with maturities ranging up to three months. Those foreign currency exchange contracts outstanding at March 31, 2020 and December 31, 2019, when aggregated and measured in U.S. dollars at contractual rates at March 31, 2020 and December 31, 2019, had net notional amounts totaling $76.1 million and $77.4 million, respectively. Unrealized gains and losses resulting from these contracts are recognized in Other Expense, Net and approximately offset corresponding recognized but unrealized gains and losses on the remeasurement of these accounts receivable.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Fair Value of Financial Instruments

The Company’s derivative instruments are carried at fair value. The Company has determined that the inputs to the valuation of these derivative instruments are Level 2 in the fair value hierarchy. Level 2 inputs are defined as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. The Company uses valuation techniques based on discounted cash flow analyses, which reflect the terms of the derivatives and use observable market-based inputs, including forward rates, and uses market price quotations obtained from independent derivatives brokers, corroborated with information obtained from independent pricing service providers.

As of March 31, 2020, there has not been any significant impact to the fair value of the Company’s derivative liabilities due to its own credit risk. Similarly, there has not been any significant adverse impact to the Company’s derivative assets based on evaluation of the Company’s counterparties’ credit risks. The following table summarizes the fair value of the Company’s derivative instruments:

Derivative Assets(a)
Derivative Liabilities(b)
March 31,December 31,March 31,December 31,
In millions2020201920202019
Derivatives designated as hedging instruments:
Interest rate contracts  $  $  $11.1  $6.6  
Foreign currency contracts  1.1      1.5  
Commodity contracts
    2.9  3.4  
Total Derivatives
$1.1  $  $14.0  $11.5  
(a) Derivative assets of $1.1 million are included in Other Current Assets as of March 31, 2020.

(b) Derivative liabilities of $9.7 million and $8.5 million are included in Other Accrued Liabilities as of March 31, 2020 and December 31, 2019, respectively. Derivative liabilities of $4.3 million and $3.0 million are included in Other Noncurrent Liabilities as of March 31, 2020 and December 31, 2019, respectively.

The fair values of the Company’s other financial assets and liabilities at March 31, 2020 and December 31, 2019 approximately equal the carrying values reported on the Condensed Consolidated Balance Sheets except for Long-Term Debt. The fair value of the Company’s Long-Term Debt (excluding finance leases and deferred financing fees) was $3,188.5 million and $2,788.6 million as compared to the carrying amounts of $3,360.6 million and $2,729.3 million as of March 31, 2020 and December 31, 2019, respectively. The fair value of the Company’s Total Debt, including the Senior Notes, is based on quoted market prices (Level 2 inputs). Level 2 valuation techniques for Long-Term Debt are based on quotations obtained from independent pricing service providers.

Effect of Derivative Instruments

The pre-tax effect of derivative instruments in cash flow hedging relationships on the Company’s Condensed Consolidated Statements of Operations is as follows:

Amount of (Gain) Loss Recognized in Accumulated Other Comprehensive LossLocation in Statement of OperationsAmount of (Gain) Loss Recognized in Statement of Operations
 Three Months Ended March 31, Three Months Ended March 31,
In millions2020201920202019
Commodity Contracts$(3.6) $(0.9) Cost of Sales$(3.1) $0.1  
Foreign Currency Contracts(2.8) (1.1) Other Expense, Net(0.4) (0.7) 
Interest Rate Swap Agreements5.5  2.0  Interest Expense, Net0.9    
Total$(0.9) $  $(2.6) $(0.6) 

The effect of derivative instruments not designated as hedging instruments on the Company’s Condensed Consolidated Statements of Operations for the years ended March 31, 2020 and 2019 is as follows:

 Three Months Ended March 31,
In millions20202019
Foreign Currency ContractsOther Expense, Net$5.5  $(0.1) 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Accumulated Derivative Instruments (Loss) Income

The following is a rollforward of pre-tax Accumulated Derivative Instruments (Loss) Income which is included in the Company’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Member's Interest as of March 31, 2020:

In millions
Balance at December 31, 2019$(10.9) 
Reclassification to Earnings(2.6) 
Current Period Change in Fair Value0.9  
Balance at March 31, 2020$(12.6) 

At March 31, 2020, the Company expects to reclassify $8.6 million of pre-tax losses in the next twelve months from Accumulated Other Comprehensive Loss to earnings, contemporaneously with and offsetting changes in the related hedged exposure. The actual amount that will be reclassified to future earnings may vary from this amount as a result of changes in market conditions.


NOTE 8 — INCOME TAXES

The Company is classified as a disregarded entity for U.S. income tax purposes and is generally not subject to domestic income tax expense. As a result, the consolidated financial statements exclude the tax effect of domestic earnings with the exception of state income tax for certain states that directly tax the operations of disregarded entities. The consolidated financial statements include the local country tax effect of foreign earnings generated by the Company’s wholly-owned international subsidiaries. During the three months ended March 31, 2020, the Company recognized Income Tax Benefit of $1.6 million on Loss before Income Taxes and Equity Income of Unconsolidated Entity of $25.2 million. During the three months ended March 31, 2019, the Company recognized Income Tax Expense of $4.0 million on Income before Income Taxes and Equity Income of Unconsolidated Entity of $99.1 million.


NOTE 9 — ENVIRONMENTAL AND LEGAL MATTERS

Environmental Matters

The Company is subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those governing discharges to air, soil and water, the management, treatment and disposal of hazardous substances, solid waste and hazardous wastes, the investigation and remediation of contamination resulting from historical site operations and releases of hazardous substances, and the health and safety of employees. Compliance initiatives could result in significant costs, which could negatively impact the Company’s consolidated financial position, results of operations or cash flows. Any failure to comply with environmental or health and safety laws and regulations or any permits and authorizations required thereunder could subject the Company to fines, corrective action or other sanctions.

Some of the Company’s current and former facilities are the subject of environmental investigations and remediations resulting from historic operations and the release of hazardous substances or other constituents. Some current and former facilities have a history of industrial usage for which investigation and remediation obligations may be imposed in the future or for which indemnification claims may be asserted against the Company. Also, closures or sales of facilities may necessitate investigation and may result in remediation activities at those facilities.

The Company has established reserves for those facilities or issues where a liability is probable and the costs are reasonably estimable. The Company believes that the amounts accrued for its loss contingencies, and the reasonably possible loss beyond the amounts accrued, are not material to the Company’s consolidated financial position, results of operations or cash flows. The Company cannot estimate with certainty other future compliance, investigation or remediation costs. Some costs relating to historic usage that the Company considers to be reasonably possible of resulting in liability are not quantifiable at this time. The Company will continue to monitor environmental issues at each of its facilities, as well as regulatory developments, and will revise its accruals, estimates and disclosures relating to past, present and future operations, as additional information is obtained.

Legal Matters

The Company is a party to a number of lawsuits arising in the ordinary conduct of its business. Although the timing and outcome of these lawsuits cannot be predicted with certainty, the Company does not believe that disposition of these lawsuits will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 10 — RELATED PARTY TRANSACTIONS

In connection with the NACP Combination, the Company entered into agreements with IP for transition services, fiber procurement fees and corrugated products and ink supply. Payments to IP for the three months ended March 31, 2020 for fiber procurement fees and corrugated products were $2.8 million (related to pass through wood purchases of approximately $59 million) and $7.8 million, respectively. There were no payments to IP for transition services during the three months ended March 31, 2020. Payments to IP for the three months ended March 31, 2019 for transition services, fiber procurement fees and corrugated products and ink supply were $0.1 million, $2.8 million (related to pass through wood purchases of approximately $62 million) and $6.3 million, respectively. In addition, approximately $1 million of payments were made for purchases unrelated to these agreements for the three months ended March 31, 2019.


NOTE 11 — SEGMENT INFORMATION

The Company has three reportable segments as follows:

Paperboard Mills includes the nine North American paperboard mills which produce primarily CRB, CUK, and SBS, which is consumed internally to produce paperboard packaging for the Americas and Europe Paperboard Packaging segments. The remaining paperboard is sold externally to a wide variety of paperboard packaging converters and brokers. The Paperboard Mills segment Net Sales represent the sale of paperboard only to external customers. The effect of intercompany transfers to the paperboard packaging segments has been eliminated from the Paperboard Mills segment to reflect the economics of the integration of these segments.

Americas Paperboard Packaging includes paperboard packaging, primarily folding cartons, sold primarily to Consumer Packaged Goods ("CPG") companies, and cups, lids and food containers sold primarily to foodservice companies and quick-service restaurants ("QSR"), all serving the food, beverage, and consumer product markets in the Americas.

Europe Paperboard Packaging includes paperboard packaging, primarily folding cartons, sold primarily to CPG companies serving the food, beverage and consumer product markets in Europe.

The Company allocates certain mill and corporate costs to the reportable segments to appropriately represent the economics of these segments. The Corporate and Other caption includes the Pacific Rim and Australia operating segments and unallocated corporate and one-time costs.

These segments are evaluated by the chief operating decision maker based primarily on Income from Operations, as adjusted for depreciation and amortization. The accounting policies of the reportable segments are the same as those described above in "Note 1 - General Information."

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Segment information is as follows:

Three Months Ended