Graphic Packaging Company
Annual Report 2021

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G R A P H I C P A C K A G I N G H O L D I N G C O M P A N Y | 2 0 2 1 A N N U A L R E P O R T Inspired packaging. A world of difference. 2021 Annual Report Graphic Packaging Holding Company (NYSE: GPK), headquartered in Atlanta, Georgia, is committed to providing consumer packaging that makes a world of difference. The Company is a leading provider of sustainable fiber-based packaging solutions for a wide variety of products to food, beverage, foodservice, and other consumer products companies. The Company operates on a global basis, is one of the largest producers of folding cartons and fiber-based foodservice products in the United States and Europe, and holds leading market positions in coated recycled paperboard (CRB), coated unbleached kraft paperboard (CUK) and solid bleached sulfate paperboard (SBS). The Company’s customers include many of the world’s most widely recognized companies and brands. Additional information about Graphic Packaging, its business and its products is available on the Company’s website at www.graphicpkg.com GR APHIC PACK AGING HOLDING COMPANY | 1 Delivering Solutions that Consumers Prefer ● Sustainable fiber-based packaging ● Primary raw material is continuously replanted ● Recyclable and reduced environmental impact at end-of-life ● Virgin paperboard is recycled into new packaging ● Alternative to plastic packaging ● High performance and quality ● Product protection that is right-sized 2 | 2021 ANNUAL REPORT Manufacturing Process Innovations Extend Our Leadership K2 Machine—Kalamazoo, Michigan Two years of focused investment have culminated in the start-up of the largest capital investment in Graphic Packaging’s history. Our K2 machine is the largest and lowest cost CRB machine in the world producing high quality CRB paperboard. The continued ramp up of our world-class K2 machine provides significant advantages including scaled production, reduced raw material consumption and the lowest-caliper capabilities in the industry. Financial Highlights in millions except for per share data INCOME STATEMENT DATA Net Sales Cost of Sales 1200 Selling, General, Administrative 1000 Income from Operations Interest Expense, Net 800 600 600 500 400 300 Net Income Attributable to Graphic Packaging Holding Company (GPHC) 400 Weighted Average Number of Basic Shares Outstanding 200 200 100 Weighted Average Number of Diluted Shares Outstanding 0 2019 Net Income Per Share Attributable to GPHC—Diluted 2020 2020 2019 2021 2021 0 2019 2020 2021 GR APHIC PACK AGING HOLDING COMPANY | 3 Year Ended December 31 2019 2020 2021 $ 7,156 $ 6,560 $ 6,160 6000 6,085 5,460 5,068 528 5000 407 4000 123 3000 204 2000 297 1000 298 0 0.68 513 524 129 167 279 280 2019 2020 0.60 512 534 141 207 294 295 2021 0.70 8000 7000 6000 5000 4000 3000 2000 1000 0 BALANCE SHEET DATA Cash and Cash Equivalents Total Assets Total Debt Total Equity $ 172 $ 179 $ 152 10,457 7,805 7,290 5,831 1,893 3,666 2,873 1,840 2,058 NET SALES in millions $7,156 $6,560 $6,160 ADJUSTED EBITDA(1) in millions ADJUSTED CASH FLOW (1, 2) in millions $1,030 $1,070 $1,056 $528 NET DEBT (1, 3) in millions $5,659 $345 $3,487 $2,720 $81 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 (1) The calculation of Adjusted EBITDA, Adjusted Cash Flow and Net Debt and a reconciliation to GAAP measures can be found in the Company’s fourth quarter 2021 earnings release, which is available on www.graphicpkg.com (2) 2020 and 2021 Adjusted Cash Flow includes significant multi-year capital investments including the new K2 machine in Kalamazoo, Michigan (3) 2021 Net Debt increased due to financing to complete the AR Packaging acquisition 4 | 2021 ANNUAL REPORT Dear Fellow Stockholders, Amidst the second year of a global pandemic, 2021 was a year of both resilience and growth. Our global team of employees remained dedicated to delivering excellent service and quality to our customers. Not only did we continue to innovate and design more sustainable products, we also commissioned our new state-of-the-art machine in Kalamazoo, Michigan. We completed the strategic acquisitions of AR Packaging, one of Europe’s largest fiber-based consumer packaging producers, and Americraft Carton, a large independent carton manufacturer in the United States. We also concluded our partnership with International Paper with the redemption of the final tranche of their minority ownership interest. Michael P. Doss President and Chief Executive Officer Our growth trajectory continued as we posted 2% net organic sales1 growth for the year, at the high end of our target range of 1% to 2%. Inflationary pressures were significant in 2021, temporarily impacting profitability, but we executed well and largely offset this headwind. We implemented multiple pricing initiatives and once again improved net performance. Our integration rate increased 200 basis points to 72% and we maintained strong liquidity of $1.3 billion at year end. Overall, we are doing what we said we would do. With the tremendous work our team accomplished, I am pleased to report Graphic Packaging’s 2021 financial performance. 2021 CONSOLIDATED RESULTS • Net Sales of $7.2 billion grew 9% from 2020 • Adjusted EBITDA2 of $1.05 billion decreased 1% from 2020 • Adjusted EPS2 of $1.14 improved 2% from 2020 • Adjusted Cash Flow2 of $81 million Progress on Vision 2025 Fiber-based consumer packaging is a superior, sustainable form of packaging across the full product life cycle. Consumer preference for fiber-based packaging and products has increased as societies move to a more circular economy. This momentum and the investments we continue to make in innovation provide confidence we can achieve our Vision 2025 goals. In 2021, we made progress across each of the four Vision 2025 pillars. Growing with the Best Customers in the Best Markets Sustainability and environmentally friendly solutions continue to be top of mind for consumers, legislators, and brands around the world. In 2021, the Single Use Plastic Directive took effect in Europe, which banned certain plastic products and directed member states to enact regulations to reduce single-use plastic consumption. Numerous municipalities in the United States also implemented regulations banning specific plastic packaging. With our focus on this consumer trend, we continued our innovations, addressing market demands for plastic packaging alternatives. (1) Net organic sales = Net sales - open market sales - sales from acquisitions closed within the last 12 months - pricing - FX impact (2) Adjusted EBITDA, Adjusted EPS and Adjusted Cash Flow represent non-GAAP measures. Please refer to the fourth quarter 2021 earnings press release for reconciliation to GAAP measures GR APHIC PACK AGING HOLDING COMPANY | 5 EUROPEAN FOOTPRINT Graphic Packaging AR Packaging EUROPEAN HEADQUARTERS Brussels, Belgium Strategic Acquisition Expands Scale in Growing European Markets AR Packaging—Lund, Sweden The acquisition enhances our global scale, innovation capabilities and our value proposition for customers throughout Europe and surrounding regions. With a broad set of industry-leading consumer packaging solutions, we are uniquely positioned to capture continued growth opportunities across existing and new customers and markets globally. 6 | 2021 ANNUAL REPORT Adoption of our KeelClip™ packaging solution is expanding globally. First commercialized in Europe, global consumer preferences for sustainable packaging are driving KeelClip adoption across Europe, Scandinavia, Brazil and now Canada. Labatt Breweries of Canada announced its planned investment and implementation of KeelClip in 2021, becoming our first customer in Canada. KeelClip™, our fiber-based alternative to plastic rings and shrink film, continued to grow. In 2021, we further expanded into new geographies including Canada and Brazil. We also extended our multi- pack portfolio by launching the Cap-It™ system, a fiber-based clip solution for PET bottles. Both innovations use our proprietary high-speed packaging machinery that can achieve the speeds and scale required by global beverage manufacturers. Our award-winning PaperSeal® line of trays offer brands and retailers a paperboard alternative that reduces plastic usage by up to 90%. PaperSeal continues to gain traction with sales doubling in 2021. We launched PaperSeal Cook in 2021, which extends the PaperSeal technology to oven and microwave-ready chilled and frozen food applications. ProducePack™, another award-winning plastic substitution line of packaging for fresh fruits and vegetables, has enjoyed success in both the European and North American markets. We expanded the line and launched ProducePack Punnet, suitable for a wide range of applications to deliver an effective alternative to traditional plastic packaging. Made from renewable paperboard, it can achieve up to a 100% reduction in plastic when a barrier coating is not required. Finally OptiCycleTM, a new, innovative line of non-polyethylene (PE) coated foodservice cups and cartons, was launched during the year. OptiCycle products are made to be more easily recyclable and allow for greater fiber recovery during the recycling process versus alternative barrier technologies. Generating Superior Returns Our Company’s history of strong financial performance provides the opportunity to exercise a balanced approach to capital allocation. 2021 was no different as we continued to invest back into the business and execute strategic M&A. In 2019, we announced our transformational investment in a new world-class CRB machine. In 2022, we are producing commercial paperboard of the highest quality with the best cost structure in the world. Our K2 machine and CRB optimization project is expected to return $130 million of incremental annual Adjusted EBITDA over three years, and will also reduce greenhouse gases, water usage and purchased energy. We became the leading fiber-based consumer packaging company in Europe as a result of the AR Packaging acquisition that we completed in November 2021. This transaction added sales of approximately $1.2 billion and 26 converting plants. Europe now represents approximately 22% of net sales on a pro-forma basis. The acquisition further strengthens organic growth opportunities by adding new market segments such as Healthcare & Beauty and by expanding our presence in Eastern Europe. The Americraft Carton acquisition strengthened our U.S. consumer portfolio. Our strategic allocation of capital over the last two years has transformed the business. We expanded our global footprint, strengthened our innovation capabilities, and entered new growth market segments. Over this same two-year period, we also returned over $1 billion to stakeholders through dividends, distributions, redemptions and share repurchases. GR APHIC PACK AGING HOLDING COMPANY | 7 Focus on Improving the Planet We take pride in our ability to develop innovative products that provide value to our customers while helping them achieve their sustainability objectives. Ninety-eight percent of our sales come from products that can be recycled today. We are making solid progress on our planet goals as well. With the completion of the K2 CRB machine start-up and execution of our CRB platform optimization plan, we will drive incremental improvements towards our water, energy and GHG intensity reduction goals. We also submitted a letter of commitment to the Science-Based Target (SBT) Initiative to establish SBTs that will focus our efforts on mitigating the GHG emissions from both our operations and our supply chain. We further advanced our sustainable growth vision in 2021 by hiring our first Chief Sustainability Officer and becoming a signatory to the United Nations Global Compact (UNGC). As a signatory, we formalized our commitment to act in accordance with the UNGC’s 10 principles of the compact, covering human rights, labor, the environment, and to take action in support of the broader UN Sustainable Development Goals. As we look forward, our focus will be on refining the interconnection of ESG with our sustainable growth strategy and advancing reporting transparency on topics that are most impactful for stakeholders. Packaging Solutions Made from Renewable, Recycled and Recyclable Materials We are focused on all stages of the packaging lifecycle. Our solutions start with trees, a renewable and sustainably managed resource, and benefit from high recovery and recycling rates. The circular process puts valuable fiber back into manufacturing with the goal to repurpose it into new packaging solutions. 8 | 2021 ANNUAL REPORT Engaging our Employees in a High-Performance Culture Important to the Company’s long-term success is ensuring our people feel safe, valued, included and engaged—from recruitment to retirement. We are focusing on human capital objectives; specifically, organizational culture, inclusion and diversity, ethics and compliance, training, and positive employee relations and engagement. In 2021, we launched an inclusion council made up of employees and senior leaders that act on behalf of the Company to oversee our diversity and inclusion programs. We established our first four business resource groups: AAPI+ (Asian American, Pacific Islander), Alianza Latinx+, BEGN+ (Black Employee Global Network) and Women@GPI. Each group is sponsored by a senior executive with a charter to promote the unique cultural differences representative of our global communities. During the year, we held a Women in Leadership Development Experience and a Diversity Speaker Series that was well attended by employees. To continue to develop our people, we partnered with LinkedIn learning and launched front-line and mid-level manager training courses. It was an eventful year and I want to thank our customers for their business, our 25,000 employees for their continued hard work and dedication, and our stockholders for their trust. We intend to further build on our successful platform of innovative fiber-based packaging solutions to benefit our customers, our employees, and all stakeholders. Michael P. Doss President and Chief Executive Officer AWARD–WINNING PACKAGING We won awards in the following competitions: AmeriStar Awards, PAC Canadian Awards, European Carton Excellence Awards, Paperboard Packaging Council Awards (PPC), UK Packaging Awards, GoldPack, Liderpack, Good Design Awards, Benelux Flexo Awards, PAC Global Awards. Pyramid Pack Aveda ProducePack™ BelleHavest Boardio™ Perfetti van Melle Rounded Corners Estrella Damm PaperSeal® ICA Supermarkets UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☑ ☐ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to or COMMISSION FILE NUMBER: 001-33988 Graphic Packaging Holding Company (Exact name of registrant as specified in its charter) Delaware 26-0405422 (State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.) 1500 Riveredge Parkway, Suite 100 Atlanta, Georgia (Address of principal executive offices) 30328 (Zip Code) (770) 240-7200 Registrant’s telephone number, including area code: Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, $0.01 par value per share Trading Symbol(s) GPK Securities registered pursuant to Section 12(g) of the Act: None Name of Each Exchange on Which Registered New York Stock Exchange Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☑ Accelerated filer ☐ Smaller reporting company ☐ Non-accelerated filer ☐ (Do not check if a smaller reporting company) Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑ No ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑ The aggregate market value of voting and non-voting common equity held by non-affiliates at June 30, 2021 was approximately $5.5 billion. As of February 21, 2022 there were approximately 307,103,551 shares of the registrant’s Common Stock, $0.01 par value per share outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. 4 5 13 16 16 18 18 19 21 23 24 38 40 90 90 90 91 91 91 91 91 91 92 96 97 INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS PART I TABLE OF CONTENTS OF FORM 10-K BUSINESS ITEM 1. ITEM 1A. RISK FACTORS ITEM 1B. UNRESOLVED STAFF COMMENTS ITEM 2. ITEM 3. ITEM 4. MINE SAFETY DISCLOSURES PROPERTIES LEGAL PROCEEDINGS EXECUTIVE OFFICERS OF THE REGISTRANT PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES [RESERVED] ITEM 6. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ITEM 9A. CONTROLS AND PROCEDURES ITEM 9B. OTHER INFORMATION ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES PART IV ITEM 16. FORM 10-K SUMMARY SIGNATURES 3 INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS Certain statements regarding the expectations of Graphic Packaging Holding Company (“GPHC” and, together with its subsidiaries, the “Company”), including, but not limited to, startup charges for the new paperboard machine in Kalamazoo, Michigan, the availability of U.S. federal income tax attributes to offset U.S. federal income taxes and the timing related to the Company's future U.S. federal income tax payments, charges for exit activities, capital investment, depreciation and amortization, accelerated depreciation related to exit activities and pension plan contributions in this report constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and its present expectations. These risks and uncertainties include, but are not limited to, the continuing effects of the COVID-19 pandemic on the Company's operations and business, inflation of and volatility in raw material and energy costs, changes in consumer buying habits and product preferences, competition with other paperboard manufacturers and converters, product substitution, the Company’s ability to implement its business strategies, including strategic acquisitions, the Company's ability to successfully integrate acquisitions, productivity initiatives and cost reduction plans, the Company’s debt level, currency movements and other risks of conducting business internationally, and the impact of regulatory and litigation matters, including those that could impact the Company’s ability to utilize its U.S. federal income tax attributes to offset taxable income or U.S. federal income taxes and those that impact the Company's ability to protect and use its intellectual property. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date on which they are made and the Company undertakes no obligation to update such statements, except as may be required by law. 4 ITEM 1. BUSINESS Overview PART I Graphic Packaging Holding Company (“GPHC” and, together with its subsidiaries, the “Company”) is committed to providing consumer packaging that makes a world of difference. The Company is a leading provider of sustainable, fiber- based packaging solutions for a wide variety of products to food, beverage, foodservice and other consumer products companies. The Company operates on a global basis, is one of the largest producers of folding cartons in the United States ("U.S.") and Europe, and holds leading market positions in coated recycled paperboard ("CRB"), coated unbleached kraft paperboard (“CUK”) and solid bleached sulfate paperboard ("SBS"). The Company’s customers include many of the world’s most widely recognized companies and brands with prominent market positions in beverage, food, foodservice and other consumer products. The Company strives to provide its customers with innovative sustainable packaging solutions designed to deliver marketing and performance benefits at a competitive cost by capitalizing on its low-cost paperboard mills and converting plants, its proprietary carton and packaging designs, and its commitment to quality and service. On January 1, 2018, GPHC, a Delaware corporation, International Paper Company, a New York corporation (“IP”), Graphic Packaging International Partners, LLC, a Delaware limited liability company formerly known as Gazelle Newco LLC and a wholly-owned subsidiary of the Company (“GPIP”), and Graphic Packaging International, LLC, a Delaware limited liability company formerly known as Graphic Packaging International, Inc. and a direct subsidiary of GPIP (“GPIL”), completed a series of transactions pursuant to an agreement dated October 23, 2017, among the foregoing parties (the “Transaction Agreement”). Pursuant to the Transaction Agreement (i) a wholly-owned subsidiary of the Company transferred its ownership interest in GPIL to GPIP; (ii) IP transferred its North America Consumer Packaging (“NACP”) business to GPIP, which was then subsequently transferred to GPIL; (iii) GPIP issued membership interests to IP, and IP was admitted as a member of GPIP; and (iv) GPIL assumed certain indebtedness of IP (the "NACP Combination"). During 2020, GPIP purchased 32.5 million partnership units from IP for $500 million in cash, fully redeeming the 18.2 million partnership units that were required to be redeemed in cash. On February 16, 2021, the Company announced that IP had notified the Company of its intent to exchange additional partnership units. Per an agreement between the parties, on February 19, 2021, GPIP purchased 9.3 million partnership units from IP for $150 million in cash, and IP exchanged 15.3 million partnership units for an equivalent number of shares of GPHC common stock. On May 21, 2021, IP exchanged its remaining 22.8 million partnership units for an equivalent number of shares of GPHC common stock. As required by the parties' agreement, these shares were immediately sold by IP. As a result, IP has no ownership interest remaining in GPIP as of May 21, 2021. 5 Acquisitions, Closures, and Dispositions Over the past five years, the Company has successfully completed over ten acquisitions and expects to pursue strategic acquisition opportunities in the future as part of its overall growth strategy. 2021 On July 1, 2021, the Company acquired substantially all the assets of Americraft Carton, Inc. (“Americraft”), the largest independent folding carton converter in North America. The acquisition included seven converting plants across the United States and is reported within the Americas Paperboard Packaging reportable segment. For more information, see "Note 4 - Business Combinations" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” On November 1, 2021, the Company acquired all the shares of AR Packaging Group AB ("AR Packaging"), Europe's second largest producer of fiber-based consumer packaging. The acquisition included 30 converting plants in 13 countries and is reported within the Europe Paperboard Packaging reportable segment. For more information, see "Note 4 - Business Combinations" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” 2020 On January 31, 2020, the Company acquired a folding carton facility from Quad/Graphics, Inc. ("Quad"), a commercial printing company. The converting facility is located in Omaha, Nebraska and is included in the Americas Paperboard Packaging reportable segment. For more information, see "Note 4 - Business Combinations" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” In March 2020, the Company made the decision to close the White Pigeon, Michigan CRB mill and to shut down the PM1 containerboard machine in West Monroe, Louisiana. During the second quarter of 2020, the Company closed the White Pigeon, Michigan CRB mill and shut down the PM1 containerboard machine. For more information, see "Note 18 - Exit Activities" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” On April 1, 2020, the Company acquired the Consumer Packaging Group business from Greif, Inc. ("Greif"), a leader in industrial packaging products and services. The acquisition included seven converting plants across the United States, which are included in the Americas Paperboard Packaging reportable segment. For more information, see "Note 4 - Business Combinations" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” In June 2020, the Company made the decision to close certain converting plants that were acquired from Greif. The Burlington, North Carolina converting facility and the Los Angeles, California converting facility were closed during 2020. For more information, see "Note 18 - Exit Activities" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” 2019 On August 1, 2019, the Company acquired substantially all the assets of Artistic Carton Company ("Artistic"), a diversified producer of folding cartons and CRB. The acquisition included two converting plants located in Auburn, Indiana and Elgin, Illinois (included in the Americas Paperboard Packaging reportable segment) and one CRB mill located in White Pigeon, Michigan (included in the Paperboard Mills reportable segment). For more information, see "Note 4 - Business Combinations" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” During 2019, the Company announced its plans to invest in a new CRB paper machine in Kalamazoo, Michigan. At the time of the announcement, the Company expected to close two of its smaller CRB Mills in 2022 in order to remain capacity neutral. During the third quarter of 2021, the Company decided to continue to operate one of the two original smaller CRB mills at least through 2022. For more information, see "Note 18 - Exit Activities" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” Share Repurchases and Dividends On January 28, 2019, GPHC's board of directors authorized an additional share repurchase program to allow GPHC to purchase up to $500 million of GPHC's issued and outstanding shares of common stock through open market purchases, privately negotiated transactions and Rule 10b5-1 plans (the "2019 share repurchase program"). A previous $250 million share repurchase program was authorized on January 10, 2017 (the "2017 share repurchase program"). 6 Share repurchases are reflected as a reduction of common stock for the par value of the shares, with any excess of share repurchase price over par value allocated between capital in excess of par value and accumulated deficit. The Company did not repurchase any shares of its common stock under the 2019 share repurchase program for the year ended December 31, 2021. The following presents GPHC's share repurchases for the years ended December 31, 2020, and 2019: Amount repurchased in millions 2020 2019 (a) Includes 7,400,171 shares under the 2017 share repurchase program thereby completing that program. 316 128 $ 23,420,010 10,191,257 (a) $ Amount Repurchased $ $ Number of Shares Repurchased Average Price 13.48 12.55 At December 31, 2021, GPHC had approximately $147 million of share repurchase authority remaining under the 2019 share repurchase program. During 2021 and 2020, GPHC paid cash dividends of $87 million and $85 million, respectively. Products The Company has three reportable segments as follows: Paperboard Mills includes the eight North American paperboard mills that produce primarily CRB, CUK, and SBS, which is consumed internally to produce paperboard packaging for the Americas and Europe Packaging segments. The remaining paperboard is sold externally to a wide variety of paperboard packaging converters and brokers. Americas Paperboard Packaging includes paperboard packaging, primarily folding cartons, sold primarily to Consumer Packaged Goods ("CPG") companies, and cups, lids and food containers sold primarily to foodservice companies and Quick- Service Restaurants ("QSR") serving the food, beverage, and consumer product markets in the Americas. Europe Paperboard Packaging includes paperboard packaging, primarily folding cartons, sold primarily to CPG companies serving the food, beverage and consumer product markets including healthcare and beauty primarily in Europe. The Company operates in three geographic areas: the Americas, Europe and Asia Pacific. For reportable segment and geographic area information for each of the last three fiscal years, see "Note 15 - Business Segment and Geographic Area Information" in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data." Paperboard Packaging The Company’s paperboard packaging products deliver brand, marketing, sustainability and performance benefits at a competitive cost. The Company supplies paperboard cartons, carriers and containers designed to protect and hold products while providing: • Convenience through ease of carrying, storage, delivery, dispensing of product and food preparation for consumers; • A smooth surface printed with high-resolution, multi-color graphic images that help improve brand awareness and visibility of products on store shelves; and • Durability, stiffness and wet and dry tear strength; leak, abrasion and heat resistance; barrier protection from moisture, oxygen, oils and greases, as well as enhanced microwave heating performance. The Company provides a wide range of sustainable paperboard packaging solutions for the following end-use markets: • Beverage, including beer, seltzer, soft drinks, energy drinks, teas, water and juices; • Food, including cereal, desserts, frozen, refrigerated and microwavable foods, pet food and health/beauty; • Prepared food and drinks, including snacks, quick-serve food and drinks for restaurants and food service providers; • Household products, including dishwasher and laundry detergent, health care and beauty aids, and tissues and papers; and • Air filter frames. 7 The Company’s packaging applications meet the needs of its customers for: Strength Packaging. The Company's products provide sturdiness to meet a variety of packaging, handling, and delivery needs, including tear and wet strength, puncture resistance, durability and compression strength (providing the ability to ship products in their own branded carton and stacking strength to meet store display packaging requirements). Promotional Packaging. The Company offers a broad range of promotional packaging options that help differentiate its customers’ products in the marketplace. These promotional enhancements improve brand awareness and visibility on store shelves. Convenience and Cooking Packaging. These packaging solutions improve package usage and food preparation: • Beverage multiple-packaging — multi-packs for beer, soft drinks, energy drinks, teas, water and juices; • Active microwave technologies — packages that improve the heating and browning of foods in the microwave; and • Easy opening and closing features — dispensing features, pour spouts and sealable liners. Barrier Packaging. The Company provides packages that protect against moisture, temperature (hot and cold), grease, oil, oxygen, sunlight, insects and other potential product-damaging factors. Paperboard Mills and Folding Carton Facilities The Company produces paperboard at its mills; prints, cuts, folds, and glues (“converts”) the paperboard into folding cartons and containers at its converting plants; and designs and manufactures specialized, proprietary packaging machines that package bottles and cans and, to a lesser extent, non-beverage consumer products. The Company also installs its packaging machines at customer plants and provides support, service and advanced performance monitoring of the machines. The Company offers a variety of laminated, coated and printed packaging structures that are produced from its CRB, CUK and SBS mills, as well as other grades of paperboard that are purchased from third-party suppliers. Below is the production at each of the Company’s paperboard mills during 2021: Location Product # of Machines 2021 Net Tons Produced West Monroe, LA Macon, GA Texarkana, TX Augusta, GA Kalamazoo, MI Battle Creek, MI Middletown, OH East Angus, Québec CUK CUK SBS SBS CRB CRB CRB CRB 2 2 2 2 2 2 1 1 931,713 738,981 583,910 585,164 508,546 219,058 178,863 99,568 The Company consumes most of its coated board output in its converting operations, which is an integral part of the customer value proposition. In 2021, approximately 72% of combined mill sales of CRB, CUK and SBS was consumed internally. CUK Production. The Company is the largest of four worldwide producers of CUK. CUK is manufactured from pine- based wood fiber and is a specialized high-quality grade of coated paperboard with excellent wet and dry tear strength characteristics and printability for high resolution graphics that make it particularly well-suited for a variety of packaging applications. Both wood and recycled fibers are pulped, formed on paper machines, and clay-coated to provide an excellent printing surface for superior quality graphics and appearance characteristics. SBS Production. The Company is one of the largest North American producers of SBS. SBS is manufactured from bleached pine and hardwood-based wood fiber and is the highest quality paperboard substrate with excellent wet and dry strength characteristics and superior printability for high-end packaging. Both wood and recycled fibers are pulped, formed on paper machines, and clay-coated to provide an excellent printing surface for superior quality graphics and appearance characteristics. SBS is also coated with resin for wet strength liquid and food packaging end uses. 8 CRB Production. The Company is the largest North American producer of CRB. CRB is manufactured entirely from recycled fibers, primarily old corrugated containers (“OCC”), doubled-lined kraft cuttings from corrugated box plants (“DLK”), old newspapers (“ONP”), and box cuttings. The recycled fibers are re-pulped, formed on paper machines, and clay- coated to provide an excellent printing surface for superior quality graphics and appearance characteristics. The Company converts CRB, CUK and SBS, as well as other grades of paperboard, into cartons and containers at converting plants the Company operates in various locations globally, including a converting plant associated with the Company's joint venture in Japan, contract converters and at licensees outside the United States ("U.S."). The converting plants print, cut, fold and glue paperboard into cartons and containers designed to meet customer specifications. Joint Venture The Company, through its GPIL subsidiary, is a party to a Japanese joint venture, Rengo Riverwood Packaging, Ltd., in which it holds a 50% ownership interest. The joint venture agreement covers CUK supply, use of proprietary carton designs and marketing and distribution of packaging systems. Sales and Marketing The Company markets its products principally to multinational beverage, food, Quick-Service Restaurants ("QSR"), health/beauty and other well-recognized consumer product companies. The beverage companies include Anheuser-Busch, Inc., MillerCoors LLC, PepsiCo, Inc. and The Coca-Cola Company, among others. Consumer product customers include Kraft Heinz Company, General Mills, Inc., Nestlé USA, Inc., Kellogg Company, Kimberly-Clark Corporation, among others. Quick-Service Restaurants ("QSR") customers include ChickFil-A, McDonald's, Wendy's, Panda Express, Dairy Queen, Chipotle, Panera and KFC and health/beauty include GlaxoSmithKline, Bayer, Johnson & Johnson, Abbott, Novartis, L’Oréal Proctor and Gamble, and Colgate. The Company also sells paperboard in the open market to independent and integrated paperboard converters. Sales of the Company’s principal products is primarily accomplished through sales offices in the U.S., Australia, Brazil, China, France, Germany, Italy, Japan, Mexico, Spain, the Netherlands and the United Kingdom, and, to a lesser degree, through broker arrangements with third parties. During 2021, 2020 and 2019, the Company did not have any one customer that represented 10% or more of its net sales. Competition Although a relatively small number of large competitors hold a significant portion of the paperboard packaging market, the Company’s business is subject to strong competition. The Company and WestRock Company ("WestRock") are the two major CUK producers in the U.S. Internationally, The Klabin Company in Brazil and Stora Enso in Sweden produce similar grades of paperboard. In non-beverage consumer packaging and foodservice, the Company’s paperboard competes with WestRock's CUK, as well as CRB and SBS from numerous competitors, and, internationally, folding boxboard and white-lined chip. There are a large number of producers in the paperboard markets. Suppliers of paperboard compete primarily on the basis of price, strength and printability of their paperboard, quality and service. In beverage packaging, cartons made from CUK compete with substitutes such as plastics and corrugated packaging for packaging glass or plastic bottles, cans and other primary containers. Although plastics and corrugated packaging may be priced lower than CUK, the Company believes that cartons made from CUK offer advantages over these materials in areas such as distribution, brand awareness, carton designs, package performance, package line speed, sustainability (particularly recyclability) and design flexibility. Raw Materials The paperboard packaging produced by the Company comes from pine and hardwood trees and recycled fibers. Pine pulpwood, hardwood pulp, paper and recycled fibers (including DLK, OCC and ONP) and energy used in the manufacture of paperboard, as well as poly sheeting, plastic resins and various chemicals used in the coating of paperboard, represent the largest components of the Company’s variable costs of paperboard production. For the West Monroe, LA, Macon, GA, Texarkana, TX, and Augusta, GA mills, the Company relies on private landowners and the open market for all of its pine and hardwood pulp and recycled fiber requirements, supplemented by clippings that are obtained from its converting operations. The Company believes that adequate supplies from both private landowners and open market fiber sellers currently are available in close proximity to meet its fiber needs at these mills. 9 The paperboard grades produced at the Kalamazoo, MI, Battle Creek, MI, Middletown, OH, and East Angus, Quebec mills are made from 100% recycled fiber. The Company procures its recycled fiber from external suppliers and internal converting operations. The market price of each of the various recycled fiber grades fluctuates with supply and demand. The Company’s internal recycled fiber procurement function enables the Company to pay lower prices for its recycled fiber needs given the Company’s highly fragmented supplier base. The Company believes there are adequate supplies of recycled fiber to serve its mills. In North America, the Company also converts a variety of other paperboard grades, in addition to paperboard that is supplied to its converting operations from its own mills. The Company purchases such paperboard requirements, including additional CRB and SBS, from outside vendors. The majority of external paperboard purchases are acquired through long- term arrangements with other major industry suppliers. The Company's European converting plants consume CUK supplied from the Company's mills and also convert other paperboard grades such as white-lined chip and folding box board purchased from external suppliers. Energy Energy, including natural gas, fuel, oil and electricity, represents a significant portion of the Company’s manufacturing and distribution costs. The Company has entered into contracts designed to manage risks associated with future variability in cash flows and price risk related to future energy cost increases for a portion of its natural gas requirements at its U.S. mills. The Company’s hedging program for natural gas is discussed in "Note 10 - Financial Instruments, Derivatives and Hedging Activities" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” Seasonality The Company’s net sales, income from operations and cash flows from operations are subject to moderate seasonality, with demand usually increasing in the late spring through early fall due to increases in demand for beverage and food products. Research and Development The Company’s research and development team works directly with its sales, marketing and consumer insights personnel to understand long-term consumer and retailer trends and create relevant new packaging. These innovative solutions provide customers with differentiated packaging to meet consumer preferences. The Company’s development efforts include, but are not limited to, developing sustainable packaging to replace plastic packaging, extending the shelf life of customers’ products; reducing production and waste costs; enhancing the heat-managing characteristics of food packaging; improving the sturdiness and compression strength of packaging to allow goods to ship in their own branded container and to meet store display needs; and refining packaging appearance through new printing techniques and materials. Sustainability represents one of the strongest trends in the packaging industry and the Company focuses on developing fiber-based packaging solutions that are more recyclable and help customers achieve their sustainability goals. The Company’s strategy is to combine functionality, innovation of packaging design with a focus on packaging end of life to create more circular packaging solutions for customers and consumers. For more information on research and development expenses see "Note 1 - Nature of Business and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” Patents and Trademarks As of December 31, 2021, the Company had a large patent portfolio, presently owning, controlling or holding rights to more than 2,700 U.S. and foreign patents, with more than 600 U.S. and foreign patent applications currently pending. The Company’s patent portfolio consists primarily of patents relating to packaging machinery, manufacturing methods, structural carton designs, active microwave packaging technology and barrier protection packaging. These patents and processes are significant to the Company’s operations and are supported by trademarks such as Fridge Vendor™, IntegraPak™, KeelClip™, MicroFlex-Q™, MicroRite™, Quilt Wave™, Qwik Crisp™, Tite-Pak™, and Z-Flute™. The Company takes significant steps to protect its intellectual property and proprietary rights. 10 Human Capital We believe that the Company’s greatest asset is our workforce. Solving day-to-day operational and business challenges in order to drive positive results for stakeholders requires attracting, developing, and retaining talented individuals with different skills, ideas, and experiences. Our Vision 2025 outlines how we will be better stewards of our planet, supporters of our people, and allies to our partners, all while generating returns for our stakeholders. Our employees play a crucial role in achieving our Vision 2025 and are guided by our shared values and growth behaviors. Our people are one of the pillars of our Vision 2025 and we strive to engage employees in a high-performance culture. In order to achieve this, we must attract, develop, and retain our talented workforce by providing opportunities for growth and a conducive atmosphere. Our talent acquisition, development, succession and diversity and inclusion strategies are all critical components of the multi-year plan for our people. We will continue to invest in capability development areas that serve as a competitive advantage for the Company such as GPI University, which launched in 2021 and serves as a platform for all employees to access relevant training and development resources on topics related to technical skills and leadership effectiveness. Also, central to capability development and talent management is challenging our team with new experiences that will enhance their leadership skills and technical capabilities. We will also continuously improve our processes and use technology to promote safety, automate our manufacturing processes, and achieve greater efficiencies utilizing processes such as Lean Six Sigma. We are evolving the capabilities of our workforce as our business and strategy change. We have invested in innovation, research and development, and digital capabilities to allow us to capture sustainability supported organic growth. As our business continues to change, we will adapt our workforce and invest in employees to ensure that we have the necessary human capital capabilities in place to support our strategy. As of December 31, 2021, the Company had approximately 25,000 employees worldwide based in 130 locations in 26 different countries around the world. Approximately 69% of our employees are in the United States and 31% are in Europe and rest of world. Worldwide, approximately 32% were represented by labor unions and covered by collective bargaining agreements or covered by works councils in Europe. As of December 31, 2021, 541 of the Company’s employees were working under expired contracts, which are currently being negotiated, and none were covered under collective bargaining agreements that expire within one year. The Company considers its employee relations to be satisfactory. Employee Health and Safety Maintaining a safe work environment is vital to the Company, and we are committed to the health, safety and wellness of our employees. Our Recorded Incident Rate, which is the rate of workplace injuries per 100 full-time employees, is approximately 1.18, and we work to maintain a safety performance rating that outperforms the industry average. We seek to achieve an injury-free workplace through various safety initiatives and programs. In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, while continuing to service our customers. We quickly implemented remote working, enhanced safety measures for employees continuing critical, on-site work at our facilities such as walk-through temperature scanners, plexiglass barriers between employees, and other methods of encouraging social distancing, and paid employees during necessary quarantines due to COVID-19. We will continue to monitor local COVID-19 conditions and adjust our practices to ensure the health and safety of our employees. Diversity and Inclusion We believe that a diverse and inclusive working environment encourages creativity, innovation, and collaboration and that a diverse and inclusive culture propels our ability to serve our global customers and communities. Our commitment to diversity and inclusion is reflected in the definitions of our core values, which dictate our behavioral norms. The Compensation and Management Development Committee of our Board of Directors annually reviews the processes and practices related to workforce diversity and inclusion programs to ensure continued equitable treatment of all employees and a culture of inclusion. Our goal moving forward is to not only mirror the diversity of the communities where we operate, but also to excel in unlocking the potential that a diverse workforce can generate. Community Engagement Building connections between our employees, their families, and our communities creates a more meaningful, fulfilling and enjoyable workplace. Our employees around the world dedicate their time and talents to improve the communities in which we live and work. Driven by our core values, making a difference for our customers, our consumers, and our community is at the root of our community engagement strategy. The Company focuses on three pillars that guide the strategy for our community service activities and philanthropic commitments: (1) putting food on the table, (2) preserving the environment, and (3) investing in education. 11 Environmental and Regulatory Matters The Company is subject to a broad range of foreign, federal, state and local environmental, employee health and safety, and other governmental regulations and employs a team of professionals in order to maintain compliance at each of its facilities. In 2021, the Company spent $9 million of capital on projects to maintain compliance with environmental laws, regulations and the Company’s permits granted thereunder. In 2022 and 2023, the Company estimates it will spend $10 million and $47 million respectively, for such projects, primarily the waste water treatment system upgrades at the Augusta, Georgia and Texarkana, Texas mills. For additional information on such regulation and compliance, see “Environmental Matters” in “Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations” and "Note 14 - Environmental and Legal Matters" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” Climate change is an important global issue that presents both challenges and opportunities for the Company and its communities. Climate change challenges for the Company are likely to be driven by changes in the physical climate where our facilities are located as well as changes in laws and regulations, including restrictions on greenhouse gas (GHG) emissions, cap and trade systems, and taxes on GHG emissions, fuel, and energy. Climate change also presents opportunities for the Company as it drives growth in demand for lower-carbon footprint products and manufacturing technologies. We believe the Company is well-positioned to take advantage of opportunities that may arise from increased consumer demand for and/or legislation mandating or incentivizing the use of products and technologies necessary to achieve a lower-carbon, lower-waste economy. Our costs of complying with complex environmental laws and regulations, as well as voluntary certification and disclosure programs, are significant and will continue to be significant for the foreseeable future. These laws and regulations and stakeholder driven voluntary certification and disclosure programs could become more stringent over time, which could result in significant additional compliance costs. Additionally, significant national or state differences in the imposition and enforcement of such laws and regulations could present competitive challenges in a global marketplace. By tracking and taking action to reduce our GHG emissions and energy use through efficiency programs and focused GHG management efforts, we can decrease the potential future impact of these regulatory matters. The Company’s Core Values underpin our commitment to our stakeholders and our strategy to deliver sustainable, recyclable packaging solutions. Our Vision 2025 outlines our plans for how we will grow the Company and the returns we expect to generate, all while prioritizing and focusing on our people and the planet. These goals are designed to position us for sustainably-achieved, long-term earnings growth. Available Information The Company’s website is located at http://www.graphicpkg.com. The Company makes available, free of charge through its website, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after such materials are electronically filed or furnished to the Securities and Exchange Commission (the “SEC”). The Company also makes certain investor presentations and access to analyst conference calls, as well as certain environmental, social, and governance information available through its website. The information contained or incorporated into the Company’s website is not a part of this Annual Report on Form 10-K. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers like the Company that file electronically with the SEC at http://www.SEC.gov. 12 ITEM 1A. RISK FACTORS Our operations and financial results could be affected by various risks, many of which are beyond our control. The following risks could affect (and in some cases have affected) the Company's actual results and could cause such results to differ materially from current estimates or expectations: Industry Risks The Company's financial results could be adversely impacted if there are significant increases in prices for raw materials, energy, transportation and other necessary supplies and services, and the Company is unable to raise prices or improve productivity to reduce costs. Increases in the costs of raw materials, including secondary fiber, petroleum-based materials, energy, wood, transportation and other necessary goods and services, could have an adverse effect on the Company's financial results. Paper manufacturing processes require significant energy and raw materials, the costs of which are subject to worldwide supply and demand factors, supply chain disruptions that can affect availability and result in increased prices, as well as trade regulations and tariffs. Because negotiated sales contracts and the market largely determine the pricing for its products, the Company is at times limited in its ability to raise prices and pass through to its customers any inflationary or other cost increases that the Company may incur. The Company uses productivity improvements and other initiatives to reduce costs, offset inflation and maintain adequate raw material supplies. These actions include global continuous improvement initiatives that use best-in-class industry methodologies and statistical process control to help design and manage many types of activities, including planning, procurement, production and maintenance. These efforts result not only in cost reductions, but also build resilience in the overall supply chain. The Company's ability to realize anticipated savings from these improvements is subject to significant operational, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control. If the Company cannot successfully implement cost savings plans, it may not be able to continue to compete successfully against other manufacturers. In addition, any failure to generate the anticipated efficiencies and savings could adversely affect the Company's financial results. Changes in consumer buying habits and preferences for products could have an effect on our sales volumes. Changing consumer dietary habits and preferences have impacted sales growth for many of the food and beverage products the Company packages. Preferences are constantly changing based on, among other factors, convenience, cost and health considerations, as well as environmental and social concerns. If these trends continue and the Company is unable to adapt to the trends, then the Company’s financial results could be adversely affected. Competition and product substitution could have an adverse effect on the Company's financial results. The Company competes with other paperboard manufacturers and carton converters, both domestically and internationally. The Company's products compete with those made from other manufacturers' CUK, as well as SBS and CRB, and other board substrates. Substitute products include plastic, shrink film, corrugated containers, and other packaging options. Product substitution may occur in response to price, quality and service issues, as well as environmental and social concerns, such as pressure to reduce packaging waste by switching to reusable containers versus single-use packaging options. In addition, to the extent the Company’s operations are subject to labor, safety and climate change regulations and requirements not stringently imposed in the states and countries in which our competitors operate, our competitors could gain cost or other competitive advantages. While the Company has long-term relationships with many of its customers, the underlying contracts may be re-bid or renegotiated from time to time, and the Company may not be successful in renewing such contracts on favorable terms or at all. The Company works to maintain market share through efficiency, product innovations and strategic sourcing to its customers; however pricing and other competitive pressures, such as providing the lowest-carbon footprint packaging solution or delivering on GHG emissions reduction targets, may occasionally result in the loss of a customer relationship. Operational Risks The Company’s operations and financial results could be adversely impacted by global events outside the Company’s control, such as the current COVID-19 pandemic and areas of political unrest. As a result of global events such as the current COVID-19 pandemic and political unrest in eastern Europe and elsewhere, there could be unpredictable disruptions to the Company’s operations that could limit production, reduce its future revenues and negatively impact the Company’s financial condition. These global events may result in supply chain and transportation disruptions to and from our facilities and affected employees could impact the Company’s ability to operate its facilities and distribute products to its customers in a timely fashion. In addition, these global events may result in extreme volatility and disruptions in the capital and credit markets as well as widespread furloughs and layoffs for workers in the broader economy. This volatility and loss of employment may negatively impact consumer buying habits, which could adversely affect the Company’s financial results. 13 The Company's future growth and financial results could be adversely impacted if the Company is unable to identify strategic acquisitions and to successfully integrate the acquired businesses. The Company has made a significant number of acquisitions in recent years, including the AR Packaging acquisition and the NACP Combination, and expects to make additional strategic acquisitions in the future as part of its overall growth strategy. The Company's ability to continue to make strategic acquisitions from time to time and to integrate the acquired businesses successfully, including obtaining anticipated cost savings or synergies and expected operating results within a reasonable period of time, is an important factor in the Company's future growth. If the Company is unable to properly estimate, account for and realize the expected revenue and cash flow growth and other benefits from its acquisitions, the Company may be required to spend additional time or money on integration efforts that would otherwise have been spent on the development and expansion of its business. The Company’s information technology systems could suffer interruptions, failures or breaches and our business operations could be disrupted, adversely affecting results of operations and the Company’s reputation. The Company’s information technology systems, some of which are dependent on services provided by third parties, serve an important role in the operation of the business. These systems could be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages, security breaches, computer viruses or cyber-based attacks. The Company has contingency plans in place to prevent or mitigate the impact of these events, however, if they are not effective on a timely basis, business interruptions could occur which may adversely impact results of operations. The Company has been, and likely will continue to be, subject to computer hacking, acts of vandalism or theft, malware, ransomware, computer viruses or other malicious codes, phishing, employee error or malfeasance, catastrophes, unforeseen events or other cyber-attacks. To date, the Company has seen no material impact on our business or operations from these attacks or events. Any future significant compromise or breach of data security, whether external or internal, or misuse of customer, associate, supplier or Company data, could result in significant costs, interrupted operations, lost sales, fines, lawsuits, and damage to the Company's reputation. However, the ever-evolving threats mean the Company and its third-party service providers and vendors must continually evaluate and adapt their respective systems and processes and overall security environment, as well as those of any companies acquired. There is no guarantee that these measures will be adequate to safeguard against all data security breaches, system compromises or misuses of data. In addition, the regulatory environment related to information security, data collection and use, and privacy is becoming increasingly rigorous, with new and constantly changing requirements applicable to the Company's business. Compliance with such requirements could also result in additional costs. The Company could experience material disruptions at our facilities or increases in the cost of insurance. Although the Company takes appropriate measures to minimize the risk and effect of material disruptions to the business conducted at our facilities, natural disasters such as hurricanes, tornadoes and other extreme weather events, floods, droughts and fires, all of which may be exacerbated by climate change, as well as other unexpected disruptions such as the unavailability of critical raw materials, power outages and equipment breakdowns or failures can reduce production and increase manufacturing costs. These types of disruptions, whether caused by climate change or other events, could materially adversely affect our earnings, depending upon the duration of the disruption and our ability to shift business to other facilities or find other sources of materials or energy. In addition, given the Company's integrated supply chain, managing board supply and properly planning for mill outages and downtime must be integrated with the converting plants’ forecasts. Any inability to do so could adversely affect the Company's financial results. Any losses due to these events may not be covered by our existing insurance policies, and insurance coverage may be subject to significant deductibles. The premiums for insurance coverage have recently increased and may continue to increase, along with the level of deductibles. In addition, the availability of some insurance coverage may decline due to insurance company losses from extensive property damage caused by natural disasters and increased cyber security breaches. The Company may not be able to develop and introduce new products and adequately protect its intellectual property and proprietary rights, which could harm its future success and competitive position. The Company works to increase market share and profitability through product innovation and the introduction of new products. The inability to develop new or better products that satisfy customer and consumer preferences in a timely manner may impact the Company's competitive position. The Company's future success and competitive position also depends, in part, upon its ability to obtain and maintain protection for certain proprietary carton and packaging machine technologies used in its value-added products, particularly those incorporating the Fridge Vendor, IntegraPak, KeelClip, MicroFlex-Q, MicroRite, Opti-Cycle, PaperSeal Slice and PaperSeal Wedge, Produce Pack, Quilt Wave, Qwik Crisp, Tite-Pak, and Z-Flute technologies. Failure to protect the Company's existing intellectual property rights may result in the loss of valuable technologies or may require it to license other companies' intellectual property rights. It is possible that any of the patents owned by the Company may be invalidated, rendered unenforceable, circumvented, challenged or licensed to others or any of its pending or future patent applications may not be issued within the scope of the claims sought by the Company, if at all. Further, others may develop technologies that are similar or superior to the Company's technologies, duplicate its technologies or design around its patents, and steps taken by the Company to protect its technologies may not prevent misappropriation of such technologies. 14 The Company's capital spending may not achieve the desired benefits, which could adversely impact future financial results. The Company invests significant amounts of cash each year on capital projects which have expected returns to the Company. The Company's ability to execute on these projects in order to achieve planned outcomes, including obtaining expected returns and strategic long-term goals within a reasonable period of time, is an important factor in the Company's financial results and commitments to the market. As these investments start up, the Company may experience unanticipated business disruptions and not achieve the desired benefits or timelines. In addition, the Company's acquisitions may require more capital than expected to achieve synergies or expected operating results. Additional spending and unachieved benefits may adversely affect the Company's cash flow and results of operations. The Company may face a shortage of a skilled workforce at its facilities. The Company's ability to maintain or expand its business depends on attracting, training and retaining a skilled workforce. Changing demographics and workforce trends may result in a loss of knowledge and skills as experienced workers retire or resign. The Company may incur higher costs to hire and retain new workers, and the failure to attract and retain sufficient skilled workers may result in operational inefficiencies or require additional capital investments to reduce reliance on labor, which may adversely impact the Company's results. The Company is subject to the risks of doing business in foreign countries. The Company has converting plants and one paper mill in 18 countries outside of the U.S. and sells its products worldwide. For 2021, before intercompany eliminations, net sales from operations outside of the U.S. represented approximately 23% of the Company’s net sales. The Company’s revenues from foreign sales fluctuate with changes in foreign currency exchange rates. The Company pursues a currency hedging program in order to reduce the impact of foreign currency exchange fluctuations on financial results. In addition, at December 31, 2021, approximately 30% of the Company's total assets were denominated in currencies other than the U.S. dollar. The Company is also subject to the following significant risks associated with operating in foreign countries: • • • • • Export compliance; Compliance with and enforcement of environmental, health and safety and labor laws and other regulations of the foreign countries in which the Company operates; Difficulties moving funds from certain countries back to the U.S.; Imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries; and Imposition of new or increases in capital investment requirements and other financing requirements by foreign governments. Financial Risks The Company's indebtedness may adversely affect its financial condition and its ability to react to changes in its business. As of December 31, 2021, the Company had an aggregate principal amount of $5,831 million of outstanding debt. Because of the Company's debt level, a portion of its cash flows from operations is dedicated to payments on indebtedness and the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be restricted in the future. Additionally, the Company’s Fourth Amended and Restated Credit Agreement (as amended, the “Current Credit Agreement”) and the indentures governing the 4.875% Senior Notes due 2022, 0.821% Senior Notes due 2024, 4.125% Senior Notes due 2024, 1.512% Senior Notes due 2026, 4.75% Senior Notes due 2027, 3.50% Senior Notes due 2028, 3.50% Senior Notes due 2029, 2.625% Senior Notes due 2029 and 3.75% Senior Notes due 2030 (the “Indentures”) may prohibit or restrict, among other things, the disposal of assets, the incurrence of additional indebtedness (including guarantees), the incurrence of liens, payment of dividends, share repurchases, the making of acquisitions and other investments and certain other types of transactions. These restrictions could limit the Company’s flexibility to respond to changing market conditions and competitive pressures. The debt obligations and restrictions may also leave the Company more vulnerable to a downturn in general economic conditions or its business, or unable to carry out capital expenditures that are necessary or important to its growth strategy and productivity improvement programs. 15 As of December 31, 2021, approximately 31% of the Company’s debt is subject to variable rates of interest and exposes the Company to increased debt service obligations in the event of increased market interest rates. Legal and Regulatory Risks The Company is subject to environmental, health and safety laws and regulations, and costs to comply with such laws and regulations, or any liability or obligation imposed under new laws or regulations, could negatively impact its financial condition and results of operations. The Company is subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those governing GHG emissions and other discharges to air, soil and water, the management, treatment and disposal of hazardous substances, the investigation and remediation of contamination resulting from releases of hazardous substances, waste disposal, recycling of packaging, extended producer responsibilities, and the health and safety of employees. These laws and regulations, particularly those that relate to GHG emissions, are evolving and expected to become more stringent over time, which could result in significant additional compliance costs (such as the installation or modification of emission control equipment), increased costs of purchased energy or other raw materials, increased transportation costs, restrictions on our operations, or additional costs associated with air and water emissions. The Company is tracking and taking actions to reduce our GHG and other air and water emissions to decrease the potential future impact of these regulatory matters. However, the Company cannot currently assess the impact that future emission standards, climate control initiatives, regulation changes and enforcement practices will have on the Company's operations and capital expenditure requirements. Environmental liabilities and obligations may result in significant costs, which could negatively impact the Company's financial position, results of operations or cash flows. See "Note 14 - Environmental and Legal Matters" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES Headquarters The Company leases its principal executive offices in Atlanta, GA. Operating Facilities A listing of the principal properties owned or leased and operated by the Company is set forth below. The Company’s buildings are adequate and suitable for the business of the Company and have sufficient capacity to meet current requirements. The Company also leases certain smaller facilities, warehouses and office space throughout the U.S. and in foreign countries from time to time. Location Related Products or Use of Facility Mills: Augusta, GA Battle Creek, MI East Angus, Québec Kalamazoo, MI Macon, GA Middletown, OH Texarkana, TX West Monroe, LA Other: Atlanta, GA(a) Concord, NH(a) Crosby, MN Louisville, CO(a) Menomonee Falls, WI SBS CRB CRB CRB CUK CRB SBS CUK, Research and Development Headquarters, Research and Development, Packaging Machinery and Design Research and Development, Design Center Packaging Machinery Engineering, Design and Manufacturing Research and Development Foodservice Rebuild Center 16 North American Converting Plants: Atlanta, GA(a) Auburn, IN Monterrey, Mexico(a) New Albany, IN(b) Newton, IA International Converting Plants: Aachen, Germany Auckland, New Zealand(a) Augsburg, Germany Carol Stream, IL Centralia, IL Charlotte, NC Chicago, IL(a) Clarksville, TN Cobourg, Ontario(a) Elgin, IL Elk Grove, IL(a)(b) Fort Smith, AR(b) Gordonsville, TN(a) Grand Rapids, MI Gresham, OR(a) Hamel, MN Irvine, CA Kalamazoo, MI Kendallville, IN Kenton, OH North Portland, OR Bawen, Indonesia Norwalk, OH Omaha, NE Oroville, CA(a) Pacific, MO Perry, GA Pineville, NC Pittston, PA Prosperity, SC Queretaro, Mexico(a) Randleman, NC Shelbyville, IL Solon, OH St.-Hyacinthe, Québec(a) St. Paul, MN Bekasi, Indonesia Berlin, Germany(b) Bremen, Germany Bristol, United Kingdom Cambridge, United Kingdom(a) Cholet, France(a) Coalville, United Kingdom(a) Frankfurt, Germany(a) Gateshead, United Kingdom(a) Graz, Austria Halmstad, Sweden(a) Hannover, Germany Highbridge, United Kingdom(a) Hoogerheide, Netherlands Staunton, VA Ibadan, Nigeria Krakow, Poland Leeds, United Kingdom Lund, Sweden(a)(b) Magdeburg, Germany(a) Maliaño, Spain Masnieres, France(a) Melbourne, Australia(a) Munich, Germany(a) Newcastle Upon Tyne, United Kingdom(a) Portlaoise, Ireland(a) Poznan, Poland(b) Requejada, Spain Rotherham, United Kingdom(a) Sneek, Netherlands St. Gallen, Switzerland(a) St. Petersburg, Russia(a) Sydney, Australia(a) Tabasalu, Estonia Tibro, Sweden Timashevsk, Russia(a) Winsford, United Kingdom(a) Igualada, Spain Ingerois, Finland(a) Jundiai, Sao Paulo, Brazil Kanfanar, Croatia Kingston Springs, TN Lancaster, TX Lawrenceburg, TN Lebanon, TN (a) Lowell, MA Lumberton, NC Marietta, GA Sturgis, MI Tijuana, Mexico(a) Tuscaloosa, AL Valley Forge, PA Vancouver, WA(a) Visalia, CA Wausau, WI Marion, OH Wayne, NJ West Monroe, LA(b) Memphis, TN Mississauga, Ontario(a)(b) Winnipeg, Manitoba Winston Salem, NC Mitchell, SD Monroe, LA(a) Xenia, OH(a) (a) Leased facility. (b) Multiple facilities in this location. 17 ITEM 3. LEGAL PROCEEDINGS The Company is a party to a number of lawsuits arising in the ordinary conduct of its business. Although the timing and outcome of these lawsuits cannot be predicted with certainty, the Company does not believe that disposition of these lawsuits will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. See "Note 14 - Environmental and Legal Matters" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 18 EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to General Instruction G.(3) of Form 10-K, the following list is included as an unnumbered item in Part I of this Report in lieu of being included in the definitive proxy statement that will be filed within 120 days after December 31, 2021. Michael P. Doss, 55, is the President and Chief Executive Officer of Graphic Packaging Holding Company. He was elected to the Board of Directors on May 20, 2015. Prior to January 1, 2016, Mr. Doss held the position of President and Chief Operating Officer from May 20, 2015 through December 31, 2015 and Chief Operating Officer from January 1, 2014 until May 19, 2015. Prior to these positions he served as the Executive Vice President, Commercial Operations of Graphic Packaging Holding Company. Prior to this Mr. Doss held the position of Senior Vice President, Consumer Packaging Division. Prior to March 2008, he had served as Senior Vice President, Consumer Products Packaging of Graphic Packaging Corporation since September 2006. From July 2000 until September 2006, he was the Vice President of Operations, Universal Packaging Division. Mr. Doss was Director of Web Systems for the Universal Packaging Division prior to his promotion to Vice President of Operations. Since joining Graphic Packaging International Corporation in 1990, Mr. Doss has held positions of increasing management responsibility, including Plant Manager at the Gordonsville, TN and Wausau, WI plants. Mr. Doss serves on the Board of Directors for the American Forest & Paper Association, the Sustainable Forest Initiative, the Paper Recycling Coalition, the Atlanta Area Council of the Boy Scouts of America, Sealed Air Corporation, Metro Atlanta Chamber of Commerce, and the Woodruff Arts Center. Stephen R. Scherger, 57, is the Executive Vice President and Chief Financial Officer of Graphic Packaging Holding Company. From October 1, 2014 through December 31, 2014, Mr. Scherger was the Senior Vice President – Finance. From April 2012 through September 2014, Mr. Scherger served as Senior Vice President, Consumer Packaging Division. Mr. Scherger joined Graphic Packaging Holding Company in April of 2012 from MeadWestvaco Corporation, where he served as President, Beverage and Consumer Electronics. Mr. Scherger was with MeadWestvaco Corporation from 1986 to 2012 and held positions including Vice President, Corporate Strategy; Vice President and General Manager, Beverage Packaging; Vice President and Chief Financial Officer, Papers Group, Vice President Asia Pacific and Latin America, Beverage Packaging, Chief Financial Officer Beverage Packaging and other executive‑level positions. Maggie Bidlingmaier, 51, joined Graphic Packaging Holding Company as the Executive Vice President and President, Americas business unit on January 28, 2022. Maggie was most recently President, Performance Solutions for Invista, a subsidiary of Koch Industries, Inc., where she held several positions and led numerous multimillion-dollar global businesses within the flooring, apparel and airbag fiber segments from 2014 to January 2022. Prior to that, she held global sales and marketing roles of increasing responsibility at Avery Dennison from 2007 to 2013. Michael Farrell, 55, became the Executive Vice President, Mills Division of Graphic Packaging Holding Company in September 2018. Prior to that, he served as the Senior Vice President, Supply Chain from January to September 2018. Prior to January 2018, Mr. Farrell served as Vice President, Recycled Board Mills of Graphic Packaging International, Inc. and its predecessor companies from January 1, 2013; and Senior Manufacturing Manager of Graphic Packaging International, Inc. from October 28, 2009 until December 31, 2012. From December 11, 2008 until October 27, 2009, Mr. Farrell was the Manufacturing Manager of the West Monroe, Louisiana mill and from September 1, 2006 until December 10, 2008 he was the General Manager of the Middletown, Ohio mill. Jean-Francois Roche, 55, is the Senior Vice President, Sales, of Graphic Packaging Holding Company. Prior to assuming his current position on January 5, 2022, Mr. Roche served as Senior Vice President and President, Europe, Middle East, and Africa from January 2020 to January 2022 and as Vice President, Global Accounts of Graphic Packaging International, LLC from October 2018 through December 2019. From April 2015 through December 2019, Mr. Roche also served as the Vice President, Sales, Europe Consumer Products. Mr. Roche joined Graphic Packaging in April 2015 from LGR Packaging where he served as Chief Sales and Marketing Officer. Prior to that Mr. Roche spent 25 years at A&R Packaging, a large Scandinavian-based multinational consumer packaging provider, working in positions of increasing responsibility culminating the position of Senior Vice President, Sales and Marketing. Mr. Roche also serves as the President of the European Carton Makers Association, Europe's folding carton industry association. Lauren S. Tashma, 55, is the Executive Vice President, General Counsel and Secretary of Graphic Packaging Holding Company. She joined the Company in February 2014. Previously, Ms. Tashma served as Senior Vice President, General Counsel and Secretary of Fortune Brands Home & Security, Inc., where she led the legal, compliance and EHS functions. Prior to that, Ms. Tashma had various roles with Fortune Brands, Inc., including Vice President and Associate General Counsel. 19 Joseph P. Yost, 54 is the Executive Vice President and President, International of Graphic Packaging Holding Company. Prior to January 5, 2022, he served as Executive Vice President and President, Americas. Prior to January 5, 2017, Mr. Yost served as Senior Vice President, Global Beverage and Europe from September 1, 2015 to January 4, 2017, Senior Vice President, Europe from March 1, 2014 to August 31, 2015 and Senior Vice President, European Chief Integration Officer/ Chief Financial Officer from February 2013 until February 2014. From 2009 until February 2013, Mr. Yost was the Senior Vice President, Supply Chain of Graphic Packaging Holding Company. From 2006 to 2009, he served as Vice President, Operations Support – Consumer Packaging for Graphic Packaging International, Inc. Mr. Yost has also served in the following positions: Director, Finance and Centralized Services from 2003 to 2006 with Graphic Packaging International, Inc. and from 2000 to 2003 with Graphic Packaging Corporation; Manager, Operations Planning and Analysis – Consumer Products Division from 1999 to 2000 with Graphic Packaging Corporation; and other management positions from 1997 to 1999 with Fort James Corporation. 20 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES GPHC’s common stock is traded on the New York Stock Exchange under the symbol “GPK.” On February 7, 2022, there were approximately 989 stockholders of record and approximately 54,788 beneficial holders of GPHC's common stock. During 2021 and 2020, GPHC paid cash dividends of $87 million and $85 million, respectively. On January 28, 2019, the Company's board of directors authorized an additional share repurchase program to allow the Company to purchase up to $500 million of the Company's issued and outstanding shares of common stock through open market purchases, privately negotiated transactions and Rule 10b5-1 plans (the "2019 share repurchase program"). The previous $250 million share repurchase program was authorized on January 10, 2017 (the "2017 share repurchase program"). Share repurchases are reflected as a reduction of common stock for the par value of the shares, with any excess of share repurchase price over par value allocated between capital in excess of par value and accumulated deficit. The Company did not repurchase any shares of its common stock under the 2019 share repurchase program for the year ended December 31, 2021. The following presents GPHC's share repurchases for the years ended December 31, 2020, and 2019: Amount repurchased in millions 2020 2019 (a) Includes 7,400,171 shares repurchased under the 2017 share repurchase program, thereby completing that program. 23,420,010 $ 10,191,257 (a) $ 316 128 $ $ 13.48 12.55 Amount Repurchased Number of Shares Repurchased Average Price During the fourth quarter of 2021, pursuant to the 2019 share repurchase program, GPHC did not purchase any shares of its common stock. 2021 On January 14, 2021, the Company drew the $425 million Incremental Term A-2 Facility (as hereinafter defined) and used the proceeds, together with cash on hand, to redeem its 4.75% Senior Notes due in 2021. On March 8, 2021, GPIL completed a private offering of $400 million aggregate principal amount of its 0.821% Senior Secured Notes due 2024 and $400 million aggregate principal amount of its 1.512% Senior Secured Notes due 2026. The net proceeds were used by the Company to repay a portion of the outstanding borrowings under GPIL's term loan credit facilities, which is under its senior secured credit facility. On April 1, 2021, GPIL entered into the Fourth Amended and Restated Credit Agreement (the “Fourth Amended and Restated Credit Agreement”) to extend the maturity date of certain of its senior secured term loan facilities and senior secured revolving credit facilities and to amend certain other terms of the agreement, including revised debt covenants and collateral requirements. Under the terms of the agreement, $975 million of the Company’s senior secured term loan facilities remains outstanding. The Company added approximately $400 million to its senior secured revolving credit facilities. $550 million of the senior secured term loan facilities and all of the senior secured revolving credit facility loans continue to bear interest at a floating rate per annum ranging from LIBOR plus 1.25% to LIBOR plus 2.00%, determined using a pricing grid based upon the Company’s consolidated total leverage ratio from time to time, and the maturity for these loans were extended from January 1, 2023 to April 1, 2026. $425 million of the senior secured term loan facilities is a Farm Credit System incremental term loan (the “Incremental Term A-2 Facility”) that bears interest at a fixed rate per annum equal to 2.67% and matures on its originally scheduled maturity date of January 14, 2028. As long as the Incremental Term A-2 Facility is outstanding, GPIL will be eligible to receive an annual patronage credit from the participating banks, which will be paid in cash and stock in the lead member bank. Patronage payable each year is variable and based on the individual financial performance of each of the member banks then participating in the loan. 21 On July 22, 2021, GPIL entered into an Incremental Facility Amendment to the Fourth Amended and Restated Credit Agreement for a second Farm Credit System incremental term loan (the “Incremental Term A-3 Facility”). The Incremental Term A-3 Facility is a senior secured term loan in the aggregate principal amount of $250 million maturing on July 22, 2028. The Incremental Term A-3 Facility bears interest at a floating rate ranging from LIBOR plus 1.50% to LIBOR plus 2.25%, determined using a pricing grid based upon GPIL’s consolidated leverage ratio. As long as the Incremental Term A-3 Facility is outstanding, GPIL will be eligible to receive an annual patronage credit from the participating banks, which will be paid in cash and stock in the lead member bank. Patronage payable each year is variable and based on the individual financial performance of each of the member banks then participating in the loan. The Incremental Term A-3 Facility is governed by the same covenants as are set forth in the Fourth Amended and Restated Credit Agreement and is secured by a first priority lien and security interest in certain assets of GPIL. On July 23, 2021, GPIL entered into Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and the Fourth Amended and Restated Guarantee and Collateral Agreement and Incremental Facility Amendment (the “First Amendment”). The First Amendment provided for a delayed draw term loan facility in an aggregate amount of €210 million and a €25 million increase to the existing Euro-denominated revolving credit facility. The new term loan facility was drawn on October 29, 2021, and bears interest at a floating rate ranging from LIBOR plus 1.125% to LIBOR plus 1.75%, determined using a pricing grid based upon GPIL’s consolidated total leverage ratio from time to time. The new term loan facility is governed by the same covenants as set forth in the Fourth Amended and Restated Credit Agreement and is secured by a first priority lien and security interest in certain assets of GPIL. On September 29, 2021, GPIL completed a $100 million tax-exempt green bond transaction through the Michigan Strategic Fund’s Private Activity Bond Program (the “Green Bonds”). The Green Bonds are special limited obligations of the Michigan Strategic Fund, as issuer, payable from and secured by a pledge of payments to be made by GPIL under a loan agreement between the Michigan Strategic Fund and GPIL. The Green Bonds mature in 2061 and include a mandatory purchase on October 1, 2026. The Green Bonds were issued at a price of 110.99% and bear interest at an annual rate of 4.0%. The equivalent yield is 1.70%. The net proceeds of $109.5 million were used to fund a portion of its spend on the CRB platform optimization project that includes the construction of a new CRB machine at its Kalamazoo, Michigan mill. The bonds have been designated as Green Bonds primarily because the proceeds were used to finance a solid waste disposal/ recycling facility resulting in diversion of waste from landfills. In addition to the solid waste recycling aspect, the project improves the environmental footprint of its CRB mill system through expected reductions in water usage, energy consumption and greenhouse gas emissions. On October 6, 2021, GPIL entered into a $400 million Incremental Facility Amendment to the Fourth Amended and Restated Credit Agreement (the "Incremental Term A-4 Facility"). The Incremental Term A-4 Facility has a delayed draw feature, and the Company funded the new term loan on October 29, 2021. The Incremental Term A-4 Facility was collateralized by the same assets as GPIL’s Senior Secured Facilities on a pari passu basis. The Incremental Term A-4 Facility bore interest at a floating rate per annum equal to the Base Rate, the Euro currency Rate plus 0.875%, or the Daily Floating LIBOR Rate plus 0.875%, as selected by the Company. The loan was repaid on November 19, 2021 with the proceeds from the 3.75% senior unsecured notes due 2030. On November 19, 2021, GPIL completed a private offering of $400 million aggregate principal amount of 3.750% senior unsecured notes due 2030 (the “Dollar Notes”) and €290 million aggregate principal amount of 2.625% senior unsecured notes due 2029 (the “Euro Notes”). The net proceeds of the Dollar Notes were used to repay in full the term loan borrowed under the Incremental Term A-4 Loan, which was under its senior secured credit facility. The net proceeds of the Euro Notes were used to repay revolver borrowings outstanding under its senior secured credit facility. 2020 On March 6, 2020, GPIL completed a private offering of $450 million aggregate principal amount of its 3.50% senior unsecured notes due 2028 (the "2028 Senior Notes"). The 2028 Senior Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Exchange Act, as amended. The offering was completed pursuant to a purchase agreement between the Company, GPIL and Field Container Queretaro (USA), L.L.C. and BofA Securities, Inc. as representative of the initial purchasers. The Company received net proceeds of the offering of approximately $443 million, after deducting the initial purchasers' discount and other transaction costs. The net proceeds of the offering were used to repay a portion of the outstanding borrowings under GPIL's revolving credit facility under its senior secured credit facility. On August 28, 2020, GPIL completed a private offering of $350 million aggregate principal amount of its 3.50% senior unsecured notes due 2029 (the "2029 Senior Notes"). The 2029 Senior Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Exchange Act, as amended. The offering was completed pursuant to a purchase agreement between the Company, GPIL and Field Container Queretaro (USA), L.L.C. and BofA Securities, Inc. as representative of the initial purchasers. The Company received net proceeds of the offering of approximately $345 million, after deducting the initial purchasers' discount and other transaction costs. The net proceeds of the offering were used to repay a portion of the outstanding borrowings under GPIL's revolving credit facility under its senior secured credit facility. 22 Total Return to Stockholders The following graph compares the total returns (assuming reinvestment of dividends) of the common stock of Graphic Packaging Holding Company, the Standard & Poor’s (“S&P”) 500 Stock Index and the Dow Jones (“DJ”) U.S. Container & Packaging Index. The graph assumes $100 invested on December 31, 2016 in GPHC’s common stock and each of the indices. The stock price performance on the following graph is not necessarily indicative of future stock price performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN $260 $240 $220 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 12/16 12/17 12/18 12/19 12/20 12/21 Period Ending Graphic Packaging Holding Company S&P 500 Stock Index Dow Jones U.S. Container & Packaging Index Graphic Packaging Holding Company $ 100.00 $ 126.58 $ 89.12 $ 142.43 $ 148.05 $ 173.19 S&P 500 Stock Index Dow Jones U.S. Container & Packaging Index 100.00 100.00 121.83 116.49 119.02 97.06 153.17 124.80 181.35 233.41 151.18 167.76 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 ITEM 6. [RESERVED] 23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION This management’s discussion and analysis of financial conditions and results of operations is intended to provide investors with an understanding of the Company’s past performance, financial condition and prospects. The following will be discussed and analyzed: • Overview of Business • Overview of 2021 Results • Results of Operations • Financial Condition, Liquidity and Capital Resources • Critical Accounting Policies • New Accounting Standards • Business Outlook A detailed discussion of the fiscal 2021 year-over-year changes can be found below and a detailed discussion of fiscal 2020 year-over-year changes can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. OVERVIEW OF BUSINESS The Company’s objective is to strengthen its position as a leading provider of sustainable fiber-based consumer packaging solutions. To achieve this objective, the Company offers customers its paperboard, cartons, cups, lids, foodservice containers and packaging machines, either as an integrated solution or separately. Cartons, carriers and containers are designed to protect and hold products. Product offerings include a variety of laminated, coated and printed packaging structures that are produced from the Company’s coated recycled paperboard ("CRB"), coated unbleached kraft paperboard ("CUK") and solid bleached sulfate paperboard ("SBS"). Innovative designs and combinations of paperboard, films, foils, metallization, holographics and embossing are customized to the individual needs of the customers. The Company is implementing strategies (i) to expand market share in its current markets and to identify and penetrate new markets; (ii) to capitalize on the Company’s customer relationships, business competencies, and mills and folding carton assets; (iii) to develop and market innovative, sustainable products and applications that benefit from consumer-led sustainability trends; and (iv) to continue to reduce costs by focusing on operational improvements. The Company’s ability to fully implement its strategies and achieve its objectives may be influenced by a variety of factors, many of which are beyond its control, such as inflation of raw material and other costs, which the Company cannot always pass through to its customers, and the effect of overcapacity in the worldwide paperboard packaging industry. Significant Factors That Impact the Company’s Business and Results of Operations Impact of Inflation/Deflation. The Company’s cost of sales consists primarily of energy (including natural gas, fuel oil and electricity), pine and hardwood fiber, chemicals, secondary fibers, purchased paperboard, aluminum foil, ink, plastic films and resins, depreciation expense and labor. Costs increased year over year by $386 million in 2021. The higher costs in 2021 were due to higher commodity inflation costs ($330 million), labor and benefits ($47 million), and other costs, net ($9 million). Commodity inflation was primarily due to chemicals ($91 million), freight ($75 million), secondary fiber ($51 million), energy ($38 million), external board ($34 million), wood ($28 million), and other costs ($13 million). Because the price of natural gas experiences significant volatility, the Company has entered into contracts designed to manage risks associated with future variability in cash flows caused by changes in the price of natural gas. The Company has entered into natural gas swap contracts to hedge prices for a portion of its expected usage for 2022. Since negotiated sales contracts and the market largely determine the pricing for its products, the Company is at times limited in its ability to raise prices and pass through to its customers any inflationary or other cost increases that the Company may incur. Commitment to Cost Reduction. In light of continuing margin pressure throughout the packaging industry, the Company has programs in place that are designed to reduce costs, improve productivity and increase profitability. The Company utilizes a global continuous improvement initiative that uses statistical process control to help design and manage many types of activities, including production and maintenance. This includes a Six Sigma process focused on reducing variable and fixed manufacturing and administrative costs and the use of Lean Sigma principles in manufacturing and supply chain processes. 24 The Company’s ability to continue to successfully implement its business strategies and to realize anticipated savings and operating efficiencies is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. If the Company cannot successfully implement the strategic cost reductions or other cost savings plans it may not be able to continue to compete successfully against other manufacturers. In addition, any failure to generate the anticipated efficiencies and savings could adversely affect the Company’s financial results. Competition and Market Factors. As some products can be packaged in different types of materials, the Company’s sales are affected by competition from other manufacturers’ CRB, CUK, SBS, folding box board, and recycled clay-coated news. Additional substitute products also include plastic, shrink film and corrugated containers. In addition, while the Company has long-term relationships with many of its customers, the underlying contracts may be re-bid or renegotiated from time to time, and the Company may not be successful in renewing on favorable terms or at all. The Company works to maintain market share through efficiency, product innovation, service and strategic sourcing to its customers; however, pricing and other competitive pressures may occasionally result in the loss of a customer relationship. In addition, the Company’s sales are driven by consumer buying habits in the markets its customers serve. Recently, the Company has seen net organic sales growth driven by the consumers' desire for sustainable packaging solutions and increased at home consumption. Changes in consumer dietary habits and preferences, increases in the costs of living, unemployment rates, access to credit markets, as well as other macroeconomic factors, may negatively affect consumer spending behavior. New product introductions and promotional activity by the Company’s customers and the Company’s introduction of new packaging products also impact its sales. Debt Obligations. The Company had an aggregate principal amount of $5,831 million of outstanding debt obligations as of December 31, 2021. This debt has consequences for the Company, as it requires a portion of cash flow from operations to be used for the payment of principal and interest, exposes the Company to the risk of increased interest rates and may restrict the Company’s ability to obtain additional financing. Covenants in the Company’s Fourth Amended and Restated Credit Agreement (as amended, the “Current Credit Agreement”) and the indentures governing the 4.875% Senior Notes due 2022, 0.821% Senior Notes due 2024, 4.125% Senior Notes due 2024, 1.512% Senior Notes due 2026, 4.75% Senior Notes due 2027, 3.50% Senior Notes due 2028, 3.50% Senior Notes due 2029, 2.625% Senior Notes due 2029 and 3.75% Senior Notes due 2030 (the “Indentures”) may, among other things, restrict the ability of the Company to dispose of assets, incur guarantee obligations, prepay other indebtedness, repurchase stock, pay dividends, make other restricted payments and make acquisitions or other investments. The Current Credit Agreement also requires compliance with a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio. The Company’s ability to comply in future periods with the financial covenants will depend on its ongoing financial and operating performance, which in turn will be subject to many other factors, many of which are beyond the Company’s control. See "Covenant Restrictions" in “Financial Condition, Liquidity and Capital Resources” for additional information regarding the Company’s debt obligations. The debt and the restrictions under the Current Credit Agreement Indentures could limit the Company’s flexibility to respond to changing market conditions and competitive pressures. The outstanding debt obligations and the restrictions may also leave the Company more vulnerable to a downturn in general economic conditions or its business, or unable to carry out capital expenditures that are necessary or important to its growth strategy and productivity improvement programs. OVERVIEW OF RESULTS This management’s discussion and analysis contains an analysis of Net Sales, Income from Operations and other information relevant to an understanding of the Company's results of operations. On a consolidated basis: • Net Sales in 2021 increased by $596 million or 9%, to $7,156 million from $6,560 million in 2020 due to organic sales growth, the AR Packaging, Americraft, Greif, and Quad acquisitions, higher selling prices, and favorable foreign exchange, partially offset by lower open market volume of our paperboard. • Income from Operations in 2021 decreased by $117 million or 22%, to $407 million from $524 million in 2020. Transactions recorded in Business Combinations, Shutdown and Other Special Charges and Exit Activities, Net increased $77 million driven by higher charges related to acquisitions. In addition, Income from Operations was negatively impacted in 2021 as compared to 2020 by inflation (primarily commodity and labor and benefits), $21 million of Winter Storm Uri related downtime and mitigation costs in 2021 net of insurance recoveries, lower volumes of our open market sales, and higher depreciation and amortization. Income from Operations was positively impacted in 2021 as compared to 2020 by higher pricing, higher volumes from organic sales growth and acquisitions, cost savings from continuous improvement and other programs, product mix, lower levels of planned maintenance and higher levels of market downtime at the uncoated SBS cupstock paper machine in 2020. 25 Acquisitions, Closures, and Dispositions • On August 1, 2019, the Company acquired substantially all the assets of Artistic, a diversified producer of folding cartons and CRB. The acquisition included two converting plants located in Auburn, Indiana and Elgin, Illinois (included in the Americas Paperboard Packaging reportable segment) and one CRB mill located in White Pigeon, Michigan (included in the Paperboard Mills reportable segment). • On January 31, 2020, the Company acquired a folding carton facility from Quad, a commercial printing company. The converting facility is located in Omaha, Nebraska and is included in the Americas Paperboard Packaging reportable segment. • On April 1, 2020, the Company acquired the Consumer Packaging Group business from Greif, a leader in industrial packaging products and services. The acquisition included seven converting plants across the United States, which are included in the Americas Paperboard Packaging reportable segment. • On July 1, 2021, the Company acquired substantially all the assets of Americraft, the largest independent folding carton converter in North America. The acquisition included seven converting plants across the United States and is reported within the Americas Paperboard Packaging reportable segment. • On November 1, 2021, the Company acquired all the shares of AR Packaging, Europe's second largest producer of fiber-based consumer packaging. The acquisition included 30 converting plants in 13 countries and is reported within the Europe Paperboard Packaging reportable segment. Share Repurchases and Dividends • During 2021, GPHC did not repurchase any shares of its outstanding common stock. GPHC had approximately $147 million available for additional repurchases under the 2019 share repurchase program. • During 2021, GPHC declared cash dividends of $90 million and paid cash dividends of $87 million. RESULTS OF OPERATIONS In millions Net Sales Income from Operations Nonoperating Pension and Postretirement Benefit Income (Expense) Interest Expense, Net Income before Income Taxes and Equity Income of Unconsolidated Entity Income Tax Expense Income before Equity Income of Unconsolidated Entity Equity Income of Unconsolidated Entity Net Income 2021 COMPARED WITH 2020 Net Sales Year Ended December 31, 2021 2020 2019 7,156 $ 6,560 $ 6,160 407 $ 524 $ 5 (123) 289 $ (74) 215 $ 1 (151) (129) 244 $ (42) 202 $ 1 216 $ 203 $ 534 (39) (141) 354 (76) 278 — 278 $ $ $ $ $ The components of the change in Net Sales are as follows: Year Ended December 31, Variances In millions Consolidated 2020 Price Volume/Mix Foreign Exchange 2021 Increase Percent Change $ 6,560 $ 150 $ 379 $ 67 $ 7,156 $ 596 9 % 26 The Company's Net Sales in 2021 increased by $596 million or 9%, to $7,156 million from $6,560 million for the same period in 2020, due to Net Sales of $344 million from the AR Packaging, Americraft, Greif, and Quad acquisitions, higher pricing, organic sales growth including new product introductions and conversions to our paperboard packaging solutions, and favorable foreign exchange partially offset by lower open market volume of our paperboard. Favorable foreign currency exchange rates were primarily due to the British Pound, Canadian Dollar, Euro, and Australian Dollar. Core converting volumes were up, primarily in global beverage and foodservice packaging, including cups, offset by declines in dry foods and cereal. Income from Operations The components of the change in Income from Operations are as follows: Year Ended December 31, Variances In millions 2020 Price Volume/ Mix Inflation Foreign Exchange Other (a) 2021 Decrease Percent Change Consolidated (22) % 35 $ (a) Includes the Company's cost reduction initiatives, planned mill maintenance costs, mill market downtime costs, expenses 83 $ 407 $ $ 524 $ (386) $ 150 $ (117) 1 $ related to acquisitions and integration activities, exit activities, and shutdown and other special charges. The Company's Income from Operations for 2021 decreased $117 million or 22%, to $407 million from $524 million for the same period in 2020. Transactions recorded in Business Combinations, Shutdown and Other Special Charges and Exit Activities, Net increased $77 million driven by higher charges for acquisitions partially offset by higher charges for exit activities in 2020, including those related to our announced closures of White Pigeon, Michigan, CRB mill and West Monroe, Louisiana, PM1 containerboard machine. In addition, Income from Operations was negatively impacted in 2021 as compared to 2020 by inflation (primarily commodity and labor and benefits), $21 million of Winter Storm Uri related downtime and mitigation costs in 2021 net of insurance recoveries, lower volumes of our open market sales, and higher depreciation and amortization. Income from Operations was positively impacted in 2021 as compared to 2020 by higher pricing, higher volumes from organic sales growth and acquisitions, cost savings from continuous improvement and other programs, product mix, lower levels of planned maintenance and higher levels of market downtime at the uncoated SBS cupstock paper machine in 2020. Inflation in 2021 increased due to higher commodity inflation costs ($330 million), labor and benefits ($47 million), and other costs, net ($9 million). Commodity inflation was primarily due to chemicals ($91 million), freight ($75 million), secondary fiber ($51 million), energy ($38 million), external board ($34 million), wood ($28 million), and other costs ($13 million). Nonoperating Pension and Postretirement Benefit Nonoperating Pension and Postretirement Benefit was income of $5 million in 2021 versus an expense of $151 million in 2020. The decrease in expense was due to a settlement charge of $153 million incurred during the first quarter of 2020 associated with the Company's purchase of a group annuity contract that transferred the remaining pension benefit obligation under the largest U.S. Plan of approximately $713 million to an insurance company. Interest Expense, Net Interest Expense, Net decreased by $6 million to $123 million in 2021 from $129 million in 2020. Interest Expense, Net decreased due to lower interest rates, partially offset by higher debt balances as compared to prior year. As of December 31, 2021, approximately 31% of the Company’s total debt was subject to floating interest rates. 27 Income Tax Expense During 2021, the Company recognized Income Tax Expense of $74 million on Income before Income Taxes and Equity Income of Unconsolidated Entity of $289 million. During 2020, the Company recognized Income Tax Expense of $42 million on Income before Income Taxes and Equity Income of Unconsolidated Entity of $244 million. The effective tax rate for 2021 is different from the statutory rate due to the tax effect of income attributable to noncontrolling interests as well as the mix of earnings between foreign and domestic jurisdictions. In addition, during 2021, the Company recorded discrete tax expense to recognize tax rate increases in the United Kingdom and to recognize the effects of the Tax Cuts and Jobs Act on executive compensation as a result of IP’s exit from the partnership. The effective tax rate in 2021 is higher than the effective tax rate in 2020 primarily due to these discrete tax items as compared to 2020. The Company utilized its remaining U.S. federal net operating loss carryforwards during 2020. However, as a result of deductions associated with the step up in tax basis of certain assets as a result of International Paper’s exit from the partnership, the Company generated a taxable loss of $574 million during 2021 that can be carried forward for U.S. federal income tax purposes indefinitely. As such, based on the net operating loss generated in 2021 as well as future tax benefits associated with planned capital projects and tax credit carryforwards which are available to offset future U.S. federal income tax, the Company does not expect to be a meaningful U.S. federal cash taxpayer until 2024. Equity Income of Unconsolidated Entity Equity Income of Unconsolidated Entity was $1 million in 2021 and $1 million in 2020 and is related to the Company’s equity investment through its GPIL subsidiary, in the Rengo Riverwood Packaging, Ltd. joint venture. Segment Reporting The Company has three reportable segments as follows: Paperboard Mills includes the eight North American paperboard mills that produce primarily CRB, CUK, and SBS, which is consumed internally to produce paperboard packaging for the Americas and Europe Packaging segments. The remaining paperboard is sold externally to a wide variety of paperboard packaging converters and brokers. The Paperboard Mills segment Net Sales represents the sale of paperboard only to external customers. The effect of intercompany transfers to the paperboard packaging segments has been eliminated from the Paperboard Mills segment to reflect the economics of the integration of these segments. Americas Paperboard Packaging includes paperboard packaging, primarily folding cartons, sold primarily to Consumer Packaged Goods ("CPG") companies, and cups, lids and food containers sold primarily to foodservice companies and Quick- Service Restaurants ("QSR") serving the food, beverage, and consumer product markets in the Americas. Europe Paperboard Packaging includes paperboard packaging, primarily folding cartons, sold primarily to CPG companies serving the food, beverage and consumer product markets including healthcare and beauty primarily in Europe. The Company allocates certain mill and corporate costs to the reportable segments to appropriately represent the economics of these segments. The Corporate and Other caption includes the Pacific Rim and Australia operating segments and unallocated corporate and one-time costs. These segments are evaluated by the chief operating decision maker based primarily on Income from Operations, as adjusted for depreciation and amortization. The accounting policies of the reportable segments are the same as those described in "Note 1 - Nature of Business and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data." 28 In millions NET SALES: Paperboard Mills Americas Paperboard Packaging Europe Paperboard Packaging Corporate/Other/Eliminations(a) Total Year Ended December 31, 2021 2020 2019 $ $ 1,007 $ 4,996 992 161 7,156 $ 988 $ 4,650 765 157 6,560 $ 1,095 4,234 689 142 6,160 33 478 60 (37) 534 (LOSS) INCOME FROM OPERATIONS: Paperboard Mills(b) Americas Paperboard Packaging Europe Paperboard Packaging Corporate and Other(c) Total (a) Includes revenue from contracts with customers for the Australia and Pacific Rim operating segments. (b) Includes accelerated depreciation related to exit activities in 2021, 2020, and 2019. (c) Includes expenses related to business combinations, shutdown and other special charges, and exit activities. (10) $ 456 82 (121) 407 $ (110) $ 639 66 (71) 524 $ $ $ 2021 COMPARED WITH 2020 Paperboard Mills Net Sales increased from prior year due to higher selling prices and mix partially offset by lower open market volume. Lower open market volume was primarily due to the closure of the White Pigeon, Michigan CRB mill and shut down of the PM1 containerboard machine in West Monroe, Louisiana, both in 2020, and one fewer production and selling day due to leap year. The Company also internalized more paperboard tons. Loss from Operations decreased due to the impacts of productivity improvements, including benefits from capital projects, and higher prices offset by commodity and other inflation, increased downtime and mitigation costs related to Winter Storm Uri, and lower open market volume. The commodity inflation was primarily due to higher prices for secondary fiber, chemicals, energy, and freight. Americas Paperboard Packaging Net Sales increased due to acquisitions including Americraft in Q3 2021 and Greif in Q2 2020, higher pricing, organic sales growth including conversions to our paperboard packaging solutions, new product introductions, and favorable foreign currency exchange rates. Higher volumes primarily in foodservice packaging including cups, beverage markets, dairy products and bakery were offset by lower volumes in dry foods, cereal, tissue, and frozen pizza. In beverage, volumes increased in all categories including craft and specialty, big beer, and soft drinks. Income from Operations decreased due to commodity inflation, other inflation (primarily labor and benefits), downtime and mitigation costs related to Winter Storm Uri, and one fewer selling day due to leap year offset by higher selling prices, cost savings from continuous improvement and other programs, the timing of annual outages, and higher volumes including from organic sales growth and acquisitions. The commodity inflation was primarily due to higher prices for freight, chemicals, secondary fiber, and external board. Europe Paperboard Packaging Net Sales increased due to the acquisition of AR Packaging on November 1, 2021 as well as higher prices, increased volumes led by beverage and convenience, and favorable foreign currency exchange rates offset by unfavorable mix. Income from Operations increased due to cost savings through continuous improvement and other programs, increased volumes, and pricing offset by commodity inflation, higher labor and benefits costs, and due to the acquisition of AR Packaging on November 1, 2021 including the amortization of purchased intangibles. 29 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company broadly defines liquidity as its ability to generate sufficient funds from both internal and external sources to meet its obligations and commitments. In addition, liquidity includes the ability to obtain appropriate debt and equity financing and to convert into cash those assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments. Liquidity and Capital Resources The Company's liquidity needs arise primarily from the funding of its capital expenditures, debt service on its indebtedness, ongoing operating costs, working capital, share repurchases and dividend payments. Principal and interest payments under the term loan facilities and the revolving credit facilities, together with principal and interest payments on the Company's 4.875% Senior Notes due 2022, 0.821% Senior Notes due 2024, 4.125% Senior Notes due 2024, 1.512% Senior Notes due 2026, 4.75% Senior Notes due 2027, 3.50% Senior Notes due 2028, 3.50% Senior Notes due 2029, 2.625% Senior Notes due 2029 and 3.75% Senior Notes due 2030 (the “Notes”), represent liquidity requirements for the Company. Based upon current levels of operations, anticipated cost savings and expectations as to future growth, the Company believes that cash generated from operations, together with amounts available under its revolving credit facilities and other available financing sources, will be adequate to permit the Company to meet its debt service obligations, necessary capital expenditure program requirements and ongoing operating costs and working capital needs, although no assurance can be given in this regard. The Company's future financial and operating performance, ability to service or refinance its debt and ability to comply with the covenants and restrictions contained in its debt agreements (see “Covenant Restrictions” below) will be subject to future economic conditions, including conditions in the credit markets, and to financial, business and other factors, many of which are beyond the Company's control, and will be substantially dependent on the selling prices and demand for the Company's products, raw material and energy costs, and the Company's ability to successfully implement its overall business and profitability strategies. Accounts receivable are stated at the amount owed by the customer, net of an allowance for estimated uncollectible accounts, returns and allowances, and cash discounts. The allowance for doubtful accounts is estimated based on historical experience, current economic conditions and the creditworthiness of customers. Receivables are charged to the allowance when determined to be no longer collectible. The Company has entered into agreements to sell, on a revolving basis, certain trade accounts receivable to third party financial institutions. Transfers under these agreements meet the requirements to be accounted for as sales in accordance with the Transfers and Servicing topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (the "Codification"). The loss on sale is not material and is included in Other Expense, Net line item on the Consolidated Statement of Operations. The following table summarizes the activity under these programs for the year ended December 31, 2021 and 2020, respectively: In millions Receivables Sold and Derecognized $ Proceeds Collected on Behalf of Financial Institutions Net Proceeds (Paid to) Received From Financial Institutions Deferred Purchase Price at December 31(a) Pledged Receivables at December 31 Year Ended December 31, 2021 2020 2,947 $ 2,970 (6) 4 180 2,850 2,787 55 5 201 (a) Included in Other Current Assets on the Condensed Consolidated Balance Sheet and represents a beneficial interest in the receivables sold to the financial institutions, which is a Level 3 fair value measure. The Company participates in supply chain financing arrangements offered by certain customers and has entered into various factoring arrangements that also qualify for sale accounting in accordance with the Transfers and Servicing topic of the FASB Codification. For the years ended December 31, 2021 and 2020, the Company sold receivables of approximately $693 million and $368 million, respectively, related to these factoring arrangements. Receivables sold under all programs subject to continuing involvement, which consist principally of collection services, were approximately $613 million and $621 million as of December 31, 2021 and 2020, respectively. 30 Cash Flows In millions Net Cash Provided by Operating Activities Net Cash Used in Investing Activities Net Cash Provided by (Used in) Financing Activities Years Ended December 31, 2021 2020 $ $ $ 609 $ (2,392) $ 1,778 $ 825 (648) (152) Net cash provided by operating activities in 2021 totaled $609 million, compared to $825 million in 2020. The decrease was primarily due to higher inventory balances due to inflation and lower other accrued liabilities balances. Pension contributions in 2021 and 2020 were $33 million and $19 million, respectively. In the first quarter of 2021, the Company made a $14 million contribution to its remaining U.S. defined benefit plan by effectively utilizing a portion of the excess balance related to the terminated U.S. defined benefit plan. Net cash used in investing activities in 2021 totaled $2,392 million, compared to $648 million in 2020. Capital spending was $802 million and $646 million in 2021 and 2020, respectively. In 2021, the Company paid $292 million and $1,412 million, net of cash acquired, for the Americraft and AR Packaging acquisitions, respectively. In the prior year, the Company paid $121 million, net of cash acquired, for the 2020 Acquisitions. Net cash receipts related to the accounts receivable securitization and sale programs were $119 million and $127 million in 2021 and 2020, respectively. Net cash provided by financing activities in 2021 totaled $1,778 million, compared to $152 million used in financing activities in 2020. Current year activities include a debt drawing of $425 million Incremental Term A-2 Facility and the use of the proceeds, together with cash on hand, to redeem the 4.75% Senior Notes due in 2021, and a debt drawing of $250 million Incremental Term A-3 Facility. Other current year activities include an offering of $400 million aggregate principal amount of 0.821% Senior Notes due 2024, an offering of $400 million aggregate principal amount of 1.512% Senior Notes due 2026. The net proceeds of $800 million were used by the Company to repay a portion of the outstanding borrowings under GPIL's term loan credit facilities, which are under its senior secured credit facility. Additionally, the Company had an offering of $100 million aggregate principal amount of tax-exempt green bonds, with the net proceeds of $111 million used to reimburse GPIL for a portion of its CRB platform optimization project. Other current year activities include a debt drawing of $400 million Incremental Term A-4 Facility and a debt drawing of €210 million Incremental Euro Term Loan Facility under the Senior Secured Credit Facility due 2026. Additionally, the Company completed the offering of $400 million Senior Notes due in 2030 and used the proceeds to repay the Incremental Term A-4 Facility and €290 million aggregate principal amount of its 2.625% senior unsecured notes due 2029 and used the proceeds to repay revolver borrowings outstanding under its senior secured credit facility. The Company also paid $150 million toward the redemption of IP's ownership interest in GPIP, and $109 million Tax Receivable Agreement (TRA) payment related to IP exit. Additionally, the Company made borrowings under revolving credit facilities primarily for capital spending, redemption of IP's ownership interest and payments on debt of $16 million. The Company also paid dividends and distributions of $92 million and withheld $15 million of restricted stock units to satisfy tax withholding obligations related to the payout of restricted stock units. In the prior year, the Company had a debt offering of $450 million aggregate principal amount of 3.50% Senior Notes due 2028, and a debt offering of $350 million aggregate principal amount of 3.50% Senior Notes due 2029. The Company also paid $500 million toward the redemption of IP's ownership interest in GPIP. The Company also made borrowings under revolving credit facilities primarily for capital spending, repurchase of stock of $316 million and payments on debt of $37 million. The Company also paid dividends and distributions of $103 million and withheld $9 million of restricted stock units to satisfy tax withholding payments related to the payout of restricted stock units. Supplemental Guarantor Financial Information As discussed in “Note 1 - Nature of Business and Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data,” on May 21, 2021, IP exchanged its remaining 22.8 million partnership units for an equivalent number of shares of GPHC common stock. As required by the parties' agreement, these shares were immediately sold by IP. As a result, IP has no ownership interest remaining in GPIP as of May 21, 2021, and GPIL is no longer subject to separate SEC filing requirements. As such, the Company has included Supplemental Guarantor disclosures that were previously included in the GPIL SEC filings effective June 30, 2021. As further discussed in “Note 5 – Debt” in the Notes to Condensed Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data,” the Senior Notes issued by GPIL (the “Issuer”) are guaranteed by certain domestic subsidiaries (the “Subsidiary Guarantors”), which consist of all material 100% owned subsidiaries of GPIL, other than its foreign subsidiary holding companies, domestic subsidiaries and in certain instances by the Company (a Parent guarantee) (collectively "the Guarantors"). GPIL's remaining subsidiaries (the “Nonguarantor Subsidiaries”) include all of GPIL’s foreign subsidiary holding companies, foreign subsidiaries and immaterial domestic subsidiaries. The Subsidiary Guarantors are jointly and severally, fully and unconditionally liable under the guarantees. 31 Other than tax related items, the results of operations, assets, and liabilities for GPHC and GPIL are substantially the same. Therefore, the summarized financial information below is presented on a combined basis, consisting of GPIL and Subsidiary Guarantors (collectively, the “Obligor Group”), and is presented after the elimination of: (i) intercompany transactions and balances among GPIL and Subsidiary Guarantors, and (ii) equity in earnings from and investments in the Nonguarantor Subsidiaries. In millions SUMMARIZED STATEMENTS OF OPERATIONS Net Sales(a) Cost of Sales Income from Operations Net Income (a) Includes Net Sales to Nonguarantor Subsidiaries of $509 million. In millions SUMMARIZED BALANCE SHEET Twelve Months Ended December 31, 2021 $ 5,847 4,973 303 185 December 31, 2021 Current assets (excluding intercompany receivable from Nonguarantor) $ Noncurrent assets Intercompany receivables from Nonguarantors Current liabilities Noncurrent liabilities Covenant Restrictions 1,235 5,888 1,258 1,472 5,713 Covenants contained in the Current Credit Agreement and the Indentures may, among other things, limit the ability to incur additional indebtedness, restrict the ability of the Company to dispose of assets, incur guarantee obligations, prepay other indebtedness, repurchase shares, pay dividends and make other restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of the indentures under which the Notes are issued, engage in mergers or consolidations, change the business conducted by the Company and its subsidiaries, and engage in certain transactions with affiliates. Such restrictions, together with disruptions in the credit markets, could limit the Company's ability to respond to changing market conditions, fund its capital spending program, provide for unexpected capital investments or take advantage of business opportunities. Under the terms of the Current Credit Agreement, the Company must comply with a maximum Consolidated Total Leverage Ratio covenant and a minimum Consolidated Interest Expense Ratio covenant. The Current Credit Agreement, which contains the definitions of these covenants, was filed as an exhibit to the Company's Form 8-K filed on April 1, 2021. Due to the completion of a material acquisition, the Current Credit Agreement requires that the Company maintain a maximum Consolidated Total Leverage Ratio of less than 5.00 to 1.00. At December 31, 2021, the Company was in compliance with such covenant and the ratio was 4.39 to 1.00. The Company must also comply with a minimum Consolidated Interest Expense Ratio of 3.00 to 1.00. At December 31, 2021, the Company was in compliance with such covenant and the ratio was 10.85 to 1.00. As of December 31, 2021, the Company's credit was rated BB+ by Standard & Poor's and Ba1 by Moody's Investor Services. Standard & Poor's and Moody's Investor Services' ratings on the Company included a stable outlook. Capital Investment The Company’s capital investments in 2021 were $899 million ($802 million was paid), compared to $651 million ($646 million was paid) in 2020. During 2021, the Company had capital spending of $855 million for improving process capabilities, $17 million for capital spares and $27 million for manufacturing packaging machinery. 32 Environmental Matters Some of the Company’s current and former facilities are the subject of environmental investigations and remediations resulting from historical operations and the release of hazardous substances or other constituents. Some current and former facilities have a history of industrial usage for which investigation and remediation obligations may be imposed in the future or for which indemnification claims may be asserted against the Company. Also, closures or sales of facilities may necessitate further investigation and may result in remediation at those facilities. The Company has established reserves for those facilities or issues where liability is probable and the costs are reasonably estimable. For further discussion of the Company’s environmental matters, see "Note 14 - Environmental and Legal Matters" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data." Contractual Obligations and Commitments A summary of our contractual obligations and commitments as of December 31, 2021 is as follows: Payments Due by Period Less than 1 Year More than 5 Years Total In millions 2,506 Debt Obligations 54 Operating Leases 132 Finance Leases 164 Interest Payable Purchase Obligations(a) 42 Total Contractual Obligations(b) 2,898 (a) Purchase obligations primarily consist of commitments for the purchase of fiber and chip processing along with 2,134 $ 51 27 216 65 2,493 $ 5,685 $ 288 205 833 388 7,399 $ 773 $ 105 29 293 141 1,341 $ 272 $ 78 17 160 140 667 $ 3-5 Years 1-3 Years $ $ commitments associated with building the new CRB paper machine in Kalamazoo, Michigan. (b) Certain amounts included in this table are based on management’s estimates and assumptions about these obligations. Because these estimates and assumptions are necessarily subjective, the obligations the Company will actually pay in the future periods may vary from those reflected in the table. International Operations For 2021, before intercompany eliminations, net sales from operations outside of the U.S. represented approximately 23% of the Company’s net sales. The Company’s revenues from export sales fluctuate with changes in foreign currency exchange rates. At December 31, 2021, approximately 30% of the Company’s total assets were denominated in currencies other than the U.S. dollar. The Company has significant operations in countries that use the euro, British pound sterling, Swedish krona, Polish zloty, the Australian dollar, the Canadian dollar, the Mexican peso or the Japanese yen as their functional currencies. The effect of changes in the U.S. dollar exchange rate against these currencies produced a net currency translation adjustment loss of $28 million, which was recorded in Other Comprehensive (Loss) Income for the year ended December 31, 2021. The magnitude and direction of this adjustment in the future depends on the relationship of the U.S. dollar to other currencies. The Company pursues a currency hedging program in order to reduce the impact of foreign currency exchange fluctuations on financial results. See “Financial Instruments” below. Financial Instruments The Company pursues a currency hedging program which utilizes derivatives to reduce the impact of foreign currency exchange fluctuations on its consolidated financial results. Under this program, the Company has entered into forward exchange contracts in the normal course of business to hedge certain foreign currency denominated transactions. Realized and unrealized gains and losses on these forward contracts are included in the measurement of the basis of the related foreign currency transaction when recorded. The Company also pursues a hedging program that utilizes derivatives designed to manage risks associated with future variability in cash flows and price risk related to future energy cost increases. Under this program, the Company has entered into natural gas swap contracts to hedge a portion of its forecasted natural gas usage for 2022. Realized gains and losses on these contracts are included in the financial results concurrently with the recognition of the commodity consumed. In addition, the Company uses interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan facility. The Company does not hold or issue financial instruments for trading purposes. See “Item 7A., Quantitative and Qualitative Disclosure About Market Risk.” Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements. 33 CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from these estimates, and changes in these estimates are recorded when known. The critical accounting policies used by management in the preparation of the Company’s consolidated financial statements are those that are important both to the presentation of the Company’s financial condition and results of operations and require significant judgments by management with regard to estimates used. The critical judgments by management relate to pension benefits, future cash flows associated with impairment testing for goodwill and long-lived assets, and deferred income taxes. Acquisitions The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method of accounting, the Company allocated the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the date of the acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Any excess of the estimated fair values of the identifiable net assets over the purchase price is recorded as a gain on bargain purchase. The estimates used to determine the fair value of long-lived assets, such as intangible assets, can be complex and require significant judgments. Therefore, we use information available to us to make fair value determinations and often engage independent valuation specialists, when necessary, to assist in the fair value determination of significant, acquired long-lived assets. The determination of fair value requires estimates about discount rates, growth and retention rates, royalty rates, expected future cash flows and other future events that are judgmental in nature. While we use our best estimates and assumptions as a part of the purchase price allocation process, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we are permitted to record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of income. The Company is also required to estimate the useful lives of intangible assets to determine the amount of acquisition-related intangible asset amortization expense to record in future periods. Such useful lives are determined based upon the expected period of future cash flows to be generated by the intangible asset. The Company periodically reviews the estimated useful lives assigned to our intangible assets to determine whether such estimated useful lives continue to be appropriate. On November 1, 2021, the Company completed its acquisition of AR Packaging (the “Transaction”), through the acquisition of all of the shares of AR Packaging for cash of $1,412 million, net of cash acquired of $75 million. AR Packaging’s results of operations have been included in the Company’s financial results since the acquisition date. The Company allocated the fair value of purchase consideration transferred to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the date of the acquisition. The Company identified that the acquired assets included customer relationships, which were assigned a fair value of $439 million using a discounted cash flow analysis. Significant assumptions in valuing this asset included the discount rate, annual revenue growth rates, customer attrition rates, projected operating expenses, projected earnings before interest, taxes, depreciation, and amortization ("EBITDA") margins, tax rate, depreciation, contributory asset charge, and future earnings projections among others.The Company believes the estimates applied to be based on reasonable assumptions, but which are inherently uncertain. As a result, actual results may differ from the assumptions and judgments used to determine fair value of the assets acquired, which could result in material impairment losses in the future. Additional information regarding our acquisitions is included in "Note 4 - Business Combinations"in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” Pension Benefits The Company sponsors defined benefit pension plans (the “Plans”) for eligible employees in North America and certain international locations. The funding policy for the U.S. qualified defined benefit plans is to, at a minimum, contribute assets as required by the Internal Revenue Code Section 412. Non qualified defined benefit U.S. plans providing benefits in excess of limitations imposed by the U.S. income tax code are not funded. The Company’s pension expense for defined benefit pension plans was $11 million in 2021 compared to $167 million in 2020. The 2020 expense includes a $154 million charge associated with the termination and settlement of the Company's largest U.S. plan. Pension expense is calculated based upon a number of actuarial assumptions applied to each of the defined benefit plans. The weighted average expected long-term rate of return on pension fund assets used to calculate pension expense was 3.59% and 4.12% in 2021 and 2020, respectively. The expected long-term rate of return on pension assets was determined based on several factors, including historical rates of return, input from our pension investment consultants and projected long-term returns of broad equity and bond indices. The Company evaluates its long-term rate of return assumptions annually and adjusts them as necessary. 34 The Company determined pension expense using both the fair value of assets and a calculated value that averages gains and losses over a period of years. Investment gains or losses represent the difference between the expected and actual return on assets. As of December 31, 2021, the net actuarial loss was $71 million. These net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, or (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains, including whether such accumulated actuarial losses at each measurement date exceed the “corridor” determined under the Compensation — Retirement Benefits topic of the FASB Codification. The actuarial loss is amortized over the average remaining life expectancy period of employees expected to receive benefits. The discount rate used to determine the present value of future pension obligations at December 31, 2021 was based on a yield curve constructed from a portfolio of high-quality corporate debt securities with maturities ranging from 1 year to 30 years. Each year’s expected future benefit payments were discounted to their present value at the spot yield curve rate thereby generating the overall discount rate for the Company’s pension obligations. The weighted average discount rate used to determine the pension obligations was 2.46% and 2.11% in 2021 and 2020, respectively. The Company’s pension expense is estimated to be approximately $9 million in 2022. The estimate is based on a weighted average expected long-term rate of return of 3.86%, a weighted average discount rate of 2.46% and other assumptions. Pension expense beyond 2021 will depend on future investment performance, the Company’s contribution to the plans, changes in discount rates and other factors related to covered employees in the plans. If the discount rate assumptions for the Company’s U.S. plans were reduced by 0.25%, pension expense would increase by approximately $1 million and the December 31, 2021 projected benefit obligation would increase approximately $10 million. The fair value of assets in the Company’s plans was $557 million at December 31, 2021 and $516 million at December 31, 2020. The projected benefit obligations exceed the fair value of plan assets by $70 million and $77 million as of December 31, 2021 and 2020, respectively. The accumulated benefit obligation (“ABO”) exceeded the fair value of plan assets by $64 million and $72 million at the end of 2021 and 2020, respectively. Goodwill The Company evaluates goodwill for potential impairment annually as of October 1, as well as whenever events or changes in circumstances suggest that the fair value of a reporting unit may no longer exceed its carrying amount. Potential impairment of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the estimated fair value of the reporting unit. As of October 1, 2021, the Company had seven reporting units, five of which had goodwill. Periodically, the Company may perform a qualitative impairment analysis of goodwill associated with each of its reporting units to determine if it is more likely than not that the carrying value of a reporting unit exceeded its fair value. If the results of the qualitative analysis of any of the reporting units is inconclusive, or if significant changes in the business have occurred since the last quantitative impairment assessment, the Company will perform a quantitative analysis for those reporting units. As of October 1, 2021, the Company performed a quantitative impairment test. The quantitative analysis involves calculating the fair value of each reporting unit by utilizing a discounted cash flow analysis based on the Company’s business plans, discounted using a weighted average cost of capital and market indicators of terminal year cash flows based upon a multiple of earnings before interest, taxes, depreciation and amortization ("EBITDA"). Estimating the fair value of the reporting unit involves uncertainties as it requires management to consider a number of factors, including but not limited to, future operating results, business plans, economic projections of revenues and operating margins, estimated future cash flows, and market data and analysis, including market capitalization. Fair value determinations are sensitive to changes in the factors described above. There are inherent uncertainties related to these factors and judgments used to estimate reporting unit fair value and the related analysis of potential goodwill impairment. The variability of the assumptions that management uses to perform the goodwill impairment test depends on a number of conditions, including uncertainty about future events and cash flows. Accordingly, the Company’s accounting estimates may materially change from period to period due to changing market factors. If the Company had used other assumptions and estimates or if different conditions occur in future periods, future operating results and cash flows could be materially impacted, and judgments and conclusions about the recoverability of goodwill could change. The assumptions used in the goodwill impairment testing process could also be adversely impacted by certain of the risks discussed in “Item 1A., Risk Factors” and thus could result in future goodwill impairment charges. 35 The Company performed its annual goodwill impairment tests as of October 1, 2021. The Company concluded that all reporting units with goodwill have a fair value that exceeds their carrying value, and thus goodwill was not impaired. The discount rate used for each reporting unit ranged from 7.5% to 8.0%, and we utilized an EBITDA multiple of 9 times to calculate terminal period cash flows. The Foodservice and Australia reporting units had fair values that exceed their respective carrying values by 25% and 21%, respectively, whereas all other reporting units exceeded by more than 30%. If we had concluded that it was appropriate to increase the discount rate we used by 100 basis points to estimate the fair value of our respective reporting units, the fair value of each reporting unit would have continued to exceed its carrying amount. The Foodservice and Australia reporting units had goodwill totaling $43 million and $11 million, respectively. The Company does not believe it is likely that there will be material changes in the assumptions or estimates used to calculate the reporting unit fair values. Recovery of Long-Lived Assets The Company evaluates the recovery of its long-lived assets by analyzing operating results and considering significant events or changes in the business environment that may have triggered impairment. The Company reviews long-lived assets (including property, plant and equipment and intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of such long-lived assets may not be fully recoverable by undiscounted cash flows. Measurement of the impairment loss, if any, is based on the fair value of the asset, which is determined by an income, cost or market approach. Deferred Income Taxes and Potential Assessments According to the Income Taxes topic of the FASB Codification, a valuation allowance is required to be established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The FASB Codification provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient taxable income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset. The Company has evaluated the need to maintain a valuation allowance for deferred tax assets based on its assessment of whether it is more likely than not that deferred tax benefits would be realized through the generation of future taxable income. Appropriate consideration was given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. In determining whether a valuation allowance is required, many factors are considered, including the specific taxing jurisdiction, the carryforward period, reversals of existing taxable temporary differences, cumulative pretax book earnings, income tax strategies and forecasted earnings for the entities in each jurisdiction. As of December 31, 2021, the Company has a valuation allowance of $38 million against its net deferred tax assets in certain foreign jurisdictions and against domestic deferred tax assets related to certain federal tax credit carryforwards, certain state net operating loss carryforwards and certain state tax credit carryforwards. As of December 31, 2020, a total valuation allowance of $34 million was recorded. As of December 31, 2021, the Company has provided for deferred U.S. income taxes attributable to future withholding tax expense related to the Company's equity investment in the joint venture, Rengo Riverwood Packaging, Ltd. In addition, the Company provided deferred income taxes for future Canadian withholding tax to the extent of excess cash available for distribution after consideration of working capital needs and other debt settlement of its Canadian subsidiary, Graphic Packaging International Canada, ULC. The Company continues to assert that it is permanently reinvested in the cumulative earnings of its Canadian subsidiary in excess of the amount of cash that is on hand and available for distribution after consideration of working capital needs and other debt settlement. Due to the deemed taxation of all post-1986 earnings and profits required by the Act, the Company has determined that no deferred tax liability should be recorded related to the outside basis difference of its Canadian subsidiary of approximately $51 million as of December 31, 2021. The Company has not provided for deferred U.S. income taxes on outside basis differences of approximately $33 million in its other international subsidiaries because of the Company’s intention to indefinitely reinvest these earnings outside the U.S. The Company’s assertion with respect to these subsidiaries remains unchanged, despite the deemed taxation of all post-1986 earnings and profits required by the Act. The determination of the amount of the unrecognized deferred income tax liability (primarily withholding tax in certain jurisdictions and some state tax) on the unremitted earnings or any other associated outside basis differences is not practicable because of the complexities associated with the calculation. The Company has elected to recognize global intangible low-taxed income (“GILTI”) as period cost as incurred, therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion upon reversal. NEW ACCOUNTING STANDARDS For a discussion of recent accounting pronouncements impacting the Company, see "Note 1 - Nature of Business and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” 36 BUSINESS OUTLOOK Total capital investment for 2022 is expected to be in the range of $440 million to $460 million. The Company also expects the following in 2022: • Depreciation and amortization expense of approximately $580 million, including pension amortization and excluding $5 million of accelerated depreciation related to exit activities. • Pension plan contributions between $10 million and $20 million excluding $6 million reflected as a contribution to the remaining U.S defined benefit plan that effectively utilizes the excess balance related to the terminated U.S. defined benefit plan. 37 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company does not trade or use derivative instruments with the objective of earning financial gains on interest or currency rates, nor does it use leveraged instruments or instruments where there are no underlying exposures identified. Interest Rates The Company is exposed to changes in interest rates, primarily as a result of its short-term and long-term debt, which include both fixed and floating rate debt. The Company uses interest rate swap agreements effectively to fix the LIBOR rate on certain variable rate borrowings. At December 31, 2021, the Company had active interest rate swap agreements with a notional amount of $200 million expiring in January 2022. The table below sets forth interest rate sensitivity information related to the Company’s debt. Long-Term Debt Principal Amount by Maturity-Average Interest Rate Expected Maturity Date In millions 2022 2023 2024 2025 2026 Thereafter Total Fair Value Total Debt Fixed Rate Average Interest Rate Variable Rate $ $ 250 $ 4.88 % 6 $ 1.92 % 700 $ — $ 2.24 % 2.25 % 512 $ 2,256 $ 3,724 $ 3,770 2.05 % 3.42 % 14 $ 27 $ 39 $ 39 $ 1,583 $ 250 $ 1,952 $ 1,945 LIBOR+ Spread LIBOR+ Spread LIBOR+ Spread — — — — — Total Interest Rate Swaps-Notional Amount by Expiration-Average Swap Rate Expected Maturity Date In millions Notional Average Pay Rate Average Receive Rate 2022 2023 2024 2025 2026 Thereafter Total $ 200 $ — $ — $ — $ — $ — $ 200 2.87 % — % — % LIBOR — — — % — — % — — % — — % — 38 Foreign Exchange Rates The Company also enters into forward exchange contracts to hedge certain other anticipated foreign currency transactions. The purpose of these contracts is to protect the Company from the risk that the eventual functional currency cash flows resulting from anticipated foreign currency transactions will be adversely affected by changes in exchange rates. During the years ended December 31, 2021 and 2020, there were no amounts reclassified to earnings in connection with forecasted transactions that were no longer considered probable of occurring and there was no amount of ineffectiveness related to changes in the fair value of foreign currency forward contracts. Additionally, there were no amounts excluded from the measure of effectiveness during the years ended December 31, 2021 and 2020. Derivatives not Designated as Hedges The Company enters into forward exchange contracts to effectively hedge substantially all receivables resulting from transactions denominated in foreign currencies. The purpose of these forward exchange contracts is to protect the Company from the risk that the eventual functional currency cash flows resulting from the collection of these receivables will be adversely affected by changes in exchange rates. At December 31, 2021, multiple foreign currency forward exchange contracts existed, with maturities ranging up to six months. Those forward currency exchange contracts outstanding at December 31, 2021, when aggregated and measured in U.S. dollars at December 31, 2021 contractual rates, had net notional amounts totaling $103 million. The Company continuously monitors these forward exchange contracts and adjusts accordingly to minimize the exposure. Deal Contingent Hedge On May 14, 2021, in connection with the AR Packaging acquisition, the Company entered into deal contingent foreign exchange forward contracts, with no upfront cash cost, to hedge €700 million of the acquisition price. These forward contracts settled October 29, 2021 concurrently with the acquisition of AR Packaging and are accounted for as derivatives under ASC 815, Derivatives and Hedging. Unrealized losses resulting from these contracts were recognized in Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net on the Company’s Condensed Consolidated Statements of Operations. For more information, see "Note 11 — Fair Value Measurement" in the Notes to Consolidated Financial Statements included herein under “Item 8., Financial Statements and Supplementary Data.” Natural Gas Contracts The Company has hedged a portion of its expected natural gas usage for 2022. The carrying amount and fair value of the natural gas swap contracts is a net asset of $2 million as of December 31, 2021. Such contracts are designated as cash flow hedges and are accounted for by deferring the quarterly change in fair value of the outstanding contracts in Accumulated Other Comprehensive Loss in Shareholders’ Equity. The resulting gain or loss is reclassified into Cost of Sales concurrently with the recognition of the commodity consumed. 39 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS GRAPHIC PACKAGING HOLDING COMPANY Consolidated Statements of Operations for each of the three years in the period ended December 31, 2021 Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2021 Consolidated Balance Sheets as of December 31, 2021 and 2020 Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended December 31, 2021 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021 Notes to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firms (PricewaterhouseCoopers LLP PCAOB ID No. 238 and Ernst & Young LLP PCAOB ID No. 42) Page 41 42 42 44 45 46 85 40 GRAPHIC PACKAGING HOLDING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS In millions, except per share amounts Net Sales Cost of Sales Selling, General and Administrative Other (Income) Expense, Net Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net Income from Operations Nonoperating Pension and Postretirement Benefit Income (Expense) Interest Expense, Net Income before Income Taxes and Equity Income of Unconsolidated Entity Income Tax Expense Income before Equity Income of Unconsolidated Entity Equity Income of Unconsolidated Entity Net Income Net Income Attributable to Noncontrolling Interests Net Income Attributable to Graphic Packaging Holding Company Net Income Per Share Attributable to Graphic Packaging Holding Company — Basic Net Income Per Share Attributable to Graphic Packaging Holding Company — Diluted Year Ended December 31, 2021 2020 2019 7,156 $ 6,085 528 (2) 138 407 5 (123) 289 (74) 215 1 216 $ (12) 204 $ 6,560 $ 5,460 513 2 61 524 (151) (129) 244 (42) 202 1 203 $ (36) 167 $ 6,160 5,068 512 8 38 534 (39) (141) 354 (76) 278 — 278 (71) 207 0.69 $ 0.60 $ 0.70 0.68 $ 0.60 $ 0.70 $ $ $ $ $ The accompanying notes are an integral part of the consolidated financial statements. 41 GRAPHIC PACKAGING HOLDING COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, 2021 Graphic Packaging Holding Company Noncontrolling Interest Total In millions Net Income Other Comprehensive Income (Loss), Net of Tax $ Derivative Instruments Pension and Postretirement Benefit Plans Currency Translation Adjustment Total Other Comprehensive Income, Net of Tax Total Comprehensive Income $ 204 $ 5 45 (28) 22 226 $ 12 $ 1 — — 1 13 $ 216 6 45 (28) 23 239 In millions Net Income (Loss) Other Comprehensive Income (Loss), Net of Tax: Derivative Instruments Pension and Postretirement Benefit Plans Currency Translation Adjustment Total Other Comprehensive Income, Net of Tax Year Ended December 31, 2020 Graphic Packaging Holding Company Noncontrolling Interest Redeemable Noncontrolling Interest Total $ 167 $ 39 $ (3) $ 203 4 100 17 121 1 29 2 32 — 10 (1) 9 6 $ 5 139 18 162 365 Total Comprehensive Income $ 288 $ 71 $ Year Ended December 31, 2019 Net Income $ 207 $ 55 $ 16 $ 278 Other Comprehensive (Loss) Income, Net of Tax: Derivative Instruments Pension and Postretirement Benefit Plans Currency Translation Adjustment Total Other Comprehensive Income, Net of Tax (6) 8 10 12 (1) 2 2 3 — 1 — 1 (7) 11 12 16 Total Comprehensive Income $ 219 $ 58 $ 17 $ 294 The accompanying notes are an integral part of the consolidated financial statements. 42 GRAPHIC PACKAGING HOLDING COMPANY CONSOLIDATED BALANCE SHEETS In millions, except share and per share amounts ASSETS Current Assets: Cash and Cash Equivalents Receivables, Net Inventories, Net Other Current Assets Total Current Assets Property, Plant and Equipment, Net Goodwill Intangible Assets, Net Other Assets Total Assets LIABILITIES Current Liabilities: Short-Term Debt and Current Portion of Long-Term Debt Accounts Payable Compensation and Employee Benefits Interest Payable Other Accrued Liabilities Total Current Liabilities Long-Term Debt Deferred Income Tax Liabilities Accrued Pension and Postretirement Benefits Other Noncurrent Liabilities SHAREHOLDERS' EQUITY Preferred Stock, par value $.01 per share; 100,000,000 shares authorized; no shares issued or outstanding Common Stock, par value $.01 per share; 1,000,000,000 shares authorized; 307,103,551 and 267,726,373 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively Capital in Excess of Par Value Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total Graphic Packaging Holding Company Shareholders' Equity Noncontrolling Interest Total Equity December 31, 2021 2020 $ $ $ 172 $ 859 1,387 84 2,502 4,677 2,015 868 395 10,457 $ 279 $ 1,125 211 35 399 2,049 5,515 579 139 282 179 654 1,128 59 2,020 3,560 1,478 437 310 7,805 497 825 213 30 291 1,856 3,147 540 130 292 — — 3 2,046 66 (224) 1,891 2 1,893 3 1,715 (48) (246) 1,424 416 1,840 7,805 Total Liabilities and Shareholders' Equity $ 10,457 $ The accompanying notes are an integral part of the consolidated financial statements. 43 GRAPHIC PACKAGING HOLDING COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY In millions, except share amounts Common Stock Shares Amount Capital in Excess of Par Value (Accumulated Deficit) Retained Earnings Accumulated Other Comprehensive (Loss) Income Noncontrolling Interests Total Equity Redeemable Noncontrolling Interest Balances at December 31, 2018 299,807,779 $ 3 $ 1,944 $ Net Income Reclassification to Redeemable Noncontrolling Interest for Share Repurchases Redeemable Noncontrolling Interest Redemption Value Mark-Up Distribution of Membership Interest Other Comprehensive (Loss) Income, Net of Tax: Derivative Instruments Pension and Postretirement Benefit Plans Currency Translation Adjustment — — — — — — — Repurchase of Common Stock (10,191,257) Dividends Declared Recognition of Stock-Based Compensation — — Issuance of Shares for Stock-Based Awards 630,385 — — — — — — — — — — — — — (30) — — — — (55) — 18 — Balances at December 31, 2019 290,246,907 $ 3 $ 1,877 $ Net Income (Loss) Redeemable Noncontrolling Interest Redemption Value Adjustment Distribution of Membership Interest Other Comprehensive Income, Net of Tax: Derivative Instruments Pension and Postretirement Benefit Plans Currency Translation Adjustment — — — — — — Repurchase of Common Stock (23,420,010) Redemption of IP's Ownership Interest Tax Effect IP Redemption Dividends Declared Recognition of Stock-Based Compensation — — — — Issuance of Shares for Stock-Based Awards 899,476 — — — — — — — — — — — — — 12 — — — — (128) (87) 16 — 25 — 10 $ 207 — — — — — — (73) (88) — — 56 $ 167 — — — — — (188) — — (83) — — (379) $ 439 $ 2,017 $ — — — — 55 13 — (22) (6) (1) 8 10 — — — — 2 2 — — — — 262 13 (30) (22) (7) 10 12 (128) (88) 18 — (367) $ 488 $ 2,057 $ — — — 4 100 17 — — — — — — 39 — (19) 1 29 2 — (124) — — — — 206 12 (19) 5 129 19 (316) (211) 16 (83) 25 — Balances at December 31, 2020 267,726,373 $ 3 $ 1,715 $ (48) $ (246) $ 416 $ 1,840 $ Net Income Distribution of Membership Interest Other Comprehensive Income, Net of Tax: Derivative Instruments Pension and Postretirement Benefit Plans Currency Translation Adjustment — — — — — Redemption of IP's Ownership Interest 38,080,072 Dividends Declared Investment in Subsidiaries Recognition of Stock-Based Compensation — — — Issuance of Shares for Stock-Based Awards 1,297,106 — — — — — — — — — — — — — — — 319 — — 12 — 204 — — — — — (90) — — — — — 5 45 (28) — — — — — 12 (6) 1 — — (423) — 2 — — 216 (6) 6 45 (28) (104) (90) 2 12 — Balances at December 31, 2021 307,103,551 $ 3 $ 2,046 $ 66 $ (224) $ 2 $ 1,893 $ The accompanying notes are an integral part of the consolidated financial statements. 276 16 (13) 30 (6) — 1 — — — — — 304 (3) (12) (2) — 10 (1) — (296) — — — — — — — — — — — — — — — 44 GRAPHIC PACKAGING HOLDING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS In millions CASH FLOWS FROM OPERATING ACTIVITIES: Net Income Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization Amortization of Deferred Debt Issuance Costs Deferred Income Taxes Amount of Postretirement Expense (Less) Greater Than Funding Other, Net Changes in Operating Assets and Liabilities, Net of Acquisitions (See Note 3) Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital Spending Packaging Machinery Spending Acquisition of Businesses, Net of Cash Acquired Beneficial Interest on Sold Receivables Beneficial Interest Obtained in Exchange for Proceeds Other, Net Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES: Repurchase of Common Stock Payments on Debt Proceeds from Issuance of Debt Retirement of Long-Term Debt Redemption of Noncontrolling Interest Borrowings under Revolving Credit Facilities Payments on Revolving Credit Facilities IP Tax Receivable Agreement Payment Debt Issuance Costs Repurchase of Common Stock related to Share-Based Payments Dividends and Distributions Paid to GPIP Partner Other, Net Net Cash Provided by (Used in) Financing Activities EFFECT OF EXCHANGE RATE CHANGES ON CASH Net (Decrease) Increase in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year CASH AND CASH EQUIVALENTS AT END OF YEAR Non-cash Investing Activities: Beneficial Interest Obtained (Sold) in Exchange for Trade Receivables Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities Non-cash Financing Activities: Right-of-Use Assets Obtained in Exchange for New Finance Lease Liabilities Non-cash Exchange of Stock Issuance for Redemption of Noncontrolling Interest Year Ended December 31, 2020 2019 2021 $ 216 $ 203 $ 278 489 9 55 (24) 93 (229) 609 (775) (27) (1,704) 130 (11) (5) (2,392) — (16) 2,965 (1,626) (150) 4,485 (3,649) (109) (27) (15) (92) 12 1,778 (2) (7) 179 172 $ 121 $ 118 $ 11 $ (652) $ 476 6 (1) 147 13 (19) 825 (616) (30) (121) 136 (9) (8) (648) (316) (37) 800 — (500) 2,614 (2,597) — (14) (9) (103) 10 (152) 1 26 153 179 $ 135 $ 71 $ — $ — $ 447 5 53 42 15 (174) 666 (331) (22) (55) 344 (156) (5) (225) (129) (37) 300 — — 2,498 (2,865) — (5) (4) (113) (6) (361) 2 82 71 153 (69) 73 16 — $ $ $ $ $ The accompanying notes are an integral part of the consolidated financial statements. 45 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Graphic Packaging Holding Company (“GPHC” and, together with its subsidiaries, the “Company”) is committed to providing consumer packaging that makes a world of difference. The Company is a leading provider of sustainable, fiber- based consumer packaging solutions for a wide variety of products to food, beverage, foodservice and other consumer products companies. The Company operates on a global basis, is one of the largest producers of folding cartons in the United States ("U.S.") and Europe, and holds leading market positions in coated-recycled paperboard ("CRB"), coated unbleached kraft paperboard ("CUK") and solid bleached sulfate paperboard ("SBS"). The Company’s customers include many of the world’s most widely recognized companies and brands with prominent market positions in beverage, food, foodservice, and other consumer products. The Company strives to provide its customers with innovative sustainable packaging solutions designed to deliver marketing and performance benefits at a competitive cost by capitalizing on its low-cost paperboard mills and converting plants, its proprietary carton and packaging designs, and its commitment to quality and service. On January 1, 2018, GPHC, a Delaware corporation, International Paper Company, a New York corporation (“IP”), Graphic Packaging International Partners, LLC, a Delaware limited liability company formerly known as Gazelle Newco LLC and a wholly-owned subsidiary of the Company (“GPIP”), and Graphic Packaging International, LLC, a Delaware limited liability company formerly known as Graphic Packaging International, Inc. and a direct subsidiary of GPIP (“GPIL”), completed a series of transactions pursuant to an agreement dated October 23, 2017 among the foregoing parties (the “Transaction Agreement”). Pursuant to the Transaction Agreement (i) a wholly-owned subsidiary of the Company transferred its ownership interest in GPIL to GPIP; (ii) IP transferred its North America Consumer Packaging (“NACP”) business to GPIP, which was then subsequently transferred to GPIL; (iii) GPIP issued membership interests to IP, and IP was admitted as a member of GPIP; and (iv) GPIL assumed certain indebtedness of IP (the "NACP Combination"). During 2020, GPIP purchased 32.5 million partnership units from IP for $500 million in cash, fully redeeming the 18.2 million partnership units that were required to be redeemed in cash. On February 16, 2021, the Company announced that IP had notified the Company of its intent to exchange additional partnership units. Per an agreement between the parties, on February 19, 2021, GPIP purchased 9.3 million partnership units from IP for $150 million in cash, and IP exchanged 15.3 million partnership units for an equivalent number of shares of GPHC common stock. On May 21, 2021, IP exchanged its remaining 22.8 million partnership units for an equivalent number of shares of GPHC common stock. As required by the parties' agreement, these shares were immediately sold by IP. As a result, IP has no ownership interest remaining in GPIP as of May 21, 2021. In connection with both the February 19, 2021 and May 21, 2021 exchanges, pursuant to elections under Section 754 of the Internal Revenue Code, the Company obtained an increase with respect to the tax basis in the assets of GPIP and certain of its subsidiaries. As a result, payments pursuant to the Tax Receivable Agreement (“TRA”), executed in connection with the formation of GPIP on January 1, 2018, are required. The TRA provides for the payment by the Company to IP of 50% of the present value of any tax benefits projected to be realized by the Company upon IP’s exchange of its membership interest into GPHC stock. As such, the Company recorded TRA liabilities of $43 million and $66 million, for the February 19, 2021 and May 21, 2021 exchanges, respectively. The TRA liabilities were recorded through adjustments to Capital in Excess of Par Value during the first and second quarters of 2021, respectively. In accordance with the terms of the TRA, the Company settled the liability for the February exchange during the third quarter and settled the liability for the May exchange during the fourth quarter of 2021. Additionally, the Company recorded an adjustment through Capital in Excess of Par Value to decrease its net domestic Deferred Tax Liability (“DTL”) by $175 million in connection with both the February and May exchanges. The decrease in the DTL reflects the change in the outside basis difference associated with the Company’s investment in GPIP and includes the impact of the tax basis step up triggered by the exchanges pursuant to Section 754 of the Internal Revenue Code in addition to other changes to book and tax basis as a result of the Company’s increased ownership interest in GPIP. Basis of Presentation and Principles of Consolidation The Company’s Consolidated Financial Statements include all subsidiaries in which the Company has the ability to exercise direct or indirect control over operating and financial policies. Intercompany transactions and balances are eliminated in consolidation. The Company, through its GPIL subsidiary, is a party to a Japanese joint venture, Rengo Riverwood Packaging, Ltd. in which it holds a 50% ownership interest that is accounted for using the equity method. 46 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Actual results could differ from these estimates, and changes in these estimates are recorded when known. Estimates are used in accounting for, among other things, pension benefits, retained insurable risks, slow-moving and obsolete inventory, allowance for doubtful accounts, useful lives for depreciation and amortization, impairment testing of goodwill and long-lived assets, fair values related to acquisition accounting, fair value of derivative financial instruments, share based compensation, deferred income tax assets and potential income tax assessments, and loss contingencies. Cash and Cash Equivalents Cash and cash equivalents include bank deposits and other marketable securities that are highly liquid with maturities of three months or less. Accounts Receivable and Allowances Accounts receivable are stated at the amount owed by the customer, net of an allowance for estimated uncollectible accounts, returns and allowances, and cash discounts. The allowance for doubtful accounts is estimated based on historical experience, current economic conditions and the creditworthiness of customers. Receivables are charged to the allowance when determined to be no longer collectible. The Company has entered into agreements to sell, on a revolving basis, certain trade accounts receivable to third party financial institutions. Transfers under these agreements meet the requirements to be accounted for as sales in accordance with the Transfers and Servicing topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (the "Codification"). The loss on sale is not material and is included in Other (Income) Expense, Net line item on the Condensed Consolidated Statement of Operations. The following table summarizes the activity under these programs for the year ended December 31, 2021 and 2020, respectively: In millions Receivables Sold and Derecognized Proceeds Collected on Behalf of Financial Institutions Year Ended December 31, 2021 2020 $ 2,947 $ 2,970 2,850 2,787 Net Proceeds (Paid to) Received From Financial Institutions Deferred Purchase Price at December 31(a) Pledged Receivables at December 31 201 (a) Included in Other Current Assets on the Condensed Consolidated Balance Sheet and represents a beneficial interest in the 180 (6) 55 4 5 receivables sold to the financial institutions, which is a Level 3 fair value measure. The Company participates in supply chain financing arrangements offered by certain customers and has entered into various factoring arrangements that also qualify for sale accounting in accordance with the Transfers and Servicing topic of the FASB Codification. For the years ended December 31, 2021 and 2020, the Company sold receivables of $693 million and $368 million respectively, related to these factoring arrangements. Receivables sold under all programs subject to continuing involvement, which consists principally of collection services, were $613 million and $621 million as of December 31, 2021 and 2020, respectively. Concentration of Credit Risk The Company’s cash, cash equivalents, and accounts receivable are potentially subject to concentration of credit risk. Cash and cash equivalents are placed with financial institutions that management believes are of high credit quality. Accounts receivable are derived from revenue earned from customers located in the U.S. and internationally and generally do not require collateral. For the years ended December 31, 2021, 2020, and 2019, no customer accounted for more than 10% of net sales. Inventories Inventories are stated at the lower of cost and net realizable value with cost determined based on standard (which approximates actual), average or actual cost. Work in progress and finished goods inventories are valued at the cost of raw material consumed plus direct manufacturing costs (such as labor, utilities and supplies) as incurred and an applicable portion of manufacturing overhead. Inventories are stated net of an allowance for slow-moving and obsolete inventory. 47 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property, Plant and Equipment Property, plant and equipment are recorded at cost. Betterments, renewals and extraordinary repairs that extend the life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred. The Company’s cost and related accumulated depreciation applicable to assets retired or sold are removed from the accounts and the gain or loss on disposition is included in income from operations. Interest is capitalized on assets under construction for one year or longer with an estimated spending of $1 million or more. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. Capitalized interest was $14 million, $7 million and $3 million for the years ended December 31, 2021, 2020 and 2019, respectively. The Company assesses its long-lived assets, including certain identifiable intangibles, for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. To analyze recoverability, the Company projects future cash flows, undiscounted and before interest, over the remaining life of such assets. If these projected cash flows are less than the carrying amount, an impairment would be recognized, resulting in a write-down of assets with a corresponding charge to earnings. The impairment loss is measured based upon the difference between the carrying amount and the fair value of the assets. The Company assesses the appropriateness of the useful life of its long-lived assets periodically. Depreciation and Amortization Depreciation is computed using the straight-line method based on the following estimated useful lives of the related assets: Buildings Land improvements Machinery and equipment Furniture and fixtures Automobiles, trucks and tractors 40 years 15 years 3 to 40 years 10 years 3 to 5 years Depreciation expense, including the depreciation expense of assets under finance leases, for 2021, 2020 and 2019 was $420 million, $414 million and $388 million, respectively. Intangible Assets Intangible assets with a determinable life are amortized on a straight-line or accelerated basis over their useful lives. The amortization expense for each intangible asset is recorded in the Consolidated Statements of Operations according to the nature of that asset. Goodwill is the Company’s only intangible asset not subject to amortization. The following table displays the intangible assets that continue to be subject to amortization and accumulated amortization expense as of December 31, 2021 and 2020: December 31, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount In millions Amortizable Intangible Assets: Customer Relationships(a) Patents, Trademarks, Licenses, and Leases Total (a) Please see "Note 4- Business Combinations" for the intangibles acquired with the AR Packaging acquisition. $ 1,106 $ 1,602 $ (734) $ 868 $ (669) $ $ 1,462 $ (621) $ 841 $ 965 $ 140 (113) 27 141 (556) $ (113) 409 28 437 The Company recorded amortization expense for the years ended December 31, 2021, 2020 and 2019 of $69 million, $62 million and $59 million, respectively. The Company expects amortization expense for the next five consecutive years to be approximately as follows: $95 million, $92 million, $90 million, $86 million, and $86 million. Goodwill The Company tests goodwill for impairment annually as of October 1, as well as whenever events or changes in circumstances suggest that the estimated fair value of a reporting unit may no longer exceed its carrying amount. 48 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company tests goodwill for impairment at the reporting unit level, which is an operating segment or a level below an operating segment, which is referred to as a component. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that component. Two or more components of an operating segment are aggregated and deemed a single reporting unit if the components have similar economic characteristics. Potential goodwill impairment is measured at the reporting unit level by comparing the reporting unit’s carrying amount (including goodwill), to the fair value of the reporting unit. When performing the quantitative analysis, the estimated fair value of each reporting unit is determined by utilizing a discounted cash flow analysis based on the Company’s forecasts, discounted using a weighted average cost of capital and market indicators of terminal year cash flows based upon a multiple of EBITDA. If the carrying amount of a reporting unit exceeds its estimated fair value, goodwill is considered impaired. In determining fair value, management relies on and considers a number of factors, including but not limited to, future operating results, business plans, economic projections of revenues and operating margins, forecasts including future cash flows, and market data and analysis, including market capitalization. The assumptions used are based on what a hypothetical market participant would use in estimating fair value. Fair value determinations are sensitive to changes in the factors described above. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment. Periodically, the Company may perform a qualitative impairment analysis of goodwill associated with each of its reporting units to determine if it is more likely than not that the carrying value of a reporting unit exceeded its fair value. However, the Company performed a quantitative impairment test as of October 1, 2021, and concluded goodwill was not impaired for any of its reporting units. The following is a rollforward of goodwill by reportable segment: In millions Balance at December 31, 2019 Acquisition of Businesses Foreign Currency Effects Balance at December 31, 2020 Acquisition of Businesses Foreign Currency Effects Balance at December 31, 2021 (a) Includes Australia operating segment. Retained Insurable Risks Paperboard Mills Americas Paperboard Packaging Europe Paperboard Packaging Corporate/ Other(a) Total $ $ $ 507 $ — (1) 506 $ — — 506 $ 897 $ — 3 900 $ 68 — 968 $ 60 $ — (1) 59 $ 475 (6) 528 $ 14 $ 1,478 — — — (1) 13 $ 1,478 543 — — (6) 13 $ 2,015 It is the Company’s policy to self-insure or fund a portion of certain expected losses related to group health benefits and workers’ compensation claims. Provisions for expected losses are recorded based on the Company’s estimates, on an undiscounted basis, of the aggregate liabilities for known claims and estimated claims incurred but not reported. Asset Retirement Obligations Asset retirement obligations are accounted for in accordance with the provisions of the Asset Retirement and Environmental Obligations topic of the FASB Codification. A liability and asset are recorded equal to the present value of the estimated costs associated with the retirement of long-lived assets where a legal or contractual obligation exists and the liability can be reasonably estimated. The liability is accreted over time and the asset is depreciated over the remaining life of the asset. Upon settlement of the liability, the Company will recognize a gain or loss for any difference between the settlement amount and the liability recorded. Asset retirement obligations with indeterminate settlement dates are not recorded until such time that a reasonable estimate may be made. The Company's asset retirement obligations consist primarily of landfill closure and post-closure costs at certain of our mills. At December 31, 2021 and 2020, the Company had liabilities of $12 million and $11 million, respectively. The liabilities are primarily reflected as Other Noncurrent Liabilities in the Company's Consolidated Balance Sheets. 49 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) International Currency The functional currency of the international subsidiaries is usually the local currency for the country in which the subsidiaries own their primary assets. The translation of the applicable currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate during the period. Any related translation adjustments are recorded directly to a separate component of Shareholders’ Equity, unless there is a sale or substantially complete liquidation of the underlying foreign investments. Gains and losses on foreign currency transactions are included in Other Expense, Net for the period in which the exchange rate changes. The Company pursues a currency hedging program which utilizes derivatives to reduce the impact of foreign currency exchange fluctuations on its consolidated financial results. Under this program, the Company has entered into forward exchange contracts in the normal course of business to hedge certain foreign currency denominated transactions. Realized and unrealized gains and losses on these forward contracts are included in the measurement of the basis of the related foreign currency transaction when recorded. Revenue Recognition The Company has two primary activities, manufacturing and converting paperboard, from which it generates revenue from contracts with customers. Revenue is disaggregated primarily by geography and type of activity as further explained in "Note 15 - Business Segment and Geographic Area Information." All reportable segments and the Australia and Pacific Rim operating segments recognize revenue under the same method, allocate transaction price using similar methods, and have similar economic factors impacting the uncertainty of revenue and related cash flows. Revenue is recognized on the Company's annual and multi-year supply contracts when the Company satisfies the performance obligation by transferring control over the product or service to a customer, which is generally based on shipping terms and passage of title under the point-in-time method of recognition. For the years ended December 31, 2021, 2020 and 2019, the Company recognized $7,131 million, $6,537 million and $6,141 million, respectively, of revenue from contracts with customers. The transaction price allocated to each performance obligation consists of the stand-alone selling price, estimates of rebates and other sales or contract renewal incentives, and cash discounts and sales returns ("Variable Consideration") and excludes sales tax. Estimates are made for Variable Consideration based on contract terms and historical experience of actual results and are applied to the performance obligations as they are satisfied. Purchases by the Company’s principal customers are manufactured and shipped with minimal lead time, therefore performance obligations are generally satisfied shortly after manufacturing and shipment. The Company uses standard payment terms that are consistent with industry practice. The Company's contract assets consist primarily of contract renewal incentive payments to customers which are amortized over the period in which performance obligations related to the contract renewal are satisfied. As of December 31, 2021 and 2020, contract assets were $17 million and $15 million, respectively. The Company's contract liabilities consist principally of rebates, and as of December 31, 2021 and 2020 were $61 million and $56 million, respectively. The Company did not have a material amount relating to backlog orders at December 31, 2021 or 2020. Shipping and Handling The Company includes shipping and handling costs in Cost of Sales. Research and Development Research and development costs, which relate primarily to the development and design of new packaging machines and products and are recorded as a component of Selling, General and Administrative expenses, are expensed as incurred. Expenses for the years ended December 31, 2021, 2020 and 2019 were $10 million, $10 million and $9 million, respectively. 50 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net The following table summarizes the transactions recorded in Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net in the Consolidated Statements of Operations for the year ended December 31: 2021 2020 2019 $ $ 84 33 $ (2) 38 4 24 In millions Charges Associated with Business Combinations(a) Shutdown and Other Special Charges Exit Activities(b) Total 10 38 (a) Includes $48 million of unrealized losses resulting from deal contingent foreign exchange forward contracts from the AR 21 138 25 61 $ $ $ Packaging acquisition (see "Note 11- Fair Value Measurement"). (b) Relates to the Company's CRB mills, converting facility closures and the PM1 containerboard machine exit activities (see "Note 18 - Exit Activities"). 2021 During 2019, the Company announced its plans to invest in a new CRB paper machine in Kalamazoo, Michigan. At the time of the announcement, the Company expected to close two of its smaller CRB Mills in 2022 in order to remain capacity neutral. During the third quarter of 2021, the Company decided to continue to operate one of the two original smaller CRB mills at least through 2022. Severance, retention, start-up costs, and other charges associated with this project are included in Exit Activities in the table above. For more information, see "Note 18 - Exit Activities." During 2019, the Company began a three-year program to dismantle and dispose of idle and abandoned assets primarily at the paperboard mills. Charges related to this program for 2021 and 2020 were $25 million and $14 million, respectively. Charges associated with this program are included in Shutdown and Other Special Charges in the table above. On July 1, 2021, the Company acquired substantially all the assets of Americraft Carton Inc. ("Americraft"), the largest remaining independent folding carton converter in North America for $292 million. The acquisition included seven converting plants across the United States and is reported within the Americas Paperboard Packaging reportable segment. Charges associated with this acquisition are included in Charges Associated with Business Combinations in the table above. For more information, see "Note 4 - Business Combinations." On November 1, 2021, the Company acquired all the shares of AR Packaging Group AB ("AR Packaging"), Europe's second largest producer of fiber-based consumer packaging, for $1,412 million in cash, net of cash acquired of $75 million, subject to customary adjustments. The acquisition included 30 converting plants in 13 countries and is reported within the Europe Paperboard Packaging reportable segment. The costs associated with this acquisition are included in Charges Associated with Business Combinations in the table above. For more information, see "Note 4 - Business Combinations." 2020 On January 31, 2020, the Company acquired a folding carton facility from Quad/Graphics, Inc. ("Quad"), a commercial printing company. The converting facility is located in Omaha, Nebraska and is included in the Americas Paperboard Packaging reportable segment. The Company paid $41 million using existing cash and borrowings under its revolving credit facility. The costs associated with this acquisition are included in Charges Associated with Business Combinations in the table above. During the first quarter of 2021, the acquisition accounting for Quad was finalized. For more information, see "Note 4 - Business Combinations." In March 2020, the Company made the decision to close the White Pigeon, Michigan CRB mill and shut down the PM1 containerboard machine in West Monroe, Louisiana. Charges associated with these projects are included in Exit Activities in the table above. For more information, see "Note 18 - Exit Activities." On April 1, 2020, the Company acquired the Consumer Packaging Group business from Greif, Inc. ("Greif"), a leader in industrial packaging products and services. The acquisition included seven converting plants across the United States and will allow the company to increase its mill-to-converting plant integration over time. The Company paid approximately $80 million using existing cash and borrowings under its revolving credit facility. The costs associated with this acquisition are included in Charges Associated with Business Combinations in the table above. During the second quarter of 2021, the acquisition accounting for Greif was finalized. For more information, see "Note 4 - Business Combinations." 51 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) In June 2020, the Company made the decision to close certain converting plants that were acquired from Greif. The Burlington, North Carolina converting facility and the Los Angeles, California converting facility were closed during 2020. Charges associated with these projects are included in Exit Activities in the table above. For more information, see "Note 18- Exit Activities." The Company has established estimated liabilities related to the partial or complete withdrawal from certain multi- employment benefit plans for facilities which have been closed. During the second quarter of 2020, the Company increased its estimated withdrawal liability for these plans by $12 million. During the fourth quarter of 2020, the Company entered into a settlement agreement with one of its closed multi-employment benefit plans and recorded a $4 million reduction in its estimated withdrawal liability for this plan. These items were recorded in Shutdown and Other Special Charges in the table above. For more information, see "Note 8 - Pensions and Other Postretirement Benefits." During 2020, the Company incurred incremental costs associated with paying payroll to employees during necessary quarantines due to COVID-19. In addition, the Company made one-time payments to front-line production employees and made contributions to local food banks in the communities where our manufacturing operations are located. The charges associated with these costs and payments were recorded in Shutdown and Other Special Charges in the table above. 2019 On August 1, 2019, the Company acquired substantially all the assets of Artistic Carton Company ("Artistic"), a diversified producer of folding cartons and CRB. The acquisition included two converting plants located in Auburn, Indiana and Elgin, Illinois (included in the Americas Paperboard Packaging reportable segment) and one CRB paperboard mill located in White Pigeon, Michigan (included in the Paperboard Mills reportable segment). Share Repurchases and Dividends On January 28, 2019, GPHC's board of directors authorized an additional share repurchase program to allow GPHC to purchase up to $500 million of GPHC's issued and outstanding shares of common stock through open market purchases, privately negotiated transactions and Rule 10b5-1 plans (the "2019 share repurchase program"). A previous $250 million share repurchase program was authorized on January 10, 2017 (the "2017 share repurchase program"). Share repurchases are reflected as a reduction of common stock for the par value of the shares, with any excess of share repurchase price over par value allocated between capital in excess of par value and accumulated deficit. The Company did not repurchase any shares of its common stock under the 2019 share repurchase program for the year ended December 31, 2021. The following presents GPHC's share repurchases for the years ended December 31, 2020 and 2019: Amount repurchased in millions 2020 2019 (a) Includes 7,400,171 shares under the 2017 share repurchase program thereby completing that program. 316 128 $ 23,420,010 10,191,257 (a) $ Amount Repurchased $ $ Number of Shares Repurchased Average Price 13.48 12.55 At December 31, 2021, GPHC had $147 million remaining under the 2019 share repurchase program. During 2021 and 2020, GPHC paid cash dividends of $87 million and $85 million, respectively. Adoption of New Accounting Standards In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This amendment modifies ASC 740 to simplify the accounting for income taxes. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this new guidance during the three months ended March 31, 2021. The Company’s adoption did not result in any changes in accounting principle upon transition and the impact to the Company’s overall financial statements is immaterial. 52 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Accounting Standards Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides temporary optional expedients and exceptions for applying GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The ASU can be adopted after its issuance date through December 31, 2022. The Company is currently evaluating the impact of this new accounting guidance. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities. Under the new guidance, the acquirer should determine what contract assets and/or contract liabilities it would have recorded under ASC 606 as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. The recognition and measurement of those contract assets and contract liabilities will likely be comparable to what the acquiree has recorded on its books under ASC 606 as of the acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. However, adoption in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance is adopted. The Company is currently evaluating the adoption date of ASU 2021-08 and the impact, if any, adoption will have on its financial position and results of operations. NOTE 2. SUPPLEMENTAL BALANCE SHEET DATA The following tables provide disclosure related to the components of certain line items included in our consolidated balance sheets. Receivables, Net: In millions Trade Less: Allowance Other Total Inventories, Net by major class: In millions Finished Goods Work in Progress Raw Materials Supplies Total 2021 2020 803 $ (18) 785 74 859 $ 609 (12) 597 57 654 2021 2020 528 $ 194 473 192 1,387 $ 471 133 349 175 1,128 $ $ $ $ 53 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property, Plant and Equipment, Net: 2021 2020 In millions Property, Plant and Equipment, at Cost: Land and Improvements Buildings(a) Machinery and Equipment(b) Construction-in-Progress $ 137 671 6,082 478 7,368 (3,808) Total 3,560 (a) Includes gross assets under finance lease of $114 million and related accumulated depreciation of $13 million as of December 31, 2021, and gross assets under finance lease of $106 million and related accumulated depreciation of $11 million as of December 31, 2020. 175 $ 908 6,753 882 8,718 (4,041) 4,677 $ Less: Accumulated Depreciation(a)(b) (b) Includes gross assets under finance lease of $39 million and related accumulated depreciation of $15 million as of December 31, 2021, and gross assets under finance lease of $36 million and related accumulated depreciation of $9 million as of December 31, 2020. $ Other Accrued Liabilities: $ 2020 2021 In millions 9 Fair Value of Derivatives, current portion — Unfavorable Supply Agreement 3 Accrued Severance 20 Dividends Payable 21 Deferred Revenue 40 Accrued Customer Rebates 57 Other Accrued Taxes 38 Accrued Payables 61 Operating Lease Liabilities, current portion Other(a) 42 Total 291 (a) Other accrued expenses include several types of expenses such as accrued bonus, external outside services and production — $ 7 10 23 29 41 50 56 73 110 399 $ $ costs. Other Noncurrent Liabilities: In millions Deferred Revenue Workers Compensation Reserve Unfavorable Supply Agreement Multi-employer Plans Deferred Compensation Operating Lease Liabilities, noncurrent portion Other Total 2021 2020 $ $ 8 $ 8 8 19 21 193 25 282 $ 7 9 27 20 16 157 56 292 54 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION Cash Flow (Used In) Provided by Operations Due to Changes in Operating Assets and Liabilities, net of acquisitions: In millions Receivables, Net Inventories, Net Other Current Assets Other Assets Accounts Payable Compensation and Employee Benefits Income Taxes Interest Payable Other Accrued Liabilities Other Noncurrent Liabilities Total 2021 2020 2019 (106) $ (80) (12) (22) 77 (15) (6) 4 3 (72) (229) $ (216) $ 35 (5) (22) 71 40 7 6 31 34 (19) $ (108) (73) (9) (8) (9) 13 (4) 8 5 11 (174) $ $ Cash paid for interest and cash paid, net of refunds, for income taxes was as follows: In millions Interest Income Taxes NOTE 4. BUSINESS COMBINATIONS 2021 2020 2019 $ $ 116 $ 25 $ 120 $ 27 $ 127 26 The Company accounts for acquisitions as business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). Americraft On July 1, 2021, the Company acquired substantially all of the assets of Americraft. The Company paid approximately $292 million, using existing cash and borrowings under its revolving credit facility. The acquisition included seven converting plants across the United States. The purchase price for Americraft has been allocated to assets acquired and liabilities assumed based on the fair values as of the acquisition date and is subject to adjustments in subsequent periods as management finalizes its purchase price allocation, including the third-party valuations. Tangible assets and liabilities were valued as of the acquisition date using the indirect and direct methods of the cost approach and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. Management believes that the purchase price attributable to goodwill represents the benefits expected as the acquisition was made to continue to expand its product offering, to integrate paperboard from the Company's mills and to further optimize the Company's supply chain footprint. The assigned goodwill, which is deductible for tax purposes, is reported within the Americas Paperboard Packaging reportable segment. 55 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The preliminary purchase price allocation, including immaterial measurement period adjustments, is as follows as of December 31, 2021: In millions Purchase Price Receivables, Net Inventories Property, Plant and Equipment Intangible Assets(a) Other Assets Total Assets Acquired Current Liabilities Total Liabilities Assumed Net Assets Acquired Goodwill Amounts Recognized as of Acquisition Date (as adjusted) $ 292 22 37 122 54 1 236 12 12 224 68 Total Estimated Fair Value of Net Assets Acquired (a) Intangible Assets primarily consists of Customer Relationships with a weighted average life of approximately 15 years. $ 292 The Company included the results of operations of this acquisition in its Consolidated Statements of Income from the closing date of the acquisition. During 2021, Net Sales and Income from Operations for the Americraft acquisition were $108 million and $4 million, respectively. AR Packaging On November 1, 2021, the Company completed the acquisition of AR Packaging Group AB, Europe's second largest producer of fiber-based consumer packaging, by acquiring all the AR Packaging Group AB shares that were issued and outstanding as of the date of acquisition. The acquisition included 30 converting plants in 13 countries and enhances the Company’s global scale, innovation capabilities, and value proposition for customers throughout Europe and bordering regions. The total cash consideration for the AR Acquisition was $1,412 million net of cash acquired of $75 million, paid in Euros through the use of deal contingent, foreign exchange forward contracts, purchased through the use of available borrowing capacity on the Company’s Senior Secured Revolving Credit Facilities and the $400 million Incremental Facility Amendment to the Fourth Amended and Restated Credit Agreement. For more information, see "Note 5 - Debt." 56 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values as of the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, none of which is expected to be deductible for tax purposes, and will be reported within the Europe reportable segment. The allocation of purchase price shown below remains preliminary and is subject to further adjustment, pending additional refinement and final completion of valuations, including but not limited to valuations of property and equipment, customer relationships and other intangible assets, and deferred tax liabilities. Goodwill is primarily attributed to synergies from future expected economic benefits, including enhanced revenue growth from expanded capabilities and geographic presence as well as substantial cost savings from duplicative overhead, streamlined operations and enhanced operational efficiency. In millions Total Purchase Consideration Cash Acquired Receivables, Net Inventories Other Current Assets Property, Plant and Equipment(b) Intangible Assets(c) Other Assets Total Assets Acquired Accounts Payable Compensation and Employee Benefits Other Accrued Liabilities Short-Term Debt and Current Portion of Long-Term Debt Long-Term Debt Deferred Income Tax Liabilities Accrued Pension and Postretirement Benefits Other Noncurrent Liabilities Noncontrolling Interests Total Liabilities Assumed Net Assets Acquired Goodwill Amounts Recognized as of Acquisition Date(a) $ 1,487 75 212 166 12 529 447 76 1,517 109 12 101 9 17 164 50 41 2 505 1,012 475 Total Estimated Fair Value of Net Assets Acquired (a) The amounts were translated from Euro to USD using the rate at the acquisition date of 1.1539. (b) Property, Plant and Equipment primarily consists of Machinery and Equipment of $371 million with a weighted average $ 1,487 life of approximately 12 years. (c) Intangible Assets primarily consists of Customer Relationships of $439 million with a weighted average life of approximately 15 years. The above fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date. The fair values of the tangible assets acquired and liabilities assumed were preliminarily determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, future expected cash flows and other future events that are judgmental and subject to change. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements (“ASC 820”). Intangible assets consisting of customer relationships, technology, and trade names were valued using the discounted cash flow analysis. The significant assumptions used to estimate the value of the customer relationships intangible assets included the discount rate, annual revenue growth rates, customer attrition rates, projected operating expenses, projected EBITDA margins, tax rate, depreciation, and contributory asset charge. 57 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on the Company’s continuing review of matters related to the acquisition. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. Since the acquisition date, the results of operations for AR Packaging of $176 million of revenue and $8 million of operating income have been included within the consolidated statements of income for the twelve months ended December 31, 2021. The following unaudited pro forma consolidated financial information for the twelve months ended December 31, 2021 combines the results of the Company for the year ended December 31, 2021 and the unaudited results of AR Packaging for the corresponding period through the Acquisition Date, November 1, 2021. The following unaudited pro forma consolidated financial information for the twelve months ended December 31, 2020 combines the results of the Company for fiscal 2020 and the unaudited results of AR Packaging for the corresponding period. The unaudited pro forma consolidated financial information assumes that the Acquisition, which closed on November 1, 2021, was completed on January 1, 2020 (the first day of fiscal 2020). The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for amortization expense of acquired intangible assets, fair value adjustments for acquired inventory, property, plant and equipment and long-term debt. For fiscal 2020, non-recurring pro forma adjustments directly attributable to the Acquisition included pre-tax amounts of $16 million related to the acquisition accounting effect of inventories acquired and $74 million of transaction costs. The $74 million of transaction costs include the $48 million loss on the forward contracts that the Company used to partially fund the acquisition of AR Packaging. These costs will not effect the Company's income statement beyond 12 months after the acquisition date. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the Acquisition actually taken place on January 1, 2020. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the Acquisition. In millions Revenue Net Income (Loss) 2020 Pro Forma Twelve Months Ended (unaudited) December 31, 2021 December 31, 2020 $ $ 8,096 $ 293 $ 7,562 94 On January 31, 2020, the Company acquired a folding carton facility from Quad, a commercial printing company. The converting facility is located in Omaha, Nebraska, close to many of the Company's existing food and beverage customers. The Company paid approximately $41 million using existing cash and borrowings under its revolving credit facility. The purchase price was allocated to assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. The Company recorded $5 million related to identifiable intangible assets (customer relationships with useful lives of fifteen years), $43 million related to net tangible assets (primarily working capital, land/buildings and equipment) and a bargain purchase gain of $7 million as the net fair value of assets acquired and liabilities assumed was greater than the purchase price. During 2020, Net Sales and Loss from Operations for the Quad acquisition were $79 million and $1.0 million, respectively. During the first quarter of 2021, the acquisition accounting for Quad was finalized. On April 1, 2020, the Company acquired the Consumer Packaging Group business from Greif, Inc., a leader in industrial packaging products and services. The acquisition included seven converting plants across the United States and will allow the Company to increase its mill-to-converting plant integration over time. The Company paid $80 million using existing cash and borrowings under its revolving credit facility. The purchase price was allocated to assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date. The Company recorded $13 million related to identifiable intangible assets (customer relationships with useful lives of fifteen years) and $67 million related to net tangible assets (primarily working capital, land/buildings and equipment). During 2020, Net Sales and Loss from Operations for the Greif acquisition were $165 million and $14 million, respectively. During the second quarter of 2021, the acquisition accounting for the Greif was finalized. 58 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2019 On August 1, 2019, the Company completed the acquisition of Artistic, a diversified producer of folding cartons and CRB. The acquisition included two converting plants located in Auburn, Indiana and Elgin, Illinois and one CRB paperboard mill located in White Pigeon, Michigan. The Company paid $53 million using existing cash and borrowings under its revolving credit facility. Management believes that the purchase price attributable to goodwill represents the benefits expected as the acquisition was made to continue to integrate paperboard from the Company’s mills, to expand its product offering and to further optimize the Company’s supply chain footprint. During 2019, Net Sales and Income from Operations from the Artistic acquisition were $31 million and $2 million, respectively. NOTE 5. DEBT Short-Term Debt is comprised of the following: In millions Short Term Borrowings Current Portion of Finance Lease Obligations Current Portion of Long-Term Debt Total 2021 2020 $ $ 9 $ 7 263 279 $ 3 5 489 497 Short-term borrowings are principally at the Company’s international subsidiaries. The weighted average interest rate on short-term borrowings as of December 31, 2021 and 2020 was 6.5% and 4.9%, respectively. 59 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Long-Term Debt is comprised of the following: In millions Senior Notes with interest payable semi-annually at 4.75%(a) Senior Notes with interest payable semi-annually at 4.875%, effective rate of 4.89%, payable in 2022(a) Senior Notes with interest payable semi-annually at 0.821%, effective rate of 0.83%, payable in 2024(b) Senior Notes with interest payable semi-annually at 4.125%, effective rate of 4.15%, payable in 2024(a) Senior Notes with interest payable semi-annually at 1.512%, effective rate of 1.52%, payable in 2026(b) Senior Notes with interest payable semi-annually at 4.75%, effective rate of 4.80%, payable in 2027(b) Senior Notes with interest payable semi-annually at 3.50%, effective rate of 3.54%, payable in 2028(b) Senior Notes with interest payable semi-annually at 3.50%, effective rate of 3.54%, payable in 2029(b) Senior Notes (€290 million) with interest payable semi-annually at 2.625% , effective rate of 2.66%, payable in 2029(b) Senior Notes with interest payable semi-annually at 3.75% , effective rate of 3.80%, payable in 2030(b) Green Bond, net of unamortized premium with interest payable at 4.00%, effective rate of 1.72%, payable in 2026(b) Senior Secured Term Loan A-2 Facility with interest payable quarterly at 2.67%, effective rate of 2.68% payable in 2028(b) Senior Secured Term Loan A-3 Facility with interest payable monthly payable at floating rates (2.10% at December 31, 2021), effective rate of 2.12%, payable in 2028(b) Senior Secured Term Loan Facilities with interest payable at various dates at floating rates (1.86% at December 31, 2021) payable through 2026(b) Senior Secured Term Loan Facility (€210 million) with interest payable at various dates at floating rates (1.63% at December 31, 2021) payable through 2026(b) Senior Secured Revolving Credit Facilities with interest payable at floating rates (1.93% at December 31, 2021) payable in 2026(b)(c) Finance Leases and Financing Obligations Other Total Long-Term Debt Less: Current Portion Total Long-Term Debt Excluding Current Portion Less: Unamortized Deferred Debt Issuance Costs 2021 2020 $ — $ 250 400 300 400 300 450 350 330 400 110 425 250 425 250 — 300 — 300 450 350 — — — — — 543 1,360 239 920 146 9 5,822 270 5,552 37 — 84 139 5 3,663 494 3,169 22 Total (a) Guaranteed by GPHC and certain domestic subsidiaries (b) Guaranteed by GPIP and certain domestic subsidiaries (c) The effective interest rates for the Company’s Senior Secured Revolving Credit Facilities were 1.63% and 2.06% as of 5,515 $ 3,147 $ December 31, 2021 and 2020, respectively. 2021 On January 14, 2021, the Company drew the $425 million Incremental Term A-2 Facility (as hereinafter defined) and used the proceeds, together with cash on hand, to redeem its 4.75% Senior Notes due in 2021. On March 8, 2021, GPIL completed a private offering of $400 million aggregate principal amount of its 0.821% Senior Secured Notes due 2024 and $400 million aggregate principal amount of its 1.512% Senior Secured Notes due 2026. The net proceeds were used by the Company to repay a portion of the outstanding borrowings under GPIL's term loan credit facilities, which is under its senior secured credit facility. 60 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) On April 1, 2021, GPIL entered into a Fourth Amended and Restated Credit Agreement (the “Fourth Amended and Restated Credit Agreement”) to extend the maturity date of certain of its senior secured term loan facilities and senior secured revolving credit facilities and to amend certain other terms of the agreement, including revised debt covenants and collateral requirements. Under the terms of the agreement, $975 million of the Company’s senior secured term loan facilities remains outstanding. The Company added approximately $400 million to its senior secured revolving credit facilities. $550 million of the senior secured term loan facilities and all of the senior secured revolving credit facility loans continue to bear interest at a floating rate per annum ranging from LIBOR plus 1.25% to LIBOR plus 2.00%, determined using a pricing grid based upon the Company’s consolidated total leverage ratio from time to time, and the maturity for these loans were extended from January 1, 2023 to April 1, 2026. $425 million of the senior secured term loan facilities, which is a Farm Credit System incremental term loan (the “Incremental Term A-2 Facility Amendment”) continue to bear interest at a fixed rate per annum equal to 2.67% and matures on their originally scheduled maturity date of January 14, 2028. As long as the Incremental Term A-2 Facility Amendment is outstanding, GPIL will be eligible to receive an annual patronage credit from the participating banks, which will be paid in cash and stock in the lead member bank. Patronage payable each year is variable and based on the individual financial performance of each of the member banks then participating in the loan. On July 22, 2021, GPIL entered into an Incremental Facility Amendment to the Fourth Amended and Restated Credit Agreement for a second Farm Credit System incremental term loan (the “Incremental Term A-3 Facility”). The Incremental Term A-3 Facility is a senior secured term loan in the aggregate principal amount of $250 million maturing on July 22, 2028. The Incremental Term A-3 Facility bears interest at a floating rate ranging from LIBOR plus 1.50% to LIBOR plus 2.25%, determined using a pricing grid based upon GPIL’s consolidated leverage ratio. As long as the Incremental Term A-3 Facility is outstanding, GPIL will be eligible to receive an annual patronage credit from the participating banks, which will be paid in cash and stock in the lead member bank. Patronage payable each year is variable and based on the individual financial performance of each of the member banks then participating in the loan. The Incremental Term A-3 Facility is governed by the same covenants as are set forth in the Fourth Amended and Restated Credit Agreement and is secured by a first priority lien and security interest in certain assets of GPIL. On July 23, 2021, GPIL entered into Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and the Fourth Amended and Restated Guarantee and Collateral Agreement and Incremental Facility Amendment (the “First Amendment”). The First Amendment provided for a delayed draw term loan facility in an aggregate amount of €210 million and a €25 million increase to the existing Euro-denominated revolving credit facility. The new term loan facility was drawn on October 29, 2021, and bears interest at a floating rate ranging from LIBOR plus 1.125% to LIBOR plus 1.75%, determined using a pricing grid based upon GPIL’s consolidated total leverage ratio from time to time. The new term loan facility is governed by the same covenants as set forth in the Fourth Amended and Restated Credit Agreement and is secured by a first priority lien and security interest in certain assets of GPIL. On September 29, 2021, GPIL completed a $100 million tax-exempt green bond transaction through the Michigan Strategic Fund’s Private Activity Bond Program (the “Green Bonds”). The Green Bonds are special limited obligations of the Michigan Strategic Fund, as issuer, payable from and secured by a pledge of payments to be made by GPIL under a loan agreement between the Michigan Strategic Fund and GPIL. The Green Bonds mature in 2061 and include a mandatory purchase on October 1, 2026. The Green Bonds were issued at a price of 110.99% and bear interest at an annual rate of 4.0%. The equivalent yield is 1.70%. The net proceeds of $109.5 million were used to fund a portion of its spend on the CRB platform optimization project that includes the construction of a new CRB machine at its Kalamazoo, Michigan mill. The bonds have been designated as Green Bonds primarily because the proceeds were used to finance a solid waste disposal/ recycling facility resulting in diversion of waste from landfills. In addition to the solid waste recycling aspect, the project improves the environmental footprint of its CRB mill system through expected reductions in water usage, energy consumption and greenhouse gas emissions. On October 6, 2021, GPIL entered into a $400 million Incremental Facility Amendment to the Fourth Amended and Restated Credit Agreement (the "Incremental Term A-4 Facility"). The Incremental Term A-4 Facility has a delayed draw feature, and the Company funded the new term loan on October 29, 2021. The Incremental Term A-4 Facility was collateralized by the same assets as GPIL’s Senior Secured Facilities on a pari passu basis. The Incremental Term A-4 Facility bore interest at a floating rate per annum equal to the Base Rate, the Euro currency Rate plus 0.875%, or the Daily Floating LIBOR Rate plus 0.875%, as selected by the Company. The loan was repaid on November 19, 2021 with the proceeds from the 3.75% senior unsecured notes due 2030. On November 19, 2021, GPIL completed a private offering of $400 million aggregate principal amount of 3.750% senior unsecured notes due 2030 (the “Dollar Notes”) and €290 million aggregate principal amount of 2.625% senior unsecured notes due 2029 (the “Euro Notes”). The net proceeds of the Dollar Notes were used to repay in full the term loan borrowed under the Incremental Term A-4 Loan, which was under its senior secured credit facility. The net proceeds of the Euro Notes were used to repay revolver borrowings outstanding under its senior secured credit facility. 61 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2020 On March 6, 2020, GPIL completed a private offering of $450 million aggregate principal amount of its senior unsecured notes due 2028. The Senior Notes bear interest at an annual rate of 3.50%. The net proceeds were used by the Company to repay a portion of the outstanding borrowings under GPIL's revolving credit facility, which is under its senior secured credit facility. On August 28, 2020, GPIL completed a private offering of $350 million aggregate principal amount of its senior unsecured notes due 2029. The Senior Notes bear interest at an annual rate of 3.50%. The net proceeds were used by the Company to repay a portion of the outstanding borrowings under GPIL's revolving credit facility, which is under its senior secured credit facility. The following describes the Company's senior secured term loans and revolving credit facilities within the Fourth Amended and Restated Credit Agreement: Document(a) Fourth Amended and Restated Credit Agreement Provision • Increased the domestic revolving credit facility by $400 million to $1,850 million. • Increased the European revolving credit facility by €7 million to €145 million. • Decreased the Japanese revolving credit facility by ¥850 million to ¥1,650 million, and • Reduced the term loan by approximately $5 million to$550 million. LIBOR plus variable spread (between 125 basis points and 200 basis points) depending on consolidated total leverage ratio. Expiration April 2026 Amendment 1 Incremental Term A-2 Facility Amendment Incremental Term A-3 Facility Amendment Increased the European revolving credit facility by €25 million to €170 million. Added Incremental EUR Term Loan Facility of €210 million. Incremental $425 million term loan facility under the Fourth Amended and Restated Credit Agreement with a delayed draw feature, which was exercised in January 2021. Incremental $250 million term loan facility under the Fourth Amended and Restated Credit Agreement, which was exercised in July 2021. April 2026 January 2028 July 2028 Second Incremental Term A-4 Facility Amendment (a) The Company's obligations under the Fourth Amended and Restated Credit Agreement (as amended by the Incremental Term A-3 Facility Amendment, the First Amendment, and the Incremental Term A-4 Facility Amendment (collectively, the “Current Credit Agreement”) are secured by substantially all of the Company's domestic assets. Incremental $400 million term loan facility under the Fourth Amended and Restated Credit Agreement, which was funded in October 2021, and settled in November 2021. November 2021 62 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) At December 31, 2021, the Company and its U.S. and international subsidiaries had the following commitments, amounts outstanding and amounts available under revolving credit facilities: Total Commitments Total Outstanding In millions Senior Secured Domestic Revolving Credit Facility (a) 978 138 Senior Secured International Revolving Credit Facilities 52 Other International Facilities Total 1,168 (a) In accordance with its debt agreements, the Company's availability under its revolving credit facilities has been reduced by the amount of standby letters of credit issued of $22 million as of December 31, 2021. These letters of credit are primarily used as security against its self-insurance obligations and workers' compensation obligations. These letters of credit expire at various dates through early 2023 unless extended. 1,850 $ 208 70 2,128 $ 850 $ 70 18 938 $ Total Available $ $ Long-Term Debt maturities (excluding finance leases and finance obligations) are as follows: In millions 2022 2023 2024 2025 2026 After 2026 Total Covenant Agreements $ 263 33 740 39 2,095 2,506 5,676 The Current Credit Agreement and the indentures governing the 4.875% Senior Notes due 2022, 0.821% Senior Notes due 2024, 4.125% Senior Notes due 2024, 1.512% Senior Notes due 2026, 4.75% Senior Notes due 2027, 3.50% Senior Notes due 2028, 3.50% Senior Notes due 2029, 2.625% Senior Notes due 2029 and 3.75% Senior Notes due 2030 (the “Indentures”), limit the Company's ability to incur additional indebtedness. Additional covenants contained in the Current Credit Agreement and the Indentures may, among other things, restrict the ability of the Company to dispose of assets, incur guarantee obligations, prepay other indebtedness, repurchase stock, pay dividends and make other restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of the Indentures, engage in mergers or consolidations, change the business conducted by the Company and its subsidiaries, and engage in certain transactions with affiliates. Such restrictions could limit the Company’s ability to respond to changing market conditions, fund its capital spending program, provide for unexpected capital investments or take advantage of business opportunities. As of December 31, 2021, the Company was in compliance with the covenants in the Current Credit Agreement and the Indentures. NOTE 6. LEASES The Company determines if a contract is or contains a lease at inception. The Company has operating and finance leases for warehouses, corporate and regional offices, and machinery and equipment. The Company enters into lease contracts ranging from one to 25 years with the majority of leases having terms of three to seven years, many of which include options to extend in various increments. Variable lease costs consist primarily of variable warehousing costs, common area maintenance, taxes, and insurance. The Company’s leases do not have any significant residual value guarantees or restrictive covenants. As the implicit rate is not readily determinable for most of the Company’s leases agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company's credit spread adjusted for current market factors, including fixed rate swaps, LIBOR, and foreign currency rates. 63 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The components of lease costs are as follows: In millions Finance lease costs: Amortization of right-of-use asset Interest on lease liabilities Operating lease costs Short-term lease costs Variable lease costs Total lease costs, net Supplemental cash flow information related to leases was as follows: In millions Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Right-of-use assets obtained in exchange for lease obligations: Operating leases Finance leases $ $ Year Ended December 31, 2021 2020 8 $ 8 75 23 10 124 Year Ended December 31, 2021 2020 76 $ 8 6 118 11 8 8 72 13 10 111 72 8 5 71 — 64 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Supplemental balance sheet information related to leases was as follows: Balance Sheet Classification 2021 2020 December 31, In millions, except lease term and discount rate Operating Leases: Operating lease right-of-use asset Current operating lease liabilities Noncurrent operating lease liabilities Total operating lease liabilities Finance Leases and Financing Obligations: Property, Plant and Equipment Accumulated depreciation Property, Plant and Equipment, net Current finance lease liabilities Noncurrent finance lease liabilities and financing obligations Total finance lease liabilities and financing obligations Other Assets Other Accrued Liabilities Other Noncurrent Liabilities Short-Term Debt and Current Portion of Long-Term Debt Long-Term Debt $ $ $ $ $ $ $ $ $ $ $ $ 258 73 193 266 153 (28) 125 7 139 208 61 157 218 142 (20) 122 5 134 $ 146 $ 139 6 15 5 16 2.74 % 5.91 % 3.24 % 5.60 % Operating Leases Finance Leases $ 78 $ 62 43 31 20 54 288 $ (22) 266 $ $ $ 17 15 14 14 13 132 205 (69) 136 Weighted Average Remaining Lease Term (Years) Operating leases Finance leases Weighted Average Discount Rate Operating leases Finance leases Maturities of lease liabilities are as follows: In millions Year ending December 31, 2022 2023 2024 2025 2026 Thereafter Total lease payments Less imputed interest Total 65 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 7. STOCK INCENTIVE PLANS The Company has one active equity compensation plan from which new grants may be made, the Graphic Packaging Holding Company 2014 Omnibus Stock and Incentive Compensation Plan (the “2014 Plan”). The 2014 Plan allows for granting shares of stock, options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), and other types of stock-based and cash awards. Awards under the 2014 Plan vest and expire in accordance with terms established at the time of grant. Shares issued pursuant to awards under the 2014 Plan are from GPHC’s authorized but unissued shares. Compensation costs are recognized on a straight-line basis over the requisite service period of the award and are adjusted for actual performance for performance-based awards. As of December 31, 2021, there were 11.6 million shares remaining available to be granted under the 2014 Plan. Stock Awards, Restricted Stock and Restricted Stock Units Under the 2014 Plan, all RSUs granted to employees generally vest and become payable in three years from date of grant. RSUs granted to employees generally contain some combination of service and performance objectives based on various financial targets and relative total shareholder return that must be met for the RSUs to vest. RSUs granted as deferred compensation for non-employee directors are fully vested but not payable until the distribution date elected by the director. RSAs issued to non-employee directors as part of their compensation for service on the Board are unrestricted on the grant date. Data concerning RSUs and RSAs granted during the years ended December 31 is as follows: RSUs — Employees Weighted-average grant date fair value Stock Awards — Board of Directors Weighted-average grant date fair value 2021 1,680,997 16.14 $ 55,055 17.80 $ 2020 1,655,854 15.40 $ 71,160 13.49 $ 2019 2,187,603 12.37 74,760 12.84 $ $ A summary of the changes in the number of unvested RSUs from December 31, 2018 to December 31, 2021 is presented below: Outstanding — December 31, 2018 Granted(a) Released Forfeited Performance adjustment(b) Outstanding — December 31, 2019 Granted(a) Released Forfeited Outstanding — December 31, 2020 Granted(a) Released RSUs Weighted Average Grant Date Fair Value 4,460,034 $ 2,187,603 (900,516) (187,729) (499,702) 5,059,690 $ 1,655,854 (1,415,365) (158,473) 5,141,706 $ 1,680,997 (2,121,203) 13.27 12.37 12.00 13.66 11.57 13.27 15.40 12.91 14.25 14.02 16.14 14.88 Forfeited Performance adjustment(b) Outstanding — December 31, 2021 (a) Grant activity for all performance-based RSUs is disclosed at target. (b) Reflects the number of RSUs above and below target levels based on actual performance measured at the end of the 4,929,861 $ (359,100) 587,461 14.47 15.09 14.39 performance period. The initial value of the service-based RSUs is based on the closing market value of GPHC’s common stock on the date of grant. The 2021 performance-based RSU grants were valued using a Monte Carlo simulation as the total shareholder return contains a market condition. RSUs are recorded in Shareholders' Equity. The unrecognized expense at December 31, 2021 is approximately $31 million and is expected to be recognized over a weighted average period of 2 years. 66 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The value of stock awards granted to the Company's directors are based on the market value of GPHC’s common stock on the date of grant. These awards are unrestricted on the date of grant. During 2021, 2020, and 2019, $27 million, $34 million and $22 million, respectively, were charged to compensation expense for stock incentive plans and is primarily included in Selling, General and Administrative expenses in the Consolidated Statements of Operations. During 2021, 2020, and 2019, RSUs with an aggregate fair value of $35 million, $23 million and $11 million, respectively, vested and were paid out. The RSUs vested and paid out in 2021 were granted primarily during 2018. NOTE 8. PENSIONS AND OTHER POSTRETIREMENT BENEFITS DEFINED BENEFIT PLANS The Company maintains both defined benefit pension plans and postretirement health care plans that provide medical and life insurance coverage to eligible salaried and hourly retired employees in North America and their dependents. The Company maintains international defined benefit pension plans which are either noncontributory or contributory and are funded in accordance with applicable local laws. Pension or termination benefits are based primarily on years of service and the employees’ compensation. Currently, the North American plans are closed to newly-hired employees except as noted below. Effective July 1, 2011, the North American plans were frozen for most salaried and non-union hourly employees and replaced with a defined contribution plan. During 2018, the Company began the process of terminating its largest U.S. pension plan (the "U.S. Plan"). This included freezing the plan as of December 31, 2018 and spinning off the active participants to the plan established as part of the NACP Combination (the "NACP Plan"). The NACP Plan is open for union and non-union hourly employees of locations that were part of the NACP Combination. During the third quarter of 2019, the Company offered a lump-sum benefit option to certain participants in the U.S. Plan. Lump sum payments of $150 million were paid in the fourth quarter of 2019 and the Company recognized a non-cash settlement charge of $39 million associated with the payouts. In the first quarter of 2020, the Company, using the assets held within the pension trust, purchased a group annuity contract that transferred the remaining pension obligation under the U.S. Plan of approximately $713 million to an insurance company. The Company incurred an additional non-cash settlement charge of $154 million related to this transfer. These non-cash settlement charges relate to Net Actuarial Loss previously recognized in Accumulated Other Comprehensive Loss. As disclosed in "Note 1 - Nature of Business and Summary of Significant Accounting Policies," during the fourth quarter of 2021, the Company acquired substantially all the shares of AR Packaging. The business combination led to the Company acquiring approximately $53 million in pension benefit obligations and $1 million in pension plan assets. Pension and Postretirement Expense The pension and postretirement expenses related to the Company’s plans consisted of the following: In millions Components of Net Periodic Cost: Service Cost Interest Cost Expected Return on Plan Assets Amortization of Actuarial Loss (Gain) Net Curtailment/Settlement Loss Net Periodic Cost (Benefit) Pension Benefits Postretirement Benefits Year Ended December 31, 2021 2020 2019 2021 2020 2019 $ $ 15 $ 10 (19) 5 — 11 $ 15 $ 14 (21) 5 154 167 $ 14 $ 46 (55) 10 39 54 $ — $ 1 — (2) — (1) $ 1 $ 1 — (2) — — $ — 1 — (2) — (1) 67 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Certain assumptions used in determining the pension and postretirement expenses were as follows: Weighted Average Assumptions: Discount Rate Rate of Increase in Future Compensation Levels Expected Long-Term Rate of Return on Plan Assets Initial Health Care Cost Trend Rate Ultimate Health Care Cost Trend Rate Ultimate Year Pension Benefits Postretirement Benefits Year Ended December 31, 2021 2020 2019 2021 2020 2019 2.11 % 3.62 % 3.59 % — — — 2.69 % 2.36 % 4.12 % — — — 4.14 % 2.37 % 4.74 % — — — 2.52 % — — 6.40 % 4.50 % 2028 3.22 % — — 6.65 % 4.50 % 2028 4.29 % — — 9.00 % 4.50 % 2028 68 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Funded Status The following table sets forth the funded status of the Company’s pension and postretirement plans as of December 31: In millions Change in Benefit Obligation: Benefit Obligation at Beginning of Year Service Cost Interest Cost Net Actuarial (Gain) Loss Foreign Currency Exchange Settlements Benefits Paid Acquisition Benefit Obligation at End of Year Change in Plan Assets: Fair Value of Plan Assets at Beginning of Year Actual Return on Plan Assets Employer Contributions Foreign Currency Exchange Benefits Paid Acquisition Settlements Fair Value of Plan Assets at End of Year Plan Assets Less than Projected Benefit Obligation Amounts Recognized in the Consolidated Balance Sheets Consist of: Pension Assets Accrued Pension and Postretirement Benefits Liability — Current Accrued Pension and Postretirement Benefits Liability — Noncurrent Accumulated Other Comprehensive Income: Net Actuarial Loss (Gain) Prior Service Cost (Credit) Weighted Average Calculations: Discount Rate Rates of Increase in Future Compensation Levels Initial Health Care Cost Trend Rate Ultimate Health Care Cost Trend Rate Ultimate Year Pension Benefits Postretirement Benefits 2021 2020 2021 2020 593 $ 15 10 (21) (4) — (19) 53 627 $ 516 $ 28 33 (2) (19) 1 — 557 $ (70) $ 1,256 $ 15 14 62 9 (743) (20) — 593 $ 1,172 $ 58 19 8 (20) — (721) 516 $ (77) $ 36 $ — 1 (3) — — (1) — 33 $ — $ — 1 — (1) — — — $ (33) $ 43 $ 21 $ — $ (4) $ (2) $ (3) $ 36 1 1 — — — (2) — 36 — — 1 — (1) — — — (36) — (2) (109) $ (96) $ (30) $ (34) 71 $ 4 $ 106 $ 4 $ (1) $ (16) $ 2.46 % 1.80 % — — — 2.11 % 3.62 % — — — 2.92 % — 6.15 % 4.50 % 2031 (1) (15) 2.52 % — 6.40 % 4.50 % 2028 $ $ $ $ $ $ $ $ $ $ 69 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company determined pension expense using both the fair value of assets and a calculated value that averages gains and losses over a period of years. Investment gains or losses represent the difference between the expected and actual return on assets. As of December 31, 2021, the net actuarial loss was $71 million. These net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, or (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains, including whether such accumulated actuarial losses at each measurement date exceed the “corridor” determined under the Compensation — Retirement Benefits topic of the FASB Codification. For the largest plan, the actuarial loss is amortized over the average remaining service period of employees expected to receive benefits. The discount rate used to determine the present value of future pension obligations at December 31, 2021 was based on a yield curve constructed from a portfolio of high-quality corporate debt securities with maturities ranging from 1 year to 30 years. Each year’s expected future benefit payments were discounted to their present value at the spot yield curve rate thereby generating the overall discount rate for the Company’s pension obligations. The weighted average discount rate used to determine the pension obligations was 2.46% and 2.11% in 2021 and 2020, respectively. The pension net actuarial gain of $21 million was primarily due to changes in the discount rate of $20 million. The weighted average discount rate at December 31, 2021 was 2.46% compared to 2.11% at December 31, 2020. Accumulated Benefit Obligation The accumulated benefit obligation, (“ABO”), for all defined benefit pension plans was $621 million and $588 million at December 31, 2021 and 2020, respectively. The projected benefit obligation (“PBO”) and fair value of plan assets where the PBO exceeded plan assets were $383 million and $361 million, respectively. The ABO and fair value of plan assets where the ABO exceeded plan assets were $378 million and $357 million, respectively. Employer Contributions The Company made contributions of $33 million and $19 million to its pension plans during 2021 and 2020, respectively. During 2021, the Company made a $14 million contribution to its remaining U.S. defined benefit plan by effectively utilizing a portion of the excess balance related to the terminated U.S. defined benefit plan. For 2022, the Company expects to make a contribution of $6 million by utilizing the excess balance. Excluding this $6 million contribution, for 2022, the Company expects to make contributions in the range of $10 million to $20 million to its pension plan. The Company also made postretirement health care benefit payments of $1 million during 2021 and 2020. For 2022, the Company expects to make approximately $2 million contributions to its postretirement health care plans. Pension Assets The Company’s overall investment strategy is to achieve a mix of investments for long-term growth and near-term benefit payments through diversification of asset types, fund strategies and fund managers. Investment risk is measured on an on- going basis through annual liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. The plans invest in the following major asset categories: cash, equity securities, fixed income securities, real estate and diversified growth funds. At December 31, 2021 and 2020, pension investments did not include any direct investments in the Company’s stock or the Company’s debt. The Company implemented a de-risking or liability driven investment strategy for its U.S. and U.K. pension plans. This strategy moved assets from return seeking (equities) to investments that mirror the underlying benefit obligations (fixed income). The weighted average allocation of plan assets and the target allocation by asset category is as follows: Cash Equity Securities Fixed Income Securities Other Investments Total Target 2021 2020 1 % 24 48 27 100 % 3 % 26 46 25 100 % 1 % 24 62 13 100 % The plans’ investment in equity securities primarily includes investments in U.S. and international companies of varying sizes and industries. The strategy of these investments is to 1) exceed the return of an appropriate benchmark for such equity classes and 2) through diversification, reduce volatility while enhancing long term real growth. The plans’ investment in fixed income securities includes government bonds, investment grade bonds and non-investment grade bonds across a broad and diverse issuer base. The strategy of these investments is to provide income and stability and to diversify the fixed income exposure of the plan assets, thereby reducing volatility. 70 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company’s approach to developing the expected long-term rate of return on pension plan assets is based on fair values and combines an analysis of historical investment performance by asset class, the Company’s investment guidelines and current and expected economic fundamentals. The following tables set forth, by category and within the fair value hierarchy, the fair value of the Company’s pension assets at December 31, 2021 and 2020: Fair Value Measurements at December 31, 2021 In millions Asset Category: Cash Equity Securities: Domestic Foreign Fixed Income Securities Other Investments: Real estate Liability Driven Investment Diversified growth fund (a) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Total Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Net Asset Value at December 31, 2021 (b) $ 19 $ 17 $ 1 $ — $ 140 8 254 7 90 39 557 $ 5 8 19 — 31 — 80 $ 13 — 234 7 59 7 321 $ — — 1 — — 32 33 $ Fair Value Measurements at December 31, 2020 $ 1 122 — — — — — 123 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Net Asset Value at December 31, 2020 (b) $ Total 6 $ — $ In millions Asset Category: Cash Equity Securities: Domestic Foreign Fixed Income Securities Other Investments: — Real estate Diversified growth fund (a) — 105 Total (a) The fund invests in a combination of traditional investments (equities, bonds, and foreign exchange), seeking to achieve 23 43 516 $ 9 43 366 $ — — 31 $ 14 — 14 $ 118 7 319 12 — 300 5 7 19 — — — 101 — — — $ 2 $ $ 4 returns through active asset allocation over a three to five-year horizon. (b) Investments that are measured at net asset value (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. A reconciliation of fair value measurements of plan assets using significant unobservable inputs (Level 3) is as follows: In millions Balance at January 1, Return on Assets, Net Purchases Transfers (Out) / In, Net Balance at December 31, 2021 2020 14 $ 2 24 (7) 33 $ 13 — — 1 14 $ $ 71 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Estimated Future Benefit Payments The following represents the Company’s estimated future pension and postretirement health care benefit payments through the year 2031: In millions 2022 2023 2024 2025 2026 2027— 2031 Multi-Employer Plans Pension Plans Postretirement Health Care Benefits $ 24 $ 26 28 30 32 174 2 2 2 2 2 10 Certain of the Company’s employees participate in multi-employer plans that provide both pension and other postretirement health care benefits to employees under union-employer organization agreements. Estimated liabilities have been established related to the partial or complete withdrawal from certain multi-employment benefit plans for facilities that have been closed. During the second quarter of 2020, the Company increased its estimated withdrawal liability for these plans by $12 million. During the fourth quarter of 2020, the Company entered into a settlement agreement with one of its closed multi-employment benefit plans and recorded a $4 million reduction in its estimated withdrawal liability for this plan. Under the terms of this settlement agreement, the Company paid $17 million in the first quarter of 2021. At December 31, 2021 and December 31, 2020, the Company has withdrawal liabilities of $19 million and $37 million, respectively, related to these plans, which is recorded as Compensation and Employee Benefits and Other Noncurrent Liabilities in the Company's Consolidated Balance Sheets, which represents the Company's best estimate of the expected withdrawal liability. DEFINED CONTRIBUTION PLANS The Company provides defined contribution plans for certain eligible employees. The Company’s contributions to the plans are based upon employee contributions, a percentage of eligible compensation, and the Company’s annual operating results. Contributions to these plans for the years ended December 31, 2021, 2020 and 2019 were $69 million, $62 million and $58 million, respectively. NOTE 9. INCOME TAXES The U.S. and international components of Income before Income Taxes and Equity Income of Unconsolidated Entity consisted of the following: In millions U.S. International Income before Income Taxes and Equity Income of Unconsolidated Entity Year Ended December 31, 2021 2020 2019 $ $ 237 $ 52 181 $ 63 289 $ 244 $ 305 49 354 72 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The provisions for Income Tax (Expense) Benefit on Income before Income Taxes and Equity Income of Unconsolidated Entity consisted of the following: In millions Current Expense: U.S. International Total Current Deferred (Expense) Benefit: U.S. International Total Deferred Income Tax Expense Year Ended December 31, 2021 2020 2019 $ $ $ $ (2) $ (17) (19) $ (57) 2 (55) $ (74) $ (23) $ (20) (43) $ (8) 9 1 $ (42) $ (10) (13) (23) (48) (5) (53) (76) A reconciliation of Income Tax (Expense) Benefit on Income before Income Taxes and Equity Income of Unconsolidated Entity at the federal statutory rate of 21.0% compared with the Company’s actual Income Tax (Expense) Benefit is as follows: In millions 2021 Percent 2020 Percent 2019 Percent Year Ended December 31, Income Tax Expense at U.S. Statutory Rate U.S. State and Local Tax Expense $ (61) (12) Permanent Items Provision to Return Adjustments Change in Valuation Allowance International Tax Rate Differences Foreign Withholding Tax Change in Tax Rates U.S. Federal & State Tax Credits Uncertain Tax Positions Domestic Minority Interest Deferred Adjustment due to IP Exit Unrealized FX Other Income Tax Expense 21.0 % $ (51) 21.0 % $ 4.1 3.2 (1.4) 0.4 1.0 0.7 0.5 (4.5) 1.0 (0.7) 1.5 (1.7) 0.6 (8) (1) 2 7 (3) (1) — 10 3.2 0.4 (0.9) (2.9) 1.2 0.3 0.1 (4.0) (2) 1.0 5 — — — (2.2) — — (0.2) (74) (12) (3) — (5) (2) (1) (1) 10 (2) 14 — — — 21.0 % 3.5 0.8 — 1.3 0.5 0.2 0.3 (2.7) 0.5 (3.9) — — 0.1 (9) 4 (1) (3) (2) (1) 13 (3) 2 (4) 5 (2) $ (74) 25.7 % $ (42) 17.0 % $ (76) 21.6 % As a result of the NACP Combination, federal and state income taxes are not recorded with respect to consolidated domestic earnings attributable to the Company’s minority interest partner, resulting in a difference between the effective tax rate and the statutory tax rate. As a result of decreases in the minority partner's interest during 2021 and 2020, the difference between the effective tax rate and the statutory tax also declined. In addition, during 2021, the Company recognized tax expense of approximately $4 million related to the remeasurement of deferred tax assets for executive compensation as a result of IP’s exchange of its remaining shares in GPIP during the period and approximately $3 million related to the remeasurement of its net deferred tax liability for its UK subsidiaries due to the statutory tax rate increase enacted during the second quarter. During 2020, the Company recognized a tax benefit of approximately $8 million attributable to the release of a valuation allowance recorded against the net deferred tax assets of two of its Canadian subsidiaries as a result of internal restructuring. The Company also recognized a tax benefit related to updates to is 2019 financial statement income tax calculations of approximately $2 million primarily due to new guidance in final U.S. Treasury Regulations issued during 2020. During 2019, the Company recognized tax expense of approximately $5 million associated with the establishment of a valuation allowance against the net deferred tax assets of its Australian subsidiary. 73 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The tax effects of differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities as of December 31 were as follows: In millions Deferred Income Tax Assets: Compensation Based Accruals Net Operating Loss Carryforwards Postretirement Benefits Tax Credits Other Valuation Allowance Total Deferred Income Tax Assets Deferred Income Tax Liabilities: Property, Plant and Equipment Goodwill Other Intangibles Investment in Partnership Net Noncurrent Deferred Income Tax Liabilities Net Deferred Income Tax Liability 2021 2020 $ $ $ $ 4 $ 192 1 31 37 (38) 227 $ (108) (3) (108) (564) (783) $ (556) $ 4 40 1 19 9 (34) 39 (21) (3) (11) (531) (566) (527) The Company has total deferred income tax assets, excluding valuation allowance, of $265 million and $73 million as of December 31, 2021 and 2020, respectively. The Company has total deferred income tax liabilities of $783 million and $566 million as of December 31, 2021 and 2020, respectively. As a result of International Paper’s final exchange in 2021, the Company currently owns 100% of the outstanding interests in GPIP. GPIP continues to be treated as a partnership for U.S. federal and state income tax purposes despite International Paper’s exit as a minority partner. Accordingly, as a result of the continuation of the partnership, domestic deferred tax assets and liabilities are not tracked based on the inside basis difference of assets and liabilities held within GPIP. Instead, the Company’s outside basis difference in its partnership investment is recorded as a deferred tax liability and disclosed above. The deferred tax liability primarily relates to differences between book and tax basis in property, plant and equipment and intangibles inside the partnership. During 2021 and 2020, IP redeemed or exchanged its entire interest in the partnership. As a result of the redemptions and exchanges, the Company recorded a decrease in its deferred tax liability in 2021 and 2020 of $175 million and $16 million, respectively, which was recorded through additional paid-in capital. According to the Income Taxes topic of the FASB Codification, a valuation allowance is required to be established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The FASB Codification provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient pretax income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset. The Company has evaluated the need to maintain a valuation allowance for deferred tax assets based on its assessment of whether it is more likely than not that deferred tax assets will be realized through the generation of future taxable income. Appropriate consideration was given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. 74 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company reviewed its deferred income tax assets as of December 31, 2021 and 2020, respectively, and determined that it is more likely than not that a portion will not be realized. A valuation allowance of $38 million and $34 million at December 31, 2021 and 2020, respectively, is maintained on the deferred income tax assets for which the Company has determined that realization is not more likely than not. Of the total valuation allowance at December 31, 2021, $30 million relates to net deferred tax assets in certain foreign jurisdictions, $1 million relates to U.S. foreign tax credit carryforwards, $5 million relates to tax credit carryforwards in certain states, and the remaining $2 million relates to net operating losses in certain U.S. states. The need for a valuation allowance is made on a jurisdiction-by-jurisdiction basis. As of December 31, 2021, the Company concluded that due to cumulative pretax losses and the lack of sufficient future taxable income of the appropriate character, realization is less than more likely than not on the net deferred income tax assets related primarily to the Company’s operations in Australia, Brazil, Netherlands, and Norway as well as certain operations in Germany. The following table represents a summary of the valuation allowances against deferred tax assets as of and for the three years ended December 31, 2021, 2020, and 2019, respectively: In millions Balance Beginning of Period Adjustments for (Income) and Expenses Additions (Deductions) Balance at End of Period December 31, 2021 2020 2019 $ $ 34 $ 1 3 38 $ 41 $ (7) — 34 $ 36 5 — 41 The Company utilized its remaining U.S. federal net operating loss carryforwards during 2020. However, as a result of deductions associated with the step up in tax basis of certain assets as a result of International Paper’s exit from the partnership, the Company generated a taxable loss of $574 million during 2021 that can be carried forward for U.S. federal income tax purposes indefinitely. Therefore, based on the net operating loss generated in 2021 as well as future tax benefits associated with planned capital projects and tax credit carryforwards, which are available to offset future U.S. federal income tax, the Company does not expect to be a meaningful U.S. federal cash taxpayer until 2024. The Company's U.S. state net operating loss carryforwards total $587 million and expire in various years through 2041. International net operating loss carryforward amounts total $191 million, of which substantially all have no expiration date. Tax Credit carryforwards total $31 million which expire in various years through 2041. Uncertain Tax Positions A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: In millions Balance at January 1, Additions for Tax Positions of Current Year Additions for Tax Positions of Prior Years Reductions for Tax Positions of Prior Years Balance at December 31, 2021 2020 2019 $ $ 20 $ 1 3 — 24 $ 21 $ 1 2 (4) 20 $ 16 2 3 — 21 At December 31, 2021, $24 million of the total gross unrecognized tax benefits, if recognized, would affect the annual effective income tax rate. As of December 31, 2021, none of the total gross unrecognized tax benefits recorded are related to indefinite lived deferred tax assets and did not have an impact on total tax expense. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in Income Tax Expense. The Company had an immaterial accrual for the payment of interest and penalties at December 31, 2021. The Company anticipates that $1 million of the total unrecognized tax benefits at December 31, 2021 could change within the next 12 months. The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions and our income tax filings are regularly examined by federal, state and non-U.S. tax authorities. The Company’s 2018 U.S. federal corporate and partnership income tax filings are currently under examination by the Internal Revenue Service. With few exceptions, the Company is no longer subject to U.S. federal, state and local tax examinations for years before 2017. 75 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) As of December 31, 2021, the Company has provided for deferred income taxes attributable to future foreign withholding tax expense related to the Company's equity investment in the joint venture, Rengo Riverwood Packaging, Ltd. In addition, Company provides deferred income taxes for future Canadian withholding tax to the extent of excess cash available for distribution after consideration of working capital needs and other debt settlement of its Canadian subsidiary, Graphic Packaging International Canada, ULC. The Company continues to assert that it is permanently reinvested in the cumulative earnings of its Canadian subsidiary in excess of the amount of cash that is on hand and available for distribution after consideration of working capital needs and other debt settlement. Due to the deemed taxation of all post-1986 earnings and profits required by the Act, the Company has determined that no deferred tax liability should be recorded related to the outside basis difference of its Canadian subsidiary of approximately $51 million as of December 31, 2021. The Company has not provided for deferred U.S. income taxes on approximately $33 million of its undistributed earnings in other international subsidiaries because of the Company’s intention to indefinitely reinvest these earnings outside the U.S. The Company’s assertion remains unchanged, despite the deemed taxation of all post-1986 earnings and profits required by the Act. The determination of the amount of the unrecognized deferred U.S. income tax liability (primarily withholding tax in certain jurisdictions and some state tax) on the unremitted earnings or any other associated outside basis difference is not practicable because of the complexities associated with the calculation. The Company has elected to recognize global intangible low-taxed income (“GILTI”) as period cost as incurred, therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion upon reversal. NOTE 10. FINANCIAL INSTRUMENTS, DERIVATIVES AND HEDGING ACTIVITIES The Company enters into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments under the Derivatives and Hedging topic of the FASB Codification and those not designated as hedging instruments under this guidance. The Company uses interest rate swaps, natural gas swap contracts, and forward exchange contracts. These derivative instruments are designated as cash flow hedges and, to the extent they are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value are not included in current earnings but are included in Accumulated Other Comprehensive Loss. These changes in fair value will subsequently be reclassified to earnings, contemporaneously with and offsetting changes in the related hedged exposure, and presented in the same line of the income statement expected for the hedged item. Interest Rate Risk The Company uses interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan facility. Changes in fair value will subsequently be reclassified into earnings as a component of Interest Expense, Net as interest is incurred on amounts outstanding under the term loan facility. The following table summarizes the Company's current interest rate swap positions for each period presented as of December 31, 2021: Start 12/03/2018 12/03/2018 End 01/01/2022 01/04/2022 (In Millions) Notional Amount Weighted Average Interest Rate $120 $80 2.92% 2.79% These derivative instruments are designated as cash flow hedges and, to the extent they are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value are not included in current earnings but are included in Accumulated Other Comprehensive Loss. Ineffectiveness measured in the hedging relationship is recorded in earnings in the period it occurs. During 2021 and 2020, there were no amounts of ineffectiveness. During 2021 and 2020, there were no amounts excluded from the measure of effectiveness. Commodity Risk To manage risks associated with future variability in cash flows and price risk attributable to purchases of natural gas, the Company enters into natural gas swap contracts to hedge prices for a designated percentage of its expected natural gas usage. Such contracts are designated as cash flow hedges. The contracts are carried at fair value with changes in fair value recognized in Accumulated Other Comprehensive Loss and resulting gain or loss reclassified into Cost of Sales concurrently with the recognition of the commodity consumed. The Company has hedged approximately 17% of its expected natural gas usage for 2022. During 2021 and 2020, there were no amounts of ineffectiveness related to changes in the fair value of natural gas swap contracts. Additionally, there were no amounts excluded from the measure of effectiveness. 76 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Foreign Currency Risk The Company enters into forward exchange contracts to manage risks associated with foreign currency transactions and future variability of cash flows arising from those transactions that may be adversely affected by changes in exchange rates. The contracts are carried at fair value with changes in fair value recognized in Accumulated Other Comprehensive Loss and gains/losses related to these contracts are recognized in Other Expense, Net or Net Sales, when appropriate. At December 31, 2020, multiple forward exchange contracts existed that expired on various dates throughout 2021. Those purchased forward exchange contracts outstanding at December 31, 2020, when aggregated and measured in U.S. dollars at contractual rates at December 31, 2020, had notional amounts totaling $102 million. No amounts were reclassified to earnings during 2021 and 2020 in connection with forecasted transactions that were considered probable of not occurring and there was no amount of ineffectiveness related to changes in the fair value of foreign currency forward contracts. Additionally, there were no amounts excluded from the measure of effectiveness during 2021 and 2020. Derivatives not Designated as Hedges The Company enters into forward exchange contracts to effectively hedge substantially all of its accounts receivables resulting from sales transactions and intercompany loans denominated in foreign currencies in order to manage risks associated with variability in cash flows that may be adversely affected by changes in exchange rates. At December 31, 2021 and 2020, multiple foreign currency forward exchange contracts existed, with maturities ranging up to six months. Those foreign currency contracts outstanding at December 31, 2021 and 2020, when aggregated and measured in U.S. dollars at contractual rates at December 31, 2021 and 2020, respectively, had net notional amounts totaling $103 million and $80 million. Unrealized gains and losses resulting from these contracts are recognized in Other Expense, Net and approximately offset corresponding recognized but unrealized gains and losses on the remeasurement of these accounts receivable. Deal Contingent Hedge On May 14, 2021, in connection with the AR Packaging acquisition, the Company entered into deal contingent foreign exchange forward contracts, with no upfront cash cost, to hedge €700 million of the acquisition price. These forward contracts settled October 29, 2021 concurrently with the acquisition of AR Packaging and are accounted for as derivatives under ASC 815, Derivatives and Hedging. Unrealized losses of $48 million for the year ended December 31, 2021 resulting from these contracts are recognized in Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net on the Company’s Condensed Consolidated Statements of Operations. For more information, see "Note 11 — Fair Value Measurement." Foreign Currency Movement Effect For the year ended December 31, 2021, 2020 and 2019 net currency exchange losses(gains) included in determining Income from Operations were $3 million, $3 million, and $(2) million, respectively. NOTE 11. FAIR VALUE MEASUREMENT The Company follows the fair value guidance integrated into the Fair Value Measurements and Disclosures topic of the FASB Codification in regards to financial and nonfinancial assets and liabilities. Nonfinancial assets and nonfinancial liabilities include those measured at fair value in goodwill impairment testing, asset retirement obligations initially measured at fair value, and those assets and liabilities initially measured at fair value in a business combination. The FASB’s guidance defines fair value, establishes a framework for measuring fair value and expands the fair value disclosure requirements. The accounting guidance applies to accounting pronouncements that require or permit fair value measurements. It indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The guidance defines fair value based upon an exit price model, whereby fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance clarifies that fair value should be based on assumptions that market participants would use, including a consideration of non-performance risk. Valuation Hierarchy The Fair Value Measurements and Disclosures topic establishes a valuation hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs — quoted prices (unadjusted) in active markets for identical assets or liabilities. 77 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Level 2 inputs — quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs — unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The Company has determined that its financial assets and financial liabilities include derivative instruments which are carried at fair value and are valued using Level 2 inputs in the fair value hierarchy. The Company uses valuation techniques based on discounted cash flow analyses, which reflects the terms of the derivatives and uses observable market-based inputs, including forward rates and uses market price quotations obtained from third party derivatives brokers, corroborated with information obtained from third party pricing service providers. Fair Value of Financial Instruments As of December 31, 2021 and 2020, there has not been any significant impact to the fair value of the Company's derivative liabilities due to its own credit risk. Similarly, there has not been any significant adverse impact to the Company's derivative assets based on evaluation of the Company's counterparties' credit risks. The following table summarizes the fair value of the Company's derivative instruments: Derivative Assets(a) Derivative Liabilities(b) December 31, December 31, In millions 2021 2020 2021 2020 Derivatives designated as hedging instruments: Interest rate contracts Foreign currency contracts Commodity contracts $ — $ — 2 — $ — 2 Total Derivatives (a) Derivative assets of $2 million are included in Other Current Assets as of December 31, 2021 and 2020 (b) Derivative liabilities of $9 million are included in Other Accrued Liabilities as of December 31, 2020 2 $ 2 $ $ — $ — — — $ 6 3 — 9 The fair values of the Company’s other financial assets and liabilities at December 31, 2021 and 2020 approximately equal the carrying values reported on the Consolidated Balance Sheets except for Long-Term Debt. The fair value of the Company’s Long-Term Debt (excluding finance leases and deferred financing fees) was $5,715 million and $3,625 million, as compared to the carrying amounts of $5,676 million and $3,524 million as of December 31, 2021 and 2020, respectively. The fair value of the Company's Total Debt, including the Senior Notes, are based on quoted market prices (Level 2 inputs). Level 2 valuation techniques for Long-Term Debt are based on quotations obtained from third party pricing service providers. Effect of Derivative Instruments The pre-tax effect of derivative instruments in cash flow hedging relationships on the Company’s Consolidated Statements of Operations for the year ended December 31, 2021 and 2020 is as follows: Amount of (Gain) Loss Recognized in Accumulated Other Comprehensive Loss Year Ended December 31, In millions 2021 2020 2019 Location in Statement of Operations Amount of (Gain) Loss Recognized in Statement of Operations Year Ended December 31, 2021 2020 2019 Commodity Contracts $ (11) $ 1 $ 1 Cost of Sales $ (11) $ 6 $ Foreign Currency Contracts Interest Rate Swap Agreements Total $ (2) — (13) $ 2 6 9 $ — Other Expense, Net Interest Expense, Net 6 7 2 6 — 7 $ (3) $ 13 $ (2) (1) 1 (2) At December 31, 2021, the Company expects to reclassify $3 million of pre-tax gain in the next twelve months from Accumulated Other Comprehensive Loss to earnings, contemporaneously with and offsetting changes in the related hedged exposure. The actual amount that will be reclassified to future earnings may vary from this amount as a result of changes in market conditions. 78 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The (income) loss of derivative instruments not designated as hedging instruments and the deal contingent hedge on the Company’s Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 is as follows: In millions Foreign Currency Contracts Deal Contingent Hedge Other Expense, Net Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net $ $ 2021 2020 2019 (5) $ 9 $ 48 $ — $ (1) — NOTE 12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The components of Other Comprehensive Income (Loss) attributable to Graphic Packaging Holding Company are as follows: Year Ended December 31, Pretax Amount 2021 Tax Effect Net Amount(a) Pretax Amount 2020 Tax Effect Net Amount(a) Pretax Amount 2019 Tax Effect Net Amount $ 7 $ (2) $ 5 $ 5 $ (1) $ 4 $ (7) $ 1 $ (6) 53 (8) 45 126 (26) 100 10 (2) (28) — (28) 17 — 17 10 — 8 10 In millions Derivative Instruments Gain (Loss) Pension and Postretirement Benefit Plans Currency Translation Adjustment Other Comprehensive Income (Loss) 12 (a) Amounts exclude impact of noncontrolling interest. See "Note 17 - Changes in Accumulated Other Comprehensive Loss." 22 $ 148 $ 121 $ (27) $ (10) $ 13 $ 32 $ (1) $ $ The balances of Accumulated Other Comprehensive Loss Attributable to Graphic Packaging Holding Company, net of applicable taxes are as follows: In millions Accumulated Derivative Instruments Loss Pension and Postretirement Benefit Plans Currency Translation Adjustment Accumulated Other Comprehensive Loss NOTE 13. COMMITMENTS December 31, 2021 2020 $ $ (8) $ (94) (122) (224) $ (13) (139) (94) (246) The Company has entered into other long-term contracts principally for the purchase of fiber and chip processing along with commitments associated with building the new CRB paper machine in Kalamazoo, Michigan. The minimum purchase commitments extend beyond 2026. At December 31, 2021, total commitments under these contracts were as follows: In millions 2022 2023 2024 2025 2026 Thereafter Total $ $ 140 91 50 48 17 42 388 79 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 14. ENVIRONMENTAL AND LEGAL MATTERS Environmental Matters The Company is subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those governing discharges to air, soil and water, the management, treatment and disposal of hazardous substances, solid waste and hazardous wastes, the investigation and remediation of contamination resulting from historical site operations and releases of hazardous substances, the recycling of packaging and the health and safety of employees. Compliance initiatives could result in significant costs, which could negatively impact the Company’s consolidated financial position, results of operations or cash flows. Any failure to comply with environmental or health and safety laws and regulations or any permits and authorizations required thereunder could subject the Company to fines, corrective action or other sanctions. Some of the Company’s current and former facilities are the subject of environmental investigations and remediations resulting from historic operations and the release of hazardous substances or other constituents. Some current and former facilities have a history of industrial usage for which investigation and remediation obligations may be imposed in the future or for which indemnification claims may be asserted against the Company. Also, closures or sales of facilities may necessitate investigation and may result in remediation activities at those facilities. The Company has established reserves for those facilities or issues where a liability is probable and the costs are reasonably estimable. The Company believes that the amounts accrued for its loss contingencies, and the reasonably possible loss beyond the amounts accrued, are not material to the Company’s consolidated financial position, results of operations or cash flows. The Company cannot estimate with certainty other future compliance, investigation or remediation costs. Some costs relating to historic usage that the Company considers to be reasonably possible of resulting in liability are not quantifiable at this time. The Company will continue to monitor environmental issues at each of its facilities, as well as regulatory developments, and will revise its accruals, estimates and disclosures relating to past, present and future operations, as additional information is obtained. Legal Matters The Company is a party to a number of lawsuits arising in the ordinary conduct of its business. Although the timing and outcome of these lawsuits cannot be predicted with certainty, the Company does not believe that disposition of these lawsuits will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. NOTE 15. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION The Company has three reportable segments as follows: Paperboard Mills includes the eight North American paperboard mills that produce primarily CRB, CUK, and SBS, which is consumed internally to produce paperboard packaging for the Americas and Europe Packaging segments. The remaining paperboard is sold externally to a wide variety of paperboard packaging converters and brokers. The Paperboard Mills segment Net Sales represents the sale of paperboard only to external customers. The effect of intercompany transfers to the paperboard packaging segments has been eliminated from the Paperboard Mills segment to reflect the economics of the integration of these segments. Americas Paperboard Packaging includes paperboard packaging, primarily folding cartons, sold primarily to Consumer Packaged Goods ("CPG") companies, and cups, lids and food containers sold primarily to foodservice companies and Quick- Service Restaurants ("QSR") serving the food, beverage, and consumer product markets in the Americas. Europe Paperboard Packaging includes paperboard packaging, primarily folding cartons, sold primarily to CPG companies serving the food, beverage and consumer product markets including healthcare and beauty primarily in Europe. The Company allocates certain mill and corporate costs to the reportable segments to appropriately represent the economics of these segments. The Corporate and Other caption includes the Pacific Rim and Australia operating segments and unallocated corporate and one-time costs. These segments are evaluated by the chief operating decision maker based primarily on Income from Operations as adjusted for depreciation and amortization. The accounting policies of the reportable segments are the same as those described above in "Note 1 - Nature of Business and Summary of Significant Accounting Policies." The Company did not have any one customer who accounted for 10% or more of the Company's net sales during 2021, 2020 or 2019. 80 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Business segment information is as follows: In millions NET SALES: Paperboard Mills Americas Paperboard Packaging Europe Paperboard Packaging Corporate/Other/Eliminations(a) Total (LOSS) INCOME FROM OPERATIONS: Paperboard Mills(b) Americas Paperboard Packaging Europe Paperboard Packaging Corporate and Other(c) Total CAPITAL EXPENDITURES: Paperboard Mills Americas Paperboard Packaging Europe Paperboard Packaging Corporate and Other Total Year Ended December 31, 2021 2020 2019 $ $ $ $ $ $ 1,007 $ 4,996 992 161 7,156 $ (10) $ 456 82 (121) 407 $ 615 $ 113 37 37 802 $ 988 $ 4,650 765 157 6,560 $ (110) $ 639 66 (71) 524 $ 444 $ 120 40 42 646 $ 1,095 4,234 689 142 6,160 33 478 60 (37) 534 208 95 35 15 353 224 165 37 21 447 DEPRECIATION AND AMORTIZATION: Paperboard Mills Americas Paperboard Packaging Europe Paperboard Packaging Corporate and Other Total (a) Includes revenue from contracts with customers for the Australia and Pacific Rim operating segments. (b) Includes accelerated depreciation related to exit activities in 2021, 2020, and 2019. (c) Includes expenses related to business combinations, shutdown and other special charges, and exit activities. 231 $ 176 53 29 489 $ 249 $ 163 41 23 476 $ $ $ In millions ASSETS AT DECEMBER 31: Paperboard Mills Americas Paperboard Packaging Europe Paperboard Packaging Corporate and Other Total December 31, 2021 2020 2019 $ $ 3,482 $ 3,682 2,669 624 10,457 $ 3,097 $ 3,327 746 635 7,805 $ 2,912 3,392 687 299 7,290 81 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Business geographic area information is as follows: In millions NET SALES: United States International(a) Total In millions LONG-LIVED ASSETS AT DECEMBER 31: United States International(a) Total Year Ended December 31, 2021 2020 2019 5,543 $ 1,613 7,156 $ 5,200 $ 1,360 6,560 $ 2021 2020 2019 3,865 $ 812 4,677 $ 3,253 $ 307 3,560 $ 4,913 1,247 6,160 2,976 278 3,254 $ $ $ $ (a) Net Sales and long-lived assets of individual countries outside of the United States are not material. NOTE 16. EARNINGS PER SHARE In millions, except per share data Net Income Attributable to Graphic Packaging Holding Company Weighted Average Shares: Basic Dilutive effect of RSUs Diluted Earnings Per Share — Basic Earnings Per Share — Diluted Year Ended December 31, 2021 2020 2019 $ 204 $ 167 $ 207 297.1 0.8 297.9 0.69 $ 0.68 $ 278.8 0.8 279.6 0.60 $ 0.60 $ 294.1 0.7 294.8 0.70 0.70 $ $ NOTE 17. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS The following represents changes in Accumulated Other Comprehensive Loss attributable to Graphic Packaging Holding Company by component for the year ended December 31, 2021: In millions Balance at December 31, 2020 Other Comprehensive Income (Loss) before Reclassifications Amounts Reclassified from Accumulated Other Comprehensive (Loss) Income(a) Net Current-period Other Comprehensive Income (Loss) Less: Net Current-period Other Comprehensive Income Attributable to Noncontrolling Interest Balance at December 31, 2021 (a) See following table for details about these reclassifications. Derivatives Instruments Pension and Postretirement Benefit Plans Currency Translation Adjustments $ (13) $ (139) $ 8 (2) 6 43 2 45 (94) $ (28) — (28) Total (246) 23 — 23 (1) (8) $ — — (1) (94) $ (122) $ (224) $ 82 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following represents reclassifications out of Accumulated Other Comprehensive Loss for the year ended December 31, 2021: In millions Details about Accumulated Other Comprehensive Loss Components Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item in the Statement Where Net Income is Presented Derivatives Instruments: Commodity Contracts Foreign Currency Contracts Interest Rate Swap Agreements Amortization of Defined Benefit Pension Plans: Actuarial Losses Amortization of Postretirement Benefit Plans: Actuarial Gains $ $ $ $ (11) 2 6 (3) 1 (2) Cost of Sales Other (Income) Expense, Net Interest Expense, Net Total before Tax Tax Expense Total, Net of Tax 5 (a) 5 (1) 4 (2) (a) (2) Total before Tax Tax Expense Total, Net of Tax Total, Net of Tax Total Reclassifications for the Period (a) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost — $ (see "Note 8 - Pensions and Other Postretirement Benefits"). NOTE 18. EXIT ACTIVITIES During 2019, the Company announced its plans to invest in a CRB platform optimization project, which included an investment in a new CRB paper machine in Kalamazoo, Michigan. At the time of the announcement, the Company expected to close two of its smaller CRB mills in 2022 in order to remain capacity neutral. During the third quarter of 2021, the Company decided to continue to operate one of these smaller CRB mills at least through 2022. In March 2020, the Company made the decision to close the White Pigeon, Michigan CRB mill and shut down the PM1 containerboard machine in West Monroe, Louisiana. During the second quarter of 2020, the Company closed the White Pigeon, Michigan CRB mill and shut down the PM1 containerboard machine. In June 2020, the Company made the decision to close certain converting plants that were acquired from Greif. The Burlington, North Carolina converting facility and the Los Angeles, California converting facility were closed during 2020. The Company accounts for the costs associated with these closures in accordance with ASC 360, Impairment or Disposal of Long-Lived Assets ("ASC 360"), ASC 420, Exit or Disposal Costs Obligations ("ASC 420") and ASC 712 Compensation- Nonretirement Post-Employment Benefits ("ASC 712"). The Company recorded $38 million and $51 million of exit costs during 2021 and 2020, respectively. Other costs associated with the start-up of the new CRB paper machine will be recorded in the period in which they are incurred. These costs are included in the Corporate and Other caption in "Note 15 - Business Segment and Geographic Area Information." 83 GRAPHIC PACKAGING HOLDING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the costs incurred during 2021 and 2020 related to these restructurings: In millions Location in Statement of Operations 2021 2020 2019 Severance costs and other (a) Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net $ Accelerated depreciation Cost of Sales Inventory and asset write-offs Business Combinations, Shutdown and Other Special Charges, and Exit Activities, Net 21 $ 17 — 11 $ 26 14 Year Ended December 31, Total (a) Costs incurred include activities for post-employment benefits, retention bonuses, incentives and professional services. 38 $ 51 $ $ 8 5 2 15 The following table summarizes the balance of accrued expenses related to restructuring: In millions Balance at December 31, 2019 Costs incurred Payments Balance at December 31, 2020 Costs incurred Payments Adjustments (a) Balance at December 31, 2021 (a) Adjustments related to changes in estimates of severance costs. Total 7 11 (6) 12 21 (20) (5) 8 $ $ $ In conjunction with the CRB platform optimization project and closure of the smaller CRB Mill, the Company currently expects to incur charges associated with these exit activities for post-employment benefits, retention bonuses and incentives in the range of $15 million to $20 million, for accelerated depreciation and inventory and asset write-offs in the range of $45 million to $50 million and for start-up charges of for the new CRB paper machine of approximately $25 million. Through December 31, 2021, the Company has incurred cumulative exit activity charges for post-employment benefits, retention bonuses and incentives of $15 million, accelerated depreciation of $45 million, and start-up charges for the new CRB paper machine of $21 million. For the closures of the White Pigeon, Michigan CRB mill and the shutdown of the PM1 containerboard machine in West Monroe, Louisiana, the Company has incurred cumulative exit activity charges for post-employment benefits of $2 million and accelerated depreciation and inventory and asset write-offs of $17 million through December 31, 2021. The Company does not expect to incur any additional significant costs charges related to these closures. NOTE 19. RELATED PARTY TRANSACTIONS In connection with the NACP Combination, the Company entered into agreements with IP for transition services, fiber procurement fees, and corrugated products and ink supply. Payments to IP for the twelve months ended December 31, 2021 for fiber procurement fees and corrugated products were $4 million (related to pass through wood purchases of $81 million) and $13 million, respectively. Payments to IP for the twelve months ended December 31, 2020 for fiber procurement fees and corrugated products were $12 million (related to pass through wood purchases of $204 million) and $28 million, respectively. As discussed in "Note 1 - Nature of Business and Summary of Significant Accounting Policies", IP has no ownership interest remaining in GPIP as of May 21, 2021. 84 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Graphic Packaging Holding Company Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Graphic Packaging Holding Company and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Americraft Carton, Inc. and AR Packaging Group AB from its assessment of internal control over financial reporting as of December 31, 2021 because they were acquired by the Company in purchase business combinations during 2021. We have also excluded Americraft Carton, Inc. and AR Packaging Group AB from our audit of internal control over financial reporting. Americraft Carton, Inc. and AR Packaging Group AB are wholly- owned subsidiaries whose total assets and total net sales excluded from management’s assessment and our audit of internal control over financial reporting represent 1.1% and 7.3% of total assets, respectively and 1.5% and 2.5% of total net sales, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021. 85 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Acquisition of AR Packaging Group AB – Customer Relationships Intangible Asset Valuation As described in Notes 1 and 4 to the consolidated financial statements, the Company completed its acquisition of AR Packaging Group AB (“AR Packaging”) for total cash consideration of $1,412 million, net of cash acquired of $75 million on November 1, 2021, which resulted in recording a customer relationships intangible asset of $439 million. As disclosed by management, customer relationships were assigned a fair value using a discounted cash flow analysis. Estimating the fair value involved the use of significant judgments and assumptions by management, including the discount rate, annual revenue growth rates, customer attrition rates, projected operating expenses, projected earnings before interest, taxes, depreciation, and amortization (“EBITDA”) margins, tax rate, depreciation, contributory asset charge, and future earnings projections, among others. The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships intangible asset from the AR Packaging acquisition is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in performing procedures related to the fair value of the customer relationships intangible asset due to the significant judgment by management when determining the estimated fair value of the customer relationships intangible asset acquired; (ii) the significant audit effort in evaluating management’s significant assumptions related to the discount rate, annual revenue growth rates, customer attrition rates, projected operating expenses, projected EBITDA margins, tax rate, depreciation, and contributory asset charge; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 86 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships intangible asset and the development of the significant assumptions related to the discount rate, annual revenue growth rates, customer attrition rates, projected operating expenses, projected EBITDA margins, tax rate, depreciation, and contributory asset charge. These procedures also included, among others (i) reading the purchase agreement; (ii) evaluating management’s accounting related to the business combination; and (iii) testing management’s process for estimating the fair value of the customer relationships intangible asset acquired. Testing management’s process included evaluating the appropriateness of the discounted cash flow analysis, testing the completeness and accuracy of the underlying data provided by management, and evaluating the reasonableness of the significant assumptions related to the discount rate, annual revenue growth rates, customer attrition rates, projected operating expenses, projected EBITDA margins, tax rate, depreciation, and contributory asset charge. Evaluating the reasonableness of the annual revenue growth rates, projected operating expenses, and projected EBITDA margins involved considering the past performance of AR Packaging and economic and industry forecasts. Evaluating the reasonableness of the customer attrition rates involved considering AR Packaging’s historical revenue by customer. Evaluating the reasonableness of the tax rate involved considering the blended state and federal rates for the jurisdictions in which AR Packaging operates. Evaluating the reasonableness of depreciation involved considering the relationship of depreciation to revenue. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the discounted cash flow analysis and in evaluating the reasonableness of the significant assumptions related to the discount rate, customer attrition rates, and contributory asset charge. Goodwill Impairment Assessment – Foodservice Reporting Unit As described in Note 1 to the consolidated financial statements, the Company’s consolidated goodwill balance was $2,015 million as of December 31, 2021. As disclosed by management, the goodwill associated with the Foodservice reporting unit was $43 million as of December 31, 2021. Management tests goodwill for impairment annually as of October 1, as well as whenever events or changes in circumstances suggest that the estimated fair value of a reporting unit may no longer exceed its carrying amount. An impairment charge is recognized for the amount by which the carrying amount of a reporting unit exceeds its fair value. When performing the quantitative analysis, the estimated fair value of each reporting unit is determined by utilizing a discounted cash flow analysis based on the Company’s forecasts, discounted using a weighted average cost of capital and market indicators of terminal year cash flows based upon a multiple of EBITDA. In estimating the fair value of the Foodservice reporting unit, management considers a number of factors, including but not limited to, future operating results, business plans, economic projections of revenues and operating margins, estimated future cash flows, and market data and analysis. The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment for the Foodservice reporting unit is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in performing procedures related to the fair value of the reporting unit due to the significant judgment by management when determining the estimated fair value of the Foodservice reporting unit; (ii) the significant audit effort in evaluating management’s significant assumptions related to economic projections of revenues and operating margins and the terminal year EBITDA multiple; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 87 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s Foodservice reporting unit and the development of the significant assumptions related to economic projections of revenues and operating margins and the terminal year EBITDA multiple. These procedures also included, among others, testing management’s process for determining the fair value of the Foodservice reporting unit; evaluating the appropriateness of the discounted cash flow analysis; and evaluating the reasonableness of significant assumptions related to economic projections of revenues and operating margins and the terminal year EBITDA multiple. Evaluating assumptions related to economic projections of revenues and operating margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Foodservice reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the discounted cash flow analysis and in evaluating the reasonableness of the terminal year EBITDA multiple significant assumption. /s/ PricewaterhouseCoopers LLP Atlanta, Georgia February 22, 2022 We have served as the Company’s auditor since 2020. 88 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Graphic Packaging Holding Company Opinion on the Financial Statements We have audited the accompanying consolidated statements of operations, comprehensive income, shareholders' equity and cash flows of Graphic Packaging Holding Company (the Company) for the year ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Ernst & Young LLP We served as the Company’s auditor from 2008 to 2020. Atlanta, Georgia February 10, 2020 89 ITEM 9. None. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company’s management has established disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within time periods specified in the Securities and Exchange Commission rules and forms. Such disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosure. Based on management’s evaluation as of the end of the period covered by this Annual Report on Form 10-K, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) were effective as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K. Management’s Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only with proper authorizations; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company's management did not include in its assessment the internal controls of Americraft Carton, Inc. ("Americraft") and AR Packaging Group AB ("AR Packaging"), which were acquired by the Company in business combinations in 2021 and are included in the Company's results for the year ended December 31, 2021. As of December 31, 2021, the Americraft and AR Packaging acquisitions total assets represent 1.1% and 7.3% of the Company’s consolidated total assets, respectively. Net Sales attributable to the Americraft and AR Packaging acquisitions represented 1.5% and 2.5% of the Company’s consolidated Net Sales for the twelve months ended December 31, 2021, respectively. The Company’s management, under the supervision of and with the participation of the President and Chief Executive Officer and the Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 based on criteria for effective control over financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment the Company’s management concluded that its internal control over financial reporting was effective as of December 31, 2021. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 90 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Pursuant to Instruction G(3) to Form 10-K, the information relating to Directors of the Registrant, compliance with Section 16(a) of the Exchange Act, compliance with the Company’s Code of Ethics, and certain other information required by Item 9 is incorporated by reference to the Registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, which is to be filed pursuant to Regulation 14A within 120 days after the end of the Registrant’s fiscal year ended December 31, 2021. ITEM 11. EXECUTIVE COMPENSATION Pursuant to Instruction G(3) to Form 10-K, the information required by Item 11 is incorporated by reference to the Registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, which is to be filed pursuant to Regulation 14A within 120 days after the end of the Registrant’s fiscal year ended December 31, 2021. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Pursuant to Instruction G(3) to Form 10-K, the information required by Item 12 is incorporated by reference to the Registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, which is to be filed pursuant to Regulation 14A within 120 days after the end of the Registrant’s fiscal year ended December 31, 2021. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Pursuant to Instruction G(3) to Form 10-K, the information required by Item 13 is incorporated by reference to the Registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, which is to be filed pursuant to Regulation 14A within 120 days after the end of the Registrant’s fiscal year ended December 31, 2021. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Pursuant to Instruction G(3) to Form 10-K, the information required by Item 14 is incorporated by reference to the Registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, which is to be filed pursuant to Regulation 14A within 120 days after the end of the Registrant’s fiscal year ended December 31, 2021. 91 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES a. Financial statements, financial statement schedule and exhibits filed as part of this report: PART IV 1. Consolidated Statements of Operations for each of the three years in the period ended December 31, 2021 Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2021 Consolidated Balance Sheets as of December 31, 2021, and 2020 Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended December 31, 2021 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021 Notes to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firms 2. All schedules are omitted as the information required is either included elsewhere in the consolidated financial statements herein or is not applicable. 3. Exhibits to Annual Report on Form 10-K for Year Ended December 31, 2021. Exhibit Number 3.1 3.2 3.3 3.4 4.1 4.2 4.3 4.4 4.5 Description Restated Certificate of Incorporation of New Giant Corporation. Filed as Exhibit 3.1 to Graphic Packaging Holding Company’s Current Report on Form 8-K filed on March 10, 2008 and incorporated herein by reference. Bylaws of Graphic Packaging Holding Company, as amended on May 20, 2015. Filed as Exhibit 3.1 to Graphic Packaging Holding Company’s Current Report on Form 8-K filed on May 27, 2015 and incorporated herein by reference. Certificate of Formation of Graphic Packaging International, LLC. Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 1, 2018 and incorporated herein by reference. Amended and Restated Limited Liability Company Operating Agreement of Graphic Packaging International, LLC. Filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on January 1, 2018 and incorporated herein by reference. Indenture dated as of November 6, 2014, by and among Graphic Packaging International, Inc., the guarantors named therein and U.S. Bank National Association, as trustee. Filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on November 6, 2014 and incorporated herein by reference. First Supplemental Indenture dated as of November 6, 2014 by and among Graphic Packaging International, Inc. the guarantors named therein and U.S. Bank National Association, as trustee. Filed as Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on November 6, 2014 and incorporated herein by reference. Second Supplemental Indenture dated as of August 11, 2016 by and among Graphic Packaging International Inc., Graphic Packaging Holding Company, the other guarantors named therein and U.S. Bank National Association as trustee. Filed as Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on August 11, 2016 and incorporated herein by reference. Supplemental Indenture among Graphic Packaging International, Inc., Graphic Packaging Holding Company, the other guarantors party thereto and U.S. Bank National Association, as Trustee, with respect to the 4.875% Senior Notes due 2022. Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on October 24, 2017 and incorporated herein by reference. Supplemental Indenture among Graphic Packaging International, Inc., Graphic Packaging Holding Company, the other guarantors party thereto and U.S. Bank National Association, as Trustee, with respect to the 4.125% Senior Notes due 2024. Filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on October 24, 2017 and incorporated herein by reference. 92 4.6 4.7 4.8 4.9 4.10 4.11 10.1* 10.2* 10.3* 10.4* 10.5* 10.6* 10.7* 10.8* 10.9* 10.10 Third Supplemental Indenture dated as of June 25, 2019, by and among Graphic Packaging International, LLC, the guarantors listed therein and U.S. Bank, National Association. Filed as Exhibit 4.2 to Graphic Packaging Holding Company and Graphic Packaging International, LLC's current report on Form 8-K filed on June 25, 2019 and incorporated herein by reference. Fourth Supplemental Indenture dated March 6, 2020, by and among Graphic Packaging International, LLC, the guarantors listed therein and U.S. Bank National Association, as Trustee, with respect to the 3.5% Senior Notes due 2028. Filed as Exhibit 4.2 to the Registrant’s Form 8-K filed on March 6, 2020 and incorporated herein by reference. Fifth Supplemental Indenture dated August 20, 2020, by and among Graphic Packaging International, LLC, the guarantors listed therein and U.S. Bank National Association, as Trustee, with respect to the 3.5% Senior Notes due 2029. Filed as Exhibit 4.2 to the Registrant’s Form 8-K filed on August 31, 2020 and incorporated herein by reference. Sixth Supplemental Indenture dated as of March 8, 2021, by and among Graphic Packaging International, LLC, Graphic Packaging International Partners, LLC, the guarantors listed therein and U.S. Bank, N.A. (including the form of Note attached as an exhibit thereto). Filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference. Seventh Supplemental Indenture, dated as of November 19, 2021, by and among Graphic Packaging International, LLC, Graphic Packaging International Partners, LLC, the guarantors listed therein and U.S. Bank, National Association (including the form of Note attached as an exhibit thereto). Filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on November 19, 2021 and incorporated herein by reference. Eighth Supplemental Indenture, dated as of November 19, 2021, by and among Graphic Packaging International, LLC, Graphic Packaging International Partners, LLC, the guarantors listed therein, U.S. Bank, National Association, Elavon Financial Services DAC, UK Branch, and Elavon Financial Services DAC (including the form of Note attached as an exhibit thereto). Filed as Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on November 19, 2021 and incorporated herein by reference. GPI U.S. Consolidated Pension Plan Master Document as amended and restated, effective January 1, 2017. Filed as exhibit 10.1 to the Registrant's Annual Report on Form 10-K filed on February 8, 2017 and incorporated herein by reference. Second Amendment to the GPI Savings Plan as amended and restated, effective January 1, 2015. Filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed on April 28, 2016 and incorporated herein by reference. Third Amendment to the GPI Savings Plan as amended and restated, effective January 1, 2015. Filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed on April 28, 2016 and incorporated herein by reference. Fourth Amendment to the GPI Savings Plan as amended and restated, effective January 1, 2015. Filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q filed on April 28, 2016 and incorporated herein by reference. Amended and Restated Employment Agreement dated as of November 19, 2015 by and among Graphic Packaging International, Inc., the Registrant and Michael P. Doss. Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on November 19, 2015 and incorporated herein by reference. Graphic Packaging Excess Benefit Plan, as amended and restated, effective as of January 1, 2009. Filed as Exhibit 10.22 to Registrant’s Annual Report on Form 10-K filed on February 23, 2010 and incorporated herein by reference. Graphic Packaging Supplemental Retirement Plan, as amended and restated, effective as of January 1, 2009. Filed as Exhibit 10.23 to Registrant’s Annual Report on Form 10-K filed on February 23, 2010 and incorporated herein by reference. Graphic Packaging Holding Company 2014 Omnibus Stock and Incentive Compensation Plan effective as of May 21, 2014. Filed as Appendix A to the Registrant's Definitive Proxy Statement on Schedule 14A filed on April 10, 2014 and incorporated herein by reference. Graphic Packaging International, Inc. Management Incentive Plan, as amended and restated as of January 1, 2020. Attached as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K filed on February 16, 2021 and incorporated herein by reference. Master Services Agreement dated November 29, 2007 by and between Graphic Packaging International, Inc. and Perot Systems Corporation. Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on December 5, 2007 and incorporated herein by reference. 10.11* Graphic Packaging International, Inc. Supplemental Plan for Participants in the Riverwood International Employees Retirement Plan, as amended and restated, effective as of January 1, 2009. Filed as Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K filed on February 23, 2010 and incorporated herein by reference. 93 10.12* 10.13 10.14* 10.15* 10.16 10.17 10.18* 10.19* 10.20* 10.21* 10.22* 10.23* 10.24 10.25 10.26 10.27* 10.28* 10.29* 10.30* Riverwood International Change in Control Supplemental Retirement Plan, as amended and restated, effective as of January 1, 2008. Filed as Exhibit 10.37 to Graphic Packaging Holding Company’s Annual Report on Form 10-K filed on February 23, 2010 and incorporated herein by reference. Amended and Restated Form of Indemnification Agreement for Directors. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 4, 2010 and incorporated herein by reference. First Amendment to the Graphic Packaging International, Inc. Supplemental Plan for Participants in the Riverwood International Employees Retirement Plan. Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on May 24, 2012 and incorporated herein by reference. Employment Agreement dated as of April 1, 2012 by and among Graphic Packaging International, Inc., Graphic Packaging Holding Company and Stephen Scherger. Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on April 5, 2012 and incorporated herein by reference. First Amendment to Master Services Agreement dated as of September 22, 2008 by and between Graphic Packaging International, Inc. and Perot Systems Corporation. Filed as Exhibit 10.22 to the Registrant's Annual Report on Form 10-K filed on February 7, 2018 and incorporated herein by reference. Second Amendment to Master Services Agreement effective as of August 1, 2012 by and between Graphic Packaging International, Inc. and Dell Marketing L.P. (as assignee of Perot Systems Corporation). Filed as Exhibit 10.30 to the Registrant's Annual Report on Form 10-K filed on February 12, 2016 and incorporated herein by reference. Fifth Amendment to the GPI Savings Plan as amended and restated, effective January 1, 2015. Filed as exhibit 10.24 to the Registrant's Annual Report on Form 10-K filed on February 8, 2017 and incorporated herein by reference. GPI Savings Plan, as amended and restated effective January 1, 2015. Filed as Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K filed on February 12, 2016 and incorporated herein by reference. First Amendment to the GPI Savings Plan, effective January 1, 2015. Filed as Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K filed on February 12, 2016 and incorporated herein by reference. Amended and Restated Employment Agreement among the Registrant, Graphic Packaging International, Inc. and Joseph P. Yost effective September 1, 2015. Filed as Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K filed on February 12, 2016 and incorporated herein by reference. Graphic Packaging International, Inc. Executive Severance Plan dated as of February 25, 2014. Filed as Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K filed on February 12, 2016 and incorporated herein by reference. First Amendment to the Graphic Packaging Holding Company 2014 Omnibus Stock and Incentive Compensation Plan effective January 1, 2017. Filed as exhibit 10.33 to the Registrant's Annual Report on Form 10-K filed on February 8, 2017 and incorporated herein by reference. Local Country Agreement - European Union Addendum effective as of November 1, 2016 to the Master Services Agreement between Graphic Packaging International, Inc. and Dell Marketing, L.P., as amended. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on April 26, 2017 and incorporated herein by reference. Third Amendment to Master Services Agreement dated as of November 1, 2016 between Graphic Packaging International, Inc. and Dell Marketing, L.P. Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on April 26, 2017 and incorporated herein by reference. Fourth Amendment to Master Services Agreement dated as of March 1, 2017 between Graphic Packaging International, Inc. and NTT DATA Services, LLC, as successor-in-interest to Dell Marketing, L.P. Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on April 26, 2017 and incorporated herein by reference. First Amendment to the GPI US Consolidated Pension Plan, dated as of May 19, 2017 and effective as of January 1, 2017. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on July 26, 2017 and incorporated herein by reference. Sixth Amendment to the GPI Savings Plan, dated as of June 27, 2017 and effective as of January 1, 2015. Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on July 26, 2017 and incorporated herein by reference. Graphic Packaging International, Inc. Non-Qualified Deferred Compensation Plan, as amended and restated effective November 1, 2017. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on October 25, 2017 and incorporated herein by reference. First Amendment to the Amended and Restated Graphic Packaging International, Inc. Non-Qualified Deferred Compensation Plan effective January 1, 2018. Filed as Exhibit 10.51 to the Registrant's Annual Report on Form 10-K filed on February 7, 2018 and incorporated herein by reference. 94 10.31* 10.32* 10.33* 10.34* 10.35* 10.36* 10.37* 10.38 10.39 10.40 10.41 10.42 10.43 10.44 10.45* 10.46 10.47 10.48 10.49 10.50 Second Amendment to the GPI US Consolidated Pension Plan dated as of November 8, 2017. Filed as Exhibit 10.52 to the Registrant's Annual Report on Form 10-K filed on February 7, 2018 and incorporated herein by reference. Third Amendment to the GPI US Consolidated Pension Plan effective as of January 1, 2018. Filed as Exhibit 10.53 to the Registrant's Annual Report on Form 10-K filed on February 7, 2018 and incorporated herein by reference. Seventh Amendment to the GPI Savings Plan effective as of January 1 2018. Filed as Exhibit 10.54 to the Registrant's Annual Report on Form 10-K filed on February 7, 2018 and incorporated herein by reference. Eighth Amendment to the GPI Savings Plan effective as of January 1, 2018. Filed as Exhibit 10.55 to the Registrant's Annual Report on Form 10-K filed on February 7, 2018 and incorporated herein by reference. Tenth Amendment to the GPI Savings Plan dated as of November 12, 2018. Filed as Exhibit 10.49 to the Registrant's Annual Report on Form 10-K filed on February 13, 2019 and incorporated herein by reference. Fourth Amendment to the GPI US Consolidated Pension Plan dated as of December 20, 2018. Filed as Exhibit 10.50 to the Registrant's Annual Report on Form 10-K filed on February 13, 2019 and incorporated herein by reference. Fifth Amendment to the GPI US Consolidated Pension Plan effective as of January 1, 2017. Filed as Exhibit 10.44 to the Registrant's Annual report on Form 10-K filed on February 11, 2020 and incorporated herein by reference. Ninth Amendment to the GPI Savings Plan. Filed as Exhibit 10.1 to the Registrant's Form 10-Q filed on July 24, 2018 and incorporated herein by reference. Non-Participating Single Premium Group Annuity Contract Proposal dated January 16, 2020 by and among Graphic Packaging International, LLC, American General Life Insurance Company and The United States Life Insurance Company in the City of New York. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on April 21, 2020 and incorporated herein by reference. Eleventh Amendment to the GPI Savings Plan dated as of December 9, 2020. Twelfth Amendment to the GPI Savings Plan dated as of December 17, 2020. Thirteenth Amendment to the GPI Savings Plan dated as of March 25, 2021. Fourteenth Amendment to the GPI Savings Plan dated as of November 10, 2021. Fifteenth Amendment to the GPI Savings Plan dated as of December 14, 2021. Directors’ Non-Qualified Deferred Compensation Plan effective January 1, 2021. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 filed on April 27, 2021 and incorporated herein by reference. Consent and Waiver Agreement dated as of February 16, 2021 by and among Graphic Packaging International Partners, LLC, Graphic Packaging Holding Company, GPI Holding III, LLC and International Paper Company. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 16, 2021 and incorporated herein by reference. Amendment dated as of March 1, 2021 to the Third Amended and Restated Credit Agreement dated as of January 1, 2018, by and among Graphic Packaging International, LLC and certain subsidiaries thereof as Borrowers, the lenders and agents named therein, and Bank of America, N.A., as administrative agent. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 1, 2021 and incorporated herein by reference. Fourth Amended and Restated Credit Agreement dated as of April 1, 2021 by and among Graphic Packaging International, LLC and certain subsidiaries thereof as Borrowers, the lenders and agents named therein, and Bank of America, N.A., as Administrative Agent. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K on April 1, 2021 and incorporated herein by reference. Share Purchase Agreement dated May 12, 2021 among Sarcina Holdings S.a.r.l., the other sellers named therein and Graphic Packaging International Europe Holdings B.V. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 14, 2021 and incorporated herein by reference. Consent and Waiver Agreement dated as of May 19, 2021 by and among Graphic Packaging International Partners, LLC, Graphic Packaging Holding Company, GPI Holding I, Inc. and International Paper Company. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 20, 2021 and incorporated herein by reference. 95 10.51 10.52 10.53 14.1 21.1 22.1 23.1 24.1 31.1 31.2 32.1 32.2 Incremental Facility Amendment by and among Graphic Packaging International, LLC, as Borrower, Graphic Packaging International Partners, LLC and Field Container Queretaro (USA), L.L.C., as Guarantors, Bank of America, N.A. as Administrative Agent and CoBank, ACB, as Incremental Term A-3 Lead Arranger and Incremental Term A-3 Lender. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 21, 2021 and incorporated herein by reference. Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and Fourth Amended and Restated Guarantee and Collateral Agreement and Incremental Facility Amendment (Incremental Euro Tranche Increase and Incremental Euro Term Facility), by and among Graphic Packaging International, LLC and certain subsidiaries thereof as Borrowers, the lenders and agents named therein and Bank of America, N.A., as Administrative Agent. Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 21, 2021 and incorporated herein by reference. Incremental Facility Amendment by and among Graphic Packaging International, LLC, as Borrower, Graphic Packaging International Partners, LLC and Field Container Queretaro (USA), L.L.C. as Guarantors, Bank of America, N.A., as Administrative Agent and the Incremental Term A-4 Lenders party thereto, and acknowledged and agreed to by Graphic Packaging Holding Company. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 6, 2021 and incorporated herein by reference. Code of Business Conduct and Ethics dated as of December 23, 2020. List of Subsidiaries. Guarantors and Issuers of Guaranteed Securities. Consent of Independent Registered Public Accounting Firms. Power of Attorney. Incorporated by reference to the signature page of this Annual Report on Form 10-K. Certification required by Rule 13a-14(a). Certification required by Rule 13a-14(a). Certification required by Section 1350 of Chapter 63 of Title 18 of the United States Code. Certification required by Section 1350 of Chapter 63 of Title 18 of the United States Code. 101.INS Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase 104 Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101). ____________ * Executive compensation plan or agreement ITEM 16. FORM 10-K SUMMARY None. 96 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES GRAPHIC PACKAGING HOLDING COMPANY (Registrant) /s/ Stephen R. Scherger Stephen R. Scherger Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 22, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Michael P. Doss Michael P. Doss /s/ Stephen R. Scherger Stephen R. Scherger /s/ Charles D. Lischer Charles D. Lischer President and Chief Executive Officer (Principal Executive Officer) February 22, 2022 Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 22, 2022 Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) February 22, 2022 97 POWER OF ATTORNEY Each of the directors of the Registrant whose signature appears below hereby appoints Stephen R. Scherger and Lauren S. Tashma, and each of them severally, as his or her attorney-in-fact to sign in his or her name and behalf, in any and all capacities stated below, and to file with the Securities and Exchange Commission any and all amendments to this report on Form 10-K, making such changes in this report on Form 10-K as appropriate, and generally to do all such things on their behalf in their capacities as directors and/or officers to enable the Registrant to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission. Signatures /s/ Laurie Brlas Laurie Brlas /s/ David D. Campbell David D. Campbell /s/ Paul D. Carrico Paul D. Carrico /s/ Michael P. Doss Michael P. Doss /s/ Robert A. Hagemann Robert A. Hagemann /s/ Philip R. Martens Philip R. Martens /s/ Mary K. Rhinehart Mary K. Rhinehart /s/ Dean A. Scarborough Dean A. Scarborough /s/ Larry M. Venturelli Larry M. Venturelli /s/ Lynn A. Wentworth Lynn A. Wentworth Title Director Date February 22, 2022 Director February 22, 2022 Director February 22, 2022 Director, President and Chief Executive Officer February 22, 2022 Director February 22, 2022 Chairman of the Board February 22, 2022 Director February 22, 2022 Director February 22, 2022 Director February 22, 2022 Director February 22, 2022 98 Corporate Information BOARD OF DIRECTORS Laurie Brlas 2,3 Former EVP and CFO Newmont Mining Corporation, a mining industry leader Michael P. Doss President and CEO Graphic Packaging Holding Company Dean A. Scarborough 1,2 David D. Campbell 2,3,4 Robert A. Hagemann 1,2 Larry M. Venturelli 1,2 Former CEO Avery Dennison Corporation, a packaging and labeling solutions leader Former Chairman and CEO ACCO Brands Corporation, an office and computer accessories manufacturer Former SVP and CFO Quest Diagnostics Incorporated, a diagnostic testing information services leader Former EVP and CFO Whirlpool Corporation, the world’s leading manufacturer of home appliances Paul D. Carrico 1,3 Philip R. Martens 3 Lynn A. Wentworth 1,3 Mary Rhinehart 1,2 Aziz Aghili 5 Former President and CEO Axiall Corporation, a chemical and vinyl-based building products company Former President and CEO Novelis Inc., a rolled aluminum manufacturing company Former SVP, CFO and Treasurer BlueLinx Holdings Inc., a building products company Former President and CEO Johns Manville, a leading building and specialty products manufacturer EVP and President of Dana Incorporated Heavy Vehicle Group 1 Audit Committee 2 Compensation & Management Development Committee 3 Nominating & Corporate Governance Committee 4 Retired from Board in March 2022 5 Joined Board in March 2022 STOCKHOLDER INFORMATION Transfer Agent and Registrar Financial Reports Broadridge Corporate Issuer Solutions, Inc. P.O. Box 1342 Brentwood, NY 11717 Toll Free: 877-830-4931 www.shareholder.broadridge.com email: SHAREHOLDER@BROADRIDGE.COM Stock Listing Graphic Packaging Holding Company’s common stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol “GPK.” Investor Information Web: investors.graphicpkg.com Graphic Packaging Holding Company’s 2021 Annual Report on Form 10-K is filed with the SEC and is available online at: investors.graphicpkg.com. Annual Meeting The 2022 Annual Meeting of Stockholders will be held at 10:00 a.m. ET, on Tuesday, May 24, 2022, at Graphic Packaging Holding Company’s headquarters located at 1500 Riveredge Parkway, NW, Suite 100, Atlanta, GA 30328 m o c . s r o n n o c - n a r r u c w w w / . . c n I , s r o n n o C & n a r r u C y b n g i s e D t r o p e R l a u n n A Corporate Offices 1500 Riveredge Parkway, NW Suite 100 Atlanta, GA 30328 (770) 240-7200 www.graphicpkg.com G R A P H I C P A C K A G I N G H O L D I N G C O M P A N Y | 2 0 2 1 A N N U A L R E P O R T

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