# Graphic Packaging Holding Co: Form 10-Q for the period ended Jun 30, 2024

- Company: [Graphic Packaging Holding Co](/companies/gpk.md) (CIK 1408075)
- Form: 10-Q
- Filed: 2024-07-30
- Accepted by EDGAR: Jul 30, 2024, 16:42 ET
- Period: 2024-06-30
- Accession: 0001408075-24-000030
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1408075/000140807524000030/gpk-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1408075/000140807524000030/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $2.23bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $4.48bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $1.76bn | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $3.49bn | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $197.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $412.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $324.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $602.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $60.0m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $119.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $74.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $127.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $190.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $355.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.62 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $1.15 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.62 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $1.16 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 306,900,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 307,900,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $164.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $61.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $200.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $125.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $2.84bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $10.83bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $1.96bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2024-06-30 | $4.93bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-06-30 | $309.0m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2024-06-30 | $11.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-06-30 | $2.81bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 43,974 characters.

### 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. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, along with the consolidated financial statements and related notes included in and referred to within this report.

### 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 nondurables (consumer staples) markets, from food and beverage, to foodservice, to household products, beauty and heath care. It produces packaging solutions at over 100 locations in over 25 countries around the world, serving customers and brands ranging from local consumer products companies and retailers to the largest multinationals. The Company offers one of the most comprehensive ranges of packaging design, manufacture, and execution capabilities available. 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 segment.

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

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, biobased materials and other packaging materials. While circularity and sustainability are increasingly important to customer 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 expand market share in its current markets and to identify and penetrate new markets; (ii) to capitalize on the Company’s customer relationships, business competencies, and manufacturing facilities; (iii) to develop and market innovative, packaging products and applications that benefit from consumer-led sustainability trends; and (iv) to continue to reduce costs by focusing on 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 any 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 the second quarter of 2024, the Company decided to close multiple packaging facilities by the end of 2024. These are in addition to the multiple packaging facilities for which the Company decided to close by the end of 2023 and early 2024. Production from these facilities will be consolidated into our existing packaging network. Current Assets within the Condensed Consolidated Balance Sheet also includes $11 million relating to multiple packaging facilities, which met the held for sale criteria as of June 30, 2024.
- 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. It is reported within the Paperboard Manufacturing reportable segment. Subsequently, in the second quarter of 2023, the Company closed this facility.
- 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 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 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 coated recycled paperboard capacity.
- 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

*In millions*

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net Sales | $2,237 | $2,392 | $4,496 | $4,830 |
| Income from Operations | 324 | 267 | 602 | 597 |
| Nonoperating Pension and Postretirement Benefit Expense | — | — | (1) | (1) |
| Interest Expense, Net | (60) | (60) | (119) | (118) |
| Income before Income Taxes | 264 | 207 | 482 | 478 |
| Income Tax Expense | (74) | (57) | (127) | (121) |
| Net Income | $190 | $150 | $355 | $357 |

### SECOND QUARTER 2024 COMPARED WITH SECOND QUARTER 2023

### Net Sales

The components of the change in Net Sales are as follows:

*In millions*

|  | Three Months Ended June 30, 2023 | Variances Price/ Volume/ Mix | M&A | Exchange | 2024 | Decrease | Percent Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Consolidated | $2,392 | $(84) | $(56) | $(15) | $2,237 | $(155) | (6)% |

The Company’s Net Sales for the three months ended June 30, 2024 decreased by $155 million or 6% to $2,237 million from $2,392 million for the three months ended June 30, 2023 due to the Augusta divestiture and related reduced open market paperboard volumes and pricing of bleached paperboard ($83 million), lower packaging volumes, mix, and pricing declines including pass through of lower input costs in Europe ($73 million), the divestiture of our two packaging facilities in Russia in 2023 ($26 million), and unfavorable foreign currency exchange ($15 million), partially offset by the acquisition of Bell in September 2023 ($42 million). Innovation sales growth was $51 million driven by conversions to our sustainable consumer packaging solutions. Lower packaging sales in food, health and beauty, and household markets were partially offset by higher packaging sales in the foodservice market.

### Income from Operations

Income from Operations for the three months ended June 30, 2024 increased $57 million or 21% to $324 million from $267 million for the three months ended June 30, 2023 primarily due to the gain from the Augusta divestiture of $75 million, offset by bleached paperboard price and volume declines (including due to the divestiture), and incremental planned maintenance expense. Excluding those items, the negative impact of lower price, packaging volumes, non-commodity (primarily labor and benefits) cost inflation, and foreign exchange were offset by performance, including cost savings from continuous improvements and other programs, and productivity improvements, including benefits from capital projects, favorable commodity deflation (primarily external board and energy, partially offset by secondary fiber), and the acquisition of Bell in September 2023. Income from Operations was also favorably impacted by a reduction in impairment charges related to the sale of our Russian operations in 2023 (refer to “*Note 14 - Divestitures”* in the Notes to Condensed Consolidated Financial Statements for additional information) and a reduction in accelerated depreciation related to the closures of several packaging and paperboard facilities of $27 million (refer to “*Note 13 - Exit Activities”* in the Notes to Condensed Consolidated Financial Statements for additional information).

### Interest Expense, Net

Interest Expense, Net was $60 million and $60 million for the three months ended June 30, 2024 and 2023, respectively, flat as compared to the prior year. As of June 30, 2024, approximately 30% of the Company’s total debt was subject to floating interest rates.

### Income Tax Expense

During the three months ended June 30, 2024, the Company recognized Income Tax Expense of $74 million on Income before Income Taxes of $264 million. The effective tax rate for the six months ended June 30, 2024 is different from the statutory rate primarily due to the write off of non-deductible book goodwill associated with the divestiture of Augusta in addition to the mix of earnings between foreign and domestic jurisdictions, including those with and without valuation allowances.

During the three months ended June 30, 2023, the Company recognized Income Tax Expense of $57 million on Income before Income Taxes of $207 million. The effective tax rate for the six months ended June 30, 2023 is different from the statutory rate primarily due to the tax impact of the charges associated with the planned divestiture of the Company’s operations in Russia that resulted in no corresponding tax benefit and the mix of earnings between foreign and domestic jurisdictions, including those with and without valuation allowances.

### FIRST SIX MONTHS OF 2024 COMPARED WITH FIRST SIX MONTHS OF 2023

### Net Sales

The components of the change in Net Sales are as follows:

*In millions*

|  | Six Months Ended June 30, 2023 | Variances Price/ Volume/ Mix | M&A | Exchange | 2024 | Decrease | Percent Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Consolidated | $4,830 | $(281) | $(41) | $(12) | $4,496 | $(334) | (7)% |

The Company’s Net Sales for the six months ended June 30, 2024 decreased by $334 million or 7% to $4,496 million from $4,830 million for the six months ended June 30, 2023 due to lower open market paperboard volumes and pricing, primarily bleached paperboard including the impact of the Augusta divestiture, the divestiture of our two packaging facilities in Russia in 2023 ($54 million), lower packaging volumes and pricing declines including pass through of lower input costs in Europe, and unfavorable foreign currency exchange, partially offset by the acquisition of Bell in September 2023 ($85 million). Innovation sales growth was $88 million driven by conversions to our sustainable consumer packaging solutions. Lower packaging sales in food, health and beauty, and household markets were partially offset by higher packaging sales in foodservice and beverage markets.

### Income from Operations

Income from Operations for the six months ended June 30, 2024 increased $5 million or 1% to $602 million from $597 million for the six months ended June 30, 2023 primarily due to the gain from the Augusta divestiture of $75 million, offset by bleached paperboard price and volume declines (including due to the divestiture), and incremental planned maintenance expense. Excluding those items, the negative impact of lower price, packaging volumes, non-commodity (primarily labor and benefits) cost inflation, and foreign exchange were offset by performance, including cost savings from continuous improvements and other programs, and productivity improvements, including benefits from capital projects, favorable commodity deflation (primarily external board and energy, partially offset by secondary fiber), and the acquisition of Bell in September 2023. Income from Operations was also favorably impacted by a reduction in impairment charges related to the sale of our Russian operations in 2023 (refer to “*Note 14 - Divestitures”* in the Notes to Condensed Consolidated Financial Statements for additional information) and a reduction in accelerated depreciation related to the closures of several packaging and paperboard facilities of $17 million (refer to “*Note 13 - Exit Activities”* in the Notes to Condensed Consolidated Financial Statements for additional information).

### Interest Expense, Net

Interest Expense, Net was $119 million and $118 million for the six months ended June 30, 2024 and 2023, respectively. Interest Expense, Net increased due to higher interest rates, partially offset by lower debt balances.

### Income Tax Expense

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

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

### Segment Reporting

The Company has three reportable segments as follows:

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

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

*Paperboard Manufacturing* includes the six North American paperboard manufacturing facilities that produce recycled, unbleached and bleached paperboard, which is consumed internally to produce paperboard consumer packaging for the Americas and Europe Paperboard Packaging segments. Paperboard not consumed internally is sold externally to a wide variety of paperboard packaging converters and brokers. The Paperboard Manufacturing segment's Net Sales represent the sale of paperboard only to external customers. The effect of intercompany transfers to the paperboard packaging segments has been eliminated from the Paperboard Manufacturing segment to reflect the economics of the integration of these segments.

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

These segments are evaluated by the chief operating decision maker based primarily on Income from Operations, as adjusted for depreciation and amortization. The accounting policies of the reportable segments are the same as those described above in “*Note 1 - General Information”* in the Notes to Condensed Consolidated Financial Statements.

*In millions*

| NET SALES: | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Americas Paperboard Packaging | $1,551 | $1,571 | $3,082 | $3,115 |
| Europe Paperboard Packaging | 474 | 523 | 944 | 1,055 |
| Paperboard Manufacturing | 174 | 252 | 397 | 568 |
| Corporate/Other/Eliminations(a) | 38 | 46 | 73 | 92 |
| Total | $2,237 | $2,392 | $4,496 | $4,830 |
| **INCOME (LOSS) FROM OPERATIONS:** |  |  |  |  |
| Americas Paperboard Packaging(b)(c) | $229 | $274 | $510 | $543 |
| Europe Paperboard Packaging(d) | 28 | 21 | 47 | 47 |
| Paperboard Manufacturing(b)(c)(e) | 68 | (33) | 42 | (6) |
| Corporate and Other(c) | (1) | 5 | 3 | 13 |
| Total | $324 | $267 | $602 | $597 |

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

(b) Includes accelerated depreciation related to exit activities in 2024 and 2023. See “*Note 13 - Exit Activities”* in the Notes to Condensed Consolidated Financial Statements for further information.

(c) Includes expenses related to business combinations, exit activities and other special items. See “*Note 1 - General Information”* in the Notes to Condensed Consolidated Financial Statements for further information.

(d) Includes impairment charges related to Russia in 2023. See “*Note 14 - Divestitures”* in the Notes to Condensed Consolidated Financial Statements for further information.

(e) Includes gain from Augusta Divestiture in 2024. See “*Note 14 - Divestitures”* in the Notes to Condensed Consolidated Financial Statements for further information.

### 2024 COMPARED WITH 2023

### Second Quarter 2024 Compared to Second Quarter 2023

#### Americas Paperboard Packaging

Net Sales decreased due to lower packaging volumes and pricing, partially offset by innovation sales growth driven by conversions to our sustainable consumer packaging solutions and the acquisition of Bell in September 2023. Lower packaging sales in food and household markets were partially offset by higher packaging sales in the foodservice market.

Income from Operations decreased due to lower pricing, packaging volumes, incremental planned maintenance expense, commodity inflation (primarily secondary fiber) and other inflation (primarily labor and benefits). These decreases were partially offset by performance, primarily due to cost savings from continuous improvement and other programs, productivity improvements, including benefits from capital projects, innovation sales growth and the acquisition of Bell in September 2023.

#### Europe Paperboard Packaging

Net Sales decreased due to lower pricing, including pass through of lower input costs, the divestiture of our two packaging facilities in Russia in 2023, unfavorable foreign currency exchange and mix, partially offset by innovation sales growth driven by conversions to our sustainable consumer packaging solutions and higher volumes. Higher packaging volumes in food and beverage markets were offset by lower packaging volumes in health and beauty and foodservice markets.

Income from Operations increased due to commodity deflation, and cost savings from continuous improvement and other programs. The commodity deflation was primarily related to external board, which is passed through to our customers, partially offset by other inflation (primarily labor and benefits). Income from Operations was also favorably impacted by higher volumes and a reduction in impairment charges related to the sale of our Russian operations in 2023. Refer to “*Note 14 - Divestitures”* in the Notes to Condensed Consolidated Financial Statements for additional information, offset by lower pricing and mix.

#### Paperboard Manufacturing

Net Sales decreased due to lower open market paperboard volumes primarily related to the Augusta divestiture, mix and pricing primarily related to bleached paperboard.

Income from Operations increased due to the gain from the Augusta divestiture (refer to “*Note 14 - Divestitures”* in the Notes to Condensed Consolidated Financial Statements for additional information) and productivity improvements, including benefits from capital projects. The increase was partially offset by lower pricing, production and sales of open market paperboard primarily bleached, higher levels of maintenance downtime, mix and commodity and other inflation (primarily secondary fiber and labor and benefits offset by energy and freight). Income from Operations was also favorably impacted by a reduction in accelerated depreciation related to the closure of Tama (refer to “*Note 13 - Exit Activities”* in the Notes to Condensed Consolidated Financial Statements for additional information).

### First Six Months of 2024 Compared to First Six Months of 2023

#### Americas Paperboard Packaging

Net Sales decreased due to lower packaging volumes and pricing, partially offset by innovation sales growth driven by conversions to our sustainable consumer packaging solutions and the acquisition of Bell in September 2023. Lower packaging sales in food and household markets were partially offset by higher packaging sales in foodservice and beverage markets.

Income from Operations decreased due to lower pricing and packaging volumes, incremental planned maintenance expenses, higher accelerated depreciation and charges related to the closures of several packaging facilities (refer to “*Note 13 - Exit Activities”* in the Notes to Condensed Consolidated Financial Statements for additional information), commodity inflation (primarily secondary fiber) and other inflation (primarily labor and benefits). These decreases were partially offset by performance, primarily due to cost savings from continuous improvement and other programs, productivity improvements, including benefits from capital projects, innovation sales growth, and the acquisition of Bell in September 2023.

#### Europe Paperboard Packaging

Net Sales decreased due to lower pricing including pass through of lower input costs, the divestiture of our two packaging facilities in Russia in 2023, unfavorable foreign currency exchange and mix, partially offset by innovation sales growth driven by conversions to our sustainable consumer packaging solutions and higher volumes. Higher packaging volumes in beverage, foodservice, and food markets were partially offset by lower packaging volumes in health and beauty and household markets.

Income from Operations was relatively consistent with increases due to commodity deflation, cost savings from continuous improvement and other programs, and higher volumes. The commodity deflation was primarily related to external board, which is passed through to our customers, partially offset by other inflation (primarily labor and benefits). Income from Operations was also favorably impacted by a reduction in impairment charges related to the sale of our Russian operations in 2023. Refer to “*Note 14 - Divestitures”* in the Notes to Condensed Consolidated Financial Statements for additional information, offset by lower pricing and mix.

#### Paperboard Manufacturing

Net Sales decreased due to lower open market paperboard volumes primarily related to the Augusta divestiture, mix and pricing primarily related to bleached paperboard.

Income from Operations increased due to the gain from the Augusta divestiture (refer to “*Note 14 - Divestitures”* in the Notes to Condensed Consolidated Financial Statements for additional information) and productivity improvements, including benefits from capital projects. The increase was partially offset by lower pricing, production and sales of open market paperboard primarily bleached, higher levels of maintenance and market downtime, mix, and commodity and other inflation (primarily secondary fiber and labor and benefits offset by energy, chemicals and freight). Income from Operations was also favorably impacted by a reduction in accelerated depreciation related to the closure of Tama (refer to “*Note 13 - Exit Activities”* in the Notes to Condensed Consolidated Financial Statements for additional information).

### FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company broadly defines liquidity as its ability to generate sufficient funds from both internal and external sources to meet its obligations and commitments. In addition, liquidity includes the ability to obtain appropriate debt and equity financing and to convert into cash those assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments.

### Cash Flows

*In millions*

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net Cash Provided by Operating Activities | $164 | $291 |
| Net Cash Provided By (Used In) Investing Activities | 175 | (437) |
| Net Cash (Used In) Provided By Financing Activities | (368) | 131 |

Net cash provided by operating activities for the first six months of 2024 totaled $164 million compared to $291 million for the same period in 2023. The decrease was mainly due to lower cash generated from operations offset by less use of cash for working capital. Pension contributions were $4 million for the first six months of 2024 and 2023.

Net cash provided by investing activities for the first six months of 2024 totaled $175 million compared to $437 million used in for the same period in 2023. The Company had capital spending of $580 million ($553 million was capitalized) and $385 million ($395 million was capitalized) in 2024 and 2023, respectively. The increase in capital spending was driven by the construction of the Company's new recycled paperboard manufacturing facility in Waco, Texas. For further discussion of the Company's new recycled paperboard manufacturing facility and continued investments made as part of the integration of acquisitions, see “*Note 13 - Exit Activities”* in the Notes to the Condensed Consolidated Financial Statements. On May 1, 2024, the Company completed the sale to Clearwater Paper Corporation of the Augusta Paperboard Manufacturing Facility for total cash consideration of $711 million. For further discussion of the Company's Divestiture of the Augusta Paperboard Manufacturing Facility, see “*Note 14 - Divestitures”* in the Notes to the Condensed Consolidated Financial Statements. Net cash receipts related to the accounts receivable securitization and sale programs were $46 million and $51 million in 2024 and 2023, respectively. In the prior year the Company completed the acquisition of Tama on January 31, 2023, from Greif Packaging LLC for approximately $100 million. For further discussion of the Tama acquisition, see “*Note 3 - Business Combinations”* in the Notes to the Condensed Consolidated Financial Statements.

Net cash used in financing activities for the first six months of 2024 totaled $368 million compared to net cash provided by of $131 million for the same period in 2023. Current year financing activities include a debt drawing of the new incremental term facilities which consist of a $50 million Incremental Term A-5 Facility (the “Incremental A-5 Loan”), a $200 million Incremental Term A-6 Facility (the “Incremental Term A-6 Loan”), an offering of $500 million aggregate principal amount of 6.375% Senior Unsecured Notes due 2032. The net proceeds were used by the Company to repay a portion of the outstanding borrowings under its senior secured revolving credit facility. The Company also drew $400 million from the senior secured domestic revolving credit facilities and used the proceeds, together with cash on hand, to redeem it's 0.821% Senior Notes due in 2024. For further discussion of the Company's newly acquired debt and redemption, see “*Note 4 - Debt”* in the Notes to the Condensed Consolidated Financial Statements. Other current year activities include borrowings under revolving credit facilities primarily for capital spending, repurchase of common stock of $200 million and payments on debt of $19 million. The Company also paid dividends of $61 million and withheld $23 million of restricted stock units to satisfy tax withholding obligations related to the payout of restricted stock units. In the prior year the Company also made borrowings under revolving credit facilities primarily for capital spending, repurchase of common stock of $29 million, and payments on debt of $10 million. The Company also paid dividends and distributions of $61 million and withheld $20 million of restricted stock units to satisfy tax withholding payments related to the payout of restricted stock units.

### Supplemental Guarantor Financial Information

As discussed in “*Note 4 - Debt”* in the Notes to Condensed Consolidated Financial Statements, the Senior Notes issued by Graphic Packaging International, LLC (“GPIL” or the “Issuer”) are guaranteed by certain domestic subsidiaries (the “Subsidiary Guarantors”), which consist of all material 100% owned subsidiaries of the issuer other than its foreign subsidiaries, and in certain instances by the Company (a Parent guarantee) (collectively “the Guarantors”). GPIL's remaining subsidiaries (the “Nonguarantor Subsidiaries”) include all of GPIL’s foreign subsidiaries and immaterial domestic subsidiaries. The Subsidiary Guarantors are jointly and severally, fully and unconditionally liable under the guarantees.

The results of operations, assets, and liabilities for Graphic Packaging Holding Company (“GPHC”) and GPIL are substantially the same. Therefore, the summarized financial information below is presented on a combined basis, consisting of the Issuer and Subsidiary Guarantors (collectively, the “Obligor Group”), and is presented after the elimination of: (i) intercompany transactions and balances among the Issuer and Subsidiary Guarantors, and (ii) equity in earnings from and investments in the Nonguarantor Subsidiaries.

*In millions*

| SUMMARIZED STATEMENTS OF OPERATIONS | Six Months Ended June 30, 2024 |
| --- | ---: |
| Net Sales(a) | $3,500 |
| Cost of Sales | 2,683 |
| Income from Operations | 558 |
| Net Income | 323 |

(a) Includes Net Sales to Nonguarantor Subsidiaries of $317 million.

*In millions*

| SUMMARIZED BALANCE SHEET | June 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Current assets (excluding intercompany receivable from Nonguarantor) | $1,576 | $1,612 |
| Noncurrent assets | 6,188 | 6,463 |
| Intercompany receivables from Nonguarantor | 360 | 1,300 |
| Current liabilities | 1,490 | 2,067 |
| Noncurrent liabilities | 5,696 | 5,478 |

### Liquidity and Capital Resources

The Company expects its material cash requirements for the next six months will be for: capital expenditures, periodic required income tax payments, periodic interest and debt service payments on associated debt, as discussed in “*Note 5 - Debt”* of the Notes to the Consolidated Financial Statements of the Company's 2023 Annual Report on Form 10-K, lease agreements which have fixed lease payment obligations, as discussed in “*Note 6 - Leases”* of the Notes to the Consolidated Financial Statements of the Company's 2023 Annual Report on Form 10-K, and minimum purchase commitments as discussed in “*Note 13 - Commitments”* of the Notes to the Consolidated Financial Statements of the Company's 2023 Annual Report on Form 10-K 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 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 4.125% Senior Notes due 2024, 1.512% Senior Notes due 2026, 4.75% Senior Notes due 2027, 3.50% Senior Notes due 2028, 3.50% Senior Notes due 2029, 2.625% Senior Notes due 2029, 3.75% Senior Notes due 2030 and 6.375% 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 included in Other Expense, Net in the Condensed Consolidated Statements of Operations. The following table summarizes the activity under these programs for the six months ended June 30, 2024 and 2023, respectively:

*In millions*

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

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

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

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

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

### 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 June 30, 2024, the Company was in compliance with such covenant and the ratio was 2.70 to 1.00.

The Company must also comply with a minimum Consolidated Interest Expense Ratio of 3.00 to 1.00. At June 30, 2024, the Company was in compliance with such covenant and the ratio was 7.50 to 1.00.

As of June 30, 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 a liability is probable and the costs are reasonably estimable. The Company believes that the amounts accrued for its loss contingencies, and the reasonably possible loss beyond the amounts accrued, are not material to the Company’s consolidated financial position, results of operations or cash flows.

For further discussion of the Company’s environmental matters, see “*Note 9 - Environmental and Legal Matters”* in the Notes to Condensed Consolidated Financial Statements.

### CRITICAL ACCOUNTING POLICIES

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 condensed 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 Company’s most critical accounting policies, which require significant judgment or involve complex estimations, are described in the Company's 2023 Annual Report on Form 10-K for the year ended December 31, 2023.

The Company performed its annual goodwill impairment tests as of October 1, 2023. The Company concluded that all reporting units with goodwill have a fair value that exceeds their carrying value, and thus goodwill was not impaired. The Europe reporting unit had a fair value that exceeded its respective carrying value by 26%, whereas all other reporting units exceeded by more than 90%. The Europe reporting unit had goodwill totaling $477 million at June 30, 2024.

### NEW ACCOUNTING STANDARDS

For a discussion of recent accounting pronouncements impacting the Company, see “*Note 1 - General Information”* in the Notes to Condensed Consolidated Financial Statements.

## Market risk

As filed, 606 characters.

For a discussion of certain market risks related to the Company, see Part II, “*Item 7A, Quantitative and Qualitative Disclosure about Market Risk”*, in the Company's 2023 Annual Report on Form 10-K for the year ended December 31, 2023.

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 swap agreements effectively to fix the SOFR rate on certain variable rate borrowings. At June 30, 2024, the Company had no active interest rate swap agreements.

## Controls and procedures

As filed, 813 characters.

#### Evaluation of Disclosure Controls and Procedures

The Company’s management has carried out an evaluation, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended. Based upon such evaluation, management has concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2024.

#### Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 165 characters.

There have been no material changes from the risk factors previously disclosed in the Company's 2023 Annual Report on Form 10-K for the year ended December 31, 2023.

Filed Jul 30, 2024.
Source: SEC EDGAR, the filing index for accession 0001408075-24-000030. Last ingested by Listed: Nov 4, 2026, 17:04 ET. No prices; not investment advice.