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Table of Contents        




UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER: 001-33988

Graphic Packaging Holding Company

(Exact name of registrant as specified in its charter)

Delaware26-0405422
(State or other jurisdiction of(I.R.S. employer
incorporation or organization)identification no.)
1500 Riveredge Parkway, Suite 100
Atlanta ,Georgia30328
(Address of principal executive offices)(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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per shareGPKNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

As of October 19, 2020, there were 270,783,150 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.



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Information Concerning Forward-Looking Statements

Certain statements regarding the expectations of Graphic Packaging Holding Company (“GPHC” and, together with its subsidiaries, the “Company”), including, but not limited to, the exit activity charges expected in connection with the closure of two CRB mills, the availability of net operating losses to offset U.S. federal income taxes and the timing related to the Company's future U.S. federal income tax payments, capital investment, depreciation and amortization 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 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 net operating losses to offset taxable income and those that impact the Company's ability to protect and use its intellectual property. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date on which they are made and the Company undertakes no obligation to update such statements, except as may be required by law. Additional information regarding these and other risks is contained in Part I, "Item 1A., Risk Factors" of the Company's 2019 Annual Report on Form 10-K, and in other filings with the Securities and Exchange Commission.




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TABLE OF CONTENTS

EX-31.1
EX-31.2
EX-32.1
EX-32.2
XBRL Content


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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months EndedNine Months Ended
September 30,September 30,
In millions, except per share amounts2020201920202019
Net Sales$1,697.7 $1,581.6 $4,907.8 $4,640.3 
Cost of Sales1,442.2 1,315.2 4,069.4 3,820.0 
Selling, General and Administrative126.3 131.3 394.1 387.8 
Other Expense, Net1.1 4.2 2.2 7.1 
Business Combinations and Shutdown and Other Special Charges, Net
9.0 8.2 48.2 24.3 
Income from Operations119.1 122.7 393.9 401.1 
Nonoperating Pension and Postretirement Benefit Income (Expense)0.2  (150.8)(0.1)
Interest Expense, Net(32.0)(35.9)(96.4)(106.4)
Income before Income Taxes and Equity Income of Unconsolidated Entity87.3 86.8 146.7 294.6 
Income Tax Expense(8.3)(16.9)(21.2)(60.9)
Income before Equity Income of Unconsolidated Entity79.0 69.9 125.5 233.7 
Equity Income of Unconsolidated Entity0.3 0.1 0.7 0.5 
Net Income79.3 70.0 126.2 234.2 
Net Income Attributable to Noncontrolling Interest(15.6)(17.9)(23.1)(60.4)
Net Income Attributable to Graphic Packaging Holding Company$63.7 $52.1 $103.1 $173.8 
Net Income Per Share Attributable to Graphic Packaging Holding Company — Basic
$0.23 $0.18 $0.37 $0.59 
Net Income Per Share Attributable to Graphic Packaging Holding Company — Diluted
$0.23 $0.18 $0.36 $0.59 

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

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GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended September 30,
2020
In millionsGraphic Packaging Holding CompanyNoncontrolling InterestRedeemable Noncontrolling InterestTotal
Net Income$63.7 $13.6 $2.0 $79.3 
Other Comprehensive Income, Net of Tax:
Derivative Instruments5.5 1.1  6.6 
Pension and Postretirement Benefit Plans0.8 0.1  0.9 
Currency Translation Adjustment23.8 4.3 0.3 28.4 
Total Other Comprehensive Income, Net of Tax30.1 5.5 0.3 35.9 
Total Comprehensive Income$93.8 $19.1 $2.3 $115.2 
2019
Net Income$52.1 $13.8 $4.1 $70.0 
Other Comprehensive Income (Loss), Net of Tax:
Pension and Postretirement Benefit Plans1.1 0.3 0.1 1.5 
Currency Translation Adjustment(14.6)(3.1)(0.9)(18.6)
Total Other Comprehensive Loss, Net of Tax(13.5)(2.8)(0.8)(17.1)
Total Comprehensive Income $38.6 $11.0 $3.3 $52.9 
Nine Months Ended September 30,
2020
In millionsGraphic Packaging Holding CompanyNoncontrolling InterestRedeemable Noncontrolling InterestTotal
Net Income (Loss)$103.1 $26.3 $(3.2)$126.2 
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments6.8 1.5 (0.1)8.2 
Pension and Postretirement Benefit Plans114.4 32.5 9.5 156.4 
Currency Translation Adjustment(10.9)(3.1)(0.5)(14.5)
Total Other Comprehensive Income, Net of Tax110.3 30.9 8.9 150.1 
Total Comprehensive Income $213.4 $57.2 $5.7 $276.3 
2019
Net Income$173.8 $46.6 $13.8 $234.2 
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments(4.8)(1.4)(0.4)(6.6)
Pension and Postretirement Benefit Plans3.2 0.9 0.3 4.4 
Currency Translation Adjustment(13.3)(2.8)(0.9)(17.0)
Total Other Comprehensive Loss, Net of Tax(14.9)(3.3)(1.0)(19.2)
Total Comprehensive Income $158.9 $43.3 $12.8 $215.0 

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

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GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
In millions, except share and per share amountsSeptember 30,
2020
December 31, 2019
ASSETS
Current Assets:
Cash and Cash Equivalents$55.5 $152.9 
Receivables, Net743.4 504.5 
Inventories, Net1,153.8 1,095.9 
Other Current Assets65.7 52.3 
Total Current Assets2,018.4 1,805.6 
Property, Plant and Equipment, Net3,437.4 3,253.8 
Goodwill1,469.9 1,477.9 
Intangible Assets, Net447.8 477.3 
Other Assets308.5 275.3 
Total Assets$7,682.0 $7,289.9 
LIABILITIES
Current Liabilities:
Short-Term Debt and Current Portion of Long-Term Debt
$495.8 $50.4 
Accounts Payable738.5 716.1 
Compensation and Employee Benefits193.4 168.4 
Other Accrued Liabilities292.0 263.8 
Total Current Liabilities1,719.7 1,198.7 
Long-Term Debt3,196.9 2,809.9 
Deferred Income Tax Liabilities529.0 511.8 
Accrued Pension and Postretirement Benefits106.7 140.4 
Other Noncurrent Liabilities295.8 266.8 
Redeemable Noncontrolling Interest (Note 13) 304.3 
SHAREHOLDERS’ EQUITY
Preferred Stock, par value $0.01 per share; 100,000,000 shares authorized; no shares issued or outstanding
  
Common Stock, par value $0.01 per share; 1,000,000,000 shares authorized; 272,545,029 and 290,246,907 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
2.7 2.9 
Capital in Excess of Par Value1,732.4 1,876.7 
(Accumulated Deficit) Retained Earnings(52.0)56.4 
Accumulated Other Comprehensive Loss(255.5)(365.8)
Total Graphic Packaging Holding Company Shareholders' Equity1,427.6 1,570.2 
 Noncontrolling Interest406.3 487.8 
Total Equity1,833.9 2,058.0 
Total Liabilities and Shareholders' Equity$7,682.0 $7,289.9 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
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GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)

Common StockCapital in Excess of Par ValueRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive (Loss) Income
In millions, except share amountsSharesAmountNoncontrolling InterestsTotal Equity
Balances at December 31, 2019
290,246,907 $2.9 $1,876.7 $56.4 $(365.8)$487.8 $2,058.0 
Net Loss
— — — (12.7)— (1.8)(14.5)
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments
— — — — (1.0)(0.3)(1.3)
Pension and Postretirement Benefit Plans
— — — — 113.3 32.4 145.7 
Currency Translation Adjustment
— — — — (46.0)(10.0)(56.0)
Repurchase of Common Stock(a)
(9,667,034)(0.1)(52.6)(71.7)— — (124.4)
Dividends Declared
— — — (21.1)— — (21.1)
Redeemable Noncontrolling Interest Redemption Value Adjustment— — 18.1 — — — 18.1 
Tax Effect of IP Redemption— — 6.8 — — — 6.8 
Distribution of Membership Interest
— — — — — (4.6)(4.6)
Recognition of Stock-Based Compensation, Net
— — 3.6 — — — 3.6 
Issuance of Shares for Stock-Based Awards
788,561 — — — — —  
Balances at March 31, 2020
281,368,434 $2.8 $1,852.6 $(49.1)$(299.5)$503.5 $2,010.3 
Net Income
— — — 52.1 — 14.5 66.6 
Other Comprehensive Income, Net of Tax:
Derivative Instruments
— — — — 2.3 0.7 3.0 
Pension and Postretirement Benefit Plans
— — — — 0.3 — 0.3 
Currency Translation Adjustment
— — — — 11.3 2.6 13.9 
Repurchase of Common Stock(b)
(2,622,283)— (14.3)(18.8)— — (33.1)
Redeemable Noncontrolling Interest Redemption Value Adjustment— — (5.4)— — — (5.4)
Dividends Declared
— — — (21.3)— — (21.3)
Distribution of Membership Interest
— — — — — (5.6)(5.6)
Recognition of Stock-Based Compensation, Net
— — 7.9 — — — 7.9 
Issuance of Shares for Stock-Based Awards
93,381 — — — — —  
Balances at June 30, 2020
278,839,532 $2.8 $1,840.8 $(37.1)$(285.6)$515.7 $2,036.6 
Net Income
— — — 63.7 — 13.6 77.3 
Other Comprehensive Income, Net of Tax:
Derivative Instruments
— — — — 5.5 1.1 6.6 
Pension and Postretirement Benefit Plans
— — — — 0.8 0.1 0.9 
Currency Translation Adjustment
— — — — 23.8 4.3 28.1 
Repurchase of Common Stock(c)
(6,607,221)(0.1)(36.0)(58.0)— — (94.1)
Redeemable Noncontrolling Interest Redemption Value Adjustment— — (0.5)— — — (0.5)
Redemption of IP's Ownership Interest— — (87.4)— — (123.5)(210.9)
Tax Effect of IP Redemption— — 9.2 — — — 9.2 
Dividends Declared
— — — (20.6)— — (20.6)
Distribution of Membership Interest
— — — — — (5.0)(5.0)
Recognition of Stock-Based Compensation, Net
— — 6.3 — — — 6.3 
Issuance of Shares for Stock-Based Awards
4,533 — — — — —  
Balances at September 30, 2020
272,236,844 $2.7 $1,732.4 $(52.0)$(255.5)$406.3 $1,833.9 
(a) Includes 410,400 shares repurchased but not yet settled as of March 31, 2020.
(b) Includes 14,436 shares repurchased but not yet settled as of June 30, 2020.
(c) Includes 308,185 shares repurchased but not yet settled as of September 30, 2020.

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


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GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)

Common StockCapital in Excess of Par ValueRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive (Loss) Income
In millions, except share amountsSharesAmountNoncontrolling InterestsTotal Equity
Balances at December 31, 2018
299,807,779 $3.0 $1,944.4 $10.0 $(377.9)$439.0 $2,018.5 
Net Income
— — — 57.9 — 15.6 73.5 
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments
— — — — (0.4)(0.1)(0.5)
Pension and Postretirement Benefit Plans
— — — — 1.2 0.2 1.4 
Currency Translation Adjustment
— — — — 3.9 0.9 4.8 
Repurchase of Common Stock(a)
(5,033,426)(0.1)(27.2)(32.2)— — (59.5)
Dividends Declared
— — — (22.1)— — (22.1)
Reclassification of Redeemable Noncontrolling Interest for Share Repurchases
— — — — — (6.7)(6.7)
Distribution of Membership Interest
— — — — — (5.0)(5.0)
Recognition of Stock-Based Compensation, Net
— — 0.9 — — — 0.9 
Issuance of Shares for Stock-Based Awards
530,196 — — — — — — 
Balances at March 31, 2019
295,304,549 $2.9 $1,918.1 $13.6 $(373.2)$443.9 $2,005.3 
Net Income
— — — 63.8 — 17.2 81.0 
Other Comprehensive (Loss) Income, Net of Tax:
Derivative Instruments
— — — — (4.4)(1.3)(5.7)
Pension and Postretirement Benefit Plans
— — — — 0.9 0.4 1.3 
Currency Translation Adjustment
— — — — (2.6)(0.6)(3.2)
Repurchase of Common Stock
(1,428,470)— (7.7)(10.6)— — (18.3)
Dividends Declared
— — — (22.1)— — (22.1)
Reclassification of Redeemable Noncontrolling Interest for Share Repurchases— — — — — 19.1 19.1 
Distribution of Membership Interest
— — — — — (6.4)(6.4)
Recognition of Stock-Based Compensation, Net
— — 5.9 — — — 5.9 
Issuance of Shares for Stock-Based Awards
94,327 — — — — —  
Balances at June 30, 2019
293,970,406 $2.9 $1,916.3 $44.7 $(379.3)$472.3 $2,056.9 
Net Income
— — — 52.1 — 13.8 65.9 
Other Comprehensive Income (Loss), Net of Tax:
Derivative Instruments
— — — — — — — 
Pension and Postretirement Benefit Plans
— — — — 1.1 0.3 1.4 
Currency Translation Adjustment
— — — — (14.6)(3.1)(17.7)
Repurchase of Common Stock
(3,729,361)— (20.2)(29.9)— — (50.1)
Dividends Declared
— — — (21.8)— — (21.8)
Distribution of Membership Interest
— — — — — (5.3)(5.3)
Recognition of Stock-Based Compensation, Net
— — 5.3 — — — 5.3 
Issuance of Shares for Stock-Based Awards
3,754 — — — — —  
Balances at September 30, 2019
290,244,799 $2.9 $1,901.4 $45.1 $(392.8)$478.0 $2,034.6 
(a) Includes 33,263 shares repurchased but not yet settled as of March 31, 2019.

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


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GRAPHIC PACKAGING HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
In millions20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income$126.2 $234.2 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization356.5 337.8 
Deferred Income Taxes(6.4)34.0 
Amount of Postretirement Expense Greater Than Funding145.2 0.6 
Other, Net30.9 18.4 
Changes in Operating Assets and Liabilities(263.2)(324.3)
Net Cash Provided by Operating Activities389.2 300.7 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Spending(402.6)(213.1)
Packaging Machinery Spending(23.1)(16.8)
Acquisition of Businesses, Net of Cash Acquired(120.6)(52.9)
Beneficial Interest on Sold Receivables85.6 320.3 
Beneficial Interest Obtained in Exchange for Proceeds(7.4)(155.4)
Other, Net(8.8)(3.5)
Net Cash Used in Investing Activities(476.9)(121.4)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Common Stock(247.3)(128.8)
Payments on Debt(27.4)(27.4)
Redemption of Noncontrolling Interest(500.0) 
Proceeds from Issuance of Debt800.0 300.0 
Borrowings under Revolving Credit Facilities2,180.5 1,970.7 
Payments on Revolving Credit Facilities(2,122.3)(2,216.0)
Repurchase of Common Stock related to Share-Based Payments(9.0)(4.1)
Debt Issuance Costs(11.6)(5.0)
Dividends and Distributions Paid to GPIP Partner(80.4)