GRAPHIC PACKAGING HOLDING CO [GPK] Filings

10-Q 1 gpk-20240630.htm 10-Q gpk-20240630

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 June 30, 2024


☐			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: 001-33988

Graphic Packaging Holding Company

(Exact name of registrant as specified in its charter)


Delaware		26-0405422
(State or other jurisdiction of		(I.R.S. employer
incorporation or organization)		identification no.)

1500 Riveredge Parkway
Atlanta,	Georgia	30328
(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:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per share	GPK	New York Stock Exchange

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 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.

Large accelerated filer

☑

Accelerated filer

☐

Smaller reporting company

☐

Non-accelerated filer

☐

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 ☑

As of July 29, 2024, there were 300,114,276 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

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INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements regarding the expectations of Graphic Packaging Holding Company (“GPHC” and, together with its subsidiaries, the “Company”), including, but not limited to, expected facility closures, pension plan contributions for 2024, 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, 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, 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 could impact the Company’s ability to utilize its U.S. federal income tax attributes to offset taxable income or U.S. federal income taxes and 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 2023 Annual Report on Form 10-K, and in other filings with the Securities and Exchange Commission.

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TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION			4
ITEM 1. FINANCIAL STATEMENTS (Unaudited)			4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK			34
ITEM 4. CONTROLS AND PROCEDURES			34
PART II — OTHER INFORMATION			35
ITEM 1. LEGAL PROCEEDINGS			35
ITEM 1A. RISK FACTORS			35
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			35
ITEM 4. MINE SAFETY DISCLOSURES			35
ITEM 5. OTHER INFORMATION			35
ITEM 6. EXHIBITS			36
SIGNATURES			37


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

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
In millions, except per share amounts	2024		2023		2024		2023
Net Sales	$	2,237	$	2,392	$	4,496	$	4,830
Cost of Sales	1,756		1,886		3,489		3,764
Selling, General and Administrative	197		205		412		402
Other Expense, Net	16		15		32		33
Business Combinations, Exit Activities and Other Special Items, Net	(56)		19		(39)		34
Income from Operations	324		267		602		597
Nonoperating Pension and Postretirement Benefit Expense	—		—		(1)		(1)
Interest Expense, Net	(60)		(60)		(119)		(118)

Income before Income Taxes	264		207		482		478
Income Tax Expense	(74)		(57)		(127)		(121)


Net Income	$	190	$	150	$	355	$	357



Net Income Per Share - Basic	$	0.62	$	0.49	$	1.16	$	1.16
Net Income Per Share - Diluted	$	0.62	$	0.49	$	1.15	$	1.15

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

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GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30, 2024
In millions	Graphic Packaging Holding Company		Noncontrolling Interest		Total
Net Income	$	190	$	—	$	190
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments	4		—		4
Pension and Postretirement Benefit Plans	3		—		3
Currency Translation Adjustment	(25)		—		(25)
Total Other Comprehensive Loss, Net of Tax	(18)		—		(18)
Total Comprehensive Income	$	172	$	—	$	172


	Three Months Ended June 30, 2023
In millions	Graphic Packaging Holding Company		Noncontrolling Interest		Total
Net Income	$	150	$	—	$	150
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments	8		—		8
Pension and Postretirement Benefit Plans	1		—		1
Currency Translation Adjustment	—		(1)		(1)

Total Other Comprehensive Income (Loss), Net of Tax	9		(1)		8
Total Comprehensive Income	$	159	$	(1)	$	158


	Six Months Ended June 30, 2024
In millions	Graphic Packaging Holding Company		Noncontrolling Interest		Total

Net Income	$	355	$	—	$	355
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments	3		—		3
Pension and Postretirement Benefit Plans	3		—		3
Currency Translation Adjustment	(82)		—		(82)
Total Other Comprehensive Loss, Net of Tax	(76)		—		(76)
Total Comprehensive Income	$	279	$	—	$	279


	Six Months Ended June 30, 2023
In millions	Graphic Packaging Holding Company		Noncontrolling Interest		Total
Net Income	$	357	$	—	$	357
Other Comprehensive Income, Net of Tax:
Derivative Instruments	3		—		3
Pension and Postretirement Benefit Plans	1		—		1
Currency Translation Adjustment	24		—		24

Total Other Comprehensive Income, Net of Tax	28		—		28
Total Comprehensive Income	$	385	$	—	$	385

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

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GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In millions, except share and per share amounts	June 30, 2024		December 31, 2023
ASSETS

Current Assets:
Cash and Cash Equivalents	$	125	$	162
Receivables, Net	875		835
Inventories, Net	1,699		1,754
Assets Held for Sale	11		—
Other Current Assets	130		94
Total Current Assets	2,840		2,845
Property, Plant and Equipment, Net	4,826		4,992
Goodwill	2,014		2,103
Intangible Assets, Net	722		820

Other Assets	426		415
Total Assets	$	10,828	$	11,175

LIABILITIES

Current Liabilities:
Short-Term Debt and Current Portion of Long-Term Debt	$	327	$	764
Accounts Payable	973		1,094
Compensation and Employee Benefits	179		273
Interest Payable	48		63

Other Accrued Liabilities	436		395
Total Current Liabilities	1,963		2,589
Long-Term Debt	4,930		4,609
Deferred Income Tax Liabilities	666		731
Accrued Pension and Postretirement Benefits	102		104

Other Noncurrent Liabilities	354		360



SHAREHOLDERS’ EQUITY
Preferred Stock, par value $0.01 per share; 100,000,000 shares authorized; no shares issued or outstanding	—		—
Common Stock, par value $0.01 per share; 1,000,000,000 shares authorized; 300,101,971 and 306,058,815 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	3		3
Capital in Excess of Par Value	2,031		2,062
Retained Earnings	1,167		1,029
Accumulated Other Comprehensive Loss	(389)		(313)
Total Graphic Packaging Holding Company Shareholders' Equity	2,812		2,781
Noncontrolling Interest	1		1
Total Equity	2,813		2,782
Total Liabilities and Shareholders' Equity	$	10,828	$	11,175

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

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GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND NONCONTROLLING INTEREST

(Unaudited)


	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
In millions, except share amounts	Shares	Amount
Balances at December 31, 2023	306,058,815	$	3	$	2,062	$	1,029	$	(313)	$	1	$	2,782
Net Income	—	—		—		165		—		—		165
Other Comprehensive (Loss), Net of Tax:
Derivative Instruments	—	—		—		—		(1)		—		(1)

Currency Translation Adjustment	—	—		—		—		(57)		—		(57)



Dividends Declared	—	—		—		(31)		—		—		(31)

Issuance of Shares for Stock-Based Awards	1,234,251	—		—		—		—		—		—
Balances at March 31, 2024	307,293,066	$	3	$	2,062	$	1,163	$	(371)	$	1	$	2,858
Net Income	—	—		—		190		—		—		190
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments	—	—		—		—		4		—		4
Pension and Postretirement Benefit Plans	—	—		—		—		3		—		3
Currency Translation Adjustment	—	—		—		—		(25)		—		(25)
Repurchase of Common Stock	(7,243,734)	—		(46)		(156)		—		—		(202)

Dividends Declared	—	—		—		(30)		—		—		(30)
Recognition of Stock-Based Compensation, Net	—	—		15		—		—		—		15
Issuance of Shares for Stock-Based Awards	52,639	—		—		—		—		—		—
Balances at June 30, 2024	300,101,971	$	3	$	2,031	$	1,167	$	(389)	$	1	$	2,813


	Common Stock			Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
In millions, except share amounts	Shares	Amount
Balances at December 31, 2022	307,116,089	$	3	$	2,054	$	469	$	(377)	$	1	$	2,150
Net Income	—	—		—		207		—		—		207
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments	—	—		—		—		(5)		—		(5)

Currency Translation Adjustment	—	—		—		—		24		1		25
Repurchase of Common Stock(a)	(1,210,000)	—		(7)		(22)		—		—		(29)


Dividends Declared	—	—		—		(31)		—		—		(31)
Recognition of Stock-Based Compensation, Net	—	—		(7)		—		—		—		(7)
Issuance of Shares for Stock-Based Awards	1,221,873	—		—		—		—		—		—
Balances at March 31, 2023	307,127,962	$	3	$	2,040	$	623	$	(358)	$	2	$	2,310
Net Income	—	—		—		150		—		—		150
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments	—	—		—		—		8		—		8
Pension and Postretirement Benefit Plans	—	—		—		—		1		—		1
Currency Translation Adjustment	—	—		—		—		—		(1)		(1)
Repurchase of Common Stock	(14,232)	—		—		—		—		—		—
Dividends Declared	—	—		—		(30)		—		—		(30)
Recognition of Stock-Based Compensation, Net	—	—		12		—		—		—		12
Issuance of Shares for Stock-Based Awards	89,097	—		—		—		—		—		—
Balances at June 30, 2023	307,202,827	$	3	$	2,052	$	743	$	(349)	$	1	$	2,450

(a) Includes 60,000 shares repurchased but not yet settled as of March 31, 2023.

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

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GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
In millions	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	355	$	357
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization	281		304


Deferred Income Taxes	(70)		38

Gain on Disposal of Business	(75)		—
Asset Impairment Charges	—		7
Other, Net	30		35
Changes in Operating Assets and Liabilities	(357)		(450)
Net Cash Provided by Operating Activities	164		291
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Spending	(564)		(372)
Packaging Machinery Spending	(16)		(13)
Acquisition of Businesses, Net of Cash Acquired	—		(100)

Proceeds from the Sale of Business	711		—
Beneficial Interest on Sold Receivables	96		60
Beneficial Interest Obtained in Exchange for Proceeds	(50)		(9)
Other, Net	(2)		(3)
Net Cash Provided By (Used In) Investing Activities	175		(437)
CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of Common Stock	(200)		(29)
Proceeds from Issuance of Debt	756		—
Retirement of Long-Term Debt	(400)		—
Payments on Debt	(19)		(10)
Borrowings under Revolving Credit Facilities	2,479		2,636
Payments on Revolving Credit Facilities	(2,892)		(2,379)

Repurchase of Common Stock related to Share-Based Payments	(23)		(20)
Debt Issuance Costs	(14)		—
Dividends Paid	(61)		(61)

Other, Net	6		(6)
Net Cash (Used In) Provided By Financing Activities	(368)		131

Decrease in cash and cash equivalents, including cash classified within Assets Held for Sale	(29)		(15)
Less Cash reclassified to Assets Held for Sale	—		7
Effect of Exchange Rate Changes on Cash	(8)		(3)

Net Decrease in Cash and Cash Equivalents	(37)		(25)
Cash and Cash Equivalents at Beginning of Period	162		150
Cash and Cash Equivalents at End of Period	$	125	$	125

Non-cash Investing Activities:
Beneficial Interest Obtained in Exchange for Trade Receivables	$	74	$	67
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	30		35




Non-cash Investing Activities	$	104	$	102

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

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — GENERAL INFORMATION

Nature of Business

Graphic Packaging Holding Company (“GPHC” 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 consumer goods packaging made from renewable resources or recycled materials. The Company designs and manufactures sustainable packaging solutions including cartons, multipack cartons, trays, carriers, paperboard canisters, and cups and bowls made primarily from unbleached paperboard, recycled paperboard, and bleached paperboard.

The Company serves a wide variety of consumer nondurables (consumer staples) markets, from food and beverage, to foodservice, to household products, beauty and heath care. It produces packaging solutions at over 100 locations in over 25 countries around the world, serving customers ranging from local consumer products companies and retailers to the largest multinationals. The Company offers one of the most comprehensive ranges of packaging design, manufacture, and execution capabilities available. The Company currently manufactures most of the paperboard it consumes in the Americas and purchases from third parties the majority of the paperboard it consumes in its Europe Paperboard Packaging segment.

Graphic Packaging works closely with its customers to understand their needs and goals and to create new and innovative designs customized to their specific needs. The Company’s approach serves to build and strengthen long-term relationships with purchasing, brand management, marketing, and other key customer functions. The Company is organized to bring the full resources of its global and local innovation, design, and manufacturing capabilities to all of its customers with the goal of delivering packaging solutions that are more circular, more functional, and more convenient.

Basis of Presentation and Principles of Consolidation

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 state 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 the Company's 2023 Annual Report on Form 10-K for the year ended December 31, 2023. 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 for and into consumer packaging made from renewable and/or recycled resources, from which it generates revenue from contracts with customers. Revenue is disaggregated primarily by geography and type of activity as further explained in “Note 10 - Segment Information.” 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.

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 delivery of a 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 June 30, 2024 and 2023, the Company recognized $2,228 million and $2,379 million, respectively, of revenue from contracts with customers. For the six months ended June 30, 2024 and 2023, the Company recognized $4,479 million and $4,807 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. Packaging 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 standard payment terms that are consistent with industry practice.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 June 30, 2024 and December 31, 2023, contract assets were $31 million and $28 million, respectively. The Company's contract liabilities consist principally of rebates, and as of June 30, 2024 and December 31, 2023 were $56 million and $60 million, respectively.

Accounts Receivable and Allowances

Accounts receivable are stated at the amount owed by the customer, net of an allowance for estimated uncollectible accounts, returns and allowances, and cash discounts. The allowance for doubtful accounts is estimated based on historical experience, current economic conditions and the creditworthiness of customers. Receivables are charged to the allowance when determined to be no longer collectible.

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 included in Other Expense, Net in the Condensed Consolidated Statements of Operations. The following table summarizes the activity under these programs for the six months ended June 30, 2024 and 2023, respectively:


	Six Months Ended June 30,
In millions	2024		2023
Receivables Sold and Derecognized	$	1,809	$	1,897
Proceeds Collected on Behalf of Financial Institutions	1,796		1,809
Net Proceeds (Paid to) Received from Financial Institutions	(31)		41
Deferred Purchase Price at June 30(a)	27		15
Pledged Receivables at June 30	152		211

(a) Included in Other Current Assets on the Condensed Consolidated Balance Sheets and represents a beneficial interest in the receivables sold to the financial institutions, which is a Level 3 fair value measure.

Receivables sold under all programs subject to continuing involvement, which consist principally of collection services, were $781 million and $770 million as of June 30, 2024 and December 31, 2023, respectively.

The Company also participates in supply chain financing arrangements offered by certain customers that qualify for sale accounting in accordance with the Transfers and Servicing topic of the FASB Codification. For the six months ended June 30, 2024 and 2023, the Company sold receivables of $516 million and $591 million, respectively, related to these arrangements.

Share Repurchases and Dividends

On July 27, 2023, the Company's board of directors authorized an additional share repurchase program to allow the Company to purchase up to $500 million of the Company's issued and outstanding shares of common stock through open market purchases, privately negotiated transactions and Rule 10b5-1 plans (the “2023 share repurchase program”). The previous $500 million share repurchase program was authorized on January 28, 2019 (the “2019 share repurchase program”) and was completed in May 2024. At June 30, 2024, the Company had $365 million available for additional repurchases under the 2023 share repurchase program.

The following table presents the Company's share repurchases under the 2019 and 2023 share repurchase programs for the six months ended June 30, 2024 and 2023 respectively:


Amount repurchased in millions, except share and per share amounts	Amount Repurchased		Number of Shares Repurchased	Average Price per Share

2024(a)(b)	$	200	7,243,734	$	27.61
2023	$	29	1,224,232	$	24.07

(a) Including $65 million shares repurchased under the 2019 share repurchase program thereby completing that program.

(b) Excluding $2 million of excise taxes incurred in 2024.

During the first six months of 2024, the Company's board of directors declared two regular quarterly dividends of $0.10 per share of common stock to shareholders of record as follows:


Date Declared	Record Date	Payment Date
February 16, 2024	March 15, 2024	April 5, 2024
May 23, 2024	June 15, 2024	July 5, 2024

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accounts Payable and Supplier Finance Program

The Company has arranged a supplier finance program (“SFP”) with a financial intermediary, which provides certain suppliers the option to be paid by the financial intermediary earlier than the due date on the applicable invoice. The transactions are at the sole discretion of both the suppliers and financial institution, and the Company is not a party to the agreements and has no economic interest in the supplier’s decision to sell a receivable. The range of payment terms negotiated by the Company with its suppliers is consistent, irrespective of whether a supplier participates in the program. The agreement with the financial intermediary does not require the Company to provide assets pledged as security or other forms of guarantees for the supplier finance program. Amounts due to the Company’s suppliers that elected to participate in the SFP program are included in Accounts Payable on the Company's Condensed Consolidated Balance Sheets and payments made under the SFP program are reflected in Cash Flows from Operating Activities in the Company's Condensed Consolidated Statements of Cash Flows. Accounts Payable included $31 million and $30 million payable to suppliers who elected to participate in the SFP program as of June 30, 2024 and December 31, 2023, respectively.

Non-cash additions to Property, Plant and Equipment, Net included within Accounts Payable on the Company’s Condensed Consolidated Balance Sheets were $118 million and $145 million as of June 30, 2024 and December 31, 2023, respectively.

Business Combinations, Exit Activities and Other Special Items, Net

The following table summarizes the transactions recorded in Business Combinations, Exit Activities and Other Special Items, Net in the Condensed Consolidated Statements of Operations:


	Three Months Ended June 30,				Six Months Ended June 30,
In millions	2024		2023		2024		2023
Charges Associated with Business Combinations(a)	$	—	$	2	$	1	$	2
Exit Activities(b)	13		6		22		17
(Gains)/Charges Associated with Divestitures(c)	(74)		3		(72)		7
Other Special Items(d)	5		8		10		8
Total	$	(56)	$	19	$	(39)	$	34

(a) These costs relate to the Tama Paperboard, LLC (“Tama”) and Bell Incorporated (“Bell”) acquisitions.

(b) Relates to the Company's closures of its three smaller recycled paperboard manufacturing facilities (which includes Tama), and the closures of multiple packaging facilities (see “Note 13 - Exit Activities”).

(c) Includes the sale of the Augusta, Georgia bleached paperboard manufacturing facility (the “Augusta divestiture”) in 2024 and the sale of the Company's Russian operations in 2023 (see “Note 14 - Divestitures”).

(d) These costs include $3 million related to the devaluation of the Nigerian Naira and $6 million related to the change in terms of the 2024 grant of restricted stock units under the Graphic Packaging Holding Company 2014 Omnibus Stock and Incentive Compensation Plan (see “Note 5 - Stock Incentive Plans”) through June 30, 2024. In 2023, $7 million related to the devaluation of the Nigerian Naira in June 2023.

2024

On May 1, 2024, the Company completed the Augusta Divestiture to Clearwater Paper Corporation for a total consideration of $711 million. The gain associated with this divestiture is included in (Gains)/Charges Associated with Divestitures in the table above. For more information, see “Note 14 - Divestitures”.

During the second quarter of 2024, the Company decided to close multiple packaging facilities by the end of 2024. Production from these facilities will be consolidated into our existing packaging network. Charges associated with this project are included in Exit Activities in the table above. For more information, see “Note 13 - Exit Activities”. Current Assets within the Condensed Consolidated Balance Sheet also includes $11 million relating to multiple packaging facilities, which met the held for sale criteria as of June 30, 2024.

2023

During 2023, the Company decided to close multiple packaging facilities by the end of 2023 and early 2024. Production from these facilities has been consolidated into our existing packaging network. Charges associated with this project are included in Exit Activities in the table above. For more information, see “Note 13 - Exit Activities”.

On January 31, 2023, the Company completed the acquisition of Tama, a recycled paperboard manufacturing facility located in Tama, Iowa. The costs associated with this acquisition were less than $1 million and are included in Charges Associated with Business Combinations in the table above. For more information, see “Note 3 - Business Combinations”. Subsequently, in the second quarter of 2023, the Company closed this facility. For more information, see “Note 13 - Exit Activities.”

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On February 7, 2023, the Company announced an approximately $1 billion investment in a new recycled paperboard manufacturing facility located in Waco, Texas. In conjunction with the completion of this project, the Company expects to close two additional smaller recycled paperboard manufacturing facilities in order to strategically expand capacity while lowering costs. Charges associated with these closures are included in Exit Activities in the table above. For more information, see “Note 13 - Exit Activities.”

On September 8, 2023, the Company completed the acquisition of Bell, an independent packaging company for $262 million. The acquisition included three packaging facilities located in South Dakota and Ohio and is reported within the Americas Paperboard Packaging reportable segment. Charges Associated with this acquisition are included in Charges Associated with Business Combinations in the table above. For more information, see “Note 3 - Business Combinations”.

During 2023, the Company decided to permanently decommission the K3 recycled paperboard machine in Kalamazoo, Michigan as part of its recycled paperboard network optimization plan that the Company initiated in 2019. As of June 30, 2024, the Company incurred charges of $2 million related to the write-off of inventory. The Company expects to incur additional charges of $5 million to $10 million as it relates to the dismantling of the K3 recycled paperboard machine through 2024.

During the second quarter of 2022, the Company began the process of divesting its interest in its two packaging facilities in Russia (the “Russian Operations”). The assets and liabilities to be disposed of in connection with this transaction met the held for sale criteria as of June 30, 2022 and each subsequent quarter end through the date of sale. On November 30, 2023, the Company completed the sale of its Russian Operations. Impairment charges associated with this divestiture are included in (Gains)/Charges Associated with a Divestiture in the table above. For more information, see “Note 14 - Divestitures”.

Adoption of New Accounting Standards

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This ASU clarifies that contractual sale restrictions should not be considered in measuring the fair value of equity securities. The Company adopted this standard in the first quarter of fiscal 2024 with no material impact on the Company’s financial position and results of operations.

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU expands disclosures in an entity's income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. This ASU is effective for fiscal years beginning after December 15, 2024. All entities should apply the guidance prospectively but have the option to apply it retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its disclosures.

NOTE 2 — INVENTORIES, NET

Inventories, Net by major class:


In millions	June 30, 2024		December 31, 2023
Finished Goods	$	575	$	602
Work in Progress	197		201
Raw Materials	674		684
Supplies	253		267
Total	$	1,699	$	1,754

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 — BUSINESS COMBINATIONS

Bell Incorporated

On September 8, 2023, the Company completed the acquisition of Bell, adding three packaging facilities in Sioux Falls, South Dakota and Groveport, Ohio for $262 million, using existing cash and borrowings under its revolving credit facility.

The purchase price allocation as of June 30, 2024 is as follows:


In millions	Amounts Recognized as of Acquisition Date (as adjusted)
Purchase Price	$	262

Cash & Cash Equivalents	3
Receivables, Net	19
Inventories, Net	17
Property, Plant and Equipment	30
Intangible Assets(a)	161
Other Assets	15
Total Assets Acquired	245
Current Liabilities	11
Other Noncurrent Liabilities	12
Total Liabilities Assumed	23
Net Assets Acquired	222
Goodwill	40
Purchase Consideration Transferred	$	262

(a) Intangible Assets primarily consists of Customer Relationships with a weighted average life of approximately 15 years.

During the second quarter of 2024, the Company finalized the acquisition accounting adjustments for Bell and the purchase price has been allocated to assets acquired and liabilities assumed based on the fair values as of the acquisition date. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, which is expected to be deductible for tax purposes, and is reported within the Americas Paperboard Packaging reportable segment.

Tama Paperboard, LLC

On January 31, 2023, the Company completed the acquisition of Tama, a recycled paperboard manufacturing facility in Tama, Iowa, from Greif Packaging LLC for approximately $100 million, using existing cash and borrowings under its revolving credit facility.

During the second quarter of 2023, the Company finalized the acquisition accounting adjustments for Tama and the purchase price has been allocated to assets acquired and liabilities assumed based on the fair values as of the acquisition date. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, which is expected to be deductible for tax purposes, and is reported within the Paperboard Manufacturing reportable segment.

Proforma disclosures were omitted for the Bell and Tama acquisitions as they do not have a significant impact on the Company’s financial results.

NOTE 4 — DEBT

Short-Term Debt and Current Portion of Long-Term Debt is comprised of the following:


In millions	June 30, 2024		December 31, 2023
Short-Term Borrowings	$	11	$	18
Current Portion of Finance Leases and Financing Obligations	7		7
Current Portion of Long-Term Debt(a)	309		739
Total Short-Term Debt and Current Portion of Long-Term Debt	$	327	$	764

(a) Includes the 4.125% Senior Notes due August 2024 and 0.821% Senior Notes redeemed April 2024.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Long-Term Debt is comprised of the following:


In millions	June 30, 2024		December 31, 2023
Senior Notes with interest payable semi-annually at 0.821%, effective rate of 0.82%, payable in 2024(a)	$	—	$	400
Senior Notes with interest payable semi-annually at 4.125%, effective rate of 4.13%, payable in 2024(b)	300		300
Senior Notes with interest payable semi-annually at 1.512%, effective rate of 1.52%, payable in 2026(a)	400		400
Senior Notes with interest payable semi-annually at 4.75%, effective rate of 4.78%, payable in 2027(a)	300		300
Senior Notes with interest payable semi-annually at 3.50%, effective rate of 3.53%, payable in 2028(a)	450		450
Senior Notes with interest payable semi-annually at 3.50%, effective rate of 3.53%, payable in 2029(a)	350		350
Senior Notes (€290 million) with interest payable semi-annually at 2.625%, effective rate of 2.65%, payable in 2029(a)	311		321
Senior Notes with interest payable semi-annually at 3.75%, effective rate of 3.79%, payable in 2030(a)	400		400
Senior Notes with interest payable semi-annually at 6.375%, effective rate of 6.45%, payable in 2032(a)	500		—
Green Bond, net of unamortized premium with interest payable at 4.00%, effective rate of 1.72%, payable in 2026(a)	105		106
Senior Secured Term Loan A-2 Facility with interest payable quarterly at 2.67%, effective rate of 2.68% payable in 2028(a)	425		425
Senior Secured Term Loan A-3 Facility with interest payable monthly payable at floating rates (7.18% at June 30, 2024), effective rate of 7.20%, payable in 2028(a)	250		250
Senior Secured Term Loan A-5 Facility with interest payable monthly payable at floating rates (7.18% at June 30, 2024), effective rate of 7.20%, payable in 2029(a)	50		—
Senior Secured Term Loan A-6 Facility with interest payable monthly payable at floating rates (7.18% at June 30, 2024), effective rate of 7.20%, payable in 2029(a)	200		—
Senior Secured Term Loan A-1 Facilities with interest payable at various dates at floating rates (6.93% at June 30, 2024) payable through 2029(a)	500		508
Senior Secured Term Loan Facility (€200 million) with interest payable at various dates at floating rates (5.13% at June 30, 2024) payable through 2029(a)	214		227
Senior Secured Revolving Credit Facilities with interest payable at floating rates (6.90% at June 30, 2024) payable in 2029(a)(c)	368		774
Finance Leases and Financing Obligations	148		161
Other	3		6
Total Long-Term Debt Including Current Portion	5,274		5,378
Less: Current Portion	316		746
Total Long-term Debt Excluding Current Portion	4,958		4,632
Less: Unamortized Debt Deferred Issuance Costs	28		23
Total Long-Term Debt	$	4,930	$	4,609

(a) Guaranteed by Graphic Packaging International Partners, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“GPIP”) and certain domestic subsidiaries.

(b) Guaranteed by GPHC and certain domestic subsidiaries.

(c) The weighted average effective interest rates for the Company’s Senior Secured Revolving Credit Facilities were 6.87% and 6.61% as of June 30, 2024 and December 31, 2023, respectively.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2024

On June 3, 2024, Graphic Packaging International, LLC (“GPIL”), a Delaware limited liability company and a direct subsidiary of Graphic Packaging International Partners, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company entered into a Fifth Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) to extend the maturity date of certain of its Senior Secured Term Loan Facilities and Senior Secured Revolving Credit Facilities and to amend certain other terms of the agreement including revised debt covenants. However, there were no changes to the maximum Consolidated Total Leverage Ratio and the minimum Consolidated Interest Expense Ratio covenants. Under the terms of the agreement, $1,425 million and €200 million of the Company’s Senior Secured Term Loan Facilities remain outstanding. The Company added $50 million to its Senior Secured Revolving Credit Facilities. $500 million (A-1) of the Senior Secured Term Loan Facilities and all of the Senior Secured Revolving Credit Facility loans continue to bear interest at a floating rate per annum ranging from SOFR plus 1.35% to SOFR plus 2.10%, determined using a pricing grid based upon the Company’s consolidated total leverage ratio from time to time, and the maturity for these loans were extended from April 1, 2026 to June 1, 2029. $425 million of the Senior Secured Term Loan Facilities continue to bear interest at a fixed rate per annum equal to 2.67% and mature on their originally scheduled maturity date of January 14, 2028. $250 million of the Senior Secured Term Loan Facilities continue to bear interest at a floating rate per annum ranging from SOFR plus 1.60% to SOFR plus 2.35%, determined using a pricing grid based upon the Company’s consolidated total leverage ratio from time to time, and mature on their originally scheduled maturity date of July 22, 2028. $250 million of the Senior Secured Term Loan Facilities continue to bear interest at a floating rate per annum ranging from SOFR plus 1.725% to SOFR plus 2.35%, determined using a pricing grid based upon the Company’s consolidated total leverage ratio from time to time, and mature on their originally scheduled maturity date of June 1, 2029. €200 million of the Senior Secured Term Loan Facilities continues to bear interest at a floating rate per annum ranging from SOFR plus 1.225% to SOFR plus 1.85%, determined using a pricing grid based upon the Company’s consolidated total leverage ratio from time to time, and the maturity for these loans was extended from April 1, 2026 to June 1, 2029.

On May 13, 2024, GPIL completed a private offering of $500 million aggregate principal amount of its 6.375% senior unsecured notes due 2032 (the “Senior Notes”). The net proceeds were used by the Company to repay a portion of the outstanding borrowings under its domestic revolving credit facility under its senior secured credit facility and to pay fees and expenses incurred in connection with the offering of the Senior Notes. As of June 30, 2024, the total outstanding debt, net of issuance costs, under the 2032 notes was $500 million.

On April 15, 2024, the Company drew $400 million from the senior secured domestic revolving credit facilities and used the proceeds, together with cash on hand, to redeem its 0.821% Senior Notes due in 2024.

On March 22, 2024, GPIL entered into an Incremental Facility Amendment to the Fourth Amended and Restated Credit Agreement for $250 million of new incremental term loans (the “New Incremental Term Facilities”). The New Incremental Term Facilities consist of a $50 million Incremental Term A-5 Facility (the “Incremental A-5 Loans”) and a $200 million Incremental Term A-6 Facility (the “Incremental Term A-6 Loans”). The New Incremental Term Facilities are senior secured term loans and mature on June 1, 2029. The Incremental Term A-5 and A-6 Loans bear interest at a floating rate ranging from SOFR plus 1.725% to SOFR plus 2.35%, determined using a pricing grid based upon GPIL’s Consolidated Leverage Ratio. As long as the Incremental Term A-5 and A-6 Loans are outstanding, GPIL will be eligible to receive an annual patronage credit from the participating lender banks, which will be paid in cash and stock in the lead member bank. Patronage payable each year is variable and based on the individual financial performance of each of the member banks then participating in the loan. The Incremental Term A-5 and A-6 Facilities are governed by the same covenants as are set forth in the Fourth Amended and Restated Credit Agreement and are secured by a first priority lien and security interest in certain assets of GPIL.

At June 30, 2024, the Company and its U.S. and international subsidiaries had the following commitments, amounts outstanding and amounts available under revolving credit facilities:


In millions	Total Commitments		Total Outstanding		Total Available(a)
Senior Secured Domestic Revolving Credit Facility	$	1,900	$	336	$	1,562
Senior Secured International Revolving Credit Facility	192		32		160
Other International Facilities	49		14		35
Total	$	2,141	$	382	$	1,757

(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 $2 million as of June 30, 2024. 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 2024 unless extended.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Covenant Agreements

The Covenants in the Company's Fifth Amended and Restated Credit Agreement (the “Current Credit Agreement”) and the supplemental indentures governing the 4.125% Senior Notes due 2024, 1.512% Senior Notes due 2026, 4.75% Senior Notes due 2027, 3.50% Senior Notes due 2028, 3.50% Senior Notes due 2029, 2.625% Senior Notes due 2029, 3.75% Senior Notes due 2030 and 6.375% Senior Notes due 2032 (the “Indentures”), limit the Company's ability to incur additional indebtedness. Additional covenants contained in the Current 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, repurchase stock, pay dividends 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 June 30, 2024, the Company was in compliance with the covenants in the Current Credit Agreement and the Indentures.

NOTE 5 — STOCK INCENTIVE PLANS

The Company has one active equity compensation plan from which new grants may be made, the Graphic Packaging Holding Company 2024 Omnibus Incentive Compensation Plan (the “2024 Plan”). Prior to the approval of the 2024 Plan and the expiration of the 2014 Plan, the Company made all new grants under the 2014 Plan. The 2024 Plan and 2014 Plan allow for granting shares of stock, options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), and other types of stock-based and cash awards. Awards under the 2024 Plan and 2014 Plan vest and expire in accordance with terms established at the time of grant. Shares issued pursuant to awards under the 2024 Plan and 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. As of June 30, 2024, there were 11.2 million shares remaining available to be granted under the 2024 Plan.

Stock Awards, Restricted Stock and Restricted Stock Units

Under the 2024 and 2014 Plans and related RSU grant agreements, RSUs granted to employees generally vest and become payable in one to three years from the date of grant. RSUs granted to employees generally contain some combination of service and performance objectives based on various financial targets and a relative total shareholder return modifier that must be met for the RSUs to vest. The 2022 and 2023 award agreements contain vesting provisions that allow retiring employees to vest on a daily pro-rata basis from the date of grant through their retirement date. In the 2024 grant agreements, the vesting provisions were changed to allow retiring employees to vest in full upon an eligible retirement. This change required the Company to accelerate the recognition of the compensation expense for the 2024 grants for active retirement-eligible employees. Retirement eligibility is dependent upon meeting certain age and/or years of service and notice requirements.

RSUs granted as deferred compensation for non-employee directors are fully vested but not payable until the distribution date elected by the director. Stock awards issued to non-employee directors as part of their compensation for service on the Board are unrestricted on the grant date.

Data concerning RSUs and Stock Awards granted in the first six months of 2024 is as follows:


		Weighted Average Grant Date Fair Value Per Share
RSUs - Employees and Non-Employee Directors	1,518,729	$	24.61
Stock Awards - Board of Directors	23,540	$	27.19

During the six months ended June 30, 2024 and 2023, $32 million and $25 million, respectively, were charged to compensation expense for stock incentive plans and included in Selling, General and Administrative expenses in the Condensed Consolidated Statements of Operations. In addition, during the six months ended June 30, 2024, $6 million was charged to compensation expense for the incremental expense related to change of vesting provisions in the 2024 grants and included in Business Combinations, Exit Activities and Other Special Items, Net in the Condensed Consolidated Statements of Operations.

During the six months ended June 30, 2024 and 2023, 1.3 million shares were issued. The shares issued were primarily related to RSUs granted to employees during 2021 and 2020.

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. Currently, the North American plans are closed to newly-hired employees.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pension and Postretirement Expense

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


	Pension Benefits								Postretirement Benefits
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
In millions	2024		2023		2024		2023		2024		2023		2024		2023
Components of Net Periodic Cost:
Service Cost	$	1	$	2	$	3	$	4	$	—	$	—	$	—	$	—
Interest Cost	6		6		11		11		—		—		—		—

Expected Return on Plan Assets	(6)		(7)		(11)		(12)		—		—		—		—
Net Curtailment/Settlement Loss	1		—		1		—		—		—		—		—
Amortization:

Actuarial Loss (Gain)	1		2		2		3		(1)		(1)		(1)		(1)
Net Periodic Cost (Benefit)	$	3	$	3	$	6	$	6	$	(1)	$	(1)	$	(1)	$	(1)

Employer Contributions

The Company made $4 million of contributions to its pension plans during the first six months of 2024 and 2023. The Company expects to make contributions in the range of $10 million to $20 million for the full year of 2024.

The Company made $1 million of postretirement health care benefit payments during the first six months of 2024 and 2023. For the full year 2024, the Company expects to make approximately $1 million in contributions to its postretirement health care plans.

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.

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 2023 Annual Report on Form 10-K.

Interest Rate Risk

The Company has previously used interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan facilities. Changes in fair value are subsequently reclassified into earnings as a component of Interest Expense, Net as interest is incurred on amounts outstanding under the term loan facilities.

As of December 31, 2023, the Company had interest rate swap positions with a notional value of $750 million which matured in April 2024. As of June 30, 2024, the Company had no outstanding interest rate swaps.

During the first six months of 2024 and 2023, there were no amounts of ineffectiveness. Additionally, there were no amounts excluded from the measure of effectiveness.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. On May 1, 2024, the Company completed the Augusta divestiture. The allocation of natural gas swap contracts identified for Augusta were dedesignated and will be treated as a derivative not designated as hedges on a go-forward basis until the contracts' expiration in 2024. Charges associated with these dedesignated hedges have been recorded in Business Combinations, Exit Activities and Other Special Items, Net in the Consolidated Statements of Operations. The Company has hedged approximately 61% and 30% of its expected natural gas usage for the remainder of 2024 and 2025, respectively, for its remaining sites. For more information, see “Note 14 - Divestitures.”

During the first six months of 2024 and 2023, 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.

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 June 30, 2024 and December 31, 2023, multiple foreign currency forward exchange contracts existed, with maturities ranging up to three months. Those foreign currency exchange contracts outstanding at June 30, 2024 and December 31, 2023, when aggregated and measured in U.S. dollars at contractual rates at June 30, 2024 and December 31, 2023, had net notional amounts totaling $201 million and $131 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.

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 June 30, 2024, 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. As of June 30, 2024 and December 31, 2023, the Company had commodity contract derivative liabilities, which were included in Other Accrued Liabilities on the Condensed Consolidated Balance Sheets of $4 million and $7 million, respectively. As of December 31, 2023, the Company had interest rate contract derivative assets, which were included in Other Current Assets on the Condensed Consolidated Balance Sheets of $2 million.

The fair values of the Company’s other financial assets and liabilities at June 30, 2024 and December 31, 2023 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 $4,949 million and $5,039 million as compared to the carrying amounts of $5,126 million and $5,217 million as of June 30, 2024 and December 31, 2023, 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.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Effect of Derivative Instruments

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


	Amount of (Gain) Loss Recognized in Accumulated Other Comprehensive Loss								Location in Statement of Operations	Amount of Loss (Gain) Recognized in Statement of Operations
	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions	2024		2023		2024		2023			2024		2023		2024		2023
Commodity Contracts	$	(2)	$	2	$	3	$	19	Cost of Sales	$	3	$	9	$	8	$	20

Interest Rate Swap Agreements	—		(4)		—		(3)		Interest Expense, Net	—		(1)		(1)		(1)
Total	$	(2)	$	(2)	$	3	$	16	Total	$	3	$	8	$	7	$	19

At June 30, 2024, the Company expects to reclassify $4 million of pre-tax loss 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.

The pre-tax effect of derivative instruments not designated as hedging instruments in the Company’s Condensed Consolidated Statements of Operations is as follows:


		Three Months Ended June 30,				Six Months Ended June 30,
In millions	Location in Statement of Operations	2024		2023		2024		2023
Foreign Currency Contracts	Other Expense, Net	$	(1)	$	(1)	$	(6)	$	(4)
Commodity Contracts	Business Combinations, Exit Activities and Other Special Items, Net	2		—		2		—

Total		$	1	$	(1)	$	(4)	$	(4)

NOTE 8 — INCOME TAXES

During the six months ended June 30, 2024, the Company recognized Income Tax Expense of $127 million on Income before Income Taxes of $482 million. The effective tax rate for the six months ended June 30, 2024 is different from the statutory rate primarily due to the write off of non-deductible book goodwill associated with the divestiture of Augusta, as well as discrete tax adjustments including a tax benefit of $3 million related to excess tax benefits on restricted stock units that vested during the period and the mix of earnings between foreign and domestic jurisdictions, including those with and without valuation allowances.

During the six months ended June 30, 2023, the Company recognized Income Tax Expense of $121 million on Income before Income Taxes of $478 million. The effective tax rate for the six months ended June 30, 2023 is different from the statutory rate primarily due to the tax impact of the charges associated with the planned divestiture of the Company’s operations in Russia that result in no corresponding tax benefit, a tax benefit of $2 million related to excess tax benefits on restricted stock that vested during the period, an increase in the Company’s valuation allowance against a portion of its net deferred tax assets in Sweden and the mix of earnings between foreign and domestic jurisdictions, including those with and without valuation allowances.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, the recycling of packaging 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 historical 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 further investigation and may result in remediation 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.

NOTE 10 — SEGMENT INFORMATION

The Company has three reportable segments as follows:

Americas Paperboard Packaging includes paperboard packaging sold primarily to consumer packaged goods (“CPG”) companies serving the food, beverage, and consumer product markets, and cups, lids and food containers sold primarily to foodservice companies and quick-service restaurants (“QSR”) in the Americas.

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

Paperboard Manufacturing includes the six North American paperboard facilities that produce recycled, unbleached and bleached paperboard, which is consumed internally to produce paperboard consumer packaging for the Americas and Europe Packaging segments. Paperboard not consumed internally is sold externally to a wide variety of paperboard packaging converters and brokers. The Paperboard Manufacturing segment's 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 Manufacturing segment to reflect the economics of the integration of these segments.

The Company allocates certain paperboard manufacturing 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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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Segment information is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
In millions	2024		2023		2024		2023
NET SALES:
Americas Paperboard Packaging	$	1,551	$	1,571	$	3,082	$	3,115
Europe Paperboard Packaging	474		523		944		1,055
Paperboard Manufacturing	174		252		397		568
Corporate/Other/Eliminations(a)	38		46		73		92
Total	$	2,237	$	2,392	$	4,496	$	4,830

INCOME (LOSS) FROM OPERATIONS:
Americas Paperboard Packaging(b)(c)	$	229	$	274	$	510	$	543
Europe Paperboard Packaging(d)	28		21		47		47
Paperboard Manufacturing(b)(c)(e)	68		(33)		42		(6)
Corporate and Other(c)	(1)		5		3		13
Total	$	324	$	267	$	602	$	597

DEPRECIATION AND AMORTIZATION:
Americas Paperboard Packaging(b)	$	48	$	46	$	105	$	89
Europe Paperboard Packaging	28		27		55		54
Paperboard Manufacturing(b)	49		86		106		147
Corporate and Other	8		6		15		14
Total	$	133	$	165	$	281	$	304

(a) Includes revenue from customers for the Australia and Pacific Rim operating segments.

(b) Includes accelerated depreciation related to exit activities in 2024 and 2023 (see “Note 13 - Exit Activities”).

(c) Includes expenses related to business combinations, exit activities and other special items (see “Note 1 - General Information”).

(d) Includes impairment charges related to Russia in 2023 (see “Note 14 - Divestitures”).

(e) Includes gain from Augusta Divestiture in 2024 (see “Note 14 - Divestitures”).

NOTE 11 — EARNINGS PER SHARE


	Three Months Ended June 30,				Six Months Ended June 30,
In millions, except per share data	2024		2023		2024		2023
Net Income	$	190	$	150	$	355	$	357
Weighted Average Shares:
Basic	305.7		308.2		306.7		308.4
Dilutive Effect of RSUs	1.2		0.9		1.2		1.0
Diluted	306.9		309.1		307.9		309.4
Earnings Per Share — Basic	$	0.62	$	0.49	$	1.16	$	1.16
Earnings Per Share — Diluted	$	0.62	$	0.49	$	1.15	$	1.15

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 12 — CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

The following represents changes in Accumulated Other Comprehensive Loss attributable to Graphic Packaging Holding Company by component for the six months ended June 30, 2024:


In millions, net of tax	Derivative Instruments		Pension and Postretirement Benefit Plans		Currency Translation Adjustments		Total
Balance at December 31, 2023	$	(1)	$	(107)	$	(205)	$	(313)
Other Comprehensive (Loss) Income before Reclassifications	(2)		2		(82)		(82)
Amounts Reclassified from Accumulated Other Comprehensive Loss(a)	5		1		—		6
Net Current-period Other Comprehensive Income (Loss)	3		3		(82)		(76)


Balance at June 30, 2024	$	2	$	(104)	$	(287)	$	(389)

(a) See following table for details about these reclassifications.

The following represents reclassifications out of Accumulated Other Comprehensive Loss for the six months ended June 30, 2024:


In millions
Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss			Affected Line Item in the Statement Where Net Income is Presented
Derivatives Instruments:
Commodity Contracts	$	8		Cost of Sales
Interest Rate Swap Agreements	(1)			Other Expense, Net
	7			Total before Tax
	(2)			Tax Benefit
	$	5		Total, Net of Tax

Amortization of Defined Benefit Pension Plans:

Actuarial Losses	$	2	(a)


	$	2		Total, Net of Tax

Amortization of Postretirement Benefit Plans:

Actuarial Gains	$	(1)	(a)


	$	(1)		Total, Net of Tax

Total Reclassifications for the Period	$	6		Total Net of Tax

(a) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see “Note 6 - Pensions and Other Postretirement Benefits”).

NOTE 13 — EXIT ACTIVITIES

2024

During the second quarter of 2024, the Company decided to close multiple packaging facilities by the end of 2024. Production from these facilities will be consolidated into our existing packaging network. Current Assets within the Condensed Consolidated Balance Sheet also includes $11 million relating to multiple packaging facilities, which met the held for sale criteria as of June 30, 2024. The costs associated with these exit activities are included in the table below for the three and six months ended June 30, 2024.

2023

During 2023, the Company decided to close multiple packaging facilities by the end of 2023 and early 2024. Production from these facilities have been consolidated into our existing packaging network. The costs associated with these exit activities are included in the table below for the three and six months ended June 30, 2024 and 2023.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On February 7, 2023, the Company announced its plan to invest approximately $1 billion in a new recycled paperboard manufacturing facility in Waco, Texas. In conjunction with this project, the Company announced the closure of three smaller recycled paperboard manufacturing facilities to manage capacity while lowering costs. The costs associated with these exit activities are included in the table below for the three and six months ended June 30, 2024 and 2023.

In the second quarter of 2023, the Company announced its decision to accelerate the closure of one of these three recycled paperboard manufacturing facilities that is in Tama, Iowa and closed the facility in the second quarter of 2023. The costs associated with this closure are included in the table below for the three and six months ended June 30, 2023.

During the six months ended June 30, 2024 and 2023, the Company recorded $37 million and $49 million of exit costs, respectively, associated with these restructurings. Other costs associated with the start-up of the new recycled paperboard machine are recorded in the period in which they are incurred.

The following table summarizes the costs incurred during the three and six months ended June 30, 2024 and 2023 related to these restructurings:


		Three Months Ended June 30,				Six Months Ended June 30,
In millions	Location in Statement of Operations	2024		2023		2024		2023
Severance Costs and Other(a)	Business Combinations, Exit Activities and Other Special Items, Net	$	5	$	4	$	7	$	12
Asset Write-Offs and Start-Up Costs(b)	Business Combinations, Exit Activities and Other Special Items, Net	8		2		15		5
Accelerated Depreciation	Cost of Sales	3		30		15		32
Total		$	16	$	36	$	37	$	49

(a) Costs incurred include activities for post-employment benefits, retention bonuses, incentives and professional services (see “Note 1 - Business Combinations, Exit Activities and Other Special Items, Net”).

(b) Costs incurred include non-cash write-offs for items such as machinery, supplies and inventory.

The following table summarizes the balance of accrued expenses related to restructuring:


In millions	Total
Balance at December 31, 2023	$	21
Costs Incurred