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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~June 30, 2021~~March 31, 2022


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

For the transition period from to

COMMISSION FILE NUMBER: 001-33988

Graphic Packaging Holding Company

(Exact name of registrant as specified in its charter)


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

1500 Riveredge Parkway, Suite 100
Atlanta,	,	Georgia	30328
(Address of principal executive offices)		(Zip Code)

(770) 240-7200

(~~Registrant’s~~Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Securities registered pursuant to Section 12(g) of the Act:

None

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

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

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

Large accelerated filer

☑☑

Accelerated filer

☐☐

Smaller reporting company

☐

Non-accelerated filer

☐☐

(Do not check if a smaller reporting company)

Emerging growth company

☐

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

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

As of ~~July 26, 2021,~~April 25, 2022, there were ~~307,048,826~~308,306,907 shares of the ~~registrant’s~~registrant’s Common Stock, par value $0.01 per share, outstanding.

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INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements regarding the expectations of Graphic Packaging Holding Company ~~(“GPHC”~~(“GPHC” and, together with its subsidiaries, the ~~“Company”~~“Company”), including, but not limited to, ~~projected sales, EBITDA and synergies from acquisitions, obtaining adequate wood and fiber supplies, the deductibility of goodwill for tax purposes,~~ the availability of U.S. federal income tax attributes to offset U.S. federal income taxes and the timing related to the Company's future U.S. federal income tax payments, ~~reclassification of loss on derivative instruments, charges associated with coated recycled paperboard mill exit activities,~~ capital investment, depreciation and amortization, ~~interest expense,~~and pension plan contributions ~~and post-retirement health care benefit payments~~ in this report constitute ~~“forward-looking statements”~~“forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from the ~~Company’s~~Company’s historical experience and its present expectations. These risks and uncertainties include, but are not limited to, the continuing effects of the COVID-19 pandemic on the Company's operations and business, inflation of and volatility in raw material and energy costs, changes in consumer buying habits and product preferences, competition with other paperboard manufacturers and converters, product substitution, the ~~Company’s~~Company’s ability to implement its business strategies, including strategic acquisitions, the Company's ability to successfully integrate acquisitions, productivity initiatives and cost reduction plans, the ~~Company’s~~Company’s debt level, currency movements and other risks of conducting business internationally, and the impact of regulatory and litigation matters, including those that could impact the ~~Company’s~~Company’s ability to utilize its U.S. federal income tax attributes to offset taxable income or U.S. federal income taxes and those that impact the Company's ability to protect and use its intellectual property. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date on which they are made and the Company undertakes no obligation to update such statements, except as may be required by law. Additional information regarding these and other risks is contained in Part I, "Item 1A., Risk Factors" of the Company's ~~2020~~2021 Annual Report on Form 10-K, and in other filings with the Securities and Exchange Commission.

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PART I —— FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
In millions, except per share amounts	In millions, except per share amounts	2021		2020		2021		2020		In millions, except per share amounts	2022		2021
Net Sales	Net Sales	$	1,737	$	1,611	$	3,386	$	3,210	Net Sales	$	2,245	$	1,649
Cost of Sales	Cost of Sales	1,482		1,349		2,882		2,627		Cost of Sales	1,858		1,400
Selling, General and Administrative	Selling, General and Administrative	125		132		251		268		Selling, General and Administrative	181		126
Other Expense (Income), Net		1		(5)		4		1
Other (Income) Expense, Net										Other (Income) Expense, Net	(2)		3
Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net	Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net	34		20		46		39		Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net	15		12
Income from Operations	Income from Operations	95		115		203		275		Income from Operations	193		108
Nonoperating Pension and Postretirement Benefit Income (Expense)		1		0		3		(151)
Nonoperating Pension and Postretirement Benefit Income										Nonoperating Pension and Postretirement Benefit Income	2		2
Interest Expense, Net	Interest Expense, Net	(29)		(30)		(59)		(64)		Interest Expense, Net	(42)		(30)

Income before Income Taxes and Equity Income of Unconsolidated Entity		67		85		147		60
Income before Income Taxes										Income before Income Taxes	153		80
Income Tax Expense	Income Tax Expense	(26)		(18)		(44)		(13)		Income Tax Expense	(46)		(18)
Income before Equity Income of Unconsolidated Entity		41		67		103		47
Equity Income of Unconsolidated Entity		1		0		1		0

Net Income	Net Income	42		67		104		47		Net Income	107		62
Net Income Attributable to Noncontrolling Interest	Net Income Attributable to Noncontrolling Interest	(4)		(15)		(12)		(8)		Net Income Attributable to Noncontrolling Interest	—		(8)
Net Income Attributable to Graphic Packaging Holding Company	Net Income Attributable to Graphic Packaging Holding Company	$	38	$	52	$	92	$	39	Net Income Attributable to Graphic Packaging Holding Company	$	107	$	54

Net Income Per Share Attributable to Graphic Packaging Holding Company — Basic		$	0.13	$	0.19	$	0.32	$	0.14
Net Income Per Share Attributable to Graphic Packaging Holding Company — Diluted		$	0.13	$	0.19	$	0.32	$	0.14
Net Income Per Share Attributable to Graphic Packaging Holding Company — Basic										Net Income Per Share Attributable to Graphic Packaging Holding Company — Basic	$	0.35	$	0.20
Net Income Per Share Attributable to Graphic Packaging Holding Company — Diluted										Net Income Per Share Attributable to Graphic Packaging Holding Company — Diluted	$	0.35	$	0.19

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

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GRAPHIC ~~PACKAGING~~P1ACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



Three Months Ended ~~June 30,~~March 31,
~~2021~~2022
In millions	~~Graphic Packaging Holding Company~~	~~Noncontrolling Interest~~	~~Total~~
Net Income	$	38		$	4		$	42107
Other Comprehensive Income (Loss), Net of Tax:

Derivative Instruments	2		0			213
Pension and Postretirement Benefit Plans	10		0			10 (9)
Currency Translation Adjustment	5		1			6 (22)
Total Other Comprehensive ~~Income,~~Loss, Net of Tax	17		1			18 (18)
Total Comprehensive Income	$	55		$	5		$	6089


~~2020~~
	~~Graphic Packaging Holding Company~~		~~Noncontrolling Interest~~		~~Redeemable Noncontrolling Interest~~		~~Total~~
~~Net Income~~	$	52	$	15	$	0	$	67
~~Other Comprehensive Income, Net of Tax:~~
~~Derivative Instruments~~	2		0		0		2
~~Pension and Postretirement Benefit Plans~~	0		0		1		1
~~Currency Translation Adjustment~~	12		3		0		15

~~Total Other Comprehensive Income, Net of Tax~~	14		3		1		18
~~Total Comprehensive Income~~	$	66	$	18	$	1	$	85


2021
In millions	Graphic Packaging Holding Company		Noncontrolling Interest		Total
Net Income	$	54	$	8	$	62
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments	3		1		4
Pension and Postretirement Benefit Plans	10		—		10
Currency Translation Adjustment	(4)		(1)		(5)

Total Other Comprehensive Income, Net of Tax	9		—		9
Total Comprehensive Income	$	63	$	8	$	71


~~Six Months Ended June 30,~~
~~2021~~
~~In millions~~	~~Graphic Packaging Holding Company~~		~~Noncontrolling Interest~~		~~Total~~
~~Net Income~~	$	92	$	12	$	~~104~~
~~Other Comprehensive Income, Net of Tax:~~

~~Derivative Instruments~~	5		1		6
~~Pension and Postretirement Benefit Plans~~	20		0		20
~~Currency Translation Adjustment~~	1		0		1

~~Total Other Comprehensive Income, Net of Tax~~	26		1		$	27
~~Total Comprehensive Income~~	$	~~118~~	$	13	$	~~131~~

2020
Graphic Packaging Holding Company Noncontrolling Interest Redeemable Noncontrolling Interest Total
Net Income (Loss) $ 39 $ 13 $ (5) 47
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments 1 0 0 1
Pension and Postretirement Benefit Plans 114 32 10 156
Currency Translation Adjustment (34) (7) (1) (42)
Total Other Comprehensive Income, Net of Tax 81 25 9 115
Total Comprehensive Income $ 120 $ 38 $ 4 $ 162

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

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GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In millions, except share and per share amounts	In millions, except share and per share amounts	June 30, 2021		December 31, 2020		In millions, except share and per share amounts	March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS

Current Assets:	Current Assets:					Current Assets:
Cash and Cash Equivalents	Cash and Cash Equivalents	$	89	$	179	Cash and Cash Equivalents	$	111	$	172
Receivables, Net	Receivables, Net	593		654		Receivables, Net	945		859
Inventories, Net	Inventories, Net	1,105		1,128		Inventories, Net	1,504		1,387
Other Current Assets	Other Current Assets	90		59		Other Current Assets	97		84

Total Current Assets	Total Current Assets	1,877		2,020		Total Current Assets	2,657		2,502
Property, Plant and Equipment, Net	Property, Plant and Equipment, Net	3,753		3,560		Property, Plant and Equipment, Net	4,675		4,677
Goodwill	Goodwill	1,478		1,478		Goodwill	2,006		2,015
Intangible Assets, Net	Intangible Assets, Net	409		437		Intangible Assets, Net	831		868
Other Assets	Other Assets	325		310		Other Assets	374		395
Total Assets	Total Assets	$	7,842	$	7,805	Total Assets	$	10,543	$	10,457

LIABILITIES	LIABILITIES					LIABILITIES

Current Liabilities:	Current Liabilities:					Current Liabilities:
Short-Term Debt and Current Portion of Long-Term Debt	Short-Term Debt and Current Portion of Long-Term Debt	$	20	$	497	Short-Term Debt and Current Portion of Long-Term Debt	$	286	$	279
Accounts Payable	Accounts Payable	837		825		Accounts Payable	1,028		1,125
Compensation and Employee Benefits	Compensation and Employee Benefits	177		213		Compensation and Employee Benefits	201		211

Interest Payable						Interest Payable	37		35
Other Accrued Liabilities	Other Accrued Liabilities	423		321		Other Accrued Liabilities	394		399
Total Current Liabilities	Total Current Liabilities	1,457		1,856		Total Current Liabilities	1,946		2,049
Long-Term Debt	Long-Term Debt	3,742		3,147		Long-Term Debt	5,645		5,515
Deferred Income Tax Liabilities	Deferred Income Tax Liabilities	403		540		Deferred Income Tax Liabilities	598		579
Accrued Pension and Postretirement Benefits	Accrued Pension and Postretirement Benefits	117		130		Accrued Pension and Postretirement Benefits	132		139
Other Noncurrent Liabilities	Other Noncurrent Liabilities	309		292		Other Noncurrent Liabilities	271		282

SHAREHOLDERS’ EQUITY
Preferred Stock, par value $0.01 per share; 100,000,000 shares authorized; 0 shares issued or outstanding		0		0
Common Stock, par value $0.01 per share; 1,000,000,000 shares authorized; 307,045,707 and 267,726,373 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		3		3
SHAREHOLDERS’ EQUITY						SHAREHOLDERS’ EQUITY
Preferred Stock, par value $0.01 per share; 100,000,000 shares authorized; no shares issued or outstanding						Preferred Stock, par value $0.01 per share; 100,000,000 shares authorized; no shares issued or outstanding	—		—
Common Stock, par value $0.01 per share; 1,000,000,000 shares authorized; 308,288,288 and 307,103,551 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively						Common Stock, par value $0.01 per share; 1,000,000,000 shares authorized; 308,288,288 and 307,103,551 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	3		3
Capital in Excess of Par Value	Capital in Excess of Par Value	2,030		1,715		Capital in Excess of Par Value	2,038		2,046
Retained Earnings (Accumulated Deficit)		1		(48)
Retained Earnings						Retained Earnings	150		66
Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss	(220)		(246)		Accumulated Other Comprehensive Loss	(242)		(224)
Total Graphic Packaging Holding Company Shareholders' Equity	Total Graphic Packaging Holding Company Shareholders' Equity	1,814		1,424		Total Graphic Packaging Holding Company Shareholders' Equity	1,949		1,891
Noncontrolling Interest	Noncontrolling Interest	0		416		Noncontrolling Interest	2		2
Total Equity	Total Equity	1,814		1,840		Total Equity	1,951		1,893
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	7,842	$	7,805	Total Liabilities and Shareholders' Equity	$	10,543	$	10,457

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

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GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND ~~REDEEMABLE~~ NONCONTROLLING INTEREST

(Unaudited)


		Common Stock			Capital in Excess of Par Value		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive (Loss) Income							Common Stock			Capital in Excess of Par Value		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
In millions, except share amounts	In millions, except share amounts	Shares	Amount								Noncontrolling Interest		Total Equity		In millions, except share amounts	Shares	Amount
Balances at December 31, 2020		267,726,373	$	3	$	1,715	$	(48)	$	(246)	$	416	$	1,840
Balances at December 31, 2021															Balances at December 31, 2021	307,103,551	$	3	$	2,046	$	66	$	(224)	$	2	$	1,893
Net Income	Net Income	—	—		—		54		—		8		62		Net Income	—	—		—		107		—		—		107
Other Comprehensive Income (Loss), Net of Tax:	Other Comprehensive Income (Loss), Net of Tax:														Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments	Derivative Instruments	—	—		—		—		3		1		4		Derivative Instruments	—	—		—		—		13		—		13
Pension and Postretirement Benefit Plans	Pension and Postretirement Benefit Plans	—	—		—		—		10		—		10		Pension and Postretirement Benefit Plans	—	—		—		—		(9)		—		(9)
Currency Translation Adjustment	Currency Translation Adjustment	—	—		—		—		(4)		(1)		(5)		Currency Translation Adjustment	—	—		—		—		(22)		—		(22)

Reduction of IP's Ownership Interest		15,307,000	—		70		—		—		(216)		(146)

Dividends Declared	Dividends Declared	—	—		—		(21)		—		—		(21)		Dividends Declared	—	—		—		(23)		—		—		(23)
Distribution of Membership Interest		—	—		—		—		—		(4)		(4)
Recognition of Stock-Based Compensation, Net	Recognition of Stock-Based Compensation, Net	—	—		(3)		—		—		—		(3)		Recognition of Stock-Based Compensation, Net	—	—		(8)		—		—		—		(8)
Issuance of Shares for Stock-Based Awards	Issuance of Shares for Stock-Based Awards	1,168,394	—		—		—		—		—		0		Issuance of Shares for Stock-Based Awards	1,184,737	—		—		—		—		—		—
Balances at March 31, 2021		284,201,767	$	3	$	1,782	$	(15)	$	(237)	$	204	$	1,737
Net Income		—	—		—		38		—		4		42
Other Comprehensive Income, Net of Tax:
Derivative Instruments		—	—		—		—		2		—		2
Pension and Postretirement Benefit Plans		—	—		—		—		10		—		10
Currency Translation Adjustment		—	—		—		—		5		1		6
Reduction of IP's Ownership Interest		22,773,072	—		241		—		—		(207)		34

Dividends Declared		—	—		—		(22)		—		—		(22)
Distribution of Membership Interest		—	—		—		—		—		(2)		(2)
Recognition of Stock-Based Compensation, Net		—	—		7		—		—		—		7
Issuance of Shares for Stock-Based Awards		70,868	—		—		—		—		—		0
Balances at June 30, 2021		307,045,707	$	3	$	2,030	$	1	$	(220)	$	0	$	1,814
Balances at March 31, 2022															Balances at March 31, 2022	308,288,288	$	3	$	2,038	$	150	$	(242)	$	2	$	1,951

~~Table of Contents~~



	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, 2020	267,726,373	$	3	$	1,715	$	(48)	$	(246)	$	416	$	1,840
Net Income	—	—		—		54		—		8		62
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments	—	—		—		—		3		1		4
Pension and Postretirement Benefit Plans	—	—		—		—		10		—		10
Currency Translation Adjustment	—	—		—		—		(4)		(1)		(5)

Reduction of IP's Ownership Interest	15,307,000	—		70		—		—		(216)		(146)
Dividends Declared	—	—		—		(21)		—		—		(21)
Distribution of Membership Interest	—	—		—		—		—		(4)		(4)


Recognition of Stock-Based Compensation, Net	—	—		(3)		—		—		—		(3)
Issuance of Shares for Stock-Based Awards	1,168,394	—		—		—		—		—		—
Balances at March 31, 2021	284,201,767	$	3	$	1,782	$	(15)	$	(237)	$	204	$	1,737

Common Stock Capital in Excess of Par Value Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive (Loss) Income Noncontrolling Interest Total Equity Redeemable Noncontrolling Interest
In millions, except share amounts Shares Amount
Balances at December 31, 2019
290,246,907 $ 3 $ 1,877 $ 56 $ (367) $ 488 $ 2,057 $ 304
Net Loss
— — — (13) — (2) (15) (5)
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments
— — — — (1) — (1) —
Pension and Postretirement Benefit Plans
— — — — 114 32 146 9
Currency Translation Adjustment
— — — — (46) (10) (56) (1)
Repurchase of Common Stock(a)
(9,667,034) — (53) (71) — — (124) —
Dividends Declared
— — — (21) — — (21) —
Redemption of IP's Ownership Interest — — — — — — — (250)
Redeemable Noncontrolling Interest Redemption Value Adjustment — — 18 — — — 18 (18)
Tax Effect of IP Redemption — — 7 — — — 7
Distribution of Membership Interest
— — — — — (5) (5) (1)
Recognition of Stock-Based Compensation, Net
— — 4 — — — 4 —
Issuance of Shares for Stock-Based Awards
788,561 — — — — — 0 —
Balances at March 31, 2020
281,368,434 $ 3 $ 1,853 $ (49) $ (300) $ 503 $ 2,010 $ 38
Net Income
— — — 52 — 15 67 —
Other Comprehensive Income, Net of Tax:
Derivative Instruments
— — — — 2 — 2 —
Pension and Postretirement Benefit Plans
— — — — — — — 1
Currency Translation Adjustment
— — — — 12 3 15 —
Repurchase of Common Stock(b)
(2,622,283) — (14) (19) — — (33) —
Redeemable Noncontrolling Interest Redemption Value Adjustment — — (5) — — — (5) 5
Dividends Declared
— — (21) — . (21) —
Distribution of Membership Interest
— — — — — (5) (5) —
Recognition of Stock-Based Compensation, Net
— — 7 — — — 7 —
Issuance of Shares for Stock-Based Awards
93,381 — — — — — 0 —
Balances at June 30, 2020
278,839,532 $ 3 $ 1,841 $ (37) $ (286) $ 516 $ 2,037 $ 44

~~(a)~~ ~~Includes 410,400 shares repurchased but not yet settled as of March 31, 2020.~~

~~(b)~~ ~~Includes 14,436 shares repurchased but not yet settled as of June 30, 2020.~~

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

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GRAPHIC PACKAGING HOLDING COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six Months Ended					Three Months Ended
		June 30,					March 31,
In millions	In millions	2021		2020		In millions	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	Net Income	$	104	$	47	Net Income	$	107	$	62

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:	Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:					Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization	Depreciation and Amortization	234		236		Depreciation and Amortization	139		117

Deferred Income Taxes	Deferred Income Taxes	31		(10)		Deferred Income Taxes	17		7
Amount of Postretirement Expense (Less) Greater Than Funding		(10)		157
Amount of Postretirement Expense Less Than Funding						Amount of Postretirement Expense Less Than Funding	(5)		(11)

Other, Net	Other, Net	49		31		Other, Net	—		23
Changes in Operating Assets and Liabilities	Changes in Operating Assets and Liabilities	(103)		(317)		Changes in Operating Assets and Liabilities	(240)		(145)
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	305		144		Net Cash Provided by Operating Activities	18		53

CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Spending	Capital Spending	(329)		(293)		Capital Spending	(221)		(137)
Packaging Machinery Spending	Packaging Machinery Spending	(17)		(14)		Packaging Machinery Spending	(2)		(9)
Acquisition of Businesses, Net of Cash Acquired		0		(123)

Beneficial Interest on Sold Receivables	Beneficial Interest on Sold Receivables	64		53		Beneficial Interest on Sold Receivables	31		33
Beneficial Interest Obtained in Exchange for Proceeds	Beneficial Interest Obtained in Exchange for Proceeds	(5)		(5)		Beneficial Interest Obtained in Exchange for Proceeds	(2)		(5)
Other, Net	Other, Net	(2)		(7)		Other, Net	(1)		(2)
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(289)		(389)		Net Cash Used in Investing Activities	(195)		(120)

CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of Common Stock		0		(157)

Proceeds from Issuance of Debt	Proceeds from Issuance of Debt	1,225		450		Proceeds from Issuance of Debt	—		1,225
Retirement of Long-Term Debt	Retirement of Long-Term Debt	(1,226)		0		Retirement of Long-Term Debt	—		(1,221)
Payments on Debt	Payments on Debt	(9)		(18)		Payments on Debt	(3)		(9)
Redemption of Noncontrolling Interest	Redemption of Noncontrolling Interest	(150)		(250)		Redemption of Noncontrolling Interest	—		(150)

Borrowings under Revolving Credit Facilities	Borrowings under Revolving Credit Facilities	1,827		1,535		Borrowings under Revolving Credit Facilities	1,972		885
Payments on Revolving Credit Facilities	Payments on Revolving Credit Facilities	(1,691)		(1,308)		Payments on Revolving Credit Facilities	(1,812)		(677)

Repurchase of Common Stock related to Share-Based Payments	Repurchase of Common Stock related to Share-Based Payments	(14)		(9)		Repurchase of Common Stock related to Share-Based Payments	(17)		(14)
Debt Issuance Costs	Debt Issuance Costs	(14)		(7)		Debt Issuance Costs	—		(5)
Dividends and Distributions Paid to GPIP Partner	Dividends and Distributions Paid to GPIP Partner	(48)		(54)		Dividends and Distributions Paid to GPIP Partner	(23)		(24)
Other, Net	Other, Net	(5)		(1)		Other, Net	2		(5)
Net Cash (Used in) Provided by Financing Activities		(105)		181
Net Cash Provided by Financing Activities						Net Cash Provided by Financing Activities	119		5

Effect of Exchange Rate Changes on Cash	Effect of Exchange Rate Changes on Cash	(1)		(5)		Effect of Exchange Rate Changes on Cash	(3)		(1)

Net Decrease in Cash and Cash Equivalents	Net Decrease in Cash and Cash Equivalents	(90)		(69)		Net Decrease in Cash and Cash Equivalents	(61)		(63)
Cash and Cash Equivalents at Beginning of Period	Cash and Cash Equivalents at Beginning of Period	179		153		Cash and Cash Equivalents at Beginning of Period	172		179
CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	89	$	84	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	111	$	116

Non-cash Investing Activities:	Non-cash Investing Activities:					Non-cash Investing Activities:
Beneficial Interest Obtained in Exchange for Trade Receivables	Beneficial Interest Obtained in Exchange for Trade Receivables	$	66	$	68	Beneficial Interest Obtained in Exchange for Trade Receivables	$	28	$	30
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	$	50	$	49	Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities	$	7	$	22
Non-cash Financing Activities:	Non-cash Financing Activities:					Non-cash Financing Activities:

Non-cash Exchange of Stock Issuance for Redemption of Noncontrolling Interest	Non-cash Exchange of Stock Issuance for Redemption of Noncontrolling Interest	$	(652)	$	0	Non-cash Exchange of Stock Issuance for Redemption of Noncontrolling Interest	$	—	$	(250)

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

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 —— GENERAL INFORMATION

Nature of Business

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

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

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

~~During 2020, GPIP purchased 32.5 million partnership units from IP for $500 million in cash, fully redeeming the 18.2 million partnership units that were required to be redeemed in cash.~~

On February 16, 2021, the Company announced that IP had notified the Company of its intent to exchange additional partnership units. Per an agreement between the parties, on February 19, 2021, GPIP purchased 9.3 million partnership units from IP for $150 million in cash, and IP exchanged 15.3 million partnership units for an equivalent number of shares of GPHC common stock.

On May 21, 2021, IP exchanged its remaining 22.8 million partnership units for an equivalent number of shares of GPHC common stock. As a result, IP has no ownership interest remaining in GPIP as of May 21, 2021.

In connection with both the February 19, 2021 and May 21, 2021 exchanges, pursuant to elections under Section 754 of the Internal Revenue Code, the Company expects to obtain an increase with respect to the tax basis in the assets of GPIP and certain of its subsidiaries. As a result, payments pursuant to the Tax Receivable Agreement (“TRA”), executed in connection with the formation of the partnership on January 1, 2018, are required. The TRA provides for the payment by the Company to IP of 50% of the present value of any tax benefits projected to be realized by the Company upon IP’s exchange of its membership interest into GPHC stock. As such, the Company recorded TRA liabilities of $43 million and $65 million, for the February 19, 2021 and May 21, 2021 exchanges, respectively. The TRA liabilities are included in Other Accrued Liabilities as of June 30, 2021, and were recorded through adjustments to Capital in Excess of Par Value during Q1 2021 and Q2 2021. In accordance with the terms of the TRA, the Company expects the liability for the February and May exchanges to be settled during the third quarter and fourth quarter of 2021, respectively. Additionally, the Company recorded an adjustment through Capital in Excess of Par Value to decrease its net domestic Deferred Tax Liability (“DTL”) by $58 million in connection with the February exchange and $109 million in connection with the May exchange. The decrease in the DTL reflects the change in the outside basis difference associated with the Company’s investment in the partnership and includes the impact of the tax basis step up triggered by the exchanges pursuant to Section 754 of the Internal Revenue Code in addition to other changes to book and tax basis as a result of the Company’s increased ownership interest in the partnership.

~~The Company’s~~Company’s Condensed Consolidated Financial Statements include all subsidiaries in which the Company has the ability to exercise direct or indirect control over operating and financial policies. Intercompany transactions and balances are eliminated in consolidation. ~~Certain reclassifications have been made to prior year amounts to conform to current year presentation.~~

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In the ~~Company’s~~Company’s opinion, the accompanying Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary to state fairly the financial position, results of operations and cash flows for the interim periods. The ~~Company’s~~Company’s year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all the information required by accounting principles generally accepted in the United States of America (“(“U.S. ~~GAAP”~~GAAP”) for complete financial statements. Therefore, these Condensed Consolidated Financial Statements should be read in conjunction with ~~GPHC’s~~GPHC’s Form 10-K for the year ended December 31, ~~2020.~~2021. In addition, the preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates and changes in these estimates are recorded when known.

Revenue Recognition

The Company has 2 primary activities, manufacturing and converting paperboard, from which it generates revenue from contracts with customers. Revenue is disaggregated primarily by geography and type of activity as further explained in "Note 10 —- Segment Information." All reportable segments and the Australia and Pacific Rim operating segments recognize revenue under the same method, allocate transaction price using similar methods, and have similar economic factors impacting the uncertainty of revenue and related cash flows.

Revenue is recognized on the Company's annual and multi-year supply contracts when the Company satisfies the performance obligation by transferring control over the product or service to a customer, which is generally based on shipping terms and passage of title under the point-in-time method of recognition. For the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company recognized ~~$1,731~~$2,238 million and ~~$1,605~~$1,644 million, respectively, of revenue from contracts with customers. ~~For the six months ended June 30, 2021 and 2020, the Company recognized $3,375 million and $3,200 million, respectively, of revenue from contracts with customers.~~

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

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company's contract assets consist primarily of contract renewal incentive payments to customers which are amortized over the period in which performance obligations related to the contract renewal are satisfied. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, contract assets were ~~$17~~$15 million and ~~$15~~$17 million, respectively. The Company's contract liabilities consist principally of rebates, and as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were ~~$55~~$53 million and ~~$56~~$61 million, respectively.

Accounts Receivable and Allowances

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

The Company has entered into agreements to sell, on a revolving basis, certain trade accounts receivable to third party financial institutions. Transfers under these agreements meet the requirements to be accounted for as sales in accordance with the Transfers and Servicing topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (the "Codification"). The loss on sale is not material and is included in Other (Income) Expense, ~~(Income),~~ Net line item on the Condensed Consolidated Statement of Operations. The following table summarizes the activity under these programs for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively:


		Six Months Ended				Three Months Ended
		June 30,				March 31,
In millions	In millions	2021		2020			In millions	2022		2021
Receivables Sold and Derecognized	Receivables Sold and Derecognized	$	1,531	$	1,357		Receivables Sold and Derecognized	$	737	$	758
Proceeds Collected on Behalf of Financial Institutions	Proceeds Collected on Behalf of Financial Institutions	1,421		1,318			Proceeds Collected on Behalf of Financial Institutions	681		685
Net Proceeds Received From Financial Institutions	Net Proceeds Received From Financial Institutions	100		31			Net Proceeds Received From Financial Institutions	64		62
Deferred Purchase Price at June 30(a)		11		10
Pledged Receivables at June 30		158		261
Deferred Purchase Price at March 31(a)							Deferred Purchase Price at March 31(a)	3		9
Pledged Receivables at March 31							Pledged Receivables at March 31	201		160

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

The Company participates in supply chain financing arrangements offered by certain customers and has entered into various factoring arrangements that also qualify for sale accounting in accordance with the Transfers and Servicing topic of the FASB Codification. For the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company sold receivables of ~~$249~~$264 million and ~~$151~~$125 million, respectively, related to these factoring arrangements.

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Receivables sold under all programs subject to continuing involvement, which consists principally of collection services, were ~~$727~~$674 million and ~~$621~~$613 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Share Repurchases and Dividends

On February ~~25, 2021 and May 26, 2021,~~22, 2022, the Company's board of directors declared a regular quarterly dividend of $0.075 per share of common stock payable on April 5, ~~2021 and July 5, 2021~~2022 to shareholders of record as of March 15, ~~2021 and June 15, 2021, respectively.~~2022.

On January 28, 2019, the Company's board of directors authorized a share repurchase program to allow the Company to purchase up to $500 million of the Company's issued and outstanding shares of common stock through open market purchases, privately negotiated transactions and Rule 10b5-1 plans (the "2019 share repurchase program"). During the first ~~six~~three months of 2022 and 2021, the Company did not repurchase any shares of its common stock under the 2019 share repurchase program. ~~During the six months ended June 30, 2020, the Company repurchased 12,289,317 shares of its common stock at an average price of $12.82 under the 2019 share repurchase program.~~ As of ~~June 30, 2021,~~March 31, 2022, the Company has $147 million available for additional repurchases under the 2019 share repurchase program.

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net

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


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Charges Associated with Business Combinations(a)	Charges Associated with Business Combinations(a)	$	23	$	(6)	$	23	$	(4)	Charges Associated with Business Combinations(a)	$	8	$	—
Shutdown and Other Special Charges	Shutdown and Other Special Charges	7		22		15		26		Shutdown and Other Special Charges	—		8
Exit Activities~~(a)~~(b)	Exit Activities~~(a)~~(b)	4		4		8		17		Exit Activities~~(a)~~(b)	7		4

Total	Total	$	34	$	20	$	46	$	39	Total	$	15	$	12

(a)For more information on these charges, see "Note 3 - Business Combinations."

(b) Relates to the Company's CRB ~~mills, converting~~mill and folding carton facility closures ~~and the PM1 containerboard machine exit activities~~ (see "Note 13 —- Exit Activities").

2022

On March 15, 2022, the Company announced its decision to close the Norwalk, Ohio folding carton facility by the end of May 2022. Severance charges associated with this project are included in Exit Activities in the table above for the three months ended March 31, 2022. For more information, see "Note 13 - Exit Activities."

2021

During 2019, the Company announced its plans to invest in a new CRB paper machine in Kalamazoo, Michigan. ~~In conjunction with~~At the ~~completion~~time of ~~this project,~~the announcement, the Company ~~currently expects~~expected to close 2 of its smaller CRB Mills in 2022 in order to remain capacity neutral. During the third quarter of 2021, the Company decided to continue to operate 1 of the 2 original smaller CRB mills at least through 2022. Severance, retention, start-up costs, and other charges associated with this project are included in Exit Activities in the table above in the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. For more information, see "Note 13 —- Exit Activities." ~~The Company also expects to incur start-up charges of approximately $15 million for the new CRB paper machine in 2021. These start-up charges are included in Exit Activities in the table above.~~

During 2019, the Company began a three-year program to dismantle and dispose of idle and abandoned assets primarily at the paperboard mills. Charges related to this program during the three months ended June 30, 2021 and 2020 were $6 million and $2 million, respectively. Charges related to this program during the six months ended June 30, 2021 and 2020 were $9 million and $4 million, respectively. Expected charges for this program for 2021 are approximately $26 million. Charges associated with this program are included in Shutdown and Other Special Charges in the table above.

On May 12, 2021, the Company announced its intent to acquire all of the shares of AR Packaging Group AB ("AR Packaging"), Europe's second largest producer of fiber-based consumer packaging, for approximately $1.45 billion in cash, subject to customary adjustments. The costs associated with this acquisition are included in Charges Associated with Business Combinations in the table above. The $1.45 billion acquisition price will be paid in Euros at close. As such, on May 14, 2021, the Company entered into deal contingent, foreign exchange forward contracts, with no upfront cash cost, to hedge 700 million Euros of the acquisition price. These forward contracts expire if the deal terminates or does not close by May 13, 2022 and are accounted for as derivatives under ASC 815, ~~Derivatives and Hedging. Unrealized gains and losses resulting from these contracts are recognized in earnings and are included in Charges Associated with Business Combinations in the table above. For more information, see~~ ~~"Note 6 — Financial Instruments and Fair Value Measurement~~."

~~2020~~

On January 31, 2020, the Company acquired a folding carton facility from Quad/Graphics, Inc. ("Quad"), a commercial printing company. The converting facility is located in Omaha, Nebraska and is included in the Americas Paperboard Packaging reportable segment. The Company paid $41 million using existing cash and borrowings under its revolving credit facility. The costs associated with this acquisition are included in Charges Associated with Business Combinations in the table above. During the first quarter of 2021, the acquisition accounting for Quad was finalized.

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In March 2020, the Company made the decision to close the White Pigeon, Michigan CRB mill and shut down the PM1 containerboard machine in West Monroe, Louisiana. Charges associated with these projects are included in Exit Activities in the table above. For more information, see "~~Note 13 — Exit Activities~~."

On April 1, 2020, the Company acquired the Consumer Packaging Group business from Greif, Inc. ("Greif"), a leader in industrial packaging products and services. The acquisition included 7 converting facilities across the United States and will allow the Company to increase its mill-to-converting plant integration over time. The Company paid approximately $80 million using existing cash and borrowings under its revolving credit facility. The costs associated with this acquisition are included in Charges Associated with Business Combinations in the table above. During the second quarter of 2021, the acquisition accounting for Greif was finalized.

In June 2020, the Company made the decision to close certain converting facilities that were acquired from Greif. The Burlington, North Carolina converting facility and the Los Angeles, California converting facility were closed during 2020. Charges associated with these projects are included in Exit Activities in the table above. For more information, see "~~Note 13 — Exit Activities.~~"

The Company has established estimated liabilities related to the partial or complete withdrawal from certain multi-employment benefit plans for facilities which have been closed. During the second quarter of 2020, the Company increased its estimated withdrawal liability for these plans by $12 million, which is included in Shutdown and Other Special Charges in the table above. For more information, see "~~Note 5 — Pensions and Other Postretirement Benefits.~~"

During the second quarter of 2020, the Company made one-time payments to front-line production employees and made contributions to local food banks in the communities where our manufacturing operations are located. The charges associated with these payments are included in Shutdown and Other Special Charges in the table above.

Adoption of New Accounting Standards

~~In December 2019, the FASB issued ASU No. 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~. This amendment modifies ASC 740 to simplify the accounting for income taxes. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this new guidance during the three months ended March 31, 2021. The Company’s adoption did not result in any changes in accounting principle upon transition and the impact to the Company’s overall financial statements is immaterial.

~~Accounting Standards Not Yet Adopted~~

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides temporary optional expedients and exceptions for applying GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate ~~(“SOFR”~~(“SOFR”). The ASU can be adopted after its issuance date through December 31, 2022. The Company adopted this standard in the first quarter of fiscal 2022 with no material impact on the Company's financial position and results of operations.

Accounting Standards Not Yet Adopted

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under the new guidance, the acquirer should determine what contract assets and/or contract liabilities it would have recorded under ASC 606 as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ASU 2021-08 is ~~currently~~effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. The Company will continue evaluating the impact of this ~~new accounting guidance.~~ASU.

NOTE 2 —— INVENTORIES, NET

Inventories, Net by major class:


In millions	March 31, 2022		December 31, 2021
Finished Goods	$	530	$	528
Work in Progress	211		194
Raw Materials	563		473
Supplies	200		192
Total	$	1,504	$	1,387

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 — BUSINESS COMBINATIONS

Americraft

On July 1, 2021, the Company acquired substantially all of the assets of Americraft Carton Inc. ("Americraft"). The Company paid approximately $292 million, using existing cash and borrowings under its revolving credit facility. The acquisition included 7 converting plants across the United States.

The purchase price for Americraft has been allocated to assets acquired and liabilities assumed based on the fair values as of the acquisition date and is subject to adjustments in subsequent periods as management finalizes its purchase price allocation, including the third-party valuations.Tangible assets and liabilities were valued as of the acquisition date using the indirect and direct methods of the cost approach and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. Management believes that the purchase price attributable to goodwill represents the benefits expected as the acquisition was made to continue to expand its product offering, to integrate paperboard from the Company's mills and to further optimize the Company's supply chain footprint. The assigned goodwill, which is deductible for tax purposes, is reported within the Americas Paperboard Packaging reportable segment.

The preliminary purchase price allocation as of March 31, 2022 is as follows:


In millions	June 30, 2021		December 31, 2020Amounts Recognized as of Acquisition Date
~~Finished Goods~~Purchase Price	$	~~427~~	$	~~471~~292

~~Work in Progress~~Receivables, Net	~~141~~		~~133~~22
~~Raw Materials~~Inventories, Net	~~355~~		~~349~~37
~~Supplies~~Property, Plant and Equipment, Net	~~182~~122
Intangible Assets, Net(a)	~~175~~54
Other Assets	1
Total Assets Acquired	236
Current Liabilities	12
Total Liabilities Assumed	12
Net Assets Acquired	224
Goodwill	68
Total Estimated Fair Value of Net Assets Acquired	$	~~1,105~~	$	~~1,128~~292

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

AR Packaging

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~NOTE 3 — DEBT~~On November 1, 2021, the Company completed the acquisition of AR Packaging Group AB ("AR Packaging"), Europe's second largest producer of fiber-based consumer packaging, by acquiring all the AR Packaging Group AB shares that were issued and outstanding as of the date of acquisition. The acquisition included 30 converting plants in 13 countries and enhances the Company’s global scale, innovation capabilities, and value proposition for customers throughout Europe and bordering regions.

~~2021~~

~~On March 8, 2021, GPIL completed a private offering~~The total cash consideration for the AR Packaging acquisition was $1,412 million net of ~~$400~~cash acquired of $75 million, ~~aggregate principal amount~~paid in Euros through the use of ~~its 0.821% Senior Secured Notes due 2024 and $400 million aggregate principal amount~~deal contingent, foreign exchange forward contracts, purchased through the use of ~~its 1.512% Senior Secured Notes due 2026. The net proceeds were used by~~available borrowing capacity on the ~~Company to repay a portion of the outstanding borrowings under GPIL's term loan credit facilities, which is under its senior secured credit facility.~~

On April 1, 2021, GPIL entered into a Fourth 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 andCompany’s Senior Secured Revolving Credit Facilities and ~~to amend certain other terms of~~ the agreement including revised debt covenants and collateral requirements. Under the terms of the agreement, $975 million of the Company’s Senior Secured Term Loan Facilities remains outstanding. The Company added approximately $400 million Incremental Facility Amendment to ~~its Senior Secured Revolving Credit Facilities. $550 million 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 LIBOR plus 1.25% to LIBOR plus 2.00%, 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 January 1, 2023 to April 1, 2026. $425 million of the Senior Secured Term Loan Facilities continue to bear interest at a fixed rate per annum equal to 2.67% and mature on their originally scheduled maturity date of January 14, 2028.

~~2020~~

~~On October 15, 2020, GPIL entered into a new $425 million term loan facility under the Third~~Fourth Amended and Restated Credit Agreement with member banks of the Farm Credit System (the "Incremental Term A-2 Facility")(collectively, the "Current Credit Agreement"). The Incremental Term A-2 Facility had a delayed draw feature, and the Company drew the entire facility on January 14, 2021. On January 15, 2021, the Company used the proceeds, together with cash on hand, to redeem its 4.75% Senior Notes due in 2021 at par. The redemption included the outstanding principal amount plus accrued and unpaid interest. The Incremental Term A-2 Facility bears interest at a fixed rate of 2.67% due quarterly, matures January 14, 2028, and does not amortize. As long as the loan is outstanding, GPIL will be eligible to receive an annual patronage credit from the participating 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.Agreement. For more information, see "Note 4 - Debt."

1412

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Long-Term Debt~~The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values as of the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, none of which is expected to be deductible for tax purposes, and will be reported within the Europe reportable segment. During the first quarter of 2022, the Company recorded acquisition accounting adjustments of $3 million to goodwill comprised of ~~the following:~~$3 million to Other Accrued Liabilities. The allocation of purchase price shown below remains preliminary and is subject to further adjustment, pending additional refinement and final completion of valuations, including but not limited to valuations of property and equipment, customer relationships and other intangible assets, and deferred tax liabilities. Goodwill is primarily attributed to synergies from future expected economic benefits, including enhanced revenue growth from expanded capabilities and geographic presence as well as substantial cost savings from duplicative overhead, streamlined operations and enhanced operational efficiency.


In millions	~~June 30, 2021~~		~~December 31, 2020~~
~~Senior Notes with interest payable semi-annually at 3.50%, effective rate~~Amounts Recognized as of ~~3.55%, payable in 2029~~Acquisition Date(a)
Total Purchase Consideration	$	~~350~~1,487

$Cash Acquired	~~350~~75
Receivables, Net	212
Inventories	166
Other Current Assets	12
~~Senior Notes with interest payable semi-annually at 3.50%, effective rate of 3.55%, payable in 2028~~Property, Plant and Equipment~~(a)~~(b)	~~450~~		~~450~~529
~~Senior Notes with interest payable semi-annually at 4.75%, effective rate of 4.81%, payable in 2027~~Intangible Assets~~(a)~~	~~300~~		~~300~~
~~Senior Notes with interest payable semi-annually at 1.512%, effective rate of 1.52%, payable in 2026(a)~~	~~400~~		0
~~Senior Notes with interest payable semi-annually at 4.125%, effective rate of 4.15%, payable in 2024(b)~~	~~300~~		~~300~~
~~Senior Notes with interest payable semi-annually at 0.821%, effective rate of 0.83%, payable in 2024(a)~~	~~400~~		0
~~Senior Notes with interest payable semi-annually at 4.875%, effective rate of 4.89%, payable in 2022(b)~~	~~250~~		~~250~~
~~Senior Notes with interest payable semi-annually at 4.75%(b)~~	0		~~425~~
~~Senior Secured Term Loan A-2 Facility with interest payable quarterly at 2.67%, effective rate of 2.68% payable in 2028(a)~~	~~425~~		0
~~Senior Secured Term Loan Facilities with interest payable at various dates at floating rates (1.59% at June 30, 2021) payable through 2026(a)~~	~~550~~		~~1,360~~
~~Senior Secured Revolving Facilities with interest payable at floating rates (1.59% at June 30, 2021) payable in 2026(a)~~(c)	~~220~~		84
~~Finance Leases and Financing Obligations~~	~~137~~		~~139~~447
Other Assets	4		576
Total ~~Long-Term Debt~~Assets Acquired	~~3,786~~		~~3,663~~1,517
~~Less:~~Accounts Payable	109
Compensation and Employee Benefits	12
Other Accrued Liabilities	104
Short-Term Debt and Current Portion of Long-Term Debt	189
Long-Term Debt	~~494~~17
Deferred Income Tax Liabilities	164
Accrued Pension and Postretirement Benefits	50
Other Noncurrent Liabilities	41
Noncontrolling Interests	2
Total ~~Long-Term Debt Excluding Current Portion~~Liabilities Assumed	~~3,768~~		~~3,169~~508
~~Less: Unamortized Deferred Debt Issuance Costs~~Net Assets Acquired	26		221,009
Goodwill	478
Total Estimated Fair Value of Net Assets Acquired	$	~~3,742~~	$	~~3,147~~1,487

(a) The amounts were translated from Euro to USD using the rate at the acquisition date of 1.1539.

(b) Property, Plant and Equipment primarily consists of Machinery and Equipment of $371 million with a weighted average life of approximately 12 years.

(c) Intangible Assets primarily consists of Customer Relationships of $439 million with a weighted average life of approximately 15 years.

The above fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date. The fair values of the tangible assets acquired and liabilities assumed were preliminarily determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, future expected cash flows and other future events that are judgmental and subject to change. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements (“ASC 820”). Intangible assets consisting of customer relationships, technology, and trade names were valued using the discounted cash flow analysis. The significant assumptions used to estimate the value of the customer relationships intangible assets included the discount rate, annual revenue growth rates, customer attrition rates, projected operating expenses, projected EBITDA margins, tax rate, depreciation, and contributory asset charge.

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on the Company’s continuing review of matters related to the acquisition. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

Since the acquisition date, the results of operations for AR Packaging of $281 million of revenue and $11 million of operating income have been included within the consolidated statements of income for the three months ended March 31, 2022.

The following unaudited pro forma consolidated financial information for the three months ended March 31, 2021 combines the results of the Company for fiscal 2021 and the unaudited results of AR Packaging for the corresponding period. The unaudited pro forma consolidated financial information assumes that the Acquisition, which closed on November 1, 2021, was completed on January 1, 2021 (the first day of fiscal 2021).

The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for amortization expense of acquired intangible assets, fair value adjustments for acquired inventory, property, plant and equipment and long-term debt.

These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the Acquisition actually taken place on January 1, 2021. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the Acquisition.


	Pro Forma Three Months Ended (unaudited)
	March 31,
In millions	2022		2021
Revenue	$	2,245	$	1,923
Net Income (Loss)	$	107	$	(12)

NOTE 4 — DEBT

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


In millions	March 31, 2022		December 31, 2021
Short Term Borrowings	$	14	$	9
Current Portion of Finance Lease Obligations	9		7
Current Portion of Long-Term Debt	263		263
Total	$	286	$	279

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Long-Term Debt is comprised of the following:


In millions	March 31, 2022		December 31, 2021
Senior Notes with interest payable semi-annually at 4.875%, effective rate of 4.88%, payable in 2022(a)	$	250	$	250
Senior Notes with interest payable semi-annually at 0.821%, effective rate of 0.82%, payable in 2024(b)	400		400
Senior Notes with interest payable semi-annually at 4.125%, effective rate of 4.15%, payable in 2024(a)	300		300
Senior Notes with interest payable semi-annually at 1.512%, effective rate of 1.52%, payable in 2026(b)	400		400
Senior Notes with interest payable semi-annually at 4.75%, effective rate of 4.80%, payable in 2027(b)	300		300
Senior Notes with interest payable semi-annually at 3.50%, effective rate of 3.54%, payable in 2028(b)	450		450
Senior Notes with interest payable semi-annually at 3.50%, effective rate of 3.54%, payable in 2029(b)	350		350
Senior Notes (€290 million) with interest payable semi-annually at 2.625% , effective rate of 2.66%, payable in 2029(b)	321		330
Senior Notes with interest payable semi-annually at 3.75% , effective rate of 3.80%, payable in 2030(b)	400		400
Green Bond net of unamortized premium with interest payable at 4.00%, effective rate of 1.72%, payable in 2026(b)	110		110
Senior Secured Term Loan A-2 Facility with interest payable quarterly at 2.67%, effective rate of 2.68% payable in 2028(b)	425		425
Senior Secured Term Loan A-3 Facility with interest payable monthly payable at floating rates (2.48% at March 31, 2022), effective rate of 2.50%, payable in 2028(b)	250		250
Senior Secured Term Loan Facilities with interest payable at various dates at floating rates (2.23% at March 31, 2022) payable through 2026(b)	540		543
Senior Secured Term Loan Facility (€210 million) with interest payable at various dates at floating rates (1.75% at March 31, 2022) payable through 2026(b)	233		239
Senior Secured Revolving Facilities with interest payable quarterly at floating rates (2.47% at March 31, 2022) payable in 2026(b)(c)	1,062		920
Finance Leases and Financing Obligations	143		146
Other	18		9
Total Long-Term Debt	5,952		5,822
Less: Current Portion	272		270
Total Long-Term Debt Excluding Current Portion	5,680		5,552
Less: Unamortized Deferred Debt Issuance Costs	35		37
Total	$	5,645	$	5,515

(a) Guaranteed by ~~GPIP~~GPHC and certain domestic subsidiaries.

(b) Guaranteed by ~~GPHC~~GPIP and certain domestic subsidiaries.

(c) The effective interest rates for the ~~Company’s~~Company’s Senior Secured Revolving Credit Facilities were ~~1.57%~~2.06% and ~~2.06%~~1.63% as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

At ~~June 30, 2021,~~March 31, 2022, the Company and its U.S. and international subsidiaries had the following commitments, amounts outstanding and amounts available under revolving credit facilities:

~~In millions~~

Total
Commitments

Total
Outstanding

~~Total Available~~

~~Senior Secured Domestic Revolving Credit Facility(a)~~

~~1,850~~

~~143~~

~~1,684~~

~~Senior Secured International Revolving Credit Facility~~

~~187~~

~~110~~

~~Other International Facilities~~

~~Total~~

~~2,092~~

~~226~~

~~1,843~~


In millions	Total Commitments		Total Outstanding		Total Available
Senior Secured Domestic Revolving Credit Facility(a)	$	1,850	$	1,016	$	812
Senior Secured International Revolving Credit Facility	202		46		156
Other International Facilities	81		32		49
Total	$	2,133	$	1,094	$	1,017

(a) In accordance with its debt agreements, the ~~Company’s~~Company’s availability under its revolving credit facilities has been reduced by the amount of standby letters of credit issued of ~~$23~~$22 million as of ~~June 30, 2021.~~March 31, 2022. These letters of credit are primarily used as security against the Company's self-insurance obligations and ~~workers’~~workers’ compensation obligations. These letters of credit expire at various dates through ~~2021 and~~ 2022 unless extended.

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Covenant Agreements

The Current Credit Agreement and the indentures governing the ~~3.50%~~4.875% Senior Notes due ~~2029, 3.50% Senior Notes due 2028, 4.75% Senior Notes due 2027, 1.512% Senior Notes due 2026,~~2022, 0.821% Senior Notes due 2024, 4.125% Senior Notes due 2024, ~~and 4.875%~~1.512% Senior Notes due ~~2022~~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 and 3.75% Senior Notes due 2030 (the ~~"Indentures"~~“Indentures”), limit the Company's ability to incur additional indebtedness. Additional covenants contained in the Current Credit Agreement and the Indentures may, among other things, restrict the ability of the Company to dispose of assets, incur guarantee obligations, prepay other indebtedness, repurchase stock, pay dividends and make other restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of the Indentures, engage in mergers or consolidations, change the business conducted by the Company and its subsidiaries, and engage in certain transactions with affiliates. Such restrictions could limit the ~~Company’s~~Company’s ability to respond to changing market conditions, fund its capital spending program, provide for unexpected capital investments or take advantage of business opportunities.

As of ~~June 30, 2021,~~March 31, 2022, the Company was in compliance with the covenants in the Current Credit Agreement and the Indentures.

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

NOTE ~~4 —~~5 — STOCK INCENTIVE PLANS

The Company has 1 active equity compensation plan from which new grants may be made, the Graphic Packaging Holding Company 2014 Omnibus Stock and Incentive Compensation Plan (the ~~“2014 Plan”~~“2014 Plan”). The 2014 Plan allows for granting shares of stock, options, stock appreciation rights, restricted stock, restricted stock units ~~(“RSUs”~~(“RSUs”), restricted stock awards ~~(“RSAs”~~(“RSAs”), and other types of stock-based and cash awards. Awards under the 2014 Plan ~~generally~~ vest and expire in accordance with terms established at the time of grant. Shares issued pursuant to awards under the 2014 Plan are from ~~GPHC’s~~GPHC’s authorized but unissued shares. Compensation costs are recognized on a straight-line basis over the requisite service period of the award and are adjusted for actual performance for performance-based awards. As of ~~June 30, 2021,~~March 31, 2022, there were ~~11.5~~10.4 million shares remaining available to be granted under the 2014 Plan.

Stock Awards, Restricted Stock and Restricted Stock Units

Under the 2014 Plan, all RSUs granted to employees generally vest and become payable in three years from date of grant. RSUs granted to employees generally contain some combination of service and performance objectives based on various financial targets and relative total shareholder return that must be met for the RSUs to vest. RSUs granted ~~to non-employee directors~~ as deferred compensation for non-employee directors are fully vested but not payable until the distribution date elected by the director. ~~Stock awards granted~~RSAs issued to non-employee directors as part of their compensation for service on the Board are unrestricted on the grant date.

Data concerning RSUs ~~and RSAs~~ granted in the first ~~six~~three months of ~~2021~~2022 is as follows:


		Weighted Average Grant Date Fair Value Per Share
~~RSUs — Employees and Non-Employee Directors~~	~~1,525,420~~	$	~~15.86~~
~~Stock Awards — Board of Directors~~	~~55,055~~	$	~~17.80~~


		Weighted Average Grant Date Fair Value Per Share
RSUs — Employees and Non-Employee Directors	1,747,582	$	20.04

During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, $18~~$9 million and ~~$20~~$11 million, respectively, were charged to compensation expense for stock incentive plans and such amounts are included in Selling, General and Administrative expenses in the Condensed Consolidated Statements of Operations.

During each of the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 1.2 ~~million and 0.8~~ million shares were ~~issued, respectively.~~issued. The shares issued were primarily related to RSUs granted to employees during 2019 and 2018, ~~and 2017,~~ respectively.

NOTE ~~5 —~~6 — PENSIONS AND OTHER POSTRETIREMENT BENEFITS

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

~~In the first quarter~~Table of 2020, the Company, using the assets held within the pension trust, purchased a group annuity contract that transferred the remaining pension obligation under its largest U.S. pension plan of $713 million to an insurance company. The Company incurred an additional non-cash settlement charge of $153 million related to this transfer. These non-cash settlement charges relate to Net Actuarial Loss previously recognized in Accumulated Other Comprehensive Loss.Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pension Expense

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


		Three Months Ended				Six Months Ended				Three Months Ended
		June 30,				June 30,				March 31,
In millions	In millions	2021		2020		2021		2020			In millions	2022		2021
Components of Net Periodic Cost:	Components of Net Periodic Cost:										Components of Net Periodic Cost:
Service Cost	Service Cost	$	3	$	4	$	8	$	8		Service Cost	$	4	$	5
Interest Cost	Interest Cost	2		4		4		7			Interest Cost	3		2

Expected Return on Plan Assets	Expected Return on Plan Assets	(4)		(5)		(9)		(12)			Expected Return on Plan Assets	(6)		(5)
Net Settlement Loss		0		0		0		153

Amortization:	Amortization:										Amortization:

Actuarial Loss	Actuarial Loss	1		1		2		3			Actuarial Loss	1		1

Net Periodic Cost	Net Periodic Cost	$	2	$	4	$	5	$	159		Net Periodic Cost	$	2	$	3

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Employer Contributions

~~The~~During the first quarter of 2022 and 2021, the Company made ~~contributions of $15~~$7 million and $1$14 million of contributions to its pension plans, ~~during the first six months of 2021 and 2020~~ respectively. In the first quarter of 2022 and 2021, the Company made a $6 million and $14 million contribution to its remaining U.S. defined benefit plan by effectively utilizing ~~a portion of~~ the excess balance related to the ~~terminated~~ U.S. defined benefit ~~plan.~~plan terminated in 2020, respectively. Excluding this ~~$14~~$6 million ~~transfer,~~contribution, the Company expects to make contributions in the range of $10 million to $20 million for the full year of ~~2021. During 2020, the Company made $19 million of contributions to its pension plans.~~2022.

NOTE ~~6 —~~7 — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT

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

For more information regarding the ~~Company’s~~Company’s financial instruments and fair value measurement, see ““Note 10 —- Financial Instruments, Derivatives and Hedging Activities”” ~~and~~ “and“Note 11 —- Fair Value Measurement”” of the Notes to the Consolidated Financial Statements of the ~~Company’s 2020~~Company’s 2021 Form 10-K.

Interest Rate Risk

The Company ~~uses~~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. Changes in fair value will subsequently be reclassified into earnings as a component of Interest Expense, Net as interest is incurred on amounts outstanding under the term loan facility. ~~The following table summarizes~~

As of December 31, 2021, the ~~Company's current~~Company had interest rate swap positions ~~for each period presented as~~with a notional value of ~~June 30, 2021:~~$200 million which matured in January 2022. As of March 31, 2022, the Company had no outstanding interest rate swaps. As discussed in "Note 8 - Income Taxes", a $10 million expense was recorded to release the lingering tax expense remaining in Other Comprehensive Income after the settlement of these swaps.

Start End (In Millions)
Notional Amount Weighted Average Interest Rate
12/03/2018 01/01/2022 $120.0 2.92%
12/03/2018 01/04/2022 $80.0 2.79%

During the first ~~six~~three months of 2021, ~~and 2020,~~ there were 0no amounts of ineffectiveness related to changes in the fair value of interest rate swap agreements. Additionally, there were 0no amounts excluded from the measure of effectiveness.

Commodity Risk

To manage risks associated with future variability in cash flows and price risk attributable to purchases of natural gas, the Company enters into natural gas swap contracts to hedge prices for a designated percentage of its expected natural gas usage. Such contracts are designated as cash flow hedges. The contracts are carried at fair value with changes in fair value recognized in Accumulated Other Comprehensive Loss and resulting gain or loss reclassified into Cost of Sales concurrently with the recognition of the commodity consumed. The Company has hedged approximately ~~32%, and 11%~~9% of its expected natural gas usage for the remainder of ~~2021 and all of 2022, respectively.~~ 2022.

During the first ~~six~~three months of ~~2021~~2022 and ~~2020,~~2021, there were 0no amounts of ineffectiveness related to changes in the fair value of natural gas swap contracts. Additionally, there were 0no amounts excluded from the measure of effectiveness.

Table of Contents

GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Foreign Currency Risk

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

~~At June 30, 2021, multiple forward exchange contracts existed that expire on various dates through the remainder~~As of ~~2021. Those purchased forward exchange contracts outstanding at June 30, 2021~~March 31, 2022 and December 31, ~~2020, when aggregated and measured in U.S. dollars at contractual rates at June 30,~~ 2021, ~~and December 31, 2020,~~the Company had ~~notional amounts totaling $45 million and $102 million, respectively.~~no outstanding forward exchange contracts.

~~NaN~~No amounts were reclassified to earnings during ~~the first six months of~~ 2021 ~~or during 2020~~ in connection with forecasted transactions that were considered probable of not occurring and there was 0no amount of ineffectiveness related to changes in the fair value of foreign currency forward contracts. Additionally, there were 0no amounts excluded from the measure of effectiveness.

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Derivatives not Designated as Hedges

The Company enters into forward exchange contracts to effectively hedge substantially all of its accounts receivables resulting from sales transactions and intercompany loans denominated in foreign currencies in order to manage risks associated with variability in cash flows that may be adversely affected by changes in exchange rates. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, multiple foreign currency forward exchange contracts existed, with maturities ranging up to nine months. Those foreign currency exchange contracts outstanding at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, when aggregated and measured in U.S. dollars at contractual rates at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, had net notional amounts totaling ~~$137~~$108 million and ~~$80~~$103 million, respectively. Unrealized gains and losses resulting from these contracts are recognized in Other (Income) Expense, ~~(Income),~~ Net and approximately offset corresponding recognized but unrealized gains and losses on the remeasurement of these accounts receivable.

~~Deal Contingent Hedge~~

On May 14, 2021, in connection with the AR Packaging acquisition, the Company entered into deal contingent foreign exchange forward contracts, with no upfront cash cost, to hedge 700 million Euros of the acquisition price. These forward contracts expire if the deal terminates or does not close by May 13, 2022 and are accounted for as derivatives under ASC 815, ~~Derivatives and Hedging~~. Unrealized gains and losses resulting from these contracts are recognized in Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net on the Company’s Condensed Consolidated Statements of Operations. For more information, see "~~Note 1 — General Information.~~"

Fair Value of Financial Instruments

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

As of ~~June 30, 2021,~~March 31, 2022, there has not been any significant impact to the fair value of the ~~Company’s~~Company’s derivative liabilities due to its own credit risk. Similarly, there has not been any significant adverse impact to the ~~Company’s~~Company’s derivative assets based on evaluation of the ~~Company’s counterparties’~~Company’s counterparties’ credit risks. ~~The following table summarizes~~As of March 31, 2022 and December 31, 2021, the ~~fair value of the~~ Company’s had commodity contract derivative ~~instruments:~~

Derivative Assets(a)
Derivative Liabilities(b)
June 30, December 31, June 30, December 31,
In millions 2021 2020 2021 2020
Derivatives designated as hedging instruments:
Interest rate contracts $ 0 $ 0 $ 3 $ 6
Foreign currency contracts 1 0 1 3
Commodity contracts
5 2 0 0
Total Derivatives
$ 6 $ 2 $ 4 $ 9

~~(a)~~ ~~Derivative~~ assets, which were included in Other Current Assets, of $5 million and $2 million, ~~are included in Other Current Assets as of June 30, 2021 and December 31, 2020,~~ respectively. ~~Derivative assets of $1 million is included in Other Noncurrent Assets as of June 30, 2021.~~

~~(b)~~ ~~Derivative liabilities of $4 million and $9 million are included in Other Accrued Liabilities as of June 30, 2021 and December 31, 2020, respectively.~~

The fair values of the ~~Company’s~~Company’s other financial assets and liabilities at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 approximately equal the carrying values reported on the Condensed Consolidated Balance Sheets except for Long-Term Debt. The fair value of the ~~Company’s~~Company’s Long-Term Debt (excluding finance leases and deferred financing fees) was ~~$3,692~~$5,658 million and ~~$3,625~~$5,715 million as compared to the carrying amounts of ~~$3,649~~$5,809 million and ~~$3,524~~$5,676 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The fair value of the ~~Company’s~~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.

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Effect of Derivative Instruments

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


		Amount of (Gain) Loss Recognized in Accumulated Other Comprehensive Loss								Location in Statement of Operations	Amount of (Gain) Loss Recognized in Statement of Operations									Amount of (Gain) Loss Recognized in Accumulated Other Comprehensive Loss				Location in Statement of Operations	Amount of (Gain) Loss Recognized in Statement of Operations
		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,						Three Months Ended March 31,
In millions	In millions	2021		2020		2021		2020			2021		2020		2021		2020		In millions	2022		2021					2022		2021
Commodity Contracts	Commodity Contracts	$	(4)	$	0	$	(5)	$	3	Cost of Sales	$	(1)	$	2	$	(1)	$	5	Commodity Contracts	$	(6)	$	(1)			Cost of Sales	$	(3)	$	—
Foreign Currency Contracts	Foreign Currency Contracts	0		0		(2)		(3)		Other Expense, Net	0		(1)		1		(1)		Foreign Currency Contracts	—		(2)				Other (Income) Expense, Net	—		1
Interest Rate Swap Agreements	Interest Rate Swap Agreements	0		0		0		6		Interest Expense, Net	2		2		3		3		Interest Rate Swap Agreements	—		—				Interest Expense, Net	—		1
Total	Total	$	(4)	$	0	$	(7)	$	6	Total	$	1	$	3	$	3	$	7	Total	$	(6)	$	(3)			Total	$	(3)	$	2

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

Three Months Ended June 30, Six Months Ended June 30,
In millions 2021 2020 2021 2020
Foreign Currency Contracts Other (Income) Expense , Net $ (1) $ 4 $ (4) $ (2)
Deal Contingent Foreign Exchange Forward Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net 17 0 17 0
Total $ 16 $ 4 $ 13 $ (2)

~~Accumulated Derivative Instruments (Loss) Income~~

~~The following is a rollforward of pre-tax Accumulated Derivative Instruments (Loss) Income which is included in the Company’s Condensed Consolidated Balance Sheet as of June 30, 2021:~~


~~In millions~~
~~Balance at December 31, 2020~~	$	~~(7)~~
~~Reclassification to Earnings~~	3
~~Current Period Change in Fair Value~~	7
~~Balance at June 30, 2021~~	$	3

At ~~June 30, 2021,~~March 31, 2022, the Company expects to reclassify $1$5 million of pre-tax ~~gains~~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.

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


		Three Months Ended March 31,
In millions		2022		2021
Foreign Currency Contracts	Other (Income) Expense , Net	$	(2)	$	(3)

NOTE ~~7 —~~8 — INCOME TAXES

Substantially all the ~~Company’s~~Company’s operations are held through its investment in GPIP, a subsidiary that is classified as a partnership for U.S. income tax purposes and is generally not subject to domestic income tax expense. As a result, the consolidated financial statements exclude the domestic tax effect of the earnings attributable to the noncontrolling ~~partner’s~~partner’s interest in GPIP for the portion of the year in which the noncontrolling partner held an interest.

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company recognized Income Tax Expense of ~~$44~~$46 million on Income before Income Taxes of ~~$147~~$153 million. The effective tax rate for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 was ~~higher~~different than the statutory rate primarily due to discrete tax expense recorded during the period of $8 million, the tax effect of income attributable to noncontrolling interests as well as the mix and levels of earnings between foreign and domestic tax jurisdictions. The Company recorded discreteadjustments, including tax expense of $3$10 million, recorded to release the lingering tax expense remaining in Other Comprehensive Income after the settlement of certain swaps and a tax benefit of $2 million related to ~~the remeasurement of the net deferred~~excess tax ~~liability for its UK subsidiaries due to the statutory tax rate increase enacted~~benefits on restricted stock that vested during the period. The Company also recorded discrete tax expense of $5 million related to the remeasurement of deferred tax assets for executive compensation as a result of IP’s exchange of its remaining shares in GPIP during the period.

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the Company recognized Income Tax Expense of ~~$13~~$18 million on Income before Income Taxes of ~~$60~~$80 million. The effective tax rate for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 was different than the statutory rate primarily due to the tax effect of income attributable to noncontrolling interests as well as the mix and levels of earnings between foreign and domestic tax jurisdictions.

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~As discussed in Note 1, as a result of~~In addition, during the ~~February 19,~~three months ended March 31, 2021, ~~and May 21, 2021 IP exchanges,~~ the Company recorded ~~an adjustment through Capital in Excess~~discrete benefits of ~~Par Value~~approximately $1 million related to ~~decrease its net domestic DTL by $58 million and $109 million, respectively. The decrease in~~excess tax benefits on restricted stock that vested during the DTL reflects the change in the outside basis difference associated with the Company’s investment in the partnership and includes the impact of the tax basis step up triggered by each exchange, pursuant to Section 754 of the Internal Revenue Code in addition to other changes to book and tax basis as a result of the Company’s increased ownership interest in the partnership.period.

NOTE ~~8 —~~9 — ENVIRONMENTAL AND LEGAL MATTERS

Environmental Matters

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

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

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

Legal Matters

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

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 10 — SEGMENT INFORMATION

~~NOTE 9 — RELATED PARTY TRANSACTIONS~~

In connection with the NACP Combination, the Company entered into agreements with IP for transition services, fiber procurement fees, and corrugated products and ink supply. Payments to IP for the six months ended June 30, 2021 for fiber procurement fees and corrugated products were $4 million (related to pass through wood purchases of $81 million) and $13 million, respectively. Payments to IP for the six months ended June 30, 2020 for fiber procurement fees and corrugated products were $6 million (related to pass through wood purchases of $107 million) and $15 million, respectively. As discussed in Note 1, IP has no ownership interest remaining in GPIP as of May 21, 2021.

~~NOTE 10 — SEGMENT INFORMATION~~

The Company has 3 reportable segments as follows:

Paperboard Mills includes the 8 North American paperboard mills that produce primarily CRB, CUK, and SBS, which is consumed internally to produce paperboard packaging for the Americas and Europe Packaging segments. The remaining paperboard is sold externally to a wide variety of paperboard packaging converters and brokers. The Paperboard Mills segment Net Sales represent the sale of paperboard only to external customers. The effect of intercompany transfers to the paperboard packaging segments has been eliminated from the Paperboard Mills segment to reflect the economics of the integration of these segments.

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

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

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

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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."

Segment information is as follows:


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
NET SALES:	NET SALES:									NET SALES:
Paperboard Mills	Paperboard Mills	$	244	$	234	$	481	$	503	Paperboard Mills	$	296	$	237
Americas Paperboard Packaging	Americas Paperboard Packaging	1,237		1,154		2,406		2,277		Americas Paperboard Packaging	1,422		1,169
Europe Paperboard Packaging	Europe Paperboard Packaging	212		183		418		360		Europe Paperboard Packaging	486		206
Corporate/Other/Eliminations(a)	Corporate/Other/Eliminations(a)	44		40		81		70		Corporate/Other/Eliminations(a)	41		37
Total	Total	$	1,737	$	1,611	$	3,386	$	3,210	Total	$	2,245	$	1,649

(LOSS) INCOME FROM OPERATIONS:
INCOME (LOSS) FROM OPERATIONS:										INCOME (LOSS) FROM OPERATIONS:
Paperboard Mills(b)	Paperboard Mills(b)	$	(18)	$	(35)	$	(45)	$	(58)	Paperboard Mills(b)	$	11	$	(27)
Americas Paperboard Packaging	Americas Paperboard Packaging	108		157		229		352		Americas Paperboard Packaging	153		121
Europe Paperboard Packaging	Europe Paperboard Packaging	27		21		47		33		Europe Paperboard Packaging	37		20
Corporate and Other~~(b)~~(c)	Corporate and Other~~(b)~~(c)	(22)		(28)		(28)		(52)		Corporate and Other~~(b)~~(c)	(8)		(6)
Total	Total	$	95	$	115	$	203	$	275	Total	$	193	$	108

DEPRECIATION AND AMORTIZATION:	DEPRECIATION AND AMORTIZATION:									DEPRECIATION AND AMORTIZATION:
Paperboard Mills	Paperboard Mills	$	56	$	67	$	114	$	126	Paperboard Mills	$	61	$	58
Americas Paperboard Packaging	Americas Paperboard Packaging	41		41		83		80		Americas Paperboard Packaging	43		42
Europe Paperboard Packaging	Europe Paperboard Packaging	11		9		22		19		Europe Paperboard Packaging	29		11
Corporate and Other	Corporate and Other	9		5		15		11		Corporate and Other	6		6
Total	Total	$	117	$	122	$	234	$	236	Total	$	139	$	117

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

(b) Includes accelerated depreciation related to exit activities in 2022 and 2021.

~~NOTE 11 — EARNINGS PER SHARE~~

Three Months Ended Six Months Ended
June 30, June 30,
In millions, except per share data 2021 2020 2021 2020
Net Income Attributable to Graphic Packaging Holding Company
$ 38 $ 52 $ 92 $ 39
Weighted Average Shares:
Basic 295.1 279.9 285.5 284.4
Dilutive Effect of RSUs 0.7 0.6 1.0 0.8
Diluted
295.8 280.5 286.5 285.2
Earnings Per Share — Basic $ 0.13 $ 0.19 $ 0.32 $ 0.14
Earnings Per Share — Diluted $ 0.13 $ 0.19 $ 0.32 $ 0.14

2120

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 11 — EARNINGS PER SHARE


	Three Months Ended
	March 31,
In millions, except per share data	2022		2021
Net Income Attributable to Graphic Packaging Holding Company	$	107	$	54
Weighted Average Shares:
Basic	308.8		275.8
Dilutive Effect of RSUs	0.9		1.4
Diluted	309.7		277.2
Earnings Per Share — Basic	$	0.35	$	0.20
Earnings Per Share — Diluted	$	0.35	$	0.19

~~(Unaudited)~~

NOTE 12 —— CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

The following represents changes in Accumulated Other Comprehensive Loss attributable to Graphic Packaging Holding Company by component for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

In millions, net of tax Derivatives Instruments Pension and Postretirement Benefit Plans Currency Translation Adjustments Total
Balance at December 31, 2020 $ (13) $ (139) $ (94) $ (246)
Other Comprehensive Income before Reclassifications 4 19 1 24
Amounts Reclassified from Accumulated Other Comprehensive Income (a)
2 1 0 3
Net Current-period Other Comprehensive Income
6 20 1 27
Less:
Net Current-period Other Comprehensive Income Attributable to Noncontrolling Interest
(1) 0 0 (1)
Balance at June 30, 2021 $ (8) $ (119) $ (93) $ (220)


In millions, net of tax	Derivatives Instruments		Pension and Postretirement Benefit Plans		Currency Translation Adjustments		Total
Balance at December 31, 2021	$	(8)	$	(94)	$	(122)	$	(224)
Other Comprehensive Income (Loss) before Reclassifications	5		(10)		(22)		(27)
Amounts Reclassified from Accumulated Other Comprehensive Income (a)	8		1		—		9
Net Current-period Other Comprehensive Income (Loss)	13		(9)		(22)		(18)


Balance at March 31, 2022	$	5	$	(103)	$	(144)	$	(242)

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

The following represents reclassifications out of Accumulated Other Comprehensive Loss for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:

In millions

Details about Accumulated Other Comprehensive Loss Components

Amount Reclassified from Accumulated Other Comprehensive Loss

Affected Line Item in the Statement Where Net Income is Presented

Derivatives Instruments:

Commodity Contracts

~~(1)~~(3)

Cost of Sales

~~Foreign Currency Contracts~~

~~Other Expense (Income), Net~~

Interest Rate Swap Agreements

3—

Interest Expense, Net

3 (3)

Total before Tax

~~(1)~~11

(a)

Tax Expense

Total, Net of Tax

Amortization of Defined Benefit Pension Plans:

Actuarial Losses

~~(a)~~

(b)

Total, Net of Tax

~~Amortization of Postretirement Benefit Plans:~~

~~Actuarial Gains~~

~~(1)~~

~~(a)~~

~~(1)~~

~~Total, Net of Tax~~

Total Reclassifications for the Period

(a) ~~(a)~~Includes tax expense of $10 million to release the lingering tax effect after settling the interest rate swaps (see "Note 7 - Financial Instruments and Fair Value Measurement" and "Note 8 - Income Taxes").

(b) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (see ““Note ~~5 —~~6 - Pensions and Other Postretirement Benefits").

~~NOTE 13 — EXIT ACTIVITIES~~

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GRAPHIC PACKAGING HOLDING COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 13 — EXIT ACTIVITIES

On March 15, 2022, the Company announced its decision to close the Norwalk, Ohio folding carton facility by the end of May 2022. The Company currently expects to incur 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 three months ended March 31, 2022.

During 2019, the Company announced its plans to invest ~~$600 million~~ in a CRB platform optimization project, which included an investment in a new CRB paper machine in Kalamazoo, Michigan. ~~In conjunction with~~At the ~~completion~~time of ~~this project,~~the announcement, the Company ~~currently expects~~expected to close 2 of its smaller CRB ~~Mills~~mills in 2022 in order to remain capacity neutral. During the third quarter of 2021, the Company decided to continue to operate 1 of these smaller CRB mills at least through 2022.

~~In March 2020, the Company made the decision to close the White Pigeon, Michigan CRB mill and shut down the PM1 containerboard machine in West Monroe, Louisiana.~~ During the ~~second quarter of 2020, the Company closed the White Pigeon, Michigan CRB mill and shut down the PM1 containerboard machine.~~

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~During the six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company recorded ~~$18~~$11 million and ~~$33~~$9 million of exit costs, respectively, associated with these restructurings. ~~These costs are included in the Corporate and Other caption in "Note 10 — Segment Information.~~" Other costs associated with the start-up of the new CRB paper machine ~~will be~~are recorded in the period in which they are incurred.

The following table summarizes the costs incurred during the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ related to these restructurings:


			Three Months Ended				Six Months Ended						Three Months Ended
			June 30,				June 30,						March 31,
In millions	In millions	Location in Statement of Operations	2021		2020		2021		2020		In millions	Location in Statement of Operations	2022		2021
Severance costs and other(a)	Severance costs and other(a)	Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net	$	4	$	3	$	8	$	7	Severance costs and other(a)	Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net	$	7	$	4
Accelerated depreciation	Accelerated depreciation	Cost of Sales	5		11		10		16		Accelerated depreciation	Cost of Sales	4		5
Inventory and asset write-offs		Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net	0		1		0		10

Total	Total		$	9	$	15	$	18	$	33	Total		$	11	$	9

(a) Costs incurred include activities for post-employment benefits, retention bonuses, incentives and professional services.

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


In millions	Total
Balance at December 31, ~~2020~~2021	$	128
Costs incurred	87
~~Payments~~	~~(6)~~
~~Adjustments(a)~~	~~(1)~~
Balance at ~~June 30, 2021~~March 31, 2022	$	1315

~~(a)~~ ~~Adjustments related to changes in estimates of severance costs.~~

In conjunction with the CRB platform optimization project and closure of 2the smaller CRB ~~Mills,~~Mill, the Company currently expects to incur charges associated with these exit activities for post-employment benefits, retention bonuses and incentives in the range of $15 million to $20 million and for accelerated depreciation and inventory and asset write-offs in the range of $50 million to ~~$60~~$55 million. ~~Additionally, the Company expects to incur start-up charges of approximately $15 million for the new CRB paper machine in 2021.~~ Through ~~June 30, 2021,~~March 31, 2022, the Company has incurred cumulative exit activity charges for post-employment benefits, retention bonuses and incentives of ~~$12~~$15 million, accelerated depreciation ~~and inventory and asset write-offs~~ of ~~$37~~$49 million, and start-up charges for the new CRB paper machine of $5$26 million.

For the closures of the White Pigeon, Michigan CRB mill and the shutdown of the PM1 containerboard machine in West Monroe, Louisiana, the Company has incurred cumulative exit activity charges for post-employment benefits of $2 million and accelerated depreciation and inventory and asset write-offs of $17 million through June 30, 2021. The Company does not expect to incur any additional significant charges related to these closures.

~~NOTE 14 — SUBSEQUENT EVENTS~~

On July 1, 2021, the Company acquired substantially all the assets of Americraft Carton, Inc. (“Americraft”), a leader in paperboard folding cartons in North America for $280 million plus $8 million for recently purchased equipment subject to customary working capital true-up. The acquisition includes 7 converting facilities across the United States and will be reported within the Americas Paperboard Packaging reportable segment.

On July 22, 2021, the Company entered into a new $250 million term loan facility under the Current Credit Facility with member banks of the Farm Credit System (the “Incremental Term A-3 Facility”). The Incremental Term A-3 Facility bears interest at a floating rate ranging from LIBOR plus 1.50% to LIBOR plus 2.25%, determined using a pricing grid based upon the Company’s consolidated leverage ratio, matures July 22, 2028, and does not amortize. As long as the loan is outstanding, the Company will be eligible to receive an annual patronage credit from the participating 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.

~~Table of Contents~~

~~GRAPHIC PACKAGING HOLDING COMPANY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

On July 23, 2021, the Company entered into a new €210 million term loan facility (the “Euro Term Loan”) under the Current Credit Agreement, while also increasing the limit under the European Senior Secured Revolving credit facility thereunder by €25 million. The Euro Term Loan has a delayed draw feature and the balance can be drawn in conjunction with the AR Packaging closing through May 12, 2022. The Euro Term Loan bears interest at a floating rate ranging from EURIBOR plus 1.125% to 1.75%, determined using a pricing grid based upon the Company’s consolidated leverage ratio, matures April 1, 2026, and is subject to amortization beginning in year two. The Company also amended the step-up of the maximum Consolidated Total Leverage Ratio for material acquisitions to less than 5.00 to 1.00 through the later of (i) the fourth full quarter after the closing of the AR Packaging transaction and (ii) the quarter ended December 31, 2022 after which the maximum ratio will step back down to 4.25x.

2422

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ITEM 2. ~~MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

This ~~management’s~~management’s discussion and analysis of financial conditions and results of operations is intended to provide investors with an understanding of the Company's past performance, financial condition and prospects. The following will be discussed and analyzed:

ØOverview of Business

ØØ Overview of ~~Business~~ 2022 Results

ØØ ~~Overview~~Results of ~~2021 Results~~ Operations

ØØ ~~Results of Operations~~

Ø Financial Condition, Liquidity and Capital Resources

ØØ Critical Accounting Policies

ØØ New Accounting Standards

ØØ Business Outlook

OVERVIEW OF BUSINESS

The ~~Company’s~~Company’s objective is to strengthen its position as a leading provider of sustainable fiber-based consumer packaging solutions. To achieve this objective, the Company offers customers its paperboard, cartons, cups, lids, foodservice containers and packaging machines, either as an integrated solution or separately. Cartons, carriers and containers are designed to protect and hold products. Product offerings include a variety of laminated, coated and printed packaging structures that are produced from the ~~Company’s~~Company’s coated-recycled paperboard ("CRB"), coated unbleached kraft paperboard ("CUK") and solid bleached sulfate paperboard ("SBS"). Innovative designs and combinations of paperboard, films, foils, metallization, holographics and embossing are customized to the individual needs of the customers.

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~~Company’s customer relationships, business competencies, and mills and folding carton assets; (iii) to develop and market innovative, sustainable 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~~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, such as inflation of raw material and other costs, which the Company cannot always pass through to its customers, and the effect of overcapacity in the worldwide paperboard packaging industry.

Significant Factors That Impact the ~~Company’s~~Company’s Business and Results of Operations

~~COVID-19 Pandemic~~. Many uncertainties remain regarding the current novel coronavirus (“COVID-19”) pandemic, including the anticipated duration of the pandemic, and the extent of local and worldwide social, political, and economic disruption it may cause. While the COVID-19 pandemic has not materially impacted the Company's overall business, operations, or financial results to date, it may have far-reaching impacts on many aspects of the Company's operations, including impacts on customer and consumer behaviors, business and manufacturing operations, inventory, accounts receivable, the Company’s employees, and the market generally. The Company will continue to assess the evolving impact of the COVID-19 pandemic and intends to make adjustments to its business accordingly, such as to match the Company's supply with demand by adjusting mill maintenance outages and taking market downtime where appropriate.

Impact of Inflation/Deflation. The ~~Company’s~~Company’s cost of sales consists primarily of energy (including natural gas, fuel oil and electricity), pine and hardwood fiber, chemicals, secondary fibers, purchased paperboard, aluminum foil, ink, plastic films and resins, depreciation expense and labor. Costs increased in the first ~~six~~three months of ~~2021~~2022 by ~~$128~~$195 million, compared to the first ~~six~~three months of ~~2020. The higher costs in the six months ended June 30,~~ 2021 ~~were~~ due to higher commodity inflation costs ($176 million), labor and ~~benefit costs~~benefits ($~~23 million), freight ($35 million), secondary fiber cost ($10 million), chemicals ($35 million), energy ($10 million), external board ($10~~12 million) and other costs, net ($57 million).

Commodity inflation was primarily due to external board ($39 million), mill chemicals ($31 million), secondary fiber ($26 million), wood ($23 million), logistics ($21 million), energy ($21 million), converting chemicals ($11 million), and other costs ($4 million). Because the price of natural gas experiences significant volatility, the Company has entered into contracts designed to manage risks associated with future variability in cash flows caused by changes in the price of natural gas. The Company has entered into natural gas swap contracts to hedge prices for a portion of its expected usage for ~~2021 and all of~~ 2022. Since negotiated sales contracts and the market largely determine the pricing for its products, the Company is at times limited in its ability to raise prices and pass through to its customers any inflationary or other cost increases that the Company may incur.

The Company’s operations and financial results could be adversely impacted by global events outside of the Company’s control, such as the current COVID-19 pandemic and the conflict between Russia and Ukraine. As a result of global events such as the current COVID-19 pandemic and the conflict between Russia and Ukraine, there could be unpredictable disruptions to the Company’s operations that could limit production, reduce its future revenues and negatively impact the Company’s financial condition. These global events may result in supply chain and transportation disruptions to and from our facilities and affected employees could impact the Company’s ability to operate its facilities and distribute products to its customers in a timely fashion. In addition, these global events may result in extreme volatility and disruptions in the capital and credit markets as well as widespread furloughs and layoffs for workers in the broader economy. As of March 31, 2022, the Company’s two converting facilities in Russia provided approximately 1% of the Company’s Net Sales and less than 1% of the Company’s EBITDA. The Company is adhering to all U.S. and EU sanctions, and the two facilities are operating to meet existing multi-national customer contractual commitments where possible. The Company has not made any new investments nor entered into any new contractual customer relationships in Russia and will actively explore all options for the business as contractual commitments expire. Additional information regarding this risk is contained in Part I, "Item 1A., Risk Factors" of the Company's 2021 Annual Report on Form 10-K, and in other filings with the Securities and Exchange Commission.

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Commitment to Cost Reduction. In light of continuing margin pressure throughout the packaging industry, the Company has programs in place that are designed to reduce costs, improve productivity and increase profitability. The Company utilizes a global continuous improvement initiative that uses statistical process control to help design and manage many types of activities, including production and maintenance. This includes a Six Sigma process focused on reducing variable and fixed manufacturing and administrative costs and the use of Lean Sigma principles in manufacturing and supply chain processes.

~~Table of Contents~~

The ~~Company’s~~Company’s ability to continue to successfully implement its business strategies and to realize anticipated savings and operating efficiencies is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the ~~Company’s~~Company’s control. If the Company cannot successfully implement the strategic cost reductions or other cost savings plans, it may not be able to continue to compete successfully against other manufacturers. In addition, any failure to generate the anticipated efficiencies and savings could adversely affect the ~~Company’s~~Company’s financial results.

Competition and Market Factors. As some products can be packaged in different types of materials, the ~~Company’s~~Company’s sales are affected by competition from other ~~manufacturers’~~manufacturers’ CRB, CUK, SBS, folding box board, and recycled clay-coated news. Additional substitute products also include plastic, shrink film and corrugated containers. In addition, while the Company has long-term relationships with many of its customers, the underlying contracts may be re-bid or renegotiated from time to time, and the Company may not be successful in renewing on favorable terms or at all. The Company works to maintain market share through efficiency, product innovation, service and strategic sourcing to its customers; however, pricing and other competitive pressures may occasionally result in the loss of a customer relationship.

In addition, the ~~Company’s~~Company’s sales are driven by consumer buying habits in the markets its customers ~~serve, and recently we have~~serve. Recently, the Company has seen net organic sales growth driven by the ~~consumers~~consumers' desire for sustainable packaging solutions and increased at home consumption. Changes in consumer dietary habits and preferences, increases in the costs of living, unemployment rates, access to credit markets, as well as other macroeconomic factors, may negatively affect consumer spending behavior. New product introductions and promotional activity by the ~~Company’s~~Company’s customers and the ~~Company’s~~Company’s introduction of new packaging products also impact its sales.

Debt Obligations. The Company had an aggregate principal amount of ~~$3,788~~$5,966 million of outstanding debt obligations as of ~~June 30, 2021.~~March 31, 2022. This debt has consequences for the Company, as it requires a portion of cash flow from operations to be used for the payment of principal and interest, exposes the Company to the risk of increased interest rates and may restrict the ~~Company’s~~Company’s ability to obtain additional financing. Covenants in the ~~Company’s~~Company’s Fourth Amended and Restated Credit Agreement (as amended, by the ~~Incremental Facility Amendment) (the “Current~~"Current Credit ~~Agreement”~~Agreement") and the indentures governing the 4.875% Senior Notes due 2022, ~~4.125%~~0.821% Senior Notes due 2024, ~~0.821%~~4.125% Senior Notes due 2024, 1.512% Senior Notes due 2026, 4.75% Senior Notes due 2027, 3.50% Senior Notes due 2028, ~~and~~ 3.50% Senior Notes due 2029, 2.625% Senior Notes due 2029 and 3.75% Senior Notes due 2030 (the ~~“Indentures”~~“Indentures”) may, among other things, restrict the ability of the Company to dispose of assets, incur guarantee obligations, prepay other indebtedness, repurchase stock, pay dividends, make other restricted payments and make acquisitions or other investments. The Current Credit Agreement also requires compliance with a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio. The ~~Company’s~~Company’s ability to comply in future periods with the financial covenants will depend on its ongoing financial and operating performance, which in turn will be subject to many other factors, many of which are beyond the ~~Company’s~~Company’s control. See "Covenant Restrictions" in ~~“Financial~~“Financial Condition, Liquidity and Capital ~~Resources”~~Resources” for additional information regarding the ~~Company’s~~Company’s debt obligations.

The debt and the restrictions under the Current Credit Agreement and the Indentures could limit the ~~Company’s~~Company’s flexibility to respond to changing market conditions and competitive pressures. The outstanding debt obligations and the restrictions may also leave the Company more vulnerable to a downturn in general economic conditions or its business, or unable to carry out capital expenditures that are necessary or important to its growth strategy and productivity improvement programs.

OVERVIEW OF ~~SECOND~~FIRST QUARTER ~~2021~~2022 RESULTS

This ~~management’s~~management’s discussion and analysis contains an analysis of Net Sales, Income from Operations and other information relevant to an understanding of the Company's results of operations on a Consolidated basis:

••Net Sales for the three months ended ~~June 30, 2021,~~March 31, 2022 increased ~~$126~~$596 million or 8%36% to ~~$1,737~~$2,245 million from ~~$1,611~~$1,649 million for the three months ended ~~June 30, 2020,~~March 31, 2021 due to ~~improved~~the acquisitions of Americraft in Q3 2021 and AR Packaging in Q4 2021, higher selling prices, increased volume ~~related to organic sales growth (including~~ from conversions to fiber-based packaging solutions, and ~~new product introductions), higher pricing,~~mix, partially offset by lower volume of open market sales and ~~favorable~~unfavorable foreign exchange.

••Income from Operations for the three months ended ~~June 30, 2021 decreased $20~~March 31, 2022 increased $85 million or ~~17%~~79% to ~~$95~~$193 million from ~~$115~~$108 million for the three months ended ~~June 30, 2020~~March 31, 2021 due to ~~unfavorable commodity and other inflation (primarily labor and benefits) offset by~~higher pricing, higher volumes from organic sales growth and acquisitions, cost savings from continuous improvement and other programs, and ~~favorable foreign exchange.~~product mix, offset by unfavorable commodity inflation and other inflation (primarily labor and benefits), lower volume of open market sales, and higher depreciation and amortization.

Acquisitions and Closures

~~Acquisitions~~

•On March 15, 2022, the Company announced its decision to close the Norwalk, Ohio folding carton facility by the end of May 2022.

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•On ~~January 31, 2020,~~November 1, 2021, the Company acquired ~~a folding carton facility from Quad/Graphics, Inc. ("Quad"), a commercial printing company.~~all the shares of AR Packaging, Europe's second largest producer of fiber-based consumer packaging. The acquisition included 30 converting ~~facility is located~~plants in ~~Omaha, Nebraska~~13 countries and is ~~included in~~reported within the ~~Americas~~Europe Paperboard Packaging reportable segment.

•On April 1, 2020, the Company acquired the Consumer Packaging Group business from Greif, Inc. ("Greif"), a leader in industrial packaging products and services. The acquisition included seven converting facilities across the United States, which are included in the Americas Paperboard Packaging reportable segment.

•On May 12, 2021, the Company announced its intent to acquire all of the shares of AR Packaging Group AB ("AR Packaging"), Europe's second largest producer of fiber-based consumer packaging, for approximately $1.45 billion in cash, subject to customary adjustments. The $1.45 billion acquisition price will be paid in Euros at close. As such, on May 14, 2021, the Company entered into deal contingent, foreign exchange forward contracts, with no upfront cash cost, to hedge 700 million Euros of the acquisition price. These forward contracts expire if the deal terminates or does not close by May 13, 2022 and are accounted for as derivatives under ASC 815~~, Derivatives and Hedging~~.

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••On July 1, 2021, the Company acquired substantially all the assets of Americraft, ~~Carton, Inc. (“Americraft”), a leader in paperboard~~the largest independent folding ~~cartons~~carton converter in North ~~America for $280 million plus $8 million for recently purchased equipment subject to customary working capital true-up.~~America. The acquisition ~~includes~~included seven converting ~~facilities~~plants across the United States and ~~will be~~is reported within the Americas Paperboard Packaging reportable segment.

Share Repurchases and Dividends

••On ~~May 26, 2021,~~February 22, 2022, the Company's board of directors declared a regular quarterly dividend of $0.075 per share of common stock payable on ~~July~~April 5, ~~2021~~2022 to shareholders of record as of ~~June~~March 15, ~~2021.~~2022.

••On January 28, 2019, the Company's board of directors authorized an additional share repurchase program to allow the Company to purchase up to $500 million of the Company's issued and outstanding shares of common stock through open market purchases, privately negotiated transactions and Rule 10b5-1 plans (the "2019 share repurchase program"). During the first ~~six~~three months of 2022 and 2021, the Company did not repurchase any shares of its common stock under the 2019 share repurchase program. ~~During the six months ended June 30, 2020, the Company repurchased 12,289,317 shares of its common stock at an average price of $12.82 under the 2019 share repurchase program.~~ As of ~~June 30, 2021,~~March 31, 2022, the Company has $147 million available for additional repurchases under the 2019 share repurchase program.

RESULTS OF OPERATIONS


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
Net Sales	Net Sales	$	1,737	$	1,611	$	3,386	$	3,210	Net Sales	$	2,245	$	1,649
Income from Operations	Income from Operations	95		115		203		275		Income from Operations	193		108
Nonoperating Pension and Postretirement Benefit Income (Expense)		1		—		3		(151)
Nonoperating Pension and Postretirement Benefit Income										Nonoperating Pension and Postretirement Benefit Income	2		2
Interest Expense, Net	Interest Expense, Net	(29)		(30)		(59)		(64)		Interest Expense, Net	(42)		(30)

Income before Income Taxes and Equity Income of Unconsolidated Entity		67		85		147		60
Income before Income Taxes										Income before Income Taxes	153		80
Income Tax Expense	Income Tax Expense	(26)		(18)		(44)		(13)		Income Tax Expense	(46)		(18)
Income before Equity Income of Unconsolidated Entity		41		67		103		47
Equity Income of Unconsolidated Entity		1		—		1		—

Net Income	Net Income	$	42	$	67	$	104	$	47	Net Income	$	107	$	62

~~SECOND~~FIRST QUARTER ~~2021~~2022 COMPARED WITH ~~SECOND~~FIRST QUARTER ~~2020~~2021

Net Sales

Three Months Ended June 30,

In millions 2021 2020 Increase Percent
Change
Consolidated $ 1,737 $ 1,611 $ 126 8 %

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


		Three Months Ended June 30,												Three Months Ended March 31,
				Variances												Variances
In millions	In millions	2020		Price		Volume/Mix		Exchange		Total		2021			In millions	2021		Price		Volume/Mix		Exchange		2022		Increase		Percent Change

Consolidated	Consolidated	$	1,611	$	14	$	77	$	35	$	126	$	1,737		Consolidated	$	1,649	$	222	$	385	$	(11)	$	2,245	$	596	36	%

The ~~Company’s~~Company’s Net Sales for the three months ended ~~June 30, 2021~~March 31, 2022 increased by ~~$126~~$596 million or 8%36% to ~~$1,737~~$2,245 million from ~~$1,611~~$1,649 million for the three months ended ~~June 30, 2020~~March 31, 2021 due to ~~organic~~$341 million of net sales ~~growth including~~related to the acquisitions of Americraft in Q3 2021 and AR Packaging in Q4 2021, higher selling prices, increased volume from conversions to fiber-based packaging solutions and new product introductions, ~~favorable~~and mix, offset by lower volume of open market sales and unfavorable foreign exchange, primarily the Euro, British Pound ~~Euro, Canadian dollar,~~ and Australian ~~dollar, and higher pricing partially offset by lower open market volume.~~dollar. Core converting volumes were up ~~and~~ driven by higher volumes in beverage, foodservice packaging including cups, confections, tissue, and ~~global beverage,~~dairy partially offset by ~~declines~~lower volumes in ~~dry foods, cereal, tissue, and~~ frozen foods ~~products.~~ and pizza.

~~Table of Contents~~ Income from Operations

~~Income from Operations~~

Three Months Ended June 30,

In millions
2021 2020 Decrease Percent
Change
Consolidated $ 95 $ 115 $ (20) (17)%

The components of the change in Income from Operations are as follows:


		Three Months Ended June 30,																Three Months Ended March 31,
				Variances																Variances
In millions	In millions	2020		Price		Volume/Mix		Inflation		Exchange		Other (a)		Total		2021			In millions	2021		Price		Volume/Mix		Inflation		Exchange		Other (a)		2022		Increase		Percent Change

Consolidated	Consolidated	$	115	$	14	$	23	$	(81)	$	3	$	21	$	(20)	$	95		Consolidated	$	108	$	222	$	49	$	(195)	$	2	$	7	$	193	$	85	79	%

(a) Includes the Company's cost reduction initiatives, planned mill maintenance ~~costs, mill market downtime~~ costs, expenses related to acquisitions and integration activities, exit activities and shutdown and other special charges.

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Income from Operations for the three months ended ~~June 30, 2021 decreased $20~~March 31, 2022 increased $85 million or ~~17%~~79% to ~~$95~~$193 million from ~~$115~~$108 million for the three months ended ~~June 30, 2020~~March 31, 2021 due to ~~unfavorable commodity~~due to higher pricing, higher volumes from organic sales growth and ~~other inflation (primarily labor and benefits) and lower open market volume offset by~~acquisitions, mix, cost savings from continuous improvement and other programs, ~~organic~~offset by unfavorable commodity inflation and other inflation (primarily labor and benefits), lower volume of open market sales, ~~growth,~~and higher ~~prices~~depreciation and ~~favorable foreign exchange.~~ amortization.

Inflation increased for the three months ended ~~June 30,~~March 31, 2022 by $195 million, compared to the first three months of 2021 ~~by $81 million~~ due to higher commodity inflation ~~of $67 million,~~costs ($176 million), labor and benefits ~~of $12 million,~~($12 million) and other ~~inflation of $2 million.~~costs, net ($7 million). Commodity inflation was primarily due to ~~freight ($25 million), chemicals ($25 million),~~ external board ($739 million), mill chemicals ($31 million), secondary fiber ($26 million), wood ($23 million), logistics ($21 million), energy ($521 million), ~~and secondary fiber~~converting chemicals ($211 million), and other ~~commodity~~ costs ~~net~~ ($34 million).

Interest Expense, Net

Interest Expense, Net was ~~$29~~$42 million and $30 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Interest Expense, Net ~~decreased~~increased due to higher debt balances, partly offset by lower ~~effective~~ interest ~~rates as compared to the same period in the prior year.~~rates. As of ~~June 30, 2021,~~March 31, 2022, approximately ~~16%~~36% of the ~~Company’s~~Company’s total debt was subject to floating interest rates.

Income Tax Expense

During the three months ended ~~June 30, 2021,~~March 31, 2022, the Company recognized Income Tax Expense of ~~$26~~$46 million on Income before Income Taxes of ~~$67~~$153 million. The effective tax rate for the three months ended ~~June 30, 2021~~March 31, 2022 is ~~higher than~~different from the statutory rate primarily due to discrete tax expense recorded during the period of $8 million, the tax effect of income attributable to noncontrolling interests as well as the mix and levels of earnings between foreign and domestic tax jurisdictions. The Company recorded discreteadjustments including tax expense of $3$10 million recorded to release the lingering tax expense remaining in Other Comprehensive Income after the settlement of certain swaps and a tax benefit of $2 million related to ~~the remeasurement of the net deferred~~excess tax ~~liability for its UK subsidiaries due to the statutory tax rate increase enacted~~benefits on restricted stock that vested during the period. The Company also recorded discrete tax expense of $5 million related to the remeasurement of deferred tax assets for executive compensation as a result of IP’s exchange of its remaining shares in GPIP during the period.

During the three months ended ~~June 30, 2020,~~March 31, 2021, the Company recognized Income Tax Expense of $18 million on Income before Income Taxes of ~~$85~~$80 million. The effective tax rate for the three months ended is different than the statutory rate primarily due to the ~~tax effect of income attributable to noncontrolling interests as well as the~~ mix and levels of earnings between foreign and domestic tax ~~jurisdictions.~~ jurisdictions with and without a valuation allowance. In addition, during the three months ended March 31, 2021, the Company recorded discrete benefits of approximately $1 million related to excess tax benefits on restricted stock that vested during the period.

The Company utilized its remaining U.S. federal net operating ~~losses~~loss carryforwards during 2020. However, as a result of deductions associated with the step-up in tax basis of certain assets as a result of International Paper’s exit from the GPIL partnership, the Company generated a taxable loss of $574 million during 2021 that can be carried forward for U.S. federal income tax purposes indefinitely. As such, based on the net operating loss generated in 2021 as well as future tax benefits associated with planned capital projects ~~deductions associated with the increase in tax basis recorded as a result of the February 19, 2021~~ and ~~May 21, 2021 share exchanges with IP, as well as~~ tax credit carryforwards, which are available to offset future U.S. federal income tax, the Company does not expect to be a meaningful U.S. federal cash taxpayer until 2024.

~~Table of Contents~~ Segment Reporting

~~FIRST SIX MONTHS 2021 COMPARED WITH FIRST SIX MONTHS 2020~~

~~Net Sales~~

Six Months Ended June 30,

In millions 2021 2020 Increase Percent
Change
Consolidated $ 3,386 $ 3,210 $ 176 5 %

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

Six Months Ended June 30,
Variances
In millions 2020 Price Volume/Mix Exchange Total 2021
Consolidated $ 3,210 $ 11 $ 110 $ 55 $ 176 $ 3,386

The Company’s Net Sales for the six months ended June 30, 2021 increased by $176 million or 5% to $3,386 million from $3,210 million for the six months ended June 30, 2020 due to net sales of $60 million from the Greif and Quad acquisitions in 2020, organic sales growth including conversions to our fiber-based packaging solutions and new product introductions, higher selling prices, and favorable foreign exchange rates, primarily the British Pound, Euro, Canadian dollar, and the Australian dollar partially offset by a decline in open market sales. The higher selling prices are the result of announced price increases, which benefit from market and inflationary pass throughs in the converting business. Core converting volumes were up primarily in foodservice packaging including cups, global beverage, pet care, and frozen foods offset by declines in tissue, dry foods, and cereal products.

~~Income from Operations~~

Six Months Ended June 30,

In millions
2021 2020 Decrease Percent
Change
Consolidated $ 203 $ 275 $ (72) (26)%

~~The components of the change in Income from Operations are as follows:~~

Six Months Ended June 30,
Variances
In millions 2020 Price Volume/Mix Inflation Exchange
Other (a)
Total 2021
Consolidated $ 275 $ 11 $ 20 $ (128) $ 7 $ 18 $ (72) $ 203

~~(a)~~ ~~Includes the Company's cost reduction initiatives, expenses related to acquisitions and integration activities, exit activities and shutdown and other special charges.~~

Income from Operations for the six months ended June 30, 2021 decreased $72 million or 26% to $203 million from $275 million for the six months ended June 30, 2020. Decreases were due to $29 million of Winter Storm Uri related downtime and mitigation costs in the first quarter of 2021, unfavorable commodity and other inflation (primarily labor and benefits), and lower volumes of our open market sales partially offset by cost savings from continuous improvement and other programs, organic sales growth, acquisitions of Greif and Omaha in 2020, and favorable foreign exchange.

Inflation increased for the six months ended June 30, 2021 by $128 million primarily due to higher commodity inflation of $101 million, higher labor and benefits of $23 million, and other inflation of $4 million. Commodity inflation was primarily due to higher freight ($35 million), chemicals ($35 million), secondary fiber cost ($10 million), external board ($10 million), energy ($10 million), and other commodity costs, net ($1 million).

~~Nonoperating Pension and Postretirement Benefit~~

Nonoperating Pension and Postretirement Benefit was income of $3 million for the six months ended June 30, 2021 versus an expense of $151 million in 2020. The decrease was due to a settlement charge of $153 million incurred during the first quarter of 2020 associated with the Company's purchase of a group annuity contract that transferred the remaining pension benefit obligation under the largest U.S. Plan of $713 million to an insurance company.

~~Interest Expense, Net~~

Interest Expense, Net was $59 million and $64 million for the six months ended June 30, 2021 and 2020, respectively. Interest Expense, Net decreased due to higher debt balances offset by lower effective interest rates as compared to the same period in the prior year.

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~~Income Tax Expense~~

During the six months ended June 30, 2021 and 2020, the Company recognized Income Tax Expense of $44 million and $13 million, respectively, on Income before Income Taxes and Equity Income of Unconsolidated Entity of $147 million and $60 million, respectively.

The effective tax rate for the six months ended June 30, 2021 is different than the statutory rate primarily due to discrete tax expense recorded during the period of $8 million as well as the tax effect of income attributable to noncontrolling interests as well as the mix and levels of earnings between foreign and domestic tax jurisdictions. The Company recorded discrete tax expense of $3 million related to the remeasurement of the net deferred tax liability for its UK subsidiaries due to the statutory tax rate increase enacted during the period. The Company also recorded discrete tax expense of $5 million related to the remeasurement of deferred tax assets for executive compensation as a result of IP’s exchange of its remaining shares in GPIP during the period.

The effective tax rate for the six months ended June 30, 2020 was different than the statutory rate primarily due to the tax effect of income attributable to noncontrolling interests as well as the mix and levels of earnings between foreign and domestic tax jurisdictions.

~~Segment Reporting~~

The Company has three reportable segments as follows:

Paperboard Mills includes the eight North American paperboard mills that produce primarily CRB, CUK, and SBS, which is consumed internally to produce paperboard packaging for the Americas and Europe Packaging segments. The remaining paperboard is sold externally to a wide variety of paperboard packaging converters and brokers. The Paperboard Mills ~~segment~~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 Mills segment to reflect the economics of the integration of these segments.

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

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		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,				June 30,					March 31,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021
NET SALES:	NET SALES:									NET SALES:
Paperboard Mills	Paperboard Mills	$	244	$	234	$	481	$	503	Paperboard Mills	$	296	$	237
Americas Paperboard Packaging	Americas Paperboard Packaging	1,237		1,154		2,406		2,277		Americas Paperboard Packaging	1,422		1,169
Europe Paperboard Packaging	Europe Paperboard Packaging	212		183		418		360		Europe Paperboard Packaging	486		206
Corporate/Other/Eliminations(a)	Corporate/Other/Eliminations(a)	44		40		81		70		Corporate/Other/Eliminations(a)	41		37
Total	Total	$	1,737	$	1,611	$	3,386	$	3,210	Total	$	2,245	$	1,649

(LOSS) INCOME FROM OPERATIONS:
INCOME (LOSS) FROM OPERATIONS:										INCOME (LOSS) FROM OPERATIONS:
Paperboard Mills(b)	Paperboard Mills(b)	$	(18)	$	(35)	$	(45)	$	(58)	Paperboard Mills(b)	$	11	$	(27)
Americas Paperboard Packaging	Americas Paperboard Packaging	108		157		229		352		Americas Paperboard Packaging	153		121
Europe Paperboard Packaging	Europe Paperboard Packaging	27		21		47		33		Europe Paperboard Packaging	37		20
Corporate and Other~~(b)~~(c)	Corporate and Other~~(b)~~(c)	(22)		(28)		(28)		(52)		Corporate and Other~~(b)~~(c)	(8)		(6)
Total	Total	$	95	$	115	$	203	$	275	Total	$	193	$	108

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

(b) Includes accelerated depreciation related to exit activities in 2022 and 2021.

(c) Includes expenses related to business combinations, ~~exit activities, and~~ shutdown and other special ~~charges.~~charges, and exit activities.

~~Table of Contents~~ 2022 COMPARED WITH 2021

First Quarter 2022 Compared to First Quarter 2021

~~2021 COMPARED WITH 2020~~Paperboard Mills

~~Second Quarter 2021 Compared to Second Quarter 2020~~

~~Paperboard Mills~~

Net Sales increased from prior year due to higher selling prices and mix partially offset by lower open market volume. Lower open market volume was primarily due to the shut down of the PM1 containerboard machine in West Monroe, Louisiana and the closure of the White Pigeon, Michigan CRB mill, both in 2020, offset by higher open market volume of SBS. The Company also internalized more paperboard tons.

~~Loss~~Income from Operations ~~decreased~~increased due to downtime and mitigation costs related to Winter Storm Uri in Q1 2021, higher prices, productivity improvements, including benefits from capital projects ~~and mix of open market volume~~ offset by commodity inflation, lower open market volume, and higher ~~labor and benefits~~levels of maintenance costs. The commodity inflation was primarily due to higher prices for ~~chemicals, freight,~~ secondary fiber, wood, chemicals, energy and ~~energy.~~ freight.

Americas Paperboard Packaging

Net Sales increased due to higher pricing, the Americraft acquisition in Q3 2021, organic sales growth including conversions to our fiber-based packaging solutions, and new product ~~introductions, increased pricing, and favorable foreign currency exchange rates.~~introductions. Higher volumes in beverage, foodservice packaging including cups, confections, tissue, and ~~global beverage~~dairy were offset by ~~declines~~lower volumes in ~~dry foods, cereal, tissue, and~~ frozen foods ~~products.~~and pizza. In beverage, volumes increased primarily in ~~most categories including~~big beer and soft drinks offset by craft and ~~specialty and big beer partially offset by soft drink.~~specialty.

Income from Operations ~~decreased~~increased due to higher selling prices, higher core converting volume and increased volume from conversions to our fiber based packaging solutions, cost savings from continuous improvement and other programs offset by commodity inflation and other inflation (primarily labor and benefits) ~~offset by higher volumes including from organic sales growth, higher selling prices and cost savings through continuous improvement and other programs.~~. The commodity inflation was primarily due to higher prices for ~~freight, chemicals, secondary fiber,~~ external board, freight, and ~~energy.~~chemicals offset by secondary fiber.

Europe Paperboard Packaging

Net Sales increased due to ~~increased~~the acquisition of AR Packaging on November 1, 2021 as well as higher prices and new product introductions including Keel Clip and PaperSeal offset by mix, lower core converting volumes, ~~led by beverage~~ and ~~convenience, mix, and favorable~~unfavorable foreign currency exchange rates.

Income from Operations increased due to ~~cost savings through continuous improvement and other programs, increased volumes, and~~higher pricing, mix, ~~offset by commodity inflation and higher labor and benefits costs.~~

~~First Six Months of 2021 Compared to First Six Months of 2020~~

~~Paperboard Mills~~

Net Sales decreased from prior year due to lower open market volume and mix offset by higher selling prices. Lower open market volume was primarily due to the closure of the White Pigeon, Michigan CRB mill and shut down of the PM1 containerboard machine in West Monroe, Louisiana, both in 2020, and one fewer production and selling day due to leap year. The Company also internalized more paperboard tons.

Loss from Operations decreased due to the impacts of productivity improvements, including benefits from capital projects, and higher prices offset by increased downtime and mitigation costs related to Winter Storm Uri, commodity inflation, and lower open market volume. The commodity inflation was primarily due to higher prices for chemicals, secondary fiber, freight and energy.

~~Americas Paperboard Packaging~~

Net Sales increased due to the Greif and Quad acquisitions, new product introductions, organic sales growth including conversions to our paperboard packaging solutions, and favorable foreign currency exchange rates. Higher volumes in foodservice packaging including cups, global beverage, and frozen foods were offset by declines in tissue, dry foods, and cereal products. In beverage, volumes increased in all categories including craft and specialty, big beer, and soft drinks.

Income from Operations decreased due to commodity inflation, other inflation (primarily labor and benefits), downtime and mitigation costs related to Winter Storm Uri, higher levels of maintenance and downtime costs, and one fewer selling day due to leap year, offset by higher volumes including from organic sales growth and acquisitions, cost savings through continuous improvement and other programs, and ~~higher selling prices. The commodity inflation was primarily due to higher prices for freight, chemicals, secondary fiber, external board, and energy.~~

~~Europe Paperboard~~the acquisition of AR Packaging

~~Net Sales increased due to increased volumes led by beverage and convenience, mix, and favorable foreign currency exchange rates.~~

~~Income from Operations increased due to cost savings through continuous improvement and other programs, increased volumes, and mix~~ offset by commodity inflation and ~~higher labor and benefits costs.~~

lower core converting volumes.

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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


		Six Months Ended					Three Months Ended
		June 30,					March 31,
In millions	In millions	2021		2020		In millions	2022		2021
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	$	305	$	144	Net Cash Provided by Operating Activities	$	18	$	53
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	$	(289)	$	(389)	Net Cash Used in Investing Activities	$	(195)	$	(120)
Net Cash (Used in) Provided by Financing Activities		$	(105)	$	181
Net Cash Provided by Financing Activities						Net Cash Provided by Financing Activities	$	119	$	5

Net cash provided by operating activities for the first ~~six~~three months of ~~2021~~2022 totaled ~~$305~~$18 million compared to ~~$144~~$53 million for the same period in ~~2020.~~2021. The ~~favorable increase~~decrease was ~~mainly~~primarily due to ~~improved~~higher working capital ~~compared to the prior year period driven by the Company’s increased utilization of its~~balances including accounts receivable ~~sale~~from higher sales and ~~securitization programs during 2021.~~inventory due to inflation. Pension contributions for the first ~~six~~three months of 2022 and 2021 ~~and 2020~~ were ~~$15~~$7 million and $1$14 million, respectively. In the first quarter of 2022 and 2021, the Company made a $6 million and $14 million contribution to its remaining U.S. defined benefit plan by effectively utilizing ~~a portion of~~ the excess balance related to ~~the terminated~~ U.S. defined benefit ~~plan.~~plan terminated in 2020.

Net cash used in investing activities for the first ~~six~~three months of ~~2021~~2022 totaled ~~$289~~$195 million, compared to ~~$389~~$120 million for the same period in ~~2020.~~2021. Capital spending was ~~$346~~$223 million and ~~$307~~$146 million in ~~2021~~2022 and ~~2020, respectively. In 2020, the Company paid $41 million and $82 million for the Quad and Greif acquisitions,~~2021, respectively. Net cash receipts related to the accounts receivable securitization and sale programs were ~~$59~~$29 million and ~~$48~~$28 million in 2022 and 2021, ~~and 2020,~~ respectively. For more information on the completion of the K2 project, please see the Capital Investment section below.

Net cash ~~used in financing activities for the first six months of 2021 totaled $105 million, compared to $181 million~~ provided by financing activities for the first three months of 2022 totaled $119 million, compared to $5 million for the same period in ~~2020.~~2021. Current year activities include borrowings under revolving credit facilities primarily for capital spending and payments on debt of $3 million. The Company also paid dividends of $23 million and withheld $17 million of restricted stock units to satisfy tax withholding obligations related to the payout of restricted stock units. In the prior year period, the Company had a debt drawing of $425 million Incremental Term A-2 Facility and ~~the use of~~used the proceeds, together with cash on hand, to redeem the 4.75% Senior Notes due in ~~2021. Other current year activities includes~~2021, an offering of $400 million aggregate principal amount of 0.821% Senior Notes due 2024, and an offering of $400 million aggregate principal amount of 1.512% Senior Notes due 2026. The net proceeds of ~~$800~~$796 million were used by the Company to repay a portion of the outstanding borrowings under GPIL's term loan credit facilities, which is under its senior secured credit facility. The Company also paid $150 million toward the redemption of IP's ownership interest in GPIP. ~~Additionally,~~In the prior year period, the Company also made borrowings under revolving credit facilities primarily for capital spending, redemption of IP's ownership interest and payments on debt of $9 million. The Company also paid dividends and distributions of ~~$48~~$24 million and withheld $14 million of restricted stock units to satisfy tax withholding obligations related to the payout of restricted stock units. In the prior year period, the Company had a debt offering of $450 million aggregate principal amount of 3.50% Senior Notes due 2028. The Company also paid $250 million toward the redemption of IP's ownership interest in GPIP. In the prior year period, the Company also made borrowings under revolving credit facilities primarily for capital spending, repurchase of common stock and payments on debt of $18 million. The Company also paid dividends and distributions of $54 million and withheld $9 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 ~~1 – General Information~~” in the Notes to Condensed Consolidated Financial Statements, on May 21, 2021, IP exchanged its remaining 22.8 million partnership units for an equivalent number of shares of GPHC common stock. As a result, IP has no ownership interest remaining in GPIP as of May 21, 2021, and GPIL is no longer subject to separate SEC filing requirements. As such, the Company has included Supplemental Guarantor disclosures that were previously included in the GPIL SEC filings effective June 30, 2021.

~~As further discussed in “Note 3 –~~4 - Debt”” in the Notes to Condensed Consolidated Financial Statements, the Senior Notes issued by GPIL (the ~~“Issuer”~~“Issuer”) are guaranteed by certain domestic subsidiaries (the ~~“Subsidiary Guarantors”~~“Subsidiary Guarantors”), which consist of all material 100% owned subsidiaries of GPIL other than its foreign subsidiaries and in certain instances by the Company (a Parent guarantee) (collectively "the ~~Gurantors"~~Guarantors"). GPIL's remaining subsidiaries (the ~~“Nonguarantor Subsidiaries”~~“Nonguarantor Subsidiaries”) include all of ~~GPIL’s~~GPIL’s foreign subsidiaries and immaterial domestic subsidiaries. The Subsidiary Guarantors are jointly and severally, fully and unconditionally liable under the guarantees.

Other than tax related items, the results of operations, assets, and liabilities for 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”~~“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.

~~Table of Contents~~


In millions	~~Six~~Three Months Ended ~~June 30, 2021~~March 31, 2022
SUMMARIZED STATEMENTS OF OPERATIONS
Net Sales(a)	$	~~2,835~~1,663
Cost of Sales	~~2,421~~1,388
Income from Operations	~~164~~157
Net Income	~~100~~107

(a) Includes Net Sales to Nonguarantor Subsidiaries of ~~$274~~$135 million.


~~In millions~~	June 30, 2021		December 31, 2020
~~SUMMARIZED BALANCE SHEET~~
~~Current assets (excluding intercompany receivable from Nonguarantor)~~	$	~~1,066~~	$	~~1,131~~
~~Noncurrent assets~~	~~5,385~~		~~5,033~~
~~Intercompany receivables from Nonguarantor~~	~~330~~		~~334~~
~~Current liabilities~~	~~1,017~~		~~1,513~~
~~Noncurrent liabilities~~	~~4,020~~		~~3,411~~

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In millions	March 31, 2022		December 31, 2021
SUMMARIZED BALANCE SHEET
Current assets (excluding intercompany receivable from Nonguarantor)	$	1,352	$	1,235
Noncurrent assets	5,883		5,888
Intercompany receivables from Nonguarantor	1,248		1,258
Current liabilities	1,331		1,472
Noncurrent liabilities	5,842		5,713

Liquidity and Capital Resources

The Company's liquidity needs arise primarily from the funding of its capital expenditures and acquisitions, debt service on its indebtedness, ongoing operating costs, working capital, share repurchases and dividend payments. Principal and interest payments under the term loan facilities and the revolving credit facilities, together with principal and interest payments on the Company's 3.50% Senior Notes due 2029, 3.50% Senior Notes due 2028, 4.75% Senior Notes due 2027, 1.512% Senior Notes due 2026, 0.821% Senior Notes due 2024, 4.125% Senior Notes due 2024, and 4.875% Senior Notes due 2022 (the "Notes"),Indentures, 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”~~“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. Refer to "Note ~~3 —~~4 - Debt" in the Notes to Condensed Consolidated Financial Statements for additional information on the Company's availability under its revolving credit facilities.


		Six Months Ended					Three Months Ended
		June 30,					March 31,
In millions	In millions	2021		2020		In millions	2022		2021
Receivables Sold and Derecognized	Receivables Sold and Derecognized	$	1,531	$	1,357	Receivables Sold and Derecognized	$	737	$	758
Proceeds Collected on Behalf of Financial Institutions	Proceeds Collected on Behalf of Financial Institutions	1,421		1,318		Proceeds Collected on Behalf of Financial Institutions	681		685
Net Proceeds Received From Financial Institutions	Net Proceeds Received From Financial Institutions	100		31		Net Proceeds Received From Financial Institutions	64		62
Deferred Purchase Price at June 30(a)		11		10
Pledged Receivables at June 30		158		261
Deferred Purchase Price at March 31(a)						Deferred Purchase Price at March 31(a)	3		9
Pledged Receivables at March 31						Pledged Receivables at March 31	201		160

~~Table of Contents~~

The Company participates in supply chain financing arrangements offered by certain customers and has entered into various factoring arrangements that also qualify for sale accounting in accordance with the Transfers and Servicing topic of the FASB ~~Codification~~Codification. For the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company sold receivables of ~~$249~~$264 million and ~~$151~~$125 million, respectively, related to these factoring arrangements.

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Covenant Restrictions

Covenants contained in the Current Credit Agreement and the Indentures may, among other things, limit the ability to incur additional indebtedness, restrict the ability of the Company to 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, together with 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 ~~Fourth Amended and Restated~~Current Credit Agreement, which contains the definitions of these covenants, was filed as an exhibit to the Company's Form 8-K filed on April 1, 2021.

~~The~~Due to the completion of the material acquisition, the Current Credit Agreement requires that the Company maintain a maximum Consolidated Total Leverage Ratio of less than ~~4.25~~5.00 to 1.00. At ~~June 30, 2021,~~March 31, 2022, the Company was in compliance with such covenant and the ratio was ~~3.42~~4.37 to 1.00.

The Company must also comply with a minimum Consolidated Interest Expense Ratio of 3.00 to 1.00. At ~~June 30, 2021,~~March 31, 2022, the Company was in compliance with such covenant and the ratio was ~~8.94~~10.20 to 1.00.

As of ~~June 30, 2021,~~March 31, 2022, 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.

Capital Investment

The ~~Company’s~~Company’s capital investment in the first ~~six~~three months of ~~2021~~2022 was ~~$346~~$125 million ($223 million was paid) compared to ~~$307~~$178 million ($146 million was paid) in the first ~~six~~three months of ~~2020.~~2021. The capital investments were primarily due to planned asset upgrades at the U.S.-based mills, including the new CRB paper machine in Kalamazoo, MIMichigan discussed in "Note 13 —- Exit Activities" in the Notes to Condensed Consolidated Financial Statements and continued investments made as part of the integration of acquisitions.

~~Environmental Matters~~Interest is capitalized on assets under construction for one year or longer with an estimated spending of $1 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 $4 million and $3 million in the first three months ended March 31, 2022 and 2021, respectively.

Environmental Matters

Some of the ~~Company’s~~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.

For further discussion of the ~~Company’s~~Company’s environmental matters, see "Note ~~8 —~~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~~Company’s condensed consolidated financial statements are those that are important both to the presentation of the ~~Company’s~~Company’s financial condition and results of operations and require significant judgments by management with regard to estimates used.

The ~~Company’s~~Company’s most critical accounting policies, which require significant judgment or involve complex estimations, are described in ~~GPHC’s~~GPHC’s Form 10-K for the year ended December 31, ~~2020.~~2021.

The Company performed its annual goodwill impairment tests as of October 1, ~~2020.~~2021. 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 Foodservice and Australia reporting units had fair values that exceed their respective carrying values by ~~17%~~25% and ~~37%~~21%, respectively, whereas all other reporting units exceeded by more than ~~45%~~30%. The Foodservice and Australia reporting units had goodwill totaling $43 million and $15 million, respectively at ~~June 30, 2021. While the~~March 31, 2022. The Company does not believe it is likely that there will be material changes in the ~~impact on~~assumptions or estimates used to calculate the ~~business to date of the COVID-19 pandemic has triggered the need to perform an impairment test on goodwill,~~reporting unit values. Therefore, the Company will continue to assess the impact on its business and will perform its annual goodwill impairment tests as of October 1, ~~2021.~~ 2022.

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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.

BUSINESS OUTLOOK

Total capital investment for ~~2021~~2022 is expected to be ~~approximately $725~~in the range of $440 million to $460 million.

The Company also expects the following in ~~2021:~~2022:

••Depreciation and amortization expense of approximately ~~$460~~$580 million, ~~excluding $5 million of~~including pension amortization and ~~$24~~excluding $5 million of accelerated depreciation related to exit activities.

••Pension plan contributions between $10 million and $20 million, excluding ~~$14~~$6 million reflected as a contribution to the remaining U.S defined benefit plan that effectively utilized ~~a portion of~~ the excess balance related to the ~~terminated~~ U.S. defined benefit ~~plan.~~plan terminated in 2020.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For a discussion of certain market risks related to the Company, see Part II, ““Item 7A, Quantitative and Qualitative Disclosure about Market Risk””, in ~~GPHC’s~~GPHC’s Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no significant developments with respect to derivatives or exposure to market risk during the first ~~six~~three months of ~~2021.~~2022. For a discussion of the ~~Company’s~~Company’s Financial Instruments, Derivatives and Hedging Activities, see ~~GPHC’s~~GPHC’s Form 10-K for the year ended December 31, ~~2020~~2021 and ““~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations —- Financial Condition, Liquidity and Capital Resources.””

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The ~~Company’s~~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~~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~~Company’s disclosure controls and procedures were effective as of ~~June 30, 2021.~~March 31, 2022.

Changes in Internal Control over Financial Reporting

There was no change in the ~~Company’s~~Company’s internal control over financial reporting that occurred during the fiscal quarter ended ~~June 30, 2021~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the ~~Company’s~~Company’s internal control over financial reporting.

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PART II —— OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in ~~GPHC’s~~GPHC’s Form 10-K for the year ended December 31, ~~2020.~~2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company purchases shares of its common stock from time to time pursuant to the 2019 share repurchase program announced on January 28, 2019. Management is authorized to purchase up to $500 million of the Company's issued and outstanding common stock per the 2019 share repurchase program. During the ~~second~~first quarter of ~~2021,~~2022, the Company did not repurchase any shares of its common stock. As of ~~June 30, 2021,~~March 31, 2022, 66.5 million shares had been repurchased as part of a publicly announced program. The maximum number of shares that may be purchased under the 2019 share repurchase program in the future is ~~8.1~~7.3 million based on the closing price of the Company's common stock as of ~~June 30, 2021.~~March 31, 2022.

ITEM 4. MINE SAFETY DISCLOSURES

None.

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ITEM 6. EXHIBITS


Exhibit Number			Description





10.1*			International Assignment- Letter of Understanding dated October 14, 2021 between Graphic Packaging International, LLC and Joseph P. Yost.

21.1			List of subsidiaries.

31.1			Certification required by Rule 13a-14(a).

31.2			Certification required by Rule 13a-14(a).

32.1			Certification required by Section 1350 of Chapter 63 of Title 18 of the United States Code.

32.2			Certification required by Section 1350 of Chapter 63 of Title 18 of the United States Code.


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

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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)	~~July 27, 2021~~April 26, 2022
Stephen R. Scherger

/s/ CHARLES D. LISCHER	Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)	~~July 27, 2021~~April 26, 2022
Charles D. Lischer

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	Derivative Assets(a)				Derivative Liabilities(b)
	June 30,		December 31,		June 30,		December 31,
In millions	2021		2020		2021		2020
Derivatives designated as hedging instruments:
Interest rate contracts	$	0	$	0	$	3	$	6
Foreign currency contracts	1		0		1		3
Commodity contracts	5		2		0		0
Total Derivatives	$	6	$	2	$	4	$	9