Document

(ATLANTA, GA, Feb 16, 2022) Graphic Packaging Holding Company (NYSE:GPK), (the “Company” or “Graphic Packaging”), a leading provider of sustainable packaging solutions to food, beverage, foodservice, and other consumer products companies, today reported Net Income for fourth quarter 2021 of $39 million, or $0.13 per share, based on 309 million weighted average diluted shares. This compares to fourth quarter 2020 Net Income of $64 million, or $0.24 per share, based on 270 million weighted average diluted shares.

Fourth quarter 2021 Net Income was impacted by a net $57 million of special charges, that are detailed in the attached Reconciliation of Non-GAAP Financial Measures table. When adjusting for these charges, Adjusted Net Income for the fourth quarter of 2021 was $96 million, or $0.31 per diluted share. This compares to fourth quarter 2020 Adjusted Net Income of $76 million, or $0.28 per diluted share.

Full year 2021 Net Income was impacted by a net $137 million of special charges that are detailed in the attached Reconciliation of Non-GAAP Financial Measures table. When adjusting for these items, Adjusted Net Income for full year 2021 was $341 million, or $1.14 per diluted share. This compares to Adjusted Net Income for the full year of 2020 of $312 million, or $1.12 per diluted share.

Michael Doss, the Company’s President and CEO said, “We met the high-end of our organic sales growth goal in 2021 generating 2% year over year growth, after generating 4% organic sales growth in 2020. We are capturing new business supported by consumer preference for sustainable, fiber-based packaging solutions. Innovation and more circular consumer packaging solutions are consistently driving organic sales growth. We are winning in existing markets while expanding our participation into new markets. The AR Packaging acquisition, completed in the fourth quarter, has further strengthened our innovative offerings for consumers and positions us for growth in new geographies, markets and products. The successful startup of our transformational K2 coated recycled board machine and execution of our coated recycled board platform optimization project will further solidify our cost and quality leadership in the industry.”

Doss continued, “Our execution of strategic initiatives, including significant price execution, is expected to result in 2022 Adjusted EBITDA in a range of $1.4 to $1.6 billion, a 42% year over year growth rate at the midpoint. The resulting robust cash flow we expect to generate will allow us to return to our desired leverage range of 2.5 to 3.0 times in 2023.” He concluded, “We are increasing Vision 2025 goals today. Our focus, leadership and growth in fiber-based consumer packaging along with our proven track record of capital allocation delivering value to stakeholders, provides confidence in a stronger outlook for our business.”

EBITDA for the fourth quarter of 2021 was $218 million, a decrease of $32 million from the fourth quarter of 2020. After adjusting for charges associated with business combinations and other special charges, Adjusted EBITDA increased $20 million to $285 million in the fourth quarter of 2021 from $265 million in the fourth quarter of 2020. When comparing against the prior year quarter, Adjusted EBITDA in the fourth quarter of 2021 was positively impacted by $58 million in favorable volume/mix, $86 million in positive pricing and $37 million in improved net operating performance. These benefits were partially offset by $142 million of commodity input cost inflation and $15 million of other inflation (primarily labor and benefits).

EBITDA for the full year 2021 was $906 million, an increase of $52 million from the full year 2020. After adjusting for charges associated with business combinations and other special charges, Adjusted EBITDA decreased 1% to $1,056 million in the full year 2021 from $1,070 million in the full year 2020. When comparing against the prior year, Adjusted EBITDA in 2021 was positively impacted by $150 million in positive pricing, $72 million of favorable volume/mix, and $144 million of improved net operating performance. These benefits were offset by $330 million of commodity input cost inflation and $56 million in other inflation (primarily labor and benefits).

Net Cash Provided by Operating Activities was $609 million for the full year 2021, compared to $825 million for the full year 2020. Adjusting for GAAP guidelines related to the classification of certain cash receipts and payments associated with our receivable sale programs and the cash payments associated with special charges, Adjusted Net Cash Provided by Operating Activities was $883 million for the full year 2021, compared to $991 million for the full year 2020. Adjusted Cash Flow for the full year 2021 was $81 million, compared to $345 million for the full year 2020.

Total Debt (Long-Term, Short-Term and Current Portion) increased $1,649 million during the fourth quarter of 2021 to $5,831 million compared to the third quarter of 2021. Total Net Debt (Total Debt, net of Cash and Cash Equivalents) increased $1,544 million during the fourth quarter of 2021 to $5,659 million compared to the third quarter of 2021. The Company's year-end Net Leverage Ratio was 5.36 times Adjusted EBITDA compared to 3.26 times at the end of 2020.

Any statements of the Company's expectations in this press release, including but not limited to projected organic sales and EBITDA growth, and achievement of newly enhanced Vision 2025 goals constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from the Company's 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 demand for its products, inflation of and volatility in raw material and energy costs, continuing pressure for lower cost products, the Company’s ability to implement its business strategies, including productivity initiatives, cost reduction plans, and integration activities, as well as the Company’s debt level, currency movements and other risks of conducting business internationally and the impact of regulatory and litigation matters, including the continued availability of the Company's 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. 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 required by law. Additional information regarding these and other risks is contained in the Company's periodic filings with the SEC.

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 paper-based foodservice products in the United States, and holds leading market positions in coated recycled paperboard, coated unbleached kraft paperboard and solid bleached sulfate paperboard. 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 web site at www.graphicpkg.com.


	Three Months Ended				Twelve Months Ended
	December 31,				December 31,
In millions, except per share amounts	2021		2020		2021		2020
Net Sales	$	1,988	$	1,652	$	7,156	$	6,560
Cost of Sales	1,701		1,391		6,085		5,460
Selling, General and Administrative	149		119		528		513
Other (Income) Expense, Net	(4)		(1)		(2)		2
Business Combinations, Shutdown and Other Special Charges and Exit Activities, Net	59		13		138		61
Income from Operations	83		130		407		524
Nonoperating Pension and Postretirement Income (Expense)	1		(1)		5		(151)
Interest Expense, Net	(35)		(32)		(123)		(129)

Income before Income Taxes and Equity Income of Unconsolidated Entity	49		97		289		244
Income Tax Expense	(10)		(20)		(74)		(42)
Income before Equity Income of Unconsolidated Entity	39		77		215		202
Equity Income of Unconsolidated Entity	—		—		1		1
Net Income	$	39	$	77	$	216	$	203
Net Income Attributable to Noncontrolling Interest	—		(13)		(12)		(36)
Net Income Attributable to Graphic Packaging Holding Company	$	39	$	64	$	204	$	167

Net Income Per Share Attributable to Graphic Packaging Holding Company — Basic	$	0.13	$	0.24	$	0.69	$	0.60
Net Income Per Share Attributable to Graphic Packaging Holding Company — Diluted	$	0.13	$	0.24	$	0.68	$	0.60

Weighted Average Number of Shares Outstanding - Basic	308.6		269.5		297.1		278.8
Weighted Average Number of Shares Outstanding - Diluted	309.3		270.3		297.9		279.6


In millions, except share and per share amounts	December 31, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and Cash Equivalents	$	172	$	179
Receivables, Net	859		654
Inventories, Net	1,387		1,128

Other Current Assets	84		59

Total Current Assets	2,502		2,020
Property, Plant and Equipment, Net	4,677		3,560
Goodwill	2,015		1,478
Intangible Assets, Net	868		437
Other Assets	395		310
Total Assets	$	10,457	$	7,805

LIABILITIES
Current Liabilities:
Short-Term Debt and Current Portion of Long-Term Debt	$	279	$	497
Accounts Payable	1,125		825


Other Accrued Liabilities	645		534
Total Current Liabilities	2,049		1,856
Long-Term Debt	5,515		3,147
Deferred Income Tax Liabilities	579		540

Other Noncurrent Liabilities	421		422


Redeemable Noncontrolling Interest	—		—

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	3		3
Capital in Excess of Par Value	2,046		1,715
Retained Earnings (Accumulated Deficit)	66		(48)
Accumulated Other Comprehensive Loss	(224)		(246)
Total Graphic Packaging Holding Company Shareholders’ Equity	1,891		1,424
Noncontrolling Interest	2		416
Total Equity	1,893		1,840
Total Liabilities and Shareholders' Equity	$	10,457	$	7,805


	Twelve Months Ended
	December 31,
In millions	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	216	$	203
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization	489		476
Amortization of Deferred Debt Issuance Costs	9		6
Deferred Income Taxes	55		(1)
Amount of Postretirement Expense Greater Than Funding	(24)		147

Other, Net	93		13
Changes in Operating Assets and Liabilities, Net of Acquisitions	(229)		(19)
Net Cash Provided by Operating Activities	609		825

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Spending	(775)		(616)
Packaging Machinery Spending	(27)		(30)
Acquisition of Businesses, Net of Cash Acquired	(1,704)		(121)


Beneficial Interest on Sold Receivables	130		136
Beneficial Interest Obtained in Exchange for Proceeds	(11)		(9)
Other, Net	(5)		(8)
Net Cash Used in Investing Activities	(2,392)		(648)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of Common Stock	—		(316)
Payments on Debt	(16)		(37)
Retirement of Long-Term Debt	(1,626)		—
Proceeds from Issuance of Debt	2,965		800
Redemption of Noncontrolling Interest	(150)		(500)
Borrowings under Revolving Credit Facilities	4,485		2,614
Payments on Revolving Credit Facilities	(3,649)		(2,597)
IP Tax Receivable Agreement Payment	(109)		—
Debt Issuance Costs	(27)		(14)
Repurchase of Common Stock related to Share-Based Payments	(15)		(9)
Dividends and Distributions Paid to GPIP Partner	(92)		(103)
Other, Net	12		10

Net Cash Provided by (Used in) Financing Activities	1,778		(152)
Effect of Exchange Rate Changes on Cash	(2)		1
Net (Decrease) Increase in Cash and Cash Equivalents	(7)		26
Cash and Cash Equivalents at Beginning of Year	179		153
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	172	$	179

The tables below set forth the calculation of the Company's earnings before interest expense, income tax expense, equity income of unconsolidated entities, depreciation and amortization, including pension amortization (“EBITDA”), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, Net Leverage Ratio and Total Net Debt. Adjusted EBITDA and Adjusted Net Income exclude charges (income) associated with: the Company's business combinations, facility shutdowns, and other special charges. The Company's management believes that the presentation of EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, and Net Leverage Ratio provides useful information to investors because these measures are regularly used by management in assessing the Company's performance. EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, and Net Leverage Ratio are financial measures not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), and are not measures of net income, operating income, operating performance or liquidity presented in accordance with GAAP.

EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, and Net Leverage Ratio should be considered in addition to results prepared in accordance with GAAP, but should not be considered substitutes for or superior to GAAP results. In addition, our EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, and Net Leverage Ratio may not be comparable to Adjusted EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate such measures in the same manner as we do.


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
In millions, except per share amounts	2021			2020			2021			2020
Net Income Attributable to Graphic Packaging Holding Company	$	39		$	64		$	204		$	167
Add (Subtract):
Net Income Attributable to Noncontrolling Interest	—			13			12			36
Income Tax Expense	10			20			74			42
Equity (Income) Loss of Unconsolidated Entity	—			—			(1)			(1)
Interest Expense, Net	35			32			123			129
Depreciation and Amortization	134			121			494			481
EBITDA	218			250			906			854
Charges Associated with Business Combinations, Shutdown and Other Special Charges and Exit Activities (a)	67			14			150			62
Pension Plan Settlement Charge (b)	—			1			—			154
Adjusted EBITDA	$	285		$	265		$	1,056		$	1,070

Adjusted EBITDA Margin (Adjusted EBITDA/Net Sales)	14.3		%	16.0		%	14.8		%	16.3		%

Net Income Attributable to Graphic Packaging Holding Company	$	39		$	64		$	204		$	167
Charges Associated with Business Combinations, Shutdown and Other Special Charges and Exit Activities(a)	67			14			150			62
Pension Plan Settlement Charge (b)	—			1			—			154
Accelerated Depreciation Related to Exit Activities	3			5			17			26
Tax Impact of Business Combinations, Shutdown and Other Special Charges, Exit Activities, Pension Plan Settlement, and Accelerated Depreciation	(13)			(5)			(28)			(48)
Noncontrolling Interest, Net of Tax	—			(3)			(2)			(49)
Adjusted Net Income Attributable to Graphic Packaging Holding Company	$	96		$	76		$	341		$	312








Adjusted Earnings Per Share - Basic	$	0.31		$	0.28		$	1.15		$	1.12
Adjusted Earnings Per Share - Diluted	$	0.31		$	0.28		$	1.14		$	1.12

(a) For the three months ended December 31, 2021, $16 million is recorded in costs of sales for inventory valuation adjustments related to business combinations offset by $8 million related to the settlement of an unfavorable supply agreement. For the twelve months ended December 31, 2021 and December 31, 2020, $20 million and $1 million, respectively, is recorded in costs of sales for inventory valuation adjustments related to business combinations offset by $8 million and $0 million related to the settlement of an unfavorable supply agreement respectively.

(Continued)


	Twelve Months Ended
	December 31,		December 31,		December 31,
In millions	2021		2020		2019
Net Income	$	204	$	167	$	207
Add (Subtract):
Net Income Attributable to Noncontrolling Interest	12		36		71
Income Tax Expense	74		42		76
Equity Income of Unconsolidated Entity	(1)		(1)		—
Interest Expense, Net	123		129		141
Depreciation and Amortization	494		481		457
EBITDA	906		854		952

Charges Associated with Business Combinations and Shutdown, Other Special Charges and Exit Activities	150		62		39
Pension Plan Settlement Charge	—		154		39



Adjusted EBITDA	1,056		1,070		1,030



	December 31,		December 31,		December 31,
Calculation of Net Debt:	2021		2020		2019
Short-Term Debt and Current Portion of Long-Term Debt	$	279	$	497	$	50
Long-Term Debt(a)	5,552		3,169		2,823
Less:
Cash and Cash Equivalents	(172)		(179)		(153)
Total Net Debt	$	5,659	$	3,487	$	2,720

Net Leverage Ratio (Total Net Debt/Adjusted EBITDA)	5.36		3.26		2.64


	Twelve Months Ended
	December 31,
In millions	2021		2020
Net Cash Provided by Operating Activities	$	609	$	825
Net Cash Receipts from Receivables Sold included in Investing Activities	119		127
Cash Payments Associated with Business Combinations, Shutdown and Other Special Charges and Exit Activities	155		39
Adjusted Net Cash Provided by Operating Activities	$	883	$	991
Capital Spending	(802)		(646)

Adjusted Cash Flow	$	81	$	345

The three months ended December 31, 2020 included 920 tons sold that did not reoccur in the three months ended December 31, 2021 due to the closing of the White Pigeon, Michigan mill and the shutdown of the West Monroe containerboard machine. The three months ended September 30, 2020 included 7,400 tons sold that did not reoccur in the three months ended September 30, 2021. The three months ended June 30, 2020 included 27,200 tons sold that did not reoccur in the three months ended June 30, 2021. The three months ended March 31, 2020 included 42,100 tons sold that did not reoccur in the three months ended March 31, 2021.


	Three Months Ended
	March 31,	June 30,	September 30,	December 31,
2021

Net Tons Sold (000's)	975	1,001	1,014	974 (a)
2020

Net Tons Sold (000's)	1,012	1,013	1,036	991