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West Monroe, LA | Unbleached paperboard, Research and Development |
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Other: | |
Atlanta, GA(b) | Headquarters, Research and Development, Packaging Machinery and Design |
Clemson, SC(b) | Research and Development |
Concord, NH(b) | Research and Development, Design Center |
Crosby, MN | Packaging Machinery Engineering, Design and Manufacturing |
Louisville, CO(b) | Research and Development |
Menomonee Falls, WI | Foodservice Rebuild Center |
(a) Sold during the second quarter of 2024. |
(b) Leased facility. |
(a) Including $65 million shares repurchased under the 2019 share repurchase program, which completed that program.
(b) Excluding $2 million of excise taxes incurred in 2024.
During 2024, 2023 and 2022, GPHC paid cash dividends of $122 million, $123 million and $92 million, respectively. Though the decision to distribute cash dividends rests solely with the Board of Directors, the Company presently intends to maintain a quarterly cash dividend, subject to earnings and liquidity considerations.
2024
On August 14, 2024 the Company drew $300 million from the senior secured domestic revolving credit facilities and used the proceeds to redeem its 4.125% Senior Notes due in 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 (A-2) 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 (A-3) 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.
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-2, A-3, 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.
2023
On February 7, 2023, GPIL entered into Amendment No. 3 to the Fourth Amended and Restated Credit Agreement (the “Third Amendment”). The Third Amendment provides for a future replacement floating interest rate benchmark (the Canadian Overnight Repo Rate Average) to take effect upon the cessation of the Canadian Dollar Offered Rate for Canadian Dollar borrowings under the domestic revolving credit facility. The Third Amendment also modified the borrowing mechanics for certain term Secured Overnight Financing Rate (“SOFR”) loans under the domestic revolving line of credit.
Total Return to Stockholders
The following graph compares the total returns (assuming reinvestment of dividends) of the common stock of Graphic Packaging Holding Company, the Standard & Poor’s (“S&P”) 500 Stock Index and the Dow Jones (“DJ”) U.S. Container & Packaging Index. The graph assumes $100 invested on December 31, 2019 in GPHC’s common stock and each of the indices. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
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| 12/31/2019 | | 12/31/2020 | | 12/31/2021 | | 12/31/2022 | | 12/31/2023 | | 12/31/2024 |
Graphic Packaging Holding Company | $ | 100.00 | | | $ | 103.95 | | | $ | 121.60 | | | $ | 140.89 | | | $ | 158.66 | | | $ | 177.28 | |
S&P 500 Stock Index | 100.00 | | | 118.40 | | | 152.39 | | | 124.79 | | | 157.59 | | | 197.02 | |
Dow Jones U.S. Container & Packaging Index | 100.00 | | | 121.14 | | | 134.41 | | | 110.49 | | | 118.91 | | | 136.68 | |
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
This management’s discussion and analysis of financial conditions and results of operations is intended to assist you in understanding the Company’s past performance, financial condition and prospects. A detailed discussion of the fiscal 2024 year-over-year changes can be found below and a detailed discussion of fiscal 2023 year-over-year changes can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
OVERVIEW OF BUSINESS
Graphic Packaging is a leading global provider of consumer goods packaging made from renewable 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. Paperboard used in its packaging solutions comes from wood fiber, a renewable resource, and from secondary (reused) fiber. Graphic Packaging’s consumer packaging is designed to be recycled, and the Company works across the value chain to make it easier for people to recycle. With this focus, the Company plays an active role in support of the move to a more circular economy and a sustainable future for generations to come. Graphic Packaging’s commitment to reducing the environmental impact of everyday consumer packaging is fundamental to our strategy, our goals, and to our business purpose.
The Company serves a wide variety of consumer markets, from food and beverage, to foodservice, household products, beauty and heath care. We produce packaging solutions at over 100 locations in over 20 countries around the world, serving customers and brands ranging from local to multinational consumer products companies and retailers. The Company offers one of the most comprehensive ranges of packaging design, manufacture, and execution capabilities available. Graphic Packaging manufactures a significant amount of the paperboard that it uses to produce packaging solutions, mainly where it believes that self-manufacture provides it with a competitive advantage and allows the Company to deliver better, more consistent results for customers. 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 operations.
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.
The Company competes with a wide range of packaging companies whose primary raw materials are paperboard, plastic, multi-layer laminates, shrink film, paper, corrugated board, bio-based materials and other packaging materials. While circularity and sustainability are increasingly important to customers purchase decisions, the Company also competes on the basis of product innovation, price, and execution capabilities. Many of the Company’s multi-year supply contracts include terms which provide for the pass through of certain costs including raw materials, energy, labor and other manufacturing costs, with the intention of reducing exposure to the volatility of these costs, many of which are outside of the Company’s control.
The Company is implementing strategies (i) to develop and market innovative, packaging products and applications that benefit from consumer-led sustainability trends; (ii) to expand market share in its current markets and to identify and penetrate new markets; (iii) to capitalize on the Company’s customer relationships, business competencies, and manufacturing facilities; and (iv) to continue to reduce costs and drive productivity through operational improvements. The Company’s ability to fully implement its strategies and achieve its objectives may be influenced by a variety of factors, many of which are beyond its control. We cannot predict with any certainty the impact that rising interest rates, a global or regional recession, or higher inflation may have on our customers or suppliers. Additionally, we are unable to predict the potential effects that any future pandemic or other global health emergency and widespread military and geopolitical conflicts and other social and political unrest or change, including Eastern Europe, Africa and the Middle East, and related sanctions or market disruptions, may have on our business.
Acquisitions and Dispositions
•On May 1, 2024, the Company completed the sale of its Augusta, Georgia bleached paperboard manufacturing facility (the “Augusta Divestiture”) to Clearwater Paper Corporation for a total consideration of $711 million.
•During 2024, the Company decided to close multiple packaging facilities by the end of 2024 and early 2025. These are in addition to the multiple packaging facilities that the Company decided to close by the end of 2023 and early 2024. Production from these facilities will be consolidated into other existing packaging facilities. Current Assets within the Consolidated Balance Sheet include $15 million relating to multiple packaging facilities that met the held for sale criteria as of December 31, 2024.
•In January 2023, the Company completed the acquisition of Tama Paperboard, LLC (“Tama”), a recycled paperboard manufacturing facility located in Tama, Iowa, from Greif Packaging LLC for approximately $100 million. Tama is included within the Paperboard Manufacturing reportable segment. Subsequently, in the second quarter of 2023, the Company closed this facility.
•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 other existing packaging facilities.
•On September 8, 2023, the Company completed the acquisition of Bell Incorporated (“Bell”), adding three packaging facilities in Sioux Falls, South Dakota and Groveport, Ohio for $262 million. Bell is reported within the Americas Paperboard Packaging reportable segment.
•During the third quarter of 2023, the Company decided to discontinue the project in Texarkana to modify an existing paperboard machine to add swing capacity between bleached and unbleached paperboard in order to focus growth investments in the strategic expansion of recycled paperboard capacity.
•During the third quarter of 2023, the Company announced its decision 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.
•During 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, resulting in cumulative impairment charges of $106 million in 2022 and 2023, including $12 million of goodwill impairment. On November 30, 2023, the Company completed the sale of its Russian Operations.
RESULTS OF OPERATIONS
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| Year Ended December 31, |
| In millions | 2024 | 2023 | 2022 |
| Net Sales | $ | 8,807 | | $ | 9,428 | | $ | 9,440 | |
| Income from Operations | 1,119 | | 1,174 | | 906 | |
| Nonoperating Pension and Postretirement Benefit (Expense) Income | (3) | | (3) | | 7 | |
| Interest Expense, Net | (230) | | (239) | | (197) | |
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| Income before Income Taxes and Equity Income of Unconsolidated Entity | 886 | | 932 | | 716 | |
| Income Tax Expense | (229) | | (210) | | (194) | |
| Income before Equity Income of Unconsolidated Entity | 657 | | 722 | | 522 | |
| Equity Income of Unconsolidated Entity | 1 | | 1 | | — | |
| Net Income | $ | 658 | | $ | 723 | | $ | 522 | |
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Liquidity and Capital Resources
The Company expects its material cash requirements for the next twelve months will be for: capital expenditures, periodic required income tax payments, periodic interest and debt service payments on associated debt (refer to “Note 5 - Debt” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information), lease agreements which have fixed lease payment obligations (refer to “Note 6 - Leases” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information), and minimum purchase commitments (refer to “Note 13 - Commitments” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data” for additional information) along with ongoing operating costs, working capital, share repurchases and dividend payments. The Company expects its primary sources of liquidity to be cash flows from sales and operating activities in the normal course of operations and availability from its revolving credit facilities, as needed. The Company expects that these sources will be sufficient to fund our ongoing cash requirements for the foreseeable future, including at least the next twelve months.
Principal and interest payments under the term loan facilities and the revolving credit facilities, together with principal and interest payments on the Company's 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 “Notes”), represent liquidity requirements for the Company. Based upon current levels of operations, anticipated cost savings and expectations as to future growth, the Company believes that cash generated from operations, together with amounts available under its revolving credit facilities and other available financing sources, will be adequate to permit the Company to meet its debt service obligations, necessary capital expenditure program requirements and ongoing operating costs and working capital needs, although no assurance can be given in this regard. The Company's future financial and operating performance, ability to service or refinance its debt and ability to comply with the covenants and restrictions contained in its debt agreements (see “Covenant Restrictions” below) will be subject to future economic conditions, including conditions in the credit markets, and to financial, business and other factors, many of which are beyond the Company's control, and will be substantially dependent on the selling prices and demand for the Company's products, raw material and energy costs, and the Company's ability to successfully implement its overall business and profitability strategies.
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 not material and is included in Other Expense, Net in the Consolidated Statements of Operations. The following table summarizes the activity under these programs for the year ended December 31, 2024 and 2023, respectively:
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| Year Ended December 31, |
| In millions | 2024 | 2023 |
| Receivables Sold and Derecognized | $ | 3,572 | | $ | 3,696 | |
| Proceeds Collected on Behalf of Financial Institutions | 3,562 | | 3,646 | |
| Net Proceeds Received from Financial Institutions | 15 | | 28 | |
Deferred Purchase Price at December 31(a) | 5 | | 1 | |
| Pledged Receivables at December 31 | 131 | | 150 | |
(a) Included in Other Current Assets on the 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 consists principally of collection services, were approximately $778 million and $770 million as of December 31, 2024 and 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. As of December 31, 2024 and 2023, the Company sold receivables of $1,104 million and $1,136 million, respectively, related to these arrangements.
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 Consolidated Balance Sheets and payments made under the SFP program are reflected in Cash Flows from Operating Activities in the Consolidated Statements of Cash Flows.
The activity of the Company's outstanding obligations confirmed as valid under its SFP for the years ended December 31, 2024, and 2023, is as follows:
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| Year Ended December 31, |
| In millions | 2024 | 2023 |
| Confirmed Obligations Outstanding at the Beginning of the Year | $ | 30 | | $ | 34 | |
| Invoices Confirmed During the Year | 108 | 117 |
| Confirmed Invoices Paid During the Year | (108) | | (121) | |
| Confirmed Obligations Outstanding at the End of the Year | $ | 30 | | $ | 30 | |
Non-cash additions to Property, Plant and Equipment, Net included within Accounts Payable on the Company’s Consolidated Balance Sheets were $198 million, $145 million and $55 million as of December 31, 2024, 2023 and 2022, respectively.
Covenant Restrictions
Covenants contained in the Current Credit Agreement and the Indentures may, among other things, limit the Company's ability to incur additional indebtedness, dispose of assets, incur guarantee obligations, prepay other indebtedness, repurchase shares, pay dividends and make other restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of the Indentures under which the Notes are issued, engage in mergers or consolidations, change the business conducted by the Company and its subsidiaries, and engage in certain transactions with affiliates. Such restrictions, as well as disruptions in the credit markets, 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.
Under the terms of the Current Credit Agreement, the Company must comply with a maximum Consolidated Total Leverage Ratio covenant and a minimum Consolidated Interest Expense Ratio covenant.
The Current Credit Agreement requires that the Company maintain a maximum Consolidated Total Leverage Ratio of less than 4.25 to 1.00. At December 31, 2024, the Company was in compliance with such covenant and the ratio was 2.81 to 1.00.
The Company must also comply with a minimum Consolidated Interest Expense Ratio of 3.00 to 1.00. At December 31, 2024, the Company was in compliance with such covenant and the ratio was 7.31 to 1.00.
As of December 31, 2024, the Company's credit was rated BB+ by Standard & Poor's and Ba1 by Moody's Investor Services. Standard & Poor's and Moody's Investor Services' ratings on the Company included a stable outlook.
Environmental Matters
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 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.
For further discussion of the Company’s environmental matters, see “Note 14 - Environmental and Legal Matters” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.”
International Operations
The Company has packaging facilities and one paperboard manufacturing facility in 20 countries outside of the U.S. and sells its products worldwide. For 2024, before intercompany eliminations, net sales from operations outside of the U.S. represented approximately 30% of the Company’s net sales. The Company’s revenues from export sales fluctuate with changes in foreign currency exchange rates. In addition, at December 31, 2024, approximately 26% of the Company's total assets were denominated in currencies other than the U.S. dollar. The Company has significant operations in countries that use the Euro, British pound sterling, Swedish krona, Polish zloty, the Australian dollar, the Canadian dollar, the Mexico peso or the Japanese yen as their functional currencies. The effect of changes in the U.S. dollar exchange rate against these currencies produced a net currency translation adjustment loss of $149 million, which was recorded in Other Comprehensive Income (Loss) for the year ended December 31, 2024. The magnitude and direction of this adjustment in the future depends on the relationship of the U.S. dollar to other currencies. The Company pursues a currency hedging program in order to reduce the impact of foreign currency exchange fluctuations on financial results. See “Financial Instruments” below.
Financial Instruments
The Company pursues a currency hedging program which utilizes derivatives to reduce the impact of foreign currency exchange fluctuations on its consolidated financial results. Under this program, the Company has previously entered into forward exchange contracts in the normal course of business to hedge certain foreign currency denominated transactions. Realized and unrealized gains and losses on these forward contracts are included in the measurement of the basis of the related foreign currency transaction when recorded. The Company also pursues a hedging program that utilizes derivatives designed to manage risks associated with future variability in cash flows and price risk related to future energy cost increases. Under this program, the Company has entered into natural gas swap contracts to hedge a portion of its forecasted natural gas usage for 2025. Realized gains and losses on these contracts are included in the financial results concurrently with the recognition of the commodity consumed. In addition, the Company has used interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan facility. The Company does not hold or issue financial instruments for trading purposes. See “Item 7A., Quantitative and Qualitative Disclosure About Market Risk.”
Off-Balance Sheet Arrangements
The Company had $30 million of standby letters of credit issued under a separate unsecured facility as of December 31, 2024 as disclosed in “Note 5 - Debt” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data. The Company does not have any other off-balance sheet arrangements.
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from these estimates, and changes in these estimates are recorded when known. The critical accounting policies used by management in the preparation of the Company’s consolidated financial statements are those that are important both to the presentation of the Company’s financial condition and results of operations and require significant judgments by management with regard to estimates used. The critical judgments by management relate to future cash flows associated with impairment testing for goodwill and long-lived assets, and deferred income taxes.
Goodwill
The Company evaluates goodwill for potential impairment annually as of October 1, as well as whenever events or changes in circumstances suggest that the fair value of a reporting unit may no longer exceed its carrying amount. Potential impairment of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. As of October 1, 2024, the Company had seven reporting units, five of which had goodwill.
Periodically, the Company may perform a qualitative impairment analysis of goodwill associated with each of its reporting units to determine if it is more likely than not that the carrying value of a reporting unit exceeded its fair value. If the results of the qualitative analysis of any of the reporting units is inconclusive, or if significant changes in the business have occurred since the last quantitative impairment assessment, the Company will perform a quantitative analysis for those reporting units.
As of October 1, 2024, the Company performed a quantitative impairment test. The quantitative analysis involves calculating the fair value of each reporting unit by utilizing a discounted cash flow analysis based on the Company’s business plans, discounted using a weighted average cost of capital and market indicators of terminal year cash flows based upon a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”).
Estimating the fair value of the reporting unit involves uncertainties as it requires management to consider a number of factors, including but not limited to, future operating results, business plans, economic projections of revenues and operating margins, estimated future cash flows, and market data and analysis, including market capitalization. Fair value determinations are sensitive to changes in the factors described above. There are inherent uncertainties related to these factors and judgments used to estimate reporting unit fair value and the related analysis of potential goodwill impairment.
The variability of the assumptions that management uses to perform the goodwill impairment test depends on a number of conditions, including uncertainty about future events and cash flows. Accordingly, the Company’s accounting estimates may materially change from period to period due to changing market factors. If the Company had used other assumptions and estimates or if different conditions occur in future periods, future operating results and cash flows could be materially impacted, and judgments and conclusions about the recoverability of goodwill could change. The assumptions used in the goodwill impairment testing process could also be adversely impacted by certain of the risks discussed in “Item 1A., Risk Factors” and thus could result in future goodwill impairment charges.
The Company performed its annual goodwill impairment tests as of October 1, 2024. The Company concluded that all reporting units with goodwill have a fair value that exceeded their carrying value, and thus goodwill was not impaired. The discount rate used for each reporting unit ranged from 7% to 8%, and we utilized a transaction multiple of 9.0 times to calculate terminal period cash flows. The Europe reporting unit had a fair value that exceeded its respective carrying value by 24%, whereas all other reporting units exceeded by more than 69%. If we had concluded that it was appropriate to increase the discount rate we used by 100 basis points to estimate the fair value of our respective reporting units, the fair value of each reporting unit would have continued to exceed its carrying amount. The Europe reporting unit had goodwill totaling $500 million. The Company does not believe it is likely that there will be material changes in the assumptions or estimates used to calculate the reporting unit fair values.
Recovery of Long-Lived Assets
The Company evaluates the recovery of its long-lived assets by analyzing operating results and considering significant events or changes in the business environment that may have triggered impairment. The Company reviews long-lived assets (including property, plant and equipment and intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of such long-lived assets may not be fully recoverable by undiscounted cash flows. Measurement of the impairment loss, if any, is based on the fair value of the asset, which is determined by an income, cost or market approach.
Deferred Income Taxes and Potential Assessments
According to the Income Taxes topic of the FASB Codification, a valuation allowance is required to be established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The FASB Codification provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient taxable income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset. The Company has evaluated the need to maintain a valuation allowance for deferred tax assets based on its assessment of whether it is more likely than not that deferred tax benefits would be realized through the generation of future taxable income. Appropriate consideration was given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. In determining whether a valuation allowance is required, many factors are considered, including the specific taxing jurisdiction, the carryforward period, reversals of existing taxable temporary differences, cumulative pretax book earnings, income tax strategies and forecasted earnings for the entities in each jurisdiction.
As of December 31, 2024, the Company has a valuation allowance of $45 million against its net deferred tax assets in certain foreign jurisdictions and against domestic deferred tax assets related to certain federal tax credit carryforwards. As of December 31, 2023, a total valuation allowance of $37 million was recorded.
As of December 31, 2024, the Company has provided for deferred U.S. income taxes attributable to future withholding tax expense related to the Company's equity investment in the joint venture, Rengo Riverwood Packaging, Ltd. In addition, the Company provided deferred income taxes for future Canadian withholding tax to the extent of excess cash available for distribution after consideration of working capital needs and other debt settlement of its Canadian subsidiary, Graphic Packaging International Canada, ULC. The Company continues to assert that it is permanently reinvested in the cumulative earnings of its Canadian subsidiary in excess of the amount of cash that is on hand and available for distribution after consideration of working capital needs and other debt settlement. The Company determined that no deferred tax liability should be recorded related to the outside basis difference of its Canadian subsidiary as of December 31, 2024.
The Company has not provided for deferred U.S. income taxes on outside basis differences of approximately $80 million in its other international subsidiaries because of the Company’s intention to indefinitely reinvest its earnings outside the U.S. The determination of the amount of the unrecognized deferred income tax liability (primarily withholding tax in certain jurisdictions) on the unremitted earnings or any other associated outside basis differences is not practicable because of the complexities associated with the calculation.
The Company has elected to recognize global intangible low-taxed income (“GILTI”) as a period cost as incurred, therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion upon reversal.
NEW ACCOUNTING STANDARDS
For a discussion of recent accounting pronouncements impacting the Company, see “Note 1 - Nature of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.”
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not trade or use derivative instruments with the objective of earning financial gains on interest or currency rates, nor does it use leveraged instruments or instruments where there are no underlying exposures identified.
Interest Rates
The Company is exposed to changes in interest rates, primarily as a result of its short-term and long-term debt, which include both fixed and floating rate debt. 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. At December 31, 2024, the Company had no outstanding interest rate swaps.
The table below sets forth interest rate sensitivity information related to the Company’s debt.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Long-Term Debt Principal Amount by Maturity-Average Interest Rate | | |
| Expected Maturity Date | | |
In millions | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | Fair Value |
Total Debt | | | | | | | | |
Fixed Rate | $— | $504 | $300 | $875 | $650 | $900 | $ | 3,229 | | $ | 3,096 | |
Average Interest Rate | —% | 1.98% | 4.75% | 3.10% | 3.10% | 5.21% | | |
Variable Rate | $14 | $23 | $35 | $285 | $1,458 | $2 | $ | 1,817 | | $ | 1,798 | |
| SOFR+ Spread | SOFR+ Spread | SOFR+ Spread | SOFR+ Spread | SOFR+ Spread | SOFR+ Spread | | |
Net Investment Hedge
On October 29, 2021 and November 19, 2021, the Company drew the full amount of the €210 million delayed draw term loan facility and completed a private offering of €290 million aggregate principal amount of the 2.625% senior unsecured notes due 2029, respectively. The Company designated this Euro-denominated debt as a non-derivative net investment hedge of a portion of our net investment in Euro functional currency denominated subsidiaries to offset currency fluctuations.
Derivatives not Designated as Hedges
The Company enters into forward exchange contracts to effectively hedge substantially all receivables resulting from transactions denominated in foreign currencies. The purpose of these forward exchange contracts is to protect the Company from the risk that the eventual functional currency cash flows resulting from the collection of these receivables will be adversely affected by changes in exchange rates. At December 31, 2024, multiple foreign currency forward exchange contracts existed, with maturities ranging up to eight months. Those forward currency exchange contracts outstanding at December 31, 2024, when aggregated and measured in U.S. dollars at December 31, 2024 contractual rates, had net notional amounts totaling $116 million. The Company continuously monitors these forward exchange contracts and adjusts accordingly to minimize the exposure.
Natural Gas Contracts
The Company has hedged a portion of its expected natural gas usage for 2025. The carrying value and fair value of the natural gas swap contracts is a net asset of $1 million as of December 31, 2024. Such contracts are designated as cash flow hedges and are accounted for by deferring the quarterly change in fair value of the outstanding contracts in Accumulated Other Comprehensive Loss in Shareholders’ Equity. The resulting gain or loss is reclassified into Cost of Sales concurrently with the recognition of the commodity consumed.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
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GRAPHIC PACKAGING HOLDING COMPANY | |
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Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2024 | |
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GRAPHIC PACKAGING HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | |
| Year Ended December 31, |
| In millions, except per share amounts | 2024 | 2023 | 2022 |
| Net Sales | $ | | | $ | | | $ | | |
| Cost of Sales | | | | | | |
| Selling, General and Administrative | | | | | | |
| Other Expense, Net | | | | | | |
| Business Combinations, Exit Activities and Other Special Items, Net | | | | | | |
| Income from Operations | | | | | | |
| Nonoperating Pension and Postretirement Benefit (Expense) Income | () | | () | | | |
| Interest Expense, Net | () | | () | | () | |
|
| Income before Income Taxes and Equity Income of Unconsolidated Entity | | | | | | |
| Income Tax Expense | () | | () | | () | |
| Income before Equity Income of Unconsolidated Entity | | | | | | |
| Equity Income of Unconsolidated Entity | | | | | | |
| Net Income | $ | | | $ | | | $ | | |
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| | | |
Net Income Per Share - Basic | $ | | | $ | | | $ | | |
Net Income Per Share - Diluted | $ | | | $ | | | $ | | |
The accompanying notes are an integral part of the consolidated financial statements.
GRAPHIC PACKAGING HOLDING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | | |
| Year Ended December 31, 2024 |
| In millions | Graphic Packaging Holding Company | Noncontrolling Interest | Total |
| Net Income | $ | | | $ | | | $ | | |
| Other Comprehensive Income (Loss), Net of Tax: | | | |
| Derivative Instruments | | | — | | | |
|
| Currency Translation Adjustment | () | | | | () | |
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| Total Other Comprehensive Loss, Net of Tax | () | | | | () | |
| Total Comprehensive Income | $ | | | $ | | | $ | | |
| | | |
| Year Ended December 31, 2023 |
| In millions | Graphic Packaging Holding Company | Noncontrolling Interest | Total |
| Net Income | $ | | | $ | | | $ | | |
| Other Comprehensive Income (Loss), Net of Tax: | | | |
| Derivative Instruments | | | — | | | |
| Pension and Postretirement Benefit Plans | () | | — | | () | |
| Currency Translation Adjustment | | | | | | |
| Total Other Comprehensive Income, Net of Tax | | | | | | |
| Total Comprehensive Income | $ | | | $ | | | $ | | |
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| Year Ended December 31, 2022 |
| In millions | Graphic Packaging Holding Company | Noncontrolling Interest | Total |
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Other Current Assets | | | | |
Assets Held for Sale | | | | |
Total Current Assets | | | | |
Property, Plant and Equipment, Net | | | | |
Goodwill | | | | |
Intangible Assets, Net | | | | |
Other Assets | | | | |
Total Assets | $ | | | $ | | |
| | |
LIABILITIES | | |
Current Liabilities: | | |
Short-Term Debt and Current Portion of Long-Term Debt | $ | | | $ | | |
Accounts Payable | | | | |
Compensation and Employee Benefits | | | | |
Interest Payable | | | | |
Other Accrued Liabilities | | | | |
Total Current Liabilities | | | | |
Long-Term Debt | | | | |
Deferred Income Tax Liabilities | | | | |
Accrued Pension and Postretirement Benefits | | | | |
Other Noncurrent Liabilities | | | | |
| | |
Commitments (Note 13) | | |
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SHAREHOLDERS' EQUITY | | |
Preferred Stock, par value $ per share; shares authorized; shares issued or outstanding | | | | |
Common Stock, par value $ per share; shares authorized; and shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively | | | | |
Capital in Excess of Par Value | | | | |
Retained Earnings | | | | |
Accumulated Other Comprehensive Loss | () | | () | |
Total Graphic Packaging Holding Company Shareholders' Equity | | | | |
Noncontrolling Interest | | | | |
Total Equity | | | | |
Total Liabilities and Shareholders' Equity | $ | | | $ | | |
The accompanying notes are an integral part of the consolidated financial statements.
GRAPHIC PACKAGING HOLDING COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | Capital in Excess of Par Value | (Accumulated Deficit) Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Noncontrolling Interests | Total Equity |
| In millions, except share amounts | Shares | Amount |
| Balances at December 31, 2021 | | | $ | | | $ | | | $ | | | $ | () | | $ | | | $ | | |
| Net Income | — | | — | | — | | | | — | | — | | | |
| | | |
| | | |
Other Comprehensive Income (Loss), Net of Tax: | | | | | | | |
Derivative Instruments | — | | — | | — | | — | | | | — | | | |
Pension and Postretirement Benefit Plans | — | | — | | — | | — | | () | | — | | () | |
| | | |
Currency Translation Adjustment | — | | — | | — | | — | | () | | () | | () | |
| | | |
| Repurchase of Common Stock | () | | — | | () | | () | | — | | — | | () | |
Dividends Declared | — | | — | | — | | () | | — | | — | | () | |
| | | |
Recognition of Stock-Based Compensation | — | | — | | | | — | | — | | — | | | |
Issuance of Shares for Stock-Based Awards | | | — | | — | | — | | — | | — | | | |
| Balances at December 31, 2022 | | | $ | | | $ | | | $ | | | $ | () | | $ | | | $ | | |
| Net Income | — | | — | | — | | | | — | | — | | | |
| | | |
Other Comprehensive Income (Loss), Net of Tax: | | | | | | | |
Derivative Instruments | — | | — | | — | | — | | | | — | | | |
Pension and Postretirement Benefit Plans | — | | — | | — | | — | | () | | — | | () | |
Currency Translation Adjustment | — | | — | | — | | — | | | | — | | | |
Repurchase of Common Stock | () | | — | | () | | () | | — | | — | | () | |
Dividends Declared | — | | — | | — | | () | | — | | — | | () | |
| | | |
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Recognition of Stock-Based Compensation | — | | — | | | | — | | — | | — | | | |
Issuance of Shares for Stock-Based Awards | | | — | | — | | — | | — | | — | | — | |
| Balances at December 31, 2023 | | | $ | | | $ | | | $ | | | $ | () | | $ | | | $ | | |
| Net Income | — | | — | | — | | | | — | | — | | | |
| | | |
Other Comprehensive Income (Loss), Net of Tax: | | | | | | | |
Derivative Instruments | — | | — | | — | | — | | | | — | | | |
| | | |
Currency Translation Adjustment | — | | — | | — | | — | | () | | — | | () | |
Repurchase of Common Stock | () | | — | | () | | () | | — | | — | | () | |
Dividends Declared | — | | — | | — | | () | | — | | — | | () | |
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Recognition of Stock-Based Compensation | — | | — | | | | — | | — | | — | | | |
Issuance of Shares for Stock-Based Awards | | | — | | — | | — | | — | | — | | — | |
| Balances at December 31, 2024 | | | $ | | | $ | | | $ | | | $ | () | | $ | | | $ | | |
The accompanying notes are an integral part of the consolidated financial statements.
GRAPHIC PACKAGING HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | |
| Year Ended December 31, |
| In millions | 2024 | 2023 | 2022 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net Income | $ | | | $ | | | $ | | |
| | | |
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: | | | |
| Depreciation and Amortization | | | | | | |
|
| Amortization of Deferred Debt Issuance Costs | | | | | | |
| Deferred Income Taxes | () | | | | | |
| Amount of Postretirement Expense Less Than Funding | () | | () | | () | |
| Gain on Disposal of Business | () | | | | | |
| Asset Impairment Charges | | | | | | |
| Share Based Compensation Expense | | | | | | |
| Other, Net | | | | | () | |
Changes in Operating Assets and Liabilities, Net of Acquisitions (See Note 3) | () | | () | | () | |
Net Cash Provided by Operating Activities | | | | | | |
| | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Capital Spending | () | | () | | () | |
Packaging Machinery Spending | () | | () | | () | |
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Acquisition of Businesses, Net of Cash Acquired | | | () | | | |
| Proceeds from the Sale of Business | | | | | | |
Beneficial Interest on Sold Receivables | | | | | | |
Beneficial Interest Obtained in Exchange for Proceeds | () | | () | | () | |
Other, Net | () | | | | () | |
Net Cash Used in Investing Activities | () | | () | | () | |
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CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
|
Repurchase of Common Stock | () | | () | | () | |
Payments on Debt | () | | () | | () | |
Proceeds from Issuance of Debt | | | | | | |
| Retirement of Long-Term Debt | () | | | | () | |
|
Borrowings under Revolving Credit Facilities | | | | | | |
Payments on Revolving Credit Facilities | () | | () | | () | |
Debt Issuance Costs | () | | | | | |
Repurchase of Common Stock related to Share-Based Payments | () | | () | | () | |
Dividends Paid | () | | () | | () | |
|
Other, Net | | | () | | | |
Net Cash Used in Financing Activities | () | | () | | () | |
| | | |
| Increase (Decrease) in cash and cash equivalents, including cash classified within assets held for sale | | | | | () | |
| Less: Cash reclassified to Assets Held for Sale | | | | | | |
| Effect of Exchange Rate Changes on Cash | () | | () | | () | |
| Net (Decrease) Increase in Cash and Cash Equivalents | () | | | | () | |
Cash and Cash Equivalents at Beginning of Year | | | | | | |
| Cash and Cash Equivalents at End of Year | $ | | | $ | | | $ | | |
| | | |
Non-cash Investing Activities: | | | |
| Beneficial Interest Obtained in Exchange for Trade Receivables | $ | | | $ | | | $ | | |
| Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities | $ | | | $ | | | $ | | |
| | | |
Non-cash Financing Activities: | | | |
Right-of-Use Assets Obtained in Exchange for New Finance Lease Liabilities | $ | | | $ | | | $ | | |
|
The accompanying notes are an integral part of the consolidated financial statements.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 —
% ownership interest that is accounted for using the equity method.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | | |
| Proceeds Collected on Behalf of Financial Institutions | | |
| Net Proceeds Received from Financial Institutions | | | |
Deferred Purchase Price at December 31(a) | | |
| Pledged Receivables at December 31 | | |
(a) Included in Other Current Assets on the 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 consists principally of collection services, were $ million and $ million as of December 31, 2024 and 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. As of December 31, 2024 and 2023, the Company sold receivables of $ million and $ million, respectively, related to these arrangements.
$ | | | $ | | | | Invoices Confirmed During the Year | | |
| Confirmed Invoices Paid During the Year | () | | () | |
| Confirmed Obligations Outstanding at the End of the Year | $ | | | $ | | |
Non-cash additions to Property, Plant and Equipment, Net included within Accounts Payable on the Consolidated Balance Sheets were $ million, $ million, and $ million as of December 31, 2024, 2023 and 2022, respectively.
customer accounted for more than 10% of net sales.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
million or more. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. Capitalized interest was $ million, $ million and $ million for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company assesses its long-lived assets, including certain identifiable intangibles, for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. To analyze recoverability, the Company projects future cash flows, undiscounted and before interest, over the remaining life of such assets. If these projected cash flows are less than the carrying amount, an impairment would be recognized, resulting in a write-down of assets with a corresponding charge to earnings. The impairment loss is measured based upon the difference between the carrying amount and the fair value of the assets. The Company assesses the appropriateness of the useful life of its long-lived assets periodically.
yearsLand improvements | years |
Machinery and equipment | to years |
Furniture and fixtures | years |
Automobiles, trucks and tractors | to years |
Depreciation expense, including the depreciation expense of assets under finance leases, for 2024, 2023 and 2022 was $ million, $ million and $ million, respectively.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | () | | $ | | | | $ | | | $ | () | | $ | | | Non-Compete Agreements | | | () | | | | | | | | | | |
Patents, Trademarks, Licenses, Leases and Developed Technology | | | () | | | | | | | () | | | |
| | | |
Total | $ | | | $ | () | | $ | | | | $ | | | $ | () | | $ | | |
The Company recorded amortization expense for the years ended December 31, 2024, 2023 and 2022 of $ million, $ million and $ million, respectively. The Company expects amortization expense for the next five consecutive years to be approximately as follows: $ million, $ million, $ million, $ million, and $ million.
| $ | | | $ | | | $ | | | $ | | | Acquisition of Businesses(b) | | | | | | | | | | |
Foreign Currency Effects | | | | | | | () | | | |
Balance at December 31, 2023 | $ | | | $ | | | $ | | | $ | | | $ | | |
Acquisition of Businesses(b) | () | | | | | | | | () | |
Disposal of business(c) | | | | | () | | | | () | |
Foreign Currency Effects | () | | () | | | | () | | () | |
Balance at December 31, 2024 | $ | | | $ | | | $ | | | $ | | | $ | | |
(a) Includes Australia operating segment.
(b) Represents goodwill and final purchase accounting adjustments recorded for Bell and Tama, respectively.
(c) Relates to the Company's divestiture of its Augusta Paperboard Manufacturing Facility (see "Note 19 - Divestitures").
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
million and $ million, respectively. The liabilities are primarily reflected as Other Noncurrent Liabilities on the Consolidated Balance Sheets.
primary activities, manufacturing and the converting of paperboard for and into consumer packaging made from renewable 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 15 - Business Segment and Geographic Area 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.
. For the years ended December 31, 2024, 2023 and 2022, the Company recognized $ million, $ million and $ million, respectively, of revenue from contracts with customers.
As of December 31, 2024 and 2023, contract assets were $ million and $ million, respectively. The Company's contract liabilities consist principally of rebates, and as of December 31, 2024 and 2023 were $ million and $ million, respectively.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Expenses for the years ended December 31, 2024, 2023 and 2022 were $ million, $ million, and $ million, respectively.
| $ | | | $ | | | Exit Activities(b) | | | | | | |
(Gains)/Charges Associated with a Divestiture(c) | () | | | | | |
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| Total lease costs, net | $ | | | $ | | |
Supplemental cash flow information related to leases was as follows:
| | | | | | | | |
| Year Ended December 31, |
| In millions | 2024 | 2023 |
Cash paid for amounts included in the measurement of lease liabilities: | | |
| Operating cash flows from operating leases | $ | | | $ | | |
| Operating cash flows from finance leases | | | | |
| Financing cash flows from finance leases | | | | |
Right-of-use assets obtained in exchange for lease obligations: | | |
| Operating leases | | | | |
| Finance leases | | | | |
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | | | | Current operating lease liabilities | Other Accrued Liabilities | $ | | | $ | | |
| Noncurrent operating lease liabilities | Other Noncurrent Liabilities | | | | |
| Total operating lease liabilities | | $ | | | $ | | |
| | | |
| Finance Leases: | | | |
| Property, Plant and Equipment | | $ | | | $ | | |
| Accumulated depreciation | | () | | () | |
| Property, Plant and Equipment, net | | $ | | | $ | | |
| Current finance lease liabilities | Short-Term Debt and Current Portion of Long-Term Debt | $ | | | $ | | |
| Noncurrent finance lease liabilities | Long-Term Debt | | | | |
| Total finance lease liabilities | | $ | | | $ | | |
| | | |
| Weighted Average Remaining Lease Term (Years): | | |
| Operating leases | | | |
| Finance leases | | | |
| | | |
| Weighted Average Discount Rate: | | | |
| Operating leases | | | % | | % |
| Finance leases | | | % | | % |
| $ | | | | 2026 | | | | |
| 2027 | | | | |
| 2028 | | | | |
| 2029 | | | | |
| Thereafter | | | | |
| Total lease payments | $ | | | $ | | |
| Less imputed interest | () | | () | |
| Total | $ | | | $ | | |
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 7 —
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 December 31, 2024, there were 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 from the date of grant. RSUs granted to employees generally contain some combination of service and performance objectives based on various financial targets that must be met for the RSUs to vest, and a relative total shareholder return modifier. 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.
| | | | | Weighted-average grant date fair value | $ | | | $ | | | $ | | |
Stock Awards - Board of Directors | | | | | | |
Weighted-average grant date fair value | $ | | | $ | | | $ | | |
|
|
| Outstanding - December 31, 2023 | | | $ | | |
Granted(a) | | | | |
| Released | () | | | |
| Forfeited | () | | | |
Performance adjustment(b) | | | | |
| Outstanding - December 31, 2024 | | | $ | | |
(a) Grant activity for all performance-based RSUs is disclosed at target.
(b) Reflects the number of RSUs paid out above target levels based on actual performance measured at the end of the performance period.
The initial value of the service-based RSUs is generally based on the closing market value of GPHC’s common stock on the date of grant, discounted to reflect that the RSUs do not accrue dividends during the vesting period. The 2024 performance-based RSU grants were valued using a Monte Carlo simulation as the total shareholder return contains a market condition. RSUs are recorded in Shareholders' Equity. The unrecognized expense at December 31, 2024 is approximately $ million and is expected to be recognized over a weighted average period of years.
The value of stock awards granted to the Company's directors as compensation are based on the market value of GPHC’s common stock on the date of grant. These awards are unrestricted on the date of grant.
During 2024, 2023, and 2022, $ million, $ million and $ million, respectively, were charged to compensation expense for stock incentive plans and such amounts are included in Selling, General and Administrative expenses in the Consolidated Statements of Operations. In addition, during 2024 $ million was charged to compensation expense for the incremental expense related to the change of vesting provisions in the 2024 grants and included in Business Combinations, Exit Activities and Other Special Items, Net in the Consolidated Statements of Operations.
During 2024, 2023, and 2022, RSUs with an aggregate fair value of $ million, $ million and $ million, respectively, vested and were paid out. The RSUs vested and paid out in 2024 were granted primarily during 2021.
NOTE 8 —
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | | | $ | | | $ | | | $ | | | $ | | | Interest Cost | | | | | | | | | | | | |
| | |
Expected Return on Plan Assets | () | | () | | () | | | | | | | |
Amortization: | | | | | | |
| | |
Amortization of Actuarial Loss (Gain) | | | | | | | () | | () | | () | |
Net Curtailment Loss | | | | | | | | | | | | |
| | |
| | |
| | |
Net Periodic Cost (Benefit) | $ | | | $ | | | $ | | | $ | () | | $ | () | | $ | () | |
% | | % | | % | | % | | % | | % | Rate of Increase in Future Compensation Levels | | % | | % | | % | | % | | | | |
Expected Long-Term Rate of Return on Plan Assets | | % | | % | | % | | % | | | | |
Initial Health Care Cost Trend Rate | | | | | | | | % | | % | | % |
Ultimate Health Care Cost Trend Rate | | | | | | | | % | | % | | % |
Ultimate Year | — | | — | | — | | 2033 | 2032 | 2031 |
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | | | $ | | | $ | | | Service Cost | | | | | | | | |
Interest Cost | | | | | | | | |
Net Actuarial Loss (Gain) | () | | | | () | | | |
Foreign Currency Exchange | () | | | | | | | |
Curtailment Loss | | | | | | | | |
|
Benefits Paid | () | | () | | () | | () | |
Acquisition | | | | | | | | |
|
Other | | | | | | | | |
Benefit Obligation at End of Year | $ | | | $ | | | $ | | | $ | | |
| | | | |
Change in Plan Assets: | | | | |
Fair Value of Plan Assets at Beginning of Year | $ | | | $ | | | $ | | | $ | | |
Actual Return on Plan Assets | () | | | | | | | |
Employer Contributions | | | | | | | | |
Foreign Currency Exchange | () | | | | | | | |
Benefits Paid | () | | () | | () | | () | |
Acquisition | | | | | | | | |
|
Other | () | | | | | | | |
Fair Value of Plan Assets at End of Year | $ | | | $ | | | $ | | | $ | | |
Plan Assets Less than Projected Benefit Obligation | $ | () | | $ | () | | $ | () | | $ | () | |
| | | | |
Amounts Recognized on the Consolidated Balance Sheets Consist of: | | | | |
Pension Assets | $ | | | $ | | | $ | | | $ | | |
Accrued Pension and Postretirement Benefits Liability — Current | $ | () | | $ | () | | $ | () | | $ | () | |
Accrued Pension and Postretirement Benefits Liability — Noncurrent | $ | () | | $ | () | | $ | () | | $ | () | |
Accumulated Other Comprehensive Income: | | | | |
Net Actuarial Loss (Gain) | $ | | | $ | | | $ | () | | $ | | |
Prior Service Cost (Credit) | $ | | | $ | | | $ | () | | $ | () | |
Weighted Average Calculations: | | | | |
Discount Rate | | % | | % | | % | | % |
Rates of Increase in Future Compensation Levels | | % | | % | | | | |
Initial Health Care Cost Trend Rate | | | | | | % | | % |
Ultimate Health Care Cost Trend Rate | | | | | | % | | % |
Ultimate Year | — | | — | | 2034 | 2033 |
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The discount rate used to determine the present value of future pension obligations at December 31, 2024 was based on a yield curve constructed from a portfolio of high-quality corporate debt securities with maturities ranging from year to years. Each year’s expected future benefit payments were discounted to their present value at the spot yield curve rate thereby generating the overall discount rate for the Company’s pension obligations. The weighted average discount rate used to determine the pension obligations was % and % in 2024 and 2023, respectively.
The pension net actuarial gain of $ million was primarily due to changes in the discount rate. The weighted average discount rate at December 31, 2024 was % compared to % at December 31, 2023.
Accumulated Benefit Obligation
The accumulated benefit obligation, (“ABO”), for all defined benefit pension plans was $ million and $ million at December 31, 2024 and 2023, respectively. The projected benefit obligation (“PBO”) and fair value of plan assets where the PBO exceeded plan assets were $ million and $ million at December 31, 2024 and 2023, respectively. The ABO and fair value of plan assets where the ABO exceeded plan assets were $ million and $ million at December 31, 2024 and 2023, respectively.
Employer Contributions
The Company made $ million and $ million of contributions to its pension plans during 2024 and 2023, respectively. The Company expects to make contributions in the range of $ million to $ million in 2025.
The Company also made postretirement health care benefit payments of $ million and $ million during 2024 and 2023, respectively. For 2025, the Company expects to make approximately $ million of contributions to its postretirement health care plans.
Pension Assets
The Company’s overall investment strategy is to achieve a mix of investments for long-term growth and near-term benefit payments through diversification of asset types, fund strategies and fund managers. Investment risk is measured on an on-going basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. The plans invest in the following major asset categories: cash, equity securities, fixed income securities, real estate and diversified growth funds. At December 31, 2024 and 2023, pension investments did not include any direct investments in the Company’s stock or the Company’s debt.
The Company implemented a de-risking or liability driven investment strategy for its North America. and U.K. pension plans. This strategy moved assets from return seeking (equities) to investments that mirror the underlying benefit obligations (fixed income).
% | | % | | % | Equity Securities | | | | | | |
Fixed Income Securities | | | | | | |
Other Investments | | | | | | |
Total | | % | | % | | % |
The plans’ investment in equity securities primarily includes investments in U.S. and international companies of varying sizes and industries. The strategy of these investments is to 1) exceed the return of an appropriate benchmark for such equity classes and 2) through diversification, reduce volatility while enhancing long term real growth.
The plans’ investment in fixed income securities includes government bonds, investment grade bonds and non-investment grade bonds across a broad and diverse issuer base. The strategy of these investments is to provide income and stability and to diversify the fixed income exposure of the plan assets, thereby reducing volatility.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | | | $ | () | | $ | | | $ | | | Equity Securities: | | | | | |
Domestic | | | | | | | | | | |
Foreign | | | | | | | | | | |
Fixed Income Securities | | | | | | | | | | |
Other Investments: | | | | | |
| |
| |
Diversified growth fund(a) | | | | | | | | | | |
| Insurance Contracts | | | | | | | | | | |
Total | $ | | | $ | | | $ | | | $ | | | $ | | |
| | | | | | | | | | | | | | | | | |
| | Fair Value Measurements at December 31, 2023 | |
| In millions | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Net Asset Value at December 31, 2023(b) |
Asset Category: | | | | | |
Cash | $ | | | $ | | | $ | | | $ | | | $ | | |
Equity Securities: | | | | | |
Domestic | | | | | | | | | | |
Foreign | | | | | | | | | | |
Fixed Income Securities | | | | | | | | | | |
Other Investments: | | | | | |
| |
| |
|
|
|
|
|
|
|
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Estimated Future Benefit Payments
| $ | | | | 2026 | | | | |
| 2027 | | | | |
| 2028 | | | | |
| 2029 | | | | |
| 2030— 2034 | | | | |
Multi-Employer Plans
Certain of the Company’s employees participate in multi-employer plans that provide both pension and other postretirement health care benefits to employees under union-employer organization agreements.
Estimated liabilities have been established related to the partial or complete withdrawal from certain multi-employment benefit plans for facilities that have been closed. At December 31, 2024 and December 31, 2023, the Company has withdrawal liabilities of $ million and $ million, respectively, related to these plans, which is recorded as Compensation and Employee Benefits and Other Noncurrent Liabilities on the Consolidated Balance Sheets, which represents the Company's best estimate of the expected withdrawal liability.
DEFINED CONTRIBUTION PLANS
million, $ million and $ million, respectively.
NOTE 9 —
| $ | | | $ | | | International | | | | | | |
Income before Income Taxes and Equity Income of Unconsolidated Entity | $ | | | $ | | | $ | | |
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | () | | $ | () | | International | () | | () | | () | |
Total Current | $ | () | | $ | () | | $ | () | |
| | | |
Deferred (Expense) Benefit: | | | |
U.S. | $ | | | $ | () | | $ | () | |
International | | | | | | |
Total Deferred | | | () | | () | |
Income Tax Expense | $ | () | | $ | () | | $ | () | |
% compared with the Company’s actual Income Tax (Expense) Benefit is as follows:
| | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| In millions | 2024 | Percent | 2023 | Percent | 2022 | Percent |
Income Tax Expense at U.S. Statutory Rate | $ | () | | | % | $ | () | | | % | $ | () | | | % |
U.S. State and Local Tax Expense | () | | | | () | | | | () | | | |
Permanent Items | | | () | | | | () | | | | () | |
Provision to Return Adjustments | | | () | | () | | | | | | () | |
Change in Valuation Allowance | () | | | | | | () | | () | | | |
Foreign Exchange Impacts | | | () | | () | | | | | | () | |
International Tax Rate Differences | () | | | | () | | | | () | | | |
| | |
U.S. Federal & State Tax Credits | | | () | | | | () | | | | () | |
| | |
| | |
| | |
|
|
|
|
|
|
Property, Plant and Equipment | $ | () | | $ | () | |
Goodwill & Other Intangibles | () | | () | |
|
Other | () | | () | |
Net Noncurrent Deferred Income Tax Liabilities | () | | () | |
Net Deferred Income Tax Liability | $ | () | | $ | () | |
The Company has evaluated the need to maintain a valuation allowance for deferred tax assets based on its assessment of whether it is more likely than not that deferred tax assets will be realized through the generation of future taxable income. Appropriate consideration was given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. The Company reviewed its deferred income tax assets as of December 31, 2024 and 2023, respectively, and determined that it is more likely than not that a portion will not be realized. A valuation allowance of $ million and $ million as of December 31, 2024 and 2023, respectively, is maintained on the deferred income tax assets for which the Company has determined that realization is not more likely than not. Of the total valuation allowance at December 31, 2024, $ million relates to net deferred tax assets in various foreign jurisdictions and $ million relates to credit carryforwards in certain U.S. states as well as U.S. foreign tax credit carryforwards. The need for a valuation allowance is made on a jurisdiction-by-jurisdiction basis. As of December 31, 2024, the Company concluded that due to cumulative pretax losses and the lack of sufficient future taxable income of the appropriate character, realization is not more likely than not on the net deferred income tax assets related to the Company’s operations in Australia as well as certain operations in Germany, Nigeria and Sweden.
| $ | | | $ | | | $ | () | | $ | () | | $ | | | 2023 | | | | | | | () | | () | | | |
2022 | | | | | | | () | | () | | | |
The Company's U.S. state net operating loss carryforwards total $ million and expire in various years through 2041. International net operating loss carryforward amounts total $ million, of which substantially all have no expiration date.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Uncertain Tax Positions
| $ | | | $ | | | Additions for Tax Positions of Current Year | | | | | | |
Additions for Tax Positions of Prior Years | | | | | | |
Reductions for Tax Positions of Prior Years | () | | () | | () | |
Balance at December 31, | $ | | | $ | | | $ | | |
At December 31, 2024, $ million of the total gross unrecognized tax benefits, if recognized, would affect the annual effective income tax rate. As of December 31, 2024, none of the total gross unrecognized tax benefits recorded are related to indefinite lived deferred tax assets and did not have an impact on total tax expense.
The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in Income Tax Expense. The Company had an immaterial accrual for the payment of interest and penalties at December 31, 2024.
The Company anticipates that an immaterial portion of the total unrecognized tax benefits at December 31, 2024 could change within the next twelve months.
The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions and our income tax filings are regularly examined by federal, state and non-U.S. tax authorities. The Company’s 2018 U.S. federal corporate and partnership income tax filings are currently under examination by the Internal Revenue Service. With few exceptions, the Company is no longer subject to U.S. federal, state and local tax examinations for years before 2018.
As of December 31, 2024, the Company has provided for deferred income taxes attributable to future foreign withholding tax expense related to the Company's equity investment in the joint venture, Rengo Riverwood Packaging, Ltd. In addition, Company provides deferred income taxes for future Canadian withholding tax to the extent of excess cash available for distribution after consideration of working capital needs and other debt settlement of its Canadian subsidiary, Graphic Packaging International Canada, ULC. The Company continues to assert that it is permanently reinvested in the cumulative earnings of its Canadian subsidiary in excess of the amount of cash that is on hand and available for distribution after consideration of working capital needs and other debt settlement. The Company determined that deferred tax liability should be recorded related to the outside basis difference of its Canadian subsidiary as of December 31, 2024.
The Company has not provided for deferred U.S. income taxes on approximately $ million of its undistributed earnings in other international subsidiaries because of the Company’s intention to indefinitely reinvest these earnings outside the U.S. The determination of the amount of the unrecognized deferred U.S. income tax liability (primarily withholding tax in certain jurisdictions) on the unremitted earnings or any other associated outside basis difference is not practicable because of the complexities associated with the calculation.
The Company has elected to recognize global intangible low-taxed income (“GILTI”) as period cost as incurred, therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion upon reversal.
NOTE 10 —
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
During 2024 and 2023, there were amounts of ineffectiveness. Additionally, there were 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. On May 1, 2024, the Company completed the Augusta divestiture. The allocation of natural gas swap contracts identified for Augusta were dedesignated and treated as a derivative not designated as hedges on a go-forward basis until the contracts' expired in 2024. Charges or gains 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 % of its expected natural gas usage for 2025. For more information, see “Note 19 - Divestitures”.
During 2024 and 2023, there were amounts of ineffectiveness related to changes in the fair value of natural gas swap contracts. Additionally, there were 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 December 31, 2024 and 2023, multiple foreign currency forward exchange contracts existed, with maturities ranging up to . Those foreign currency exchange contracts outstanding at December 31, 2024 and 2023, when aggregated and measured in U.S. dollars at contractual rates at December 31, 2024 and 2023, respectively, had net notional amounts totaling $ million and $ million. Unrealized gains and losses resulting from these contracts are recognized in Other Expense, Net in the Consolidated Statements of Operations and approximately offset corresponding recognized but unrealized gains and losses on the remeasurement of these accounts receivable.
Foreign Currency Movement Effect
For the year ended December 31, 2024, 2023 and 2022 net currency exchange losses included in determining Income from Operations were $ million, $ million, and $ million, respectively.
NOTE 11 —
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The fair values of the Company’s other financial assets and liabilities at December 31, 2024 and 2023 approximately equal the carrying values reported on the 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 $ million and $ million, as compared to the carrying amounts of $ million and $ million as of December 31, 2024 and 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.
Effect of Derivative Instruments
| $ | | | $ | | | | Cost of Sales | $ | | | $ | | | $ | () | | | | | | | | | | |
Interest Rate Swap Agreements | | | () | | | | | Interest Expense, Net | () | | () | | | |
| Total | $ | | | $ | | | $ | | | | | $ | | | $ | | | $ | () | |
At December 31, 2024, the Company expects to reclassify $ million of pre-tax gain 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.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | () | | $ | () | |
Commodity Contracts(a) | Business Combinations, Exit Activities and Other Special Items, Net | | | | | | |
| Total | | $ | () | | $ | () | | $ | () | |
(a) Relates to hedge dedesignation as a result of the Augusta Divestiture (see "Note 10 - Derivatives").
NOTE 12 —
| $ | () | | $ | | | | $ | | | $ | () | | $ | | | | $ | | | $ | () | | $ | | | Pension and Postretirement Benefit Plans Gain (Loss) | | | () | | | | | () | | | | () | | | () | | | | () | |
Currency Translation Adjustment (Loss) Gain | () | | () | | () | | | | | | | | | | () | | | | () | |
| | | | | | | |
| | | | | | | |
| Other Comprehensive (Loss) Income | $ | () | | $ | () | | $ | () | | | $ | | | $ | | | $ | | | | $ | () | | $ | | | $ | () | |
| $ | () | | Pension and Postretirement Benefit Plans | () | | () | |
Currency Translation Adjustment | () | | () | |
|
|
Accumulated Other Comprehensive Loss | $ | () | | $ | () | |
NOTE 13 —
| | 2026 | | |
| 2027 | | |
| 2028 | | |
| 2029 | | |
Thereafter | | |
Total | $ | | |
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 14 —
NOTE 15 —
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 North American paperboard manufacturing facilities that produce recycled, unbleached and bleached paperboard, which is primarily consumed internally to produce paperboard consumer packaging for the Americas and Europe Paperboard Packaging segments. Paperboard not consumed internally is sold externally to a small group of paperboard packaging converters. 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, which does not meet the criteria of a reportable segment, 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 ("CODM") based primarily on Income from Operations as adjusted for depreciation and amortization. The Company’s CODM, who is responsible for allocating resources, assessing performance of the operating segments and making strategic decisions, has been identified as the Chief Executive Officer. The Company’s segments maintain separate financial information, and the CODM evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The accounting policies of the reportable segments are the same as those described above in “Note 1 - Nature of Business and Summary of Significant Accounting Policies.”
The Company did not have any one customer who accounted for 10% or more of the Company's net sales during 2024, 2023 or 2022.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | | | $ | | | $ | | | $ | | | Cost of Sales(b) | | | | | | | | | | |
Selling, General and Administrative(b) | | | | | | | | | | |
Other(c) | | | | | () | | | | | |
| |
Income (Loss) from Operations | $ | | | $ | | | $ | () | | $ | () | | $ | | |
| | | | | |
| Other Segment Information | | | | | |
Capital Expenditures | $ | | | $ | | | $ | | | $ | | | $ | | |
| Depreciation and Amortization | | | | | | | | | | |
| | (a) Includes revenue from customers for the Australia and Pacific Rim operating segments reported within Corporate and Other.
(b) Cost of Sales and Selling, General and Administrative both include depreciation and amortization, while Cost of Sales also includes accelerated depreciation related to exit activities for all segments presented (see “Note 18 - Exit Activities”).
(c) Includes expenses related to business combinations, exit activities and other special charges for all segments presented (see “Note 1 - General Information”) and a gain from the Augusta Divestiture in Paperboard Manufacturing (see “Note 19 - Divestitures”).
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2023 |
| In millions | Americas Paperboard Packaging | Europe Paperboard Packaging | Paperboard Manufacturing | Corporate and Other | Total |
Net Sales(a) | $ | | | $ | | | $ | | | $ | | | $ | | |
Cost of Sales(b) | | | | | | | | | | |
Selling, General and Administrative(b) | | | | | | | | | | |
Other(c) | | | | | | | () | | | |
| |
Income (Loss) from Operations | $ | | | $ | | | $ | () | | $ | () | | $ | | |
| | | | | |
| Other Segment Information | | | | | |
Capital Expenditures | $ | | | $ | | | $ | | | $ | | | $ | | |
| Depreciation and Amortization | | | | | | | | | | |
| |
(a) Includes revenue from customers for the Australia and Pacific Rim operating segments reported within Corporate and Other.
(b) Cost of Sales and Selling, General and Administrative both include depreciation and amortization, while Cost of Sales also includes accelerated depreciation related to exit activities for all segments presented (see “Note 18 - Exit Activities”).
(c) Includes expenses related to business combinations, exit activities and other special charges for all segments presented (see “Note 1 - General Information”) and impairment charges related to Russia in Europe Paperboard Packaging (see "Note 19 - Divestitures").
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| $ | | | $ | | | $ | | | $ | | |
Cost of Sales(b) | | | | | | | | | | |
Selling, General and Administrative(b) | | | | | | | | | | |
Other(c) | | | | | | | () | | | |
| |
Income (Loss) from Operations | $ | | | $ | | | $ | | | $ | | | $ | | |
| | | | | |
| Other Segment Information | | | | | |
Capital Expenditures | $ | | | $ | | | $ | | | $ | | | $ | | |
| Depreciation and Amortization | | | | | | | | | | |
| | (a) Includes revenue from customers for the Australia and Pacific Rim operating segments reported within Corporate and Other.
(b) Cost of Sales and Selling, General and Administrative both include depreciation and amortization, while Cost of Sales also includes accelerated depreciation related to exit activities in Paperboard Manufacturing (see “Note 18 - Exit Activities”).
| $ | | | $ | | |
International(a) | | | | | | |
|
|
Total | $ | | | $ | | | $ | | |
| | | | | | | | | | | |
| In millions | 2024 | 2023 | 2022 |
LONG-LIVED ASSETS AT DECEMBER 31: | | | |
United States | $ | | | $ | | | $ | | |
International(a) | | | | | | |
|
|
|
|
)) )) |
| | |
| | |
| () | |
(a) See following table for details about these reclassifications.
| | Cost of Sales | |
Interest Rate Swap Agreements | | () | | | Interest Expense, Net |
| | | | | Total before Tax |
| | () | | | Tax Benefit |
| | $ | | | | Total, Net of Tax |
| | | | |
Amortization of Defined Benefit Pension Plans: | | | | |
|
|
| Actuarial Losses | | $ | | | (a) | Total before Tax |
| | () | | | Tax Benefit |
| | $ | | | | Total, Net of Tax |
| | | | |
Amortization of Postretirement Benefit Plans: | | | | |
|
|
| Actuarial Gains | | $ | () | | (a) | Total before Tax |
| | | | | Tax Expense |
| | $ | () | | | Total, Net of Tax |
| | | | |
Total Reclassifications for the Period | | $ | | | | Total, Net of Tax |
(a) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see “Note 8 - Pensions and Other Postretirement Benefits”).
NOTE 18 —
million relating to multiple packaging facilities that met the held for sale criteria as of December 31, 2024.
GRAPHIC PACKAGING HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In the second quarter of 2023, the Company announced its decision to accelerate the closure of of these three recycled paperboard manufacturing facilities that was 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 year ended December 31, 2023.
During the third quarter of 2023, the Company decided to discontinue the project in Texarkana to modify an existing paperboard machine to add swing capacity between bleached and unbleached paperboard in order to focus growth investments in the strategic expansion of recycled paperboard capacity. The Company incurred charges of $ million within the Paperboard Manufacturing reportable segment related to the write-off of assets, which were primarily engineering, consulting, and permitting costs for this project. The costs associated with this project are included in the table below for the year ended December 31, 2023.
During the third quarter of 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. Through December 31, 2024, the Company incurred charges of $ million related to the write-off of inventory, dismantling of the recycled paperboard machine and accelerated depreciation for the assets. The costs associated with these exit activities are included in the table below for the year ended December 31, 2024 and 2023.
2022
In March 2022, the Company announced its decision to close the Norwalk, Ohio packaging facility and closed the facility in September 2022. The Company incurred charges associated with this exit activity for post-employment benefits, retention bonuses and incentives, which are included in the Severance Costs and Other line item in the table below for the year ended December 31, 2022.
During 2019, the Company announced its plans to invest in a new recycled paperboard machine in Kalamazoo, Michigan. At the time of the announcement, the Company expected to close of its smaller recycled paperboard manufacturing facilities in 2022 in order to remain capacity neutral. During the third quarter of 2021, the Company decided to continue to operate of the original smaller recycled paperboard manufacturing facilities. In the second quarter of 2022, the Company closed the Battle Creek, Michigan recycled paperboard manufacturing facility. The Company incurred charges associated with this exit activity for post-employment benefits, retention bonuses and incentives, which are included in the Severance Costs and Other line item in the table below for the year ended December 31, 2022.
During the years ended December 31, 2024, 2023, and 2022, the Company recorded $ million, $ million and $ million of exit costs, respectively, associated with these restructurings. Other costs associated with the start-up of the new recycled paperboard machine recorded in the period in which they are incurred.
| $ | | | $ | | | |
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| 4.1 | |
| 4.2 | |
| 4.3 | |
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| 4.4 | |
| 4.5 | |
| | | | | |
| 4.6 | |
| 4.7 | |
| 4.8 | |
| 4.9 | |
| 4.10 | |
| 4.11 | Eighth Supplemental Indenture, dated as of November 19, 2021, by and among Graphic Packaging International, LLC, Graphic Packaging International Partners, LLC, the guarantors listed therein, U.S. Bank, National Association, Elavon Financial Services DAC, UK Branch, and Elavon Financial Services DAC (including the form of Note attached as an exhibit thereto). Filed as Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on November 19, 2021 and incorporated herein by reference. |
| 4.12 | |
| 10.1* | |
| 10.2* | |
| 10.3* | |
| 10.4* | |
| 10.5* | |
| 10.6* | |
| 10.7* | |
| 10.8 | |
| 10.9* | |
| 10.10* | |
| | | | | |
| 10.11* | |
| 10.12* | |
| 10.13* | |
| 10.14* | |
| 10.15* | |
| 10.16* | |
| 10.17* | |
| 10.18* | |
| 10.19 | |
| 10.20* | |
| 10.21 | |
| 10.22 | |
| 10.23 | |
| 10.24 | Incremental Facility Amendment by and among Graphic Packaging International, LLC, as Borrower, Graphic Packaging International Partners, LLC and Field Container Queretaro (USA), L.L.C., as Guarantors, Bank of America, N.A. as Administrative Agent and CoBank, ACB, as Incremental Term A-3 Lead Arranger and Incremental Term A-3 Lender. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 21, 2021 and incorporated herein by reference. |
| 10.25 | Incremental Facility Amendment by and among Graphic Packaging International, LLC, as Borrower, Graphic Packaging International Partners, LLC and Field Container Queretaro (USA), L.L.C. as Guarantors, Bank of America, N.A., as Administrative Agent and the Incremental Term A-4 Lenders party thereto, and acknowledged and agreed to by Graphic Packaging Holding Company. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 6, 2021 and incorporated herein by reference. |
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| 10.27 | |
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| 10.28* | |
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| 10.30* | |
| 10.31 | |
| 10.32 | |
| 10.33* | |
| 14.1 | |
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| 32.2 | |
| 97.1 | |
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| 101.INS | Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | XBRL Taxonomy Extension Schema |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
| 104 | Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101). |
_________* Executive compensation plan or agreement
ITEM 16. FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GRAPHIC PACKAGING HOLDING COMPANY
(Registrant)
| | | | | | | | |
|
| | |
| /s/ Stephen R. Scherger | Executive Vice President and Chief Financial Officer
(Principal Financial Officer) | February 12, 2025 |
| Stephen R. Scherger | |
| | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | | | | | | | |
| /s/ Michael P. Doss | President and Chief Executive Officer
(Principal Executive Officer) | February 12, 2025 |
| Michael P. Doss | |
| | |
| /s/ Stephen R. Scherger | Executive Vice President and Chief Financial Officer
(Principal Financial Officer) | February 12, 2025 |
| Stephen R. Scherger | |
| | |
| /s/ Charles D. Lischer | Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer) | February 12, 2025 |
| Charles D. Lischer | |
POWER OF ATTORNEY
Each of the directors of the Registrant whose signature appears below hereby appoints Stephen R. Scherger and Lauren S. Tashma, and each of them severally, as his or her attorney-in-fact to sign in his or her name and behalf, in any and all capacities stated below, and to file with the Securities and Exchange Commission any and all amendments to this report on Form 10-K, making such changes in this report on Form 10-K as appropriate, and generally to do all such things on their behalf in their capacities as directors and/or officers to enable the Registrant to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission.
| | | | | | | | |
| Signatures | Title | Date |
| | |
| /s/ Aziz Aghili | Director | February 12, 2025 |
| Aziz Aghili | | |
| | |
| /s/ Laurie Brlas | Director | February 12, 2025 |
| Laurie Brlas | | |
| | |
| /s/ Andrew P. Callahan | Director | February 12, 2025 |
| Andrew P. Callahan | | |
| | |
| /s/ Michael P. Doss | Director, President and Chief Executive Officer | February 12, 2025 |
| Michael P. Doss | | |
| | |
| /s/ Robert A. Hagemann | Director | February 12, 2025 |
| Robert A. Hagemann | | |
| | |
| /s/ Philip R. Martens | Chairman of the Board | February 12, 2025 |
| Philip R. Martens | | |
| | |
| /s/ Mary K. Rhinehart | Director | February 12, 2025 |
| Mary K. Rhinehart | | |
| | |
| /s/ Dean A. Scarborough | Director | February 12, 2025 |
| Dean A. Scarborough | | |
| | |
| /s/ Larry M. Venturelli | Director | February 12, 2025 |
| Larry M. Venturelli | | |
| | |
| /s/ Lynn A. Wentworth | Director | February 12, 2025 |
| Lynn A. Wentworth | | |
| | |
| | |
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