CCL Industries Inc
Annual Report 2022

Plain-text annual report

CCL Industries Inc. 2022 Annual Report CCL Avery Checkpoint Innovia Avery is the world’s largest supplier of labels, specialty converted media and software solutions to enable short-run digital printing in businesses and homes alongside complementary products sold through distributors, mass-market stores and e-commerce retailers. Checkpoint is a leading developer of RF and RFID-based technology systems for loss prevention and inventory management applications, including labeling and tagging solutions, for the retail and apparel industries worldwide. Innovia is a leading global producer of specialty, high- performance, multi-layer, surface-engineered films for label, packaging and security applications. CCL is the world’s largest converter of pressure sensitive and extruded film materials for a wide range of decorative, instructional, security and functional applications for government institutions and large global customers in consumer packaging, healthcare, chemicals, consumer durables, electronic device and automotive markets. Extruded and labeled plastic tubes, aluminum aerosols and specialty bottles, folded instructional leaflets, specialty folded cartons, precision engineered and die cut components, electronic displays, polymer banknote substrate and other complementary products and services are sold in parallel to specific end-use markets. 25,300 Employees 205 Production Facilities 43 Countries 6 Continents NORTH AMERICA REPRESENTS EUROPE REPRESENTS EMERGING MARKETS REPRESENTS 43% of total sales 29% of total sales 28% of total sales CAUTION ABOUT FORWARD-LOOKING INFORMATION This annual report contains forward-looking information and forward-looking statements, as defined under applicable securities laws (hereinafter collectively referred to as “forward-looking statements”) that involve a number of risks and uncertainties. Forward-looking statements include all statements that are predictive in nature or depend on future events or conditions. Forward-looking statements are typically identified by, but not limited to, the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” or similar expressions. Statements regarding the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of the Company, other than statements of historical fact, are forward-looking statements. Specifically, this annual report contains forward-looking statements regarding the anticipated growth in sales, income and profitability of the Company’s segments; the Company’s improvement in market share; the Company’s capital spending levels and planned capital expenditures in 2023; the adequacy of the Company’s financial liquidity; the Company’s targeted return on equity, improved return on total capital, adjusted earnings per share, Adjusted EBITDA growth rates and dividend payout; the Company’s effective tax rate; the Company’s ongoing business strategy; the Company’s ability to maintain a Net Debt to Adjusted EBITDA ratio below 3.5 times; the Company’s expectations regarding general business and economic conditions; the Company’s Corporate Social Responsibility initiative to enhance the integration of social and environmental objectives into its business operations and strategy; the Company’s expectation to achieve its overall environmental footprint and waste reduction goals for 2025 and 2030; the Company’s ability to successfully deploy initiatives that reduce the carbon footprint of its products and services; the continuing impact the Covid (“CV19”) pandemic and the conflict between Ukraine and Russia will have on the global economy and the global supply chain; the Company’s success in passing on foreign exchange movements and input cost changes, including inflationary costs, to its customer base; the Company’s expectation that Avery will continue to open up new revenue streams in short-run digital printing applications; the Company’s expectation that inflationary cost pressures are likely to ease in 2023; the Company will successfully manage business activity levels at its manufacturing locations; CCL Label and CCL Design will successfully manage new product initiatives and capacity expansion plans; the expectation that CCL Design’s results will improve in 2023 as more normalized supply chains develop for automotive and electronics markets; CCL Secure’s success in developing market-leading security technology to pursue widespread long-term adoption of polymer banknotes; the Company’s expectation that growth at Avery’s direct-to-consumer businesses will outpace legacy product lines and that further “tuck-in” acquisitions are possible; the Company’s expectation that the Checkpoint results will improve with continued strong demand for RFID related products and as economic activity improves in China; the Company’s expectation that Innovia will offset resin, energy and freight cost increases with productivity initiatives and price increases to its customer base; and Innovia will successfully fill capacity at its new EcoFloat shrink film line in 2023. Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions, including, but not limited to, the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and the Company’s ability to attract and retain qualified employees. Do not unduly rely on forward-looking statements as the Company’s actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions, which may prove to be incorrect, including, but not limited to, assumptions about the following: higher consumer spending; increased customer demand for the Company’s products; continued historical growth trends, market growth in specific segments and entering into new segments; the Company’s ability to provide a wide range of products to multinational customers on a global basis; the benefits of the Company’s focused strategies and operational approach; the Company’s ability to implement its acquisition strategy and successfully integrate acquired businesses; the achievement of the Company’s plans for improved efficiency and lower costs, including the ability to pass on polypropylene resin, aluminum and other inflationary cost increases to its customers; the availability of cash and credit; fluctuations of currency exchange rates; the Company’s continued relations with its customers; and general business and economic conditions. Should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking statements. Further details on key risks can be found throughout this report and particularly in Section 4: “Risks and Uncertainties.” Except as otherwise indicated, forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on the business. Such statements do not, unless otherwise specified by the Company, reflect the impact of dispositions, sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them; therefore, the financial impact cannot be described in a meaningful way in advance of knowing the specific facts. The forward-looking statements are provided as of the date of this annual report and the Company does not assume any obligation to update or revise the forward-looking statements to reflect new events or circumstances, except as required by law. Unless the context otherwise indicates, a reference to “the Company” means CCL Industries Inc. and its subsidiary companies and equity-accounted investments. 20 2 2 L E T T E R TO S H A R E H O L D E RS Donald G. Lang Executive Chairman Geoffrey T. Martin President and Chief Executive Officer 2022 was the third year of this historic pandemic, a period during which CCL’s adjusted net earnings moved from less than $500 million at the end of 2019 to well over $600 million for 2022, with aspirations for further gains in 2023. None of us could imagine such a development during the worrisome lockdown days of the winter and spring of 2020, but it happened. Sales for 2022 were up 12.1%, excluding foreign currency translation, to $6.4 billion. The Canadian dollar, among the strongest currencies in the world in 2021, bowed to the mighty U.S. dollar in 2022, but also gained against a number of major international currencies, especially in Europe largely due to the conflict in the Ukraine; so, collectively, a minor translation headwind. Adjusted net earnings* increased by $33 million to $635 million, up 5.5%, excluding foreign currency translation, while adjusted basic earnings per Class B share* improved from $3.37 in 2021 to $3.57 in 2022; foreign currency translation reduced results by $0.02 in 2022. Restructuring charges and transaction expenses for the most recent acquisitions were $11.7 million. Despite higher capital spending in a recovering world, free cash flow* increased by $41 million to $573 million, or 90% of adjusted net earnings. Tight management of working capital during the global supply chain crisis aided the result. CCL Segment 2022 sales increased 8.3% organically to $3.9 billion, heavily price driven to recover the most difficult inflation period any of us have seen since the 1970s, although modest volume gains augmented. Geographically, we delivered high single-digit progress in North America and Europe, over 25% growth in Latin America, much of it volume derived, offset by a modest decline in Asia Pacific. Operating income* grew just under 10% to $600 million, while adjusted EBITDA* margin fell 50 basis points to 21.6%; inflation the driver of the decline on the margin-dilutive effect of passing along only higher raw materials costs to customers, in most cases. Home & Personal Care results improved significantly on gains in tubes and labels in all regions except Asia, but CCL Container was really the standout business area for growth in 2022 as sales increased over 40% on strong volume and price increases, driving profitability to the highest level in our long history in the category. We also had another outstanding year at our label joint venture in the Middle East. Asia sales improved slightly in ASEAN countries as Covid restrictions gradually lifted but fell in China where they tightened; following the Chinese government policy U-turn and subsequent infection outbreak during the fourth quarter, if anything, demand declined further. The small 2021 label acquisition in Singapore made a solid profit in 2022. Our aluminum slug business remained loss making in 2022 but improved on poor results in 2020 and 2021 and is now expected to make a positive contribution to earnings in 2023. We expect to source approximately 60% of our requirements for CCL Container internally this coming year. 1 2022 Annual ReportHealthcare & Specialty performance was outstanding in 2022. Results improved to expectations at the Graphics West short-run folding cartons acquisition in its second full year, and a number of strategic investments were made to expand this initiative around the world. Labels and inserts delivered very strong results globally, with notable gains at previously underperforming units in Germany and Denmark. Ag Chem had an off year, with lower sales in the U.S. consumer lawn & garden sector and decidedly mixed performance in Europe due to operational challenges. Supply availability plus paper and freight inflation were superbly handled by the team, with well-executed price increases while leveraging our industry knowledge and financial strength in procurement. Mid-teens organic growth included volume-based share gain driving strong profitability improvement. Food & Beverage had a sluggish start to 2022 but really gained momentum as the year progressed, with both volume gains and inflation recovery price increases. Sleeves’ recent growth trajectory notably reversed in the U.S. as we focused on margin protection in tight markets, ceding share as necessary. Double-digit organic growth in Europe and Emerging Markets more than offset and cross-sector sales to Homecare customers were an area of strength. The new in-mould label plant in the U.S. posted startup losses. New pressure sensitive label plants for beverage in Brazil and South Africa were again strong, and Asia recovered as on-premise consumption returned; organic growth in the high teens globally on better mix, price increases and share gains. Wine & Spirits operations had another solid year. In the first quarter, we suspended further investment in equity or debt financing to support our joint venture in Russia. Our local partner continues to operate the business, which focuses on consumer essentials. Sector profitability overall improved. CCL Design sales to electronics OEMs, after increasing in the low teens organically in both 2020 and 2021, fell mid-single digits in 2022 as consumer demand waned; chip shortages and Covid restrictions in China also impaired supply chains. We prepared for the future with the opening of a major new facility in Zhongshan in South China, a major regional hub for the electronics industry. ASEAN markets were less impacted, with a much-improved year in Malaysia at the recent Super Enterprises acquisition, while our startup in India delivered solid profits. Mexico was strong on new business wins, although the new Desin acquisition performance was a little disappointing, albeit solidly profitable. Automotive had a positive year on good gains in Europe, Latin America and China but struggled in North America. The new McGavigan acquisition did very well in China but the plant in Scotland continued to lose money. Sales to alkaline battery producers were stable. Olympic Tapes made significant gains with heat management tapes for electric vehicles and delivered good returns. Overall, profitability at CCL Design declined modestly as gains in automotive could not offset the decline in electronics. CCL Secure had an off year after an unusually weak fourth quarter as many developed world central bank vaults were full with banknotes after a run on cash during the pandemic. Sales volume in 2022 derived from a number of new polymer conversions in emerging markets, but with significantly reduced security features and therefore lower price points. This particularly impacted our plants in Australia and the U.K. Highlights were strong gains in Latin America and in our stamps and passport components business in the United States. Avery Our consumer segment had a strong year on the back of 7.1% organic growth, a big recovery in the badges category, so decimated at the height of the pandemic, tight management of inflation and five meaningful acquisitions over the past two years. Supply challenges were an ever present threat all year, especially component imports from China to the U.S. and paper globally driven by a lengthy strike at a major European producer, compounded by the closure of so many mills in the United States. Our teams did a superb job navigating this crisis and ensuring our customers were able to rely on us. The RFID Hotel acquisition far exceeded expectations, results for the Adelbras tapes addition in Brazil were good but the two new businesses in the horticultural space somewhat disappointed on softening demand as consumers re-prioritized spending to other areas of the economy. Plum Paper, acquired in 2021, moved to a new facility near San Diego, driving improved operational performance. Operating income* increased by approximately $19 million to $168 million on sales of $914 million, a return on sales* of 18.3%, down 270 basis points, on the dilutive effect of acquisitions and the impact of inflation especially in the first half of the year. 2 2022 LETTER TO SHAREHOLDERS2022 Annual ReportCheckpoint Despite a rapidly changing retail landscape navigating the post-pandemic boom (or bust) era, Checkpoint continued to make progress in 2022. Apparel Labeling Solutions again delivered record levels of profitability for the year on 25% sales growth driven by exceptional gains in RFID, plus the Uniter and Technoblu acquisitions. Merchandise Availability Solutions posted sales gains in the Americas but the outbreak of war in the Ukraine changed consumer sentiment in Europe while parts of Asia, especially China, wrestled with continuing Covid restrictions and tough comparisons to a strong prior year. We announced the closure of our EAS label plant in Japan, and plan to consolidate volume in China at our superb new campus in Hai’an in 2023. The smaller Meto business had an improved year. Segment operating income* for 2022 increased to a record $119 million on sales of $819 million, a return on sales of 14.5%, down 50 basis points. Results were aided by a $12 million gain on sale of an unused older property in China. Innovia It was a challenging year at Innovia. In the Americas, resin declined in 2022 as fast as it had risen in 2021. For much of the year, compounding sequential declines consistently stranded us with higher-cost inventory as we passed through lower resin price indexes to customers. In Europe, rampant energy and freight inflation following the conflict outbreak in the Ukraine particularly hurt our large plant in the U.K. Finally, in Poland, we had the expense of the EcoFloat startup, our new sustainable shrink label film that aids PET bottle recycling. We expect to grow our production of this film in 2023 and beyond as many customers adopt the technology. Sales reached $795 million, with a 12.2% adjusted EBITDA* margin, compared to 17.3% in 2021, 20.7% in 2020, and 15.2% in 2019 … back to where we started in 2018. Free cash flow from operations*, however, was very strong and the second- best year under our ownership, aided by improved working capital. In May, we announced the construction of a new label films plant in Germany for $70 million. The new capacity will come on stream by early 2025 and is targeted at pressure sensitive label applications for consumer packaged goods. Sustainability In 2022, alongside many of our consumer packaged good customers, the Company committed to set emissions reduction targets through the Science Based Targets Initiative (SBTi) and became a member of the Business Ambition for 1.5oC Campaign. This requires targets by June of 2024 to meet the net-zero standard limiting the global temperature rise to 1.5oC. Our businesses continue to take important initiatives in support of this aim. CCL Label broke ground on a major new energy-efficient building in Dornbirn, Austria, significantly expanding our current operations for sustainable sleeve solutions. EcoFloat® Sleeves were also officially approved for PET recycling in South Africa. CCL Secure received recognition at the 23rd Energy Institute Awards ceremony for achieving a 26% reduction in CO2 emissions, 31% reduction in energy consumption, and 40% reduction in water usage per tonne of product since 2018. Avery’s new line of ecofriendly dissolvable labels disintegrate in water, leaving no sticky residue behind. Innovia launched Rayoface™ CSA46, a clear, one-side gloss-coated BOPP film that is approximately 10% thinner than most label films, providing a higher yield and improved carbon footprint for Food & Beverage and Home & Personal care applications. We will continue to report progress on external initiatives and internal targets annually in our Sustainability Report. Delivering to Shareholders Following our February 2023 Board meeting, we announced a 10.4% increase to the dividend; the annualized payout now stands at $1.06 per Class B share and $1.05 per Class A share, more than doubling over the last five years and without omission or reduction for more than four decades. Despite spending $287 million on acquisitions and $419 million on net capital expenditures, the Company’s net debt to adjusted EBITDA ratio ended 2022 comfortably inside investment-grade territory at 1.24 times, up 0.18  turns. Why the increase? In May 2021 (renewed in May 2022), the Board approved a Normal Course Issuer Bid giving management discretionary authority to buy back a substantial number of the Company’s Class B non-voting shares. The Company spent $200 million on share repurchases in the first half of 2022 at an average price of $58.95/share; dividends and buy-backs returned a combined $370 million to shareholders in 2022. We plan to invest $415 million in 2023 in capital equipment and new plant expenditures, compared to approximately $360 million of expected depreciation and amortization expense, excluding right-of-use asset amortization. With 98% of sales outside Canada, CCL continues to provide domestic shareholders considerable geographic risk diversification. 3 2022 Annual ReportDiversity, Leadership and Governance CCL is a global company with operations in 43 countries. We are devoted disciples of decentralized organizational principles, one of the most important of which is our deeply held conviction that business leadership should be local to the country where we operate, especially outside North America. We firmly believe this ensures our operating units around the world reflect the ethnicity and society in the business communities we serve. We value deep industry experience, entrepreneurial spirit and a proven track record above all other attributes for our senior leaders. We are prejudiced to always seek to promote from within, regarding external recruitment as a last-resort admission of failure to develop people internally. Our lean, professional corporate team continues its technically excellent, agile, highly responsive mantra, costing approximately 1% of sales, a telling metric we should nail to the mast for the long haul. In our 2022 employee census, 63% of employees are men, 37% women, employees identifying themselves as “white” totaled 41% of the population; no material change since 2021. We remain deeply committed to the principle that our people must reflect the cultural norms where our plants, distribution centres and offices are located – globally. Gender and cultural diversity starts at the top; 40% of Directors on our Board are now women, with one from a culturally diverse background, but a journey not yet at its end. We were all deeply saddened by the news of Alan Horn’s untimely passing in early 2023. His tenure as a Director spanned almost 15 years during the most transformative era CCL has experienced, and for many years prior to that, as an advisor to the Lang family. His exceptionally sharp mind, humorous delivery when making a point and savvy instincts around people will all be sorely missed. We welcome Ms. Angella Alexander, Chief Human Resources Officer at ATS Corporation (TSX:ATS), to the Board, which continues to represent all shareholders through good governance practice, while providing seasoned wise counsel to management. 2023 Outlook Our major challenge in 2022 was inflation but, right now, although we are watching it carefully, the signs point to it not being such a burning issue in 2023. The big question for CCL and our customers in the year ahead surrounds demand as central banks raise interest rates everywhere. We are ready as always for all eventualities but prepared in detail for the most likely scenario: a slow growth world but not a recessionary one. The early weeks of 2023 have been consistent with that, but we still see many opportunities to invest and grow. New plants and equipment is one route forward, but we also believe tighter financing markets could strengthen our hand in acquiring new businesses, most likely as portfolio additions to our current operating segments. Acquisitions continue to be the best use of our excess capital and our balance sheet is well endowed. We close with nothing but praise and appreciation for our truly incredible people and their amazing dedication these past three years as we fought our way through this once-in-a-generation event, adjusting for life’s twists and turns as we moved forward. We believe it’s culture versus programs that, in the end, gets you through such dramatic periods in history, something our politicians would do well to remember for next time…treat people in the right way, with honesty, fairness and facts (including saying “we don’t know” when that’s the right answer) and they will always respond. To our customer and supplier partners, we thank you for helping us through this extraordinary time, without you, we would simply not exist, and to our shareholders, well, we are still here: wiser, fitter and ready for the next phase of our advancement. Donald G. Lang Executive Chairman Geoffrey T. Martin President and Chief Executive Officer * Non-IFRS measures; see Section 5A of CCL’s Management’s Discussion and Analysis for more detail. 4 2022 LETTER TO SHAREHOLDERS2022 Annual Report F I N A N C I A L H I G H L I G H T S (In millions of Canadian dollars, except per share and ratio data) Sales Adjusted EBITDA % of sales Restructuring and other items – net loss Net Earnings % of sales Basic earnings per Class B share Net earnings Diluted earnings Adjusted basic earnings per Class B share Dividends per Class B share As at December 31 Total assets Net debt* Total equity Net debt to Adjusted EBITDA* Return on equity (before other expenses)* Number of employees * A non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2022 6,382.2 1,231.4 19.3% 11.7 622.7 9.8% 3.50 3.48 3.57 0.96 8,664.4 1,522.3 4,265.2 1.24 15.9% 25,300 2021 5,732.8 1,173.1 20.5% 4.4 599.1 10.5% 3.33 3.31 3.37 0.84 7,627.8 1,249.2 3,747.0 1.06 17.2% 25,100 11.3% 5.0% 3.9% 5.1% 5.1% 5.9% 14.3% -63.0% 21.9% 13.8% 0.8% 5 2022 Annual Report This Management’s Discussion and Analysis of the financial condition and results of operations (“MD&A”) of CCL Industries Inc. (“the Company”) relates to the years ended December 31, 2022 and 2021. In preparing this MD&A, the Company has taken into account information available until February 23, 2023, unless otherwise noted. This MD&A should be read in conjunction with the Company’s December 31, 2022, annual consolidated financial statements, which form part of the CCL Industries Inc. 2022 Annual Report dated February 23, 2023. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), and, unless otherwise noted, both the financial statements and this MD&A are expressed in Canadian dollars as the presentation currency. The major measurement currencies of the Company’s operations are the Canadian dollar, U.S. dollar, euro, Argentine  peso, Australian  dollar, Bangladeshi taka, Brazilian real, Chilean peso, Chinese renminbi, Danish krone, Hong Kong dollar, Hungarian forint, Indian  rupee, Israeli shekel, Japanese yen, Malaysian ringgit, Mexican peso, Moroccan dirham, New  Zealand dollar, Philippine  peso, Polish zloty, Russian ruble, Singaporean dollar, South African rand, South Korean won, Swiss franc, Thai baht, U.K. pound sterling and Vietnamese dong. All per Class B non-voting share (“Class B share”) amounts in this document are expressed on an undiluted basis, unless otherwise indicated. The Company’s Audit Committee and its Board of Directors (the “Board”) have reviewed this MD&A to ensure consistency with the approved strategy and results of the business. I N D E X 1. Corporate Overview 8 8 A) The Company 8 B) Coronavirus (“CV19”) Pandemic 8 C) Customers and Markets 9 D) Strategy and Financial Targets 11 E) Recent Acquisitions and Dispositions 12 F) Subsequent Events 13 G) Consolidated Annual Financial Results 15 H) Seasonality and Fourth Quarter Financial Results 18 2. Business Segment Review 18 A) General 20 B) CCL Segment 22 C) Avery 24 D) Checkpoint 24 E) Innovia 25 F) Joint Ventures 26 3. Financing and Risk Management 26 A) Liquidity and Capital Resources 27 B) Cash Flow 27 C) Interest Rate, Foreign Exchange Management and Other Hedges 28 D) Equity and Dividends 29 E) Commitments and Other Contractual Obligations 30 F) Controls and Procedures 31 4. Risks and Uncertainties 40 5. Accounting Policies and Non-IFRS Measures 40 A) Key Performance Indicators and Non-IFRS Measures 45 B) Accounting Policies 45 C) Critical Accounting Estimates 45 D) Related Party Transactions 46 6. Outlook 6 F O R WA R D - LO O K I N G I N F O R M AT I O N This MD&A contains forward-looking information and forward-looking statements, as defined under applicable securities laws (hereinafter collectively referred to as “forward-looking statements”) that involve a number of risks and uncertainties. Forward-looking statements include all statements that are predictive in nature or depend on future events or conditions. Forward-looking statements are typically identified by, but not limited to, the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” or similar expressions. Statements regarding the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of the Company, other than statements of historical fact, are forward- looking statements. Specifically, this MD&A contains forward-looking statements regarding the anticipated growth in sales, income and profitability of the Company’s segments; the Company’s improvement in market share; the Company’s capital spending levels and planned capital expenditures in 2023; the adequacy of the Company’s financial liquidity; the Company’s targeted return on equity, improved return on total capital, adjusted earnings per share, Adjusted EBITDA growth rates and dividend payout; the Company’s effective tax rate; the Company’s ongoing business strategy; the Company’s ability to maintain a Net Debt to Adjusted EBITDA ratio below 3.5 times; the Company’s expectations regarding general business and economic conditions; the Company’s Corporate Social Responsibility initiative to enhance the integration of social and environmental objectives into its business operations and strategy; the Company’s expectation to achieve its overall environmental footprint and waste reduction goals for 2025 and 2030; the Company’s ability to successfully MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report deploy initiatives that reduce the carbon footprint of its products and services; the continuing impact the Covid (“CV19”) pandemic and the conflict between Ukraine and Russia will have on the global economy and the global supply chain; the Company’s success in passing on foreign exchange movements and input cost changes, including inflationary costs, to its customer base; the Company’s expectation that Avery will continue to open up new revenue streams in short-run digital printing applications; the Company’s expectation that inflationary cost pressures are likely to ease in 2023; the Company will successfully manage business activity levels at its manufacturing locations; CCL Label and CCL Design will successfully manage new product initiatives and capacity expansion plans; the expectation that CCL Design’s results will improve in 2023 as more normalized supply chains develop for automotive and electronics markets; CCL Secure’s success in developing market-leading security technology to pursue widespread long-term adoption of polymer banknotes; the Company’s expectation that growth at Avery’s direct-to-consumer businesses will outpace legacy product lines and that further “tuck-in” acquisitions are possible; the Company’s expectation that the Checkpoint results will improve with continued strong demand for RFID related products and as economic activity improves in China; the Company’s expectation that Innovia will offset resin, energy and freight cost increases with productivity initiatives and price increases to its customer base; and Innovia will successfully fill capacity at its new EcoFloat shrink film line in 2023. Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions, including, but not limited to, the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and the Company’s ability to attract and retain qualified employees. Do not unduly rely on forward- looking statements as the Company’s actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions, which may prove to be incorrect, including, but not limited to, assumptions about the following: higher consumer spending; increased customer demand for the Company’s products; continued historical growth trends, market growth in specific segments and entering into new segments; the Company’s ability to provide a wide range of products to multinational customers on a global basis; the benefits of the Company’s focused strategies and operational approach; the Company’s ability to implement its acquisition strategy and successfully integrate acquired businesses; the achievement of the Company’s plans for improved efficiency and lower costs, including the ability to pass on polypropylene resin, aluminum and other inflationary cost increases to its customers; the availability of cash and credit; fluctuations of currency exchange rates; the Company’s continued relations with its customers; and general business and economic conditions. Should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward- looking statements. Further details on key risks can be found throughout this report and particularly in Section 4: “Risks and Uncertainties.” Except as otherwise indicated, forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on the business. Such statements do not, unless otherwise specified by the Company, reflect the impact of dispositions, sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them; therefore, the financial impact cannot be described in a meaningful way in advance of knowing the specific facts. The forward-looking statements are provided as of the date of this MD&A and the Company does not assume any obligation to update or revise the forward-looking statements to reflect new events or circumstances, except as required by law. Unless the context otherwise indicates, a reference to “the Company” means CCL Industries Inc. and its subsidiary companies and equity-accounted investments. Additional information relating to the Company, including the Company’s Annual Information Form, is available on SEDAR at www.sedar.com or on the Company’s website www.cclind.com. 7 2022 Annual Report1 . C O R P O R AT E OV E RV I E W A) The Company Founded in 1951, and publicly listed under its current name since 1980, the Company’s corporate offices are located in Toronto, Ontario, Canada, and Framingham, Massachusetts, United States, with a regional centre for Asia Pacific in Singapore. The corporate offices provide executive and centralized services such as finance, accounting, internal audit, treasury, risk management, legal, tax, human resources, information technology, environmental, health and safety and oversight of operations. The Company employs approximately 25,300 people in 205 production facilities located in North America, Latin America, Europe, Australia, Africa and Asia including equity investments in two joint ventures operating nine facilities. The CCL Segment (“CCL”) is the world’s largest converter of pressure sensitive and extruded film materials for a wide range of decorative, instructional, security and functional applications for government institutions and large global customers in consumer packaging, healthcare, chemicals, consumer durables, electronic device and automotive markets. Extruded and labeled plastic tubes, aluminum aerosols and specialty bottles, folded instructional leaflets, specialty folded cartons, precision engineered and die cut components, electronic displays, polymer banknote substrate and other complementary products and services are sold in parallel to specific end-use markets. Avery is the world’s largest supplier of labels, specialty converted media and software solutions to enable short-run digital printing in businesses and homes alongside complementary products sold through distributors, mass-market stores and e-commerce retailers. Checkpoint is a leading developer of RF and RFID-based technology systems for loss prevention and inventory management applications, including labeling and tagging solutions, for the retail and apparel industries worldwide. Innovia is a leading global producer of specialty, high-performance, multi-layer, surface-engineered films for label, packaging and security applications. The Company partly backward integrates into materials science, with capabilities in polymer extrusion, adhesive development, coating and lamination, surface engineering and metallurgy deployed as needed across the four business segments. B) Coronavirus (“CV19”) Pandemic 2022 marked the third year of the global CV19 pandemic, which saw the advent of the highly contagious omicron wave that resulted in a resurgence of restrictive measures by governments and lockdowns especially in China. As the year progressed and boosters were quickly deployed, oral antivirals became available and population immunity evolved, managing infections became the new normal. Accordingly, global mortality rates declined, civil restrictions largely disappeared, global travel almost returned to normal with only China still applying severe controls and global supply chain issues began to ease. However, as the year drew to a close, China abandoned its zero-CV19 policy, and a significant infection outbreak occurred temporarily impacting economic activity within the country, and the final impact not yet fully understood. Throughout the year CCL maintained its safety policies for employees, suppliers and customers ensuring its facilities remained open. Despite these challenges, the Company delivered record adjusted earnings per share and strong free cash flow, while maintaining its global growth strategy deploying $287.2 million on three acquisitions in 2022, and $419.4 million in net capital expenditures, while repurchasing $200.0 million of the Company’s stock in share buyback programs. The Company finished the year with a robust balance sheet with available liquidity of $2.1 billion and expectations of continuing to execute its global growth initiatives. C) Customers and Markets The state of the global economy and geopolitical events can affect consumer demand and customers’ marketing and sales strategies to promote growth, including the introduction of new products. These factors directly influence the demand for the Company’s products. Growth expectations generally mirror the trends of each of the markets and product lines in which the Company’s customers compete and the growth of the economy in each geographic region. The Company attempts to gain market share in each market and category over time. The markets served by the CCL Segment are large and diverse, with some sectors highly fragmented, but with few competitors having the Company’s substantial operating breadth or global reach. Avery has a dominant market-leading position for its products in North America, Europe and Australia. Checkpoint has significant market positions in all regions of the world and sells directly to retailers and apparel manufacturers and competes with other global retail labeling companies. Innovia operates plants in Europe, Mexico and Australia and has additional distribution capabilities in the United States that sell films to pressure sensitive materials producers, flexible packaging converters and the consumer- packaged goods industry, while also producing film internally for security and label applications. 8 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportD) Strategy and Financial Targets The Company’s strategy is to increase shareholder value through investment in organic growth and product innovations around the world, augmented by a global acquisition strategy. The Company builds on the strength of its people in marketing, manufacturing and product development and nurtures strong relationships with its international, national and regional customers and suppliers. The Company anticipates increasing its market share in most product categories by capitalizing on market insights and the growth of its customers, and by following developments such as globalization, new product innovation, branding and consumer trends. A key attribute of this strategy is maintaining focus and discipline. The CCL Segment aspires to be the market leader and the highest value-added producer in each customer sector and region in which it chooses to compete. The primary objective is to invest in growth globally, both organically and by acquisition. Avery objectives align to its core competencies in label solutions centered on specialty converted media that enable short-run digital printing in homes and businesses and increasingly using the direct-to-consumer channel, both organically and by acquisition. Checkpoint focuses on technology- driven loss-prevention and inventory-management and labeling solutions for the retail and apparel industries, inclusive of a rapidly developing RFID product portfolio. Innovia is a leading global producer of specialty, high-performance, multi-layer, surface-engineered biaxially oriented polypropylene (“BOPP”) films for label, packaging and security applications. Innovia also provides significant depth and capability to develop proprietary films for label applications. The Company’s financial strategy is to be fiscally prudent and conservative. The 2022 financial results delivered strong cash flow and a solid balance sheet after investing $287.2 million in acquisitions and $419.4 million in net capital expenditures to execute global growth initiatives. During good and difficult economic times, such as the prolonged impact of the CV19 pandemic, coupled with the conflict between Ukraine and Russia that began in February 2022 that has led to insecurity in consumer demand, volatility in energy, commodity and currency markets compounding an inflationary economic environment, the Company has maintained high levels of cash on hand and unused lines of credit to reduce its financial risk and to provide flexibility when acquisition opportunities are available. As at December 31, 2022, the Company had $839.5 million of cash on hand and approximately US$910.0 million of undrawn capacity on the Company’s unsecured revolving credit facility. The Company maintains a continuous focus on minimizing its investment in working capital to maximize cash flow in support of growth in the business. In addition, capital expenditures are targeted at the most attractive growth opportunities and are expected to be accretive to earnings. The Company’s financial discipline and prudent allocation of capital have ensured sufficient available liquidity and a secure financial foundation for the long-term future. A key financial target is return on equity before goodwill impairment loss, restructuring and other items, non-cash acquisition accounting adjustments and tax adjustments (“ROE,” a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A). The Company continues to execute its strategy with a goal of achieving a comparable ROE level to its leading peers in specialty packaging. 2022 ROE of 15.9%, although solid was down compared to 2021 as retained earnings increased faster than profitability gains: Return on Equity 2022 15.9% 2021 17.2% 2020 17.8% 2019 17.8% 2018 20.0% 2017 24.0% Another metric used by the investment community as a comparative measure is return on total capital before goodwill impairment loss, restructuring and other items, non-cash acquisition accounting adjustments and tax adjustments (“ROTC,” a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A). The chart below details performance since 2017. The Company targets delivering returns in excess of its cost of capital. ROTC of 11.8% for 2022 declined compared to 2021 due to the solid increase in adjusted net earnings for 2022, offset by the increase in capital deployed for acquisitions and net capital expenditures compared to 2021: Return on Total Capital 2022 11.8% 2021 12.5% 2020 11.9% 2019 10.8% 2018 11.3% 2017 14.0% ROTC should increase as the Company deleverages its balance sheet and increases net earnings as the turbulent operating environment caused by the conflict between Ukraine and Russia wanes and the Chinese economy bounces back after the impact of the removal of the zero-CV19 policy has played out. The long-term growth rate of adjusted basic earnings per Class B share (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A) is another important financial target. This measure excludes goodwill impairment loss, restructuring and other items, tax adjustments, gains on business dispositions and non-cash acquisition accounting adjustments. Management believes that, by taking into account both the relatively stable overall demand for 9 2022 Annual Report consumer staple and healthcare products globally and the continuing benefits from the Company’s focused strategies and operational approach, a positive growth rate in adjusted basic earnings per share is realistic under reasonable economic circumstances. The Company has achieved significant growth in its annual adjusted basic and basic earnings per share since 2017: Basic EPS Growth Rate 2022 5.1% Adjusted Basic EPS Growth Rate 5.9% 2021 12.5% 9.4% 2020 10.4% 10.4% 2019 1.5% 2.2% 2018 (2.2%) 1.5% 2017 36.4% 17.9% In 2022, adjusted basic earnings increased by 5.9% to $3.57 per Class B share. Improved profitability from the CCL Segment (including increased earnings from the Company’s joint ventures), Avery and Checkpoint more than offset increased net interest expense, reduced profitability for Innovia plus increased corporate costs. The Company believes continuing growth in earnings per share is achievable in the future as impact from high transportation and energy costs subside and resin indices stabilize for the Innovia Segment and the Company executes its global business strategies across all of its Segments. The Company will continue to focus on generating cash and effectively utilizing the cash flow generated by operations and divestitures. Earnings before net finance cost, taxes, depreciation and amortization, excluding goodwill impairment loss, earnings in equity-accounted investments, non-cash acquisition accounting adjustments, restructuring and other items (“Adjusted EBITDA,” a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A), is considered a good indicator of cash flow and is used by many financial institutions and investment advisors to measure operating results and for business valuations. As a key indicator of cash flow, Adjusted EBITDA demonstrates the Company’s ability to incur or service existing debt, to invest in capital additions and to take advantage of organic growth opportunities and acquisitions that are accretive to earnings per share. Historically, the Company has experienced growth in Adjusted EBITDA: 2022 2021 2020 2019 2018 Adjusted EBITDA $ 1,231.4 $ 1,173.1 $ 1,123.2 $ 1,067.2 $ 995.3 $ % of sales 19% 20% 21% 20% 19% 2017 959.2 20% In 2022, Adjusted EBITDA increased by approximately 5.0% from 2021, 5.6% excluding the negative impact of foreign currency translation. The Company’s Adjusted EBITDA margins remain at the top end of the range of its peers. The Company expects growth in Adjusted EBITDA in the future as the western world evolves in the midst of the conflict between Ukraine and Russia, the economy in China rebounds post recovery from the abandonment of the zero-CV19 policy and the Company implements its global growth initiatives. The framework supporting the above performance indicators is an appropriate level of financial leverage. Based on the dynamics within the specialty packaging industry and the risks that higher leverage may bring, the Company has a comfort level up to a ceiling of approximately 3.5 times net debt to Adjusted EBITDA with an appropriate deleveraging and liquidity profile to maintain its investment-grade ratings with Moody’s Investor Service (“Moody’s”) and S&P Global (“S&P”). As at December 31, 2022, net debt (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A) to Adjusted EBITDA was 1.24 times, 0.18 turns higher than the 1.06 times at December 31, 2021, reflecting increased Adjusted EBITDA more than offset by increased net debt. This leverage level is consistent with management’s conservative approach to financial risk and the Company’s ability to generate strong levels of free cash flow from operations (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A). This leverage level also allows the Company the flexibility to quickly execute its acquisition growth strategy without significantly exposing its credit quality. The Board does not have a target dividend payout ratio (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A). However, the Company has paid dividends quarterly for over forty years without an omission or reduction. The Board views this consistency and dividend growth as important factors in enhancing shareholder value. For 2022, the dividend payout ratio was 27% of adjusted earnings. This dividend payout ratio reflects the strong cash flows generated by the Company and solid improvement in adjusted earnings in 2022 compared to 2021. Therefore, after careful review of the current year results, budgeted cash flow and income for 2023, the Board has declared a 10.4% increase in the annual dividend: an increase of $0.025 per Class B share per quarter, from $0.24 to $0.265 per Class B share per quarter ($1.06 per Class B share annualized). Including this increase, the Company has more than doubled the annualized rate since March 2018. The Company believes that all of the above targets are mutually compatible and consequently should drive meaningful shareholder value over time. 10 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report The Company’s strategy and ability to grow and achieve attractive returns for its shareholders are shaped by key internal and external factors that are common to the businesses it operates. The key performance driver is the Company’s continuous focus on customer service, supported by its reputation for quality manufacturing, competitive pricing, product innovation, dependability, ethical business practices and financial stability. The Company updates its financial strategies and its performance against internal benchmarks while considering its obligations to Corporate Social Responsibility (“CSR”). The Company’s CSR initiative is designed to enhance the integration of social and environmental concerns into its business operations and strategy as well as interactions with stakeholders. Since 2019, the Company has been continuing to build up the initiative to align with best practices in the industry with changes and progress released in an annual Sustainability Report covering material environmental and social responsibility issues and policies. These reports are made available on the Company’s website at www.cclind.com/sustainability. Sustainability: The Company is committed to helping customers meet their targets by developing new products while reducing the environmental impact of its manufacturing processes. In June 2022 the Company committed to set science-based targets for emissions through the Science-Based Targets Initiative (“SBTi”) to be finalized and released by June 2024. This commitment will further the Company’s progress towards reducing the overall environmental footprint of its business in addition to working towards achievement of the waste reduction goals set for 2025 and 2030. Ethics: The Company’s Global Business Ethics Guide, enhanced in 2021 to align with the Company’s Corporate Social responsibility strategy, is its primary policy on workplace practices, human rights, health and safety, ethical conduct and fair business practices for all employees. Reviewing the Guide is an important part of new hire training and global facilities are audited to ensure all new hires have access to a copy of the ethics guide. Health & Safety: The health and safety of the Company’s employees around the world is a top priority. The Company’s current Environmental Health & Safety (“EHS”) policy and robust safety reporting programs address the statutory requirements of the countries where the Company does business. The EHS policy is reviewed and revised as needed as part of the Company’s annual Sustainability Report disclosure. Quarterly reporting of health and safety performance statistics to management and the CSR Committee is required, with the objectives of an injury-free workplace and appropriate responses to all incidents. Each facility is assessed a colour code ranking for safety in each calendar year, with a focus on improvement of their health and safety standards. Responsible Supply Chains: The Company continues to work with its supply chain partners to reduce the overall environmental and social impacts of its products including transportation, secondary packaging and material sourcing. Through predictive forecasting and responsive production, the Company is able to drive down lead times and help lower inventory throughout the supply chain with the added benefit of reducing waste and obsolescence and lowering the effects on the environment. Circular Innovation: The Company’s product innovation teams work directly with customers to create sustainable products enabling the circularity of customers’ primary packaging while supporting end consumer sensitivity to reduce waste in the environment and reduce overall environmental impacts. E) Recent Acquisitions and Dispositions The Company is globally deployed with significant diversification across the world economy including emerging markets, a broad customer base, distinct product lines and many different currencies. The Company continues to deploy its cash flow from operations into its core Segments with both internal capital investments and strategic acquisitions. The following acquisitions were completed over the last two years: • In May 2022, the Company acquired privately owned Floramedia Group B.V. (“Floramedia”), based in Westzaan, in the Netherlands, for approximately $53.1 million, net of cash acquired. Floramedia is a European leader in horticulture media with in-house tag and label production complemented with sales offices in six countries. It is reported as part of Avery. • In April 2022, the Company acquired Adelbras Indústria e Comércio de Adesivos Ltda. and Amazon Tape Indústria e Comércio de Fitas Adesivas Ltda. (collectively “Adelbras”), headquartered in Vinhedo near São Paulo, Brazil, for approximately $152.3 million net of cash and debt. Adelbras is a producer of adhesive tapes sold through retailers and distributors to consumers and small businesses under the Adelbras brand name. The new business is reported as part of Avery. • In January 2022, the Company acquired privately owned McGavigan Holdings Ltd. (“McGavigan”), headquartered in Glasgow, Scotland, and with significant manufacturing operations in China, for $103.6 million, net of cash acquired and debt assumed. McGavigan is a leading supplier of “in mould” decorated components for automotive interiors and forms an integral part of CCL Design. 11 2022 Annual Report • In December 2021, the Company acquired International Master Products Corporation (“IMP”), based in Michigan, U.S., for $70.8 million, net of cash acquired. IMP is a leading provider of labels and tags for the U.S. horticulture industry through digitally enabled design software; it is reported as part of Avery. • In December 2021, the Company acquired Lodging Access Systems, LLC, (“LAS”), based in Florida, U.S., for $26.4 million, net of cash acquired. LAS is a leading supplier of digitally printed and encoded RFID key cards, wrist bands and key fobs for access controls. LAS further expands Avery’s direct-to-consumer business. • In December 2021, the Company acquired the pharmaceutical leaflet printing press and customer list from the Laramara Foundation in São Paulo, Brazil, for $0.8 million. These assets were added to the CCL Segment. • In December 2021, the Company acquired Forever Blue Investimentos e Participações S.A. (d.b.a. “Tecnoblu”), headquartered in Blumenau, Brazil, for $17.7 million, net of cash and debt. Tecnoblu is now a part of the Checkpoint Apparel Labeling Solutions business (“ALS”). • In December 2021, the Company acquired Desarrollo e Investigación S.A. de C.V. and Fuzetouch PTE LTD (Singapore) (collectively “D&F”) headquartered in San Luis Potosí, Mexico, for approximately $51.3 million, net of cash acquired. D&F is a leading supplier of graphic interface control panels and assemblies and now trades as “CCL Design.” • In July 2021, the Company acquired the Uniter Group of companies (“Uniter”), based in A Coruña, Spain, with operations in Europe, Asia and North Africa, for approximately $50.4 million, including debt assumed and net of cash acquired. Uniter’s five factories are part of the Checkpoint ALS business. • In July 2021, the Company acquired privately owned Plum Paper LLC (“Plum”), based in California, U.S., for approximately $26.3 million, net of cash acquired. Plum is a leading supplier of personalized planners and is part of Avery’s growing direct-to-consumer business. • In May 2021, the Company acquired privately held Lux Global Label Asia Pte. Ltd. (“LUX”), based in Singapore, for approximately $9.4 million, net of cash. LUX produces decorative labels for global consumer product customers in the ASEAN region. LUX now trades as “CCL Label Singapore.” • In April 2021, the Company acquired the assets of Europack Packaging and Fluid Management GmbH (“Europack”) for approximately $0.9 million. Europack was added to the CCL Segment. The acquisitions completed over the past few years, in conjunction with the building of new plants around the world, have positioned the CCL Segment as the global leader for labels in the personal care, healthcare, food and beverage, durables, security and specialty categories. Avery is the world’s largest supplier of labels, specialty converted media, and software solutions to enable short-run digital printing in businesses and homes alongside complementary office products. Checkpoint has added technology-driven loss-prevention, inventory-management and labeling solutions, including RF and RFID-based systems, to the retail and apparel industries. Innovia provides vertical integration, driving the Company deeper into polymer sciences, enhancing the development of proprietary products for its customers. F) Subsequent Events Prior to the release of the 2022 annual financial statements, the Company announced the following: • In February 2023, the Company announced the appointment of Ms. Angella V. Alexander to the Board of Directors. • The Board of Directors has declared a dividend of $0.265 per Class B non-voting share and $0.2625 per Class A voting share, which will be payable to shareholders of record at the close of business on March 17, 2023, to be paid on March 31, 2023. 12 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportG) Consolidated Annual Financial Results Selected Financial Information Results of Consolidated Operations Sales Cost of sales Gross profit Selling, general and administrative expenses Earnings in equity-accounted investments Net finance cost Restructuring and other items Earnings before income taxes Income taxes Net earnings Basic earnings per Class B share Diluted earnings per Class B share Adjusted basic earnings per Class B share Dividends per Class B share Total assets Total non-current liabilities Comments on Consolidated Results 2022 6,382.2 4,667.0 1,715.2 852.6 862.6 19.9 (64.8) (11.7) 806.0 183.3 622.7 3.50 3.48 3.57 0.96 8,664.4 2,897.8 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2021 5,732.8 4,140.7 1,592.1 761.4 830.7 11.2 (56.9) (4.4) 780.6 181.5 599.1 3.33 3.31 3.37 0.84 7,627.8 2,462.8 $ $ $ $ $ $ $ $ 2020 5,242.3 3,740.1 1,502.2 725.4 776.8 9.5 (65.2) (27.6) 693.5 163.8 529.7 2.96 2.94 3.08 0.72 7,336.7 2,792.5 Sales were $6,382.2 million for 2022, an increase of 11.3% compared to $5,732.8 million recorded in 2021. This increase in sales includes an organic growth rate of 7.3% and acquisition-related growth of 4.8%, partially offset by the 0.8% negative impact of foreign currency translation. Consistent with 2021, approximately 98% of the Company’s 2022 sales to end-use customers are denominated in foreign currencies. Consequently, changes in foreign exchange rates can have a material impact on sales and profitability when translated into Canadian dollars for public reporting. The depreciation of the euro, U.K. pound, Australian dollar and Thai baht by 7.6%, 6.8%, 4.0% and 5.2%, respectively, was partially offset by a 3.8%, 8.6% and 4.9% appreciation of the U.S. dollar, Brazilian real and Mexican peso relative to the Canadian dollar in 2022 compared to average exchange rates in 2021. Selling, general and administrative expenses (“SG&A”) were $852.6 million for 2022, compared to $761.4 million reported in 2021. The increase in SG&A expenses in 2022 relates to an increase in corporate expenses, general increases across all business Segments of the Company and most notably the impact of the twelve acquisitions over the last two years. Corporate expenses for 2022 increased to $71.8 million, compared to $60.6 million for 2021, primarily due to increased variable compensation expenses on improved profitability in the fourth year of the amended long-term incentive plan. Operating income (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A) for 2022 was $934.4 million, an increase of 4.8% compared to $891.3 million for 2021. Foreign currency translation was a 0.5% negative impact to consolidated operating income for 2022 compared to 2021. CCL, Avery and Checkpoint Segments each increased operating income while Innovia posted a decline, compared to 2021. Further details on the business segments follow later in this report. Adjusted EBITDA in 2022 was $1,231.4 million, an improvement of 5.0% compared to $1,173.1 million recorded in 2021. Excluding the impact of foreign currency translation, the increase was 5.6% over the prior year. Net finance cost was $64.8 million for 2022, compared to $56.9 million for 2021. The 13.9% increase in net finance cost can primarily be attributed to increased finance costs on increased variable rate debt partially offset by an increase in finance income for 2022 compared to 2021. 13 2022 Annual Report For the full year 2022, restructuring costs and other items represented an expense of $11.7 million ($9.7 million after tax) as follows: • Restructuring expenses of $10.3 million ($8.3 million after tax), primarily related to severance and reorganization costs across the CCL Segment, Checkpoint and Innovia. • Acquisition transaction costs totaled $1.4 million ($1.4 million after tax), for the three acquisitions closed in 2022. The negative earnings impact of these restructuring and other items in 2022 was $0.05 per Class B share. For the full year 2021, restructuring costs and other items represented an expense of $4.4 million ($3.5 million after tax) as follows: • Restructuring expenses of $3.9 million ($3.0 million after tax), primarily related to severance and reorganization costs across the CCL Segment, Checkpoint and Innovia. • Acquisition transaction costs totaled $0.5 million ($0.5 million after tax), for the nine acquisitions closed in 2021. The negative earnings impact of these restructuring and other items in 2021 was $0.02 per Class B share. In 2022, the consolidated effective tax rate was 23.3%, compared to 23.6% in 2021, excluding earnings in equity-accounted investments. The combined Canadian federal and provincial statutory tax rate was 26.5% for 2022 (2021 – 26.5%). The decline in the effective tax rates was attributable to a higher portion of taxable income in lower taxed jurisdictions, as well as new U.K. tax legislation enacted in 2021 that raised income tax rates for future periods, requiring the Company to increase its deferred income liability by $8.0 million resulting in a corresponding increase in tax expense. This increase in tax expense in 2021 was partially offset by a $7.3 million reduction in valuation allowances due to improved profitability at certain subsidiaries of the Company. Of this $8.0 million increase in 2021, $4.7 million primarily related to book and tax timing differences and other discrete items. However, $3.3 million related to indefinite life intangibles from recent acquisitions that were recognized for accounting purposes but had no corresponding tax basis and were therefore excluded from adjusted basic earnings per share in 2021. Approximately 98% of the Company’s sales are to customers outside of Canada, and the income from these foreign operations is subject to varying rates of taxation. The Company’s effective tax rate is also affected from year to year due to the level of income in the various countries, recognition or reversal of tax losses, tax reassessments and income and expense items not subject to tax. Net earnings for 2022 increased 3.9% to $622.7 million, compared to $599.1 million recorded in 2021 due to the items described above. Basic earnings per Class B share were $3.50 for 2022 versus the $3.33 recorded for 2021. Diluted earnings per Class B share were $3.48 for 2022 and $3.31 for 2021. The movement in foreign currency exchange rates in 2022 compared to 2021 had a negative impact on the translation of the Company’s basic earnings of $0.02 per Class B share. The diluted weighted average number of shares was 179.2 million for 2022, compared to 180.9 million for 2021. Adjusted basic earnings per Class B share was $3.57 for 2022, up 5.9% from $3.37 in 2021. The movement in foreign currency exchange rates in 2022 versus 2021 had an estimated negative translation impact of $0.02 on adjusted basic earnings per Class B share. This estimated foreign currency impact reflects the currency translation in all foreign operations. As of December 31, 2022, the Company had 11.8 million Class A voting shares and 165.2 million Class B non-voting shares issued and outstanding. In addition, the Company had outstanding stock options to purchase 1.4 million Class B non-voting shares, 0.4 million restricted stock units to issue 0.4 million Class B non-voting shares under the Restricted Stock Unit Plan, 0.2 million restricted stock units to issue 0.2 million Class B non-voting shares under the 2017-2025 Long Term Retention Plan, 0.1 million restricted stock units to issue 0.1 million Class B non-voting shares under the 2019 Long Term Retention Plan (collectively the “RSUs”) and 0.3 million deferred share units (“DSU”) outstanding to issue 0.3 million Class B non-voting shares. Lastly, the Company has a performance stock unit (“PSU”) plan to issue up to 1.5 million Class B non-voting shares to participants, provided the financial performance criteria have been achieved and the participants are still employed by the Company. Since December 31, 2022, 8,000 Class A voting shares were converted to 8,000 Class B non-voting shares and 31,500 stock options were exercised for 31,500 Class B non-voting shares. There has been no change in the number of RSU’s, DSUs or PSUs to be issued. 14 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportH) Seasonality and Fourth Quarter Financial Results 2022 Sales CCL Avery Checkpoint Innovia Total sales Segment operating income CCL Avery Checkpoint Innovia $ $ $ Operating income Corporate expenses Restructuring and other items Earnings in equity-accounted investments Finance cost, net Earnings before income taxes Income taxes Net earnings Per Class B share Basic earnings Diluted earnings Adjusted basic earnings $ $ $ $ Unaudited Qtr 1 Unaudited Qtr 2 Unaudited Qtr 3 942.0 180.3 203.0 196.4 1,521.7 152.8 33.9 26.6 15.3 228.6 17.6 1.8 (3.2) 212.4 14.7 197.7 47.5 150.2 0.84 0.83 0.85 $ $ $ $ $ $ $ 965.2 236.5 197.1 216.4 1,615.2 154.9 46.9 22.6 23.4 247.8 17.8 3.2 (3.7) 230.5 15.4 215.1 51.7 163.4 0.91 0.91 0.94 $ $ $ $ $ $ $ 1,000.8 257.0 196.0 204.3 1,658.1 160.2 44.7 35.1 6.8 246.8 18.9 3.3 (4.0) 228.6 17.1 211.5 47.6 163.9 0.93 0.92 0.95 Unaudited Qtr 4 947.1 239.8 222.6 177.7 1,587.2 131.9 42.1 34.6 2.6 211.2 17.5 3.4 (9.0) 199.3 17.6 181.7 36.5 145.2 0.82 0.82 0.83 $ $ $ $ $ $ $ Year 3,855.1 913.6 818.7 794.8 6,382.2 599.8 167.6 118.9 48.1 934.4 71.8 11.7 (19.9) 870.8 64.8 806.0 183.3 622.7 3.50 3.48 3.57 $ $ $ $ $ $ $ 15 2022 Annual Report 2021 Sales CCL Avery Checkpoint Innovia Total sales Segment operating income CCL Avery Checkpoint Innovia $ $ $ Operating income Corporate expenses Restructuring and other items Earnings in equity-accounted investments Finance cost, net Earnings before income taxes Income taxes Net earnings Per Class B share Basic earnings Diluted earnings Adjusted basic earnings Fourth Quarter Results $ $ $ $ Unaudited Qtr 1 Unaudited Qtr 2 Unaudited Qtr 3 876.7 140.4 168.7 163.7 1,349.5 157.2 21.0 25.4 19.5 223.1 15.9 — (1.9) 209.1 14.7 194.4 46.6 147.8 0.82 0.81 0.82 $ $ $ $ $ $ $ 856.3 178.9 187.7 183.4 1,406.3 139.5 38.2 29.1 28.7 235.5 16.2 2.6 (2.1) 218.8 14.1 204.7 51.7 153.0 0.86 0.86 0.89 $ $ $ $ $ $ $ $ $ $ 882.0 209.7 189.3 207.2 1,488.2 127.6 51.2 24.6 20.5 223.9 10.3 0.7 (2.4) 215.3 14.2 201.1 47.9 153.2 $ 0.85 0.84 0.85 $ $ $ Unaudited Qtr 4 883.2 179.9 226.8 198.9 1,488.8 121.5 38.4 36.4 12.5 208.8 18.2 1.1 (4.8) 194.3 13.9 180.4 35.3 145.1 0.80 0.80 0.81 $ $ $ $ $ $ $ Year 3,498.2 708.9 772.5 753.2 5,732.8 545.8 148.8 115.5 81.2 891.3 60.6 4.4 (11.2) 837.5 56.9 780.6 181.5 599.1 3.33 3.31 3.37 Sales for the fourth quarter of 2022 increased 6.6% to $1,587.2 million, compared to $1,488.8 million recorded in the 2021 fourth quarter. Excluding foreign currency translation, sales for the fourth quarter of 2022 increased by 4.3% compared to the 2021 fourth quarter. This increase was due to an organic sales decline of 0.6% offset by acquisition related growth of 4.9%. The CCL Segment and Avery each recorded organic sales growth rates of 1.8% and 2.6%, respectively, while Checkpoint and Innovia posted organic declines of 2.2% and 12.2%, respectively. Organic growth at the CCL Segment, driven by strong results at the Home & Personal Care, Healthcare & Specialty and Food & Beverage sectors, partially offset softness in electronics markets impacting CCL Design and an abnormally slow quarter at CCL Secure. Avery sales improved significantly in North America offsetting declines internationally. Checkpoint’s modest organic decline attributable to slow Merchandise Availability Solutions (“MAS”) markets in Asia and an inventory glut in ALS supply chains, more than offsetting solid MAS markets in the Americas and continued strength in RFID products. Sales at Innovia were down on declines in resin indices especially in North America and significantly lower demand in the label materials industry in both the United States and Europe. Operating income in the fourth quarter of 2022 increased 1.1% to $211.2 million, compared to $208.8 million in the fourth quarter of 2021. For the fourth quarter of 2022, the CCL Segment and Avery improved operating income 8.6% and 9.6%, respectively offsetting declines for Checkpoint and Innovia. Sales gains for the CCL Segment improved profitability 4.2% net of currency translation, with improvements in all regions other than Asia Pacific. Profitability for Avery improved on strong results for North American direct-to-consumer and the impact of recent acquisitions. Checkpoint’s results were flat to the prior year, excluding the impact of currency translation. At Innovia, profitability declined on low label materials industry demand, energy inflation in Europe, higher freight costs and falling resin indices pinching margins short term on higher cost inventory. Corporate expenses were $17.5 million in the fourth quarter of 2022, compared to $18.2 million recorded in the prior-year period. The decrease in corporate costs is principally attributable to an insurance accrual recovery. 16 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report Adjusted EBITDA increased 4.3% to $289.0 million for the fourth quarter of 2022 compared to $277.2 million for the 2021 comparable period. Adjusted EBITDA improved due to the aforementioned results for the CCL Segment and Avery. Net finance cost was $17.6 million for the fourth quarter of 2022 compared to $13.9 million for the fourth quarter of 2021. Increased total debt outstanding for the fourth quarter of 2022 compared to the fourth quarter of 2021 was the primary driver for an increase in comparative net finance costs. For the fourth quarter of 2022, restructuring costs and other items represented an expense of $3.4 million ($2.7 million after tax) as follows: • Restructuring expenses primarily related to severance and reorganization costs for the CCL Design and Checkpoint operations. The negative earnings impact of these restructuring costs and other items for the 2022 fourth quarter was $0.01 per Class B share. For the fourth quarter of 2021, restructuring costs and other items represented an expense of $1.1 million ($0.9 million after tax) as follows: • Restructuring expenses primarily related to severance and reorganization costs for the CCL Segment and Checkpoint operations globally to match operational costs to customer demand levels during the pandemic. The negative earnings impact of these restructuring and other items for the 2021 fourth quarter was $0.01 per Class B share. Tax expense in the fourth quarter of 2022 was $36.5 million, resulting in an effective tax rate of 21.2% compared to $35.3  million and an effective tax rate of 20.1% in the prior-year period. The comparative effective tax rates for the fourth quarters of 2022 and 2021 are lower than the annual effective tax rates due to the timing of reductions in valuation allowances based on the Company’s ability to utilize previously unrecognized deferred tax assets at its foreign subsidiaries and other discrete adjustments. Net earnings in the fourth quarter of 2022 were $145.2 million, compared to net earnings of $145.1 million in the fourth quarter of 2021. Basic earnings per Class B share were $0.82 in the fourth quarter of 2022, compared to $0.80 in the fourth quarter of 2021. The movement in foreign currency exchange rates in the fourth quarter of 2022 compared to 2021 had a positive impact of $0.03 on basic earnings per Class B share. Adjusted basic earnings per Class B share improved 2.5% to $0.83 for the fourth quarter of 2022, compared to $0.81 in the corresponding quarter of 2021. Summary of Seasonality and Quarterly Results For the CCL Segment and Innovia, the first and second quarters are generally the strongest due to the number of workdays and various customer-related activities. Also, there are many products that have a spring-summer bias in North America and Europe such as horticultural labels, agricultural chemicals and certain beverage products, which generate additional sales volumes for the Company in the first half of the year. The polymer banknote business within the CCL Segment experiences intra-quarter variations in sales influenced by central banks’ reorder volatility. For Avery, the third quarter has historically been its strongest as it benefits from increased demand related to back-to-school activities in North America, although the impact is expected to diminish in future periods on secular declines in low-margin ring binder sales and the expansion of the Avery’s direct-to-consumer businesses that do not have this seasonal bias. For Checkpoint, the second half of the calendar year is healthier as the business substantially follows the retail cycle of its customers, which traditionally experiences more consumer activity from September through to the end of the year and prepares for the same in its supply chain from mid-year on. Checkpoint’s year-over-year comparative quarterly results often include one- time large chain-wide customer-driven hardware installations that strengthen future reoccurring label revenues. Sales in the final quarter of the year are negatively affected in North America by Thanksgiving and globally by the Christmas and New Year holiday season shutdowns. Sales and net earnings comparability between the quarters of 2022 and 2021 were primarily affected by the magnitude of CV19-related civil limitations by country, regional economic variances, the impact of foreign currency changes relative to the Canadian dollar, the impact of volatile energy and commodity markets resulting from the conflict between Ukraine and Russia, supply chain disruptions, the timing of acquisitions, the effect of restructuring initiatives, the impact of central bank reorder patterns, tax adjustments and other items. In particular, the first and second quarters of 2022 experienced significant sales growth as the CCL Segment and Avery quickly increased sales prices to offset inflationary cost pressures 17 2022 Annual Reportaugmented by newly acquired businesses. The CCL Segment experienced notable increases in its Home & Personal Care and Healthcare & Specialty business lines for the year on a more stable operating environment in North America. However, China’s decision to abandon its zero-CV19 policy, and the resulting increase in illnesses caused a temporary downturn of economic activity, most pronounced at CCL Design Electronics and Checkpoint, adversely impacting results for the fourth quarter of 2022. Avery experienced an uptick in sales and profitability in the second quarter of 2022 as customers commenced back-to-school purchases earlier due to uncertainty in the supply chain, resulting in a slight decrease for the third quarter compared to traditional seasonal patterns. Avery’s direct-to-consumer name badge, event badge and wristbands categories improved comparatively to each quarter of 2021 as sports and leisure events, conventions, meetings and conferences trended towards pre-pandemic levels. Innovia’s resin index-linked sale price increased revenues in the first part of the year, but sharp declines in indices for much of 2022 had a corresponding impact on sales and profitability as the Segment sold through high priced inventories. Furthermore, dramatic increases in European energy costs in the second half of 2022 negatively impacted Innovia’s profitability. 2 . B U S I N E S S S E G M E N T R E V I E W A) General All divisions of the Company invest capital and management effort to develop world-class manufacturing operations, with spending allocated to geographic expansion, cost-reduction projects, the development of innovative products and processes, the maintenance and expansion of existing capacity and the continuous improvement in health and safety in the workplace, including environmental management. The Company also makes strategic acquisitions for global competitive advantage, servicing large customers, taking advantage of new geographic markets, finding adjacent and new product opportunities, adding new customer segments, building infrastructure and improving operating performance. Avery, Checkpoint and the CCL Design business within the CCL Segment are less capital intensive as a percentage of sales than the Company’s other businesses. Further discussion on capital spending is provided in the individual Segment discussion sections below. Although each Segment is a leader in market share or has a significant position in the markets it serves in each of its operating locales, it also generally operates in a mature and competitive environment. For a number of years, consumer products and healthcare companies have experienced steady pressure to maintain or even reduce prices to their major retail and distribution channels, which has driven significant consolidation in the Company’s customer base. This has resulted in many customers seeking supply chain efficiencies and cost savings in order to maintain profit margins. Volatile commodity costs, and more recently in 2022, obvious inflationary input costs have also created challenges to manage pricing with customers. These dynamics have been an ongoing challenge for the Company and its competitors, requiring greater management and financial control and flexible cost structures. Unlike some of its competitors, the Company has the financial strength to invest in the equipment and innovation necessary to constantly strive to be the highest value- added producer in the markets that it serves. The cost of many of the key raw material inputs for the Company, such as plastic films and resins, paper, specialty chemicals and aluminum, are largely dependent on the supply and demand economics within the petrochemical, energy and base metals industries. Checkpoint purchases component parts including circuit boards, memory chips and other electronic modules from third parties. The significant cost fluctuations for these inputs can have an impact on the Company’s profitability. The Company generally has the ability, due to its size and the use of long-term contracts with both suppliers and customers, to mitigate volatility in purchased costs and, where necessary, to pass these on to the market in higher product prices. However, Innovia and parts of the CCL Segment can experience delays in price adjustments, up or down, to customers due to the nature of their respective relationships and contracts. Innovia’s pricing mechanisms are more complex, involving multiple indices for polypropylene used by customers and suppliers and differing terms in contracts when trigger points are arrived at for price changes. The success of the Company is dependent on each business managing the cost-and-price equation with suppliers and customers. A driver across the Company for maximizing operating profitability is the discipline of pricing contracts based on size and complexity, including consideration for fluctuations in raw materials and packaging costs, manufacturing run lengths and available capacity. This approach facilitates effective asset utilization and relatively higher levels of profitability. Performance is generally measured by product against estimates used to calculate pricing, including targets for scrap and output efficiency. An analysis of total utilization versus capacity available per production line or facility is also used to manage certain divisions of the business. In most of the Company’s operations, the measurement of each sales order shipped is based on actual selling prices and production costs to calculate the amount of actual profit margin earned and its return on sales relative to the established benchmarks. This process ensures that pricing policies and production performance are aligned in attaining profit margin targets by order, by plant and by division. 18 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportManagement believes it has both the financial and non-financial resources, internal controls and reporting systems and processes in place to execute its strategic plan, to manage its key performance drivers and to deliver targeted financial results over time. In addition, the Company’s internal audit function provides another discipline to ensure that its disclosure controls and procedures and internal control over financial reporting will be assessed on a regular basis against current corporate standards of effectiveness and compliance. The Company is not particularly dependent upon specialized manufacturing equipment. Most of the technology employed by the production sites can be sourced from multiple suppliers. The Company, however, has the resources to invest in large- scale projects to build infrastructure in current and new markets because of its financial strength relative to that of many of its competitors. Direct competitors in parts of the CCL Segment are often smaller and may not have the financial resources to stay current in maintaining state-of-the-art facilities. Certain new manufacturing lines take many months for suppliers to construct, and any delays in delivery and commissioning can have an impact on customer expectations and the Company’s profitability. Innovia, in addition to its unique method for producing BOPP films for label and packaging applications, also provides the Company with the know-how and material science capability to develop proprietary substrates. Finally, the Company also uses strategic partnerships as a method of obtaining exclusive technology in order to support growth plans and to expand its product offerings. The Company’s major competitive advantage is based on its strong customer service, process technology, the know-how of its people, market-leading brand awareness and loyalty, and the ability to develop proprietary technologies and manufacturing techniques. During 2022, the Company commenced operations of its new proprietary “EcoFloat” shrink films manufacturing line. This hybrid polyolefin film facilitates easy separation from primary bottle packaging to aid customers’ bottle-to-bottle circular recycling initiatives globally. The expertise of the Company’s employees is a key element in achieving the Company’s business plans. This know-how is broadly distributed throughout the world; therefore, the Company is generally not at risk of losing its competency through the loss of any particular employee or group of employees. Employee skills develop through on-the-job training and external technical education, enhanced by the Company’s entrepreneurial culture of considering creative alternative applications and processes for its products. The nature of the research carried out by the CCL Segment can be characterized as application or process development. The Company spends meaningful resources on assisting customers to develop new and innovative products. While customers regularly come to CCL with concepts and request assistance to develop products, the Company also takes its own new ideas to the market. Proprietary information is protected by confidentiality agreements and by limiting access to its manufacturing facilities. The Company values the importance of protecting its customers’ brands and products from fraudulent use and, consequently, is selective in choosing appropriate customer and supplier relationships. Avery has a strong commitment to understanding its ultimate end users, actively seeking product feedback and using consumer focus groups to drive product development initiatives. Furthermore, it leverages the wider Company’s technology to deliver product innovation that aligns with consumer printable media trends. Avery has also invested in many direct-to-consumer businesses globally and encourages the cross-pollination of unique products and best practices. Checkpoint has always been an innovator in its industry, with a strong dedication to research and development activities. It was a pioneer of RF electronic-article-surveillance hardware and consumables. Checkpoint has made further advances with the active enhancement and deployment of RFID solutions, including inventory management software, to the retail and apparel industries. Innovia maintains a world-class research and development centre specifically dedicated to the support of films for label, security and packaging applications. The new discoveries and product enhancements generated from this centre are deployed globally, sometimes benefitting downstream businesses such as CCL Secure and CCL Label. The Company continues to invest time and capital to upgrade and expand its information technology systems and security. This investment is critical to keeping pace with customer requirements and in gaining or maintaining a competitive edge. Software packages are, in general, off-the-shelf systems customized to meet the needs of individual business locations. The CCL Segment, Avery, Checkpoint and Innovia communicate with many customers and suppliers electronically, particularly with regard to supply-chain-management solutions and when transferring and confirming design formats and colours. A core attribute of Avery’s printable media products is the customized software to enable short-run digital printing in businesses and homes. Avery recognizes that it is critical to develop its software solutions to maintain its market-leading position with consumers. Avery launched WePrint™, expanding its direct-to-consumer software solutions, and acquired the e-commerce platforms of 19 companies over the past nine years, to leverage acquired digital printing software into the pre-existing Avery suite. 19 2022 Annual ReportAvery products are most often sold under the market-leading Avery brand and, with equal prominence in German-speaking countries, the Zweckform brand and within Brazil the Adelbras brand. At Checkpoint, products are predominantly sold under the Checkpoint brand and, for retail merchandising products in Europe and Asia Pacific, the Meto brand. The Company recognizes that in order to maintain the pre-eminent positions for Avery, Zweckform, Adelbras, Checkpoint and Meto, it must continually invest in promoting these brands. Product quality, innovation and performance are recognized attributes for the success of these brands. The Company deploys many initiatives to reduce the carbon footprint of its products and services to ensure the business is sustainable. A few of the notable items in 2022 that advanced the Company’s sustainability and environmental goals are described here. CCL Label broke ground on its new sustainable sleeve building in Dornbirn, Austria, which will expand the Company’s current operations in Europe for sustainable sleeve solutions. EcoFloat® film for Sleeves was officially approved for PET recycling in South Africa. CCL Secure won the Energy Management Award at the 23rd Energy Institute Awards ceremony, receiving recognition for achieving a 26% reduction in CO2 emissions, 31% reduction in energy consumption and 40% reduction in water usage per tonne of product since 2018. Avery’s new line of ecofriendly dissolvable labels disintegrate completely in water, without leaving sticky residue behind. The process does not require hot water to dissolve and will disintegrate in thirty seconds or less. Dissolvable labels are ideal for reusable containers that will be washed regularly or for containers with constantly changing contents or expiration dates. Innovia launched Rayoface™ CSA46, a clear, one-side gloss coated BOPP film that is approximately 10% thinner than most facestock films, providing a higher yield and improved carbon footprint, perfect for Food & Beverage and Home & Personal care applications. Business Segment Results Segment sales CCL Avery Checkpoint Innovia Total sales Operating income* CCL Avery Checkpoint Innovia Operating income 2022 2021 $ $ $ $ 3,855.1 913.6 818.7 794.8 6,382.2 599.8 167.6 118.9 48.1 934.4 $ $ $ $ 3,498.2 708.9 772.5 753.2 5,732.8 545.8 148.8 115.5 81.2 891.3 * This is a non-IFRS measure. Refer to “Key Performance Indicators and Non-IFRS Measures” in Section 5A. Comments on Business Segments The above summary includes the results of acquisitions on reported sales and operating income from the date of acquisition. B) CCL Segment There are five customer sectors inside the CCL Segment. The Company trades in three of them as CCL Label (with Label substituted as relevant for Tube and Container product lines) and one each as CCL Design and CCL Secure. The differentiated CCL sub-branding points to the nature of the application for the final product. The sectors have many common or overlapping customers, process technologies, information technology systems, raw material suppliers and operational infrastructures. CCL Label supplies innovative specialized label, plastic tube, aluminum aerosol and specialty bottle solutions to Home & Personal Care and Food & Beverage companies. It also supplies regulated and complex multi-layer labels and specialty folding cartons for major pharmaceutical, consumer medicine, medical instrument and industrial or consumer chemical customers referred to as the Healthcare & Specialty business. CCL Design supplies long- life, high-performance labels and complex engineered parts to automotive, electronics and durable goods companies. CCL Secure supplies polymer banknote substrate, pressure sensitive stamps, passport components, ID cards and other security documents to government institutions. 20 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report The Segment’s product lines include pressure sensitive labels, shrink sleeves, stretch sleeves, in-mould labels, precision printed and die cut metal, glass and plastic components, expanded content labels, pharmaceutical instructional leaflets, specialty folded cartons, graphic security features, extruded or labeled plastic tubes, aluminum aerosols or specialty bottles and printed polymer security film substrates. It currently operates 149 production facilities located in Canada, the United States (including Puerto Rico), Argentina, Australia, Austria, Brazil, Chile, China, Denmark, Egypt, France, Germany, Hungary, Ireland, Israel, Italy, Korea, Malaysia, Mexico, the Netherlands, New Zealand, Oman, Pakistan, Philippines, Poland, Russia, Saudi Arabia, Singapore, South Africa, Switzerland, Thailand, Turkey, United Arab Emirates, the United Kingdom and Vietnam. Nine of these plants are connected to the equity investments in CCL-Kontur and Pacman-CCL, which are included in the above locations. This Segment’s industry is made up of a very large number of competitors that manufacture a vast array of decorative, product information, identification and security label-type applications. The Company believes that CCL is one of the largest consolidated operators in most of its defined global market sectors. Competition often comes from single-plant businesses, invariably owned by private operators who compete with the Segment in local markets. There are also a number of multi-plant competitors in certain regions of the world and a handful of specialists in a single market segment globally. However, there are few major competitors with the product breadth, global reach and scale of the CCL Segment. The Company has completed numerous label business acquisitions, strategic joint ventures and greenfield start-ups geographically and added new product offerings to position CCL Label as a global leader in the Home & Personal Care, Food & Beverage and Healthcare & Specialty end markets. CCL Design is an equally significant financial and geographic market for the CCL Segment, principally focused on the automotive, electronics and durable goods markets. The high- security, specialized polymer banknote operations form an integral part of CCL Secure. CCL produces labels predominantly from polyolefin films and paper partly sourced from extruding, coating and laminating companies, using raw materials primarily from the petrochemical and paper industries. CCL also coats and laminates pressure sensitive materials in house and is generally able to mitigate the cost volatility of third-party-sourced materials due to a combination of purchasing leverage, agreements with suppliers and its ability to pass on these cost increases to customers. In the label industry, price changes regularly occur as specifications are constantly changed by the marketers and, as a result, the selling prices of these labels are updated, reflecting current market costs and new shapes and designs. CCL’s global customers expect a full range of product offerings in more geographic regions, further integration into their supply chain at a global level and protection of their brands, particularly in markets where counterfeiting is rife. These requirements put many of the Segment’s competitors at a disadvantage, as do the investment hurdles in converting equipment and technologies to deliver products, services and innovations. Having trusted and reliable suppliers is an important consideration for global consumer product companies, major pharmaceutical companies, OEMs in the durable goods business and, of course, central banks. This is even more important in an uncertain economic environment when many smaller competitors may encounter difficulties and customers want to ensure their suppliers are financially viable. CCL considers customers’ demand levels, particularly in North America and Western Europe, to be reasonably mature and, as such, will continue to focus its expansion plans on innovative and higher growth and value-added product lines within those geographies, with a view to improving overall profitability. In Asia, Latin America and other emerging markets, a higher level of economic growth is still expected over the coming years, despite the slower conditions experienced in the past few years. This should provide opportunities for the Segment to improve market share and increase profitability in these regions. Furthermore, there is close alignment of label demand to consumer staples, with the exception of CCL Design and CCL Secure, which are completely aligned to the automotive, electronics and durable goods industries, as well as government institutions and central banks, respectively. Management believes the Segment will attain the sales volumes, geographic distribution and reach mirroring those of its customers over the next few years through its focused strategy and by capitalizing on following customer trends. CCL Segment Financial Performance Sales Operating income Return on sales 2022 % Growth $ $ 3,855.1 599.8 15.6% 10.2% 9.9% $ $ 2021 3,498.2 545.8 15.6% Sales in the CCL Segment for 2022 increased 10.2% to $3,855.1 million, compared to $3,498.2 million in 2021, driven by organic growth of 8.3% and 2.3% from acquisition-related growth, partially offset by 0.4% negative impact from foreign currency translation. 21 2022 Annual Report Sales in 2022 for North America were up high single digit excluding the impact of currency translation and acquisitions, compared to 2021. Home & Personal Care sales and profitability increased on very strong demand for aerosol containers, price increases in all product lines plus modest market share gains in labels and tubes. Healthcare & Specialty sales and profitability improved significantly with strong demand in Healthcare partially offset by soft Specialty markets as pandemic-related consumer lawn & garden chemicals demand faded. Food & Beverage results, although solid, declined compared to a robust prior period due to a more normalized product mix in the current year less influenced by a post- pandemic surge in “on-premise” demand in the prior year. CCL Design sales and profitability declined on reduced demand in the technology sector and supply chain and unrecovered inflation challenges in the automotive sector that commenced in 2021 and prevailed for much of 2022. Overall, profitability and return on sales improved as operating efficiencies were implemented and inflationary cost increases were managed effectively. European sales were up high single digit for 2022, excluding currency translation and acquisitions, compared to 2021. Home & Personal Care organic sales improved modestly and profitability would have been flat to the prior year if not for adverse currency devaluation. Healthcare & Specialty sales increased significantly on strong demand in Healthcare across the region, offsetting share loss in Ag-Chem markets; profitability improved dramatically with particularly improved results in Denmark and Germany. Food & Beverage sales gained in all markets due to price increases, however, profitability after the negative impact of currency translation was flat to 2021. CCL Design, excluding the newly acquired McGavigan business, improved sales and profitability on comparatively stronger automotive, industrial and electronics markets. CCL Secure results reduced significantly on slow demand and softer sales mix for the year. Overall European sales improved as price increases offset inflationary cost escalation, but profitability declined due the adverse impact of currency devaluation. Sales in Latin America, excluding currency translation, increased double digit for 2022 compared to 2021. Sales improved in Mexico in all lines of business. Profitability in Mexico also increased dramatically with particularly robust gains at CCL  Secure and CCL Container. In Brazil, sales and profitability improved significantly with gains across all product categories (especially Food & Beverage) augmented by the impact of favourable currency translation. Results in Argentina improved but were more than offset by a decrease in Chile with both countries impacted by currency devaluation. Excluding the impact of currency translation, overall operating income and return on sales improved compared to 2021. Asia Pacific 2022 sales, excluding acquisitions and currency translation were down low single digit compared to 2021. Sales in China were modestly down for the year, driven by an exceptionally soft fourth quarter at CCL Design due to weak electronics markets and the wide CV19 case outbreak that followed the lifting of restrictions, which reduced domestic demand and impaired many customers’ operations. Sales and profitability across ASEAN markets improved compared to the prior year period that was still impacted by strong CV19 restrictions. In Australia, sales and profitability decreased, with flat results for label operations offset by significantly reduced results at CCL Secure compared to a robust prior year. South Africa posted significantly improved results compared to the 2021 start-up year. For the Asia Pacific region, operating income declined and return on sales fell. Operating income for the CCL Segment increased by 9.9% to $599.8 million for 2022 compared to $545.8 million for 2021, principally due to the success of the CCL Segment in North America and Latin America. Foreign currency translation also had a positive effect of 0.2% on 2022 operating income compared to 2021. Operating income as a percentage of sales for 2022 and 2021 was 15.6%. The CCL Segment invested $322.9 million in capital spending in 2022 compared to $230.6 million last year. The major expenditures were for equipment installations and new plants to support capacity additions globally. Depreciation and amortization, excluding amortization on right-of-use assets, for the CCL Segment was $212.1 million in 2022, compared to $205.3 million in 2021. C) Avery Avery is one of the world’s largest supplier of labels, specialty converted media and software solutions to enable short-run digital printing in businesses and homes alongside complementary products sold through distributors and mass-market retailers and pressure sensitive tapes in Brazil. The products are split into five primary lines: (1) Printable Media: including address labels, product identification labels and name badges/cards supported by customized software solutions where applicable; (2) Organization Products: including binders, indexes, sheet protectors, and writing instruments; (3) Direct- to-Consumer: digitally imaged labels, name & event badges, RFID enabled key cards & wristbands, planners and kids- oriented identification labels supported by unique web-enabled e-commerce URLs; (4) Pressure Sensitive Tapes; and (5) Horticultural labels & tags. Products in the Printable Media and Direct-to-Consumer categories are predominantly used by businesses and individual consumers consistently throughout the year; however, in Organization Products, North American demand typically surges for the back-to-school season during the third quarter. Horticultural labels & tags are seasonally stronger in the first and fourth quarters. 22 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportAvery operates 23 manufacturing and three distribution facilities. Sales for Avery are principally generated in North America, Europe, Latin America and Australia, with a market-leading position. Many products are sold under the market-leading Avery brand and, with equal prominence in German-speaking countries, under the Zweckform brand name that is better known by consumers in that part of Europe. Avery bolstered its presence in Latin America in 2022 with the Adelbras acquisition in Brazil with its well established in-market brand under the same name. Avery also has a well-known assembly of direct-to-consumer and direct-to-business brands supported by unique URLs. pc/nametag goedgemerkt Imprint Plus Colle à Moi IDentilam InTouch MasterTag Floramedia Mabel’s Labels badgepoint Easy2Name Stuck on You I.D.&C. Plum Paper RFID Hotel Avery reaches some of its consumers and end users at small businesses through distribution channels including mass- market merchandisers, office superstores, wholesalers, contract stationers, mail order and e-commerce retailers. Merger activity and store closures in some of these distribution channels can lead to short-term volume declines as customer inventory positions are consolidated. Avery is the leading brand in its core markets, with the principal competition being lower-priced private label products. Secular decline in Organization Products and core mailing address labels has been partly offset by innovations such as shipping and product identification labels and Avery’s proprietary direct-to-consumer e-commerce label design software platform WePrint™. Furthermore with 19 acquisitions since 2014, Avery expanded its digital printing franchises to custom roll labels, the digital graphic arts sector, the meetings and events planning industry, personalized identification labels for kids, event badges, personalized planners, RFID-enabled keycards & wristbands and horticultural labels & tags. Some of these e-commerce platforms expanded rapidly during the pandemic while others, such as event and corporate identity name badges weakened, and some very significantly. Future growth rates in all these new businesses are expected to outpace Avery’s legacy product lines. It is also the Company’s expectation that Avery will continue to open up new revenue streams in short-run digital printing applications. Avery Financial Performance Sales Operating income Return on sales 2022 % Growth $ $ 913.6 167.6 18.3% 28.9% 12.6% $ $ 2021 708.9 148.8 21.0% Avery sales for 2022 were $913.6 million a 28.9% improvement compared to the $708.9 million posted in 2021. The increase was due to 7.1% organic growth, 21.3% acquisition-related growth, and 0.5% positive impact from foreign currency translation compared to 2021. North American sales increased high single digit for 2022, excluding currency translation and acquisitions, compared to 2021. Sales and profitability in the Printable Media category declined due to the impact of one key customer dramatically reducing inventory along with paper shortages on the supply side. Organization Products results increased on improving end market demand as office work began to return to normal, noteworthy price increases and share gains for three-ring binders. Direct-to-Consumer business lines, including name badges all produced strong results for 2022. The newly acquired RFID card business continued to perform ahead of expectations. The IMP horticultural business saw slower consumer demand. Overall profitability increased, but the decline in the printable media category resulted in a lower return on sales. International sales, largely generated from products in the Printable Media, Pressure Sensitive Tapes, Horticultural and Direct-to-Consumer categories, represent approximately 31% of the Avery Segment for 2022. Sales, excluding acquisitions and currency translation, were up single digit in Europe with significant organic growth across all the Direct-to-Consumer categories partially offset by reductions at legacy Printable Media operations. The smaller business units experienced mixed results, with gains in Latin American business offset by a decline in results in Australia. The newly acquired Adelbras performed to expectations but Floramedia, like IMP above, experienced slower demand in a soft horticultural market. Operating income increased 12.6% to $167.6 million for 2022 compared to $148.8 million in 2021. Return on sales was 18.3% for 2022 compared to 21.0% for 2021, largely due to the impact of recent acquisitions. 23 2022 Annual Report Avery invested $38.0 million in capital spending for 2022, compared to $14.7 million for 2021. The majority of the expenditures in 2022 were for infrastructure additions in the Direct-to-Consumer operations in North America and Europe. Depreciation and amortization, excluding amortization on right-of-use assets, was $28.8 million for 2022 compared to $19.0 million for 2021. D) Checkpoint Checkpoint is a leading manufacturer of technology-driven loss-prevention, inventory-management and labeling solutions, including RF and RFID solutions, to the retail and apparel industry globally. There are three primary product lines: MAS, ALS and Meto. The MAS line focuses on electronic-article-surveillance (“EAS”) systems, including hardware, software, labels and tags for loss prevention and inventory control systems including RFID solutions. ALS products are apparel labels and tags, some of which are RFID capable. Meto is a small separately branded Europe-centric product line, including hand-held pricing tools and labels and promotional in-store displays. All MAS and ALS products are sold under the Checkpoint brand. Checkpoint is supported by 25 manufacturing facilities, ten distribution facilities and three product and software development centres globally. Checkpoint is headquartered in the United States but uses its worldwide footprint to generate sales internationally. Checkpoint sells directly to retailers or apparel manufacturers and competes with other global retail labeling companies. Checkpoint’s market-leading position, strong brand recognition and product development pipeline should still drive modest growth despite the move to an omni-channel retail landscape. Large contracts with retailers for hardware and software can create significant quarter-to-quarter and, in some cases, year-to-year revenue volatility. However, Checkpoint’s comprehensive solution of hardware and software also creates an important high-margin recurring revenue stream for related consumables. The Company is also confident that Checkpoint can capture its share of the fast-growing RFID market as retailers move increasingly to omni-channel distribution from a single inventory position. Checkpoint Financial Performance Sales Operating income Return on sales 2022 % Growth $ $ 818.7 118.9 14.5% 6.0% 2.9% $ $ 2021 772.5 115.5 15.0% Checkpoint sales were $818.7 million for 2022, a 6.0% increase compared to $772.5 million for 2021, driven by 3.8% organic growth, 5.5% acquisition growth partially offset by a 3.3% negative impact from foreign currency translation. MAS sales and profitability declined overall compared to a strong 2021, despite gains in North America and Latin America attributable to sale price increases that compensated for inflationary cost tension, which was more than offset by lower volume and soft end market demand in Europe and Asia. This led to some restructuring of the sales organizations in those regions and the announced closure of a global supply plant in Japan. Notwithstanding a weaker than expected fourth quarter as the apparel supply chain wrestled high inventories, ALS results for 2022 increased significantly, buoyed by strong growth in RFID products, newly implemented productivity initiatives and solid contributions from recent acquisitions. The smaller Meto business recorded improved performance for 2022 compared to 2021. Operating income for 2022 was $118.9 million, an increase of 2.9% compared to $115.5 million in 2021. Return on sales was 14.5% for 2022, compared to 15.0% for 2021. Checkpoint invested $50.8 million in capital spending for 2022, compared to $31.5 million for 2021. The majority of expenditures in 2022 were in the Europe and Asia Pacific regions to enhance capacity in ALS manufacturing facilities. Depreciation and amortization, excluding amortization on right-of-use assets, was $34.2 million for 2022, compared to $31.3 million for 2021. E) Innovia Innovia operations acquired in 2017, Treofan acquired in 2018, Flexpol acquired in 2020 and two small legacy film manufacturing facilities transferred from the CCL Segment make up this business. Innovia’s global footprint for the manufacture of specialty high-performance, multi-layer, surface-engineered BOPP films, includes major facilities located in each of Australia, Belgium, Mexico, Poland and the United Kingdom. These films are sold to customers in the pressure sensitive materials, flexible packaging and consumer packaged goods industries worldwide, with a small percentage of the total volume consumed internally by CCL Secure and CCL Label within the CCL Segment. In addition, two smaller legacy facilities, one located in Germany and one in the United States, produce almost their entire output for the CCL Segment’s Food & Beverage and Home & Personal Care businesses, respectively. During the second quarter of 2022, Innovia 24 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report commenced operations of its new “EcoFloat” investment in Poland. This hybrid polyolefin shrink film facilitates easy separation from the primary bottle packaging to accommodate customers’ bottle-to-bottle circular recycling initiatives globally. The majority of the film produced by this production line will be used by the CCL Segment’s Food & Beverage business. Polypropylene resin is the most significant input cost for this Segment, derived from oil or natural gas and manufactured globally by a limited number of producers. Polypropylene costs depend on the prices of natural gas, oil and the availability of resin cracking capacity. Innovia does not use derivative financial instruments to hedge its exposure to volatility of polypropylene prices; therefore, many of its large customer price agreements adjust for movements up and down in resin cost. Polypropylene costs increased throughout 2021, with North America outpacing Europe in resin price declines during much of 2022. Film innovation remains a strategic focus for the Segment, investing resources in its industry-leading research and development people and laboratory in the United Kingdom. This commitment has resulted in the development of unique process technology, highly differentiated specialty BOPP films and innovative surface coating technology, keeping film innovation at the forefront for the Segment. During 2022, Innovia announced a significant investment in new films manufacturing capacity in Germany. This new multi- layer co-extrusion film line will produce highly engineered thin gauge pressure sensitive label film to support growing sustainability-driven lower resin content materials. Construction of this new facility is expected to start by the second quarter of 2023 with commercial operations slated for early 2025. Innovia Financial Performance Sales Operating income Return on sales 2022 % Growth $ $ 794.8 48.1 6.1% 5.5% $ (40.8%) $ 2021 753.2 81.2 10.8% Innovia sales for 2022 increased 5.5% to $794.8 million, compared to $753.2 million in 2021, attributable to 6.8% organic growth, partially offset by 1.3% negative impact from foreign currency translation. The organic increase is attributable to the pass-through pricing mechanics associated with dramatically higher resin costs in the first part of the year partially offset by falling resin costs for much of 2022. Volume of film sold in North America increased, however, the decommissioning of an old film line in Poland to make way for the start-up of the new “EcoFloat” investment and weak European label materials industry demand in the fourth quarter offset. Films sold internally for CCL Secure and CCL Label operations were solid. Operating income declined 40.8% to $48.1 million compared to $81.2 million for 2021. Sequential monthly declines in resin costs, especially in the United States, and the corresponding reduction in sales price progressively implemented for much of 2022, squeezed margins as Innovia worked through higher cost inventory positions. Although significant energy surcharges in Europe were implemented earlier in the year to aid in offsetting rapidly escalating costs in the region at historically unheard-of rates, acceptance by the customer base and dramatically volatile movements in energy prices delayed its impact. Significant increases in transportation costs also negatively impacted profitability for 2022 compared to 2021, especially in Europe. Return on sales was 6.1% for 2022 compared to 10.8% for 2021. Innovia invested $35.4 million in capital spending for 2022 largely for the new film extrusion and top coating capabilities in Europe and Mexico compared to $47.0 million for 2021. Depreciation and amortization for Innovia, excluding amortization on right-of-use assets, was $47.1 million for 2022, compared to $46.1 million for 2021. F) Joint Ventures For the years ended December 31 Sales (at 100%) CCL Label joint ventures Earnings in equity-accounted investments (at 100%) CCL Label joint ventures Earnings in equity-accounted investments (at 50%) 2022 187.7 39.8 19.9 $ $ $ 2021 143.5 22.5 11.2 $ $ $ +/- 30.8% 76.9% 77.7% Results from the joint ventures are not proportionately consolidated into a Segment but instead accounted for as equity investments. The Company’s share of the joint ventures’ net income is disclosed in earnings in equity-accounted investments in the consolidated income statement. 25 2022 Annual Report Both Pacman-CCL and CCL-Kontur had record years as sales and profitability increased significantly on strong product mix and market share gains. Earnings in equity-accounted investments amounted to $19.9 million for 2022, compared to $11.2 million for 2021. Excluding the impact of foreign currency translation, sales and earnings in equity-accounted investments improved 26.0% and 79.7%, respectively. 3 . F I N A N C I N G A N D R I S K M A N AG E M E N T A) Liquidity and Capital Resources The Company’s leverage ratio is as follows: For the years ended December 31 Current debt Current lease liabilities Long-term debt Long-term lease liabilities Total debt(1) Cash and cash equivalents Net debt(1) Adjusted EBITDA Net debt to Adjusted EBITDA(1) $ $ $ 2022 6.6 40.0 2,175.6 139.6 2,361.8 (839.5) 1,522.3 1,231.4 1.24 $ $ $ 2021 15.3 32.7 1,691.4 111.9 1,851.3 (602.1) 1,249.2 1,173.1 1.06 (1) Total debt, net debt and net debt to Adjusted EBITDA are non-IFRS measures; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A. In May 2022, the Company amended its syndicated revolving credit facility extending the maturity an additional two years to February 2027. The Company’s debt structure at December 31, 2022, was primarily comprised of the 144A 3.05% private notes due June 2030 in the principal amount of US$600.0 million ($806.4 million), 144A 3.25% private notes due October 2026 in the principal amount of US$500.0 million ($674.2 million), the $300.0 million principal amount 3.864% Series 1 Notes due April 2028, and borrowings of $394.1 million on the Company’s syndicated revolving credit facility. Outstanding contingent letters of credit totaled $1.8 million; accordingly, there was approximately US$910.0 million of unused availability on the revolving credit facility at December 31, 2022. The Company’s debt structure at December 31, 2021, was primarily comprised of the 144A 3.05% private notes due June 2030 in the principal amount of US$600.0 million ($750.5 million), 144A 3.25% private notes due October 2026 in the principal amount of US$500.0 million ($627.4 million), the $300.0 million principal amount 3.864% Series 1 Notes due April 2028, and borrowings of $9.5 million on the Company’s syndicated revolving credit facility. Outstanding contingent letters of credit totaled $3.5 million; accordingly, there was approximately US$1.19 billion of unused availability on the revolving credit facility at December 31, 2021. Net debt was $1,522.3 million at December 31, 2022, $273.1 million higher than the net debt of $1,249.2 million at December 31, 2021. Net issuance of long-term debt was $292.3 million, inclusive of lease obligation repayments and the impact of foreign currency translation. Net debt increased due to net drawdowns on syndicated revolving long-term debt facilities to finance acquisitions and the purchase of shares under the Company’s normal course issuer bid. Net debt to Adjusted EBITDA increased to 1.24 times as at December 31, 2022, compared to 1.06 times at the end of 2021, due to the increase in net debt, partially offset by an increase in Adjusted EBITDA. The measure will continue to strengthen as the Company strategically deploys its free cash flow for business acquisitions and capital expenditures, offset by any future purchase of shares under its normal course issuer bid. The Company’s overall average finance rate was 2.9% as at December 31, 2022, compared to 2.4% at December 31, 2021, reflecting an increase in borrowing on the Company’s syndicated revolving credit facility at higher short-term variable interest rates. Interest coverage (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A) was 13.3  times and 14.6 times in 2022 and 2021, respectively, indicative of higher net finance costs relative to increased operating income. 26 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report The Company’s approach to managing liquidity risk is to ensure that it will always have sufficient liquidity to meet liabilities when they are due. The Company believes its liquidity will be satisfactory for the foreseeable future due to its significant cash balances, its expected positive operating cash flow and the availability of its unused revolving credit line. The Company anticipates funding all of its future commitments from the above sources but may raise further funds by entering into new debt financing arrangements or issuing further equity to satisfy its future additional obligations or investment opportunities. B) Cash Flow Summary of Cash Flows Cash provided by operating activities Cash used for financing activities Cash used for investing activities Effect of exchange rates on cash Increase (decrease) in cash and cash equivalents Cash and cash equivalents – end of year 2022 992.8 (72.6) (706.6) 23.8 237.4 839.5 $ $ $ 2021 838.7 (370.0) (541.3) (29.0) (101.6) 602.1 $ $ $ In 2022, cash provided by operating activities was $992.8 million, compared to $838.7 million in 2021. Free cash flow from operations (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A) was $573.4 million for 2022, compared to $531.8 million in the prior year. Driving the change in these metrics for 2022 were increased earnings, improved working capital, partially offset by increased income taxes and net interest paid and, for the latter metric, increased net capital expenditures compared to 2021. The Company maintains a rigorous focus on its investment in non-cash working capital. Days of working capital employed (a non-IFRS measure; see “Key Performance Indicators and Non-IFRS Measures” in Section 5A) was 30 days and 29 days at December 31, 2022, and December 31, 2021, respectively. The days working capital employed increased modestly as it was largely driven by the impact of acquisitions with higher levels of working capital than the average. Cash used for financing activities in 2022 was $72.6 million, consisting of net drawdowns of long-term debt and lease obligations of $292.3 million, dividend payments of $170.3 million and repurchase of Class B non-voting shares pursuant to normal course issuer bids totaling $200.0 million, partly offset by proceeds from the issuance of shares of $5.4 million due to the exercise of stock options. Cash used for investing activities in 2022 of $706.6 million was primarily for acquisitions that totaled $287.2 million and net capital expenditures of $419.4 million. After the above noted items and the $23.8 million positive effect of foreign currency rates, cash and cash equivalents increased by $237.4 million in 2022 to $839.5 million. Capital spending in 2022 amounted to $447.2 million and proceeds from capital dispositions were $27.8 million, resulting in net capital expenditures of $419.4 million, compared to $306.9 million in 2021. Increased capital expenditures in 2022 were due in part to inflation and to relieve capacity constraints in 2021 plus expected growth initiatives for 2023 and beyond. Depreciation and amortization in 2022 amounted to $323.2 million, compared to $302.8 million in 2021, excluding right-of-use asset amortization. The Company is continuing to seek investment opportunities to expand its business geographically, add capacity in its facilities and improve its competitiveness. As in previous years, capital spending will be monitored closely and adjusted based on the level of cash flow generated. C) Interest Rate, Foreign Exchange Management and Other Hedges The Company periodically uses derivative financial instruments to hedge interest and foreign exchange rates. The Company does not utilize derivative financial instruments for speculative purposes. As the Company operates internationally with slightly over 2.0% of its 2022 sales to end-use customers denominated in Canadian dollars, it has significant market risk exposure to changes in foreign exchange rates. Each subsidiary’s sales and expenses are primarily denominated in its local currency, minimizing the foreign exchange impact on the operating results. The Company also has exposure to market risks related to interest rate fluctuations on its debt. To mitigate this risk, the Company maintains a combination of fixed and floating rate debt. 27 2022 Annual Report The Company periodically uses interest rate swap agreements to allocate notional debt between fixed and floating rates. The Company believes that a balance of fixed and floating rate debt can reduce overall interest expense and is in line with its investment in short-term assets such as working capital, and long-term assets such as property, plant and equipment. The Company uses cross-currency interest rate swap agreements (“CCIRSA”) as a means to convert U.S. dollar debt into euro debt to hedge a portion of its euro-based investment and cash flows. As at December 31, 2022, the Company utilized CCIRSAs to hedge its euro-based assets and cash flows, effectively converting notional US$264.7 million 3.25% fixed rate debt into 1.23% fixed rate euro debt, US$111.5 million 3.25% fixed rate debt into 1.16% fixed rate euro debt, US$204.6 million 3.05% fixed rate debt into 2.06% fixed rate euro debt and US$203.9 million 3.05% fixed rate debt into 2.00% fixed rate euro debt. The effect of the CCIRSAs has been to decrease finance cost by $16.5 million for the year ended December 31, 2022 (2021 – $14.0 million). The Company has potential credit risks arising from derivative financial instruments if a counterparty fails to meet its obligations. The Company’s counterparties are large international financial institutions and, to date, no such counterparty has failed to meet its financial obligations to the Company. As at December 31, 2022, the Company had $68.7 million potential exposure to credit risk arising from derivative financial instruments. As at December 31, 2022, the Company had approximately US$1.2 billion and €46.0 million drawn under the 144A private bonds and syndicated revolving credit facility, which are hedging a portion of its U.S. dollar-based and euro-based investments and cash flows, inclusive of U.S. dollar debt swapped to euros. D) Equity and Dividends Summary of Changes in Equity For the years ended December 31 Net earnings Dividends Settlement of exercised stock options Contributed surplus on expensing of stock options and stock-based compensation plans Defined benefit plan actuarial gain net of tax Repurchase of shares Increase in accumulated other comprehensive income (loss) Increase in equity Equity Shares issued at December 31 – Class A (000s) – Class B (000s) $ $ $ 2022 622.7 (170.3) 6.6 37.4 45.8 (200.0) 176.0 518.2 4,265.2 11,815 165,231 $ $ $ 2021 599.1 (151.0) 61.8 17.0 37.1 — (99.2) 464.8 3,747.0 11,822 168,362 In 2022, the Company declared dividends of $170.3 million, compared to $151.0 million declared in the prior year. As previously discussed, the dividend payout ratio in 2022 was 27% (2021 – 25%) of adjusted earnings. After careful review of the current year results, budgeted cash flow and income for 2023, the Board declared a 10.4% increase in the annual dividend: an increase of $0.025 per Class B share per quarter, from $0.24 to $0.265 per Class B share per quarter ($1.06 per Class B share annualized). If cash flow periodically exceeds attractive acquisition opportunities available, the Company may also repurchase its shares, provided that the repurchase is accretive to earnings per share and it will not materially increase financial leverage beyond targeted levels. In May 2022, the Company renewed its share repurchase program under a normal course issuer bid to purchase up to 14.5 million Class B non-voting shares, approximately 8.8% of outstanding Class B non-voting shares of the Company. During 2022, the Company acquired 3,392,680 of its Class B shares for cancellation at an average price of $58.95 per share. The excess of the purchase price over the paid-up capital was charged to retained earnings. 28 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report E) Commitments and Other Contractual Obligations The Company’s obligations relating to debt, leases and other liabilities at the end of 2022 were as follows: December 31, 2021 December 31, 2022 Payments Due by Period Carrying Amount Carrying Amount Contractual Cash Flows 0–6 Months 6–12 Months 1–2 Years 2–5 Years More than 5 Years Non-derivative financial liabilities Secured bank loans Unsecured bank $ 4.8 $ 2.0 $ 2.0 $ 1.8 $ 0.1 $ 0.1 $ — $ — loans Unsecured 144A 3.25% private notes Unsecured 144A 3.05% private notes Unsecured 3.864% Series 1 Notes Unsecured syndicated bank credit facility Other long-term obligations Interest on unsecured bank credit facilities Interest on 144A 3.25% private notes Interest on 144A 3.05% private notes Interest on unsecured 3.864% Series 1 Notes Interest on other long-term debt Trade and other payables Accrued post-employment benefit liabilities Lease liabilities Total contractual cash obligations 10.1 4.3 4.3 2.3 0.6 0.5 0.8 627.4 674.2 677.7 750.5 806.4 813.2 298.8 298.9 300.0 9.5 5.6 394.1 2.3 396.2 2.3 — — — — 1.6 * * * * * * * * * * 91.3* 10.8 82.6* 5.5 183.9* 10.3 61.3* 0.3 3.3 0.1 1,321.5 1,394.4 1,394.4* 1,394.4 * 144.6 * 179.6 228.2* 186.3 3.0 21.5 — — — — 0.2 11.0 11.0 12.4 5.8 — — 3.0 19.9 — — — — 0.5 22.0 22.0 24.8 11.6 0.1 — 17.2 31.0 677.7 — — 396.2 — 47.5 44.1 74.4 34.8 0.1 — 77.8 62.8 0.1 — 813.2 300.0 — — — — 62.0 5.8 — — 127.2 51.1 $ 3,172.8 $ 3,756.2 $ 4,424.0 $ 1,454.6 $ 64.0 $ 129.8 $ 1,416.2 $ 1,359.4 * Accrued long-term employee benefit and post-employment benefit liability of $15.7 million, accrued interest of $10.3 million on unsecured notes, unsecured bonds and unsecured syndicated credit facilities, and accrued interest of $2.4 million on derivatives are reported in trade and other payables in 2022 (2021: $13.8 million, $9.6 million and $2.4 million, respectively). Pension Obligations The Company sponsors a number of defined benefit plans in countries that give rise to accrued post-employment benefit obligations. The accrued benefit obligation for these plans at the end of 2022 was $554.4 million (2021 – $782.6 million), the fair value of the plan assets was $298.6 million (2021 – $468.7 million) and an irrevocable surplus due to an asset ceiling was $2.1 million (2021 – nil), for a net deficit of $257.9 million (2021 – $313.9 million). Contributions to defined benefit plans during 2022 were $15.1 million (2021 – $17.3 million). The Company expects to contribute $56.4 million to pension plans in 2023, inclusive of defined contribution plans. These estimated funding requirements will be adjusted annually, based on various market factors such as interest rates, expected returns and staffing assumptions, including compensation and mortality. The Company’s contributions are funded through cash flows generated from operations. Management anticipates that future cash flows from operations will be sufficient to fund expected future contributions. Details of the Company’s pension plans and related obligations are set out in note 20, “Employee Benefits,” of the Company’s 2022 annual consolidated financial statements. 29 2022 Annual Report Other Obligations and Commitments The Company has provided various loan guarantees for its joint ventures and associates totaling $19.9 million (2021 – $21.3  million). The Company has posted surety bonds through accredited insurance companies globally totaling $52.4 million (2021 – $39.7 million). The nature of these commitments is described in note 26 and note 27 of the Company’s 2022 annual consolidated financial statements. There are no defined benefit plans funded with the Company’s stock. F) Controls and Procedures Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the President and Chief Executive Officer (“CEO”) and the Senior Vice President and Chief Financial Officer (“CFO”), on a timely basis so that appropriate decisions can be made regarding public disclosure. The Company’s Disclosure Committee reviews all external reports and documents before publication to enhance disclosure controls and procedures. As at December 31, 2022, based on the continued evaluation of the disclosure controls and procedures, the CEO and the CFO have concluded that the Company’s disclosure controls and procedures, as defined in National Instrument 52-109, Certificate of Disclosure in Issuers Annual and Interim Filings (“NI 52-109”), are effective to ensure that information required to be disclosed in reports and documents that the Company files or submits under Canadian securities legislation is recorded, processed, summarized and reported within the time periods specified. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management is responsible for establishing and maintaining adequate internal control over financial reporting. NI 52-109 requires CEOs and CFOs to certify that they are responsible for establishing and maintaining internal control over financial reporting for the issuer, that internal control has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS, that the internal control over financial reporting is effective, and that the issuer has disclosed any changes in its internal control during its most recent interim period that has materially affected or is reasonably likely to materially affect its internal control over financial reporting. In accordance with the provisions of NI 52-109, management, including the Chief Executive Officer and the Chief Financial Officer, have limited the scope of their design of the Company’s disclosure controls and procedures and internal control over financial reporting to exclude controls, policies and procedures of Adelbras and Floramedia. These companies were acquired during the second quarter of 2022. The total net assets acquired for these acquisitions was $205.4 million, which are reported in the Company’s consolidated financial statements of financial position for the year ended December 31, 2022, and was approximately 5.0% of consolidated net assets and less than 3.3% of sales. The scope limitation is primarily based on the time required to assess disclosure controls and procedures and internal control over financial reporting in a manner consistent with the Company’s other operations for these acquisitions. The assessment on the design effectiveness of disclosure controls and procedures and internal control over financial reporting is on track for completion by the end of the second quarter of 2023 and the assessment of the operating effectiveness will be completed by the fourth quarter of 2023. Except for the preceding changes, based on the evaluation of the design and operating effectiveness of the Company’s internal control over financial reporting, the CEO and the CFO concluded that the Company’s internal control over financial reporting was effective as at December 31, 2022. There were no material changes in internal control over financial reporting in the financial year ended December 31, 2022. 30 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report4 . R I S KS A N D U N C E R TA I N T I E S The Company is subject to the usual commercial risks and uncertainties from operating as a Canadian public company and as a supplier of goods and services to the non-durable consumer packaging and consumer durables industries on a global basis. A number of these potential risks and uncertainties that could have a material adverse effect on the business, financial condition and results of operations of the Company are, in no particular order, as follows: The Conflict between Ukraine and Russia Late in February of 2022 the conflict between Ukraine and Russia commenced and to the extent it continues or escalates it may impact other risks disclosed in this document and further impact the Company’s financial results. For the years ended December 31, 2022 and 2021, a de minimis percentage of the Company’s sales were derived directly from customers based in Russia and Ukraine. However, the Company has a 50% equity interest in a U.K. holding company that owns 100% of CCL Kontur, which operates four label plants, headquartered in Podolsk, Russia. The Company’s 50% equity partner in this joint venture has management control of the Russian operations. The Company suspended all future financial support by way of equity injection or additional debt financing to this joint venture while fully complying with all government-imposed trade sanctions. The Company’s financial exposure in this joint venture is approximately $61.6 million as at December 31, 2022. It is not possible at this time to predict the ultimate consequences of the conflict in Ukraine and the impact on the carrying value of the Company’s investment in this joint venture. The Company will monitor the factors influencing the carrying value of its investment and, if appropriate, may incur impairment charges. The conflict in Ukraine may escalate and/or expand in scope with broader consequences, including further sanctions, embargoes, regional instability, cyber events and geopolitical shifts; potential retaliatory action by the Russian government against the Company and the Company’s joint venture or its customers, such as nationalization of foreign businesses in Russia; and increased tensions between the western world and countries in which the Company operates, none of which can be predicted. The Company also cannot predict the conflict’s impact on the global economy and on its business and financial statements. Covid-19 Pandemic In March 2020, the World Health Organization declared a global pandemic related to CV19. The impacts on global commerce have been and are anticipated to continue to be far-reaching. CV19 has resulted in unprecedented governmental actions in multiple jurisdictions, including the closure of workplaces determined to be non-essential, the imposition of new health and monitoring requirements and the imposition of restrictions on the international, national and local movement of people and some goods. There have been significant disruptions to business operations, supply chains and customer activity and demand; service cancellations, reductions and other changes; the imposition of quarantines and curfews; as well as considerable general concern and uncertainty. There has been significant stock market volatility and significant volatility in foreign exchange and commodity markets. While CV19-related governmental and public health imposed restrictions were partially relaxed in a number of jurisdictions, renewed, and in some instances, heightened restrictions have since been imposed or are contemplated in multiple jurisdictions. While the Company’s operations have been determined by most jurisdictions to be essential businesses and have continued to operate throughout the pandemic with limited disruptions, there can be no assurance that this will continue to be the case throughout the duration of the CV19 pandemic or that such plants will operate at pre-pandemic staffing and production levels. CV19 continues to have varying impacts by geography and sector on the Company’s employees, suppliers and customers and on the demand for the respective products that the Company and its customers produce. While the introduction, beginning in late 2020, of vaccines designed to offer protection against CV19 offers the possibility of a reduction in the duration of the pandemic, the time needed for widespread availability and distribution of such vaccines, their duration and efficacy against the emergence and spread of new strains of CV19, as well as the levels of public participation in inoculation programs, remain uncertain. The duration of the pandemic and its impact on the Company’s financial performance and position is an area of estimation uncertainty and judgment, which is continuously monitored and reflected in management’s estimates. The impacts of the CV19 pandemic that may have an effect on the Company include: a change in short-term and/or long- term demand and/or pricing for the Company’s products; reductions in production levels; increased costs resulting from the Company’s efforts to mitigate the impact of CV19; deterioration of worldwide credit and financial markets that could limit the Company’s ability to obtain external financing to fund operations and capital expenditures, and result in a higher rate of losses on accounts receivable due to counterparty credit defaults; disruptions to supply chains; impairments and/or write-downs of assets; restrictions on movement of workforce; reductions in the labour force; the closure of workplaces; and adverse impacts on the Company’s information technology systems and internal control systems as a result of the need to maintain remote work arrangements. A material adverse effect on the Company’s employees, customers and/or suppliers could have a material adverse effect on the Company. 31 2022 Annual ReportSignificant uncertainty remains with respect to the future impact of CV19 on the Company’s businesses. As a result, the Company’s expected financial results for 2023 and beyond may be negatively impacted by continued CV19-related disruptions. The Company cannot currently estimate the severity of any such impact, which may be material. The overall severity and duration of CV19-related adverse impacts on the Company’s businesses will depend on future developments that cannot currently be predicted, including directives of governmental and public health authorities, the extent and duration of governmental assistance for individuals and businesses adversely affected by CV19, the effectiveness of inoculation programs, the extent to which suppliers and customers are impacted by renewed operating restrictions and closures and the speed at which they are able to return to normalized production levels, the level of consumer demand, the status of labour availability and the ability to staff the Company’s operations and facilities. Even after CV19 outbreaks have subsided, the Company may continue to experience material adverse impacts to its businesses as a result of CV19’s global economic impact, including any related recession. Raw Materials Component Parts and Inflation Although the Company is a large customer to certain key suppliers, it is also an inconsequential buyer of some materials and components such as computer chips. The ability to grow earnings will be affected by inflationary and other increases in the cost of electronic sub-assemblies and raw materials, aluminum ingot, slugs and foils, resins, extruded films, pressure sensitive laminates, paper, binder rings and plastic components. Inflationary and other increases in the costs of raw materials, labour and energy have occurred in the past and are expected to reoccur, and the Company’s performance depends in part on its ability to pass these cost increases on to customers in the price of its products and to effect improvements in productivity. The Company may not be able to fully offset the effects of raw material costs and other sourced components through price increases, productivity improvements or cost-reduction programs. If the Company cannot obtain sufficient quantities of these items at competitive prices, of appropriate quality and on a timely basis, it may not be able to produce sufficient quantities of product to satisfy market demand, product shipments may be delayed, or its material or manufacturing costs may increase. Innovia is sensitive to price movements in polypropylene resin used in its BOPP films for label, packaging and security applications. Polypropylene is the most significant input cost and is traded in the market, with prices linked to the market price of natural gas and refining capacity. Price movements must be managed and, where necessary, passed along to the Segment’s customers. Failure to pass along higher costs in a timely and effective manner to its customers could have a material adverse effect on the Innovia Segment’s business and profitability. Checkpoint’s supply chain relies significantly on components sourced from factories in Asia; therefore, supply disruption and tariff changes could adversely affect sales and profitability. Avery’s U.S. supply chain relies almost completely on its plant in Tijuana, Mexico; supply disruption, changes to border controls or the failure to implement the provisions of the United States-Mexico-Canada Agreement on trade could adversely affect sales and profitability. Overall, any of these problems could result in the loss of customers and revenue, provide an opportunity for competing products to gain market acceptance and have a material adverse effect on the Company’s business, financial condition and results of operations. Potential Risks Relating to Significant Operations in Foreign Countries The Company operates plants in North America, Europe, Latin America, Africa, Asia, Australia and the Middle East. Sales to customers located outside of Canada in 2022 were approximately 98% of the Company’s total sales, a level similar to that in 2021. Non-Canadian operating results are translated into Canadian dollars at the average exchange rate for the period covered. The Company has significant operating bases in both the United States and Europe. In 2022, 40.2% and 29.4% of total sales were to customers in the United States and Europe, respectively. The Company’s operating results and cash flows could be negatively impacted by slower or declining growth rates in these key markets. The sales from business units in Latin America, Asia, Africa and Australia in 2022 were 28.0% of the Company’s total sales. In addition, the Company has equity accounted investments in Russia and the Middle East. There are risks associated with operating a decentralized organization in 205 manufacturing facilities in 43 countries around the world with a variety of different cultures and values. Operations outside of Canada, the United States and Europe are perceived generally to have greater political and economic risks and include the Company’s operations in Latin America, parts of Asia, Russia and the Middle East. These risks include, but are not limited to, fluctuations in currency exchange rates, inflation, changes in foreign law and regulations, military conflicts, government nationalization of certain industries, currency controls, potential adverse tax consequences and locally accepted business practices and standards that may not be similar to accepted business practices and standards in North America and Europe. Although the Company has controls and procedures intended to mitigate these risks, these risks cannot be entirely eliminated and may have a material adverse effect on the consolidated financial results of the Company. 32 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportImpairment in the Carrying Value of Goodwill and Indefinite-Life Intangible Assets As of December 31, 2022, the Company had approximately $2.6 billion of goodwill and indefinite-life intangible assets on its consolidated statement of financial position, the value of which is reviewed for impairment at least annually. The assessment of the value of goodwill and intangible assets depends on a number of key factors requiring estimates and assumptions about earnings growth, operating margins, discount rates, economic projections, anticipated future cash flows and market capitalization. For Innovia the estimated value in use was close to the carrying value, therefore, any adverse movement in key assumptions, including discount rates, could potentially lead to impairment. There can be no assurance that future reviews of goodwill and intangible assets will not result in an impairment charge. Although it does not affect cash flow, an impairment charge does have the effect of reducing the Company’s earnings, total assets and equity. Competitive Environment The Company faces competition from other suppliers in all the markets in which it operates. There can be no assurance that the Company will be able to compete successfully against its current or future competitors or that such competition will not have a material adverse effect on the business, financial condition and results of operations of the Company. This competitive environment may preclude the Company from passing on higher material, labour and energy costs to its customers. Any significant increase in in-house manufacturing by customers of the Company could adversely affect the business, financial condition and results of operations of the Company. In addition, the Company’s consolidated financial results may be negatively impacted by competitors developing new products or processes that are of superior quality to those of the Company or that fit the Company’s customers’ needs better, or have lower costs; or by consolidation within the Company’s competitors or by further pricing pressure being placed on the industry by the large retail chains. Foreign Exchange Exposure and Hedging Activities Sales of the Company’s products to customers outside Canada account for approximately 98% of the revenue of the Company. Because the prices for such products are quoted in foreign currencies, any increase in the value of the Canadian dollar relative to such currencies, in particular the U.S. dollar and the euro, reduces the amount of Canadian dollar revenues and operating income reported by the Company in its consolidated financial statements. The Company also buys inputs for its products in world markets in several currencies. Exchange rate fluctuations are beyond the Company’s control and there can be no assurance that such fluctuations will not have a material adverse effect on the reported results of the Company. The use of derivatives to provide hedges of certain exposures, such as interest rate swaps, forward foreign exchange contracts and aluminum futures contracts, could impact negatively on the Company’s operations. Retention of Key Personnel and Experienced Workforce Management believes that an important competitive advantage of the Company has been, and will continue to be, the know-how and expertise possessed by its personnel at all levels of the Company. While the machinery and equipment used by the Company are generally available to competitors of the Company, the experience and training of the Company’s workforce allows the Company to obtain a level of efficiency and a level of flexibility that management believes to be high relative to levels in the industries in which it competes. To date, the Company has been successful in recruiting, training and retaining its personnel over the long term, and while management believes that the know-how of the Company is widely distributed throughout the Company, the loss of the services of certain of its experienced personnel could have a material adverse effect on the business, financial condition and results of operations of the Company. The operations of the Company are dependent on the abilities, experience and efforts of its senior management team. To date, the Company has been successful in recruiting and retaining competent senior management. Loss of certain members of the executive team of the Company could have a disruptive effect on the implementation of the Company’s business strategy and the efficient running of day-to-day operations. This could have a material adverse effect on the business, financial condition and results of operations of the Company. 33 2022 Annual ReportAcquired Businesses As part of its growth strategy, the Company continues to pursue acquisition opportunities where such transactions are economically and strategically justified. However, there can be no assurance that the Company will be able to identify attractive acquisition opportunities in the future or have the required resources to complete desired acquisitions, or that it will succeed in effectively managing the integration of acquired businesses. The failure to implement the acquisition strategy, to successfully integrate acquired businesses or joint ventures into the Company’s structure, or to control operating performance and achieve synergies may have a material adverse effect on the business, financial condition and results of operations of the Company. In addition, there may be liabilities that the Company has failed or was unable to discover in its due diligence prior to the consummation of the acquisition. In particular, to the extent that prior owners of acquired businesses failed to comply with or otherwise violated applicable laws, including environmental laws, the Company, as a successor owner, may be financially responsible for these violations. A discovery of any material liabilities could have a material adverse effect on the business, financial condition and results of operations of the Company. Long-Term Growth Strategy The Company has experienced significant and steady growth over the last decade. The Company’s organic growth initiatives coupled with its international acquisitions over the last number of years can place a strain on a number of aspects of its operating platform including human infrastructure, operational capacity and information systems. The Company’s ability to continually adapt and augment all aspects of its operational platform is critical to realizing its long- term growth strategy. Another key aspect to the Company’s growth strategy includes increased development of the Company’s presence in emerging markets that could create exposure to unstable political conditions, economic volatility and social challenges. If the Company cannot adjust to its anticipated growth, results of operations may be materially adversely affected. Lower than Anticipated Demand Although Checkpoint enjoys the advantage of significantly lower customer concentration than the rest of the Company, it remains heavily dependent on the retail marketplace. Changes in the economic environment including the liquidity and financial condition of its customers, the impact of online customer spending or reductions in retailer spending and new store openings could adversely affect sales. A reduction in the commitment for chain-wide installations due to decreased consumer spending that results in reduced demand for loss prevention by retail customers or failure to develop new technology that entices the customer to maintain its commitment to Checkpoint’s loss prevention products and services may also have a material adverse effect on the Company’s business, financial condition and results of operations. Exposure to Income Tax Reassessments The Company operates in many countries throughout the world. Each country has its own income tax regulations and many of these countries have additional income and other taxes applied at state, provincial and local levels. The Company’s international investments are complex and subject to interpretation in each jurisdiction from a legal and tax perspective. The Company’s tax filings are subject to audit by local authorities, and the Company’s positions in these tax filings may be challenged. The Company may not be successful in defending these positions and could be involved in lengthy and costly litigation during this process and could be subject to additional income taxes, interest and penalties. This outcome could have a material adverse effect on the business, financial condition and results of operations of the Company. Realization of Deferred Tax Assets The Company needs to generate sufficient taxable income in future periods in certain foreign and domestic tax jurisdictions to realize the tax benefit. If there is a significant change in the time period within which the underlying temporary difference or loss carry-forwards become taxable or deductible, the Company may have to revise its unrecognized deferred tax assets. This could result in an increase in the effective tax rate and could have a material adverse effect on future results. Changes in statutory tax rate may change the deferred tax asset or liability, with either a positive or a negative impact on the effective tax rate. The computation and assessment of the ability to realize the deferred tax asset balance is complex and requires significant judgment. New legislation or a change in underlying assumptions may have a material adverse effect on the business, financial condition and results of the Company. 34 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportFluctuations in Operating Results While the Company’s operating results over the past several years have indicated a general upward trend in sales and net earnings, operating results within particular product forms, within particular facilities of the Company and within particular geographic markets have undergone fluctuations in the past and, in management’s view, are likely to do so in the future. Operating results may fluctuate in the future as a result of many factors in addition to the global economic conditions, and these factors include the volume of orders received relative to the manufacturing capacity of the Company, the level of price competition (from competing suppliers both in domestic and in other lower-cost jurisdictions), variations in the level and timing of orders, the cost of raw materials and energy, the ability to develop innovative solutions and the mix of revenue derived in each of the Company’s businesses. Operating results may also be impacted by the inability to achieve planned volumes through normal growth and successful renegotiation of current contracts with customers and by the inability to deliver expected benefits from cost-reduction programs derived from the restructuring of certain business units. Any of these factors or a combination of these factors could have a material adverse effect on the business, financial condition and results of operations of the Company. Insurance Coverage Management believes that insurance coverage of the Company’s facilities addresses all material insurable risks, provides coverage that is similar to that which would be maintained by a prudent owner/operator of similar facilities and is subject to deductibles, limits and exclusions that are customary or reasonable given the cost of procuring insurance and current operating conditions. However, there can be no assurance that such insurance will continue to be offered on an economically feasible basis or at current premium levels, that the Company will be able to pass through any increased premium costs, or that all events that could give rise to a loss or liability are insurable, or that the amounts of insurance will at all times be sufficient to cover each and every loss or claim that may occur involving the assets or operations of the Company. Catastrophic Events Natural disasters, such as earthquakes, tsunamis, floods or wildfires, public health crises, such as epidemics and pandemics, political instability, acts of terrorism, war or other conflicts and other events outside of the Company’s control, may adversely impact its business and operating results. In addition to the direct impact that such events could have on the Company’s facilities and workforce, these types of events could negatively impact consumer spending in the impacted regions or, depending on the severity, globally, which would impact the Company’s customers and in turn impact demand for its products. Dependence on Customers The Company has a modest dependence on certain customers. The Company’s two largest customers combined accounted for approximately 6.8% (2021 – 8.1%) of the consolidated revenue for the fiscal year 2022. The five largest customers of the Company represented approximately 13.8% (2021 – 15.2%) of the total revenue for 2022 and the 25 largest customers represented approximately 34.6% (2021 – 35.8%) of the total revenue. Several thousand customers make up the remainder of total revenue. Although the Company has strong partnership relationships with its customers, there can be no assurance that the Company will maintain its relationship with any particular customer or continue to provide services to any particular customer at current levels. A loss of any significant customer, or a decrease in the sales to any such customer, could have a material adverse effect on the business, financial condition and results of operations of the Company. Consolidation within the consumer products market base and office retail superstores could have a negative impact on the Company’s business, depending on the nature and scope of any such consolidation. Environmental, Health and Safety Requirements and Other Considerations The Company is subject to numerous federal, provincial, state and municipal statutes, regulations, by-laws, guidelines and policies, as well as permits and other approvals related to the protection of the environment and workers’ health and safety. The Company maintains active health and safety and environmental programs for the purpose of preventing injuries to employees and pollution incidents at its manufacturing sites. The Company also carries out a program of environmental compliance audits, including an independent third-party pollution liability assessment for acquisitions, to assess the adequacy of compliance at the operating level and to establish provisions, as required, for environmental site remediation plans. The Company has environmental insurance for most of its operating sites, with certain exclusions for historical matters. 35 2022 Annual ReportDespite these programs and insurance coverage, further proceedings or inquiries from regulators on employee health and safety requirements, particularly in Canada, the United States and the European Economic Community (collectively, the “EHS Requirements”), could have a material adverse effect on the business, financial condition and results of operations of the Company. In addition, changes to existing EHS Requirements, the adoption of new EHS Requirements in the future, or changes to the enforcement of EHS Requirements, as well as the discovery of additional or unknown conditions at facilities owned, operated or used by the Company, could require expenditures that might materially affect the business, financial condition and results of operations of the Company to the extent not covered by indemnity, insurance or covenant not to sue. Furthermore, while the Company has generally benefited from increased regulations on its customers’ products, the demand for the services or products of the Company may be adversely affected by the amendment or repeal of laws or by changes to the enforcement policies of the regulatory agencies concerning such laws. Operating and Product Hazards The Company’s revenues are dependent on the continued operation of its facilities and its customers. The operation of manufacturing plants involves many risks, including the failure or substandard performance of equipment, natural disasters, suspension of operations and new governmental statutes, regulations, guidelines and policies. The total loss of certain of the Company’s manufacturing plants could have a significant financial impact on the affected business segment, particularly where the plant represents a single or significant source of supply. The operations of the Company and its customers are also subject to various hazards incidental to the production, use, handling, processing, storage and transportation of certain hazardous materials. These hazards can cause personal injury, severe damage to and destruction of property and equipment and environmental damage. Furthermore, the Company may become subject to claims with respect to workplace exposure, workers’ compensation and other matters. The Company’s pharmaceutical and specialty food product operations are subject to stringent federal, state, provincial and local health, food and drug regulations and controls, and may be impacted by consumer product liability claims and the possible unavailability and/or expense of liability insurance. The Company prints information on its labels and containers that, if incorrect, could give rise to product liability claims. A determination by applicable regulatory authorities that any of the Company’s facilities are not in compliance with any such regulations or controls in any material respect may have a material adverse effect on the Company. A successful product liability claim (or a series of claims) against the Company in excess of its insurance coverage could have a material adverse effect on the business, financial condition and results of operations of the Company. There can be no assurance as to the actual amount of these liabilities or the timing thereof. The occurrence of material operational problems, including, but not limited to, the above events, could have a material adverse effect on the business, financial condition and results of operations of the Company. The Timing and Volume of New Banknote Orders The CCL Secure banknote substrate operation is dependent on government procurement decisions and the volume and timing of new or replacement banknote orders is often uncertain. These decisions can be influenced by many political factors that could delay or reduce the volume of banknote orders. The impact of new large volume banknote orders may result in the Company having to invest in material capital projects to support government procurement decisions. As a result, volatility may be created in the cash flows and in the financial results of the CCL Secure operations, which could have a material adverse effect on the financial condition of the Company. Product Security CCL Secure’s banknote substrate business is involved in high security applications and must maintain highly secured facilities and product shipments. CCL Secure maintains vigorous security and material control procedures. All employees, guests and third-party contractors with access to facilities and products are prudently screened and monitored. However, the loss of a product, counterfeiting of a high security feature or the breach of a secured facility as a result of negligence, collusion or theft is possible. Loss of product whilst in transit, particularly during transshipment, through the failure of freight management companies or the loss of the shipment vehicle by accident or act of God is possible. Consequently, the financial damage and potential reputational impairment on CCL Secure may have a material adverse effect on the Company’s business, financial condition and results of operations. 36 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportFinancial Reporting The Company prepares its financial reports in accordance with accounting policies and methods prescribed by IFRS. In the preparation of financial reports, management may need to rely upon assumptions, make estimates or use their best judgment in determining the financial condition of the Company. Significant accounting policies are described in more detail in the notes to the Company’s annual consolidated financial statements for the year ended December 31, 2022. In order to have a reasonable level of assurance that financial transactions are properly authorized, assets are safeguarded against unauthorized or improper use and transactions are properly recorded and reported, the Company has implemented and continues to analyze its internal control systems for financial reporting. Although the Company believes that its financial reporting and financial statements are prepared with reasonable safeguards to ensure reliability, the Company cannot provide absolute assurance in that regard. Compliance with Anti-Bribery and Export Laws Due to the Company’s global operations, the Company is subject to many laws governing international relations, including those that prohibit improper payments to government officials and commercial customers, and which may restrict where the Company can do business, what information or products the Company can supply to certain countries and what information the Company can provide to foreign governments, including but not limited to the Canadian Corruption of Foreign Public Officials Act (“CFPOA”), the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act and the U.S. Export Administration Act. The Company’s policies mandate compliance with these anti-bribery laws. The Company operates in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently or intentionally breached, for example, through fraudulent or negligent behavior of individual employees, the Company’s failure to comply with certain formal documentation requirements or otherwise. Additionally, the Company may be held liable for actions taken by local dealers and partners. If the Company is found to be liable for CFPOA, FCPA or other violations (either due to the Company’s own acts or through inadvertence, or due to the acts or inadvertence of others), the Company could suffer from civil and criminal penalties or other sanctions, which could have a material adverse impact on the Company’s business, financial condition, and results of operations. New Product Developments Markets are continually evolving based on the ingenuity of the Company and its competitors, consumer preferences and new product identification and information technologies. In particular, customers and consumers are seeking more sustainable product offerings using recyclable components and enabling circularity in product use. To the extent that any such new developments result in a decrease in the use of any of the Company’s products, a material adverse effect on the financial condition and results of operations could occur. Checkpoint’s ability to create new products and to sustain existing products is affected by whether the Company can develop and fund technological innovations, such as those related to the next generation of product solutions, evolving RFID technologies, and other innovative security devices, software and systems initiatives. The failure to develop and launch successful new products could have a material adverse effect on Checkpoint’s business, financial condition and results of operations. Although Innovia has a unique manufacturing process for a portion of its BOPP product line and CCL Secure is the leading manufacturer of polymer banknote substrate, the Company depends on its ability to constantly evolve the technological capabilities of its products to meet the demands of its customer base. New scientific advancements in polymer film manufacturing could curtail the use of Innovia’s BOPP, while the advancement of e-commerce and cashless societies may outmode the need for polymer banknotes. Innovia’s investment in its new hybrid polyolefin film facility in Poland and new thin gauge film facility in Germany, all to support sustainability ambitions of its customers. It may take time for these operations to become profitable and there can be no assurances of success. Failure to invest in intellectual properties and perpetually innovate may result in lower demand for films and banknote substrate and could have a material adverse effect on the Company’s business, financial condition and results of operations. Labour Relations While labour relations between the Company and its employees have been stable in the recent past and there have been no material disruptions in operations as a result of labour disputes, the maintenance of a productive and efficient labour environment cannot be assured. Accordingly, a strike, lockout or deterioration of labour relationships could have a material adverse effect on the business, financial condition and results of operations of the Company. 37 2022 Annual ReportLegal and Regulatory Proceedings Any alleged failure by the Company to comply with applicable laws and regulations in the countries of operation may lead to the imposition of fines and penalties or the denial, revocation or delay in the renewal of permits and licenses issued by governmental authorities or litigation. In addition, governmental authorities, as well as third parties, may claim that the Company is liable for environmental remediation or damages. A significant judgment against the Company, the loss of a significant permit or other approval or the imposition of a significant fine or penalty could have a material adverse effect on the business, financial condition and results of operations of the Company. Moreover, the Company may from time to time be notified of claims that it may be infringing patents, copyrights or other intellectual property rights owned by other third parties. Any litigation could result in substantial costs and diversion of resources, and could have a material adverse effect on the business, financial condition and results of operations of the Company. In the future, third parties may assert infringement claims against the Company or its customers. In the event of an infringement claim, the Company may be required to spend a significant amount of money to develop a non-infringing alternative or to obtain licenses. The Company may not be successful in developing such an alternative or obtaining a license on reasonable terms, if at all. In addition, any such litigation could be lengthy and costly and could have a material adverse effect on the business, financial condition and results of operations of the Company. The Company may also be subject to claims arising from its failure to manufacture a product to the specifications of its customers or from personal injury arising from a consumer’s use of a product or component manufactured by the Company. While the Company will seek indemnity from its customers for claims made against the Company by consumers, and while the Company maintains what management believes to be appropriate levels of insurance to respond to such claims, there can be no assurance that the Company will be fully indemnified by its customers or that insurance coverage will continue to be available or, if available, will be adequate to cover all costs arising from such claims. In addition, the Company could become subject to claims relating to its prior or acquired businesses, including environmental and tax matters, or claims by third parties, such as distributors or agents. There can be no assurance that insurance coverage will be adequate to cover all costs arising from such claims. Specifically, in the first quarter of 2019, a hearing on a jurisdictional issue was heard in respect of a lawsuit launched in 2011 by Benoy Berry and a company controlled by him, Global Secure Currency Ltd. (collectively “Berry”), in Nigerian Federal Court against CCL Secure Pty Ltd. (formerly Innovia Security Pty Ltd.) (“ISPL”), and Innovia Films Ltd. (collectively “IFL”), as well as other defendants not affiliated with ISPL. The court denied IFL’s motion to dismiss the lawsuit on the jurisdictional issue. IFL is appealing that decision to the highest appeals court in Nigeria. The lawsuit alleges that IFL and the co-defendants committed to build a banknote substrate plant in Nigeria and Berry seeks an order requiring IFL and the co-defendants to build the plant or in lieu thereof, grant an award of total damages in the amount of €1.5 billion ($2.2 billion). IFL intends to vigorously defend this claim, which the Company considers to be without merit and accordingly, the Company has made no provision for the matter. Defined Benefit Post-Employment Plans The Company is the sponsor of a number of defined benefit plans in thirteen countries that give rise to accrued post- employment benefit obligations. Although the Company believes that its current financial resources combined with its expected future cash flows from operations and returns on post-employment plan assets will be sufficient to satisfy the obligations under these plans in future years, the cash outflow and higher expenses associated with these plans may be higher than expected and may have a material adverse impact on the financial condition of the Company. Breach of Legal and Regulatory Requirements CCL Secure’s banknote substrate operation has the highest accreditation within the security printing industry. This accreditation provides governments and central banks with assurance in respect of safeguarding high ethical standards and business practices. Violation of CCL Secure’s highly strict requirements and constant detailed oversight in relation to bribery, corruption and anti-competitive activities remains a risk in an industry expecting the highest ethical standards. Consequently, the financial damage and potential reputational impairment on CCL Secure that could arise if the standards and practices are compromised, or perceived to have been compromised, may have a material adverse effect on the Company’s business, financial condition and results of operations. 38 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual ReportMaterial Disruption of Information Technology Systems The Company is increasingly dependent on information technology (“IT”) systems to manufacture its products, process transactions, respond to customer questions, manage inventory, purchase, sell and ship goods on a timely basis and maintain cost-efficient operations, as well as maintain its e-commerce websites. Any material disruption or slowdown of the systems, including a disruption or slowdown caused by the Company’s failure to successfully upgrade its systems, system failures, viruses or other causes, could have a material adverse effect on the business, financial condition and results of operations of the Company. If changes in technology cause the Company’s information systems to become obsolete or if information systems are inadequate to handle growth, the Company could incur losses and costs due to interruption of its operations. The Company maintains information within its IT networks and on the cloud to operate its business, as well as confidential personal employee and customer information. The secure maintenance of this information is critical to the Company’s operations and reputation. The Company invests in hardware and software to prevent the risk of intrusion, tampering and theft. Any such unauthorized breach of the IT infrastructure could compromise the data maintained, which could cause the corruption or exposure of confidential or proprietary information, a significant disruption in operations, the loss or theft of critical data and financial resources and meaningful harm to the Company’s reputation, any of which could result in a material adverse effect on the Company’s business, financial condition and results of operations. Credit Ratings The credit ratings currently assigned to the Company by Moody’s and S&P, or that may in the future be assigned by other rating agencies, are subject to amendment in accordance with each agency’s rating methodology and subjective modifiers driving the credit rating opinion. There is no assurance that any rating assigned to the Company will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future. A downgrade in the credit rating assigned by one or more rating agencies could increase the Company’s cost of borrowing or impact the Company’s ability to renegotiate debt, and may have a material adverse effect on the Company’s financial condition and profitability. Share Price Volatility Changes in the Company’s stock price may affect access to, or cost of, financing from capital markets and may affect stock- based compensation arrangements. The Company’s stock price has appreciated significantly over the last ten years and is influenced by the financial results of the Company, changes in the overall stock market, demand for equity securities, relative peer group performance, market expectation of future financial performance and competitive dynamics among many other things. There is no assurance that the Company’s share price will not be volatile in the future. Protection of Intellectual Property Certain of the Company’s products involve complex technology and chemistry and the Company relies on maintaining protection of this intellectual property and proprietary information to maintain a competitive advantage. The infringement, expiration or other loss of these patents and other proprietary information would reduce the barriers to entry into the Company’s existing lines of business and may result in loss of market share and a decrease in the Company’s competitiveness, which could have an adverse effect on the Company’s financial condition, results of operations and cash flows. There also can be no assurance that the patents previously obtained or to be obtained by the Company in the future will provide adequate protection of such intellectual property or adequately maintain any competitive advantage. Dividends The declaration and payment of dividends is subject to the discretion of the Board of Directors taking into account current and anticipated cash flow, capital requirements, the general financial condition of the Company and global economy as well as the various risk factors set out above. The Board of Directors intends to pay a consistent dividend with consistent increases over time. However, the Board of Directors may in certain circumstances determine that it is in the best interests of the Company to reduce or suspend the dividend. In that situation, the trading price of the Company’s Class A and Class B shares may be materially affected. 39 2022 Annual ReportClimate Change Event risks caused by global climate change, including the frequency and severity of weather-related events, could damage the Company’s facilities, disrupt operations, impact revenues and cash flow, and create financial risk. These could result in substantial costs for emergency response efforts during the event, reinstatement of regular business operations and repair or replacement of premises and equipment. The potential impact or financial consequence of such events is highly uncertain. The Company’s operations are spread over more than 205 locations around the world and therefore subject to varying climate change event risks. Global climate change also gives rise to other risks to the Company’s business and operations, including increased regulation and market shifts in supply and demand, which are also difficult to predict. Many countries in which the Company carries on business are at differing stages of developing policy and regulations regarding carbon emissions and other environmental impacts, which could significantly affect the Company’s business, create financial obligations and increase operating costs. Increased public awareness of climate change may impact consumer demand for the Company’s customers’ products. The Company’s failure to innovate more sustainable or circular economy products could have a material adverse effect on its financial condition and profitability. The Company’s failure to implement environmental, social and governance targets and initiatives, or to achieve its sustainability targets could have a material adverse impact on its financial condition and profitability. 5. AC C O U N T I N G P O L I C I E S A N D N O N - I F R S M E A S U R E S A) Key Performance Indicators and Non-IFRS Measures The Company measures the success of the business using a number of key performance indicators, many of which are in accordance with IFRS as described throughout this report. The following performance indicators are not measurements in accordance with IFRS and should not be considered as an alternative to or replacement of net earnings or any other measure of performance under IFRS. These non-IFRS measures do not have any standardized meaning and may not be comparable to similar measures presented by other issuers. These additional measures are used to provide added insight into the Company’s results and are concepts often seen in external analysts’ research reports, in financial covenants in banking agreements and note agreements, in purchase and sales contracts on acquisitions and divestitures of the business, and in discussions and reports to and from the Company’s shareholders and the investment community. These non-IFRS measures will be found throughout this report and are referenced alphabetically in the definition section below. Adjusted Basic Earnings per Class B Share – An important non-IFRS measure to assist in understanding the ongoing earnings performance of the Company, excluding items of a one-time or non-recurring nature. It is not considered a substitute for basic net earnings per Class B share, but it does provide additional insight into the ongoing financial results of the Company. This non-IFRS measure is defined as basic net earnings per Class B share, excluding gains on dispositions, goodwill impairment loss, non-cash acquisition accounting adjustments, restructuring and other items and tax adjustments. Earnings per Class B Share Three Months Ended December 31 Twelve Months Ended December 31 Basic earnings Net loss from restructuring and other items New U.K. tax legislation Non-cash acquisition accounting adjustment related to inventory $ $ 2022 0.82 0.01 — — 2021 0.80 0.01 — — $ Adjusted basic earnings $ 0.83 $ 0.81 $ 2022 3.50 0.05 — 0.02 3.57 $ $ 2021 3.33 0.02 0.02 — 3.37 Adjusted EBITDA – A critical financial measure used extensively in the packaging industry and other industries to assist in understanding and measuring operating results. It is also considered as a proxy for cash flow and a facilitator for business valuations. This non-IFRS measure is defined as earnings before net finance cost, income taxes, depreciation and amortization, goodwill impairment loss, earnings in equity accounted investments, non-cash acquisition accounting adjustments, restructuring and other items. The Company believes that Adjusted EBITDA is an important measure as it allows the assessment of the Company’s ongoing business without the impact of net finance cost, depreciation and amortization and income tax expenses, as well as non-operating factors and unusual items. As a proxy for cash flow, it is 40 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report intended to indicate the Company’s ability to incur or service debt and to invest in property, plant and equipment, and it may allow comparison of the Company’s business to that of its peers and competitors who may have different capital or organizational structures. Adjusted EBITDA is a measure tracked by financial analysts and investors to evaluate financial performance and is a key metric in business valuations. Adjusted EBITDA is considered an important measure by lenders to the Company and is included in the financial covenants for the Company’s bank lines of credit. The following table reconciles Adjusted EBITDA measures to IFRS measures reported in the annual consolidated income statements for the periods ended as indicated. Adjusted EBITDA Net earnings Corporate expense Earnings in equity-accounted investments Finance cost, net Restructuring and other items Income taxes Operating income Less: Corporate expense Add: Depreciation and amortization Add: Non-cash acquisition accounting adjustment related to inventory $ $ Three Months Ended December 31 Twelve Months Ended December 31 $ $ 2022 145.2 17.5 (9.0) 17.6 3.4 36.5 211.2 (17.5) 95.3 — $ $ 2021 145.1 18.2 (4.8) 13.9 1.1 35.3 208.8 (18.2) 86.6 — $ $ 2022 622.7 71.8 (19.9) 64.8 11.7 183.3 934.4 (71.8) 365.3 3.5 2021 599.1 60.6 (11.2) 56.9 4.4 181.5 891.3 (60.6) 342.4 — Adjusted EBITDA (a non-IFRS measure) $ 289.0 $ 277.2 $ 1,231.4 $ 1,173.1 Days Working Capital Employed – A measure indicating the relative liquidity and asset intensity of the Company’s working capital. It is calculated by multiplying the net working capital by the number of days in the quarter and then dividing by the quarterly sales. Net working capital includes trade and other receivables, inventories, prepaid expenses, trade and other payables, and income taxes recoverable and payable. The following table reconciles the net working capital used in the days of working capital employed measure to IFRS measures reported in the consolidated statements of financial position as at the periods ended as indicated. Days Working Capital Employed At December 31 Trade and other receivables Inventories Prepaid expenses Income taxes recoverable Trade and other payables Income taxes payable Net working capital Days in quarter Fourth quarter sales Days of working capital employed $ $ $ 2022 1,100.5 785.1 50.0 44.6 (1,394.4) (60.3) 525.5 92 1,587.2 30 $ $ $ 2021 1,083.8 677.3 46.5 37.9 (1,321.5) (48.5) 475.5 92 1,488.8 29 41 2022 Annual Report Dividend Payout Ratio – The ratio of earnings paid out to the shareholders. It provides an indication of how well earnings support the dividend payments. Dividend payout ratio is defined as dividends declared divided by earnings, excluding goodwill impairment loss, non-cash acquisition accounting adjustments, restructuring and other items, and tax adjustments, (together “Adjusted earnings”) expressed as a percentage. Dividend Payout Ratio Dividends declared per equity Adjusted earnings Dividend payout ratio 2022 170.3 635.0 $ $ 2021 151.0 606.0 $ $ 27% 25% Free Cash Flow from Operations – A measure indicating the relative amount of cash generated by the Company during the year and available to fund dividends, debt repayments and acquisitions. It is calculated as cash flow from operations, less capital expenditures, net of proceeds from the sale of property, plant and equipment. The following table reconciles the measure of free cash flow from operations to IFRS measures reported in the annual consolidated statements of cash flows for the periods ended as indicated. Free Cash Flow from Operations Cash provided by operating activities Less: Additions to property, plant and equipment Add: Proceeds on disposal of property, plant and equipment Free cash flow from operations Twelve months ended December 31 2022 992.8 (447.2) 27.8 $ 2021 838.7 (323.8) 16.9 573.4 $ 531.8 $ $ Interest Coverage – A measure indicating the relative amount of operating income earned by the Company compared to the amount of net finance cost incurred by the Company. It is calculated as operating income (see definition below), including discontinued items, less corporate expense, divided by net finance cost on a twelve-month rolling basis. The following table reconciles the interest coverage measure to IFRS measures reported in the annual consolidated income statements for the periods ended as indicated. Interest Coverage Operating income (a non-IFRS measure; see definition below) Less: Corporate expense Net finance cost Interest coverage Twelve months ended December 31 2022 934.4 (71.8) 862.6 64.8 13.3 $ $ $ 2021 891.3 (60.6) 830.7 56.9 14.6 $ $ $ 42 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report Net Debt – A measure indicating the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the outstanding debt. It is defined as current debt, which includes bank advances, plus long-term debt and lease liabilities, less cash and cash equivalents. Net Debt to Adjusted EBITDA (or “Leverage Ratio”) – A measure that indicates the financial leverage of the Company. It indicates the Company’s ability to service its existing debt. Operating Income – A measure indicating the profitability of the Company’s business units defined as income before corporate expenses, net finance cost, goodwill impairment loss, earnings in equity-accounted investments, restructuring and other items, and income taxes. See the definition of Adjusted EBITDA above for a reconciliation of operating income measures to IFRS measures reported in the annual consolidated income statements for the periods ended as indicated. Restructuring and Other Items and Tax Adjustments – A measure of significant non-recurring items that are included in net earnings. The impact of restructuring and other items and tax adjustments on a per share basis is measured by dividing the after-tax income of the restructuring and other items and tax adjustments by the average number of shares outstanding in the relevant period. Management will continue to disclose the impact of these items on the Company’s results because the timing and extent of such items do not reflect or relate to the Company’s ongoing operating performance. Management evaluates the operating income of its segments before the effect of these items. Return on Equity before goodwill impairment loss, restructuring and other items, non-cash acquisition accounting adjustments and tax adjustments (“ROE”) – A measure that provides insight into the effective use of shareholder capital in generating ongoing net earnings. ROE is calculated by dividing annual net earnings before goodwill impairment loss, restructuring and other items, tax adjustments, gains on business dispositions and non-cash acquisition accounting adjustments by the average of the beginning and the end-of-year equity. The following table reconciles net earnings used in calculating the ROE measure to IFRS measures reported in the annual consolidated statements of financial position and in the annual consolidated income statements for the periods ended as indicated. Return on Equity Net earnings Restructuring and other items (net of tax) New U.K. tax legislation Non-cash acquisition accounting adjustment related to inventory Adjusted net earnings Average equity Return on equity Twelve months ended December 31 2022 622.7 9.7 — 2.6 635.0 4,006.1 15.9% $ $ $ 2021 599.1 3.5 3.4 — 606.0 3,514.6 17.2% $ $ $ Return on sales – A measure indicating relative profitability of sales to customers. It is defined as operating income (see definition above) divided by sales, expressed as a percentage. 43 2022 Annual Report The following table reconciles the return on sales measure to IFRS measures reported in the annual consolidated income statement in the segmented information per note 4 of the Company’s annual consolidated financial statements for the periods ended as indicated. Return on Sales Sales CCL Avery Checkpoint Innovia Total sales Operating income CCL Avery Checkpoint Innovia Total operating income Return on sales CCL Avery Checkpoint Innovia Total return on sales $ $ $ $ Three Months Ended December 31 Twelve Months Ended December 31 $ $ $ $ 2022 947.1 239.8 222.6 177.7 1,587.2 131.9 42.1 34.6 2.6 211.2 13.9% 17.6% 15.5% 1.5% 13.3% 2021 883.2 179.9 226.8 198.9 1,488.8 121.5 38.4 36.4 12.5 208.8 13.8% 21.3% 16.0% 6.3% 14.0% 2022 2021 $ $ $ $ 3,855.1 913.6 818.7 794.8 6,382.2 599.8 167.6 118.9 48.1 934.4 $ $ $ $ 15.6% 18.3% 14.5% 6.1% 14.6% 3,498.2 708.9 772.5 753.2 5,732.8 545.8 148.8 115.5 81.2 891.3 15.6% 21.0% 15.0% 10.8% 15.5% Return on total capital before goodwill impairment loss, restructuring and other items, non-cash acquisition accounting adjustments, and tax adjustments (“ROTC”) – A measure of the returns the Company is achieving on capital employed. ROTC is calculated by dividing annual net income before goodwill impairment loss, restructuring and other items, non- cash acquisition accounting adjustments, and tax adjustments by the average of the beginning- and the end-of-year equity and net debt. The following table reconciles net earnings used in calculating the ROTC measure to IFRS measures reported in the annual consolidated statements of financial position and in the annual consolidated income statements for the periods ended as indicated. Return on Total Capital Net earnings Restructuring and other items (net of tax) New U.K. tax legislation Non-cash acquisition accounting adjustment related to inventory Adjusted net earnings Average total capital Return on total capital Twelve months ended December 31 2022 622.7 9.7 — 2.6 635.0 5,391.9 11.8% $ $ $ 2021 599.1 3.5 3.4 — 606.0 4,834.7 12.5% $ $ $ Total Debt – A measure indicating the financial indebtedness of the Company. It is defined as current debt, including bank advances, plus long-term debt. 44 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report B) Accounting Policies Accounting Policies The above analysis and discussion of the Company’s financial condition and results of operation are based on its consolidated financial statements prepared in accordance with IFRS. A summary of the Company’s significant accounting policies is set out in note 3 of the consolidated financial statements. C) Critical Accounting Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of sales and expenses during the year and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. In particular, estimates are used when determining the amounts recorded for depreciation and amortization of property, plant and equipment and intangible assets, outstanding self-insurance claims, pension and other post-employment benefits, income and other taxes, provisions, certain fair value measures including those related to the valuation of business combinations, share-based payments and financial instruments and also for the valuation of goodwill and intangible assets. Goodwill and Indefinite-Life Intangibles Goodwill represents the excess of the purchase price of the Company’s interest in the businesses acquired over the fair value of the underlying net identifiable tangible and intangible assets arising on acquisitions. Goodwill and indefinite-life intangibles are not amortized but are required to be tested for impairment at least annually or if events or changes in circumstances indicate that the carrying amount may not be recoverable. During the 2022 fourth quarter, the Company completed its impairment test as at September 30, 2022. Impairment testing for the cash-generating units (“CGU”), CCL, Avery, Checkpoint, and Innovia, was done by a comparison of the unit’s carrying amount to its estimated value in use, determined by discounting future cash flows from the continuing use of the CGU. Key assumptions used in the determination of the value in use include long-term growth rates of 3% to 5% and pre-tax discount rates ranging from 10% to 12%. Discount rates reflect current market assumptions and risks related to the segments and are based upon the weighted average cost of capital for the segment. The Company’s historical growth rates are used as a basis in determining the growth rate applied for impairment testing. Significant management judgment is required in preparing the forecasts of future operating results that are used in the discounted cash flow method of valuation. In 2022 and 2021, it was determined that the carrying amount of goodwill and indefinite-life intangibles was not impaired. However, for the Innovia CGU, the estimated value in use was close to the carrying value. Since the process of determining fair values requires management judgment regarding projected results and market multiples, a change in these assumptions could impact the fair value of the reporting units, resulting in an impairment charge. Long-Lived Assets Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Performance of this evaluation involves management estimates of the associated business plans, economic projections and anticipated cash flows. Specifically, management considers forecasted operating cash flows, which are subject to change due to economic conditions, technological changes or changes in operating performance. An impairment loss would be recognized if the carrying amount of the asset held for use exceeded the discounted cash flow or fair value. Changes in these estimates in the future may result in an impairment charge. Employee Benefits The Company accrues its obligation under employee benefit plans and related costs net of plan assets. Pension costs are determined periodically by independent actuaries. The actuarial determination of the accrued benefit obligations for the plans uses the projected unit credit method and incorporates management’s best estimate of future salary escalation, retirement age, inflation and other actuarial factors. The cost is then charged as services are rendered. Since these assumptions, which are disclosed in note 20 of the 2022 annual consolidated financial statements, involve forward-looking estimates and are long-term in nature, they are subject to uncertainty. Actual results may differ, and the differences may be material. D) Related Party Transactions A summary of the Company’s related party transactions is set out in note 27 of the 2022 annual consolidated financial statements. 45 2022 Annual Report6. O U T LO O K 2022 was the third year of pandemic-related challenges. At the beginning of the year, a surge in the omicron variant prompted severe civil restrictions in China; then late in the fourth quarter, the accelerated elimination of the Chinese government’s zero-CV19 policy resulted in a rampant increase in infections, both disrupting economic activity that has continued in the early weeks of 2023. Furthermore, the Ukraine/Russian conflict started in the first quarter, followed by sanctions, embargos, supply chain challenges and additional pressure on global inflation rates, further disrupting economic activity. There is no end in sight to the conflict. The Company continued to prioritize safety for its employees and customer service, working through supply chain challenges, remaining open for business everywhere. All-in for 2022, the Company posted record adjusted earnings per share of $3.57 per Class B share compared to $3.37 per Class B share for 2021 and a healthy liquidity position of $2.1 billion cash and available credit capacity to fund future growth initiatives. Inflationary cost pressures are likely to ease but will continue in some areas in 2023, but not at the same rate as 2022 as central banks have reacted quickly, increasing interest rates to suppress the pace of inflation. Therefore, prudently managing business activity levels in each of the Company’s manufacturing locations and passing on input cost changes to its customers will be at the forefront while balancing the likely continued volatility in currency markets. The CCL Segment reported a strong year in 2022 compared to 2021, with organic growth and profitability improvement across the Home & Personal Care, Healthcare & Specialty and Food & Beverage more than offsetting declines for CCL Design and CCL Secure. CCL Label and CCL Design remain committed to pursuing new product initiatives, with capacity expansion plans in new and existing markets for its core customers where the opportunity meets long-term profitability objectives. CCL Design’s results are expected to improve in 2023 as the acute impact of China’s elimination of its zero-CV19 policy subsides and the expected normalizing of the automotive and electronics supply chains develop. CCL Secure will continue to develop market-leading security technology to pursue long-term widespread adoption of polymer banknotes across the world’s central banks. Avery’s sales and profitability improved steadily compared to prior year as pandemic-related restrictions subsided, office capacity improved, students returned to in-classroom learning and the meetings and events industry approached pre-pandemic levels. For 2023, growth at Avery’s Direct-to-Consumer businesses is expected to outpace legacy product lines. Further “tuck-in” acquisitions bolstering Avery’s presence globally are also possible. Checkpoint results improved in 2022, despite a delay in inflationary price increases to offset cost challenges in MAS early in the year and China’s about-face on their zero-CV19 policy that adversely impacted fourth quarter results in both ALS and MAS. Checkpoint expects continued strong demand in 2023 for RFID related products and as economic activity climbs in China, a gradual return to norm in the apparel supply chain in the second half of 2023. Supply chain challenges and inflationary cost pressures remain on the watch. Innovia faced significant polypropylene resin indices-related price declines in second half of 2022 coupled with dramatically increased freight and energy costs that hindered results for the year. Effectively managing input cost volatility, energy and freight cost inflation while offsetting with enhanced productivity efforts and, as appropriate, price adjustments, remain mission critical. Successfully filling the capacity of the proprietary new “EcoFloat” shrink film line in Europe will be at the forefront for 2023. The Company concluded the year with cash on hand of $839.5 million and unused availability on the revolving credit facility of approximately US$910.0 million. The Company’s liquidity position is robust, with a net debt leverage ratio of 1.24 times Adjusted EBITDA at the end of the current year, despite business acquisitions and net capital investments of $287.2 million and $419.4 million, respectively, as well as $200.0 million used to buy back the Company’s Class B non-voting shares. As always, the Company remains focused on vigilantly managing working capital and prioritizing capital to higher-growth organic opportunities or unique acquisitions expected to enhance shareholder value. The Company expects capital expenditures for 2023 to be approximately $415.0 million, supporting organic growth and new greenfield opportunities globally. Early first-quarter orders have been mixed but so far sufficient to realize modest sales gains. Inflationary input cost pressures globally, energy and commodity cost volatility particularly in Europe, and the economic impact of the conflict between Ukraine and Russia remain at the forefront of management concerns. If demand remains stable and the Company executes on its global growth initiatives, results for 2023 should exceed 2022. 46 MANAGEMENT’S DISCUSSION AND ANALYSIS Years ended December 31, 2022 and 2021 (Tabular amounts in millions of Canadian dollars, except per share data)2022 Annual Report47 KPMG LLP 100 New Park Place, Suite 1400 Vaughan, ON L4K 0J3 Tel 905-265 5900 Fax 905-265 6390 www.kpmg.ca KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Document classification: KPMG Confidential INDEPENDENT AUDITOR’S REPORT To the Shareholders of CCL Industries Inc. Opinion We have audited the consolidated financial statements of CCL Industries Inc. (the Entity), which comprise: • the consolidated statements of financial position as at December 31, 2022 and December 31, 2021 • the consolidated income statements for the years then ended • the consolidated statements of comprehensive income for the years then ended • the consolidated statements of changes in equity for the years then ended • the consolidated statements of cash flows for the years then ended • and notes to the consolidated financial statements, including a summary of significant accounting policies (hereinafter referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2022 and December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our auditor’s report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 2022 Annual Report48 CCL Industries Inc. February 22, 2023 2 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2022. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matter described below to be the key audit matter to be communicated in our auditor’s report. Evaluation of Innovia’s goodwill and brands for impairment Description of the matter We draw attention to Notes 2(d), 3(e(i)), 3(h(i)) and 13 of the financial statements. The goodwill and brands balances were $2,193.5 million and $441.6 million respectively, of which $345.7 million and $53.1 million related to the Innovia cash-generating unit (CGU). The Entity performs goodwill and indefinite life assets impairment testing annually or more frequently when events or circumstances indicate that the carrying amount may not be recoverable. The recoverable amount is the higher of a CGU’s fair value, less costs to sell, and its value in use. In determining the value in use, future cash flows were discounted. Key assumptions used in the determination of the value in use include growth rates and discount rates. Why the matter is a key audit matter We identified the evaluation of the Innovia CGU’s goodwill and brands for impairment as a key audit matter. This matter represented an area of significant risk. Significant auditor attention and significant auditor judgment, in particular that of senior team members and valuation professionals with specialized skills and knowledge, was required in performing and evaluating the results of our procedures. How the matter was addressed in the audit The primary procedures we performed to address this key audit matter included the following: We calculated historical profitability growth rates and compared those rates against the rates predicted by the Entity. We considered whether the current economic environment or internal and external communications made by the Entity are indicative of a continuation of, or a change from, past experience. We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the appropriateness of the discount rate, which was based on weighted average cost of capital (WACC) by comparing the Entity’s WACC to a WACC range that was independently developed using publicly available market data including risk premiums, betas and debt to capital ratios for comparable entities. 2022 Annual Report49 CCL Industries Inc. February 22, 2023 3 We assessed the reasonableness of the recoverable amount of goodwill and brand assets by developing an estimated recoverable amount using the Entity’s future cash flows for each CGU and the independently developed discount rate developed by valuation professionals above, and comparing the result to the Entity’s estimated recoverable amount. We performed sensitivity analyses over key assumptions and assessed their impact on the Entity’s determination that the estimated recoverable amount exceeded the carrying amount of the CGU. Other Information Management is responsible for the other information. Other information comprises: • the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions. • the information, other than the financial statements and the auditor’s report thereon, included in a document likely to be entitled “Annual Report”. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated. We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor’s report. We have nothing to report in this regard. The information, other than the financial statements and the auditor’s report thereon, included in a document likely to be entitled “Annual Report” is expected to be made available to us after the date of this auditor’s report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS as issued by the IASB, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 2022 Annual Report50 CCL Industries Inc. February 22, 2023 4 In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. • The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are 2022 Annual Report51 CCL Industries Inc. February 22, 2023 5 inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. • Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. • Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Chartered Professional Accountants, Licensed Public Accountants The engagement partner on the audit resulting in this auditor’s report is Tammy L. Brown. Vaughan, Canada February 22, 2023 2022 Annual ReportC O N S O L I D AT E D S TAT E M E N T S O F F I N A N C I A L P O S I T I O N (In millions of Canadian dollars) As at December 31 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Prepaid expenses Income taxes recoverable Total current assets Non-current assets Property, plant and equipment Right-of-use assets Goodwill Intangible assets Deferred tax assets Equity-accounted investments Other assets Derivative instruments Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Current portion of long-term debt Lease liabilities Income taxes payable Derivative instruments Total current liabilities Non-current liabilities Long-term debt Lease liabilities Deferred tax liabilities Employee benefits Provisions and other long-term liabilities Derivative instruments Total non-current liabilities Total liabilities Equity Share capital Contributed surplus Retained earnings Accumulated other comprehensive loss Total equity attributable to shareholders of the Company Acquisitions Commitments and contingencies Subsequent event Total liabilities and equity On behalf of the Board: Note 2022 2021 6 7 8 10 11 12,13 12,13 15 9 24 14 18 18 15 20 24 16 29 5 26 31 $ $ 839.5 1,100.5 785.1 50.0 44.6 2,819.7 2,212.3 180.2 2,193.5 1,018.3 71.5 79.5 23.9 65.5 5,844.7 $ 8,664.4 $ $ $ 1,394.4 6.6 40.0 60.3 0.1 1,501.4 2,175.6 139.6 311.7 256.9 14.0 — 2,897.8 4,399.2 468.4 132.0 3,730.2 (65.4) 4,265.2 602.1 1,083.8 677.3 46.5 37.9 2,447.6 1,910.3 145.5 1,975.1 991.1 47.7 68.4 25.8 16.3 5,180.2 7,627.8 1,321.5 15.3 32.7 48.5 — 1,418.0 1,691.4 111.9 286.6 315.5 15.2 42.2 2,462.8 3,880.8 462.1 103.6 3,422.7 (241.4) 3,747.0 $ 8,664.4 $ 7,627.8 See accompanying explanatory notes to the consolidated financial statements. Donald G. Lang Director Geoffrey T. Martin Director 52 2022 Annual Report C O N S O L I D AT E D I N C O M E S TAT E M E N T S (In millions of Canadian dollars, except per share information) Years ended December 31 Sales Cost of sales Gross profit Selling, general and administrative expenses Restructuring and other items Earnings in equity-accounted investments Finance cost Finance income Interest on lease liabilities Net finance cost Earnings before income tax Income tax expense Net earnings Earnings per share Basic earnings per Class B share Diluted earnings per Class B share See accompanying explanatory notes to the consolidated financial statements. Note 30 19 19 11,19 22 17 17 2022 6,382.2 4,667.0 1,715.2 852.6 11.7 (19.9) 870.8 72.2 (12.9) 5.5 64.8 806.0 183.3 622.7 3.50 3.48 $ $ $ $ $ $ $ $ 2021 5,732.8 4,140.7 1,592.1 761.4 4.4 (11.2) 837.5 59.4 (7.7) 5.2 56.9 780.6 181.5 599.1 3.33 3.31 53 2022 Annual Report C O N S O L I D AT E D S TAT E M E N T S O F C O M P R E H E N S I V E I N C O M E (In millions of Canadian dollars) Years ended December 31 Net earnings Other comprehensive income (loss), net of tax: Items that may subsequently be reclassified to income: Foreign currency translation adjustment for foreign operations, net of tax recovery of $1.4 for the year ended December 31, 2022 (2021 – tax recovery of $5.4) Net gains (losses) on hedges of net investment in foreign operations, net of tax recovery of $3.7 for the year ended December 31, 2022 (2021 – tax expense of $12.4) Effective portion of changes in fair value of cash flow hedges, net of tax recovery of $0.1 for the year ended December 31, 2022 (2021 – tax expense of $0.2) Net change in fair value of cash flow hedges transferred to the income statement, net of tax recovery of $0.1 for the year ended December 31, 2022 (2021 – tax expense of $0.3) Actuarial gains on defined benefit post-employment plans, net of tax expense of $16.8 for the year ended December 31, 2022 (2021 – tax expense of $12.1) Other comprehensive income (loss), net of tax Total comprehensive income See accompanying explanatory notes to the consolidated financial statements. 2022 $ 622.7 $ 2021 599.1 200.4 (24.4) (0.3) 0.3 45.8 221.8 844.5 $ (180.4) 81.5 0.7 (1.0) 37.1 (62.1) 537.0 $ 54 2022 Annual Report C O N S O L I D AT E D S TAT E M E N T S O F C H A N G E S I N E Q U I T Y (In millions of Canadian dollars) Class A Shares (note 16) Class B Shares (note 16) Total Share Contributed Surplus Capital Accumulated Other Total Equity Comprehensive Attributable to (Loss) Shareholders Gain Retained Earnings Balance, January 1, 2021 $ 4.5 $ 392.3 $ 396.8 $ 90.1 $ 2,937.5 $ (142.2) $ 3,282.2 Net earnings Dividends declared Class A Class B Defined benefit plan actuarial gains, net of tax Stock-based compensation plan Stock option expense Stock options exercised Income tax effect related to stock options Other comprehensive loss — — — — — — — — — — — — 599.1 — 599.1 — — — 3.5 — 61.8 — — — — — 3.5 — 61.8 — — — — — 20.8 2.6 (11.3) 1.4 — (9.8) (141.2) 37.1 — — — — — — — — — — — — (99.2) (9.8) (141.2) 37.1 24.3 2.6 50.5 1.4 (99.2) Balance, December 31, 2021 $ 4.5 $ 457.6 $ 462.1 $ 103.6 $ 3,422.7 $ (241.4) $ 3,747.0 Net earnings Dividends declared Class A Class B Defined benefit plan actuarial gains, net of tax Stock-based compensation plan Stock option expense Stock options exercised Income tax effect related to stock options Repurchase of shares (note 16) Other comprehensive gain — — — — — — — — — — — — — 622.7 — 622.7 — — — 9.0 — 6.6 — (9.3) — — — — 9.0 — 6.6 — (9.3) — — — — 28.6 0.9 (1.2) 0.1 — — (11.2) (159.1) 45.8 — — — — (190.7) — — — — — — — — — 176.0 (11.2) (159.1) 45.8 37.6 0.9 5.4 0.1 (200.0) 176.0 Balance, December 31, 2022 $ 4.5 $ 463.9 $ 468.4 $ 132.0 $ 3,730.2 $ (65.4) $ 4,265.2 See accompanying explanatory notes to the consolidated financial statements. 55 2022 Annual Report C O N S O L I D AT E D S TAT E M E N T S O F C A S H F L O W S (In millions of Canadian dollars) Years ended December 31 Cash provided by (used for) Operating activities Net earnings Adjustments for: Property, plant and equipment depreciation Right-of-use assets depreciation Intangible amortization Earnings in equity-accounted investments, net of dividends received Net finance costs Current income tax expense Deferred income tax recovery Equity-settled share-based payment transactions Gain on sale of property, plant and equipment Change in inventories Change in trade and other receivables Change in prepaid expenses Change in trade and other payables Change in income taxes receivable and payable Change in employee benefits Change in other assets and liabilities Net interest paid Income taxes paid Cash provided by operating activities Financing activities Proceeds on issuance of long-term debt Repayment of long-term debt Repayment of lease liabilities Proceeds from issuance of shares Repurchase of shares (note 16) Dividends paid Cash used for financing activities Investing activities Additions to property, plant and equipment Proceeds on disposal of property, plant and equipment Business acquisitions (note 5) Cash used for investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Translation adjustments on cash and cash equivalents Cash and cash equivalents at end of year See accompanying explanatory notes to the consolidated financial statements. 56 2022 2021 $ 622.7 $ 599.1 257.1 42.1 66.1 (13.5) 64.8 210.9 (27.6) 38.6 (13.8) 1,247.4 (69.6) 23.6 (0.6) 41.9 (4.0) (12.7) 30.4 1,256.4 (56.7) (206.9) 992.8 1,010.7 (676.6) (41.8) 5.4 (200.0) (170.3) (72.6) (447.2) 27.8 (287.2) (706.6) 213.6 602.1 23.8 839.5 $ 245.3 39.6 57.5 (5.0) 56.9 191.2 (9.7) 28.3 (5.9) 1,197.3 (125.9) (129.5) (9.0) 164.0 (2.5) (20.4) 9.6 1,083.6 (48.1) (196.8) 838.7 41.3 (274.7) (36.1) 50.5 — (151.0) (370.0) (323.8) 16.9 (234.4) (541.3) (72.6) 703.7 (29.0) 602.1 $ 2022 Annual Report N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S Years ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information) 1 . R E P O R T I N G E N T I T Y CCL Industries Inc. (the “Company”) is a public company, listed on the Toronto Stock Exchange, and is incorporated and domiciled in Canada. These consolidated financial statements of the Company as at and for the years ended December 31, 2022 and 2021, comprise the results of the Company, its subsidiaries and its interest in joint ventures and associates. The Company has manufacturing facilities around the world and is primarily involved in the manufacture of labels, consumer printable media products, technology-driven label solutions, polymer banknote substrates and specialty films. 2022 marked the third year of the global COVID-19 (“CV19”) pandemic, which saw the advent of the highly contagious omicron wave that resulted in a resurgence of restrictive measures by governments and lockdowns especially in China. As the year progressed and boosters were quickly deployed, oral antivirals became available and population immunity evolved managing infections became the new normal. Accordingly global mortality rates declined, civil restrictions largely disappeared, global travel almost returned to normal with only China still applying severe controls and global supply chain issues began to ease. Throughout the year CCL maintained its safety policies for employees, suppliers and customers ensuring its facilities remained open. However, as the year drew to a close China abandoned its zero-CV19 policy, a significant infection outbreak occurred temporarily impacting economic activity within the country, with the final impact not yet fully understood. 2 . B A S I S O F P R E PA R AT I O N (a) Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. These consolidated financial statements were authorized for issue by the Company’s Board of Directors on February 22, 2023. (b) Basis of measurement These consolidated financial statements have been prepared on the historical cost basis except for the following items in the consolidated statements of financial position: • Derivative financial instruments are measured at fair value; • Financial instruments at fair value through profit or loss are measured at fair value; and • Assets related to the defined benefit plans are measured at fair value and liabilities related to the defined benefit plans are calculated by qualified actuaries using the projected unit credit method (c) Presentation currency These consolidated financial statements are presented in Canadian dollars, which is the Company’s presentation currency. All financial information, except per share information, is presented in millions of Canadian dollars, unless otherwise noted. (d) Use of estimates and judgements The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of sales and expenses during the year and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Estimates and assumptions are used mainly in determining the measurement of recognized transactions and balances. In the process of applying the Company’s accounting policies, management makes various judgements, apart from those involving estimations, that can significantly affect the amounts it recognizes in the financial statements. Judgements, estimates and assumptions are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. The Company has applied judgement in its assessment of the classification of financial instruments, the recognition and derecognition of tax losses and provisions, the determination of cash-generating units (“CGUs”), the identification of the indicators of impairment for property and equipment and intangible assets, the level of componentization of property and equipment and the allocation of purchase price adjustments on business combinations. 57 2022 Annual ReportEstimates are used when determining the amounts recorded for depreciation and amortization of property, plant and equipment, intangible assets and right-of-use assets, outstanding self-insurance claims, pension and other post- employment benefits, income and other taxes, provisions, lease liabilities, certain fair value measures, including those related to the valuation of business combinations, share-based payments and financial instruments and in the valuation of goodwill and intangible assets. 3 . S I G N I F I C A N T AC C O U N T I N G P O L I C I E S The accounting policies set out below have been applied consistently to all comparative information presented in these consolidated financial statements. (a) Basis of consolidation (i) Business combinations The Company measures goodwill as the fair value of the consideration transferred including the recognized amount of any non-controlling interest in the acquiree, less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss. The Company elects to measure, on a transaction-by-transaction basis, non-controlling interest either at its fair value or at its proportionate share of the recognized amount of the identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred. (ii) Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed, when necessary, to align them with the policies adopted by the Company. (iii) Associates and joint arrangements The Company’s interests in equity-accounted investees comprise interests in associates and joint ventures. Associates are those entities in which the Company has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another entity. The Company classifies its interest in joint arrangements as either joint operations (if the Company has rights to the assets and has obligations for the liabilities relating to an arrangement) or joint ventures (if the Company has the rights only to the net assets of an arrangement). When making this assessment, the Company considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances. Investments in associates and joint ventures are accounted for using the equity method and are recognized initially at cost. The Company’s investments include goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Company’s share of the income and expenses and equity movements of equity-accounted investees, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that it ceases. When the Company’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued, except to the extent that the Company has an obligation or has made payments on behalf of the investee. (iv) Transactions eliminated on consolidation Inter-company balances and transactions, and any unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Company’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report(b) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the Company’s entities using exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency using the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in the foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on translation are recognized in the consolidated income statement, except for differences arising on the translation of a financial liability designated as a hedge of the net investment in a foreign operation or qualifying cash flow hedges, which are recognized directly in other comprehensive income (see note 3(b)(iii)). Foreign currency-denominated non-monetary items, measured at historical cost, have been translated at the rate of exchange at the transaction date. The financial statements of each of the Company’s subsidiaries are measured using the currency of the primary economic environment in which the entity operates. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into Canadian dollars using exchange rates at the reporting date. The income and expenses of foreign operations are translated into Canadian dollars using the average exchange rates for the period. (ii) Foreign operations Foreign currency differences are recognized directly in other comprehensive income and presented within the foreign currency translation adjustment. When a foreign operation is disposed of, the amount in other comprehensive income related to the foreign operation is fully transferred to the consolidated income statement. A disposal occurs when the entire interest in the foreign operation is disposed of or, in the case of a partial disposal, when the partial disposal results in the loss of control of a subsidiary or the loss of significant influence. For any partial disposal of the Company’s interest in a subsidiary that includes a foreign operation, the Company re-attributes the proportionate share of the relevant amounts in other comprehensive income to non-controlling interests. For any other partial disposal of a foreign operation, the Company reclassifies to the consolidated income statement only the proportionate share of the relevant amount in other comprehensive income. Foreign exchange gains and losses arising from a monetary item receivable from, or payable to, a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized directly in other comprehensive income and presented within the foreign currency translation adjustment. (iii) Hedge of net investment in a foreign operation The Company applies hedge accounting to the foreign currency exposure arising between the functional currency of the foreign operation and the parent entity’s functional currency, regardless of whether the net investment is held directly or through an intermediate parent. Foreign currency differences arising on the translation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized directly in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized in the consolidated income statement. When the hedged part of a net investment is disposed of or partially disposed of, the associated cumulative amount in equity is transferred to the consolidated income statement as an adjustment to the consolidated income statement on disposal, in accordance with the policy described in note 3(b)(ii). 59 2022 Annual Report(c) Financial instruments (i) Financial assets and liabilities The Company recognizes financial assets and financial liabilities initially at fair value and subsequently measures them at either fair value or amortized cost based on the following classifications: Amortized cost: The Company classifies financial assets held to collect contractual cash flows at amortized cost, including cash and cash equivalents and trade and other receivables. The Company initially recognizes the carrying amount of such assets on the consolidated statement of financial position at fair value plus directly attributable transaction costs, and subsequently measures them at amortized cost using the effective interest method, less any impairment losses. Fair value through profit or loss (“FVTPL”): Financial assets purchased and financial liabilities incurred, with the intention of generating earnings in the near term, are classified as FVTPL. This category includes derivative assets and derivative liabilities that do not qualify for hedge accounting, if any. For items classified as FVTPL, the Company initially recognizes such financial assets on the consolidated statement of financial position at fair value and recognizes subsequent changes in the consolidated income statement. Transaction costs incurred are expensed in the consolidated income statements. The Company does not currently hold any assets and liabilities designated as FVTPL. Fair value through other comprehensive income (“FVTOCI”): This category includes the Company’s investments in securities. Subsequent to initial recognition, they are measured at fair value on the consolidated statement of financial position and changes therein are recognized in other comprehensive income. When an investment is derecognized, the accumulated gain or loss in other comprehensive income is not transferred to the consolidated income statement. Other financial liabilities: This category is for financial liabilities that are not classified as FVTPL or FVTOCI and includes trade and other payables and long-term debt. These financial liabilities are recorded at amortized cost on the consolidated statement of financial position. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. (ii) Derivative financial instruments, including hedge accounting The Company uses derivative financial instruments to manage its foreign currency and interest-rate-risk exposure and price-risk exposure related to the purchase of raw materials. Embedded derivatives are separated from the host contract and accounted for separately. If the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through the income statement. Changes in the fair value of separable embedded derivatives are recognized immediately in the consolidated income statement. On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Company makes periodic assessments of prospective hedge effectiveness. The fair value of forward exchange contracts is based on their listed market prices, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include adjustments to take into account the credit risk of the group entity and counterparty when appropriate. 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual ReportCash flow hedges When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period that the hedged cash flows affect profit or loss, under the same line item in the consolidated statement of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the consolidated income statement. If the hedging instrument no longer meets the criteria for hedge accounting or expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in unrealized gains or losses on cash flow hedges in equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases, the amount recognized in other comprehensive income is transferred to the consolidated income statement in the same period that the hedged item affects profit or loss. Fair value hedges Fair value hedges are hedges of the fair value of recognized assets, liabilities or unrecognized firm commitments. Changes in the fair value of derivatives that are designated as fair value hedges are recorded in the consolidated income statement, together with any changes in the fair value of the hedged item that are attributable to the hedged risk. (d) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended uses, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. The fair value of property, plant and equipment recognized as a result of a business combination is based on the amount for which a property could be exchanged on the date of valuation between knowledgeable, willing parties in an arm’s length transaction. Borrowing costs related to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of the assets. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized within selling, general and administrative expenses in the consolidated income statement. The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. 61 2022 Annual Report(ii) Depreciation Depreciation is calculated based on the cost of the asset, or other amount substituted for cost, less its residual value. Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows: • Buildings • Machinery and equipment • Fixtures and fittings • Minor components Up to 40 years Up to 20 years Up to 10 years Up to 5 years Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (e) Intangible assets (i) Goodwill Goodwill arises on the acquisition of subsidiaries and is tested for impairment annually or more frequently if events or circumstances indicate that the carrying amount may not be recoverable. For measurement of goodwill at initial recognition, see note 3(a)(i). Subsequent measurement Goodwill is measured at cost, less accumulated impairment losses. In respect of equity-accounted investments, the carrying amount of goodwill is included in the carrying amount of the investment. (ii) Other intangible assets Indefinite life intangibles, such as brands, are tested for impairment annually or more frequently if events or circumstances indicate that the carrying amount may not be recoverable. Intangible assets consist of patents, trademarks, brands, software and the value of acquired customer relationships. Impairment losses for intangible assets where the carrying value is not recoverable are measured based on fair value. Fair value is calculated by using discounted cash flows. The fair values of customer relationships acquired in a business combination are determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows. The fair values of brands acquired in a business combination are determined using the multi-period excess earnings method or the relief of royalty method, whereby the value of the brand is equal to the royalty savings from having ownership as opposed to licensing the brand. Amortization is recognized in the consolidated income statement on a straight-line basis over the estimated useful lives of intangible assets, other than indefinite-life intangible assets, such as brands and goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative years are as follows: • Patents, trademarks and other • Customer relationships • Brands and goodwill Up to 15 years Up to 20 years Indefinite-life 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report(f) Leases The Company recognizes right-of-use assets and lease liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. The right-of-use asset is measured based on the initial value of the lease liability adjusted for lease payments made at or before the commencement of the lease, initial direct costs and estimated dismantling and restoring costs. The right-of-use asset is depreciated over the shorter of the lease term and the asset’s useful life, unless it is reasonably certain the Company will obtain ownership by the end of the lease term, in which case the asset is depreciated over its useful life. The lease liability is measured at the present value of all future lease payments discounted at the lessee’s incremental borrowing rate. Lease liabilities are measured at amortized cost using the effective interest rate method whereby interest is recognized in profit or loss over the lease term. The Company has adopted the practical expedients related to short-term leases and leases of low-value assets whereby lease obligations associated with these leases are recognized as an expense in the consolidated income statement when incurred. (g) Inventories Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in, first-out principle and includes expenditures incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing locations and conditions. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling. The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business, less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories. Estimates regarding obsolete and slow-moving inventory are also computed. (h) Impairment (i) Financial assets, including receivables A financial asset not carried at FVTPL is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates an expected credit loss (“ECL”). Loss allowances are measured on the basis of lifetime ECLs where losses are recognized from all possible default events over the expected life of a financial instrument. The Company considers evidence of impairment for financial assets measured at amortized cost at both a specific asset and a collective level. All individually significant financial assets measured at amortized cost are assessed for specific impairment. All individually significant financial assets measured at amortized cost that are found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. In assessing collective impairment, the Company uses historical trends of the probability of default, timing of recoveries and the amount of expected loss, adjusted for management’s judgement as to whether current and expected future economic and credit conditions are such that the expected losses are likely to be greater than or less than those suggested by historical trends. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate and reflected in an allowance account against trade receivables. Losses are recognized in the consolidated income statement. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. 63 2022 Annual Report(ii) Non-financial assets The carrying amounts of non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the impairment would be recognized in the consolidated income statement. Impairments are recorded when the expected recoverable amount of assets is less than their carrying amount. The recoverable amount is the higher of an asset’s or a cash-generating unit’s fair value, less the cost to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to the CGU, or the group of CGUs, that is expected to benefit from the synergies of the combination. This allocation is subject to an operating segment ceiling test and reflects the lowest level at which that goodwill is monitored for internal reporting purposes. An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses, other than those relating to goodwill, are evaluated for potential reversals when events or changes in circumstances warrant such consideration. The carrying values of finite-life intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Additionally, the carrying values of goodwill and indefinite- life intangibles are tested annually for impairment. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior years are assessed at each reporting date for any indications that the losses have decreased or no longer exist. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Goodwill that forms part of the carrying amount of an equity-accounted investment is not recognized separately and therefore is not tested for impairment separately. Instead, the entire amount of the equity-accounted investment is tested for impairment as a single asset when there is objective evidence that the equity-accounted investment may be impaired. (i) Employee benefits (i) Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in the consolidated income statement in the period that the service is rendered by the employee. (ii) Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit post-employment plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value using a discount rate comparable to high-quality corporate bonds. Any unrecognized past service costs and the fair value of any plan assets are deducted. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. An economic benefit is available to the Company if it is realizable during the life of the plan or on settlement of the plan liabilities. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in the consolidated income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in the consolidated income statement. The Company recognizes all actuarial gains and losses arising from defined benefit plans directly in other comprehensive income immediately and reports them in retained earnings. 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual ReportThe Company determines the net interest expense on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability, taking into account any changes in the net defined benefit liability during the period as a result of the contributions and benefit balances. Net interest expense and other expenses related to the defined benefit plans are recognized in profit or loss. (iii) Termination benefits Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date or provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value. (iv) Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are recognized as the related service is provided. (v) Share-based payment transactions For equity-settled share-based plans, the grant-date fair value of options granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The amount recognized as an expense is adjusted to reflect the actual number of share options for which the related service and non-market vesting conditions are expected to be met. The fair value of employee stock options is measured using the Black-Scholes model. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, the expected volatility, the weighted-average expected life of the instrument, the expected dividends, and the risk-free interest rate. Service and non-market performance conditions attached to the awards are not taken into account in determining fair value. For equity-settled share-based deferred share unit, performance stock unit, long-term retention and other restricted share unit plans, the grant-date fair value of deferred share units is recognized as an employee expense, with a corresponding increase in equity. The grant-date fair value is not subsequently remeasured. (j) Provisions A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as a finance cost. (k) Revenue Revenue is measured based on the consideration specified in a contract with a customer. Revenue is recognized as performance obligations are satisfied and the Company transfers control of a product or service to a customer. For performance obligations satisfied at a point in time, revenue is recognized when the Company has a present right to payment, the buyer has legal title to the asset, physical possession of the asset has transferred to the buyer, the buyer has the significant risks and rewards of ownership and the buyer has accepted the asset. Generally, the buyer obtains control at the time goods are shipped, the product is delivered or services are rendered. For performance obligations satisfied over time, revenue is recognized by measuring the progress toward complete satisfaction of that performance obligation. For customer contracts that contain multiple performance obligations, each element is treated separately for revenue recognition purposes. For these contracts, the total transaction price is allocated to each obligation based on its relative stand-alone selling price. Revenue is then recognized for each obligation when the relevant recognition criteria are met. Certain contracts with customers contain incentives, including the payment of discounts based on quantities purchased. These incentives represent variable consideration and are estimated and recognized as a reduction of related revenues. 65 2022 Annual Report(l) Finance income and costs Finance income comprises interest income on invested funds, changes in the fair value of financial assets at FVTPL, and gains on hedging instruments that are recognized in the consolidated income statement. Interest income is recognized in the consolidated income statement as it accrues, using the effective interest method. Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at FVTPL, impairment losses recognized on financial assets, and losses on hedging instruments that are recognized in the consolidated income statement. All borrowing costs are recognized in the consolidated income statement using the effective interest method, except for those amounts capitalized as part of the cost of qualifying property, plant and equipment. (m) Taxation Income tax expense comprises current and deferred tax. Income tax expense is recognized in the consolidated income statement except to the extent that it relates to items recognized either in other comprehensive income or directly in equity. In such cases, the tax is also recognized in other comprehensive income or directly in equity, respectively. (i) Current tax Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting period and includes any adjustments to taxes payable in respect of previous years. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities. (ii) Deferred tax Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated statement of financial position. Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the end of the reporting period and which are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. (iii) Deferred tax liabilities Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates, except where the reversal of the temporary difference can be controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. (iv) Deferred tax assets A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill or in respect of temporary differences that arise on initial recognition of assets and liabilities acquired, other than in a business combination, and those that affect neither accounting nor taxable profit or loss. (n) Share capital All shares are recorded as equity. When share capital is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effect, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When repurchased shares are subsequently sold or reissued, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to retained earnings. (o) Earnings per share The Company presents basic and diluted earnings per share (“EPS”) data for its Class B shares. Basic EPS is calculated by dividing net earnings attributable to shareholders of the Company by the weighted average number of shares outstanding during the period. Diluted EPS is determined by adjusting net earnings attributable to shareholders and the weighted average number of shares outstanding for the effects of all potentially dilutive shares. 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report(p) Segment reporting A segment is a distinguishable component of the Company that is engaged either in providing related products and services (business segment) or in providing products and services within a particular economic environment (geographical segment) and that is subject to risks and returns that are different from those of other segments. Segment information is presented in respect of the Company’s business and geographical segments. The Company’s primary format for segment reporting is based on business segments. The business segments are determined based on the Company’s management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly other investments and related revenue, loans and borrowings and related expenses, corporate assets (primarily the Company’s headquarters) and head office expenses. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment. (q) Government grants Government grants are recognized when there is reasonable assurance that they will be received and that the Company will comply with conditions attached to the grant. Government grants for compensation of expenses are deducted from the related expense on a systematic basis in the periods in which the original expenses are recognized in profit or loss. Government grants related to assets are deducted in arriving at the assets carrying value. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense. 4 . S E G M E N T R E P O R T I N G (a) Business segments The Company has four reportable segments, as described below, which are the Company’s main business units. The business units offer different products and services and are managed separately as they require different technology and marketing strategies. For each of the business units, the Company’s CEO, the chief operating decision maker, reviews internal management reports regularly. The Company’s reportable segments are the following: • CCL is a converter of pressure sensitive and specialty extruded film materials for a wide range of decorative, instructional, functional and security applications for government institutions and large global customers in the consumer packaging, healthcare & chemicals, consumer electronic device and automotive markets. Extruded & laminated plastic tubes, aluminum aerosols & specialty bottles, folded instructional leaflets, precision decorated & die cut components, electronic displays, polymer banknote substrate and other complementary products and services are sold in parallel to specific end-use markets. • Avery is a supplier of labels, specialty converted media and software solutions to enable short-run digital printing in businesses and homes alongside complementary office products sold through distributors and mass-market retailers. The products are split into three primary lines: (1) Printable Media, including address labels, shipping labels, marketing and product identification labels, business cards, and name badges supported by customized software solutions; (2) Organizational Products Group, including binders, sheet protectors, indexes & dividers and writing instruments; (3) Direct-to-Consumer digitally imaged media, including labels, business cards, name badges, event badges, wristbands and family-oriented identification labels supported by unique web-enabled e-commerce URLs. • Checkpoint is a manufacturer of technology-driven loss-prevention, inventory-management and labeling solutions, including radio frequency and radio frequency identification (“RFID”) solutions, to the retail and apparel industry. The Segment has three primary product lines: Merchandise Availability Solutions (“MAS”), Apparel Labeling Solutions (“ALS”) and “Meto.” The MAS line focuses on electronic-article-surveillance (“EAS”) systems; hardware, software, labels and tags for loss prevention and inventory control systems including RFID solutions. ALS products are apparel labels and tags, some of which are RFID capable. Meto supplies hand-held pricing tools and labels and promotional in-store displays. • Innovia supplies specialty, high-performance, multi-layer, surface-engineered biaxially oriented polypropylene (“BOPP”) films from facilities in Australia, Belgium, Mexico, Poland and the United Kingdom (“U.K.”) to customers in the pressure- sensitive label materials, flexible packaging and consumer packaged goods industries worldwide. Additionally, a small percentage of the total volume is sold internally to CCL Secure while two smaller film facilities, in Germany and the U.S., produce almost their entire output for CCL Label. 67 2022 Annual ReportCCL Avery Checkpoint Innovia Corporate expenses Restructuring and other items Earnings in equity-accounted investments Finance cost Finance income Interest on lease liabilities Income tax expense Net earnings $ 2022 3,855.1 913.6 818.7 794.8 $ Sales 2021 3,498.2 708.9 772.5 753.2 $ $ 6,382.2 $ 5,732.8 $ Operating Income $ $ 2022 599.8 167.6 118.9 48.1 934.4 (71.8) (11.7) 19.9 (72.2) 12.9 (5.5) (183.3) 2021 545.8 148.8 115.5 81.2 891.3 (60.6) (4.4) 11.2 (59.4) 7.7 (5.2) (181.5) Total Assets Total Liabilities Depreciation and Amortization Capital Expenditures $ 622.7 $ 599.1 December 31 2022 2021 2022 2021 2022 2021 2022 2021 CCL Avery Checkpoint Innovia Equity-accounted investments Corporate $ 4,290.6 $ 3,919.6 827.1 1,102.7 1,101.8 1,117.7 1,167.0 1,157.2 68.4 79.5 543.9 916.7 $ 1,178.6 293.8 445.0 304.5 — 2,177.3 $ 1,088.9 266.7 538.4 300.7 — 1,686.1 $ 234.5 37.2 43.0 49.0 — 1.6 $ 226.5 25.4 39.5 49.4 — 1.6 $ 322.9 38.0 50.8 35.4 — 0.1 $ 230.6 14.7 31.5 47.0 — — Total $ 8,664.4 $ 7,627.8 $ 4,399.2 $ 3,880.8 $ 365.3 $ 342.4 $ 447.2 $ 323.8 All revenues are from products and services transferred at a point in time, except $72.9 million for the year ended December 31, 2022 (December 31, 2021 – $76.3 million), which are for installation and maintenance service arrangements within the Checkpoint Segment. (b) Geographical segments The CCL, Avery, Checkpoint and Innovia Segments are managed on a worldwide basis but operate in the following geographical areas: • Canada; • United States and Puerto Rico; • Mexico, Brazil, Chile and Argentina; • Europe; and • Asia, Australia, Africa and New Zealand. Canada United States and Puerto Rico Mexico, Brazil, Chile and Argentina Europe Asia, Australia, Africa and New Zealand $ $ 2022 152.7 2,565.6 709.6 1,879.2 1,075.1 Sales 2021 134.3 2,252.2 487.8 1,819.7 1,038.8 $ 2022 71.1 1,938.9 755.6 1,831.6 826.9 Property, Plant and Equipment, Goodwill and Intangible Assets $ 2021 70.8 1,759.7 566.1 1,716.5 763.4 Consolidated $ 6,382.2 $ 5,732.8 $ 5,424.1 $ 4,876.5 The geographical segment is determined based on the location from which the sale is made. 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report 5. AC Q U I S I T I O N S (a) Acquisitions in 2022 In January 2022, the Company acquired privately owned McGavigan Holdings Ltd. (“McGavigan”), headquarted in Glasgow, Scotland and with significant manufacturing operations in China, for $103.6 million net of cash acquired and debt assumed. McGavigan is a leading supplier of “in mould” decorated components for automotive interiors and is an integral part of CCL Design. The following table summarizes the allocation of the consideration to the fair value of the assets acquired and liabilities assumed for the McGavigan acquisition: Cash consideration, net of cash acquired Assumed debt Trade and other receivables Inventories Property, plant and equipment Right-of-use assets Goodwill Intangible assets Deferred tax assets Trade and other payables Income taxes payable Lease liabilities Deferred tax liabilities Net assets acquired $ $ $ 94.3 9.3 103.6 14.7 6.8 23.2 10.2 51.7 17.5 3.7 (11.5) (0.9) (7.5) (4.3) $ 103.6 Goodwill is comprised of the excess fair value of the consideration paid over the fair value of the net assets acquired. Factors that make up the amount of goodwill recognized include expected synergies and employee knowledge of operations. The total amount of goodwill for McGavigan is $51.7 million, which is not deductible for tax purposes. In April 2022, the Company acquired Adelbras Indústria e Comércio de Adesivos Ltda. and Amazon Tape Indústria e Comércio de Fitas Adesivas Ltda. (collectively “Adelbras”) headquartered in Vinhedo near São Paulo, Brazil for approximately $152.3 million net of cash and debt. Adelbras is a producer of adhesive tapes sold through retailers and distributors to consumers and small businesses. The new business largely reports as part of Avery. The following table summarizes the allocation of the consideration to the fair value of the assets acquired and liabilities assumed for the Adelbras acquisition: Cash consideration, net of cash acquired Assumed debt Trade and other receivables Inventories Prepaid expenses Property, plant and equipment Goodwill Intangible assets Trade and other payables Income taxes payable Deferred tax liabilities Net assets acquired $ $ $ 139.8 12.5 152.3 16.1 24.6 2.5 23.9 64.5 30.2 (5.9) (0.2) (3.4) $ 152.3 69 2022 Annual Report As a result of the inherent complexity associated with the valuation of net assets acquired, the determination of the fair value of assets and liabilities acquired for Adelbras is based upon preliminary estimates and assumptions. The Company will continue to review information prior to finalizing the fair value of the assets acquired and liabilities assumed. The actual fair value of the assets acquired and liabilities assumed may differ from the amounts noted above. Goodwill is comprised of the excess fair value of the consideration paid over the fair value of the net assets acquired. Factors that make up the amount of goodwill recognized include expected synergies and employee knowledge of operations. The total amount of goodwill for Adelbras is $64.5 million, of which approximately $34.5 million is deductible for tax purposes. In May 2022, the Company acquired privately owned, Floramedia Group B.V. (“Floramedia”), based in Westzaan, in the Netherlands, for approximately $53.1 million net of cash acquired. Floramedia is a European leader in horticulture media with in-house tag and label production complemented with sales offices in seven countries. Floramedia is reported as part of Avery. The following table summarizes the allocation of the consideration to the fair value of the assets acquired and liabilities assumed for the Floramedia acquisition: Cash consideration, net of cash acquired Trade and other receivables Inventories Prepaid expenses Property, plant and equipment Right-of-use assets Goodwill Intangible assets Deferred tax assets Trade and other payables Income taxes payable Lease liabilities Deferred tax liabilities Provisions and other long-term liabilities Net assets acquired $ $ $ 53.1 9.5 6.9 0.3 3.5 6.4 29.2 20.0 1.1 (9.0) (0.7) (6.7) (6.5) (0.9) 53.1 Goodwill is comprised of the excess fair value of the consideration paid over the fair value of the net assets acquired. Factors that make up the amount of goodwill recognized include expected synergies and employee knowledge of operations. The total amount of goodwill for Floramedia is $29.2 million, which is not deductible for tax purposes. The following table summarizes the combined sales and net earnings that the newly acquired McGavigan, Adelbras and Floramedia have contributed to the Company for the current reporting period. Twelve Months Ended December 31, 2022 $ $ 130.9 0.9 Sales Net earnings 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report (b) Pro forma information The pro forma consolidated financial information below has been prepared following the accounting policies of the Company as if the acquisitions took place on January 1, 2022. The pro forma consolidated financial information has been presented for illustrative purposes only and is not necessarily indicative of the results of operations and financial position that would have been achieved had the pro forma events taken place on the dates indicated, or the future consolidated results of operations or financial position of the consolidated company. Future results may vary significantly from the pro forma results presented. The historical consolidated financial information has been adjusted in preparing the pro forma consolidated financial information to give effect to events that are: (i) directly attributable to the acquisitions; (ii) factually supportable; and (iii) with respect to revenues and earnings, expected to have a continuing impact on the results of CCL Industries Inc. As such, the impact from acquisition-related expenses is not included in the accompanying pro forma consolidated financial information. The pro forma consolidated financial information does not reflect any cost savings (or associated costs to achieve such savings) from operating efficiencies, synergies or other restructuring that could result from the acquisitions. The following table summarizes the sales and net earnings of the Company combined with McGavigan, Adelbras and Floramedia as though the acquisitions took place on January 1, 2022: Sales Net earnings (c) Acquisitions in 2021 Twelve Months Ended December 31, 2022 $ $ 6,446.4 629.0 In April 2021, the Company acquired the assets of Europack Packaging and Fluid Management GmbH (“Europack”) for approximately $0.9 million. Europack was added to the CCL Segment. In May 2021, the Company acquired privately held Lux Global Label Asia Pte. Ltd. (“LUX”), based in Singapore for approximately $9.4 million, net of cash. LUX produces decorative labels for global consumer product customers in the ASEAN region. LUX now trades as “CCL Label Singapore.” In July 2021, the Company acquired privately owned Plum Paper LLC (“Plum”), based in California, U.S. for approximately $26.3 million, net of cash acquired. Plum is a leading supplier of personalized planners and is part of Avery’s growing direct-to-consumer business. In July 2021, the Company acquired the Uniter Group of companies (“Uniter”), based in A Coruña, Spain, with operations in Europe, Asia and North Africa for approximately $50.4 million, including debt assumed and net of cash acquired. Uniter’s five factories are part of the Checkpoint Apparel Labeling Solutions business. In December 2021, the Company acquired Desarrollo e Investigación S.A. de C.V. and Fuzetouch PTE LTD (Singapore) (collectively “D&F”) headquartered in San Luis Potosi, Mexico, for approximately $51.3 million net of cash acquired. D&F is a leading supplier of graphic interface control panels and assemblies and now trades as “CCL Design”. In December 2021, the Company acquired Forever Blue Investimentos e Participacoes S. A. (d.b.a. “Tecnoblu”), headquartered in Blumenau, Brazil for $17.7 million net of cash and debt. Tecnoblu is now a part of the Checkpoint Apparel Labeling Solutions business. In December 2021, the Company acquired the pharmaceutical leaflet printing press and customer list from the Laramara Foundation (“Laramara”) in São Paulo, Brazil for $0.8 million. These assets were added to the CCL Segment. In December 2021, the Company acquired Lodging Access Systems, LLC, (“LAS”), based in Florida, U.S. for $26.4 million, net of cash acquired. LAS is a leading supplier of digitally printed and encoded RFID key cards, wrist bands and key fobs for access controls. LAS further expands Avery’s direct-to-consumer business. 71 2022 Annual Report In December 2021, the Company acquired International Master Products Corporation (“IMP”), based in Michigan, U.S., for $70.8 million net of cash acquired. IMP is a leading provider of labels and tags for the U.S. horticulture industry through digitally enabled design software, expanding Avery’s direct-to-consumer business. The following table summarizes the allocation of the consideration to the fair value of the assets acquired and liabilities assumed for the Europack, LUX, Plum, Uniter, D&F, Tecnoblu, Laramara, LAS and IMP acquisitions: Cash consideration, net of cash acquired Assumed debt Trade and other receivables Inventories Other current assets Property, plant and equipment Right-of-use assets Goodwill Intangible assets Deferred tax assets Trade and other payables Income taxes payable Lease liabilities Deferred tax liabilities Provisions and other long-term liabilities Net assets acquired $ $ $ $ 243.8 10.2 254.0 31.5 17.9 2.2 32.4 4.6 128.8 67.0 0.5 (16.0) (4.3) (4.5) (5.1) (1.0) 254.0 Goodwill is comprised of the excess fair value of the consideration paid over the fair value of the net assets acquired. Factors that make up the amount of goodwill recognized include expected synergies and employee knowledge of operations. The total amount of goodwill and intangible assets for Europack, LUX, Plum Paper, Uniter, D&F, Laramara, Tecnoblu, IMP and LAS is $195.8 million, $148.1 million which is deductible for tax purposes. 6. C A S H A N D C A S H E Q U I VA L E N T S Bank balances Restricted cash Short-term investments Cash and cash equivalents 7. T R A D E A N D OT H E R R E C E I VA B L E S Trade receivables Other receivables Trade and other receivables 72 December 31, 2022 December 31, 2021 $ $ 755.3 8.0 76.2 839.5 $ $ 584.1 8.0 10.0 602.1 December 31, 2022 December 31, 2021 $ $ 974.4 126.1 $ 948.4 135.4 1,100.5 $ 1,083.8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report 8 . I N V E N TO R I E S Raw material Work in progress Finished goods Total inventories December 31, 2022 December 31, 2021 $ $ 370.4 71.0 343.7 785.1 $ $ 305.4 67.8 304.1 677.3 The total amount of inventories recognized as an expense in 2022 was $4,667.0 million (2021 – $4,140.7 million), including depreciation of $298.2 million (2021 – $284.0 million). 9. E Q U I T Y-AC C O U N T E D I N V E S T M E N T S Summary financial information for equity-accounted investments, including joint ventures and associates, not adjusted for the percentage ownership held by the Company, is as follows: Net earnings Other comprehensive income (loss) Total comprehensive income Carrying amount of investments in associates and joint ventures Net earnings Other comprehensive loss Total comprehensive income Carrying amount of investments in associates and joint ventures At December 31, 2022 Associates Joint Ventures 20.1 0.3 20.4 41.3 $ $ $ 19.7 (5.0) 14.7 38.2 $ $ $ Total 39.8 (4.7) 35.1 79.5 At December 31, 2021 Associates Joint Ventures 6.2 — 6.2 31.1 $ $ $ 16.3 (5.5) 10.8 37.3 $ $ $ Total 22.5 (5.5) 17.0 68.4 $ $ $ $ $ $ 73 2022 Annual Report 1 0. P R O P E R T Y, P L A N T A N D E Q U I P M E N T Cost Balance at January 1, 2021 Acquisitions through business combinations Other additions Other movements Disposals Effect of movements in exchange rates $ Land and Buildings 914.3 11.1 15.9 10.2 (5.9) (32.6) Machinery and Equipment Fixtures, Fittings and Other $ $ 2,717.5 20.7 305.3 (47.1) (33.7) (97.0) $ 49.9 0.6 2.6 (1.1) (0.6) (2.3) Total 3,681.7 32.4 323.8 (38.0) (40.2) (131.9) Balance at December 31, 2021 $ 913.0 $ 2,865.7 $ 49.1 $ 3,827.8 Acquisitions through business combinations Other additions Other movements Disposals Effect of movements in exchange rates Balance at December 31, 2022 Accumulated depreciation Balance at January 1, 2021 Depreciation for the year Other movements Disposals Effect of movements in exchange rates 26.9 43.3 8.9 (12.8) 35.7 1,015.0 266.4 35.5 (1.8) (1.7) (9.8) $ $ 22.6 399.0 (28.3) (40.8) 135.3 3,353.5 1,501.6 205.4 (30.8) (27.0) (52.0) $ $ $ $ 1.1 4.9 0.5 (1.2) 1.8 56.2 31.0 4.4 (1.6) (0.5) (1.6) $ $ 50.6 447.2 (18.9) (54.8) 172.8 4,424.7 1,799.0 245.3 (34.2) (29.2) (63.4) Balance at December 31, 2021 $ 288.6 $ 1,597.2 $ 31.7 $ 1,917.5 Depreciation for the year Other movements Disposals Effect of movements in exchange rates Balance at December 31, 2022 Carrying amounts At December 31, 2021 At December 31, 2022 37.4 (2.6) (4.2) 13.5 332.7 624.4 682.3 $ $ $ 215.4 (17.3) (35.4) 83.9 1,843.8 1,268.5 1,509.7 $ $ $ $ $ $ 4.3 (0.2) (1.2) 1.3 35.9 17.4 20.3 $ $ $ 257.1 (20.1) (40.8) 98.7 2,212.4 1,910.3 2,212.3 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report 1 1 . L E A S E S (a) Right-of-use assets Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property, plant and equipment (see note 10). Cost Balance at January 1, 2021 Acquisitions through business combinations Other additions Other movements Effect of movements in exchange rates $ Land and Buildings 181.6 2.9 19.3 (10.7) (6.7) Machinery and Equipment Fixtures, Fittings and Other $ $ 14.2 1.5 2.7 (4.3) (0.3) $ 30.1 0.2 9.2 (4.1) (1.7) Balance at December 31, 2021 $ 186.4 $ 13.8 $ 33.7 $ Acquisitions through business combinations Other additions Other movements Effect of movements in exchange rates Balance at December 31, 2022 Accumulated depreciation Balance at January 1, 2021 Depreciation for the year Other movements Effect of movements in exchange rates 11.5 46.0 (17.1) 5.8 232.6 45.6 26.5 (8.5) (1.8) $ $ 4.6 5.3 (4.2) 0.9 20.4 7.1 4.0 (2.6) (0.1) $ $ 0.5 10.3 (7.4) 0.9 38.0 14.8 9.1 (5.0) (0.7) $ $ $ $ Balance at December 31, 2021 $ 61.8 $ 8.4 $ 18.2 $ Depreciation for the year Other movements Effect of movements in exchange rates Balance at December 31, 2022 Carrying amounts At December 31, 2021 At December 31, 2022 29.7 (15.1) 2.7 79.1 124.6 153.5 $ $ $ $ $ $ 3.5 (1.2) 0.5 11.2 5.4 9.2 $ $ $ 8.9 (7.1) 0.5 20.5 15.5 17.5 $ $ $ (b) Amounts recognized in the consolidated income statements and statements of cash flows Total 225.9 4.6 31.2 (19.1) (8.7) 233.9 16.6 61.6 (28.7) 7.6 291.0 67.5 39.6 (16.1) (2.6) 88.4 42.1 (23.4) 3.7 110.8 145.5 180.2 Interest expense on lease liabilities Expenses relating to short-term leases Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets Total cash outflow for leases $ $ $ $ 5.5 5.3 0.5 53.2 $ $ $ $ 5.2 4.7 0.5 46.5 December 31, 2022 December 31, 2021 75 2022 Annual Report Customer Relationships Patents, Trademarks and Other Brands Total Goodwill $ 710.1 $ 188.7 $ 432.3 $ 1,331.1 $ 1,918.5 1 2 . I N TA N G I B L E A S S E T S Cost Balance at January 1, 2021 Acquisitions through business combinations Effect of movements in exchange rates 69.2 (21.9) Balance at December 31, 2021 $ 757.4 Acquisitions through business combinations Effect of movements in exchange rates Balance at December 31, 2022 Accumulated amortization Balance at January 1, 2021 Amortization for the year Effect of movements in exchange rates Balance at December 31, 2021 Amortization for the year Effect of movements in exchange rates Balance at December 31, 2022 Carrying amounts At December 31, 2021 At December 31, 2022 $ $ $ $ $ $ 62.0 18.1 837.5 262.6 46.4 (8.0) $ $ 301.0 $ 53.8 9.0 363.8 456.4 473.7 $ $ $ 0.5 (7.8) 181.4 5.7 (1.8) 185.3 60.9 11.1 (2.1) 69.9 12.3 — 82.2 111.5 103.1 $ $ $ $ $ $ — (9.1) 423.2 — 18.3 441.5 — — — — — — — 423.2 441.5 $ $ $ $ $ $ 69.7 (38.8) 1,362.0 67.7 34.6 1,464.3 323.5 57.5 (10.1) $ $ 370.9 $ 66.1 9.0 446.0 991.1 1,018.3 $ $ $ 116.7 (60.1) 1,975.1 145.4 73.0 2,193.5 — — — — — — — 1,975.1 2,193.5 1 3 . G O O DW I L L A N D I N D E F I N I T E - L I F E I N TA N G I B L E A S S E T S Impairment testing for cash-generating units containing goodwill and indefinite-life intangible assets For the purpose of impairment testing, goodwill and indefinite-life intangible assets are allocated to the Company’s operating segments, which represent the lowest level within the Company at which goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill and indefinite-life intangible assets allocated to each unit are as follows: Goodwill CCL Avery Checkpoint Innovia Indefinite-life intangible assets – brands Avery Checkpoint Innovia 76 December 31, 2022 December 31, 2021 $ $ $ $ 1,234.4 357.2 256.2 345.7 $ 1,160.6 240.3 241.1 333.1 2,193.5 $ 1,975.1 198.8 189.7 53.1 441.6 $ $ 187.6 180.3 55.4 423.3 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report Impairment testing for goodwill and indefinite-life intangible assets was done by a comparison of the asset’s carrying amount to its estimated value in use, determined by discounting the CGU future cash flows. Key assumptions used in the determination of the value in use include growth rates of 3% to 5% and pre-tax discount rates of 10% to 12%. Discount rates reflect current market assumptions and risks related to the CGUs and are based upon the weighted average cost of capital. The Company’s historical growth rates are used as the basis in determining the growth rate applied for impairment testing. The Company completed its impairment testing as at September 30, 2022. The estimated values in use of CCL, Avery, Checkpoint and Innovia CGUs exceeded their carrying values. As a result, no goodwill and indefinite-life intangible assets impairment was recorded during 2022. However, for the Innovia CGU, the estimated value in use was close to the carrying value. Therefore, any adverse movement in key assumptions, including discount rates, could lead to impairment in future periods. 1 4 . T R A D E A N D OT H E R PAYA B L E S Trade payables Other payables Trade and other payables 1 5. D E F E R R E D TA X (a) Unrecognized deferred tax assets Deferred tax assets have not been recognized in respect of the following items: Deductible temporary differences Tax losses Income tax credits December 31, 2022 December 31, 2021 $ $ 886.1 508.3 $ 782.2 539.3 1,394.4 $ 1,321.5 December 31, 2022 December 31, 2021 $ $ 7.4 59.3 — 66.7 $ $ 8.1 58.4 1.1 67.6 The unrecognized deferred tax assets on tax losses of $8.7 million will expire between 2023 and 2032, $8.7 million will expire beyond 2032, and $41.9 million may be carried forward indefinitely. The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable income will be available against which the Company can utilize the benefits therefrom. 77 2022 Annual Report (b) Recognized deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net (Assets) Liabilities December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 $ Property, plant and equipment Intangible assets Derivatives Inventory reserves Employee benefit plans Share-based payments Capitalized research and development Provisions and other items Tax loss carry-forwards $ 9.1 — 0.1 17.6 67.9 11.6 9.3 62.7 21.1 $ 1.8 — — 14.8 79.9 8.0 3.8 58.0 13.7 Balance before offset Offset of tax 199.4 (127.9) 180.0 (132.3) $ $ 133.9 291.2 8.3 0.5 0.7 — — 5.0 — 439.6 (127.9) 127.1 275.7 7.2 0.4 — — — 8.5 — 418.9 (132.3) $ 124.8 291.2 8.2 (17.1) (67.2) (11.6) (9.3) (57.7) (21.1) 240.2 — 125.3 275.7 7.2 (14.4) (79.9) (8.0) (3.8) (49.5) (13.7) 238.9 — Balance after offset $ 71.5 $ 47.7 $ 311.7 $ 286.6 $ 240.2 $ 238.9 Balance at December 31, 2021 Liability (Asset) Recognized in Income Statement Acquisitions Translation and Others Recognized in Other Comprehensive Income/Equity Balance at December 31, 2022 Liability (Asset) $ Property, plant and equipment Intangible assets Derivatives Inventory reserves Employee benefit plans Share-based payments Capitalized research and development Provisions and other items Tax loss carry-forwards $ 125.3 275.7 7.2 (14.4) (79.9) (8.0) (3.8) (49.5) (13.7) $ (2.6) (2.3) 6.1 (1.6) (1.8) (3.6) (5.0) (9.7) (7.1) $ (0.2) 11.9 — — — — — (2.3) — $ 2.3 5.9 0.1 (1.1) (2.3) 0.1 (0.5) 3.8 (0.3) $ — — (5.2) — 16.8 (0.1) — — — 124.8 291.2 8.2 (17.1) (67.2) (11.6) (9.3) (57.7) (21.1) $ 238.9 $ (27.6) $ 9.4 $ 8.0 $ 11.5 $ 240.2 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report Balance at December 31, 2020 Liability (Asset) Recognized in Income Statement Acquisitions Translation and Others Recognized in Other Comprehensive Income/Equity Balance at December 31, 2021 Liability (Asset) $ Property, plant and equipment Intangible assets Derivatives Inventory reserves Employee benefit plans Share-based payments Capitalized research and development Provisions and other items Tax loss carry-forwards $ 121.7 267.6 1.3 (13.6) (78.9) (4.2) (5.9) (49.8) (10.1) $ 228.1 $ 5.1 8.3 (0.9) (0.9) (12.8) (2.3) 2.0 (4.1) (4.1) (9.7) $ $ 0.1 5.0 — (0.1) (0.3) — — (0.4) — $ (1.6) (5.2) 0.1 0.2 — (0.1) 0.1 4.8 0.5 $ — — 6.7 — 12.1 (1.4) — — — 125.3 275.7 7.2 (14.4) (79.9) (8.0) (3.8) (49.5) (13.7) $ 4.3 $ (1.2) $ 17.4 $ 238.9 The aggregate amount of temporary differences associated with investments in subsidiaries and joint ventures for which deferred tax liabilities were not recognized as at December 31, 2022, is $3,174.4 million (2021 – $2,903.9 million). The aggregate amount of temporary differences associated with investments in subsidiaries and joint ventures for which deferred tax assets were not recognized as at December 31, 2022, is $44.2 million (2021 – $18.1 million). 1 6. S H A R E C A P I TA L Shares issued (in millions) Balance, January 1, 2021 Stock options exercised Director share units exercised Restricted share units exercised Balance, December 31, 2021 Repurchase of shares Stock options exercised Director share units exercised Restricted share units exercised Long-term retention units exercised Balance, December 31, 2022 Class A Shares 11.8 — — — 11.8 — — — — — 11.8 $ $ Amount 4.5 — — — 4.5 — — — — — 4.5 $ Class B Shares 167.4 0.9 * 0.1 168.4 (3.4) 0.1 * 0.1 * $ Amount 392.3 61.8 0.5 3.0 457.6 (9.3) 6.6 0.1 5.3 3.6 165.2 $ 463.9 $ Total 396.8 61.8 0.5 3.0 462.1 (9.3) 6.6 0.1 5.3 3.6 468.4 * Number of Class B non-voting shares issued was nominal. At December 31, 2022, the authorized share capital comprised an unlimited number of Class A voting shares and an unlimited number of Class B non-voting shares. The Class A and Class B shares have no par value. All issued shares are fully paid. Both Class A and Class B shares are classified as equity. In May 2022, the Company renewed its share repurchase program under a normal course issuer bid to purchase up to 14.5 million Class B non-voting shares, approximately 8.8% of outstanding Class B non-voting shares of the Company. During 2022, the Company acquired 3,392,680 of its Class B shares for cancellation at an average price of $58.95 per share. The excess of the purchase price over the paid-up capital was charged to retained earnings. (a) Class A The holders of Class A shares receive dividends set at $0.01 per share per annum less than Class B shares; they are entitled to one vote per share at meetings of the Company, and their shares are convertible at any time into Class B shares. 79 2022 Annual Report (b) Class B Class B shares rank equally in all material respects with Class A shares, except as follows: (i) Holders of Class B shares are entitled to receive material and attend, but not to vote at, regular shareholder meetings. (ii) Holders of Class B shares are entitled to voting privileges when, under a takeover bid when voting control has been acquired, consideration for the Class A shares exceeds 115% of the market price of the Class B shares. (iii) Holders of Class B shares are entitled to receive, or have set aside for payment, dividends declared by the Board of Directors from time to time, set at $0.01 per share per annum greater than Class A shares. (c) Dividends The annual dividends per share were as follows: Class A share Class B share 1 7. E A R N I N G S P E R S H A R E Basic earnings per share 2022 0.95 0.96 $ $ 2021 0.83 0.84 $ $ The calculation of basic earnings per share for the year ended December 31, 2022, was based on profit attributable to Class A shares of $41.2 million (2021 – $39.3 million) and Class B shares of $581.5 million (2021 – $559.8 million) and a weighted average number of Class A shares outstanding of 11.8 million (2021 –11.8 million) and Class B shares outstanding of 166.2 million (2021 – 167.9 million). Weighted average number of shares (in millions) Issued and outstanding shares at January 1 Effect of stock options exercised Effect of restricted share units exercised Effect of repurchase of shares Weighted average number of shares at December 31 Diluted earnings per share Class A Shares 11.8 — — — 11.8 2022 Class B Shares 168.4 — 0.1 (2.3) 166.2 Class A Shares 11.8 — — — 11.8 2021 Class B Shares 167.4 0.5 — — 167.9 The calculation of diluted earnings per share for the year ended December 31, 2022, was based on profit attributable to Class A shares of $40.9 million (2021 – $39.1 million) and Class B shares of $581.8 million (2021 – $560.0 million) and a diluted weighted average number of Class A shares outstanding of 11.8 million (2021 –11.8 million) and Class B shares outstanding of 167.4 million (2021 –169.1 million). Weighted average number of shares – diluted (in millions) Weighted average number of shares (basic) Effect of deferred share units on issue Effect of share-based compensation Weighted average number of shares (diluted) December 31, 2022 December 31, 2021 178.0 0.2 1.0 179.2 179.7 0.2 1.0 180.9 The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the year that the options were outstanding. 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report 1 8 . LOA N S A N D B O R R OW I N G S Current liabilities Current portion of other loans (iv) Current portion of unsecured bank credit facilities (ii) Short-term operating credit lines available (v) Short-term operating credit lines used Non-current liabilities Unsecured syndicated bank credit facilities (i) Unsecured notes (iii) Other loans (iv) December 31, 2022 December 31, 2021 $ $ $ $ $ 6.6 — 6.6 14.0 — 394.1 1,779.5 2.0 $ $ $ $ $ 15.3 — 15.3 10.9 0.4 9.5 1,676.7 5.2 $ 2,175.6 $ 1,691.4 (i) Unsecured syndicated bank credit facilities As at December 31, 2022, the Company had an unsecured US$1.2 billion revolving credit facility with a syndicate of banks. The facility bears interest at the applicable benchmark interest rate, plus an interest rate margin linked to the Company’s net debt to EBITDA. Borrowings under the facility were $238.0 million (CDOR plus 1.0%), US$67.5 million ($91.5 million; Term SOFR plus 1.0%), €46.0 million ($66.7 million; EURIBOR plus 1.0%) and $1.8 million of contingent letters of credit drawn on this syndicated bank credit facility. As at December 31, 2021, $11.0 million (CDOR plus 1.0%) and $3.5 million of contingent letters of credit were drawn on this syndicated bank credit facility. In February 2020, this facility was amended, extending the maturity from March 29, 2023, to February 28, 2025. In May 2022, this facility was again amended, extending the maturity an additional two years to February 2027. As at December 31, 2020, the Company had an unsecured US$161.0 million ($204.9 million; LIBOR plus 0.75%) non-revolving term loan facility with a syndicate of banks that bore interest at the applicable domestic rate, plus an interest rate margin linked to the Company’s net debt to EBITDA. This facility was fully repaid October 29, 2021. The unused portion of the revolving syndicated bank credit facility was US$906.4 million at December 31, 2022 (December 31, 2021 – US$1,188.5 million). As at December 31, 2022, transaction costs related to the unsecured syndicated bank credit facilities were $2.1 million (December 31, 2021 – $1.5 million). (ii) Unsecured bank credit facilities In January 2019, the Company signed a two-year unsecured bilateral credit facility for US$35.0 million with a maturity date of January 22, 2021, which was extended to January 22, 2022, early in 2020, and extended, again, to January 22, 2025, early in 2021. This bilateral loan incurred interest at the applicable domestic rate plus an interest rate margin and automatically extended out an additional year on an annual basis. As of December 31, 2021, the facility was undrawn. The facility was cancelled in March 2022. In December 2019, the Company signed an uncommitted unsecured bilateral credit facility for A$65.0 million that incurred interest at the applicable domestic rate plus an interest rate margin. As of December 31, 2021, the facility was undrawn. The facility was cancelled in August 2022. 81 2022 Annual Report (iii) Unsecured notes Unsecured notes as at December 31, 2022, consisted of US$600.0 million ($806.4 million; 2021 – $750.5 million) principal amount of 144A 3.05% private notes, offered in a private placement in the United States in May 2020, maturing June 1, 2030; $298.9 million (2021 – $298.8 million) principal amount of 3.864% Series 1 Notes, maturing April 13, 2028; and US$500.0  million ($674.2 million; 2021 – $627.4 million) principal amount of 144A 3.25% private notes, maturing on October 1, 2026. These notes bear interest payable semi-annually. The net proceeds of all three notes were used to partially repay amounts borrowed under the unsecured syndicated bank credit facility. As at December 31, 2022, the Company utilized cross-currency interest rate swap agreements (“CCIRSA”) to effectively convert notional US$408.5 million (2021 – US$408.5 million) of the 144A 3.05% private notes into €360.0 million (2021 – €360.0 million) 2.06% and 2.00% fixed rate debt and convert notional US$376.2 million (2021 – US$376.2 million) of the 144A 3.25% private notes into €340.0 million (2021 – €340.0 million) 1.16% and 1.23% fixed rate debt in order to hedge its euro-based assets and cash flows (note 24(a)). (iv) Other loans Other loans include term bank loans at various rates and repayment terms. (v) Operating credit lines Interest rates charged on the credit lines are based on rates varying with Term SOFR, SONIA, EURIBOR, the prime rate and similar market rates for other currencies. (vi) Reconciliation of changes in liabilities arising from financing activities Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the consolidated statement of cash flows as financing activities. Changes in the Company’s liabilities arising from financing activities are as follows: Balance at January 1 Financing cash flows Foreign exchange Other Balance at December 31 $ 2022 1,706.7 334.1 117.0 24.4 $ 2021 1,941.2 (233.4) (13.8) 12.7 $ 2,182.2 $ 1,706.7 As at December 31, 2022 and 2021, there are no assets pledged as collateral against long-term debt. 1 9. F I N A N C E I N C O M E A N D C O S T Recognized in consolidated income statement Interest expense on financial liabilities measured at amortized cost Fees and interest recognized on other financial instruments Interest expense on post-employment defined benefit plans Finance cost Interest income on cash and cash equivalents Interest income on other assets Interest income on post-employment defined benefit plans Finance income Interest expense on lease liabilities Net finance cost recognized in consolidated income statement The above finance income and cost are with respect to assets (liabilities) not at FVTPL. 82 December 31, 2022 December 31, 2021 $ $ 70.6 (11.7) 13.3 72.2 5.8 0.2 6.9 12.9 5.5 64.8 $ 58.8 (10.1) 10.7 59.4 2.4 0.2 5.1 7.7 5.2 $ 56.9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report 2 0. E M P LOY E E B E N E F I T S Present value of wholly unfunded defined benefit obligations Present value of partially funded defined benefit obligations Total present value of obligations Fair value of plan assets Irrecoverable surplus due to asset ceiling Recognized liability for defined benefit obligations Liability for long-service leave and jubilee plans Total employee benefits Total employee benefits reported in trade and other payables Total employee benefits reported in non-current liabilities (a) Defined contribution post-employment plans December 31, 2022 December 31, 2021 $ $ 240.4 314.0 554.4 (298.6) 2.1 257.9 14.7 272.6 15.7 256.9 $ $ 275.7 506.9 782.6 (468.7) — 313.9 15.4 329.3 13.8 315.5 The Company sponsors defined contribution post-employment plans in Canada, the U.S., Thailand, the Netherlands and the U.K. A post-employment plan is classified as a defined contribution plan if the Company pays fixed contributions into a fund at a separate entity and the Company has no further obligation to pay any further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. The expense for Company-sponsored defined contribution post-employment plans was $33.7 million in 2022 (2021 – $31.6 million), of which $0.1 million (2021 – $0.1 million) was for key management personnel. Company contributions into defined contribution state plans are included in the line item Compulsory social security contributions in the table in note 21. (b) Defined benefit post-employment plans The Company also has defined benefit post-employment plans in various countries of the world. Although some of these plans have elements common to defined contribution plans, the Company has accounted for these as defined benefit plans as they are not fully funded at a separate entity. Partially funded defined benefit obligations The Company’s defined benefit post-employment plans are not fully funded. The obligation of these plans, net of any assets, is recorded in non-current liabilities on the consolidated statement of financial position in employee benefits or, for payments expected to be made within the next twelve months, in trade and other payables in current liabilities. Fluctuations in the pension liabilities resulting from actuarial gains or losses due to changes in risk factors are recorded in other comprehensive income. The primary partially funded plans are in Canada, the U.K., Switzerland and the Netherlands. Details of these plans are as follows: (i) In Canada, the Company has a registered partially funded defined benefit pension plan for seven retired executives and one active employee. The Company makes all required contributions to the plans. Benefits are based on employee earnings. An actuary is involved in measuring the obligation of the plan and in calculating the expense and any contributions required. The plan is closed to new members. The primary risk factors for this plan are longevity of plan beneficiaries, discount rate volatility for the value of the obligation and market risk on the assets. The Company has determined that any surplus in the plan after all obligations have been covered is fully available to the Company. (ii) In the U.K., the Company has two registered partially funded defined benefit pension plans. The Company’s plan has no active members and is closed to new members. Benefits are based on final salary. All members of the plan are either deferred or retired and benefits are provided to spouses or dependents in the event of a member’s death before or after retirement. The Company is required to make payments of £0.8 million in deficit funding contributions annually. An actuary is involved in measuring the obligation of the plan and in calculating the expense and any contributions required. The primary risk factors for this plan are longevity of plan beneficiaries and discount rate volatility for the value of the obligation and market risk on the assets. The Company has determined that any surplus in the plan after all obligations have been covered is fully available to the Company. 83 2022 Annual Report  On April 6, 2019, the Innovia plan was frozen. No further benefits will be earned by members in the plan and no contributions will be paid into the plan other than deficit funding contributions. It is closed to new members. Benefits are based on a member’s final pensionable salary and length of service at retirement. Benefits are provided to spouses in the event of a member’s death before or after retirement. The Company is required to make payments of £1.2 million in deficit funding contributions annually. An actuary is involved in measuring the obligation of the plan and in calculating the expense and any contributions required. The primary risk factors for this plan are longevity of plan beneficiaries and discount rate volatility for the value of the obligation and market risk on the assets. The Company has determined that any surplus in the plan after all obligations have been covered is available to the Company if the plan is wound up. However, any surplus while the plan is ongoing is under the authority of the trustees. Active members have been moved to a defined contribution plan. (iii) In Switzerland, the Company provides a mandatory, legislated contribution-based cash balance plan for employees that is accounted for as a post-employment defined benefit plan. Benefits from the plan are paid out at retirement, disability or death. If an employee terminates from the Company prior to retirement, the vested benefit equal to the accumulated savings account balance is transferred to the pension plan of the new employer. The plan is governed by a foundation board that is legally responsible for the operation of the plan and includes employer and employee representation, in equal numbers. A legally required minimum level of retirement benefit is based on age-related savings contributions, an insured salary defined by law and a required rate of return set annually by the Swiss government. Contributions from both employers and employees are compulsory and vary according to age and salary. The primary risk factors for this plan are longevity of plan beneficiaries, discount rate volatility for the value of the obligation and market risk on the assets. Under Swiss pension law, any surplus assets technically belong to the pension plan and any reduction in contributions is at the discretion of the Board. (iv) In the Netherlands, the Company provides a defined-benefit career average pay plan for a small number of employees. An actuary is involved in measuring the obligation of the plan. Benefits from the plan are paid through retirement and at death, before or during retirement, to the spouse or dependents. If a member of the plan leaves the Company, the member may choose to have the benefits of the plan transferred into the plan of the new employer. The benefit formula is based on a percentage of each year’s pensionable salary up to a set maximum salary, less a social security offset. Benefits are guaranteed by an insurance company and the Company is required to pay annual premiums on the insurance contract based on a contract interest rate. There are no employee contributions to the plan. The primary risk factors for this plan are longevity of plan beneficiaries and discount rate volatility. This plan was frozen as of December 31, 2018, and all members were moved to a defined contribution plan. The most recent actuarial valuation for funding purposes for the executive defined pension plan in Canada was as of January 1, 2021. The next required actuarial valuation will be as of January 1, 2024. The most recent actuarial valuation of the two U.K. defined benefit pension plans for funding purposes were as of January 1, 2020. The next required valuation is as of January 1, 2023. Wholly unfunded defined benefit obligations For defined benefit post-employment plans that have no assets, the Company simply funds the plans as benefits are paid. The primary wholly unfunded plans are in Canada, the U.S. and Germany. Details of these plans are as follows: (i) In Canada, the Company maintains non-registered, wholly unfunded supplemental retirement arrangements for one active Canadian executive, eight retired Canadian executives and two retired U.S. executives or their widows. The Company makes all required contributions to the plans. Benefits are based on employee earnings. An actuary is involved in measuring the obligation of the plans and in calculating the expense and any contributions required. The plans are closed to new members. The primary risk factors for these plans are longevity of plan beneficiaries and discount rate volatility. (ii) In the U.S., the Company has a post-employment, wholly unfunded deferred compensation plan for designated executives (“NQP”). Liabilities are based strictly on the contributions made to the plan and an established rate of return and are not subject to actuarial adjustments. It allows executives to elect to defer specified portions of salary, cash bonuses and long-term incentive plan payments. The Company contributes a matching portion of the executive’s NQP deferred amount to a maximum of 8% of the executive’s base salary plus bonus. The Company may also contribute a discretionary annual Company contribution based on a percentage of base salary and annual bonus. Contributions to the NQP for one of the executives vest immediately. For the other executives, immediate vesting of discretionary Company contributions and interest occurs on death, disability or change of control, with normal vesting occurring at age 60 with 10 years’ service. The Company’s match portion and interest vest in the same manner as Company contributions in the 401k plan. Elective deferrals by the executive vest immediately. 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report (iii) In Germany, the Company has several wholly unfunded defined benefit plans. There are four salary-based annuity plans that are closed to new members, but currently have approximately 90 active members. All contributions and benefits are funded by the Company. The primary risk factors for these plans are longevity of plan beneficiaries and discount rate volatility. There are also three cash balance plans for current employees. Two of those plans require the Company to match a specific portion of employee contributions. Upon retirement, lump sum payments are made unless an employee requests an annuity. The third cash balance plan has employer and employee contributions and pays out in three instalments upon retirement. The primary risk factor for these three plans is discount rate volatility. (iv) The Company has wholly unfunded post-employment defined benefit plans in Austria, France, India, Italy, Mexico and Thailand. Benefits are paid out in a lump sum upon retirement, disability or death. There are no employee contributions in these plans. Benefits are based on salary and length of service with the Company. The following table shows the reconciliation from the opening balances to the closing balances for the defined benefit post-employment plans, including the defined benefit pension plans, supplemental retirement plans and other post- employment defined benefit plans. 2022 Accrued benefit obligation: Balance, beginning of year Current service cost Past service cost Interest cost Employee contributions Benefits paid Actuarial (gains) losses – experience Actuarial gains – demographic assumptions Actuarial gains – financial assumptions Reinstatements and transfers Effect of curtailment Settlement loss Effect of movements in exchange rates Balance, end of year Plan assets: Fair value, beginning of year Expected return on plan assets Actuarial losses Employee contributions Employer contributions Benefits paid Administrative expenses Settlements Effect of movements in exchange rates Fair value, end of year Irrecoverable surplus due to asset ceiling Funded status, net deficit of plans Accrued benefit liability Partially Funded 506.9 2.2 — 8.7 1.0 (12.1) 11.1 (0.7) (182.8) (0.1) — (0.3) (19.9) 314.0 468.7 7.9 (152.9) 1.0 5.5 (12.1) (1.1) (0.3) (18.1) 298.6 (2.1) (17.5) (17.5) Wholly Unfunded 275.7 5.5 0.4 5.6 1.8 (9.6) (4.0) (0.3) (40.9) — (0.4) — 6.6 240.4 — — — — 9.6 (9.6) — — — — — (240.4) (240.4) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Total 782.6 7.7 0.4 14.3 2.8 (21.7) 7.1 (1.0) (223.7) (0.1) (0.4) (0.3) (13.3) 554.4 468.7 7.9 (152.9) 1.0 15.1 (21.7) (1.1) (0.3) (18.1) 298.6 (2.1) (257.9) (257.9) 85 2022 Annual Report 2021 Accrued benefit obligation: Balance, beginning of year Opening balance from current year acquisitions Current service cost Past service cost Interest cost Employee contributions Benefits paid Actuarial (gains) losses – experience Actuarial (gains) losses – demographic assumptions Actuarial gains – financial assumptions Reinstatements and transfers Effect of curtailment Effect of movements in exchange rates Balance, end of year Plan assets: Fair value, beginning of year Expected return on plan assets Actuarial gains Employee contributions Employer contributions Benefits paid Administrative expenses Settlements Effect of movements in exchange rates Fair value, end of year Funded status, net deficit of plans Accrued benefit liability The Company’s net defined benefit plan expense is as follows: 2022 Current service cost Past service cost Net interest cost on accrued benefit liability Curtailment gain Settlement loss Administration costs Net defined benefit plan expense Net defined benefit plan expense is recorded in: Cost of sales Selling, general and administrative expenses Finance cost Net defined benefit plan expense 86 Partially Funded Wholly Unfunded $ $ $ $ $ $ $ $ $ $ 535.3 — 2.7 0.3 6.9 1.0 (14.1) (1.5) (3.4) (8.0) (0.8) — (11.5) 506.9 454.8 5.7 25.9 1.0 6.3 (14.1) (0.9) (0.1) (9.9) 468.7 (38.2) (38.2) Partially Funded 2.2 — 0.8 — — 1.1 4.1 1.4 1.9 0.8 4.1 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 301.2 0.9 5.2 0.2 4.4 1.5 (11.0) 1.0 1.4 (12.8) 0.7 (1.2) (15.8) 275.7 — — — — 11.0 (11.0) — — — — (275.7) (275.7) Wholly Unfunded 5.5 0.4 5.6 (0.4) — — 11.1 1.4 4.1 5.6 Total 836.5 0.9 7.9 0.5 11.3 2.5 (25.1) (0.5) (2.0) (20.8) (0.1) (1.2) (27.3) 782.6 454.8 5.7 25.9 1.0 17.3 (25.1) (0.9) (0.1) (9.9) 468.7 (313.9) (313.9) Total 7.7 0.4 6.4 (0.4) — 1.1 15.2 2.8 6.0 6.4 11.1 $ 15.2 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report 2021 Current service cost Past service cost Net interest cost on accrued benefit liability Curtailment gain Settlement loss Administration costs Net defined benefit plan expense Net defined benefit plan expense is recorded in: Cost of sales Selling, general and administrative expenses Finance cost Net defined benefit plan expense Actuarial gains (losses) recognized directly in equity are as follows: Actuarial gains (losses) – experience Actuarial gains – demographic assumptions Actuarial gains – financial assumptions Experience gains (losses) on plan assets Irrecoverable surplus $ $ $ $ Partially Funded Wholly Unfunded 2.7 0.3 1.2 — 0.1 0.9 5.2 2.4 1.6 1.2 5.2 $ $ $ $ $ $ $ $ $ $ 5.2 0.2 4.4 (1.2) — — 8.6 1.4 2.8 4.4 8.6 2022 (7.1) 1.0 223.7 (152.9) (2.1) Recognized during the year in other comprehensive gain $ 62.6 $ Plan assets consist of the following: 2022 Equity securities Debt securities Real estate Other Total 2021 Equity securities Debt securities Real estate Other Total Partially Funded Wholly Unfunded 51% 34% 3% 12% 100% — — — — — Partially Funded Wholly Unfunded 55% 34% 2% 9% 100% — — — — — Total 7.9 0.5 5.6 (1.2) 0.1 0.9 13.8 3.8 4.4 5.6 13.8 2021 0.5 2.0 20.8 25.9 — 49.2 Total 51% 34% 3% 12% 100% Total 55% 34% 2% 9% 100% No plan assets are directly invested in the Company’s own shares or directly in any property occupied by, or other assets used by, the Company. 87 2022 Annual Report The actual returns on plan assets are as follows: 2022 2021 Partially Funded (145.0) 31.6 $ $ Wholly Unfunded $ — $ — $ $ Total (145.0) 31.6 The weighted average economic assumptions used to determine post-employment benefit obligations are as follows: December 31, 2022 Discount rate Expected rate of compensation increase December 31, 2021 Discount rate Expected rate of compensation increase Partially Funded Wholly Unfunded 4.45% 1.71% 1.84% 1.46% 4.35% 2.57% 1.54% 2.06% The weighted average economic assumptions used to determine post-employment plan expenses are as follows: December 31, 2022 Discount rate Expected rate of compensation increase December 31, 2021 Discount rate Expected rate of compensation increase Partially Funded Wholly Unfunded 1.84% 1.48% 1.30% 1.37% 1.54% 2.05% 1.37% 2.35% Total 4.41% 2.35% 1.73% 1.92% Total 1.73% 1.92% 1.33% 2.11% The sensitivity analysis on the defined benefit obligation is as follows, and it is prepared by altering one assumption at a time and keeping the other assumptions unchanged. The resulting defined benefit obligation is then compared to the defined benefit obligation in the disclosures: Discount rate (increase 1%) Discount rate (decrease 1%) Longevity (+1 year) Inflation (+0.25%) Inflation (-0.25%) Salary (increase 1%) Salary (decrease 1%) Duration (years) Partially Funded (52.1) 55.2 8.5 7.2 (7.2) 2.4 (1.8) 17 $ $ $ $ $ $ $ Wholly Unfunded (18.1) 19.9 7.3 — — 2.5 (2.3) 11 $ $ $ $ $ $ $ The Company expects to contribute $4.6 million to the partially funded defined benefit plans and pay $16.4 million in benefits for the wholly unfunded plans in 2023. (c) Long-term incentive, long-service leave, jubilee and other plans The Company has long-term incentive plans with share-based payments, long-service leave plans and jubilee plans in various countries around the world. As at December 31, 2022, $0.7 million (2021 – $0.8 million) of the total obligation of $14.7 million (2021 – $15.4 million) was classified as current and reported in trade and other payables. The expense for these plans was $27.8 million in 2022 (2021 – $16.4 million). 88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report 2 1 . P E R S O N N E L E X P E N S E S Wages and salaries Compulsory social security contributions Contributions to Company-sponsored defined contribution plans Net expenses related to defined benefit plans Equity-settled share-based payment transactions 2 2 . I N C O M E TA X E X P E N S E Current tax expense Current tax on earnings before earnings in equity-accounted investments for the year Deferred tax expense (benefit) (note 15) Origination and reversal of temporary differences Impact of tax rate changes Recognition of previously unrecognized tax losses and deductible temporary differences $ 2022 1,199.3 141.0 33.7 15.2 38.6 $ 2021 1,116.9 126.4 31.6 13.8 28.3 $ 1,427.8 $ 1,317.0 $ $ 2022 210.9 (16.4) — (11.2) (27.6) $ $ 2021 191.2 (5.3) 9.0 (13.4) (9.7) Total income tax expense $ 183.3 $ 181.5 Reconciliation of effective tax rate Combined Canadian federal and provincial income tax rates The income tax expense on the Company’s earnings differs from the amount determined by the Company’s statutory rates as follows: Net earnings for the year Add: income tax expense Deduct: earnings in equity-accounted investments Earnings before income tax and equity-accounted investments Income tax using the Company’s domestic combined Canadian federal and provincial income tax rates Effect of tax rates in foreign jurisdictions Impact of tax rate changes Recognition of previously unrecognized tax losses and deductible temporary differences Losses and deductible temporary differences for which no deferred tax asset was recognized Non-deductible expenses and other items Income tax expense (recovery) recognized directly in other comprehensive income Derivatives and foreign currency translation adjustments Actuarial gains Total income tax expense recognized directly in other comprehensive income 2022 26.5% 2021 26.5% $ $ $ $ 622.7 183.3 19.9 786.1 208.3 (9.2) — (11.2) 6.1 (10.7) 183.3 (5.2) 16.8 11.6 $ $ $ $ 599.1 181.5 11.2 769.4 203.9 (16.7) 9.0 (13.4) 3.1 (4.4) 181.5 6.7 12.1 18.8 89 2022 Annual Report The Company is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. If the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. 2 3 . S H A R E - B A S E D PAY M E N T S For options and share awards granted for stock-based compensation, $38.5 million (2021 – $26.6 million) was recognized in the consolidated financial statements as an expense, with a corresponding offset to contributed surplus. At December 31, 2022, the Company had five share-based compensation plans, which are described below: (a) Employee stock option plan Under the employee stock option plan, the Company may grant options to employees, officers and directors of the Company. The Company does not grant options to independent directors. The exercise price of each option equals the closing market price of the Class B non-voting shares on the last trading day prior to the grant date of the option, and an option’s maximum term is 10 years. Current options vest 25% one year from the grant date and 25% each subsequent year. The term of these options is five years from the grant date. In general, the grants are conditional upon continued employment. No market conditions affect vesting. Granted options are not entitled to dividends and may not be transferred or assigned by the option holder. In 2022 and 2021, stock option grants were not awarded. A summary of the status of the Company’s employee stock option plan as of December 31, 2022 and 2021, and changes during the years ended on those dates, is presented below: Outstanding at beginning of year Granted Exercised Forfeited Outstanding at end of year Options exercisable at end of year 2022 Weighted Average Exercise Price Shares (in millions) 2021 Weighted Average Exercise Price Shares (in millions) 1.5 — (0.1) (0.1) 1.3 1.1 $ $ $ 61.45 — 61.50 58.85 61.64 62.71 2.4 — (0.9) — 1.5 0.9 $ $ $ 59.68 — 56.67 — 61.45 62.88 The weighted average share price of stock options exercised in 2022 was $66.64 (2021 – $70.00). The following table summarizes information about the employee stock options outstanding at December 31, 2022. Options Outstanding Options Exercisable Options Outstanding (in millions) Weighted Average Remaining Contractual Life Weighted Average Exercise Price Options Exercisable (in millions) Weighted Average Exercise Price 0.6 0.7 1.3 1.2 years 0.2 years 0.6 years $ $ $ 55.73 66.87 61.64 0.4 0.7 1.1 $ $ $ 55.73 66.87 62.71 Range of Exercisable Prices $55.73 $66.87 $55.73 – $66.87 90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report (b) Deferred share units (“DSU”) The Company maintains a deferred share unit plan. Under this plan, non-employee members of the Company’s Board of Directors may elect to receive DSUs, in lieu of cash remuneration, for director fees that would otherwise be payable to such directors, or any portion thereof, until DSU holdings of a prescribed limit have been achieved. In addition, director compensation includes an annual grant of DSUs. The number of units received is equivalent to the fees earned and is based on the fair market value of a Class B non-voting share of the Company on the date of issue of the DSU. When dividends are paid on Class B non-voting shares of the Company, the equivalent value per DSU is calculated and the holder receives additional DSUs in lieu of actual cash dividends based on the fair market value of a Class B non-voting share of the Company. DSUs cannot be redeemed or paid out until such time as the director ceases to be a director. A DSU entitles the holder to receive, on a deferred payment basis, the number of Class B non-voting shares of the Company equating to the number of the holder’s DSUs on the redemption date. The Company accounts for the DSU plan as an equity-settled share-based payment transaction. The Company had 0.3 million DSUs outstanding as at December 31, 2022. (c) Performance stock units (“PSU”) In 2019, the Company introduced a performance stock unit plan. Under the plan, participants may be eligible to receive a maximum of approximately 1.5 million Class B non-voting shares of the Company to be issued from treasury. The vesting of these shares is dependent on the Company’s performance and continuing employment. The grant-date fair value of these shares is being amortized over the vesting period and recognized as compensation expense. (d) Long-term retention plan (“LTRP”) In 2017, the Company instituted a long-term retention plan. Under the plan, the Company provided a one-time retention incentive to executives totaling 0.3 million restricted share units (“RSU”). The incentive vests 25% in each year beginning in 2022 and ending in 2025, inclusive. In 2019, under the aforementioned long-term retention plan, the Company provided a one-time retention incentive to additional executives totaling 0.1 million RSUs. The incentive vests 25% in each year beginning in 2024 and ending in 2027, inclusive. Each RSU is equivalent to one Class B non-voting share of the Company, to be issued from treasury. The Company had 0.3 million RSUs outstanding under this plan as at December 31, 2022. (e) Other restricted share units In 2020, the Company established the restricted share unit plan. Each unit is equivalent to one Class B non-voting share of the Company. Current units vest 25% one year from the grant date and 25% each subsequent year. The term of these units is four years from the grant date, and will be settled through equity. The grants are conditional upon continued employment. No market conditions affect vesting. Granted units are not entitled to dividends and may not be transferred or assigned by the unitholder. The Company had 0.4 million restricted share units outstanding under this plan as at December 31, 2022. 91 2022 Annual Report2 4 . F I N A N C I A L I N S T R U M E N T S (a) Hedges of net investments in foreign operations US$123.8 million (2021 – US$123.8 million) of unsecured 144A 3.25% private notes, US$191.5 million (2021 – US$191.5 million) of unsecured 144A 3.05% private notes and US$67.5 million (2021 – nil) of the unsecured syndicated bank credit facilities (hedging items) have been used to hedge the Company’s exposure to its net investment in US-dollar-denominated operations (hedged items), with a view to reducing foreign exchange fluctuations. The foreign exchange effect of the unsecured 144A 3.25% private notes, the unsecured 144A 3.05% private notes, the unsecured syndicated bank credit facilities and the net investment in US-dollar-denominated subsidiaries is reported in accumulated other comprehensive loss in the consolidated statement of financial position. These have been and continue to be 100% fully effective hedges as the notional amounts of the hedging items equal the portion of the net investment balance being hedged. No ineffectiveness was recognized in the consolidated income statement in 2022 or 2021. Unsecured syndicated bank credit facilities (hedging item) of €46.0 million (2021 – nil) were used to hedge the Company’s exposure to its net investment in self-sustaining euro-denominated operations (hedged items) with a view to reducing foreign exchange fluctuations. The foreign exchange effect of both the unsecured syndicated bank credit facilities and the net investment in euro-denominated subsidiaries was reported in other comprehensive loss in the consolidated statement of financial position. This was a 100% fully effective hedge as the notional amount of the hedging item equalled the portion of the net investment balance being hedged. No ineffectiveness was recognized in the consolidated income statement in 2022 or 2021. In February 2017, the Company converted US$264.7 million of the 144A 3.25% private notes (note 18) into €250.0 million 1.23% fixed rate debt using CCIRSAs (hedging items). In February 2018, a further US$111.5 million of the 144A 3.25% private notes (note 18) were converted into €90.0 million 1.16% fixed rate debt using CCIRSAs. In June 2020, US$204.6 million and US$203.9 million of the 144A 3.05% private notes (note 18) were converted into €180.0 million 2.06% fixed rate debt and €180.0 million 2.00% fixed rate debt, respectively, using CCIRSAs. Each of these conversions was to hedge the Company’s euro-based assets and cash flows. Fair value of these CCIRSAs was recorded in non-current liabilities when negative in value and non-current assets when positive in value. The offset was recorded in accumulated other comprehensive loss in the consolidated statement of financial position. These have all been, and continue to be, 100% fully effective hedges as the notional amounts of the hedging items equal the portion of the net investment balance being hedged. No ineffectiveness was recognized in the consolidated income statement in 2022 or 2021. Notional Principal Amount Interest Rate Fixed Rate Fixed Rate Received (US$) Paid (€) 2022 (C$) Fair Value December 31 2021 (C$) Maturity Effective Date US$105.8 million € 100.0 million 3.25% 1.24% $ 3.0 million $ (7.8) million October 1, 2026 February 28, 2017 US$84.8 million € 80.0 million 3.25% 1.20% $ 2.8 million $ (5.3) million October 1, 2026 February 28, 2017 US$42.3 million € 40.0 million 3.25% 1.21% $ 1.2 million $ (3.0) million October 1, 2026 February 28, 2017 US$31.8 million € 30.0 million 3.25% 1.29% $ 0.8 million $ (2.4) million October 1, 2026 February 28, 2017 US$62.1 million € 50.0 million 3.25% 1.16% $ 13.9 million $ 9.2 million October 1, 2026 February 21, 2018 US$49.4 million € 40.0 million 3.25% 1.15% $ 10.7 million $ 7.1 million October 1, 2026 February 22, 2018 US$125.0 million € 110.0 million 3.05% 2.06% $ 10.1 million $ (6.9) million June 1, 2030 June 10, 2020 US$79.6 million € 70.0 million 3.05% 2.06% $ 6.3 million $ (4.9) million June 1, 2030 June 10, 2020 US$68.0 million € 60.0 million 3.05% 2.00% $ 5.6 million $ (3.6) million June 1, 2030 June 23, 2020 US$45.3 million € 40.0 million 3.05% 2.00% $ 3.6 million $ (2.8) million June 1, 2030 June 23, 2020 US$45.3 million € 40.0 million 3.05% 2.01% $ 3.8 million $ (2.8) million June 1, 2030 June 23, 2020 US$45.3 million € 40.0 million 3.05% 2.01% $ 3.7 million $ (2.7) million June 1, 2030 June 23, 2020 92 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report (b) Credit risk Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows: Cash and cash equivalents Trade and other receivables Other assets Derivative instruments The aging of trade receivables at the reporting date was as follows: Under 31 days Between 31 and 90 days Greater than 90 days December 31, 2022 December 31, 2021 $ 839.5 1,100.5 18.7 65.5 $ 602.1 1,083.8 19.7 16.3 $ 2,024.2 $ 1,721.9 December 31, 2022 December 31, 2021 $ $ 545.9 372.9 73.4 992.2 $ $ 576.7 320.6 69.5 966.8 The movement in the allowance for impairment in respect of trade receivables during the year was as follows: Balance at January 1 (Decrease) increase during the year Balance at December 31 December 31, 2022 December 31, 2021 $ $ 18.4 (0.7) 17.7 $ $ 18.1 0.3 18.4 The Company believes that no impairment allowance is necessary in respect of trade receivables not past due. 93 2022 Annual Report (c) Liquidity risk Exposure to liquidity risk The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: December 31, 2021 December 31, 2022 Payments Due by Period Carrying Amount Carrying Amount Contractual Cash Flows 0–6 Months 6–12 Months 1–2 Years 2–5 Years More than 5 Years Non-derivative financial liabilities Secured bank loans $ Unsecured bank loans Unsecured 144A 3.25% private notes Unsecured 144A 3.05% private notes Unsecured 3.864% Series 1 Notes Unsecured syndicated bank credit facility Other long-term obligations Interest on unsecured bank credit facilities Interest on 144A 3.25% private notes Interest on 144A 3.05% private notes Interest on unsecured 3.864% Series 1 Notes Interest on other long-term debt Trade and other payables Accrued post-employment benefit liabilities Lease liabilities Total contractual cash obligations 4.8 $ 10.1 $ 2.0 4.3 $ 2.0 4.3 627.4 674.2 677.7 750.5 806.4 813.2 298.8 298.9 300.0 9.5 5.6 394.1 2.3 396.2 2.3 $ 1.8 2.3 — — — — 1.6 * * * * * * * * 91.3* 10.8 82.6* 5.5 183.9* 10.3 61.3* 3.3 * 1,321.5 * 1,394.4 0.3 1,394.4* 0.1 1,394.4 * 144.6 * 179.6 228.2* 186.3 3.0 21.5 0.1 0.6 — — — — 0.2 11.0 11.0 12.4 5.8 — — 3.0 19.9 $ 0.1 0.5 $ — 0.8 $ — 0.1 — — — — 0.5 22.0 22.0 24.8 11.6 0.1 — 17.2 31.0 677.7 — — — 396.2 — 47.5 44.1 74.4 34.8 0.1 — 77.8 62.8 813.2 300.0 — — — — 62.0 5.8 — — 127.2 51.1 $ 3,172.8 $ 3,756.2 $ 4,424.0 $ 1,454.6 $ 64.0 $ 129.8 $ 1,416.2 $ 1,359.4 * Accrued long-term employee benefit and post-employment benefit liability of $15.7 million, accrued interest of $10.3 million on unsecured notes, unsecured bonds and unsecured syndicated credit facilities, and accrued interest of $2.4 million on derivatives are reported in trade and other payables in 2022 (2021: $13.8 million, $9.6 million and $2.4 million, respectively). (d) Currency risk Exposure to currency risk The Company’s exposure to foreign currency risk was as follows based on notional amounts: U.S. Dollar 212.1 315.4 336.9 384.4 December 31, 2022 December 31, 2021 U.K. Pound 17.3 27.1 35.1 — Euro 134.7 159.3 233.0 749.4 U.S. Dollar 151.1 343.1 364.5 319.7 U.K. Pound 25.4 20.3 31.4 — Euro 104.9 142.1 205.7 706.6 Cash and cash equivalents Trade and other receivables Trade and other payables Long-term debt 94 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report Sensitivity analysis A 5% weakening of the Canadian dollar, as indicated below, against the following currencies at December 31 would have increased (decreased) equity and income by the amounts shown below. This analysis assumes that all other variables; in particular, interest rates, remain constant. Euro U.S. dollar U.K. pound 2022 (41.1) (25.5) 26.0 Equity 2021 (25.4) (19.7) 6.1 Income Statement 2021 (0.6) 3.0 0.1 2022 (0.5) 3.8 0.3 A 5% strengthening of the Canadian dollar against the above currencies at December 31 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. (e) Interest rate risk An increase of 100 basis points in interest rates on the floating rate debt and cash equivalents as at the reporting date would increase net earnings by $4.4 million (2021 – $5.4 million increase). This analysis assumes that all other variables; in particular, foreign currency rates, remain constant. (f) Fair values versus carrying amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statement of financial position, are as follows: Assets carried at fair value: Other assets Derivative financial assets Assets carried at amortized cost: Trade and other receivables Cash and cash equivalents Liabilities carried at fair value: Derivative financial liabilities Liabilities carried at amortized cost: Trade and other payables Unsecured 144A 3.25% private notes Unsecured 144A 3.05% private notes Unsecured 3.864% Series 1 Notes Unsecured syndicated bank credit facilities Other loans December 31, 2022 December 31, 2021 $ $ $ $ $ $ $ Carrying Amount 18.7 65.5 84.2 1,100.5 839.5 1,940.0 0.1 0.1 1,394.4 674.2 806.4 298.8 394.1 8.6 $ $ $ $ $ $ $ Fair Value 18.7 65.5 84.2 1,100.5 839.5 1,940.0 0.1 0.1 1,394.4 613.5 673.9 282.2 394.1 8.6 $ $ $ $ $ $ $ Carrying Amount 19.7 16.3 36.0 1,083.8 602.1 1,685.9 42.2 42.2 1,321.5 627.4 750.5 298.8 9.5 20.5 $ $ $ $ $ $ $ Fair Value 19.7 16.3 36.0 1,083.8 602.1 1,685.9 42.2 42.2 1,321.5 663.3 781.7 320.4 9.5 20.5 $ 3,576.6 $ 3,366.7 $ 3,028.2 $ 3,116.9 The basis for determining fair values is disclosed in note 3. The interest rates used to discount estimated cash flows for the unsecured notes are based on the government yield curve at the reporting date, plus an adequate credit spread. 95 2022 Annual Report (g) Fair value hierarchy The table below summarizes the levels of hierarchy for financial assets and liabilities. The different levels have been defined as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2: inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). December 31, 2022 Other assets Derivative financial assets Long-term debt Derivative financial liabilities December 31, 2021 Other assets Derivative financial assets Long-term debt Derivative financial liabilities Level 1 Level 2 Level 3 Total 18.7 — — — 18.7 $ $ — 65.5 (1,972.3) (0.1) $ (1,906.9) $ — — — — — $ 18.7 65.5 (1,972.3) (0.1) $ (1,888.2) Level 1 Level 2 Level 3 Total 19.7 — — — 19.7 $ $ — 16.3 (1,795.4) (42.2) $ (1,821.3) $ — — — — — $ 19.7 16.3 (1,795.4) (42.2) $ (1,801.6) $ $ $ $ The methods and assumptions used to measure the fair value are as follows: The fair value of derivative financial instruments generally reflects the estimated amounts that the Company would receive to sell favourable contracts or pay to transfer unfavourable contracts, at the reporting date. The Company uses discounted cash flow analysis and market data such as interest rates, credit spreads and foreign exchange spot rates to estimate the fair value of forward agreements and interest-rate derivatives. The fair value of long-term debt is estimated using public quotations, when available, or discounted cash flow analysis based on the current corresponding borrowing rate for similar types of borrowing arrangements. 2 5. F I N A N C I A L R I S K M A N AG E M E N T The Company has exposure to the following risks from its use of financial instruments: • credit risk; • liquidity risk; and • market risk. This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. 96 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report (a) Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and it arises principally from the Company’s receivables from customers and investment securities. The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s payment and delivery terms and conditions are offered. The Company’s review includes external ratings, where available, and in some cases bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval from senior management; these limits are reviewed quarterly. Customers that fail to meet the Company’s benchmark creditworthiness may transact with the Company only on a prepayment basis. The Company is potentially exposed to credit risk arising from derivative financial instruments if a counterparty fails to meet its obligations. These counterparties are large international financial institutions, and, to date, no such counterparty has failed to meet its financial obligations to the Company. As at December 31, 2022, the Company’s exposure to credit risk arising from derivative financial instruments amounted to $68.7 million (2021 – $16.3 million). (b) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity by monitoring expected cash flows and to ensure the availability of credit as much as possible, that it will always have sufficient liquidity to meet its liabilities when they are due. The financial obligations of the Company include trade and other payables, long-term debt and other long-term items. The contractual maturity of trade payables is six months or less. Long-term debt includes instruments with varying maturities extending to 2030. The Company has the capacity to discharge its current liabilities from the continued cash flows from business operations and an additional $839.5 million of cash on hand and US$906.4 million of available capacity within its syndicated bank credit facility at December 31, 2022. (c) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices, will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Company uses derivatives to manage market risks. Generally, the Company seeks to apply hedge accounting in order to manage volatility in profit or loss. The Company does not utilize derivative financial instruments for speculative purposes. (i) Currency risk The Company operates internationally, giving rise to exposure to market risks from changes in foreign exchange rates. The Company partially manages these exposures by contracting primarily in Canadian dollars, euros, U.K. pounds and U.S. dollars. Additionally, each subsidiary’s sales and expenses are primarily denominated in its local currency, further minimizing the foreign exchange impact on the operating results. In other cases, borrowings are done by non-Canadian-dollar-based subsidiaries in their own functional currencies such that the principal and interest are denominated in a currency that matches the cash flows generated by those subsidiaries. These provide natural hedges that do not require the application of hedge accounting. (ii) Interest rate risk The Company is exposed to market risk related to interest rate fluctuations on its debt. To mitigate this risk, the Company maintains a combination of fixed and floating rate debt. (iii) Commodity price risk Polypropylene is the most significant input cost for the Innovia Segment. It is traded in the market, with prices linked to the market price of natural gas and refining capacity. The Segment does not use derivative financial instruments to hedge its exposure to the volatility of polypropylene prices; therefore, movements must be managed and, where possible, passed along to the Segment’s customers. 97 2022 Annual Report(d) Capital management The Company’s objective is to maintain a strong capital base throughout the economic cycle to maintain investor, creditor and market confidence and to sustain the future development of the business. This capital structure supports the Company’s objective to provide an attractive financial return to its shareholders equal to that of its leading specialty packaging peers. The Company defines capital as average total equity and measures the return on capital (or return on equity) by dividing annual net earnings before goodwill impairment loss and restructuring and other items by the average of the beginning and the end-of-year shareholders’ equity. In 2022, the return on capital was 15.9% (2021 – 17.2%). Management and the Board maintain a balance between the expected higher return on capital that might be possible with a higher level of financial debt and the advantages and security afforded by a lower level of financial leverage. The Company has provided a growing level of dividends to its shareholders over the last few years, generally related to its growth in earnings. Dividends are declared bearing in mind the Company’s current earnings, cash flow and financial leverage. There were no changes in the Company’s approach to capital management during the year. The Company is subject to certain financial covenants on its unsecured syndicated bank credit facility. The Company monitors the ratios on a quarterly basis and at December 31, 2022, was in compliance with all its covenants. 2 6. C O M M I T M E N T S A N D C O N T I N G E N C I E S (a) Commitments As at December 31, 2022, the Company had uncollateralized surety bonds of $52.4 million (2021 – $39.7 million), primarily to the Brazilian Tax Authority in order to facilitate the appeal of tax reassessments. The Company intends to vigorously defend these claims, which the Company considers to be without merit and, accordingly, has made no provision for the matter. (b) Contingencies In the normal course of operations, the Company and its subsidiaries may be subject to lawsuits, investigations and other claims, including environmental, labour, product, customer disputes and other matters. In the first quarter of 2019, a hearing on a jurisdictional issue was heard in respect of a lawsuit launched in 2011 by Benoy Berry and a company controlled by him, Global Secure Currency Ltd. (collectively “Berry”), in Nigerian Federal Court against CCL Secure Pty Ltd. (formerly Innovia Security Pty Ltd.) (“ISPL”), and Innovia Films Ltd. (collectively “IFL”), as well as other defendants not affiliated with ISPL. The court denied IFL’s motion to dismiss the lawsuit on the jurisdictional issue. IFL is appealing that decision to the highest appeals court in Nigeria. The lawsuit alleges that IFL and the co-defendants committed to build a banknote substrate plant in Nigeria and Berry seeks an order requiring IFL and the co-defendants to build the plant or in lieu thereof, grant an award of total damages in the amount of €1.5 billion ($2.2 billion). IFL intends to vigorously defend this claim, which the Company considers to be without merit and accordingly, the Company has made no provision for the matter. Management believes that adequate provisions for legal claims have been recorded in the accounts where required. Although it is not always possible to accurately estimate the result or magnitude of legal claims due to the various uncertainties involved in the legal process, management believes that the ultimate resolution of all such pending matters, individually and in the aggregate, will not have a material adverse impact on the Company, its business, financial position or liquidity. 98 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report2 7. R E L AT E D PA R T I E S (a) Beneficial ownership The directors and officers of CCL Industries Inc. as a group beneficially own, control, or direct, directly or indirectly, approximately 11.2 million of the issued and outstanding Class A voting shares, representing 95.0% of the issued and outstanding Class A voting shares. (b) Loan guarantees The Company has provided various loan guarantees for its joint ventures and associates totaling $19.9 million (2021 – $21.3 million). 2 8 . K E Y M A N AG E M E N T P E R S O N N E L C O M P E N SAT I O N Short-term employee compensation and benefits Share-based compensation Post-employment benefits 2 9. AC C U M U L AT E D OT H E R C O M P R E H E N S I V E LO S S Unrealized foreign currency translation losses, net of tax recovery of $3.3 million (2021 – tax expense of $1.8 million) Gains on derivatives designated as cash flow hedges, net of tax recovery of nil (2021 – tax expense of $nil) 2022 9.9 5.2 0.9 $ 16.0 $ 2021 10.3 4.9 0.6 15.8 2022 2021 (65.5) $ (241.5) 0.1 0.1 (65.4) $ (241.4) $ $ $ $ 99 2022 Annual Report 3 0. R E S T R U C T U R I N G A N D OT H E R I T E M S Restructuring costs Acquisition costs Total restructuring and other items 2022 10.3 1.4 11.7 $ $ 2021 3.9 0.5 4.4 $ $ For the full year 2022, restructuring costs and other items represented an expense of $11.7 million ($9.7 million after tax) as follows: • Restructuring expenses of $10.3 million ($8.3 million after tax), primarily related to severance and reorganization costs across the CCL, Checkpoint and Innovia Segments. • Acquisition transaction costs totaled $1.4 million ($1.4 million after tax), for the three acquisitions closed in 2022. For the full year 2021, restructuring costs and other items represented an expense of $4.4 million ($3.5 million after tax) as follows: • Restructuring expenses of $3.9 million ($3.0 million after tax), primarily related to severance and reorganization costs across the CCL, Checkpoint and Innovia Segments. • Acquisition transaction costs totaled $0.5 million ($0.5 million after tax), for the nine acquisitions closed in 2021. 3 1 . S U B S E Q U E N T E V E N T S Prior to the release of the 2022 annual consolidated financial statements, the Company announced the following: • The Board of Directors has declared a dividend of $0.265 per Class B non-voting share and $0.2625 per Class A voting share, which will be payable to shareholders of record at the close of business on March 17, 2023, to be paid on March 31, 2023. 100 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears ended December 31, 2022 and 2021 (In millions of Canadian dollars, except per share information)2022 Annual Report S I X Y E A R F I N A N C I A L S U M M A R Y (In millions of Canadian dollars, except share and ratio data) 2022 2021 2020 2019 2018 2017 Sales & Net Earnings Sales Depreciation and amortization Net finance costs Net Earnings Basic net earnings per Class B Share $ 6,382.2 $ 5,732.8 $ 5,242.3 $ 5,321.3 $ 5,161.5 $ 4,755.7 365.3 64.8 622.71 342.4 56.9 599.12 346.4 65.2 529.73 329.6 81.0 477.14 278.0 80.7 466.85 259.2 75.2 474.16 $ 3.501 $ 3.332 $ 2.963 $ 2.684 $ 2.645 $ 2.706 $ Financial Position Current Assets Current Liabilities Working capital7 Total Assets Net debt Shareholders’ equity $ Net debt to equity ratio Net debt to total book capitalization 2,819.7 1,501.4 1,318.3 8,664.4 1,522.3 4,265.2 0.36 $ $ 2,447.6 1,418.0 1,029.6 7,627.8 1,249.2 3,747.0 0.33 $ $ 2,224.7 1,262.0 962.7 7,336.7 1,390.9 3,282.2 0.42 $ $ 2,105.0 1,148.0 957.0 7,038.0 1,716.2 2,897.7 0.59 $ $ 2,125.2 1,346.9 778.3 7,027.6 1,902.5 2,673.1 0.71 $ $ 1,851.6 1,299.7 551.9 6,144.0 1,773.9 2,157.9 0.82 26.3% 25.0% 29.8% 37.2% 41.6% 45.1% Number of Shares (000,000’s) Class A – Dec 31 Class B – Dec 31 Weighted average for the year 11.8 165.2 178.0 11.8 168.4 179.7 11.8 167.4 178.7 11.8 166.8 178.0 11.8 165.9 176.8 11.8 165.0 175.8 $ Cash Flow Cash provided by operations Additions to plant, property & equipment Business acquisitions Dividends Dividends per Class B share $ 992.8 $ 838.7 $ 882.9 $ 779.5 $ 772.7 $ 711.2 447.2 287.2 170.3 323.8 234.4 151.0 282.8 161.4 128.7 345.6 40.4 121.1 352.9 365.9 92.2 285.7 1,191.4 81.2 0.96 $ 0.84 $ 0.72 $ 0.68 $ 0.52 $ 0.46 Note: 1 After pre-tax restructuring and other items – net loss of $11.7 million. 2 After pre-tax restructuring and other items – net loss of $4.4 million. 3 After pre-tax restructuring and other items – net loss of $27.6 million. 4 After pre-tax restructuring and other items – net loss of $25.0 million. 5 After pre-tax restructuring and other items – net loss of $14.8 million. 6 After pre-tax restructuring and other items – net loss of $11.3 million. 7 Current assets minus current liabilities. 101 2022 Annual Report Europe Asia Pacific Günther Birkner President, Food & Beverage, Healthcare & Specialty and Innovia Zurich, Switzerland Derek Cumming Group Vice President, CCL Design East Kilbride, Scotland Scott Mitchell-Harris Group Vice President, Checkpoint ALS and MAS Europe Barcelona, Spain Lee Pretsell Group Vice President, Healthcare & Specialty Dublin, Ireland Werner Ehrmann Vice President, Technology Development Holzkirchen, Germany Simon Huber Managing Director, Innovia Films Europe Zurich, Switzerland Mathias Maennel Vice President & Managing Director, CCL Design Europe Solingen, Germany Michael McGarry Vice President & Managing Director, Healthcare Europe Belfast, Northern Ireland Jamie Robinson Vice President & Managing Director, Home & Personal Care Europe and Food and Beverage, U.K. Castleford, England Reinhard Streit Vice President & Managing Director, Food & Beverage Europe Völkermarkt, Austria Jim Anzai Vice President & Managing Director, CCL Industries North Asia Tokyo, Japan Da Gang Li Group Vice President, CCL Industries Greater China Shanghai, PR China Pravin Krishnan Vice President & Managing Director, CCL Design ASEAN Singapore Kittipong Kulratanasinsuk Vice President & Managing Director, CCL Label ASEAN Bangkok, Thailand Daniel Choo Thian Chau Managing Director, CCL Label & Checkpoint Vietnam Ho Chi Minh City, Vietnam Lifeng Wang Vice President & Managing Director, CCL Design – Intelligent Decorative Technologies Suzhou, PR China Alex Zhu Vice President & Managing Director, CCL Design Greater China Suzhou, PR China Mark Gentle Vice President & Managing Director, Checkpoint & Meto Australia, New Zealand & ASEAN Melbourne, Australia Neil Sanders Vice President & Managing Director, CCL Secure – Polymer Bank Notes Melbourne, Australia Latin America Luis Jocionis Goup Vice President, CCL Industries South America São Paulo, Brazil 2 0 2 2 B U S I N E S S L E A D E R S H I P North America Mark Cooper President, Avery & METO Brea, California, USA Ben Lilienthal President, Checkpoint & Group Vice President, CCL Industries Central America Thorofare, New Jersey, USA Ben Rubino President, Home & Personal Care Lumberton, New Jersey, USA Stephan Finke Vice President & Managing Director, Food & Beverage North America and Australia/New Zealand Sonoma, California, USA Eric Frantz Group Vice President, Home & Personal Care, North America Hermitage, Pennsylvania, USA Bill Goldsmith Vice President Business Development, CCL Design North America Clinton, South Carolina, USA Al Green Vice President, Technology Development Clinton, South Carolina, USA Andy Iseli Vice President & General Manager, CCL Tube Los Angeles, California, USA Jon Knight Vice President & General Manager, Innovia Films North America Winston-Salem, North Carolina, USA Sandra Lane Vice President, CCL Secure North America Greensboro, North Carolina, USA John O’Brien Vice President & General Manager, CCL Label Canada Toronto, Ontario, Canada Allison Phillips Vice President, Strategic Business Development Avery North America Brea, California, USA Patrick Thomas Vice President & General Manager, CCL Design North America Strongsville, Ohio, USA 102 2022 Annual Report2 0 2 2 C O R P O R AT E E X E C U T I V E S Donald G. Lang Executive Chairman Geoffrey T. Martin President and Chief Executive Officer Suzana Furtado Corporate Secretary Kamal Kotecha Vice President, Taxation Mark McClendon Vice President and General Counsel James A. Sellors Senior Vice President, CCL Industries Asia Pacific Lalitha Vaidyanathan Senior Vice President, Finance-IT-Human Resources, CCL Industries Nick Vecchiarelli Vice President, Corporate Accounting Monika Vodermaier Vice President, Corporate Finance Europe Sean P. Washchuk Senior Vice President and Chief Financial Officer 2 0 2 2 B O A R D O F D I R E C T O R S Angella V. Alexander Director since 2023 Chief Human Resources Officer, ATS Corporation Ontario, Canada Linda G. Cash Director since 2021 Corporate Director Georgia, U.S.A. Vincent J. Galifi Director since 2016 President, Magna International Inc. Ontario, Canada Kathleen L. Keller-Hobson Director since 2015 Corporate Director Ontario, Canada Donald G. Lang Director since 1991 Executive Chairman, CCL Industries Inc. Ontario, Canada Erin M. Lang Director since 2016 Managing Director, LUMAS Canada Ontario, Canada Stuart W. Lang Director since 1991 Corporate Director Ontario, Canada Geoffrey T. Martin Director since 2005 President and CEO, CCL Industries Inc. Massachusetts, U.S.A. Douglas W. Muzyka Director since 2016 Corporate Director Pennsylvania, U.S.A. Thomas C. Peddie Director since 2003 Corporate Director Ontario, Canada 103 2022 Annual ReportS H A R E H O L D E R S ’ I N F O R M AT I O N Auditors KPMG LLP Chartered Professional Accountants Legal Counsel McMillan LLP Transfer Agent TSX Trust Company 301-100 Adelaide Street West Toronto, ON M5H 4H1 Email: Investor Services: Fax: Website: shareholderinquiries@tmx.com (416) 682-3860 or (800) 387-0825 (888) 249-6189 or (514) 985-8843 (outside Canada and the U.S.A.) www.tsxtrust.com Financial Information Institutional investors, analysts and registered representatives requiring additional information may contact: Sean Washchuk Senior Vice President and CFO (416) 756-8526 Additional copies of this report can be obtained from: CCL Industries Inc. Investor Relations Department 111 Gordon Baker Road Suite 801 Toronto, ON M2H 3R1 Tel: Fax: Email: Website: (416) 756-8500 (416) 756-8555 ccl@cclind.com www.cclind.com Annual Meeting of Shareholders The Annual Meeting of Shareholders will be held on: May 11, 2023 at 2:00 p.m. CCL Industries Inc. 111 Gordon Baker Road Suite 801 Toronto, ON M2H 3R1 Class B Share Information Stock Symbol CCL.B Listed TSX Opening price 2022 Closing price 2022 Number of trades Trading volume (shares) Trading value Annual dividends declared $68.76 $57.84 400,400 69,097,238 $4,228,221,597 $0.96 Shares outstanding at December 31, 2022 Class A voting shares Class B non-voting shares 11,814,887 165,231,489 3 2 0 2 – o i d u t S n g i s e D E V O B L E D y b d e n g i s e D 104 This report is printed on recyclable, acid-free and chlorine free paper. Printed in Canada. 2022 Annual Report CCL Industries Inc. 111 Gordon Baker Road, Suite 801 Toronto, ON M2H 3R1, Canada Tel +1 (416) 756 8500 161 Worcester Road Framingham, MA 01701, USA Tel +1 (508) 872 4511 www.cclind.com 

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